User Groups (Centrex or PBX)

As the market has become more competitive and vendors have become more careful with their money, the major associations for telecommunications users, such as the International Communications Association (ICA) in the United States and the Canadian Business Telecommunications Alliance (CBTA) in Canada, have faded away, with the result that their Centrex special interest groups have been lost as well. This trend is unfortunate, because accessible user groups can be valuable forums in which to share experiences with other users and information with vendors and customers. Two user groups remain specifically for Centrex customers in North America.

The National Centrex Users Group (NCUG), which is somewhat misnamed, as it has one Canadian director and a number of members from outside the United States, provides Centrex users with a platform to deal with product development, product delivery, and regulation issues. NCUG has good relationships with service providers and switch manufacturers, and provides free membership for end users and associate members. The NCUG operates a 3-day conference in the United States in late March of each year; it also publishers a quarterly newsletter.

Nortel Networks has now consolidated its separate Canadian and American user organizations into one DMS-Centrex users' group, to provide a forum for all those customers whose Centrex service is delivered from Nortel-made COs. Meetings of the predecessors to this Nortel group were lively events in the 1980s when digital Centrex was first introduced, but they did not see significant activity in the past decade, as third generation Centrex remained quite stable.

With the arrival of IP-Centrex, combined with the likely growth in the number of service providers and customers, the value of user groups is expected to be much greater over the next few years.


Personnel and Training Requirements (Centrex or PBX)

One major advantage frequently claimed for legacy Centrex service was that it needed fewer support people than an in-house PBX system, both at the system analyst/administrator level and at the console operator level. The average PBX (within a typical office complex) tends to require one analyst and two operators for every 1,000 users on the system. A commonly accepted figure for a Centrex-based service is one analyst and two operators per 3,000 users (i.e., locals). Many of these savings are the result of sending most change orders to the telco for implementation, along with the inherent DID characteristics of Centrex.

Voice and Video
A supposed advantage of IP telephony systems, whether Centrex or PBX, is that end users can configure their own phones—but that is true only to a limited extent. The majority of callers into an organization, and most people within it, depend on telephones for real-time, person-to-person communications.

A PC on a desktop may be, largely, an island of personal preference, but this cannot be the case with our phones, as these must be closely integrated into a dynamic system with widespread connections. An organization needs people who possess, or can be trained in, the administrative and technical skill sets to match IP telephony resources to everyone's needs.

All of this means that IP-Centrex will likely continue to need the same number of telephony support personnel that were in place for legacy Centrex. However, this complement of analysts will fall to about one-quarter of those needed for a complete in-house PBX solution in many organizations, because the integration and administration of application subsystems (such as messaging, contact centers, relationship management, and wireless integration) will be the responsibility of the service provider.

Training Needs
Each IP-Centrex-using organization will need to invest in professional training for voice service management, along with good user education, but will gain the benefit of more versatile system administrators and a simpler user environment than was previously the case. In a new generation Centrex solution, the professional telecom analyst will need to be conversant with not only the features of a telephone system, but also much that pertains to the underlying Internet protocol network and multimedia communications systems.

In many cases, these needs will be addressed by the cross-training of voice personnel on data and vice versa, together with support personnel all being trained on the implications of real-time multimedia communications.


Service Level Agreements

The convergence of voice, video, and data networks leads to the demand for toll-quality services equivalent to those delivered by legacy circuit-switched networks, but delivered on top of a packet-switched network. The ability to provide preferential, or guaranteed, service to certain traffic flows is known as QoS. QoS is designed to manipulate four key network characteristics that are analogous to a water pipe:

- Bandwidth = width of the pipe;

- Delay = length of the pipe;

- Jitter = variation in length of the pipe (i.e., delay variations);

- Packet loss = leaks in the pipe.

QoS is ultimately about the control of networks, about providing a network infrastructure that is responsive to the needs of all users, both inside and outside the organization. The overprovisioning of network resources, in the hope that full capacity will not be reached, has been a common approach with LANs. However, overprovisioning only addresses the need for increased bandwidth, while delay, jitter, and packet loss need to be addressed with other techniques.

The overprovisioning of bandwidth is not practical with WANs, where bandwidth is usually contracted with a carrier and the cost is much higher than with a LAN. It has become a common and desirable practice for the management of QoS to be defined by service-level agreements (SLAs).

Purpose of an SLA
The purpose of an SLA is to spell out the terms and conditions of a business arrangement between two or more participants. The SLA provides the "glue" for a good relationship, in which all parties may be winners. However, if participants have difficulty making and implementing commitments, the service agreement is bound to fail.

In a telecommunications systems environment, there will be a number of SLAs. For example, an internal SLA may exist between a service-providing department (e.g., IS) and a user department, or perhaps for a specific application for the organization. Another example may be an SLA within a single department, where two groups need to work together to meet a particular user need.

In most cases, an SLA is an external service agreement between an organization and its vendor. With telecom service agreements the content is not necessarily a strict legal document, but rather a statement of expectations. An SLA need not be technically detailed; it delineates "what," "when," and "(who," but not "how" or "why." You should avoid creating SLAs that are win-or-lose arrangements.

Contents of an SLA
A normal SLA will contain the following information:

1- Names of the partner organizations to the agreement;

2- Names of those persons who have authority to commit to the agreement;

3- Agreement commencement and termination dates, possibly also specifying regular review dates, at which the adequacy and currency of the agreement will be determined;

4- Details regarding what is to be delivered to whom, perhaps including when (but not how or why);

5- Details of any crucial elements that must be provided by assignees in order to meet commitments;

6- Service standards for delivery in terms of quality, quantity, and cost, where applicable;

7- Definitions of noncompliance;

8- Details on the escalation procedures required to resolve conflict, should it occur;

9- Details about the process involved in revising or edit the SLA;

10- Details of the process regarding agreement termination;

11- Details regarding penalties which would apply for nonperformance;

12- Implementation details.

Implementation of an SLA

SLA implementations can take two forms. Often a dry run or pilot test is held for a month or two, to ensure that the parties understand their commitments and can deliver as promised. On other occasions, implementation commences at a given point and revisions are processed through the terms of the SLA.

