Use of proprietary solutions in VoIP industry, Vonage case

Using proprietary call agents are not uncommon in VoIP industry. Several service providers including Vonage, Softbank, NuVox etc use their own call agents because of three broad reasons: (1) to save some money on equipment purchases and improve margins, (2) to maintain control over development of applications and hence be able to differentiate, and (3) off-the-shelf gear sometimes does not meet the specifications of a service provider’s business plan and feature requirements.

Back in late nineties there were several VoIP providers that used their own proprietary hardware and software solutions. According to our 1999 annual report, around 21 percent of the service providers operating in the market at the time were using proprietary gateway or call controller. These included Net2phone, OzEmail Interline (later acquired by ITXC), Innomedia, Networks Telephony, and Wherever.net. Using in-house developed software and hardware was more common among IP fax service providers due to problems with implementation of T.38 standard.

There simply were no robust off-the-shelf VoIP systems available in the market. Vendors used service provider networks to ‘lab-test’ their products. The initial deployments for the vendors were more like bakeoffs. Naturally the service providers did not put much trust in these systems. However since the late nineties, VoIP equipment has come a long way. The quality has improved significantly. Nevertheless, it stands true that service providers still attempt to differentiate their service offering by leveraging open APIs provided by vendors. That will continue to a certain extent. This exercise is in most cases limited to gaining experience on the vendor product rather than to add value to the product in form of new features. However I have found that new features added by service providers on their own initiative are often found available off-the-shelf, which is why service providers like Vonage and Softbank do not have to re-invent the wheel.

Background to Vonage’s proprietary call agent
Most of the VoIP service providers that started off as using proprietary gear, migrated overtime to standards-based off-the-shelf gear. The reasons why Vonage chose to stick to the proprietary call agent are two-fold: (1) Prior to retail VoIP offering, Vonage offered Cable companies and ISPs a private label VoBB solution. Six years ago, when Vonage got going in that direction, companies like Broadsoft and Sylantro could not offer Vonage such a private label solution. Vonage had to develop it in-house. (2) Vonage had developed an early fascination with dynamicsoft (later acquired by Cisco) application development environment. Dynamicsoft did not start off as an application server vendor. It started off as a protocol stack vendor later discovering that application developers preferred to build SIP stacks in-house rather than source them from third party vendors. However, by the time dynamicsoft had switched over its development emphasis, Vonage had already built applications of its own using dynamicsoft SIP stack.

Vonage’s switch over to standards based call agent solution
The initial work on dynamicsoft stack and the early business model of private label VoBB led Vonage to stick to its own proprietary call agent. The rest, we heard from Judge Claude Hilton some months back. However there is not much reason to continue using the proprietary call agent. Vonage, if it survives, will at some point switch over to standards based call agent. The infringement is likely to catalyze that. It remains to be seen how quickly Vonage is able to do the switch over to standards based call agent, should it decide to take that route. The switch over will not take less than a year if Vonage is to avoid disruption of its service features.