Although the conceptual model of evolving TDM networks to IP has been universally accepted by end users, network operators, and telecom equipment vendors, the timeline associated with that transition remains poorly defined. While this can be attributed to many factors, the need to take action is increasing due to pressure from subscribers, basic economics, and services evolution.

What is important, however, is that these factors, when aggregated, make continued acceptance of TDM business and services models difficult to sustain. Accordingly, this white paper explores the challenges that network operators face in this rapidly evolving world, as well as the business factors that serve to provide a powerful impetus to move beyond the model.

Before undertaking a discussion of the business considerations and tools available to assist network operators in defining transformation strategies, it is first important to delineate the various approaches available to them.

The first topic often discussed in the realm of IP transformation is the need to a chose a migration option. This discussion is often portrayed in the context of choosing either one of two options:

• IP overlay

• All-IP migration

In the IP-overlay scenario, the network operator simply deploys an IP network in addition to its TDM infrastructure. In contrast, the all-IP migration approach mandates a more flash-cut approach consistent with a total network replacement model. Although it seems logical to present both as separate and distinct approaches, in reality they are both best viewed as variants of the IP-overlay approach – differing only in timeline.

In this regard, it is important to note that even though the BT (News - Alert) 21CN initiative which results in a single next-generation network configuration, with no legacy switching is frequently cited as aligned with the all-IP option, it does not involve a single flash-cut, but rather consists of an orderly timeline of TDM replacement in alignment with the IP-overlay model. What differentiates BT's migration to other network operators' implementation of the IP-overlay approach can be viewed as a defined timeline for the migration of subscribers off the TDM network and subsequent decommissioning of network elements and offices. Therefore, network operators can best be viewed as only facing one transformation option, which should also include the requirement to define the timeline for completion best suited to market conditions, available resources and customer expectations.

A second topic that is often positioned as representing a critical decision path for network operators is the need to decide between two technologies: the next-generation network (NGN) softswitch and the IP Multimedia Subsystem (IMS). While in this case there is a decision path to be taken, many of the operators that initially deploy NGN softswitch-based solutions continue to view transition to IMS as a mandatory step. Other operators may chose to forego the softswitch stage in favor of an initial IMS approach. Since the relationships between these two architectures are closely aligned in standards, evolving from the softswitch era to IMS is well defined. However, the initial deployment of a softswitch does introduce a second cutover phase (from softswitch to IMS), which injects additional complexity into the equation.

After a period of market hesitation, IMS is now showing renewed interest from network operators.

This trend is captured in research survey results that Heavy Reading recently conducted addressing the deployment of hosted applications. As depicted in Figure 1.1, 66 percent of network operators consider seamless migration of hosted applications to IMS as either important, or of critical importance confirming the view that IMS represents the optimal configuration.

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This section addresses the broad range of factors and their impacts that network operators must consider when formulating a network transformation strategy. These factors include:

• Services evolution

• Changes in the competitive landscape

• Environmental and economic factors

In the past two years, the demographic impact of younger subscribers has been increasingly felt globally, as they mature and become voracious users of Web 2.0- and SIP-based services. This development, though difficult to determine quantitatively, is certainly one of the leading factors for the monumental growth curve in social networking sites that share content among numerous users.

Since this recent momentum appears to be the cusp of initial deployments, it is a given that wireless and wireline subscribers should continue to focus on the delivery of triple-play, multimedia-based capabilities in their networks. As they develop these capabilities, they must incorporate Web 2.0-style applications into their telecom experience to provide a suite of intelligent, intuitive, and self-defined services. While it is still early in the Telco 2.0/Web 2.0 evolution path, recent Heavy Reading research has found that 62 percent of network operators plan to integrate some form of Web 2.0 mashups within the next two years in order to meet customer needs. Likewise, the strong market interest in delivery of fixed/mobile convergence (FMC) solutions to enable seamless service models for end-users, regardless of terminal utilized, is another powerful technology factor driving evolution.

In addition to the factors noted above, the impact of IP technology on the competitive landscape

is equally as profound with the arrival of the first wave of IP telcos such as BT 21CN and KPN,

which continue to reset the bar for telco transformation.

