s Stan Brovont Vice President Marketing and Business Development ARRIS 3871 Lakefield Drive Suwanee, GA 30024 stan.brovont@arrisi.com SCTE Business Services Symposium Tuesday, Oct. 17
Introduction The cable industry has enjoyed tremendous success serving residential customers over the past several decades. From its start as a one-way provider of basic video services, MSOs added premium channels, high-speed data, VOD, interactive services and most recently, VoIP. By leveraging the capacity and elegance of the Hybrid-Fiber Coax (HFC) pipe, cable operators have stayed ahead of their competition, including Direct Broadcast Service (DBS) and more recently from the telcos. Ever since cable companies succeeded in deploying primary line digital voice as the third leg of the triple play residential package, the ability to offer the same attractive package to business customers has been possible. Cable is the leader in video bandwidth and applications; it excels at delivering very high-speed data. And with the reliability created by PacketCable Multimedia (PCMM) Quality of Service (QoS) standards, it delivers what every small to medium-sized business needs, at a better price (see Figure 1). Figure 1 Offering business services has unique and rigorous challenges. The business services market has traditionally been served by ILECs by virtue of their access capabilities such as fiber, T1 facilities (to run PBX and Key Systems) and Centrex features from Class 5 switches. But with cable s nearly ubiquitous carrier grade HFC cable plant, MSOs can tackle the business services marketplace head on. MSOs have built up a material amount of direct experience delivering voice services and with the support of vendors that have a proven track record of delivering voice over HFC, MSOs will be able to wrest away a significant portion of market share. Cable needs to adapt its residential service experience to serve customers whose needs are quite www.arrisi.com Page 2 of 12 October 2006
different. Small and medium-sized businesses (SMB) keep different hours, require higher bandwidth at different times and need individually tailored networks to link multiple locations. They need a detailed Service Level Agreement (SLA) to cover outages, and since a business services customer is potentially a much higher revenue producer, a greater degree of tech support must be factored in. Cable s successful pursuit of business services revenue will be a combination of market segmentation, service bundling and a careful selection of technologies with which to form solutions aimed at providing a compelling all-in-one service to a single, high revenue customer. This would include voice, data, video, virtual local area networks (VLAN) and wireless communications services. Business Voice Opportunities An Underserved Market Stratecast Partners estimates that the SMB segment in the U.S. represents a $40 billion annual market opportunity for cable MSOs today 1. Other analysts predict similar, very large potential markets. The SMB segment is defined as a company with less than 500 employees and is a historically under-served segment of the overall business market: SMBs. Historically, SMBs have been under-served by both RBOCs and IXCs because they are preoccupied protecting their very largest customers and have left the SMB market to be serviced by a large, complex community of local resellers and integrators. Past attempts to address the SMB market via CLECs failed because they were burdened with the high costs of leased twisted pair networks and poor support from the ILEC s. Most are now out of business. SBC s acquisition of AT&T and Verizon s acquisition of MCI will increase their need to focus on their top-revenue producing accounts. This, coupled with their need to manage their huge investments in fiber to deliver advanced services to consumers, will cause them to continue to under serve the SMB market. Many cable MSOs already have business services organizations established, including Comcast, Cox, Time Warner Cable, Charter, and Cablevision. All of these operators have begun to achieve some success in serving business customers but the total growth potential remains very large. Addressing the SMB Market Serving the SMB will challenge present approaches to selling and supporting SMB accounts. SMBs want the same accountability, service levels, and features that Fortune 1000 companies enjoy. Cable operators already operate as local entities in the communities they serve and will most likely succeed in delivering services directly to the SMB. However, MSO sales organizations for business customers must operate differently from those typically selling residential services. They must be able to provide network planning that keeps up with their potential customer s evolving needs. SMBs typically do not possess full-time telecom staff, and require their suppliers to provide substantial networking and application management services, at reasonable prices. MSO sales engineers have to solve communications problems while using a bundling strategy to meet the diverse needs of their enterprise customers. 1 Stratecast Partners, A division of Frost & Sullivan, Stratecast Partners Insight for Executives (SPIE 2006 #30 August 4, 2006, SMBs: The Next Big Opportunity for Cable MSOs www.arrisi.com Page 3 of 12 October 2006
