SERVICE PROVIDERS CARRIER SWITCHES: Go Hard for Softswitches

Service providers’ traffic is increasingly moving from voice to data, and
the present TDM switches are unable to cope up with emerging data applications.
So, vendors are focusing more on next-generation switches as they are designed
according to data requirements of the service providers. In India, things are
moving slowly towards next-generation switches. There have been a few pilot
deployments and one can expect large-scale deployment very soon.

Technology
Trends

Most traditional TDM switches are costly and occupy a lot of space whereas
softswitches come at a fraction of that cost and space. Service providers are
hence increasingly opting for softswitches for voice-based applications and next
generation switches for 3rd generation network.

Soft switch is a software-based switching platform as opposed to a
hardware-based switching platform. They are based on open systems whereas TDM
systems are based on proprietary standards. Softswitch is a generic term for any
open-application program interface software used to bridge a public-switched
telephone network and VoIP by separating the call-control functions of a phone
call from the transport layer. Simply put, Softswitch is the concept of
separating the network hardware from network software. In traditional
circuit-switched networks, hardware and software are not independent.
Circuit-switched networks rely on dedicated facilities for inter-connection and
are designed primarily for voice communications. More efficient packet-based
networks use Internet Protocol (IP) to efficiently route voice and data over
diverse routes and shared facilities.

Softswitch, media gateway controller, call agent, and gatekeeper can be
clubbed together to perform the functions that are coming to be called
softswitches. Gatekeeper is the ancestor term, derived from VoIP systems in
which gateways converted the voice and signaling from analog PSTN and SS7 to IP
packets. The gatekeeper controlled one or more gateways, guiding the setup and
teardown of voice circuits between the two kinds of networks. Media gateway
controller is an elaboration of gatekeeper, growing out of the first efforts to
standardize the control of media gateways using a protocol called media gateway
control protocol (MGCP).

The functions of a softswitch fall under four different layers: applications
and features; service-creation environment; call control or a call agent; and
protocol mediation, enabling devices, such as gateways, using different
protocols to communicate. Feature servers are the newcomers to the softswitch
landscape, emerging as a repository for applications and databases that can be
used to deliver services above and beyond the simplest call control. But the
term is deceiving, because a feature server is not a discrete entity, but rather
a number of servers spread out over one or more networks that can be accessed to
deliver services.

An emerging issue is whether features have to be on the softswitch itself or
relegated to a feature server. In the PC model there are operating systems and
applications, and they are clearly separated. However, an operating system often
includes basic application functions, such as the ability to display pictures
and play audio. Likewise, on a softswitch too, there are certain applications
such as basic call routing, where it is difficult to segregate them from the
call agent because of policy issues.

The future benefit of Softswitches will be dictated by the extent to which
network control and service logic also migrate away from the switch.
Distributing functionality means that switches will be simpler, more efficient,
and cheaper. Switches will be able to focus on switching, allowing other
components to provide network control and service logic. Distributed service
logic means that application development will not be constrained to centralized
creation, control, and service delivery. Instead, services can be created and
deployed at various places through an extended network.

BUYING TIPS

MARKET INFORMATION

For the sake of analysis, we have segregated carrier switches and VoIP
switches. Things are moving fast on the VoIP front whereas there is saturation
in the carrier switch front. VoIP equipment has undergone a bifurcation. Today,
there are two clear segments of VoIP equipment. First, the VoIP gateways and
gatekeepers installed mainly in the Class 4 Tax/Tandem layer of telecom
networks. Second, the VoIP softswitches deployed by operators in the Class 5
layer of telecom networks. These switches have a lot more intelligence as
compared to Class 4 switches. In addition to the traditional VoIP vendors, the
Class 5 softswitches have an array of well-known traditional TDM switch vendors
vying for this crucial piece of the next-generation telecom network. Deployment
action in this space has also begun in India with the Tatas conducting a
commercial trial during the last fiscal. H.323-based equipment still rules the
roost, with SIP-based equipment beginning to make a mark. With several standards
of VoIP being there in the market, equipment coming out in the market has
support for several of these standards.

The switching space in India is a highly-competitive market, with prices of
TDM switches hitting rock bottom. Though VoIP equipment are only now getting
deployed in India, they compete with TDM switches. Thus, TDM switch prices play
a significant role in price determination of VoIP equipment. And VoIP vendors
targeting India have not had the buffer of a new market when it comes to price
competitiveness. VoIP equipment prices are calculated for every unit of port
equivalent to every DSO circuit or line in the case of TDM switches. Per port
prices of VoIP gateways during FY 2002—03 varied from Rs 4,500—7,000 ($90—150),
depending on the size of deployment.

The traditional TDM voice switch, the future of which has been a subject of
intense debate over the last few years, still ‘stands strong’. In India,
where the network infrastructure build-up got accelerated in the last 10 years
or so, the addition of switching capacity by BSNL has been really impressive but
has slowed down in the last two years. In FY 2002—03, for the first nine
months, the addition was just about 2.4 million lines, as compared to 7.5
million lines in the preceding 12 months. The total local switching capacity by
the end of December 2002 was 49.8 million lines. Expectedly, there has been no
tender for switching by BSNL in the entire fiscal 2002—03.

