July 1998

BY Tom Keating

It is curious that convergence should manifest itself in diversity, but that is the case in telecommunications. In this industry, convergence — the integration of voice and data — advances on multiple fronts. Convergence is evident in the mergers among service providers, in the restructuring of private networks and the public switched telephone network (PSTN), and in the rise of Internet telephony. And soon, convergence will find yet another expression — this time at the network appliance level. Specifically, we are looking forward to a new hybrid, a piece of hardware that combines data routing and call switching, a router-PBX.

BATTLE OF THE SERVICE PROVIDERS
The most dramatic instance of convergence we’ve seen is the wave of mergers and acquisitions among service providers. Examples include the recent WorldCom purchases of MCI and UUNET. Also, SBC bought SNET and U.S. West, and Bell Atlantic purchased NYNEX. In addition, AT&T bought out Teleport Communications Group (TCG).

Telecom corporations realize that network bandwidth is power. And, with the Internet’s incredible growth, network bandwidth has never been more important. (In the AT&T/TCG deal, an all-stock transaction valued at approximately $11.3 billion, the real prize was TCG’s huge fiber network.)

However, corporate mergers in the telecom world aren’t just about bigger pipes on the Internet. No, they’re about the future. The telecom corporations realize that their circuit-based networks are becoming antiquated. The future is ADSL (or some other flavor of DSL), packet-based (IP) networks, and fiber. Using packet-based networks is many times more efficient and easier to manage than using circuit-based networks. Packet-based data can be compressed (<4 Kb/s for voice), while circuit-based networks are tied to their inefficient 64-Kb/s voice architecture.

The service providers, including AT&T and WorldCom, are in a battle for supremacy, whether it’s providing phone service (Centrex), long-distance, enhanced services, or Internet access. This battle is going to get even more heated in the latter portions of 1998, but especially in 1999.

COZY CARTEL OR MUTUALLY ASSURED DESTRUCTION?
The wave of mergers among telecom companies make it look as though convergence is another word for consolidation. Well, if that’s what convergence meant — fewer competitors, and hence less competition — we’d have to wonder whether convergence was anything worth celebrating. But convergence is working at more than one level. Convergence is also apparent in the technology the telecom companies rely upon, and convergence at this level promises to make it easier for new players to join the ranks of the service providers, creating more competition.

Telecom companies are in an interesting predicament. As much as they might yearn for the good old days of regulated monopolies, they find themselves in an intensely competitive evironment, which, though it is currently thinning the ranks of the combatants, tempts everyone concerned to "go nuclear," and break everything wide open.

With today’s technology, telecom could start looking more like the data communications world. Basically, the weapons now available to telcos suggest a form of mutually assured destruction. After this battle starts, nothing will look the same.

MERCHANTS OF CONVERGENCE
Let’s face it, the world is going IP. Even the carriers are starting to use IP over Sonet. In my opinion, it’s only a matter of time before the large networking vendors try to break into the carrier market with large-scale router-based voice switches and customer premise router-based PBXs.

We have already seen the emergence of PC-based PBXs, from companies such as Interactive Intelli-gence, AltiGen, and NetPhone. LAN-based PBXs are also starting to emerge, including Selsius, which is IP-based, as well as products from CellIT and Sphere Communications, which are ATM-based. These companies have all seen the trend toward openness, but just as importantly they have seen the trend toward convergence; it is much easier to manage one system than several disparate systems. Evolving from a PBX to a PC-based PBX was certainly a big step in converging traditional separate entities. Having a router-based PBX will be just another step forward on the evolutionary time line within the telecom world.

Companies that used to concentrate on traditional data routers are now adding voice to their router products. For example, Cisco, Bay Networks, and 3Com have all been shipping IP telephony modules on their routers for a few months now.

While these IP telephony modules will certainly increase the revenues of router companies, I see an even bigger revenue opportunity for these companies in the future.

Think of all the PBXs in the world. Even the most "open" PBXs require some sort of serial link, TSAPI, or (if you’re lucky) a 10 Base-T network link. That extra layer introduces latency, another protocol layer to troubleshoot, and other integration hassles. Don’t get me wrong, these solutions usually work very well. However, wouldn’t it be great if we had PBXs that plugged right into your network, that let you use a standard API (TAPI, TSAPI, etc.), and that let you enable advanced CTI and Internet telephony functionality?

These capabilities are available on PC-based PBXs, which have converged the personal computer (PC) with telecom. However, I have an even bigger convergence vision, and it involves the networking companies. I foresee both Cisco and Bay Networks taking on the huge multi-billion dollar telecom market utilizing their router technology to build router-based PBXs for corporations, and router-based switches for the carrier market.

THE TREND TOWARD ROUTER-BASED SWITCHES
Basically, Cisco and Bay will become PBX manufacturers. If you think about it, a PBX already is a router, only it routes circuit-based phone calls rather than data packets. How easy would it be to take a Cisco or Bay router and convert it to a PBX? These networking vendors have already figured out how to add voice to their routers utilizing IP telephony modules. So is it so farfetched to imagine a Cisco router-PBX at a corporate premises connected over a data line (using IP) to the Central Office? The CO could also use routers for call switching, rather than (dare I dare say it) an AT&T 5ESS?

All we need to create a router-based PBX or router-based carrier switch is to take a router and add:

1. voice modules (to connect to the PSTN).
2. a call control API.
3. billing software (for carrier equipment).

CURRENT STATE OF ROUTER-PBX COMPETITION
By now, I may have convinced you that convergence means competition. Well … it does and it doesn’t. Right now, we’re seeing consolidation among data neworking vendors, and we may yet see consolidation between PBX and routing vendors. For example, Cisco bought LightSpeed and NetSpeed. 3Com bought U.S. Robotics. Cabletron and Nortel signed a partnering agreement. And there are rumors Nortel or Lucent may acquire Bay.

