Disaggregation or disintegration

We are in the midst of a revolution in the way communication networks are built, operated and used. The architectural trend of separating services from switching and transmission that began with SS7 has accelerated with the shift to IP networks. Network owners are becoming less the operators of their networks as they outsource more of this responsibility to their equipment vendors and others. We see more examples of over-the-top services every day, delivered by entities with no connection to the operation of the network.

Other industries have gone through this process of evolving from a highly integrated structure for delivering its products to an ecosystem of suppliers and distributors. Think of the evolution of automobile industry from the days when the Ford River Rouge plant took in iron ore at one end and delivered completely assembled cars at the other, to the distributed network of suppliers involved in producing cars today.

Disaggregation is the term used to describe this transition from an integrated to a distributed structure. It sounds better than that other term meaning the opposite of integration. Disintegration suggests demise rather than a positive development in the life of an industry.

Disaggregation works if it results in more efficient production of better products. Another prerequisite for success is a model for distributing revenues that supports a sustainable ecosystem. If key players in the disaggregated model cannot sustain their business, the result will be disintegration instead.

Changes in the way telecommunication services are measured and valued will challenge the revenue part of the equation. The networks that were once supported by customers making telephone calls now carry primarily data traffic. With the growth of VoIP services, even voice calls look like more data traffic on the network.

Consider the old model for telephone service as one that could collect revenue for calls that used network capacity at a rate of 64 kilobits per second. Compare that to revenue potential of data traffic. Whatever the service plan, network operators are collecting substantially less for a given amount of network capacity from today's data customers than they did from yesterday's voice customers.

To be sure, the cost of delivering a given amount of capacity is falling as well. But identifying the cost of delivering service to specific customers has always been a tricky exercise in this business. Spreading the revenue among multiple players both complicates and raises the importance of an accurate cost allocation.

Market forces can ultimately determine the appropriate level of disaggregation in the delivery of communication services. How much disintegration the industry experiences along the way is an open question, however.

Dr. Barry Sullivan is content director at IEC