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IP Network Transformation: Waiting Costs More Than You Think

Gary Zimmerman

Few CSPs would dispute that IP-based mobile communications are the future. But some still see little reason to replace TDM switches that, on the surface, cost them little beyond energy and housing expenses. At the recent Neustar Interactive Insights Summit, telecommunications experts Jennifer Pigg, Vice President at Yankee Group, outlined the conundrum — and revealed the cost of doing nothing is higher than many think.

According to Pigg, in the last ten years only an estimated 10% of TDM switches have been decommissioned. Over the same period, however, PSTN access lines have dropped by nearly 50%, resulting in substantially fewer lines per TDM switch. Add the two numbers together, and the industry as a whole is looking at a much higher cost per PSTN subscriber. For some communications service providers (CSPs), the cost of servicing PSTN customers has risen by more than one million dollars per year.

More sobering statistics about the decline of landline-based services:

  • Over 25% of all U.S. households do not have a landline, but 98% of all U.S. households have at least one mobile phone;
  • Nearly half (48%) of all U.S. households list their mobile phone as their primary number — a percentage that will rise as younger consumers enter the market;
  • As mobile phone security improves, consumers will be even more likely to abandon their landlines.

There are significantly higher operational costs associated with TDM switches, a shrinking number of experienced personnel and parts required to maintain TDM switches, higher real estate costs, energy consumption, taxes and other considerations. Taken together, they make a compelling ROI argument for a full-scale migration to IP-based communications.

Managing the IP network transformation is critical both in terms of accelerating ROI and minimizing disruption to PSTN subscribers. Although landlines are declining, Yankee Group estimates there will still be 20 million PSTN subscribers in the U.S. by 2024. By shifting core network functions to IP, CSPs can even keep their legacy access network intact for PSTN subscribers, capping costs and eliminating expensive TDM switches at the same time.

For more tips and best practices behind IP network transformation, you are invited to download a free new eBook, "Network Transformation: A Guide to Planning Your Journey to All-IP."

By Gary Zimmerman, Director of Solution Marketing at Neustar

Related topics: Telecom, VoIP

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