While nearly everyone agrees that competition is good, and that it encourages improvements and speeds innovation, few point out an important side effect: Competitors can copy each other so much that they start to resemble each other. (Ever notice how closely Time resembles Newsweek, and how much a MIG resembles an F-15?) And of course, competitors can merge, in which case they actually become each other.

In this industry, the trend toward hybrid appliances may yet lead to hybrid corporations. In the meantime, router companies and PBX companies are no doubt working on eliminating their respective weaknesses and reinforcing their respective strengths.

Datacom Companies Working To Match PBX Vendor Advantages
Are the Nortels and Lucents of the world looking over their shoulders at Cisco and Bay? In truth, Nortel and Lucent do not fear Cisco very much (at least not yet). Nortel and Lucent have years of experience in telecom that Cisco just doesn’t have. Also, with telecom equipment, you need virtually 100 percent uptime, which all major PBX manufacturers have, and network vendors traditionally don’t have.

Cisco, however, is aware of the reliability problems inherent in networking, and it is working on resolving these issues with Hewlett-Packard and Oracle. These three companies are partnering to make sure HP’s Unix, combined with Oracle’s Parallel Server, and Cisco’s networking equipment, has 99.999 percent annual uptime by the year 2000. Should they succeed (and I believe they will), they will be well positioned to break open the telecom market to their networking products. Then, a router-based PBX won’t seem such a fantasy after all!

Another advantage that telecom has over the networking guys is billing software. Years of development have gone into some of these billing systems. Of course, that isn’t necessarily true anymore either. Cisco and HP recently announced their Internet Usage Platform to allow ISPs and other large IP network operators to accurately extract accounting information from an IP environment for use in billing, marketing, and capacity planning. And Bay’s Versalar Access Switch provides usage-based billing. (Hmmm. That sure sounds a lot like something traditional carriers such as AT&T and WorldCom use in their circuit-based networks for tracking billable minutes.)

PBX Vendors May Eventually Work To Match Router Company Advantages
Even if the router-based PBX takes off, the current PBX manufacturers will not stand idly by as Cisco and Bay Networks move into their home turf. They will regroup. They will redesign their product lines and move with market trends. Thus, if the market moves toward router-based PBXs, you can expect to see Nortel and Lucent there. In fact, Nortel already has a router in its product arsenal.

HOW THE ROUTER-BASED PBX WILL EVOLVE
No doubt Cisco and Bay Networks have already thought of creating a router-based PBX. But even if these two networking companies come out with such a product, they have a long way to go before they can compete with Nortel, Lucent, AT&T, and others. And when the router-PBX does eventually come out, you can expect that this device will follow the usual phases of product evolution.

1. Beta phase — Early product development.
2. Early adopter phase ("bleeding edge") — Those that embrace the technology early on even though the product is untested.
3. FUD/discrediting phase — Competitors attempt to sow fear, uncertainty, and doubt. (What the traditional telecom companies, and perhaps the PC-PBX manufacturers will do, should the router-PBX comes to market.)
4. Adoption phase — Companies established in the telecom market as well as general businesses adopt the new router-PBX (carrier switch) technology.
5. Standardization phase — Standards bodies choose the best (in most cases) technology and make it a standard. Helps to stabilize and legitimize the market.
6. Growth phase — After the standards have been established and stabilized, the router-PBX has a good shot at growing.

A PLEA FOR OPENNESS AND INTEROPERABILITY
I have one request to make of any router vendor, including a Cisco or a Bay Networks, that wishes to enter the PBX market. I ask that you … KEEP YOUR PRODUCTS OPEN AND USE INDUSTRY STANDARDS! If a standard does not exist, then work with a standards body to try to create one.

If the telecom world has anything to teach Cisco or Bay, it is the necessity of keeping products open and using industry standards. In telecom today, we see a backlash against closed, proprietary systems. Nobody is going to buy a Cisco router-based PBX if it uses an API exclusive to Cisco’s product line. Telecom has learned the hard way that proprietary programming languages or links aren’t very popular. Programmers today want choices, not one-vendor soup-to-nuts solutions with no alternatives.

For instance, if I were to buy a router-PBX from Cisco and another from Bay, I’d want to be able to buy third-party CTI software applications from Coresoft, AnswerSoft, and others, that could communicate with both router-PBXs. I’d want to be able to connect the Cisco and Bay router-PBXs across the network and set up ACD queues, create Class of Service (COS) distinctions, assign phone extensions, etc. But I would only be able to accomplish all this if both brands of router-PBXs were to use industry-standard APIs.

Those familiar with routers will know that Cisco uses its own operating system on its routers, and these routers are fully functional only when you turn on tag switching, which is proprietary to Cisco routers. Unfortunately, when you do so, Cisco routers do not communicate very well (at all) with competitor’s routers. Thus, if you are a Cisco shop, you are stuck with Cisco routers (not necessarily a bad thing) if you want optimum performance.

Will Cisco, Bay Networks, and the other router vendors settle their competitive differences to be able to get together and come up with a standard API for "router-based call control" similar to TAPI? I certainly hope so. It would be a shame if convergence were to remove all but the most artificial barriers to interoperability, especially since that’s exactly what convergence was supposed to eliminate in the first place.

It is curious that convergence should manifest itself in diversity, but that is the case in telecommunications. In this industry, convergence — the integration of voice and data — advances on multiple fronts. Convergence is evident in the mergers among service providers, in the restructuring of private networks and the public switched telephone network (PSTN), and in the rise of Internet telephony. And soon, convergence will find yet another expression — this time at the network appliance level. Specifically, we are looking forward to a new hybrid, a piece of hardware that combines data routing and call switching, a router-PBX.