Voice over IP in the Local Exchange: A Case Study

Title: Voice over IP in the Local Exchange: A Case Study

Research Question: How does the cost of operating a Voice over IP (VoIP) network compare to a traditional circuit-switched network in a local exchange?

Methodology: The study used a case study approach, focusing on a 75,000 subscriber Local Exchange Carrier (LEC) network and a scaled-up 30,000 node IP network of the University of Pittsburgh. The researchers compared the operating costs of both networks, considering factors such as customer service, outside plant maintenance, and the actual cost differences of the switching technologies.

Results: The study found that the operating cost differential between IP and circuit switching for this LEC will be small. A substantial majority of a telco's operating cost lies in customer service and outside plant maintenance, which will be incurred equally in both networks in a pure substitution scenario. The operating cost difference lies in the actual cost differences of the switching technologies, estimated to be less than 10%-15% of the total operating cost of the network.

Implications: The study suggests that the operating cost difference between VoIP and circuit-switched networks is minimal. Even if the cost differences for substitute services were large, the overall impact on the telco's financial performance would be small. However, VoIP has some hidden benefits on the operations side, such as the ability to manage data and voice services with the same systems infrastructure, potentially reducing the incremental operations cost of rolling out new services.

Link to Article: https://arxiv.org/abs/0109067v1 Authors: arXiv ID: 0109067v1