At first sight the use of IP-based telephony technology -- sometimes called voice over IP (VoIP) -- that lets companies put voice and data traffic on one network would seem to be a threat to the switched telephone network that the large telecomms companies run and PBX vendors. Telcos don't see it that way.
Many organisations in New Zealand are taking up IP voice services for their internal calls, in order to avoid toll bills and integrate voice with their data and video networks.
However, traditional telcos are also getting in on the act -- around the world, many carriers realise IP is the way of the future, whether it is used to transmit voice, data or video, and are planning for the day when all-IP transmission is the norm, while at the same time realising the technology needs to improve for this to happen.
Telecom is working towards having an all-IP network, to run like a giant virtual private network (VPN), and will invest $1 billion "over a number of years" in building it.
Telecom industry services manager Greg McAlister told a Nortel Networks function in Auckland in December that "there's a perception that telcos don't like IP because it cannibalises their existing revenue, but we regard IP as critical to the future".
The all-IP network will "bring a lot more features to the market, result in lower cost services and will achieve 99.999% reliability", McAlister says.
Telecom chief technical officer Murray Milner says the all-IP network will include a full voice service using VoIP, which will be rolled out progressively.
"We will be retaining the PSTN [public switched telephone network] as long as it makes sense to do so."
As the all-IP network is rolled out it, it will run in conjunction with the PSTN "with full interoperability and will be seamless to the customer".
Last year, Telecom bought a signalling gateway and virtual private port server from 3Com subsidiary CommWorks, thus enabling calls to be re-routed from busy exchanges to ones with excess capacity.
Milner says the deal relates to IP dial-up traffic and to tandem switches, where toll calls go through more than one switch.
"The CommWorks equipment has the potential to replace some of that tandem switching."
A crucial part of the CommWorks deal is the "soft switch", an emerging software-based technology which performs call management functions carried out by class four and five switches, the large, expensive but very reliable devices that switch PSTN calls.
In simple terms, a soft switch (short for software switch) is an application which sends incoming calls through a media gateway rather than the standard class four and five switches that telcos use.
The gateway converts the call into IP packets or another packet-based format and routes it to a gateway near its destination, which changes it back to a standard phone call.
Though the arrangement with CommWorks is significant, Milner says most of the soft switch deployment that will drive the all-IP network will be done in conjunction with Alcatel, which Telecom has chosen, in a deal not yet signed, as its main partner in the rollout.
"Various components will come from different vendors," he says, adding that an oft-touted feature of soft switches -- that, because they're based on open standards, telcos putting them in can pick hardware from different vendors -- isn't totally accurate.
"There are some possibilities along those lines, but it's not perfect in that regard." There is broad interoperability, but when it comes down to specific features, they can be more vendor-specific, he says.
The all-IP network will be able to serve the entire country, he says, but those Telecom services adequately handled by the PSTN will remain for a decade or so, as the legacy PSTN infrastructure is still working well.
"We expect to have the capacity to put the whole country on to it, but there's no need to -- we'll loop traffic on to the PSTN for some years to come."
The PSTN is a "sunk asset" has says, meaning it has been purchased, is on Telecom's books and still has plenty of use and depreciation left.
As for QoS and reliability issues relating to IP, "there are no limits in capacity or robustness in the design we have in place".
Currently, 50% of Telecom's traffic is packet-based, he says.
The newly formed TelstraClear carries 70% of its traffic in packet form and the newly formed company intends to continue with the PSTN elements of the former Clear and TelstraSaturn networks, says spokesman Ralph Little.
In a statement, TelstraClear told Computerworld that TelstraSaturn and Clear had recently completed investments in IP and PSTN, and says it will use the best of both technologies in future.
"In practically all cases, these are based on similar core protocols and in many cases are from the same vendor, such as Nortel, Alacatel and Juniper. As such, fundamental internetworking is achievable, depending on consumer requirements and the combined network will carry forward the best commercial components of each architecture."
It's naturally also open to soft switching. "It is likely that 'soft switch' next generation switching capabilities will be introduced in the future."
CommWorks South Asia managing director Ben Cardwell says he believes widespread replacement of class five switches -- along with class four switches, the most commonly used technology -- by soft switching within telcos is a few years away.
"Class five replacement by IP is a change that will take another five years, not because of technology but because of policy and public safety issues. There are a lot of issues in the industry like emerging services and lawful intercept, ie wiretapping."
The billions of dollars invested in legacy PSTN equipment, as mentioned by Milner, is a reason telcos haven't flocked to soft switches in greater numbers and there are also questions regarding QoS (quality of service) and security.
Telcos demand 99.999% (commonly called "five nines") reliability in their networks and there is still some doubt as to whether a soft switched environment can provide that yet. (see analyst sidebar).
Vendors of soft switch technology include Sun, Lucent, Nortel, Cisco, CommWorks and Australia-based Open Telecommunications.
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