Centrex Renaissance

by John D. Bray

Serious new investment is being made in central office-based services. Regulators appear to be ready to let the fight begin in earnest between Centrex and the PBX (Private Branch Exchange).

Local exchange telephone companies have discovered that, in Centrex, they have the only differentiated product in the crowded customer-switching marketplace. Hardware manufacturers are offering new sets and switches in voice/data and data-only formats. Software developers are recognixing the opportunity to support the large, established user base. Customers are beginning to understand that Centrex is an extremely flexible service concept. Like any modern communications system, Centex is hardware-dependent. Unlike the options available to most users, Centrex is not hardware bound.

In 1981, most telephone companies in the U.S. and Canada decided that they could make more money selling customer premises-based switching than they could selling central office-based switching. Following the time-tested "grass is always greener" school of marketing, the telephone companies' low-key, service-oriented sales forces convinced themselves that the only reason they were not selling was that their product did not look exactly like everyone else's. The regulators seemed to feel that if they just left their wards to their own devices and AT&T direction, the regulatory difficulties of Centrex services would just disappear.

U.S. District Court Judge Harold Greene's divestiture order in 1982, though not necessarily a complete surprise to AT&T, caught the local phone companies with limited planning resources and few integrated stratigies ready for implementation.

Though there was shock and then lethargy in some quarters, most telephone companies took action quickly. The establishment of independent dealers was a giant step in many states. The telephone comapany recognized itself as a wholesaler of products, rather than insisting on total customer control. Initially, this concept was thought to apply to the new, small-user market.

Executone, Inc. saw the license as much more broad than that. This dealer strategy broadened the terminal equipment variety available to Centrex customers. There was no need to wait for the telephone companies to test terminal equipment and negotiate distribution agreements. Everything in the market was already compatible with the national telephone network, and Centrex, as a soft-ware defined feature group, is a component of that network.

While more sources were becoming available to users, manufacturers like Northern Telcom, Inc. and Gandalf Data, Inc. were seeking new ways to enter the marketplace as suppliers to the telephone companies. Northern Telcom's response to the need for a digital central office with CenPHex capability suggests it isn't only the telephone companies that have done a quick about- face.

As no one knew that Centrex would come through divestiture stronger than ever, Northern Telcom's DMS-100 central office could only have been developed to be the first giant PBX aimed at displacing major Centrex installations. Instead, major supply contracts across the U.S. and Canada for Northern Telcom caused AT&T, the historically dominant U.S. supplier, to rethink its central office development strategy. A crash program was initiated to develope a full array of Centrex features in its digital technology central office, the 5 ESS. These are scheduled for customer site testing in January 1986.

While Northern Telcom was teaching new lessons to sum old suppliers in 1983 and 1984, in 1985 there is a crowd of new options--that is, new suppliers entering the market and old suppliers offering new options--for Centrex. GTE Corp.'s manufacturing arm, Automatic Electric, is trying to get a foothold in the central office market. Where AT&T and Northern Telcom are touting the ability of their offices to serve remotes, ITT is getting a foothold in the market by offering so-called centrex remotes that bring digital functionality to the customer while being hosted by extant technology, the 1A ESS.

Like many customers, the telephone companies are learning that combing voice and data functions in the same switch is not always a cost-effective answer. Using ordinary bell wire for local transmission does appear to be an effective answer. Sophisticated customers, of course, have already beaten the utilities to that conclusion. They have been using contention data switches, like Gandalf, in conjunction with Centrex.

Using the in-house cabling provided by the telephone company to carry both voice and nonvoice traffic simultaniously, these users strip off the data traffic at the building terminal block, sending it through the cost-effective contention switch and letting the time- and quality-sensitve voice traffic pass on to the central office.

More elaborate solutions for the digital data communications user are seen in announcements from companies like Wisconsin Bell and Southern New England Telephone Co., where Siemens Communications Systems, Inc. equipment is being considered as the backbone for a separate, switched data network.

