The low cost and easy implementation of integrated access solutions has CLECs increasingly using them to gain a strategic battlefield advantage.Competitive carriers are turning to integrated access solutions where voice and data traffic on separate, partially filled T1 lines can be more cost efficiently aggregated onto fewer T1 lines, making this equipment the weapon of choice for competitive local exchange carriers (CLECs) trying to capture new markets.
However, in addition to integrated access solutions' expediency in such situations, these units possess more firepower than most CLEC battle planners realize. They can help solve a number of other business and technical challenges, allowing CLECs to attack on more fronts in the telecommunications revolution.
The term integrated access is being used to classify a lot of telecom munitions equipment these days. However, an integrated access solution combines a variety of voice and data services onto a common transport system consisting of one or more lines based on time division multiplexing (TDM), digital subscriber line (DSL) or packet/cell technology. Frequently, the unit is located at the customer's premises, but it could be located in a central office (CO), collocation site or carrier's point of presence (PoP). In addition, these units can be cascaded when traffic from single T1 systems or larger modular units is further aggregated by a broadband system onto a synchronous optical network (SONET) ring.
There are, of course, the well known advantages of integrated access solutions. Typically, network planners turn to integrated access solutions when faced with traffic scenarios that would result in the fractional use of T1 or DSL for voice and data applications. Quite simply, when today's telecommunications revolution is being fought as much on the bottom line as the front line, aggregating the traffic through an integrated access system to fill a minimal number of T1 or higher-speed access or transport systems saves money.
There is a common misconception in the industry that a business case for integrated access equipment only makes sense when multiple services are involved. In fact, that has been manufacturers' battle cry for nearly a decade: to increase efficiency and cut costs by combining voice and data services on a shared circuit. Indeed, this is the classic implementation in all of the literature at the telecommunications arms shows.
However, compared with digital loop carrier (DLC) solutions, integrated access will often prove favorable for voice applications alone. In fact, basic systems--those with 12 to 24 voice ports and one or two high-speed data ports, or pizza box--will prove adequate for customers with only 12 to 14 voice lines. For the average installation, this means payback in 12 to 18 months. A similar case can be made for larger integrated access systems; the number of lines merely increases.
Here are some battle plans comparing the individual circuit costs of the traditional method of provisioning voice circuits with an integrated access solution. The secret formula yields the number of lines necessary to break even on the cost of deploying the integrated access system.
In a typical access network, a DLC bunkered in at a CLEC's collocation site in an incumbent LEC's (ILEC's) local CO provides a business plain old telephone service (POTS). Using industry averages, the DS-0 switch port costs $18 and the DLC port $85. A DS-0 line will cost $90 for installation and $15 per month.
However, employing an integrated access solution (see "Integrated Access Solution" chart, below) the DLC at the collocation cage is replaced by a simple cross-connect unit belonging to the ILEC. The individual POTS lines are aggregated onto a single T1 line, extending from a pizza box integrated access unit at the customer's premises to the CLEC's PoP.
Graph: Integrated Access Solutions
The overall cost includes $1,700 for the switch port, $325 for installation, $125 monthly for the T1 line and $1,700 for the integrated access unit. Using the secret formula, the lower cost of the T1 line offsets the cost of individual lines. As a result, a CLEC with a 12-month payback target can pursue business customers with as few as 14 lines. An 18-month target drops the required number of lines to 13. After that, the CLEC will realize respectively $150 or $240 a month in savings to record as increased profit margin or as leverage to undersell the competition.
While an integrated access strategy can be based on voice alone, does it make sense when data makes up roughly half of today's network traffic? Competing against the ILECs' broad service portfolios with voice alone begs comparison with going into battle with carbine rifles alone. Custer tried it in 1876 and was completely outmatched. Had Custer been able to call in the Gatling guns, the competitive edge might have swung his way that day at the Little Bighorn River.
For CLECs trying to capture a beachhead, selling voice service in the metropolitan areas is the winning solution initially, but adding data can be a devastating tactic. In the example, having justified the cost of the integrated access solution based on 14 voice lines alone, the CLEC now has 10 free DS-0 circuits available. In the telecommunications revolution, leaving 10 lines unused is equivalent to putting half your troops on a hill as spectators while the other half does battle, sharply reducing the margin for victory. For the sake of example, we will send only four of those lines into action armed with frame relay service (see "Voice and Data" chart, below) at 384 kilobits per second (kbps). This results in $200 in monthly revenue, cutting the payback period by one-third to eight months. Of course, after eight months that revenue can be added to the $150 in savings for a total of $350 profit monthly. Adding data to the mix in this example will allow the CLEC to target this solution at customers with as few as five voice lines (18-month payback).
Winning Hearts and Minds
Once customers are won, keeping them is critical to CLECs. As any military strategist will tell you, the key to ultimate victory in a campaign is capturing the hearts and minds of the populace. This is true in marketing telecommunications products and services as well. High churn rates are expensive and cumbersome to administer. There is a growing consensus that bundling services through an integrated access strategy can help reverse high churn rates. It makes sense that customers are less likely to defect for a greener deal on an individual service if all of their existing services are wrapped up in a single package. In other words, if you have your customers' services bundled, their hearts and minds follow.
