New realism and growth prospects for wireless

Mar 20, 2002 12:00 PM, Laurie Gooding

That growth is no figment of the imagination. The Cellular Telecommunications Industry Association reported that 2001 U.S. wireless service revenues grew 28% over the previous year to $58.7 billion. Also during the first quarter of 2001 alone, 70 U.S.-based wireless vendors raised $1.2 billion in venture capital.

It is true that many carriers overspent for 3G network licenses. European wireless carriers have invested approximately $100 billion on licenses and have since lost stock value as investors worry about how the carriers will recoup that investment. To survive, carriers are being forced to roll out next-generation services as quickly as possible while controlling capital expenditures.

These forces are aligning to fuel new innovations as increasing subscriber usage drives the need for more mobile switching center (MSC) capacity. Shrinking profit margins for voice services dictate that wireless carriers find new ways to generate revenue from value-added services and install more efficient network technologies to support traffic growth. Carriers are beginning to realize that they can implement softswitch-based solutions in the MSC to create a more flexible, cost-effective and open network environment that supports faster service creation and delivery as they migrate to packet-enabled 3G networks.

To date, softswitches have largely been the domain of wireline carriers, but with growing support for SIP, mobility and wireline-to-wireless signaling, the same softswitch can support wireline and wireless subscribers--ultimately in an all-IP network. Softswitches can function as gatekeepers, SIP proxy servers, MSCs or even call state control functions for 3G networks.

MSC technology is still primarily based on legacy Class 5 switches adapted from the wireline world. While some operators wait for legacy vendors to introduce 3G MSCs, others will begin evolving their infrastructure with next-generation solutions designed to improve scalability and cost-performance, as well as support more subscribers and services. Next-generation vendors such as Winphoria, Spatial Wireless, Cambia Networks and Airslide Systems are beginning to deliver systems that offer many advantages, including:

Scalability: Softswitch-based MSCs can support up to four times as much traffic in the same footprint as legacy switches.

Cost-effectiveness: In addition to reducing the cost of buying and operating MSCs, next-generation softswitches provide lower transport costs and eliminate the need to buy new 3G switches in the future.

New revenue opportunities: These solutions can support more subscribers (capacity) and third-party enhanced service applications.

Easier migration to 3G: Next-generation MSCs are based on the disaggregated softswitch architecture, which is accepted for 3G wireless networks and enables more configuration flexibility than legacy switches.

Unlike legacy Class 5-based MSCs, next generation switches are optimized for functioning in a wireless environment. Instead of adding transcoders, cellular processors and protocol support as an afterthought, wireless softswitches are built from the ground up to operate efficiently in wireless networks. In traditional (2G) wireless networks, for example, coded speech from the handset is converted to 64 kb/s so it can be switched via the public switched network, even if the call is destined for another mobile subscriber. In some cases, carriers send speech through an interexchange network, where speech is recompressed in a different format to save money. Every time speech is recoded, an additional delay is introduced and voice quality drops.

Delays in the 3G migration of radio access networks--namely, 3G handset availability and frequency allocation--would seem to suggest that wireless operators can take their time in implementing next-generation core network solutions, such as wireless softswitches. However, recent research by Pioneer Consulting finds that there is much more at stake, and that even without implementing support for 3G standards, operators can realize more economic MSC expansion by implementing wireless softswitches and offload solutions such as packet data server nodes. The delay in 3G deployments has actually proved positive for next-generation equipment vendors, extending the window of opportunity and lengthening product-testing periods.

The first wireless operators to embrace innovative MSC technologies, such as wireless softswitches, will be better positioned to reduce operational expenses while offering new services, acquiring new customers, and migrating their networks to 3G. It is shortsighted to adopt a “wait and see” approach as handset manufacturers struggle to roll out compatible handsets. Encumbered by subscriber growth and increasing usage, legacy wireless networks need cost-effective solutions for additional capacity now.

Even without considering the explosive growth of wireless data services, increasing MOUs overall will drive the need for additional core network capacity. Because data services drive up MOUs and require additional network expansion, carriers will benefit greatly from incremental network upgrades in the core, rather than continued investments in circuit switch-based MSC solutions.

Laurie Gooding is a Senior Market Analyst covering IP Network Convergence for Pioneer Consulting. She can be reached at lgooding@pioneerconsulting.com.

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