With all good SLAs the partners must have a positive attitude and a strong desire to make the agreement work. If the agreement fails, or creates negative feelings, then it is considered a management failure by all. The best SLAs are those that exist through mutual trust and personal relationships, rather than those where changes to the agreement seem to be going on perpetually.

Importance of an SLA

In the last few years, senior managers have led the move to using SLAs, both within organizations (i.e., between departments) and between organizations. SLAs are used in many contexts apart from the telecom business, but are especially crucial in the related areas of multimedia communications and supporting applications, such as ACD, CRM, and UM.

The popularity of extensive outsourcing arrangements, to allow organizations of all sizes to concentrate on their core competencies and to move away from service activities that are difficult to maintain (e.g., because of skilled personnel shortages), plays a large part in this greater interest in SLAs. This trend is consistent with the development of IP-Centrex services.


System Management (Centrex or PBX)

IP-Centrex and IP-PBXs share features that make system administration easier, as compared with legacy telephone systems. The common trend is to push down more responsibility for system administration from the expensive expert to the user (which, in turn, is part of the larger push for cost saving that has all of us dialing complex number codes and counting out our own bank notes at an automatic teller machine). With IP telephony services and systems, the user may move an IP phone from one outlet to another on the same network, since the device is self-registering with the controller—so users could essentially handle the physical moves. Individual users can also set up some features on their own phones, such as ring patterns and tones, together with icons used on the screen.

An internal system administrator using a Web-based browser package can change calling features and forwarding patterns, set up UM mailboxes, and manipulate access to long-distance or international codes. This in-house capability not only saves the cost of work orders that were, previously, sent to the telco (which may charge $100 per hour), but also enables changes to be completed within hours, rather weeks.

With a major Centrex-based application (such as ACD for a contact center), managers, supervisors, and system administration personnel can view and print exactly the information that they need. This would include agent and group performance, load and profile management, and historical reporting.

An example of a system administration screen from Nortel's IP-Centrex Management package is shown in Figure 1.

Figure 1: System administration screen.

A prime characteristic of IP-Centrex is that the service is delivered over the existing LAN within a building or campus, and that a network management system for that is all ready in place. There will be the need, however, to enhance the management capabilities to support multimedia services over the previously data-only network. This VoIP traffic needs a high-performance, reliable, and flexible IP-network based on a set of techniques that will ensure the required QoS. The following list of action items is taken from a position paper published by Nortel Networks:

- Use a high-level, software-based policy manager to define and control traffic flow, especially for premium traffic.

- Control bandwidth utilization based on time of day, application priority, and network conditions.

- Separate traffic into queues.

- Mark and police entry traffic.

- Monitor traffic levels at each outgoing interface.

- Actively manage output queues.

- Filter exit traffic for security and congestion control.

- Use packet discard algorithms.


Guidelines for Implementation

The following set of guidelines is useful for the successful implementation and management of in-house LANs that support voice communications:

- Prior to implementing IP-Centrex, the personnel who are responsible for telephony should acquire reasonable knowledge of the technology embodied in the first three layers of the OSI model—namely the physical data link and network layers. This would cover aspects of cabling, Ethernet, and IP as general technologies that are critical to the function of enterprise IP telephony and hence IP-Centrex. This knowledge might be obtained by communicating with other existing IP telephony installations (whether IP-PBX or IP-Centrex) and from vendors' literature.

- Membership in a Centrex users' group is an invaluable way to share information with other analysts and managers, and to provide feedback to suppliers.

- The cabling system is the key to a "clean" network installation. A well-designed, installed, and certified cabling system will form the foundation of an enterprise-grade LAN capable of supporting the demands IP telephony.

- The physical installation of an IP-Centrex service has to be well coordinated with a number of crucial departments, in addition to the users. These include the premises management, information technology/services operations, and senior management. In many situations any installation work (such as the pulling of new cable runs or the placing of phone sets) has to be done outside regular working hours.

- Every detail of an IP-Centrex installation, as part of the overall

- LAN infrastructure, must be fully documented. This documentation starts with the user's name, and continues through the identification of the voice terminal (IP phone or a computer with softphone), the jack identification, and various cross-connect positions to the port on an Ethernet switch. The identity of other users in a calling group, with interdependent call forwarding, must also be recorded to help with fault diagnosis.

- Feature validation and configuration of Ethernet switches and routers on a LAN will be necessary as part of the upgrade to carry voice and video over an IP network. Software and firmware upgrades may be required on such equipment to enable QoS and high-reliability capabilities, along with the planned configuration of these features to provide for end-to-end QoS capabilities. We recommend that some testing be undertaken to ensure that the characteristics of the LAN will support IP telephony under a range of call loads during peak data traffic. This can be done using specialized simulation software and "virtual" call endpoints that simulate call loads on the network while capturing statistical information on the ability of the network to carry the voice traffic. The overall architecture of the network must be in keeping with current design rules that stipulate a hierarchy of connectivity, such as the core, distribution, and edge approach, along with using both layer 2 and layer 3 switching with VLANs. Network reliability is paramount; all financial and technically practical approaches should be considered to ensure high uptime (over 99.9%) of the network infrastructure, including the processes and procedures used for troubleshooting, upgrade, and general maintenance.

- Data-oriented operations personnel have lower expectations of the availability, or uptime, of their network than do telephony support staff. Planned maintenance of networking equipment may include scheduled downtime, which may well be unacceptable to the phone users. There is more likelihood of problems with IP networks than with voice-only service.

- Understand and deal with issues surrounding the powering of IP phone sets, which is a significant factor in the overall reliability of an IP telephony system.

- IP-Centrex service, partly because of the physical separation between control and switching functions, will always involve multiple vendors, with the risk of finger-pointing. For the LAN equipment we are free to pick and choose, if the vendors support industry standards. With telephones, we will probably want to stay with one vendor; otherwise users will encounter a reduced feature set.

- The line of demarcation between carrier and customer must be clearly identified, as the sets and switches on the users' side of the demarcation line will be totally the customer's responsibility.

