A short time ago in 1992 Microsoft launched Windows 3.1, one of the first major PC GUI operating systems. The networking protocols supported included Novell and Token Ring - no TCP/IP.
Three years later I was on vacation in New Zealand in August 1995 and being so far east was among the first consumers in the world to take delivery of Windows 95 - supplied with a TCP/IP stack!
Eleven years ago could you have predicted that Internet Protocol would become the network protocol of choice?
The omnipresent Internet has coerced the world into using its protocol. Technically, we can thank Dr. Vinton Cerf, Dr. Robert Kahn, Sir Tim Berners-Lee and many others. Economically, (despite some uninformed comments to the contrary) we can thank Al Gore and the US congress for the Supercomputer Network Study Act and the High-Performance Computing Act and for establishing the Universal Service Fund in the US.
When Sir Tim wanted to easily access documents around the ring of the CERN particle accelerator¹, and Senator Gore had the vision of a federally funded information equivalent of the US highway system², did either of them expect that the Internet Protocol would change the technical and economic foundations of the global telecommunications networks?
Microsoft’s customers have determined that Internet Protocol or IP rules the roost, and tomorrow SIP will be available in every personal computing device on the planet passing control of connections from the carrier to the customer.
Dramatic deconstruction of the telecom service provider industry is made possible by this change of who’s in control.
Yesterday’s largest carriers - AT&T, BT, Deutsch Telecom, MCI, and NTT all have to rethink their carrier business models. Consolidation, restructuring and widespread changes are inevitable.
Guiding voice transmissions over IP radically alters the competitive landscape for all telecom operators and especially carriers, as it allows Internet Service Providers to offer voice services.
Cable MSOs that upgraded to the Data Over Cable Service Interface Specification 1.1 can now bring Voice over IP to every home they pass, and use this as a competitive advantage against their satellite competition. Although some of the US MSOs rejected overtures from the upstart market leader Vonage, they eventually saw the light and signed up with AT&T CallVantage or offer their own service.
Using Voice over IP carriers can provide their customers the ability to call back to their home country and completely eliminate the need for the traditional international carrier portion of the call. The packets are sent over public IP networks until the transmission is terminated in the home country. The home-based carrier doesn’t lose their traditional terminating revenue, but all revenue is lost to the originating carrier.
Most major carriers have begun to deploy Voice over IP to replace Class 4 switching and almost 10% of voice traffic is now routed using IP. The reasons for this change in technology are numerous and well explained in Frank Ohrtman’s book Softswitch³. Sales of traditional Class 4, Class 5 and PBX systems have shrunk in developed markets and softswitch sales using IP have grown.
If you consider that over 70% of corporate voice traffic is from employee to employee and that all of this can now be moved to VoIP over the corporate WAN, you can begin to see the problem that traditional carriers face.
There are over 245 million users of Windows XP. With SIP included with the operating system, all of these users could shift to IP-based service providers. Just imagine a carrier with 245 million subscribers, that’s something that does not exist today!
The change from circuit-based to packet-based switching merges the boundaries between telecom, carriers, ISPs, Cable MSOs, and wireless vendors (802.x, GSM or CDMA). Convergence is upon us in a VoIP world ⁴; offering marketing terms such as 3-way and even quadruple plays.
A role for carriers is to become the police force of fair and transparent communication between communities, nation states, and international corporations. The need to monitor and report on inter-network communications through session border controllers grows daily. The carrier can tie this interconnect information to other network access data and provide a clear, billable, auditable record of communications on its network.
Carriers that provide Internet service will prosper. In addition they may be a telephony and video services provider. They will be able to survive the fierce price competition through their knowledge of traditional interconnection agreements and their ability to negotiate the best rates for data transportation.
Carriers will be in competition with many alternative providers but their knowledge of interconnected networks will help them if they have routing optimization software that gives them the ability to make informed decisions on network routing in real-time.
Offering VoIP connectivity and services to maintain market share
In-Stat/MDR estimate that 378k US subscribers will sign up for VoIP services in 2004, and Ovum estimate there will be 10m VoIP subscribers worldwide (with 3.5m in Japan) in 2004. Some subscribers will move to VoIP for lower costs and other for improved services such as unified messaging and find me/follow. If operators don’t provide these, they will lose the subscriber to alternative service providers. Although this number may seem small, it is forecast to grow substantially in the next 12 months.
Operators that do not offer VoIP services run the risk of losing the subscriber altogether.
Generating additional revenue at the lowest possible cost
The reduced OAM&P costs of a VOIP network minimizes the cost to the carrier whilst allowing for value added services that can generate additional revenue.
