Global IP Exchange: Current Status and Future Prospects for IPX

Research Extract for Report Participants

Simon Sherrington and Terence Prospero

Edited by Danny Dicks

Innovation Observatory Ltd

December 2012

David Martin and Simon Sherrington Innovation Observatory Ltd May 2009 Global IP Exchange: Current Status and Future Prospects for IPX – Research Extract

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Table of contents

0 Executive summary ...... 4 1 Definitions ...... 5 2 Awareness and benefits of IPX ...... 6 3 Barriers and drivers of IPX ...... 7 4 Who’s who in IPX ...... 8 5 IPX equipment markets ...... 10 5.1 Technologies underpinning IPX networks ...... 10

5.2 Leading providers of IPX enabling technologies ...... 11

6 Market forecasts ...... 12 7 Contents list for full report ...... 16

0 Executive summary

The international IPX market is now emerging – after years of discussion. Many of the world’s largest carriers and several major wholesale roaming service providers have now launched IPX propositions.

Customers are starting to sign up for IPX services. Innovation Observatory estimates that by the end of 2012 the leading IPX providers had around 1200 customer accounts for their services. Most customers were still only buying one or two IPX services (rather than the wide range of services many IPX providers can now offer) and often only for limited traffic volumes or select routes. However, the number of buyers of bundles is growing, and a few buyers have decided to use IPX for all their international connectivity.

Revenues from IPX remain very small in comparison with the global market for wholesale international and roaming voice, data, messaging and multimedia services. And while many wholesale buyers do indicate their likelihood to begin buying IPX services over the next three to five years, IPX providers cannot expect them to shift all their spending during that time frame. They will still want and need to manage many legacy connections. The transition to IPX will be incremental – an evolutionary rather than revolutionary process. Over the next five years Innovation Observatory forecasts that the wholesale value of services traversing IPX networks will grow from around USD706 million in 2012 to USD5 billion in 2017. Overall, excluding value- added services, the IPX market is forecast to represent around 6.4% of the international wholesale market for voice and data services by 2017, up from around 1.4% in 2012.

While these numbers look very large the retained (net) value for IPX providers is expected to be much smaller (USD108 million in 2012 and USD1.0 billion in 2017). This is because, for instance, termination fees for voice simply flow through the books, and the transit value of GRX is based on traffic volume, not the high wholesale price of mobile roaming data – the money for which might not even be booked as revenue by the IPX. The net value proportion of the total grows over the forecasts period as IPX providers develop more value-added services.

Much of the 2012 market value is associated with legacy services such as GRX which have been migrated on to IPX networks – sometimes without customers even knowing. This is not new revenue but simply a migration of existing spend. Future growth will be delivered by LTE roaming and interoperability services, voice services (including VoLTE), high-quality international data services, rich media and advanced telephony services, and value-added services designed to make service provision more efficient and which help operators identify potential customers. Further into the future IPX providers have a real opportunity to drive growth by helping ‘over-the-top’ (OTT) providers to access fixed and mobile operator networks in a way which generates revenues for the OTT providers, the IPX provider and the fixed and mobile operators. Opening up APIs will be critical for this, and IPX providers are in a great position to aggregate APIs to enable global access.

Innovation Observatory’s report Global IP Exchange: Current Status and Future Prospects for IPX (of which this is a summary extract) focuses on the opportunity to provide international IPX services (including direct international services and roaming services). It does not address the opportunity to provide in-country national IPX services – an associated and potentially significant market.

It is based on in-depth interviews with 44 wholesale service buyers, IPX providers and technology vendors; as well as extensive desk research and market modelling. It provides definitions for the market, looks at the complex mix of market barriers and drivers, reviews market trends and customer requirements, and analyses leading IPX providers and leading providers of IPX infrastructure (specifically signalling and IPX proxy solutions). It also provides forecasts for the value of services flowing over IPX networks.

1 Definitions

IPX networks are interconnected, private (i.e., off the public Internet), secure, managed IP networks capable of providing guaranteed quality of service within and across interconnected networks by class of service or application. IPX networks are additionally intended to be able to deliver services end-to-end with a limited number of network hops to assure quality of service. (Services must travel through a maximum of two IPX providers.) Services are typically supported by SLAs.

