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against future declines in market prices. By virtue of being able to offer more services than a Class 4 or 5 solution, service providers deploying softswitch can enjoy service differentiation if not additional revenues from the services they offer that nonsoftswitch service providers cannot. Finally, the creation of new services, from which softswitch-equipped service providers can sell and enjoy higher margins, is another motivating factor for the growth of softswitch sales and will be described later. A look at one s residential or cellular phone bill reveals that the service provider makes most of its money in the margins it makes selling features such as call waiting and voice mail. This is a motivating factor to adopt softswitch.
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Softswitch is smaller than Class 4 and, as illustrated in Figure 11-2, requires less physical space to deliver the same port density, that is, the equivalent number of phone lines as Class 4. Depending on the configuration, a softswitch may take as little as one-thirteenth of the space required by Class 4 to perform the same service. This is an advantage for softswitch. Due to the smaller footprint, softswitch power consumption and cooling requirements are also less than the legacy switches. Smaller hardware size also translates into lower real estate expenses. One comparison is a softswitch solution from Convergent Networks. Their product can concentrate 36,000 DS0s in one 7-foot rack consuming a
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Figure 11-2 A comparison of space needed to house 36,000 DS0s in Class 4 and softswitch
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Billable space necessary to house 13 racks (36,000 DS0s) for Class 4 156 sq.ft.
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Space necessary to house 1 rack (36,000 DS0s) for Softswitch - 12 sq. ft
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Downloaded from Digital Engineering Library @ McGraw-Hill (www.digitalengineeringlibrary.com) Copyright 2004 The McGraw-Hill Companies. All rights reserved. Any use is subject to the Terms of Use as given at the website.
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24-inch 24-inch space, plus space to access the switch, for a billable total of 12 square feet per month. A Class 4 switch in comparison, delivering 36,000 DS0s, requires 13 racks for a total of 156 square feet per month at $35 per square foot of central office space per month. The softswitch in this example offers a 92 percent cost saving over the Class 4 in real estate costs.11 The miniaturization of Class 4 components will not soon match the advantages of softswitch in footprint. The smaller footprint of the softswitch translates into lower real estate costs for the service provider. Although this may not be a major concern for an incumbent provider who has built and paid off its central office facilities, it is critical for a new market entrant or an incumbent expanding into new markets. Table 11-2 illustrates the financial advantages in rent or real estate concerns relative to the smaller footprint of softswitch. This advantage is explored further in the net present value models later in this chapter. Figures 11-3 and 11-4 demonstrate the difference in the central office or collocation space needed to house a Class 4 switch and a softswitch. All the space needed to house the components of either switch generates a monthly rental expense. As set forth in the net present value problems, space for a single rack in the Denver market rents for $1,000 per month. If softswitch requires one rack to do the same function as Class 4, which takes 13 racks, then softswitch costs one-thirteenth as much as Class 4 in monthly rent for this configuration. The maximum density in a Class 4 switch in one 7-foot rack is 2,688 DS0s. The maximum density of a Convergent Networks ICS2000 softswitch is 108,864 DS0s. In order for the Class 4 to transmit long-distance traffic
Table 11-2 A comparison of rental space required between Class 4 and softswitch
Number of 7-foot racks for 36,000 DS0s Rental cost per month per rack Total per month Total per year per location
Class 4 13 $1,100 $14,300 $171,600
Softswitch 1 $1,100 $1,100 $13,200
Convergent Networks. A Business Case for Next-Generation Switching: Revolutionizing Carrier Revenues and Returns. pg. 3. www.convergentnet.com.
Downloaded from Digital Engineering Library @ McGraw-Hill (www.digitalengineeringlibrary.com) Copyright 2004 The McGraw-Hill Companies. All rights reserved. Any use is subject to the Terms of Use as given at the website.
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