Interest is growing in all-IP networking but transition is slower than expected

While analysts and vendors agree IP networking is the way of the future, the transition from legacy services to next-generation technology is slower than expected, according to the latest research from Forrester Research Inc.

This doesn’t mean there isn’t any interest in IP networking — in fact,

both Bell and Telus say they are seeing more interest from customers. Even analysts outline the benefits of next-generation technology and predict the eventual migration to new services. So what’s the hold-up?

According to Brownlee Thomas, Montreal-based director of global telecom services with Giga Information Group (a subsidiary of Forrester Research Inc.), both service providers and enterprises are trying to cut costs. This has resulted in a slower transition to all-IP networks and a slower adoption of new services like Multi-Protocol Label Switching (MPLS)-based virtual private networks.

“”A couple of years ago, companies (were under) pressure to be competitive,”” Thomas says. “”Now they’re saying they’ll do more with what they’ve got.””

There is also a need for some of the largest service providers to reduce debt, according to a recent Forrester report, Telecom Services Trends 2003-2005.

These factors are resulting in price stabilization of inter-regional data services and possible price increases for legacy services like Frame Relay, ATM and private lines — as much as three to six per cent, according to the report.

“”Traditional network operators are not going to promote Frame Relay,”” says Thomas. “”They’re going to push very hard for managed network services.””

While Frame Relay is point-to-point, she notes MPLS is more flexible because it has four ways of prioritizing service and acts like a private line.

“”If you have a dozen networks to manage, this streamlines those networks on a common platform,”” she says. “”The more networks, the more expensive to offer interoperability. Companies have to decide if it costs more to maintain their network or more to replace it.””

Frame Relay works well, she says, and many companies are still under contract and aren’t looking to replace their technology just yet. This is providing a transition period for the MPLS standard to mature, she adds.

“”They’re holding out on big rollouts because they want to stretch their dollar with what they currently have,”” she says. “”There’s no urgent need to prioritize traffic.””

This is expected to change, she adds, by 2006, as the economy improves and contracts for legacy services expire.

“”As more Frame Relay contracts expire, customers are faced with the decision to renew their Frame Relay contracts, which may go up slightly (in price),”” says James Slaby, a senior industry analyst with Forrester.

As we see lower prices for next-generation services, he predicts prices for Frame Relay and ATM will level off and go up again.

Girish Pathak, Telus Corp.’s chief technology officer and vice-president of engineering, says we are at the cusp of making the transformation from a legacy infrastructure to an IP infrastructure that is capable of delivering voice, video and data in an integrated fashion.

“”If anything I would see the acceleration of IP-based infrastructure,”” he says. “”There is interest in providing stability in operations and cost — these are key factors that would determine whether or not you choose to migrate.””

He says the drivers of IP networking include operating and capital efficiencies, the ability to deliver integrated services and the ability to provide better delivery of services.

Erone Quek, director of IP technology with Bell Canada, says his company is also seeing an uptake in IP activity.

“”Customers are asking for IP-based services and most of them VPN-type services,”” he says. “”They don’t migrate in one day but over the course of the next three, four, five years.””

He says growth of legacy services is slowing down, and he expects customers will migrate some or all of their services over to IP-based VPNs, depending on their requirements.

“”There is a certain limit on what Frame Relay service can provide as bandwidth,”” he adds.

According to the Forrester report, Global 2000 companies that rely heavily on international telecom services will consider outsourcing some of their global wide-area networks and other telecom services by 2005, while two-thirds will use converged multimedia WAN services.

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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