IPX user communities are intended to be able to adopt a range of wholesale business models and payments models that can support fair payment throughout the value chain, with everything from free and paid peering to end-to-end cascading payments between suppliers with transparent pricing.

IPX networks are intended to enable the delivery of voice, data or other content between networks, with interoperability between different implementations and standards.

IPX networks are also intended to be able to deliver many services across a single connection. They are intended ultimately to be truly multiservice-capable. Indeed, IPX networks may already carry a variety of services. These include services that have previously travelled over alternative infrastructures such as

 Roaming 2G and 3G mobile data traffic,  2G and 3G voice and data roaming signalling data and  National or international voice transit.

They are also expected to carry new service types that cannot be technically or cost-effectively delivered over traditional TDM wholesale networks, or be properly delivered over IP networks without end-to-end QoS. Such services include

 High definition voice,  Video calling,  LTE voice and data roaming and  LTE signalling.

These services travelling over IPX networks are defined as IPX-based services. Services that previously travelled over alternative infrastructures are defined as legacy IPX-based services. New services that require IPX networks (or equivalent) for proper delivery are defined in this report at next-gen IPX-based services.

IPX network operators are companies that operate a network capable of delivering services while meeting the GSMA/i3 Forum QoS specifications. An IPX operator might own its own fibre and MPLS network. Alternatively it might lease capacity on fibre or MPLS networks on which it has deployed the infrastructure needed to deliver and manage interoperable cross- network services.

2 Awareness and benefits of IPX

Innovation Observatory’s report is underpinned by detailed conversations with buyers of wholesale services. Although the survey conducted by Innovation Observatory was intended to deliver depth of insight through detailed qualitative discussion about the IPX market, we took the opportunity to ask some standard questions about IPX, and buyers’ plans and requirements.

The first thing we sought to understand was operator awareness of IPX. The figure below shows responses to the question ‘which of the following best describes your company's use and knowledge of IPX services?’ (n=24 operators worldwide).

Only 15% of our sample classified themselves as current users of IPX, with nearly half currently evaluating IPX as an option; we believe this broadly reflects the general penetration of IPX globally at the end of 2012 (across fixed and mobile customers).

We next assessed these operators’ general perceptions of the benefits of IPX. The figure below shows the responses given (the list of options was prompted) on a 0-5 scale where 5 is the highest importance.

Interviewees ranked end-to-end QoS, defined CoS and interoperability with LTE as the most important benefits of IPX, closely followed by the ability to buy multiple services over one

© Innovation Observatory Ltd 2012 Page 6 Global IP Exchange: Current Status and Future Prospects for IPX – Research Extract connection, the hub model of wholesale networking, and access to service-aware networking. Reduction of individual wholesale costs ranked lowest. Buyers did indicate that cost reduction is a reason for considering IPX, but there is a feeling that insufficient information on the costs of IPX has been provided by suppliers.

3 Barriers and drivers of IPX

We have identified nine distinct barriers to the adoption of IPX services by operators worldwide. It may not surprise you to learn that price is one of them – but actually, just as important as price levels is the lack of clear information about price structures, or comparisons with alternative international wholesale IP transit and service interconnection options. The quotes in the graphic below are taken from our in-depth interviews with wholesale buyers.

Other barriers include:

• Lack of critical mass • Lack of LTE • Operator organisational barriers • Ignorance of IPX • Uncertainty about the ability of IPX to fix interoperability problems • Security concerns • Regulatory barriers • Infrastructure and geographical hurdles.

The analysis in the report explores these in detail. Fortunately for IPX providers there are many drivers too.

Key drivers include:

 The general migration from circuit-switched services to IP  The need for network interoperability between IP networks  The additional need for service-level interoperability  The opportunity to introduce new revenue-generating services  The associated opportunity to increase quality and different classes of services  The cost advantages offered by the hub model of networking  The opportunity to drive out cost by combining multiple services over a single connection.

