One of the most difficult decisions confronting service providers today is when to retire time division multiplexing (TDM)-based voice switches and upgrade to Internet Protocol (IP) networking equipment.
Faced with the daunting prospect of a complex, risky and costly migration to IP, service providers typically want to delay network transformation projects for as long as possible and squeeze every last drop of value from legacy TDM equipment. The prevailing attitude toward a TDM-to-IP voice upgrade is, “If it isn’t broken, don’t fix it.” Indeed, a recent study by research firm Heavy Reading found that the replacement of circuit-switched gear continues to be slow globally. In North America, for example, just 31 percent of 152 million lines are packet switched or VoIP now, and the region is still expected to have only 42 percent packet switched lines by 2017.
But maintaining legacy networks is fast becoming unsustainable. The service provider’s all-too-familiar predicament is described as the “traditional voice ‘death spiral’” by Professor Richard Taylor, co-director emeritus at the Institute for Information Policy, Pennsylvania State University. That is, as voice subscribers opt for mobile or VoIP alternatives and the cost of maintaining the network stays the same or rises, then the cost per customer increases and profitability decreases. In addition, some TDM-based switching equipment is so old that it may no longer be supported by the original supplier for maintenance, which increases the risk of service outages.
There are many powerful drivers that can override service provider reluctance to invest in TDM replacement, including the FCC’s not-so-gentle push toward IP trunking and all-IP service delivery. Ultimately, though, it all comes down to cost savings and new revenue opportunities.
By retiring redundant, legacy equipment and consolidating IP equipment in fewer physical locations, service providers can significantly reduce what they spend on power supply, real estate, labor and transport. There is also potential to benefit from government incentives or tax credits for using more power-efficient technology.
In addition to cost savings, revenue generation should also factor into the case for retiring TDM networks. An IP-based network provides a platform for introducing new services, such as IPTV or triple-play bundles. Also, the inherent flexibility of IP-based networks enables service providers to launch new services more quickly and efficiently.
There is no magic one-size-fits-all business case as every network is unique. While service providers have well-worn rationales for delaying the TDM-to-IP network transition, which may indeed be painful to consider, ever more network operators are choosing not to wait after considering how to
- Leverage new services and marketing opportunities to make home phones desirable to millennials
- Bundle service packages to maximize return on broadband investments and CAF (Connect America Fund) funding
- Exploit the cost savings from an all-IP network, while continuing to provide a vital, high-quality public service.
In future posts, we’ll delve deeper into IP network transformation, the services it enables, the latest operational tools, architectural options now and for the future, and how to combine them all into the business case you need to justify such change. It’s definitely worth discussing. I mean, even the FCC thinks the future is all-IP. The time to transform your network is now!
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One thought on “It’s Time to Transform the Network”
Take it a step further and skip building the next gen network for a commodity service like voice. The same argument on rising cost per user could be made regarding many service provider's residential voice business.
I'd argue that outsourcing is the smart choice given the competitive market dynamics, changing usage patterns and the lure of other capex-intensive strategic initiatives (like satisfying that unquenchable thirst for more broadband). Voice services are still essential parts of the bundle but building and running the voice network–legacy big iron or next gen all-VoIP software–is not necessary. The solution: leverage the cloud for wholesale.