By Richard Martin

Call-processing mechanics aside, “the technological underpinnings of circuit-based networks today remain unchanged from those deployed a century ago,” note analysts from New Paradigm Resource Group, in their report entitled “The Great Migration: The Road to All-Packet.”

The first in-depth analysis of the game-changing shift of telcos, ISPs, cable operators and others to all-IP environments, the NPRG report is provided exclusively to full-conference attendees at VON. And, in many ways, the topic of the report – the Big Shift, as it’s sometimes called, is at the centerpiece of the 2009 VON Conference & Expo.

That’s the subject of one of the conference tracks at the VON Conference & Expo, entitled Migrating to IP-Centric Environments in a Recession. The sessions within the Migration track include deep dives into tactics for marketing advanced IP services, the evolution of VoIP peering, and the future of HD voice. It’s a shift that no telecommunications provider, from the largest multination carrier to the smallest rural telco, can afford to ignore.

“Service providers having any roots in the legacy circuit-based network world will have to make the migration to the packet world or risk becoming irrelevant,” wrote the NPRG analysts.

Avoiding the risk of irrelevancy is at the heart of Verizon Communications' (VZ) emerging strategy, for instance, to add the mini-applications known as widgets to its FiOS residential broadband service. “Big telcos, incumbent MSOs and competitors alike are taking a page from Apple (AAPL) and Palm Inc.’s (PALM) widget strategies,” reported Tara Seals, executive editor of xchange. “Not because they want to, but because they have to – to fend off over-the-top threats and differentiate commodity services like voice.”

In this rapidly transforming milieu, traditional minutes-based voice service is a ticket to oblivion. “Under fire from any number of threats, be it online video and other over the top players or mobile operators,” Seals added, “traditional wireline companies see a critical need to let users personalize their services through apps, thus making them stickier, more differentiated and ultimately viable.”

Equally concerned with viability are the large cable companies, or MSOs, who are attempting to move up-market with rich IP services to attract larger enterprises, beyond their traditional small and medium-sized businesses.

“The cable industry itself has successfully penetrated the SMB segment with business services, but the mid to large enterprise market has different needs than the T1 replacement market,” Glenn Calafati, director of product development at Optimum Lightpath, told VON. “How do you move up the food chain and address their needs when you’re replacing a lot of products like SONET with all-Ethernet-based options?”

The answer, as you might expect, is to replace conventional ATM infrastructure with fully IP-based Ethernet LAN, thus readying for such advanced features as content delivery networks, bulk Internet bandwidth, deeper managed services, and mobile and wireless capabilities.

The “Great Migration” is being driven by two primary forces that, in a sense, are sides of the same coin: on the one hand, reported NPRG, “providers are looking to packet technologies to generate new (or more future-proof) revenue.” On the other side, they are “moving to next-gen networks to minimize their overall costs.”

Similar urgencies are powering the growth of hosted VoIP services, which have thrived in the recession as businesses of all sizes look to slash their telecom and IT budgets. “For the first three months of 2009, U.S. service providers experienced an average of 43 percent year-over-year growth for hosted IP telephony services,” reported Khali Henderson on PHONE+, “according to data released in May by Infonetics Research Inc.”

Still in its early phase, the Big Shift will take a matter of decades to run its course. That doesn’t mean that service providers can afford to watch from the bleachers.