Service providers that offer only one type of service-voice or data-are losing revenue opportunities in an increasingly competitive market. New technologies in hardware and software enable the shift to a revenue-driven business model, and for service providers facing extinct user margins, becoming a multiservice carrier is the only way to stay competitive.

Since the most significant barrier is the high cost of overlay networks, the best approach, especially for new entrants, is to deploy a single packet network with voice and data traffic. With packet-based capabilities, service providers gain direct control over the development and deployment of competitive, revenue-generating services.

Local-loop replacement represents a new revenue stream from the data service provider's existing customer base. More important, an end-to-end Internet Protocol network can enable the rapid creation of new, differentiated, value-added calling features.

This converged-network business model also enables service providers to capture market share by penetrating new customer segments. Low-cost bundled voice and data services open the door to previously hard-to-serve enterprise accounts, especially in the fast-growing small and medium-size enterprise segment. A managed-service offering, such as IP Centrex, which allows users to subscribe to multiple business communications services over a single broadband connection, is an attention-grabbing incentive to the enterprise communications manager to abandon the traditional voice paradigm.

Service providers can also generate revenue through repeat business, by creating customer loyalty via customized packages of calling features. Converged IP services can transform access-based business models into value-added service models with annuity-based revenue streams.

These alternatives to a circuit-switched facility represent a smart central office investment strategy with quick payback, higher flexibility, lower management costs and lower space demands. Lower overhead translates into affordable broadband access services, and the ability to offer multimedia services to small and medium-size businesses at a good price.

This approach also presents a valuable opportunity to think more strategically. Service providers can ask, "What are today's killer applications for the small, medium and large enterprise? And how can we meet customer demands for communication-driven business process improvement?" Once they know the answers, each service provider can choose the revenue base it intends to pursue and develop differentiated services for its markets.

Using that new approach, even old familiar business phone services, like Centrex, can be reimplemented for broadband packet networks. Transformed into next-generation offerings, these services can increase office productivity, provide a high degree of customization-and generate the levels of income service providers need for success in today's environment.

Jim Zeitlin is the Senior Vice President of Engineering and Chief Technical Officer at Vpacket Communications (Milpitas, Calif.).