Editorial : IP Centrex: The Road to Service Provider Recovery

The only way RBOCs, IXCs and CLECs can generate new enterprise revenue other than stealing each other’s customers is with IP Centrex. Here’s 20 reasons why a Centrex approach to enterprise voice networking is better than the customer-owned PBX approach and in the end will win the new revenues.

But first, some background information about the name IP Centrex. Few if any service providers would approach customers with a name like Centrex. It originally stood for central office exchange, implying the switch that handled your voice services was owned and operated by the telco and located in their facilities, versus being customer-owned—for example, a private branch exchange (PBX). So today’s IP Centrex wannabees are calling it IP hosted voice, virtual PBX, ICP or anything but the legacy name Centrex. Great name, but it conveys old voice services.

So, what is IP Centrex? It’s services based on all new VoIP technology, such as IP PBX, IP applications, media servers and so on, but it is located on the service provider’s site. The customers buy or lease the IP phones, and use their existing LANs (shared or segmented from data) and CPE, such as analog phones and non-IP PBXs. In short, it’s the service providers adding IP management and network services to VoIP technology.

So why would a service provider want to do this versus just providing IP-VPN or some other WAN IP service? Because moving an IP packet between corporate sites is a commodity service with no profit. Today, the money is in big enterprise users’ voice and data equipment replacement. Selling IP access only to an enterprise customer generates revenue in the neighborhood of $10/month/user. Selling a complete IP solution with value added (unified messaging, Web presence, video and so on ) could generate roughly $100/month/user!

So here are 20 reasons why IP Centrex is a winner for both the enterprise customer and the service provider.

1) VoIP is complex. If the only voice traffic an enterprise telecom manager had to deal with were traffic among its own sites, no IP data traffic and only one IP service provider, and if every end user terminal had the same VoIP standard, it would be workable in house. The reality is that most voice traffic is not intra-company, IP service today requires multiple IP service providers, and there are dozens of different VoIP standards (H.323, SIP, Megaco, MGCP and so on). Bottom line: If VoIP via an IP PBX is to fulfill its mission, the enterprise user would have to become in reality a service provider to do it.

2) Outsourcing. IP Centrex is basically outsourcing your voice services, much like the majority of small enterprises and today’s large government users do today for their IT requirements such as Web services, email and PC maintenance. VoIP CPE is just as complex, so why wouldn’t an enterprise want to outsource voice to an IP Centrex provider?

3) Voice is not strategic. Very few enterprise customers today shopping for voice service upgrades would classify voice services as strategic. Incremental IP Centrex provides a path for migrating incrementally from a mix of circuit-switched PBXs and a hodgepodge of voice mail systems that don’t interoperate well to an all-VoIP solution.

4) Scale economies. Legacy circuit-switched Centrex didn’t have scale economies. The problem was that a CO served a business area of 50 to 100 square miles and dozens of big customers. However, a single IP Centrex servicing center could literally cover the globe and thousands of enterprise customers.

5) Standardization. No enterprise, no matter how big, will be able to resolve the VoIP standard issues regarding interoperability. But the four RBOCs could get together legally and interpret a VoIP standard for IP Centrex and solve the problem.

6) E-911. One of today’s most challenging issues with IP LAN phones is how to locate an emergency 911 caller. An IP Centrex provider is in a much better position than the enterprise manager to solve this problem with 100 percent accuracy, because the provider is the interface with the local emergency services.

7) Unbundled loops. Enterprise managers can’t order unbundled loops, UNE platforms or inter-machine trunks without going through a service provider. Yes, a user can order DSL, but the service is going to come bundled with an ISP. Service providers have more flexibility regarding IP access than do end users, and can offer them more options.

8) QoS. A service provider has a network view of the IP device on the customer’s desk simultaneous with a view of the IP backbone network. An IP Centrex provider is in a much better position to guarantee QoS than a service provider that only interfaces on the out-of-building access side of a customer-owned IP PBX.

9) Disaster recovery. An IP Centrex service provider manages the telephone numbers of individual end users rather than an isolated block of numbers assigned to a PBX. Regarding disaster recovery service, an IP Centrex provider could redirect individual incoming phone calls to a wireless phone, home phone or emergency center within minutes. In a PBX enterprise environment this type of rerouting for disaster recovery would be difficult, if not impossible.

10) Telecommuting. A CLEC or ILEC could service both the business and residential sites with an IP Centrex solution—IP Centrex a powerful service for the telecommuter.

11) Mobile interconnection. Here too, the IP Centrex service provider, being a carrier, controls the enterprise users’ telephone numbers. It also can port numbers with wireless service providers, thus making it easier to integrate the office with the mobile employee or road warrior.

12) Privacy. One of the big regulatory challenges of VoIP—with all of the integrated service packages, instant messaging, buddy lists, etc.—is privacy of information. Today you could find an employee in a company who would trade a corporate directory for a Ferrari t-shirt. Try to get customer information from a service provider employee, however, and you would probably get a call from the FBI. From a regulator’s perspective, IP Centrex providers would do a better job of controlling employee information than would enterprise managers.

13) Security. Another big challenge of always-on IP phones and IP PBXs is protection from hackers. An IP Centrex provider is in a better position to stop a denial of service attack than an enterprise manager of an IP PBX.

14) ENUM. A major hurdle for VoIP in general is the lack of a directory that can convert IP addresses to telephone addresses. That’s where the Electronic Numbering initiative enters the picture. An IP Centrex provider that controls the block of user addresses is going to be in a stronger position to create services than a wholesale IP carrier that doesn’t control the block of end user telephone numbers.

15) Wi-Fi. Talking about an option for end-user presence, VoIP via a Wi-Fi phone is no more than months away from the marketplace. Such a phone using IP Centrex-assigned telephone numbers adds a new dimension to telephone presence at home, work, airport, hotel and convention center locations.

16) Call center. The call center—or, as IP people like to say, contact center—is a $12 billion CPE market per year and growing. An IP Centrex solution with telecommuter connectivity is a winner. Add to that toll-free services plus voice/Web service integration, and you have another strong candidate for new service provider revenues.

17) IETF and IP PBX. The Internet Engineering Task Force is the de facto standards group for most enterprise IP products, including IP LANs, SIP phones and IP PBXs. The problem is that the IETF folks think IP service provider networks should be free and dumb. In the IP Centrex service model, however, networks can be neither free nor dumb for VoIP to take off. Service providers have to make money in the enterprise market, and IP Centrex is the way to do it.

18) People. The reason corporations don’t own fiber optic networks and use public rights of way is that, in addition to hardware, you need people to run a network. The same can be said for IP PBX technology: skilled people are needed. Service providers supporting IP Centrex have such skilled people, but enterprise network managers generally don’t.

19) Billing systems. The reason you see flat-rate billing and best-effort IP network service is that there is no way to determine the network resources used “end-to-end” in an IP session. IP Centrex service providers are in the best spot to make usage- and/or QoS-based billing a reality. Plus, in many cases service providers could use existing billing systems for IP Centrex.

20) OSS. The operations support systems that come with off-the-shelf IP PBXs do next to nothing regarding OSS, such as preordering, ordering, service provisioning, IP mediation, rating and service assurance. Enterprise managers aren’t going to build OSS themselves. Only IP Centrex providers can deliver industrial-strength OSS.

IP Centrex will be a winner—and in reality, it is the only winner on the horizon for capturing new enterprise customer revenues from VoIP technology. If you want to learn more, TeleStrategies is offering the seminar “Understanding IP Centrex and New Revenue Generation Opportunities” this fall. Please see www.telestratgies.com or call 703-734-7050 for more information.