However, network operators also face additional competition in the form of aggressive cable operators intent on rolling out broadband-based, triple-play solutions. This drives network operators to deploy additional broadband and DSL capabilities, forcing a shift to IP. In this regard, traditional telephony telcos are strong with respect to basic plain old telephone service (POTS) capabilities, while cable operators typically possess greater bandwidth into the home through Coax cable. As both continue to evolve, the final outcome is an increased level of direct head-to-head competition.

Factor in the continuing impact of "over the top" content carriers such as Skype, and it is evident that telecom operators face a dynamic and virulent competitive landscape.

While some TDM operators may attempt to compete on price utilizing service bundles to mitigate subscriber loss, this strategy is problematic. Since competition already has an acute impact on prices of legacy services with little signs of relief on the horizon, the IP telco is emerging as best positioned to differentiate itself from TDM carriers via services mix and level of innovation. While some may argue that only larger operators need to undertake IP transformation, given ongoing price-point pressures, the encroachment of traditional and "over the top" services and demand for higher speed broadband, smaller operators also risk being left behind if they do not commit to IP.

Network transformation as an evolution strategy is also aligned with the globally endorsed need to reduce carbon footprint, minimize power consumption, and eliminate use of hazardous materials. While TDM networks were based on best practices in effect when deployed, much of the installed base does not meet the requirements associated with directives such as the European Union (EU) Restriction of the Use of Certain Hazardous Substances (RoHS) adopted in 2006, which restricts use of certain hazardous substances such as lead solder during the manufacturing process. Although RoHS does not apply to installed telecom equipment, new equipment sold in the EU must meet these requirements.

Applying the principal of "Moore's law" to telecom equipment results in the potential for network operators to greatly reduce their central-office footprint, and thus reduce associated greenhouse gas emissions. Given the steadily increasing costs of power, the business case associated with power savings alone is increasingly relevant. For example, Figure 2.1 provides an estimate of the power savings associated with replacing a 10,000-line legacy switch with a 2-frame-based compact IMS configuration. While the IMS configuration provides enough capacity to replace multiple legacy switches, its power consumption is much lower and represents a cost of only $9,023 per year vs. the $79,541 bill for a single 10,000-line switch – a savings of more than $70,518.

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The annual cost estimates for both solutions represent an upper boundary, given the calculations assumption of power consumption per busy hour for the entire year vs. consideration of lower power consumption associated with off-peak traffic periods. However, since this assumption is utilized for both approaches, it represents a valid point of comparison.

Over and above these savings, additional secondary savings would be gained given that next-generation IMS solution footprint uses only a fraction of the floor space of a TDM switch, and therefore dissipates much less heat, resulting in lower air-conditioning costs. Simply stated, while in the past building a business case based solely on power consumption would have been extremely difficult, it is now feasible.

This approach also drives a significant and measureable reduction in green house emissions. Based on EPA conversion factors, this single replacement results in a reduction of 637 metric tons of CO2, which is equivalent to the annual greenhouse gas emissions from 117 passenger vehicles.

Over and above the impressive environmental savings noted above, other key business and economic factors afford significant Opex savings. These include:

• Leveraging IP for wireless backhaul

• Reducing facilities costs via the introduction of Session Initiation Protocol (News - Alert) (SIP) trunking

• The introduction of intelligent IP end-point devices such as femtocells in the home

• Implementing LTE and WiMAX

Confronted with the ongoing high costs that many wireless operators experience in leasing T1 facilities from incumbent North American-based fixed operators, utilizing IP backhaul from the radio access network (RAN) to the core presents some immediate cost benefits and also gives operators additional bandwidth to support both voice and data services on a common facility. While Ethernet-based IP backhaul is only now starting to influence the wireless landscape, its potential to have a profound impact is already evident.

Similar to IP backhaul, SIP trunking is emerging as a technique for achieving facilities-related cost reductions for fixed and enterprise networks. Essentially, SIP trunking enables connection of IP PBXs, as well as legacy PBXs, to interwork with IP networks while eliminating the need for traditional primary rate interface (PRI) circuits to interconnect PBXs to the network. While the leasing costs associated with these facilities differs significantly on a global basis, SIP trunking could conservatively offer a 40 percent reduction in cost savings over current leased arrangements.

With activities currently underway – as part of the SIPConnect initiative, under the auspices of the SIP Forum (News - Alert) – to define interworking and the feature sets that SIP trunking should universally support, SIP trunking is positioned to become a mainstay strategy for enterprise evolution within the next two years. Moreover, since the PacketCable 2.0 specification also introduces support of SIP endpoints, SIP trunking is also emerging as an attractive option for cable operators, which will drive additional market momentum.

