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E TÉCNICA DE LISBOA INSTITUTO SUPERIOR TÉCNICO

A Study into Next Generation Networks for Voice Services: History, Design and Policy Implications

Patrick William Montgomery (Licenciado) Dissertação para obtenção do Grau de Mestre em Engenharia e Gestão da Tecnologia ORIENTADOR: DOUTOR MANUEL FREDERICO TOJAL DE VALSASSINA HEITOR JÚRI: PRESIDENTE: DOUTOR MANUEL FREDERICO TOJAL DE VALSASSINA HEITOR VOGAIS: DOUTOR ADOLFO DA VISITAÇÃO TRIGUEIRA CARTAXO DOUTOR STEFFEN HEINZ HOERNIG DOUTOR RUI MIGUEL LOUREIRO NOBRE BAPTISTA

Março 2005

Resumo: Durante os últimos 30 anos, o campo das telecomunicações foi alvo de desenvolvimentos tecnológicos e comerciais enormes. Um novo paradigma foi criado chamado indústria de Infocomunicações, onde o modelo tradicional de concorrência inter-firma foi substituído por níveis múltiplos de concorrência: entre produtos & serviços, entre redes, entre tecnologias & entre firmas. A telefonia de voz foi até recentemente o produto principal da indústria das telecomunicações. Mas na última década, com o crescimento dos serviços de dados e de multimédia o papel da telefonia de voz está a mudar. Nos últimos anos, os fabricantes de equipamentos de telecomunicações começaram a produzir e a publicar um conceito novo para os serviços de voz chamado Next Generation Networks (NGN). Estas redes são baseadas na tecnologia de comutação em pacotes ao contrário da tecnologia de comutação de circuito usada tradicionalmente na telefonia de voz. Este estudo analisa a evolução das telecomunicações e tenta analisar os factores tecnológicos, económicos e políticas que necessitam ser considerados pelos operadores e reguladores no que respeita à migração das redes de comutação em circuitos para redes comutadas em pacotes. Os resultados deste estudo indicam que existe um número de cenários para operadores de redes onde a migração para uma rede de pacotes resulta em reduções dos custos operacionais, permite expansão para mercados novos e permite o desenvolvimento de serviços novos e mais avançados de multimedia. Existem algumas questões no desenho de uma rede NGN que precisam de atenção especial, nomeadamente QoS, a escolha de protocolo VoIP, numeração nómada & interligação VoIP. Foram identificados áreas como numeração/endereçamento para serviços NGN, Controlo de qualidade de voz, definição serviços de emergência e interligação VoIP onde poderia ser necessária a definição de novas políticas. Palavras-Chave: VoIP; Comutação em Pacotes; Telecomunicação; Numeração, Telefonia; VoB; NGN; Infocomunicações

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Abstract: The last 30 years have seen huge technological and commercial developments in the field of

telecommunications.

A

new

paradigm

has

been

created

known

as

the

Infocommunications industry where the traditional inter-firm competitive model has been replaced by multi-layers of competition between products/services, between networks, between technologies & between firms. The main product of the telecommunications industry has until recently been voice telephony. With the growth of data and multimedia services in the last decade the role of voice telephony is changing. In recent years telecommunications manufacturers have begun producing and marketing a new network concept for voice services entitled Next Generation Networks (NGN). These networks are based on packet switching technology as opposed to the circuit switching technology traditionally used in voice telephony. This study reviews the evolution of voice telecommunications and attempts to analyse the technological, economical and regulatory factors that need to be considered by telecoms operators and policy makers as the industry migrates from circuit switched networks to packet switched networks. The finding of this study indicates that there are a of different number of wireline operator scenarios where implementation of NGN networks for voice services offers operational cost savings as well permitting service expansion to new markets and also permits the deployment of new and advanced multimedia services. There remain a number of issues in the design of NGN networks that require special attention such as QoS, VoIP protocol choice, nomadic user numbering and VoIP interconnect. A policy role is envisaged for numbering/addressing of NGN services, Voice quality control, definition of ‘lifeline’ and ‘emergency access’ requirements and VoIP interconnect. Key Words: VoIP; Packet Switching; Telecommunications; Numbering; Telephony; VoB; NGN; Infocommunications.

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Acknowledgements: I would like to thank my supervisor professor Dr.Manuel V. Heitor for putting up with my ever-changing ideas regarding this thesis My appreciation goes to the teaching and administrative staff at IST for running a tough but stimulating and rewarding Master’s course. I thank my colleagues for creating a dynamic environment during the course and for putting up with my Portuguese spoken with an Irish brogue for so long. Special thanks to my employer Jazztel for sponsoring me on this master’s course. And last but not least I thank Sónia for being there when it mattered.

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LIST OF ACRONYMS CMTS CMS CO COTS CPE DQoS DOCSIS ECS E-MTA ERG HDT IP IPCentrex IPTV KDC LEA MG MGC MGCP MPLS MTA NCS NGN NIU OSS PBX PDH PATS POTS PSTN QoS RKS SDH SIP STB TDM VoB VoD VOIP VPN

Cable Modem Termination System Call Management Server Central Office Commercial Off The Shelf Customer Premises Equipment Dynamic Quality of Service Data Over Cable Service Interface Specification Electronic Communication Service Embedded MTA (with voice) European Regulators Group Host Digital Terminal Internet Protocol Centralised PBX-like services over IP Television (transmitted) over IP Key Distribution Centre (server) Law Enforcement Act (CALEA) Server Media Gateway Media Gateway Controller Media Gateway Control Protocl Multi-Protocol Labelled Services Multimedia Terminal Adaptar Network Call Signalling protocol Next Generation Network Network Interface Unit Operating Support System Private Branch Exchange Pleio Synchronous Hierarchy Public Available Telephone Service Plain Old Telephony Service Public Switched Telephone Network Quality of Service Recording Keeping Server Synchronous Digital Hierarchy Session Initiation Protocol Set Top Box Time Division Multiplexing Voice over Broad Video on Demand Voice over Inter Protocol Virtual Private Network

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TABLE OF CONTENTS

1.

INTRODUCTION ........................................................................................................................5

1.1. 1.2. 1.3. 1.4. 1.5. 1.6. 1.7. 1.8. 1.9.

RESEARCH BACKGROUND .........................................................................................................6 FROM TELECOMMUNICATIONS TO INFOCOMMUNICATIONS ..................................................7 EVOLUTION OF VOICE TELEPHONY ........................................................................................14 DATA COMMUNICATIONS OVERVIEW.....................................................................................24 TELEPHONY REGULATION OVERVIEW ...................................................................................30 TELEPHONY STANDARD MAKING BODIES OVERVIEW ..........................................................36 TELECOM HISTORY REVIEW ...................................................................................................41 MOTIVATION FOR THE STUDY ................................................................................................42 THESIS STRUCTURE ..................................................................................................................43

2. NETWORK SWITCHING MODELS .....................................................................................44 2.1. 2.1.1. 2.2. 2.2.1. 2.3. 2.4. 2.4.1. 2.4.2. 2.4.3. 2.4.4. 2.4.5. 2.5.

CIRCUIT SWITCHING MODEL ................................................................................................44 CIRCUIT SWITCHING RELIABILITY ...........................................................................................45 HYBRID CIRCUIT AND PACKET SWITCHING ........................................................................47 HYBRID CIRCUIT SWITCHING / PACKET SWITCHING RELIABILITY ............................................50 PACKET SWITCHING ...............................................................................................................50 CABLE NETWORKS AND PACKET TELEPHONY........................................................................55 CIRCUIT SWITCHING CABLE TELEPHONY MODEL ..................................................................55 CABLE STANDARD BODIES ......................................................................................................56 CABLE PACKET SWITCHED TELEPHONY NETWORK ...............................................................57 HYBRID PACKET AND CIRCUIT SWITCHING SOLUTION ............................................................58 ADVANTAGES OF VOIP VERSUS CIRCUIT-SWITCHED VOICE IN CABLE NETWORKS .............59 CHAPTER REVIEW ...................................................................................................................60

3. PACKET SWITCHING DEPLOYMENTS .............................................................................62 3.1. PACKETIZED VOICE OVER CABLE DEPLOYMENTS ................................................................62 3.1.1. TELECABLE – ASTURIAS ...........................................................................................................63 3.1.2. COX NETWORKS .....................................................................................................................65 3.2. PACKETIZED VOICE OVER COPPER DEPLOYMENTS .............................................................67 3.2.1. YAHOO! BB .............................................................................................................................67 3.2.2. NEUF TELECOM .......................................................................................................................69 3.3. CASE STUDY INCUMBENT OPERATORS .................................................................................70 3.3.1. BRITISH TELECOM ...................................................................................................................70 3.4. CASE STUDIES VOICE OVER BROADBAND OPERATORS ......................................................74 3.4.1. VONAGE UNITED STATES .........................................................................................................74 3.4.2. AT&T BROADBAND .................................................................................................................75 3.4.3. SKYPE....................................................................................................................................76 3.4.4. INSTANT MESSAGING PROVIDERS ............................................................................................77 3.5. CORPORATE VOICE PACKET SWITCHING..................................................................78 3.5.1. GRUPO MUNDIAL-CONFIANÇA FINANCIAL VOIP ENTERPRISE NETWORK ..................................78 3.5.2. AXA PORTUGAL VOIP ENTERPRISE NETWORK .........................................................................81 3.6. CHAPTER REVIEW ...................................................................................................................82 4. VOICE ENABLED PACKET NETWORKS DESIGN CONSIDERATIONS ....................84 4.1.

QUALITY OF SERVICE .............................................................................................................84

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4.1.1. 4.1.2. 4.1.3. 4.1.4. 4.1.5. 4.1.6. 4.2. 4.2.1. 4.2.2. 4.2.3. 4.2.4. 4.2.5. 4.2.6. 4.2.7. 4.3. 4.4. 4.5. 4.6. 4.7. 4.7.1. 4.7.2. 4.8. 4.9.

NETWORK AVAILABILITY .......................................................................................................87 BANDWIDTH ............................................................................................................................88 DELAY .....................................................................................................................................88 JITTER .....................................................................................................................................89 LOSS ........................................................................................................................................89 VOICE QUALITY ......................................................................................................................90 VOICE OF PACKET PROTOCOL CHOICE ..................................................................................90 ELCP (VOICE OVER ATM).......................................................................................................92 MGCP/MEGACO ......................................................................................................................92 H323 ......................................................................................................................................93 SIP .........................................................................................................................................94 INTER-ASTERISK EXCHANGE (IAX)..........................................................................................96 VOIP INTERCONNECT ..............................................................................................................96 VOICE OVER PACKET PROTOCOL CONCLUSIONS .......................................................................98 SECURITY ..............................................................................................................................100 LIFELINE / EMERGENCY SERVICES ACCESS.......................................................................101 LAWFUL INTERCEPTION .......................................................................................................102 MULTIMEDIA OPTIONS OFFERED BY A PACKET BASED NETWORK ....................................103 NUMBERING/ADDRESSING FOR PACKET BASED SERVICES ..............................................106 FIXED LOCATION VOIP.........................................................................................................108 VARIABLE LOCATION VOIP..................................................................................................108 REGULATORY CONSIDERATIONS .........................................................................................109 CHAPTER REVIEW .................................................................................................................115

5. STRATEGIC CONSIDERATIONS FOR VOICE COMMUNICATIONS & NGN ........120 5.1. 5.2. 5.3. 5.4. 5.5. 5.6. 5.7. 5.8. 6.

FAILURE OF DEREGULATION FOR FIXED VOICE COMMUNICATIONS ..................................120 FIXED TO MOBILE SUBSTITUTION & INTEGRATION .............................................................121 P2P TELEPHONY & VOB TELEPHONY ..................................................................................123 TRANSMISSION & EQUIPMENT COSTS ..................................................................................124 SINGLE ACCESS FOR MULTIPLE SERVICE DELIVERY..........................................................124 PORTUGUESE MARKET SITUATION 2004..............................................................................126 NGN IMPACTS ON THE TELECOMMUNICATION MARKET STRUCTURE...............................127 CHAPTER REVIEW ..................................................................................................................129 CONCLUSIONS .......................................................................................................................131

6.1. SUMMARY OF FINDINGS ........................................................................................................131 6.1.1. KEY FINDINGS FROM THE TECHNICAL ANALYSIS......................................................................139 6.1.2. KEY FINDINGS FROM THE POLICY ANALYSIS ............................................................................140 6.2. SUGGESTIONS FOR FURTHER RESEARCH ..............................................................................141 REFERENCES .................................................................................................................................142

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List of tables

Table 2 The Layers of The Old Telecoms Industry........................................................................................8 Table 3 Characteristics of the Innovation System in the Old Teleoms Industry ......................................9 Table 4 Location of R&D in the New Telecoms Industry 1998 ..................................................................11 Table 5 Comparison of Innovation Systems ................................................................................................ 13 Table 6 Content of the Telecommunications Law in the UK, 1984......................................................... 33 Table 1 Telephony Service Providers Alternatives ..................................................................................... 43 Table 7 TeleCable Key Facts ......................................................................................................................... 63 Table 8 TeleCable Service Offering.............................................................................................................. 64 Table 9 Cox Networks Key Facts .................................................................................................................. 65 Table 10 Yahoo! BB Key Facts....................................................................................................................... 68 Table 11 Neuf Telecom Key Facts ................................................................................................................. 69 Table 12 Vonage Key Facts............................................................................................................................ 74 Table 13 Key Facts Skype............................................................................................................................... 76 Table 14 EU Universal Service Directive QoS parameters........................................................................ 87 Table 15 ITU Voice Application Delay Specifications................................................................................ 88 Table 16 Protocol Mapping Between TDM and Packet Switching .......................................................... 91 Table 17 -VoIP Questionaire.......................................................................................................................... 97 Table 18 Cisco VoIP Protocol Comparison .................................................................................................. 99 Table 19 Security Functions..........................................................................................................................100 Table 20 Network Security Levels ............................................................................................................... 101 Table 21 ERG VoIP Geographic Numbering Questionaire Response .....................................................109 Table 22 ERG VoIP Differentiation Questionaire Response....................................................................109 Table 23 EU Regulatory framework Communication Service Definitions ............................................ 110 Table 24 VoIP regulatory definitions............................................................................................................111 Table 25 Old vs. New Telecommunications .............................................................................................. 113 Table 26 Portuguese Voice Market – Source Anacom............................................................................122

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List of figures Figure 1 Basic requirements for a one-way line telecommunication channel......................................... 14 Figure 2 Simple trunking diagram of 4-digit step-by-step automatic exchange ................................... 16 Figure 3 Principle of reed relay and crossbar exchange.............................................................................. 16 Figure 4 Portugal Telephony Subscriber Growth 1996-2003.................................................................... 21 Figure 5 World Telephony Subscriber Growth 1996-2003........................................................................ 21 Figure 6 Early 1990’s Mobile Innovations.................................................................................................... 23 Figure 7 History of Computing Timeline...................................................................................................... 25 Figure 8 OSI 7 Layer Model ............................................................................................................................ 28 Figure 9 TCP/IP Interhost commuincation.................................................................................................. 29 Figure 10 Circuit Switch Network intra-switch and inter-switch calls ....................................................... 44 Figure 11 Circuit Switch functional layout example .................................................................................... 46 Figure 12 VoDSL Hybrid Model ...................................................................................................................... 48 Figure 13 VoCable Hybrid Model.................................................................................................................... 48 Figure 14 Voice Packet Switching on the backbone................................................................................... 49 Figure 15 VoIP Interconnect........................................................................................................................... 49 Figure 16 Nortel CS2K NGN Network .......................................................................................................... 50 Figure 17 Nortel CS2K & MCS5200 NGN Network................................................................................... 52 Figure 18 Siemens Surpass NGN Network .................................................................................................. 54 Figure 19 Circuit switched cable telephony network .................................................................................. 56 Figure 20 Packetcable VoIP cable telephony network................................................................................ 57 Figure 21 Services offered by a MTA/Set-Top Combo Box...................................................................... 58 Figure 22 Hybrid Packet and Circuit Switching Network.......................................................................... 59 Figure 23 TeleCable Customer Growth 2000-2004.................................................................................. 64 Figure 24 Cox VoIP Architecture................................................................................................................... 66 Figure 25 BT Network high level overview 2004......................................................................................... 71 Figure 26 BT Next Generation Network high level overview .................................................................... 71 Figure 27 BT Interconnect Structure 2004.................................................................................................. 72 Figure 28 BT 21st Century Network Model................................................................................................. 72 Figure 29 BT 21Century Network High Level Architecture....................................................................... 73 Figure 30 Two separate Voice and Data networks of GMC before introduction of VoIP.................... 79 Figure 31 New combined GMC Voice and Data Packet Network ........................................................... 80 Figure 32 H323 Protocol Suite ...................................................................................................................... 94 Figure 33 IETF SIP Protocol Suite .................................................................................................................. 95 Figure 34 ETSI Functional block diagram showing handover interface HI............................................103 Figure 35 ITU Internatonal Public Telecommunication Structure..........................................................107 Figure 36 NGN Telecommunications Value Chain ................................................................................... 115 Figure 37 Moving the Business Model up the Value Chain .....................................................................125

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1.

INTRODUCTION

This thesis aims to analyse the past and the near future of voice telephony core switching. It aims to study the background leading to the present situation in the telecommunication sector of industrialised countries where telecommunications liberalization has taken place extending previous work done by Fransman [17] in this area but with a focus on the options available for the technical architecture of voice communications networks of wireline (fixed line) telecommunications operators with the advance of packet switching. Within this area attention is paid to the technological, economical and regulatory factors in the current telecommunications

wireline

sector

and

how

these

impact

on

the

design

of

telecommunications networks to support voice switching.

Early work in the area of IP Telephony by McGarty [29] has already analysed some aspects of the change in voice communications permitted with the use of packet switching but this study aims to analyse more segments of the voice communications industry taking into consideration recent technological advance in voice switching technology. Although there has been other research done into the issues involved with technology, business and regulatory choices such as presented by McKnight [30], this investigation aims to extend on the earlier work but with a particular focus on the potential technological and regulatory impacts related to the design of packet switched Next Generation Networks (NGN) for voice and voice related services.

In summary this study aims to analyse background leading up to the Next Generation Network (NGN) model and benefits derived from the migration of voice and voice related services from an existing circuit switched voice network to a next generation network packet switched network and the resulting impacts to the industry with the goal to observe what technical, commercial and regulatory recommendations can be derived to ensure that telecommunications continue to play a constructive role in wealth creation in society. Special attention is given to the Portuguese market. The recent evolution in the data communications world is also considered important but is beyond the scope of this research.

A limitation of this research was that insufficient data was found to postulate mathematical or statistical formulae regarding the optimum design or policy choices in NGN for voice

5

services which therefore cause the findings of this research to be of a descriptive nature. Nevertheless it is believed that the findings highlight important issues for operators and policy makers in the wireline market with the evolution from circuit switched voice networks to packet switched voice and data networks.

Specific voice telephony areas identified in this study for future work, which will be discussed during this report, are: 1. VoIP protocol choice for packet networks. 2. Analysis of Skype and Instant Messaging user population profiles to determine if users are using these media as replacements to traditional voice telephony or as an additional communications media. 3. Optimum criteria for new numbering and addressing concept for VoIP and multimedia services. 4. Regulatory positioning regarding numbering, lifeline and interconnect for voice over packet users. 5. Technical options for future (overlapping) access technologies for voice users to access NGN networks such as Powerline and WiMax technology.

1.1.

Research Background The world of telecommunications has changed immensely in the last decades of the last century and is continuing to change in this century. The last 30 years has seen huge technological and commercial developments in the field of telecommunications. There have been whole new multibillion € industries created by the rise of the internet and mobile communications which have contributed significantly to the national economies of industrialized countries. The British telecoms regulator Ofcom estimates that 4% of the UK GDP is derived from the telecommunications industry1 and the largest companies in many national economies are telecoms operators like NTT in Japan and PT in Portugal2. Although compared to the quantum shifts that have occurred on the mobile and data communications networks it may be thought that the traditional fixed line voice networks have not changed much during these years, this would be incorrect. There have been in the last years, and still are, underway substantial shifts in the underlining building blocks of the fixed line networks – the central office exchange or voice switch which are laying the 1

www.ofcom.org.uk

6

foundation for a new generation of voice, data and multimedia services. There has been an evolution of voice switching from analogue lines with manual switch boards through digital circuit switched exchanges to the voice enabled packet switched networks controlled by soft-switches known as Next Generation Networks (NGN).

Before analysing the NGN network models it is important to contextualise the recent changes by reviewing what has happened in the telecommunications industry before the advent of the packet switching NGN networks. Sections 1.2 to 1.4 review the economical and technological background of voice telecommunications.

1.2.

From Telecommunications to Infocommunications The 1980’s saw a huge new industries rise up from nowhere where companies like Worldcom and Cisco that were set-up in garages or campus labs became in a few years some of the largest companies in the United States by stock market valuation. The term the ‘new economy’ arose during those years to describe the spectacular growth of high technology companies during the 1990s before the Nasdaq crash. In the current postinternet bubble and post-telecom boom economy there has been a strong tendency to downplay the significance of the recent innovations in these areas as the share values of the principal players have dropped drastically in the last years and many players have disappeared. However this would be incorrect as there has been a paradigm shift in the underlying structure of the telecommunications industry in the last decade driven by technological and regulatory change.

A good model for comparing the evolution of the telecommunications industry was produced by Fransman [17], In his view 3 stages of development of the industry are defined:

• • •

The old Telecoms Industry (to the mid-1980s) The transition Telecoms Industry The birth of the Infocommunications Industry

THE OLD TELECOMS INDUSTRY (TO THE MID-1980s) The old telecoms industry was the time when the sector was considered to be a natural monopoly and that due to increasing returns to scale telecoms services could only be 2

By stock market capitalization Q3-2004 7

provided efficiently by a monopoly network provider. Telecoms in most industrialized countries were provided by one monopoly network operator.

In most large countries the network operator would purchase most of its network equipment from one main telephone equipment maker like Deutche Telekom with Siemens in Germany, France Telecom with Alcatel in France and Bell with Western Electric in the United States.

In the smaller industrialized countries (Sweden with Ericsson being a notable exception) and most of the developing countries the national monopoly telecoms carriers procured their telecoms equipment from the handful of specialist telecom equipment makers who competed in world markets. While being profitably locked into long-term relationships with the monopoly network operators in their home country, these specialist technology suppliers competed vigorously in the rest of the world where telecoms equipment markets were not similarly locked up by competing suppliers with privileged supply relationships with the national operator.

Fransman defines the following three layer model to describe the Old Telecoms Industry:

LAYER 3: SERVICES LAYER (voice, fax, freephone services)

LAYER 2: NETWORK LAYER (circuit-switched network)

LAYER 1: EQUIPMENT LAYER (switches, transmission systems, customer premises equipment) Table 1 The Layers of The Old Telecoms Industry3

A pattern of close, long term, obligational co-operation emerged as the dominant form of economic organization between the monopoly operator in Layer 2 and the specialist technology suppliers in Layer 1. It is reasonable to characterize the dominant form of economic organisation in these countries as one of quasi-vertical integration.

The technological regime structures the learning regime. Essentially, the learning process involved the monopoly network operators (located in Layer 2) learning how to run and 3

From Fransman 1998 8

improve its telecoms network which provided the platform for the services that it offered. Being a monopolist, the ‘selection environment’ of the network operator excluded pressures and incentives to compete in telecoms services markets. However as Fransman note, there were pressures and incentives to improve both the network and services emanating from domestic political processes as well as rivalry between national systems to rapidly introduce new technologies and services. The latter pressures and incentives shaped the learning process.

In the Old Telecoms Industry the monopoly network operator was both a user and an innovator of telecoms technologies and equipment. However, there was a division of labour with the network operator concentrating on research (including fundamental and long term research) and design while its selected equipment supplier/s (located in Layer 1) specialised in development and mass manufacture of equipment. As a sophisticated user and innovator of telecoms technologies and equipment, the monopoly network operator was well-placed to learn-by-using and by experiencing opportunities for further improvements through running the network. However, in developing telecoms technologies and equipment for mass manufacture, the specialist equipment suppliers also underwent a learning process that enabled them over time to move into the upstream parts of the innovation process, namely into increasingly research- and design-intensive activities. Below in Table 2 Fransman summarises the cycle of innovation in the old telecoms world.

Closed innovation system High entry barriers Fragmented knowledge base Medium-powered incentives Slow sequential innovation process: Research – prototype – Trials – cutover Table 2 Characteristics of the Innovation System in the Old Teleoms Industry4

THE TRANSITION TELECOMS INDUSTRY In the mid-1980s, for different political-economic reasons, Japan, the UK and the US decided to end the monopolies of their national monopoly network operators. The result was the birth of competition in the fixed networks. At the same time the first mobile technology was being tentatively developed with the Nordic Mobile Service in Scandinavia.

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New Entrants and Specialist Technology Suppliers Although liberalising regulatory regimes provided a necessary condition for rapid and successful entry by the original new entrants, they were not sufficient. Equally important were low technological barriers to entry into the telecoms services markets (in Layer 2) created by the existence of specialist telecoms equipment suppliers.

These specialist equipment suppliers provided the ‘black-boxed’ technologies that the new entrants needed to construct and run their own networks. Unlike their counterparts in other industries such as pharmaceuticals or semiconductors, where substantial in-house technological capabilities were necessary in order to enter and compete, the Original New Entrants in the Telecoms Industry were able to turn to specialist technology suppliers for most of their technology requirements. Without the knowledge-acquisition and learning process that the specialist technology suppliers underwent in the Old Telecoms Industry, would-be original new entrants would have faced formidable technological barriers to entry.

From the point of view of the specialist technology suppliers, liberalisation created new markets for their accumulated knowledge and competencies.

By the mid-1990s a decisive process of vertical specialisation had occurred between Layer 1 and 2 in the Telecoms Industry. As noted earlier, in the Old Telecoms Industry the R&D engine was largely located in the central research laboratories of the monopoly network operators with the specialist equipment suppliers being largely relegated to playing the role of dependant developers and manufactures. By the end of 1995 however, this situation had changed dramatically with the now incumbent network operators making the decision to leave more and more of the R&D related to the network and its elements to the specialist equipment suppliers. At the same time the incumbents decided to open their procurement, agreeing to buy from new suppliers in addition to their traditional suppliers.

