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Is Softswitch Deconstructive, Disruptive, or Both
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Is Softswitch Deconstructive, Disruptive, or Both
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Table 12-2 cont. Pros and cons: Is softswitch disruptive
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Pros Mainstream Class 4 vendors have not succeeded in achieving a significant market share with their Class 4 replacement softswitch solutions, leaving the market to start up softswitch vendors.
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Cons Mainstream long-distance service providers are slashing their rates to the point of losing money. This is done to deny profitable margins to new market entrants that use softswitch and thus inhibit the growth in new market entrants and hinder the sales of softswitch. Mainstream long-distance service providers with Class 4 switches, armed with excess capacity on their existing networks, are slashing their rates to deny new market entrants any opportunities at profitability. Internet depression denies capital to new market entrants, as discussed in Michael J. Mandel s The Coming Internet Depression. Incumbents with legacy Class 4 switches continue to hold market share. Incumbents do not invest in new plants due to capital crunch. With new market entrants not emerging due to capital crunch and capital denied to softswitch vendors, softswitch vendors go out of business.
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The operating costs of Class 4 cannot be reduced. Class 4 will always require 10 or more times as much rack space as softswitch and draw more power than softswitch, making Class 4 always more expensive to operate than softswitch. The growth in enterprise VoIP telephony demands small, enterprise-grade softswitch solutions such as IP Centrex and IP PBX, leading to the dilution of the business long-distance market and the erosion of mainstream long-distance service providers market share.
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The simplification of VoIP made possible by new media gateways and softswitch applications allows alternative service providers (Community Antenna Television [CATV], ISPs, RBOCs, municipal metro area network [MAN] operators, and applications service providers) to offer long-distance service and disrupt mainstream service providers. The events of September 11, 2001 (the destruction of switching facilities, leaving 300,000 subscribers without service) drive the fear of the loss of central office services and promotes a move to softswitched IP networks, driving a growth in softswitch sales. Under Section 271 of the Telecommunications Act of 1996, RBOCs gain permission to offer long distance in their regions. The need is growing to deploy switching gear fast. Softswitch provides that advantage (Qwest and SONUS are examples of this). Mainstream service providers fear mainstream Class 4 vendors will discontinue Class 4 product lines, leaving them without technical support for their existing Class 4 switches. They are choosing softswitch to protect themselves.
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Is Softswitch Deconstructive, Disruptive, or Both
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simple argument in favor of softswitch is the financial advantages, as seen in the purchase and operating costs of softswitch. The previous chapter compared the real-world purchase and operating costs of softswitch and Class 4. In almost every instance, softswitch is cheaper to purchase and operate than Class 4. This proves to be attractive to new market entrants and to incumbent service providers seeking to upgrade their existing infrastructure. The chief argument service providers have had against softswitch in the past is that it does not match the performance parameters of Class 4. Softswitch now matches or exceeds the performance parameters of Class 4 in terms of reliability (five 9s), scalability (100,000-plus DS0s and over 800,000 busy hour call attempts [BHCAs]), quality of service (QoS, 4.0 plus mean opinion scores [MOSs]), and the features and applications (transmits all features and applications that a Class 4 does in addition to new IPcentric features). Given that softswitch matches or exceeds the performance parameters of Class 4 and that it is less costly to purchase and operate, new market entrants to the converging long-distance market will want to acquire and deploy softswitch in place of Class 4. These lower costs equate to lower barriers to entry and exit for those new market entrants. Service providers such as ISPs, cable TV providers (CATVs), application service providers, nonfacilities-based long-distance resellers, power companies, and broadband service providers are now enabled to offer long-distance service to their new and existing customers. In addition to those new market entrants, RBOCs are gradually entering the long-distance market in their respective regions. To do so, they must satisfy conditions established in Section 271 of the Telecommunications Act of 1996. The Act requires RBOCs to meet a federally mandated 14-point checklist before they offer long distance in their operating region. The checklist includes interconnection and collocation; unbundled network elements; poles, ducts, conduits, and rights of way; loops; transport; switching; 911, directory assistance, and operator services; white page directory listings; number administration; signaling and databases; number portability; dialing parity; resale; and reciprocal compensation before they can offer long distance within their own operating regions. As the RBOCs succeed in meeting those requirements and make plans to roll out long-distance service in their operating areas, they will want to use equipment that is competitively priced and can be quickly deployed. Softswitch, given that all other factors are equal (scalability, reliability, QoS, and features), is a more logical choice in this role than Class 4. If multiple RBOCs were awarded the opportunity to offer long-distance service throughout the United States in, say, one year, there would be a rush to
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