One of the biggest is the need to support LTE deployments, but there are other critical factors (discussed in depth in the report) that IPX providers can leverage to open up the market. Operators widely view the introduction of new and better services as essential if they are not to be relegated to the role of ‘dumb pipes’. For example, HD voice is perceived as a crucial development to reduce the loss of traffic to OTT players. High-quality video services for business also are attractive to some operators, both large and small. One mobile operator from the Asia-Pacific region told us ‘The economics of mobile means a need for ever more services.’ It is this requirement to deliver new differentiated services that will ultimately – in our view – drive IPX adoption.

4 Who’s who in IPX

As the market for IP Exchange services has started to grow, so the ranks of IPX providers has also begun to swell, with many heavyweight telecoms service providers now offering access to IPX networks and IPX-based services. Innovation Observatory has compiled a list of leading IPX providers and identified a short-list of those IPX providers that we believe are setting the pace in terms of growth and product / service innovation. The market includes IPX providers that have come from a voice background, players that have specialised in the provision of roaming support services, and global carriers that have offered a complete range of voice, data, roaming and signalling services. Many are still in the market entry phase, with a few dozen initial customers – often existing GRX or signalling buyers. Some are succeeding in driving customer base growth and are signing customers for newer IPX-based services such as LTE roaming.

Company IPX details Aicent IPX launched May 2010. Its full portfolio of services is now delivered across its IPX network. It has a particularly strong presence in the Asia-Pacific region. Its background is in providing interoperability solutions for mobile operators. Aicent has an IPX peering agreement with BICS to extend its global reach. Publicly named IPX customers include China Mobile Hong Kong, and SK Telecom. Belgacom One of the earliest entrants to the IPX market. It is one of the world’s largest International international voice carriers, which is reflected in its IPX customer base which Carrier Services includes many buyers of IP voice services, and fixed and mobile operators. It has (BICS) an IPX peering agreement with Aicent. BICS has an established LTE roaming service already with ten active customers. BT BT launched IPX services in 2009, with an emphasis on voice, and in particular interoperability of TDM and IP voice. It has subsequently added Sigtran, GRX and video. Its network is HD-voice ready, and the company has signed up nearly 300 IPX customers – most of them buying VoIP break-in or break-out to TDM. CITIC CITIC International Telecom announced its IPX availability in September 2010. It International offers a broad range of services including voice, data and roaming solutions over Telecom its IPX network. It is positioned as an IPX gateway into mainland China. Colt Colt is a provider of VoIP services over its IPX-compliant network, and is offering services to smaller customers needing high quality solutions between the 22 countries in which it owns networks. It is targeting IPX at wholesale customers and is offering VoIP aggregation services. It also offers access to a voice trading platform. Comfone Comfone is a specialist provider of wholesale roaming services. It has introduced its IPX network to support roaming services with increased quality of service and to support LTE roaming and interoperability.

