Powering Network Transformation

Over the past few weeks, I have collaborated with Alcatel-Lucent (NYSE: ALU) on a white paper addressing the challenges facing network operators in defining and executing a TDM-to-IP network transformation strategy.

One of the elements of this research addressed the basic power savings associated with TDM vs. IP networks. We estimated power costs for a 10,000-line legacy TDM switch and a two-frame compact IP Multimedia Subsystem (IMS) configuration based on North American kWh power costs. While the IP technology chosen – a compact two-frame IMS configuration – could effectively retire several TDM switches of this size, its power consumption profile was approximately one tenth that of TDM.

As my colleague Stan Hubbard noted a few weeks ago, "Energy consumption has clearly emerged as a major topic for telecom and data center network operations, and we are going to hear a lot more debate on this issue before the dust settles." He is right on the money. (See Spotlighting Energy Efficiency.)

Since then, I have been researching VOIP vs. circuit-switched line penetration globally to quantify the savings that lower power costs deliver. Based on initial estimates, the numbers are staggering.

In order to capture these costs, I started with input from Pyramid Research , which estimates that there were 160 million circuit-switched lines in operation in Canada and the U.S. at the end of 2008. Based on the cost assumptions defined in the white paper, each 10,000-line switch utilizes a total of 925,000 kWh per year, or $7.95 per line. Applying this cost per line to the 160 million installed lines results in an estimated annual power cost of $1.27 billion per year. It is also important to note that the costs associated with SS7 networks are not included, and would drive the figure even higher.

In contrast, the IP solution utilizes only 102,000 kWh per year for an annual operating power cost of $144 million per year – resulting in an annual savings of $1.13 billion at current U.S. kWh pricing levels.

In addition to the financials, the associated reduction in carbon-dioxide emissions would have to be off the chart as well. But I will leave those calculations and discussions to the attendees of Light Reading's upcoming Green Telecom event in Dallas on October 27.

While I don't expect this article to result in a sea change in network operators' attitudes and plans to replace TDM equipment, hopefully a few CEOs will start to view those orderly rows of humming TDM switches in a new – and more expensive – light.

— Jim Hodges, Senior Analyst, Heavy Reading