The Case for IP Mediation

IP mediation vendors each tout their method of collecting and processing data as the best in the business; meanwhile, service providers wonder why they should leave the cozy simplicity of flat-rate billing.

Although the phrase "IP mediation" has joined the ranks of ambiguous and hyped terms in the telecom industry, the case for IP mediation appears to be strong. The fact is that as carriers and service providers broaden their services and go beyond flat-rate voice or Internet access, they will need an IP mediation strategy.

This is an area that is poised for a boom, as evidenced by a research report entitled "IP Business Infrastructure" released by The Insight Research Corporation last summer. Among the findings were that the packet-based billing mediation market will increase from 10 percent of the overall market last year to 35 percent three years from now.

Even if the IP mediation market is relatively young, the strategic reasons for deploying this technology are becoming clear. "Mediation is really a requirement as you move from the simple circuit-switched world to a converged world, where both traditional circuit-switched measurements and packet-based service measurements have to be interworked in order to render bills," says Robert Rosenberg, president of Insight Research.

Services and applications that use IP or that bill based on content would make full use of IP mediation products. This could include voice over IP, streaming video, video on demand, and 2.5G and 3G wireless data.

Slow Adoption

While vendors such as AP Engines, EHPT, Hewlett-Packard, Narus and Xacct shout from the highest mountains about the necessity of IP mediation, the market isn't necessarily jumping in with both feet-at least not yet. The big question, says Barbara Lancaster, president of consultancy LTC International, is whether service providers will "have to have complex pricing and service bundles in an IP environment just because we did that before."

"That's one of the reasons for the delay" of IP mediation deployment, she says. "If you look at the real cost for service providers to have all those marketing plans and resulting complexity in the billing system and what the customers want, it's not clear to me that all these weird and wacky plans that the marketing guys dream up are actually worthwhile."

Customers have reacted positively to simple pricing plans, and service providers don't have to deal with complicated settlement and reconciliation processes, says Lancaster. While she thinks it'll be an uphill battle for IP mediation to gain a critical mass of market penetration, she does see it becoming more important for providers with IP-based networks.

"If you're building a brand new network and you are focusing on high-speed access services, then you're likely to buy an IP backbone and edge network elements, and focus on customer care and billing for an all-IP environment," Lancaster says. So far not many carriers fitting that description have emerged on the scene. "Most people feel they need to have a broad basket of services to offer customers or they are not going to get small and medium businesses to shift carriers."

"IP mediation really has to sell itself to the customer; it comes back to the total cost of ownership and to how many service providers have IP networks," she says. "They have to have regular billing/mediation, regular provisioning, regular activation, and now they have a whole other layer with IP services."

Even if IP-based carriers need IP mediation functions for their business, deployment of these types of systems is still going slowly. "The market has slowed down a bit, but I'm sure I'm not alone in saying that IP mediation is going to be a central part of the [OSS] market for the next five years or so," says Mike Allen, senior analyst at Aberdeen Group. "It's simply because the ILECs are going to have to put in a lot of these types of systems and have all of this work together."

While the vendors might be claiming they are deploying a lot of systems, it's not happening quite that fast. "I think what's going on is the ILECs are doing something very tricky from a strategic point of view," Allen says. "On the one side, they really want to appear as the market leaders for consumers with DSL and broadband; on the other side, they don't want to put it in too fast, because the longer they can forestall market adoption of these kinds of services, the more they can put CLECs at a strategic disadvantage."

He says that if the CLECs can't make money due to economic and other circumstances, they will go out of business and put the ILECs in a good position.

Another reason why IP mediation systems have been somewhat slow to take off is the fact that they have to work with legacy systems. "That's a considerable complexity, because we still don't have an easy way to make sure all of our billing records flow into these new systems," Allen says.

Flat-rate billing may be easy and comfortable for both service providers and customers, but realistically most industry watchers don't see this model lasting very long. "The reason why you have people doing flat-rate billing is partly because they don't know how to do usage-based billing," says Phil Mutooni, manager of BSS/OSS engineering at IP network provider iBasis, which offers unified communications services over IP to service providers. "If you can't bill for services, you go the simple route," he says.

