Next-generation networks promise to deliver communications services that can be accessed anywhere, any time, on a single network. While the business world has started to experiment with the flexibility of converged IP communications, the politics of telecommunications regulation has stalled any plans for such innovation to reach the home user. Brett Winterford reports.
The definition of a next-generation network (NGN), as convoluted as it is, can be summarised as a single packet-based IP network that can provide a user with ubiquitous access to all of their voice, data and video communications.
The pursuit of the next-generation network is being driven primarily by large telecommunications carriers looking to hold back the tide of declining revenues from their ageing copper networks.
Most of the world's large telcos, Australia's Telstra among them, have declared an interest in upgrading their extensive networks to the converged IP world. The United States telecommunications industry, backed by various state governments, is undertaking a massive investment in taking high-speed optical fibre to the home. BT (British Telecom) is investing several billion pounds a year in a next-generation network, and plans to turn off its old phone network within 10 years. Similarly, France Telecom plans to spend E1 billion a year on research and development to build what it calls its NExT (New Experience in Telecommunications strategy).
"We are living through very big changes," says Barbara Dalibard, president and CEO of corporate communications service provider Equant, which was recently brought out by France Telecom. "Revenues are decreasing on basic voice services."
"All the major carriers have a next-generation network plot," said Vince Kennedy, director of innovation and solutions for NEXTEP broadband. "Their fixed line revenues have been decreasing for a while."
Despite being extremely expensive to roll out, next-generation networks promise telecommunications carriers a significant reduction in operational costs. Today, most major carriers have a mix of data and voice networks - sometimes as many as a dozen.
To choose a local example, Telstra has three mobile voice and data networks, a legacy circuit-switched PSTN and a rabble of internet access networks and data networks. Compounding this complexity, IT systems within carriers tend to be product- or network-based (in 'silos'), which makes it hard for the company's marketing folk to gain a single view of a customer.
"The current model sees carriers sell whatever services a particular network is capable of," said Geof Haydon, Asia-Pacific director of innovation and market development for networking vendor Alcatel. "An IP-based network, on the other hand, is flexible enough that the network can deliver existing services and many new services from a lower cost base."
Going all-out IP
The earliest adopters of converged networks in the business world were attracted to the cost savings associated with running their voice communications over IP and reducing their fixed line phone call expenditure. But since then, most carriers have reduced their fixed line prices dramatically, making 'toll bypass' a far less compelling driver to upgrade, Dalibard said.
Instead, the drivers behind today's converged networks tend to be the cost savings and productivity gains made from enhanced call management, reduced maintenance and administration costs, and the reduced costs associated with innovative applications such as videoconferencing, presence technology and unified messaging.
Many of these applications, such as videoconferencing, have been around for decades, but never at the quality and low price available on a high-speed IP network. Most videoconferencing to date, for example, has run on 768 Kbps or 2 Mbps connections, which often results in movement and sound being out of synchronisation, forcing users to adjust their body language or slow down their speech.
Those industry pundits who have been lucky enough to try out video conferencing on next-generation IP networks agree that the user experience is something else altogether. Roland Chia, business manager for converged communications at technology integrator Dimension Data, likens it to "taking part in a face-to-face conversation with a character in a digital movie".
Enhanced call management technologies include functionality such as 'call forking', which sees calls that come through to a user's phone number diverted to any device of their choosing.
"The main benefit of a next-generation network is the independence and mobility of access," explains Kennedy. "Traditionally, my phone number is associated with a piece of equipment - be it my mobile phone or my home phone," "In future applications, that number will be associated with me, regardless of what equipment I am using, as long as I log in with a username and password. I can receive calls any time, anywhere."
This application becomes particularly useful when combined with 'presence' technology, which will allow a user making a phone call, sending an email or an instant message to be provided with the location or status of the person they wish to communicate with. The consumer world has already sampled a taste of this technology using the likes of MSN and Yahoo Messenger, but corporate versions due for release far outweigh these early iterations in terms of functionality and security.
