Beyond Third Generation Telecommunications Architectures:
The Convergence of Internet Technology and Cellular Telephony[1]
Randy H. Katz
EECS Department
University of California, Berkeley
Berkeley, CA 94720-1776
“Just as the market share of centralized computers dropped from nearly 100 percentage in 1977 to less than 1% in 1987, our research … suggests that the share of analog voice in the global telecom market will drop from more than 80% in 1994 to less than 1% in 2004. Thousands of ISPs, with WorldCom at the helm, will prevail, with ever-spreading networks of fiber, optimized for data.”
“The most common PC of the next decade will be a digital cellular phone, tied to the Net and based on a single chip with integrated analog and digital circuitry. As powerful as a supercomputer of old, it will be as mobile as your watch, and as personal as your wallet.” George Gilder, Futurist Economist, in Wired Magazine, January 1998, page 42.
Abstract: The two most significant trends in today’s telecommunications industry are the significant growth of the cellular network and the rapid rise of the Internet. The rise of mobility and data-oriented applications are fundamentally changing the very nature of the telecommunications network. These new developments present significant challenges for the industry and its incumbent infrastructure equipment providers. Voice will continue to be an important application, but its dominant position will diminish in the future network. These future networks will be optimized for data, not for voice. In this paper, we make the case that future telecommunications infrastructures will be heavily based on the Internet Protocol (IP) and that an Integrated Services Packet Network (ISPN) will form the basis for multimedia services in the future telecommunications network.
1. Introduction
The telephony network has evolved over the last 120 years into one of the most ubiquitous and complex technological systems known to humankind. Over one billion of the five billion inhabitants of the planet have made a telephone call, an astounding number that continues to grow as the developing world increases its investment in telecommunications infrastructure.
Yet at the end of the 20th Century, the engineering design principles that underlie this great technical achievement are being challenged. The fastest growing sector of the telecommunications industry is cellular services, introducing new demands for user and handset mobility in the future network. In contrast to wireline telephones, cellular handsets are sophisticated electronic devices able to perform advanced digital signal processing, extensive user interface support, and ultimately provision of many personal information management functions (address book, electronic mail, personal messaging, etc.).
Following a similar explosive growth trend is the number of Internet subscribers. Today, their dominant application is data, with emerging capabilities for telephony services within the context of the Internet. Internet usage counters many of the engineering assumptions about the telephone network, which has been carefully engineered to deliver outstanding performance for real-time voice. The rise of handheld devices, Personal Digital Assistants, integrating ever more extensive computing and communications capabilities in a small formfactor, will further increase the importance of data applications within the network.
The rest of this paper is organized as follows. The next section compares and contrasts the telecommunications and data communications industries. Section 3 examines the rise of data applications and speculates on whether data will come to dominate voice in the future network. Section 4 compares Internet technology with the technology of the telephone network and the emerging ATM technology. We also describe the rapid rise of Internet telephony and support for real-time streams in the Internet’s packet switching architecture. We argue that the evolution of Internet technology, in the form of Integrated Service Packet Networks, will come to dominate the telecommunications infrastructure in the 21st Century. In Section 5, we describe one possible vision for how this might become about, particularly in the context of cellular networks support wide-area and local-area data. Section 6 gives our summary and conclusions.
2. Comparison of Telecommunications and Data Communications Industries
2.1. The Telecommunications Industry: Challenges and Opportunities
Telecommunications is perhaps the largest service industry in the world. The total worldwide telecommunications revenue was approximately $900 billion at the end 1996. This is expected to grow by 50% to $1300 billion by the year 2000.
The vast majority of the revenue in this industry is local phone services provided by the telecommunications operators. The figure below captures the global trade in telecommunications equipment and services. The market for telecommunications equipment providers was $69 billion in 1996. The market for international long distance services was $30 billion in international telecommunications settlements. The remaining $17 billion is in other rendered services, such as consulting.[2] While revenue growth from international calls has been growing slowly, equipment sales worldwide are expanding, especially in the developing world.