"I think it's difficult for people to have a conceptual idea about this, because when they think of IP they think of surfing the Web-where you don't need anything more than one bill at a flat rate," Allen says. "ILECs and service providers generally have a deep interest in keeping things simple, [because they know] that with IP they will have to put in a lot of other related systems such as IP fraud, fault management and other OSS and billing systems. If they can put it in a little more slowly, they'll have time and money to implement those changes."

IBasis is fairly indicative of the types of service providers lining up for IP mediation products. Mutooni says they invested in IP mediation in part because a customer had special requests for billing. "They had special requirements for how often they wanted to be billed and how numbers were computed, so it was more than flat rate," he says. "We needed to put something in to give us the granularity and level of understanding on what each user was doing on the system. This had to be nonintrusive, as close as possible to real time and have the flexibility of looking at those records from the wire or data mining logs." For more on a combined approach to IP mediation, which involves both probe-based and event-based methods, see "Hybrid Mediation Systems,".

The Theory of Evolution

IP mediation start-up companies know fully that they occupy a very narrow niche in the OSS infrastructure. Also, many of the companies that are making important developments in this space are fairly small and don't have the backing of a big name behind them.

"The overall perception of mediation is that it's something simply to gather data for billing," says Chris Whitely, project manager at Insight Research. "But the major mediation vendors out there today are focused on doing more than just billing."

Part of IP mediation's value to a network is that the software typically resides between network elements and the rest of the back-office infrastructure. It captures customer usage information close to the network-in some cases from the wire directly-and correlates, rates and generally packages the data in such a way as to be useful.

This puts IP mediation platforms in the unique position of potentially collecting and passing a lot more than just usage data to the billing system. Just one example involves AP Engines, whose AP InterLink product suite includes a module that enables automated service activation.

Mediation "is really going to have to touch much more than the billing system," Allen says. "It's going to have to touch all of the other accounting systems, marketing systems, plus all the other OSSs like provisioning." He adds that IP mediation has to hit the service management layer, the network management layer and all the way down to the element management layer.

Mutooni says added features would be interesting "if the functionality they will give us includes more capabilities, such as being able to look at data in different ways, and not just gathering information but having the ability to look at SNMP traps and so on."

There may be strong arguments for building out the functionality of IP mediation products, but Insight Research's Rosenberg cautions against trying to do it all. "If I want to take a mediation system and start to create what looks like the full functionality of a provisioning system, it becomes a cost-benefit analysis," he says. "You have to ask if the investment in engineering gives you the bang you want when the other guy has invested years to build a provisioning system."

Rather, he says, IP mediation companies might be better off building hooks to other OSS components, something most of them have already done.

Partner or Perish

Most IP mediation vendor have dozens of partners. Ultimately a jam-packed list probably doesn't amount to very much, but if actual R&D is going on among the companies, then that's a different story.

The major IP mediation companies have partnered with billing, provisioning and other OSS vendors, and in some cases they are preintegrating their software packages. Because most service providers are fairly set on their billing vendor, the IP mediation platform usually comes later and by necessity must accommodate existing infrastructure. In addition, IP mediation vendors can get service provider buy-in by publishing open APIs. "From a practical perspective, [IP mediation companies] have to be able to be as seamless and as quick to integrate as possible," says LTC's Lancaster. "It doesn't leave them much choice but to send out their API specs to everyone to see if anyone has a problem."

"I think ultimately alliances probably don't mean anything, but I think it's one way to make sure that your product works well with others," Aberdeen's Allen says.

Beyond preintegration or open APIs, the question becomes: Does it makes sense for the billing vendors to include mediation as part of their platforms? "This has been a cyclical argument for the past 25 years on the traditional voice side, where the mediation players will come out with a rating engine and then no one uses it because it conflicts with the rater in the billing engine," Lancaster says. "They turn off the module, and then a couple of years later they decide that rating engine is good, so it's the same kind of circular argument we're seeing with the IP mediation guys."