Since 2005, the concept of a small, home-based intelligent wireless radio access node has continued to garner both market interest and vendor attention. As a result, with trials ongoing and commercial deployments anticipated to start happening within 18 months, the femtocell appears poised to become an IP appliance that will propel the intelligent home concept to the next level.

The significant outcome of this strategy is that, given the femtocell typically utilizes either an Ethernet or an xDSL connection, it will allow subscribers to consolidate voice and broadband services into a single, manageable entity. Moreover, since femtocells are SIP-enabled, they are also extremely well suited to integration with IMS architectures.

As this trend continues, it is only logical that end users will expect their telecom providers to make a similar transition from TDM to IP. For these subscribers, no measure of service bundling or price reductions by TDM telcos would likely be able to entice them to maintain their TDM roots.

With the rollout of new IP telcos ramping, end users have carrier alternatives that did not exist a few years ago. It is also important to note that since femtocells are home-based, they theoretically provide mobile carriers with the technology to compete with fixed network operators, thereby adding additional volatility to the telecom landscape.

Just as fixed operators are committed to delivery of broadband to the end-user, a key pillar of wireless transformation centers on providing the equivalent of fixed network broadband capabilities to wireless subscribers. This impact is already apparent in live WiMAX networks, while the commercial availability of LTE within the next 18 months, will initiate the next wave of mobile multimedia enhancements. Therefore, in order to ensure end-to-end IP access, replacement of TDM network bottlenecks immediately by mobile operators represents a strategic priority. Likewise, similar to the femtocell example noted above, the impact of these 4G wireless network access upgrades also constitutes an increased threat to fixed operators, as equivalent throughput provides the impetus for subscribers to replace home PSTN service with mobile access.

As previously noted, multiple sets of factors are driving the need for IP evolution. In this section, we examine the relevant steps that a network operator must consider in executing specific network strategies. There are several considerations that must be addressed, including:

• Choosing between a subscriber vs. carrier stimulus model

• Reliance on internal resources vs. use of external consultants to facilitate transformation

• Determining the all-important end-date target for legacy network retirement

An important first step that a network operator must take in crystallizing its evolution strategy is to choose between two distinct set of stimuli – subscriber vs. carrier. These advocate migration based on either subscriber preferences, or the pace chosen by the telco, which should also inherently consider the markets with the greatest forecasted uptake in IP services.

Although both approaches are equally valid for a phased migration, a network operator could also be impacted by both sets of stimuli if the migration path chosen represents an extended timeline.

Conversely, for network operators that advocate an extremely compressed, aggressive timeline, the carrier-driven stimulus model would have the greatest impact. Figure 3.1 below provides a summary of cost benefits and tradeoffs of basing migration on either of these stimulus models.

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An additional vital consideration network operators must address in the development of a strategy is the use of strictly internal resources or also external resources. Given the replacement of its TDM network represents a one-time occurrence for a network operator, it is critical to get it right.

Yet, while network operators do possess a rich set of technical skills, typically they have not undertaken such a dramatic conversion since the introduction of digital TDM switches to replace the analog offices some 20 years ago. While the conversion process may outwardly appear to be a straightforward exercise, given the sheer size of many of these TDM networks, the services supported, a well-defined transformation plan must incorporate the critical phases and steps to support an end-to-end migration of millions of subscribers without compromising service integrity, and network availability. A sample of the considerations that must be addressed include, assessing overall network readiness, pre-conversion testing to ensure service stability as regions are converted, network design estimates for the IP core network, and formulation of detailed contingency plans to deal with unique region specific requirements.

Therefore, having access to resources that have developed and implemented complex migration strategies multiple times greatly reduces the risk and ensures a smooth conversion. With increasing numbers of network operators outsourcing the day-to-day operation of legacy wireless and wireline networks to vendors' professional services organizations, extending this relationship to this same organization for IP conversion is straightforward and low-risk business decision.

The value of this approach is also reflected in Heavy Reading research, which captures network operators' perception of the value of access to professional services for deployment of next-generation hosted applications (see Figure 3.2). With 74 percent of network operator respondents classifying professional services as either critical or important, it is evident that these telcos strongly endorse the skill sets that vendor-based professional services teams bring to the table.