DT ICSS Deutsche Telekom ICSS was one of the first operators to launch an IPX network. Its initial proposition was focused on data. Deutsche Telekom has subsequently established its IPX with a significant number of major customers for its IPX services. It now has a broad portfolio of IPX services including support for IPX voice hubbing as well as for RCS-e / RCS-5. Etisalat Etisalat is emerging as a significant IPX provider for the Middle East and Africa. Its IPX solution accompanies a wider hubbing strategy which is enabling Etisalat to position itself as a gateway to the region. Its role is being strengthened by peering partnerships with many major international content and application providers seeking closer proximity of their data to customers. iBasis iBasis has an extensive IPX network, based on its own infrastructure and supported by its IPX peering agreement with Telecom Italia Sparkle, and IPX interconnect services being provided through AMS-IX. It started with a strong voice focus but now also deliver GRX and signalling over its IPX network. Named customers include E-Plus, KPN, Reliance Communications (India) and UNE (Colombia). NTT Com NTT Com formally announced the launch of IPX over its IP network in February 2012. Initially offered services include IPX voice, GRX and roaming signalling. Orange Wholesale Orange Wholesale formally entered the IPX market in May 2012. It has a strong multi-service focus and does not count customers taking only VoIP/TDM interoperability or only GRX services over its MPLS network (of which it has many) as IPX customers. As a group Orange has taken a strong leadership position with regard to HD voice, is rolling out HD services in key markets and is working on supporting HD internationally over its IPX. PCCW Global PCCW provides IPX voice, data and signalling services over its Intercarrier Interconnect global IP/MPLS network. It is one of the first to offer managed HD video communications and managed HD voice and videoconferencing. Sybase 365 Sybase 365 entered the IPX market from its position as a provider of global roaming, messaging and GRX solutions for mobile operators. It has moved into new territory with the introduction of its IPX voice service and also been swift to launch (and announce customers for) LTE roaming. Named IPX customers include Globe Telecom, China Mobile Hong Kong, Total Access Communications, CSL Hong Kong and Korean companies SK Telink and KT Corporation, Telecom New Zealand and Bhutan’s TashiCell. Syniverse Syniverse launched its IPX in 2009, and now offers a broad range of services over IPX including voice, roaming, signalling and messaging. It was early to market with its LTE roaming testing solution. It also offers mobile video interoperability. Named IPX customers include The Bahamas Telecommunications Company and SmarTone. Tata Tata Communications has a strong (but not exclusive) focus on mobile operators Communications for its IPX network. Its IPX+ mobile broadband enablement framework includes GRX with QoS, signalling over IPX, and as you would expect from the world’s largest voice carrier, voice over IPX interconnect. Telefonica TIWS’s IPX service, launched in 2011, is offered in Europe, North and South International America and Africa, and will be extended to Central America in 2013. TIWS offers Wholesale access to virtually all of its services over IPX including IMS interworking, videocalling, and roaming WiFi as well as more common IPX services. Telecom Italia Sparkle has introduced IPX services as an evolution of its GRX platform, and Sparkle offers services over its own extensive network, which includes a strong presence in South America. Services provided include GRX, voice, messaging and roaming. TeliaSonera Whilst TICS has not marketed the launch of an IPX service it has been offering International IPX-equivalent services (meeting the requirements of end-to-end quality, hop Carrier numbers, and the ability to buy multiple services over a single MPLS connection) for a number of years. It owns one of the most extensive global network infrastructures of any carrier, giving it the ability to control end-to-end quality of service without reliance on third parties. Telstra Global Telstra Global launched its IPX solution in May 2012. It has a broad data-focused portfolio, with depth of coverage in the Asia-pacific region. It is positioning IPX as a platform for new service creation. TNS Inc TNS operates an IPX network spanning North America, Europe and the Asia- Pacific. A strong feature of TNS’s strategy is the introduction of value added services designed to help its customers generate incremental revenue, or reduce

costs. This model was developed serving the financial services business and has been extended to the mobile telecoms market. XConnect A carrier-neutral service provider offering interworking hubs and federation services. It offers service-aware IP interconnect, including between IPX providers acting as an IPX proxy.

Whilst the providers in the IPX market come from a number of different backgrounds, they are all converging on a similar market positions, offering a combination of roaming, hubbing, transit and interoperability services over IPX networks. The figure below shows the mix of services that make up the IPX market.

In broad terms, most IPX providers offer services across the red layer of established services (except WiFi roaming which is offered by fewer providers); they are working towards offering services in the emerging services (green) layer, and they selectively offer services in the VAS (orange) layer. They vary in terms of whether they can offer the services at the network (blue) layer. Some have very little infrastructure, others have extensive networks.

5 IPX equipment markets

IPX networking is underpinned by a range of technologies, some old, some new. At its heart IPX networking is a combination of new business models (such as wholesale hub networking) and architecture (one connection to access multiple services) applied to existing technologies and service markets. This section reviews the technologies needed to deliver IPX networks and IPX-based services, and also highlights some of the leading emerging providers of equipment and technology being adopted by IPX providers.

5.1 Technologies underpinning IPX networks

As Tom Schroer, Director of Service Provider Marketing at Dialogic, points out: ‘If you look at next-generation networks from a layered perspective, service providers are moving from siloed networks to a layered architecture with a common transport network connecting various access methodologies; a session control and management layer; and a common application and services layer.’ This is reflected in the architecture of IPX networks.

IPX network operators need to have access to an MPLS network (either leased or owned) to enable them to deliver a transport service with end-to-end quality of service that conforms to the quality of service specifications set out by the GSMA and i3 Forum. They must also be able to advertise routes to users and interconnect partners in conformance with GSMA specifications.