- There will always be tension between the needs for security and the desire for accessibility and mobility. The security arrangements must be monitored and tested frequently, as they will need updating to meet new threats or to handle increased traffic loads.

- Any organization that has a number of IP-Centrex installations in different locations must have the ability to manage these networks from a central site over a WAN, typically a corporate intranet. For this purpose there should be as much conformity in access technologies, protocols, and bit rate as possible.

- Both end-user and support personnel training are critical components to any voice technology implementation, and they are especially important with IP-Centrex. The ability to provide end users with an interface to the system, allowing them to make changes to their IP telephone, is a powerful feature that could either reduce or increase management overhead, depending on the nature of education provided.

- Finally, a wise project manager knows that an unexpected technicians' strike, or a sudden shortage of a specific type of network interface card, can hold up installation for several weeks without warning. Since so many players are involved in the implementation of IP-Centrex at any site, it is sensible to allow at least one month's leeway for the completion date of a new or significantly enhanced service.


Cabling Categories

The use of UTP copper wiring for multimegabit-per-second, in-building data networks was first proposed in the mid-1980s and became generally accepted after the Category 5 standards were defined in 1994. Category 5 (Cats) cables usually have four twisted pairs of 24-AWG copper wire and are terminated with eight-wire RJ45 miniature connectors. This cable delivers 100-Mbps Ethernet bitstreams up to a distance of l00m (325 ft) between the electronic equipment (e.g., a switch) and the desktop device. Typically, cabling system manufacturers will provide guarantees or "certification" of the performance of their cabling materials if the cable plant in a new installation has been designed and installed correctly.

We cannot be sure that full Cat5 performance will be delivered if the in-line components, as identified in Figure 1, between the desktop computer (or IP phone) and the server come from different cable and equipment manufacturers. For this reason cabling implementations should follow best practices for design and implementation, according to the manufacturer's specifications, and those outlined in the EIA/TIA Building Telecommunications Wiring Standards (to which the cabling performance specification must abide).

Figure 1: End-to-end components with a LAN.

Category 5 Enhanced (Cat5E) standards were defined by the telecom industry in early 2000. Cat5E performance has been so improved over the earlier standard that a string of Cat5E components will deliver guaranteed Cat5 performance, even if they come from a variety of manufacturers.

Category 6 (Cat6) cabling has been on the market, from several manufacturers, for a few years. It offers a 10 times improved performance bit rate over Cat5 (i.e., supporting 1,000 Mbps, or gigabit, Ethernet). Most applications do not justify gigabit Ethernet to the desktop, but it is used in LAN backbones and for connection to network servers. Standardization of the Cat6 specifications was due to take place by the end of 2002. Until that happens, there is some risk with using the Cat6 class of cabling and mixed-vendor implementations should certainly be avoided before there is industrywide acceptance of Cat6 standards.

Category 7 (Cat7) is a different class of cabling, because it includes a metallic mesh shield around the twisted copper pairs, underneath the outer layer of plastic insulation. Cat7 cabling was developed in Europe and is being used in several countries there, particularly in Germany, for highcapacity LAN installations.

Over the past 5 years many corporate LANs in North America have been built with Cat5E cabling, and a limited number of Cat6 infrastructures are now in place, in spite of its lack of standardization. Our experience has been that there is no more than a 10% cost differential between quotations for Cat5E and Cat6 implementations. One reason for this is that the actual cable materials make up well under one-half of the cost of a complete wiring installation.

Physical LAN costs have not changed much over the past decade, at around $200 per outlet for Cat6 (or about $180 with Cat5E), including needs analysis, system design, hardware, cable, cable-pulling, connecting, and testing, in small-to-medium installations (e.g., a school or a low-rise suburban office building). Expect cabling infrastructure costs to be above $200 per outlet in high-rise, downtown office towers, especially if installation is controlled by unionized workers.


Installing IP-Centrex

Installing IP-Centrex
In many conventional Centrex installations the service provider, usually the incumbent telephone company, owned the telephone wiring within the customer's building, as well as provided the telephone service. This arrangement meant that the telco was responsible for the quality of service to the user's desktop and, if the telephone was rented as part of the service right up to the user's ear and mouth. The disadvantage of this situation was that the telco was usually unwilling for the unshielded twisted pair (UTP) cabling to be shared between voice and data signals, thus necessitating the installation of separate cables and cross-connect equipment for Centrex service and for the corporate LAN.

Within recent years most telcos in North America and in some European countries have disposed of the telephone cabling in customers' premises, making the building owners responsible for all in-house telecommunication cabling. This development has made fault diagnosis more complex, but has also opened the door to the shared use of the cabling infrastructure within an office area.

The arrival of IP-Centrex carries this shared use trend to completion, in that the voice and signaling packets travel over the same LAN and through the same switches as the corporate data traffic. In most installations, therefore, IP-Centrex will be superimposed on a preexisting LAN, which is likely to be Ethernet operating at 100 Mbps, and those responsible for implementing the service will not be much concerned with the underlying cable infrastructure.

The exceptions will be those cases where IP-Centrex is to be implemented in conjunction with a major LAN upgrade, or when additional cabling runs and outlets are required to service the IT phones.

For these reasons we have included the following discussion of the types of copper cabling that are now generally used for Ethernet networks


Distributed Contact Center

Distributed Contact Center
A retail organization with outlets across the country maintains a call center with 200 agents, primarily for inbound customer service. To remain competitive, this retailer must provide extended hours of service, with a "follow-the-sun" approach, by having two call centers, one located on the Pacific and the other on the Atlantic coast. Both call centers have overlapping hours of coverage to assist during the peak call load periods during the day. The centers are supported by two networked digital PBXs with ACD and customized CTI.

In addition to supporting regular inbound calls, the retailer is looking to implement a converged IP contact center, which integrates the functionality of the call center with their Web site. Web site users are to have seamless integration when working with the site and the new contact center.

To build this capability, IP telephony technology has been defined for use. The organization has the choice of purchasing IP-PBX systems or using an IP-Centrex service from a national provider. With the IP-PBX option, the retailer will run VoIP traffic over the corporate WAN between the sites (a 3-Mbps LAN extension circuit derived from a carrier-provided MPLS network). With IP-Centrex, the carrier will be responsible for connecting the traffic between the two sites (resulting in a broadband interconnect charge).

