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TRANSCRIPT
The Development of VoIP in Fixed Networks
A Report for DTI
John HorrocksHorrocks Technology Limited
withDavid Lewin
Peter HallOvum Limited
27 February 2001
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Table of contents
Executive Summary.....................................................................................................1
Objectives.......................................................................................................................................... 1
Networks............................................................................................................................................ 1
Services............................................................................................................................................. 2
The market........................................................................................................................................ 3
Telephony services types...................................................................................................................6
Terminals........................................................................................................................................... 6
Access............................................................................................................................................... 7
Networks............................................................................................................................................ 7
Traffic................................................................................................................................................ 9
Conclusions..................................................................................................................................... 11
1 Introduction.....................................................................................................12
1.1 Terminology........................................................................................................................... 12
1.2 Acronyms............................................................................................................................... 13
2 IP Technology and networks.........................................................................15
2.1 The Internet protocol..............................................................................................................15
2.2 The commercial drivers behind IP...........................................................................................16
2.3 IP networks and their state of development.............................................................................16
2.3.1 The public Internet...................................................................................................16
2.3.2 Managed IP networks...............................................................................................17
2.3.3 Comparison.............................................................................................................18
2.3.4 ATM......................................................................................................................... 19
3 Networking issues...........................................................................................20
3.1 Identification systems.............................................................................................................20
3.2 Routeing................................................................................................................................. 21
3.2.1 Routeing in circuit switched networks.......................................................................21
3.2.2 Routeing in the public Internet..................................................................................21
3.2.3 Routeing in Managed IP networks............................................................................22
3.3 Protocols and signalling..........................................................................................................23
3.3.1 Session Initiation Protocol (SIP)...............................................................................23
3.3.2 H.323....................................................................................................................... 25
3.3.3 H.248 & Megaco......................................................................................................26
3.3.4 BICC Bearer Independent Call Control.....................................................................26
3.3.5 Tiphon..................................................................................................................... 26
3.3.6 Proprietary protocols................................................................................................27
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3.3.7 Comparison of protocol stacks.................................................................................27
3.4 Next generation network architecture......................................................................................29
3.4.1 Introduction..............................................................................................................29
3.4.2 Softswitches............................................................................................................30
3.4.3 Transport structures (ATM, IP and MPLS)................................................................30
3.5 Network boundary devices......................................................................................................32
3.5.1 Firewalls.................................................................................................................. 32
3.5.2 NATS....................................................................................................................... 32
4 VoIP services...................................................................................................34
4.1 Service types.......................................................................................................................... 34
4.1.1 Categorisation..........................................................................................................34
4.1.2 State of development of services..............................................................................36
4.1.3 Wholesale services..................................................................................................37
4.1.4 Related services......................................................................................................37
4.2 Service provision.................................................................................................................... 38
4.3 Terminal types and availability................................................................................................40
4.4 Access configurations and user installations...........................................................................41
4.4.1 Analogue access......................................................................................................41
4.4.2 ISDN........................................................................................................................ 41
4.4.3 xDSL....................................................................................................................... 41
4.4.4 ADSL....................................................................................................................... 42
4.4.5 VoDSL..................................................................................................................... 44
4.4.6 Cable modems.........................................................................................................44
4.5 The home of the future...........................................................................................................44
5 The Retail Market.............................................................................................46
5.1 The current UK telecommunications retail market...................................................................46
5.2 Internet access....................................................................................................................... 48
5.3 Commercial models................................................................................................................49
5.4 Implications for new forms of telephony..................................................................................50
5.5 Differences between the UK and the USA...............................................................................50
5.6 Conclusion............................................................................................................................. 51
6 Forecasts.........................................................................................................53
6.1 Telephony service provision....................................................................................................53
6.2 Telephony services types.......................................................................................................54
6.3 Terminals............................................................................................................................... 54
6.4 Access................................................................................................................................... 55
6.5 Networks................................................................................................................................ 56
6.5.1 Network types..........................................................................................................56
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6.5.2 Network use.............................................................................................................58
6.6 Residential traffic forecasts.....................................................................................................60
6.6.1 Qualitative................................................................................................................60
6.6.2 Quantitative projections to 2005...............................................................................62
6.7 Summary............................................................................................................................... 64
7 Conclusion.......................................................................................................65
Contacts...................................................................................................................67
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Executive Summary
ObjectivesTechnology and liberalisation have led to many changes in telecommunications during the last decade but greater changes are in prospect for this new decade. The Internet Protocol is recognised as the common transport system for networks of the future. The public Internet with its email and world wide web information service have become part of everyday life although few people had used either eight years ago. The process of moving voice services onto IP is beginning. This report has two objectives:
to outline how networks will change over the next 5-7 years with respect to voice communications
to estimate the proportions of voice communications of residential and small business users that will be carried on IP in fixed networks
NetworksWith IP based networks, there is a clear separation between access, transport and service provision. Two types of IP transport networks are used to provide services:
The public Internet, which was conceived from the computer data communications culture and is an “open” network of interconnected networks run by different parties and available without restriction for the creation of services through functionality at the edge of the network,
Managed IP networks, which are essentially closed and support only specific services that are created by the network operator or an authorised service provider.
Figure 1 summarises the differences between the Internet and managed IP networks.
Figure 1: Comparison between the Internet and managed IP networks
Internet Managed IP
Approach Open = unrestricted access and use
Closed = restricted access and use
Functionality and service creation
At network edges by users or independent third parties
Within or at the edge of networks but only where enabled by the operator
Charging Subscription or traffic volume only
Can support usage based charging
Connectivity at the IP level Full interconnection Hardly any at present
Addressing Public global system Internal private addressing possible
Quality of service Not managed Managed to support defined levels
Whilst there are distinct differences between Internet and Managed IP networks, there is a widespread misunderstanding that the Internet cannot be used to provide a delay intolerant service such as telephony
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because of its unpredictable quality of service. However service providers can and do add a layer of management1 to the Internet to improve quality of service, and a significant proportion of international traffic to some destinations is already carried on the Internet by wholesale services that are used by many large and well known operators.IP is not the only new network technology. ATM (Asynchronous Transfer Mode) is a link layer “small packet” technology that can either be used underneath IP or be used to provide virtual circuits to carry media without involving IP. Many of the new systems designed for telcos who want a next generation PSTN are ATM based and so the report includes these ATM developments.
ServicesWe focus on two main service types:
Public telephony, which uses only E.164 numbering. Internet named telephony2, which uses only Internet naming
and so far has not yet developed into a full any-any service and whose quality is more unpredictable and may be significantly lower.
We use these service distinctions based on identification because they relate to users and are independent of terminal types which will change. The Internet trade-jargon, however, uses distinctions based on terminal types:
Phone-Phone: a bypass service which uses ordinary telephones and the PSTN for access and termination and the Internet for the long distance or international part of a call. It includes calling card services.
PC-Phone: where a call can be made to a traditional telephone from a PC and where the call will be carried most of the way on the Internet and handed to a circuit switched network operator at the terminating end.
PC-PC: where a call will be made entirely on the Internet. Although at present:
Phone – Phone = Public telephony PC – Phone = Public telephony PC – PC = Internet named telephony
These relationships will change and become more complex since in the future:
Phones may support Internet naming as well as E.164. public telephony will also be supported on PCs via IP based
networks.There are four main categories of company that are providing services:
a) Traditional telcos with directly connected customers and a significant proportion of their own infrastructure
b) Telcos who work mainly or wholly as indirectly connected operators (their customers use carrier selection, carrier pre-
1 By monitoring quality closely and switching traffic to different routes as necessary2 A clumsy but necessary title – at least its meaning is reasonably clear.
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selection or 2-stage call set up) and use leased lines for transmission
c) Internet Telephony Service Providers, who predominantly use the Public Internet and have little infrastructure under their own control
d) Internet Service Providers who are adding voice related service features to their access services.
Figure 2 shows the relationship between the service categories and the development routes being followed by the different players. The terms “PC-PC” etc have been added but apply only with the current state of their relationship to services.
Figure 2: Development routes
Services
Internet Named Telephonywith “presence”
Public Telephony
Public Telephony(by-pass)
Internet
Managed IPTelcosown infrastructure
Telcosleased infrastructure
ISPs
Internet TelephonyService Providers
Background
user@domain
E.164
E.164
Network type
PC- Phone
PC- PC
Phone- Phone
The current situation is that: The market for public telephony from a PC is growing and selling
primarily on low prices for bypass traffic Internet named telephony from PC to PC is starting as a free
function provided by ISPs and portals. Usage is driven by both cost savings and functionality (mainly the presence feature3).
Both the Internet and managed IP networks are being used for public telephony bypass services
Very few telcos have yet migrated onto managed IP networks
The marketTwenty years ago the market was characterised by:
Most traffic being telephony Nearly all revenue being from telephony Calls being charged per minute Prices being strongly dependent on distance International calls subsidising national and local calls
3 “Presence” functions indicate on a PC screen which of the user’s list of frequent contacts are currently on-line.
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The growth of the Internet has changed the market completely by providing hugely growing data traffic funded by subscription and partly by advertising. Within a few years the market will be characterised by:
Most traffic being data Significantly reducing revenue from telephony Prices being distance independent and fixed network call
charges being replaced by subscription (mobile calls will probably continue to be charged per minute because of the relatively high economic cost of radio capacity)
There are two drivers for users to change their service providers: Cost savings Functionality and ease of use
When prices were high, cost savings were the main issue for users and this created a strong bypass market for calls, but as prices drop, cost savings will be less of an issue leaving functionality and ease of use as the main drivers for users.Users currently pay both access and call charges. Call related costs and charges are reducing and billing and administration are becoming an increasing proportion of costs. These changes are creating pressure for calls to be included in subscriptions.We think that the combination of technology advances towards multi-service solutions and price reductions will drive a process of combination in service provision in the retail market. As prices reduce consumers will find it easier to buy everything from one service provider. Figure 3 shows our conclusions. The separate market segments of:
Circuit switched access line paid by subscription Internet access paid by subscription Fixed telephone calls paid according to use
will be replaced by: Access line paid by subscription but including Internet access Basic services including email, fixed voice calls and data paid by
subscription with some funding by advertising. These services will probably be combined with the access line
Premium services paid separately, probably on a pay-as-you-go basis using electronic payment
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Figure 3: Changes in retail market segments
Subscription
Circuit switched access
Usage basedcharging
Internet accessInternet access
Premium servicesPremium services
Basic telephonyBasic telephony
Premium servicesPremium services
Basic telephony
&
Combined access
Now ~ 2005
We expect that telephony service provision will go through a period of fragmentation as new players enter the market providing bypass services that compete on price. This sector will grow and then decline as price becomes less of an issue and calls begin to be charged by subscription. Some bypass operators may be able to continue by reselling services or bundling services with non-telecommunications services such as power.This period of fragmentation will be followed by consolidation as the volume of IP based traffic grows, as call related charges for basic telephony disappear and the pressure for simplification and combination takes over. Figure 4 shows these developments.
Figure 4: Voice service provision
Time
Percentageof voicetraffic
(not to scale)
Telco
~ 2002 ~ 2005
ISP
Bypass and ITSP
The battle zoneFragmentation Consolidation
Call basedcharges disappear
It should be noted that this figure is not indicating the technology used. For example changes from circuit switching to ATM or IP will take place within the services provided by the telcos.
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Telephony services typesPublic telephony based on E.164 numbering is universal. Although many people consider numbers to be less memorable and user friendly than Internet names, they have the advantage of being used across all languages, alphabets and cultures. We think that E.164 numbering will continue as the basis for any-any public telephony for the indefinite future. In other words we think that for the foreseeable future it is unlikely that telephony users will cease to have E.164 numbers.We think that Internet named telephony will grow rapidly as a service for informal closed user groups, but that the any-any capability that would make it a public service will not develop until the second half of the decade because of addressing and standards issues. In the long term we think that public telephony and Internet named telephony will exist in parallel.
TerminalsCurrently almost all the residential market for telephony terminals is a combination of analogue wired telephones and cordless telephones. VoIP is supported only from PCs where users have special software and use a headset.As VoIP develops, we expect that PCs will be fitted with conventional style handsets. This will either be through the addition of sockets for analogue telephones or through new phones with USB interfaces. We think that USB handsets with matching non standard software in the PC are the more likely solution. These development may coincide with the introduction of better support for VoIP in Windows. The next development will be the introduction of a standard self standing IP based telephone using either Ethernet or USB as the interface. This development will be driven by the move towards an integrated digital home system and the introduction of new network termination points for both public and Internet named telephony. This development will occur later than the USB handsets for PCs because it is more dependent on standards. Figure 5 shows these developments.
Figure 5: Trends in terminal use
Time
Percentageof terminals(not to scale)
PCs with software
Analogue and cordless
Windowsintegration
~ 2002
Headsets
~ 2005
IP based phones(USB or Ethernet)
Growth of integrated home digital systems
IP based phones reduce market for analogue and cordless
New NTPsdefined
USB Handsets
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AccessNearly all residential users have analogue access lines; few have ISDN. BT is wholesaling ADSL access to its own ISP (BTInternet) and also to other ISPs. We expect that the prices for ADSL access will fall to below £20/month within two years and that user demand will be high. We are not so bullish about local loop unbundling which is starting very slowly and where the experience from the USA is that there can be significant operational difficulties. This may mean that BT operates most of the ADSL and resells the access to other ISPs.The next step for residential users is likely to be the presentation of services via a single standardised IP based network termination point (Ethernet and USB seem to be candidates at present) The introduction of this interface will contribute to growth in IP based telephones. We expect that this new form of network termination point will start around 2005. We think that the development of standards will be the determining factor in the timescale. Figure 6 summarises these developments.