One of the best indicators of the change in technological regime as the Old Telecoms Industry gave way to the New Telecoms Industry is provided by data on the changing location of R&D. This is illustrated clearly by the data shown in the following table: 4

Fransman 1998 10

FIRM/INDUSTRY NTT BT AT&T Cisco Ericsson Nortel Lucent Nokia WorldCom Level 3 Global Crossing Roche Glaxo Welcome Smithkline Beecham Vehicle Industry Leisure & Hotel Industry Building Materials Industry Brewery Industry

R&D / SALES % 3,7% 1,9% 1,6% 18,7% 14,5% 13,9% 11,5% 10,4% ~0% ~0% ~0% 15,5% 14,4% 10,8% 4,2% 3,2% 3,0% 2,3%

Table 3 Location of R&D in the New Telecoms Industry 19985

Several characteristics of the technological regime in the New Telecoms Industry are evident from this table. The first characteristic is that the incumbent network operators such as NTT, BT and AT&T are not particularly R&D-intensive especially when compared with traditionally non high tech hotel, building materials and brewery industries. The second characteristic is that the new entrants like WorldCom, Level3 and Global Crossing are even less R&D-intensive than the incumbents, doing virtually no in-house R&D. The reason, as already mentioned in this chapter, is that many new entrants have made the strategic decision to outsource almost all of their R&D requirements to the specialist technology suppliers. Although note that all of the new operators suffered severe financial problems in 2002 with Global Crossing and WorldCom going into chapter11 bankruptcy protection (not too mention the accounting scandals) and Level3 came very close to it. The third characteristic is that R&D intensive activities, mainly relating to the elements that go into the network, have moved decisively into the specialist technology suppliers, represented in table 5 by Cisco, Ericsson, Nortel, Lucent and Nokia. These specialist technology suppliers are some six times as R&D intensive as the incumbents At&T, BT and NTT. Furthermore, their R&D intensity is comparable to that of the pharmaceutical companies, acknowledged

5

Idem 11

companies, acknowledged to be amongst the most R&D-intensive of all sectors.

It may be concluded, therefore, that while in the Old Telecoms Industry the ‘innovative engine’ was located largely in the central research laboratories of the monopoly network operators, in the New Telecoms Industry the ‘R&D engine’ has moved decisively into the specialist technology suppliers. This provides one key indicator of the extent of the process of vertical specialisation between Layers 1 and 2 (see Table 3) in the New Telecoms Industry. A significant word of caution, however, is necessary regarding this conclusion. This arises because it is important not to confuse R&D with innovation. Firms with low R&D intensity may nevertheless be highly innovative, and their innovativeness may lead to competitiveness and high profitability. One example of this was the TMN MIMO prepayment service that was invented by TMN, a Portuguese mobile operator allowing TMN to regain market control in the Portuguese mobile telephony market.

THE

INTERNET

AS

A

NEW

PARADIGM

AND

THE

BIRTH

OF

THE

INFOCOMMUNICATIONS INDUSTRY In the early 1990s the Internet emerged as a commercial force, creating an alternative way of delivering the same or similar services to those provided over the conventional circuitswitched telecoms networks and, in addition, a host of new services. But the Internet was far more than just an alternative platform; it was nothing less than a radically new paradigm in the area of both information and communications, changing fundamentally the way people would think of problems and solutions in this field. Furthermore, by inserting itself into the very fabric of the Telecoms Industry, the Internet brought about the metamorphosis

of

this

industry

into

what

will

be

termed

by

Fransman

the

‘Infocommunications’ Industry.

The key of the internet lay in the move from circuit switching (typically in 64kbit/s chunks) to packet switching and from permanent nailed up connections between 2 points to dynamic routing between many network points. The IP Internet Protocol is the most well known packet switching protocol but there exist also other packet switching protocols like ATM. Whereas with circuit switching and permanent point-2-point connections a physical circuit would be dedicated to that connection for the whole existence of that connection regardless of the amount of data transmitted between two points, packet switching broke the communication information up into many separate data packets which could travel

12

independently and if necessary through different routes to their destination. This was a much more efficient use of network capacity and also permitted the development of a whole range of multi-media services that were not restricted by the old circuit switched limitations. Also this enabled telecommunications networks to become to a certain extent non-rival as more than one user could use the same physical path for more than one service at the same time. The innovation system in the Infocommunications Industry has undergone a fundamental transformation as can be seen in the following table: INFOCOMMUNCATIONS INDUSTRY Open Innovation system Low (relative) entry barriers Many Innovators Common knowledge base High-powered incentives Rapid, concurrent, innovation: New forms of innovation

OLD TELECOMS INDUSTRY Closed innovation system High entry barriers Few Innovators Fragmented knowledge base Medium-powered incentives Slow sequential innovation process: Research – prototype – Trials – cutover

Table 4 Comparison of Innovation Systems6

Competitive forces are one of the key conditions ‘surrounding’ the creation of knowledge and therefore are part of the technological regime. It is these forces that Schumpeter had in mind when he referred to the “fundamental impulse that sets and keeps the capitalist engine in motion” [38]. In the Infocommunications industry it is necessary to distinguish between four forces of competition:

•

Between products/services;

•

Between networks;

•

Between technologies;

•

Between firms.

Examples of competition in each of these four areas are, respectively, competition between voice, fax, e-mail and more recently instant messaging; competition between copper wire, coaxial cable, optical fibre and fixed wireless for local access; competition between TDMA and CDMA mobile standards in second and third generation digital mobile; and competition between network operators. Competition in each of these areas may occur independently of competition in the other areas or there may be interdependencies between some or all of the areas.

6

Fransman 1998 13

The existence of these four elements of competition of the Infocommunications industry is a significant change to competitive structure of the telecommunications industry as it was a decade ago and the role of packet switching plays a crucial facilitating role in the middle of these competing forces and the way voice packet switching develops in national markets and telephony service provider networks will impact significantly on the range of voice services available to consumers. Therefore the factors that need to be considered by telephony service operators when making network design choices are not only relevant to them but also have a wider impact that policy makers should take into account when setting regulations and guiding interconnect policy. To facilitate the understanding of present voice switching technology choices, a review will be made of the history of voice and data network technology and the regulatory and standards bodies associated with the technologies.

1.3.

Evolution of Voice Telephony Going back to basics it is seen that in the communication of analogue information such as voice, music or modem tones between two points the signal must first be converted into electrical signal via a transducer. In a wireline telecommunication system the electronic signal is passed to the destination by a wire or cable link. At the destination, a second transducer converts the electronic signal back into the original analogue signal as displayed in Figure 1.

Figure 1 Basic requirements for a one-way line telecommunication channel7

The telephone is a telecommunications device that transmits speech by means of electric signals8.

The first telephone was built in Boston, Massachusetts in 1876 by Alexander

Graham Bell. Initially telephone calls were connected from one end-user to the other via the

7 8

Telecommunications Primer, Langley,G & Ronayne, JP; Pitman Publishing 1993 Definition of telephone as given in http://encyclopedia.thefreedictionary.com 14

the manual telephone exchanges, the first of these was invented by Tivadar Puskas. These manual telephone exchanges consisted of one to several hundred switchboards. A switchboard9 was a device used to manually connect a group of telephones from one to another or to an outside connection. The user was known as an “operator”. The switchboard was usually designed to enable the operator to sit at it. It would have a high backpanel which consists of rows of female jacks, each jack designated and wired as a local termination of a phone subscriber. This system was functional but rather slow and labour intensive.

A significant improvement to the manual switchboard was made in 1891 Almon B. Strowger invented and patented the first automatic telephone exchange: the Strowger or step-bystep switching exchange. While there were many extensions and adaptations of this initial patent, the one best known consists of 10 layers or banks of 10 contacts arranged in a semi-circle. When used with a dial telephone, each pair of numbers caused the shaft of the central contact "hand" to first step up a layer per digit and then swing in a contact row per digit. These step switches were arranged in banks, beginning with a "line-finder" which detected that one of up to a hundred subscriber lines had the receiver lifted "off hook". The line finder hooked the subscriber to a "dial tone" bank to show that it was ready. The subscriber's dial pulsed at 10 pulses per second (depending on standards in particular countries).

9

Definition of switchboard as given in http://encyclopedia.thefreedictionary.com 15

Figure 2 Simple trunking diagram of 4-digit step-by-step automatic exchange10

Automatic switching permitted telephone subscribers to dial one another automatically without the assistance of an operator thereby reducing the cost and resources required to run a telephone network and providing a faster and cheaper service to the consumer.

In the 1950s exchanges based on the Strowger switch were surpassed by switches using the crossbar technology. Crossbar or Reed switches use switching matrixes made from a two dimensional array of contacts and offered faster switching and would accept pulses faster than the Strowger’s typical 10 pps – typically around 20 pps.

Figure 3 Principle of reed relay and crossbar exchange11

The Crossbar switches used a different concept from the step-by-step exchanges where instead of each switch or selector having its own little distributed ‘brain’, there is a central “brain” which controls all switches (see Figure 3). This central brain registers the number dialled, checks that the calling number is permitted to make the call, and tests to see if the called number is engaged. Exchanges using this centralized control function are called common control exchanges. If the called number is free, this common control equipment chooses a path through the exchange to join together the calling line to the called line, and issues instructions to all the crossbar switches concerned to operate in such a way that the two lines are connected together. With the increased speed of operation it now becomes attractive to replace ordinary rotary dials by push button telephones which are easier and quicker for the subscriber to use.

The first digital exchanges using the Time Division Multiplexing (TDM) appeared in the 1975: The SL-1 switch produced by Northern Telecom12. These circuit switched digital 10

Telecommunications Primer, Langley,G & Ronayne, JP; Pitman Publishing 1993 Idem 12 Nortel Networks Historical Milestones http://www.nortelnetworks.com/corporate/corptime/1970.html 1975 11

16

exchanges offered a number of advantages over the analogue or space division exchanges such as: •

Lower Capex and Opex costs than for analogue equipment, especially maintenance staff savings were significant;

•

Space savings: Digital exchanges in a fully digital environment take up less space than analogue exchanges;

•

Transmission improvement: The change from FDM to digital TDM transmission systems combined with the change from 2-wire space division to digital 4-wire enables losses to be reduced significantly without having to invest heavily in new plant in local distribution networks;

•

The relative ease by which digital switching equipment can evolve to provide new services.

The growth of TDM circuit switching was accompanied by an evolution in the signalling. Signalling in the telephony context is defined as passing information and instructions from one point to another relevant to the setting up or supervision of a telephone call.13 Some examples of signals are:

a) On-hook or Off-hook signals – indicate to the network that a user is requesting or terminating service from the network; b) Dialled digits – determine the routing of the call from the origination point through the network to the termination point; c) Calling party digits – inform the network of the originator of a call or transaction.

The evolution of communications technology created a demand for new and enhanced services. To meet these demands circuit switched based networks use two distinct types of signalling: •

Per-trunk Signalling (PTS);

•

Common Channel Signalling (CCS).

These two types of signalling support the following components of any voice or data call:

13

Telecommunications Primer, Langley,G & Ronayne, JP; Pitman Publishing 1993

17

•

Signalling component – contains the supervisory and address signals used for call related control (call set-up, monitoring and take down) and with CCS also non-call related control (database queries, mobility management);

•

Voice and data component – contains the traffic between the originator and the recipient of the call, regardless of whether it is a voice or a data call.

With analogue telephone systems the signalling component of a call is transmitted on the same facility as that is used for the voice component. The type of signal is referred to as Per Trunk Signalling (PTS). Both signalling traffic and voice traffic occur on one trunk dedicated specifically to that call. PTS requires the voice component to be completely built, even if a call cannot be completed. For instance, if the number being dialled was busy, a voice facility has been wasted that could be used for another call. This was especially important for toll switches, as wasted voice facilities can mean loss of income. PTS signalling had a number of limitations: •

Relatively slow;

•

Limited information capacity;

•

Limited capability of conveying information which is not directly call-related;

•

Inability of some systems to send detailed information back to the calling end;

•

Inability of some systems to provide sufficient information for accurate itemized call billing;

•

Systems tend to be designed for specific application conditions;

•

Systems tend to be expensive because each circuit has to be equipped independently, i.e. No sharing techniques or economies of scale.

The CCITT Signalling System No.7 (aka. Common Channel Signalling) standard was created by the International Consultative committee for Telephony and Telegraphy to overcome the aforementioned limitations of PTS signalling. Common Channel Signalling (CCS) is a generic term for a telecommunications system using two separate paths for information transfer: a) One path for voice and data bearer information; b) One common path for all-related signalling information.

18

CCS allows full use of interoffice trunk facilities for voice or data. CCS also provides additional bandwidth for signalling on a common, separate trunk. The amount of signalling information during calls is small compared to the voice component of that call. One signalling link can be used for several voice calls without becoming overloaded. Advantages of CCS signalling over PTS signalling are: a) Signalling is completely separate from switching and speech transmission, and thus may evolve without the constraints normally associated with such factors; b) Significantly faster than voice-band signalling; c) Potential for a large number of signals; d) Freedom to handle signals during speech; e) Flexibility to change or add signals; f) Potential for services such as network management, network maintenance, centralized call accounting; g) Particularly economic for large speech circuit groups; h) Economic also for smaller speech circuit groups due to quasi-associated and disassociated signalling capabilities; i)

Systems have been standardized for international use;

j) Can be used to control the setting-up and supervision of non-voice services. CCS soon became the norm in industrialized countries for interconnect between networks and on a more gradual basis as intra-network inter-switch interconnect protocol. CCS standards were developed by ITU and the North American standards body - the main one being ISUP. Separated signalling not only provided the advantages listed above but provided the foundation for INAP Intelligent Network which enabled operators to provide Freephone, Premium, VPN, Prepaid and other database look-up services much more efficiently than was possible before.

CCS is a very pertinent example for this study as it was in effect the first form of packet switching for voice although only for the voice signalling. As shall be seen later in this thesis there are many similarities in the design of voice packet switching and benefits it is

19

envisaged to bring with the design and benefits provided by CCS in its time. Except that now the advantages relate not just to voice signalling transport but also to voice ‘content’ transport.

It has been seen that in the nearly 130 years since the telephone was invented there have been a series of improvements made to the voice telephony networks permitting the deployment of better and cheaper voice services. However these changes seen in the wireline networks were overshadowed in the 1980s and 1990s by rise and exponential growth of wireless and data networks which although are not the principal focus of this research have had important impacts of the wireline market and will be reviewed in the following sections.

Mobile voice In the mobile telephony sector it is important to appreciate the increases that have occurred

in

mobile

telecommunications

in

the

last

decade

despite

the

recent

underachievement of 3G mobile networks in Europe. Figure 4 illustrates the growth in mobile and fixed line subscribers during the 1996 – 2003 period taking national figures from Portugal as an example. As can be seen mobile subscriber growth has been very strong with penetration overtaking fixed lines in the last years [24]. 10000 9000

Mobile Subscribers (k)

8000

Fixed network Subscribers (k)

7000 6000 5000 4000 3000 2000 1000 0 1996

2003

Figure 4 Portugal Telephony Subscriber Growth 1996-200314

The situation regionally and globally shows a similar picture again with mobile subscribers overtaking fixed line subscribers on both European and Global levels. Interestingly according to the ITU although total mobile subscriber numbers overtook fixed lines

14

www.itu.org Statistics 20

subscribers in 2002 revenue was still higher for fixed line telephony (364 Billion$ vs. 465 Billion$ in 2002)15

1600000 1400000 1200000

Europe Mobile Subscribers (k) World Mobile Subscribers (k) Europe Fixed Subscribers (k) World Fixed Subscribers (k)

1000000 800000 600000 400000 200000 0 1996

2003

Figure 5 World Telephony Subscriber Growth 1996-200316

After mobile telephony was first launched commercially in the 1980’s in Europe it quickly became apparent that without a fixed standard, the effectiveness of the new technology would be severely limited and most countries would run out of bandwidth soon. A well known anecdote from the early days of mobile telephony is that in the early 1980’s AT&T asked management consultancy company McKinsey to predict how many cellular phones there would be in the world in the year 2000. McKinsey predicted that 900.000 Americans would have mobile phones by 2000; the actual figure was over 70m with over 10 times as many users globally.

In Europe work on the first standard for civilian cellular mobile communications began in Scandinavia in 1970, involving the PTTs (national network operators) and specialist equipment suppliers of Denmark, Finland, Norway and Sweden. Later on in the early 1980’s higher than expected demand for mobile telephony led to the development of GSM which was started in 1982, when the Conference of European Posts and Telegraphs (CEPT) operators formed a study group called ‘Groupe Spécial Mobile’ (the initial meaning of GSM). The group’s goal was to study and develop a pan-European public cellular system in the 15

ITU, “Key Global Indicators for the World Telecommunications http://www.itu.int/ITU-D/ict/statistics/at_glance/KeyTelecom99.html 16 www.itu.org Statistics 21

Service

Sectors”

900 MHz range using spectrum that had been previously allocated. At that time, there were many incompatible and spectrum consuming analogue cellular systems in various European countries. Some of the basic criteria for their proposed system were:

•

Good subjective speech quality;

•

Low terminal and service cost;

•

Support for international roaming;

•

Ability to support handheld terminals;

•

Support for range of new services and facilities;

•

Spectral efficiency;

•

ISDN compatibility.

The evolution of the mobile standards up to GSM is shown in the below figure:

Figure 6 Early 1990’s Mobile Innovations17

As analysed by the Economist magazine [11], the Mobile telephony market experienced exponential growth during the 1990s helped by a virtuous circle of reducing prices of mobile telephones in parallel with increasing functionalities of the phones and mobile service.

17

Derived from milestone information taken from ‘GSM Association’ history of GSM presentation 22

service. Lowering of handset prices was driven by increasing economies of scale as market growth, lowering chipset prices and a competitive handset supplier market. As well as becoming cheaper, handset quality was improving through reduction of chipset, battery improvements and design improvements.

The case of mobile telephony and especially GSM is relevant to study when investigating NGN networks as the successful commercialisation of GSM is an important example of the successful

international

collaboration

between

regulators,

network

operators

and

manufacturers to create a service which has had a significant positive impact on society globally. Also the far less successful deployment (so far) of 3G networks is an example of when this same collaboration does not work so well with the technology having numerous technical problems and delays and the model of auctioning of 3G licences when the business models for these networks were not yet clear seems to have had some weaknesses.

1.4.

Data Communications Overview Data Communication can be defined as the transmission of data or information from one point to another. There have been enormous developments in the data world in the last 30 years which have significantly impacted on the way people work and play in the industrialised world. A good summary of key developments in the data world is shown in Figure 7.

23

Figure 7 History of Computing Timeline18 18

From http://en.wikipedia.org/wiki/Timeline_of_computing 24

A detailed analysis of the background to the current situation with data communications is beyond the scope of this research. Key drivers in the evolution of data communication were the continually increasing computer processing power (at same cost) driven by Moore’s Law and enabling the computing hardware industry to offer more features and functions in less space and at lower cost. This in turn assisted in the massification of personal computers in both the consumer and business worlds. Also at the same time the world experienced the rise of the Internet.

The Internet today combines a range of functions such as broadcasting capability, an information dissemination mechanism and a medium for collaboration and interaction between individuals and their computers without regard for geographic location. The Internet represents an example of the benefits of sustained investment and commitment to research and development of information infrastructure. Beginning with the early research in packet switching, the government, industry and academia have been partners in evolving and deploying this exciting new technology. A paper on the history of Internet written by the original developers is available which describes in more detail Internet developments [28].

However it is important to introduce the concepts of communication in the data world as this directly relates to the design of voice packet networks. In the 1970s the OSI developed the Open Systems Interconnection Reference Model (OSI) as a framework of standards for computer-to-computer communications. The OSI Reference Model is made up of seven layers: The Application Layer: This layer serves as the window for application process (e.g., file transfers, database access, and e-mail) to access network services. The layer handles general network access, flow control, and error recovery. Presentation Layer: This layer determines the format to use when exchanging data among members of a network. Data gets translated from the application layer and is transmitted to a destination computer. The application layer of the receiving computer translates the data into a form that its application layer understands. Encryption and data compression is also handled at the presentation layer.

25

Session Layer: This layer allows two applications on different computers to establish, use, and end a connection called a session. The layer provides synchronization between user tasks by placing checkpoints in the data stream. This layer also implements dialog control between communicating processes, regulating which side transmits, when, for how long, and so on. Transport Layer: This layer provides an additional connection level beneath the session layer. It repackages messages, dividing long messages into several packets and collecting small packets together in one package. It ensures that packets are delivered error free, in sequence, and with no losses or duplications. This layer allows the packets to be transmitted efficiently over the network Network Layer: This layer performs routing functions, ensuring that data is routed correctly from source node to the destination node on the network. The network layer manages network traffic as well. Issues such as packet switching, routing, and data congestion are all handled by the network layer. Data Link Layer: This layer sends frames or packets of data from the network layer to the physical layer. On the receiving end, it packages raw bits from the physical layer into data frames or packets. This layer sends a packet of data, then it waits for an acknowledgment from the recipient. It also detects any problems with the packet that may have occurred during the transmission. Packets of data that were not acknowledged, or packets that were damaged during transmission are resent. Physical Layer: This layer transmits the unstructured raw bit stream over a network cable. This layer defines how the cable is attached to the network adapter card. It also defines which transmission technique will be used to send data over the network cable. The OSI model is still the general reference standard for most networking documentation.

26

Figure 8 OSI 7 Layer Model19

TCP/IP TCP/IP was developed in the mid 1970s to solve the problem of connecting many military computing systems around the USA. The systems were from different manufacturers, ran different protocol stacks and for the sake of reliability, several routes were needed between each network. This is similar to the design problem of a packet network (with voice) today. The TCP/IP solution entails running all or part of the TCP/IP protocol stack on each device that will be required to inter-work with others. The networks can then be connected using IP gateways or routers that are aware of all networks and that can communicate across them. Within the TCP/IP environment, all devices are said to fall into one of two categories: 1. Hosts are devices that run applications and may be any device from a PC to a mainframe computer. 2. Gateways are devices otherwise known as routers that connect networks and route data between them.

Currently TCP/IP consists of a four-layer architecture more or less mirroring the ISO 7 layer model: •

Network Acesss Layer - responsible for transferring data from one device on a network to any other on the same network;

19

www.osi.org 27

•

Internet Layer – delivers data from any hosts on the internetwork to any other hosts, regardless of the network or destination, The IP protocol resides on this layer;

•

Host-to-Host Layer – TCP resides at this layer to provide reliable transport to and from applications implemented at hosts. User Diagram Protocol (UDP) is an alternative protocol used also at this layer for unreliable transport.

•

Process Layer – Within TCP/IP applications are referred to as processes.

Below illustrates communication between two hosts over multiple networks using the TCP/IP protocol suite.

Figure 9 TCP/IP Interhost commuincation20

As TCP/IP is completely vendor independent and is not concerned with the type of machine it is operating on or the type of network that it is operating over, it is ideal for the requirements of today’s network designers.

The growth of data communications has been a significant factor in the development of voice packet switching networks as the fact that voice traffic no longer is the only or

20

Extracted from ‘fixed network technologies’ presentation by Prof. Adolfo V. T. Cartaxo. IST Lisbon January 2003. 28

increasingly even the main communication service (by volume of information) passing over of a service providers network is a key motivator for the shift to a packet switched network.

1.5.

Telephony Regulati egulation Overview Another important element in the voice communications equation is the regulatory environment. In the years after Alexander Graham Bell‘s patents on the telephone expired, competition in local telephone service was fierce. However, the various systems did not interconnect with each other, with the unhappy result that some businesses needed multiple telephones, one for each system. The concept of universal service has its roots in network economics: each additional node on the network enhances the value of all other nodes, because each of them can reach a larger number of people. Indeed, the first users of telephones were limited to calling a very small number of people who also had phones. Only when a sufficient number of households and businesses joined the telephone network did it provide convenience and value to the average consumer. This principle follows Metcalfe´s law which states that

21

“the usefulness, or utility, of a network equals the square

of the number of users”. It shall be seen that Metcalfe’s continues to have relevance in NGN networks.

National regulation for telecommunications was often managed by the entity responsible for the other main historical forms of communications: post & telegraph. For example the monopoly in communications in the UK (initially mainly letters and parcels) was legally established in the 17th century under a private company’s licensing regime. In the early years of the 20th century, the non-renewals of licenses to private telephone companies initiated the nationalization of the telecommunications industry. Telecommunications were integrated

into

a

governmental

department

in

charge

of

postal

services

and

telecommunications which was later transformed into a national company like in ‘the Post Office’22 in 1969 in the U.K. This model, combining telephony, telegraphy and postage communications, was adopted in many other European countries including Portugal.

In the USA the regulatory model was different: municipalities initially granted telephone franchises, but as more and more independent telephone companies (telcos) merged, it 21

Robert Metcalfe founded 3Com Corporation and designed the Ethernet protocol for computer networks. Metcalfe's Law states that the usefulness, or utility, of a network equals the square of the

number of users

29

became more difficult to regulate them on a local basis and so states began to regulate the local telephone exchanges. AT&T had a competitive advantage over the other local telcos because it held the patents on long distance interconnections and before long, AT&T.s acquisition strategy gave it clear monopoly status in the USA. In 1910, the Interstate Commerce Commission began to regulate the interstate portion of AT&T’s business to ensure just and reasonable rates. The Telecommunications Act of 1934 established the Federal Communications Commission and transferred regulatory control of interstate telecommunications from the ICC to the FCC. Although AT&T was a private company it was subjected to strict regulatory measures to ensure no abuse of the monopolistic position it held.

The role of the national telecoms regulator during the 100 years until the mid 1990s was basically to guarantee that the public telephony was universally available to the public and to ensure that a fair price was charged for the telephony services. Telecommunications regulation was marked by a remarkable degree of segmentation and invariability. This was because at that time each communications service was available only through a single technology, each medium of communications could be governed by its own, discrete regulatory system that did not have to take into account the impact of other technologies. In addition as stated by Spulbert [41], because policy makers tended to regard each medium as a natural monopoly, they subjected telecommunications networks to the nowclassic regime of common-carriage regulation, in which state and federal regulatory authorities imposed non-discrimination and mandatory service requirements, monitored quality, supervised investments, and restricted competitive entry. Most importantly, this approach focused on the rates that telecommunications providers could charge end users for purchasing outputs. The primary policy issue centered on whether such rates should be based on historical cost or replacement cost.

Two emergent forces began to destabilize this century-old regulatory consensus in the 1990s. First, scientific advances are rendering different communications media increasingly interchangeable, allowing intermodal or platform competition as described earlier with the four forces of competition in the Infocommunications age. Not only has the emergence of competition between technological platforms provided consumers and firms with a variety of ways to access network services; it has also begun to put pressure on the historical 22

UK regulatory overview www.ofcom.co.uk 30

regulatory distinction among voice, video, and data communications, in which each type of service was governed by a separate regulatory regime. The second driving force is the fundamental shift in regulatory approach exemplified by the enactment legislation starting in the United States and the European Union with the Telecommunications Act of 1996 and the 1990 EU Directive on competition in the markets for telecommunications services respectively.

These legislations were designed to introduce competition into local telephone service by compelling every incumbent local telephone company to interconnect with its competitors on reasonable and non-discriminatory terms and to provide them with unbundled access to every element of its network. In the USA although initially hailed as a major deregulatory change, it increasingly appears that, rather than representing a shift towards deregulation, the 1996 Act marked a shift towards a different style of regulation known as “access regulation.” Rather than regulating the terms under which consumers purchase outputs, access regulation instead regulates the ability of competitors to obtain inputs.

