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To: Mr. Miller who wrote (6154)	4/22/1998 3:30:00 PM
From: Brooke Geiger	Read Replies (1) \| Respond to of 7703

HERE WE GOOOOOOOOO!!!!!!! Brooke (throwing southern comfort popsicles to Rocketman with tennis shoes on =) )

To: Mr. Miller who wrote (6154)

4/22/1998 3:31:00 PM

From: Hope

Read Replies (1) | Respond to of 7703

Borrowed from the Ascend thread:

Global Telephony must read article. 4/98 Cover Story.

The Internet:
Changing the face of communications

The Internet has changed from an annoyance
to a possible threat to telcos worldwide

globaltelephony.com

By Wayne Walley, Editor-in-Chief

The Internet is proving to be a catalyst for transformations in the telecommunications
world. Now, instead of trying to swat the Internet away like an annoying gnat buzzing
around their ears, the telecommunications industry's giants are starting to realize that
this phenomenon is one they can no longer ignore.

"I have seen a gigantic shift in view and personality in as short a time as one year. A
year ago, the carrier sense was that the technology would never work and certainly
not work in their environments," says Heidi Bersin, vice president of marketing for
U.S.-based Clarent Corp., a provider of Internet telephony solutions targeting the
carrier market. "Then it was, 'Oh, oh. This will happen. What can I do to stop this?'
Then they realized it would happen anyway and are looking at how to make
lemonade out of lemons."

The hasty change in telephone companies' attitudes toward the Internet and IP-based
networks could not have come at a better time, according to a recent article in the
McKinsey Quarterly, written by a principal and four consultants with McKinsey &
Co. "This is exactly the right moment for telecom executives to take seriously
both
the transition to IP-based networks and the threat from datacom attackers,"
the
report suggests. "The coming battle will not be for the faint of heart. Value will
migrate to the top two or three players in each industry segment."

The Internet protocol's capability to scale up and support a global network with
greater capacity than the public switched telephone network and the generation of
new services and network independence have forced telcos to shift the way they
think about telecom infrastructure. U.S.-based Bellcore goes as far as describing the
evolution of Internet technology to IP dial tone as being similar to the integrated
services digital network concept that the telecom industry had hoped to create with
ISDN and broadband ISDN.

Telcos' new attitude toward the Internet also stems from the need to meet increasing
demand for Internet access. "In Europe there's quite an uptake for Internet
access,
approximately 100% growth, although that is from a fairly low base," says Staffan
Lindholm, general manager for Internet programs at Ericsson Telecom AB. "Telcos
have been looking for a killer application for ISDN, and they have finally found it."
He sees the next wave of technology for providing Internet access as being digital
subscriber line (xDSL), specifically asymmetrical digital subscriber line (ADSL).

Futurists already paint a picture of opportunities using today technologies, including
the Internet, that will significantly alter the way people bank, invest, shop or are
entertained. Bellcore envisions the development of Internet protocol dial tone with
ubiquitous access to a global infrastructure based on Internet technology that
provides a wide range of voice, data and video services.

"The Internet redefines communications, enabling new classes of services," said Kim
Polese, president and CEO of Marimba, at January's ComNet conference in
Washington, D.C. The race now is for providers to give consumers easy high-speed
access that is painless to use. "In the networked age, we will think of the Internet as a
utility," she said.

Paul Tempest Mitchell, systems engineering manager for Sun Microsystems' Telco
Division, San Jose, California, expands on this idea. "What the Internet is bringing to
the consumer is the potential to get services from anywhere. There is Java. Or there
could be two people in a garage who write a service. They put it on an ISP server,
and it's available on the Internet through the ISP or the cable company or the mobile
phone."

The result is an odd era for communications, exploding the economic models that
have governed telcos for decades and morphing the industry into a form of
telecommunications able to accept the inevitable evolution from the circuit-switched
world to a packet-switched future by developing lucrative new markets and
applications.

A change in attitude, pure and simple, is one way some telcos are making this
transition.

WorldCom was one of the first new breed of carriers to recognize the possibilities,
with its acquisition of UUNet and MFS and its now proposed merger with MCI.
Deutsche Telekom has purchased a significant piece of Israel-based VocalTec, one
of the leaders in Internet telephony technologies.

