Network Service Providers

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Lecture 5

• Network Service Providers

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Telecommunication Industry

• In a state of flux due to
• increased competition
• growth of the Internet
• globalization of the worldwide economy

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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

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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

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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
• RBOCs also expanding overseas, SBC owns 10 of
  Telkom South Africa

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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

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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

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Examples of Expansion

• RBOCs, 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

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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

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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

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New Class of Resellers

• Emerged in mid 1990s
• 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

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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

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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

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Modified Final Judgement

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

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RBOC s

• Retained
• the Bell logo and the right to sell local and
  toll calling within local areas
• the lucrative yellow pages and white directories
• Denied
• the right to manufacture equipment

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Bellcore

• Centralized organization
• Jointly owned by the RBOCs
• central point for National Security and Emergency
  Preparedness
• technical resource for the RBOCs
• administered the North American Numbering Plan

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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
• Bells opened 100 service features to competitors

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Bells Core Business

• Local telephone service
• Experienced enormous growth in data and wireless
  services

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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 RBOCs remain

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Independents

• 1,270 independent telephone companies
• Alltel Corporation
• Cincinnati Bell
• Sprint Corporation
• in many rural areas
• 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

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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

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Impact TC Act 1996

• 14-point checklist for RBOCs
• Opened local service to interexchange carriers,
  CAPs, cable companies, wireless operators,
  broadcasters, and utility cos
• Required interconnection for the above
• Local could sell cable and TV services,
  equipment, and out-of-state long distance

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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 RBOCs to manufacture once they receive
  permission to sell in-region long distance
  services

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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

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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

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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
• VPNs, webhosting

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Transporting Calls
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Markets Opened by TC Act 1996

• Telephone system manufacturing
• Sales of interstate long distance depending on
  meeting conditions of interconnection

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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

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Impact of TC Act 1996

• Permitted RBOCs to sell in-region long distance
  after 14-point checklist
• Freed interexchange carriers, CAPs, 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

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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

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Impact of TC Act 1996

• Promised carrier reimbursable discount to
  schools, health care institutions, and libraries
  in rural areas
• Allowed RBOCs to manufacture goods through
  separate subsidiaries, after they receive
  permission to sell in-region long distance
  services

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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

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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

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LATA

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

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Local and Interexchange Carriers

• Post divestiture conditions
• IXC carriers were barred from carrying traffic
  within LATAs
• Local phone companies were to carry traffic
  within LATAs
• IXC carriers forced to hand-off interstate calls
  to local provider which are then carried to their
  final destinations

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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 IXCs telephone switch
  that connects to the local telephone company

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Point of Presence

• A long distance carriers office in your local
  community
• Place where long distance carrier lines
  terminate, just before those lines are connected
  to the local telephone companys lines
• IXC may have several POPs within a LATA

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POP

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

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Competitive Access Providers

• An alternative, competitive local exchange
  carrier, such as MCI metro
• Largest CAPs are
• ATT
• MCI Worldcom

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CAPs and CLECs

• The CAP provider evolved into CLECs in the 80s
  and 90s
• 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 Bells revenue, 4.5 cents per
  minute

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CAPs and CLECs

• 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

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