Internet gives birth to the future of phone networks

RICHARD BRADDELL finds out how a little old data packaging system called IP will change telecommunications.

The revolution begins in the trenches. Once the dirt, mud and dust are returned to their proper resting place in the ground, there will be little visible sign of change.

But beneath the surface rests the manifesto for a new world of digital communications. Or so we are told.

In Auckland, telecommunications company TelstraSaturn has been digging up kilometres of central business district pavements for a fibre-optic network.

Although the network will not be completed until the end of the year, from June it will become the Auckland backbone of TelstraSaturn's $50 million internet protocol telecommunications network.

Internet protocol, as its name suggests, is the rules of the road under which internet traffic travels across telecommunications networks. But it is becoming much more. If internet protocol were to be left to the data functions originally envisaged, all would be well and good.

But because of its popularity, it is now becoming the mechanism under which telecommunications companies ultimately hope to standardise all the traffic across their networks.

Whether internet protocol, or IP as it is known, is the best choice for this purpose is another story. But its rapid acceptance makes it the inevitable choice for new networks, and TelstraSaturn's Auckland, Wellington and Christchurch CBD networks are likely to be the first commissioned in New Zealand that will use internet protocol right from the outset.

What makes IP so good is that it not only transmits information in digital form, it cuts it up into packets of data. These packets have a digital address label, which is read by special computers, called routers, that redirect them through the network using the most cost-efficient route available.

The savings can be enormous, which is why telecommunications companies are anxious to get not just data but voice travelling through their networks.

For customers, it implies enormous benefits as well. Because of the huge data capacity of fibre-optic networks, users will be able to download not just the Beatles, but a host of video and data services as well.

Every bit as important, the services will be much easier to set up and use. The great advantage of internet protocol is that because each bit of voice or data has its own individual address, traditional telephone exchanges and PABXs on customer premises can be eliminated because the traffic finds its own way without their help.

One of the world's first fully IP networks, a private one, was commissioned last year for Social Welfare in a partnership with Clear Communications and Cisco. It promised huge savings, if only because long-distance voice calls were no longer distinguishable from local and therefore travelled at local rates.

On top of that, there were set-up savings that will appeal to small and medium-sized businesses.

Since each device, be it a telephone or a computer, has its own identity, there is no need for separate data and voice jacks. And since they all operate from the same jacks, with individual needs determined in the telco's network, there is no need for any special installations when office layouts are reconfigured.

But the fixed wire world of internet protocol is only the beginning. At least part of the reason why mobile operators in Europe were prepared to spend a mind-boggling $US100 million on third-generation mobile radio spectrum licences was that they expected to run internet protocol-based mobile services as well.

Given the fantastic expenditure already, the question of whether operators can afford to embark on third-generation (3G) is a matter of fierce debate.

"Europe has shot itself in the foot, and certainly the UK has, because I don't think we are going to see 3G," Peter Cochrane, the former head of technology at British Telecom, reportedly said.

According to one school, the only reason European operators wanted 3G spectrum was because their existing spectrum was already crowded by voice.

But it is not quite as simple as that, says Sven Vogeler, a Sydney-based 3G mobile expert with German telecommunications supplier Siemens. Although European operators will keep using their existing spectrum for voice, they will want to offer value-added internet protocol-based services to restore declining average revenues per user and to build customer loyalty.

Although 3G has been touted as suitable for high-quality streaming video, the general expectation is that its main use will be in less intensive applications such as mobile e-mail. Mr Vogeler says European operators will offer full 3G services, but they are unlikely to extend beyond urban centres.

But there still remains an important issue of how all the different standards of the future will work together. Mr Vogeler says mobile networks will have to be integrated more closely with their fixed-wire cousins so services can automatically switch from device to device, be it fixed or mobile, with content automatically tailored to a suitable form.

But just getting mobile handsets and devices capable of handling the various standards is a challenge. Mr Vogeler is confident it will be met.

But why bother with 3G when an intermediate mobile generation known as 2.5G, capable of delivering most of the internet protocol services, will be offered in New Zealand this year by both Telecom and Vodafone?

One factor favouring a 3G rollout in New Zealand is that spectrum prices are a third of those in Europe.

And if Mr Vogeler is right, the pressure to integrate mobile with fixed-wire services will bring 3G's arrival forward. That will require much smarter networks than exist today.