There is no shortage of network service providers in the market who are using the "business anywhere, any time" mantra to bring the world's largest corporations onto converged networks. Globally, companies with offices in more than one country tend to contract their connectivity needs on a global basis to the likes of AT&T, Equant (France Telecom) and BT InfoNet.
"We are giving business users access to data, voice and video in ways that they could traditionally only access from their office, from anywhere in the world," pitches Raj Kapoor, vice president of BT in Australasia.
But for the carriers providing traditional voice and data services to users at home, opportunities in the business market are largely overshadowed by the opportunities in the residential market.
While industry commentators see opportunities in taking communications tools such as videoconferencing and unified messaging to the small business market, from a revenue perspective, all eyes are on home users.
"In the business world, services such as VPN will all migrate onto the IP network, but it will be the same revenue, fulfilled by a different network," explains Kevin Dillon, vice president of technology at Juniper Networks. "The services themselves will not be much different."
Taking IP home
For carriers, it's the consumer market that has the most potential to vastly increase its consumption of bandwidth. Considering the capability of a converged network to deliver entertainment and communications to a range of devices in the home, and the bandwidth necessary to handle it (especially for IPTV, video-on-demand and interactive gaming), its little wonder that the consumer market is where the carriers see opportunities for revenue growth.
"From a revenue perspective, the whole premise of a next-generation network is residential use," Heydon said. "This is what excites the telcos - the classic triple-play of internet, voice and IPTV into the consumer market."
For home users, the technology can be used to integrate entertainment and communications needs.
"When its gets interesting is when we are coming up with new variations on old themes," Heydon said. "You can make a decision on an incoming phone call on your TV screen - choose whether to take it as a video call, flick it off to your handset, flick it to your mobile if you're heading out the door, flick it to your messages if you can't take the call at that time."
Heydon said that while all the carriers in Australia have ambitions of providing such services, Telstra is the only player realistically capable of providing ubiquitous services to the whole country.
Telstra has been vocal about its plans to upgrade to a next-generation network. In November 2005, Australia's incumbent carrier made public a comprehensive plan to kit out a network capable of handling high-speed internet, voice-over-IP, video-on-demand, telecommuting access, multi-channel IPTV and videoconferencing.
The $11 billion plan, however, is hinged on a debate with Australia's competition regulator, the ACCC, which insists that such a network is made available to other service providers as per the existing regulatory regime for Telstra's copper network.
Telstra argues that investing such a large amount of money in a new network should subject it to different rules than the legacy network it was handed when it was partially privatised.
"Poor regulatory decisions which do not allow the company to earn an adequate return on investment oblige the management and the board to consider the wisdom of such investments," threatened Kate McKenzie, deputy group managing director of public policy and communications for Telstra, in a regulatory briefing held in late 2005.
A spokesperson for Telstra has since confirmed that the carrier is prepared to abandon the network build altogether if the regulator's stance doesn't change.
But despite Telstra's threat to pull out of the network build, the federal government and industry analysts feel that it is inevitable that the carrier will have to upgrade.
"From my perspective, I think it is inevitable that Telstra will invest in new networks," said Federal Communication Minister, Senator Coonan in a speech to investment analysts in December. "Telstra is looking for new growth opportunities and has identified integrated services, content and applications as the likely source of this growth."
If and when Telstra takes the plunge, Haydon said Australians outside of major population centres should expect a long wait before they start seeing the benefits of the technology.
"It will take a long time to build an IP network that covers an entire country," Haydon said. "It's easy to do the first half of the network in built-up areas, but the second half is very costly and difficult. It's a big amount of spend and you need to be able to be sure you will get the return. Its easy to justify that spend in highly populated areas and far harder elsewhere."
Hence, business users will be playing with the technology for a long time before the wider populace, despite the residential market being the main target of the effort.
Next-generation bandages
While there is no doubt that the services available on next-generation networks will prove a boon for business users and consumers, they will only be a stabilising force for carrier revenues, rather than a source of new profits, Kennedy said.
"The next-generation services might not increase revenue streams, but they will at least stop it from decreasing," he said. "When it comes to these services, the cost equation will become less important than the features the user can get out of it.
"Users won't necessarily fork out more for this functionality, but it might stop them leaving the carrier for somebody else."