Australia's Telstra initially offered high-speed cable Internet services to nearly 1
million premises in Sydney and Melbourne last year in its Big Pond Cable Internet
project. And Global One is now touting new Internet-related services including a
global dial-up IP service.

What these carriers have seen is that, "as the Internet grows, the business of telcos
grows. They provide the copper and the connection," says Ashraf Dahod, president
of U.S.-based NetCore Systems in Wilmington, Massachusetts. The company is
currently developing a carrier-class multilayer switch to enable quality of service for
large-scale networks such as the Internet. "Telcos can take the Internet on as an
opportunity or be overrun by it. The Internet has changed the way we do business."

Peter Radley, director of marketing and business development for Alcatel, Paris,
agrees. "IP is a vehicle, a commodity that delivers information more efficiently," he
maintains. "The Internet is a series of fleets of vehicles carrying commodities using
existing transportation to do it. Telecoms is the information highway."

Radley is keen to point out the symmetry of growth, with Internet subscribers, fixed
telephony customers and mobile telephony users each expected to grow by about
250 million between 1996 and 2001, meaning there is plenty of potential growth for
the telco business without the Internet (see Table 1 below).

The difference is that Internet subscribers use the telephone network for longer
periods of time, increasing demand, the need to handle traffic more intelligently and
the need to re-architect the public network by adding capacity.

"All of these are important driving forces, and all have their own implication on
telecoms," Radley explains. "That doesn't mean you need to build a new network,
but it can be federated." Advances in intelligent networks make it possible to
generate a single bill, he notes, although, right now regulation hinders such
arrangements in many places.

As volumes grow with Internet access and consumers embrace it for voice
telephony, some core competencies will be important, such as billing and customer
care, all things that telcos have honed over 150 years, says Amy Snyder, a partner in
Deloitte Consulting, Boston. "The telcos are well-positioned," she says. "They can
truly integrate voice and data solutions to solve business problems for corporations.
The trick is to make the transition from one architecture to another."

Improving IP's voice

As Snyder implies, all is not rosy on the ISP side of business either. Traditional, or
simply plain access, ISPs are having a hard time making ends meet these days. They
too need to make a change in their business model. Industry observers note that
revenues from traditional Internet services, such as basic Internet access, will pale in
comparison to revenues of traditional telecom services carried over the Internet.

Instead of competing with telcos' connectivity expertise, ISPs can compete with
traditional circuit-switching providers on an economic basis through voice over
IP
(VOIP), said Mike Martin, western area manager for Netspeak, at a panel
discussion at PTC '98 in Honolulu in January. "There are enough users for
voice over
IP to make money," he said. "This is going to be big."

Meanwhile, still remaining problems associated with using the Internet for voice aren't
looking so hopeless anymore.

"Clearly the whole business will improve when the Internet improves," says David
Greenblatt, vice president of operations for Net2Phone, IDT's Internet telephony
service. Internet telephony, or IP telephony, requires bandwidth-on-demand,
Greenblatt says, something the public Internet cannot yet guarantee.

"The issue is bandwidth, bandwidth, bandwidth," Greenblatt says. When lots of
traffic goes over a common line, things tend to get backed up. So investment in the
Internet backbone, which Sprint, MCI and others are building out at a rapid pace,
needs to happen before the public Internet becomes a greater vehicle for phone
conversations, he claims.

The technology also presents latency problems or lost packets. But the quality of
Internet telephony has improved with fixed point-to-point systems and worldwide
grouping of routers, Clarent's Bersin says. Faster microprocessors, small digital signal
processors with limited functions specialized for Internet telephony, the availability of
bandwidth and quicker routers have all contributed to improvement in voice quality
over the Internet. Specifically, the next generation of routers is expected to be
capable of giving preference to handling the types of packets that are sensitive to
delay.

Developers are also getting closer to resolving standards for VOIP (see sidebar).
And security has improved with firewalls, encryption and authentication, and
quality-of-service mechanisms for IP are being developed that use methods such as
classes of service defined with certain loss and delay guarantees.

