The Centrex Alternative

Centrex is "basically normal single line telephone service with 'bells and whistles' added." While this is undoubtedly true for a large percentage of installations that want dial tone and perhaps a few extra services, Centrex is now offering more flexibility and features than in the past. Let us start with the basics. Why would an organization want to lease its entire infrastructure from the local telephone company rather than buy its own PBX? The most important reasons include:

  • Low start-up costs. The equipment and software is owned, stored, and kept up-to-date by the carrier. Fees are a direct multiple of the number of stations and therefore highly predictable from year to year.

  • Ease of physical movement. If employees move to new offices, the "virtual" telephone system easily moves with them. The risk of moves is diminished.

  • Cafeteria-style features. Features are available on an ad hoc basis; users pay only for those they use.

  • High uptime. Centrex service runs off central office-class PBXs (or soft-switches) and therefore is unlikely to fail. Of course, the risk from cable cuts or other external factors is unchanged.

There are some disadvantages:

  • Higher costs for volatile environments. Costs could easily escalate beyond an in-house PBX if users frequently move offices, require special services, or require special technology (e.g., computer telephony integration applications, such as screen pops).

  • Potential loss of service flexibility. If the culture of the organization is "do it now," there could potentially be a conflict with operating under the provider's set schedule for moves, additions, etc. This disadvantage is somewhat lessened if the service provider offers IP telephones that can be logically moved by software.

  • May not scale. While Centrex can certainly scale physically, it may not scale economically. As the number of users goes into the hundreds and thousands, the law of large numbers comes into play. Trunk lines can be reduced on a per-person basis, technologies and expertise can be spread over many more phones, and generally per-unit cost can be driven down.

  • Feature availability. While Centrex offerings usually have the standard telephony features such as call forwarding, speed dial, park, etc., certain special features may not be available. If the organization wants something specific that is not a product offered, bringing telephony in-house may be required.

Voice-over-IP: Premises Equipment

Voice-over-IP (VoIP) has two components: (1) premises equipment, such as IP telephones and switches, and (2) wide area network facilities and equipment, such as gateways and VoIP cards in routers. Popular publications sometimes confuse the subject by not distinguishing between the two. In some cases, an IP-based PBX is cost-effective when VoIP over a wide area network is not, and vice versa.

A premises-based IP PBX has the following advantages over the traditional, proprietary PBX:

  • There is the potential to use a single wiring network for both data and voice rather than separate, parallel wiring systems now used.

  • Ease of move, add, change (MAC) within a building. Instead of extensive administrative changes via a proprietary interface, the user's telephone is simply moved from one office to another. Because each telephone set has its own IP address, it rings at the right place as long as it is on the organization's IP network. Some organizations spend thousands of dollars a month on moves within a single building.

  • Newer applications, such as unified messaging, are easier to implement on IP-based systems.

  • Capacity can be added in much smaller increments than with traditional PBXs, which may require a new shelf, node, or even a complete forklift upgrade.

  • IP-based PBXs are generally more open and standards based, holding out the promise of less costly hardware and software enhancements.

  • Web-based applications can be easily linked with the IP telephony world. For example, it is far less expensive to install "screen pops" in an IP telephony environment than in traditional PBX systems. Sales personnel and others who need information on the caller can benefit from such features. Another example: an employee has a question about a 401K feature. He finds the information in the organization's intranet Web page. He clicks on a "click to talk" button and the appropriate party is dialed as he picks up his telephone to talk.

Despite these advantages, the IP PBX has a few limitations (at least for the moment):

  • IP PBXs have not yet scaled to thousands of users. Nonetheless, each year the number of ports available on a single unit (such as the 3COM NBX 100) continues to increase.

  • The "tank-like" reliability of traditional vendors such as Avaya, Nortel, and Siemens has not been achieved — at least in public perception. Like PCs in the early days of the mainframe world, IP PBXs have to evolve bullet-proof armor before Fortune 500 firms will trust their corporate headquarters' voice system to a new technology.

  • The huge installed base of legacy, proprietary PBX software will need to be ported or developed for the IP world. That process is occurring rapidly.