To manage the organizational requirements in serving the SMB segment some MSOs may consider partnering with the integrators and value added resellers (VARs) already serving this market. These integrators often offer added value as they are also typically channels for telephone sets, key systems, cabling contractors, and other related elements of the SMB s total telecommunications requirements. The experience of these integrators may be valuable in successfully managing the customer s cut-over to the MSO s telecommunications solutions because such conversions often require special provisioning and commissioning capabilities. MSO s may need to consider separating their service implementation and maintenance organizations from those providing residential services. SMB customers require voice services ranging from central office provided call management (known as Centrex in ILEC parlance), to PBX and Key System tie lines, to transparent remote office connectivity (known in the past as Foreign Exchange lines). With the advent of VoIP, many SMB s and their providers are using soft switch platforms and SIP trunking between inhouse managed proxy servers. There is also a very large market for T1 replacement and T1 bypass. There are millions of T1 s in service connecting remote switches, cellular base stations, data networking terminals, alarm circuits, surveillance gear, etc., many leased to SMBs. MSOs can distinguish themselves by providing clients that have constrained staff resources, such as like schools and hospitals, with an understanding of business IT integration requirements and ongoing services support. Innovative MSOs can take market share from ILECs by developing and catering specialized solutions that meet the demands of municipalities, educational facilities, and healthcare providers. Cable Has Mature Infrastructure DOCSIS and PacketCable compatible network elements and network endpoints provide a solid foundation for providing services necessary for deployment of business voice services to commercial customers. Existing network elements and network endpoints already provide the fundamental architecture upon which services have been widely deployed to residential customers. The pillars of this architectural foundation, all of which are more critical to commercial services than residential services, include: Carrier Class Reliability High Availability High Density Wire Speed Extensibility Quality of Service Today s HFC networks are engineered for the highest reliability and signal quality ever in history. Large segments of US cable plant are equipped with backup power to the actives and, in some cases, redundant fiber rings between the head end and the fiber nodes. Head ends are almost universally equipped with emergency power generators and monitored or even staffed 24 hours a day to ensure Call Servers, gateways, CMTS and fiber transmission equipment are always operating properly. Existing DOCSIS and PacketCable deployments have proven that carrier class availability and reliability for voice and data services can be achieved over HFC networks. Years of run time in www.arrisi.com Page 4 of 12 October 2006
the field have provided the burn in time necessary to harden up and solidify the hardware, software, and support of the network elements and network endpoints upon which business services can rely. Some equipment manufacturers have designed architectural attributes into their products that increase their suitability for meeting commercial service reliability requirements such as fault tolerance, redundancy, hitless failover and software updates, and embedded back-up batteries. These key features provide for the high availability, high reliability, and carrier class performance which the business market demands. Today, MSOs can satisfy various line capacities in addressing many applications from singlefamily residences, to Multi-dwelling Units (MDU). The same end-point device can be configured for SMBs. Traditionally, cable operators use 1 or 2-line devices for residential deployments and SOHO customers represent one of cable operators most natural entry points into the SMB space today using the PacketCable network platform. For some SMB market applications, however, higher line counts must be considered. A small business may require 10 lines. Some E-MTA manufacturers already offer 8- and 12-line devices which are more suitable for larger offices such as law firms, medical centers, call centers, and telemarketing offices. Multiple rack-mounted multiline E-MTAs can be part of a highly