In the estimates for IP-Centrex, we have included a figure of $80 per month for each agent, for the rental of contact center-related software (ie., ACD and CRM). Because this results in a 5-year total of $870,000, compared with an estimated $500,000 purchase cost for two copies of the software on the IP-PBXs, it is probably a higher figure than can be justified.

We should also note that the expected annual cost for the system administration/software support personnel has been set at $70,000 each, to account for the high skill level required in this complex contact center environment.

The bottom line totals show a 10% lifetime cost advantage to the IP-Centrex solution, compared with two IP-PBXs.


Single-Site Organization

Single-Site Organization
This example is based on the head office of a petrochemical company, which consists of a small campus of office/industrial buildings containing 350 phones. The organization has modest growth, with personnel count estimated to increase by 2% per year (total phone set count is allotted in year 1). The organization is a legacy Centrex user that wants to take advantage of IP-PBX features and network convergence. They have realized that to implement IP telephony technology they must replace their existing LAN equipment with new Ethernet switches that support QoS and either in-line power or with the addition of powered patch-panels. Because the cost of the LAN upgrade would occur with either an IP-PBX or IP-Centrex, it is not considered in the financial comparison (suffice it to say that such an upgrade would be on the order of $150 to $300 per network port).

Figure 1 illustrates the basic components that make up the IP-Centrex infrastructure from the provider to the customer's premises.

Figure 1: Typical infrastructure components for IP-Centrex.

The estimated costs, over 5 years, of the IP-Centrex and IP-PBX solutions for this single-site operation are shown in Table 1. Where an item is assumed to be paid on a one-time (capital expenditure) basis, the boxes for years 2-5 have been left blank.

Table 1: Single-Site Cost Comparison (350 Subscribers)

We have assumed that the monthly rental for an IP telephone, or console, is one-twentieth of the purchase cost for that set. That figure seems to be in line with telco practices in the past, but in a competitive environment and at a time of low interest rates, telephone rentals may be considerably less expensive. Based on our estimates, the net present cost of IP-Centrex in this situation would be about 35% more than that for an IP-PBX.

Definitions for Tables 6.1-6.3
Line installation: The provider's fee for setting up a logical connection (register) from the IP phone set to the IP telephony switch located in the CO. This is typically a software configuration; the customer would physically place the phone, connect it to the internal LAN, and ensure communications ability to the IP call processors in the CO.

Line rental: The monthly cost of a logical port on the CO located IP call processor.

Feature installation: The one-time cost of having the provider install a package of features for a single user. These features include such items as call hold, call forwarding, and conference calling.

Phones: The cost of buying or renting a particular level of IP phone from the provider, not including physical installation.

Attendant console: The cost of buying or renting a (typically) PC-based softphone that provides attendant console features.

Feature rental: The monthly rental cost of a package of telphony features, including unified messaging.

Administrator interface: The monthly cost for system administrators (employees of the customer) to access the system configuration interface (ideally Web-based) of the IP call processors, or associated CO-based IP-Centrex system, allowing them to carry out "soft" MACs.

Administrator/support: The yearly cost of a trained individual (employee of the customer) who supports the IP-Centrex system or in-house IP-PBX system.

Broadband installation and rental: The monthly cost charged by the carrier for providing a broadband connection (including CPE routedswitch) from the CO to the customer premises for IP Centrex. Note that Tables 1 and 2 provide broadband costing on a per-user basis.

Table 2: Distributed Contact Center Cost Comparison (200 Agents)

Broadband interconnect: The carrier's fee for interconnecting two or more physical locations (from a single customer) using IP-Centrex. This is essentially the WAN, which carries VoIP traffic between facilities. Long-distance VoIP calls can also be carried over the carriers' network infrastructure to a terminating location, where they are converted (via a gateway) back to the regular PSTN.

PSTN gateway: A device that provides the interface between an IP telephony system and the PSTN. Usually takes the form of a modular router or dedicated hardware device that attaches to the LAN and is controlled by the IP call processor(s) in an in-house IP-PBX system.

PSTN access: The quantity and monthly cost of CO trunks to access the PSTN. These trunks are usually connected to the PSTN gateways and in most cases are B channels on multiple PRI-ISDN links.

System installation: The one-time cost of installing an IP telephony system, including IP-PBX (call processor), gateways, phones, and unified messaging. This cost is typically between 15% and 20% of the overall capital cost of the system.

System maintenance: The yearly cost of contract maintenance (on-site break/fix) for an in-house IP-PBX system, both hardware and software. This cost is typically between 12% and 20% (recurring yearly) of the overall capital cost of the system and includes the cost of software upgrades (new releases).

Quantity (Qty): The number of units for the specific item. In the case of administrator/support this could be a fraction of an individual such as 3.5, where 3.5 full-time equivalent (FTE) resources are required (that is to say, three support personnel would be dedicated full time, and a fourth person would only spend half of his or her time on system support).

Unit cost: The unit cost column denotes either the one-time capital cost or the recurring charge for the item (e.g., monthly for rented items and annually for personnel).

Phone maintenance: The average unit cost of maintenance for IP telephones in the event that a large IP-Centrex client wishes to purchase (outright) phone sets, as opposed to continuous rental.


Financial Analyses - Approximations, Telephone Sets

Financial Analyses
Any financial comparison between IP-Centrex services and in-house (customer-owned) solutions must use input data that are specific to the organization under review. An exhaustive financial analysis is difficult to achieve without a considerable amount of data and effort. Even so, variables such as interest rates and market dynamics can render an exceptionally detailed financial analysis as an approximation.

An increasingly important factor is the growing popularity of IP telephony systems (usually IP-PBXs). While legacy Centrex services would normally be compared to circuit-switched digital PBXs or KTSs, it is more realistic to build comparisons between IP-Centrex and IP-PBX systems. We fully expect that digital PBXs will wane in popularity as IP telephony takes hold in more enterprises over the next few years. The financial dynamics of IP-PBXs also upset the traditional comparison, because factors such as inside wiring, system management, and application integration have changed considerably with this new technology. For these reasons our financial analyses focus on comparing IP-Centrex service to IP-PBX systems only.