On top of this IPX network operators require servers to deliver messaging services, content and applications and softswitches to provide IP-based voice. Most IPX providers – as established

© Innovation Observatory Ltd 2012 Page 10 Global IP Exchange: Current Status and Future Prospects for IPX – Research Extract wholesale players – have much of this in place already (although no player has these resources deployed in all parts of the world).

They then also need the infrastructure to link together multiple different networks and services. Key technologies include:

Signalling gateways – these are required to enable communications to be established and maintained between different international networks. IPX providers players a key role in supporting the translation and interworking between signalling standards and the varying ways they are implemented.

Gateways – In addition to signalling, IPX providers often provide media translation – for instance between different methods of networking, such as from TDM to IP, or between differing implementations of the same protocols, such as variants of VoIP. Messaging gateways are required to mediate, manage accessibility and provide opt-in capabilities.

IPX proxies – to support service level interworking and offer session-based accounting including CDR generation. Proxies also deliver security functions including access control. They must support transport of control and user-plane traffic and must enable selection of routes (in multilateral hubbing environments). Where not provided by other network elements the IPX proxies also need to deliver media transcoding or conversion, signalling translation or conversion, IPv4/IPv6 transcoding, and destination address look-up (including mobile number portability and ENUM-type functions).

On top of these, IPX providers are also delivering value added services, and so need servers and analytics tools to ensure grey route detection, fraud detection and anti-spam controls.

5.2 Leading providers of IPX enabling technologies

The IPX networking market is currently a very small subset of the wider markets for equipment providing VoIP/TDM voice interoperability and signalling solutions. The early leading providers of IPX-enabling technologies are leading suppliers in those larger markets. Our report provides profiles of six companies that have developed comprehensive solutions that can and are being deployed in IPX providers’ networks, and that Innovation Observatory currently regards – based on our analysis of their customers bases and products – as leaders in this market. These players are summarised in the table below.

Vendor Key IPX-relevant products Acme Packet Session border controllers with IPX proxy function and security, Net-Net Session router SIP proxy and IMS breakout gateway, Diameter Director Diameter signalling controller Dialogic IP softswitch, including MSC supporting TDM to IP; BorderNet SBC family for security, connectivity and service assurance, gateways for transcoding and bandwidth optimisation F5 Networks Diameter signalling solution: Diameter routing agent, Diameter edge agent, 3GPP-compliant interworking function (2G/3G-LTE etc), testing and simulation tool, offering context-aware routing and load balancing

Other relevant platforms and solutions include intelligent traffic management solutions and signalling delivery control (F5 Traffix Signalling Delivery Controller optimizes and scales Diameter, RADIUS, and SIP interfaces) Genband Intelligent IPX Solution encompasses S3 Intelligent Session Border Controller, G-Series Media Gateways, C-Series Call Controllers/Softswitches and the GENView RSM management platform

Other relevant platforms and solutions include the GENiUS IP switching

platform, application servers for consumer and business applications and P- Series traffic and policy management products. Sonus Networks Session border control including some IPX proxy functions; including media transcoding, security, interworking and QoS support

Other relevant products include centralised routing and policy server and VoIP network intelligence tools Tekelec Diameter signalling router: functioning as IETF Diameter agent, 3GPP Diameter routing agent or GSMA Diameter edge agent and providing load balancing

Other relevant platforms / solutions / products encompass policy management (policy server / PCRF, policy analytics platform, policy gateway), subscriber data management, SS7 signalling (HLR router, signal transfer point, signalling gateway), and performance monitoring and analytics

6 Market development

The key factors shaping the current growth of the markets are discussed extensively in the drivers and barriers sections of our report. Some of the factors influencing the future market are uncertain; some of these will play a critical role in the rate of growth of the IPX market, and for this reason require assumptions to be made when modelling the market. These factors include:

 Speed of rollout and adoption of LTE  Rate of migration to IPX for international telephony  Speed of adoption of advanced telephony  Speed of adoption of RCS and rich media  Use of local breakout  Application of policy  Introduction of advanced and value added services  Use of IPX networks for content delivery.