Recently, some interexchange carriers (IXCs) paused in the midst of battle, ignoring the din for a moment, to look through the smoke for a way to outflank the enemy. The carriers observed that while they could initially win customers based on price, the customers' loyalty came cheap, and they would turn coat for as little as $50. Instead of using data as free revenue, they found that by packaging it cost effectively with voice, they could win a more lasting allegiance because customers were unlikely to step into competitive territory for anything less than a superior package.
AT&T is among those that has employed this bundling strategy to avoid being vulnerable to an endless price war based on voice alone. AT&T wraps up local and long distance telephone services, and Internet access in its CERFtone offering, using a scalable integrated access solution to aggregate the services. Scalability of the equipment allows the carrier to offer its small-business customers six to 16 voice channels for local, local toll and long distance service along with a choice of Internet access speeds ranging from 56kbps to 384kbps. For AT&T, the modular integrated access solution allows it to consolidate lines, manage all of the services centrally and quickly reconfigure services.
Of course, many combinations of services may have merit. Data services--frame relay or leased lines for Internet access or virtual private networks (VPNs), for example--are typically provided via a second T1 line. In both cases, the lines are dedicated and typically only partially filled. Using an integrated access solution, both sets of traffic can be can be aggregated. Since the line can be justified on the basis of voice only, the data revenue becomes the spoils of war.
Bundling services through integrated access has other benefits. Manufacturers offer a wide array of services on optional service cards for their larger modular units--integrated services digital network (ISDN), frame relay, asynchronous transfer mode (ATM), DSL, digital data service (DDS), routing and Internet protocol (IP). Virtually all existing services are available on cards and, as new services emerge, manufacturers are making them available. As CLECs begin to bundle more services through integrated access, they will be able to match or exceed ILECs offerings. This capability to provide a range of services on minimal infrastructure can give a CLEC a significant tactical advantage over the ILEC.
ILECs, victims of their size, tend toward separating functions, not just voice and data, but separate units and infrastructures for voice and each data service. If the customer wants POTS, the ILEC provisions POTS lines. If the customer adds frame relay, T1 lines are dedicated to the services.
Most CLECs do not have the riches of infrastructure that allow ILECs to employ such a strategy. However, constructing such an infrastructure is cumbersome and costly, and it creates a weak spot in the ILECs' defenses that can be exploited with integrated access. If a voice customer wants frame relay, the CLEC simply locks and loads the card. ATM? Another card goes into the chamber.
Minimal infrastructure, therefore, becomes an asset that allows the CLEC to move quickly and cost effectively. Further, ILECs tend to be CO oriented, or at least regionalized in their offerings of data services. Few CLECs have chosen to exploit this. However, an integrated access unit equipped for ATM, as an example, could conquer territory in an area where the incumbent does not offer the service. The new service is simply backhauled along with voice and other services to the CLECs PoP.
Because of their concentration on voice services as the way to establish a market base, CLECs in general have not yet employed such bundling as a primary strategy. However, one would guess it is only a matter of time if CLECs are to defend their hard-fought ground.
While bundling can reduce churn, it does not eliminate it. One of the tyrannies of being a carrier is that customers will come and go, and demand all kinds of changes to their service in between. The compact size and modularity of integrated access solutions help mitigate the effects of an unpredictable marketplace. If a customer deserts, voice or data cards can be used elsewhere, or the whole chassis can be easily relocated, avoiding stranded investment. The system can be reconfigured in minutes for a new customer.
As competition stiffens and CLECs look for new ways to differentiate themselves, service is becoming a formidable weapon. Integrated access allows CLECs to initiate a service campaign on two fronts. First, integrated access allows the CLEC to consolidate what ILECs over the decades have separated--one sales force, one customer service group, technicians capable of provisioning and maintaining all services and one trouble desk.
Provisioning and maintenance, in particular, is simplified. A DLC system located at a CLEC's collocation cage or local PoP leaves a central monitor unable to specifically determine the location of trouble in the access network and, therefore, incapable of remotely applying any remedy.
However, an integrated access solution located at the customer's premises allows centralized maintenance--voice and data--all the way to the customer's end equipment.
From the command center, technicians can configure, test, monitor new services, change existing services and perform a full range of tests, including bit error rate tests (BERT), loopbacks, and simple network management protocol (SNMP) gets and sets. From the customers' vantage point, they now have one number to call, are relieved of finger-pointing, know categorically if the trouble resides in the network or their equipment and can add or change services at will, often in minutes rather than days. This is the kind of service that will win customers' hearts and minds, and possibly the war.
The key to CLECs' marketing success is they are not fighting the war with cumbersome heavy armament and major battlements in every neighborhood. Like the classic revolutionary, they are waging a guerilla war with light arms and fleeting tactical moves--strategically locating expensive switches, deploying compact equipment in cramped collocation cages defining their borders with efficient fiber rings. These are the lean, mean telecommunications machines of these revolutionary times.
Integrated access solutions can play a significant role in CLECs' tactics and not just for the accepted reason that one T1 for voice and data is cheaper than one for each service. Among the secret warheads built into an integrated access solution, they make economic sense in many cases for voice-only applications, while data becomes the spoils of war. Using modular integrated access units to bundle services, a little used tactic today except by the local arms of IXCs, promises the best way to reduce churn among customers. An integrated network also appears to have the potential to conquer the divided networks of the Bell companies.
Nicholas J. Williams is president and CEO of Premisys Communications Inc., Fremont, Calif. He can be reached at +1 510-353-7600.
