On the surface, carriers should be making a fortune by providing integrated access, e.g. all user traffic on one high-speed digital pipe, with new service requirements provisioned instantly, bandwidth on demand, and of course billing per application or event. So why aren’t carriers betting the farm on integrated access, when the technology appears to be here? The answer: It’s hard to make a business case for it. And here are 10 reasons why
1. REGULATION—Nothing can pull the rug out from under a carrier’s business case more than a change in the regulations. For example, take a data CLEC, with a DSL-based business plan using single, unbundled telco loop; providing Internet access, VoIP and instant provisioning of local telephone numbers; and serving up to eight telephones per house. Technology-wise this is possible, but several months back the FCC came along and said to the CLECs, you can have loop sharing (or spectrum unbundling) from the ILECs. Users can keep their ILEC voice service and get Internet access from the data CLEC. As for instant provisioning of multiple telephones, each with their own number, the data CLEC had better figure out how to handle E911 (when you dial 911 today, the emergency service center knows your street address via a table lookup basis on your ANI number). If data CLECs can’t handle E911 to the regulators’ satisfaction, forget lifeline voice service opportunities. The point is that providing voice services looks less attractive business-wise for data CLECs today than several months ago.
What about the other integrated access approaches—are they immune to regulatory changes? No. Take cable for example: if AT&T has to invest many billions of dollars to upgrade cable systems to provide Internet access along with local and long-distance voice, would it make sense to do this if the FCC mandates equal access? If the customer wants ILEC local and MCI long-distance service via your cable system—AT&T—you give it to them. If AT&T can’t protect its exclusive Internet access via cable modems from regulatory changes, what are the chances it will be able to prevent equal access to voice service?
Finally, what about the corporate Internet access schemes (ATM, frame relay and everything-over-IP)? Are they immune to regulatory change? No, I don’t believe so. Note that today’s digital access is expensive not because of actual cost but price. For example, what’s the difference facilities-wise between T-1 at $400 to $1,000 per month, and high-bit-rate DSL (HDSL) obtained by a data CLEC via two unbundled loops for as low as $12 per month? Nothing! The same price-versus-cost argument can also be made for ILEC fiber serving corporate users. Bottom line is no one knows what the rules will be for ILECs getting into in-region long distance and the flexibility they will be given regarding access pricing. If they are permitted to drop the price for non-integrated access and to make up lost revenue other ways, those IXC integrated access revenues forecasts will change dramatically in a negative way.
2. INCOMPATIBILITY—Today the various integrated access schemes described in the sidebar are not compatible with each other. But it’s even worse than that. Carriers are having trouble supporting native frame relay to ATM, even to the same customers solely on their network. Also, there’s little evidence that voice via frame relay or ATM service for private networks is being interconnected into the public, circuit-switched network to date.
So what’s the technical problem? The OSS, of course. Carriers either use proprietary OSS or OSS supplied by the router/ATM vendor. If the customer is not going with a single carrier or using multiple carriers deploying similar network products, the customer is out of luck regarding interconnection. If carriers can’t solve the interconnection problem between access schemes and/or intercarrier operations for similar access schemes, the market for integrated access will remain small for years.
3. STANDARDS—Today there are no meaningful integrated access standards at the OSS level to provide for carrier-to-carrier interoperability as discussed above. The other downside to the lack in standards is that the carrier has to provide and maintain the MUX/router equipment at the customer premises. Standards would permit off-the-shelf purchasing by users of CPE with maintenance contracts. Bottom line: with regard to developing business cases for integrated access, budget big bucks for CPE and maintenance because its going to be the carrier’s responsibility.
4. MERGERS AND ACQUISITIONS—Creating a business plan to enter the integrated access market while simultaneously creating a plan for being acquired is no easy task. For small CLECs or IXCs, spending money to develop an integrated access service business could likely be money down the drain for the acquiring partner even in larger carrier mergers. For example, if MCI WorldCom acquires Sprint, in my opinion Sprint’s ION network offering will be dropped. I don’t see the compatibility with MCI WorldCom’s ON-NET infrastructure approach and Sprint’s ION offering. In short, how do you make an integrated access business plan, if the acquiring carrier views this investment as having no value?
5. INVENTORY—Don’t worry about billing if you can’t maintain, provision or order the service. Moreover, none of the above is relevant, if you don’t know the inventory of network resources—backbone bandwidth, CPE port availability, and of course access bandwidth. The Achilles’ heel of all the integrated access approaches is inventory OSS. You have to know in real time what’s available in the network, or integrated access will never live up to the hype. So if you create an integrated access business plan, factor in big bucks for an inventory system that has yet to be developed to the degree required, or reduce your revenue forecast.
