The rules have changed for public network service providers and there is no going back--and no slowing down. There even are new definitions of what constitutes a challenge and an opportunity.

Traditional timelines for product deployment and routine progress in the industry must make way for new operational and organizational approaches to compete in this intelligent database-driven era. Carriers must learn from the new generation of technologies they are deploying and design appropriate business models to match them. The legacy business models no longer fit and must change. 

Government–Business and Regulation

Government regulation is one factor affecting how Incumbent local exchange carriers (ILECs) operate. Under government regulations, ILECs must find ways to run parts of their business (the IT department, for example) as unregulated entities and to segment their data services from traditional voice services.  This is not the case for their competitors, the competitive local exchange carriers (CLECs).

This type of segregation does not make sense in a world where the new technologies being deployed are increasingly integrated. The next generation of operational support systems (OSSs) are also being designed as integrated systems. At a time when ILECs also should integrate their business models, they are segregating them. It makes no sense.

To correct this problem requires a two-pronged approach: 

• There must be an examination of the historical view of what constitutes a “core business system” for an ILEC. Then the ILEC must determine how to engineer and support the core business vs. the infrastructure systems needed to run the business. Consolidating common operations to take advantage of the natural economies of specific business areas is crucial. 

• There must be a strategy developed to convince governmental agencies to regulate processes rather than regulating operational or technology structures to improve competitive markets.

Define It

ILECs are built upon legacy business models that all but ignore the technological marriage of data and voice, along with the distributed architecture of network elements that have off-loaded functionality to a myriad of OSSs. Network elements are no longer stand-alone; yet, ILECs still manage their businesses as if they were. 

There is a fundamental flaw here: ILECs end up with two Information Technology (IT) organizations with duplicate functions. Even worse, these departments compete against one another when partnership should be the name of the game.

To further illustrate this concept, here is a comparison of a traditional, non-telecom business model and an ILEC (carrier) business model: 

In the telecom carrier business model above, departments 3 & 4 really are both IT departments. CLECs and Dotcoms--along with other new generation technology businesses--seem to understand this concept while ILECs don't.  Network Engineering and Operations are the "Adam and Eve" of all IT departments--existing even before the term information technology was coined.  But with the advent of teletype data systems and PCs, ILECs have developed two distinct organizations, fundamentally in the same business, but operating very inefficiently with theoretically the same--but ambiguously different--charters.

In theory, the Network Engineering and Operations unit supports Telecommunications or (the Core Business) and the Information Technology (IT) unit supports business infrastructure management.  However, the boundaries between these two organizations is more departmentally self-serving and political than practical. 

The boundaries between these two departments even appear to violate the Federal Communications Commission (FCC) requirements for central office equipment (COE) tax depreciation requirements in several inadvertent--and I would add, practical--instances. It is unintentional, but results because of COE depreciation rules that are anachronistic. These bureaucratic boundaries cause unintended confusion, and put carriers in a Catch-22 situation. 

The bottom line is that these two departments must partner to be able to offer the best solutions for both the ILEC and its customers. But they cannot work together as long as one is regulated and one is not. 

Core business systems are generally systems that communicate with a network element.  However, many of these core business systems within ILECs are being managed by IT departments that have little affiliation with Network Engineering or Operations.  Complicating this issue further is that both internal and external data services have been considered non-telecom services, and are therefore managed by the IT department.  

Network Engineering and Operations is rapidly moving from considering voice as its core business to considering both voice and data as core operations. This change brings up an obvious dilemma. This technology merger will compel the ILECs to merge logical functions and similar departments.  

A precise definition of what constitutes COE for the new generation of distributed network elements is necessary.  The FCC standards that still define COE were developed when network element systems were stand-alone and centralized.  Today's network elements are distributed and specialized. 

Monopolies (Good or Bad?)

Big is not bad in the carrier world, if properly regulated.  In fact, it may be the best of all worlds–combining the best principles of many economic alternatives. 

Consider that the original telecommunication industry in America was founded on what was considered capitalistic heresy at that time. When Ma Bell first forwarded the concept for a nationwide telephone service and agreed to regulation, the motive was to build a universal wireline telecommunications network that has since been unequaled. 

