AT&T (NYSE: T) and Verizon (NYSE: VZ) are clearly two service providers making a migration away from the PSTN to all IP, but the move has to carefully take into account a number of key technical, business and operational issues.
Left, Verizon's Melone. Right, AT&T's Donovan.
Speaking at the recent ATIS Executive Roundtable event during this past week's CTIA tradeshow in New Orleans, Tony Melone, CTO of Verizon and John Donovan, SVP of technology and network operations at AT&T, outlined the challenges they and every incumbent telco will face.
Both service providers have been increasingly offering IP-based voice services as their traditional legacy PSTN revenues decline every quarter. AT&T's traditional voice lines declined to 37.8 million at the end of the first quarter of 2012, while Verizon ended the quarter with 23.7 million total traditional voice lines.
Being incumbent service providers, the obvious issue is that the delivery of IP-based voice service cannibalizes an existing revenue stream that has served them for the better part of a hundred years.
Melone said that moving to all-IP based voice network is a careful strategy of weighing regulatory issues and maintaining new and legacy services.
"One of the first things that come to mind is if we have a new network let's make sure we don't try to force old products on the new network," he said. "I think we had the tendency both internally to do some things by never wanting to cut the cord on some products that were making some revenue to incent people to move to the new. Then, in some cases we have some regulatory challenges on what we can do and not do on the on the new and the old network."
Melone added that the inevitable realities of migrating away from the PSTN to IP for an ILEC like Verizon creates the other issue of having to support a network where revenue is declining every quarter.
"It's a delicate balance of doing some things to aggressively to navigate that effectively, but there's still some hurdles along the way that we need to make sure both internally and externally on the regulatory front that we manage and push," he said. "I think that we need to be opportunistic. To think we can in the next five years we force the issue and reduce our cost structure by shutting down the old network is unrealistic."
Donovan, who is also seeing a rise in IP revenues while traditional PSTN voice revenues and lines decline, agreed that the migration to IP shouldn't be done hastily.
"If you look at old services and old platforms over here and the new services on new platforms, there's a minefield you have to walk through," he said.
Echoing some of the same comments of his ILEC counterpart, Donovan said there are a number of bad outcomes a service provider needs to avoid: putting new services on new platforms is expensive and putting new services on old platforms.
Donovan said another key issue is that any transition needs to take into account the back office operations that have existed for decades.
"It is very tricky to work towards new platforms and new services because there are a lot of processes for these legacy services that are highly embedded in customer operations so there's a lot at risk there," he said. "I'd like to go as fast we can prudently do so, but having 6,000 or so nodes of old platforms and going to 4,000 interim nodes to retire for the long run does not make a good business case."
Despite these challenges, Donovan encourages "everybody that is predicting the demise or the overnight extinction of the PSTN to just think about what you can do to monetize in this pivot because there's a big opportunity there."
Service providers are making progress to develop methods and standards that take into account the operational and regulatory issues in transitioning the PSTN to IP.
ATIS itself, earlier this year, launched a new initiative to create standards and best practices to help service providers like AT&T and Verizon transition their TDM-based PTSN networks to IP.
With the new Transition Landscape Team, ATIS has tasked itself with three main goals: evaluating PSTN replacement network architecture and capabilities, defining requirements for services on an IP-based network, and examining if there are relevant standards to handle IP-based telephony as a replacement for PSTN telephony.
In addition, the transition team will consider what impact an all IP-based network and related security issues will have for VoIP providers like Vonage and a host of other OTT providers that can be accessed via a user's cable or DSL broadband connection.
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