scaleable solution that can grow well beyond 12 lines to easily accommodate mediumsized businesses. These devices can be deployed today leveraging the existing PacketCable architecture, or in conjunction with advanced Business Services enabled SIP solutions. The MSO can offer features such as Automatic Call Distribution, Multiple Appearance Extensions, and Hunt Groups, just to name a few. These features can also eliminate the need for expensive customer premises equipment such as Key Systems and PBXs. Most E-MTA manufactures are also extending their portfolios to offer Wi-Fi capable E-MTAs, enabling operators to build SMB voice and data networks cost-effectively and aesthetically. Whether implementing SIP or NCS protocols, QoS is a foundational capability (see Figure 2). The ability to assign service priority is essential for any type of competitive voice offering, and will certainly be a baseline requirement for more demanding business customers. PacketCable QoS has its roots in DOCSIS 1.1 and is integral to all PacketCable specifications, including PacketCable Multimedia. Existing deployed network elements and E-MTAs already have these features and the cable industry s experience building managed metro and core networks to sustain the high quality of service supported by PacketCable standards compliant equipment will serve it well in addressing the SMB market. www.arrisi.com Page 5 of 12 October 2006
Figure 2 At the head-end, CMTSs with wire speed functionality are quite mature and have proven to be a key factor in handling larger and larger traffic loads while being able to maintain increasing number of lines and associated call volumes even while under heavy data traffic load. These systems currently have the scale and density necessary for many business services deployment as well as providing a hardware platform that allows for evolution into the even higher scale software architectures being defined via DOCSIS 3.0. A very important consideration for SMB customers will be the cable operators ability to prevent problems, or, in the case of an issue, to quickly troubleshoot and resolve problems. Advanced troubleshooting capabilities aimed at Network Operations Center (NOC) personnel, field technicians, and call center representatives will allow operators to maintain volume SMB VoIP deployments, while E-MTA loop diagnostics provide remote testing of installation and allow ongoing trouble management for E-MTAs. The ability to remotely test E-MTAs will provide greater customer satisfaction and reduce maintenance costs by quickly identifying inside-wire faults, ringing issues or just a receiver off-hook when customer trouble reports are received. In addition to maximizing customer satisfaction, this will also lower operator costs by reducing unnecessary truck rolls. Properly managed and marketed, this could be a significant competitive advantage for cable over the ILECs because cable E-MTAs are intelligent end points with these remote diagnostic capabilities while ILEC are still tied to dumb twisted pair. The ARRIS experience from analysis of many customer trouble report cases shows that a significant number of truck rolls may be avoided; indeed, a significant percentage of faults can be detected and resolved before the subscriber has even noticed the problem, something an ILEC simply cannot do over twisted pair. www.arrisi.com Page 6 of 12 October 2006
Whether an MSO is already charging, or is considering charging for inside wire maintenance, remote loop diagnostics capability will enable service representatives to confirm that trouble reports are indeed premises wiring faults. Loop diagnostics capabilities will: Reduce the costs of repair-operations by eliminating Customer Trouble Reports (CTR) related to installation and inside-wire maintenance Reduce on-going Mean Time To Repair (MTTR) by identifying inside-wire faults immediately Eliminate uncertain truck rolls due to assumptions about faulty premises-wiring conditions Increase customer satisfaction and reduce churn by eliminating repeated failed attempts on "No Trouble Found" Enable effective and profitable inside wire maintenance revenue with the aid of new test tools As mentioned previously, commercial services are typically more demanding than residential services. This forces the cable operator to ensure that any selected network element has the troubleshooting tool set to quickly and efficiently diagnose any problem. Tools that should be considered include loop back testing, local loop diagnostics, and call quality metrics. With good tools, operators will be able to decrease MTTR and preserve customer satisfaction. Integration of MSO Infrastructure with Legacy Business Networks Businesses are heavily dependent on the daily operation of both their data network and their phone systems. Due to their dependence on the availability of their voice and data networks, business customers have traditionally selected legacy