Because no large-scale IP-Centrex offerings were available at the time of this writing, we have used available information and reasonable judgment to provide estimated costs for future IP-Centrex services. Our analyses have also assumed that IP-Centrex rental costs hold steady over a multiyear provider contract, and we have brought these future rental expenditures to an approximate present value by assuming an annual discount rate of 5%.

We have assumed that the premium on IP-PBX costs, as compared with TDM PBXs, will have disappeared by 2004.

While not included in these comparisons, time versus money factors should be considered, to more accurately calculate an organization's return on investment (ROI) of a private IP-PBX option. Standard and well-known financial modeling tools such as net present value (NPV) or internal rate of return (IRR) would most likely be used, along with the weighted average cost of capital (WACC), or interest rate, depreciation, and marginal tax rate.

Investment Period
The installation of a new PBX solution ("greenfield" or major replacement) is normally treated as a 5- to 10-year investment. Even with the introduction of IP-PBXs, a comparative analysis should cover a similar range of time. Government organizations may tend to the high side (10 years) of this period, while a more dynamic company would be on the low side (5 years). We expect that new software releases for IP-PBX systems will occur more frequently over the next few years than has been the custom with legacy PBXs, due to the emerging nature of this technology.

Inside Wiring
Because the inside wiring component is now equalized when IP telephony or IP-Centrex is considered, it is not included in these calculations. You should, however, know that a small number of additional LAN cabling outlets and associated Ethernet switch interfaces may be required in various building locations in which only a phone might be required (such as lobbies).

Telephone Sets
It is reasonable to assume that IP telephones will be available both as rented units from the IP-Centrex provider or as an outright purchase by the customer organization. Per-unit costs are normally driven by the features available on the set itself (e.g., number of lines or Web browsing capability). We categorize these IP phones in the same manner as traditional phone sets: single-line (basic) phones, feature phones, executive phones, and contact-center set (softphone). In the case of purchase, the customer organization should factor in maintenance costs for the sets (which a service provider would include as a component of the rental charges).

For estimation purposes we have assumed that the cost of IP phones will drop 50% in the first 3 years that IP-Centrex is on the market, because several manufacturers should be producing them in large quantities by the year 2005.


Concerns with IP-Centrex

Concerns with IP-Centrex
We must be aware of the potential issues associated with IP-Centrex, which may not be present with legacy Centrex services. As outlined, a number of requirements must be fulfilled for a successful implementation of IP-Centrex. These major issues are summarized as follows.

Operational Costs
The single most significant issue surrounding the use of Centrex services, legacy or IP-based, is the recurring operational cost. This is the monthly charge made by the provider for supplying IP-Centrex services and related applications.

In financial evaluations, this cost is most often compared to the sum of capital and operational costs of an in-house telephony system over a specified period of time.

PBX and CO switching technologies have been developed over a number of decades. Thousands of person-years have been invested in software and hardware engineering to create an exceptionally reliable and ubiquitous service. Enterprise-scale IP telephony technology is relatively new and has not achieved the installed base and extensive long-term field-testing of existing circuit-switched technologies. A risk associated with IP Centrex services is that they are based on emerging technologies with complex software. Providers will have to be extra vigilant to ensure the reliability of IP-Centrex infrastructure components.

The Internet revolution has seen a new breed of individuals evolve: hackers. While the compromising of traditional telephony services (long distance and DISA) has long since been exercised by inventive and unlawful individuals, the advent of IP telephony opens up an entirely new twist to this old story. It is foreseeable that hackers, who currently practice their trade on both the Internet and corporate data networks, will now have much more access to, and control of, telephony services. This could evolve into a serious issue; most IP telephony systems are based on widely used operating systems and protocols, which are well-known to the hacker community. A considerable number of techniques currently exist to attack or use the resources of existing data network-based services, the realm of which telephony has now entered. A hacker at a distant location could, given the appropriate access and knowledge, attack, control, or cripple elements of IP-Centrex.

Whether IP-Centrex or private IP telephony is used by an organization, security of the internal network must be given increasing priority, in order to guard against service disruptions and the loss or compromise of corporate and personal assets and privacy.

Network Considerations

Since IP telephony, and hence IP-Centrex, are required to run over the LAN of a customer's organization, that network must have the inherent capability of carrying such traffic. Latency, jitter, and bandwidth characteristics of the LAN must be within tolerable limits for packet voice traffic. These parameters, otherwise known as quality of service (QoS), are created and sustained by both the architecture of the network and the capability and configuration of the electronic equipment (switches and routers) used to build the LAN on which packet voice traffic will flow.

A number of other network considerations must be made when deploying IP telephony technology, such as dynamic host configuration protocol (DHCP), a network service that provides each IP phone with a unique IP address at startup. This could be supported by the provider, but because of the potential in-house requirements of directory integration and other needs, may have to be supported in-house.

A consequence of convergence is that the failure of part or all of an organization's LAN also means the failure of telephony services. While users of traditional voice networks have enjoyed exceptional reliability, this has not been the case historically with LAN infrastructures and for PC users. Therefore, appropriate amounts of redundancy must be built into the LAN infrastructure to provide for high availability (upward of 99.9%). This is usually accomplished through numerous hardware and software techniques, including redundant power supplies, duplicated backbone links, and routing redundancy. Organizations should plan to invest around 15% over the base capital cost of implementing a LAN to increase its reliability.

911 Requirements
The service provider will have to create the capability of connecting 911 services into the IP-Centrex environment. Basic 911 requirements dictate that a caller must be routed to a public safety answering point (PSAP), with information on the caller location provided by ANI and other database information. This can usually be accomplished with IP-Centrex. Enhanced 911 has the extended requirement of being able to locate a caller to within a particular area of a building or campus, or within a limited number of logically grouped telephones. Enhanced 9 1 1 therefore requires substantially more intelligence from the telephony and LAN infrastructure. Such capabilities can be accomplished by having intelligence built into the LAN, whereby an IP phone set and the particular port on an active LAN switch can be queried by management software, which in turn provides a database search for a location of that phone set. This information will have to be passed to the provider and ultimately (and in a timely manner) to the PSAP.

