The prevailing view is that moving voice to an IP solution gives many advantages, especially cost. What are the economic arguments for switching voice calls in packet rather than circuit mode, putting to one side the technical and quality-of-service issues?
Some inter-related themes form the big picture of telecommunications networks today:
• The big architectural difference between circuit and packet-switched networks is the location of the service control – within the network with circuit-switched, at the edge with packet-switched. Control at the edge and use of an essentially dumb packet network enables ‘over the top’ service providers, such as WhatsApp, Skype, FaceTime, to have the commercial relationship with the users.
• There is a growing sentiment that always-on access to the Internet is a basic human right. Unfortunately, there is a tendency also to devalue content, insofar as people do not care to have to pay for it.
• Many network operators are considering how best to replace their circuit switches forming the PSTN. Replacement by IP systems has proved difficult and many operators are waiting to take advantage of the shift of voice away from the fixed PSTN onto mobile. Despite this, the fixed PSTN is still essential in most countries as a network of last resort and for interconnection.
On the question of whether packet is cheaper than circuit switching for voice, there are several points to consider:
- Switching system costs – Many would say that packet switching is cheaper – after all, many supported services are free. Often overlooked though is the price users pay for the infrastructure supporting voice over Internet Protocol (VoIP) – the computer/tablet/smart phone, broadband access and Internet Service Provider service, etc. Therefore, the question is whether there is any inherent cost (as opposed to ‘price’). Interestingly, there is remarkably little difference between the elements of a circuit switch-block and those of an IP router; both usually comprise time-space-time switch with similar semiconductor technology. So, apart from differences in the costs of signalling, the inherent costs are essentially equal.
- Terminating functionality – A profound influence on all network costs is the location of the interfacing equipment. Terminating a line on the exchange represents some 70% of the total cost of the switching system, costs incurred by the network operator. However, for VoIP services, the analogue-to-digital encoding, packetisation, powering, and ring-tone generation is in the users’ devices (a computer or tablet), the costs of which are borne by the user giving a cost advantage to VoIP providers. However, if a fixed operator hopes to use VoIP to replace its circuit-switches and if many of its users wish to keep their telephone and line, the operator will have to provide the terminating functions at the boundary of the packet switching system. Mobile operators do not have this concern as mobile handsets provide the functionality.
- Multi-service platform – A single all-purpose platform supporting all services has long been seen as a way of saving capital and operational costs. This advantage is true with any technology, not just IP (indeed, earlier multiservice platforms were circuit-based).
- Bearer traffic loadings – The potential loadings of 85% or higher with packet networks compare favourably to about 70% in circuit-switched networks. However, such loadings on packet networks are avoided to reduce the probability of packets being delayed, particularly for latency-intolerant services such as voice. Lo 30% is typically required to ensure voice quality, so reducing any cost advantage of packet switching.
- Industry economies of scale – There is a general move towards the use of IP technology for networks as there is with computer-controlled digital electronics in general. Since vendors’ prices are driven by economies of scale, today’s prices of packet switching benefit from this shift – which rather makes the economics of circuit versus packet switching a self-fulfilling prophecy.
- On a like-for-like basis, therefore, there is no inherent cost difference between circuit and packet-switching technology. However, packet can benefit from the shift of the user network interface and the move to a multi-service network. The enthusiasm of fixed operators to move to VoIP has slowed because of the need to support existing fixed subscriber lines. The UNI location is not an issue for mobile networks; existing 4G networks will shift to all-IP architectures as the existing circuit-switched mobile exchanges are withdrawn.