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Second Quarter 1998

Managed Networks: Enabling Predictable QoS Guarantees


In the premiere issue of INTERNET TELEPHONY™, I made some predictions about the future of IP telephony. While on the surface those theories might appear aggressive, they’re certainly not any more aggressive than the statements being made by companies offering managed IP networks and services. A well-managed corporate IP network is perfect for IP telephony applications. It offers all the glue to hold these applications together, while supporting high (enough) voice quality. Who are the providers of managed IP bandwidth and why are they placing their bets on both corporate and next gen IP telephony applications to drive their revenues?

Managed Network Design
What is a managed network? A managed network is one that has predictable performance measured in terms of Quality of Service (QoS) or Quality of Transmission (QoT) guarantees. These latency (that is, the time it takes to pass an IP packet from one point in the network to another) and the ability of the network to move large amounts of packet traffic without dropping or losing packets. When IP telephony is run across an unmanaged network like the Internet, it is subject to network congestion on the 'Net effects the quality of the call. A managed network provides IP telephony applications with the predictable performance needed to be successful within a corporation, or between Internet Service Providers (ISPs).

A managed network can be created out of existing network infrastructure; for example, a corporation’s data network back-bone.

IP telephony traffic takes advantage of the existing infrastructure to connect callers via gateways from remote branch offices to the main corporate site. The infrastructure could include frame relay, circuit-switched, or ATM links. While this approach is simple and straightforward, it is also expensive to implement. It is built around over-provisioning the bandwidth needed to support both the corporation’s existing data applications and the toll bypass voice needs — sort of a brute-force method. In addition, to be truly successful, it requires performance guarantees from the intranet provider. Fortunately, Sprint and AT&T have already begun to offer performance guarantees on their backbones’ latency. This approach works best when the needed bandwidth is either already there or relatively inexpensive to add.

Another managed network design — more complex and potentially more efficient — involves the use of a concept in the IP networking world referred to as subnets. Think of a subnet in this case as a specialized network that gets only the IP telephony traffic, while the corporation’s data traffic travels via slower routes. For example, a managed network  attacks the problem of network congestion by segregating the network into sub-networks using routers. Basically, the idea is to ensure that adequate bandwidth is available by controlling or limiting the traffic introduced onto a designated IP telephony sub-network. Carriers would be able to charge more for this "first-class" service.

Real-world examples of managed network suppliers include some of the best-known names in the telecommunications markets: AT&T via AT&T WorldNet, Sprint via Global One, MCI, and some new hot players such as Qwest Communications, Level 3, ITXC, and Genuity (now part of GTE Internetworks).

Will some of these bandwidth suppliers also offer IP telephony service? Yes. Already this year there have been several bold moves by some of the newer players to grab more of the bandwidth and IP telephony carriage markets via consolidation. One of the largest moves is being undertaken by Qwest Communications, which will acquire LCI International in a stock swap valued at $4.4 billion. The merger will create the fourth-largest long-distance company in the United States. The marriage of the two telecommunications companies combines Qwest’s fiber network, which is set up to run IP data — and Qwest has published plans to sell both bandwidth and IP telephony services — with LCI’s sales and marketing expertise, distribution channels, intelligent network platform, customer service, and billing system. So, the fourth-largest long-distance/band-width provider will be building out an IP telephony service to be priced at 0.75 cents per minute.

The traditional market players such as AT&T are not taking this new entrant lightly either, they have announced their own plan to offer domestic IP-based debit card service with a 0.075 to 0.09 cent a minute rate by midyear. There has been a great deal of discussion about the arbitrage opportunities for next gen telcos to provide cost-effective toll bypass applications for businesses and why this opportunity is relatively short -lived. In fact, some analysts predict that it is only viable for the next one to two years. Part of the reason for this short market window is the fact that Internet Telephony Service Providers’ (ITSP’s) customer pricing will be nearly matched by the existing Inter-Exchange Carriers (IXCs) and, internally, they both must pay similar termination and settlement charges.

If traditional long-distance provider pricing becomes low enough, then the only real value in IP telephony for a corporation can be found in adding applications in-house. So, will corporations have to purchase gateways and create or revise their own networks to reap the benefits of IP telephony applications? The answer is "Yes," to purchasing gateways, and "Perhaps," to rebuilding their corporate networks. For a corporation with excess capacity on its existing data networks, the real expense to implementing voice over IP is in purchasing IP gateways.

The case for a corporation’s decision to deploy IP telephony versus pay for IP telephony minutes is very compelling. Because the IP telephony gateway is on company premises and uses network bandwidth that is procured at a fixed price, it will almost always be less expensive than paying for minutes through either an IXC or an ITSP. As discussed above, there are bandwidth providers today that will provide a corporation either a heavily provisioned corporate intranet or create a subnet out of the service provider’s network with performance guarantees to ensure IP telephony traffic passage. Therefore, business customers now have the justification and means to deploy cost-saving IP telephony.

Managed corporate networks are the "backbone" of corporate IP telephony. In the last several months, more than enough key bandwidth suppliers have emerged. Deploying gateways and judicious use of these bandwidth suppliers’ resources can save companies real money.

Mike Katz is vice president of marketing and business development at NetPhone, Inc. Headquartered in Marlborough, Massachusetts, NetPhone is a leading provider of computer telephony solutions for small business environments. For more information, contact the author at [email protected].

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