White Paper

Prepaid Application

Veraz Networks Inc.

Pub. Rev. 01

Date Dec-05

Revision record: White Paper: Prepaid Application Description Auth: MD

Publication No. 05121401-01

Copyright by VERAZ NETWORKS INC., 2005. All rights reserved worldwide. The information contained in this document is proprietary and is subject to all relevant copyright, patent and other laws protecting intellectual property, as well as any specific agreement protecting VERAZ NETWORKS INC.s rights in the aforesaid information. Neither this document nor the information contained herein may be published, reproduced or disclosed to third parties, in whole or in part, without the express, prior, written permission of VERAZ NETWORKS INC. In addition, any use of this document or the information contained herein for any purposes other than those for which it was disclosed is strictly forbidden. Any representation(s) in this document concerning performance of VERAZ NETWORKS INC.s product(s) are for informational purposes only and are not warranties of future performance, either express or implied. VERAZ NETWORKS INC.s standard limited warranty, stated in its sales contract or order confirmation form, is the only warranty offered by VERAZ NETWORKS INC. in relation thereto. VERAZ NETWORKS INC. reserves the right, without prior notice or liability, to make changes in equipment design or specifications. This document may contain flaws, inaccuracies, omissions or typesetting errors; no warranty is granted nor liability assumed in relation thereto, nor responsibilities for third-party rights which may be affected in any way by the use thereof, unless specifically undertaken in VERAZ NETWORKS INC.s sales contract or order confirmation. Information contained herein is periodically updated and changes will be incorporated into subsequent editions. If you have encountered an error, please notify VERAZ NETWORKS INC.

White Paper

Prepaid Application

Contents
Executive Summary .............................................................................................................5 Business Analysis................................................................................................................6 Environmental Analysis .................................................................................................6 Overview ..............................................................................................................6 Deregulation.........................................................................................................6 Customer Demand ...............................................................................................6 Socioeconomic Requirements..............................................................................7 Market Analysis.............................................................................................................7 Target Market.......................................................................................................7 Market Characteristics and Problem Analysis ......................................................7 Market Requirements ...........................................................................................7 Market Forecast and Analysis ..............................................................................8 Available Platforms ..............................................................................................................9 PC Platforms .................................................................................................................9 Switch Platforms ...........................................................................................................9 Service-Node Platforms ................................................................................................9 The Prepaid Solution from Veraz ......................................................................................10 Introduction .................................................................................................................10 Prepaid Services Application Solution Components ....................................................11 Prepaid Services Application Solution Components ....................................................12 Veraz Prepaid Service Solution Features ....................................................................12 Prepaid Service Solution Costs ...................................................................................13 Three Important Questions................................................................................................14 References:.........................................................................................................................14

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Veraz Networks Inc. Proprietary

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Prepaid Application

Executive Summary
According to The Yankee Group Prepaid providers are under extreme price pressure, and customized services have emerged as a dynamic opportunity for revenue growth, especially in wireless applications. The Yankee Group predicts the wireless prepaid market will grow 24 percent by 2008. The main reasons for high market demand for prepaid service are mainly because they serve as an alternative to traditional telephone calling cards; they act as budget control for business and/or personal use; they facilitate travel to foreign countries; they allow for prepaid wireless services; they offer alternatives in areas where residential service is difficult to obtain; they can be helpful in emergency situations and they provide options for customers with sub-optima credit ratings. The prepaid industry, though prosperous, has its challenges. With competition on the rise, service providers are forced to build traffic volume and keep the margins low to survive. In order to succeed they need to keep costs low; operate their networks with high efficiency; maximize the reach for their services. They also have to interconnect with multiple carrier networks supporting diverse protocols and signaling standards. Finally, they must have proven interoperability with best-of-breed prepaid service platforms, multi-national signaling support, seamless any-to-any protocol interworking, and maximum bandwidth efficiency. The Veraz prepaid service solution is ideal for retail National Long Distance (NLD) and International Long Distance (ILD) service providers; wholesale network providers, wholesale providers of specialized pre-paid service; and wireless service providers. These service providers may offer service to individuals, businesses or non-traditional customers (those without local service or permanent locations or with credit challenges). Prepaid services can increase both revenues while reducing risk and collection expenses. The Veraz Prepaid Service Solution delivers a highly cost-effective and flexible solution for service providers. The following is a list of eight reasons why Service Providers should choose the Prepaid Service Solution from Veraz: 1. Fully distributed, scalable, modular architecture enabling fast, low-cost expansion into new markets accelerating time to market and revenue generation 2. Optimal bandwidth efficiency coupled with uncompromising toll-quality voice over both TDM & IP ILD networks 3. For global service providers, Veraz provides the widest possible global footprint through different types of public networks by delivering multi-national SS7 signaling support with adaptable SS7 signaling framework 4. Veraz provides multiple protocols interworking 5. Veraz provides highly cost-effective IP-based solution compared to traditional TDM alternatives by as much as 30% 6. Veraz enables granular control over routing and service policies leading to efficient usage of network resources & lower costs 7. Veraz offers a broad range of potential end-user customers 8. Fast time to install, test and turn-up. Veraz prepaid solutions can be installed in matter of days whereas legacy solution may take several months to year to install and turn-up.

