IP Centrex Breaks Out of CO Box

Channel Partners

July 1, 1999

11 Min Read
IP Centrex Breaks Out of CO Box

Posted: 07/1999

IP Centrex Breaks Out of CO Box
By Charlotte Wolter

One of the most distinct characteristics of the Internet is that it breaks down
barriers of distance in networks–makes them irrelevant, in fact. Similarly, Centrex
services based on Internet protocol (IP), such as IP Centrex, break down barriers of

An IP Centrex system can be located almost anywhere in a network, and it can serve any
number of remote offices seamlessly, with users and callers alike unaware that the
operator or voice mail service they are using is located thousands of miles away. The
ability to provide services in this way, and at a relatively low cost, is one of the most
important reasons why IP Centrex systems, many just introduced, already are becoming
attractive alternatives to both traditional Centrex and private branch exchanges (PBXs).

In fact, IP Centrex blurs the distinction between PBX and Centrex because, with IP, it
is the same service on the same equipment, whether operated by the user or a service
provider. Also, the equipment can be located physically anywhere, including the customer’s
premises, even if the service is offered by a service provider.

Image: IP Centrex: How It Works

Centrex usually is defined as having a service provider manage
"switchboard"-type telecom services rather than the user. The user gets the same
features as on a PBX, but the service provider ostensibly can do it more cheaply because
multiple users are served from the same equipment, which is located in the central office

The drawback of Centrex-type services is that the services must be delivered from the
CO. If a company has branches in other cities or states, different Centrex groups would
have to be established, or costly tie lines and T1s must link a complex hybrid network of
PBXs and Centrex. Such a system may not be able to provide a uniform dial plan from office
to office because of the differences in the CO switches by different vendors.

In IP Centrex, the call management services are provided by a server in one CO or one
customer premises location, with IP links to other offices and even to remote workers’
homes. Telephone calls outside the company would be routed to the public switched
telephone network (PSTN), but calls to branch offices within the company would be carried
on an IP network and managed by an IP Centrex. Even calls within a company’s premises can
be IP-based, if the company adopts a converged voice/data network over its local area
network (LAN), but that is not necessary to make use of IP Centrex services.

Centrex IP, says Janet Smith, senior manager, Centrex IP marketing, at Richardson,
Texas-based Nortel Networks, "[has] the same feature functions as a central office
switch, but now you can get it using IP access rather than local-loop access. It is access
over a managed IP network to the same services."

Those services can be delivered via a company’s own corporate network connected to a
CO, via digital subscriber line (DSL), cable modem or integrated services digital network
(ISDN) access for a remote worker, or via a virtual private network (VPN) connection.

With an IP Centrex system in place and an IP-based network established among a
company’s branch offices, other revenue-generating opportunities for service providers
become possible. Using the system’s gatekeeper, which manages much of the call control,
other services can be delivered, such as unified messaging and application sharing.

"Service providers can come up with a package of services that can differentiate
them from competitors," Smith says. One potential target market, she says, is upscale
individual users with high-speed connections. "As service providers, we have just
created a new environment in which to sell services. All of us know we make more money on
services than transport."


There are a number of advantages to IP-based Centrex services. Most obvious is the
reduction in long distance charges by routing internal company calls to branch offices
over the company’s or service provider’s network, providing toll bypass.

Possibly more important is the fact that, to the caller and the users of the system, an
IP Centrex service functions as a single service even though branch offices may be
thousands of miles apart. A receptionist in Los Angeles may answer calls for a small
remote office in St. Louis seamlessly. Even remote workers accessing from home can retain
access to the full Centrex functions.

For resellers, this gives them the ability to target a whole company, not just a local
office, and to offer a product that reaches all the way to the desktop. Because with an IP
network the service can be extended outside a single CO, even the most remote branch
office can be served with the same Centrex, with the same level of functionality, as the
main office.

IP Centrex also enables a smaller competitive local exchange carrier (CLEC) with large
switches in just a few locations to offer nationwide Centrex services. "CLECs do not
have the switch penetration that an RBOC (regional Bell operating company) does,"
Smith says. "With Centrex IP, they can extend the reach of their switches simply by
extending the reach of the IP network.

"They can put switches strategically in New York, Chicago and Los Angeles and
serve the whole country," Smith adds.

Smith says that Nortel’s DMS 100, for example, offers more than 350 calling features,
including 28 different ways to forward a call. Individual users typically use only about a
dozen or fewer of these features, but particularly for some vertical markets, a specific
feature set is very important but may be difficult to get to from a remote office or home.

"The point is that there is tremendous capability there, much of it
untapped," Smith says. "What we can now make available with IP is the reach.
Because of the nature of IP, my address goes with me wherever I go, so I can get to all
the capabilities no matter where I am, working from home or another office."

Centrex, most vendors admit, has not been an unqualified success, even with lowered
pricing. However, IP Centrex fixes many of the difficulties of Centrex, most notably the
question of how to extend Centrex capabilities to remote offices and retain identical

Another issue has been control. Centrex has suffered to a certain extent in comparison
with traditional PBX because there is the ability to customize. IP Centrex systems, by
contrast, give great control over the features of the system, and the telecom manager can
administer it from the desktop using a browser. So customers are able to outsource
management of the telephone system, yet retain control.


One of the distinctions among IP Centrex systems is how much IP voice is used in the
system. Companies can use IP voice to communicate only between offices, keeping their
in-house traditional telephony and even PBX. Other IP Centrex systems are available with
IP voice all the way to the desktop on the LAN, where calls are terminated by either a
"soft phone" client on a PC or an IP phone. Nortel plans to offer a version of
its product that will include its own desktop IP phone units.

