The IPX market: where it's going and what the potential is

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By Jon Tee

IPX networks are interconnected, private (i.e. off the public Internet), secure, managed IP networks providing guaranteed quality of service within and across interconnected networks by class of service supported by SLAs and with options for end-to-end cascading payments between suppliers and with transparent pricing.

They are designed to support both single (multilateral) connection to an IPX or bilateral interconnect agreements as well as interworking and roaming across fixed and mobile network standards (GSM, CDMA, LTE etc.) for a range of services. IPX networks are intended to enable the delivery of voice, data or other content between networks, with interoperability and quality of service delivered across links.

The IPX market is at an early stage and although suppliers are beginning to launch services there is still a high degree of uncertainty from potential buyers of services as to what IPX offers and how it relates to already existing services such as wholesale circuit-switched voice, wholesale VoIP interconnect services (possibly including some level of QoS) and GRX for mobile data roaming. Part of the uncertainty arises from IPX providers approaching the market from different backgrounds: GRX providers seeing IPX as the logical extension of their GRX platforms and principally a data service while fixed voice carriers see IPX as a way to provide fixed VoIP with a high quality of service. These different backgrounds are reflected in the different standards approaches taken by the GSMA and i3Forum bodies.

Supply side characteristics

Many of the important players in the market are GRX providers such as Aicent, BICS, Sybase, Syniverse, TeliaSonera. These companies hope to broaden their addressable market by developing their GRX businesses into full-blown IPX platforms capable of delivering a much wider range of services. GRX players are also aware of the need to be able to support VoLTE as such services begin to be rolled out. Carriers without GRX businesses such as Tata also see an opportunity to position themselves further up the value chain through offering high-value QoS-backed VoIP services to their customers.

Table 1: The different backgrounds of players contesting the IPX market

Demand side characteristics

The motivations for buying IPX vary between different kinds of potential customers.
Mobile operators, for instance, perceive the benefits of IPX to be around cost reduction (especially for international voice), better quality of service (for international IP voice in particular) and quality of service by class of data (for data) and easier service and partner management (through single connection to a multi-service platform). Such potential customers hope that better quality of service on international voice calls will encourage their customers to talk for longer when making international calls and to make less use of the VoIP services of over-the-top (OTT) players like Skype (which can't offer end-to-end guaranteed QoS) for international calling.

Fixed operators also perceive the benefits of IPX to be around cost reduction (for voice in particular, as use of an IPX network can enable them to provide TDM termination or termination on third party VoIP networks without having to invest in local border gateways to convert between protocols), better quality of service (compared with basic VoIP interconnect) and through helping enabling them use a single multi-service platform. In addition, for them, price transparency is also important.
Cutting across the fixed/mobile divide, another critical dimension is how established the operator is.

New entrants are particularly interested in rapidly establishing interconnect agreements that expand the geographic and operator coverage for their customers. They are less likely to have legacy service revenue to protect. More established providers are interested in the possibilities IPX offers to provide new higher-value services at good levels of quality while minimising costs for existing legacy services.

Market outlook

The market is not static and there are a number of developments that have the potential to stimulate demand for IPX:

• rollout of LTE networks and the launch of VoLTE
• significant growth in demand from VoIP service providers looking for high-quality transit and termination services, but seeking to minimise operational and capital costs of expanding their geographic reach
• roll-out of next-generation IP core networks based on IMS (meaning more conversion of long-distance traffic as it moves between IP and TDM networks)
• a significant increase in dissatisfaction with the quality of service obtained from 'best-efforts' IP transport services especially for services such as videocalling.

Over the next five years existing platforms such as GRX, TDM and non-IPX IP networks including IP MPLS networks and the public Internet will continue to carry voice, messaging and other data traffic. There will be no sudden dramatic shift to IPX.

However, an increasing proportion of traffic will flow over IPX infrastructure. Legacy network platforms do not have all the capabilities of an IPX network. The challenge for suppliers is to be able to clearly articulate to potential customers the advantages that an IPX network can offer in comparison with potentially lower-cost best-efforts networks.

This article is an extract from Innovation Observatory's report IPX Services Now and Future. If you would like a complimentary copy please email me. Please indicate your company and job title and if you would be interested in receiving more information on the IPX market.