The Complete Bundle

Service providers can choose from several buildout and resale options to deliver integrated voice and data services over DSL

Combining voice and data traffic over a single digital subscriber line enables telecommunications service providers to deliver not just bundled services to the small business and upscale residential market segments, but also integrated bundled services. What's the difference between bundled services and integrated bundled services? Quite a bit of margin.

Small businesses today spend 10 times more for local voice services than they do for data services. Telephone service is the lifeline of businesses and has been a budgeted line item for years. But although the demand for high-speed data services is increasing, the willingness to pay is not. With the advent of integrated bundled services, costs are shared across a single pipe, allowing service providers to create compelling bundled services that meet the value criteria of the small business and upscale residential markets.

Today, DSL service providers are selling high-speed Internet access for $40 to $200 per month, depending on the amount of bandwidth. According to IDC, small businesses (independent businesses with 100 or fewer employees) spend $520 per month on local voice services. By providing integrated voice and data services over DSL, service providers now can turn a $200 per month revenue stream into a $720 per month revenue stream. On the residential side, providers can double their data revenues with a voice bundle.(Figures 1 and 2).

Complete DSL, a new category of products and services that is just beginning to emerge in the market, will enable carriers to take advantage of the margin of opportunity between traditional bundled services and integrated bundled services. Complete DSL consists of two new pieces of equipment that expand the capability of a high-bandwidth DSL to deliver up to 16 phone lines and high-speed Internet access - without disrupting current telephone service and Class 5 switches.

Complete DSL architecture

Complete DSL begins with customer premises equipment (CPE) - sometimes called an integrated access device - at the small business or upscale residence. The CPE has RJ-11 jacks for the telephone, key system, PBX or fax connections and an Ethernet port for the LAN connection. Such equipment packetizes voice traffic and combines it with data traffic, then puts the combined traffic out onto a DSL. Prioritization techniques are used to ensure toll-quality voice (Figure 3).

As with other data-only DSL offerings, the complete DSL service connects the DSL from the customer premises to a DSL access multiplexer (DSLAM) at the central office (CO). From the DSLAM, the voice traffic passes to a voice gateway, where the packetized voice is converted to time division multiplexed traffic and passed on to a Class 5 switch over a T-1 connection. Similar to POTS, the Class 5 switch continues to generate dial tone and Class 5-type features such as caller ID, *69 ringback service and call waiting. The complete DSL architecture passes these voice features seamlessly to the telephones at the customer premises - neither the Class 5 switch nor the telephones are aware that a broadband connection exists between them.

The service provider then can provision a DSL broadband pipe to the customer premises using dynamic bandwidth allocation. Here's an example of how it works: The entire bandwidth is used for data until a phone is taken off-hook. At that time, approximately 40 kb/s is consumed for the duration of the call. When the call is completed, all bandwidth reverts to the data path. With 384 kb/s service, eight simultaneous phone calls can be supported to a single customer premises; a 768 kb/s service can support 16 simultaneous phone calls.

The centralized vs. distributed debate

One of the first considerations for designing a complete DSL network is where to place the voice gateway - in the CO (distributed architecture) or in a regional switching center (centralized architecture). After weighing the pros and cons of both, the outcome typically is based on the type of service provider making the decision. Incumbent telcos usually choose the distributed architecture while competitive local exchange carriers (CLECs) favor the centralized approach.

The distributed model is appropriate in networks where the Class 5 switch resides in each CO. Incumbent service providers that are serving their subscribers from a single CO don't have to worry about serving them from a different Class 5 switch in a different location. Local number portability (LNP) issues and costs are critical factors in analyzing the trade-offs between the distributed and centralized models for incumbents.

The centralized model allows the voice gateway costs to be shared across multiple COs. This is particularly attractive in the early deployment stages when rates for the new service can be shared across a broader market. From a competitive carrier's standpoint, this model reduces co-location costs and is more conducive to a strategy that supports DSL transport purchases from several sources.

Incumbents may find LNP costs too high to counter the cost of a gateway in each CO, leading them to a distributed architecture. On the other hand, CLECs typically find that spreading the cost of a gateway across multiple COs can reduce co-location costs, leading them to a centralized architecture.

The complete DSL provider

Service providers have a myriad of buildout and resale options to deliver integrated voice and data bundled services over DSL. Each piece of the architecture - CPE, DSLs, voice gateways and Class 5 switches - represents another choice. These choices provide service providers with a multitude of opportunities for entering this business, trading off costs with time to market.

The truck-roll reseller. At the advent of DSL data deployments, companies that specialize in deploying CPEs have sprung up nationwide. In this model, the DSL service provider certifies a range of CPE that may be deployed in its network. The CPE service partners specialize in the installation and maintenance of these certified devices, providing a valuable service in truck rolls, customer support and inventory management.

The DSL transport reseller. As DSL rollouts start to accelerate, service providers may choose to rent DSLs on a monthly basis from a DSL transport provider rather than incur the cost and overhead of building their own DSL networks. The business models for the two are very different. Key considerations are cost and time to market. DSL buildout costs include co-location rental, legal fees for negotiating the co-location space and copper pairs, capital equipment costs for the DSLAM and management costs for all these pieces. DSL transport providers may provide time-to-market advantages. Several DSL transport providers have a national footprint, and some have extensive footprints in certain regions. Service providers planning to deploy voice over DSL in markets where DSL transport providers have a presence should look closely at the cost trade-off between buildout vs. rental.

The voice-over-DSL transport reseller. As complete DSL service providers start to deploy services, another partnering opportunity arises: voice-over-DSL transport providers. These new offerings include the sale of voice-enabled DSLs. Rather than building out the voice-over-DSL network, a service provider rents a T-1 from a voice-over-DSL transport provider and connects that to its Class 5 switch.

The dial-tone reseller. As is the case for any voice service, Class 5 switches may be purchased to provide local telephony services. Many dial-tone service providers will rent ports and value-added features on a Class 5 switch. Again, the trade-off here is the expense of a multimillion-dollar capital outlay and building voice expertise in-house, as well as time-to-market.

With all these types of service providers and choices, it is important for the complete DSL service provider to understand where its core competencies are, where it can add value, what the financial ramifications are and, most important, how to support the customer seamlessly. Small business and upscale residential customers depend on 99.999% service reliability. In order to win these customers' trust, it is critical that the customer is presented with attractive financial savings and an excellent customer service experience devoid of finger-pointing. As complete DSL service providers examine their resale opportunities, they need to have a comprehensive plan in place for providing this level of service to these customers.

The new voice-over-DSL market

As complete DSL service providers wrestle with these alternatives for architecting a voice-over-DSL network, they need to keep in mind that there is now a huge market opportunity. Voice services over DSL can turn a $3.6 billion data service business into a $36 billion local voice service business.

The time is ripe for capturing small business and upscale residential customers with integrated bundled services. The complete DSL service providers that can do this effectively will be a formidable force in local loop services.

As the industry witnessed new long-distance providers emerge in the 1980s, the next decade will be the era for new local loop service providers. Early movers have the advantage to sign these customers up for their services.