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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: jach who wrote (54101)	9/12/1998 2:34:00 PM
From: Ed K	Read Replies (1) \| Respond to of 61433

What's really behind the Ascend and Cisco deals By Thomas Nolle Network World, 09/07/98 On the surface, the news seems simple. Ascend buys Stratus. Cisco buys Summa Four. IP giants battle for positioning in the holy war of convergence, or voice over IP, or whatever. But nothing is what it seems to be on the surface these days. Look at two other news stories. Lucent gets orders from regional Bell operating company SBC and competitive local exchange carrier (CLEC) Dakota Telcom for billions of dollars worth of 5ESS switches. If we're converging on a new IP-based voice infrastructure, the old technology is sure getting a heck of a send-off. Now it's possible that Cisco and Ascend planners have their heads in the converging clouds, so to speak, and have missed the other news stories. It's also possible that the first two news items were really caused by the second two. If Class 5 voice switches are still worth billions, maybe IP players need to get into that market. (Note, I'm not saying, "Replace that market with IP," but rather "get into that market.") There's an architecture - a set of standards - that Cisco and Ascend could use to threaten Lucent and Nortel (not to mention Siemens, Ericsson and others) in the Class 5 switch market. It's called advanced intelligent network (AIN). AIN is a Bellcore initiative to restructure the way voice telephony works to make it look more like client/server computing. In traditional voice networks, all service features had to be programmed into the big central office edge switches, or Class 5 switches. The software was so complex that features were planned two years in advance, and the cost of the devices kept mounting. AIN is targeted at fixing that problem. In an AIN, service intelligence is distributed among service control points (SCP), service switching points (SSP) and intelligent peripherals. These smart gadgets are linked in a control network using signal transfer points (STP). What runs that control network? Signaling System 7 (SS7). What's the common thread in the Cisco/Summa Four and Ascend/Stratus deals? SS7. Summa Four is big in the intelligent peripherals market; Stratus is big in intelligent peripherals and STPs. Get the picture? If AIN were adopted, it would make today's Class 5 switches a distributed series of switches and computers linked via SS7. The switches would be SSPs, not much more than a dumb matrix that nearly anyone could build. All the service features - the SCPs and intelligent peripherals - would reside in the computers. AIN was designed to make it possible to deploy new service features faster. It was also designed to reduce costs to carriers and open the market to more competition. Those are goals competitive carriers would value, yet a large local exchange carrier (SBC) and a CLEC (Dakota Telcom) just bought traditional Class 5 switches from Lucent. Could they have done so in part because no organized, AIN-like product set is available? Today even small switches are built on monolithic lines, without the concepts of distributed computing that AIN has represented for nearly a decade. AIN could take off, though, if somebody brought the right combination of computer and switch technology together and linked it with SS7. By developing a Class 5 switch strategy based on AIN and the downsized and distributed form of telephone switching, Cisco and Ascend could target the multibillion-dollar market that today goes to Nortel or Lucent almost by default. Why, die-hards will ask, can't these announcements of SS7 deals be viewed as a sure sign of convergence or the righteous victory of voice over IP against the heathen time-division multiplexing voice establishment? Simple: Because Class 5 switches are used mostly for local calling and feature support, and those functions don't really offer any value foothold for the data IP players. A local call is two analog loops linked at a single switch. Why move to IP to save transport costs when no transport is being consumed? Even if convergence isn't what we could delicately call crap (which it is), it won't influence the outcome of the data communications company-vs.-telco fight. The majority of the profits Lucent reported in its recent third-quarter announcement had nothing to do with any product that would be affected in any way by convergence. What would affect Lucent is a change in edge switching, and that's a market the data players can't easily turn into a data market. We have mouths, ears and analog phones, not RS-232 interfaces. One thing the convergence advocates say is true: We are at a pivotal point in the evolution of the voice market. The big voice players have a revenue stream that literally dwarfs data revenue. If those voice guys get into data, which Nortel and Lucent clearly intend to do, then today's data players will be a revenue pimple by comparison - unless they can carry the battle to the telco giants' home territory - switching, not transport infrastructure. Can Cisco and Ascend see past the convergence and voice-over-IP mumbo jumbo? Will some other player do that and ace out the kingpin data vendors and big telco players? Only time will tell. Nolle is president of CIMI, a technology assessment firm in Voorhees, N.J. He can be reached at (609) 753-0004 or tnolle@cimicorp.com. nwfusion.com