Figure 6: Access developments
Time
Percentageof accesssockets
(not to scale)ADSL separate
from PSTN access
Analogue
~ 2002 ~ 2005
Standard IP based NTP(USB or Ethernet)replaces analogue
IP based phones reduce market for analogue and cordless
Networks There are three main types of packet network used for voice:
Public Internet backbones. Managed IP networks PSTN replacement networks.
The same underlying transmission system can support all three network types and some operators are running or planning to run all three types with partitioning based on MPLS.The two major technological developments will be:
Improved quality of service in managed IP networks through further development and implementation of MPLS and the
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introduction of special quality control protocols that give voice packets priority over other traffic.
Further refinement and implementation of SIP, which is expected to be the main call control protocol for voice and other media services.
We think that these networks will develop in the following ways: The public Internet as a “best efforts” network will not change
much. Operators of Internet backbones will add QoS features as soon as
practicable in order to be able to increase their revenue by offering service level agreements. Improved QoS be introduced from 2003
Network interconnection at the call control level using SIP over IP will not start before about 2005 because of the need for further standardisation.
Nearly all procurement of new PSTN capacity will use PSTN replacement networks based largely or wholly on ATM. For straightforward PSTN applications, operators will not be in a hurry to replace their local circuit switches, which can continue to be used at marginal cost. Where customers want advanced services, they will use an overlay of managed IP networks.
In the very long term, the managed IP and PSTN replacement networks may merge and SIP may become the dominant protocol for call control.
We think that BT and the cable operators will start to offer VoIP services from their managed IP networks to the SME and residential markets starting from 2001/2. They will address the SME market with broadband and VPN services delivered over ADSL and VoDSL. These services will include voice but initially may not have all the features required for PSTN substitution.For PSTN replacement, we think that BT and the cable operators will introduce an overlay of packet based technology in very limited areas, starting from around 2004. This overlay will grow gradually according to need and some circuit switches may still be in use after 2010.
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TrafficFigure 7 shows qualitatively how we expect public and Internet named telephony from PCs to grow. The relative proportions of public and Internet named telephony are impossible to predict with confidence. Internet named telephony will grow more slowly initially as there is a square law effect based on the probability of both parties using PCs, but since most residential call minutes are traffic between regular correspondents (family and friends) the potential for growth is enormous.
Figure 7: Growth of voice traffic from PCs
Time
Callminutes
Internet named telephonyfrom PC
Public telephonyfrom PC
Growth from lower price
Windowsintegration
~ 2002
Price ceases to drive growthbecause time based charging ceases
for national calls
Growth from features / ease of use
PC-PC starts to handlesignificant proportion
of communicationsbetween regular
correspondents with PCs
~ 2005
Growth limited by“square law” effect
10% of current level of PSTN traffic
Figure 8 shows the quantitative projections.
Figure 8: Projections of residential minutes
2000 2001 2002 2003 2004 2005Lines (m) 24.5 24.5 24.5 24.5 24.5 24.5Lines used for Internet (m) 7.8 12 14 15 16 17PC for voice users (m) 0.1 0.4 0.9 1.7 2.9 4.6PC-PC critical mass factor 0.08 0.12 0.19 0.26 0.35 0.43
Public telephony from phone mins/line/day 8.9 8.4 8.2 8.2 8.4 8.9Public telephony from PC mins/line/day 2.5 2.8 3.1 3.5 3.9 4.4Internet named telephony from PC mins/line/day 6.0 6.9 7.9 9.1 10.5 12.1
Public telephony from phone m mins pa 79,464 75,491 73,604 73,604 75,444 79,216Public telephony from PC m mins pa 133 389 1,004 2,172 4,207 7,447Internet named telephony from PC m mins pa 25 120 481 1,484 3,881 8,869
Figure 9 draws these various forecasts together into a single table for the near, medium and long term future.
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Figure 9: Future scenarios
Period Short term2001-2005
Medium term2006-2010
Long term2011 onwards
Services Public telephony (E.164) universal
Internet named telephony grows but only for informal groups
Public telephony (E.164) universal
Internet named telephony becomes an any-any service
Both exist alongside each other
Service provision Fragmentation Consolidation and battle between ISPs and telcos
Impossible to predict
Terminals Analogue unaffected
Growth phase for telephony from PCs
Analogue terminals start to decline
Growth phase for standard IP telephones and integrated home systems
Integrated home systems
Access Separate analogue and ADSL NTPs
Analogue access declines
Growth phase for new IP based NTP
Standard IP based NTP
Networks Growth phase for bypass and ITSPs
Growth of wholesale services
Growth of global IP managed networks without interconnection
Replacement of circuit switched networks with SIP on IP or BICC on ATM. Media carried direct on ATM in many networks
IP based interconnection implemented
Slow migration to all-IP as SIP gradually replaces BICC and IP is used without ATM and SDH
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ConclusionsThe provision of voice related services over fixed telecommunications networks will change significantly in the next decade with increasing use of packet technology. The main conclusions about the way in which networks will develop are:
1. Public telephony will be provided increasingly over ATM and IP technology including the public Internet.
2. New Internet named telephony is already starting to grow as a means of communicating between informal groups. The presence feature where users are informed which members of their “buddy list” are on-line are likely to be very popular and lead to a new form of intermittent group communication. This service will eventually become an any-any service and exist in parallel with public telephony.
3. The early stages of the changes will be driven mainly by users who make calls from PCs initially for cost savings but increasingly for ease of use. Developments in the Windows operating system and new handsets with USB interfaces will be particularly significant.
4. Network operators will introduce packet based network technology. This will happed first for the support of new broadband services including but not dominated by voice. These services will roll out from 2002 and address the main demand for new features.
5. The replacement of existing PSTN services will happen much more slowly and not be complete even by the end of the decade because the existing circuit switches can continue to be operated at marginal cost. However there will be little new investment in circuit switches and so extra capacity will be provided by a packet based overlay, most probably based on ATM.
6. The choice of protocols for networks is not entirely clear. The long term preference seems to be SIP but much further development is needed to support interworking adequately and to provide the special features required by regulation.
7. Interconnection will depend on circuit switching until about 2005 when the standardisation has matured sufficiently for IP based interconnection of voice services.
8. Transmission delay will be a difficult and sensitive issue, and will have a major influence on network design. It may result in use of ATM continuing for a long time.
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1 IntroductionThere are two main parts to the report:
An introduction to and explanation of the technology changes including both IP and ATM
An examination of the market for fixed voice services, the main trends and forecasts of the future volumes of VoIP traffic
The report focuses on fixed communications and does not address the use of IP in mobile networks such as is starting with GPRS and will develop much further with the UMTS networks that use the 3GPP standards.Voice over IP (VoIP) involves the Internet industry in the provision of services provided hitherto exclusively by the telecommunications industry. This convergence of industries with different histories into the same market sector creates a choice for this report. Should the report be written from the perspective of the telecommunications or Internet industries? We have chosen to write it from the telecommunications perspective because we judge that the audience for whom it is intended will be more familiar with that culture.
1.1 TerminologyTerminology for VoIP is imprecise and there are no well established definitions. Much of the confusion arises from the absence of clear service descriptions and the fact that the word “Internet” is both the name of a network of networks and the name of a protocol. This lack of precision creates a serious problem. We therefore attempt to use the following terms and definitions consistently in this report:
Voice over IP (VoIP): Any communication that includes conversational voice provided on a network that uses the Internet Protocol (ie either Internet or a managed IP network)
IP telephony: Same meaning as VoIP Public telephony: A public conversational voice service that
uses the established telephone numbering system defined in ITU-T Recommendation E.164. This service may be provided on traditional circuit switched networks, ATM based networks, the public Internet, managed IP networks or a combination of such networks.
Internet named telephony: A public or semi-public conversational voice service that uses Internet names and may include “presence” functions4. In practice it may be limited in the short term to the users of the same service provider. This service may be provided on the public Internet, managed IP networks or a combination of such networks. This is not yet a commonly used term but we have coined it because it is needed in this analysis.
Internet telephony: Although it normally means telephony over the public Internet, we avoid this term because it creates too much confusion between the public Internet, the Internet protocol and Internet naming.
Figure 10 shows the relationship between these terms.
4 “Presence” functions indicate on a PC screen which of the user’s list of frequent contacts are currently on-line.
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Figure 10: Terminology
Circuit switchedTechnology
Identification
IP (Internet or managed IP)
E.164 Internet names
Service Internet named telephonyPublic telephony
VoIP / IP telephony
InternettelephonyInternet
telephony
Whilst we explain that there is a significant difference between the public Internet and managed IP networks, either can be used to provide public telephony or Internet named telephony and therefore the distinction between these types of network should not be part of any distinction between services.We are also of the view that voice quality should not be part of any distinction between services because the voice quality achievable with these new technologies is changing and so is not a stable reference point for definitions. There is a widespread misunderstanding that the Internet cannot provide adequate quality for public telephony, yet various incumbent operators are using Internet based wholesale services for some of their international traffic.
1.2 Acronyms3GPP 3rd Generation Partnership ProjectAAL ATM Adaptation LayerADSL Asymmetric Digital Subscriber LineALG Application Layer GatewayATM Asynchronous Transfer ModeBICC Bearer Independent Call ControlCC Country CodeCLI Calling line indicationDNS Domain Name SystemDSL Digital Subscriber LineENUM A working group of IETF developing a method for resolving E.164 numbers into names for Internet resourcesETSI European Telecommunications Standardisation InstituteFRIACO Flat Rate Internet Access Call OriginationGPRS General Packet Radio ServiceGSM Global System for MobilesIAB Internet Architecture BoardIANA Internet Assigned Numbers Authority
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ICANN Internet Corporation of Assigned Names and NumbersIETF Internet Engineering Task ForceIP Internet Protocol (IPv4: version 4, IPv6: version 6)ISOC Internet SocietyISP Internet Service ProviderITSP Internet Telephony Service ProviderITU-T International Telecommunication Union – Telecommunication SectorLAN Local Area NetworkNAT Network Address TranslatorRIPE Réseaux IP EuropéensSIP Session Initiation ProtocolSME Small and Medium sized EnterpriseTIPHON Telecommunications and Internet Protocol Harmonization Over NetworkTLD Top Level DomainTSAP Transport Layer Service Access PointUAC User Agent ClientUAS User Agent ServerUMTS Universal Mobile Telecommunications SystemVoIP Voice over IPVPN Virtual Private Network
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2 IP Technology and networks
2.1 The Internet protocolThe Internet Protocol, and the technology that supports it, has become established as the central technology for communication networks. Its significance is that it is a multi-service technology since it provides a common format for communication that can support all services and can be supported on all the various different electrical, optical and radio transmission systems as shown in figure 11.
Figure 11: The central role of IP
Services
Voice Data Video
Transmission
IP Protocol
Electrical Optical Radio
Reality, however, is not quite as simple, since the IP protocol is not that well suited to time critical data streams such telephony media and there are various methods for improving network performance such as using ATM routers instead of IP for media streams. The Internet and the various IP-related protocols were developed originally in the 1970s from the Arpanet programme funded by the US Department of Defense. The objective was to develop a highly resilient data network. The expertise and culture came from the academic community, and the hardware was developed by the computer industry rather than the traditional telecommunications industry. The significance of the Internet grew dramatically in the second half of the 1990s, when the technology developed enough to provide email, information services and latterly voice with adequate quality, and when the market penetration of personal computers needed for accessing the Internet became high.
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2.2 The commercial drivers behind IPThe two main driving forces behind the growth of IP technology are:
The low capital cost compared to other communications technologies. The performance/price ratio of IP based switches is doubling every 18 months whereas that of circuit switches is doubling every 80 months. The lower cost of IP compared to traditional communications technologies is caused by the simplicity of the designs, the intensity of competition in the retail orientated computer market and the large economies of scale.
Its potential as a multi-service technology, which leads to cost savings both in the provision and operation of networks.
The result is that almost all telecommunications are now migrating, or planning to migrate, to IP technology. Even where the IP protocol is not that well suited to particular services, such as conversational voice with its sensitivity to transmission delay, the advantages outweigh the disadvantages.
2.3 IP networks and their state of developmentTwo types of IP networks are used to provide services:
The public Internet Managed IP networks
2.3.1 The public InternetThe Internet is a network of interconnected networks run by different parties, but made to appear to a large extent as a single network. The Internet was conceived from the computer data communications culture and has four primary characteristics:
a service creation environment where the network is basically open and services are created at the network edge with the interior of the network having minimal functionality
a common public addressing system such that packets pass unaltered between networks. (This ideal has is not achieved when network address translators are used for the connection of end networks but it remains true for other networks and is still seen as a fundamental design goal of the Internet)
a common server system (Domain name system) for resolving the names used by users to identify destinations into IP addresses so that routeing can be end-end
funding by arrangements that are not related to callsIn practice there are two types of network:
Backbone networks that provide a global mesh of interconnectivity (example are Genuity, UUNET (Worldcom), Sprint, AT&T, Cable & Wireless)
Internet Service Providers who provide access to the Internet and some services (examples are Freeserve, BT Internet, AOL, LineOne, and Compuserve). Customers access the ISPs either by dial-up or leased line.