Cellular telephony remains the hottest and fastest growing sector of the telecommunications market. In the Nordic countries, ten mobile telephones are being added for each wireline phone. This trend is being experienced, not only in the developed world but also in the developing world. Wireless communications can be very cost attractive. It achieves this by avoiding the expensive deployment of local “wired” access technologies.
In the United States, the largest worldwide market for cellular services, subscriber growth has been and remains on an exponential curve. At the end of the 1996, the number of U.S. subscribers grew to 44 million.[3]
As an indication of what these means for infrastructure providers, the number of cellular sites in the U.S. grew by 25% in one year, to 30,000 cell sites. The deployment of cell sites (and associated infrastructure) is growing at the same exponential rate as the number of subscribers.[4]
It is predicted that by the Year 2001, the number of worldwide mobile telephone users will have grown to 600 million. By the same time, the number of Internet users will have grown to 400 million. Both trends remain on the exponential growth curve well into the next century[5].
The rapid rise of digital cellular systems is an important related trend. Digital technology not only enables high quality voice and more efficient spectrum utilization. It provides a critical foundation in the wide-area for ubiquitous data-oriented applications as well.[6]
This dramatic growth in cellular demand is an international phenomenon. By the year 2000, an astounding one in three telephones is expected to be a mobile telephone.[7] This widespread access to mobile communications will very likely have a profound impact on our lifestyle in the next century.
The International Telecommunications Union reports that 20% of telecommunications revenue comes from mobile subscriptions, 10% from international phone calls, 60% from local calls, and 10% from all other services. More interesting is the relative revenue growth associated with each of these. In the developed world, local services will undergo only limited additional expansion, and is unlikely to serve as a major source of revenue growth. Since 1990, revenues from international calls have increased only about 50%. On the other hand, revenues from mobile telephony have increased 8 fold (800%) in the same time frame![8]
It is not surprising that equipment for the mobile network infrastructure represents the greatest revenue growth opportunity. Even the developing world sees the advantages of a more rapidly deployed cellular infrastructure. In countries like India, it is much faster, albeit more expensive, to obtain a cellular phone than to wait the many months for a wireline installation!
In a recent market survey of cellular subscribers, performed by Peter D. Hart Research Associates in March 1997 and quoted on the CTIA Web Page, data-oriented applications represent a considerable percentage of new services they desire. When asked which services they would like beyond basic wireless telephony, they responded as follows:
Call Forwarding / 37%Paging / 33%
Internet/E-Mail / 24%
Traffic/Weather / 15%
Conference Calling / 13%
News / 3%
The services in italic represent data-oriented services. It is interesting to note that one in four cellular subscribers have requested access to the Internet from their cellular phones.
To summarize, the rapid rise in cellular telephone networks, in terms of subscribers, revenue, and opportunity to install new networks, represents a major opportunity for the traditional telecommunications industry. The deployment of digital systems, and the increasing demand for data-oriented services, is the challenge. The key issue is what will be the appropriate architecture of the future network.
2.2. Data Communications Industry: Opportunities and Challenges
The portable computer market is the most rapidly growing sector of the personal computer market. By the year 2000, it is expected that this will represent a $50 billion market[9] (interestingly enough, of the same order of magnitude as global trade in telecommunications equipment!). Telecommunications equipment providers are increasingly aware of the rising importance of data services. Nokia has already stated that it expects 20-30% of its revenue to come from data-oriented equipment and services by the end of the century.
An emerging market is for computing devices that have been called Personal Digital Assistants (PDAs). These are small “palmtop” devices that integrate many personal information management functions, like a personal calendar, notes, and an address book. The U.S. Robotics PalmPilot is the first such device to become a commercial success, selling over one million units since its initial product launch in 1996. The PalmPilot Professional executes the TCP/IP network stack, thus making such devices full fledged nodes on the Internet one a dial-up connection is established. The popularity of this device indicates that a market exists for integrated computing and communications capabilities that can fit in a pocket. This could be the shape of things to come for future mobile telephones or computer-telephone combinations.
