Call it the battle of the networks—the telecom networks, that is. In one corner are the incumbent equipment and service providers that have together spent upward of $300 billion building extensive proprietary phone networks. In the other corner are a crowd of upstarts hoping that the new technologies and superior economics of Internet protocol (IP) networks¹ will allow them to attack the incumbents’ position. Driving it all are a boom in voice and data traffic and the inexorable transition from a circuit- to a packet-switched telecommunications infrastructure.

The battle has already been joined in the datacom space (see text panel for a definition). Attackers have made considerable inroads into datacom during the past five years. Companies like UUNET (now part of WorldCom), BBN (now part of GTE), and Ascend/Cascade are using the Internet and its open standards to pick off horizontal slices of the telecom industry’s value chain such as hosting and redundancy. Now, the competition is spilling over from datacom into the much bigger and more lucrative telephony space as they attempt to hijack the voice traffic currently routed through proprietary networks. How far they succeed will largely depend on what incumbents do to protect...