The telecommunications industry has loudly debated the economics of access—how to compete with cable operators, how far to carry fiber into businesses and neighborhoods, and how to spread maintenance costs among users. Yet an equally weighty problem is receiving less analysis: how can telcos make the most of the historic shift from legacy networks to platforms based on Internet Protocol (IP)?¹

Telecom companies have been investing in these networks for several years, making this change the largest and most significant transformation of their network platforms since they switched from analog to digital systems, in the 1980s. So far, the economics of IP have been less than reassuring: many incumbents are spending billions to adopt this new technology, but to date few of them have shown how to make IP profitable in serving their enterprise customers. Even so, most telcos not only feel pressured by the threat that their competitors will undercut their profitability with competing offerings but also are tempted by the opportunity to deliver a new array of services. Consequently, they are undertaking the IP transformation in the hope they will find the payoff somewhere along the way.

Insights into the factors that allow some companies to benefit...