6. SLAs—Today’s non-integrated access data services come with virtually no meaningful service level agreements (SLAs). Internet access is best-effort flat rate. Frame relay and ATM are offered as permanent virtual circuits (PVCs), priced flat rate with an assumed QoS. Integrated access is a different animal, at least in the corporate marketplace. Again, if you are preparing the business plan for integrated access, budget even more money for OSS to validate SLAs.
7. INTERNAL RESOURCE COMPETITION—It’s tempting to look at today’s network infrastructure—ATM backbones providing frame relay and IP services—and say integrated access is just a new way of packaging what is already offered, but with new revenue opportunities (voice, ASP value-added services, etc.). Yes, the network elements (ATM backbones etc.) can be deployed to provide multiple services, but not the OSS. They will require resources for upgrading and/or replacement. The business planner’s dilemma: Do you invest in new OSS for integrated access at the expense of upgrading OSS for non-integrated services? Where you get the biggest bang for the OSS dollar is a hot item of debate within a number of carrier operations today. If it isn’t being debated, it should be.
8. CHANGING TECHNOLOGY—Creating a five-year business plan today is a challenge for many reasons, and changing technology is one of them. You can make a case for eliminating ATM and frame relay network technology, which is key to integrated access service offerings, and replacing everything with optical switches and/or wavelength routers. And of course the 3G wireless people say you can do everything with a mobile wireless device, including integrated access, so who needs copper wires? Tough to make a bulletproof business case using 1999 technology, with all the fiber and wireless hype floating around.
9. USER SKEPTICISM—I have yet to see a published article or a conference presentation covering a dynamite integrated access services story. Billing World editors place routine calls to the carriers who are hyping integrated access and ask for details about billing strategy—with virtually no success: They aren’t talking.
So without success stories or SLAs in an environment of rapidly changing technology, carrier mergers and acquisitions, and falling prices for non-dedicated access, users—particularly corporate users—are skeptical that the integrated access carriers can deliver what’s promised. Tough to make a carrier business case where real big investment dollars are needed, if you don’t have signed customer contracts beforehand.
10. SMART PEOPLE—In order to make a business case for integrated access, you have to make the case that you’re going to carry lots of voice traffic, and/or provide value-added IP (e.g., ASP stuff like hosted applications, VPNs, e-commerce and more). First, I would dismiss voice as a generator of big bucks. In the residential market, it’s hard to see cable companies or data CLECs being the sole voice provider to the home without massive capital investment; and in the business market, the integrated access provider won’t see much overall gain of voice service revenue by transferring customers from dedicated to integrated access. So this, in my opinion, leaves value-added IP revenues to save the integrated access business case.
To succeed in IP-ASP, smart IP people are required. Carriers today don’t have the human resources required to implement and support shared IP applications. Most carrier executives realize this and counter with “Well, we are going to team with the giant application and system integration people.” That’s okay, except when you talk to the application and system integration folks, they say all they want from carriers is managed bandwidth for IP services. If they are right and succeed in getting managed bandwidth, why do you need to integrate things of no interest, like voice and ATM or frame relay PVCs? How do you make a bulletproof business case for integrated access, when your key partners (e.g., ASPs) don’t see the value?
The good news for billing and other OSS executives and their suppliers is that they will be needed with or without an integrated access business case. The bad news: carriers will be spending big bucks for something—integrated access services—with a greater chance of business failure than success.
Types of Integrated Access
A variety of technologies address integration of access for voice, data and video services. Here are the leading candidates.
1. ATM: Carriers install ATM multiplexers on a corporate user site and use local telco access lines (T-1, fiber and DSL) to interconnect to their serving center. Users get voice, frame relay, Internet access and eventually application service provider (ASP) value added from the carrier. Sprint’s Integrated On Demand (ION) most closely fits this description. .
2. Frame relay: Same as ATM, except that access speed is limited to T-1 (1.5 Mbps) or DSL (up to 1.5 Mbps), and the value added comes from combining frame relay service with voice over the same line. AT&T’s Integrated Network Connection (INC) comes close to something that meets this description.
3. Everything-over-IP: Carriers place an IP access device on the customer premise; telcos provide T-1, fiber or DSL access, as in the ATM option 1; and all user traffic is converted to IP. The Level 3 Communications’ vision would be an example of everything-over-IP.
4. DSL: A data CLEC, for example, uses an unbundled ILEC copper loop to create digital subscriber line (DSL) access at speeds of up to 1.5 Mbps over this pipe. The user (typically a consumer or small business) gets Internet access today, and in the near future voice-over-IP.
5. Cable modems: Same as the DSL option, except the cable operator uses its entertainment cable infrastructure to provide residential Internet access today and voice-over-IP in the future.
There are other approaches, such as MCI WorldCom’s ON-NET, which focuses not so much on integrating traffic streams but carrying as much traffic over its fiber access facilities from corporate user sites to their backbone networks. And there are many other options such as mobile wireless-3G options due out in a few years.
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