technologies such as Frame Relay and time division multiplexing (TDM) technology to ensure service level agreements (SLAs). Using standards-based circuit emulation services (CES) to create pseudo wires, MSOs can offer legacy services transparently and reliably over existing Ethernet/IP network with DOCSIS and Non-DOCSIS capabilities. An MSO can now move in and serve these customers, offering a bundle of Voice and Data services using CES-enabled CPE devices to preserve their existing investment in PBX and key systems -- while providing them higher bandwidth at lower cost. The point-to-point nature of the circuit, as well as its special characteristics of constant bit rate clocking and signaling can be perfectly maintained using wire-speed CMTS equipped with PacketCable QoS. The equipment on both ends of the pseudo wire maintain the same level of service and functionality as if they were still communicating over a T1/E1 or Frame Relay physical link (see figure 3). www.arrisi.com Page 7 of 12 October 2006
Figure 3 Using advanced new Ethernet Operation and Monitor (OAM) capabilities plus Circuit Emulation Service alarms and monitoring, operators can also apply the same demarcation techniques traditionally built into Channel Service Unit/Data Service Unit (CSU/DSU) premises equipment. A Cable Modem equipped with Circuit Emulation Service functionality maintains the timing, network monitoring and fault isolation capabilities that a true T1 link provides. Both telephony and data communication may be transported directly over the Ethernet, thus providing the business room to grow both in its telephony and data communication needs. Using CESenabled cable modems and gateways an MSO can offer PBX hosting services using Centrex, soft switches and Class 5 switches without the need for the customer to migrate to VoIP. An MSO may also utilize existing PCMM, VLAN and MPLS technologies to provide Ethernet Line Service, a point to point service (E-Line) and Ethernet LAN Service, a multipoint to multipoint service (E-LAN); transparent, private line, virtual private line and LAN services. Turning on traffic engineering capabilities such as MPLS and L2VPN in their network elements ensures Service Level Agreements (SLAs) are met that deliver end-to-end performance matching SMB requirements for voice, video and data. Cable operators need to deploy these features in their converged network elements including core routers, CMTSs, and advanced CPE such as cable modems or Ethernet gateways. As an example, municipalities are considering viable strategies and approaches with their multiple vertical markets including healthcare, education and utilities. These large and medium businesses are considering deploying hefty IP PBXs at their premises. These solutions require climate-control and power protection. In some cases it may be strategically beneficial to let the MSO own and baby-sit the voice equipment. The equipment co-location would include equipment to connect to the PSTN. The MSO may be better suited to secure and run the required networks and sub-networks with other bundled applications, resulting in a sturdier www.arrisi.com Page 8 of 12 October 2006
integration of all the interconnected requirements. Since the MSO can afford more expensive, hot-swap, 5-nines CPU architecture than most corporations can, a Centrex approach, where all the services are housed on the MSO facilities, may offer greater reliability and economy overall. MSOs can offer VoIP to SMBs by capping growth in existing legacy circuit switched PBXs and key systems (see Figure 4). For single locations, E1/T1 circuit emulation technologies can be used to interconnect legacy on-premises voice switches to the public network. Multi location businesses can use CES CPE device for inter-connecting legacy TDM telephony and LAN traffic. Using CES to create tie lines between PBXs in different sites enables a remote site to use abbreviated dialing using extension of the main branch, and use all features traditionally enabled by the larger PBX of the main branch. Voice quality and richness of features including proprietary features of PBX are maintained by ensuring signaling transparency and small round trip time between sites. Similarly, with the use of E-LAN or E-Line VPNs between sites, the CES enabled CPE can employ DiffServe and Q-in-Q features to provide traffic engineering tools for end to end SLA. Figure 4 Wireless DOCSIS for Multi-location Businesses In a multiple-location business solution, a Wireless CMTS (WCMTS) can be configured to provide advanced IP services over a DOCSIS based wireless network. A WCMTS using wireless DOCSIS for connectivity provides operators of any size the opportunity to offer VOIP and high-speed data services where hard-wire two-way cable plant has not been built. A carrier grade system should support ample traffic volumes along with good latency control and scalable www.arrisi.com Page 9 of 12 October 2006