Points of interconnection between IP networks are commonly provided at special sites (telecom hubs) that are served by large capacity optical fibres and where different operators can rent space and support services.
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Each IP network is made up of interconnected routers, which switch the packets of information.The situation is shown in figure 12.
Figure 12: Structure of the Internet
ISP3
ISP3
ISP1
ISP1
Backbone ABackbone A Backbone BBackbone B Backbone CBackbone C
Customers
ISP5
ISP4
ISP6
ISP6
ISP7
ISP7
ISP2
ISP2
The flow of money is from customer to ISP to backbone network. “Horizontal” connections between ISPs, and between backbone operators are normally made on a peering basis without payments provided that the traffic is not grossly imbalanced.The public Internet is growing very rapidly and having difficulty in keeping pace with demand, with the result that the quality of service is poor at times when traffic loads are high.
2.3.2 Managed IP networksManaged IP networks come from the telecommunications culture. They are similar in principle to the Internet in that they also use routers and are interconnected with other networks. However they differ in that they:
Are essentially closed and support only specific services that are created by the network operator or a service provider who uses a service creation platform provided or enabled by the network operator. Being "closed" means that the networks carefully control the traffic that they accept from other networks and protected themselves at their edges by firewalls
May use their own private internal addressing system and may alter the addresses used in packets when they pass across network boundaries
Are normally dimensioned and managed to provide better quality of service
Commonly provide more detailed traffic management and may support call related charging
May offer defined levels of quality of service such as maximum delay instead of what is called “best efforts”.
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In terms of the current state of development, a number of large telcos and consortia of telcos are running global managed IP networks. However it is important to realise that these networks have very few if any interconnections at the IP level. They may provide PSTN and Internet access but many of their services are available only on-net. There are several reasons for this situation:
The network operators are aiming initially at the large corporate market with VPN and intra-enterprise services (eg interconnection of LANs at different sites) and are aiming to obtain large market share by offering special on-net services. They are not focusing on any-any connectivity.
The state of the standards at present does not support service interoperability at the IP level or interoperability between equipment from different vendors, because not all the standards are sufficiently precise (H.323 related standards are generally much better than SIP related ones). It may take 2-3 years before the standards achieve the quality needed for interoperability. The operators of these networks are therefore having to obtain some groups of equipment from the same vendor.
A telco that is migrating from circuit switched to packet would almost always use an ATM or managed IP network rather than the Internet
2.3.3 ComparisonFigure 13 summarises the differences between the Internet and managed IP networks.
Figure 13: Comparison between the Internet and managed IP networks
Internet Managed IP
Approach Open = unrestricted access and use
Closed = restricted access and use
Functionality and service creation
At network edges by users or independent third parties
Within or at the edge of networks but only where enabled by the operator
Charging Subscription or traffic volume Can support usage based charging
Connectivity at the IP level Full interconnection Hardly any at present
Addressing Public global system Internal private addressing possible
Quality of service Not managed Managed to support defined levels
Whilst this table shows clear and distinct differences between Internet and Managed IP networks, there is a widespread misunderstanding that the Internet cannot be used to provide a delay intolerant service such as telephony because of its unpredictable quality of service. Service providers can add a layer of management to the Internet to improve quality of service and if quality is particularly bad may route traffic temporarily on circuit switched or managed IP networks. ITXC, a large wholesale international carrier uses the Internet in this manner for good quality telephony. Thus telephony can be provided either on managed
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IP networks or on the Internet with some additional management functions. This scenario is shown in figure 14.
Figure 14: Service provision and types of network
Telephony service provision
ManagedIP network
PublicInternet
Managementlayer
2.3.4 ATMIP is not the only new network technology. ATM (Asynchronous Transfer Mode) is a link layer “small packet” that can either be used underneath IP or be used to provide virtual circuits to carry media without involving IP. Many of the new systems designed for telcos who want a next generation PSTN are ATM based and so the report includes these ATM developments (see sections 3.3 and 3.4).
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3 Networking issues
3.1 Identification systemsThe systems for identifying called and calling parties use names and addresses.NamesA name is a “combination of characters and is used to identify end users. (Character may include numbers, letters and symbols)”5. An end user is “a logical concept which may refer to a person, a persona (eg. work, home etc.), a piece of equipment (eg. NTE, phone etc.), an interface, a service (eg. Freephone), an application (eg. Video on Demand), or a location”.A name is distinct in function from an address, which “ identifies the specific termination points of a connection and is used for routeing”. Addresses are essential for communication as the end points always have to be identified in a way that can be used for routeing, but names are not essential. Names are added for some services to make it easier for users to identify the distant end-point or to provide an identification system that is independent of the structure of the networks or the current location of the called party.There are two common naming schemes:
E.164 names (numerical strings) defined by ITU-T Recommendation E.164 – The International Public Telecommunication Numbering Plan. This scheme is a mixture of names and addresses. It started primarily as an addressing system but has migrated to become more of a naming system because location and operator portability are functions of names rather than addresses.
Internet names of the form “user@domain” defined by RFC 1035 - Domain Names - Implementation and Specification
The choice of identification scheme is related to the nature of the service because a service description needs to specify which type of name is used. This is important because:
users need to know how to identify their correspondents the choice of identification system determines the set of
potential correspondents that can be reached interconnected networks need to have a common method of
identifying communicating usersAddressesIP addresses are divided, in principle, into two parts:
The identity of the network (the network part) The identity of the interface attached to the network (the host
address, which is the destination of the IP packet)The range of addresses allocated to ISPs may be chosen to provide aggregation, ie ISPs that are connected to the same transit (backbone) operator may have adjacent allocations. There are two versions of IP protocols, whose address formats differ significantly:
5 According to ITU-T Recommendation E.191
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IPv4, a 32-bit address, which is used throughout the Internet but which is considered to be in increasingly short supply and whose allocations are being controlled carefully
IPv6, a 128-bit address, which is just starting to be used and should provide more than adequate capacity for the future.
IP address allocations are made in blocks to ISPs and are organised to be aggregatable so that traffic on a particular route is likely to have addresses in contiguous blocks. This is important to reduce the size of the routeing tables in routers where several contiguous blocks that the same route require only one entry. The size of these routeing tables is a potential bottleneck in the growth of the Internet as router technology is only just keeping ahead of the traffic growth.ISPs normally allocate IP addresses to dial-up customers dynamically using the Dynamic Host Configuration Protocol6 (DHCP). Addresses are allocated from a pool only while the customer is logged-on. After logging-off the same address will be allocated to another user.IP addresses are allocated to interfaces, but different communication streams using different protocols may share the same interface. These streams are differentiated using port numbers which are carried in the protocol (eg TCP, UDP or RTP) that runs on top of IP. The combination of an IP address and a port number uniquely identifies the source or destination of a stream of packets flowing between an application. Each application protocol has a “well known” fixed port number assigned to it plus a range of port numbers for dynamic assignment to communication streams.
3.2 Routeing
3.2.1 Routeing in circuit switched networksIn circuit switched networks, calls are routed step-by-step7. In most cases the signalling and the transmission circuit follow the same path and each switch decides which subsequent switch to route to8. The routeing decisions may be made using number analysis based on routeing tables stored within the switch with or without additional information from a database (intelligent network databases may be used for number portability or services where the number is not suitable for analysis with routeing tables such as freephone numbers). The point at which a switch determines the routeing information based on the exact location of the called party varies from case to case.
3.2.2 Routeing in the public InternetIn the public Internet, there is normally a two stage process for general routeing (the special arrangements for SIP and H.323 are described later). Most communications are established in a client to host mode, eg 6 RFC 21317 By “step-by-step” we mean a procedure whereby the location of the distant end may be determined in one or more stages through processes at different points in the call path. 8 There is an alternative where signalling is routed between Signalling Transfer Points (STPs) and the transmission circuit is set-up separately under control of the STPs after the signalling interactions and may take a separate route. This technique is used extensively in fixed networks in Germany and the Netherlands and is some mobile networks, but is not used much in fixed networks in the UK.
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access to an email server or a web site, where the called host has a fixed IP address:
The first stage determines the IP address of the called host. The calling host (the client) uses the public domain name system (DNS) system to resolve the Internet name for the host at the distant end into a public IP address. This differs from step-by-step routeing because the calling end determines the distant end address whereas with step-by-step routeing this information may be determined at an intermediate point.
Packets are sent to the called host’s IP address and each router (packet switch) routes the packets according to routeing tables. Because the IP addresses use aggregation and reflect the connection topology of the Internet, the size of the routeing tables is kept to manageable proportions. Routers exchange information electronically about the ranges of addresses that they can reach, and this enables the routeing tables to be updated automatically or semi-automatically, saving administrative work.
This arrangement works satisfactorily where clients (eg the user’s PC) have IP addresses that are assigned dynamically by their ISP because the communications sessions are always established from the client to the host and the only incoming communications to the client come from a host that the client has first accessed.The Internet is capable of supporting any-to-any communications such as telephony as well as client to host, but the problem of dynamic addressing must be overcome. There are several methods for determining a far end address:
The Session Initiation Protocol (SIP)9 (see later under “Protocols”) The “Instant Messaging solution” Additional communications
The “Instant Messaging solution”This is a proprietary solution that has no established name but is widely used in instant messaging and portal services that provide voice communications to users of the same service.A small piece of proprietary software is downloaded to the user’s PC and this software sends to the service provider a copy of the IP address allocated by the ISP when the user logs on, and another cancellation message when they log-off. The service provider maintains a database of the active IP addresses of its customers and uses this database to resolve called names to IP addresses.
Additional communicationsCalling and called parties only need to determine each others’ IP addresses to establish voice communications. Where addresses are assigned dynamically, they can determine their addresses from their PCs and exchange these IP addresses by email or PSTN call and then establish voice communications over the Internet without any involvement of a telephony service provider.
3.2.3 Routeing in Managed IP networks Managed IP networks at present are not interconnected with each other for telephony at the IP level, although they may have interconnection to the PSTN and to the Internet. The market objective of these services at 9 RFC 2543
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present is to provide intra-enterprise services especially VPNs and interconnection between LANs at different sites. There may be some connections between customers of the same managed IP network. The absence of IP based interconnections is due to:
The inadequacy of the standards to support interoperability between different vendors
The early stage of development of the services and the focus on market segments that offer the highest margins
Managed networks normally use compatible products from a single vendor. These products are based on either SIP or H.323 with proprietary additions.
3.3 Protocols and signalling
3.3.1 Session Initiation Protocol (SIP)SIP is a relatively new protocol for initiating, modifying and terminating end-end sessions of communications. These sessions can include Internet multimedia conferences, Internet telephone calls and multimedia distribution. SIP’s key functions are to determine the called party’s current location (address) and to match their communication capabilities and preferences.SIP is generally accepted to be the main protocol to be used for VoIP on both the Internet and managed IP networks in the long term, although some of the earlier implementations are using H.323 (see later). Although SIP is a relatively simple protocol, operators such as Global Crossing consider that SIP and its usage are not yet defined in sufficient detail to support interoperability between vendors. The work in the ETSI Tiphon project is aiming to provide this additional precision by defining the “profiles and deltas” needed for interoperability.The main function of SIP is to enable a calling host to establish a media path defined by IP addresses and port numbers to a called host that is identified by a SIP address. The SIP address is the same form (user@domain) as an email address, except that the value of “user” could be either a name such as “john_smith” or a telephone number. Domain indicates the user’s home network. Once the media path is defined, the media communications (session) are controlled by the Session Description Protocol (SDP)10.In SIP all communications are between clients and servers:
User Agent Clients (UAC) send SIP messages User Agent Servers (UAS) receive SIP messages Proxy servers in networks act as both clients and servers and
pass requests and responses to and from other servers Redirect servers accept a SIP request, map the address into zero
or more new addresses and return these addresses to the client. Registrar servers accept registration requests
Figure 15 shows the operation of SIP in proxy mode11. The calling UAC sends a request (INVITE) message indicating the SIP address of the called party and the type of media communications to which they are
10 RFC 232711 SIP can also operate in redirect mode without proxies, but proxies would normally be used in the provision of services.
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being invited. The proxy server in the network sends this message to a redirect server that indicates the URL of the next server to which the message must be sent. The next proxy server accesses a location server to determine the current location of the called party in the form of a URL or IP address. The called party sends a response message (200=success) to the calling party indicating whether or not they accept the session and giving a Call-id. If the session is accepted then the call identity is given as “call-id@host”. “host” may be either a URL or an IP address and it indicates the destination for the requested media session. The calling party sends an ACK message and the media session is then established directly between the calling and called parties using SDP. Either the caller or the called parties may terminate the session using a BYE message.
Figure 15: SIP in proxy mode
UAC
UASProxyServer
Redirectserver
Locationserver
UAS
UAC
Response containsCall-id@host
Host is URL or IP addressof called terminal
URL of nextserver URL of next
UAS
SIP addressof called
user
Session controlled by SDPMedia packets sent to IP address
of called UAS obtained from response
ProxyServer
Uses information from registration
Calling party Called party
The request and response messages contain a “record-route” header that enables proxy servers to add their identity in the form of a URL to a list of the proxy servers that the message has traversed. This list is then used to force all response messages to take the same route as the request messages so that the proxy servers can keep track of the calls.The proxy servers may be either:
Stateless, in which case they finish their task and then forget what they have done, or
Stateful, in which case they keep a record of their action until a sequence of actions is completed, ie they know that an call is in progress until the call is terminated.