In the 1990’s a significant shift in policy toward telecommunications occurred in the industrialised countries as first privatisation and then deregulation of the national industries occurred in Europe while in the United States the dominant carrier AT&T was broken up into 7 regional operating companies while at the same time licenses were given for other enterprises to offer telephony services such as the cable companies.

The first example of the regulation after privatisation was the United Kingdom Telecommunication Act of 1984 which paved the way for competition in the UK market (although initially only one extra license was awarded). In Table 5 various key parts of the regulation are analysed illustrating some of the limitations of initial legislation [45].

General provisions Universal service

Rates regulation

The Telecommunication Act of 1984 paved the way for the privatization of BT and the liberalization of the sector. It also set the framework for the regulation of the sector. The Act of 1984 obliged BT to provide universal services obligations. These encompass the obligation to provide a basic level of service at average prices, the provision of public telephone boxes and schemes for low-income households. Price regulation is operated through the now well-known RPI-X price cap formula, in which RPI is the retail-price-index and X an efficiency factor. The result is that the operator cannot increase the average

31

Interconnection regulation

Convergence

price of the regulated product (within a basket of services) above the percentage set by the formula during the four year period for which the formula is designed. The content of the basket has been considerably reduced over time. Interconnection procedures were initially set under the supervision of Oftel via the BT license and via the arrangement between BT and Mercury throughout the 1980’s. It became a critical issue in the 1990’s and required heavier intervention of Oftel. The Telecommunications Act of 1984 quite logically provided no measures relating to convergence of technologies. It is the duty of the new Communication Bill, which is still before the parliament, to address this issue.

Table 5 Content of the Telecommunications Law in the UK, 198423

This initial UK policy did not prove to be very successful and was adapted later with more licenses made available and tougher policy towards interconnection charges covered by the incumbent BT. As a result of the EU competition directive all EU member states were required to permit competition in the fixed networks and regulators were presented with similar challenges as seen in the UK market in their attempts to foster competition in the national markets.

Portugal was a relative late comer with liberalisation in the fixed network only in 2000. The institute responsible for telecommunications (and postal communications) regulation & supervision was the Instituto das Comunicações de Portugal (ICP) which was created in 1981.24

At the beginning of 2002, the role of ICP was redefined and it was renamed Autoridade Nacional de Comunicações (ANACOM) and changed from being a public entity to being a public corporation.

The regulatory duties of Anacom are as follows [1]:
To guarantee network access for communications operators under conditions of transparency and equality;
To promote competition and development in communications markets, namely in the context of convergence of telecommunications, media and information technologies;

23 24

VOETS “UK Regulatory Overview” 2003 ICP was created by Decree law 188/81 on the 2nd of July 1981 32


To grant rights for the exercise of postal and telecommunications activities; to ensure management of the radio spectrum, guaranteeing co-ordination between civil, military and paramilitary communications;
Management of numbering in the communications sector. In the EU there is in addition to the national regulators another regulation making/proposing body - the Information Society DG of the European Commission which is responsible to draft EU wide regulations for telecommunications. This is a public consultation process and upon acceptance by the European Council and European Parliament the resulting directives are imposed on member states. The objectives of the EU regulatory framework are25:

-

To promote competition by fostering innovation, liberalising markets and simplifying market entry;

-

To promote the single European market;

-

To promote the interest of citizens.

Other roles of regulators like ANACOM are to ensure technical representation of the State in international counterpart bodies; accompany the activities of similar regulatory entities and foreign experience in regulating communications, besides establishing relations with other regulatory entities; to collaborate with other public and private entities in fostering scientific investigation applied to telecommunications, and national and international divulgation of the sector; to promote technical standardisation, in collaboration with other organisations, in the communications sector and related fields; to collaborate in defining civil emergency planning policies for the communications sector, providing technical support for the bodies and services responsible for establishing and operating the integrated network of emergency communications; to ensure that studies are carried out in the areas of postal communications and telecommunications; and to undertake projects in the context of promoting access to the information and knowledge society.

Regulation of telecommunications is still an important issue today and not only regarding telephony but also other communication form of the Infocommunications age like email,

33

and instant messaging. Government policies will go a long way toward determining whether new information technologies widen or narrow social divisions. One of the cornerstones of regulatory policy is the commitment to universal access to telephony services. A pertinent question is what the services should now be covered by the commitment to universal access. Goslee [21] argues that the current social commitment should be expanded to include universal access for the new technologies26 with at least three new components: access to a computer with a World Wide Web browser, a personal Internet email address, and the capability to make one's own information available via the Web to avoid the growth of an information underclass. Castells [4] goes even further by arguing for the reintegration of

social

development

and

economic

growth

through

technological

innovations,

informational management, and shared world development with telecommunications playing a vital role.

As stated by Courcoubetis [9] all the changes in technology, economics and legislation in telecommunications in the last years have made the role of the regulator more complex than when telephony was the main service to be regulated. The convergence of transport services, whereby Internet transport protocols are used to transport any type of information, and the convergence of content services of retrieving and displaying digitized information using the uniform Internet application protocols of the World Wide Web, together with the use of personal computers at the edge of the network for multiple tasks (from telephony to watching interactive video), creates a new ubiquitous computing and communication packet switching network.

The regulatory bodies play an important role in defining the format of voice packet networks as through their mandate have the ability to facilitate or not the deployment of voice services packet networks as shall be discussed later on in chapter 4.8.

25

European Commission – Information Society DG “The Treatment of Voice over Internet Protocol (VoIP) under the EU Regulatory Framework” Commission Staff Working Document (P.4) www.europa.eu.int 26 Susan Goslee, “Losing Ground Bit by Bit Low-Income Communities in the Information Age”, Benton Foundation 1998, www.benton.org 34

1.6.

Telephony Standard Making Bodies Overview A final piece of the telecommunication puzzle for NGN is the role of standards. Standards are necessary in most areas of life. The primary reason for standards in telecommunications is to ensure that hardware and software produced by different vendors can work together. Without networking standards, it would be very difficult for different networks to communicate with each other. Standardization is an essential requirement for the open exchange of information; without it, the network simply will not work. The benefits of standardization are that they: •

enable interoperability

•

Encourage innovation, foster enterprise and open up new markets

•

Create trust and confidence in products

•

Expand the market, bring down costs and increase competition

•

Help prevent the duplication of effort

Standards are crucial to facilitate the system engineering of new telecommunications systems. Globally there are a number of standard bodies with output of relevance for telecommunications. Here follows a review of the main ones related to voice communications:

1. ITU The ITU27 was founded in 1865 as an international body to decide on common rules to standardize equipment to facilitate international interconnection of telegraphy equipment. Since then the ITU has evolved to cover all forms of wireless and wireline communications and after the Second World War the ITU became a UN specialised agency. In its own words ‘The Union was established last century as an impartial, international organization within which governments and the private sector could work together to coordinate the operation of

telecommunication

networks

and

services

and

advance

the

development

of

communications technology’. ITU groups make recommendations on common rules to standardize equipment to facilitate international interconnection, adopted uniform operating instructions which would apply to all countries, and laid down common international tariff and accounting rules.

35

2. ISO The ISO28 (International Organization for Standardization) was created in 1947 as an international organization with the goal "to facilitate the international coordination and unification of industrial standards". Although ISO, unlike the other standards organisation bodies listed in this section, does not have a specific focus on the telecommunications industry many of the ISO standards nevertheless are applied in telecommunications. ISO is a network of the national standards institutes of 146 countries, on the basis of one member per country, with a Central Secretariat in Geneva, Switzerland, that coordinates the system. ISO is a non-governmental organization: its members are not, as is the case in the United Nations system, delegations of national governments. According to the organisation “ISO occupies a special position between the public and private sectors. This is because, on the one hand, many of its member institutes are part of the governmental structure of their countries, or are mandated by their government. On the other hand, other members have their roots uniquely in the private sector, having been set up by national partnerships of industry associations.” 3. IETF29

The main standard setting organisation for the Internet is the Internet Engineering Task Force (IETF) which is falls under the umbrella of the Internet Society (ISOC). The Internet Society is an international, non-profit, membership organization that fosters the expansion of the Internet. The groups under ISOC are the IESG, IAB and IETF. The Internet Engineering Steering Group (IESG) is responsible for technical management of IETF activities and the Internet standards process. The IESG ratifies or corrects the output from the IETF's Working Groups, gets WGs started and finished, and makes sure that nonWG drafts that are about to become RFCs are correct. The Inter Architecture Board (IAB) is responsible for the "big picture" of the Internet, and focuses on long-range planning and coordination among the various areas of IETF activity. When a new IETF working group is proposed, the IAB reviews its charter for architectural consistency and integrity. 27

ITU “ITU Overview History” http://www.itu.int/aboutitu/overview/history.html

28

ISO, “Why Standards Matter” http://www.iso.org/iso/en/aboutiso/introduction/index.html

36

The Internet Engineering Task Force (IETF) is a large open international community of network designers, operators, vendors, and researchers concerned with the evolution of the Internet architecture and the smooth operation of the Internet. It is open to any interested individual. The IETF is not a traditional standards organization, although many specifications are produced that become standards. The IETF is made up of volunteers, many of whom meet three times a year to fulfil the IETF mission. There is no membership in the IETF. Anyone may register for and attend any meeting. The IETF mission includes: •

Identifying, and proposing solutions to, pressing operational and technical problems in the Internet;

•

Specifying the development or usage of protocols and the near-term architecture to solve such technical problems for the Internet;

•

Making recommendations to the Internet Engineering Steering Group (IESG) regarding the standardization of protocols and protocol usage in the Internet;

•

Facilitating technology transfer from the Internet Research Task Force (IRTF) to the wider Internet community; and

•

Providing a forum for the exchange of information within the Internet community between vendors, users, researchers, agency contractors, and network managers.

4. ETSI30 The European Telecommunications Standards Institute (ETSI) is an independent, non-profit organization, whose mission is to produce telecommunications standards for today and for the future. ETSI is officially responsible for standardization of Information and Communication

Technologies

(ICT)

within

Europe.

These

technologies

include

telecommunications, broadcasting and related areas such as intelligent transportation and medical electronics. ETSI unites 688 members from 55 countries inside and outside Europe, including manufacturers, network operators, administrations, service providers, research bodies and users - in fact, all the key players in the ICT arena. ETSI plays a major role in developing a wide range of standards and other technical documentation as Europe's contribution to world-wide ICT standardization. This activity is supplemented by interoperability testing services and other specialisms. ETSI's prime objective is to support global harmonization by providing a forum in which all the key players can contribute actively. ETSI is officially recognized by the European Commission and the EFTA secretariat. 29 30

IETF “Overview of the IETF” www.ietf.org ETSI http://www.etsi.org/about_etsi/5_minutes/5min_a.htm 37

ETSI's Members determine the Institute’s work programme, allocate resources and approve its deliverables. As a result, ETSI's activities are closely aligned with market needs and there is wide acceptance of its products. ETSI's standards are built on consensus.

5. ANSI31 Founded in 1918 The American National Standards Institute (ANSI) is a private, non-profit organization that administers and coordinates the U.S. voluntary standardization and conformity assessment system. The Institute's mission is to enhance both the global competitiveness of U.S. business and the U.S. quality of life by promoting and facilitating voluntary consensus standards and conformity assessment systems, and safeguarding their integrity. The main elements of the American National Standards process include: •

consensus on a proposed standard by a group or “consensus body” that includes representatives from materially affected and interested parties;

•

broad-based public review and comment on draft standards;

•

consideration of and response to comments submitted by voting members of the relevant consensus body and by public review commenters;

•

incorporation of approved changes into a draft standard; and

•

right to appeal by any participant that believes that due process principles were not sufficiently respected during the standards development in accordance with the ANSI-accredited procedures of the standards developer.

The ANSI process serves all standardization efforts in the United States by providing and promoting a process that withstands scrutiny, while protecting the rights and interests of every participant. In essence, ANSI standards quicken the market acceptance of products while making clear how to improve the safety of those products for the protection of consumers. ANSI promotes the use of U.S. standards internationally, advocates U.S. policy and technical positions in international and regional standards organizations, and encourages the adoption of international standards as national standards where they meet the needs of the user community.

31

ANSI http://www.ansi.org/about_ansi/overview/overview.aspx?menuid=1 38

6. CableLabs32

Cablelabs in an interesting example of a standards body formed for a specific (sub) industry of telecommunications, the cable television industry, which traditionally had not offered voice or data services. CableLabs was founded in 1988 by members of the North American cable television industry. Cable Television Laboratories is a non-profit research and development consortium that is dedicated to pursuing new cable telecommunications technologies and to helping its cable operator members integrate those technical advancements into their business objectives. CableLabs serves the cable television industry by: -

Researching and identifying new broadband technologies;

-

Authoring specifications;

-

Certifying products; and

-

Disseminating information.

CableLabs benefits the cable television industry and consumers by: -

enabling interoperability among different cable systems;

-

facilitating retail availability of cable modems and advanced services; and

-

helping cable operators deploy innovative broadband technologies.

CableLabs is funded by the monthly subscription fees paid by members as well as by testing-related fees. Cable operators from around the world are eligible to become members. In 2000 tComLabs, a European version of CableLabs was created albeit with a more limited brief to perform certification testing for the European versions of the CableLabs DOCSIS (North American) standard.

It has been seen that standards are necessary in telecommunications to ensure that hardware and software produced by different vendors can work together. There are currently a range of national and international standards bodies producing standards for voice communications. On a national level the standardisation may also be managed by the national regulator especially with regards to organisation of forums. These forums act as discussion and consultation platforms. Through industry forums organized by the regulator, operators take an important part in the discussion around telecommunications policies and regulatory policies. 32

www.cablelabs.com/about 39

As can be seen, there are a plethora of organisations defining often overlapping standards in the telecommunications world today. This fits well with the model of competition for the Infocommunication age defined earlier where there is competition between not only firms but between products, networks and technologies. The more established standards organisations like the ITU and ISO now have to compete with the more dynamic industry specific organisations like CableLabs and IETF as well as with their regional counterparts like ANSI & ETSI. So far this system seems to be working well with organisations like the ITU & ETSI integrating into their recommendations the best standards resulting from the new younger and more dynamic standard setting bodies like IETF and CableLabs.

There is always the risk of waste through duplication of effort and all standards organisations constantly have to prove that they are adding value Applying general economic theory regarding the effect of competition in a market the range of overlapping standard making bodies can be seen as a positive factor as its helps avoid complacency and enables continued value production from these organisations for global society. The inconvenience with the current competitive standards market from a network design point of view is that there is uncertainty as to which standards will become the main standard adopted for a given service and to avoid deploying the wrong standard, support for multiple standards is required in a network which increases the overall cost and complexity.

1.7.

Telecom History Review In conclusion it can be seen that there have been a series of technological improvements in the transport of voice communications in the 130 years since the telephone was invented. The regulatory model for telecoms, which historically was regarded as a natural monopoly, was until the mid 1990s to guarantee that the public telephony was universally available to the public at a fair price. During the last decades there have also been major technological developments in adjacent and overlapping wireless and data communication industries.

It was observed that the rise during the last decade of the Infocommunications industry that according to Fransman [17] has changed the traditional inter-firm competitive model to a industry with multi-layers of competition between products & services, between networks,

40

networks, between technologies and between firms.

In the 1990s the traditional natural monopoly telecoms regulatory consensus as described by Spulber [41] was destabilized by technological advances allowing intermodal or platform competition in the Infocommunications age and the fundamental shift in regulatory approach with opening up of wireline telecommunications markets for competition in the United States and the European Union with the Telecommunications Act of 1996 and the 1990 EU Directive on competition in the markets for telecommunications services respectively. The regulatory bodies play an important role in defining the regulatory format for voice packet networks as they have in the past for voice circuit switched models but with a different set polices more adapted to the infocommunication age.

Finally it was observed that the telecommunications industry has a plethora of organisations defining often overlapping standards in the telecommunications world today. This fits well with the multi-layer model of competition for the Infocommunication age as the more established standards organisations like the ITU and ISO now have to compete with the more dynamic industry specific organisations like CableLabs and IETF as well as with their regional counterparts like ANSI & ETSI.

The inconvenience with the current competitive standards market from a network design point of view is that there is uncertainty as to which standards will become the main standard adopted for a given service and to avoid deploying the wrong standard often support for multiple standards is required in a network which increases the overall network cost and complexity. 1.8.

Motivation for the study The choice faced by both incumbent and alternative fixed line telephony operators now is how to manage this transition from a voice centric circuit switched network to a data centric packet switched network taking into consideration that the main revenue provider in the short term is still simple voice switching but that to ensure long term survival it will be essential to support a platform more advanced data and multimedia services. The options available vary from operator to operator but are basically the following:

Voice Switching Alternatives Continue with circuit switching technology for voice telephony and treat new data and

1

41

2 3

multimedia services a separate products requiring separate technological solutions; Cap growth on existing circuit switching technology and use packet switching technology for future growth solutions; Replace circuit switching technology completely with packet switching technology supporting voice, data and multimedia services. Table 6 Telephony Service Providers Alternatives33

Note that it is possible to choose to some extent a mixture of the above alternatives based on the network specific existing infra-structure.

The author, in his role as Senior Engineer in the network planning department of JAZZTEL an alternative network operator active in the Portuguese and Spanish markets, has personally been involved during the last 4 years in various investigations into next generation network technology and hopes that this study can be put to practical use.

1.9.

Thesis Structure

The structure of this thesis is broken down into introducing the topic and reviewing the historical technological and regulatory background of the voice telephony industry in this chapter.

In chapter 2 current voice network switching models and VoIP protocols are analysed.

In chapter 3 case studies of packet switching deployments are reviewed.

Chapter 4 looks at voice design considerations for NGN.

Chapter 5 considers the current strategic considerations in the telecoms world.

Chapter 6 present the conclusions from this study.

33

Options based on author’s research and professional experiences as voice network planner. 42

2.

NETWORK SWITCHING MODELS

The evolution in the telecommunications market have created conditions were there now exists various architectures for a voice switched network as will be detailed in the following sections 2.1.

Circuit Switching Model The circuit switching network for wireline operators consists of Class 4 & Class 5 central office switches, additionally there may exist IN SCP & STP nodes which add a more advanced service capability to the PSTN networks.

Switches carry voice traffic over trunks and lines. A line is a dedicated user connection between an end-user and the local switch (directly or via multiplexing and/or repeating equipment) and the interface to the user will consist of one copper twisted line pair for POTS and one or two twisted pairs for basic rate ISDN connections. A trunk is a 64kbps channel grouped within E1 or T1 carriers and is used for communication between switches, between switches and medium/large PBXs and between switches and other network nodes such as RAS & IVR servers. In Europe trunks are grouped in E1s 2.048Mbps (30B+D) carriers while in the USA trunks are grouped in T1 1.544Mbps (23B+D) carriers B stands for bearer channel i.e. channel that will bear or transport information and D stands for the Data or signalling channel. Only local intra-switch calls do not pass over trunks which is where the original reasoning of the lower cost for local calls comes from as these calls did not consume additional trunking capacity on the network as is illustrated in Figure 10.

Figure 10 Circuit Switch Network intra-switch and inter-switch calls34

34

Network design based on life voice network deployments seen by author. 43

Class 4 switches are used exclusively for trunking traffic and do not have any line interfaces and typically are used as internal gateways for long distance traffic or external gateways to other operator networks. CLASS 5 switches as well as offering trunk interfaces also support line interfaces and therefore also termed local exchange (LE) switches. These are the switches where all POTS and BRI interfaces connect to.

Although there are hardware and software design and capability differences between the circuit switching exchanges from different supplier the basic model is similar.

A circuit switching exchange will consist of: •

Trunk interfaces;

•

Line interfaces (if Class5);

•

Signalling processors;

•

Switching Matrix;

•

Central Call Processor;

•

Peripheral devices

The trunks and lines are connected to aggregation modules where concentration may occur for lines. These concentrator models will be linked to the switching matrix which is where the calls are physically switched in between interfaces. SS7 Signalling is controlled by a separate module and the 64k signalling links may be sent multiplexed internally on the switch into trunk interfaces like in the DMS 100e or an external multiplexer may be required. Call control is managed by core CPUs (Computing Module) which will also contain the routing and billing tables and switch configurations. Billing and log records are generated for call and switch events which are stored on the switch as well as sent to downstream mediation devices for billing and management systems.

2.1.1. Circuit Switching Reliability A general feature of traditional circuit switching solutions is their high reliability with high levels of hardware and software redundancy inherent in the design of a switch. A standard requirement in the circuit switched world for a product to be accepted for deployment or considered ‘carrier class’ was a reliability of 5 nines i.e. 99.999% reliability.

44

A quick calculation illustrates what this level of reliability means in terms of unscheduled outages for customers:

99.999% reliability equals 0.00001 unreliability => unreliability/unscheduled outage time per year = 365x12x60x0.00001 = 5.26 minutes

Figure 11 Circuit Switch functional layout example35

Interconnection between switches is in E1 or T1 circuits and the connecting switches can be located on the opposite side of the world as long as the transport network is of sufficient quality. Transmission networks in the pure circuit switched network use PDH and SDH technology.

35

Nortel Networks DMS 100e layout from DMS Product Description documentation of Nortel Networks 45

Often although the core switches in a network are circuited switched, large parts of either the access or transport network may already be over ATM or IP packet switched transport networks which are able to transport various voice and data traffic through a common transport media. Also the use of packet switching transport permits compression of voice traffic through the use of lower bandwidth codec’s than the standard 64kbps G711 like G729a, G726, G723.

The principal switching vendors in Europe and North America are: Nortel Networks (DMS), Ericsson AXE), Alcatel (S12), Siemens (EWSD) and Lucent although there are many smaller switching equipment vendors active and all manufacturers follow a similar implementation in the design of their circuit switching exchanges which is generally along the lines of the design shown in Figure 11.

2.2.

Hybrid Circuit and Packet Switching The following partial packet switching implementation may exist in an operator’s voice telephony network:

1. Packet switching used for the access network 2. Packet switching used on inter-switch backbone 3. VoIP protocols used for interconnect to other operators via the use of VoIP gateways

(1) Packet switching is used on the access networks various scenarios:

1a) Voice over DSL (VoDSL) with IAD (Integrated Acess Devices) on the CPE side. With VoDSL the telephone is connected to an IAD at the subscriber end which converts the analogue phone signals into VoATM or VoIP. From the IAD the physical line copper pair from the subscriber is connected using DSL transport technology to a DSLAM (DSL Access Mulitplexer) in the local exchange. The DSLAM sends the IAD traffic via the IP or ATM backbone network to a voice gateway where the packetised Voice (VoATM or VoIP) is converted into circuit switched voice and interconnected to a circuit switching exchange where conventional switching with the PSTN world is carrier out.

46

Figure 12 VoDSL Hybrid Model36

1b) Voice over cable with MTAs (integrated cablemodems – multimedia terminal adaptor)

With VoCable the telephone is connected to an MTA at the subscriber end which converts the analogue phone signals into VoIP (Packetcable). From the MTA the coaxial cable is connected to the hybrid fibre access network using the DOCSIS transport protocol to CMTS (Cable Modem Terminating System) in the cable headend. The CMTS sends the IAD traffic via the IP backbone network to a voice gateway where the VoIP is converted into circuit switched voice and interconnected to a circuit switch where conventional switching with the PSTN world is carried out.

Figure 13 VoCable Hybrid Model37

(2) Packet switching used on Inter-Switch backbone Packet switching between carrier exchanges was one of the earliest forms of packet switching implementations in telecommunications operator networks and was used to

36 37

Network design based on life voice network deployments seen by author. Idem 47

reduce the transport cost for backbone traffic. Initial applications were for intercontinental voice circuits where the transport cost was very high and by using voice over packet more calls could be sent over the amount of bandwidth. Long distance traffic from a circuit switching exchange is sent to an IP (or other packet protocol) gateway where the traffic is converted into VoIP (or another voice over packet protocol) with a more bandwidth efficient codec and sent via an IP backbone to the far end location where there is another IP gateway that converts the traffic back into TDM protocol and is interconnected to a TDM switch where conventional switching with the far end PSTN market is carried out.

Figure 14 Voice Packet Switching on the backbone38

(3) VoIP protocols used for interconnect to other operators via the use of VoIP gateways In certain conditions it may be interesting for operators to use the Internet to interconnect with one another. This is typically done for low volume traffic interconnects where dedicated transmission capacity between the two operators is not justifiable economically. Here voice traffic destined for the far-end operator is sent over the Internet via voice gateways which converts the TDM traffic into VoIP traffc. At the far end there is another voice gateway which converts the VoIP traffic back into TDM and routes to the local PSTN network via an TDM switch. Note that these type of interconnect are not always sustainable if the quality of the public internet connection between the two operators is not of consistent quality.

Figure 15 VoIP Interconnect39 38

Network design based on life voice network deployments seen by author. 48

2.2.1. Hybrid Circuit Switching / Packet Switching Reliability A big advantage of TDM circuit switched networks is their reliability, however once the network is made more complex with the addition of packet switching in parts of the network the overall reliability of the voice service can be affected. Simply the fact of adding more boxed into a solution equals more potential points of failure in the overall solution. With voice over packet networks if there is less redundancy and higher MTBF (mean time between failure) in the access DSLAMs or CMTS equipment or backbone IP gateways then voice quality will be effected. Also the transport paths may be more susceptible to interference from other lines (DSL) or services (Cable) or be controllable (Public Internet) by the operator. A robust design of access equipment and high IP QoS on the IP backbone or Internet will improve the reliability of these configurations. 2.3.

Packet Switching An end to end packet switching network is a multi-service intelligent network with IP (or sometimes ATM) technology at its core. These networks are also known as NGN (Next Generation Networks). An NGN network is more than a standard IP network with voice traffic going over it and as such requires specific design considerations. As stated by Huawei switch manufacturer [23] The telecommunications network is a different concept from the Internet: The telecommunications network provides commercial services and the telecommunications services it provides are a kind of commodity, so it should ensure the quality of service, sufficient security, reliability and good after-sales services, and it should have high manageability and maintainability. Whereas the Internet is different: Its task is to mainly realize interconnection between computers, and on this basis users can get some services.

Figure 16 Nortel CS2K NGN Network40

The network provides transmission services in a principle of “Use the services as they are all 39 40

Network design based on life voice network deployments seen by author. Example NGN Network with CS2K www.nortelnetworks.com 49

all right; and the network shall not be held responsible if they are not”, so the services are provided with no QoS guarantee, and any security issue is up to the users.The exact format of NGN core voice networks vary between operators and NGN equipment manufacturers as can be seen with some NGN example diagrams in Figure 16, Figure 17 and Figure 18 but based on JAZZTEL 2004 NGN supplier market survey [27] consist of the following principal elements: 1. Softswitch; 2. Media gateway; 3. Signalling Gateway; 4. OSS (Operating Support System); 5. CMTS/DSLAM in case of VoCable/VoDSL.