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Veraz Networks Inc. Proprietary

Prepaid Application

White Paper

The return on investment for prepaid application solution varies from market to market. Return on investment will depend on many factors including: a) deployment scale - e.g., how many million minutes per month, b) versatility of platform for differentiation and c) ability to leverage multiple applications with prepaid billing. With best-in-class next-generation solutions leveraging a distributed softswitch approach, the return on investment is greatest with high subscriber base widely distributed, service differentiation, and service-richness and can be shown to be less than a year or even less than six months to breakeven.

Business Analysis
Environmental Analysis
Overview
According to industry analysts prepaid service is one of the fastest-growing segments in the telecommunications industry and is in high demand for the following main reasons: ! Serve as an alternative to traditional telephone calling cards ! Act as budget control for business and/or personal use ! Facilitate travel to foreign countries ! Allow for prepaid wireless services ! Useful for business promotions ! Offer alternatives in areas where residential service is difficult to obtain ! Helpful in emergency situations ! Provide options for customers with bad credit ratings There are several factors responsible for the growth of the prepaid application:

Deregulation
Global deregulation has played a very important role in the telecommunications industry and dramatically changed the competitive landscape. Time to market, price wars, bundling, and value added- services are the main strategies deployed by companies in the new environment.

Customer Demand
As the availability of information increases, so does the level of customer expectations of service providers. Customers, not limited to a single service provider, have the option of switching if the providers do not meet their requirements.

Veraz Networks Inc. Proprietary

05121401-01

White Paper

Prepaid Application

Socioeconomic Requirements
The socioeconomic environment also has an impact on the services required by the market: ! Credit risk spawns prepaid use ! Globalization necessitate more business meetings ! Control of costs associated with travel ! Mobile phones and prepaying for their childrens accounts

Market Analysis
Target Market
The telecommunication prepaid application targets two main markets: The primary market is the retail National and International long-distance service providers and / or Wholesale of specialized pre-paid service providers. The secondary market is the Wholesale Network and some wireless service providers.

Market Characteristics and Problem Analysis

The prepaid market has plenty of opportunities and challenges. Prepaid service providers need to maintain competitiveness, need to sustain customer loyalty, and need to interconnect with diverse global networks. The following highlights the main market characteristics: ! Highly competitive market characterized by high volumes & low margins ! Service providers focus on cost much more than quality of service ! Providers need to maximize reach for services to increase volume ! Service providers need to provide access to customers via both legacy TDM and emerging IP networks ! Interconnection with multiple carrier networks supporting diverse protocols and standards is critical ! Specialized providers typically offer both retail and wholesale services signaling

Market Requirements
! Highly efficient usage of network resources and bandwidth ! Easy, standards-based integration with best-of-breed prepaid servers ! Seamless interworking with TDM as well as early generation and emerging VoIP networks (e.g. H.323 & SIP-based networks) ! Support for multi-national SS7 and PRI signaling standards in order to have local terminations & lower costs ! Support for distributed deployment configurations to enable low-cost expansion into new regions ! Support for both retail and wholesale services using same platform

05121401-01

Veraz Networks Inc. Proprietary

Prepaid Application

White Paper

Market Forecast and Analysis

Thomas Miezejesk, the author of the article prepaid morphs, published on September 05, 2005, explains that the Pelorus Group reported that there is no question that prepaid has attracted the attention of the major players in the telecom industry.

