How long is a distance?

Jul 16, 2002 12:00 PM, Arnold C. Englander

Following the implementation of telecom reforms in Bolivia, India, Hungary and Poland, and potentially landmark test cases of the 1996 Telecommunications Act in the United States, network architects and equipment vendors are likely to end 2002 with a new understanding of the long distance (LD) telecommunications business.

Telecom reform is redefining the distinctions between international long-distance (ILD), national long distance (NLD), and local long distance (intra-LATA LD in the United States), forcing carriers to revise business models and equipment vendors to adapt product lines. While many similarities exist between telecom reforms in various countries, it is the differences that lead to the complexities in segmenting markets and requirements for Class 4 LD equipment.

The entry of distance-insensitive, softswitch-based Class 4 solutions further adds to this dynamic. In many respects, the same Class 4 softswitch deployed in Delhi to manage ILD traffic can be used to manage NLD services-not just between Delhi and Mumbai, but also between Calcutta and Chennai. However, from a regulatory view this can only be done if the ILD carrier building the POP in Delhi has an NLD license.

Long-distance telephony:  A tale of two countries

To better understand the LD market segmentation, it helps to divide countries into two segments:

1. Countries that have well-defined and stable laws governing ILD, NLD and local services; and

2. Countries that have interpretable, provisional and dynamic laws governing ILD, NLD and local services (as well as dynamic competitive landscapes).

According to Newton's Telecom Dictionary (17th Edition), long distance is defined as: "Any telephone call to a location outside the local calling area. Also called a toll call or a trunk call." In all cases, LD calls are trunk calls, while toll calls may be local or LD calls. In addition, "local calling areas" are defined differently in different countries.

ILD is easily defined as calls that terminate outside the country from which the call originated. Likewise, local services are defined, at least partially, as calls that are originated directly by (or terminated directly to) a residential, business or public phone end customer.

It is the call "legs" in the middle that are hard to define. Generally speaking, this requires geographic demarcations, such as "circles" in India, or local access and transport areas (LATAs) in the United States. India is divided into 21 circles. The United States is divided into 196 LATAs that, in turn, are subdivided into area codes.

Thus, one can speak precisely in terms of intra-circle vs. inter-circle calling in India, and of intra-LATA vs. inter-LATA in the United States. In India, NLD is one and the same as inter-circle calling.

India as Type 1 example

India is an example of Type 1, a country that has distinct laws and licenses for ILD and NLD. India has started the process of privatizing VSNL, the state owned ILD monopoly, and opened ILD to competition on April 1, 2002.

Leaving the state-owned NLD monopoly (BSNL) intact, India opened NLD to competition two years ago. (In return, also in 2000, BSNL was permitted to provide local service in all areas except Mumbai and Delhi.) Inter-circle calling legs are the exact domain and limits of NLD.

In 1994, India opened local services (called basic services and delivered by basic service operators, or BSOs) to competition, allowing one licensed competitive BSO per "circle" in addition to the government-owned incumbent. In January 2001, India opened basic service to unfettered competition in all 21 circles. Intra-circle calling legs belong to the domain of basic services. 

United States as Type 2 example

The United States has interpretable, provisional and dynamic laws with respect to inter-LATA, intra-LATA and local services. Moreover, the United States does not have an overarching policy on NLD. In the United States, specific companies are allowed (or forbidden) to participate in inter-LATA, or intra-LATA or both, in addition to being allowed to participate in ILD, or local or both. Laws governing inter-LATA vs. intra-LATA have been interpreted and tested ever since the AT&T divestiture in 1984 and with renewed intensity since the issues were re-opened under the Telecommunications Act of 1996.

Before 1984, AT&T had a near monopoly on telephone service. AT&T, with its 22 Bell operating companies, sold local, interstate long-distance and international long-distance services. Under divestiture, AT&T was expressly prohibited from offering intra-LATA ("local" long-distance) calls. Although rules varied by state, AT&T's competitors (such as MCI and Sprint) have always been allowed to offer intra-LATA calls. RBOCs were expressly prohibited from offering inter-LATA services.