SOFTSWITCH The Softswitch provides call control and signaling services for the IP endpoints, signaling gateways, and media gateways. The Softswitch controls call setup and delivers vertical call features and maintains the call state and controls the operation of signalling gateways and media gateways.

Media Gateway Media Gateway, also called trunking gateway, terminates the voice bearer paths and transcodes calls between the managed IP network and the public switched telephone network (PSTN). In other words, it serves as the interconnection point for IP phone calls leaving the broadband access network for the PSTN, or for regular phone calls leaving PSTN for the broadband access network.

Signalling Gateway Signalling Gateway interconnects call signalling between the PSTN network and the operators managed IP network and provides signalling translation.

OSS The Operating Support System of VoIP is made up of amongst others: •

Provisioning Server which performs initialization, authentication and registration functions for IP endpoint provisioning;

•

Billing servers;

50

•

Log and alarm server

•

Authentication and security server such PacketCable Key Distribution Center (KDC);

•

Other servers such as media server and announcement server.

CMTS The CMTS (Cable Modem Termination System) manages access network resources for highspeed data and PacketCable services such as VoIP. CMTS that are designed according to the CableLabs DOCSIS 1.1 standard and above have sufficient QoS and latency for data and voice transport. In addition, to reliably deliver VoIP service.

DSLAM The DSLAM is an access multiplexer for DSL access networks. The DSLAM receives the physical copper pairs and extracts the IP or ATM traffic from the DSL transport mechanism and connectos to the operator IP or ATM backbone.

Figure 17 Nortel CS2K & MCS5200 NGN Network41

One of the advantages of an NGN network as shown in the diagram above is the core of the network can support a range of access technologies as long as all support IP services. This means that the same voice packet network can support subscribers from cable access, dsl access, wireless access or any other technology that may be convenient for the network operator to use to reach particular users. Currently the main focus on NGN networks from 41

Example NGN Network with MCS5200 and CS2K www.nortelnetworks.com 51

the access point of view is via cable, dsl or conventional LAN/WAN networks but there are other possible access technologies that may become more widespread in the future such as power line technology & broadband wireless access such as WiFi or WiMax. Powerline technology which uses the electrical network as access network offers interesting technical and commercial advantages for power companies that which to offer additional data and voice services to their customers as discussed by Sakai [36]. WiFi and WiMax networks have also been widely touted as mass deployable access solutions where the ability to support voice services and not just broadband internet access is seen as a crucial commercial necessity for the future success of these networks42. As of Q1 2005 no major voice over packet service deployments using WiMax or Powerline were found so this study will when discussing access technologies focus on cable and dsl access. However this does not mean that other access technologies will not play an important role in voice over packet networks and more study should be done to determine the future (overlapping) methods voice users will use to access NGN networks. Also some NGN can support mobile UMTS users and can permit operators to offer both fixed and mobile telephony services with a high degree of service integration.

Calls made to or from subscribers on a VoIP NGN network can either be on-net or off-net. An on-net call is defined as a pure end-to-end IP voice call. The voice signals start from an IP endpoint which could be a cable MTA, an DSL IAD, a PC softphone or other type of voice user at the subscriber’s premises and travels through the operator’s managed IP network routed by softswitch and monitored/managed by OSS elements, before reaching another VoIP subscriber on the other end. An off-net call is when a call is made between a VoIP subscriber and a regular phone user in the tradition voice network. This call leaves the VoIP network and enters the PSTN via a media gateway to a traditional circuit switch exchange.

NGN networks can support a range of different types of voice services over their standard IP core. Access may be over a range of different access technologies such as cable, dsl, wireless 3G or WiFi networks or directly with VoIP over managed IP networks or even the public Internet. Interconnection to the PSTN is done via media gateways and it is also possible to interconnect to other softswitches of the same network operator or other network operators directly with VoIP typically using the SIP-T flavour of SIP protocol [39].

42

ZDNet online newsgroup “Study: Net http://news.zdnet.com/2100-1035_22-5579377.html 52

phones

key

to

WiMax

success”

Figure 18 Siemens Surpass NGN Network43

An important feature of the NGN networks is the open interface to application services permitting the development of new services from multiple suppliers. New voice services can be offered to subscribers without having to do costly hardware upgrades on the CPE equipment as the VoIP protocols permit a range of services not possible within the constraints of a TDM POTS or ISDN user interfaces.

Another characteristic of the current NGN market is that competition among soft-switch manufacturers is high. Especially as now there are new entrants from China such as Huawai and ZTE are increasing their sales efforts in the western markets and competing with traditional manufacturers like Nortel, Siemens and Lucent as well as with the new western softswitch manufacturers such as Sonus Networks and Nuera.

The growth of non-voice telecommunications traffic has caused a large growth in packet switched networks which are a significant factor in the development of NGN voice packet switching networks as the fact that voice traffic no longer is the only or increasingly even the main communication service (by volume of information) passing over of a service providers network is a key motivator for the shift to a more optimised packet switched transport network.

43

Example NGN network based on Siemens Surpass Softswitch www.siemens.com 53

NGN networks are based on a multi-service packet network and reduce transmission costs by bundling of voice and data services over common transmission pipes. Also the NGN network solution is of a more compact design and requires less footprint and energy than the equivalent voice capacity on a circuit switch thus lowering operational costs44. Also there are currently more network equipment suppliers for packet switching solutions than there were for circuit switch solution and this increased competition has led to a reduction of the equivalent NGN hardware port and software license cost for NGN voice subscribers. Packet switching also permits an expanded geographic reach for the service provider as the distributed nature of NGN solutions permits more flexibility through the support of multiple access technologies for connecting new customers or markets. Finally the packet technology permits the delivery of a range of multimedia services such as video calls more efficiently and economically than on circuit switched networks. 2.4.

Cable Networks and packet telephony The case of cable networks is an interesting subgroup to analyse in more detail within the telephony provider family as cable networks are currently well positioned players to take advantage of the multi-service capabilities of packet networks to bundle voice, data and multimedia services to their customers. Like with the fixed line operators there currently are available various network models to support telephony services as will be described in the following sections. 2.4.1.

Circuit Switching Cable Telephony Model

The original network architecture for cable companies that wanted to offer voice services was based on circuit-switched voice like regular fixed line voice telephony operators. Differences are that the access network for telephone companies is twisted copper wire and for cable is coaxial cable. Also a circuit switched cable telephony customer requires installation of a network interface unit (NIU) on the side of a house that connects to phones inside the premise and interfaces the host digital terminal (HDT) in the cable network. An NIU is an environmentally hardened device located on the side of the house. An NIU is network-powered and can utilize the existing copper wiring and RJ-11 phone jacks inside the house. The NIU converts voice calls between the analogue format (which can be accessed by phones) and ratio frequency format (for transport over the cable access network). The HDT aggregates the voice calls from various subscribers and hands them

44

NGN solutions proposed to Author required on average 1/10 of footprint and energy of equivalent installed circuit switch capacity. 54

over to a Class 5 switch through a GR-303 interface (USA) or ETSI V5.2 interface(rest of the world), which then routes the calls throughout the public telephone network (PSTN) as illustrated in Figure 19 below.

Figure 19 Circuit switched cable telephony network45

Despite its proven reliability and stability, the circuit-switched voice technology has many shortcomings, including: 1) large up-front investment (particularly for Class 5 switches); 2) expensive customer premise equipment (NIUs); 3) inflexibility in network layout as many network elements need to stay together physically in each geographic location; 4) little sharing of network investment with other cable services such as high-speed data; and 5) high operating costs.

2.4.2. Cable standard bodies

Like with the European operators and manufacturers of CEPT did with the creation of the GSM standard, the main players in the US cable industry created a standards & research body called CableLabs in 1988 to draw up proposal for standards for more advanced services on cable networks.

CableLabs released DOCSIS 1.1 in 1999 and by 2002 the first DOCSIS enabled CMTS and Cablemodems were being commercialized. DOCSIS 1.1 adds a Quality of Service (QoS) feature to prioritize different types of traffic running through the broadband cable pipeline. CMTS Compliancy to the DOCSIS 1.1 ensures minimum latency guarantees of voice call packets. The DOCSIS 2.0 specification, which enables the tripling of the upstream 45

UBS Investment Research 'Cable Telephony Primer' September 2003 55

bandwidth, approaching the level of the downstream bandwidth has also been defined by CableLabs. DOCSIS 2.0 aims to improve the scalability of VoIP architecture given the symmetric nature of telephony traffic. In addition, to reliably deliver VoIP service, CMTS needs to add voice-specific processing and capabilities, which are defined by CableLabs in its PacketCable specification. 2.4.3. Cable Packet Switched Telephony Network

The first standard produced by CableLabs DOCSIS 1.0 was specifically geared for data traffic but it soon became apparent that the burgeoning VoIP technology could be applied to cable data networks to offer more efficient voice services and the PacketCable VoIP standard was born. Figure 20 shows the architecture of VoIP as defined by CableLabs.

Figure 20 Packetcable VoIP cable telephony network46

As can be seen in Figure 20 a Packet cable VoIP telephony network consists of: MTAs at the subscriber residence, a CMTS in the cable headend, a managed IP network with a softswitch/packet switch architecture the CMS (softswitch), OSS Servers and Applications and Media Gateways, Media Gateways Controllers (often integrated into softswitch as well) and signalling gateways to communicate with the PSTN.

46

UBS Investment Research 'Cable Telephony Primer' September 2003 56

The MTA may be deployed as a voice-enabled cable modem (called embedded MTA, or EMTA), an environmentally hardened NIU, or it may be integrated into a set-top box. Recent indications are that the incremental cost of an E-MTA relative to a data-only cable modem has been declining significantly47. When compared to NIU used in the circuit switched cable telephony solution the E-MTA has the following advantages: 1. E-MTA Installation significantly easier than NIU installation; 2. E-MTA has much lower cost than an NIU; 3. An NIU is inconvenient for in-home networking to PC for data service as PC is not normally within reach of NIU whereas E-MTA can be located wherever there is a cable TV coaxial connection. Developments such as the NineLanes IP STB48 are already underway for MTA/Set-Top Combo where there will exist one integrated set-tops with IP voice, high-speed data, and video services. And such a box can be connected to other devices (PC and phones) though wireless (e.g., Wi-Fi) and cordless phone technologies as illustrated in Figure 21.

Figure 21 Services offered by a MTA/Set-Top Combo Box49

2.4.4. Hybrid packet and circuit switching solution

As shown in Figure 20, the cable industry has developed a hybrid VoIP architecture that allowed Cable operators with legacy circuit-switched technology to maximize the value of the Class 5 switch install base while migrating to the VoIP architecture over time. Such

47

Supplier quotations for MTA & E-MTAs 2003/2004 NineLanes IP STB on http://www.equator.com/solutions/customerspotlight.html 49 Idem 48

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architecture calls for a Class 5 switch to perform most of the call processing, but provides an IP-based transport in the local access cable network via the V5.2 or GR-303 interface. It helps cable operators to extend the reach of the Class 5 switch into farther, smaller markets, instead of being limited to the markets where Class 5 switches are physically located.

Figure 22 Hybrid Packet and Circuit Switching Network50

2.4.5. Advantages of VoIP Versus CircuitCircuit-Switched Voice in Cable Networks

To summarise PacketCable VoIP offers the following advantages over circuit switched technology in cable telephony networks: •

VoIP can be deployed and operated more economically and efficiently because of its convergence capability, which allows significant sharing of network resources for multiple cable services such as data and voice;

•

VoIP also offers greater flexibility in network configuration, which lowers the obstacle to expand telephony coverage into smaller markets instead of being limited to large markets as in the case of circuit-switched technology;

•

PacketCable architecture deployed for VoIP is not just limited to voice service. It can also be used for other advanced multimedia services based on IP in the future, such as online gaming and video conferencing;

50

UBS Investment Research 'Cable Telephony Primer' September 2003 58

•

Packet switching operational costs are lower than circuit switching due to reduced physical size and energy requirements therefore leading to reduced CO space rental and electricity bills.

2.5.

Chapter Review It can be seen from the network switching models reviewed in this chapter that there are various different models that are followed by network operators for the voice telephony networks ranging from pure circuit switching to hybrid networks using both circuit and packet switching to pure packet switched networks. The NGN packet switching network model was seen to consist of the following main elements based on JAZZTEL market survey [27]: 1. Softswitch; 2. Media gateway; 3. Signalling Gateway; 4. OSS (Operating Support System); 5. CMTS/DSLAM in case of VoCable/VoDSL.

The packet switched network model when compared to the circuit switched network models is superior both in technical and commercial aspects. Packet switched networks permit bundling of a higher range of voice, data and multimedia services over a common infrastructure and at lower cost than with circuit switched networks. However it was also recognised that many wireline telephony service providers have already made substantial investments in circuit switched technology and therefore the option of hybrid networks using both circuit and packet switching are attractive to many network operators as a way to maximise return on existing circuit switch investments.

NGN networks can support a variety of wireline and wireless access technologies but for the purpose of this study which focuses on wireline operators cable and dsl access were found to be the most used at the present time and as such will be analysed the most. Several advantages were seen in the use of packet switching over circuit switching as described by switching equipment vendors such as Huawei [23] such as:

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•

Packet switching convergence capability which allows sharing of common network resources for multiple services such as data and voice;

•

Packet switching platform architecture is not just limited to voice service. It can also be used for other advanced multimedia services based on IP such as videocalls and interactive multimedia applications;

•

Operational costs for packet switching are lower than circuit switching due to reduced physical size and energy requirements therefore leading to reduced CO space rental and electricity bills.

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3.

PACKET SWITCHING DEPLOYMENTS

When considering aspects of NGN network deployment it is useful to review deployments of new technologies by other operators in other markets.

From the network operator perspective this assists in gaining technical knowledge from other operator experiences regarding the planning, deployment and operation of new voice switching solutions as well as giving an awareness of other service providers strategies and product offerings. From the regulatory point of view the same exercise is useful as it can highlight future regulatory issues that may arise in the home market.

There have been significant developments in a number of specific segments of the telephony market namely in the Cable, Voice over Broadband (VoB) and more recently the Voice over DSL market segments.

It is however important to take into account when reviewing packet switching deployments that the status quo in the telecommunications industry after the post dot.com bust and with the recent delays with the deployment of the mobile 3G networks years of is one where there is a lack of interest by the capital markets for the funding of large scale investments in an industry where many operators have had severe financial difficulties in the last few years and the margins of pure voice telephony services are in general declining51. Also many operators have excess circuit switch capacity which has already been paid for so there is an incentive to use up this capacity before investing in new technologies.

3.1.

Packetized Voice over Cable Deployments The uptake to packet switching has been very pronounced in the cable market where the new technology offered a considerable cost improvement over the circuit switched access networks. Two good examples of cable companies who have started implementing voice packet switching are Telecable and Cox Communications.:

51

An example is declining margins in the long distance and international call market as identified by among others Ofcom in the Phase 2 consultation, www.ofcom.co.uk 61

3.1.1. Telecable – Asturias Key Facts: Date Founded Telephony offered since Market Infracstructures Number of Employees Weekly Minutes Number of Active Lines Circuit Switched Install Base Packet Switching Deployment Strategy

1995, License granted 1997 1999 Asturias, Spain Hybrid Fibre Coax Network (HFC): Fibre-optic backbone (500km) and Coaxial access network (1200km) passing 240.000 homes 630 8 559 558 68 000 Yes Existing TDM subscriber is maintained but all new deployments are made using packet switching

Table 7 TeleCable Key Facts52

TeleCable is a regional cable operator in the Asturias region of Spain. Telecable has grown steadily since it started offering cable TV services in 1998. Shortly after its creation TeleCable started offering telephony, narrowband (dial-up) and broadband internet services to its customers. TeleCable has a market share of 25.6 % of the telephony market in areas covered by its network which equates to 12% of the whole Asturias telephony market. It is the largest competitor to Telefónica (the incumbent operator) in the area.

New customer growth peaked in 2002 and although still strong is reaching maturity especially for television customers. In Q1 2004 TeleCable had roughly twice as many TV service subscribers as telephony service subscribers. But as shown in Figure 23 the rate of growth from Telephony subscribers has increased significantly in the last years from being equal to TV subscriber growth in 2000 to being 2.5 times higher in Q1 2004. Part of this growth is due to existing television customers upgrading with voice and also due to the sales in the business market which has little or no corresponding TV.

52

Data from TeleCable marketing presentation March 2004 62

NORMALISED CUSTOMER GROWTH (2000=100) 200 150 TV

100

Telephony 50 0 2000

2001

2002

2003

2004

Figure 23 TeleCable Customer Growth 2000-200453

When TeleCable needed more network capacity for cable telephony subscribers in 2003 they decided, after a market analysis to acquire a packet switching solution (softswitch) for the support of all new cable telephony customers. Existing voice customers will continue to be supported on the installed TDM switching infrastructure to safeguard previous network investments. TeleCable [42] believes that the move to a soft-switching solution will enable the company to continue to expand its competitiveness and provide a strong platform for future service development. The TeleCable service offering shown in Table 8:

Table 8 TeleCable Service Offering54 53

Data from Telecable marketing presentation, March 2004. Note that 2004 sales figures are estimates based on Q1 values 54 Data from TeleCable marketing presentation, March 2004 63

The principle reason for the choice of a packet switching solution was economic. As was seen in section 2.4.5 there exists a substantial CPE and installation cost advantage with packetcable deployments when compared to circuit switching deployments. Another strong incentive for acquiring an NGN solution is the possibility that having a multi service network offers for future service development. Some potential new services under study by TeleCable this year are tele-alarms, interactive TV, Video on demand, Internet access via TV and video conferencing.

3.1.2. COX Networks Key Facts: Telephony offered since Market Infracstructures Number of Active Lines Circuit Switched Install Base Packet Switching Deployment Strategy

1997 USA Hybrid Fibre Coax Network (HFC): Fibre-optic backbone (500km) and Coaxial access network (1200km) passing 240.000 homes 1.100.000 Yes

Existing telephony customer base is maintained on circuit switching technology. New customer deployed either with pure packet switching solution or hybrid packet switching access with TDM core configurations. 55 Table 9 Cox Networks Key Facts

Cox Communications is a cable company active in various geographical areas in the USA. Cox offers both analogue and digital cable television. Like TeleCable, Cox provides a range of other communications and entertainment services, including residential telephony, broadband Internet access, and business voice and data services. Cox is also involved in the media content area as an investor in programming networks such as the Discovery Channel. Cox is the 3rd largest cable television company in the USA with approximately 6.7 million total customers. Cox Communications started operations solely with a television service and later with deregulation in the US added data and telephony services. After the Telecommunications Act of 1996 local US markets were opened to competition and cable companies like Cox Communications entered the voice market shortly afterwards. Currently Cox is the 12th largest telephone company in the United States. Cox’s had more than 1 million residential customers and more than 100,000 Cox Business Services customer locations serviced with circuit-switched technology. The company grew its residential

64

residential telephone customer base by 38 percent in 2003. In Q1 2004, Cox launched a VoIP voice packet switching trial to residential customers in Roanoke, Vancouver, and the company is preparing to launch additional VoIP telephone markets in 2004. Figure 24 Cox VoIP Architecture illustrates the set-up of the Cox voice packet switching network.

Figure 24 Cox VoIP Architecture56

Cox lists the following advantages gained by implementation of voice packet switching [10]:

•

VoIP technology enables Cox to deliver long distance (LD) traffic over its own IP backbone network. Currently, more than 25% of Cox’s long distance customer calls are transported via the company’s national backbone, reducing its reliance on third-party wholesale LD providers.

•

VoIP provides an economically efficient method to provide high quality telephone service in Cox markets, enabling the company to reach its goal of providing a threeproduct bundle of services in all of its markets.

•

VoIP technology permits efficient geographic expansion of Cox’s phone services, as through its lower cost base allows the company to launch telephony in geographical areas where the economics did not justify the cost of a circuit-switched architecture.

•

Cox is also planning to expand its phone service footprint via VoIP beyond the residential market to business customers.

55 56

Data from Cox website www.cox.com Cox Communications VoIP Whitepaper • May 2004 65

•

Cox’s VoIP architecture provides the flexibility to expand service in existing circuitswitched phone markets with either a circuit-switched-only approach, or with a complementary VoIP overlay (once existing circuit-switch capacity is fully exhausted).

VoIP technology enables Cox to introduce phone services to customers the company is not currently reaching, without stranding the capital it has invested in its circuit-switched operations. The company is not planning to abandon its circuit-switched business. Cox will continue to utilize the spare capacity of existing switches. 3.2.

Packetized Voice over Copper Deployments Packet switching with access over the copper wire local loop is the other main access technology deployed for voice packet switching. The EU released as decree in December 2000 on local loop [15] mandating unbundled access to the local loops of the incumbent in the fixed public telephone network. The EU ruling and advances in DSL technology have enabled alternative operators to use unbundling along with DSL access technology to offer voice, data and multimedia services to the residential and business markets by installing equipment in the incumbents local exchanges without the need to deploy expense last mile access networks. Initially in Europe local loop unbundling was not very successful as incumbent operators imposed high costs and restrictions for installation and access to equipment placed in the incumbents local exchanges but with the possibility to add multiple services over a common copper wire access this technology has become a more popular and many operators incumbents and alternative operators alike are expanding the roll-out of broadband offering including VoIP or VoATM. Some examples of operators currently deploying voice over packet with copper access using DSL are Novis in Portugal, Neuf Telecom in France and Yahoo!BB in Japan.

Two good examples of operators who has rolled out a packetized voice based on DSL access are Yahoo!BB in Japan and Neuf Telecom in France: 3.2.1. Yahoo! BB Key Facts: Date Founded Telephony offered since Market Infracstructures Number of Employees

January, 1996 April,2002 started the official service of BB Phone, a broadband phone service Japan ADSL line and Giga-bit class IP Network 1029

66

Number of Active Lines Approximately 3.3 Million Circuit Switched Install Base No Packet Switching Deployment Soft-switch Strategy Table 10 Yahoo! BB Key Facts57

Yahoo! BB is a broadband service provider in the Japanese market. The Yahoo! BB service started initially as a data-only ISP offering broadband internet access via ADSL. The company was the first competitive carrier in the world to surpass the incumbent provider in DSL market share58. Yahoo! BB has achieved a dominant share of the DSL market in Japan among residential users, small and medium-sized enterprises, and small office/home office users. The number of Yahoo! BB subscribers at the end of March 2004 had risen to approximately four million people, and broadband market share was 35.8%59. In 2002 the company launched the BB Phone along with the roll out of VoIP enabled modems. The BB Phone service has a monthly subscription fee priced well below the incumbent NTTs rates and subscribers can place calls within the Yahoo! BB network free of charge, while calls terminating outside the network, including calls within Japan as well as international calls, are charged at significantly lower cost than the incumbents NTT rates. The BB Phone service was very successful as with number portability and DSL modem with POTS ports subscriber could maintain their old number and phone and the service did not require the PC to be turned on to use. Also as Yahoo! BB controls the access and core IP networks it can manage QoS to ensure end-2-end for voice traffic. BB Phone subscribers numbers reached more than one million users in less than a year after the service was introduced and currently has approximately 3.3 million subscribers60. The BB Phone technical solution is a prime example of packet switching implementation for non-voice network operators as Yahoo! BB could with relative ease upgrade their existing IP network by adding soft-switches in the core, VoIP enabled DSL modems at the customer premises and media gateways to connect to the PSTN. The VoIP voice protocol used on the access side is the MGCP protocol61. Yahoo! BB has continued to take advantage of its multi-

57 58

Sonus Networks, Sales Presentation Q2-2004- Customer network implementation example See http://www.softbankbb.co.jp/english/consumer/service/bbphone/index.htm

59 Inoue, Masahira, CEO Yahoo!BB Investor Presentation, June 17, 2004 http://docs.yahoo.co.jp/info/investor/en/talk/ 60 Utstar Press Release “Yahoo! BB: A Japanese Success Story” http://investorrelations.utstar.com/ReleaseDetail.cfm?ReleaseID=124797 61

Sonus Networks, Sales Presentation Q2-2004- Customer network implementation example 67

service network to provide a range of multi-media and content service and is currently also offering TV services via its broadband connections. 3.2.2. Neuf Telecom Key Facts Telephony offered since Market Infracstructures

2003 France Unbundled access to incumbent France Telecom local copper loop with 20.000 km fibre optic backbone. >500.000 (with voice or data) No

Number of Active Lines Circuit Switched Install Base Packet Switching Softswitch Deployment Strategy 62 Table 11 Neuf Telecom Key Facts

Neuf Telecom (formely LDCOM) is an alternative operator and ISP in France who currently is offering a triple play service over DSL where consumers starting from a basic broadband tariff can choose a mix of voice telephony, broadband and television add on services offered at competitive rates. Neuf Telecom started as an ISP offering wholesale and hosting services in 1998 and since the beginning of the unbundling process in France invested heavily in its unbundled DSL network, offering wholesale and retail broadband services. With the technological advances Neuf Telecom started trials with voice over DSL and TV over DSL and after building sufficient expertise in the technologies began to add voice and television services to its core broadband offering with an aggressive commercial strategy.

From the beginning Neuf telecom has focused its strategy on producing its own services and has invested massively in local loop unbundling, the only way to have direct access to the end user. Thanks to the rapid rollout of its unbundled DSL network in 2003, neuf telecom has launched the most competitive and innovative High-Speed offering on the market not only to companies, but also to households (offer combining telephone and Internet, voice over IP, triple play modem and High-Speed offers ranging from 512 Kbits/s to 8 Megabits/s)63.

The technical solution that has implemented to offer voice over packet is an softswitch based NGN network which as Neuf Telecom did not have any voice circuit switch install 62 63

Data from Neuf Telecom website www.neuf.fr February 2005 Corporate Information ‘About Neuf Telecom’ www.neuf.com 68

base was the optimum technological and commercial choice for the company. The new services have proved very successful and Neuf Telecom has managed in less than one year to increase its unbundled customer base 5 times from 100.000 to 500.000 lines.

3.3.

Case Study Incumbent Operators The incumbent fixed network operators have in general not been very fast in the uptake of the NGN network model. A principal reason for this is the large install base of the circuit switching equipment that incumbent operators have. In some cases packet switching solutions have been used for specific product or geographic solutions such as the Telecom Italia national backbone network64 and British Telecom Business Services Solution.65. But incumbent operators across Europe have started to announce plans for deployment of NGN networks. BT was one of the first incumbents to announced it’s plan for its NGN based 21st Century. Also recently Belgian incumbent Belgacom announced the deployment of an IPbased NGN consolidated infrastructure on which voice over IP and other multimedia realtime-communication services could be delivered to the residential and business segments66. 3.3.1. British Telecom

British Telecom (BT) is the incumbent operator in the United Kingdom. BT was one of the first incumbent operators to face competition in the European market with partial liberalisation of the UK market in 1984. After 20 years of liberalisation and regulation in the UK market BT still maintains the majority share of the fixed line telephony market although the share is not so high as in other European countries. BT announced in 2004 the company’s plans for the evolution of BT access and core networks to simplify and optimise network resources and to permit a platform for future service offerings. The plan entitled 21st Century Network [35] consists of a major change of the network architecture with a reduction of number of network elements using a common packet switched backbone for both voice and data. On the access side all existing and new subscribers will be connected to what BT terms Multi Service Access Nodes (MSANs) which enable both voice and broadband services. This NGN solution is in contrast to the current BT network architecture where voice and broadband services are separated at the local exchange.