"The technology has evolved to do voice processing, and it will only get better and
better," Bersin says.

Deregulation has also made carriers looking for quick and legal ways to enter new
markets more accepting of the Internet, says Bersin. "It's a much longer process to
buy a PBX or central office and register themselves as a new circuit switch provider
in a country," she says. "If they go in as an ISP, they can buy lines as ISPs and save
millions in setting it up."

Industry observers also see a big future for Internet telephony. A recent Frost
&
Sullivan study predicts the Internet telephony market will reach $1.89 billion by
the
end of 2001. According to a Crittenden Roth study, the largest consumers of
Internet
telephony products in the year 2000 will be telcos, spending $500 million, and
enterprise networks, spending $400 million.

The data threat

The big threat to telcos is not Internet telephony, but private data networks, argues
Ulysses Auger, president and CEO of CAIS Internet and parent company CGX
Communications. "Over private data networks, you can engineer the traffic flow, and
the quality of Internet telephony is quite good. And as the future becomes the
present, combinations will occur with better ways of exchanging traffic at network
access points, and a lot of companies with private interconnecting will bypass the
public networks."

To be a competitor in the telecom market in a few years, Auger says, carriers will
have to provide customers with origination or termination. "The long-distance
provider will just provide the long-haul piece, and that will be a difficult and narrow
market," he explains. "But it will be very important to bundle transport with the
origination or termination leg to the premises of the person you call. You need to be a
kind of IP local exchange carrier."

Large corporations in particular will migrate all or part of corporate data
networks to
the Internet and intranets, with IP as the networking platform of choice, says
Deloitte's Snyder. But there is a silver lining to this trend for telcos, Snyder
says, even
though IP networks and virtual private networks (VPNs) are replacing
traditional
telco cash cows such as T-1 and E-1 type services with leased lines.

"To the extent corporations migrate mission-critical applications to VPN over
IP
networks, they will hold ISPs' feet to the fire for quality of service. We all know
true
quality of service these days, given the standards, is end-to-end facilities. That
means
deep pockets, and that brings you back to telcos."

Contact Editor-in-Chief Wayne Walley.

Packet savings

No matter how fast some people talk on the telephone, there are periods of silence.
In traditional telephony applications, those pauses mean wasted bandwidth because
the synchronous digital hierarchy (SDH) channels generate a constant stream of bits
at the specified rate whether there is conversation or not. In packet voice, speech is
transported as data packets, and these packets are generated only when there is
actual speech to transport.

The elimination of wasted bandwidth during periods of silence will, by itself, reduce
the effective required bandwidth by one-third or more, according to a recent Cisco
white paper about packet voice networks. That alone is a compelling reason to
consider packet voice.

But the technology does pose problems with delay and loss of timing synchronization.
To solve this problem, public Internet protocol networks are turning to resource
reservation protocol (RSVP) to help offer guaranteed service levels. The signaling
protocol can be used to signal packet switches and routers to reserve resources in
order to reduce delay and delay jitter resulting from resource competition. That way
no matter how fast or slow you talk, packet voice should save bandwidth and offer
good quality.
--Wayne Walley

Telcos vs. ISPs

Most in the industry agree that there is more mingling than fighting among traditional
telephone companies and Internet service providers (ISPs) as most telephone
companies are already in the ISP business, albeit mainly through a separate division
or acquisition of an existing ISP. But competition is growing between ISPs who are
looking for ways to differentiate themselves in the marketplace.

As result, companies that usually sell products to telcos are now targeting ISPs.
Hewlett-Packard, for example, has adapted its OpenView management system for
the ISP market, giving service providers a way to quickly deploy value-added
services such as electronic mail, electronic commerce, Web hosting, smart cards and
more.

"ISPs are struggling to differentiate, and the high margin is in value-added services,"
says Tina Burnside, worldwide Internet e-commerce marketing program manager for
Hewlett-Packard. "They can charge more for tier services that are more complex."

One of the first customers of the system was Telstra, Australia's major
telecommunications carrier and also the country's leading ISP. "ISPs need to manage
their business better," Burnside says. "We are helping ISPs with telco components to
better deliver services and integrate with phone service. That means something like
converged billing can happen in that area."
--Wayne Walley

What lies ahead?