Cable MSOs look to tie VoIP subscribers into Premium packages that provide extra revenue on a monthly basis with little to no additional cost to the operator.
Most VoIP offerings offer a fixed number of minutes of usage per month, knowing full well that over 73% of users will never approach these usage limits.
Building new voice infrastructure at a pace that reflects revenue growth
Adding VoIP to an existing IP account can be done at relatively little cost. There are several ASP models that provide full billing and customer care packages on a pay as you use basis. The reduced cost of provisioning and maintenance supports this model over conventionally connected subscribers.
In the US, AT&T’s CallVantage and Vonage can be added to any IP account at minimal cost and revenues will grow over time as this service replaces the traditional regional account.
What standards should be embraced?
The standards used are those that benefit the customer - TCP/IP, SIP, SIMPLE, H.323 – and they will be chosen by the customer’s applications.
As other intercommunication devices are invented and other protocols proposed, the carrier should welcome these protocols as a means to stay current with the consumer’s protocol of choice.
Scalability and call processing capacity
The latest generation of softswitches are scalable to 400,000 subscribers and 4m BHCA. This is an order of magnitude improvement over traditional circuit switched solutions. With each passing year advances in hardware and software provide increases in scalability and call volume that can easily keep pace with economic reasons for deployment of new hardware.
An evolution strategy to slowly migrate to an all IP future versus a more radical full replacement solution
Most of the established network equipment providers are providing an evolutionary strategy for the migration of existing switching technology to IP; Nortel with their Succession CS2000⁵ and Siemens with their Surpass hiQ8000⁶.
Older switching technologies will be replaced with newer softswitches over time. At first softswitches will be deployed in Metro centers for economic reasons and for introduction of new services more economically viable than with traditional switches. As soon as a softswitch is deployed, the economic pendulum swings more rapidly. The cost of migration of subscribers to new service offerings is reduced if a new generation switch is available.
Opportunities in the VoIP arena
abound and several of the keynote speakers at this conference are driving the change to providing services using IP. There are many reasons that VoIP will usurp traditional networks:
The most compelling argument, even for carriers that do not plan to fully exploit the new disruptive benefits of VoIP, is the substantial reduction in cost. The OAM&P cost reductions can be passed on as better prices to residential and business customers.
IP PBX and IP Centrex services easily surpass what is offered today on traditional analog and digital platforms, and the ease of provisioning and subsequent monitoring allows for increased profits on traditional and new services.
Unified communications across the enterprise for voice, e-mail, Instant Messaging and fax offers solutions that are easily managed using an IP infrastructure. Interoperability between diverse vendors is now possible using a harmonized underlying protocol.
New services such as click to dial, push-to-talk, find me\follow me, and other presence aware solutions are possible using SIP with extensions such as SIMPLE.
The management of Voice, Video and Integrated Data is dramatically improved with IP architecture. Instant Messaging is becoming the enterprises’ medium of choice, and is growing to support text, voice and video messages.
Security will grow in importance with each terrorist outrage, and with the recent FCC ruling that VoIP communications are subject to the same CALEA regulations as traditional voice circuits, a new role is given to carriers to supply information not just for billing but also for the security forces. Voice over IP companies, including the several cities that provide universal Wi-Fi (802.x) infrastructure, are now required to provide quaintly named ‘wiretaps’ to the security services for voice calls. This requirement helps protect the investments of the established carriers.

From a paper included at Carriers' World 2004, London, UK.

¹ < http://info.web.cern.ch/info/ES/CERN50/50ansSciences/1990_en.html >
² “We must have an information superhighway network that is as accessible, open, democratic and as ubiquitous as the telephone network. I want a school child in Carthage, Tennessee, to come to school and be able to plug into the Library of Congress, and then work at home as his own pace regardless of that child’s income.” Al Gore.
³ Ohrtman, Frank. “Softswitch : Architecture for VoIP”. McGraw-Hill Professional, 2002.
⁴ Siemens recently announced that it is combining its fixed-line telecoms network unit with its wireless network and handsets business in order to focus on seamless communication, whereby intelligent devices could access the same applications, be they fixed or mobile based, over a single IP network. This Siemens division has 60,000 employees and revenues of around $17 billion. Siemens enterprise customers include BMW, DaimlerChrysler, Deutsche Bank, Ford, IBM, Kodak, Oracle and Volvo.
⁵ < http://www.nortelnetworks.com/products/01/succession/cs/cs2000.html >
⁶ < http://www.icn.siemens.com/carrier/products/surpass/hiq8000.html >