Due to the geographic independence of IP telephony, both IP-Centrex providers and in-house IP telephony systems must provide for appropriate routing of 911 calls to the local PSAP, as opposed to traversing an internal LAN / WAN and connecting to the PSTN at some unrelated location.

Phone Power
Like residential telephones, most traditional Centrex sets are powered from the CO. With IP Centrex however, multiple phone sets (connected to an in-building LAN) cannot derive power from the CO and must be locally powered. This local power is derived in one of two ways: a phone-based power adapter or in-line power. In either case, the power located in the building is used, which may be subject to a number of anomalies and often has no backup (UPS or emergency power). CO power however is quite reliable because it is typically supported by both battery and a diesel generator for longer outages.

A phone-based power adapter is a small ac/dc power transformer cube connected to a standard ac power outlet near the IP telephone; it provides the necessary power to the set.

In-line power is delivered on the same cable as signaling. Power is "injected" onto the cable either from a special patch panel or by the network Ethernet switch itself (on a per-port basis). In-line power can also be used to power wireless LAN access points, which would be in support of wireless in-building IP-Centrex.

Broadband Connectivity and Call Processing
Reliance on a single broadband connection from the CO for telephony services creates a potential single point of failure. While this is also true of legacy Centrex services and their multipair copper cables from the CO, IP-Centrex can be additionally protected if the telco provides some element of redundant IP call-processing equipment at the customer location. This could provide very basic call capability until normal services are restored. In addition, redundant broadband connectivity should be established, at an additional cost, ideally through a physically separate connection with another carrier. Such a connection could also be created using a lower-performance (and hence, lower-cost) link until the main link is restored.

Messaging and Directory Integration
It is anticipated that the use of an internal IP-PBX will allow an organization to configure unified messaging and directory services in a more controlled and secure manner than with the use of an IP-Centrex service, which might require significantly more involvement between the customer's and the service provider's management. Since internal e-mail systems and network-based directories are cornerstones of data networking, telephony integration to these elements in larger organizations will be vitally important.


Evaluating IP Centrex

The Attractions of IP-Centrex
As IP-Centrex proliferates, the benefits inherent to the technology should translate into functional and service-level gains for customer organizations. Network convergence, packet-switching, and the removal of various physical restrictions are among the prime elements that should promote IP-Centrex to the forefront of outsourced telephony services. We can summarize these benefits as follows.

Capital Costs
The most immediate and obvious benefit of Centrex services is the elimination of most capital expenditure. We should note, however, that in the case of IP-Centrex, the LAN infrastructure within an organization must be brought up to specification in order to support the technology of IP telephony.

Data and voice requirements are now combined into a single infrastructure. Network convergence provides the benefits of reduced management overhead and the leveraging of existing IT skill sets that lead to reduced operational costs and improved service levels.

Multiple Locations and Mobility
IP-Centrex provides a simpler and more effective means to create a seamless telephony environment when considering multiple geographic locations. An organization can have a number of offices, along with individual remote users, that can all be part of a single unified environment at lower expected costs than with legacy Centrex.

Computer-Telephony Integration
CTI is significantly enhanced and simplified by the use of IP-Centrex. Access to network-based applications via a phone (such as Web browsing or basic task- or lookup-oriented software applications) can now be accomplished with much less integration time and effort, through the use of simplified software interfaces.

Unified Messaging
UM is significantly less difficult and expensive to implement with Centrex than with other technologies. With network-based softswitches and IP-Centrex servers, voice mail information can be integrated with e-mail and fax to form a unified messaging environment, usually provided as the single "inbox" for an individual user.

Simplification of MACs
As IP telephony removes the barriers imposed by hardwired phones, the complexity, time, and cost of moves, adds, and changes are significantly reduced. IP phones can be easily relocated within a facility by attaching them to any appropriate connection on the internal Ethernet LAN. In most cases, a MAC can be accomplished by the user unplugging the set, moving to a new location, and plugging the set back into an operational network jack (such as in the case of moving an individual's office location).

Local Access Cabling
Legacy Centrex generally requires a separate pair of copper wires from the CO to support each phone. This cable plant requirement sometimes resulted in delays with implementation (adding more copper cabling) and put limits on the wired building capacity. Since IP-Centrex utilizes a broadband extension to a site, the cabling requirement from the CO is significantly reduced, as only two fiber-optic cable strands or a limited number of pairs of copper cable are required to provide broadband connectivity. With the elimination of copper cabling requirements from each phone to the CO, the potential issues of electrical interference or damaging currents and voltages induced on such cable are also eliminated.

Inside Wiring

In most cases, legacy Centrex telephone sets within a building must connect directly back to the CO with copper cabling . As a result, multipair copper riser cable is required to interconnect the telco cabling at the point of entry into the building with each wiring distribution closet. Such cabling is also a requirement with traditional digital PBX installations, in addition to individual drop-cabling to each telephone set. In Centrex nomenclature, this cabling is often called "inside wiring." Since IP telephony requires no main distribution frame (MDF) or secondary distribution frame (SDF) termination points, a significant reduction in copper cabling can be realized, negating the requirement for multipair riser cabling within a building and dedicated drop-cabling per telephone set.

Provider Infrastructure
Added to these benefits, the IP-Centrex service provider also gains from the significant reduction in physical space, management complexity, and support requirements at the CO (or provider location). IP-Centrex and packet-switching systems have a higher packing density on the equipment racks, while at the same time being smaller, lower-powered, and requiring less environmental support than the traditional CO-based circuit-switching equipment.

Provider WAN
IP-Centrex has the opportunity to deliver seamless services to an organization that is geographically dispersed. In a customer-owned solution, voice traffic may have traveled over an internal network (TDM or VoIP) to interconnect remote sites for toll bypass and networked voice requirements. Voice traffic in an IP-Centrex environment has the option of flowing over the carrier's data infrastructure, relieving the customer of implementing and managing QoS factors on their internal WAN, while avoiding the burden of additional traffic on the corporate network.