Two significant projects are on the horizon for the information superhighway

By George Lawton, Contributing Editor

In 1969, researchers in the United States began linking universities with a test
network maintained by the federal government. This marked the first phase of the
Internet, which was characterized by myriad fragmented networks and the absence
of commercial endeavors.

The second phase began in the early 1990s when Internet service providers (ISPs)
began creating their own commercial backbone, which brought hordes of consumers
and businesses on-line. This spawned applications varying from home shopping and
banking to electronic stock trading, as well as less expensive electronic data
interchange (EDI) services. However, high-latency and low-bandwidth
communications have limited the deployment of high revenue services such as voice
via the Internet protocol.

Today, the telecommunications industry is rapidly entering the third phase of
the
Internet, in which these bandwidth and latency limitations will be overcome.
Breaking
these barriers will unleash applications such as telephony; videoconferencing;
telepresence, or three-dimensional videoconferencing; video-on-demand;
remote
collaboration; and whatever else might be conceived. In the Internet's third phase,
efforts are coming from U.S. universities in projects such as Internet2
(www.internet2.edu), and from the commercial sector, as in the Project Oxygen
global undersea fiber network (www.oxygen.org).

Just as universities pioneered and developed the technologies and applications that
are on the Internet today, they appear to be leading the way to the next phase of the
Internet through the Internet2 project, spearheaded by the University Corporation for
Advanced Internet Development, Washington, D.C. The basic concept of Internet2
is to create a network of gigabit-speed network access points (NAPs), or points of
presence, called gigapops, which will route traffic with high reliability. These would
be located near participating universities that could access this bandwidth using
traditional local and wide area network technologies.

The researchers behind Internet2 are perfecting the protocols for specifying and
providing connectivity, ensuring quality of services and providing the network
management tools, data and organizations to keep everything running. The project's
architects feel the way to guarantee quality of service is through an accounting
mechanism to ensure that carriers are compensated for the traffic they carry. They
are working on creating an accounting and cost allocation scheme for negotiating
reasonable, efficient and productive distribution of costs among Internet2 members.

Internet2's objective is not to create new technology, and the project is not merely a
network research experiment. Its goal is to create a standards-based production
network using off-the-shelf technology wherever possible before the network goes
commercial.

Just as in the first phase of the Internet, universities will be responsible for connecting
their facilities to these gigapops, while the National Science Foundation will provide
funding for the high-speed backbone connecting the gigapops.

"If you look at what happened 10 years ago, a small investment by the federal
government in NSF funding resulted in huge expenditures on university networks,"
notes a spokesman for the Internet2 project.

When the technology behind Internet2 is fully commercialized, carriers will be able to
offer high-quality Internet services worldwide at the same level of reliability and
quality as existing telecommunications services, but at a significantly lower cost,
thanks to the economies of scale that the existing Internet provides.

"An important point about Internet2 is that it is not going to do anyone any good
unless it transforms the whole Internet," the spokesman explains. "You can think of it
as an extranet for higher education, but that kind of misses the point since most of the
Internet traffic does not go to other universities. If these technologies are not widely
adopted, they will be of limited use."

Internet2's corporate sponsors-which include Digital Equipment Corp., Lucent
Technologies, the Nokia Research Center, Northern Telecom and Simmons-are firm
believers that Internet2 will be good for the deployment of future services. The
project has already received about $20 million in corporate cash and in-kind
donations, such as equipment and services. These have come from vendors that see
the universities as great beta users for their technology because the researchers are
willing to spend time to get it to work, according to Internet2.

MCI is providing the Internet service for the Internet2 backbone, called the
very-high-speed Backbone Network Service (vBNS). The carrier recognizes the
potential of this type of network, especially since it has plans for upgrading its
commercial network.

MCI's voice backbone has been growing at only about 10% annually, while the
Internet backbone has been growing about of 80% to 110% annually, says
Randy
Catoe, director of Internet engineering at MCI.

