Lecture 5

1. Lecture 5 Network Service Providers

2. Telecommunication Industry • In a state of flux due to: • increased competition • growth of the Internet • globalization of the worldwide economy

3. Globalization • More competition in long distance services in the US • Growth of multinational corporations eager to purchase services from a single source • Growing demand for network capacity • Liberalization of overseas TC markets • Opportunity developing countries very large

4. Developing Countries • Long waiting lists for telephone lines • Eastern Europe has fewer than 20 phones per 100 people • US has 64 phones per 100 people

5. Long Distance Market • Still some growth potential in US • Interstate margins slim, growth decreasing • Investment in overseas ventures possible with overseas deregulation • Results in higher profit margins • RBOC’s also expanding overseas, SBC owns 10% of Telkom South Africa

6. TC Service 1984-1990 • Local carriers: • Sell mainly local and toll services • Yellow page advertising • Cellular services • Long distance carriers: • Interstate voice • Data telecommunication services

7. After TC Act 1996 • Local providers and cable operators: • interstate long-distance inside their territories • high-speed data networking • Internet access and services • cellular services outside their territories • local calling outside their territories • interstate long-distance outside their territories

8. Examples of Expansion • RBOC’s, Cable TV operators, and independents: • interstate long distance from within their region • high-speed data networking • Internet access and services • cellular services outside their region • local calling outside their region • interstate long distance outside their region

9. Examples of Expansion • Cable TV operators emerging as major competitors for Internet access and local phone service • Independent carriers (Level 2, Quest Comm., Global Crossings) building high-speed fiber optic networks • Many resellers in long distance, Internet and data services

10. Services sold by resellers: • Debit cards • Dial-around calling • International call back services • Internet access • Local telephone service • Long distance to consumers and small business • Local and long distance to hospitals and college dorms

11. New Class of Resellers • Emerged in mid 1990’s • CLEC: competitive local exchange carriers • Sell local, data services, Internet access and local toll calling to business and residential customers • Urban business customers bulk of business • Use their own facilities, and buy from local exchange carriers

12. The Bell System Prior to 1984 • 22 local Bells, all owned by ATT • Bells sold local, domestic, and international services • Manufactured and sold central office switches, customer premise telephone systems, electronics and consumer phones • yellow pages and white page directories

13. Monopoly System • ATT had a total monopoly on all telephone traffic • MCI and Sprint wanted to compete with ATT in metropolitan areas • by 1974 many complaints filed against ATT for not supplying connections to local phone companies, antitrust suite filed • anti-trust suit resolved in 1984

14. Modified Final Judgement • ATT settles with the Justice Department • ATT must divest 22 local companies • Ownership transferred to 7 Regional Bell Operating Companies

15. RBOC’ s • Retained: • the “Bell” logo and the right to sell local and toll calling within local area’s • the lucrative yellow pages and white directories • Denied: • the right to manufacture equipment

16. Bellcore • Centralized organization • Jointly owned by the RBOC’s • central point for National Security and Emergency Preparedness • technical resource for the RBOC’s • administered the North American Numbering Plan

17. Bells 1984 -1996 • Sold basic services • 1988: allowed to offer enhanced services • computer processing to act on subscriber transmitted information • voice mail • audio text • electronic mail services • Bell’s opened 100 service features to competitors

18. Bell’s Core Business • Local telephone service • Experienced enormous growth in data and wireless services

19. Telecommunication Act 1996 • Bell territories were opened further to competition • long distance vendors • cable companies • local access providers • utility companies • Many mergers followed between the Bells, now only 4 RBOC’s remain

20. Independents • 1,270 independent telephone companies • Alltel Corporation • Cincinnati Bell • Sprint Corporation • in many rural area’s • Supply dial tone to 15% of the telephones in US and cover >50% of US geographically • May manufacture their own phones and sell long distance within their regions

21. Impact TC Act 1996 • Objective to open up $193 billion p/y local telephone market to deeper competition • Provided guidelines for opening interstate long distance market

22. Impact TC Act 1996 • 14-point checklist for RBOC’s • Opened local service to: interexchange carrier’s, CAPs, cable companies, wireless operators, broadcasters, and utility co’s • Required interconnection for the above • Local could: sell cable and TV services, equipment, and out-of-state long distance

