TABLE OF CONTENTS Softswitch techologies, simply put, are cheaper than circuit switches both in purchase price and in terms of OAM&P. This lowers the barriers to entry to new market entrants, which is critical for competition to enter the local loop market place. The following pages will delve into the cost factors of a voice service provider and how softswitch is the more cost-effective option.
Softswitch is cheaper than Class 4 in purchase cost and OAM&P. The net present value models later in this chapter provide concrete comparisons of Class 4 switches versus softswitch in terms of purchase price and OAM&P.
It is estimated that a service provider's largest cost is the ongoing expense of running the network and the switches themselves. Networks must be deployed, maintained, repaired, monitored, and upgraded. The Aberdeen Group has found that competitive carriers spend 60 to 70 percent of their overall expenses on OAM&P. The ability to manage the entire network via a softswitch solution (including adding and altering specific customer services, upgrading capacity, and fixing faults) from a centralized location leads to considerable time and cost savings. [8] Packet-technology-based long-distance carriers maintain that their service provider customers will be able to offer voice services at 20 percent off the traditional rates and they claim the underlying infrastructure can be 40 percent less expensive to operate. [9]
As Figure 11-1 illustrates, in 2001 service providers invested $89 million worldwide on softswitch technology. In the same...