"We will be investing in two kinds of initiatives," Catoe explains. "One that takes
current routing technologies and puts them on steroids. The other based on
convergence ideas, in which we can meaningfully use the large network we are
building for multiple applications, so that the overall network increases at a lower
overall cost.

"For example, we are currently providing resilience in one of our data networks by
not provisioning it to 100% capacity, so that, even if a node fails, it can still operate.
If we can adopt alternate resiliency techniques that involve making changes at the
switching layer, we can devote more bandwidth to end-user performance."

Catoe sees no inherent limitations in the use of Internet protocols for delivering the
same level of service possible with other types of data networks. "This is all a
network design problem. There are no inherent limitations in the Internet protocol,
but the overall network design is going to impact it," he notes.

"Another perspective is that of the kinds of data the market wants to introduce into
the equation. Voice is one of the least technically challenging because with
compression you can reduce data rate to a relatively small amount."

Although many people have some ideas about how to use Internet2, such as remote
collaboration, digital libraries, virtual laboratories, and virtual reality conferencing,
some of the best applications may not have even been conceived.

"It is not always apparent what the best use of the network is before people use it,"
Ubois says. "The Internet was up and running before people figured out the Web
was the thing to use it for. The universities and researchers are likely to come up with
new killer applications for the next generation Internet."

Owing to the success of the business model pioneered by the Internet, in which
consumers and carriers buy access to the network, U.S.-based CTR Group Ltd. has
launched a rather ambitious plan to build a global fiber optic network along the same
principles. Instead of requiring carriers to buy capacity on a specific submarine cable
link, Project Oxygen allows carriers to buy access to the network in 10-Gb/s
increments that can be used for routing calls to any of the destinations served by the
network.

"We believe that traditional forecasting of international traffic is obsolete," explains
Neil Tagare, CEO of Project Oxygen. "Carriers require tremendous flexibility in the
volume and direction of global traffic, and that is what Oxygen provides."

Project Oxygen plans to allocate 20 Gb/s of traffic for video programming, which will
be given away free to television stations, cable television companies and video
programmers. This represents about 16,000 channels of such programming, which
will be available at each node of the network. The participating carriers would be
free to repackage and distribute this programming to their customers as they see fit.

Network deployment will begin in early 1999 and should be complete by the
year
2003 for a total cost of $14.7 billion. Ultimately, the network will reach 256
landing
points worldwide. It will use asynchronous transfer mode (ATM) protocols
running
on top of a synchronous optical network (Sonet) backbone. Project Oxygen's 38
self-healing loops will provide at least 100 different ways of routing traffic in the event
of heavy volume or a break in a particular route.

The smallest capacity segments will carry 320 Gb/s of data using four fiber pairs.
Each fiber pair will carry eight frequencies of light, transmitting data at 10 Gb/s per
frequency. Links of less than 300 miles will contain 16 fiber pairs, allowing a capacity
of 960 Gb/s.

Project Oxygen promises to promote tremendous competition in the international
telecommunications market. Only about 50 carriers own the approximately 350
submarine cables in use today, Tagare notes. "Our goal is to increase ownership from
50 to more than 1,000 carriers worldwide," he says.

The cost of international communications could drastically decrease as a result of the
project's improvements in the speed of fiber optic communications and economies of
scale in building and maintaining this network. Participating carriers will pay on the
order of $2,000 for an E-1 line over 25 years, according to Project Oxygen
documentation. That comes out to less than $10 per DS-0 telephone circuit per year,
a fee that a telephone company could easily recoup with only one day of international
traffic.

The future of the Internet points toward a world in which bandwidth is almost too
cheap to meter. Profits will have to be made not through commodity voice services
but by adding value and convenience to voice services.

"We believe that voice as a stand- alone product may not have much value," says
Tagare. "It will be integrated into multimedia and video applications within three to
five years. The revenues carriers derive today will essentially go away. The carriers
of the future will derive revenues from resale, repackaging and delivery of content,
whether it is data or video content."

RETURN TO TOP

Any Comments?
Send them to Karen Murphy at msblues@earthlink.net.

www.globaltelephony.com
www.internettelephony.com
Global Telephony April 1998
c1998 Intertec Publishing Corp., a Primedia company
All Rights Reserved.