Development of Internet Protocol Centrex

Ever since Centrex was launched 40 years ago, it seems that technological advances in telecommunications have occurred in premises-based PBX systems before being adopted for Centrex services. This trend is now apparent with Internet protocol-based telephony products, in that IP-PBXs were being sold 2 years before beta testing of Internet Protocol Centrex (IP-Centrex) was really underway. In late 2002 several telcos were moving from pilot trials of IP-Centrex to the early stages of its service delivery.

In the several years that IP telephony PBX systems have been on the market, they have sold in modest numbers and supported no more than 1% of all PBX-attached stations in the United States by the end of 2002, with a smaller impact in other markets. To some extent, this slow rate of acceptance is certainly due to the overall slackening of investment in telecom equipment since the run-up to the year 2000. However, another serious factor is that the advantages of the IP-PBX over conventional, circuit-switched [or time-division multiplexing (TDM)], PBXs are not obvious to most telecom or IT managers.

This relatively slow acceptance of the IP-PBX is not necessarily a good indicator of the future of IP-Centrex, once that becomes a stable, fullfeatured service that is intelligently and aggressively sold by the service providers, both ILECs and CLECs.

IP-Centrex offers all the advantages that have been well advertised for premise-based IP telephony systems (e.g., ease of administration and ease of access to corporate, LAN-based applications), combined with the present advantages of Centrex (i.e., the complexity of design; implementation and management being outsourced to the telco with the voice switch placed inside the perimeter of the public network).

We are convinced that IP-Centrex will bring a revolution in the delivery of corporate voice communications and that within 10 years as many business-related endpoints will be supported by IP-Centrex services as by premises-based switches.

The package of advantages that can be promised for IP-Centrex is sufficiently attractive and thus in tune with the trend of renting managed services for IT functions (such as Web server hosting), that organizations that retain ownership of their PBX may be in a minority within a decade.

This predicted revolution, produced by the acceptance of IP-Centrex, will have three dimensions:

1. The new IP-Centrex hardware and software will be produced by a wider range of companies than the five large manufacturers of CO systems.

2. Because of the reduced cost and complexity to enter the market, IP-Centrex will be available from more competitive and smaller companies than just the ILECs. Those providers that are now in the managed services business with Web servers and customer relationship management (CRM) software will also be renting integrated voice services.

3. The current best case, business-line market, share ratio of 20% for Centrex to 80% for premises-based switches could be reversed to an 80:20 ratio in favor of IP-Centrex within 10 years. The senior management of the largest Centrex system manufacturer is predicting a 50:50 market share ratio for Centrex versus PBX, within a decade, and we believe that this is a reasonable expectation.