The Business Case For Migration To
BY DR. RAMESH LAKSHMI-RATAN
Major carriers around the world
face the challenging task of migrating their existing legacy networks to an
IP-based next-generation network (NGN) infrastructure. Carriers realize that
their current TDM networks are no longer sustainable going forward. Their
current networks are expensive in terms of capital and operational expenses,
and inhibit competitiveness due to the cost and long amount of time required
to implement changes. Furthermore, legacy switch vendors are beginning to
announce end-of-life for their TDM equipment.
With a full appreciation of the
technological and business benefits of Voice over IP (VoIP) and NGNs,
carriers are no longer debating whether to migrate their TDM networks, but
rather are seeking the most effective way to reach the ï¿½promised land.ï¿½ In
fact, migration from circuit-switched TDM to IP-based NGN is already
underway for several major long-distance carriers around the world.
This trend is clearly reflected in the rising worldwide demand for VoIP-based
solutions. A recent report by Infonetics Research projects a CAGR of 42
percent as the global carrier VoIP equipment market grows from $1.2 billion
in 2003 to $5 billion in 2007. This article examines the business case
supporting carriersï¿½ decision to migrate to NGNs based on VoIP technology,
and explains how NGNs will enable carriers to achieve their current and
future business goals in a highly competitive marketplace.
Real Business Drivers for Migration to Next-Generation Networks
First of all, NGNs offer relief for the current ailments of TDM networks.
They provide for a tremendous increase in scale and are much easier to
manage than traditional circuit-switched networks. This is particularly
important for incumbent long-distance carriers that operate very large
networks. VoIP technology is mature and proven, and carriers recognize the
economic and technical benefits of utilizing this technology.
NGNs will play a major role in meeting industry demands for robust
architectures that are flexible, scalable, and cost-effective. NGNs will
enable carriers to improve margins and capture market share in competitive
and deregulated markets. Carriers can reduce opex and capex for their
underutilized voice and ever-growing data networks by migrating to a
convergent IP infrastructure, supporting different types of access networks
and end user devices.
Migration to an NGN provides immediate operational savings and efficiency
improvements, significant enough to justify initial investments. For
example, a recent analysis demonstrated that using an IP/softswitch
architecture to replace a TDM switch of equal capacity would shrink the
space required in the central office from 28 racks to two. Reductions in air
conditioning and power costs alone will allow carriers to recoup the cost of
a new softswitch in only 18 months. In comparison, the cost of most circuit
switches needed to be spread over more than 10 years.
Another inherent advantage of IP-based systems is that they enjoy the same
short evolution interval as computing systems. Whereas TDM systems have
historically provided evolutionary shifts in technology at five- and
ten-year intervals, IP-based systems advance in conformance with Mooreï¿½s law
ï¿½ i.e., processing capabilities double every 18ï¿½24 months for the same level
of capital investment. This translates into increased efficiencies and
enhanced capabilities for the creation of new revenue-generating services at
much shorter intervals than in legacy systems.
Open standards-based network elements (e.g., SIP) and interfaces provide the
carrier with greater flexibility and choice with regards to network systems
vendors. NGNs will enable carriers to create new revenue opportunities and
get to market quickly with attractive and innovative multimedia services
that are not possible in the TDM environment. No longer ï¿½lockedï¿½ to a
particular switch manufacturer, carriers can develop their own customized
services using standard tools, such as Java SIP servlets, for specific
target markets. SIP also allows for standards-based interoperability with
application servers from different vendors, as well as connectivity with
other carriersï¿½ networks.
Already, carriers need to be able to support IP traffic originating from a
growing multitude of sources. Increased VoIP traffic is coming from other
national or international long-distance carriers, residential local
networks, enterprises, and mobile networks, all of which are migrating to
IP-based voice infrastructures. The growth of prepaid VoIP calling cards, IP
Centrex, and IP PBX are examples of applications that are driving new IP
Before enjoying the benefits and
long-term savings associated with NGN networks, carriers must address
several new challenges in getting these networks up and running. While these
issues may appear to be purely technical, closer analysis shows that they
quite often boil down to business issues.
ï¿½ New pricing/revenue models: Carrier voice network revenue
structures have traditionally been built around differentiation between
minutes of use and the types of minutes. For example, wireline long distance
may be priced at 3 cents per minute, wireless minutes may be priced at 8
cents per minute, and 800 numbers may be priced at 18 cents per minute. This
pricing model is no longer relevant for IP-based services. While carriers
want to take advantage of the economics of IP telephony, they need to
accommodate rate structures that are shifting from minutes of use to include
access connectivity and bandwidth consumption. Call detail records (CDRs)
for carrier-to-carrier billing and traffic management must still be
maintained regardless of the rate structures. At the same time, carriers
must establish new technology models for interconnection that overcome
security concerns created by a more open architecture. As mentioned above,
SBCs could play an important role in providing CDRs for carrier billing.
