AT&T's Circuit-Switching Dilemma

FRAMINGHAM (07/17/2000) - Some time ago AT&T Corp. Chairman C. Michael Armstrong created a buzz by saying AT&T would no longer invest in new circuit switches.

This statement, often repeated by other AT&T officials, was a verbal sleight of hand that reveals much about the carrier's challenges.

No one wants to be left behind in the explosion of packet-switched traffic. But it would be truly amazing if AT&T - which carries up to 300 million phone calls per day - really stopped investing in circuit-switched architecture. That would be like Ford Motor Co. saying it's no longer building cars because trucks are hot.

What Armstrong really meant is that AT&T is not installing any more of its classic switching platform that anchors its long-distance network. This switch, called the 4ESS, was originated by what is now Lucent Technologies Inc. as the workhorse of the AT&T network. Some 145 of these big boxes direct circuit-switched traffic around the country, and AT&T can evidently manage its growth in calling volume via increased port density, adjunct processors and the like.

But Lucent has other circuit-switching products for carriers, and still others that provide both circuit- and packet-switching capability. While Armstrong can claim that AT&T isn't buying any more exclusively circuit-switching platforms, there's more to the story.

AT&T is now also a local carrier with a need for a local telephone switch like Lucent's 5ESS. As it happens, AT&T has chosen to install Lucent's follow-on to the 5ESS called the 7 R/E, which can take classic circuit-switched traffic but also has interfaces that support voice over IP and ATM.

Something similar is going on in AT&T's relationship with Nortel Networks, which came to fruition after AT&T spun off Lucent and opened itself up to multiple vendors. Many big carriers use Nortel's DMS 100 and DMS 250 - classic circuit switches for local and long-distance traffic. AT&T has decided to buy Nortel's follow-on DMS 500, which combines local and long-distance circuit and packet switching in a single migration-path-friendly platform.

Far from not investing in these switches, AT&T is behind the eight ball to get more of them into its network as it promotes local service to business and, increasingly, residential customers.

Frank Ianna, president of AT&T network services, says the company is installing 40 Lucent 7 R/E and Nortel DMS 500 switches this year. Ianna makes the point that many new carriers stop short of pitching directly to enterprises precisely because it might mean putting in this kind of diverse, hybrid network.

That may protect AT&T's position as the leading legacy carrier, but it's also why the investment mix at AT&T is so complex. No matter how its CEO spins the story, AT&T can't divert - and isn't diverting - all of its capital spending to a critically needed next-generation IP network with hosting, caching and content-distribution capabilities and broadband local access. If AT&T ever separates the legacy business from its data, Internet and cable ventures, this will be a large reason why.

Rohde is managing editor of The Edge section of Network World. He can be reached at drohde@nww.com.

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