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Italtel NGN Equipment Supplier Customer Case Study Ericsson NGN Equipment Supplier Customer Case Study 66 Newspaper DM Europe 24th February 2005 65

69

Figure 25 BT Network high level overview 200467

BT’s stated target is to ensure that, by 2009, broadband dialtone is instantly available to most BT customers in the UK. Consumers will be able to plug a broadband device into their phone line, and immediately be able to subscribe to BT’s broadband service

Figure 26 BT Next Generation Network high level overview68

67 68

From BT presentation to ITU 2004 From BT presentation to ITU 2004 70

A potential area of regulatory intervention with this network evolution by the incumbent operator in the UK is the change in the model for interconnection to the incumbent’s operator network and specifically impact to the current local loop unbundling models. Ofcom69 has correctly identified that the new network will not maintain the points of interconnect (POIs) that exist in the present network as is shown in Figure 27 and Figure 28. New technical and commercial models will need to be defined for the POIs of the new BT network.

Figure 27 BT Interconnect Structure 200470

Figure 28 BT 21st Century Network Model71

BT’s stated aims with the new network architecture are to: 1. Make it easier to create new services o

Faster

o

More people can create

2. Make it easier to buy and use services o

Enable customers

3. Make it simpler to deliver and maintain service o

Process automation

4. 30-40% cost reduction through use of fewer networks carrying more services

69

Ofcom: Strategic Review of Telecommunications Phase 2 consultation - November 2004 Idem 71 Idem 70

71

The overall Architecture of the 21C network is based on:

•

A converged Network based on IP and an MPLS core.

•

An Intelligence layer that is mobile enabled based on 3GPP concepts permitting users to log on anywhere and use any device.

•

Operation Support Service (OSS) systems integrated with a hub architecture permitting lower cost of integration and faster change.

•

An open applications layer exposing re-usable capabilities – faster application provision and third party apps.

Figure 29 BT 21Century Network High Level Architecture

BT has announced that its 21st Century Network will be deployed to the majority of its customers by 2008. This network has the potential to enhance competition in service provision and application design, if it uses open rather than proprietary standards. However, the rules on access to these networks, which need to be developed very soon, will have profound consequences for the extent to which these pro-competitive benefits are realised. The BT NGN network will be the one of the first major NGN network deployed in Europe and will be interesting to project to study further as it rolls out in the coming years.

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3.4.

Case Studies Voice over Broadband Operators

A area of growth in 2003 and 2004 especially in the United States has been telephony services over public internet broadband connections known as Voice over Broadband (VoB). These predominantly residential services are offered over DSL and Cable broadband connections and are generally provided by a different service provider than the broadband DSL or cable service provider. The VoB services have been successful in the US market where there is a relatively high level of broadband deployment and where not all cable operators are offering telephony. In Europe due to the different make up of the broadband markets the uptake of VoB has been much less pronounced although Ofcom the UK regulator has recently launched a consultation regarding the reservation of a separate numbering range for VoB services [29]. 3.4.1. Vonage United States

Key Facts: Date Founded

January 2001

Market

USA

Financing

Vonage is a privately held company.

Number of Employees

475+

Calls Completed Per Week ~5 million

Number of Active Lines

~250 000 72

Table 12 Vonage Key Facts

Vonage offers flat-rate VoIP call packages for a monthly fee, which include supplementary services such as call waiting, voicemail, call forwarding, call transfer, caller ID, and caller ID block. Vonage combines US local, long distance, and Canada calls for one flat price. Vonage is the most notable service provider using the SIP IP voice technology. It has a large customer base among cable and dsl subscribers. Vonage provides customers with a free analogue telephony adapter box that converts voice between the packet and analog formats so that a POTS phone handset can be used to access the service. Although Vonage

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http://www.vonage.com/products_tour.php 73

markets its services directly to end-users it has also entered into partnerships with cable operators with the following options: 1) Wholesale arrangement where cable operators buy the service from Vonage and operate and support the service by themselves; and 2) Private-label contract like the one that the company signed with Earth link, where Vonage handles everything, but the service is marketed under the name of the distributor, which takes a cut of the revenue. Recently Vonage announced a distribution deal73 with Staples Inc. office supply stores and Cisco where Cisco’s Linksys home networking unit will offer a $59 adapter for Vonage service and a $89 home router that has the adapter built-in. Linksys and Vonage will sell the devices through Staples Inc. office supply stores among others, and Vonage will offer them on its web site. Vonage Chairman Jeffrey Citron said the company also plans to sell Netgear routers that offered WiFi wireless networking.

But as an independent provider Vonage faces a number of hurdles: Most telephone companies that sell high-speed Internet access require customers to

•

buy phone service as well. •

Cable companies have aggressive plans to launch their own VOIP services.

•

Regulators are still debating how rules for traditional phone service should apply to VOIP.

3.4.2. AT&T Broadband A very similar service to Vonage is now being offered by AT&T’s CallVantage VoIP service. AT&T is the first established telecommunications operator to enter the Voice over Broadband market on a large scale. The AT&T VoIP service CallVantage is similar to the Vonage service. i.e. it offers flat-rate VoIP call packages for a monthly fee. Like with Vonage, new CallVantage subscribers are sent self-installable telephone adapters to packetize their voice for IP transport. In addition to the traditional phone features of call waiting, three-way calling and call forwarding, the VOIP service offers additional features such as browser access to call logs, nine-person conferencing, do-not-disturb and find-me functions, and follow-me call routing settings. Other typical VOIP enhancements include browser-accessible voice mail and click-to-dial phone lists. Like Vonage, AT&T has also signed distribution deal with a major retailer to sell its CallVantage Internet phone service in See http://www.msnbc.msn.com/id/5806377/ news item

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in Best Buy stores74. AT&T is also running trials of a global voice-over-IP service75 aimed at multinational corporations that want to configure worldwide, single-PBX-like dialing. The service, with an expected launch next year, should also appeal for its ability to link up remote or roaming workers with broadband connectivity and IP phone or softphone. Web-accessed voice mail will allow participants to hear their messages by phone or PC and forward them to anyone in the world via e-mail. Call logs will allow participants to track and monitor their calling habits or move frequently called numbers into their personal phone books for click-to-dial access. The trials are scheduled to begin in the third quarter of this year in Australia, Hong Kong, Singapore and the United Kingdom. AT&T's global network uses MPLS (Multi-Protocol Labelled Services) routing technology to drive down packet latency and achieve toll-quality (i.e., traditional telephony) voice transmission. 3.4.3.

SKYPE

Key Facts: Date Founded

2003

Market

Worldwide

Number of Registered Users

5.4 Million

Circuit Switched Install Base

No

Packet

Switching

Deployment Peer2 Peer technology using proprietary version of SIP

Strategy Table 13 Key Facts Skype

protocol 76

The software behind Skype, a global Peer-to-Peer (P2P) telephony company has the potential of being the most disruptive technology yet seen in the telecommunications industry. P2P has already had a large disruptive impact in the music and media industries and P2P could significantly alter the telephony industry.

“I knew it was over when I downloaded Skype. When the inventors of KaZaA are distributing for free a little program that you can use to talk to anybody else, and the 74

See http://www.msnbc.msn.com/id/5806377/ item

75

See http://www.eweek.com/article2/0,1759,1610113,00.asp news item

75

quality is fantastic, and it’s free – it’s over. The world will change now inevitably.” Quote from Michael Powell, chairman, Federal Communications Commission77. Skype

and

service

offerings

like

it

have

the

potential

to

revolutionise

the

telecommunications world with their free worldwide calling service model once their subscriber base reaches critical mass according to Metcalfe’s law. Skype has served as a model for a host of other Voice over Broadband companies such as Net2phone, Nikotel, Callserve, Peoplecall. The company which is run by the same team who founded KaZaA and the service offers free global telephony to other Skype users via its next-generation peer-to-peer software and offers pre-paid offnet global PSTN termination at very competitive rates. Skype is a PC based telephony service and requires installation of the company’s software as well as a PC microphone and speakers, or PC headset to use. The Skype software provides a softphone user interface with directory service. According to Skype [40] the decentralized P2P networks model has several advantages over traditional client-server networks or centrally controlled voice switching networks in the case of telephony. These P2P networks scale indefinitely without decreasing search time and without the need for costly centralized resources. They utilize the processing and networking power of the end-users machines since these resources always grow in direct proportion to the network itself. Each new node added to the network adds potential processing power and bandwidth to the network. The Skype software can currently run on Windows, Pocket PC, Linux & Mac OS X systems and the company claims to be developing software for mobile devices and handsets. 3.4.4.

Instant Messaging providers

Other potential players in the VoB telephony are the instant messaging providers – primarily Microsoft’s MSN and Yahoo Messenger services which both offer the option to add audio and even video to an IM conversation. Like with Skype these services have the potential, if voice quality can be ensured, once they obtain critical user mass to cause a significant impact on the traditional telephony markets. 76

77

From Skype webpage www.skype.com

Fortune Magazine, February 16, 2004

76

More study is required to determine if the current user population of Skype and Instant Messaging are using these media as replacements to traditional voice telephony or as additional communications media.

3.5.

CORPORATE VOICE PACKET SWITCHING The business market segment of the telephony market has traditionally been one of the most profitable for network operators. But some of the first voice over packet networks to be launched were exactly in this segment. This is because many large corporations had during the later end of 1990’s built up data networks between the various locations which with the technological advances on packet telephony could be upgraded to permit sharing of data and intra-site voice calls.

A pertinent example of what corporations can do with packet telephony could already be seen in 1998 with Mundial-Confiança VoIP network. The VoIP network of the MundialConfiança group was, when launched in 1998, the largest VoIP network in the world. This was a private corporate network and serves as an interesting case study for corporate markets. 3.5.1. Grupo Mundial-Confiança Financial VoIP Enterprise Network Grupo Mundial-Confiança (GMC) was a Portuguese insurance and banking group. The group has a large network of around 750 branch offices throughout Portugal, of which approximately half of which are outside the major urban areas of Lisbon and Porto.

The original GMC communications set-up consisted of two separate networks [6] – one for voice traffic and one for data traffic. Each location had a PBX so that voice calls within single office location was ‘onnet’ and was switched internally and did not incur charges from their telephony service provider – Portugal Telecom. Voice traffic to destinations outside each office location was ‘offnet’ and was sent via the PBX interfaces to the PT network. This included calls between offices which accounted for a large part of the voice traffic. At the same time GMC maintained a data network to route connect branch terminals to backoffice servers. The data network was a hierarchical, 3-tier aggregation network using serial lines, low bandwidth (64 K) at the edges and increasingly higher bandwidth (up to ~1.5 M) closer to the backbone. The backbone consists of IP, with Token Ring and Ethernet emulation, over asynchronous transfer mode (ATM) transport.

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Figure 30 Two separate Voice and Data networks of GMC before introduction of VoIP78

The multi-service network was acquired to realize the following benefits: •

Reduce cost of voice and data communications;

•

Making internal data available to all parts of the firm to leverage and cross-sell each other's products and support new euro (€) transaction applications being developed;

•

Support future applications (e.g. web, Mail, intranet);

•

Consolidate leased line infrastructure.

GMC required a solution for their new combined data/voice/video network that would meet the following objectives:

78

•

The new network should be standards based and able to host different flavours of networking protocols/products.

•

Migration of the network should not impact their existing SNA infrastructure.

•

Full connectivity between branch offices (TCP/IP and SNA).

•

Full voice and fax connectivity between branch offices (VoIP).

•

Provide higher availability and performance.

•

Network management should be integrated and centralized.

•

Direct inward dialing (DID) functionality.

•

Mean Opinion Score (MOS) of 4 required (considering private switched telephone network [PSTN] as 5, which is the level of quality the customer is accustomed to).

Cisco “Understanding Delay in Packet Voice Networks” White Paper 78

GMC used a Cisco solution for the new voice and data networks which is illustrated in Figure 31 below. The new network consisted of gateway routers in all the braches with a

hierarchical structure between local, regional and core office locations.

Figure 31 New combined GMC Voice and Data Packet Network79

Each branch location now had a router with BRI voice interfaces connecting to local branch PBX which connected to the rest of the GMC network via leased line, channelized E1 connections. The bandwidth from branch to higher nodes was 64 K, between local and regional nodes the backbone varied between 128 K to 768 K, depending on the size of the branch and the number of downstream branches it aggregated and bandwidth between regional nodes and the backbone varied between 128 K to 1.5 M, depending again on the size of the branch and the number of downstream branches aggregating via this one. Bandwidth for the network design was based on 40 K data and 24 K voice (two calls as 12 K each) per branch. The "maximum number of simultaneous calls" for the top level 3640 (regional or Layer 3) routers was calculated, and vary between 6 and 68. The highest volume traffic load in the busy hour vary between 30 and 112 c/h. Both good voice quality and adequate SNA response times are important in this network. Several quality of service (QoS) mechanisms were implemented to prioritize voice and SNA interactive traffic over SNA batch and other IP traffic. To meet the high availability requirement of the network, the following measures were implemented: •

79

Leased lines backup connections between the major backbone nodes

Cisco “Understanding Delay in Packet Voice Networks” White Paper 79

•

ISDN data backup from all the Regional, Local and Branch nodes (voice backup is via the PSTN)

•

Dual Core Routers in the backbone nodes

•

Every Gatekeeper is shadowed by a hot standby, providing first-level fail-over on Gatekeeper failure. Second-level fail-over (if both Gatekeepers should fail at once) is provided by rerouting voice calls through the PSTN.

The Grupo Mundial-Confiança was later broken up and part of the group was sold to another banking group but nevertheless their network is a good example of the advantages corporations can gain by implementing voice and data packet networks. 3.5.2. AXA Portugal VoIP Enterprise Network A more recent example of corporate packet switching is the Lan Telephony project recently announced by Systems Integrator Convex for the insurance company Axa in Portugal [8]. This project consists in the implementation of a multi-service corporate network between the four corporate buildings of the Axa, the 20 proprietary branch offices and the around 100 branch offices of Axa agents. In total around 1500 telephone ports are involved. Some differences between the current Axa and previous Mundial networks is that Axa will use ADSL connections to the agents instead of leased lines. Also a new advancement is that Axa is going to use its multi-service IP network to create an IP contact centre. The IP contact centre will combines voice and web communication and an example of the type of advanced services that become possible with the deployment of a multi-service packet network.

This model of interconnecting various company locations through VoIP is being copied in many corporations around the world and network operators need to define what strategies to apply in response to this phenomenon. As said before the business market segment of the telephony market has traditionally been one of the most profitable for network operators and although some revenue for the traditional services can be lost through VoIP application in corporate networks many operators see other business opportunities such offering managed voice and data services such as VPNs and IPCentrex to the corporate customers thereby compensating for the loss of traditional voice call termination revenue receipts. Operators with NGN will be able to offer more possibilities to VoIP based

80

customers and therefore the corporate VoIP deployment trends could serve as another motivator for operators to implement NGN networks.

3.6.

Chapter Review It has been seen is this chapter that there are a range of wireline operators currently offering or planning to offer packetized voice services. There are a variety of access technologies for voice over packet networks and specific case studies were drawn from the VoCable and VoDSL worlds where both access technologies permit the bundling of voice, data and multimedia services over a common access medium. It was seen that voice of over packet deployments are not limited to either incumbents (e.g. BT) or alternative wireline operators (e.g. Neuf Telecom, TeleCable, Vonage) but that alternative operators especially those without legacy circuit switching networks have been faster to deploy the new technology. It is important to take into account that due to financial difficulties that many (especially alternative) operators have had in the last few years as well as due to the decline of the margins of pure voice telephony services80 the conditions for raising investment for large scale capital investments are not so favourable. Also many operators have excess circuit switch capacity which has already been paid for so there is an incentive to use up this capacity before investing in new technologies. All this can delay the deployment of an NGN network and the associated new services.

Case studies covering cable and dsl access types were reviewed. Also Voice over Broadband access independent providers were identified as potential competitors to not just the local incumbent but also to the traditional alternative wireline operators although it is unsure whether access independent VoB providers will be able to survive in the long term from competition of the local broadband service provider. New business models which do not have subscription or caller fees like those of Skype and instant messaging providers could prove to be very effective disruptors to the current telecommunications model but more study is required to ascertain the usage models for of these services.

The EU decree on local loop unbundling [15] and advances in DSL technology were seen as key enablers for the growth of voice, data and multimedia services to the residential and business markets over DSL access technology. VoB deployment has not been very 80

An example is declining margins in the long distance and international call market as identified by among others Ofcom in the Phase 2 consultation, www.ofcom.co.uk 81

substantial so far in Europe although Ofcom the UK regulator has recently launched a consultation regarding the reservation of a separate numbering range for VoB services [29].

The packet switching deployments reviewed in this chapter support the findings of chapter 3 that packet switching offers technical and commercial advantages to service providers by enabling them to lower their network and customer premise equipment cost, combine voice and data services on the same network and permits the development of new innovative voice and multimedia solutions.

For network operators with previous voice circuit switching infra-structure the shift to pure packet switching deployment is less clear-cut than for operators without an installed circuit switch base but even here voice packet switching deployments are seen as beneficial for growth in new market areas as with Cox Communications or even as a complete replacement to circuit switched network as with BT. The BT NGN network especially, which according to the company will be deployed to the majority of its customers by 2008, will be the one of the first major NGN networks deployed in Europe and will be interesting to project to study further as it rolls out in the coming years.

Also corporate case studies illustrated many of their most profitable corporate customers have already installed VoIP and network operators need to define what strategies to compensate for the loss of voice call termination revenue operators such as advanced managed voice and data services such as VPNs or IPCentrex. Operators with NGN will be able to offer more possibilities to VoIP based customers and therefore the corporate VoIP deployments can serve as another motivator for operators to implement NGN networks.

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4.

VOICE ENABLED PACKET NETWORKS DESIGN CONSIDERATIONS

In the previous sections a review of the history of voice telephony, network switching models and packet switching deployments were made. Following on from the previous sections this section reviews the main design considerations for NGN networks as deduced from the analysis of the technological, economical and regulatory considerations seen. The following factors are considered to be important in the design of an NGN network:

 Quality of Service  Protocol Choice  Security  Lifeline  Lawful Interception  Multimedia Options  Numbering  Regulatory considerations

4.1.

Quality of Service The IP protocol was originally designed to reliably get a packet to its destination with less consideration to the amount of time it takes to get there. IP networks must now support many different types of applications, many of which require low latency. Otherwise, the end-user quality may be significantly affected or in some cases the application does not work at all.

Quality of Service (QoS) is a broad term used to describe the overall experience a user or application will receive over a network. QoS involves a broad range of technologies, architecture, protocols. Network operators achieve end-to-end QoS by ensuring that network elements apply consistent treatment to traffic flows as they traverse the network.

A number of QoS parameters can be measured and monitored to determine whether a service level offered or received is being achieved. These parameters consist of the following: 1. Network availability

83

2. Bandwidth 3. Delay 4. Jitter 5. Loss

There are also QoS performance affecting parameters that cannot be measured but provide the traffic management mechanisms for the network routers and switches. These consist of:

a. Emission priority b. Discard priority

The Internet was originally designed for packet delivery where all packets where treated equally without any discrimination or explicit delivery guarantees. This was known as the ‘best effort model’. This model suffered from problems of congestion when high levels of data packets are transmitted as detailed by Gevros [18] and was not suitable for real-time applications such as voice.

The initial economic model for the Internet also suffered from the problem that it was priced by access rather than usage. Network resources are congestible and although they can be used by more than one person increasing usage degrades their quality i.e. individual overuse creates an externality and it lowers the value of usage for everyone else as discussed by Varian [44].

At present there is still not a perfect model in place to internalize this externality but ISP services with traffic limits as offered by many ISPs81 in Europe where users pay if their traffic use goes above a certain amount within a set period (typically monthly) sometimes also with a separation between ‘national’ and ‘international’ traffic82, are a way of limiting network congestion, if somewhat inexact.

81

For example BT Broadband in the UK, KPN in Holland and T-Mobile in Germany all have traffic limits for their cheapest broadband offerings in Q3-2004. 82 E.g. Portuguese ISPs Netcabo and SAPO XL of the PT group define traffic to ‘.pt’ as national and other traffic as international, although it has to be noted that the ‘pt’ domain does not necessarily translate to a physical routing address within Portugal. 84

The IETF developed two service models to enhance the services offering on the Internet. The first model which was not successful in ISP and equipment manufacturer uptake was IntServ (integrated services architecture) which offered two traffic classes: best effort and guaranteed service classes using admission control, resource reservation and per flow handling in routers. IETF also defined the DiffServ (Differentiated services architecture). DiffServ makes the fundamental assumption that the Internet will continue to be dominated by best effort traffic and consists of doing admission control only at the edge of the network (as access links are often the bottleneck), DiffServ consists of marking packets with a differentiated Type of Service (TOS) where these packets are routed according to the priorities assigned to each TOS level.

It has been suggested by Henderson [22] to use DiffServ as a way of controlling conventional data traffic congestion by offering users the option of paying for different levels of service. I.e. DiffServ can thus be used to offer customers a range of QoS classes with a different pricing structure.

This permits service offerings with higher price for customers who are willing to pay for a higher QoS even the traffic sent may be the same. As Henderson states such price discrimination maximises the provider’s profits and is comparable to practises in other industries especially air travel where adjacent seats can have widely different prices. This option does not work however when DiffServ is used exclusively for differentiated between types of applications such a real-time like voice and non real-time applications. Under the EU Universal Service Directive the national regulatory authorities should, for service providers in the national markets providing public telephone networks and/or publicly available telephone services to users at fixed locations, be able to monitor the achieved quality of the service offered to ensure that the quality of service is of appropriate level.

The directive defines the QoS parameters shown in Table 14 and it can be noted that the parameters are inadequate for measuring the problems that may occur in voice over packet networks.

85

Table 14 EU Universal Service Directive QoS parameters83

Returning to the QoS parameters defined previously the following points can raised regarding each parameter.

4.1.1.

Network Availability

If the network is unavailable this will obviously affect the user QoS in a significant way. Network availability is maximised by ensuring physical availability or redundancy of the elements making up the network by:

1. Redundant interfaces (multiple physical connections); 2. Redundant processor cards ; 3. Redundant power supplies (back-up power sources); 4. Redundant nodes.

83

EU Universal Service Directive (2002/22/EC) 86

4.1.2.

Bandwidth

In broadband deployments it is very typical for operators to oversubscribe the bandwidth on their network. This means that the bandwidth a user subscribed to is not always available to him. This allows all users to compete for available bandwidth. They get more or less bandwidth depending upon the amount of traffic from other users on the network at any given time. However for packet voice there is requirement for guaranteed bandwidth for packets carrying voice traffic. Bandwidth sensitive traffic like voice can be separated from other traffic by use of VLAN or Virtual Circuits. If the traffic cannot be separated on different logical or physical networks then mechanisms must be put in play to ensure prioritisation of the voice packets such as the DiffServ service discussed earlier.

4.1.3.

Delay

Network delay is the transit time an application experiences from the ingress point to the egress point of the network. Voice applications are very sensitive to delay. The International Telecommunication Union (ITU) considers network delay for voice applications in Recommendation G.114. This recommendation defines three bands of one-way delay as show in Table 6.

Table 15 ITU Voice Application Delay Specifications84

Note that these recommendations are for connections with echo adequately controlled, which implies that echo cancellers are used. Echo cancellers are required when one-way delay exceeds 25 ms (G.131). All networks should be engineered such that the maximum expected voice connection delay is known and minimized. 84

ITU Recommendation G.114, www.itu.org 87

Cisco defines two distinct types of delay: fixed and variable [7]. Fixed delay components add directly to the overall delay on the connection such as Coder delay, algorithmic delay, packetisation delay, serialization delay, queuing/buffering delay, Network switching delay. Variable delays arise from queuing delays in the egress trunk buffers on the serial port connected to the WAN. These buffers create variable delays, called jitter, across the network. Variable delays are handled via the de-jitter buffer at the receiving router/gateway. According to Cisco the generally-accepted limit for good-quality voice connection delay is 200 ms one-way (or 250 ms as a limit). As delays rise over this figure, talkers and listeners become un-synchronized, and often they speak at the same time, or both wait for the other to speak. While the overall voice quality is acceptable, users may find the stilted nature of the conversation unacceptably annoying. Talker overlap may be observed on international telephone calls which travel over satellite connections (satellite delay is in the order of 500 ms, 250 ms up and 250 ms down). The network designer therefore needs to take into account the effect of delays introduced by multiple hops when designing a packet voice network.

4.1.4.

Jitter

Jitter is a measure of the delay variation between consecutive packets for a given traffic flow. Voice is very sensitive to jitter, a minimal amount of jitter may be acceptable but as jitter increases, the voice application may become unstable. Voice gateways and IP phones often can compensate for small amounts of jitter. All networks introduce some jitter because of the variability in delay introduced by each network node as packets are queued. However as long as the jitter in the network is limited, network QoS can be maintained.

4.1.5.

Loss

Loss can occur due to errors introduced by the physical transmission medium. Landline connections generally have low loss but wireless connections such as satellite, mobile or FWA networks have a high BER that varies due to environmental conditions such as fog, rain, RF interference, cell handoff during roaming, and physical obstacles such as trees, buildings and mountains. Loss can also occur when congested network nodes drop packets.

88

To minimise packet loss through congestion, congestion avoidance mechanisms like Random Early Discard (RED) with TCP-based flows. RED algorithms randomly and intentionally drop packets once the traffic reaches one or more configured thresholds. RED takes advantage of the TCP protocol’s window size throttling feature and provides more efficient congestion management for TCP-based flows.

4.1.6.

Voice Quality

The factors that impact voice quality in packet network design are first of all the quality of the QoS parameters described previously. Poor QoS will not only affect voice quality but also other telephony aspects such as call set-up and billing if signalling messaging is corrupted.

Additionally

the

type

of

codec

used

will

impact

voice

quality.

