PSTN migration: A smart business investment
Service providers can’t continue to carry the cost and risk created by their aging public switched telephone network (PSTN) equipment. PSTN migration – also called PSTN transformation – offers a means to change the economics of PSTN services. With the right approach to migration, providers can reduce costs, create efficiencies, and develop new sources of voice revenue.
Legacy PSTNs generate significant revenue for operators. But they also present some significant challenges. There are good reasons to embark on a PSTN migration plan in the near future:
- PSTN operation costs are increasing: Service providers are supporting a declining number of subscribers with their TDM networks. But the PSTN equipment remains, as do the high costs required to power, maintain, and house it. The combination of low port utilization and high OPEX is creating unsustainable per-user costs. And the need to run parallel networks for voice and data services adds costly inefficiencies.
- The clock is ticking on TDM voice technologies: Most vendors’ PSTN portfolios and maintenance contracts will reach end-of-life by 2020. Service providers will struggle with upgrades, maintenance, and failures as parts and PSTN skills become scarce. They will also face new commercial challenges in determining how to handle TDM voice subscribers. They will need new voice solutions.
- PSTN revenues are declining: TDM voice platforms do not support the creation of new revenue. Providers that continue to use these platforms face the risk of increased churn rates. There is a good case for moving subscribers to packet-based digital voice services that can create new revenue and prevent churn.
As time passes, it will become more challenging for operators to commit to the effort and investment required to keep legacy PSTN equipment running. Service providers can’t stop the inevitable: PSTN subscriber bases will continue to shrink as consumers explore and adopt other voice services. It’s time to move forward. PSTN migration makes economic sense now.
How migration changes the economics of PSTN services
Migration can reduce the high power, maintenance, and real estate costs associated with legacy PSTNs. It can also provide paths to greener networking, alignment with broadband evolution projects, and service innovation that generates new revenue.
Reduce power consumption
Line units are the main drivers of power consumption in legacy PSTNs. Active or inactive, all equipped lines consume power. PSTN switches also place demands on heating, ventilation, and air conditioning (HVAC) systems – another big consumer of power. The costs associated with HVAC system use amplify the power inefficiency of inactive lines.
Service providers can draw on several different migration techniques to reduce the power consumed by PSTN equipment:
- Line grooming reduces power consumption by removing inactive lines and optimizing the distribution of active lines.
- Switch consolidation lowers power consumption by reducing the number of switches required to support active subscribers and allowing these switches to run at optimal capacity. This technique is often combined with line grooming.
- Platform migration dramatically reduces per-line power consumption and costs by moving PSTN services to IP platforms. These platforms offer a smaller footprint, simpler switching, energy-efficient operations, and reduced conditioning requirements.
Reduce maintenance costs
PSTN migration moves the network to a state where maintenance is simpler and cheaper. For example, it brings a management system model that makes it easier to integrate operations and business support systems. It also reduces the number of nodes to manage and facilitates integration across fixed and voice platforms.
A systematic migration reduces the cost and risk of maintaining aging equipment. By consolidating switches, providers can conserve spare parts. By phasing out certain switches, they can reduce the number of system types and vendors they have to manage.
Reduce real estate costs
Legacy PSTNs come with significant real estate costs. The equipment takes up considerable space and may be distributed across many central offices. A potential challenge for PSTN providers is to bring real estate costs down while retaining PSTN subscribers and revenue.
Migration can help address this challenge. In addition to boosting capacity and supporting compelling new subscriber offers, IP platforms and distribution hardware take up a 2–5x smaller footprint compared to their legacy PSTN counterparts. IP networks also support efficient indoor configurations and service centralization, both of which save space.
If service providers free up large amounts of space, they can consider selling or renting this space to generate revenue. Those that lease central office space may be able to negotiate with property owners and secure more favorable terms.
Build a greener network
Migration can help service providers reduce their carbon footprint. Techniques such as line grooming and switch consolidation make a substantial dent in power consumption. But the reductions are greatest for operators that embrace full migration. By adopting efficient, IP-based networks, providers can greatly reduce per-line power consumption and get closer to sustainability targets.
Seize opportunities to align with broadband evolution
Although not an enabler for broadband evolution, PSTN migration can complement broadband initiatives and reduce overall transformation costs. The value of aligning broadband evolution and migration programs depends on how service providers plan to operate in the future and how they design their future broadband infrastructure.
Providers must take care in aligning these programs. Smart planning will allow an operator to avoid duplicating operations. It will also allow the operator to deploy equipment – such as multiservice access nodes (MSANs) – that works for both programs and supports technical migration for voice-only subscribers.
Most providers use IP platforms to support the voice component of triple-play offers. These voice services are delivered over broadband or narrowband using an MSAN. With a full PSTN migration, operators must handle voice-only subscribers effectively. They need to choose between technical and commercial migration and support the choice with the right equipment and voice cards.
Providers that plan effectively can mix cards and optimize system usage for both types of migration. They can also choose to optimize equipment based on the type of broadband evolution they are undertaking. By executing PSTN and broadband transformation operations simultaneously, they can increase efficiency and minimize customer site and field operations.
Use migration to generate new revenue
TDM-based voice services no longer generate new revenue. This is why more and more operators are setting their sights on packet-based digital voice services.
A comprehensive PSTN-to-IP migration gives service providers new ways to generate revenue. For example, a move to IP could entice voice-only subscribers to purchase broadband or IPTV service. Or it could create opportunities to capture subscribers with services that unite the mobile and fixed domains.
An IP network can support convergence that isn’t possible with TDM voice technology. When providers migrate voice to broadband, it becomes an IP service that can be packaged in innovative ways to generate revenue and capture market share.
Making the (business) case
Many operators are delaying migration because they lack a complete view of the business case. They zero in on the investments they need to make over a specific time period to complete a full legacy PSTN migration. But they don’t necessarily capture all the costs associated with the PSTN. As a result, they don’t fully appreciate the savings they could generate with a migration project.
Figure 1 makes the case for investing in migration. It shows the ratio between CAPEX investment in migration and projected OPEX savings in several different global regions. On average, service providers will obtain 4 euros in savings for each euro invested over 10 years.
Figure 1: PSTN migration – CAPEX investments vs. OPEX savings
Why start migration now?
Service providers know that they are taking risks by continuing to use aging PSTN systems. But many wonder about when to start a migration project. Given that the net present value (NPV) of a migration project decreases with each day of delay, the best answer may be now.
The key to understanding the impact of delayed start is to calculate project-related CAPEX, NPV, and payback period over a specific period (typically 10 years). The period is measured from the moment the decision is made to migrate.
If migration is delayed, the project NPV is lower. A provider will not achieve any savings as long as it continues to operate a legacy network. Costs for power, maintenance, and operations remain at their highest – and NPV continues to fall – until migration begins. The delay also reduces the post-migration time frame, giving the service provider less time to enjoy the savings that migration brings.
In short, PSTN migration can’t continue to be deferred. The cost to operate legacy TDM networks will continue to climb as PSTN equipment and products age and reach end-of-life.
The time to act is now. With effective migration strategies, service providers can generate significant savings, preserve the value in the PSTN, and build a platform for capturing new revenue and market share.
Our authors look forward to your questions and comments.