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Article: Broadband IP Services and Pricing

Note: This is an archived article that appeared in the Teracom newsletter April 2001, and this article has not been updated to reflect technology developments since then.

Please be assured that our training courses have been updated since the time of this article!

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This article is a follow-up to "Broadband Networks and Services".
The first thing to consider is that the "Information Highway" exists. Been there, done that. Carriers like MCI, Pac Bell, Ameritech, Verizon, AT&T, Bell Canada and Global Crossing already have huge amounts of capacity in place between switching centers in major cities. We are now in the process of figuring out how to actually let users access this capacity... part of the "All-IP Network" story.
Key questions are:
1. How to get this capacity to you?
2. What will you do with it?
3. How will you pay for it?
Let's look at these one at a time:

1. How to get this capacity to you?
In the telecommunications business, we distinguish between "residential" customers and "business" customers. "Business", of course, includes colleges, government, organizations, schools, medium and large businesses. "Residential" includes your home, home office, and for the purposes of our discussion, small businesses.
We also use the term "access network" to refer to the connection between your site and the nearest big switching center, where you can get on to the information highway. The term "transmission network" is used instead of "information highway" or "backbone".
For residential customers, don't hold your breath waiting for very high-capacity access. For the vast majority of users, communications are going to happen over the existing wires into your home for the foreseeable future; we're talking DSL at between 1 and 7 Mb/s, VDSL at maybe 25 Mb/s, or some portion of 10 Mb/s using a cable modem. While this is certainly faster than and a huge improvement over using a modem and a regular phone line, it isn't anything like what business customers are going to get.
Business customers are going to get fiber access to the switching centers before residential customers, for one simple reason: because the phone company can charge them to install it, and because they'll pay for high-end services delivered over it.
There is a plethora of different kinds of physical fiber to use, several strategies for designing the physical layout of the fiber and some arguments regarding how to organize the bits on the fiber. One choice for the latter would be to use SONET on the access network, as it is on the transmission network. With this scenario, a business could get OC3 (150 Mb/s) or maybe OC12 (600 Mb/s) access. A more likely choice is Gigabit Ethernet over fiber; in this case, the business would have 1000 Mb/s access.

2. What will you do with it?
We'll concentrate on the case of a business customer with very high capacity (>100 Mb/s) access for the remainder of this discussion.
The answer to this question is fairly simple: the same thing a business does now with 100 Mb/s.
The business will be handed the capability to extend the sort of performance and flexibility we currently have intra-building to inter-building communications. The idea of physical foundation walls and concrete slabs becoming a barrier will disappear. That Oracle database that you are accessing could be 1000 miles away. You won't know; and it won't make much of a difference to your IT people either, because the carrier will provide communications services over the fiber access that look just like the communication services already used inside the building: IP packets over LAN frames.
There are several terms used to describe this kind of service; and unfortunately, those names are also used to describe other ideas. The most common term is "Virtual Private IP Network service", or IP VPN service, or just a VPN. Be careful: this is a commercial, guaranteed-quality service over a carefully controlled network... not the Internet. The term "VPN" is also used to mean secure communications over the (unreliable) Internet, and something else in PBX voice networks.
We understand how a carrier could provide this kind of transparent IP network service - and how (in contrast to the Internet) the quality of the communication services can be guaranteed in our acclaimed three-day core training Course 101, "Telecom, Datacom and Networking for Non-Engineers", and in our advanced Course 110, "IP, VoIP and MPLS for the Non-Engineering Professional".

3. How will you pay for it?
Flat rate. You pay for the access (installation charge and monthly charge, at each location, as always), and communicate whatever you want to other locations, with no per-minute or per-packet charges... kind of like the way Internet pricing works today.
The end-to-end throughput will be determined mainly by the weakest link in the chain, the access circuits. Those are what you will pay for. The carrier will use that revenue to build the common transmission network with enough capacity so that your access circuit is the weakest link.
The difference between these commercial IP VPN services and the Internet is the guaranteed quality of the network service. There are a number of methods of implementing quality guarantees; underlying many of them are ATM Permanent Virtual Circuits (PVCs) connecting your locations across the transmission network. Each PVC can be allocated a quality of service. It appears that ATM will be replaced with Multiprotocol Label Switching (MPLS) over the next five years. In MPLS, a Forwarding Equivalence Class (FEC), which gets mapped to a label, is similar to a PVC in ATM.
Of course, some service providers will charge per PVC/FEC for the quality guarantee. What we end up with is Internet-style pricing (pay for the access only, per month) for decent quality; pay per point-to-point Quality of Service (QoS) guarantee (per month) for those communications where you need a very high quality guaranteed.
For more information: Course 101, Telecom, Datacom and Networking for Non-Engineers, and Course 110 IP, VoIP and MPLS for the Non-Engineering Professional
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