  • Organizations with unreliable wiring or whose current bandwidth is nearly occluded with data communications traffic (e.g., large file transfers) may not have the building infrastructure to support voice over data.

Exhibit 1 displays a simplified diagram of an IP-based PBX. Note that multiple links are enabled — traditional circuit switched (TDM) telephony, IP telephony via the LAN, and links to the Internet.

Exhibit 1: Example IP (LAN)-Based Telephone System (Courtesy of AltiGen Communications.)

Although it is difficult to quantify the net economic effect, some of the features provided by LAN telephony contribute to greater employee productivity. Many of these features are available in traditional TDM telephony systems, but at a higher cost. Examples include:

  • Easy screen pops. When a customer calls, a link is established between the incoming caller ID and a contact package such as ACT!, Outlook, or Goldmine. Information from the contact database is displayed immediately as the call comes in.

  • Call handling. When an employee is on the line and another call comes in, a graphical interface simplifies decision making: the call can be ignored, accepted, routed to a queue for others to handle, sent to voicemail, or added to a conference. The key difference from past systems is that these features not only exist on less expensive platforms but they are often displayed on a workstation screen. Hence, employees can actually use the features on the system because the interface is simpler.

  • Simplified voicemail/unified messaging. Users can use their workstation interface to listen, save, skip, delete, and scroll through voicemail messages. Clicking on a stored message can return calls. For those so inclined, messages can be saved as an Internet standard WAV file or more compressed proprietary file and forwarded as an e-mail attachment.

To further illustrate some of the capabilities and benefits of IP-based telephony, we can use the Siemens' optiPoint 100 advance IP telephone ( as a representative model. Siemens states that optiPoint provides for the following features and benefits:

  • Features:

    • Hands-free and speakerphone

    • Memory dial and redial

    • Display of the incoming number (CLI)

    • Call hold/consultation

    • Alternate

    • Call forwarding (CFU, CFB, CFNR)

    • Call waiting

    • Call transfer

    • Call deflection (user-controlled forward)

    • CTI interface allowing TAPI client control

    • Programmable ring tone, volume, and cadence

    • Country-specific menu guidance

  • Benefits:

    • Long-distance and toll calls can be transmitted over the IP network, reducing communication costs.

    • Integrating voice and data into one network means investment in one technology and one support organization, reducing infrastructure costs.

    • Software updates and feature enhancements can be downloaded quickly and easily, thus enabling cost-effective upgrades.

    • Intuitive, interactive menu keys and displays along with simple dialing capabilities save time.

    • Direct-dial keys are programmable, providing ease of use.

    • OptiPoint 100 advance telephone automatically stores the numbers of the last 20 unanswered calls.

    • Excellent voice quality in both hands-free and open listening modes using special digital signal processor (DSP) technology and acoustic algorithms for echo cancellation.

The Siemens IP phones can be upgraded with software (a good feature in a highly volatile technical environment). Other examples of IP telephones include InterPhone by DSG Technology and Cisco's IP phone 7960 (see Exhibit 2). Cisco's IP phone can also accept firmware updates via download.

Exhibit 2: Cisco IP Phone 7960 (Courtesy of Cisco Systems.)

When evaluating IP telephony solutions, voice quality is obviously critical. A standard measure, MOS (mean opinion score), is used by the industry to determine the subjective quality of the telephone conversation. The ranking is from 1 (very bad) to 5 (perfect, undistorted toll quality sound). One firm, NetIQ, has a well-developed monitoring system, VoIP Assessor, that allows simulation of VoIP traffic and an assessment of its quality. According to a recent Business Communications Review article, "The Assessor software measures delay, packet loss and jitter, and produces a report showing call quality by day of week, location, network cause, etc. There's been years and years of research that went into that ITU standard, so it really is a fairly scientific answer: You run this kind of traffic through this network with the parameters you told us, and here's what call quality's going to sound like." Call quality is expressed as MOS.

One clear indicator of the direction of the industry is the fact that Sprint, a major long-distance carrier, has decided to build out all its local telephone service using VoIP technology. Certainly the older technologies will co-exist for years, but the world is moving quickly to a fabric of interlacing packets that will carry information without regard to its original form.