June 1999

BY DOUG KLAIBER

Throughout the telecommunications marketplace, a trend toward deregulation and liberalization has raised expectations for increased competition, reduced consumer prices, and led to innovative new services. Here in the United States, the Telecommunications Act of 1996 was widely touted as the beginning of a new age of affordable, new services. Yet consumers have yet to see any significant new service offerings or savings in their monthly bills. Why hasn't the promise of lower costs and new service offerings been realized in the marketplace? The answer lies not in the halls of government but in the central office facilities of service providers. The rules have changed but the infrastructure has not.

ARCHITECTURAL LIMITATIONS
While the stage has been set for a new competitive landscape, the existing network architecture has prevented its realization. In markets where CLECs (competitive local exchange carriers) are challenging the ILECs (incumbent LECs), these CLECs are often merely reselling services using the existing infrastructure. In fact, industry experts estimate that more than 90% all CLEC access lines are passively resold.

Facility-based CLECs attempting to build new networks have been hampered by the high cost of large, proprietary Class 5 switches. With a typical up-front cost of $3 million per deployment, traditional switch technology has prevented CLECs and other next-generation service providers from significantly altering the cost models long employed by the ILECs.

The existing proprietary Class 5 switching infrastructure has also hampered service providers' ability to create and deploy innovative new services to gain a competitive advantage. The proprietary architectures of the existing switch platforms have made network operators entirely dependent on switch vendors for new software applications and upgrades. These software upgrades and new services often take years to develop, are extremely expensive, and remain the exclusive property of the switch manufacturer. This makes it difficult for service providers to differentiate themselves and limits the services available to consumers.

NETWORK TRANSFORMATION
Today, however, the U.S. telecommunications market is poised to enter a new era of competition - an era that finally realizes what the Telecommunications Act of 1996 promised. The Public Switched Telephone Network (PSTN) will be transformed as voice, data, and enhanced services converge. A new network architecture will emerge, driven by new technologies, new demand, and increased competition.

Today's network is divided into two elements: the PSTN and the Public Switched Data Network (PSDN). The PSTN consists of large, centralized proprietary Class 5 switches with Remote Switching Modules (RSMs) and Digital Loop Carriers (DLCs). This architectural configuration, representing $250 billion in network investment and hundreds of billions of dollars in annual service revenues, has changed little over the last several decades.

In contrast, the substantially smaller PSDN - consisting of network point of presence (POPs) and remote access devices - is growing at a dramatic rate. The growth of the PSDN is being driven by the Internet, intranets, Virtual Private Networks (VPNs), and remote access. However, the PSTN remains the principal means for delivering data services. According to Dataquest, 46.5 million analog modems will be sold in the year 2000. And nearly all personal computers purchased today come equipped with a 56K modem.

Many industry pundits have been claiming that packet-switched voice will displace circuit-switched voice in a matter of a few years. However, despite the hype, VoIP has yet to establish itself in any significant manner. If packetized networks are truly destined to displace circuit-switched networks, the process could easily take a decade or more - if it ever happens at all.

Thus, some form of convergence between the PSTN and the emerging PSDN is inevitable. The trouble is, no one is certain of how and when this evolution will take place. Nevertheless, two things seem clear:

1. With the existing central office switch infrastructure representing a multi-billion-dollar investment, it is unlikely operators will opt for a wholesale replacement of it any time soon.
   
   
2. While packet-based technologies like IP and ATM will dominate in transport applications and are well suited for Class 4/toll circuit switching, Class 5 TDM (time division multiplexing) will be required in the network for some time. Class 5 switching will become more distributed, reside at the edge of the network, and become integrated with enhanced service offerings.

In other words, circuit switching and packet switching will co-exist for quite a while, with IP, ATM, and TDM all playing complementary roles.

A NEW ARCHITECTURE
Against this evolving network landscape, a new network architecture is emerging - a next-generation architecture blends the PSTN and the PSDN.

Instead of large, centralized, proprietary switch infrastructures, this next-generation architecture pushes central office functionality to the edge of the network. The result is a distributed network infrastructure that leverages new, open technologies to dramatically reduce the cost of market entry and increase flexibility, while accommodating both circuit-switched voice and packet-switched data.

