Cbeyond's Next-Generation Network: Benefits of Soft-Switch Control and Packet Telephony
The full value of soft-switch control and packet telephony must be measured by its impact on three key areas: improved economics for traditional services, the introduction of new services, and rapid scalability of both.
Cbeyond has spent a lot of time comparing the economics of incumbent CLECs with its internal business plan. Cbeyond's current business model shows that packet telephony is much less expensive than more traditional circuit-switch based network models. In addition to the lower cost structure, packet networks offer carriers the advantage of easily integrating a wide array of additional services to the customer. Thereby providing enhanced service opportunities for the carrier.
Compression: In Cbeyond's current implementation, each voice call requires 88 kbps of network bandwidth. This is based on its use of the G.711 CODEC (64 Kbps) and the overhead associated with breaking a call into IP packets. Very soon Cbeyond will enable compression in our network (a feature already supported) and effectively reduce that bandwidth requirement by 40% - 50%. This creates facility savings and provides bandwidth for additional voice lines and/or IP applications.
Packet Peering for Long Distance Termination: In Cbeyond's current model, domestic and international long distance calls are terminated via a circuit-switched. In addition to the per minute charges we pay to terminate a call, we pay for separate local access circuits and spend capital on trunking gateway ports to connect to those circuits. Very soon companies will release IP products such that we will be able to route all of our long distance calls as IP packets. The result is that we can use the same local access that we already buy for ISP services; both Internet and LD traffic will use the same connection. As such, we expect considerable CAPEX and OPEX savings when we convert to packet peering later this year.
New Access Technologies: All of Cbeyond's services are delivered via Internet Protocol (Layer 3). Because IP is so ubiquitous, Cbeyond is positioned to take advantage of a broad range of local access options. Even today we serve our headquarters office over a transparent LAN connection from YIPES Communications. Our use of IP combined with deployment of LEC end-office collocations makes T-1, DSL, Frame Relay, ATM, transparent LAN (Ethernet), and emerging wireless services all access alternatives. Cbeyond will consistently evaluate the options at its disposal to minimize access and transport costs.
IP Phones and other IP End-Points: There are currently a large number of companies that are developing/offering IP Phones. Prices for such devices are rapidly approaching a $200 price range with a broad array of features not common on traditional sets. In addition, software clients that use the same telephony protocols are being developed to make standard telephones out of one's PC without the need for specialized cards or hardware. We believe that as we expand the capability of our infrastructure to support more PBX-like features, that the adoption of IP-based phones and other similar devices will increase. This increase in use will have an inverse relationship with the use of IAD's. In other words, if we convert a customer to the use of IP Phones with PBX-like support, they will no longer need their own key system or PBX nor an IAD to provide it with trunks. The adoption of IP Phones is all upside in our current model - an upside that would result in significant CAPEX reductions as customers buy their own IP phones.
Next generation services are a key success factor in Cbeyond's model. We often say that packet telephony and the softswitch have "moved communications into a computing paradigm." There are two main elements in Cbeyond's current infrastructure 1] the IP network and 2] call control logic. All call control is provided by the Cisco BTS 10200 soft-switch that is nothing more than a software application running on a standard Sun Microsystems server. In addition to providing the core set of features that the product is designed to support such as call set-up, call completion, call routing, and traditional Class 5 features, the software also provides protocol level and software API's (Application Programming Interfaces). These API's allow 3rd party developers to write new applications that use the resources of the soft-switch. By using these open interfaces anyone who can write code can create new communications-related applications that Cbeyond can manage and/or sell.
There is an entire industry that is emerging around the development of hardware and software that supports Cbeyond's vision. The International Softswitch Consortium now has over 250 members, many of which are working on new applications. Companies are developing applications such as Unified Messaging, hosted or virtual PBX, conferencing, auto-attendant, IVR, ACD, follow-me services, and complex speech recognition.
We are certain that this emerging market will produce an unprecedented number of applications that will create a new type of CLEC industry where the services offered by its members will be truly distinguishable. This vision cannot be fulfilled by the current voice infrastructure. The reason we have seen so little innovation in traditional 'phone company' services is precisely because the architecture is so inflexible. The open interfaces offered in the packet-telephony model will make those infrastructures the home of new services that end-users desire.
The last success factor is the speed and efficiency with which Cbeyond's next-gen network can be deployed. The two factors that drive this ability are the minimal space requirements of our equipment and the network-based intelligence of our services. Without regard for the increased efficiency that comes from end-office collocations, the only equipment needed to establish Cbeyond's complete capability in a new market could all easily fit within four 7' racks. While in the real world we make space for other carriers to terminate their fiber and we leave room for future expansion, the components needed to establish service in a new market include a few routers, Ethernet switches, trunking gateways, and Sun servers to provide key data services such as DNS, voicemail, etc. Compared with a DMS 500 or Lucent 5E installation, it's hard to believe that they will be able to accomplish the same result. In addition, a soft-switch is not deployed in each market. This removes the burden of managing and administering a new voice switch in each market. The end result is that new services can be enabled very quickly with little capital cost across all of our markets. When compared with the burden of deploying legacy systems, it is easy to see that packet-based players will grow faster and more efficiently.
Cbeyond must be valued based on the disruptive change wrought by packet telephony: improved economics for traditional services, the introduction of new services, and rapid scalability of both. The next generation provider that leverages soft-switch control and packet infrastructure will not only compete with incumbents, but ultimately force adoption in the industry through new services not possible in the legacy PSTN. As this adoption accelerates, Cbeyond will leverage the flexible nature of its infrastructure and rapidly deploy to meet market demands.