The issue with these systems is that they use only proprietary IP phones. That
introduces higher cost, as some of those units are priced in the $500 range. "We all
know that you can’t take a [Nortel] Meridian telephone set and have it work behind a
Lucent [Technologies Inc.] PBX," says Jim Burton, founder, CT Link Inc., St. Helena,
Calif., who chaired a session on next-generation equipment at Network+Interop ’99 in Las
Vegas. "One of the beauties of the IP world is that I can take this telephone set and
it becomes a commodity. It is no longer the $500 expensive device sitting on the desktop.
It’s sub-$200 and I should be able to use it behind anybody’s telephone system, and buy it
at Radio Shack or Staples," he says, adding there is an industry standard-setting
effort under way for IP telephones and it is, in his opinion, making progress.

There are also configurations in which IP Centrex and the company’s PBX coexist as the
system migrates to IP. A typical scenario is to implement an IP Centrex connection to just
a few remote offices or for a specific project or application within a company. There may
not be complete integration with the features of the existing PBX, but the systems can
work well in tandem.

Established switch vendors are offering IP Centrex-type services as adjuncts to
existing CO switches. Nortel’s approach is to add an IP gateway module to its DMS 100 CO
switch. An IP call coming in from a company’s leased lines or VPN is converted to
time-division multiplexing (TDM) and is handled by the switch like any other call, with
access to all the features of the switch, including billing. The call can be converted
back to IP if the company uses IP telephony on its LAN, or it can remain a traditional TDM

Nortel has products that add on to DMS 100 switches in trials today and will have them
generally available by April 2000, Smith says. The company also is developing both IP
phones and voice on the LAN with a call management server and delivery over the company’s
routed network, says Dave Robertson, vice president and chief technologist, Nortel
Networks. At press time the company was planning to announce specific products in June and
deliver them before the end of 1999.

"The offer [that] we think is going to have major market kick is what we call the
hybrid," Robertson says. This would be a PBX-like product with connectivity to the
LAN so customers can put telephones on the LAN, and that also has IP wide area network
(WAN) connections for toll bypass. But it supports full portability of the applications
and feature functions of a traditional PBX.

Brian Allain, vice president, Internet Business Systems for Murray Hill, N.J.-based
Lucent Technologies Inc., says the company is taking a two-pronged approach to IP PBX and
Centrex, with products for its existing switches as well as the new IP Exchange product
family. Lucent will extend its existing Definity PBX product with the addition of IP voice
in both the LAN and WAN connections.

IP Exchange is, by contrast, very much a next-generation network product. "It’s a
very open and distributed platform, distributed meaning that different applications and
different elements of the systems can reside at different geographical locations of the
network," Allain says. "So don’t think of a box anymore. Think of elements of a
system that reside in different locations and different segments of your network."

Lucent will introduce an IP Centrex product called IP Exchange Server, designed to be
used on a WAN and to scale up to very large systems. It is aimed at service providers, yet
has common software with the company’s two enterprise-oriented products, IP Exchange Com,
a Windows NT-based server that supports up to 96 stations, and IP Exchange Link, which
takes voice communications and data communications and puts them in one box.

Lucent will introduce most of its product later this year and a few early in 2000. The
company is in trials now with IP Exchange Com and IP Exchange Adaptor. The Definity IP
solution also is in trials and will roll out in phases over 2000.

A number of vendors are offering IP-based systems that can function as either PBXs or
Centrex services, with the servers based in the service provider’s office.

Smaller vendors such as Shoreline Teleworks, Sunnyvale, Calif., have full IP
PBX/Centrex systems aimed at small-to-medium-sized businesses and CLECs. Rather than
deploying next year, Shoreline already is in the market providing products to customers,
says Stephen Mullaney, vice president of marketing. The company’s current product serves
about 100 terminals and the next release will serve several hundred, scaling within six
months to 1,000 terminals. The product works in conjunction with traditional PBXs.

Shoreline has retained traditional telephony to the desktop in part because it allows
customers to install standard 2500 telephones, with all the keys and standard features
that customers prefer at a cost usually less than $200.

Sphere Communications Inc., Lake Bluff, Ill., has introduced Sphericall, a
network-based PBX/Centrex system that uses IP over asynchronous transfer mode (ATM) for
links among the sites on the system. Kurt Jacobs, director of product management, says the
company believes that only ATM links from CO to the customer and across the WAN to branch
offices can guarantee the quality of service (QoS) needed for business communications.

Recently, Sphere has teamed with Promatory Communications Inc., Fremont, Calif., to
offer an ATM-based IP Centrex system for service providers with all local access via DSL.
The system can operate over multiple flavors of DSL, including asymmetric DSL (ADSL),
G.Lite, symmetric DSL (SDSL) and isochronous DSL (IDSL). This provides the high-speed
connections needed for IP voice.

Burton says the Sphere solution "is really good for an enterprise solution on a
wide area network. They use ATM in the backbone to the curb to the closet [PBX]."
Then delivery to the desktop can be via traditional or IP telephone.

However, there are others who believe ATM is not a long-term solution, even in the
business space. Robertson says, "ATM is great but IP is where it’s at, and you can
get close to what ATM did for us [in QoS]. I think ATM will be around for a long time but
will stay in the backbone and will become of diminishing importance in the industry."

Charlotte Wolter is infrastructure editor for PHONE+ magazine.

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