This shift is strikingly similar to the change that occurred in corporate information processing during the last decade. Economics and breakthrough technology combined to completely alter the data networking architecture. Today, instead of networks based on large, centralized, expensive mainframes and "dumb" terminals, we have distributed networks made up of low-cost, "smart" desktop computers linked together. This architecture has allowed the mainframe computers to do what they were originally designed to do and permitted applications to be pushed closer to the end-user, reducing overall cost, while greatly enhancing system flexibility and functionality.

In other words, this new generation of low-cost, open switching platforms has the potential to transform the telecommunications service market in the same way the desktop PC changed the corporate computing landscape. Large centralized Class 5 proprietary switches will continue to play a roll in the network, but distributed open Class 5 access and enhanced services platforms will play a dominant role in altering the network landscape.

THE MISSING LINK
Key to the success of this transformation is a new next-generation architecture - purposely built to provide the "missing link" between the PSTN and the PSDN. This next-generation switching architecture represents an entirely new approach to delivering services, designed to:

• Deliver robust switching functionality at a cost that is orders of magnitude lower than traditional, proprietary Class 5 switches.
  
  
• Distribute central office switching functionality throughout the network.
  
  
• Protect existing investments by supporting a wide range of analog and digital network standards, interfaces, media, and service elements.
  
  
• Reduce the number of network elements by combining a range of telephony, application, and service delivery functions.
  
  
• Enable new service creation through programmability and the flexibility of an open Application Programming Interface (API).
  
  
• Provide a high degree of scalability, enabling network operators to rapidly and cost-effectively grow their subscriber base.
  
  
• Promote extensibility through open architecture design to take advantage of future technology advances.
  
  
• Redefine true, carrier-class design for maximum fault tolerance and zero downtime.

Clearly, this approach represents a dramatic departure from the "old" switch architecture. The differences in a side-by-side comparison are immediately apparent in Figure 1.

CHANGING THE ECONOMIC MODEL
The most immediate and obvious benefit of these next-generation switches is their cost. Compared to traditional Class 5 switches, next-generation switches reduce up-front investment by a factor of 30 and offer scalability that is far less expensive and far more linear.

The market implications of this cost advantage are clear. With a next-generation switch, even small, start-up CLECs can afford to enter under-served secondary or tertiary markets and compete profitably. As these CLECs gain market share, next-generation switches can be rapidly and cost-effectively scaled to meet growing demands.

THE SERVICE ADVANTAGE
Reducing cost, however, is only part of the competitive equation. Today's subscribers demand services that add value to their personal communications. The ability to create and deploy customized services that satisfy subscribers' needs is required to compete profitably.

Next-generation switches offer an advantage: flexible programmability, with enhanced service applications integrated within the switch architecture. This eliminates the need for a separate enhanced services platform in most situations, further reducing up front costs. The open software architecture of next-gen switches allows rapid development of new services and features. When combined with the low cost and distributed nature of next-generation switches, this flexibility enables network operators to create bundled service offerings tailored to discrete subscriber bases - even in the smallest deployments. The implications and benefits of this are clear to any network operator in a competitive situation.

DELIVERING ON THE PROMISE
While opinions abound, the fact is that no one is certain how the multi-billion dollar telecommunications market will shake out. To compete and win in the next century, network operators will need vision and extreme flexibility. Advanced next-generation switching architectures offer the ability to:

• Reduce the cost and complexity of network operations by pushing switch functionality to the edge of the network.
  

• Satisfy the need for voice/data convergence, giving network operators the flexibility to take advantage of emerging technologies and standards.
  
  
• Protect existing network investments, while allowing network operators to cost-effectively deliver new services to new markets.

Next-generation switches will provide a solid migration path from the networks of today to the converged networks of tomorrow. They offer full PSTN integration and true Class 5 switch capabilities, together with seamless integration with IP and ATM data backbones. Their open programmability enables next-generation switches to deliver customized enhanced services to discrete subscriber bases. Additionally, their low cost and high scalability enables profitable operation in both small and large deployments.

Doug Klaiber is director of marketing for Taqua Systems, Inc., and he can be reached for comment at (508) 778-8808 or online at dklaiber@taqua.com. Taqua is an emerging leader in next-generation switching platforms based in Centerville, Massachusetts. For more information on Taqua visit their web site at www.taqua.com.

FIGURE 1           [Return to text]