Where calls are charged by the minute, the proxy servers will have to be stateful to create a call record for billing and will therefore have to use the record-route function.SIP provides no control over the routeing of the SDP session media packets, which may take a different route compared to the SIP packets.Since Internet is a worldwide network, SIP services (location servers) can be created anywhere and there is no technical constraint on the relationship between the called party and the location of their SIP service provider. Furthermore SIP is not essential if the parties to a session already know each others’ locations by other means.
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3.3.2 H.323H.323 is the ITU-T’s standard for “Visual telephone systems and equipment for local area networks which provide a non-guaranteed quality of service”. H.323 defines the signalling and the components of the system, but it does not define the LAN or transport layer, and therefore can be used for voice and multi-media provided over IP. The signalling concepts in H.323 are based on ISDN access signalling (ITU-T Recommendation Q.931).H.323 is a “system” standard that makes reference to:
H.225: Call signalling protocols and media stream packetisation for packet based multimedia communications systems
H.245 Control of communications between visual telephone systems and terminal equipment
Various standards in the H-series on video codecs Various standards in the G-series on audio codecs
H.323 defines the signalling between: Endpoints, which are terminals or gateways Gatekeepers, which may manage the communications of
terminalsFigure 16 shows the general structure:
Figure 16: H.323
Terminal
Gatekeeper
Gateway Circuit switchednetwork
Terminal
TerminalH.323 / H225
over LAN or IP
There are four stages in a communication12: Signalling between the calling endpoint and the gatekeeper to
obtain admission to the network Signalling between the calling and called endpoints to establish
the call. This signalling may go either direct or via the gateway. Establishment of the media control channel using the in-band
H.245 protocol. This signalling may go either direct or via the gateway.
The media communications themselves using the same transport addresses as the media control channel
Each endpoint of an information flow is identified by a Transport Address, which consists of an address relating to the network protocol being used (eg an IP address) and a TSAP (Transport Layer Service Access Point) identifier, which allows multiplexing of flows for a single 12 H.323 section 7.3.1
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terminal. Endpoints may have separate transport addresses for signalling and media.Endpoints may also have alias addresses which include E.164 numbers, Internet names and other identifier strings. The gateways provide translation between aliases and Transport Addresses if incoming traffic is sent to an alias address.
3.3.3 H.248 & MegacoH.248 is an ITU-T standard for the Media Gateway Control Protocol. This is a protocol to provide remote control of media gateways. The standard was developed originally by the Megaco group in IETF and offered to ITU-T for publication as H.248.
3.3.4 BICC Bearer Independent Call ControlBICC13 is a standard developed in ITU-T and ETSI for signalling. It is heavily based on ISUP. In terms of its name and origin it should provide a common standard for signalling between networks that use different protocols, but in practice the design is strongly biased towards implementation on ATM networks and it suitability for pure IP networks is doubtful according to some experts. The Ericsson Bridgehead/Engine solution uses BICC as the protocol between the softswitches and therefore BICC over ATM based solutions are likely to be used as an alternative to SIP for at least a decade.
3.3.5 TiphonThe ETSI TIPHON project is developing a generalised communications protocol to support voice services over IP with the emphasis initially on public telephony. This “meta-protocol” protocol is being mapped into actual protocols such as SIP and H.323 with the production of standards that are in effect a combination of profiles (choices of options) and deltas (additions) that define how to use SIP, H.323 and H.248. TIPHON will also look at interworking between SIP and H.323 and between these protocols and ISUP to provide inter-operability with circuit switched networks.Figure 17 shows the structure of the standards that are being developed in TIPHON.
13 ETSI EN 301 848-1 or ITU-T Q.1901
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Figure 17: TIPHON Standards
TIPHON Architecture= list of functional grouping
TIPHONService capability A
TIPHONService capability B
TIPHONService capability C
TIPHON Information Flow SetTIPHON SDL state diagrams
TIPHON Message Set
TIPHON – SIPMessage mappings
TIPHON – H.323Message mappings
TIPHON – H.248Message mappings
TIPHONMeta-protocol
Unlike SIP, TIPHON is developing the ability for control of the routeing of the media channel as well as the signalling channel.
3.3.6 Proprietary protocolsMany ITSPs are using proprietary software for PC-Phone and PC-PC applications. The use of proprietary software is likely to continue for some time until standardised interoperable software becomes available at reasonable prices.
3.3.7 Comparison of protocol stacksFigure 18 compares typical protocol stacks for signalling and call control.
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Figure 18: Typical call control protocol stacks
SDH on optical fibre
ATM with MPLS
SIP BICCH.323
SIP
IPIP
TCPor UDPTCPor UDP
H.323 / H.225H.323 / H.225 BICC
AAL5/SAAL
BICC
AAL5/SAALAAL5/SAAL
TCP or UDPTCP or UDP
IPIP
Megaco H.248Megaco H.248
TCP or UDP/ALFTCP or UDP/ALF
IPIP
Megaco
MTP
Figure 19 compares typical protocol stacks for media packets.
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Figure 19: Typical protocol stacks for media packets
SDH on optical fibre
ATM with MPLS
RTP
IPIP
UDPUDP
CodecCodec
AAL1/AAL2AAL1/AAL2
CodecCodec
In both the above figures the full range of options for the use or absence of ATM and SDH are not shown. They are explained in section 3.4.3.
3.4 Next generation network architecture
3.4.1 IntroductionThe main equipment suppliers such as Cisco, Lucent, and Nortel have invested many hundreds of millions of dollars in developing multi-service architectures and components for managed IP networks. These networks are often called next generation networks. They are seen by their suppliers as long term replacements for existing circuit switched networks and specialist data networks.Figure 20 shows the basic architecture of a next generation network. There are three parts, which are sometimes thought of as layers:
The access system, which is designed to work with a variety of access transmission systems
The transport layer described in section 3.4.3 The services and control layer where the key component is the
softswitch described in section 3.4.2
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Figure 20: Next generation network
Network TerminationPoint
Fibre or CopperTransport network
(Managed IP or ATM)
Softswitch
Media Gateway Control
PSTNAnaloguesockets
Ethernet LAN
CircuitSwitched
interconnection
Announcementserver
AccessSystem
Media Gateway
Signalling Gateway
Platform for 3rd party applicationsBilling and admin
3.4.2 SoftswitchesA softswitch is a set of software that provides:
service provision call management (call server) subscriber management call record generation.
With the SIP protocol, it implements the proxy functions, with H.323 it implements the gatekeeper functions. Some designs such as Ericsson’s Engine run BICC, which is derived from the ISDN signalling system ISUP and adapted for use over ATM. Whereas call control was implemented in circuit switched networks using very expensive special purpose hardware, softswitches are implemented on general purpose computers such as Sun Workstations.Whilst the softswitch provides the call control, calls may be routed to an announcement server, which is a voice response system that handles tones and any in-band functions.
3.4.3 Transport structures (ATM, IP and MPLS)Network designers have to design networks to support one or more types of application with differing sensitivities to delay and with different variations in traffic loading. At the physical level they have a basic topology of physical cables or radio links that interconnects the nodes of the network. They then have up to three methods of sharing and interconnecting the physical capacity. The objective of the design is to maximise the traffic handling capacity within the quality constraints of the services being supported whilst minimising cost.
At the physical level (layer 1), they use the structures of the Synchronous Digital Hierarchy (SDH) to subdivide the capacity on the cable fibres and add some basic fault monitoring capability. At nodes they use cross connects to interconnect different units of capacity on different cables. This results in a different and normally more complex topology of capacity.
At the link layer (layer 2), they use a packet type system to create an even more finely grained system of links to time share capacity on the topology created by SDH. This is either the ATM
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system of short fixed length cells, or the frame relay system of longer and variable length frames. The ATM links connect ATM routers that switch ATM cells in accordance with a link identifier called a virtual path – virtual channel combination.
At the network layer (layer 3), traffic between end users is sent in IP packets that are routed by IP routers at layer 3 nodes according to the IP address of the destination.
IP packets can run on ATM that in turn runs on SDH or run directly on SDH, ie layer 2 can be null. IP networks always have IP routers at their edges or access points to route incoming and outgoing packets. Inside the network, however, they can choose either to place other IP routers at the nodes or to use ATM routers to create a mesh of virtual connections between the IP routers at the edge. Although the use of ATM adds additional overheads in terms of the ATM headers, it has several advantages:
ATM routers introduce less delay than IP routers because they are much faster as they can be built with more functions in hardware, whereas IP routers depend more on software
ATM routers offer more flexibility in running multiple queues ATM can distinguish between 5 different quality classes, whereas
mechanisms for distinguishing quality in IP are not yet fully developed.
These advantages are especially valuable for conversational voice because it is highly sensitive to delay. Therefore many of the telcos are using ATM inside their networks because they see telephony as their main source of revenue and wish to maintain their competitive edge in voice quality (low delay).There is a further recent development called Multi-Protocol Labelling System (MPLS)14. With MPLS, IP routers at the edges of a network attach locally defined labels to IP packets. These labels define a Forwarding Equivalence Class (FEC) and they are used by internal IP routers for:
Routeing. Label edge routers can use labels to define a whole route through a complex network of ATM nodes.
Distinguishing different classes of traffic for quality differentiation.
The use of labels reduces the processing load on the router because the label can be analysed more easily and quickly than the IP address. The three main advantage of adding label switching to an IP core network that does not use ATM are:
The reduction in delay The addition of source route control The introduction of different quality classes
Where the internal routers are ATM15 rather than IP, the label is carried in the ATM header instead of the virtual path – virtual channel identifier. The three main advantage of adding label switching to ATM are that:
MPLS has a well defined protocol for establishing labels for routes within a network
MPLS labels can be used with IP, ATM and frame relay and so can work across a network of mixed technologies
14 RFC 303115 They could also be frame relay
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MPLS is better equipped for rapid reconfiguration for congestion control
For IP packets that relate to signalling and data, there are four options inside a network:
IP alone IP with MPLS IP on ATM IP with MPLS on ATM
For media, there is the additional option not to use IP at all but to run the voice directly over ATM using the ATM Adaptation Layer AAL1 or AAL2. This is the lowest delay solution. Since the media stream in telephony is much more sensitive to delay than the signalling, the option of running the signalling as IP on ATM with the media going directly on ATM is quite attractive.The design and management of IP/ATM networks is the subject of much development work at present.SDH is also not essential and some companies are developing “IP over ” routers that put IP packets directly onto optical modulators.
3.5 Network boundary devices
3.5.1 FirewallsFirewalls are devices that are placed at the boundary of networks to protect the networks from denial of service attacks and unwanted traffic. Firewalls are used mainly to protect company intranets and web sites, ie they are used on end networks. However the need for protection and access control to support charging in transit networks may lead to firewalls being used more widely on interconnected networks that provide VoIP services.Firewalls work by examining the IP addresses and port numbers used within incoming and outgoing packets and allowing only certain ranges of addresses and port numbers through. This examination adds delay that degrades the quality of real-time communications, and firewall developers are being challenged by the need to keep this delay adequately low for conversational voice. It is quite difficult to formulate policies for firewalls that will provide adequate protection whilst not rejecting too much wanted traffic.A group in IETF called MIDCOM is developing a protocol for the control of firewalls by the devices that handle the call signalling. This will enable the signalling to instruct media gateways to open “pinholes” (particular IP address:port number combinations) that relate to calls that are in progress. These pinholes are then closed when a call is terminated.
3.5.2 NATSNetwork Address Translators (NATs) are devices that enable a small number of public IP addresses to be pooled and shared by a larger number of terminals. The terminals inside the area served by a NAT have private IP addresses. The NAT changes the values of the public address in the incoming packets to a private address, and changes the value of the private address in an outgoing packet to a public address.
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Because NATs hide the internal private addresses of a network, they provide some protection.NATs are used widely at present both to hide internal addresses and to reduce the demand for public IP addresses. Because NATs change the values of IP addresses in packets they interfere with the operation of applications that are aware of IP addresses. The SIP signalling messages may contain end IP addresses in the call-ids, and these addresses will need to be altered as the SIP messages cross a NAT. This is a messy situation and requires an Application Layer Gateway (ALG) to make the necessary changes.Many people in IETF see IPv6 as the solution to the shortage in IPv4 addresses and hope that when IPv6 is used NATs will disappear, but there is a wide range of views about when IPv6 will become widely used and whether operators will still want to use private IP accesses for security purposes.
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4 VoIP servicesWhat is VoIP (voice over IP)? There is no simple answer to this question as the term VoIP covers a variety of different services and implementations.
4.1 Service types
4.1.1 CategorisationWith the development of IP there are now several types of service that involve voice, whereas previously there was just public telephony. This situation is causing considerable confusion because the definitions and terminology that are agreed formally in standardisation bodies have not kept up with the developments in the technology and the market place.In addition to the multiplication of service types, there is innovation in service presentation and access, and innovation in the way in which what we categorise as different services may be combined together. It is unlikely that the definitions and terminology will catch up with the diversification in the market and this will cause significant difficulty for regulators who wish to continue to apply various requirements such as access to emergency services and malicious call tracing as it will be difficult for them to define the boundaries within which the requirements apply.We think that it is worthwhile continuing to try to use some definitions and categorisation because doing so facilitates analysis and clarifies discussion. The alternative would make it impracticable to have any meaningful overview of the situation.There are two aspects to the type of service:
the type of traffic – just voice or voice as part of multimedia the method of identifying correspondents and setting up a call –
either public telephony based on E.164 numbering or “Internet telephony” based on Internet naming (user@host) or instant messaging
Some people would argue that quality is an equally important aspect of a service and that the use of E.164 numbering should be linked to the achievement of an adequate level of quality. However, we do not include quality in the definition because we need a definition of telephony against which we can make statements about quality without the problem of circularity, and also because quality may change significantly as the technology develops, and users can handle changes in quality more easily than changes in numbering.These aspects can be grouped into three main service types:
Public telephony, which uses only E.164 numbering. (There is also private telephony, which uses a private numbering plan but not Internet names.)
