Mobile Rate plans - Promotions

Promotions
Wireless carriers regularly set aside funds to offer promotional deals to their customers. Promotions are designed to drum up new business for the carrier and are only for new customers, not existing customers. (Loyalty is rarely rewarded in the telecommunications industry.) If a new customer activates a phone with the carrier, she qualifies for the promotion. Promotions may include the following offers:

Free night and weekend calling for a year;

A free phone;

A free battery;

Free merchandise or gift certificates;

Extra airtime minutes each month.

Promotions are usually advertised on the Internet, on radio, and in newspapers, but you can normally find the latest promotions by calling customer service. If you are an existing customer, you can still request the promotion. Corporate accounts rarely qualify for consumer promotions, but the corporate account executive may be able to pull some strings because the purpose is to retain the corporate account and develop more business from it. Many account executives are skilled in securing preferential treatment for their corporate customers.

Upgrading from analog to digital
In the early days of wireless phones, everyone used analog phones. In the late 1990s, customers began migrating to digital wireless service. Around 2000, the number of digital users equaled the number of analog users, with about 45 million of each type. The two main reasons for this trend are that digital service is higher quality and is more affordable. When digital service was first made available to the public, carriers offered very attractive pricing. The carriers had invested in building their digital networks and were eager to build their customer base.

The downside of switching from analog to digital is that you must buy a new digital phone, your coverage area may be different, and you may have to get a new phone number.

For some wireless users, digital service is not the best option. Carriers offering analog service are still hungry for business and still offer competitive pricing. Of course, the rate plans vary from market to market, but especially in smaller, nonurban areas, analog service rate plans are usually the best. In these smaller markets, digital wireless service only has limited coverage, so a customer’s analog phone might be more useful.

Mobile Rate plans - Individual rate plans

Individual rate plans make up about 75% of all wireless telephone rate plans. These plans are tiered according to the number of airtime minutes included in the plan. Carriers normally require a term agreement with these rate plans, but during the term, they allow the user to upgrade or downgrade their plan to the next higher or lower plan.

Downgrading Rate Plans
For example, a traveling businesswoman chose a high-level rate plan and signed a 12-month term agreement with PCS PrimeCo. After 5 months, she decided to drop down to the next lower-level plan because she was not using all of the free airtime minutes. The carrier agreed to downgrade the calling plan, but required a new 12-month term agreement to start immediately. An additional 12 months were not added to her original 12-month term. Her total time commitment ended up being 17 months, not 24 months. Table 1 shows the impact of downgrading a rate plan. The calculations are based on the sample phone bill in Figure 1.


Table 1: Downgrading a Rate Plan Can Save Money

Upgrading rate plans
In the previous example, the customer chose a rate plan that was inappropriate for her call volume. She selected too large a plan and ended up wasting money. The opposite scenario is just as common. Many wireless customers select a rate plan that is too small. They use all the free airtime minutes early in the billing cycle and then rack up airtime charges for the additional minutes. Upgrading to a higher plan will inevitably cut their cost.

One of the most common scenarios I have seen deals with office workers who go out as field representatives for their company. One such office worker never used more than his allotted 150 minutes each month. But once he became a field sales manager, his usage increased to 600 minutes each month. After his first month in the field, he upgraded to a higher rate plan. Table 2 illustrates the change.


Table 2: Upgrading Wireless Rate Plans

Select a carrier that automatically changes your rate plans
The above examples represent the majority of wireless phone users who never seem to get their phones on the most cost-effective rate plans. One month their usage is up, the next month it is down. To avoid overpaying, they must vigilantly audit their bills each month. Today, some carriers automatically adjust a customer’s rate plan to the most costeffective rate plan each month. Their billing system selects the most cost-effective rate plan before printing the bill each month.

Last-minute rate-plan changes
Some carriers allow “last-minute” rate-plan changes. Here’s an example of how this works.

A small construction company has 10 mobile phones. The billing cycle ends on the 20th of each month. The office manager calls the carrier on the 18th or 19th and finds out how many minutes of airtime each phone had used. If a particular phone has used too much or too little airtime, she has the carrier change the rate plan. When the bill cuts the next day, the 20th, the new rate plan is in force, even though the calls were already made. This is possible because the billing system and the system that tracks airtime are independent of each other.

The prorated wireless telephone bill
When a rate plan is changed in the middle of the bill cycle, the next phone bill is a confusing mess. The bill reflects two minibilling cycles that are each half a month long. The first half of the bill shows a refund of unused access. The second part of the bill shows charges for half a month’s access, and then another full month’s access at the new rate.