6.1 Revenue streams

Innovation Observatory has identified a wide range of distinct revenue streams for IPX network operators and service providers. Some of these are early-stages service markets, while others are well-developed service markets where the services – and their associated revenue streams – are being migrated from legacy transit network environments on to IPX networks.

Managed access services involve the provision of a managed IPX access connection (typically MPLS but sometimes Ethernet) all the way to the network operator customer’s own premises. Providing this managed access service extends the ability of the IPX provider to deliver end-to-end QoS. It can monitor traffic from the immediate point of demarcation from the customer’s network. The business model for this is typically purchase of a connection, port and capacity/traffic commitment.

Roaming data transit services have been offered on GRX networks for years now, but with growing volumes of data traffic in general, and with the arrival of the need for LTE data roaming, which will cause a rapid increase in data roaming traffic, there is a significant opportunity for IPX providers to support mobile operators with roaming data services. Roaming data services are being introduced in a couple of ways. First, IPX providers are migrating their GRX customers on to their IPX networks. This enables them to add additional quality of service options if their customers want it. Second, IPX providers are beginning to offer support for 4G data roaming services. 4G data roaming will require better international QoS support if the ‘4G

© Innovation Observatory Ltd 2012 Page 12 Global IP Exchange: Current Status and Future Prospects for IPX – Research Extract experience’ is to be supported when customers leave their home market. An IPX network can provide this support, where a GRX network typically cannot.

Roaming voice transit services have also been provided by intermediaries for many years. IPX providers are working on providing support for roaming IP-based LTE voice. It will be several years before there is significant demand for this from mobile operators but it will ultimately become a very important revenue stream. In the short term IPX providers are demonstrating their technical capability and they are also offering roaming voice test beds. Initial LTE services use circuit-switched fall-back for voice, and so calls use the same roaming transit mechanisms as operators’ 2G and 3G networks. IPX providers are increasingly offering signalling for 2G and 3G roaming services over their IPX networks (see below), and in some cases carry 2G and 3G roaming voice over their IPX networks as an alternative to traditional transit options, although this is far less common.

Roaming signalling for 2G and 3G services has been a fertile market for intermediaries in recent years, and roaming signalling for 4G will be no different. IPX providers are offering to transport 2G and 3G roaming signalling over their IPX networks already. They are also developing new signalling solutions to support LTE signalling, which runs on a completely different protocol. LTE-to- 2G/3G signalling conversion will also be required.

Roaming messaging comprises roaming SMS and roaming MMS. Roaming SMS is similar to roaming signalling. Traditionally delivered over SS7/C7 networks SMS signalling has been a strong market for wholesale intermediaries. Like legacy signalling, SMS signalling is now offered by IPX providers both over legacy networks and over IPX networks. MMS messages meanwhile are typically carried over GRX. This means that as IPX providers have started migrating their GRX services on to IPX, so they have been migrating their MMS transit services to enable QoS support if the customer wants it.

Settlement and clearing services include data clearing and financial clearing and settlement. The former includes the checking and transfer of data files between operators to provide third-party validation of network usage as a basis for billing. The latter includes calculating the bills to be paid by different operators, and sending out the bills to those that owe money. It may also include receipt of the monies on behalf of the mobile operators. This has been offered by roaming hub providers for some time, and is a natural value-added service for IPX providers.

Traffic steering – Traffic steering solutions take a variety of guises including traffic redirection using mobile number portability databases, and ENUM databases.

Analytics – IPX providers are increasingly using their position as a trusted intermediary, with a privileged overview of what is happening in networks – particularly in a roaming context – to provide analytics services helping IPX customers to improve their services and their profitability. Example applications are route management and balancing based on quality of service, pricing and knowledge of the number of hops to end points, silent roamer identification, and marketing services.

Fraud management services – fraud management is one area that is being enhanced with the use of analytics. Operators are also providing NRTRDE (Near Real Time Roaming Data Exchange) services.

International voice break-in / break-out is being offered by a number of IPX providers. This supports interoperability between TDM and VoIP services, and between different flavours of VoIP. The service can provide termination for inbound services on to PSTN or mobile networks (break-in); or transit or transit and termination for outbound services.

