Telecom Past and Present

By : Antonis Hontzeas M.B.A. Technological progress is an ongoing process which means whatever anyone says, or whatever architecture we end up with, this architecture will be nothing more than a step in the never-ending staircase of network evolution. Before we discuss what architectures the industry is looking at (and by this I mean plausible architectures that will result from both endogenous and exogenous pressures) I think it is important to have a brief look at the history of the telecom/information network and how we ended up where we are today.  Here’s a very basic treatment but with the provided links I think you’ll get the picture. The original intention of telephony was to interconnect people in the most efficient, least cost way.This started with the switchboard where you had an operator receive your call (which was originally generated by a hand generator on the telephone set) and then through a plug based system, manually interconnect you to your wanted destination which you communicated orally to the operator.Now, at some point in time in a little town in the states, it so happened that there were two morticians and the wife of one of the morticians was the operator. So whenever a call came in for mortician services, the operator made sure that the call ended up the funeral parlor that her husband owned.This particular favoritism pissed of the other mortician, who was a dude that went by the name of Almon Strowger. This cat loosing business and all, decided to design an automatic system that allowed mechanical call interconnection thus eventually rendering the manual switchboard obsolete. This system became know as the Strowger switch and was indeed the first mechanical telephone interconnection system and predecessor to the present circuit switched telephony system.The Strowger switch also brought forth in a primitive way the concept of equal access.The Strowger switch eventually gave way to crossbar architectures and with the advent of computer systems, the stored program control system eventually replaced crossbar technologies.Now the thing with stored program control (or SPC as its know in the industry) is that it was composed of segregated subsystems. You had a subsystem for CAS and then SS7 signaling, a subsystem for voice interconnection (and by that time the common form of connection was through an aggregated (multiplexed) form of PCM (pulse code modulation), a subsystem for supplementary services (such as call back, call waiting etc..), a subsystem for subscriber data, a subsystem for number translation/routing, a subsystem for operation and maintenance, and a whole other set of subsystems. All these subsystems where controlled/coordinated by a central control subsystem.So the switch basically contained in a vertical sort of way whatever you needed to ensure proper call processing and communication with other switches and the human environment .   

Typical SPC systems included the Ericsson AXE, the Alcatel System 12 (formerly ITT 1240) , the Motorola EMX,  the Siemens EWSD, the Northern Telecom (Nortel) DMS, the Stromberg Carlsson DCO, the AT&T No. xx(eventually  Lucent and now Alcatel-Lucent)  and so forth. An interesting point is that Japanese manufacturers (for example Fujitsu and NEC) also became interested in the telecom game and started developing their own systems, but didn’t gain much headway in an industry that was dominated by European and American companies (as opposed to the   success the Japanese have had in heavy industry (cars, steel) and electronics). Today, the Chinese (Huawei, ZTE) are experiencing success and have managed to change the rules of the game (commoditization). Indeed, communication technology is no longer the prerogative of Europe and America. The network consisted of a number of these switches, means to interconnect them (a transmission network initially PDH and then SDH) and synchronize them (a master clock that coordinated the local switch clocks) as well as a central (and many regional) operation centers for monitoring (and upgrading) the status of the switches and the network as a whole. Now in the eighties and nineties a number of factors started disrupting this Euro American haven. First of all, we had Judge Greene and deregulation which forced the breakup of AT&T and brought forth a system of regional bells and inter-exchange carriers injecting an embryonic form of competition into the bell system (Europe followed later in its own way). This, through equal access, increased the need for services and features at an attractive price.Since we were now dealing with a price sensitive market, the first signs of commoditization started appearing in voice services.Also, we had new communications options coming in the form of mobile communication and companies (example Vodafone) that focused only on this form of communication. These companies started competing for customers and actually offered their services as replacement services to the traditional fixed line systems.Thirdly, we had the democrats in power (the Clinton administration) that shifted investment from military technologies to communication/information technologies (the information superhighway) and a host of new proprietary military technologies became available for mass industrial deployment (example: CDMA).We also had some bad ass entrepreneurs that viewed the telecom market a virgin territory for their offering and started to convince the industry that IP was the way to go.And then of course, we had the internet1 .The telecom game was never to be the same.

1 The internet itself eminated from military research (the Arpanet). Also, the FCC should be given credit to having through the Computer inquiries and Stephen’s reports prepared the regulatory foundation that  allowed the eventual growth and expansion of this medium. These proposals also laid the groundwork for a very basic form of net neutrality since AT&T was now not the only company that could provide access devices for the infocom network and had to compete like anyone else (remember that AT&T pc??).

One of the principle revenue generators of switch providers  was (and still is) software sales which include sets of new features that each new  revision of a software package introduced. In other words, a major portion of revenue was generated by the subscriber services subsystems that were sold as part of every new version of the released software. Now take a look at the layered architecture model (for example in 3G system, 4G (LTE) and common core converged services layered architectures). You’ll see that the part of the network responsible for subscriber services is a layer on its own and through the standardized ip network communicates with the rest of the network. So If another company/industry (such as computer software knowledge powerhouses and companies specializing in multi vendor, multi standard integration) provides the application layer (whether VoIP, iptv, mobile tv etc..) you can understand that a strong portion of revenue that originally (with considerable unadjusted margin) went to the classical switch manufacturers is now gone. And since the control and connectivity part of the network (since it is subject to standardization) is commoditized (longer to developed, costly, but faster to reproduce) and subject to price erosion, then you can see the predicament that the classical suppliers are faced with2.In addition, the layered architecture aside from isolating the various parts of the network and allowing independent development, also indirectly suggests that each part or layer can actually be a different company (or logical entity). So one corporation can supply services (very possible; likely), another can control the network intelligence (not likely, usually goes with the connectivity part; but for the sake of argument) and finally a third company can assume the connectivity part of the network. Still another company can be the overall administrator and coordinator of the three operational entities (again for the sake of argument; but it is possible!!!). So if you couple this with regulatory legislation (cfr. Functional separation) and opex reductions (outsourcing of the network to a third party) then both the traditional suppliers and the traditional telecom operators are facing transitions within their established operational domains and   structural integrity. Some companies have taken aggressive steps towards addressing these changes. Others   still maintain a middle of the road kinda thinking.

What’s happening to Telecom? That seems to be the prevailing question nowadays. The answer is simple: Nothing! At least nothing out of the ordinary. Oh sure, capital generally is being concentrated and coupled with  the maturity of the voice segment, certain parts of the communication technology (and associated

2 Of course when a switch manufacturer provides about 1000 media gateways to the whole network, then of course price erosion or not (assuming the manufacturer has a sound pricing and cost policy) the manufacturer receives impressive revenues just by sheer volume of sales.  

business models) are suffering price erosion. This means from the supply side mergers and from the demand side falling prices. But the fact remains the same. Telecom is a tool. It’s a tool whose original purpose was (and still is) to get people to talk to each other in the most efficient way. Of course, people found that with party lines they could meet new people (remember that party lines were FREE!!!) and expand their socializing and loh!!!, you have the social network. So the internet didn’t really invent the social network, it just made it more efficient (and cheaper!!!). So telecom is still doing what it was meant to do. Its just that now instead of being the prime communication tool (ie. Voice), its part of an increasingly expanding set of tools that allow people to socialize (whether speech, writing or multimedia) and communicate. And since telecom/speech is another spoke in the wheel, it’ll have to learn to play as part of the orchestra, and with the appropriate remuneration.