Even for operators that have already deployed some form of IP network overlay, maximizing all the benefits inherent with an IP network can be difficult while they run a TDM network in parallel.

This section weighs in on the challenges associated with the subscriber-driven adoption of an IP overlay without a defined timeline for completion. These closely intertwined challenges include:

• New services introduction

• Network administration challenges

• OSS, provisioning, and billing challenges

As previously noted, new, emerging, disruptive technologies (such as femtocells) have the potential to blur the line between VoIP and wireless operators from a services perspective. As a result, while not all would endorse the view that converged operators can slowly replace distinct fixed or wireless operators, it is a possible scenario. Certainly, end users would not object to this evolution, since it would enable mixing of both mobile and landline services.

However, TDM networks do not support this model today, and while it can be supported to some extent in the IP-overlay model, there are some limitations. For example, if a network operator wishes to introduce a new multimedia service using its IP overlay, while service introduction is relatively straightforward (depending on the model chosen in Section 3.1), it faces challenges rolling out this service in certain markets, if that area is still heavily served by TDM infrastructure.

This not only fuels consumer disappointment, but also makes marketing strategic services a more difficult proposition, if there is no firm timeline for the new service becoming available. A secondary limitation of this approach is that it makes it difficult for operators to introduce support for new SIP-based multifunctional fixed/mobile convergence (FMC) enabled terminals.

The only approach to deal with this impediment is a clearly defined and assiduous migration strategy. As depicted in Figure 3.5, once fixed and mobile TDM end offices are replaced, a common IMS core can be used to support all services including legacy IN applications through use of the IP Multimedia Service Switching Function (IM-SSF), which performs the necessary SIP mapping to support access to IN services.

Beginning with the IP overlay is definitely a positive step for network operators; however, it does introduce additional complexity during the transition phase, since both next-generation and TDM equipment must be supported to maintain fully carrier-grade metrics. This introduces the requirement to maintain a full inventory of maintenance spares for both networks. Even though spares for TDM equipment may be considered as price-mature, as vendors shift their manufacturing focus to new components and fewer legacy spares are sold, some form of price increase should be anticipated. Given the age of some TDM equipment, the potential for a decrease in the mean time between failures (MTBF) of circuit cards becomes a strong possibility, thereby exerting additional pressure on telco staff.

A secondary set of network administration challenges includes committing to continued updates to network administration guidelines and support of regulatory based mandatory services such as the Communications Assistance for Law Enforcement Act (CALEA).

The IP-overlay model also necessitates the continued support of two OSS, provisioning, and billing systems. The ongoing costs and impact of this approach are not trivial. Given the lifespan of TDM networks, the OSS and provisioning systems have been developed in isolated "silos" to support distinct services, as depicted below in Figure 3.3.

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However, the introduction of IMS, as depicted in Figure 3.5, introduces a single contiguous OSS and provisioning system that enables operators to support all services within a single system. This in turn supports a "one-touch" provisioning model, instead of the multiple-hands approach of modifying legacy OSS, provisioning, and billing silos. A key enabler of this single provisioning deployment model is the service delivery platform (SDP), designed to complement IMS. With the increased focus on telecom and Web 2.0 mashups, a single system for billing becomes even more relevant for the reasons noted above, as well as to assist in day-to-day troubleshooting.

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In lieu of drawing a firm timeline by which all TDM core infrastructure will be retired, some carriers have adopted the stance of simply introducing an IP overlay with the intent of accelerating the retirement once a critical mass of subscribers or markets have been transitioned. While this approach seems logical, a simple common threshold, or "tipping point," that is applicable to all operators does not exist.

For these operators, rather than focusing only on a subscriber-penetration number, day-to-day network operation practices must be examined. These factors, captured in Figure 3.7, provide secondary proof points that the pace of network transformation could benefit from acceleration.

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Given the challenges associated with the increasing Opex costs of TDM networks, and demands for Web and SIP based services, traditional all-TDM stalwarts can no longer maintain the view that evolution to next-generation IP telecommunications is an optional, long-term future strategy.

For these operators, network transformation empowered by an IMS deployment based on an IP overlay model continues to represent the optimal approach.

Moreover, for telecom providers that have already augmented TDM with IP technology, the systematic development of an all-IP timeline remains the final and vital piece of the equation to ensure market relevance in the era of all-IP networks.