IP-Centrex Field Trials

IP-Centrex Field Trials
The electronic government department of the State of Wisconsin conducted a field trial of IP-Centrex, based on Lucent's iMerge product, in conjunction with SBC Communications, in late 2001. The state is a very large Centrex customer, with well over 60,000 lines in state offices, universities, and local agencies, such as county and city governments.

The Centrex features were derived from a 5ESS CO switch in Lisle, Illinois, and carried 145 miles over a T1 link to the state's offices in Madison, using the configuration shown in Figure 1. The equipment in Lisle was shared with the much larger IP-Centrex pilot test at Lucent's own campus in Naperville, Illinois (which is described below).

Figure 14: IP-Centrex trial network.

This project in Madison lasted for 90 days and involved only 11 users, based on a preexisting 10/100 Mbps LAN, which has approximately 100 users on each Ethernet switch. Unidata IW200 IP phone sets were used for this trial. These telephones employ the H.323 protocol, with a G.711 codec, echo cancellation, an internal hub, and local ac power supply.

The trial's coordinator concluded that the successes of this project were that all the features of Centrex, including 911 calls and voice mail, continued to work, there was full integration into the State's five-digit dialing scheme, and there were no apparent issues with the LAN.

A number of problems were identified, such as intermittent voice clipping and fading, frequent echoing and excessive background noise in the sets, infrequently dropped calls, and two complete service outages. Users also complained about a slight delay in obtaining dialtone and poor telephone set ergonomics.

The conclusions from this small trial were that home-based workers and "road-warriors" are most likely to benefit from IP-Centrex, while no applications have yet been written for the IP phones.

SBC Communications deployed an ambitious trial of IP-Centrex, jointly with Lucent, at that company's new technology center at Naperville, Illinois, in the spring of 2001. This live network trial served more than 1,600 product development, design, and test personnel through an iMerge Centrex Feature Gateway linked to the 5ESS central office system, which also provides digital Centrex service to 10,000 employees on the same industrial campus.

A 2-month trial of IP-Centrex was conducted in the spring of 2002 at the University of Toronto (UTO), in partnership with Bell Canada and Nortel Networks. The university rents about 12,000 Centrex lines for its 200 buildings, spread over four campuses, with single wire center service for each campus. All intercampus calling is done over the PSTN, with 10-digit dialing within and between two area codes, as all the sites are in one extended local calling area. UTO has been a digital Centrex customer since 1986 and currently has a 5-year contract, at $14.35 per month per line.

For the last 5 years the university has subscribed to the Station Configuration Management service, which allows a customer's own telecom personnel to implement some moves, additions, or change orders in real time. However, the more complex change requests need the participation of Bell's technicians in the CO, where their turnaround time for work on one to five sets is up to 1 week. It turns out that approximately 75% of orders need at least some action by the telco, so the telecommunications manager sends the whole request to Bell, since the university would not save any money by doing part of the job and splitting responsibility for a work order increases the possibility of errors. In other words, UTO's telecom analysts can only do about 25% of the MAC requests that are received from their users in the legacy Centrex environment.

UTO owns three Avaya/Octel voice mail systems, with one unit being installed at each of its main campuses, and has a total of 6,800 voice mailboxes. Six thousand mailboxes are used for the large downtown campus, while the Aerospace Studies Institute, in northern Toronto, rents 100 voice mailboxes from the telco's call manager service. There are some 80 bulletin board services also based on the Avaya systems, which vary greatly in size and usage.

A three-position switchboard continues to be ample to handle calls through the main listed number, which is first answered by a recorded announcement, with option 1 going to the operator and option 2 to the main menu.

Bell Canada has provided a stable, dedicated team of support people to UTO, and this has led to a QoS for legacy Centrex that cannot be beaten.

Thirty users, located in several buildings on the downtown Toronto campus, participated in the IP-Centrex trial. The service was delivered over a T1 link from the same DMS-100 system that provides legacy Centrex. These users included administrators, academics, and IT personnel. Each participant had a Nortel i2004 phone plus a SIP Client package in the desktop PC. These people have found it hard to adapt to the softphone and much prefer to use the IP telephone set. Voice quality over IP-Centrex was very good when calling within the trial group or to other Centrex phones in the university. The most significant quality difference was on some calls with cell phones, when "clipping" sometimes occurred. Compared with legacy Centrex, there was also some loss of quality on conference calls; the audio degraded as more participants were added.

Responsibility for data networks at UTO is split between the central IT department, which looks after the optical fiber backbone between buildings, and the department responsible for a specific building, which controls the LANs inside that building. All LANs deliver switched Fast Ethernet to each desktop, but the quality of local network management differs widely.

Within this university environment there is not much call for the networked applications that are offered by IP-Centrex. No one is asking for UM and there are no requirements for CRM. The ability to set up a short-term, virtual call center may be helpful for a few class projects and the potential easily to adjust the number of lines to meet seasonal demand in student residences may have some value.

The real interest in this case is how IP-Centrex will be tariffed. Because the switching is being done in customer-owned equipment, the rates should be lower than with legacy Centrex, but there is not yet any information available as to how much less the costs will actually be. At the very least, there is hope that the implementation of IP-Centrex may allow the university to increase its share of in-house MACs from one-quarter to three-quarters of the total.


Provincial Government Relies on Centrex Services

Provincial Government Relies on Centrex Services
The government of the province of Ontario, Canada, has nearly 70,000 direct, full-time employees working for its ministries and agencies, including the Ontario Provincial Police (OPP). These workers are distributed across the geographically large province, in some 2,000 buildings, serving the population of approximately 11 million citizens. In the early 1990s the provincial government had a policy of moving some large ministerial head offices out of Toronto to other cities, in order to provide steady employment in those regional locations. For example, the Ministry of Transportation is based in the city of St. Catharines and the OPP's headquarters are now located in the town of Orillia. The cities mentioned in this report are shown on the provincial map in Figure 1.

Figure 1: Major cities in Ontario.

More recently, the government has moved various small offices housing a series of different agencies into a number of consolidated locations, while relying on toll-free numbers, public electronic kiosks, and Internet access to deliver local services. These major moves have greatly increased the province's reliance on telecommunications, especially messaging and teleconferencing.

