Softswitch
`Architecture for VoIP
`
`Franklin D. Ofrtman,Jr.
`
`San Juan Seoul Singapore Sydney ‘Toronto
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`McGraw-Hill
`New York Chicago San Francisco Lisbon
`London Madrid Mexico City Milan New Delhi
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`AT&T Exhibit 1025
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` Deiatnileee
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`234567890 DOCMOC 0987654
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`ISBN 0-07-140977-7
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`i 238
`
`Se 2s Go Bee
`Figure 11-5
`The components of
`softswitch are
`distributed.
`
`Chapter 11
`
`Softswitch Architecture
`Components
`
`Signaling Gateway
`
`eam
`SGCP
`
`Media Gateway Controller Denver
`with mirrorsite in Seatile
`
`SS7 Gateway
`Chicago
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`Page 3
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`Figure 11-6
`A distributed
`architecture enables
`the dispersal of
`softswitch solution
`components that
`can lowerreal estate
`Media Gateway
`:
`E. .
`costs.
`
`MiPERDee.==Media Gateway Washington,D.C.
`Seattle
`
`Application Server
`Los Angeles
`
`Media Gateway
`Dallas
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`Economic and Regulatory Issues
`Concerning Softswitch
`
`In its April 10, 1998 Report to Congress, the FCC determined that phone
`to-phone IP telephony is an enhancedservice andis not a telecommunica-
`tions service. The importantdistinction here is that telecommunications
`service providersare liable for access chargesto local service providers both
`at the originating and terminating endsof a long-distance call. A telecom-
`munications service provider must also pay into the Universal Service
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`AT&T Exhibit 1025
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`Softswitch Economics
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`| 239
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`Net Present Value of Softswitch
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`Fund. Long-distance providers using VoIP (and by inference, softswitch)
`avoid paying access and Universal Service fees. Given thin margins on
`domestic long distance, this poses a significant advantage for phone-to-
`phoneIP telephony service providers."
`The possibility that the FCC mayrule differently in the future cannot be
`discounted. Having to pay access fees to local carriers to originate and ter-
`minate a call coupled with having to pay into the Universal Service Fund
`would pose a significant financial risk to the business plan ofa softswitch-
`equipped, VoIP, long-distance service provider. Just as international long-
`distance bypass providers used VoIP to bypass international accounting
`rates and make themselves more competitive than circuit-switched carri-
`ers, softswitch-equipped VoIP carriers can make themselves more competi-
`tive in the domestic market by bypassing access charges and avoiding
`paying into the Universal Service Fund. The service provision model set
`forth in this chapter is strongly affected by the possibility of the FCC re-
`versing itself on phone-to-phoneIP telephony.
`Access fees in North American markets run from about $.01 per minute
`for origination and termination fees to upwardsof $.05 per minute in some
`rural areas. Thatis, a call originating in Chicago, for example, would gen-
`erate an origination fee of $.01 per minute. If the call terminated in Plen-
`tywood, Montana, it may generate a $.05 per minute terminationfee. This
`call would generate a total of $.06 per minute in access fees. If the carrier
`can only charge $.10 per minute, it will reap only $.04 per minute for this
`call after paying access fees to the generating and terminating local phone
`service providers.
`Table 11-4 illustrates the impact on profits and losses for a long-distance
`service provider that must pay access fees. The impact of the access fees on
`the net present value ofVoIP carriers who are exempt from access fees and
`non-VoIP carriers is addressed later in this chapter where a service
`provider generates 25 percent more revenuebyvirtue of not paying access
`fees to othercarriers.It is possible that the FCC at some point could reverse
`this ruling and make VoIPcarriers pay accessfees.
`
`“Federal Communications Commission Report to Congress,” April 10, 1998, paragraphs 88-93.
`
`The net present value is an engineering economics term for determining
`when the benefit of investing in a new technology outweighs the cost of
`
`
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