Some carriers still do manual data entry, and they may neglect to give you the refund for the partial month. After a brief explanation, you should be able to negotiate this credit.

Mobile Rate plans - Emergency plan

Mobile Rate plans
In order to balance their customers’ needs with their own need to be profitable, wireless carriers have designed numerous rate plans for light users, heavy users, and corporate users. Neglecting to fine-tune their rate plans may make the difference between a slim profit margin and no profit at all. For these reasons, wireless phone rate plans change many times each year.

For consumer and corporate users alike, it is difficult to keep up with the plans and ensure each phone is on the most cost-effective rate plan. A business that diligently manages its wireless billing each month will regularly pay 20% less than a similar company that rarely examines its cellular billing.

Although wireless telephone rate plans regularly change, the plans’ designs remain consistent. The following section explains the most common rate plans. Table 1 shows the four basic types: emergency plans, individual plans, small group plans, and corporate plans. These plans are billed monthly, but many of them are available as prepaid wireless plans.


Table 1: Typical Rate Plans Offered in the Chicago Market

Emergency plan
A typical emergency plan costs $15 to $20 per month for access, includes only 10 minutes of free calling, and has a high per-minute rate for additional minutes. Additional minutes may cost as much as $0.95 each. This plan is designed for people who will only use the phone in the event of an emergency. It is ideal for workers who will only use the phone for one or two calls a month, such as security guards.

Many emergency-rate-plan customers put the phone in the trunk of their cars to be used only in case of a flat tire or other emergency. They can save money by canceling the monthly service, but keeping the phone. Any mobile phone will dial 911, even if the phone is not activated with a carrier.

If a caller uses the phone more than 10 to 30 minutes each month, he should change to an individual rate plan to avoid the high per-minute rates of the emergency plans. It is not unusual for an employee to grab a back-up cellular phone without changing the rate plan. In auditing the bills of large companies, I have seen employees grab a back-up phone and use it without changing the rate plan. All the minutes are then billed at very high rates. The company could have saved more than $100 per month by upgrading to a better rate plan.

Mobile phone rate plans : Free wireless phones

Mobile phone rate plans
Wireless telephone service expenses include monthly recurring charges and the initial start-up costs. Start-up costs may include the cost of a new phone, the first month’s access, and a one-time enrollment fee. Access is charged one month in advance, so this is always paid at the time of activation. Enrollment fees are designed to cover the carrier’s initial administrative expenses. But in today’s competitive marketplace, customers should insist that carriers waive this expense.

In the best-case scenario, the customer gets a free phone, pays no enrollment fee, and only pays for the first month’s access. Prepaid cellular, on the other hand, normally has a high initial cost and the user must purchase a phone. Prepaid cellular does not include a monthly bill, however.

Free wireless phones
Carriers will normally give the phone for free if the user signs a term agreement. New customers should always ask the carrier for a free phone. The carrier will require at least a 12-month term agreement, which is negligible because most people will use the phone for at least 12 months. This is a win-win situation because the user gets a free phone, and the carrier can count on 12 months of revenue from the customer.

Besides term agreements, new users can cut their start-up costs by purchasing a phone apart from their carrier. Phones can be purchased over the Internet or at electronics shops, and, in many cases, a second-hand phone may be sufficient. In a corporate setting, employees regularly relocate or resign but company-owned cell phones are rarely recycled. A company can save $250 by recycling a phone instead of purchasing a new one for each new employee. Prior to purchasing the phone, be sure your carrier will program your phone and allow it to be used on its network.

Monthly billing for wireless telephone service
The typical cellular phone bill contains three charges:

Access: A monthly recurring fee the user pays to use, or “access,” the carrier’s wireless network. Access is charged one month in advance.

Airtime: Charges for the calls made over the past month. Airtime is billed after the calls are made.

Taxes and Fees: Fees charged in advance for extra features, such as caller ID and voice mail.

A user who receives the bill on May 1 might be billed $35 for access in the month of May and $50 airtime for calls made in April. To use the carrier’s network, you must pay for access in advance. Once you have made the calls, you are billed for the usage.

When users cancel wireless service, they are issued a small refund. Since they have paid for future access, but will not use it, the carrier refunds the money.