The courts assigned nearly all of the Class 4 switches in the United States (in those days, mostly AT&T's 4ESSs) to AT&T and the Class 5 switches (mostly 5ESSs)--including the tandem switches that immediately tied the 5ESSs together--to the seven newly formed RBOCs. While AT&T needed to retain the 4ESSs for ILD and inter-LATA long-distance services, it also fought to keep the 4ESSs because they were key to AT&T's lucrative business services, such as software-defined networks, known today as voice virtual private networks. In these services, the 4ESSs connected directly to small private branch switches called PBXs (sold at the time by AT&T) belonging to the business customers themselves. In other words, at least in business services, the 4ESS Class 4 switches enabled AT&T to preserve the full range of distance-from international calls to calls around the block. Moreover, this is a classic example of how Class 4 switch features, carriers' business models and telecom reforms often play hand-in-hand.

In order to provide intra-LATA services, the RBOCs and independent local exchange carriers (LECs) deployed new Class 4 LATA-tandem switches, sometimes referred to as access tandem switches. This is when the LECs invented the marketing term "local long distance" for their intra-LATA services (a market in which they competed with non-AT&T IXCs), to distinguish them from the inter-LATA services that they were forbidden to provide.

One result of divestiture was a "resegmentation" in the Class 4 switch market, spurring a significant increase in Class 4 switch sales. As the switch requirements changed, competition took hold, and new vendors like Summa Four (acquired in the early 1990s by Cisco) and Excel (acquired in the late 1990s by Lucent) began to capture market share.

The Telecommunications Act of 1996 allows IXCs to offer intra-LATA as well as local services. In return, the incumbent local exchange carriers (ILECs), most of them originally part of AT&T, were permitted to offer inter-LATA services provided they comply with a checklist of requirements. 

Segmentation of markets and product requirements for Class 4 softswitches

Why would anyone want to sort through all of this? The answer is simple: The segmentation of requirements for Class 4 switches--the switching systems used for ILD, NLD (in India, inter-circle), inter-LATA, intra-circle and intra-LATA--must be understood within the context of the segmentation of long-distance markets.

In order to segment a market, one needs to understand the customers (carriers)--who they are, what drives them and how your product can address the challenges they face. In the U.S. market, the NLD customer is a moving target. Actually, the targets are not only moving, they are wrestling with each other! This is hardly surprising given the magnitude of the LD and local markets (each roughly U.S.$100 billion per year) up for grabs.

Given the complexities and numerous levels of LD segmentation, we will focus now on one aspect--the ILD/NLD segmentation of Class 4 softswitches.

Similarities and differences between softswitches optimized for ILD vs. NLD

The similarities between softswitches optimized for ILD vs. those optimized for NLD are strong and fundamental.  Both are built for long distance, and therefore both must be able to control medium-scale, medium-density trunking media gateways (primarily using the MGCP protocol and, later, MEGACO) as well as H.323 protocol gateways. Both need to support network services such as calling card, and both need to integrate with PSTN signaling by means of SS7 (ISUP) full tunneling and SS7 to PRI full tunneling.

Softswitches optimized for ILD and NLD are both inherently distance- and location-insensitive--only the media gateways need to be near the Class 5 switches with which they interface. The softswitch in New York managing calls to the U.K. can be the same one managing calls from New York to Spain, Argentina to Bolivia, or Washington, D.C., to Boston.

These similarities, however, are overwhelmed by the differences.

ILD Class 4 softswitches

Softswitches optimized for ILD support sophisticated routing capabilities including time- and date-based routing, source-based routing (both in the form of ANI-based and gateway-based routing), priority (least cost) routing, intra- and inter-domain routing, private and global numbering plans, forwarding on busy/ring-no-answer, online dynamically modifiable routing, resource availability routing, and randomized. These capabilities are needed for complex international routes, widespread networks often composed of multiple domains operated by different carriers, and to build the features of global hosted services such as VoIP VPNs and global call centers.

Softswitches optimized for ILD also need to support special capabilities for international carrier exchanges. These capabilities include inter-domain billing, techniques for minimizing post dial delay (PDD) including dynamically updating (streamlining) routing tables based on resource availability indicator information (RAI), and overlap sending for SS7 so that the routing of the call can begin as soon as the caller has entered the first few digits. ILD-optimized softswitches also must support a large number of country-specific SS7 variants, since international traffic involves connecting a multitude of national networks.

