Next generation network technology is key to carrier success in e-commerce and Call Center applications say analysts

Unlocking the full potential of existing carrier infrastructure to deliver next generation Internet services needs technical and business innovations which carriers must start now. There are clear benefits for end-users in call center and e-commerce applications that provide integrated on-line browsing and telephony. Carriers that want to compete in delivering the service packages that support these applications must invest in switching technology that bridges the gap between voice, data and Internet platforms. Incumbent carriers, particularly in Europe, must break away from their conservative attitude towards new voice services or lose the opportunity to new entrants.

According to a new report released today from respected independent research and consulting company Ovum, change is overdue and IP (Internet Protocol) has provided a focus for that change. A key first step is to provide a link from the PSTN (Public Switched Telephone Network) service platforms to IP. This allows traditional telephony to be delivered to any IP access point that supports the required class of service. Whilst this provides a means for new entrant carriers to compete in IP telephony, it also opens the door to new applications that combine the best of the Web`s worldwide marketing capabilities with the comfort and security of a person-to-person phone call.

This revolution in developing `next generation networks` has created a new battleground for carriers and a worldwide bonanza in the equipment market. In the report, Next Generation IP Networks: Service Opportunities from New Platforms, Ovum predicts that the market for devices that interconnect PSTN and IP networks alone will be worth $1.3 billion by the year 2006.

"While building next generation networks requires a number of technical issues to be addressed, the integration of PSTN, IN and IP platforms will be essential in removing the barriers that exist between the Internet and traditional PSTN services," says Dr. Iain Stevenson, principal analyst and lead author of Ovum`s new report.

"Integrating platforms and network technologies will be critical in order to remain competitive, not only in terms of costs, but also to enable service creation, innovation and customization that leverages IP." The next generation technology that is being deployed now represents a first small step towards breaking down these barriers and enabling such services.

In reality, the next generation network is not a revolution but a logical evolution and integration of existing technologies to enable new services. New entrants are already focusing on IP as a design. However, they find themselves restricted at the local loop, which still mandates the use of low bandwidth accesses and requires gateway devices to interconnect with the PSTN services of other carriers. Incumbent carriers can use the same gateway technology to add value to their Internet service portfolios. All classes of carrier can use new soft switch and server platforms with these gateways to produce innovative services. Ovum finds that within the next two years, interconnect limitations will be resolving and a new entrant will be able to build a complete network using IP and gateway equipment and will not need to invest in expensive Class 5 switches.

This change in the competitive landscape has dramatically revolutionized the industry`s view of the traditional PSTN. "Incumbents can`t afford to wait," states Stevenson. "New entrants will embrace an IP solution and the next generation switching equipment places them in a position to compete with the broad range of established carrier services." Additionally, the widespread use of the Internet opens opportunities within the SME market by enabling carriers to offer complete packages of IP-based services. Such services as Voice over IP (VoIP) and unified messaging will be able to leverage the link between IP and voice networks and there will be no barriers to message transport.

According to Ovum, incumbent carriers recognize the benefit of next generation networks but must resolve internal conflict. The Internet business units within incumbents frequently press for change and a greater adoption of IP throughout the network. The voice services business units, particularly outside the US, view IP as a threat to be resisted. These conflicts must be reconciled if the revenue opportunity from the next generation is to be realized. Despite presenting a clear view of business benefit, Ovum points out that there are no `killer applications` for the integrated IP and PSTN network. "There has not been a single user-driven application scenario that has compelled carriers to justify a significant investment," confirms Stevenson. "No application has proved to be capable of this so far and next generation networks are no different in this respect.

However, these networks are ground breaking. They enable unification of services, simplification of carrier infrastructure and a range of new applications that will be commercially successful." Ovum`s report finds that the first applications to successfully leverage such networks will be the Web-enabled call center. Additionally, gateway equipment will provide the necessary integration of service platforms needed to make these applications available through current carrier networks.

"Overall, IP represents a huge opportunity for equipment vendors," says Stevenson. "Change is occurring in transmission, core switching, access networks and OSS platforms and gateways for signalling and media are the new component of this expanding market." New entrants are the first market for such equipment, but as incumbents convert to IP, they will provide a larger demand in terms of unit numbers. The established telco vendors - Nortel, Lucent, Siemens, Alcatel and Ericsson - need to enhance their current Class 5 switches with packet add-ons, while also needing integrated gateway products for new entrant carriers.

Meanwhile, data network vendors with their heritage in IP, such as Cisco, face the challenge of developing products for the incumbent carriers. "This has led to a number of vendor acquisitions and carrier partnerships to address radical departures from existing engineering practices," adds Stevenson.

Next Generation IP Networks: Service Opportunities from New Platforms

Next Generation IP Networks: Service Opportunities from New Platforms will be available from Ovum in late September and costs lb1695/EUR2695/$3150/A$4095. Authored by analysts Dr. Iain Stevenson and Edward Pugh, the report, the first in a two-part series, offers in-depth analysis of the infrastructure change needed to deliver integrated voice and data services over IP. It includes regional forecasts and details market scenarios and strategies for incumbent and new entrant carriers such as BT, Telia and Level 3, and equipment vendors including Cisco, Nortel and Salix. The second report of the series focusing on IP services will be available in November and can be purchased now at a special package price. For further product information call Ovum at (800) 642-OVUM or visit http://www.ovum.com