Rationale for Centrex

Centrex Positives and Negatives

- Personnel savings
- Network cost savings
- Less management effort
- Ease of use
- Space and power savings
- Automatic upgrades

- Loss of control
- Possible cost increase over time
- Delays in making changes
- Limited systems integration
- Hybrid Centrex-PBX networks

When we talk to telecom managers about choosing Centrex service or PBX systems, their reasons are remarkably balanced. The one absolute advantage of conventional Centrex, over the in-house PBX option, they see as saving of space. This is particularly important for large organizations that rent expensive floors in downtown office towers. Good second reasons for choosing Centrex are the savings on personnel—both system administrators and console operators—and the expected relief from problems of technological obsolescence. For 40 years Centrex has been steadily, although not spectacularly, sold on the basis of the two Ss: simplicity and space. These are still the reasons given by small business owners as the rationale for renting single-line Centrex packages.

Introduction to Centrex

Centrex service was launched in the early 1960s and thus has a 40-year history in the telecommunications industry. In that time Centrex has progressed from the financial district of lower Manhattan to being a good source of revenue for some 20 telephone companies (telcos) in various countries around the world.

Our best estimate is that 20 million Centrex lines are in service, with 15 million of these in the United States, over 2 million in Canada, and more than 1 million lines in Britain. Centrex services have also been available for several years in Australia, where Telstra provides perhaps a half million lines in the major cities, as well as in Belgium, Ireland, the Netherlands, and Switzerland.

The sales of Centrex equipment by the telecom manufacturers to the telcos has fallen off, in recent years, as capital expenditure budgets have been cut back heavily. About 1.6 million new Centrex lines were installed in the United States in the year 2000, but these shipments fell to 1.1 million lines in 2001.

On a percentage basis, Centrex services provide approximately 5% of all the business telephone lines in the world, with the highest market shares being 20% in Canada and 15% in the United States. Widespread acceptance of Centrex outside North America has been inhibited by the cost of providing a local loop for each telephone from the serving central office (CO). Centrex and standard business lines are probably double counted, since some CO lines that support key telephone systems (KTS) are actually Centrex lines, because of the relatively low tariffs. In North America up to one-tenth of all Centrex lines are provided by major telcos to resellers on a wholesale basis.

For marketing purposes, a variety of brand names are used to identify Centrex services by different telcos. For example, some parts of SBC Communications use the name Centron; Qwest Communications delivers integrated voice, video, image, and data services as Centrex PRIME in 13 states; and Verizon-NYNEX still calls the service Intellipath. BT labels its digital Centrex as FeatureNet, and Telstra, in Australia, rents the same service with the name of CustomNet.

Early Centrex services were analog in nature, and analog phones are still supported by all the service providers. Most North American telcos classify Basic Rate Integrated Services Digital Network (ISDN) telephone service as Centrex, at least from the tariff viewpoint, and some deliver digital Centrex by using ISDN technology. Most of the proprietary digital Centrex phones and data units predate the availability of ISDN.

In many cases the link between the serving CO and the customer's premises has been with multipair copper cables, requiring one pair per station for digital Centrex. Some installations have been deployed through a concentrator in the customer's premises—a good example being the Cable & Wireless (C&W) Centrex service in London—with an optical fiber connection to the serving CO. This concentrator, or remote module, remains under the control of the CO, meaning that if the main switch or its trunk line fails, all in-progress calls stay on but no new connections can be set up while the CO is not available. Such remote modules may serve a single customer (with the problem of finding equipment room space) or multiple customers (as in a shopping center).

Centrex service through remote CO modules.
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