ILD-optimized softswitches also need to support global hosted services applications-distance insensitive services such as VoIP VPNs, which provide private, abbreviated numbering plans and closed user groups for all calls, avoiding PSTN toll charges in the process. And because ILD VoIP networks usually interconnect a large number of different carriers' closed and managed IP networks and sometimes unmanaged networks including the open Internet, security is essential (both in terms of VoIP access, authentication and authorization, and IP firewalls and NAT).

NLD Class 4 softswitches

NLD-optimized softswitches are simpler, less "intelligent," but more "powerful" than ILD-optimized softswitches. "More powerful" is measured in call attempts per second (CAPs) and/or busy hour call attempts (BHCA), which are typically 4 to 10 times higher for NLD's more basic routing requirements than ILD-optimized softswitches. This larger number of CAPS is used to control large-scale, high-density trunking media gateways based on the MGCP and eventually the MEGACO protocol. The media gateways are 5 to 10 times denser in terms of the number of T-1/E-1 and ultimately the number of DS0s they support per chassis.

Routing and signaling, however, are much simpler in NLD softswitches compared to ILD softswitches. Networks are simpler and generally deployed and managed by a single carrier, so the sophistication required for wholesale international carrier exchanges does not apply. Only one flavor of SS7 is needed-the flavor of that particular nation. So where vendors of ILD-optimized softswitches invest heavily in supporting dozens of national SS7 variants, vendors focusing on NLD softswitches generally support and certify SS7 for only those nations in which they power NLD networks.

NLD-optimized softswitches are required, earlier on in their deployment, to support local number portability (LNP) regulatory requirements and implementations specific to the (single) countries in which they provide service. The same is true for country-specific national 1-800 number services. Generally this is accomplished by supporting the IN platforms already in place in those specific countries (IN capabilities generally do not cross international borders), which means supporting and/or tunneling TCAP messages through VoIP traffic. But again, these requirements are country-specific, and vendors focusing on NLD softswitches generally support IN for only those nations in which they power NLD networks.

Finally, while NLD softswitches do not generally support global hosted services and all the sophisticated routing algorithms from which those services are built, they often support subscriber services such as voice mail.

Hybrid and combination solutions

Since the differences between ILD-optimized and NLD-optimized softswitches come down to "brains" vs. "brawn" and multinational vs. country-specific signaling capabilities, the natural question is could and should these types be combined?  Fortunately the answer to "could" is yes.

But the hybrid ILD/NLD Class 4 softswitch solutions will not come quickly or easily for at least two reasons:

1. The different core competencies and experience required from vendors to migrate from an ILD focus to an NLD focus or vice versa. Supporting and certifying a very large number of national variants of SS7 ISUP is very demanding, requiring a large investment and enough deployments spread out across the world to provide the experience, drive the learning curve and make the investment worthwhile. Likewise, IN integration is complex, and although vendors focusing on NLD softswitches need only develop the competence and software for each new country they sell into, it too is costly and depends on very specialized skills. 

2. In many countries, regulations and licenses maintain barriers between providing ILD and NLD services. In India for instance, an NLD license (distinct from an ILD license) costs US$100 million (with no "discounts" provided if a carrier has or is simultaneously buying an ILD license costing US$5 million).

Both of these issues will no doubt be resolved, but this will take time and will separate the experienced vendors from the naïve.

Conclusion

We have segmented the markets and product requirements for Class 4 softswitches based on definitions of LD telephony. We found that the definitions are driven by telecom reform and therefore are both country-specific and sometimes dynamic. We also saw that because softswitches are distance insensitive and location independent, they can easily be used to support carriers migrating or expanding from ILD to NLD, or inter-LATA long distance to intra-LATA long distance, and vice versa. In that regard, softswitch technology has arrived at an especially opportune time with respect to telecom reform.

We have looked at the similarities and differences between Class 4 softswitches optimized for ILD vs. NLD and discussed what it would take in terms of core competencies and market dynamics to produce hybrid and combination solutions. NLD markets and product requirements are highly country-specific, due not only to local number portability (LNP) and 1-800 service implementations, but also to the definitions, relative sizes and laws governing NLD that vary among countries.

But more than anything else, we have seen how regulatory reform shapes the segmentation of markets and product requirements for Class 4 solutions (be they ILD, NLD, intra-circle or intra-LATA, or inter-circle or inter-LATA), by determining the critical issue of "How Long is a Distance?"

Arnold C. Englander is Vice President of Product Strategy and Planning for VocalTec Communications.

Visit VocalTec Communications online.