In terms of yearly revenue, the telecommunications industry is considerably larger than the data communications industry. Part of the imbalance is due to relative size of service revenue compared with equipment revenue (the data communications industry consists of equipment vendors; the telecommunications industry is a mixture of both operators and equipment providers). Nevertheless, as indicated by predicted future growth, the latter is growing much more rapidly.
The telecommunications industry is expected to grow from about $900 billion in 1996 to $1300 billion by the year 2000, a growth rate of 50%. In the same time period, the data communications industry is expected to grow from $29 billion in revenue to $72 billion, a growth rate of 300%.
The stock market’s capitalization of corporations represents the investors’ view of future corporate growth. Under this admittedly imprecise metric, investors believe that in the near future, Cisco Systems, a maker of Internet switching equipment, will have approximately the same revenues as Lucent Technologies, a broad-based vendor of telecommunications infrastructure equipment. The following table captures the perceived market value and annual sales, as of August 1997.
DataCommunications / Market Cap ($Billions) / Annual Sales
($Billions) / Tele-
communications / Market Cap
($Billions) / Annual Sales
($Billions)
Cisco Systems / $46 / $6 / AT&T / $57 / $52
3Com/US Robotics / $16.1 / $5.5 / Lucent / $48 / $24
Ascend/Cascade / $7.7 / $1.3 / GTE / $42.3 / $21.7
Newbridge / $7.4 / $0.9 / Bell Atlantic / $33.3 / $13.3
To summarize, the data communications is small compared with the size of the telecommunications industry, but is growing quickly. By the end of the century, in terms of equipment sales revenue, the two industries will be of comparable size. The introduction of small handheld computing devices able to execute the Internet’s protocols presents new opportunities for mobile telephone-computer integration with the Internet. The challenge is whether the existing telephone networks, wireline and cellular, will be able to provide the required services for this emerging class of users and applications.
3. Is the Future of the Network Voice or Data?
Beyond cellular telephony, the second trend affecting future telecommunications infrastructures is the dramatic rise of the Internet and the World Wide Web. The precise number of Internet users is not known, but it is generally believed to be somewhat fewer than the number of cellular subscribers (approximately 200 million). For example, Reuters reports that that there are 82 million PCs connected to the Internet today, and they expect this number to grow to 286 million by the Year 2001. CommerceNet’s Internet Demographic Survey reports 55 million Internet users in the United States and Canada alone. It is reasonable to double this number to represent a worldwide Internet population of about 100 million users. Thus, the number of Internet users is perhaps 10% of the 1 billion strong worldwide telephone population.
The accelerating use of the Internet is changing the nature of interpersonal interaction as well as people’s lifestyles. An Internet FIND/SVP Survey performed during November-December 1995 found that 25% of Internet users make fewer long distance phone calls. In the U.S., many parents obtain electronic mail accounts as soon as their first child goes to college. 32% of Internet users report watching less television.
From the viewpoint of sizing the network, Internet access changes the fundamental assumptions about the underlying traffic patterns. It has been reported that more than 50% of the telecommunications traffic in the San Francisco Bay Area is already data traffic, not voice traffic. This is perhaps not too surprising, given the high density of computer and Internet-usage in the region. The much longer connection times associated with data calls have overloaded the local telephone switching infrastructure, causing excessive call blocking during peak usage periods. The network was provisioned for short duration voice conversations. It does not represent the best design for computer sessions. For data-oriented applications like Internet access, the appropriate network design metric is data throughput, not voice quality.
This development is supported from data collected by the U.S. Federal Communications Commission, as quoted in The Economist Magazine of 13 September 1997. The duration of a call to an Internet Service Provider (ISP) is typically an order of magnitude longer than the average of all calls. (Bell Atlantic, U.S. West, Pacific Bell, and SBC are regional telephone operating companies covering the Northeast, Rocky Mountain, West, and Southwest parts of the United States respectively).