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.