It was a visionary, heroic and pragmatic milestone that was contrary to conventional business ideology. Divestiture came along in the early 1980s  and dismantled the Bell System in the interest of eliminating the company's monopoly and opening up the industry to other competitive service providers.  

A New World

The world and the telecom world have changed.  Technology will move businesses into new opportunities and operational directions that provide everyone with better quality, superior services at reduced costs.  These are the intrinsic values of next generation technologies, but only if technology is left to itself, and not dissected irretrievably by government regulation.  

Businesses should have the right and ability to adapt as technology allows them--without impediments from the government.  Government should only get involved to modify policies that manage “processes” to advance competition. It should never--or only with the highest level of restraint--restrict technological advancements. 

Businesses, government and individuals must effectively exploit technology. To do that, there must be integration of applications and systems, not segregation.  

The Next Generation

The single greatest competitive advantage that telecommunications businesses actually have going for them today, will be found in the rapid deployment of next generation Networks (NGN). These new networks will offer OSSs that can provide the means to speed products to market, and increase technical service quality (error reduction) and organizational efficiency.

The OSSs are essentially off-loaded operations, administration, maintenance and provisioning (OAM&P) systems that once were all contained within the network element.  OSSs are known as near-network systems, or perhaps more accurately today as Distributed Network Element Systems. They are part of the new network element distributed architecture, vs. the old standalone network elements. 

NGNs are fundamental to success in the new marketplace of highly complex services and products, quality control, ease of access and service on demand.  The prime reason is that new technology is driven by intelligent databases that enable automation, consolidation and simplification, ensuring quality of service and enhanced functionality. 

Without the ability to rapidly deploy automated databases coupled with a complementary operational business model that moves toward consolidated operations, then ILECs will continue to fail to take full advantage of next generation technologies. 

One other very fundamental area involving NGN systems, has do to with corporate leadership. ILECs must convey to network element vendors that they will no longer purchase systems that are not built with an open architecture.  They must also make it clear that they will be unyielding in their demand to have all legacy network elements retrofitted with equipment configuration databases that can be uploaded to next generation database systems.  

This is an effort that all telecommunications businesses and the government should be able to agree upon, to clearly improve the operation and reliability of the entire industry. These upgrades are essential to take full advantage of NGNs. 

NGN products and complementary operational business models are fundamental keys to success in a communications business’ future.  However, without high-quality leadership and high-level personnel that is team based and technology focused, ILECs will be incapable of engaging in the merits of real change to make fundamental operational and technological improvements.  Without exception, management's vision and importance to a corporation cannot be overstated.

Leadership in Times of Change

ILECs must rely on the rank and file, as well as the organizational and regional leadership teams, who are often tactical and not strategic in their decision processes, to move forward.  ILECs must have clearly stated business goals to properly reorganize and improve their operations. A clear business model must be designed at a strategic leadership level, devoid of regional or operational tactical self-interests.

Most ILECs now operate in multiple states,  and have yet to fully consolidate their physical or organizational operations.  This consolidation is crucial to gain operational efficiencies. The technology to do this consolidation is available now.  But the changes ILECs must make will be evolutionary, not immediate. Those carriers that are at the front-end of the evolutionary curve will win big--not only for themselves but also for their consumers.

The future will bear out these realities. Any excuses about regional, regulatory or cultural needs are red herrings designed only to cover up failures in moving forward with very complex changes that are necessary at all levels. 

Technology is designed to automate, consolidate and simplify. Attempting to deploy it otherwise is counter-productive.  Organizations (people) usually have a proclivity to resist change--unless mobilized and empowered to lead and trust that change will improve conditions.  ILECs must understand the fundamental principle of function before form.

The key to successful change is evaluating the technology (functions) and then designing an operational model (form) that best uses those new tools.  ILECs must do this--both for themselves as businesses and for the benefit of their customers.
Russ Otter is Area Manager in Network Operations with Pacific Bell (SBC). He can be reached at russ.vicki@gte.net. The opinions expressed in this article are those of the author, and do not reflect the opinions or policies of Pacific Bell.

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