The emergence of converged IP services riding over a cable hybrid fiber/coax (HFC) network promises great opportunities for cable operators, including new revenue from high-speed Internet data, interactive digital television and cable telephony services. How quickly a cable operator can make the jump to offering multiple IP services depends on its business objectives, what its network looks like today and the versatility of its front-line operations staff and the systems they are asked to manage.

This article examines the role of cable IP telephony in this transformation by describing a new incremental approach. It also explains why this new "hybrid" IP solution makes sense for larger operators with embedded circuit-switched infrastructures. This solution runs converged IP services from the end customer's premises to the headend and then to a traditional telephone switching center—rather than going straight to an all-IP network at once.

Risks and rewards

While the potential rewards for converged IP-access services are great, with expectations of increasing the industry's annual revenue stream from $40 billion to $60 billion, converged services present a significant set of challenges for the cable industry.

Most of these challenges spring from market drivers that are forcing the industry to give up its old one-way video entertainment business model to one focusing on converged services. These drivers include: an insatiable end customer demand for bandwidth; an acceleration in the development of IP switching and optical networking; regulatory support of competition; and an increasingly on-line economy.

Figure 1: Circuit-switched cable telephony solution and an IP-based NCSG access solution.

Cumulatively, these challenges require the cable operator to sustain the profitable growth of its old business while it upgrades its network and realigns its revenue-generating assets in support of the highest growth areas found in its new business.

In particular, this is the case for those cable operators who have dealt with their insurgence into the cable telephony business by dividing their operations into two lines of business: one for the competitive local exchange carrier (CLEC) market, and one for the cable TV market.

With some exceptions, most cable operators have divided their cable telephony operations across these two businesses, placing their telephone switches and operations support systems in their CLEC central offices, and their digital carrier concentrators (called host digital terminals or HDTs) in their cable TV headends.

While the capital cost of cable IP telephony architecture is not by itself prohibitive, the opportunity costs required to replace the investment in the CLEC side of the business are enough that these cable operators want to leverage their existing network equipment and pursue an incremental IP solution.

A new 'hybrid' IP solution

From the recognition of this problem, a new, hybrid cable IP telephony architecture has emerged. This new architecture enables cable operators with circuit-switched telephony equipment to begin offering converged IP services over their access network without having to forklift all of their existing circuit-switched equipment out of the network.

This hybrid approach promises to allow a cable operator to extract more value from its existing network investment while beginning to migrate toward IP. The key to the hybrid solution is a new piece of equipment that is typically referred to as a network call signaling gateway (NCSG).

Comparing architectures

Figure 1 depicts a circuit-switched cable telephony system and an IP-based NCSG access system with a view that parallels their respective architectures. For comparison, an all-IP cable telephony solution is depicted in Figure 2.

Figure 2: Migrating from a hybrid to an all-IP telephony solution.

The system on the left side of Figure 1 represents a circuit-switched cable telephony system that is designed to offer Plain Old Telephone Service (POTS) and interconnect with today's public switched telephone network (PSTN).

This consists of a network interface device (NID) located at the customer premise; an HDT located at the cable headend; and a Sonet interface to a central office containing a Class 5 local digital switch (LDS).

The HDT functions as an access concentrator, which takes 24 64-kbps telephone lines and combines them into a single 1.544-Mbps data stream. The HDT is connected to the LDS through a standard TR-303 switch interface.

A typical HDT has an element management system that is shared by a number of HDTs for provisioning and fault management. Other operations support functions include monitoring upstream bandwidth, tracking frequency agility performance, which reacts to noise ingress on a call-by-call basis, and other performance management audits.

Eager to quickly establish a presence in cable telephony and lock-up customers, a number of cable operators have deployed circuit-switched equipment for their telephony service because they had no alternative. With the advent of IP as a real alternative over the past year, cable operators with circuit-switched equipment are looking for ways to leverage that investment to migrate toward the cost, service and management benefits of IP.

From IP appliances to the headend

The right side of Figure 1 depicts the NCSG-based approach. From the customer premises, this centers on an IP-based network interface unit (NIU). Using PacketCable terminology, this device consists of an embedded Multimedia Terminal Adapter (MTA) and a cable modem combined into a single unit that supports multiple phone lines and a high-speed data connection for a PC or home network.

