Level 3 Goes Soft

Posted: 08/1999

Level 3 Goes Soft
Lucent Softswitch Investment Expected To Yield Huge Saving
By Peter Lambert and Paula Bernier

Determined to offer telephony services without ever deploying a Class 5 telephone switch, Louisville, Colo.-based Level 3 Communications Inc. went to the biggest maker of Class 5 switches for an alternative--and got it. On June 23, Level 3 agreed to purchase $250 million worth of new "softswitches" from Lucent Technologies Inc., Murray Hill, N.J., over the next four years, launching what the two companies called a "foundation for next-generation broadband services."

To date, Level 3 has offered primarily long-haul data services over its Internet protocol (IP) network. But according to Lucent and Level 3, the new switches will enable Level 3 to offer public switched telephone network (PSTN)-quality voice services over that same IP network--initially long distance voice this year and, eventually, local voice, including advanced intelligent network (AIN) services such as call waiting, call forwarding, billing and operator assistance.

Lucent's softswitch system comprises call control servers, application servers and policy servers, the last of which has access into directories in both the PSTN and IP worlds, providing a common framework to bridge them.

"With this platform, every phone becomes a way to access the best of the Internet, and every PC becomes a way to access the best of the telephone networks," says James Crowe, Level 3 president and CEO.

According to Hilary Mine, senior analyst with Probe Research Inc., Cedar Knolls, N.J., other vendors also are on the softswitch path, including Richardson, Texas-based Nortel Networks, with its IP Connect and Succession Networks call servers; San Francisco-based Cisco Systems Inc., which is working with Morristown, N.J.-based Technologies Inc. to develop call-control servers; and a number of as yet unnamed startup manufacturers. "In all cases, the vision is to separate the control of a call from the physical transport of the call," Mine says.

Mine notes that, despite its identity as a new-world packet-based carrier, Level 3 so far has selected telephony system suppliers not from the packet realm, but from the traditional PSTN realm: switch maker Lucent, signaling system specialist Tekelec Inc., Calabasas, Calif., and cell-relay switch maker Fore Systems Inc., Pittsburgh. "Lucent and Nortel have a lot more experience writing software and testing it than a Cisco does," Mine says.

Yet, Level 3 is determined to avoid buying any circuit switches because it is convinced that packet switching can converge voice, data and multimedia services at much lower costs. "If you were going to build a pure telephony network, circuit switching would probably still be the best way to go," says Mine. "But a carrier like Level 3 gains substantial savings by folding two networks--voice and data--into one packet-switched network.

Over time, Crowe says, the Lucent softswitch, which runs on industry standard computer servers, will put communications switching on the price/performance curve associated with computer processors, which doubles every 18 months. With a network featuring Cisco routers for data and Lucent softswitches for voice, Level 3 expects to reap capital savings between 40 percent and 60 percent, and operational savings that "may be even greater," Crowe says. "We founded our company on the fact that [this convergence] was necessary, and in fact inevitable."

Further, Level 3 believes that server-based switches will generate a level of application innovation already proved on the Internet and World Wide Web. "With open applications program interfaces (APIs), developer toolkits and an open invitation to developers to combine the best of the web, the Internet and telephone networks, we expect a flowering of a whole new set of services that neither Lucent nor Level 3 can now see," Crowe says. "In our view, every new idea that an entrepreneur has is a potential source of differentiation for Level 3."

One week earlier, Lucent sought to get that ball rolling when it introduced the Lucent Full Circle applications development program and some initial unified messaging and broadband multimedia applications. Participants in the launch included long distance carrier and cable operator AT&T Corp.; wireless carrier WinStar Communications Inc., New York; directory services software provider Novell Inc., Provo, Utah; and server hardware and software provider Sun Microsystems Inc., Palo Alto, Calif.

The Full Circle program provides APIs and support services for developers of applications for four Lucent programmable platforms, including the PacketStar IP Services Platform, a computer server-based softswitch designed to deliver standard PSTN features and other services to IP networks, and the 7R/E Programmable Feature Server, which converts voice signals into packets. Both products are part of Level 3's agreement.

According to Mine, Level 3 may be able to accelerate application development through a broader development community, but the testing phase of implementing new switching features will remain complex and time-consuming, whether the software runs on mainframe, Class 5 switch hardware or on a computer server. As it rolls out telephony services, she says, Level 3 could keep its feature set small and simple, since approximately 95 percent of corporate telephony features are used by only 5 percent of customers. That means Level 3 could target the other 95 percent of customers with a very basic set of features.

From the start, unlike most IP telephony services today that require customers to dial 800 numbers and enter ID codes before placing calls, the softswitches will enable Level 3 customers to dial numbers directly. If the quality of the IP link degrades to a certain level, the softswitch will automatically route the voice traffic to a PSTN connection. Level 3 already has an "overflow" contract with Frontier Corp., Rochester, N.Y., for such purposes.

Level 3 previously had announced plans to roll out voice services in the second half of this year. As of late June, the softswitch was being used to offer services to Level 3 employees, and the carrier was "wringing out bugs" in the operational support systems (OSSs), Crowe says. "We won't sell a communications service until we can provide the kind of quality customers expect, and we believe that will happen in the second half of this year." Although Lucent acquired billing software supplier Kenan Systems Corp., Cambridge, Mass., for $1.48 billion last January, Level 3 has yet to select a billing vendor, "and you can't launch it until you can bill for it," Mine says.

Initially, the softswitch will run on Sun's Solaris operating system and servers. By year's end, Lucent expects the software to run on Hewlett-Packard Co.'s OpenView, Microsoft Corp.'s Windows NT and Linux operating systems.

Under the agreement, Level 3 also can purchase Lucent's IP Exchange Systems and DEFINITY IP Solutions, an IP-private branch exchange (IP-PBX). The companies will collaborate on future enhancements of softswitches and gateways for broadband services combining voice, video communications and web communications. "Level 3 gets a big time-to-market advantage," says Lucent Chairman and CEO Rich McGinn. "And because the technology is software-based, you can talk about release of applications virtually on the fly."

Level 3's network also features Nortel Networks' optical equipment and asynchronous transfer mode (ATM) switches and Cisco's core routers.

In related news, Cisco reached a definitive agreement to acquire privately held TransMedia Communications, Inc., San Jose, Calif., in a deal valued at approximately $407 million. TransMedia's Media Gateway technology is designed to seamlessly unite IP, PSTN and ATM public voice networks, and according to both companies, is complementary to Cisco's industry leading voice-over-packet product line. The gateway integrates ATM-based circuit switching and voice-over-packet technologies, but it does not attempt to take on the call control and policy roles of the softswitch.

Cisco characterized the acquisition as underscoring its commitment to offering service providers an accelerated migration from circuit-based networks to "New-World" packet-based networks.