T1 - Bypassing Monthly Expenses

By Roger Koenig
January, 1994

Telecommunications transmission in North America is now almost entirely digital. Every time you make a call across the country, or across the city, your voice is being converted to digital numbers. Only in the "last mile" (the telephone office closest to your caller) is the digital speech coding converted back to an analog electrical voltage to drive a telephone. The standard means of digital transmission and connection that makes this possible is called T1 or Digital Signal 1 (DS-1). It has become the basic building block of the telephone network and the fiber optic transmission lines that link it.

T1 transmission came out of Bell Labs approximately 30 years ago. For the last dozen years, T1 transmission has been available for business telecommunications users to create private networks, linking sites with voice, data, and video communications. A T1 line appears to the user as a plastic box on the wall. You plug into it at each end with a wide modular plug. Equipment called multiplexers or channel banks convert the T1 digital line into 24 or 48 individual telephone lines or high-speed data channels.

The Universal Communications Pipe:  Technically, T1 is a method of sending digital "1" and "0" pulses on two pairs of copper wire at a high speed. The standard speed, or "bit rate," is 1.544 megabits per second, enough pulses to support 24 or 48 simultaneous telephone conversations in each direction.

You can think of T1 transmission as a digital "pipe." You put "1" and "0" bits of information in at one end, and the information comes out at the other end exactly as you put it in - whether the other end is in the next town or across the country. As a point-to-point leased line service, a T1 has no connection to the telephone company switch. There are no per-minute charges for calls over the T1, only a fixed monthly charge of leasing the "pipe." What you transmit on a T1 leased line is up to you - DID lines, remote dial-out lines, data, talk paths, or remote operator connections. The telephone company neither knows nor cares what type of information is being carried in the T1 communications pipe.

Messaging services are profitably using T1 lines that have monthly leases anywhere between $400 and $4,000 per month depending on distance between sites and the number of accounts handled. Lines are typically leased from the local telephone company for consolidations within your Local Access Transport Area (LATA), and from a long distance company (AT&T, MCI, Sprint) for consolidations between LATA's. There are also 600 independent fiber optic transmission companies in the U.S. that specialize in leasing T1 circuits within specific cities or geographical areas of the country.

Digital Is Cheaper:  Messaging services, like the rest of the telecommunications industry, are going digital. The motivation is a matter of saving money while providing a better quality of service to customers. Two pairs of copper wire using digital T1 transmission are cheaper, easier to maintain, and sound better than using 24 pairs of copper wire to do the same job with analog techniques. The monetary savings telephone companies, or "carriers," enjoy by using T1 is being passed on to customers. Rates for analog private line services, including Foreign Exchange (FX) lines, have been going up while rates for digital private line services (T1) have been going down. In some areas, you can lease a full T1 line - capable of connecting 48 DID, concentrator, or call-out lines - for the same monthly expense as four analog FX lines. Telephone answering, paging, and voice mail services are using T1 leased lines for mergers, consolidations, market expansions, and to reduce monthly FX charges.

Transparent Consolidations:  Let's talk about a typical T1 installation between messaging service locations such as Akron and Cleveland. The overall goal is to transport all of the service lines from the Akron Office to the Cleveland Office. Existing DID, call-out, and concentrator lines in Akron are connected to appropriate cards in Channel Bank 1. The channel bank converts or "multiplexes" all of the 24 analog line signals into a single high-speed digital signal - the T1. At the Cleveland end of the T1 line, Channel Bank 2 converts the T1 signal back into 24 analog lines. The lines are then connected to the Cleveland Switch exactly like local DID, call-out, and concentrator lines. All customer accounts from Akron are transported to Cleveland combining the two services into one larger service.

To the messaging service customers, the consolidation of Akron into Cleveland is transparent. Connecting (or "cutting-over") the Akron lines to the T1 Channel Bank is typically done late at night. Customer answering, voice mail, and paging accounts are immediately handled in Cleveland after the "cut." All current Akron customer account information and messages are entered in Cleveland before the cut. Due to the T1 digital technology, there is no loss in speech quality by transporting the Akron lines to Cleveland.

Most significantly for the messaging service, there are no per-minute toll costs for DID or call-outs from Akron to Cleveland. All communications traffic goes over the messaging service's private T1 network. The economics of T1 lines has paid-off for consolidating messaging businesses from 10 to 300 miles apart.

The Sum is Less than the Halves:  Every business has costs considered "fixed," such as rent, office equipment, insurance, accounting, and overhead management. Other expenses are "variable," depending on the volume of customer accounts handled, such as operations staff payrolls.

The major motivation for messaging service to consolidate or merge with T1 lines is to cut expenses both fixed and variable. For fixed expenses, operating one office is obviously cheaper than the overhead associated with two offices. One switch, voice mail system, and paging terminal costs less than two. Not everyone realizes, however, that variable expenses are lower for larger messaging services than smaller ones.

The statistics of telephone call traffic dictate that the bigger you are, the more efficiently you use operators, equipment, and trunks. This is due to the averaging effect of telephone traffic coming from large groups of callers. In a large group, each operator or voice mail port can handle more calls on average. Callers have a lower probability of waiting on hold or getting a busy tone. Airlines, credit card companies, and insurance companies learned this a long time ago. Reducing payroll and overhead costs is the reason that customer service operators for these high-volume companies are typically at one large site in the country.

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