During the last 3 years, the government has outsourced most of the management and systems administration of its data and voice networks to contractors, under the overall coordination of EDS. The province was driven to this solution in part due to significant issues in hiring and retaining the required number of competent telecom and IT professionals on government salary scales.

In mid-2000 AT&T Canada was awarded a multiyear contract to provide outbound, switched voice and data services at extremely low rates, which led to much voice traffic being taken off the leased-line Government of Ontario Network (GOnet).

Telephone Services and Systems
For 2 decades, the government of Ontario acquired new telephone services and systems with a focus on individual cost/value, rather than on compatibility with existing systems. In the mid 1990s, the government had more than 40 types of PBXs and KTS in service. As the year 2000 approached, many older KTS and some obsolete PBXs were replaced due to concerns related to both compatibility and Y2K issues between telephone switches and voice mail systems. The replacement program resulted in the narrowing of system types, leaving no more than a dozen different models of phone switches in use by the government, with clusters of certain manufacturers' systems in specific cities within the province (e.g., Siemens/ROLM in Kingston and Mitel in Ottawa). Recently, Avaya Definity systems have become prominent for new contact center implementations.

The government's mid-2000 telecom inventory showed a total of approximately 80,000 desktop phones, of which 35,500 are attached to Centrex circuits. Centrex services, provided by Bell Canada, are used by most provincial employees in the cities of Toronto, Guelph, London, and Peterborough (see Figure 5.3). Some 10,000 of the phones attached to KTS are in small rural offices that, due to seasonal workload, remain quiet for a portion of the year; hence we estimate that the Centrex lines actually carry more than 60% of all voice traffic minutes processed by government departments. It is interesting to note that 85% of the phones in provincial offices are served by Nortel switches (Centrex, KTS, or PBX).

Voice Messaging
The government of Ontario has achieved considerably more standardization with voice processing systems than it did with telephone switches. Over 90% of all voice mailboxes are Lucent systems, linked to Centrex services or government-owned PBXs. In Toronto the government owns 10 Lucent systems that are collocated in Bell Canada buildings, adjacent to the DMS-100 switches that deliver Centrex. These systems have an average of 72 ports and up to 390 hours of voice message storage. A similar collocation arrangement exists for the government with Bell's Centrex switches in the cities of Guelph and Peterborough (with 36 ports and 60 hours each). In other locations, the province rents Centrex-linked voice mailboxes on a contractual basis.

Software from Lucent is used to enable the Voicenet service, linking all of the Lucent-based voice mailboxes throughout the provincial government, whether the user's telephone is served through Centrex or by an Avaya, Mitel, Nortel, or Siemens PBX. Voicenet is very valuable to most provincial employees as an easy-to-use, everywhere-available service parallel to e-mail.

Distributed Contact Center
In 2001, an agency of the provincial government implemented a contact center, which employs a number of agents who are scattered, in small groups, in a number of offices across Ontario. This contact center is based on an Avaya Definity G3 switch, with ACD (including agent skills routing), and uses a number of IP telephony features. An attached Octel (model 250) messaging system, with 12 ports and 70 hours of voice/fax storage, is also part of the center. Up to 100 agents and supervisors have Avaya's IP agent software, which provides a PC-based softphone.

The Avaya and Octel systems are located in an office building in midtown Toronto, together with approximately 50% of the agents. Agents log into the ACD over the government's IP LAN/WAN, with the agent software requiring a maximum bit rate of 8 Kbps to set up and maintain each two-way call. Voice calls are routed from the Definity Enhanced Communication System (ECS) over the PSTN to remote agents using Centrex, DID on a PBX, or a regular business line (1FL) at the agent end. Home-based agents can be incorporated into this distributed contact center with very little difficulty.

A number of primary rate ISDN links are attached to the Definity switch (providing up to 119 B channels), because two voice lines are needed for each active incoming call that is extended over the PSTN for a remote agent. The system is licensed to have 50 simultaneously active agents.

This contact center incurs long-distance charges to its remote agents, for about one-half of the total call volume. The government is paying less than 4 cents per minute for its provincewide toll voice service, so this cost is significant, but not prohibitive. The hybrid IP/TDM solution clearly made the best use of the technology that was available at the time of its cutover, but could be made more cost-effective and flexible when it becomes feasible to transfer the contact center to a wholly IP-Centrex network.

Effectiveness of Centrex
Government telecom managers consider that Centrex delivers an effective service to its users, at a per-line cost of around 50% of the one-month, single-line tariff. Centrex is not used for ACD in contact centers, and, therefore, the Ministry of Finance is unique within the government in being directly responsible for several large PBXs and making little use of Centrex. The widespread use of Centrex is consistent with the government's policy of outsourcing services and is helped by satisfaction with Bell Canada's management of the service.

The government has implemented extended Ethernet VLANs between most of its offices throughout Toronto using DWDM over dedicated optical fiber pairs. A reasonable amount of fiber is available in most urban centers in Ontario because of competition between the electrical power distributors (e.g., Toronto Hydro), cable TV carriers, and several telcos. With these circumstances it will be logical to install interbuilding VLANs in other cities across the province.

As the government of Ontario establishes well-managed broadband networks in urban areas throughout the province and continues to require telephone and data services in over 1,000 buildings, it will become a natural and ideal candidate for the widespread implementation of IP-Centrex, which we expect will replace the older PBXs and many KTS over the corning 5 years.

Technology Trial
The provincial government participated in a limited technology trial of IP-Centrex in the spring of 2002. The duration of this trial was constrained due to the so-called gating requirements of Nortel Networks' schedule, as the manufacturer moved the product through its development and testing stages to market availability.

Some 30 government employees at one building in downtown Toronto used Nortel i2004 sets on their desks and softphones in their PCs for the 90-day test. The IP-Centrex service was delivered over a Fast Ethernet LAN, which had no native QoS capabilities. The coordinator of this trial reported that, on some conversations between the IP phones and off-Centrex callers, there was "clipping" of the voice signals, making the line sound as though it were set up in half duplex mode.
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