Sample mobile telephone bill

Sample mobile telephone bill
Figure 1 is an example of a typical wireless telephone bill. The fictional user has a Telephone Company D phone in the St. Louis market. Mobile phone bills have three sections: cover page with payment coupon, account summary, and the call detail. In this particular bill, the customer pays $50 per month for access and gets 500 minutes of free airtime. Additional airtime costs $0.10 per minute. The plan also includes “first incoming minutes free.” This customer is paying $3.25 for “handset replacement insurance.” If the customer damages the phone, Telephone Company D will replace it. The replacement plan may carry a deductible.


Figure 1(a): Sample mobile telephone bill: page 1.


Figure 1(b): Sample mobile telephone bill: page 2, account summary.


Figure 1(c): Sample mobile telephone bill: page 3, phone charges.

This customer has a couple of options to reduce this monthly bill. First, the customer is paying for the 500-minute plan but only used 291 minutes. If Telephone Company D has a 250-minute plan for $25, the bill could be reduced by about $20. Another way to reduce the bill is to cancel the $3.25 monthly fee for “insurance.” Mobile phones rarely need repairs; so as long as the customer is not tough on the phone, this plan is a waste of money. The customer also had 60 minutes of calling to an 800 number. This airtime could be eliminated altogether if the user would use a landline phone, such as a payphone. If the calls were made while driving, this option is not feasible.

Cellular service : Number portability, 3G, WAP

Number portability
In the 1990s, the FCC mandated that the wireless phone industry must implement a number portability system. Historically speaking, cellular phone numbers have not been portable. If a user changes from Bell Atlantic Mobile to Sprint PCS, she has to get a new phone number. The old number is recycled by Bell Atlantic Mobile and Sprint PCS assigns the user a new number.

This process is so frustrating that most customers simply stay with the current carrier, rather than experience the “pain of change” to a new carrier. Getting a new phone number may require a business user to print new business cards and new letterhead, and the user must inform his clients of the new number. Few people are willing to go through this headache just to save a few dollars each month.

Third-generation technology
Telecom suppliers worry about the capacity of their networks. If the network is maxed out, they cannot enroll new customers, and existing customers switch to different carriers. New technologies are implemented to increase network capacity and allow carriers to offer more sophisticated services to their customers. The next significant wireless telecommunications technology is referred to as “the third generation.”

Three 3G technologies have been developed, but none has yet been deployed. The three technologies are WCDMA, CDMA2000, and TD-SCDMA, developed by Americans, Europeans, and Chinese, respectively. Governments, telecom manufacturers, carriers, and other power brokers are still deciding which technology to deploy. 3G is often in the news because of the high-level negotiations deciding the future of the wireless industry, but until it is deployed, 3G is not very relevant for the end user.

WAP
WAP allows mobile telephone users to send and receive electronic data. WAP has been heavily marketed by carriers, but the service has had a rocky start. The service had many technical glitches, and the technology’s early adopters lost their enthusiasm. WAP’s biggest drawback is that it is not user friendly. Data input is inconvenient, and most customers cannot tolerate the tiny display screen.

Digital cellular service : PCS & Low Earth-Orbiting Satellites

Digital cellular service
In the late 1990s, carriers began migrating their customers from analog service to digital cellular service. Digital cellular allows carriers to increase privacy, reduce cloning fraud, and increase capacity by 3 to 10 times. Digital cellular signals are multiplexed and scrambled, making it more difficult for eavesdroppers to listen in to a conversation. Digital service also includes more features such as caller ID, call waiting, repeat dialing, and call return. A carrier that upgrades from analog to digital technology can offer better service to more customers.

PCS
In the early 1990s, the FCC auctioned off six more bands of the airwaves to be used for personal communications service (PCS). The auction was controversial and the stakes were high. Many people complained that the government had no right to collect money by “selling” the airwaves. The bids at the auction were much higher than predicted and the government was surprised at how much money it raised. The auction of the A, B, and C blocks netted the U.S. Treasury $17.9 billion. In the Washington/Baltimore market alone, AT&T Wireless paid $211,771,000 just for the right to broadcast phone calls. Some of the entrepreneurs who got the bids eventually defaulted on the payments. Consequently, PCS service was not rolled out as quickly as planned.

PCS service uses digital technology and is rich with features. PCS also uses less complex pricing and billing schemes than traditional cellular service. Because of these advantages, wireless carriers and customers alike are making the shift from analog wireless services to PCS.