Figure 1 (Source: Pelorus Group)

As can be noted from Figure 1, Pelorus projects that the prepaid wireless market will grow to $25 billion by 2007. The same infrastructure established to support prepaid wireless can be used to issue prepaid debit cards and other stored value products. The Yankee Group predicts the wireless prepaid market will grow 24 percent by 2008 as prepaid providers are under extreme price pressure, and customized services have emerged as a dynamic opportunity for revenue growth, especially in wireless applications.

Veraz Networks Inc. Proprietary

05121401-01

White Paper

Prepaid Application

Available Platforms
There are basically three prepaid service equipment configurations available for use by service providerspersonal computer (PC) platforms, switch platforms, and service-node platforms.

PC Platforms
PC platforms are not carrier-grade and not considered for large service providers.

Switch Platforms
A single switch will typically have interactive voice response (IVR) resources, together with a workstation necessary for administration purposes. Traditional TDM switch-based platforms usually have high call capacities and offer reliable network operations as well as centralized control for call processing. The disadvantages of switch-based platforms are that all calls must be transported to a central point for voice treatment and processing, are costly and are often not flexible enough to allow for customization.

Service-Node Platforms
The traditional service-node configuration is generally comprised of a set of functions mapped to one or more network components. The functionalities are basically call processing, specialized resources, and database capabilities. Service-node platforms usually have larger switching capacity, reliable network operations, centralized control, and a modular architecture that can grow with call volume. The disadvantages of traditional service-node platforms include their higher purchase price for lowvolume operations. With Next Generation Networks, new service nodes, combining a distributed softswitch and prepaid platform, improves the economics of prepaid deployments. In addition, next generation solutions are more easily customized with service-creation environments.

05121401-01

Veraz Networks Inc. Proprietary

Prepaid Application

White Paper

The Prepaid Solution from Veraz

Introduction
With proven interoperability with best-of-breed prepaid service platforms, multi-national signaling support, seamless any-to-any protocol working and maximum bandwidth efficiency, the Veraz Prepaid Services Application solution provides a highly cost-effective and flexible solution for service providers. Being IP-based, the Veraz Prepaid solution allows the prepaid service platform to be hosted at a central location on the IP network, while delivering services to multiple regions and countries resulting in significant cost-savings compared to traditional TDM solutions. The cost-effectiveness is further enhanced by the fully distributed, modular architecture of the ControlSwitch, which enables expansion to new regions with the addition of just the components required for that location. For instance, expansion to a new region may only require the addition of a media gateway and no additional investment in application or switching infrastructure. With support for multi-national signaling variants of SS7 and ISDN-PRI, and seamless any-to-any interworking between TDM signaling and IP protocols such as H.323 & SIP, the ControlSwitch enables delivery of prepaid services to a broad range of end-users served by IP, PSTN and wireless networks. The ControlSwitchs adaptable signaling framework enables customization of new national variants in a matter of days. Besides enabling rapid entry into new regions to exploit new market opportunities, this allows prepaid service providers to reduce costs via local termination in multiple regions. The Veraz solution leverages best-of-breed prepaid servers that support a rich set of features and are based on standard off-the-shelf computing platforms for cost-effective, scalable and fault-redundant configurations. The comprehensive set of features supported includes on-line credit card validation for recharge, multiple language support, multiple currency support, fraud control and an extensive set of real time rating features. The operational costs are minimized through web-based management of accounts, users and features, including the option of a customer self-service portal. The industry-leading compression characteristics and voice quality of the I-Gate 4000 family of media gateways deliver substantial bandwidth savings for prepaid service providers, along with uncompromising toll-quality voice over both TDM and IP networks. Additionally, ControlSwitch is a core element in solutions that incorporate products from the Veraz VOSA partnership program. Veraz offers numerous field-deployed prepaid solutions interoperable with specialized products from VOSA partners. Key Benefits: ! Highly cost-effective IP-based solution compared to traditional TDM alternatives ! Delivery of prepaid services over the widest possible global footprint via multi-national signaling support and any-to-any protocol interworking ! Choice of best-of-breed prepaid servers that deliver a rich set of easily customizable features ! Fully distributed, modular architecture enabling fast, low-cost expansion into new markets ! Optimal bandwidth efficiency coupled with uncompromising toll-quality voice over both TDM & IP networks

