When competitive local exchange carriers (CLECs) buy telecommunications switching systems, they purchase the same equipment incumbent telephone companies do. However, CLECs deploy their switches in a business environment radically different from the traditional telco setting. Some unique characteristics of this new environment pose a challenge, both for switch vendors and the CLECs themselves.
Most central office switches originally were designed to serve the needs of established local telephone companies. Traditional telcos generally purchase a new switch to replace an older central office and to accommodate growth in a specific geographic area. Telcos have an established customer base with a large percentage of residential and small business subscribers. So when they purchase a switch, incumbent telephone companies already know who and where their customers are and how quickly they expect to recoup their investment.
CLECs, by contrast, are entering new markets with relatively few established customers and need central office switches designed to serve these new markets. CLECs, with their limited resources, also are having to purchase their switches to reduce their dependence on incumbent telcos for resale services and unbundled facilities. Their ability to thrive as full-service providers depends on how successfully they can leverage their limited resources to compete for customers, bring new services to market quickly and accommodate rapid growth.
Established telcos use much of their switch capacity to provide basic voice and custom calling services to residential and small business customers. CLECs, however, primarily serve business customers who demand high-end services such as ISDN, Internet access, high-speed data and video transport, and advanced intelligent network (AIN) services.
Selection of a switch that best meets these needs is critical in helping a CLEC meet its objectives. The optimum switch in the CLEC environment must be reliable, scaleable, modular, flexible, cost-effective and versatile, and provide remote capabilities. Switch vendors must offer quick response to feature requests, opportunities for partnering arrangements and brand loyalty.
Reliability is critical for CLECs because their sophisticated business customers demand the highest standards of network performance. Many competitive access providers (CAPs) attracted this customer base in the first place because of the reliability of their state-of-the-art fiber transport facilities. To sustain this competitive edge as CLECs, their switching networks must maintain performance standards that are as good as, or better than, incumbent telcos. Reliability and simplicity of operation also are important for a thinly staffed CLEC with a lean maintenance force of engineers and technicians.
CLECs need to deploy switches with a small initial investment, yet must offer advanced services immediately and expand their network capacity rapidly as they attract new customers. Unlike incumbent telcos, which can generate internal capital from the depreciation of older equipment, CLECs may need to seek financing for switch purchases. This makes low start-up cost a requirement.
Even though CLEC switches start small, they must accommodate significantly more growth, much more quickly, than switches deployed by traditional telcos. CLECs are experiencing annual growth of 24 percent to 26 percent--about three times the growth rate of traditional telecommunications services. A scaleable switch, which can be expanded by adding equipment rather than replacing the entire system, allows a CLEC to start with a small switch and add modules as customer demand materializes.
Modular switch architecture also helps CLECs stay competitive by modernizing their networks and maintaining high service standards. For example, a carrier launching Internet service can connect additional modules to an existing switch to add the trunking capacity needed to support the new service without network blockages. Modular architecture also enables a CLEC to incorporate new technology without replacing the switch. Switch modules generally may be added without service interruption.
Modular architecture also is an advantage to CLECs when they can deploy remote switching modules--instead of additional full-cost switches--to expand their service areas. A remote module can extend a CLEC's network quickly at low cost and can be upgraded to a full switch later to accommodate growth. Incumbent telcos have used remote modules to upgrade service to thinly populated rural areas. CLECs can use the same architecture to cover key markets cost-effectively with a competitive overlay network.
CLECs are most successful when they can move aggressively to take advantage of market opportunities and win the race to bring new services to customers. According to Merrill Lynch, investment bankers have warned that CLECs have a window of opportunity of 12 months to 18 months to build a customer base before the market shifts.
To achieve this degree of agility, CLECs need switches that are versatile enough to carry any kind of traffic that offers revenue opportunities: ISDN voice and data, local and long distance calls, Internet access, wireless PCS, AIN services, even interactive video, multimedia and cellular traffic. While incumbent telcos and long distance carriers with large-scale networks can afford to dedicate an entire switch to specific services, CLECs need the flexibility to accommodate a variety of services on a few switches or, in some cases, on a single switch.
Interconnection is a critical issue for CLECs, both with their own facilities and with the public switched telephone network. The CLEC's switches must interconnect with both the incumbent telco's network and the long distance carriers'. Although the Telecommuni-cations Act of 1996 mandates interconnection, CLECs must meet exacting technical standards to connect their switches with incumbent telephone companies' end offices and tandem networks. Interconnection is particularly difficult if their switches use proprietary technology that does not interface easily with the existing local exchange network.
Selecting an established switch vendor whose equipment is widely used by incumbent telcos is likely to make the interconnection process easier and minimize service problems. Purchasing a major-brand switch also can establish a CLEC as a major facility-based player in the telecommunications market and increase its credibility with incumbent telcos and major customers alike.
Many CLECs also have a significant investment in SONET fiber-optic facilities and require switches that connect with their existing networks at minimal interface expense.
Finally, CLECs demand even more flexibility from their switch vendors than incumbent telcos demand. Switch manufacturers are accustomed to providing installation, technical support, training and other services to traditional telephone companies. CLECs need even more extensive partnering arrangements such as creative financing, maintenance and network management services.
Purchasing a switch is an opportunity for a CLEC to advance its business to a new level of innovation and customer service as a full-service provider. Selecting the right switch for its unique environment and requirements will help a CLEC compete successfully with a state-of-the art local telecommunications network.
Michael Onatolu, market development manager for Lucent Technologies, can be reached at (630) 979-7588.