Low Earth-Orbiting Satellites
Low earth-orbiting satellites (LEOS) provide wireless telephone service for users across the globe. The handheld phone transmits and receives signals to and from geosynchronous satellites. Once enough satellites are launched into space, a caller should be able to make and receive calls anywhere across the globe. This revolutionary technology will allow people everywhere to make voice calls, transmit data, or connect to the Internet from anywhere. The concept is especially attractive in isolated places such as the Andes Mountains, where the telecommunications infrastructure is significantly underdeveloped.

LEOS technology has many glitches, however. During the recent war in Kosovo, telephone lines were severely damaged. News correspondents brought in satellite phones to call the outside world. In spite of the hefty $2,000 to $3,000 price tag, these phones rarely worked properly, especially when used indoors.

Probably the biggest problem facing rapid LEOS deployment is the high cost of building the network. In 1998, the Iridium Company, daughter company of Motorola, first offered global wireless telephone service. Iridium spent more than $5 billion building its 66-satellite constellation that would provide coverage throughout the world. But in its first 2 years, the company enrolled only 10,000 customers. A small customer base means small revenue, and in 2000, Iriduim filed for bankruptcy. What began as a dynamic cutting-edge high-tech company quickly died as the result of financial problems. Even its major supporter, Motorola, refused to bail the company out. Iridium is now back in business, but it mainly targets commercial users in remote parts of the world, such as off-shore locations.

Mobile radio and mobile telephones

Mobile radio and mobile telephones
Two-way mobile radio communication was first used around the time of World War I. Mobile radio is still used today across the globe by taxicab companies, police departments, fire departments, trucking companies, and marine operations. Mobile radio users only communicate with each other; they cannot connect to the public-switched telephone network. Users take turns speaking because the system only allows for one-way communication. But the price of wireless telephone service is dropping and, in most cases, it is now cost effective for a company to replace its mobile radios with cellular phones.

Mobile telephones were developed because people wanted to call from their cars to normal landline phones. The first mobile phones were very expensive, and each city could only handle a small number of simultaneous phone calls. One of the first mobile phone systems, in St. Louis, could not even accommodate 100 simultaneous calls. Mobile telephones were given their own frequency band by the FCC, and this small portion of the airwaves would only accommodate a small number of users. Cellular telephone service changed all of this.

Voice and data convergence

Voice and data convergence
One of the recent data networking trends is called convergence. Convergence means that different signals such as voice, video, and data are transmitted over a single medium. On the consumer level, Web TV is an example of convergence; cable TV and the Internet are provided across a single cable. At the business level, many companies are migrating their voice long-distance traffic across their data networks.

Businesses have traditionally carried their voice and data traffic over separate networks. The phone companies assigned separate account managers to handle a business’ voice and data needs. The services had separate contracts and were billed separately. As part of the recent streamlining effort of the phone companies, voice and data services now share the same account manager, the same contract, and the same invoice. But the greater change is that voice and data now ride the same phone line.

Voice over frame relay
The main benefit of voice over frame relay (VoFR) is that long-distance calls are free. VoFR is normally only used to carry intracompany long-distance traffic or international long-distance traffic. The latency of packetswitching technology affects the call quality (i.e., conversations may be choppy).

Latency is a term that describes the transmission delay due to the speed of the media and the processing time of the network equipment, such as routers. Each stage in the network may only add milliseconds of delay, but the combined latency may be enough to distort the sound of the phone call. VoFR is, therefore, rarely used for “front office” applications. However, businesses with lots of intracompany long-distance calling can significantly reduce their long-distance billing. By moving their long distance across their frame relay network, they will eliminate the long-distance cost altogether. If they do not mind slightly compromising call quality, thousands of dollars can be saved.

Voice over Internet
Voice over Internet (VoIP) is the same concept as VoFR, except the voice calls are converted to data packets and sent along a network that uses Internet Protocol (IP). The Internet, or a private WAN using IP, are both examples of IP networks. The same latency problems previously described with VoFR apply with VoIP.

On a much smaller scale, cost savings can be achieved by using one of the Internet’s free long-distance Web sites such as http:// www.net2phone.com or http://www.dialpad.com. These services allow a person to make free long-distance calls over the Internet. Most of them limit the destination of the call to the United States, but a few of these services have roots in the Far East and may include Korea or Taiwan as approved calling destinations. Internet phone calls often experience a lot of noise, similar to a shortwave radio conversation, or international calls 5 or 10 years ago. The call quality is poor, but you cannot beat the price.

