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Make hay while the sun doesn’t shine: harvesting circuit-switching in the economic gloom

22 мая 2009

Last week, Nokia Siemens Networks and the Finnish mobile operator Elisa demonstrated what they claimed was the world’s first circuit-switched over HSPA (CSoHSPA) call.

Use of CSoHSPA could increase voice and data system capacity (by 50–100% for voice, according to Nokia Siemens) by taking advantage of the improvements offered by the shared packet air interface of HSPA, and it would allow operators to retain use of their widely deployed core circuit-switched voice networks. Although HSPA devices are required, it is in essence a software-only upgrade: it is a feature of HSPA+ (3GPP Release 7), not a network overhaul. This raises broader questions about the value of investment in converged, packetised voice–data core networks – questions that have become more urgent in the context of a recession.

The idea is not a new one: back in the early days of voice over broadband, some vendors proposed channelised voice over DSL (CVoDSL) as a way of allowing established voice operators to provide more equivalent narrowband voice circuits at lower cost over DSL. But CVoDSL has never been deployed on a major scale: incumbents had nice, relatively untroubled PSTN and ISDN businesses that they did not want to risk, and many new entrant service providers went straight to VoIP because they were essentially coming to voice via the consumer broadband Internet access business.

Evidence of a rethink of the relative value of maintaining circuit-switching and
all-IP transformation in core networks comes from the grandfather of converged all-IP core networks: BT’s 21st Century Network (21CN). BT admitted last week that the current economic environment has driven the incumbent to reduce the speed of its 21CN implementation, and that it needed to re-assess how next-generation access integrates with its core NGN. But this is a deceleration rather than a reversal. BT remains committed to the long-term goals of 21CN. In addition, Nokia Siemens expects LTE to bring in full end-to-end mass-market VoIP, although it is also unclear exactly how this will be implemented. Nokia Siemens already has a 'Fast Track Voice over LTE' solution that enables its customers to "exploit their investment in their existing circuit-switched mobile core network".1 Nokia Siemens presents this as a way to accelerate the migration to 'full-blown' LTE, but it can just as easily be seen as a means to delay the investment in the IMS core.

In a recession, operators tend to re-assess those parts of their capex budgets that are dedicated to heavy investment in return for long-term efficiency gains. Maximising free cashflow and protecting established investments now tend to take priority over maximising operating cashflow a few years down the line. Hence short- to medium-term measures, such as implementing CSoHSPA, that potentially protect existing investments and delay the need to invest further will look attractive, whereas the benefits of ambitious and costly convergence schemes that promise long-term cost savings in mature (for which read stagnant or declining) legacy services markets will be scrutinised more closely. A phrase one hears more and more frequently during the downturn is that of 'harvesting' existing assets, and we would expect this harvest to continue at least until the green shoots of renewal are well established.


Rupert Wood, Principal Analyst

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