That is just an early sign of what may be a devastating trend for Lucent, Nortel Networks and other big makers of telecom gear. Dozens of upstarts have formed to push the new approach. That poses a tough challenge for Nortel and its switchmaking rivals. Those sales, in turn, drive billions of dollars in sales of high-margin services, plus perennial upgrades to run and enhance these switches. Carriers can buy softswitches from the newcomers, or they can fashion their own softswitches as Level 3 did.
Big carriers are cautious about softswitches' reliability.
We're talking about switching over a piece of a large public telephone network. But softswitches are getting better, and even top-tier players like BellSouth and Verizon say they will likely start trying them out in the next year or so. For decades all phone traffic relied on venerable circuit switches, but the future lies in internet-style packet switches. A circuit switch opens up a dedicated line between two callers and keeps it open until they disconnect-an antiquated and inefficient design. Packet-switching works well for data and, increasingly, can handle voice.