ATM
ATM is a high-speed packet-switching telecommunications service. ATM is typically used only by very large businesses such as Fortune 100 companies, major universities, and telephone companies. Telephone companies use ATM technology in the “backbone” of their networks. A voice phone call from New York to Tokyo will probably be converted to ATM packets as the data travels along an undersea phone line lying at the bottom of the ocean.

ATM is a high-cost service, designed for high-volume users, and will therefore not be used by most businesses. According to the Vertical Systems Group, only slightly more than 35,000 enterprises worldwide are currently using ATM services, while frame relay has more than 1.2 million subscribers.

Why is ATM so fast?
ATM carries voice, video, and data at speeds up to 622 Mbps. Such a high speed is due to three factors: asynchronous switching, cell length, and the use of hardware in switching. “Asynchronous” means the service transfers different data at different times and can process multiple jobs simultaneously.

ATM’s fixed-length packets, called cells, make ATM more efficient than other technologies, such as frame relay. The size of each frame relay packet must be processed, while ATM networks waste no time figuring out how large or small a packet is. ATM networks expect each packet to be 53-bytes long, and they rapidly move these packets up and down the network.

Another advantage of ATM over frame relay is that the switching is controlled in the network hardware, instead of the software. These three advantages make ATM a very fast data networking technology.

Although ATM may be a fast technology, it is also a costly one. Installing an ATM network is very expensive, and the monthly charges not only include fixed charges for the network, but also usage on an ATM network. ATM is only a cost-effective technology for extremely large businesses.

Frame relay : Replacing dedicated lines with frame relay

Frame relay
The original WANs consisted of multiple remote locations connected together. Each site may have a single computer or an entire LAN. The LANs connect to each other with dedicated lines provided by a telephone company. But the dedicated lines are expensive for customers, and they eat up too much of the carrier’s network capacity. Frame relay service is a solution to both of these problems.

Frame relay service uses variable-sized packets of data called frames. Unlike X.25, an earlier packet-switching service, frame relay service is a fast-packet technology. It discards erroneous packets, instead of correcting them. Error correction is performed at the end-points only, and not along the way, which results in a speedier transmission. If the receiving computer detects errors, it asks the sending computer to retransmit the data. Because errors are few with digital communication, this feature makes frame relay very quick. Unlike dedicated lines, frame relay is not a full-time connection. This is not a problem, because most businesses transmit data intermittently.

The PVC
Frame relay service providers set up a PVC between two customer sites that acts like a dedicated line. The customer chooses each PVC’s bandwidth. For example, a Louisville furniture manufacturer uses a 56-Kbps PVC to a remote facility in rural Kentucky but has a 256-Kbps PVC to the sales office in Atlanta, Georgia. More bandwidth is needed to the sales office, because more data is shared with this site. If the company used dedicated lines instead of frame relay, the cost would be almost double. Frame relay gives the best of both worlds: lots of bandwidth and low cost.

The CIR
The frame relay customer chooses the bandwidth of each PVC. As with other data services, the higher the bandwidth, the higher the cost. The 256-Kbps PVC costs more than the 56-Kbps PVC. The bandwidth is called the committed information rate (CIR), which is simply the rate of information that the phone company commits to always have available for you. The frame relay CIR is, therefore, the minimum speed limit. On the other hand, a 56-Kbps dedicated private line can transmit data no faster than 56 Kbps. The bandwidth of a dedicated line is, therefore, the maximum speed.

Frame relay is a “bursty” service. The furniture company could potentially transmit data at T-1 speeds across a 56-Kbps PVC if the phone company network has some spare bandwidth. Qwest boasts that its network has so much capacity that customers can save money by specifying “zero CIR” and still transmit data at T-1 speeds.

If frame relay service is used all within one LATA, then the service will be provided by the LEC in the area. For example, a Seattle hospital with numerous clinics in the same metropolitan area would purchase frame relay services from either its local carrier U S West or a competitive LEC that operates in the area. If the data network crosses LATA boundaries, a long-distance carrier, such as AT&T, will provide the service. However, the customer will still pay a local loop charge. The local loop is a dedicated private line from its facility to the long-distance carriers nearest frame relay-equipped central office. The local loop is provided by the LEC but will be billed on the frame relay carrier’s bill.

To install frame relay service, the customer must buy routers to be used at each location. Each carrier charges an installation fee, and the network technicians who program the router may charge additional fees. A business’ monthly frame relay pricing is based on PVCs, CIR, local loop charges, and any contractual discounts. Frame relay is a measured service—carriers show the usage on each invoice but most do not charge for it.