Internet named telephony16, which uses only Internet naming but in other respects is functionally similar to public telephony except that the quality is more unpredictable and may be significantly lower.
Multi-media, which may use either E.164 numbering or Internet naming. Multi-media services are at a very early stage of
16 A clumsy but necessary title – at least its meaning is reasonably clear.
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development with video telephony being one of the main examples to date.
The Internet trade-jargon describes three services: Phone-Phone: a bypass service which uses ordinary telephones
and the PSTN for access and termination and the Internet for the long distance or International part of a call. It includes calling card services. This is a subset of the natural meaning of “Phone – Phone”, which could include normal PSTN and Internet named telephony calls between IP based telephones
PC-Phone: where a call can be made to a traditional telephone from a PC and where the call will be carried most of the way on the Internet and handed to a circuit switched network operator at the terminating end. In our terminology, this is currently an implementation of public telephony since E.164 numbers are used for identifying the called party, but in the future phones may support Internet naming as well as E.164.
PC-PC: where a call will be made entirely on the Internet. In our terminology, at present this is only Internet named telephony where Internet names are used for identifying the called party, but in the future public telephony will also be supported on PCs via IP based networks.
This is a different categorisation from the one that we are adopting for this report. Its categories are based on terminal types rather than services, and although its categories can be equated to our service categories now, these relationships will change in the future. Figure 21 shows the relationships in these categories now and in the future. To equate “Phone” with E.164 and “PC” with either E.164 or Internet naming is misleading as the relationship is more complex.
Figure 21: Relationship of categories to services
PublicTelephony
(E.164)
InternetNamed
Telephony
Phone-Phone
PC-Phone
PC-PC
Now
Now NowFuture
Future? Future?
In addition to these services, Internet end users do not have to use any specific third party service but may define their own services.
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4.1.2 State of development of servicesPublic telephony
Public telephony is beginning to be implemented quite widely as PC-Phone, where calls originated from a PC over the Internet are routed to a PSTN gateway for delivery to ordinary telephones. Implementation over an all IP route has not yet started. Such implementation would need either the ENUM public service to convert the called number to an Internet name, or the allocation of E.164 numbers to operators who use IP at the local level. An all IP implementation of public telephony over Internet will start in about 2 years time.
Internet named telephonyInternet named telephony is growing rapidly but on the basis of informal closed user groups. It has not yet started as a full any-any service because of two obstacles:
The services use PC terminals at present and PCs are not normally left on for receiving incoming calls. This situation will change somewhat when ADSL becomes widely available, but it will change most when Internet telephones (dedicated computer based telephones) become a commodity item. This development is probably at least four years away because there is not yet sufficient standardisation of the terminal-network interface. Good quality standards that support interoperability between different vendors are needed to create the confidence for development and large volume production to produce attractive terminals at an affordable price.
Although Internet names are used for identification, these names need to be resolved into IP addresses for routeing. These addresses are normally allocated dynamically for the period when a dial-up terminal is logged on. This means that a user cannot store the Internet addresses of frequent correspondents because these addresses will not remain valid.
The short term solution to the dynamic address problem offers communications between customers of the same service provider only. This is the “instant messaging” solution described earlier.This solution is also used to provide a service known as “presence” which is very popular. Users develop their own lists of frequent contacts (buddy lists) which are stored by the service provider. Whenever a user logs-on his presence is notified to every other user that has stored his name in their buddy list. Thus a user knows who is available. The presence feature is included in most Internet named telephony services.Internet named telephony services with presence are commonly offered as part of portals such as Yahoo and as part of “Instant Messenger” services that include a short text message capability where the message is flashed on the screen of the recipient. These services also include point-multipoint capabilities that allow groups to chat together.Presence and chat add a new dimension to telecommunications from the user’s perspective. It changes telecommunications from being a deliberate one-one act by making the communications more spontaneous and less focused. In a domestic situation it makes communications more like people sharing the same living room and in a business situation more like sharing an open plan office. We think that this will be a very significant development.These services are well suited to any planning activity and could therefore be used to plan criminal activities.
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The long term solution to the dynamic address problem is the use of SIP proxy servers by Internet telephony service providers. Their introduction should enable Internet named telephony to develop into a general any-any service.
4.1.3 Wholesale servicesThe previous section has considered only retail services. Both Internet and managed IP, however, are already used extensively in wholesale services for long distance/international PSTN traffic, especially to countries with relatively low traffic volumes or high accounting (termination) rates. Operators who run these service sell capacity to national carriers and shared telecom centres. Prices for this traffic vary continually in a “spot market” fashion. Regulators seem to be unaware of the extent to which these services have developed in the last two years. For example, some 50% of the voice traffic from the US to China is understood to be handled in this way. Major players17 are:
ITXC, which uses the public Internet and has over 250 points of presence covering 60 countries. It was started by Vocal Tec and AT&T in 1997. It carried some 270m minutes in Q3 2000 (=1,080m minutes pa) with an annualised growth rate of over 120%. Its customers include most of the international carriers in the US, Cable & Wireless, Japan Telecom, Korea telecom and Telstra. ITXC actively manages quality using its own proprietary technology, and passes some 15% of its traffic back to circuit switched networks when the Internet is heavily congested.
Genuity, which uses a managed IP network. It was started by GTE Internetworking but separated from them when GTE merged with Bell Atlantic to form Verizon. GTE provides wholesale services as well as retail services that are badged in other companies’ portals and part of the Internet backbone. In Q2 2000, its annual VoIP traffic rate was estimated to be 2,400 m minutes pa.
iBasis, which uses the public Internet and started carrying VoIP in 1998. It has some 15-20 major telecom centres around the world and exchanges traffic through large ISPs. It claims to deliver PSTN quality by its own proprietary management and monitoring and passes less than 10% of its traffic to the PSTN during periods of congestion.
4.1.4 Related servicesOne of the early service applications for PCs is “Click-to-talk” where a web page offers a button to initiate a voice conversation with a call centre. The Click-to-talk button is a particular form of user interface for initiating either a public telephony or an Internet telephony call. The type of call will depend on whether E.164 numbering or Internet naming is used.A variation of Click-to-talk would give the user the capability to select the called party so click-to-talk becomes click-to-dial. This form of service presentation is being adopted by many of the Internet Telephony Service Providers who operate through customisable web pages called portals. An example is Yahoo. This form of presentation is well suited to funding by advertising.
17 Information taken from “IP Telephony: Exploiting Market Opportunities” by Peter Hall, Ovum, Dec 2000
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Another application is “Internet call waiting” where an incoming public telephony call that meets an exchange line that is engaged with an Internet access call, can be diverted to the called party’s ISP and delivered through the Internet. This is a form of call diversion that connects an incoming public telephony call in series with an Internet telephony call.Unified messaging is an integrated service application that can combine various service elements to give users the ability to retrieve messages or stored communications (voicemail, faxmail) of various types in a variety of different ways including having the stored messages collected over the Internet. For example stored voice messages could be collected as a digital file and listened to using local decoding and replay on the user’s laptop.
4.2 Service provisionThere are four main categories of company that are providing services:
e) Traditional telcos with a significant proportion of their own infrastructure
f) Telcos who work mainly or wholly as indirect operators (their customers use carrier selection, carrier pre-selection or 2-stage call set up) and use leased lines for transmission
g) Internet Telephony Service Providers, who predominantly use the Public Internet and have little infrastructure under their own control
h) Internet Service Providers who are adding voice related service features
The motivation for the telco culture operators, a) and b), is to use IP to provide cost savings and enable them to catch up with some of the service developments of the other types of operator.The motivation for the Internet culture operators, c) and d), is to capture the established public telephony service market and establish themselves as the service providers of the futureIn practice many larger companies may appear under more then one or even all categories. For example, BT has its own ISP business (BTInternet) which is promoting Internet named telephony services between its users, and it also owns a significant shareholding in QUIP, which runs by-pass services. Many large telcos are currently backing all options because they are uncertain how the market will develop.Figure 22 shows the relationship between three of the service categories that we define and the development routes being followed by the different players. These diagrams do not show multi-media services because they have not developed significantly yet. The terms “PC-PC” etc have been added but apply only with the current state of relationship to services.
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Figure 22: Development routes
Services
Internet Named Telephonywith “presence”
Public Telephony
Public Telephony(by-pass)
Internet
Managed IPTelcosown infrastructure
Telcosleased infrastructure
ISPs
Internet TelephonyService Providers
Background
user@domain
E.164
E.164
Network type
PC- Phone
PC- PC
Phone- Phone
Figure 23 shows the same basic diagram but with the degree of shading of the arrows indicating the progress achieved to date. On the left side the darkness indicates the proportion of such operators that use either the Internet or managed IP. On the right side, the darkness indicates the extent of service provision, showing instant messaging as the predominant application at present.
Figure 23: Progress to date
Services
Public Telephony
Public Telephony(by-pass)
Internet
Managed IPTelcosown infrastructure
Telcosleased infrastructure
ISPs
Internet TelephonyService Providers
Background
user@domain
E.164
E.164
Network type
PC- Phone
PC- PC
Phone- Phone
Internet Named Telephonywith “presence”
The current situation is that: The market for public telephony from a PC is growing and selling
primarily on low prices for bypass traffic Internet named telephony from PC to PC is starting as a free
function provided by ISPs and portals. Usage is driven by both cost savings and functionality (mainly the presence feature).
Both the Internet and managed IP networks are being used for public telephony bypass services
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Very few telcos have yet migrated onto managed IP networksIn the long term we predict that the bypass market for public telephony calls will disappear as prices drop below a sensitive level and as usage based payments are replaced by subscriptions. The speed with which the services and markets will develop will be determined by:
The availability to users of appropriate terminals The development of access systems for domestic and small
business premises The way in which equipment will be configured in the home in
future.We explore these aspects of the market development and their relationship to services in the following parts of this section. In a subsequent section we look in more detail at the network technology and its support of services, including the distinction between the use of Internet and managed IP networks.
4.3 Terminal types and availabilityThe type of terminal determines the services that can be supported.The types of terminal are:
A traditional telephone with circuit switched (normally analogue) network access
A PC with an Internet browser and software to support voice communications and either a headset or a handset for the user. We expect that Microsoft will introduce Internet named telephony with some support for SIP in the next or next but one version of Windows. Handsets would use the USB interface if they include dialpads, or could use the sound card sockets if they do not.
A special Internet telephone, which is a special purpose device for supporting Internet telephony and public telephony over dial-up access to the Internet.
A stand-alone IP telephone with LAN or USB access.The traditional telephone can support only public telephony, but the other three terminal types can support both public telephony and Internet named telephony.The current situation is that:
Almost all households have at least one traditional telephone We have not been able to find figures for the percentage of
households with at least one PC but estimate that it is over 40% since in September 2000 some 32%18 of households had dial-up Internet access.
We expect that it may become common place for PCs to be sold with either an integral handset or a socket for plugging-in an analogue telephone. We think that the most likely solution is a handset with dialpad and a USB interface, with all functionality controlled by software loaded into the PC. Net2Phone has announced that it will introduce a USB telephone for use with
18 Report on Internet Access by National Statistics dated 19 Dec 2000 available from www.statistics.gov.uk. Ovum’s estimate is 27% at Jan 2001.
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PCs early in 2001 at a price of $55. We think that solution offers lower costs and more functionality than the provision of a socket for an analogue telephone.
We are aware of at least one special Internet phone designed for using the Internet over dial-up access19 but the price is high and the design complex so we do not think that it will achieve much market share.
The market for stand-alone IP telephones with LAN or USB interfaces is only just starting and is aimed at business use with proprietary interfaces (PBX replacement). We think that there will eventually be a large residential market for such telephones but only when there are new standard interfaces and network termination points, or a more standardised system for downloading software (Java applets) into these telephones. These telephones will be used in the future integrated home communication systems described in section 4.5.
4.4 Access configurations and user installations
4.4.1 Analogue accessNearly all users currently have analogue access. There are currently 24.5m residential exchange lines in UK and 10m business exchange lines. Modem technology has developed rapidly and V.90 modems can support speeds of up to 56 kbit/s on a dial-up connection. This is quite sufficient for voice and data, as some Internet voice codecs use less than 10 kbit/s.
4.4.2 ISDNSome users have ISDN access which offers speeds of up to 128kbit/s using both channels. The main advantage of ISDN over modems is the very greatly reduced time between initiating the access and being able to send or receive useful data. For ISDN this time can be reduced to less than 1 second compared to 5-15 seconds for a modem. However, the basic access ISDN market for residential users has not grown much and is not likely to grow in view of the development of xDSL and the introduction of flat rate modem access (FRIACO).
4.4.3 xDSLA range of new Digital Subscriber Line (DSL) technologies are becoming available for making greater use of Copper access lines. The technologies are summarised in figure 24.
