In my last post, titled Verizon No Longer Concerned With Telephones Connected With Wires, I described an interview Ivan Seidenberg, chief executive of Verizon Communications, did at a Goldman Sachs investor conference on Thursday. In the inteview Seidenberg described how, by using the decentralized structure of the Internet rather than the traditional design of phone systems, Verizon had a new opportunity to cut costs sharply.
This summer I spent some time reading Martin Sauter's excellent new book Beyond 3G, Bringing Networks, Terminals and the Web Together. In the book Martin describes the movement in the wireless/cellular world away from circuit-switched telephony technologies like 2G, 2.5G (EDGE) and even 3G to 4G based technologies like LTE and WiMAX.
What does wireless technology have to do with copper wires? Like these wireless technologies, the Public Switched Telephone Network (PSTN) uses circuit-switched telephony technology designed around voice. Even DSL (a technology basically designed to extend the life of the copper wire based network by a few years) is a circuit-switched service - Internet based traffic goes to the Internet and voice traffic goes - you guessed it - right to the PSTN.
Circuit-switch based networks have made a lot of sense for the past 100 years or so. 
They work well for voice calls because by nature they are deterministic. If a circuit is available a connection is made. If a circuit is not available the call attempt gets rejected and the customer gets some kind of message back from the busy switch. Once a connection is made (phone-to-phone) the connection is also deterministic - each call is independent and cannot influence any other calls. A great design for voice communications - whether it be with copper wires or over wireless frequencies.
The problem with these circuit-switch based networks though is they were designed for voice. Sauter argues correctly that when networks are designed for specific applications, there is no separation between the network and the applications which ultimately prevents evolution. In addition, tight integration of applications and networks also prevents the evolution of an application because changing the applications also requires changes to the network itself. The PSTN basically cannot evolve beyond where it is now - it's been tweaked-up to the point where it cannot be tweaked-up any more.
Internet (TCP/IP based) technologies work using exactly the opposite approach. A neutral transport layer carries packets and any kind of application (voice, video, data, etc) can efficiently send high and low volumes of data through the network. For applications the connection process is transparent - the device operating system establishes an Internet connection before the application is even launched. The network and any applications running that use the network are independent of each other.
Verizon Wireless, AT&T, Sprint, etc are all moving to non-circuit-switched IP based 4G technologies like WiMAX and LTE to handle voice, video and data traffic. It is inevitable that Verizon's landline division (along with other landline carriers) move in this same direction.