ï¿½ Quality of Service (QoS): Voice is still the killer application;
therefore carriers must ensure QoS over their core MPLS networks, which can
be configured to give priority to voice and important signaling packets.
While MPLS technically allows for monitoring of transmission, most carriers
will not allow application-based bandwidth shaping on their network by
another carrier. Thus, traffic management turns into a business issue. To
begin solving these issues, IP interconnection points must be controlled at
the deepest levels of the protocol.
ï¿½ Security: Security in carrier networks involves business
relationships. For example, carrier CIOs will oppose providing access to
internal routing tables between enterprise IP networks to the public
networks due to the sensitivity of that information from a business
perspective. Another difference between TDM and VoIP-based PSTN security is
that TDM networks use SS7 signaling point codes that are difficult to hack.
However, once these codes are turned into IP addresses or SIP URIs in an NGN,
they are much easier to hack. IP security issues must be addressed using
border elements controlled by centralized routing logic to prevent fraud and
new phenomena like ï¿½voice spam.ï¿½
ï¿½ Routing: Routing and management in NGNs is a crucial function.
Intelligent and flexible routing can increase throughput and quality, while
lowering operational costs. In general, intercarrier business is about
arbitrage. Since arbitrage permits and encourages dynamic routing, traffic
exchange (peering) must be accommodated without exposing routing algorithms
and IP addresses to customers/peers to ensure business security and avoid
redundant provisioning. This type of routing involves much more than network
ï¿½ Interoperability: Even in an ï¿½all-IPï¿½ world, interoperability is
still an issue. Multiple variants and flavors of the same protocol (even
SIP) are not always interoperable. Carriers must ensure that their voice
customers can connect to other customers both internally and externally,
since practically anyone can create a SIP end-point and send traffic.
SBCs will play an important role in supporting the shift in carrier
networks. Improvements to SBCs already in use between the enterprise and the
carrier could help to prevent exposure of sensitive information between IP
networks, while still providing information like CDRs for carrier billing.
Additional and enhanced security measures will be required.
By meeting the above challenges, carriers will open the door to a plethora
of new business opportunities. Carriers can deploy multimedia IP-based
services at the network edge, accelerating provisioning timetables and
reducing costs. Voice quality over broadband networks could easily exceed
that of TDM networks ï¿½ meaning that carriers could charge for CD-quality
high-fidelity voice (e.g., use it to broadcast concerts). Carriers must take
a hard look at their business practices and network management strategies if
they want to exploit the full potential of IP-based NGNs.
Gradual, Painless Migration
from TDM to NGN
Despite the strong case for migration to NGN, carriersï¿½ business realities
dictate a structured, phased migration strategy with minimal operational
disruption. Forklift upgrades are not feasible due to lack of resources and
the organizational ï¿½painï¿½ they cause.
Carriers require no-risk migration of their core networks to NGNs, using an
open, standards-based solution. Migration strategies must meet the following
ï¿½ Seamless PSTN/SS7 and legacy VoIP connectivity with support for IN
services to secure existing revenue streams;
ï¿½ Service creation capabilities to target different market segments, e.g.,
calling card services for consumers and VoIP VPNs and conferencing for
ï¿½ Cost-effective and non-disruptive transition process that is ï¿½transparentï¿½
to end users.
The business case for VoIP is based on immediate, substantial operational
savings and reduced capex in the short term, coupled with the potential for
increased revenues and market share from multimedia, real-time IP services
in the longer term. This business case, together with the continual
improvements and maturity of VoIP technology, have brought carriers and
service providers to the conclusion that NGNs are the best way to realize
their business strategy. The remaining question for most carriers is how
best to migrate their current TDM infrastructure to NGN. By combining the
right network solution with a well-planned migration approach, carriers will
be able to maximize their existing investment and maintain service levels,
while creating the infrastructure for new services and revenues in an
Dr. Ramesh Lakshmi-Ratan is
senior vice president of strategy at VocalTec, a leading telecom equipment
vendor of packet voice solutions for next-generation networks. An innovator
and provider of VoIP solutions since 1995, VocalTecï¿½s equipment is
commercially deployed in over 130 countries. For more information, please
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