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Prepaid Application

Prepaid Services Application Solution Components

Figure 2: Prepaid Services Application Solution Components

Figure 3: Prepaid Services Application Solution

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Prepaid Application

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Prepaid Services Application Solution Components

! The prepaid service application solution from Veraz includes the following components: # # Veraz ControlSwitch Based on Sun Hardware Platform Veraz I-Gate Media Gateway

! Application Server ! IP-based Prepaid Server ! Carrier-grade computing hardware ! Media Server (software on standard server or separate box)

Veraz Prepaid Service Solution Features

! Service Features # # # # # # # # # Access number and prefix based Dialing PIN and CLI Authentication Call Types (national/ international, VoIP) Sequence calling allowed Post dial and pre-connect branding announcements Multiple and preferred language support Use of multiple pre-paid cards for same call Balance announcement in multiple currencies and in minutes at beginning and end of the call Outgoing Call Restrictions (to certain countries, and numbers)

! Fraud Control Features # # # # Simultaneous Account Access: when a pre-paid card call is in progress, if another call attempt is made using the same PIN, call is blocked CLI Blocking: when call attempt and/or invalid pin attempt thresholds are exceeded for a CLI, it is entered into a Blocked CLI list Admin can add/remove CLIs from the blocked list Service provider can provision threshold values.

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Veraz Networks Inc. Proprietary

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Prepaid Application

! Real Time Rating Features # # Multiple Rate-Plan Support Per minute Flat Rates allows service provider to specify per minute flat rates

National PSTN Calls International PSTN Calls (by country to country rates) Intra-ISP VoIP Calls Inter ISP VoIP Calls

# # # #

Billing based on exact call duration or rounding per one minute and one second Use minimum call charge for calls less than configured minimum call duration Pay Phone Surcharge is added to call rating when applicable CDR generated for every call Fraud Control Features

! Web-based Service Provisioning Features # # # Super user or user privileges for Network Provider Administrators Typical Network Provider Administrative Functions Supported includes Install, Upgrade, Provision Data, Users, Pre-Paid access numbers and Announcements Typical Service Provider Admin Functions Supported incl. provisioning of Rate Plans, Service Offers, Block PINs, CLI

Prepaid Service Solution Costs

The return on investment for prepaid application solution varies from market to market. Return on investment will depend on many factors including: a) deployment scale (e.g., X million minutes per month, b) versatility of platform for differentiation and 3) ability to leverage multiple applications with Prepaid billing. With best-in-class next-generation solutions leveraging a distributed softswitch approach, the return on investment is greatest with high subscriber base widely distributed, service differentiation, and service-richness and can be shown to be less than a year or even less than six months to breakeven.

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Veraz Networks Inc. Proprietary

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Prepaid Application

White Paper

Three Important Questions

Now that you know where the market is going, what the options are and how the Veraz prepaid application solution can play a vital role on your success, we would like to recommend that you answer the following questions to verify if this application is something the service provider would like to pursue. The questions are as follows: 1. Do you service residential or SME business toll/long distance customers? Would you like to reach non-traditional customers (those without local service and/or permanent locations for example, college students, military, tourists from overseas, and people who travel without cell phones)? Would this be a good addition to your current offerings? 2. Have you been servicing credit challenged/budget customers? If so, this may be a good way to increase both revenues and margins while reducing risk and collection expenses? 3. Are your competitors or companies like you operating in other markets more profitable? Is this a service they are being successful at? Veraz can work with individual service providers to determine their unique needs and return on investment scenario. If you require more information on this application, please www.veraznetworks.com or call your local sales representative. visit our web site at

References:
http://www.intelecard.com Sept 05 2005 - Prepaid morphs

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