Compressor/decompressor (codec) systems and digital signal processing (DSP) are commonly used in voice communications because they conserve bandwidth. But they also degrade voice quality. The best codec’s provide the best bandwidth conservation while producing the least degradation of the signal. Bandwidth can be measured using laboratory instruments, but voice quality requires human interpretation. In voice communications, particularly Internet telephony, the mean opinion score (MOS) provides a numerical measure of the quality of human speech at the destination end of the circuit. The scheme uses subjective tests (opinionated scores) that are mathematically averaged to obtain a quantitative indicator of the system performance. A method to determine MOS85 is to have a number of listeners rate the quality of test sentences read aloud over the communications path or service to be tested by male and female speakers. A listener gives each sentence a rating as follows: (1) bad; (2) poor; (3) fair; (4) good; (5) excellent. The MOS is the arithmetic mean of all the individual scores, and can range from 1 (worst) to 5 (best). 4.2.

Voice of Packet Protocol choice

One of the first key design choices faced by operators when designing a packet switched network is the choice of protocol. On a core network level one of the first choices will be whether to have the backbone based on ATM or IP.

89

The advantage of ATM was that many carrier backbones are already running on ATM technology and the DSL (including VoDSL) access has traditionally been provided over ATM as DSL is based on ATM. However for the foreseeable future IP will continue to dominate the market through its widespread ubiquity and versatility and although in scenarios with a high DSL deployment it may still make sense to keep some ATM in the network the future of voice packet switching will predominantly be based on IP networks.

Another important design choice for a packet switched network is the choice of protocol to use for voice. There are a number of protocols currently available and it is not clear which is more suitable or if a mix of voice over packet protocols will be required to deal with different situations. There is some variation in the suggested network protocol architecture between different switching equipment suppliers often driven by investment these companies have made in one protocol or another. So for the near future it will be necessary to support a multitude of standards and protocols and interworking between them to

accommodate packetised telephony. The following table shows one manufacturer’s (Nortel Networks) philosophy as to protocol mapping between NGN and TDM networks.

Table 16 Protocol Mapping Between TDM and Packet Switching86

There is a range of voice over packet transport protocols available in packet

switched

networks which shall be reviewed in the following sub-sections:

85 86

http://searchnetworking.techtarget.com/gDefinition/0,294236,sid7_gci786677,00.html Nortel Networks – Detailed in softswitch deployment proposal Q2 2004 90

4.2.1. ELCP (Voice over ATM) Emulated Loop Control Protocol is a message-based protocol that relies on the ETSI V5.2 standard87. The ELCP protocol specifies a mechanism in which V5.2-based signalling messages are exchanged between the VoDSL Gateway and IAD (Integrated Access Devices) to support both POTS (Plain Old Telephone System) and ISDN Voice over ATM.

An Interworking Function (IWF) that supports ELCP controls the activation and deactivation of both POTS and ISDN user ports. ELCP has been used extensively in VoDSL deployments but is now being replaced as IP protocol driven IADs are appearing on the market. For example JAZZTEL Spain announced a change of their DSL access solution to an IP based solution88

4.2.2. MGCP/Megaco The Media Gateway Control Protocol (MGCP) and H.248/Megaco were designed to provide an architecture where specific communications elements and telephony gateways could be centrally added a VoIP network. In this instance, an architecture using these protocols closely coincides with the existing PSTN services [20].

In its current form, MGCP is an aggregate of two earlier protocols, SGCP and IPDC. MGCP places call signaling control and processing intellect in call agents or media gateway controllers. Media gateways are telephony gateways that assist multi-service packet networks, translating data packets and audio signals. Just as a gatekeeper in H.323, the MGCP call agent performs the same call routing functions, but with constricted control. The gateways are counted on to execute commands forwarded by the call agents.

Megaco RFC 3015 was developed by the IETF Megaco Working Group in alliance with ITU-T Study Group 16. Megaco delivers the affiliation between the Media Gateway (MG) and the Media Gateway Controller (MGCP) by conjoining the Call Control existence and the Media Processing (MG) entity. The Media Gateway (MG) adapts media provided by one type of network into the framework of another type of network. All the while MGC controls the call states that relate to connection control for media channels in MG. Like H.323, MGCP is a

87

ITU www.itu.int/ITU-T ATM Forum Loop Emulation Service Using AAL2

88

Alcatel Press release IP DSLAM deployment with JAZZTEL Spain www.alcatel.com 91

complementary protocol. The newer Megaco and MGCP are equipped as internal protocols for traffic between MGCs and MGs for corroded gateway architectures. The MGC utilizes the signalling layers of H.323 and acquaints itself as a H.323 gatekeeper or as an H.323 endpoint. Focusing on the audio signal translation, MGs converse the audio signals transported on telephone circuits and data packets funnelled over the Internet or packet switched networks.

4.2.3. H323 The ITU-T started work on defining VoIP signaling protocols in May 1995 [19]. In December 1996, Study Group 16 passed the H.323 v.1, referred to as a “standard for realtime videoconferencing over non-guaranteed quality of service LANs.” The protocol then evolved to support a wider range of applications and the latest version (4th) of the H.323 basic standard was released in 1999. This recommendation describes terminals and other entities (gatekeepers, gateways, multipoint control units) that provide multimedia communication over packet based networks. Support for audio is mandatory, while data and video are optional.

H.323 is considered an “umbrella” specification, covering multiple sub protocols related to call setup and signaling. The H.323 delineates all aspects of call transmission, call establishment and network resource availability. Several sub-protocols are defined by H.323; such as Registration, Admission, and Status (RAS) protocols for call routing, H.245 the “call control channel”, and H.225 protocols for call set up. 4 Two protocols used, which define the essential requirements for transporting real-time data over a packet network are the Real-Time Control Protocol (RTCP) and/or the Real-Time Transport Protocol (RPT). H.323 applies four major elements for a network-based communications system: 1. Gatekeepers 2. Mulitipoint Control Units (MCU) 3. Terminals 4. Gateways

92

Figure 32 H323 Protocol Suite89

Control Units (MCU) permits multiparty audio and videoconferences. Considerable issues in IP telephony (addressing problems) are handled by Gateways. Gateways enable the use of standard telephones to converse over the Internet instead of multimedia computers. In order to call another PC user, you must have their Internet Protocol (IP) address. Using a gateway product, you only need to dial their phone number. Gatekeepers provide address translation and bandwidth management by mapping IP addresses and telephone numbers. In order to have a successful IP network that will command all call traffic commencing and concluding at regular telephones, gatekeeper services are essential. H.323 requires that TCP connections be used to transport the messages, resulting in an additional roundtrip exchange. The protocol uses multiple roundtrip messages to delegate signaling and control for calls between two terminals. 4.2.4. SIP Session Initiation Protocol (SIP) is the Internet Engineering Task Force’s (IETF) standard for multimedia conferencing over IP. SIP is a session-layer transaction protocol that provides advanced

signaling

and

control

functionality

for

a

large

range

of

multimedia

communications. It was specified by the MMUSIC WG as a proposed standard in 1999 (IETF RFC 2543) and was updated by the SIP WG in 2002 (IETF RFC 3261) [19].

89

ITU H323 recommendation, www.itu.org 93

The main functions are: location of resources/parties, invitation to service sessions, and negotiation of session parameters. To fulfill this functionality, SIP provides a small number of text-based messages to be exchanged in separate transactions between the SIP peer entities (SIP user agent in a user terminal). In this way, the Basic Call control functionality is provided by one signalling transaction using the INVITE request message, whereas SIP is independent from the session it establishes. Other transactions complement the Basic Call, e.g., explicit call release. Network entities such as proxy servers or redirect servers that can be traversed by the messages, and can be used for support, e.g., for address resolution. It is fundamental to the SIP architecture that the signalling path is independent from the data path. The session itself is described at two levels. The SIP protocol contains the parties’ addresses and protocol processing features; the description of the media streams that are exchanged between the parties of a multimedia session are defined by another protocol. Therefore, the IETF suggests the Session Description Protocol (SDP, IETF RFC 2327). SDP is, in fact, not a protocol, but a structured, text-based media-description format that can be carried in the SIP message body. Since the message body is transparent to SIP any session description can be transferred, including a Web link. SIP sessions are not restricted to telephony calls or conference capabilities, but can include information retrieval or broadcast sessions, depending on the session description. SDP also allows the scheduling of session start and stop times or to describe recurring sessions.

Figure 33 IETF SIP Protocol Suite90

90

IETF SIP RFC3261 and related RFC’s www.ietf.org 94

4.2.5. Inter-Asterisk eXchange (IAX)

The Inter-Asterisk Exchange (IAX) is a lightweight protocol. It is associated with Asterisk, the open source PBX developed by Digium Inc. IAX is used on Voice-over-IP networks much like the widely known SIP protocol.

IAX is not well known outside the Asterisk user community but has benefits in certain circumstances and is starting to be used by some VoIP carriers like Voicepulse who recently announced that they had carried 20 million VoIP minutes using the IAX protocol91.

Some reasons given by the Asterisk community as advantages of IAX over SIP are:

•

IAX handles Network Address Translation at the protocol layer so it’s much easier to configure on residential connections (SIP requires using STUN, keepalives, or some other workaround not built into the protocol).

•

IAX is well suited for trunks carrying many simultaneous calls because it multiplexes the signalling for all these separate calls into one stream. The result is that the bandwidth required is reduced significantly.

•

IAX is the native protocol of Asterisk, so it’s very easy for users who want to use this protocol with the free, open-source PBX software to do so.

Little information is available regarding implementations of the IAX protocol and it is currently not considered in any of the major softswitch supplier NGN solutions. However there may be a future take-off of IAX implementations for specific voice scenarios like there was with Linux when critical mass was reached.

4.2.6. VoIP Interconnect VoIP interconnect is an interesting option for carriers with NGN networks especially for VoIP to VoIP calls as it removes the need for a media gateway and degradation of call quality via protocol conversion. In August 2004 a short questionnaire was sent to the main Portuguese Wireline operators asking if any VoIP interconnect was currently available or was planned to be available for national interconnect and with which VoIP protocol [26]. 91

Yahoo News http://biz.yahoo.com/prnews/040917/nyf039_1.htm 17th September 2004 95

#

VoIP Interligação Questionario / VoIP Interconnect Questionaire

1

O operador permite interligação para tráfego de voz via IP?

Does the operator permit interconnection of voice traffic via IP? 2

Se (1) foi positivo quais são os protocolos & codecs suportados pelo operador para interligação em VoIP (e.g. H323 ou SIP-T / G711, G726 etc)?

If (1) was affirmative what are the protocols and codecs supported by the operator for VoIP interconnection (e.g. H323 or SIP-T / G711, G726 etc)? 3a

Se (1) foi negativo: Está previsto no futuro permitir interligação via VoIP?

If (1) was negative: Is it planned to offer VoIP interconnect in the future? 3b

Se está previsto, pode dar um estimativa de quando?

If it is planned, when is the expected launch date? 3c

Se está previsto utilizar VoIP para interligação, quais são os protocolos VoIP & codecs previstos?

If it is planned to use VoIP for interconnect, please state which VoIP protocoles and codecs will be used? Table 17 -VoIP Questionaire92

The questionnaire received initially only negative answers although several operators later indicated that they are studying the possibility of VoIP interconnect in 2005 with preference for us of the SIP or SIP-T93 protocol. On an international level in 2004 there are already a number of VoIP and mainstream carriers that permit interconnect via VoIP. Typical protocols used are SIP or H323 and there was in 2004 no clear preference between the two for the operators sampled94.

Carrier VoIP interconnect makes technical sense for PATS based VoIP services as the cost for both transmission and HW ports is lower for VoIP interconnect when compared with TDM interconnect95. The position of the incumbent will have the most impact on this question on the national level as for example the biggest interconnect routes of all the main Portuguese wireline operators are with Portugal Telecom (PT). PT currently does not offer VoIP interconnect and has not got any plans to do so in the future. As designated universal service provider the incumbent should make available the most suitable interconnect for 92

JAZZTEL questionnaire sent to Portuguese operators August 2004 SIP-T is a versions of SIP that encapsulates ISUP messaging so is more suitable for interconnections of calls starting and ending in the circuit switched PSTN but are transit over an VoIP network. 94 Interconnect options offered by several international carrier to JAZZTEL 2003/2004 included VoIP 93

96

each type of service. For NGN VoIP customers this means an IP interconnect. More study should be carried out to determine whether it may be necessary for the national regulator to intervene to motivate PT to offer VoIP interconnect at some stage in the not too distant future.

The applications of VoIP protocols are constantly changing and protocol choice requires careful attention. Due to these instabilities it is recommended that an NGN platform should support at least SIP and MGCP protocols and if possible H323 as well to enable maximum flexibility in service development. There has been during 2004 & 2005 a trend showing that the importance of the H323 protocol is diminishing compared to SIP as major NGN and CPE equipment manufacturers are shifting from H323 to SIP [27] but more study is required to confirm this trend. 4.2.7. Voice over Packet Protocol Conclusions The choice of protocol to use for voice services on a packet network is not a clear one and will depend a lot on the type of users the network aims to support as the requirements of large multi-user business customers are different to those of single user residential subscribers. For the time being at least it will be important that an operator network can support multiple VoIP protocols. ATM may still be used is some parts of the packet switched networks but the use of VoATM is seen as being replaced by more versatile VoIP protocols even if part of the transport layer is still over ATM.

Historically VoIP traffic was done predominantly using the H.323 protocol and H323 is the protocol with the largest equipment installation at the moment. However the main development efforts the manufacturing industry are going into SIP at the moment as it is seen to be a more simple but versatile protocol for the multimedia services of the future.

Current large scale VoIP deployments show a pattern of SIP and MGCP deployments as access protocols but ideal model is not clear: The world's largest peer-to-peer VoIP subscriber network, Skype, is using its own proprietary protocol, loosely based on SIP, but not SIP. Vonage uses SIP, The world's largest commercial VoIP subscriber network, Yahoo! BB in Japan is using MGCP, not SIP. PacketCable deployments are based on MGCP.

95

Jazztel Engineering department cost calculation 2004 showed a approximate cost advantage of

97

The only limited finding is that operators who are offering multimedia services through proprietary infrastructure like Yahoo! BB and its DSL service and the cable operators with the Cable modem broadband offerings use the MGCP protocol which gives the operator full control to the over supplementary services control as opposed to SIP and H323 where these generally reside on the endpoints ie. MGCP is used to control dumb terminal devices in a “client-server” mode where typical standard POTS analogue telephones will be connected whereas SIP and H323 are implemented on intelligent endpoints which may be connected to other softswitches, IP PABXs, or multimedia terminal devices96.

Taking into account that the service provider can control services and thereby revenue more easily with a ‘dumb’ endpoint this is an advantage for the MGCP protocol implementation. However some more advanced multimedia services involving voice may not be available with MGCP.

Table 18 Cisco VoIP Protocol Comparison97

On the interconnect side this study has shown that currently there are a variety or protocol choices for VoIP interconnect or peering between operators such as H323, SIP or IAX where again the SIP or SIP-T protocol is growing as protocol .

Further analysis should be done in the coming years to see whether any clear protocol model develops with the deployment of NGN networks worldwide.

33% of interconnect in VoIP over circuit switched voice. 96 Examples of user types given by softswitch manufacturers during JAZZTEL 2004 NGN RFI. 97 Cisco VoIP protocol overview, www.cisco.com 98

4.3.

Security There are many security functions that can be considered. These common functions as described by McGarty [29] are listed below: Function Unauthorized Access Control

Billing Control

Wiretapping Implementation Remote Instantaneous Cutoff Packet Streaming Control

Network Management Compartmentalization

Code Key Control

Details The system shall be designed so that there shall be no unauthorized access of any IVN, router, switch, or IntraNet backbone element. The IVN shall provide for total and complete firewall capabilities to insure secure access and shall not permit any unauthorized packet flow through any IVN connected router. The IVN shall provide for a complete secure billing collection system with complete and full real time redundancy. It must also provide alarms for any attempt to penetrate the system in an unauthorized fashion and shall provide for a complete and secure keyed access system for company access. The system shall allow for any and all legally authorized wiretaps to be implemented on the system. The taps must be in a standard format and must be able to be obtained in a secure and compartmentalized format. The system must have the capability of remotely and instantaneously being cutoff to prevent any unauthorized breach of security. The system must prevent packet streaming. Namely the system must prevent the unauthorized use of the routers, whether they are connected via an IntraNet or Internet, by others for the purpose of sending packets over the network or through the routers. The IVN must have the capability to authorize each and every packet before transmission. The network management system must be fully compartmentalized from the system. Any access to any voice channel must be monitored and must have a key control access capability. No user of the system may access any voice circuit in any fashion without having that access monitored. The system must use a secure code key access technique for any access to, modification of, reconfiguration of, or any material change to the system, its configuration, connections, or any other operational function. Table 19 Security Functions98

Hacking and replicating a Voice over packet call is easier to do than with circuit switched voice services as the more opportunities and ways to simulate and/or intercept IP packets than traditional circuit switched voice99. Therefore it will be important to analyse possible threats, protocols weaknesses, and similar security risks and what can architecturally be done to ensure a secure environment.

The overall issues of network security are at four levels; physical attach of resources, transport compromise between resources, logical attack at software in it broadest sense,

98 99

McGarty, Terrence P. & McKnight, Lee “International IP Telephony” Mit Press 1998 Findings from Jazztel network security study for new VoIP services 2004 99

and end user compromise. One can view the issues in an open and a closed network environment. The following Table presents an overview of these extremes.

Table 20 Network Security Levels100

There are differences in the various NGN solutions when it comes to security preparedness. CableLabs PacketCable specification contains a number of security options involving encryption of the voice packets and temporary password based on Kerberos token exchange. But other SIP or H323 VoIP solutions do not have the same options and are therefore more liable to security breaches. 4.4.

Lifeline / Emergency Services Access A strong attraction of circuit switching networks was the high reliability associated with them, the so called 99.999% or five nines reliability. High reliability is not just a positive feature of TDM switches but in many countries a legal requirement. The concept of a lifeline, a line that can function even when there is a local power outage at the subscriber end is very important and not all access solutions for NGN networks will support lifeline functionality which consists of in-line powering of terminals as well as a certain level of redundancy and robustness in the access network.

Associated to the lifeline another important voice network feature that may be an regulatory requirement for service operation licensing is the guaranteed access to Emergency Services. The emergency numbers 112, 911 or 999 should have a higher priority routing profile assigned to them than normal calls and should have one or more redundant interconnect routes with the emergency services response centre. Near 100% reliability has been a very important feature of circuit switched networks and an NGN network should aim to emulate existing network robustness for voice services. However in case where the voice service provider does not control the access network such as with some Voice over Broadband operators reviewed in the previous chapter it may be

100

Idem 98 100

impossible to for guarantee lifeline or access to emergency services. Skype for example specifically specifies that is does not offer any access to emergency service numbers and other VoB operators like Vonage and AT&T broadband do offer emergency number access but not lifeline.

Regulatory bodies have been considering these issues and as will be discussed later in the chapter although there are national difference the general consensus is to let the technology mature more before imposing too many rigid rules regarding lifeline and emergency services access.

4.5.

Lawful Interception There is a legal requirement in many European countries to make available to the law enforcement agencies (LEA) upon request (generally with court order depending on national legislation) a means to record all the telephony traffic to and from a specific subscriber of the telecoms provider as well as call summary data such as start time, stop time of calls answered or not answered etc. The LEA will normally have a connection between their intelligence equipment and the operator network to enable the information to be transmitted. There is no common European standard for legal interception as this area is considered to be a national matter under EU law101 and different nations have defined the interception requirement in different ways [13] an ETSI group was set up to define a common framework for legal interception across Europe to facilitate service provider and manufacturer compliance. The principal ETSI interface specifying legal interception details for TDM networks (and data networks) is ETSI ES 201 671 - Handover interface for the lawful interception of telecommunications traffic.

101

EU Framework Directive recital 101

Figure 34 ETSI Functional block diagram showing handover interface HI102

The principle for voice is that incoming calls to, and outgoing calls from, a specific access interface can be monitored without the parties involved being aware of this [12]. Two types of information may be obtained and provided to the LEA as a result: Call content, i.e. voice and/or in-band data, which is delivered to the LEA via a dedicated Call Content Channel (CCC) comprising two CC links. Call-related data, e.g. calling/called numbers and call start/stop times, which are delivered to the LEA via a dedicated Call Data Channel (CDC). Initially packet switching networks did not support legal interception but now most current softswitch solutions do support it although with no fixed locations services it may be difficult to keep track of specific target locations. This touches on the wider difficulty that law enforcement agencies are having in keeping track with the many different ways to communicate available presently and further developments are underway to develop a broader interception standard for packet switched networks encompassing not just voice traffic but also data traffic103.

4.6.

Multimedia options offered by a packet based network One of the advantages offered by a packet based voice switching network is the availability of a host of new service offerings taking advantage of the flexibility that a packet networks 102

ETSI recommendation ETSI ES 201 671, www.etsi.org

102

offer. The widespread use of IP as the standard transport mechanism for data networks enables many advanced Internet applications which could be thought of as being enhanced voice services such as multimedia e-mail, real-time chat, streaming media (including music and video), and videoconferencing. Also with the increased bandwidth permitted by advances in access technology such as ADSL2 non voice services such as television and video on demand can also be provided over the same IP interface. An example of a such an service multimedia deployment is was seen in chapter 4 with Neuf Telecom and its combined voice, broadband, IPTV and VoD services over ADSL.

The definition of multimedia communications is constantly evolving but one broad definition given by McGarty and McKnight [29] is: ‘Multimedia Communications is a conversation with others, using all of the available senses, combining meaning and content between a group of individuals, displaced in time and space.’ McGarty and McKnight also point out that the new services of the multimedia age will need to be much more people centred than traditional PC user dominated Internet world. A report104 studying web habits by the UCLA Centre for Communication Policy found that the typical Internet user spends less time watching television, is a keen reader and actively socialises with friends. Although some findings are more typical of trends, such as more men surf the net than women, and the wealthier sections of the population are more avid users, the image of the typical user is a long way from the stereotypical image of the loner geek [7]. The successful deployment of multimedia communications services in a commercially viable way to a diverse consumer population is a key challenge facing telecommunications service providers.

The benefits of designing a network that is based on open interfaces and can support a range of media types is that new services can be interactive, On-demand & Personalized. By using an open protocol based packet switched network provides the network architecture for a service provider to deliver new advanced services quickly and economically. The following examples of services currently supported by the leading

103

ETSI, www.etsi.org/li Legal Interception LI study group details packet switching as one of future study. 104 www.ccp.ucla.edu

103

softswitch manufacturer Nortel Networks105 on their MCS softswitch illustrate some of the multimedia type service already available:

Single number service: Once a customer gets assigned a number, they can use their service from anywhere they have broadband access

Extended Reach services: Find me – guide me type of feature offered through services such as simultaneous ringing, sequential ringing Collaboration services: Empowers user with services such as co-browse, web push, clipboard sharing, instant messaging, 1-1 video calls

Conferencing services: Enhances the communication experience by enabling users to have multiparty voice conferences and in the near future multiparty video conferences

Personalization services: Gives users the power to set up screening rules and allows them to choose how to show their availability. This reduces the customer support requirements on your side.

It is important to note that none of these services will be a ‘Killer Application’ i.e. a service that will purely by itself attract a huge amount of customers and revenue, but collectively these services and the ability to innovate with new services will represent a strong customer value proposition. Hopefully they will proof to just the tip of the iceberg in terms of news services and value that will be created on the back of the packet based multimedia networks being built today. Some examples of new services envisaged by technology watchers are [37]:

TV Caller ID: a service offering provided by triple-play providers – specifically Cable TV operators who already have voice and TV passing through the same network. TV Caller ID will display on the TV screen when the phone rings and could be turned off or limited to emergency calls when the user is watching TV and does not want to be disturbed, the service would be controlled via remote control. This same caller ID info could also be routed simultaneously to your computer.

105 By Sales Q1-Q3 2004 Nortel Networks has been the leading global voice over packet softswitch vendor

104

Videocalling: With the increased penetration of broadband and video compression technologies the quality is becoming sufficiently good to provide real TV quality video and audio streamed across the Internet in real time. A new generation of SIP Video phones have become available on the market in 2004106and with the deployment of NGN networks this service has the potential to really take-off. Another application of video will be done by the Cable companies which through with integrated cameras and speakerphone on the settop boxes will enable your TV as a video screen. Video calling could spawn a host of other applications such as video mail to replace voice mail, enhanced caller ID info would include not just names and numbers, but a digital image of the person calling or perhaps a short, pre-recorded video clip.

Interactive Gaming: VoIP and NGN networks will also be a key component in true interactive gaming, allowing gamers to vocally and visually converse with opponents across the world. 4.7.

Numbering/Addressing for packet based services Numbering is an important aspect of NGN design and depends on regulatory input to determine which numbering will be permitted and which will not. PSTN numbering follows the ITU-T E.164 recommendation.

The ITU-T recommends that the maximum number of digits for the international geographic, global services, and network applications should be 15 (excluding the international prefix). The international public telecommunication number for geographic areas is composed of a variable number of decimal digits arranged in specific code fields. The international public telecommunication number code fields are the Country Code (CC) and the National (Significant) Number N(S)N as shown in Figure 35

106

See for example number of videophone vendors advertised at main global IT & Telecoms fair: CeBit. www.cebit.com 105

Figure 35 ITU Internatonal Public Telecommunication Structure107

E.164 addresses can be used in DNS by using Electronic Numbering (ENUM) which allocates a specific zone, primarily e164.arpa for use with E.164 numbers. Any phone number, such as +351 211234567 can be transformed into a hostname by reversing the numbers, separating

them

with

dots

and

adding

the

e164.arpa

suffix

resulting

in

7.6.5.4.3.2.1.1.2.3.5.1.e164.arpa DNS can then be used to look up the internet address of the VoIP service. ENUM allows your DNS server the ability to translate a subscriber phone number into a subscriber IP address and vice versa. A VoIP server, IP-PBX or IP phone that supports ENUM will then first try to find a called party IP address. If the ENUM lookup doesn't return anything, it will go ahead placing the call as usual via the PSTN. Otherwise it will place a peer-to-peer VoIP call. There are some commercial issues regarding whether or not to permit ENUM between customers and offnet VoIP entities. Voice Subscribers on the packet network need to have an address that is accessible from the PSTN network. The type of number assigned should depend on the type of voice service associated to this number; there are fundamentally two types of application possibilities for voice packet switch subscribers:

1. Fixed Location VoIP: Voice services where the voice application is always in a fixed physical location like the voice port on E-MTA in a cable network or a voice port on a DSL IAD.

107 ITU-T “The International Public telecommunications Numbering Plan” Recommendation E.164 05/97

106

2. Variable Location VoIP: Voice services where the voice application is not fixed to a single physical location such as softphone client where users can logon and logoff from different physical locations to use the voice services. 4.7.1.

Fixed Location VoIP

For this first case the general the ITU-T guidelines for international geographic services can be followed [25] i.e. the service is treated similarly to regular POTS services on the PSTN network. 4.7.2. Variable Location VoIP

In this second case the service differs from traditional voice telephony by offering mobility, and personal rather than household access. Subscribers of these types of services are also known as nomadic users.