On the network side, the shared bandwidth carrying the cable TV video, the DOCSIS IP data and PacketCable voice services is split in the upstream direction. The two-way video signals go in one direction, while the IP data and VoIP data streams are sent to a cable modem termination system (CMTS).

The CMTS receives and sends DOCSIS command signals and service traffic over the cable HFC network. To provide both IP data and VoIP services, the CMTS must distinguish between both service streams and be able to route them by type of service. Once recognized, these data streams are sent along to a prescribed end-point on the cable operator's metro network or to an Internet service provider's (ISP) network.

The IP data service packets are routed to the appropriate ISP network. Live VoIP service traffic is routed directly to the NCSG.

NCSG: Circuit to packet to circuit

At a very high level, the NCSG connects directly to a cable operator's existing LDS and CMTS using industry standard interfaces. It then packetizes the incoming phone calls from the PSTN and sends them from the headend to the customer using IP, or takes outgoing voice packets and translates them for delivery to the LDS and the PSTN.

More specifically, the NCSG has two primary functions. The first is to extract the Packet-Cable-specified NCS signaling protocols and convert those commands into signaling instructions that can arrange for a dedicated circuit to carry the voice service traffic to an end-point on the PSTN.

The second function of the NCSG is to reformat the portion of the voice service traffic that has been packetized into a DOCSIS variable-bit-rate transport format. The NCSG reformats it into a DS-0 bearer channel, a traditional circuit-switching communications link. When this translation is completed, the NCSG delivers the voice service traffic to the LDS. The LDS sends the outgoing calls out through to the PSTN and forwards incoming calls to the serving NCSG.

Using PacketCable terminology, the LDS serves as a "call agent" proxy providing all call-feature, CLASS and other service-critical functions such as call record, usage recording and recent-change administration with its typical carrier-class, 99.999 percent reliability.

Advantages of the NCSG solution

Anyone who has designed a network knows that the economics get harder to prove-in the closer one gets to the end user. Where bandwidth and IP routing are involved, it is vital that the edge of the network connecting to the end customer be made future-proof through a cost-effective systems architecture.

It is the process of transitioning the service logic and the operations support systems that run a POTS network to the IP call agents, server farms and technically qualified people that will be the critical gating factor. From an operational and economic viewpoint, the larger a cable operator gets, the more attractive the NCSG solution becomes.

Consider the following: The circuit-switched solution is a stand-alone, proprietary one that, while it is market proven, it lacks the inherent benefits of an IP approach. The NCSG solution is a standards-based, converged services offering that also costs less. But, its real value comes from its ability to insulate the end customer from obsolesce, where the impact of early retirement can make or break a cable operator's business case.

Each case was compared to the following two scenarios. In the first scenario, a penetration rate consistent with today's IP data service and cable telephony service projections over the next three years was assumed. All things being equal, the alternatives deliver relatively equal subscriber value, but, after taking into account operating and depreciation expenses, the economics favor the NCSG. Table 1 shows the results of the parallel penetration scenario, by highlighting the impact on Earnings Before Interest and Taxes (EBIT).

In the second case, the demand for cable IP telephony and other advanced services was accelerated, beginning in the third year. While the NCSG's margins hold, the solvency of the circuit-switched solution is brought into question. Table 2 highlights the outcome of the early retirement scenario.

This business case shows that an NCSG solution can allow a large operator to install a solution that offers converged IP services now and at a price that is superior to the alternative of continuing to use an all circuit-switched solution.

More importantly, with cable operators viewing the cable telephony business opportunity as more than a "me too" plain old telephone service, they are looking to offer an application-rich telephony service that blends voice and data capabilities that can only truly be enabled through IP. The NCSG solution positions cable IP telephony at the edge of the cable operator's network, where the converged application value IP offers to the end customer can be captured, leveraged and preserved for the future.

There are different evolution paths to take a cable operator from an NCSG solution to an all-IP one. Although a full explanation of this is beyond the scope of this article, Figure 2 provides a high-level illustration of one way this could be done.