The total voice switching market in FY 2002—03 has been estimated at Rs
1,588 crore. Lucent, with almost all major orders from private basic service
providers, except Bharti, and its share of BSNL’s GSM as well as fixed line
orders, emerged a clear leader with a revenue of Rs 605 crore and accounted for
a market share of 38 percent. Alcatel, based largely on its supply to BSNL fixed
line and Tata Teleservices/VSNL, emerged as No. 2 with an estimated revenue of
Rs 396 crore. Siemens, with BSNL’s fixed line orders, Bharti’s local and
trunk orders, and a part of BSNL’s GSM switching order, emerged No. 3.

While, ITI’s share has gone down considerably, Fujitsu, and NEC have almost
vanished from the market. Only

Ericsson has a different story. Though it did score on the GSM front, it did not
execute anything for BSNL or private fixed operators (except TAX for Reliance)
in wireline. And it is not active in CDMA. However, as GSM networks keep on
expanding, it will bounce back. That is something one cannot say for the rest.

And that includes C-DoT manufacturers. BSNL, it seems, has also almost
stopped procurement of C-DoT switches. Till 2000—01, C-DoT switches were
procured regularly. In fact, in 2000—01, about 4.6 million C-DoT lines were
procured, about ten percent more than the previous year. The government had
promised to continue with the procurement.

VoIP Switch

The voice over IP (VoIP) equipment industry took a quantum leap in year 2002—03,
driven by significant deployments in ILD operations. The VoIP equipment market,
which was negligible in the previous fiscal, registered a healthy first year
sales of Rs 48 crore. Unit-wise, an estimated 77,000 ports of VoIP equipment
were shipped during the fiscal.

VoIP deployments during the fiscal 2002—03 were primarily led by the ILD
operators. Data Access, in particular, focussed heavily on this new technology.
Its core infrastructure, connecting the US, the UK, and Japan with points of
presences (POPs) in India was totally based on VoIP technology. The VoIP vendor,
which benefited out of this full-throttle VoIP play by Data Access was Israeli
player Vocaltec Communications. Vocaltec received as many as three separate
deals from Data Access during a short period of 10 months. And thus, it clearly
was the market leader in India during the fiscal. It effectively captured 65
percent of the VoIP equipment market.

The other two ILD players, though late to take up VoIP, had begun the process
of embracing VoIP towards the end of the fiscal. In particular, Bharti Telesonic
took upon itself to regain grounds lost to Data Access, by going for a
significant deployment during the last quarter. VSNL, which had gone for
rudimentary VoIP equipment towards the earlier part of the fiscal, was also
looking at a more aggressive VoIP act in the forthcoming months of fiscal 2003.

The market today is in very early stages. Deals in the current year could go
in any direction. And each of the deals could result in dramatic shifts in
standings of players in the market. However, fiscal 2002—03 ended with
Vocaltec taking market leadership with 65 percent market share, followed by
Ericsson at 14 percent and Cisco Systems at 10 percent.

Almost all global players were vying for both market share as well as mind
share. There were two types of players. The IP players like Cisco, Vocaltec,
Commworks, Sonus, Winphoria, Nuera, Arelnet, and Verso Technologies are holding
the VoIP-only banner.

On the other hand, the traditional TDM switch vendors like Alcatel, Siemens,
Ericsson, Motorola, and Nortel prescribe a more sequential migration from TDM to
VoIP. The second group likes to call its VoIP product lines (in many cases TDM
switches with VoIP capability) as NGN switches. During 2002—03, Vocaltec,
Cisco, Veraz and Verso were the VoIP vendors which achieved the TEC
certification for deployments in India.

It was the government’s dramatic go-ahead to VoIP implementation by both
ILD operators and ISPs in April 2002, that gave impetus to VoIP implementation
in the service provider space. The market, though still at an infantile stage,
is growing very fast. iLocus estimates India’s VoIP traffic in calendar 2003
to touch 1320 million minutes.

In fiscal 2003—04, it is expected that ILD operators will come under
intense pressure from competition, compelling them to deploy VoIP equipment.
Data Access has signed a global framework deal with Vocaltec for supplying $8
million worth of equipment for its global expansion during the currrent fiscal.
A part of this deal has already been implemented. VSNL has also started
deploying Alcatel’s NGN-ready switches in its network.

What could make fiscal 2003—04 an even better year for VoIP is the fact
that for the first time, one is likely to see significant rollouts of VoIP in
national and local networks. India’s largest operator, BSNL, which had already
deployed VoIP equipment in six locations during the last fiscal, could go in for
expansions. Tata Teleservices is known to be carrying out a commercial trial of
the next-generation softswitch from Winphoria Networks (now acquired by
Motorola) in its Western India network.

Commercial induction is expected around mid-2003. Aksh Broadband, a broadband
operator in Rajasthan has already ordered for Versio Technologies’ Clarent
softswitches. The deal worth $5.7 million (licenses for 256,000 endpoints) is
for an end-user level implementation of VoIP across Rajasthan, which is slated
to be completed by end 2004.

Considering the already booked orders and the likely VoIP implementations
from various service providers, Voice&Data estimates that the market for
VoIP equipment will grow by over 100 percent to touch Rs 100 crore in fiscal
2003—04.