In the UK [33] Ofcom the British Regulator defines fixed locations VoIP as a publicly available telephone service (PATS) but Ofcom does not class variable location VoIP as PATS and therefore are subject to fewer regulatory requirements. As a consequence, non-PATS VoB services are not required to provide consumer protection measures such as special facilities for end-users with disabilities, itemised billing and access to directory enquiries and operator assisted services. But Ofcom does state that the use of geographic numbering is not suitable for these types of service and proposes a separator indicative for VoB services (056). The European Regulators Group (ERG) recently issued an ‘ERG Common Statement for VoIP

regulatory approaches’ [14]. Regarding numbering ERG states that VoIP services can be addressed in many alternative forms such as through IP addresses, SIP addresses, H.323 addresses or E.164 numbers. It acknowledges that using traditional E.164 numbers is just one option and it might gradually loose its dominant role in the future. The ERG thesis included results of a questionnaire on numbering and number portability sent to European regulators which had varying reponses to questions such as ‘Are geographic numbering ranges open for VoIP services’

VoIP Numbering Response

Countries

Geographic Numbering open for VoIP

Austria, Belgium, Bulgaria, Finland, France, Germany, Greece, Hungary, Ireland, Malta, the Netherlands, Norway, Portugal,

107

Romania, Spain, Sweden, Switzerland, UK Austria, Bulgaria, Malta, the Netherlands, Portugal, Romania, Spain

Miscellaneous requirements that have to be fulfilled by VoIP services. Geographic Numbering not open for Cyprus, Czech Republic, Estonia, Poland, Slovenia. VoIP Under review Cyprus, Iceland and Malta Table 21 ERG VoIP Geographic Numbering Questionaire Response108

Another question was whether geographic numbers for VoIP services are differentiated in any way from numbers used by traditional PSTN services? Are geographic numbers for differentiated VoIP compared to traditional PSTN service numbering? No Differentiation Under review Table 22 ERG VoIP Differentiation Questionaire Response109

Response 18 Countries 4 Countries

It is apparent the area of VoIP numbering is only now beginning to be considered by the European telecoms regulatory bodies and further study will be required to follow future decisions and guidelines that regulators will make regarding VoIP numbering. The Portuguese regulator Anacom has not yet issued any VoIP related decrees or guidelines for assigning numbering to VoIP subscribers. 4.8.

Regulatory considerations Voice over packet and specifically VoIP is a service that can come in formats substantially different to the regular POTS service as was seen in section 3.2 with the various models of Voice over Broadband service providers like Vonage, Skype and Yahoo. It is important that the regulatory bodies distinguish correctly between the various type of packet telephony service offerings and adapt legislation for the different models. As has been seen important regulatory considerations for Packet telephony are:

108 109

•

Lifeline

•

Public Available Telephone Service

•

Universal Service

•

Numbering

ERG ‘ERG Common Statement for VoIP regulatory approaches’ www.erg.org February 2005. Idem 108

•

Operator Interconnect

•

Lawful Interception

Current regulation for Voice over Packet (often generalised as VoIP) varies amongst industrialised countries. In the US the previous chairman of the FCC famously stated that ‘If it walks like a duck, looks like a duck, sounds like a duck then it must be a duck’ and considered VoIP as being equal to POTS services and therefore subject to the same duties and norms. But current policy is more laissez-faire and the FCC is giving US VoIP providers time to let the technology mature. In Europe where VoIP take-up has until recently been on a smaller scale there been less attention paid to the issue by legislators. Current EU regulatory framework defines the following communications services relative to this study: Service Electronic Communication Service (ECS)

Service Description An ECS service is a service normally provided for renumeration which consists wholly or mainly in the conveyance of signals on Electronic Communications Networks. VoIP can be considered a Publicly Available ECS. Public Available Service available to the public for originating and receiving Telephone Service national and international calls and access to emergency (PATS) services through a number or numbers in a national or international telephone numbering plan Universal Service The provision of a defined minimum ser of services to be (US) made available at the quality specified to all end-users at an affordable price, provided by at least one operator which may be so designated by the National Regulatory Authority to have Universal Service Obligation. Table 23 EU Regulatory framework Communication Service Definitions113

EU Directive Framework110 Directive, Art2(c)

Universal Service Directive, Art 2(c)111 Framework Directive, 2(c)112

Art

Additionally the EU has released in June 2004114 an information and consultation document on VoIP ‘The treatment of Voice over Internet Protocol (VoIP) under the EU Regulatory Framework’. This document sets out the regulatory conditions that apply to communications services and although due to the continuing evolution of publicly available VoIP services does not try and classify them but rather gives the following indications in Table 24 as to when EU regulations may or may not apply to VoIP services:

110

European Commission – Framework Directive (2002/21/EC) Article 2c. European Commission – Universal Service Directive (2002/21/EC) Article 2c. 112 European Commission – Framework Directive (2002/21/EC) Article 2c 113 Summary from EU communication framework and universal service directives 114 European Commission – Information Society DG “The treatment of Voice over Internet Protocol (VoIP) under the EU Regulatory Framework” Commission Staff Working Document www.europa.eu.int Released 14th June 2004 111

109

Service Product only VoIP offering

VoIP used for Intranet Communication

Publicly available VoIP services

Service Description Offering of a VoIP product (e.g. a software program to be run on a personal computer) with no ongoing provision of a service, although the product may allow for voice communication between two users who have purchased the product. VoIP technologies used to provide internal communications within private networks or within a public operators core network but not affecting on the retail services offered to customers nor on the quality of those service. Publicly available VoIP services where there is access to E.164 numbers

Applicable To EU Regulations No - as this does not entail the provision of an Electronic Communication Service.

Yes - are covered by the Private network section of the Authorisation Directive but there are no obligations addressed to private networks. Yes - But exact regulations that applies depends on the nature of the service offered. Table 24 VoIP regulatory definitions115

At present the laws regarding VoIP voice over packet switching vary from country to country. In the USA the FCC has historically not regulated the Internet or the services provided over it116 has organized an FCC Internet Policy Working Group to identify, evaluate and address policy issues that will arise as telecommunications services move to Internetbased platforms [16]. In Europe there has been some movement to define specific rules for certain type of voice packet switching services especially by the UK regulator Ofcom. Ofcom issued a consultation document in February 2004 [33] concerning numbering arrangements for Voice over Broadband (VoB) services and is in the process of carrying out a strategic review of the Telecommunications market. Ofcom makes a distinction between (a) VoB that cannot always connect calls to emergency service telephone numbers and are classed as publicly available telephone services (PATS) and (b) VoB that cannot always connect calls to emergency service numbers which are classed as non-PATS and are subject to fewer regulatory requirements than VoB services which are PATS. As a consequence Ofcom states that non-PATS VoB services are not required to provide consumer protection measures such as special facilities for end-users with disabilities, itemised billing and access to directory enquiries and operator assisted services. Ofcom proposes a distinct numbering range for VoB services in the national dialplan. This according to Ofcom satisfies a demand for a new and distinguishable number range for VoIP services.

115 116

Idem FCC “Does the FCC Regulate VoIP?” http://www.fcc.gov/voip/ 110

Other regulators in Europe such as the Irish regulator Comreg have also published their postions on VoIP numbering and service in general in the last year. Last October, the Irish regulatory authority, Comreg, published its position on numbering for VoIP-based services and related issues. The regulator decided to allow the use of geographic numbers under certain conditions, and opened a dedicated VoIP number range: 076. In the Irish case since the initial ruling no VoIP-based services have been activated in the 076 number range due to an absence of underlying interconnection arrangements. In Jan 2005, Comreg formally asked the fixed incumbent operator, Eircom, to submit interconnection conditions, taking into account three retail price points: national, local and sub-local (with sub-local being equivalent to tariffs for internet dial-up). Comreg has now decided to step up its intervention in order to make 076 VoIP an operational reality in Ireland. 'From the experience since October 2004, it is unlikely that timely progress will be made without direction by Comreg,' said a regulator spokesperson in a statement. 'The draft directions are aimed at minimising additional delays in the interests of competition in what is already a protracted timescale for opening VoIP services based on 076 numbers.'117 The Portuguese regulator Anacom on the other hand has not yet issued any consultations or decrees regarding VoIP.

Ofcom also is in the process of a strategic review of the telecommunications sector in the United Kingdom and as part of this process has been consulting with all the stakeholders in the industry. Feedback received from the review has been published in the Phase 2 consultation document and relevant points to this study were: •

Stakeholders urging Ofcom to consider the traditional concept of telecoms – the physical network business – as part of a much wider value chain that incorporates the internet, content businesses, IT apparatus and consumer devices. Increasingly, there is competition between companies at different places in this value chain.

•

Other stakeholders including equipment manufacturers, content providers, and public interest and consumer groups, believed that there would be powerful benefits from the deployment of next generation broadband networks. These benefits would accrue to the economy as a whole, through development of new services, increased productivity and competitiveness, and to society, through the creation of new social

111

networks and greater access to information and public services. There was felt to be a gap between the private interests of network operators (who for a variety of reasons may not currently wish to make these investments) and the public interest. •

Ofcom

believes

that

telecommunications

is

about

to

undergo

a

critical

transformation. This is because there are a number of technological trends about which commercial and regulatory decisions need to be made soon, and which will fundamentally affect the future shape of the telecoms sector. These trends include migration from circuit-switched to NGN packet-switched networks, increasing intelligence at the edge of networks and demand for higher access bandwidths. •

Many respondents pointed out that at some point (many believed in the very near future) the physical bandwidth limitations of the copper local loop would be reached. At this point, other technologies, such as fibre laid beyond the exchange, would need to be widely deployed. The regulation and competitive environment today are likely heavily to influence how rapidly such higher access speeds are available to consumers, and the extent of competition in these next generation access networks.

Table 25 Old vs. New Telecommunications118

The BT NGN network has the potential to simplify regulation, because a single set of rules on access may be used for many different services as compared to the service-specific regulation that currently exists. Ofcom states that the physical network may not become commoditised. Network operators may be able to differentiate themselves strongly on the basis of reliability, security or latency, for example.

117

DM Europe Newspaper ‘Comreg steps up intervention to move forward VoIP numbering’ 23-022004 118 From Ofcom Strategic Review Phase 2 Consultation Document 112

The physical network should in future represent a smaller proportion of the total value chain than at present. However, as Ofcom states the conclusion that regulation of the physical network business will be rendered redundant may not be correct as there may still be scope to exploit market power in this area, even in the long term, although the materiality of this effect relative to other competition problems may decline.

Ofcom also believes that in the longer term, some form of regulation may also be required to facilitate the emergence of competition across this wider value chain, telecoms regulation in future may be as much about ensuring open standards, and fair access to proprietary standards, as about the cost of accessing network elements. Suppliers may emerge who are able to gain market power in many different aspects of service access. These include:

• OPERATING SYSTEMS. Consumers have increasing expectations that multiple devices, running on different networks, are able to interact with one another seamlessly. Control over the software environment in which they do this can confer a very considerable source of market power. Standards battles for the operating system are taking place in games consoles, mobile phones, set top boxes, PDAs and other devices; • MIDDLEWARE. Control over the middleware which controls devices’ interaction with telecoms networks may in future be a very significant source of market power. If a device is connected to multiple networks and could use many alternative service providers, this middleware controls which of these it uses. So control over the middleware could allow a supplier to exert considerable leverage over these service providers; and • DEVICES - Suppliers with large market shares in devices such as mobile handsets and PCs could have the potential to leverage their position in determining the operating system used, the applications and bookmarks pre-loaded, and in some cases the service providers (such as ISPs) they recommend.

113

Figure 36 NGN Telecommunications Value Chain119

Basic voice services will become a smaller part of the over value chain but nevertheless still will be a mayor element of NGN communications networks.

In 2005 it is expected that more recommendations and guidelines for VoIP will be released in Europe. The European Regulators Group (ERG) states in its recently published thesis [14] that VoIP has the potential to become an important pan-European and international service and that the ERG is dedicated to enabling the development and widespread use of VoIP services in Europe by promoting competition, supporting the development of the internal market and the promotion of interests of citizens for the benefit of service providers and consumers. The ERG is therefore committed to creating a regulatory environment in which VoIP services can flourish. 4.9.

Chapter Review

As was seen in this chapter there are a number of important issues that must be considered with the design of NGN networks.

For the network planning of the NGN wireline operators must consider: •

Quality of Service (QoS) of the IP Packet Network;

•

Choice of protocol(s) used for voice services;

•

Network security issues which do not exist or exist to a much lesser extend in an circuit switched network;

119

Ofcom phase 2 strategic review 114

•

How to provide lifeline and emergency services access in packet switched networks

•

How to permit lawful interception;

•

How to design the NGN network to maximise the use of the multimedia options offered by a packet switched network;

•

Numbering and addressing considerations for fixed location voice, variable location voice and multimedia services.

QoS is important for voice packet switching as the original packet switched network the Internet was not designed on the basis of ‘best effort model’ and does not guarantee sufficient QoS for for real-time applications such as voice as detailed by Gevros [18]. Therefore for QoS planning the following network quality parameters need to be within the QoS limits for voice enabled networks: 1. Network availability 2. Bandwidth 3. Delay 4. Jitter 5. Loss As well as QoS performance affecting parameters emission priority and discard priority that cannot be measured but provide the traffic management mechanisms for the network routers and switches.

Regarding the choice of protocol to use for voice services on a packet network it was seen that it is advisable for the time being at least that an operator network can support multiple VoIP protocols. ATM may still be used is some parts of the packet switched networks but the use of VoATM is seen as being replaced by more versatile VoIP protocols even if part of the transport layer is still over ATM. Historically VoIP traffic was done predominantly using the H.323 protocol and H323 is the protocol with the largest equipment installation at the moment. However the main development efforts the manufacturing industry are going into SIP at the moment as it is seen to be a more simple but versatile protocol for the multimedia services of the future. Current large scale VoIP deployments show a pattern of SIP deployment for ‘intelligent’ terminals and MGCP deployment for ‘dumb’ terminals as access protocols and SIP or SIP-T as a trunking protocol. It was found that the protocol H323 is still being used in both VoIP access and interconnect applications but usage is on

115

the decline. Further analysis should be done in the coming years to see whether any clear protocol model develops with the deployment of NGN networks worldwide.

Security for Voice over packet users was seen as an important factor as well as hacking and replicating a Voice over packet call is easier to do than with circuit switched voice services as the more opportunities and ways to simulate and/or intercept IP packets than traditional circuit switched voice120. The overall issues of network security are at four levels; physical attach of resources, transport compromise between resources, logical attack at software in it broadest sense, and end user compromise. There are differences in the various NGN solutions when it comes to security preparedness. CableLabs PacketCable specification contains a number of security options involving encryption of the voice packets and temporary password based on Kerberos token exchange. But other SIP or H323 VoIP solutions do not have the same options and are therefore more liable to security breaches.

It was seen that a lifeline, a line that can function even when there is a local power outage at the subscriber end is very important and not all access solutions for NGN networks will support lifeline functionality which consists of in-line powering of terminals as well as a certain level of redundancy and robustness in the access network. Also associated to the lifeline another important voice network feature that may be an regulatory requirement for service operation licensing is the guaranteed access to Emergency Services. However it is observed that in the case where the voice service provider does not control the access network such as with some Voice over Broadband operators reviewed in the previous chapter it may be impossible to for guarantee lifeline or access to emergency services. Skype for example specifically specifies that is does not offer any access to emergency service numbers and other VoB operators like Vonage and AT&T broadband do offer emergency number access but not lifeline.

NGN needs to support legal interception as this is a legal requirement in many European countries. There is no common European standard for legal interception as this area is considered to be a national matter under EU law121 and different nations have defined the interception requirement in different ways however an ETSI group was set up to define a common framework for legal interception across Europe to facilitate service provider and

120 121

Findings from Jazztel network security study for new VoIP services 2004 EU Framework Directive recital (7) 116

manufacturer compliance [13] which can be used as guideline for NGN design. It is noted that for nomadic VoIP users it may be difficult to keep track of specific target locations.

The ability to support new Multimedia services is seen as one of the advantages offered by a packet based voice switching network taking advantage of the flexibility that a packet networks offer. The definition of multimedia communications is constantly evolving but one broad definition given by McGarty and McKnight [29] is: ‘Multimedia Communications is a conversation with others, using all of the available senses, combining meaning and content between a group of individuals, displaced in time and space.’ The widespread use of IP as the standard transport mechanism for data networks enables many advanced Internet applications which could be thought of as being enhanced voice services such as multimedia e-mail, real-time chat, streaming media (including music and video), and videoconferencing as well as non voice services such as television and video on demand. It is important to note that probably none of these services will be a ‘Killer Application’ i.e. a service that will purely by itself attract a huge amount of customers and revenue, but collectively these services and the ability to innovate with new services will represent a strong customer value proposition.

Numbering is another important aspect of NGN design and depends on regulatory input to determine which numbering will be permitted and which will not. Voice Subscribers on the packet network need to have an address that is accessible from the PSTN network. The type of number assigned should depend on the type of voice service associated to this number; there are fundamentally two types of application possibilities for voice packet switch subscribers: Fixed Location VoIP & Variable Location VoIP. In the UK [33] Ofcom the British Regulator defines fixed locations VoIP as a publicly available telephone service (PATS) but Ofcom does not class variable location VoIP as PATS and therefore are subject to fewer regulatory requirements. The European Regulators Group (ERG) recently issued an ‘ERG Common Statement for VoIP regulatory approaches’ [14]. Regarding numbering ERG states that VoIP services can be addressed in many alternative forms such as through IP addresses, SIP addresses, H.323 addresses or E.164 numbers. It acknowledges that using traditional E.164 numbers is just one option and it might gradually loose its dominant role in the future. More study is required to determine whether there is a need for the definition of a new numbering and addressing concept for VoIP and multimedia services.

117

Although the design of an NGN network is primarily the concern of the network operator certain aspects also have policy impacts and need be considered by policy makers such as regulatory bodies. Specifically the following areas of possible regulatory intervention related to the design of voice services on packet switched networks were identified: •

Whether to impose rigidly the requirement for lifeline and emergency services access in packet switched networks

•

Whether changes in national & international numbering plans are required especially for nomadic VoIP users;

•

What VoIP interconnect policies if any should be implemented.

At present the laws regarding VoIP voice over packet switching vary from country to country. In the USA the FCC has organized an FCC Internet Policy Working Group to identify, evaluate and address policy issues that will arise as telecommunications services move to Internet-based platforms [16]. In Europe there has been movement to define specific rules for certain type of voice packet switching services especially by the UK regulator Ofcom. Ofcom issued a consultation document in February 2004 [33] concerning numbering arrangements for Voice over Broadband (VoB) services and is in the process of carrying out a strategic review of the Telecommunications market. In 2005 it is expected that more recommendations and guidelines for VoIP will be released in Europe. The European Regulators Group (ERG) states in its recently published thesis [14] that VoIP has the potential to become an important pan-European and international service that the ERG is therefore committed to creating a regulatory environment in which VoIP services can flourish.

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5.

STRATEGIC CONSIDERATIONS FOR VOICE COMMUNICATIONS & NGN

There are over 1 billion landlines delivering POTS in the world. Traditional landline voice operators are seeing erosion of their revenues due to competitive technologies such as mobile, WIFI/WIMAX, and voice over IP while revenues from broadband are not growing fast enough to replace these revenues. Is the fixed network going to decline or will there be a "Third Wave" of telecoms technology coming along to re-vitalise the fixed network? The fast pace of developments make it difficult to make firm assessments about the near future of voice telephony in the wireline telecommunications industry, but there are some clear trends visible that will have an impact on the strategic considerations of the players in the industry. This chapter will attempt to identify some of these trends and to see if and how the NGN network model can have an impact.

5.1.

Failure of deregulation for fixed voice communications Deregulation in the Wireline market in Europe for voice communications has on the whole until recently been a policy failure. Figures vary from country to country but the incumbent operators everywhere have maintained the majority of market share. Four years after deregulation in the Portuguese Market the incumbent Portugal Telecom dominates both the fixed voice and broadband markets. As in the USA earlier [43] there was a huge influx of capital into the telecoms sector after liberalization. Vaaler and McKnight122 state the policy conclusions learned from the turmoil in the US Telecoms market is that the state has a role in encouraging competition but not market mania. They should ensure more transparent accounting practices; better corporate governance and more deliberate deregulation. One of the few bright spots in the Wireline de-regulation has been the growth of telephony service offered by the cable companies.

The deployment NGN Packet switched network can offer advantages for both incumbent and alternative network operators where theoretically alternative operators should be more flexible than incumbents in being able to adopts the new technology due to the smaller installed circuit switch base. In particular is was seen in previous sections that the cable 122

Vaaler, Paul M. & McKnight, Lee W. “Creative Destruction in US Telecoms: A Bubble Blown and

Then Burst: 1996-2003” 119

companies, who are now the main competitors to the incumbent in most European markets at least in the residential segment are well positioned to evolve their service offering with the new services offered by NGN networks. Unfortunately, as highlighted by Ofcom [34], due to the low financial returns that new entrants in the wireline telephony markets have had over the last decade, there is now little interest in the capital markets to finance the capital investments required to upgrade to NGN packet switched networks for alternative network operators which could have a negative impact on competitiveness in the telecoms market.

5.2.

Fixed to mobile substitution & integration Wireless operators have been been some of the first network operators to implement NGN packet switching networks. For example many of the NGN standards now emerging from the ETSI TISPHON group are derived from mobile 3GPP standards. Further analysis of the wireless packet switched network models is beyond the scope of this research, but nevertheless the wireless network developments are having various impacts on the wireline markets. Firstly, even before the launch of the 3G, mobile penetration had exceeded fixed line penetration in most industrialised countries. Subsequently mobile operators have had to make huge investments to obtain their 3G UMTS licenses and then to upgrade their networks in the last years but the non-voice 3G services launched so far like video-calls and mobile ‘broadband’ internet have had limited commercial impact. However upgrading to 3G networks has also provided mobile operators with increased voice call capacity in their networks. This extra network capacity has given mobile operators a strong incentive to increase voice traffic on their networks.

Mobile operators are now offering attractive call packages typically with low call rates for on-net or mobile to mobile calls and/or subscription fees including large numbered free minutes. At the same time the wireless operators have kept the interconnect fees charged to wireline operators for terminating calls on their networks artificially high. There have been various EU court cases against mobile operators for exploiting their market position like the EU ruling in July of 2004 where the European Commission accused Vodafone and mmO2 of exploiting their dominant positions in the U.K. market for international roaming by

120

by charging excessive wholesale prices to other European operators123 but the impact of these rulings has not affected the mobile operators in a significant way at the moment.

The mobile operators are effectively taking business from the Wireline market in both residential and business segments. In the residential market many, especially young people, are not longer installing fixed line in their homes and in the business market mobile operators are deploying mobile gateways which are connected directly to PBX of the company through which not only all calls to the mobile network can be routed but also other destinations such as international and long distance traffic. Fixed/Mobile substitution affects all the wireline operators although the incumbent usually also has a mobile arm so exposure is reduced somewhat although the incumbent will typically have a much smaller market share in the mobile sector. Portugal has been one of the countries most severely affected by this phenomenon as can be clearly seen in the evolution of the voice market. Note that fixed to mobile substitutions should not only be measured in call minutes as, especially in the youth market, sms is also used as substitution to voice calls.

Table 26 Portuguese Voice Market – Source Anacom124

The NGN network model is interesting for operators that own both wireline and wireless networks as a common network switching core can control subscribers accessing the network via mobile of fixed interfaces. This enables the development of fixed and mobile network integration, where the same handset can be used either as a fixed or as an wireless device depending on whether it is in range of a fixed location base station (e.g. home or office), where the phone can be reached by a fixed line PSTN number and outbound calls are charged according to fixed line rates, or elsewhere where the phone acts 123

Gartner Research EU ruling may lead to lower roaming mobile fees http://www3.gartner.com/DisplayDocument?doc_cd=122112 124 www.anacom.pt statistics sections 121

as a mobile device with mobile outbound number and tariffs125. The ‘fixed’ location may or may not have an actual physical POTS line installed.

An example of this type of service is the ‘Optimus Home’ product in the Portuguese market which uses fixed numbering for a mobile device where calls can be made anywhere within the ‘home’ area code. The Portuguese regulator Anacom is currently studying the legalities of this service after initially prohibiting the advertising of it126. In the ‘Optimus Home’ case there is no fixed line present in the fixed location the only difference to a regular mobile call is the use of restricted geographic range where the phone can be used and lower tariff rates.

The threat from mobile operators may also serve as an incentive for wireline operators to implement NGN networks to be able to offer more advanced services and thereby regain revenue. Also with VoIP over WiFi access, wireline may in turn be able to cannibalize the mobile markets by offering mobility to fixed numbers. Related to this it is interesting to note that the many mobile operators seem to have realised this potential threat from WiFi networks and have invested in WiFi deployment127 so as to some case become some of predominant WiFi service providers where they may try and restrict VoIP type of services over their WiFi networks. Further study is required to determine the extent and effects of mobile operator ownership of commercial WiFi networks.

5.3.

P2P Telephony & VoB Telephony The threat to Wireline operators (both incumbent and alternative) from fixed to mobile substitution may however be dwarfed if peer-2-peer services like Skype reach critical mass especially once WiFi enabled telephones and Pocket PC/PDAs becoming available. A recent study published by the Portuguese consumer association DECO on VoIP [2] made a cost comparison for a moderate monthly call bundle of international destinations where the incumbent’s tariff was shown to be higher by a factor of 10 and even the most competitive alternative operators tariffs where higher than the Voice over Broadband (VoB) call charges 125

Note that these tariffs may be set to be the same or not depending on the marketing strategy of the operator 126 www.anacom.pt Incumprimento - oferta ''Optimus Home'' - deliberação de 21.12.2004 127 For example the mobile operator T-Mobile owns one of the largest WiFi networks in the USA and the mobile operators Optimus and Vodafone own or partially own have large WiFi networks in Portugal. 122

although the difference between VoB rates and some of the more competitive alternative fixed line operator rates such as JAZZTEL’s MBP tariff was not so high. However VoB can also be an opportunity for wireline operators as they to can offer an VoB service with the deployment of NGN networks and can use VoB to compete in new markets or as an additional service for existing customers who may have an fixed line in one location and and VoB client to use when not at that location with the same access number.

Taking into account the much lower cost structure for P2P communications, the next battlefront could well become the control of the ISP access networks as the ISPs may try and restrict VoB services not offered by them.

Policy makers may need to monitor ISP Access and decide whether regulations are required to ensure that incumbent ISPs do not try and strangle 3rd party access through their networks.

5.4.

Transmission & Equipment costs There has been a continual decrease in the transmission costs128 due firstly to the overcapacity on the national and international backbones of many operators and secondly to the introduction of more advanced multiplexing and transmission technology to permit higher rates on the same fibre-optic physical networks.