Replacing dedicated lines with frame relay
Consider the following example: A chain of tire stores in Ohio has four locations. Each location connects to the other three with dedicated T-1 lines. This “fully meshed” network requires a total of six T-1s. The charge for each T-1 includes the local loop at the starting point, the interexchange carrier mileage, and the local loop on the terminating end of the circuit. The network is illustrated in Figure 2.


Figure 2: Meshed network.

The company decided to replace its network of T-1 lines with frame relay service. Using frame relay, each location only requires one local loop connection to the frame relay provider’s central office. The data is then transmitted across the carrier’s network, which is usually called a cloud. To convert from dedicated lines to frame relay, the company had to purchase routing equipment and pay installation fees. The monthly charges are based on the local loop charges, the PVCs, and the CIR chosen by the customer. Figure 3 shows the change from dedicated lines to frame relay. The customer’s monthly cost dropped from $6,000 to $3,000.


Figure 3: Frame relay network.

Packet switching : What is a Packet?

Packet switching
Dedicated private lines tie up an entire phone line for the entire month. Circuit switching also ties up an entire phone line, but only for the duration of the call. Packet switching is much more efficient. Packet switching only ties up part of the phone line for the duration of the call. Like circuit switching, if the computers are not sending or receiving data, they stay off the phone lines, keeping them free for other users. But with packet switching technology, even the quiet times within one call will be filled with packets of data from someone else’s call.

The data is broken into packets that are sent from point A to point B. The packets may travel across different paths within the telephone company’s network. At the terminating point, all the packets are reassembled in the correct order.

What is a packet?
A packet is group of bytes of information that are processed independently across packet-switching networks (see Figure 1). Each packet has three parts: header, data, and footer. The header and footer are like a train with an engine in the front and a caboose in the back. They contain important information about the packet, such as the sender’s address, the destination address, the size of the packet, and the type of data contained in the packet, such as voice, data, or video. Voice and video packets are given priority in packet-switching networks, just like passenger trains are given priority on a railroad. Voice and video require a steady stream for the transmission to be smooth.


Figure 1: Packets, frames, and cells.

One reason packet switching is fast is because it does not correct transmission errors within the network. Instead, the data is sent again. The receiving computer tells the sending computer “I didn’t get all the packet … please resend the missing ones.” This is very effective for data communication where slight delays can be tolerated, but most businesses still refuse to move their voice traffic across a packet-switching network, because of the slight delay. Few companies want to sound like the 1980s computerman Max Headroom when they talk to their customers.

Prior to being transmitted across a computer network, a given computer file, such as a simple word processing document will be broken into packets of data. For example, imagine that a man named Sam in Seattle decides to write a love letter to Louise in Long Island. Sam plans to transmit the letter to Louise across a packet-switched network.

Using Microsoft Word, Sam writes a brief letter to Louise expressing his deep love for her. Sam is not a man of many words; his letter contains only 100 words. The size of the computer file containing the letter is only 20 Kb. Sam’s company uses a packet-switching service called ATM. The ATM service breaks Sam’s letter into 377 individual packets and transmits each one to the Long Island office. The whole process takes less than 1 second. In Long Island, the packets are reassembled in order, and the computer file is now accessible. Tears run down Louise face as she reads Sam’s love letter.

Circuit switching

Circuit switching

Overview
The original telephone service consisted of two phones in two separate locations connected by a single line. To call multiple locations required multiple phone lines. Cities across America began to be covered with a network of unsightly telephone wires. After the switchboard was invented, a person could call any other phone using a single telephone line. Half a century later, the same situation occurred, except this time it was with data calls instead of voice calls.

With dedicated private lines, two remote computers connect over a distance using a fixed circuit. That circuit cannot be shared by anyone else. But the phone companies do not like their lines being tied up, so they invented circuit switching.

With circuit switching, the caller (normally a computer) dials the other caller and the two have exclusive use of the phone line until they decide to end the communication. Once the communication is finished, the connection ends and the line is available for another caller. Circuit switching works just like a regular voice phone call between two people; they call, they chat, they hang up.

At the beginning of each circuit switched call, the network determines the route of the call. That path, or circuit, is open for the duration of the call. On the next call, the network may choose an alternate path (see Figure 1). With packet switching, the network establishes a permanent route for the call. On each call, the data travels across the same path in the network. In frame-relay networks, this is called a PVC.


Figure 1: Circuit switching.