Ameritech, working with AT&T, has selected Illinois Bell as the site for its integrated services digital network trial. Centrex product managers around the country smile at talk of ISDN. To their knowledge, none of today's PBX products are compatible with the ISDN concept. Solutions like the Gandalf and Siemens options mentioned above extend the functional life of today's network workhorse, the 1A ESS.

Electronic key telephone service, with its associated reductions in cable requirement and rearrangement flexibility, works with Centrex as well as it does with PBX or any basic telephone service. If the Centrex user has what is generally known as Centrex II or later editions of Centrex service, these key systems tend to duplicate many of the features already incorporated in the basic Centrex line rates. AT&T and Northern Telcom have produced additional product lines that work only with Centrex, as proprietary sets do with PBXs.

In the case of AT&T, a subprocessor must be installed in the central office. Northern Telcom has takien another step. With its Unity series, rather than duplicate the array of features inheret in the central office itself, Northern Telcom has produced a series of high-function sets that combine flexibility with economy.

These feature sets actually use the in-place, two-pair station wire. They can be monitored by a receptionist using a small console that displays either 15 or 30 station-busy lamps. The console positions use either 25- or 50-pair cable. Several companies, including the Redmond, Wash.-based Tone Commander Systems, Inc., have produced Centrex consoles. Many of these are aimed at providing low-cost console operation for the small Centrex customer where little support was available before.

The telephone companies are also reaching out to make Centrex compatible with adjunct systems, like voice messaging. In 1982, the 1A ESS talked only to itself when doing call processing. Now, when it finds a called station busy or one that does not answer, it will retain the number of the first station called. When it forces the call to a predignated point, like a customer-owned voice message center, it first passes on the original called telephone number. This enables the message center to bring up a screen filled with data on the party that is normally located at the originally called number. When the message center takes the forwarded call, the call can be answered professionally and personally.

Direct customer control of the telephone number and line feature arrangements has become commonplace in companies with an aggressive Centrex policy.

The moves and changes area has become one of the most contested in Centrex software development. Products have been developed by AT&T, Bell Communications Research, Inc. and American Telecorp, Inc., as well as local products developed by Illinois Bell, Nynex Corp. and Northwestern Bell. Each of these products is aimed primarily at speeding up the rearrangement process while cutting costs for both the customer and the telephone company.

Telco Research Corp. of Nashville, Commercial Software, Inc. of New York and several others have entered the lists with mainframe-,mini-,and microcomputer-based systems, each aimed at providing a cost-effective solution to an old, but now more critical customer management problem. System size and the desired speed of reports will usually dictate the best answer for each user.

An area of rapidly expanding interest in Centrex is the multitenant market. Several telephone companies have seen enough potential to put new offering together that will take new names and have new rate structures. Basic Centrex advantages, like its ability to handle expansion and contraction easily, while leaving serious maintenance problems in the hands of the telephone companies, seem to be important factors. Customer control of moves and changes also plays a major role.

Technology no longer appears to be a limiter to central office-based services. Centrex will give way to a host of new labels denoting more specialized services.

No longer dependent on a single source for innovation, development and distribution, the Centrex customer and the telephone company alike can look forward to an increasing rate of innovation.

All of the manufacturers with an interest in the market of not yet established a place. Major firms, like Ericsson Information Systems, do not plan to be left out. ITT's strategy to start with Centrex remotes and build back into the central office has potential. The excitement surrounding the resurgence of Centrex in the U.S. and Canada has triggered serious inquiries from Europe.

Several other factors will determine whether development accelerates as fast as it can, including regulators, customers, telephone company management, embedded processes and alternative technologies. At the end of Round 1, Centrex has surprised many observers and reassured others. Unless sumone fixes the fight, it is going all the way.

* Note: Bray is vice-president, marketing, for American Telecorp, Inc., Redwood City Calif.