The impact of reduced transmission costs are that the advantages of optimisation in transmission bandwidth delivered by implementation of NGN networks are diluted somewhat.

5.5.

Single Access for Multiple Service Delivery There is a strong trend in the telecommunications industry towards offering of multiple services of a single network access. This was seen in the previous section with the analysis of the cable industry development of triple play voice, broadband and television services through a single coaxial interface. Also just as importantly has been the development of the DSL technology permitting initially voice and broadband access over a single access but with advances in DSL technology such as ADSL2 and more intelligent customer equipment

128

Comparison cost of leased lines for comparable distances for JAZZTEL between 2000 & 2004 123

more bandwidth and services can be made available over copper line accesses permitting addition of new services such as TV over IP (IPTV), Video calling and Video on Demand (VoD).

Kingston Telecommunications129 in the United Kingdom and Aliant Telecom130 in

Canada are examples of operators who have recently launched multiple voice, broadband and television services offerings over DSL.

The 3G mobile networks are also marketing voice and broadband access as well as other new advanced multimedia services such as video-telephony. Typically with 3G the prices for data traffic are still very high and not conducive to moderate internet usage as can be seen in the tariffs of Portuguese mobile operator TMN that has published rates of around €5 per Megabyte of traffic131. Lastly commercial WiFi / Wireless Public Data Networks theoretically also permit delivery of a range of services through a single wireless access although currently the focus of all Wisp operators analysed was on providing internet access only.

With the increasing downward returns on basic telephony services the telecommunications operators are increasingly under pressure to develop new business models that will more effectively deal with the reality of the market. Operators are trying to move further up the value chain by offering applications and content. There are various business models appearing by different target market segments (e.g., enterprise versus consumer) and by type of service (e.g., entertainment versus information) but a key objective of many wireline operators is to offer more bundled voice, data and media service package to customers132.

Figure 37 Moving the Business Model up the Value Chain133

129

www.kcom.com http://www.aliant.ca 131 http://www.tmn.pt/3G 132 Examples are triple play voice, broadband Internet and TV offerings of JAZZTEL (www.jazztel.pt) and Cabovisão (www.cabovisao.pt) in the Portuguese market. 133 Taken from equipment supplier Siemens new business model overview presentation 130

124

In all the aforementioned access types the advantages of using NGN packet-based technologies are apparent as it enables more optimal mix of different services over a common access.

5.6.

Portuguese Market Situation Situation 2004 It is not planned to analyse specific markets in great detail but the Portuguese market is an interesting case study as the incumbent operator has an extremely strong position in the all segments of the telecommunications market.

The Portugal Telecom group not only originates over 90% of fixed line calls but also owns the largest national cable Television company TV Cabo, dominates the broadband market through its ADSL and Cable offerings and owns the largest national mobile operator. Additionally The PT group also very astutely has invested in media companies and either solely or through joint ventures controls several media and Internet content providers. Although the mobile operator of the PT group is the main mobile operator, in this market PT does not have such a dominant position as it does in its other markets, therefore PT has launched a range of new fixed line services in the last year such as Wireline SMS, bundled minutes package, Videophones, Fixed line phones with new features such as SMS, SIM card number download, colour screen and distinctive ringing134 in an effort to try and stem the migration of traffic to the mobile networks. There initially appeared to be some comparison to the ‘Hold or Fold’ game of US telecoms described by Vaaler & McKnight [43] in the Portuguese Telecommunications DSL market as none of the competitors to the PT have high operating margins due to high access and related charges covered by PT. 2004 has seen the temporary withdrawal of residential DSL service offerings from two of the main ISPs: Novis and IOL both claiming that regulatory conditions were biased towards the incumbent. The main remaining operator active in the mass broadband market ONI, adopted an opposite strategy with an aggressive rollout of a duo-play voice and ADSL broadband service bundled together for a monthly fee of € 22,50. However in 2005 Novis re-entered the mass broadband market with a similar offer to the Oni duo play product of voice and ADSL broadband services but with higher bandwidths (up to 8Mbps) permitted by the more recent ADSL2 technology. Novis is known to be studying 134

PT Residential Sales, Services offered with Siemens Fujitsu phones 2004 125

the possibility of adding television services to this offering to make it a triple play service bundle. It is estimated that the ONI & Clix services, which are based on access to copper pairs between incumbent local exchange and customer premises as permitted by unbundling of the local loop (ULL) conditions, are currently priced below cost price135 and require need large scale massification to be profitable. At the same time, the PT group has launched a pre-pay broadband offering model through both its cable and DSL operations which offers a lower average broadband cost for light to moderate Internet users. It is highly likely that this pre-pay model will prove to be very successful in the Portuguese market as prepay mobile telephony (which was invented in Portugal) also has had a much higher uptake in Portugal than in most other countries. The risk with widespread deployment of the prepay broadband services is that the benefits offered by always-on Internet connections are not gained which could stall the deployment of multimedia services in Portugal. Prepay users are also much less likely to sign up to VoB telephony which may be one of the strategic reasons why PT is marketing it’s prepay product heavily. It is interesting to note that Novis, the only Portuguese ISP to specifically market VoIP VoB with its DSL service no longer offers that service136.

Although the alternative operators such as JAZZTEL and Cabovisão with cable access and Novis and ONI with DSL access are beginning to launch duo or triple play services based on packet switched technology at this stage it is unclear how successful they will be in the face of strong competition in Portugal from the mobile operators and incumbent PT group.

5.7.

NGN impacts on the Telecommunication market structure As has been seen in the previous chapters deployment of NGN packet switching networks can benefit both incumbent and alternative fixed network operators although the benefits are most substantial for network operators that do not have a large install base of TDM equipment (Greenfield vs. Brownfield developments) which are not incumbent operators. Incumbent operators may have an advantage in the fact that they may find it easier to raise the capital investments required for the deployment of an NGN network. Principal NGN advantages seen in chapters 3 and 4 were: 135

Based on estimated equipment and PT access costs

126

•

Lower network purchase and operating costs;

•

Expanded geographic reach.

•

Higher service differentiation;

NGN permits a reduction in operating costs for the wireline operators due to (a) reduced size and energy requirements and (b) due to increased lower switch port and software license prices due to increased competition among the manufacturers of softswitching equipment. Subscribers that might have been uneconomic or physically unreachable with circuit switch technology can be more easily reached in NGN networks as more access technologies are available to the network operators to use. For example with a Voice over Broadband it is possible for network operators to offer voice services to customers not without a direct connection to their network via the public Internet. But the main advantage of NGN is that the convergence of transport services in NGN networks, whereby Internet transport protocols are used to transport any type of information, and the convergence of content services of retrieving and displaying digitized information using the uniform Internet application protocols of the World Wide Web, together with the use of intelligent devices such as personal computers or integrated STBs at the edge of the network for multiple tasks (from telephony to watching interactive video), creates a new ubiquitous computing and communication platform permitting service providers to offer multiple and new services and move up the value chain by offering more than simple voice and data connectivity to customers. With transport of packets becoming increasingly cheaper, the transmission of packets is becoming a commodity and as stated by Siemens [39] it is very hard to make money out of a commoditized network in which complexity resides at the edges rather than the core. Telecoms companies are having to depart from the business of simply transporting bits and are trying to diversify their services. The NGN network technology could play a vital role in service differentiation, and in helping companies to make profits and consumers have more and better product offerings.

136 Novis ADSL retail modem packs in 2001 & 2002 came with a VoB phone and account included but this service is now no longer offered.

127

5.8.

Chapter Review It has been seen in this chapter that there are the following strategic consideration in the telecommunications market at the current time that can have an impact on the NGN network deployments:

The general failure (so far) of deregulation in the wireline markets has created a status quo where the capital market are sceptical of the returns of large scale investments network upgrades in the wireline markets for alternative operators which could reduce the competitiveness of the wireline markets;

Fixed to mobile substitution and integration by mobile networks is also reducing the revenues of wireline operators especially those that do not also own a mobile operator. This phenomena may serve as an motivation for wireline operators to implement NGN networks to enable them to compete more effectively with the mobile operators through bundled service offerings;

Peer to peer telephony and voice over broadband telephony was seen as another potential threat to wireline operators but again also an incentive to implement NGN networks to also be able to offer VoB services;

There is a general trend of reduction in transmission cost which reduces the transmission efficiency advantage obtained from packet switching implementations;

NGN Networks provide a platform for wireline operators to offer bundled services enabling them to move up the value chain and increase revenue streams. This bundled services can be provided via various access technologies with the main technologies currently being coaxial cable access networks and xDSL copper pair access networks;

In the Portuguese market many of the alternative network operators are currently starting to implement bundled service solutions over packet switched networks although the strong position of the incumbent and mobile operators in the nationals markets is making it difficult for the alternative wireline operators to expand.

128

It is not clear at the moment if NGN implementation will change the telecommunications market structure in favour of either the incumbent or alternative operators. More study is required to see which group can gain more competitive advantages from NGN. In general it was seen that NGN offers lower network purchase and operating costs, expanded geographic reach and higher service differentiation which can benefit all wireline operators.

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6.

CONCLUSIONS

This chapter summarizes the key findings of this study, firstly, then it suggests the further research and finally it concludes with the policy recommendations. 6.1.

Summary of findings This study analysed the history, design and policy implications for Next Generation Networks

(NGN)

for

voice

services

and

covered

a

review

of

the

history

of

telecommunications leading to the present technological and regulatory status. The various network switching models for voice packet switching were analysed along with the deployment options available for wireline operators. Case studies were made of existing packet switching deployments to determine whether any clear trends were apparent with NGN deployment. The various technological, commercial and regulatory considerations related to the design of a voice enabled packet network were investigated and discussed. Finally building upon previous findings from the study and market trends some strategic considerations for voice telephony & NGN were identified.

The telecommunication history review showed that there have been a series of technological improvements in the transport of voice communications in the 130 years since the telephone was invented. The regulatory model for telecoms, which historically was regarded as a natural monopoly, was until the mid 1990s to guarantee that the public telephony was universally available to the public at a fair price. During the last decades there have also been major technological developments in adjacent and overlapping wireless and data communication industries. It was observed that the rise during the last decade of the Infocommunications industry that according to Fransman [17] has changed the traditional inter-firm competitive model to a industry with multi-layers of competition between products & services, between networks, between technologies and between firms.

In the 1990s the traditional natural monopoly telecoms regulatory consensus as described by Spulber [41] was destabilized by technological advances and the fundamental shift in regulatory approach with opening up of wireline telecommunications markets for competition in the USA and the EU with the Telecommunications Act of 1996 and the 1990 EU Telecommunications Directive. It was concluded that the regulatory bodies play an 130

important role in defining the regulatory format for voice packet networks as they have in the past for voice circuit switched models but with a different set polices more adapted to the infocommunication age. Also it was observed that the telecommunications industry has a plethora of organisations defining often overlapping standards in the telecommunications world today. The more established standards organisations like the ITU and ISO now have to compete (and cooperate) with the more dynamic industry specific organisations like CableLabs and IETF as well as with their regional counterparts like ANSI & ETSI. This situation does create an uncertainty as to which standards should be chosen for new network deployments where it is recommended to introduce solutions supporting multiple standards which has a trade-off of increasing the overall network cost and complexity but permitting development of a wider service range than would be permitted in a single standard world.

The review of the network switching models in chapter 3 showed that there are various different models that are followed by network operators for the voice telephony networks ranging from pure circuit switching to hybrid networks using both circuit and packet switching to pure packet switched networks. The NGN packet switching network model was seen to consist of the following main elements based on JAZZTEL market survey [27]: 1. Softswitch; 2. Media gateway; 3. Signalling Gateway; 4. OSS (Operating Support System); 5. CMTS/DSLAM in case of VoCable/VoDSL access networks.

The packet switched network model when compared to the circuit switched network models is superior both in technical and commercial aspects. Packet switched networks permit bundling of a higher range of voice, data and multimedia services over a common infrastructure and at lower cost than with circuit switched networks. However it was also recognised that many wireline telephony service providers have already made substantial investments in circuit switched technology and therefore the option of hybrid networks using both circuit and packet switching are attractive to many network operators as a way to maximise return on existing circuit switch investments.

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The analysis of packet switching deployments showed there are a range of wireline operators currently offering or planning to offer packetized voice services. There are a variety of access technologies available for voice over packet networks but as cable and dsl access were found to be the most used at the present time these access technologies were analysed in more detail. However attention should also be paid to other potential access technologies that may be used more in the near future such as power line technology whose advantages have been discussed by Sakai [36] and WiMax networks whose commercial success may be dependant on being able to add voice as well as just broadband internet access137.

Specific case studies were drawn from the VoCable and VoDSL worlds where both access technologies permit the bundling of voice, data and multimedia services over a common access medium. It was seen that voice of over packet deployments are not limited to either incumbents (e.g. BT, Belgacom) or alternative wireline operators (e.g. Neuf Telecom, TeleCable, Vonage) but that alternative operators especially those without legacy circuit switching networks have been faster to deploy the new technology. It was noted that the conditions for raising investment for large scale capital investments are currently not favourable for many operators due to financial difficulties that many (especially alternative) operators have had in the last few years and due to the decline of the margins of pure voice telephony services138. Also many operators have excess circuit switch capacity which has already been paid for so there is an incentive to use up this capacity before investing in new technologies. All these factors can contribute to the delay of the deployment of an NGN network and the associated new services.

Case studies covering cable and dsl access types were reviewed. Voice over Broadband access independent providers were identified as potential competitors to not just the local incumbent but also to the traditional alternative wireline operators although it is unsure whether access independent VoB providers will be able to survive in the long term from competition of the local broadband service provider. New business models which do not have subscription or caller fees like those of Skype and instant messaging providers could

137

ZDNet online newsgroup “Study: Net phones key to WiMax success” http://news.zdnet.com/2100-1035_22-5579377.html 138 An example is declining margins in the long distance and international call market as identified by among others Ofcom in the Phase 2 consultation, www.ofcom.co.uk 132

prove to be very effective disruptors to the current telecommunications model but more study is required to ascertain the usage models of these services.

The EU decree on local loop unbundling [15] and advances in DSL technology were seen as key enablers for the growth of voice, data and multimedia services to the residential and business markets over DSL access technology. VoB deployment has not been very substantial so far in Europe although regulators like Ofcom in the UK [33] and Comreg in Ireland have made public consultation regarding numbering range for VoB services.

The packet switching deployments reviewed in chapter 4 support the findings of the review of the network switching models in chapter 3 that packet switching offers technical and commercial advantages to service providers by enabling them to lower their network and customer premise equipment cost, combine voice and data services on the same network and permit the development of new innovative voice and multimedia solutions.

Also it was seen that for network operators with previous voice circuit switching infrastructure the shift to pure packet switching deployment is less clear-cut than for operators without an installed circuit switch base but even here voice packet switching deployments are seen as beneficial for growth in new market areas as with Cox Communications or even as a complete replacement to circuit switched network as with BT. The BT NGN network especially, which according to the company will be deployed to the majority of its customers by 2008, will be the one of the first major NGN networks deployed in Europe and will be interesting to project to study further as it rolls out in the coming years.

Corporate case studies illustrated that many of their most profitable corporate customers have already installed VoIP and network operators need to define what strategies to compensate for the loss of voice call termination revenue operators such as advanced managed voice and data services such as VPNs or IPCentrex139. Operators with NGN will be able to more possibilities to VoIP based customers and therefore the corporate VoIP deployments can serve as another motivator for operators to implement NGN networks.

139

Voice VPN and IPCentrex are common service possibilities quoted by suppliers in JAZZTEL NGN 2004 RFI for corporate markets. 133

The study of voice enabled packet networks in chapter 5 identified the following network design considerations: •

Quality of Service (QoS) of the IP Packet Network;

•

Choice of protocol(s) used for voice services;

•

Network security issues which do not exist or exist to a much lesser extend in an circuit switched network;

•

How to provide lifeline and emergency services access in packet switched networks

•

How to permit lawful interception;

•

How to design the NGN network to maximise the use of the multimedia options offered by a packet switched network;

•

Numbering and addressing considerations for fixed location voice, variable location voice and multimedia services.

QoS is important for voice packet switching as the original packet switched network the Internet was not designed on the basis of ‘best effort model’ and does not guarantee sufficient QoS for for real-time applications such as voice as detailed by Gevros [18].

Regarding the choice of protocol to use for voice services on a packet network it was seen that it is advisable for the time being at least it will be important that an operator network can support multiple VoIP protocols. ATM may still be used is some parts of the packet switched networks but the use of VoATM is seen as being replaced by more versatile VoIP protocols even if part of the transport layer is still over ATM. Within VoIP it was seen that the traditional H323 protocol is gradually being replaced as the main development efforts of the manufacturing industry go into SIP which is seen to be a more simple but versatile protocol for the multimedia services of the future and also in certain situation by the MGCP protocol. Current large scale VoIP deployments show a pattern of SIP deployment for ‘intelligent’ terminals and MGCP deployment for ‘dumb’ terminals as access protocols and SIP or SIP-T as a trunking protocol. It was found that the protocol H323 is still being used in both VoIP access and interconnect applications but usage is on the decline. It is recommend that further analysis should be done in the coming years to see whether any clear protocol model develops with the deployment of NGN networks worldwide.

Security for Voice over packet users was seen as an important factor as well as hacking and replicating a Voice over packet call is easier to do than with circuit switched voice services

134

as the more opportunities and ways to simulate and/or intercept IP packets than traditional circuit switched voice140 and it was found that there are differences in the various NGN solutions when it comes to security preparedness. The CableLabs PacketCable specification contains a number of security options involving encryption of the voice packets and temporary password based on Kerberos token exchange. But other SIP or H323 VoIP solutions do not have the same options and are therefore more liable to security breaches.

It was seen that a lifeline, a line that can function even when there is a local power outage at the subscriber end is very important and not all access solutions for NGN networks will support lifeline functionality which consists of in-line powering of terminals as well as a certain level of redundancy and robustness in the access network. Also associated to the lifeline another important voice network feature that may be an regulatory requirement for service operation licensing is the guaranteed access to Emergency Services. However it is observed that in the case where the voice service provider does not control the access network such as with some Voice over Broadband operators reviewed in the previous chapter it may be impossible to for guarantee lifeline or access to emergency services. Skype for example specifically specifies that is does not offer any access to emergency service numbers and other VoB operators like Vonage and AT&T broadband do offer emergency number access but not lifeline.

NGN needs to support legal interception as this is a legal requirement in many European countries. There is no common European standard for legal interception as this area is considered to be a national matter under EU law141 and different nations have defined the interception requirement in different ways however an ETSI group was set up to define a common framework for legal interception across Europe to facilitate service provider and manufacturer compliance [13] which can be used as guideline for NGN design. It is noted that for nomadic VoIP users it may be difficult to keep track of specific target locations.

The ability to support new multimedia services is seen as one of the advantages offered by a packet based voice switching network taking advantage of the flexibility that a packet networks offer. Multimedia communications are constantly evolving as noted by McGarty and McKnight in earlier work on IP Telephony [29] and the widespread use of IP as the

140 141

Findings from Jazztel network security study for new VoIP services 2004 EU Framework Directive recital (7) 135

standard transport mechanism for data networks enables many advanced Internet applications which could be thought of as being enhanced voice services such as multimedia e-mail, real-time chat, streaming media (including music and video), and videoconferencing as well as non voice services such as television and video on demand. It is important to note that probably none of these services will be a ‘Killer Application’ i.e. a service that will purely by itself attract a huge amount of customers and revenue, but collectively these services and the ability to innovate with new services will represent a strong customer value proposition.

Numbering is another important aspect of NGN design and depends on regulatory input to determine which numbering will be permitted and which will not. Voice Subscribers on the packet network need to have an address that is accessible from the PSTN network. The type of number assigned should depend on the type of voice service associated to this number; there are fundamentally two types of application possibilities for voice packet switch subscribers: Fixed Location VoIP & Variable Location VoIP. In the UK [33] Ofcom the British Regulator defines fixed locations VoIP as a publicly available telephone service (PATS) but Ofcom does not class variable location VoIP as PATS and therefore are subject to fewer regulatory requirements. The European Regulators Group (ERG) recently issued an ‘ERG Common Statement for VoIP regulatory approaches’ [14]. Regarding numbering ERG states that VoIP services can be addressed in many alternative forms such as through IP addresses, SIP addresses, H.323 addresses or E.164 numbers. It acknowledges that using traditional E.164 numbers is just one option and it might gradually loose its dominant role in the future. More study is required to determine whether there is a need for the definition of a new numbering and addressing concept for VoIP and multimedia services.

Although the design of an NGN network is primarily the concern of the network operator certain aspects also have policy impacts and need be considered by policy makers such as regulatory bodies. Specifically the following areas of possible regulatory intervention related to the design of voice services on packet switched networks were identified: •

Whether to impose rigidly the requirement for lifeline and emergency services access in packet switched networks

•

Whether changes in national & international numbering plans are required especially for nomadic VoIP users;

•

What VoIP interconnect policies if any should be implemented.

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At present the laws regarding VoIP voice over packet switching vary from country to country. In the USA the FCC has organized an FCC Internet Policy Working Group to identify, evaluate and address policy issues that will arise as telecommunications services move to Internet-based platforms [16]. In Europe there have been regulatory rulings in the UK by Ofcom and in Ireland by Comreg. Ofcom issued a consultation document in February 2004 [33] concerning numbering arrangements for Voice over Broadband (VoB) services and is in the process of carrying out a strategic review of the Telecommunications market. In 2005 it is expected that more recommendations and guidelines for VoIP will be released in Europe. The European Regulators Group (ERG) states in its recently published thesis [14] that VoIP has the potential to become an important pan-European and international service that the ERG is therefore committed to creating a regulatory environment in which VoIP services can flourish.

There were identified in chapter 6 the following strategic considerations in the telecommunications market at the current time that can have an impact on the NGN network deployments:

1. The general failure (so far) of deregulation in the wireline markets has created a status quo where the capital market are sceptical of the returns of large scale investments network upgrades in the wireline markets for alternative operators which could reduce the competitiveness of the wireline markets; 2. Fixed to mobile substitution and integration by mobile networks is also reducing the revenues of wireline operators especially those that do not also own a mobile operator. This phenomena may serve as an motivation for wireline operators to implement NGN networks to enable them to compete more effectively with the mobile operators through bundled service offerings; 3. Peer to peer telephony and voice over broadband telephony was seen as another potential threat to wireline operators but again also an incentive to implement NGN networks to also be able to offer VoB services; 4. There is a general trend of reduction in transmission cost which reduces the transmission efficiency advantage obtained from packet switching implementations; 5. NGN Networks provide a platform for wireline operators to offer bundled services enabling them to move up the value chain and increase revenue streams. This bundled

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services can be provided via various access technologies with the main technologies currently being coaxial cable access networks and xDSL copper pair access networks; 6. In the Portuguese market many of the alternative network operators are currently starting to implement bundled service solutions over packet switched networks although the strong position of the incumbent and mobile operators in the nationals markets is making it difficult for the alternative wireline operators to expand. 7. It is not clear at the moment if NGN implementation will change the telecommunications market structure in favour of either the incumbent or alternative operators. More study is required to see which group can gain more competitive advantages from NGN. In general it was seen that NGN offers lower network purchase and operating costs, expanded geographic reach and higher service differentiation which can benefit all wireline operators.

The above findings from the study into next generation networks for voice services can be summarised into the following key technical and regulatory points: 6.1.1. Key findings from the technical analysis 1. Packet Switching Networks for voice services offer both short term and long term benefits when compared to TDM switching technology.

•

Packet switching permits operational costs saving and enables Wireline and cable operators to expand their telephony business to new geographical areas.

•

Packet switching permits the deployment of advanced multimedia services.

2. TDM Network operators have three general choices regarding network planning:

•

Implement a hybrid voice switching model where the circuit switched telephone exchanges are connected via gateways to the subscriber via VoIP or VoATM over packet access networks;

•

Implement packet switching for new subscribers while maintaining existing subscribers on existing circuit switching technology

•

Build multi-service packet network and migrate existing customer base to it phasing out the circuit switching technology.

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3. Packet switching IP implementation in part of the voice network (hybrid model) can affect voice quality but with a robust design of access equipment and high IP QoS on the IP backbone or Internet these transport models will be an attractive model for service providers as they permit them to enter or connect to new markets at lower cost than with a circuit switched only solution.

4. Single VoIP protocol choice for an NGN Network is unwise currently as it is still unclear as to which VoIP protocols will be adopted for different user segments. MGCP is indicated as a good protocol choice for controlling ‘dumb’ terminals while SIP can be used for “intelligent terminals”. 6.1.2. Key findings from the policy analysis

1) The issue of numbering for Voice over Broadband (VoB) and other nomadic telephony users groups will become more noticeable as broadband penetration deepens and VoB subscriber numbers increase and requires some strategic decisions to be made by national regulators i.e. whether to continue using PSTN fixed numbering for nomadic users or to define a separate numbering range for non-PATS VoIP services. Similar questions will also arise with the take-off of video services and the specific numbering ranges if any that should be assigned to these services.

2) Deployment of NGN multi-service network by Wireline operators offers long term benefits to society as it permits more innovation in service offering available to citizens. This study has encountered following aspects of voice packet network deployments where regulatory intervention may be required: •

To ensure that voice quality complies with basic EU guidelines.

•

In definition of ‘lifeline’ and ‘emergency access’ requirements for all forms of Voice over Packet communications.

•

In definition of guidelines for operators to use when implementing VoIP interconnect (as with increasing adoption of softswitches in a national network the ability to interconnect via IP will become more important and more efficient for call termination).

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3) The technological and economical possibilities offered by NGN networks permits increased competition for voice services from cable operators adding telephony to their service offering, from Voice over Broadband service providers offering telephony services to broadband subscribers and from operators making use of unbundling to offer voice, data and other multimedia services using DSL access technology.

6.2.

Suggestions for further research The following areas relevant to voice packet networks were identified during this study that require further research to determine the affects to NGN:

1. Technical options for future (overlapping) access technologies for voice users to access NGN networks such as Powerline and WiMax technology. 2. VoIP protocol choice for packet networks. There has been during 2004 & 2005 a trend showing that the importance of the H323 protocol is diminishing compared to SIP as major NGN and CPE equipment manufacturers are shifting from H323 to SIP [27] but more study is required to confirm this trend. 3. Analysis of Skype and Instant Messaging user population profiles to determine if users are using these media as replacements to traditional voice telephony or as an additional communications media. 4. Optimum criteria for new numbering and addressing concept for VoIP and multimedia services. It is apparent the area of VoIP numbering is only now beginning to be considered by the European telecoms regulatory bodies and further study is required to analyse and assist the decisions and guidelines that the regulators will make in the future regarding VoIP numbering. 5. More study should be carried out to determine whether it may be necessary for the national regulator to intervene to motivate the incumbents operators to offer VoIP interconnect as a way of encouraging deployment of NGN networks with new multimedia services.

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