As we polish our crystal ball and prepare to predict the future, it is worth a brief recap of the recent past in the ever-developing world of IP Voice on the trading floor. Most firms have either introduced, piloted or are considering the use of IP trading circuits. CIOs and Telecom Managers have come to understand that IP Voice can help solve the problems of cost reduction and business continuity. They also now all understand the well kept secret of the industry: that one U.S. carrier provided most of the underlying service through a small pool of resellers. Now, they merged with the largest local provider of that same service. Many firms are in the process of diversifying and correcting this gaping vulnerability. To counter that parry, the same service providers who created this single point of failure network are scrambling to make the move from reseller to carrier using different carriers. These resellers who are without infrastructure are also trying to partner with VoIP PBX (Private Branch Exchange) based service providers to create an IP switched environment. They do this while the circuit switched based providers are exiting the field and customers are disconnecting that service in droves. Where is all of this going and what will the future hold? Let's explore some possibilities.

After all is said and done, the facilities based carrier network with MPLS (Multiprotocol Label Switching), QoS (Quality of Service), and a broad geographic footprint built on sound telco standards with carrier class vendor partners will prevail. That natural selection is playing out now and the market will determine the winners and losers. May the best-qualified vendors win.

The next revolution will be in the CPE (customer premises equipment). In the 1980s when we sold Centrex, we built solid designs that were cost competitive and very functional. On the day of the cutover to the users, if the station equipment did not change, it was a non-event at the desktop. A Centrex line change is too intangible a change for the average user who expected a sleek new telephone. A simple change of keypad feature strokes was all that they actually realized. This same let down will not be true of the trading desktop. Exciting innovations in the network will produce new CPE that will bring competition, drastically lower prices and advanced functionality. The naysayers, who claim that the traders will never change their 'set in stone' ways, may be indulging in wishful thinking. Perhaps they missed the 'Game Boy' generation that is poised to take over the leadership of the industry. Your grandfather's turrets aren't going to play in their arena, and recent graduates with a host of IP vendor certifications are in abundance.

In their defense, these incumbent turret manufacturers have very difficult issues to overcome in order to compete in this new world order. They face a lack of research and development dollars, as well as conflicting business plans created by mergers and acquisitions. Their biggest obstacle is that they can't simply write down their current exorbitant billing to compete, without a major overhaul of their businesses. You will undoubtedly see price incentives to stay with the old technology. Those manufacturers with TDM networks will continue to cross-subsidize between the two. Some may even introduce scaled-down versions of the turret position, but all of these short-term actions won't change the enormous footprint in your datacenter that is feeding on your expensive power, heating, and air conditioning, not to mention the prime real estate they occupy. They will also introduce yet another interface card to accept IP networks over Ethernet. If it is anything like its cousins, the card will cost in the 5-digit range, will offer security issues for you to resolve, and wont reduce your costs one iota. Some of these vendors realize this and are already focusing on alternative markets, or selling out before the inevitable occurs. Perhaps they should offer energy subsidies as part of their next sale.

So assuming that this is the correct vision, who is the clear and undisputed winner? PBX vendors are the natural top seed. The units are one or two Us high on a relay rack and can support the same density of desktops that farms of cabinets currently support. Hosted, on site, or in your recovery center, they can provide remote service and are low cost enough to warrant a second device as a backup and still come in at a fraction of the price of the current TDM solutions. Hedge Funds, Boutiques and Disaster Recovery sites are already using multi-button IP telephones for contingency operations and some even for primary trading operations. Such solutions offer the price points, features and functionality that satisfy the firm's requirements. So why not create some industry specific desktop instruments that can provide the same functions at a vastly reduced price? Initially they will be proprietary, but eventually they will be SIP (Session Initiated Protocol) standard and will work across various PBXs. Some leading edge players have cracked that code and are producing the first generation sets right now. Future developments will provide the look and feel of the older systems with the advanced features and lower costs that will make the C-Level staff sit up and take notice. The previously mentioned naysayers are already dismissing features over compliance issues and reasserting that the traders won't change. Remember that they may have a vested interest in the past. The PBX players are focusing on the future. The market will drive the behavior and operations will change. Look at the technology on your floor, in your datacenters, and in the applications on your screen if you still need convincing. How much of it was there five scant years ago?

The markets have changed, the network is changing, and the guard is about to change as well. Those who foresee and prepare for this change will be viewed as forward thinking visionaries. The only item that has not changed, and honestly can't, is the turret switch currently occupying its spacious and well-appointed living quarters at your expense.

This is the third article in a series. The previous articles may be found in the Nov/Dec '04 Ticker: The Evolution of Voice Trading to IP and in the Mar/Apr '05 Ticker: The Evolution of Voice Trading to IP: Business Continuity.)

Bill Wagner is the Vice President of Technology at PAETEC Communications Financial Services in New York City and can be contacted at william.wagner@paetec.com; web: www.paetec.com.