19 The Aplio/Phone in the USA which is based on H.323 and sells for ~$200.
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Figure 24: xDSL technologies
Data rates Pairs used
Analogue access on same pair
Range Main application
ADSL
(Asymmetric DSL)
< 8Mbit/sto the home
< 512 kbit/sfrom the home
1 Yes < 4 km High speed Internet access and delivery of video-on-demand
HDSL
(High speed DSL)
2 Mbit/ssymmetric
1-3 No < 4 km Services to small businesses
VDSL
(Very high speed DSL)
>> 2Mbit/s 1 No < 500m Short connections of user premises to cabinets in the street served by fibre
4.4.4 ADSLADSL is the best developed technology and the one most relevant to residential customers. It enables high speed internet access to be provided in parallel with continued use of an exchange line by an analogue telephone. The Internet access can also be used for the various forms of VoIP.Figure 25 shows an ADSL service to a residential customer provided by the provider of the copper loop (eg BT). With ADSL the format of the network termination point for the Internet access would be either a LAN connection or a USB interface. IP packets are normally carried on ATM across a network owned by the access provider with each customer having a permanent virtual circuit (PVC) to their Internet service provider.
Figure 25: ADSL by the provider of the copper loop
FrameNTP
MDF
MDF
DSLAM
LocalswitchLocalswitchRCU
ISP
Each customerorders ATM PVCto ownISP
Copper loop Circuit switchednetwork
ATMnetwork Internet
LAN orUSB
Extensionwiring
ADSLModemfunction
Figure 26 shows ADSL on an unbundled loop where the other operator provides both the ADSL access and the telephony service.
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Figure 26: ADSL on unbundled loop
NTP
MDF
MDF
DSLAM
LocalswitchLocalswitchRCU
ISP
Each customerorders ATM
PVC to own ISP
Copper loop
Circuit switchednetwork
ATMnetwork Internet
LAN orUSB
Extensionwiring
ADSLModemfunction HDFHDF
Other operator
BT
Figure 27 shows the plans for line sharing option where the ADSL access is provided on an unbundled loop but the loop owner continues to provide the telephony service. The ADSL provider manages the loop and passes the analogue telephony access circuit back to BT.
Figure 27: ADSL on BT shared loop
NTP
MDF
MDF
DSLAM
LocalswitchLocalswitchRCU
ISP
Each customerorders ATM PVCto ownISP
Copper loop Circuit switchednetwork
ATMnetwork Internet
LAN orUSB
Extensionwiring
ADSLModemfunction HDFHDF
Other operator
BT
BT introduced ADSL during 2000 and its service seems to be growing well. Following substantial intervention by Oftel, local loop unbundling to enable others to offer ADSL will be rolled out during 2001 with the aim of making it available in most areas by July 2001. Although strong demand for unbundling was expected, the initial order level was very low because operators were not satisfied with the commercial and operational arrangements. We have been informed that experience with Bell Atlantic in the US suggests that operational difficulties are likely with unbundled loops and that it will be may be 1-2 years before all the issues are resolved adequately.
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4.4.5 VoDSLVoice over DSL (VoDSL) is a generic name for techniques for providing multiple voice accesses over a single physical access line. The technology is not yet standardised and some vendors use ATM rather than IP for the voice access whilst providing separate IP access for data.Verizon (Bell Atlantic) announced in July 2000 that it was running a VoDSL trial with 16 telephony circuits on one copper pair.VoDSL is likely to grow rapidly as a delivery technology for small businesses offering a combination of analogue ports for conventional telephones and IP over Internet accesses for PCs or IP telephones from a local area network served by one or more copper pairs. We think that the possibility of using VoDSL technology on unbundled lops will create significant incentives for incumbents to introduce next generation technology at the local level.
4.4.6 Cable modemsThe cable industry is planning to use cable modems for broadband access. Communications are provided by fibre of coaxial cable between a cable modem on the customer’s premises and Cable Modem Termination System (CMTS) at the head end. The CMTS is connected to a managed IP network that supports:
a Call Management Server an announcement server media and signalling gateways to the PSTN
Figure 28 shows the arrangement
Figure 28: PacketCable Architecture
Cable modem
Fibre or coax
CallManagement
Server
Media GatewayController
PSTNAnaloguesockets
Ethernet LAN
CircuitSwitched
interconnection
Announcementserver
Cable ModemTermination
System
Media Gateway
Signalling Gateway
Transport network(Managed IP or ATM)
Cable operators are planning to use the PacketCable architecture and standards. The standard for the cable access is called Data Over Cable System Interface Specification (DOCSIS) developed in the USA.The cable modem has an integral multi-media terminal adapter that supports both analogue telephone and Ethernet sockets. Two IP addresses are allocated to the adapters so that voice and data packets can be handled on logically separate networks.
4.5 The home of the futureThe long term trend for home systems is towards an integrated distributed digital system for all communication, information and
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entertainment services, based on advanced LAN technology with either a cable, fibre or low power radio transmission medium. This goal is being approached in two directions, from the PC, which is adding entertainment and communication functions, or from the TV, which is adding information functions. Some of the main drivers are:
Cost savings and space savings from the use of multi-purpose hardware
Access to common data from several rooms Access to single entertainment sources eg digital radio/TV
receivers and cable set-top boxes with access controls Internal communications in houses with several rooms
The main constraints on these developments are: Concerns from the film industry about copyright violations Processing power to handle entertainment quality digital video in
real time Low cost high performance LAN equipment The culture change to build LAN wiring into new housing
developmentsCopyright concerns are a very significant issue. The film industry is very concerned about the prospect of films being available in unencrypted digital form and also about the potential for distributing them on the Internet. They are therefore likely to oppose any moves that bring unencrypted material and IP based communications closer together. In practice this means that they may lobby the consumer electronics industry to maintain practical incompatibilities that will make copying more difficult. The consequence of this may be that convergence towards an integrated digital home communications and entertainment network is delayed by 2-3 years compared to what developments in technology alone would permit.
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5 The Retail Market
5.1 The current UK telecommunications retail marketLiberalisation of the UK telecommunications market began in 1982 and the UK has led liberalisation in Europe in almost all areas. The early policy was to promote the full duplication of network infrastructures20 but this policy has shifted slightly under pressure from Europe21 to one where the infrastructure of the incumbent operator can be re-used in almost all possible ways by other operators and service providers.The following figures give some basic statistics for the UK market as of June 200022.
Figure 29: Market shares for exchange lines
BT C&W Cable Other Growth rate paResidential fixed lines 82% 0% 18% 0% 2%Business fixed lines 85% 4% 8% 2% 11%
In the following figures, the percentages shown in brackets show the proportion of each type of traffic.
Figure 30: Market shares and growth for residential call minutes
BT C&W Cable Other Growth rate paLocal (41%) 78% 4% 17% 1% -8%National (15%) 83% 5% 10% 2% -10%International (2%) 66% 5% 11% 17% -7%To Mobiles (5%) 76% 5% 18% 2% 60%Other (38%) 78% 5% 17% 0% 94%
Figure 31: Market shares and growth for business call minutes
BT C&W Cable Other Growth rate paLocal (32%) 62% 14% 6% 19% -7%National (29%) 49% 15% 4% 32% -1%International (5%) 24% 18% 2% 56% 6%To Mobiles (6%) 55% 17% 5% 23% 30%Other (28%) 71% 9% 5% 15% 66%
Some 19% of the total (residential + business) calls in the category “Other” are to freephone numbers and these calls are growing enormously at 536% pa, and 73% are to local rate numbers and these are growing at 62% pa. This is growth is largely due to Internet access. The figures for call minutes from residential fixed lines indicate that at least:
5% of local calls
20 For example, the duopoly policy and restrictions in the early 1980s on the use of BT leased lines by Mercury21 For example, the European requirement for carrier pre-selection the pressure for an early introduction of local loop unbundling.22 Source: Oftel Market Information Update dated Nov 2000.
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7% of national calls 23% of international calls 7% of calls to mobiles
are being made using carrier selection. The figures for calls from business lines cannot be deduced accurately but are likely to be higher.The market is now changing very rapidly with intense price competition that is:
pushing the prices closer to costs and reducing the distance dependent element of prices
making on-net discounts more common, because the costs of these calls are lower and because these discounts are seen as ways of attracting customers.
For example, ntl has introduced a distance independent national tariff that makes no distinction between local and long distance calls, and offers some free calls between its own subscribers. We expect that the distinction between local and national prices will be removed by most operators by the end of 2003. This change will probably reduce the average margins for indirect (carrier selection) service providers.The user friendliness of carrier selection will be improved from early 2001 with the introduction of carrier pre-selection, where the local exchange stores the identity of the selected indirect operator and routes the call without the user having to input a carrier selection code or use a “smart box” to add it.Thus there will be both a positive factor (pre-selection) and a negative factor (uniform rates country wide) affecting the growth of carrier selection traffic. In practice the continued commercial viability of carrier selection services will depend very much on the interconnection rates for call origination and termination that are determined by Oftel.The continuing cost reductions in core networks mean that billing and administration are becoming an increasing proportion of an operator’s costs. This situation plus the marketing attraction of simplicity and reduced uncertainty point to a switch from billing by the call minute to including the price of calls in the monthly subscription. This is already beginning to happen with some tariffs that include a certain number of minutes per month, but is likely to be extended to all national calls and even some international ones. It is also beginning with the new flat rate Internet access tariffs. The main determinant of when billing by the call minute will cease will be a major change to the interconnection charging arrangements. This has been suggested in the past under the name of capacity based charging but has now been introduced although only for Internet access (FRIACO). The extension of this principle to telephony is not being considered actively at present and its timing is difficult to predict but we think that it will probably be introduced within about three years.From an economic point of view it is beneficial to have some indicator to the user when their actions are incurring costs, and the loss of per minute billing will remove the economic incentive to terminate calls. However some of the operators who are offering flat rate Internet access are introducing non economic methods of limiting call duration such as an absolute call time limit and an automatic cut off if there is no activity on the line for more than X minutes. These technical methods may prove an adequate way to control costs.
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5.2 Internet accessBy September 2000, some 7.8m households out of a total of some 25M had Internet access, the figure having grown from 18% to 32% in the previous 12 months23. The number of exchange lines is approximately one per household and relatively few (<5%) households have more than one exchange line.Internet dial-up access is estimated from the June Oftel figures as some 20% of all traffic minutes originated from fixed lines and over 30% of all residential traffic, if most dial-up traffic originates from residential lines,. With the current growth rates of the order of 100% pa, the proportion of residential traffic generated by Internet use at end 2000 may be approaching 50%.This rapidly growing Internet access traffic is putting extreme pressure on the dimensioning of the circuit switched networks giving operators a strong incentive to segregate this traffic and move it off the main PSTN as early as possible.There are two ways in which this may be done:
By replacing the modem by ADSL access so that the Internet traffic is kept completely separate from PSTN traffic. This technique also provides much higher speed access than is possible with dial-up modems and provides “always-on” connection to the Internet.
By segregating Internet access traffic at the local exchange by analysing the called number and routeing the traffic direct to a modem bank.
Both these forms of traffic segregation are currently being implemented. The following are typical retail rates for different forms of Internet access:
ADSL: £40 per month Dial-up access:
o 1p/min all day every day via an indirect operatoro 3-4p/min peak with unlimited use during evenings and
weekends for £6 per montho unlimited use for £13-15 per month
In the US, where Bell Atlantic (now Verizon) is estimated to be some 18 months ahead of the UK, there were 350,000 DSL subscribers by September 2000 with approximately 12m homes passed. Verizon is currently offering ADSL access for $39-95/month including the modem.We think that the price of ADSL will drop to the range £15-20 per month within 2 years because:
the price of modems and line cards will drop as sales volumes increase
the initial price is probably set high as demand is exceeding supply
This will make ADSL quite affordable for residential customers.There are also developments at the wholesale level in delivery of access services. 23 Report on Internet Access by National Statistics dated 19 Dec 2000 available from www.statistics.gov.uk.
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The huge rise in Internet access traffic has led to the introduction of Flat Rate Internet Access Call Origination (FRIACO) charges which Oftel has determined.Oftel has recently determined a rental charge of £122 pa with an £88 connection charge and a £29 disconnection charge for a complete (analogue access plus ADSL) unbundled local loop. This charge is thought to be compatible with allowing other operators to offer ADSL on unbundled loops at prices commensurate with BT’s £40/month.Oftel has also required BT to offer shared access from end 2000, where BT continues to provide the analogue telephony access but another operator provides the ADSL facility.
5.3 Commercial modelsThe commercial model for telecommunications is undergoing profound change. Twenty years ago the model was characterised by:
Most traffic being telephony Nearly all revenue being from telephony Calls being charged per minute Prices being strongly dependent on distance International calls subsidising national and local calls
The growth of the Internet has changed the market completely by providing hugely growing data traffic funded by subscription and partly by advertising. Within a few years the market will be characterised by:
Most traffic being data Significantly reducing revenue and profits from telephony Prices being distance independent and fixed network call
charges being replaced by subscription (calls to and from mobiles will probably continue to be charged per minute because of the relatively high economic cost of radio capacity)
For example, the total call revenue across all operators for local, long distance and international telephone calls (calls to mobile and Internet access) in UK fell from £713m per quarter at end June 1999 to £591m at end June 200024, a drop of 15%.These changes raise the question of where the profit in telecommunications is going to come from as this economic change progresses. There are three potential sources:
Cost savings in network technology and reduced staffing levels Increased subscriptions New income streams such as advertising
An important regulatory and political issue will be the funding mechanism for the local access line as lines are used increasingly for DSL technologies. Discussions of universal service25 obligations and funding will have to address DSL access when this form of access becomes widespread and broadband becomes the normal expectation of customers.
