June 1999

The news is simply breathtaking! (And this, from a jaded telecom journalist, no less!) For champions and boosters of the fledgling Internet telephony industry, the announcement by British Telecom and Nortel Networks — two of the largest incumbent, PSTN players — that they will build a brand-spanking new IP telephony network infrastructure in Spain is the watershed event we’ve all been waiting for. In one fell swoop, BT and Nortel have helped validate the technology, the applications, and the astounding opportunities awaiting companies that are smart enough and brave enough to take the IP plunge.

THE PLAYERS
Nortel Networks (www.nortelnetworks.com), as evidenced by this announcement, has not been twiddling its R&D thumbs (all 40,000 of them) in the time since its 9-billion-dollar merger with Bay Networks. To wit: Nortel Networks is winning a large share of recent voice and data switching sales to new carriers, has a huge chunk of the new pan-European OC-192 network business, and is winning lots of business from new CLECs entering the telco market. More importantly, the company is starting to deliver on its oft-quoted approach to deliver IP telephony from the network core — and has the carrier-class equipment to finally back up its claim.

British Telecom (www.bt.com), once lumbering and slow to respond to new market opportunities, is acting more like a new telecom tiger — it has refocused on new, emerging broadband and IP-centric technologies and revamped itself to aggressively pursue new opportunities in the deregulating European telecommunications market. BT is currently the sixth largest carrier in the world, with over 27 million subscriber lines and revenues of over $25 billion.

THE GIST OF IT ALL
In December 1998, when the Spanish market opened to competition, British Telecom won a competitive operating license, allowing it to compete with Telefonica Espana, the Phone Company of Spain, for subscribers in Telefonica’s backyard. But instead of sticking with old-line PSTN technology and infrastructure, BT decided to catapult itself and the Spanish telecommunications services market into the new millenium with a new, native IP telephony service infrastructure.

This new network aims to offer a combination of full-featured telephone services and advanced data/multimedia services to customers of BT’s Spanish subsidiary. BT will initially install over 90,000 lines in 10 cities, with plans to expand to 27 cities within three years. Beginning with full-featured long-distance services available by the end of 1999 to over 20 million potential customers, BT will offer a full range of voice, data, and multimedia services using new Internet-based technology from Nortel Networks (these technology elements are described in more detail under the heading Nuts and Bolts below).

The new network will be entirely based on Internet Protocol (IP) equipment and software that will strive to offer a user experience and level of quality on par with traditional telephone networks — largely due to the support and use of Signaling System 7 (SS7). Because the new network is running IP, BT estimates the cost to acquire and operate the network will be approximately 50 percent of a traditional voice network. And, because of the open, modular nature of Nortel Networks’ Internet telephony technology, it should be possible for BT to introduce advanced services on a large scale more quickly than using more traditional service platforms.

According to estimates by Probe Research (www.proberesearch.com)a leading market research firm covering the IP telephony market, the total installed base of voice over IP by service providers is under 200,000 lines today. These lines are primarily used for discount services that avoid high long-distance charges by using the Internet instead of established phone companies’ networks. This would make BT’s network in Spain, at an initial 90,000 lines, the largest VoIP network in the world.

THE GAME PLAN
Initially, by the beginning of the year 2000, BT and Nortel will offer alternative long-distance services nationwide to citizens in Madrid, Barcelona, Seville, Valencia, Valladolid, Malaga, San Sebastian, Zaragoza, Bilbao, and La Coruna. The service will be offered over a high-speed optical network connected to approximately 75 CVX 1800 access switches from Nortel Networks, the majority of which will be installed over the next 24 months. The CVX switches are controlled by open and extensible Java-based software — one of the linchpins of Nortel Networks’ Internet telephony strategy.

Around the year-2001 timeframe, BT and Nortel will aim to consolidate all voice and data services over the network, and launch the first wave of multimedia services. In the year-2002 timeframe, the plan is to start offering multimedia and broadband enterprise and residential services.

The services that will initially be offered include an array of core network services such as SS7 ISUP 1+ long-distance, local number portability, calling cards, 800 and 900 number services, operator services, and voice VPNs. Second-phase, managed voice services will include IP Centrex, IP CLASS services, emergency 911, and global roaming. Third-phase, multimedia services will include Internet call waiting, unified messaging, desktop video conferencing, and click-to-talk Web buttons.

NUTS AND BOLTS
BT plans to leverage Nortel Networks’ new IPConnect Internet Telephony solutions product line to make these services a reality. IPConnect is Nortel Networks’ platform for providing full-featured telephone services and advanced data/multimedia services, employing Java-based call control and services, and a scalable MGCP (Media Gateway Control Protocol) architecture.

IPConnect implements a distributed architecture consisting of five basic components:

• IPConnect Call Engine (ICE);
• CVX 1800 Access Switch or media gateway;
• Universal Signaling Point (USP) SS7 gateway;
• Universal Audio Server (UAS); and
• Integrated Network Management (INM).

The IPConnect Call Engine is Java-based call control software that runs on commercial computing platforms, such as Sun Microsystems’ Solaris-based servers. The IPConnect Call Engine issues instructions to various media, signaling, and service-related elements in an IP network. This includes call signal processing, call establishment and related management, resource management, service delivery, and admissions control in an IP network environment. The IPConnect Call Engine maintains current status information of all calls and generates administrative records necessary for activities, including billing.

The CVX 1800 Access Switch is a third-generation media gateway that is optimized for large-scale, IP-based long-distance networks. Its purpose is to provide bidirectional interfaces between a circuit-switched network and various media-related elements in an IP network. The key responsibility of the CVX 1800 is to transport media of various types — including voice, fax, video, and modem data — between the IP network and the circuit-switched network without loss of integrity or degradation of quality.

The Universal Signaling Point (USP) is a signaling gateway that provides reliable and secure access points between an SS7 network and various call control-related elements in an IP network. The key responsibility of the USP is to repackage SS7 information into formats understood by elements in each network and to present a reliable view of the elements in the IP network to the SS7 network.

The Universal Audio Server is a service module that provides value-added capabilities beyond call establishment and control. The main function of the Universal Audio Server is interactive voice response (IVR). Other available features include fax and conferencing services. The Audio Server accommodates multiple languages and enables dynamic recording, flexible configurations, user-friendly provisioning, and natural sound.

Integrated Network Management (INM) enables carriers to perform a multitude of functions, such as configuring new services, monitoring element performance, and downloading software upgrades. INM’s key management functions include fault management, accounting management, performance management, and policy management.

Nortel Networks’ IPConnect promises to deliver a number of benefits to BT, allowing the company to leapfrog current implementations of Internet telephony. One of the key features of the solution is its ability to provide PSTN equivalent telephony services with no customer behavior changes — a smart and very meaningful capability. The system also allows BT to ramp up services very quickly, as it has de-coupled services creation from the transport mechanism.

Other valuable benefits to BT include the ability to have the IP telephony network interoperate with existing circuit-switched networks using native SS7 signaling, and the lower infrastructure costs that are part and parcel of taking advantage of an open architecture, general computing platform, and silicon economics.