Poor ISDN! Originally planned by the PTTs as total replacement for the entire analog telephone network before the dawn of deregulation, ISDN was always a service in search of an application. And then, just as it seemed that ISDN had actually found such an application in the form of Internet access, xDSL (in all its various flavors) now offers higher bandwidths than ISDN over the same copper infrastructure and without ISDN's tendency to clog up central office switches. To add to ISDNās troubles, ISDN's bandwidth advantage over analog modems is now not that great.

Is this the end of the line for ISDN? Clearly, the short term answer is "No." At the end of 1998, CIR estimates that there were no more than 60,000 xDSL lines in place in the U.S., (This estimate excludes HDSL, which is used mostly for the provisioning of T1 lines) while there were between one and two million ISDN BRI lines installed. xDSL is available only in selected areas of the country. ISDN BRI is widely available ÷ it is ubiquitous in the major urban areas and has a 70 percent penetration across the entire country. Despite its disadvantages and its critics, ISDN is still the most widely used digital technology. This is an odd thing to say about a technology supposedly on its death bed.

Such facts, however, do not guarantee that ISDN will survive. The Bell companies now look like they are fairly serious about pushing xDSL solutions. Admittedly, it is very hard to know when to take the Bells at their word when it comes to the deployment of new services, but CIR believes that more than a Bell commitment to xDSL will be needed to do in ISDN. One reason for believing this is that ISDN and xDSL remain targeted towards somewhat different applications. This CIR White Paper explains more of how the two networking technologies are likely to coexist.

The differing applications orientation of xDSL and ISDN is particularly noticeable when the voice environment is considered. xDSL began life as technology intended to provide telco customers with access to interactive video, a business that turned out to be something of a joke. Then it was repositioned from voice to data as an Internet access technology. It is only recently that the xDSL community has begun to think about voice in the light of the growing trend towards voice/data integration. By contrast, ISDN has emerged first and foremost as a voice-oriented technology, and while it too has begun to take on a data orientation, much of the today's ISDN deployment is voice oriented.

Because data (i.e., the Internet) has been the major recent driver for ISDN, it is easy to forget how important voice can be in generating ISDN revenues. For example, in the (admittedly Centrex-oriented) Bell Atlantic region, 60 percent of all ISDN lines are used for voice Centrex. One advantage that ISDN Centrex offers is that customers can appear to have a half-dozen incoming lines, while using only a single ISDN line. As a call comes in, the receptionist can put it on hold at the telco switch, freeing up the line for other calls. As many as four calls can be placed on hold in this way, while two additional calls are handled over the ISDN BRI. The capability combines the two "B" channel capability of the ISDN BRI with the central office processing of Centrex. With an office phone system, the customer would need six regular phone lines to perform what ISDN Centrex can do with one.

For the time being, xDSL does not offer anything like these capabilities. During 1999, xDSL vendors are expected to support voice services, such as conference calling and remote links to corporate phone systems, but it is clear that xDSL has a long way to go before it can offer the voice features of ISDN, which, after all, was designed very much with voice in mind. At the present time, xDSL systems are concerned with voice mainly in order to filter it out and send it to the PSTN, while dealing with data over a dedicated data network. xDSL may be able to catch up in terms of its capabilities ÷ but it will be quite some time before this occurs.

The difference between ISDN and xDSL with regard to voice illustrates a larger point. While much is made of the overlap and competition between ISDN and xDSL, these two technologies have differing capabilities and satisfy rather different needs for rather different applications. This is shown in the exhibit below , which suggests that ISDN has sufficient advantages to guarantee its growth for some time to come.

Some of the current differences between ISDN and xDSL will disappear. In particular, xDSL will become more available, more reliable and more manageable. However, ISDN intrinsically has a different set of capabilities than ADSL. In particular, ISDN will remain in demand where its switched service and voice features are required. CIR believes that the number of xDSL lines installed in the U.S. will not exceed the number of ISDN lines for at least five years.

And ISDN and xDSL will increasingly complement each other too. This trend is currently most obviously seen in the International Telecommunications Unionās G.992.1 Annex B Recommendation for ADSL on ISDN lines. With a single type of DSLAM, operators and service providers therefore can offer ADSL services on ISDN lines. ADSL subscribers can now surf the Internet at broadband (or near broadband) speeds, while using their existing phones, faxes and/or ISDN services at the same time. Another technological possibility lies in the IDSL flavor of xDSL, which is based on ISDN Basic Rate 2B1Q transmission technology and can use existing ISDN CPE, thus saving consumers money. Such a merger of the broadband and the narrowband may be what the future looks like.

Still, while CIR believes that ISDN should not be dismissed too easily, it may not last forever. It is a narrowband service in an era in which customer demands are increasingly for broadband services. It is (D channel excepted) a circuit switched service in an era in which the trend is towards packet/cell/frame switching. Finally, while in this White Paper we have considered ISDN as an access service, its original claim to fame was as a ubiquitous digital multimedia WAN. In this respect, ISDN has already lost the race (and lost it big time) to the Internet. This is ironic, considering that ISDN is doing so well as a technology that provides access to the Internet.

Meanwhile, CIRās expectations are that xDSL will increasingly come to serve those customers that would have previously opted for ISDN. In this environment, ISDN equipment vendors could face a demand to lower prices on equipment and telcos may face the same pressure on their ISDN service. (Much has been made of the telcosā reluctance to sell xDSL service for fear of hurting their installed base of leased lines ÷ but much the same can be said about their unwillingness to harm their ISDN revenues.)

Particularly threatening to ISDN is DSL Lite, which promises broadband services at ISDN prices. Eliminating the POTS splitter feature from the current product makes modems easier to install as well as lowering their cost. It also saves an installation visit and reducing the setup charge associated with rollout of DSL services. Equipment manufacturers should be able to develop a DSL Lite modem that sells for approximately $200. Major PC manufacturers, such as Dell and Compaq, have already committed to including Lite modems with some of their PCs, although their initial output of such combos will be only a few thousand boxes. This is not enough to pump prime the xDSL market.

And, in addition to the problems that are specific to ISDN and xDSL, both face similar problems with regard to management issues. Consumers complain that both services can be difficult to order ÷ only some specialists at the telcos are able to take orders ÷ and there have also been problems with configuration. Because ISDN has had such problems longer, there have been more attempts to deal with them from the ISDN side of the house. ISDN equipment makers, for example, are selling equipment that automatically configures the ISDN connection by sending a message that informs the network what kind of equipment the customer is using.

ISDN is a mature technology that delivers great value for certain applications. For the foreseeable future, ISDN and xDSL will coexist. CIR expects ISDN to continue its growth to at least the year 2000, but we expect it to reach a plateau after 2000 as xDSL becomes more widely available.