January 1999

Wholesaling The Networks: A Bumpy Ride?

BY MICHAEL ANDERSON

Most service providers today are involved in buying or wholesaling network infrastructure resources, and there are even providers whose sole business is outsourcing (or wholesaling) their infrastructures. Wholesaling is the process in which a service provider with physical resources makes a portion of those resources available to another service provider. But as with any new practice, wholesaling has both benefits and drawbacks for infrastructure owners, service providers, and end users alike.

On the plus side, wholesaling allows new service providers to purchase rather than build the resources they need, enabling them to focus on service rather than systems, while providing their customers with more service choices. On the minus side, wholesaling adds a layer of complexity to network management, and traditional two-tier relationships between service providers and end users become three-tier relationships when infrastructure owners enter the picture.

In some cases, wholesaling is used strictly for reselling purposes. For example, if one service provider has a large ATM network and sells part of that network to another provider, the buyer can then turn around and sell ATM services to its customers. In other cases, wholesaling provides the basis for value-added reselling, such as when a provider sells a piece of fiber (or other physical resource) to another provider. The buyer then connects a switch to the end of that fiber and uses it to build new services for customers.

WHOLESALING CATCHES WIND
The practice of wholesaling really began gathering steam following the deregulation of the telecommunications industry. At that time, many local carriers wanted to get into the long-distance business but were not allowed to build physical networks. These carriers obtained long-distance services from Interexchange Carriers (IXCs) and then sold these services as their own. This was beneficial to all parties involved since IXCs were able to sell large blocks of circuits all at once, thus making a profit while complying with deregulation requirements. Local carriers were able to obtain the services at volume discounts and mark them up enough to generate revenue while keeping prices competitive with IXC regular rates.

Prior to deregulation, service providers did buy resources from each other, but used them for internal networks only. This form of service wholesaling had limited use, and the network management implications were resolved on a case-by-case basis. Now, as service providers use these resources to actually resell services, the practice of wholesaling is gaining momentum.

A number of service providers are now specializing in building network infrastructures for volume sales exclusively to other service providers. With little overhead, these infrastructure providers can keep prices low. And, because these providers concentrate solely on their core area of expertise, they are helping to establish wholesaling as a viable solution with many benefits (i.e., lower costs, and freedom to concentrate on business rather than system issues). Yet, as service wholesaling becomes more of a business model itself, the network management issues surrounding it have grown.

NETWORK MANAGEMENT DISPARITIES
In traditional networks, service providers have concerned themselves with setting up and maintaining network management solutions for internal use, to suit their specific needs. These solutions were built differently from carrier to carrier and not designed for public use. Now, these varied and incompatible network management systems can present a real barrier for infrastructure providers wholesaling resources to service providers. To succeed, infrastructure providers must be able to extract information from their network management system, partition the network to give their service provider customers a view of their portion of it, and present the information in a form those customers can understand.

There are problems on the wholesale customer side as well. In order to sell services based on the resources they have purchased, service providers must make their customers aware that they do not own the actual switches and fiber. For example, in billing for services, the provider must be able to give invoices to customers, even though they actually obtain the billing records from the wholesaler.

Service providers often purchase resources from a number of different wholesalers, and it can be very difficult to correlate the various network management information that accompanies resources and equipment. For example, in delivering a single service to an end user, a service provider may combine some of its own resources with resources from two different wholesalers. In order to provide the end user with a single bill for that service, the service provider must correlate billing information data from all three resource providers.

Historically, network equipment providers have developed their elements and element management systems from a single-vendor, single-network perspective. Now, in the era of service wholesaling, this practice is often not flexible enough to meet the needs of the new wholesale service provider.

To enable effective network resource wholesaling, the network element management system must support exporting and partitioning of network management information, and must incorporate open interfaces that allow easy integration with other vendors' systems. Systems must also effectively interface with higher layer management systems, as well as control the individual elements of a network.

INTEGRATING NETWORK MANAGEMENT SYSTEMS
The main issues involved in the wholesaling process are extracting network management information, segmenting the network for security, and sharing and delivering that information in an understandable form. A new class of network management products is addressing these issues by focusing specifically on providing standardized information.

Interfaces for providing this capability have been available for some time in the form of the Telecommunications Management Network (TMN) standards, which define a network management model comprised of several layers of functionality: Element; Element Management; Network Management; Service Management; and Business Management. The importance of the level at which the information is exchanged is often missed in the model of network management information sharing. This can have a dramatic impact on the flexibility of the wholesaled service, since most wholesale models are based on information exchange at the service management or network management layer.

If information is exchanged at the service management layer, wholesale customers will easily be able to create new instances of an existing service (i.e., a new end-to-end circuit). However, they may have limited abilities to provide value-added services. If the management information is exchanged at the network management layer, wholesale customers will be able to more easily differentiate their service offerings. But they will have the additional overhead of defining their own service management system.

The capabilities of the underlying network management systems directly affect the level at which information can be exchanged. Infrastructure wholesalers need to build networks using management systems that allow interfaces with external customers at a variety of levels.

The Telemanagement Forum, an industry consortium, is driving the implementation of the TMN model in equipment and software vendors' products as well as for service providers. These products are enabling a standardized interface for sharing, protecting, and providing network information. These capabilities will be key to solving today's network management problems so that the benefits of wholesaling can become a reality.

Michael Anderson is the senior product marketing manager for the Core Switching Division, Ascend Communications, Inc. Ascend is a leading provider of technology and equipment solutions for telecommunications carriers, Internet service providers, and corporate customers. Visit their Web site at www.ascend.com.