Allen says we may see mediation functionality showing up within other OSS software-most notably billing-and then those vendors will sell everything as one package. "It will happen because there's market interest in doing that-no matter if they are an ISP, ILEC or CLEC," he says. They have an interest in getting these systems installed quickly and at lower cost."

However, Mutooni from iBasis isn't optimistic about combining billing and mediation into a single product. "You don't want your billing system to be your mediation system, because the key is you always want flexibility," he says. "If you don't decouple them, you're constraining yourself."

While an end-to end system has obvious advantages to service providers that don't want the complexity of integration work, Mutooni cautions that it could also be a double-edged sword. "The only thing is when you create an end-to-end solution you align yourself very strongly and essentially you're making a statement," he says. "For example, Lucent now can't go out there and sell its equipment and support Portal's billing software."

A few IP mediation products are under the auspices of large companies such as HP and Lucent, but most mediation companies are on their own. Yet, as many companies race toward the goal of providing an end-to-end OSS system, we may see some of the IP mediation players like AP Engines, Narus, or Xacct get gobbled up by larger companies. "We expect to see activities like acquisitions, since some of these companies might be good candidates for the big companies," Mutooni says.

In addition to keeping an eye out for possible acquisitions, no one is ruling out new entrants joining the IP mediation fray. So far, several IP mediation companies have become more widely known and have signed up more customers, but the market is still fairly wide open. "I do think there will be more entrants in the market, but the new companies have to differentiate themselves and show they can provide something of value that the others don't," says Whitely at Insight Research.

Another source of innovation could come from established, traditional mediation companies also jumping in-sometimes being pushed into the IP market by their ILEC customers. "I'm in the camp that the big guys [traditional carriers] are far from dead," says LTC's Lancaster. "They are pushing their current mediation vendors to be able to handle IP, so you're seeing a lot of the traditional guys like Computer Generation Inc. [acquired by Intec Telecom Systems in November 2000] and Comptel working on products that can do that." This way, she says, the incumbents don't have to put in new software from another vendor, and they don't have to retrain staff or buy new hardware.

Finding Its Place

Technologically, IP mediation may be a no-brainer for service providers delving into the world of IP and usage-based services. However, while market projections are rosy, it's taking longer than expected to reach those levels.

"Given the current [economic] climate, things won't move as quickly as I thought they might two years ago," says Insight Research's Rosenberg. "The point is this may take several more years to mature. This is not labor-intensive software development; you don't need armies of people, but what the companies do need is a few dozen really good people to build a system and find indirect ways to sell it."

Sidebar

Hybrid Mediation Systems

While many service providers have yet to jump on the IP mediation bandwagon, others are contemplating what comes next.

Most IP mediation products on the market today take one of two technology approaches. They tend either to use probes or analyzers to actively collect usage-based data, or to take a more passive approach by looking at audit logs or other collection points for information. However, there's already some talk about using a hybrid approach-that is, to deploy both the probe-based and event-based methods of data collection.

"I think we'll see more of the combination approach simply because no vendor can be certain which types of applications and uses are going to take precedence in the market," says Mike Allen, senior analyst at Aberdeen Group. "I suspect they'll hedge their bets and use some combination of the two, but what that hybrid will look like I really don't know."

IBasis, which runs an IP network and offers services to carriers and other providers, uses Narus' IP mediation platform for a suite of services that includes e-mail, voice, and fax. According to Phil Mutooni, manager of BSS/OSS engineering at iBasis, the company may be going to a hybrid approach to mediation in the future. "In voice over IP, you want to authenticate calls in real time, so you need that information off the wire; on the other hand, you can get other information from logs," Mutooni says. "It depends on the service."

Although iBasis isn't going with a hybrid approach today, Mutooni says that when the time comes they will take a rules-based approach. "Each service will have a rule set," he says. "These rules will define how data is collected and how it's processed."

Ultimately, the decision on whether to choose one method or combine them lies within the service provider's implementation, says Chris Whitely, project manager at Insight Research. "It has a lot to do with the status of their network, what kind of networks they have in place and what kind of data they need to get," he says. "The IP world makes it a bit more complex because there are new network elements, and service providers will have to know how they are going to bill."