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Source: Softswitch Architecture for VoIP
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Is Softswitch Deconstructive, Disruptive, or Both
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Since the introduction of Voice over IP (VoIP) in the last decade, most of the debate comparing VoIP to the Public Switched Telephone Network (PSTN) or softswitch to the Class 5 switch focuses on a DS0-to-DS0 replacement of the incumbent technology by the new technology. It has also consisted of a feature-by-feature comparison followed by a component-by-component comparison. This is an inaccurate means of comparing the two technologies. Much of the terminology focuses on softswitches as Class 4 or 5 replacements. A better perspective is to view the new technology as superceding as opposed to replacing Class 4 or Class 5 switches. This chapter will focus on two concepts currently in vogue regarding new technologies superceding incumbent technologies: deconstruction and disruption. In their 2000 book entitled Blown to Bits1, Phillip Evans and Thomas Wurster explore how certain industries have been deconstructed by the Internet. That is, the emergence of information or services available via the Internet has caused firms to lose sales and market share if not their entire business due to the emergence of new technologies. Examples of those industries include travel agencies, retail banks, and automobile retailers. The following pages will investigate the potential deconstruction of the North American telecom industry by Internet-related telephony applications. Clayton M. Christensen in Innovator s Dilemma (referred to earlier) describes how some well-managed firms can find themselves disrupted by new technology that is cheaper, simpler, smaller, and more convenient to use, known as disruptive technology. Has the PSTN or major components of the PSTN been disrupted by softswitch technologies This chapter will study both of these concepts relative to the impact of softswitch on the current telecommunications markets.
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Deconstruction
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The telecom sector in recent years has been deconstructed by technologies that are Internet related, if not by the Internet itself. Long-distance bypass using VoIP, as described earlier in this book, is a good example of such a technology. The delivery of telephony features to a voice service via the Internet Protocol (IP) would also be an example of deconstruction of the telecom service provider industry by an Internet-related technology.
1 Evans, Philip, and Thomas Wurster. Blown to Bits. Boston, MA: Harvard Business School Press, 2000.
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Is Softswitch Deconstructive, Disruptive, or Both
Is Softswitch Deconstructive, Disruptive, or Both
Deconstruction of Service Providers
Incumbent telephone service providers are being deconstructed as their market share shifts from their networks to IP-based networks and applications. As incumbent service providers lose revenue, they have less money to spend on infrastructure. This inevitably affects the vendors that supply incumbent service providers with legacy platforms (Class 4 or 5 switches and private branch exchanges [PBXs]). Christensen s Innovator s Dilemma describes value networks 2 as consisting of, in this case, service providers and the vendors that service them. As the service providers see their market shares and resultant revenues fall off, their vendors will also be adversely affected. Potential deconstruction of the telecom industry by Internet-related technologies focuses on service providers and the vendors that provide their infrastructure. A discussion of carriers is in order. Perhaps the most vulnerable are long-distance providers such as the Big Three (WorldCOM, AT&T, and Sprint). Seventy percent of corporate telephone traffic is employee to employee, that is, office to office. As this traffic moves to the corporate wide area network (WAN), the long-distance traffic, for example, is almost free (the expense is the bandwidth and new VoIP infrastructure at the very edge of the network). To dramatize this point, if 70 percent of corporate long distance migrates away from the Big Three and onto the WAN, the Big Three are severely deconstructed by Internet-related technology (VoIP). The new IP PBXs, especially those that are Session Initiation Protocol (SIP) based, to quote Christensen, are cheaper, simpler, smaller, and more convenient to use than legacy PBXs. The inclusion of SIP on Microsoft s Window s XP, as another example of potential deconstruction, enables every Windows-XP-equipped PC to be a telephone. This could shift 245 million XP users to be long-distance subscribers to IP-based service providers and/or the corporate WAN in the next 2 to 3 years. No phone company in the world has 245 million subscribers. In order to understand how softswitch, particularly softswitch as a Class 4 replacement, could deconstruct the long-distance market, it is important
A value network, as defined by Christensen, incorporates both the physical attributes of a product or system as well as the associated cost structure (as typically measured by the gross margin). This cost structure includes all business-related costs (research, engineering, development, sales, and marketing) necessary to sustain a business. A value network also includes all the critical upstream and downstream value chain participants. Tightly intertwined value networks prevent disruption by giving incumbents an easy avenue to co-opt potentially disruptive technologies by cramming them into their existing business model.
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