Softswitch -- Increasing
Margins In A Competitive Marketplace
BY ARNOLD ENGLANDER
The emergence of the softswitch architecture as the model
for next-generation networks underscores the maturity and adoption of packet
telephony technology in the telecommunications industry. Softswitches are
meeting industry demands for robust architectures that are flexible,
scalable, and cost-effective.
Problem: Increased Competition Decreases Margins
The telecommunications industry is transitioning from a monopolistic to
a competitive business model in local, national, and global markets. The
deregulation of telecommunications industries in an increasing number of
countries around the world has introduced profound changes in the way
service providers and carriers run their businesses. As competition takes
hold, consumers become more demanding, looking for newer services and
cheaper rates. Service providers respond by reducing prices and expanding
their service portfolios.
From the service provider and carrier perspective, all of
this results in decreasing margins and more customer churn. They need the
ability to offer new, advanced, value added services in a timely manner to
create new revenue streams and retain customers. To make matters more
complex, they need to do this while reducing costs. Thus, the two critical
factors driving the telecom market in this competitive era are:
- Time-to-market and time-to-revenue for new services.
- Reduction in capital expenses (CapEx) and operational expenses (OpEx)
to improve margins and shorten return on investment (ROI) payback
Solution: Softswitch Architecture
In order to meet the requirements of a competitive marketplace, service
providers and carriers seek solutions that:
Enable bundled service offerings using a common
Facilitate rapid deployment of new services at lower
costs than traditional PSTN networks;
Reduce OpEx and CapEx vis-ï¿½-vis circuit-switched
Facilitate evolutionary migration to IP networks while
preserving investments in TDM equipment.
Softswitches meet these criteria, as they allow for tight
integration with the PSTN, quick creation of services, rapid deployment of
equipment, simple management, and effective migration paths from PSTN to
packet telephony networks.
DRIVING SOFTSWITCH DEPLOYMENTS
Rapid Introduction of Enhanced Services
In times of increased competition, the ability to quickly refine and
bundle services, thus staying at the cutting edge of the market by providing
premium and customer-retaining (ï¿½stickyï¿½) offers, is crucial. Migration
to softswitch-based networks enables carriers to rapidly introduce enhanced
global hosted services, such as voice virtual private networks (V-VPNs),
centrex, call centers, conferencing, calling card, voice mail, unified
messaging, and more. These services are especially attractive to the
lucrative enterprise market, which ï¿½ according to Probe Research ï¿½ will
account for 45 percent of all VoIP traffic by 2005.
Softswitch architectures support a convergent voice and data network,
thereby reducing OpEx, e.g., costs of feature upgrades and service creation,
network management, and maintenance. Moreover, softswitch architecture
provides service flexibility and enables a more efficient network topology,
as network elements and servers can be deployed only where they are needed
and only with the required functionality for a given location. Centralized
servers can be used to distribute services and provide centralized
management to remote locations.
Modular softswitch architectures enable a low-cost, entry-level
solution, which can be expanded cost-effectively in accordance with traffic
volumes. Decomposition of gateways into control and media layers allows the
deployment of less expensive media gateways that are centrally controlled
via media gateway control protocol (MGCP). Since a single controller can
manage several media gateways, the carrierï¿½s overall capital investment in
establishing or expanding the network is decreased.
ADVANTAGES OF SOFTSWITCH
Inherent advantages of softswitches ï¿½ that make them the ideal tool
for helping carriers to prosper in a competitive environment ï¿½ include:
ï¿½ Softswitch-based service platforms are both modular and
scalable. This means that the cost of entering new markets ï¿½ either
geographically and/or in terms of types of services ï¿½ can be significantly
lower than when using the ï¿½one size fits allï¿½ circuit-based switches of
the PSTN world. It also means that carriers can grow their networks,
platforms, and service capabilities as customers and revenues materialize in
these new markets.
ï¿½ Softswitch-based service platforms can provide services
that are location independent and distance insensitive. Services in Tokyo,
Beijing, and New York can be served off of a platform located in Berlin.
Calls between Tokyo and New York can cost almost as little to the carrier as
calls between New York and New Haven.
ï¿½ Global hosted business services served off of softswitch-based
platforms are neither inherently local or long-distance ï¿½ they are both,
to the benefit of global enterprises. The incumbent local carrier, with its
Class 5 switch functionality, has no inherent advantage in providing Centrex
services to the likes of Mercedes Benz offices around the world; nor does
the incumbent long-distance carrier, with its Class 4 functionality, have
any advantage in providing voice virtual networks to IBM campuses in
Raleigh, Boca Raton, and White Plains.
The same softswitch that is used to provide enhanced
services can be scaled up to manage large-scale media gateways around
the world to provide ï¿½carriersï¿½ carrierï¿½ wholesale services
including carrier interconnect, trunk replacement, and packet tandem
switching, blurring the distinction between network providers and
service providers and further enabling carriers to fine tune their
business models and optimize profitability.
Softswitch-based service platforms support service
creation environments that enable rapid development, customization,
branding, and fine tuning of value-added services by means of standard
visual programming languages and Web development tools (very different
from the scarce and expensive resources needed to program new services
on a ï¿½hard switchï¿½). This means that softswitch-equipped carriers
can develop new services that are custom tailored to target markets ï¿½
both faster and less expensively than ï¿½hard switchï¿½-based carriers.
Softswitch-based platforms can support convergent voice
and data services that cannot be supported well (if at all) using
circuit-based switches. Some of these services are high margin, value
added, PC-centric applications, such as Web-enabled call centers and
Web-managed conferencing with document sharing.
Softswitches that are truly multi-protocol can bring the
benefits of SIP (new endpoints/clients and rapidly developed, innovative
services and applications) and MGCP (denser, larger scale, lower cost
per port trunking gateways) to large deployed networks using H.323.
Softswitches should interoperate with and extend existing H.323 networks
in order to provide an extensive global calling reach and revenue
generating capacity upon first deployment.
Softswitches that provide interoperability with legacy
equipment and interdomain capabilities can be deployed virtually
seamlessly in conjunction with the existing network. In this way, a new
network can be built gradually in accordance with evolving business
requirements, while the existing network continues to operate and
The deployment of softswitch-based, next-generation networks positions
carriers to compete in times of shrinking margins and costly customer churn.
Softswitches can be used to rapidly create fine-tunable service bundles
comprised of premium, ï¿½stickyï¿½ enhanced services as well as lower cost
basic services ï¿½ all while reducing OpEx and CapEx costs by a more
Arnold Englander is vice president, product strategy and
planning at VocalTec Communications Ltd. VocalTec is a leading telecom
equipment provider of packet voice solutions for carriers and service
providers. For more information, visit the companyï¿½s Web site at www.vocaltec.com.
To The July 2002 Table Of Contents ]