23. Impact TC Act 1996 • Raised limit on the number of TV stations networks could own • Phased out cable rate regulation • Promised carrier discounts to schools, health care institutions and libraries • Allowed RBOC’s to manufacture once they receive permission to sell in-region long distance services

24. Interexchange Carriers • ATT, MCI, Sprint • Before Act, primarily sold long distance and international service • Own most of the switching and transmission equipment routing their calls • Connect to provider to complete the call

25. New Interexchange Carriers • Level 3 and Qwest Communications • route traffic over a mix of of their own fiber and facilities owned by other carriers • Williams Communications • sells mainly at the wholesale level to other carriers and Internet service providers

26. New Interexchange Carriers • Services include: • toll-free 800, 877, 888 services • outgoing long distance, private lines • local calling services • data transmission services • 900 services • Internet access • cellular wireless services • VPN’s, webhosting

27. Transporting Calls

28. Markets Opened by TC Act 1996 • Telephone system manufacturing • Sales of interstate long distance depending on meeting conditions of interconnection

29. Merger and Partner Mania • Amritech invests $6 million in Europe • BellSouth $2 million in Latin America • ATT and Teleport Communications Group and TCI • WorldCom with MCI

30. Impact of TC Act 1996 • Permitted RBOC’s to sell in-region long distance after 14-point checklist • Freed interexchange carriers, CAP’s, cable companies, wireless service operators, broadcasters and gas and electric utilities to sell local telephone service • Required local telephone providers to offer resale and interconnection

31. Impact of TC Act 1996 • Authorized local telephone companies to sell cable and TV services, equipment and out-of-state long distnace form outside their regions, voice messaging and cellular • Raised the limit of TV stations networks could own and phased out cable rate regultion

32. Impact of TC Act 1996 • Promised carrier reimbursable discount to schools, health care institutions, and libraries in rural areas • Allowed RBOC’s to manufacture goods through separate subsidiaries, after they receive permission to sell in-region long distance services

33. Interexchange Carriers • Prior to 1996 Act: ATTm MCI, Sprint • After 1996 Act: • Frontier, Qwest, and Level 3 Communications: • own most of their own switching and transmission equipment, microwave, fiber, multiplexers, etc. • route their customers traffic over a mix of their own network and leased fiber or cabling from others • sell capacity at wholesale to other carriers and Internet service providers

34. Interexchange Carriers • Services include: • toll-free 800, 877, 888 services • outgoing long-distance • dedicated private lines • local calling services • data transmission services • PCS cellular services • 900 services: VPN, web hosting • Internet access • cellular wireless services

35. LATA • Local access and transport area • 161 local geographical area’s in the US • area in which local telephone area’s may offer phone services, local or long distance • regulated locally state-by-state

36. Local and Interexchange Carriers • Post divestiture conditions: • IXC carriers were barred from carrying traffic within LATA’s • Local phone companies were to carry traffic within LATA’s • IXC carriers forced to hand-off interstate calls to local provider which are then carried to their final destinations

37. Point of Presence • The point in the network where the IXC carrier passes off the call to the local phone company is called the point-of-presence or POP (see figure 3.3, page 97) • It is the location of the IXC’s telephone switch that connects to the local telephone company

38. Point of Presence • A long distance carrier’s office in your local community • Place where long distance carrier lines terminate, just before those lines are connected to the local telephone company’s lines • IXC may have several POPs within a LATA

39. POP • Each major interexchange carrier has a POP in each metropolitan area • EX: ATT has two in Boston

40. Competitive Access Providers • An alternative, competitive local exchange carrier, such as MCI metro • Largest CAP’s are: • ATT • MCI Worldcom

41. CAP’s and CLEC’s • The CAP provider evolved into CLEC’s in the 80’s and 90’s • IXC paid access charges to the local carrier for access and egress to the local loop • This cost passed on to their customers • Amounted to 1/3 of Bell’s revenue, 4.5 cents per minute

42. CAP’s and CLEC’s • Business customers found these access charges to be costing them a lot of money • Circumventing these charges a priority • Learned how to circumvent by building their own capacity and connections • Beginning of CAP industry • Supply alternative for local phone service and access to IXC carriers from local areas