24 Oftel Market Information, Nov 2000, Table 925 The right to have a telephony service at standard charges even if it is uneconomic for the operator to provide it – for example in rural areas with low population densities
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It its work on new services in the mid 1990s, Oftel identified the need for both the technical and commercial aspects of interconnection to change in line with those aspects of the services offered to users, and it seems that the interconnection charges for local access, which are determined by Oftel, will inevitably be a key factor in the market.
5.4 Implications for new forms of telephonyThere are two motivators for users to change their service providers:
Cost savings Functionality and ease of use
When prices were high, cost savings were the main issue for users and this created a strong bypass market for calls, but as prices drop, cost savings will be less of an issue leaving functionality and ease of use as the main driver for users. In the area of functionality, the Internet culture is almost certain to lead the telco culture until the market has established a new general understanding of the needs of the users and the telcos can catch up.
5.5 Differences between the UK and the USAThe UK and US markets are significantly different. The main differences are that:
The US still has a structural separation between local and long distance carriers in that incumbent local carriers are not allowed to provide long distance services in the areas where they operate local services, whereas the UK does not.
In the US local calls are not charged either per minute or per call and are subsidised by long distance calls. Long distance carriers have to pay local access subsidies to local carriers. US states and local authorities also raise taxes from telecommunications. These factors result in the long distance tariffs being high and create a much stronger market for bypass services.
The regulation of voice services is technology specific with Internet based services avoiding the heavy regulation placed on the traditional telcos. In contrast the UK and most European countries have technology neutral regulation.
The US mobile market is far behind that of Europe and is not yet reducing fixed network traffic volumes to a significant extent
The large and powerful incumbent local carriers are not major providers of ISP services, whereas BT is a major ISP provider (although not as great as either France Telecom or Deutsche Telekom)
According to the Federal Communications Commission, significant changes may be made to the US regulatory framework to reduce the regulation on telecommunications during the Bush administration.The other area of significant difference is the availability of numbers. The US, Canada and Mexico are part of the North American Numbering Plan, which is a fixed length 10-digit numbering system that has a severe shortage of spare numbers. This will constrain the options for allocating E.164 numbers to new IP based services.The US distinctives of a strong national bypass market and a shortage of E.164 numbers are driving strong interest at present in the development of a public service called ENUM that amongst other things
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will translate an E.164 number used for the provision of public telephony by a telco into an Internet name for the same use so that a caller can communicate over the Internet and avoid call charges.
5.6 ConclusionWe expect the retail market for telecommunications to change very rapidly, and more rapidly in the UK and Europe than in the USA unless the structure of the US market is changed quickly.We think that the combination of technology advances towards multi-service solutions and price reductions will drive a process of combination in the retail market. As prices reduce consumers will find it easier to buy everything from one service provider. Figure 32 shows our conclusions for the retail market. The separate market segments of:
Circuit switched access line paid by subscription Internet access paid by subscription Fixed telephone calls paid according to use at varying rates
will be replaced by: Access line paid by subscription but including Internet access Basic services including email, fixed voice calls and data paid by
subscription with some funding by advertising. These services will probably be combined with the access line
Premium services paid separately, probably on a pay-as-you-go basis using electronic payment
Figure 32: Changes in retail market segments
Subscription
Circuit switched access
Usage basedcharging
Internet accessInternet access
Premium servicesPremium services
Basic telephonyBasic telephony
Premium servicesPremium services
Basic telephony
&
Combined access
Now ~ 2005
These changes will also apply to wholesale services. These trends will tend to squeeze bypass operators out of the market, although some may be able to continue by reselling services or bundling services with non-telecommunications services such as power.There is likely to be a marketing battle for the provision of these combined basic telephony and access services. We think that size and customer relations will be the dominant factors and that therefore the
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battle will be fought mainly between the telcos with access lines and the large ISPs. The ISPs will have to obtain their access lines from the telcos either by local loop unbundling or buying and re-badging a wholesale service. If BT’s network access business becomes truly independent from the other BT businesses and if it invests adequately in new technology, then we think that most operators will prefer to re-badge this facility rather than run unbundled loops.
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6 ForecastsForecasting is difficult and almost certain to be inaccurate. The prevailing view is that it is impossible to look more than a year or two ahead. The following is based on a combination of research, and analysis from underlying trends.We think that the future of public fixed networks lies in their use for broadband services because broadband services are likely to remain cheaper than mobile on fixed networks for the foreseeable future.Fixed networks are facing a pervasive wave of change that will eventually lead to all-IP systems. However there are various different parts of the telecommunications systems that are changing at different rates. We therefore look at the different aspects of:
services terminal access networks
separately. We then look at the effect on residential traffic and finally present the overall picture.
6.1 Telephony service provisionWe expect that telephony service provision will go through a period of fragmentation as new players enter the market, especially the bypass markets, which are driven by users who want to save costs. Carrier pre-selection will help the bypass market which will grow and then decline as price becomes less of an issue and calls begin to be charged by subscription.This period of fragmentation will be followed by consolidation as the volume of IP based traffic grows and as call related charges for basic telephony disappear. As we explained at the end of the last section, we expect that the size of the customer base will be a dominant issue and that the main battle in the longer term will be between the direct access telcos and the large ISPs. We cannot predict the outcome but we think that the telcos start with an advantage from having larger customer bases and higher, though falling, revenues.Figure 33 shows these developments.
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Figure 33: Voice service provision
Time
Percentageof voicetraffic
(not to scale)
Telco
~ 2002 ~ 2005
ISP
Bypass and ITSP
The battle zoneFragmentation Consolidation
Call basedcharges disappear
In addition, from 2002 onwards some larger operators who have hitherto provided only corporate services will use the opportunities of ADSL to move down into the SME and upper end of the residential markets. This is not shown in figure 33.
6.2 Telephony services typesPublic telephony based on E.164 numbering is universal. Although many people consider numbers to be less memorable and user friendly than Internet names, they have the advantage of being used across all languages, alphabets and cultures, we think that E.164 numbering may continue as the basis for any-any public telephony for the indefinite future. In other words we think that for the foreseeable future it is unlikely that telephony users will cease to have E.164 numbers.We think that Internet named telephony will grow rapidly as a service for informal closed user groups, but that the any-any capability that would make it a public service will develop mainly in the second half of the decade. Its growth will be dependent on:
Terminal developments IP based interconnection IP based switching in the local networks
In the long term we think that public telephony and Internet named telephony will exist in parallel.Many people talk about multimedia, but there is no clear view of what new multimedia services will be. At present multimedia seems to be a assembly of various existing services with the addition of real time video.
6.3 TerminalsCurrently almost all the residential market for telephony terminals is a combination of analogue wired telephones and cordless telephones. VoIP is supported only from PCs where users have proprietary software and use a headset.As VoIP develops, we expect that PCs will be fitted with conventional style handsets. This will either be through the addition of sockets for
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analogue telephones or through new phones with USB interfaces. We think that USB handsets with matching non standard software in the PC are the more likely solution. These development may coincide with the introduction of better support for VoIP in Windows. The protocol choices made by Windows will have a significant effect on the market.The next development will be the introduction of a standard self standing IP based telephone using either Ethernet or USB as the interface. This development will be driven by the move towards an integrated digital home system and the introduction of new network termination points for both public and Internet named telephony. This development will occur later than the USB handsets for PCs because it is more dependent on signalling and call control standards. Figure 34 shows these developments. The aim is only to show trends and the graph is not to scale. The effect of increased use of mobiles as a substitute for fixed telephones is not included.
Figure 34: Trends in terminal use
Time
Percentageof terminals
(not to scale)PCs with software
Analogue and cordless
Windowsintegration
~ 2002
Headsets
~ 2005
IP based phones(USB or Ethernet)
Growth of integrated home digital systems
IP based phones reduce market for analogue and cordless
New NTPsdefined
USB Handsets
6.4 AccessNearly all residential users have analogue access lines; few have ISDN. BT is introducing ADSL, wholesaling ADSL access to its own ISP (BTInternet) and also to other ISPs. We expect that the prices for ADSL access will fall and that user demand will be high. The experience of a colleague in UK, the author’s use of ADSL in a hotel in Japan and press reports all suggest that users find the “always on” capability and the improved access speeds26 very attractive, and once tried they would not be without them.We are not so bullish about local loop unbundling which is starting very slowly and where the experience from the USA is that there can be significant operational difficulties. This may mean that BT operates most of the ADSL and resells the access to other ISPs.26 Higher access speed does not always produce faster data throughput if there are bottlenecks elsewhere.
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Voice over DSL is a very promising technology that will enable Internet access and several voice circuits to be provided on a single exchange line. Its introduction is likely to start in 1-2 years time. Local loop unbundling would enable other operators to offer integrated voice and data services to small businesses through VoDSL. Such competition could put significant commercial pressure on BT, but it is not likely to affect residential users very much.The next step for residential users is likely to be the presentation of services via a single standardised IP based network termination point (Ethernet and USB seem to be candidates at present) instead of the current situation of a combination of standardised analogue interfaces and a customised connection to ADSL that requires specific software to be used in the PC. The introduction of this interface will contribute to growth in IP based telephones. We expect that this new form of network termination point will start around 2005. We think that the development of standards will be the determining factor in the timescale.Figure 35 summarises these developments.
Figure 35: Access developments
Time
Percentageof accesssockets
(not to scale)ADSL separate
from PSTN access
Analogue
~ 2002 ~ 2005
Standard IP based NTP(USB or Ethernet)replaces analogue
IP based phones reduce market for analogue and cordless
6.5 Networks
6.5.1 Network typesIn terms of the services that they provide, there are three main types of packet network used for voice:
Public Internet backbones, which are IP based and extensively interconnected at the IP level. They do not interact with any call control signalling applied by service providers at the edges.
Managed IP networks, which are used mainly for VPN service to large corporates and have interconnection only with circuit switching. The call control protocols of the earlier networks are based on ISUP/BICC/H.323 but SIP based protocols are gradually
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being introduced. These networks typically use a mixture of IP and ATM for transport.
PSTN replacement networks, which use ISUP/BICC and run over ATM without using IP for the PSTN replacement services. So far, these networks are mostly used at the transit rather than the local level.
The same underlying transmission system can support all three network types and some operators are running or planning to run all three types with partitioning based on MPLS.The two major technological developments will be:
Improved quality of service in managed IP networks through further development and implementation of MPLS and quality protocols such as RSVP27 and Diff Serv28, which can be used to give voice packets priority over other traffic.
Further refinement and implementation of SIP, which is expected to be the main call control protocol for voice and other media services.
We think that these networks will develop in the following ways: The public Internet as a “best efforts” network will not change
much in nature although it will continue to grow in capacity. Some of the traffic that is carried will migrate to managed IP networks.
Operators of Internet backbones will add QoS features as soon as practicable in order to be able to increase their revenue by offering service level agreements. Improved QoS at the transport level will develop first based on traffic segregation using MPLS and more generous dimensioning to improve quality. This development is likely to take effect in 2003-2006. Secondly the new quality protocol techniques will be implemented in the 2005-2008 period.
Network interconnection at the call control level using SIP over IP will not start before about 2005 because of the need for further standardisation.
Improved firewalls for access control will be implemented from about 2003 onwards.
Application service platforms will be introduced from about 2004 to facilitate service provision and development by third parties
Nearly all procurement of new PSTN capacity will use PSTN replacement networks based largely or wholly on ATM. Transit networks will be replaced first, however for straightforward PSTN applications, operators will not be in a hurry to replace their local circuit switches, which can continue to be used at marginal cost. Where customers want advanced services, they will use an overlay of managed IP networks. In the longer term, ie towards the end of the decade, replacement may be justified on grounds of cost savings and difficulty in obtaining spare parts.
Operators of managed networks who do not use ATM will have difficulty in avoiding increased transmission delays. Past work suggests that customers could be dissatisfied with these delays but they may adapt to accept some increase in delay compared to circuit switched networks.
27 Resource ReSerVation Protocol, RFC 220528 RFC 2474 and RFC 2638
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In the very long term, the managed IP and PSTN replacement networks may merge with SIP may become the dominant protocol for call control.
Figure 36 illustrates these changes.
Figure 36: Network developments
Time
PublicInternet
~ 2010~ 2005
BroadbandManaged
IP(telephony++)
PSTNreplacement(telephony) Transit
firstLocal only
where growthReplace local
for cost savings
Largely unchanged in designTraffic migration to managed IP
Traffic segregationwith MPLS
Quality protocolsRSVP DiffServ
SIP on IPinterconnection
Improvedfirewalls
SIP basedcommon network
ISUP/BICCon ATM
6.5.2 Network useWe consider how the different types of network operator identified earlier will use these network types.
Internet Service ProvidersISPs are already introducing PC-Phone public telephony and PC-PC Internet named telephony using proprietary software. They wish to retain customers and gain revenue from voice. We expect that they will migrate from proprietary software to the use of SIP, however their solutions and technology will be heavily influenced by developments in Windows. ISPs will be keen to foster the development of standard IP based telephones that use LANs connected to ADSL access, since this will give them the opportunity to provide telephony services to all users, not just those who are sitting at a PC. By not offering conventional telephony, they will hope to avoid the regulatory requirements that telcos have to meet.Where they run their own networks, ISPs are likely to use IP based solutions that do not include ATM, which they regard as part of the telecom culture. They will however be keen to adopt techniques within their networks that can improve quality such as MPLS. MPLS will also enable them to offer more services to the business market such as virtual private networks.