transmit-and-receive capacity supporting at least one downstream RF channel and up to six upstream RF channels. The receiver should support TDMA, ATDMA and SCDMA modes to cancel both wideband and multiple ingress noise, cancel co-channel interference and suppress burst noise in the upstream (see Figure 5). Figure 5 The WCMTS could also support end-to-end 802.1Q VLAN for advanced data applications for bundling business applications. Each VLAN will provide a secure and private connection between customer end-points anywhere on the cable network. Additionally the same WCMTS can provide static routing, with the optional use of RIPv2 or OSPFv2 Layer 3 routing protocols. Fixed Mobile Convergence Fixed Mobile Convergence, which is the concept of using Local Area Wireless networks for data and voice access when available, will bring the best of both worlds to our highly mobilized workforce. This mobile workforce will retain the convenience of one-number access at a much more economic price point. These users will now use Wi-Fi networks for voice and data access when they are in their home, business, or even hotspots. When they are truly mobile they will use the existing cellular network as they do today. This will be completely seamless to the end user, but will certainly improve the economics of mobility. Using this converged platform, MSOs can leverage their carrier class access networks to gain new business customers that rely heavily on mobility. This is a new, high value customer segment the MSO isn't able to effectively address with today's infrastructure. Businesses value the convenience of mobility in a very big way. Many businesses fund mobile devices for their employees because it significantly improves the efficiency of communication in their workforce. www.arrisi.com Page 10 of 12 October 2006
This added efficiency comes at a large and sometimes unpredictable price. The mobile workforce uses these funded devices with little regard to whether they are near the desktop phone or not. The convenience and portability of a single communication device that functions as your address book, email client, and phone is a very compelling product offering. Mobile phone usage is also driven by the mobile workforce providing their mobile contact information to their customers and colleagues. These individuals don t know the mobile worker s current location, but they do know their likelihood of reaching their party of interest in much higher when they call the mobile worker s cellular phone. These factors make mobility a key service for today s workforce. Another key issue FMC addresses is in-building cellular coverage. Many cellular users experience poor coverage in their homes and particularly inside of their business. FMC solves these problems by making use of the Wi-Fi networks that have been rolled out in huge numbers over the last few years. Nearly every business has Wi-Fi coverage and residential Wi-Fi is reaching a very high level of popularity as well. Summary There is a large opportunity for cable operators to meet the under served needs of Small and Medium sized Businesses. Their HFC plant and much of their infrastructure is already capable of meeting the reliability, availability, quality of service, and other demands of the business market. The experience the MSOs have gained in their residential high speed data and VoIP offerings are directly applicable to offering business services. While some adjustments to their organizations and network operations may be necessary, by wisely deploying appropriate incremental head end and subscriber premises technologies MSO s can create an attractive, economic bundle of voice and data services that will be highly competitive against the ILECs and their value-added resellers. Other technologies ideally suited to the DOCSIS and PacketCable infrastructure such as remote loop diagnostics and Fixed Mobile Convergence can be leveraged by the MSOs into a strongly differentiated position. Cable has already started down the path of establishing themselves as credible and serious about selling services to SMB, and is poised to rapidly exploit this opportunity for dramatic future growth. www.arrisi.com Page 11 of 12 October 2006
Glossary CES CMTS CSU DSU E-MTA HFC ILEC IP IXC MPLS MSO NCS OAM PBX PCMM QoS SIP SLA SMB TDM VLAN VoIP WCMTS Circuit Emulation Services Cable Modem Termination System Channel Service Unit Data Service Unit Embedded Multimedia Terminal Adapter Hybrid Fiber-Coax Incumbent Local Exchange Carrier Internet Protocol Inter-Exchange Carrier Multi-Protocol Label Switching Multiple System Operator Network Control Signaling Operations and Monitor Private Branch Exchange PacketCable Multimedia Quality of Service Session Initiation Protocol Service Level Agreement Small to Medium sized Business Time Division Multiplex Virtual Local Area Network Voice over Internet Protocol Wireless CMTS www.arrisi.com Page 12 of 12 October 2006