What is IP Interconnection?
The quality of telephone service depends not only upon the underlying technology and the service provider but also upon connection agreements signed between different carriers to ensure that calls exchanged between their networks conform to minimum quality standards. Traditional landline calls relied on TDM circuits which are covered by various commercial interconnection agreements as well as government oversight and hence customers never had to worry about what service provider the other party was using.
The VoIP industry however does not have such interconnection standards as various vendors do not yet exchange packets at the IP level. Many VoIP calls still need to travel over copper lines for a part of the journey between two endpoints, especially if both parties are being served by different operators. This can often result in the degradation of quality and also severely limits the ability of vendors to offer additional services such as HD voice etc. which cannot be provided over copper lines. Hence there is a need for carriers to exchange traffic on an IP to IP basis to ensure quality of service to customers, regardless of which phone company is serving them.
Many VoIP service providers such as Vonage, Ooma and others have made significant investments in their IP networks in order to provide competitive rates to customers for voice calls. On the other hand, incumbent carriers AT&T and Verizon have also started upgrading their networks to provide unified business VoIP calls. Although it is in the best interests of all the players to enter into interconnection agreements with each other, the larger incumbent players clearly have an advantage when it comes to dictating terms and conditions of contracts largely due to the size of their subscriber base.
Verizon has entered into IP interconnection agreements with six providers including Vonage in the last year in a move widely seen as a preemptive strike against potential FCC regulations. However, commercial agreements are just the beginning and several regulatory and legal issues will need to be resolved for comprehensive IP interconnection. Smaller carriers are naturally apprehensive that they might not be able to afford the interconnection charges that bigger carriers can pay. Agreements such as the one Verizon is pursuing have very strict NDA policies which prevent competitors from appealing to the FCC in case they believe the terms to be restrictive, which is also a cause for concern.
Even with several vendors entering into voluntary IP interconnection agreements, it might be necessary for the FCC to step in with appropriate regulations for the industry to make a smooth transition from older TDM to the newer and much more efficient IP technology.