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ISPs will use the public Internet for connection to other networks but may augment it with techniques to improve quality for their voice traffic.
Internet Telephony Service ProvidersITSPs will take very much the same approach as ISPs.
Corporate network operatorsMany operators who have extensive core networks provide advanced services including VPN to large corporates. These operators may also be Internet backbone providers. Examples are Worldcom and Cable and Wireless. These operators are likely to migrate their voice services onto IP within the next four years so that they can gain economies of scope and develop new services. Cable and Wireless for example has signed a contract for Nortel to replace all their circuit switches by IP based softswitches by 2004.BTIgnite is developing a broadband network for multimedia and VPN services. This network is likely to compete to some extent with BT’s more traditional PSTN services. These operators are likely to use the growing availability of ADSL access and subsequently of VoDSL on unbundled local loops to provide advanced services. Thus they are likely to move down market and provide VoIP services to SMEs and even some residential users from 2002 onwards.Quality of service is likely to be a major concern for these operators. They are therefore likely to use MPLS within their networks. Some may send media packets directly on ATM without using IP.Interconnection between these networks will initially be supported only using circuit switching call protocols such as ISUP because of the slow development of SIP standards to the level where they can support interoperability easily. We think that extensive interconnection for voice at the IP level using SIP will not occur until after 2005.
Telcos with leased infrastructureThese operators who do not have direct connections to customers have tended to use various technologies to minimise the costs of providing bypass services. They use a range of transmission and switching technologies. Some will move early to IP but a variety of solutions will remain. We expect that cost reduction and maximising the returns from existing investments will be the priority when the call based bypass market starts to reduce.
Telcos with own infrastructureWe think that telcos with their own infrastructure for direct connection to customers, eg BT and the cable companies, will follow two different and parallel approaches. Where the voice service needed is still the PSTN, we do not expect there to be any strong incentive for migration from circuit switching to packet technology before 2005 at the earliest because these operators can continue to use the equipment that they have already purchased at marginal cost. There will however be two reasons why we think that they will want to introduce packet based telephony:
They want to gain experience of running a packet based PSTN type service
They need either to replace some of their oldest circuit switches or they need extra capacity in areas where traffic has grown rapidly or where there are new building developments.
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For these reasons, we think that BT and the cable operators will introduce an overlay of packet based technology in very limited areas, starting from around 2004. This overlay will grow gradually according to need and some circuit switches may still be in use after 2010.We think that low transmission delays will be the prime objective in the network design and therefore these operators may well choose ATM based solutions. In the case of BT, they may extend their ATM transit network with its BICC/ISUP call control down to the local level and not use IP at all.In parallel starting from 2002, these operators will address the SME and the top of the residential market with broadband and VPN services delivered over ADSL and VoDSL in the same way as the corporate network operators. These services will include voice but initially may not have all the features required for PSTN substitution. They are likely to use SIP or H.323 for their call control.
6.6 Residential traffic forecastsTraffic may be carried on IP for either of two reasons:
The caller uses IP ego He makes a public telephony (E.164) call but from a PC
using Internet access (currently called PC – phone)o He makes an Internet named telephony call from a PC to
a person identified by “user@domain” (currently called PC-PC)
The network operator uses IP technology within its network We consider the first of these cases as it will be the dominant one in the shorter term at the national level. We consider only residential calls because we have statistics for current residential call volumes but not for residential plus small business.
6.6.1 QualitativeWe think that there is still moderate potential growth for traditional type voice traffic as prices reduce, ie prices are still sufficiently high that there is some price elasticity. Some of this potential traffic, however, will be carried by mobile telecommunications and email.We think that the current reduction in local and national call minutes of around 10% per annum is due to the growth of mobile communications which are substituting for fixed communications and to a lesser extent to the growth of email as a convenient means for sending short messages. Although the substitutionary effects of both will continue, there are some signs of saturation in the mobile market and so we think that these substitutionary factors will not stay at their current level.We think that public telephony traffic from PCs will grow for two reasons:
it will compete on price and functionality with phone-phone, which is pure substitution
it will increase call minutes by reducing prices but this will only be a factor for 3-5 years for national calls. After that prices will be sufficiently low that prices will no longer influence calling times significantly
Internet named telephony from PCs will grow, probably much faster than public telephony, but initially with only a small proportion of the
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traffic being substitutionary and most being due to presence features and chat between small informal user groups. In the longer term Internet named telephony from PCs will have a significant substitutionary effect. We have come across the following interesting instances:
The working non-technical wife of a telecommunications executive (who is well able to pay for normal telephony) comes from the North of England but lives in the South and prefers to use Internet named telephony from PCs to communicate regularly with her family in the North.
A group of 14-year old pupils at a private school in London use Internet named telephony from PCs in conference mode to do their homework together
Both cases are influenced much more by features than price. Notwithstanding all the work on voice quality in the past in the ITU and ETSI, we expect that the threshold of acceptable voice quality is lower than the telecommunications industry believes.We think that major enabling factors for growth in the use of PCs for telephony will be
the support of public and Internet named telephony in a future version of Windows, giving greatly improved awareness and ease of use. We think that this will start in 2002.
improvements in the quality achievable. It needs to become a little better to really take off but we think that this will occur by 2002-3.
flat rate charges for access, either FRIACO or ADSL. The “always on” feature of ADSL will help, but we expect ADSL to roll out only at moderate rate in the next two years and we think that the flat rate access charges are more significant than access speed as the speeds from dial-up can support IP telephony adequately
growth in integrated digital home systems including entertainment, but we expect that this will not be a factor until 2004 onwards because of copyright concerns.
Figure 37 shows qualitatively how we expect public and Internet named telephony from PCs to grow. The relative proportions of public and Internet named telephony are impossible to predict with confidence. Internet named telephony will grow more slowly initially as there is a square law effect based on the probability of both parties using PCs, but since most residential call minutes are traffic between regular correspondents (family and friends) the potential for growth is enormous.
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Figure 37: Growth of voice traffic from PCs
Time
Callminutes
Internet named telephonyfrom PC
Public telephonyfrom PC
Growth from lower price
Windowsintegration
~ 2002
Price ceases to drive growthbecause time based charging ceases
for national calls
Growth from features / ease of use
PC-PC starts to handlesignificant proportion
of communicationsbetween regular
correspondents with PCs
~ 2005
Growth limited by“square law” effect
10% of current level of PSTN traffic
In the longer term, we expect growth in the use of standard IP based telephones, but this development will probably have relatively little impact on the residential market by 2005, so we ignore it in the quantification in the next section.
6.6.2 Quantitative projections to 2005It is impossible to make reliable forecasts of the volume of IP telephony given the embryonic state of the market. We can, however, make projections based on reasonable and explicit assumptions.The starting point for the projections is the Oftel statistics for end June 2000, giving:
The number of residential lines (24.5 million) The number of residential public telephony call minutes from
ordinary telephones and hence the number of residential call minutes per line per day. Calls to mobiles and calls to non-geographic numbers are omitted. In Q2 2000 this figure was 8.9 minutes/day for the sum of local, national and international, and 0.7 minutes/line/day for calls to mobile. For comparison, the average users of each residential fixed line together make some 7.4 minutes of calls per day from their mobiles, but this figure includes business calls .
We assume: The number of residential lines for telephony purposes stays
constant The number of residential public telephony call minutes from
ordinary telephones per line per day changes as follows from 2001 to 2005: -5%, -2.5%, 0% +2.5%, +5% giving a minimum in 2003. This pattern reflects the combination of fundamental growth in demand and mobile substitution. In Q2 2000, fixed
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terminal to fixed terminal traffic was reducing at 10% pa but we do not think that this reduction will continue
We show the estimate by National Statistics for end September 2000 of the number of homes with Internet access and our estimate of how this figure will grow, but we do not use any of these figures.We use the Ovum29 estimate of the number of users of PC-phone services up to 2005 and assume one user per line. We estimate that each line used for telephony from PCs will make 2.5 minutes of public telephony calls from a PC per day in 2000, but that this figure will grow at 12.5%.Users of PCs will also be able to make Internet named telephony calls. We estimate that each such would like to make 6 minutes/day of Internet named telephony calls and that this will grow by 15%pa. This figure is larger than the public telephony figure because Internet named telephony will be more “chat” orientated. However such calls can only be made to other users of PCs for telephony creating a strong critical mass effect that in practice is likely to be rather less than a square law. The PC-PC critical mass factor takes account of this effect.Figure 38 shows the results. The effect of substitution of PC based telephony for traditional public telephony has not been included (ie the figures for public telephony should be reduced by the substitution effect).
Figure 38: Projections of residential IP telephony minutes from PCs
2000 2001 2002 2003 2004 2005Lines (m) 24.5 24.5 24.5 24.5 24.5 24.5Lines used for Internet (m) 7.8 12 14 15 16 17PC for voice users (m) 0.1 0.4 0.9 1.7 2.9 4.6PC-PC critical mass factor 0.08 0.12 0.19 0.26 0.35 0.43
Public telephony from phone mins/line/day 8.9 8.4 8.2 8.2 8.4 8.9Public telephony from PC mins/line/day 2.5 2.8 3.1 3.5 3.9 4.4Internet named telephony from PC mins/line/day 6.0 6.9 7.9 9.1 10.5 12.1
Public telephony from phone m mins pa 79,464 75,491 73,604 73,604 75,444 79,216Public telephony from PC m mins pa 133 389 1,004 2,172 4,207 7,447Internet named telephony from PC m mins pa 25 120 481 1,484 3,881 8,869
The forecast shows that public and Internet named telephony from PCs will each account for some 10% of the total residential traffic. It also shows the Internet named telephony growth overtaking the public telephony growth in about 2005. Figure 39 shows the results in graphical form. This figure also shows the Ovum forecasts30 that were arrived at by a different method.
29 “IP Telephony: Exploiting Market Opportunities” by Peter Hall, Ovum, Dec 200030 “IP Telephony: Exploiting Market Opportunities” by Peter Hall, Ovum, Dec 2000
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Figure 39: Forecasts for telephony from PCs
2001 2002 2003 2004 2005
2
4
6
8
000 millioncall minutes/year
Ovum PC-Phone national minutes
Ovum PC-Phone international minutes
Internet named telephony(PC – PC)
Public telephony(PC – Phone)
10% of current traditional public telephony
In terms of the rate of change, it is worth recalling that 10 years ago there was very little use of email, which began to take off around 1993, and very little use of the World Wide Web, which began to take off around 1994/5. Thus there is scope for substantial changes by 2005-2007.
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6.7 SummaryFigure 40 draws the various qualitative forecasts together into a single table for the near, medium and long term future. The table illustrates the “jigsaw” nature of the developments.
Figure 40: Future scenarios
Period Short term2001-2005
Medium term2006-2010
Long term2011 onwards
Services Public telephony (E.164) universal
Internet named telephony grows but only for informal groups
Public telephony (E.164) universal
Internet named telephony becomes an any-any service
Both exist alongside each other
Service provision Fragmentation Consolidation and battle between ISPs and telcos
Impossible to predict
Terminals Analogue unaffected
Growth phase for telephony from PCs
Analogue terminals start to decline
Growth phase for standard IP telephones and integrated home systems
Integrated home systems
Access Separate analogue and ADSL NTPs
Analogue access declines
Growth phase for new IP based NTP
Standard IP based NTP
Networks Growth phase for bypass and ITSPs
Growth of wholesale services
Growth of global IP managed networks without interconnection
Replacement of circuit switched networks with SIP on IP or BICC on ATM. Media carried direct on ATM in many networks
IP based interconnection implemented
Slow migration to all-IP as SIP gradually replaces BICC and IP is used without ATM and SDH
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7 ConclusionThe provision of voice related services over fixed telecommunications networks will change significantly in the next decade with increasing use of packet technology. The main conclusions about the way in which networks will develop are:
9. Public telephony will be provided increasingly over IP and ATM technology including the public Internet.
10. New Internet named telephony is already starting to grow as a means of communicating between informal groups. The presence feature where users are informed which members of their “buddy list” are on-line is likely to be very popular and lead to a new form of intermittent group communication. This service will eventually become an any-any service and exist in parallel with public telephony.
11. The early stages of the changes will be driven mainly by users who make calls from PCs initially for cost savings but increasingly for ease of use. Developments in the Windows operating system and new handsets with USB interfaces will be particularly significant.
12. Network operators will introduce packet based network technology. This will happed first for the support of new broadband services including but not dominated by voice. These services will roll out from 2002 and address the main demand for new features.
13. The replacement of existing PSTN services will happen much more slowly and not be complete even by the end of the decade because the existing circuit switches can continue to be operated at marginal cost. However there will be little new investment in circuit switches and so extra capacity will be provided by a packet based overlay, most probably based on ATM.
14. The choice of protocols for networks is not entirely clear. The long term preference seems to be SIP but much further development is needed to support interworking adequately and to provide the special features required by regulation.
15. Interconnection will depend on circuit switching until about 2005 when the standardisation has matured sufficiently for IP based interconnection of voice services.
16. Transmission delay will be a difficult and sensitive issue, and will have a major influence on network design. It may result in use of ATM continuing for a long time.
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Contacts
John HorrocksHorrocks Technology LimitedBethany, Chapel LanePirbrightSurrey GU24 0JZTel: +44 1483 797807Email: [email protected]
David LewinOvum LimitedCardinal Tower12 Farringdon RoadLondon EC1M 3HSTel: +44 20 7551 9213Email: [email protected]
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