IP transit with added quality of service or security – This includes transit of IP traffic related to cloud services, content and applications. The first and most prevalent example of this is interconnection of operators’ IPX networks with RIM data centres to ensure more secure transit of BlackBerry messaging traffic.

Hosted applications – This is a revenue stream that has yet to emerge but that is very much in the mind of IPX providers: the hosting of applications on behalf of telecoms operators and service providers. This could include hosting of managed cloud-based RCS solutions, conferencing solutions, or hosting of enterprise cloud platforms (PaaS) that operators can then use to serve their end users, with guaranteed global quality of service assurance.

IPX advanced telephony – IPX providers have started to introduce solutions to support interoperability and high quality transport between varieties of advanced telephony services including HD voice and conferencing, and videocalling and videoconferencing (in SD and HD).

IPX RCS and rich media – IPX providers do not yet offer support for RCS and rich media applications, but they are starting to discuss likely requirement for these services with those mobile operators that are implementing RCS and RCS-type solutions. Future revenue will come from providing interconnection and interoperability, and in some cases full hosting of the RCS platform.

Content transcoding and transrating – This is not currently a significant revenue stream for IPX providers, but IPX providers are likely to introduce transcoding and transrating solutions so that mobile operators can deliver content internationally using the codecs, definition-levels and bit streams that best suit the terminating networks and devices.

Roaming WiFi – is an application that has emerged as operators have looked for ways to reduce the cost of providing roaming data services to their customers. A number of IPX providers have introduced roaming WiFi capabilities to enable mobile operators to take advantage of public WiFi infrastructure in other markets while retaining the ability to monitor customers’ usage and to bill customers by using a WiFi roaming exchange. Initial WiFi roaming implementations have often used GRX networks and for that reason are migrating on to IPX networks along with the GRX traffic.

6.2 Market forecast

Taking all of the above revenue streams into account, Innovation Observatory estimates that the gross value of all international wholesale telecoms services transported by new IPX networks will rise from around 1.4% of the international wholesale business today to USD5 billion in 2017. IPX providers will capture only a proportion of this as net retained fees, but it still reflects tremendous growth potential.

The report provides forecast splits for voice and data traffic, and well as IPX traffic volumes.

The revenues in this forecast are modelled gross – they include revenues associated with transit, and also termination of services on networks.

The forecasts include revenues associated with legacy services delivered over IPX networks (such as GRX), and also revenues associated with new services delivered over IPX networks (such as LTE roaming).

These forecasts cover international services only; they exclude IPX revenues derived from national communications services.

7 Contents list for full report

0 Executive summary 5 1 Definitions 6 2 Market drivers and barriers 7 2.1 Market barriers 7 2.2 Market drivers 16 3 Market trends 24 3.1 Use of IPX as a platform for delivery of new international services 24 3.2 Other trends 29 4 Buyer perspectives on benefits, plans and selection criteria 33 5 IPX network operator and service provider profiles 38 5.1 Aicent 43 5.2 Belgacom International Carrier Services 46 5.3 BT 49 5.4 CITIC Telecom International 54 5.5 Colt 56 5.6 Comfone 59 5.7 Deutsche Telekom International Carrier Sales & Solutions 61 5.8 Etisalat 64 5.9 iBasis 66 5.10 NTT Communications 69 5.11 Orange Wholesale 71 5.12 PCCW Global 74 5.13 Sybase 365 76 5.14 Syniverse 79 5.15 Tata Communications Services 83 5.16 Telefònica International Wholesale Services 85 5.17 Telecom Italia Sparkle 90 5.18 TeliaSonera International Carrier 92 5.19 Telstra Global 95 5.20 TNS Inc 98 5.21 XConnect 102 6 IPX equipment markets 105 6.1 Technologies underpinning IPX networks 105 6.2 Leading providers of IPX enabling technologies 106 6.3 Vendor profiles 107 7 Market size and forecasts 113 7.1 The current market for IPX 113 7.2 Market forecasts 115 8 Analysis of IPX-related service opportunities 126 9 Strategic recommendations for IPX providers 129 9.1 Marketing and sales 129 9.2 Business models 130 9.3 Positioning the IPX network as a platform 130

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