Ribbon Communications: The Need for an Agile Services-Driven Network: Part 1 in the IP Wave Series

Ribbon Telecoms Channel

The major challenge facing communications service providers (CSPs) is not about handling ever-growing bandwidth demands without increasing Capex. Smart selection of network technologies that leverage advances in aggregating, routing, and transmitting bits largely have the answer for that.

The much more pressing challenge is on the services front, from competition, substitution, and the inability to maximize revenues. These concerns reduce the top line and restrict CSPs’ ability to maneuver. If CSPs can gain the agility to offer services quicker than the competition, they can both increase revenue by capturing new customers and reduce churn by offering existing customers new services as they become available.

Cloud Service Provider Competition

Large cloud or webscale service providers (we’ll use webscale service providers, or WSPs, so as not to confuse acronyms) are putting traditional CSPs between the proverbial rock and hard place. The three largest WSPs, AWS, Azure, and Google Cloud, own a massive 61% of the global cloud market. They have already transformed business computing, moving IT structures into the cloud, and have now begun focusing on service offerings that connect business locations to the cloud.

The websites of these WSPs brim with menus of connectivity services aimed at linking businesses to hosted cloud resources, to the Internet, and even with themselves over virtual WANs. Link speeds range from 1G to 100G, and they even offer dedicated wavelength services.

In many cases, WSPs offer these services directly, over a dark fiber infrastructure. Indeed, AWS boasts of over 275 points of presence globally, although they still mostly collaborate with large CSPs to deliver the services. This is where the squeeze comes in.

At the low end, the CSPs provide basic transport. They are the hewers of wood and drawers of water, getting bottom dollar while the WSPs make all the margins. At the high end, the WSPs repackage and resell CSP connectivity services, often bundling them with their cloud services. The CSPs make better margins, but lose their contact with the end customers. Worse, they will likely lose large chunks of those revenues in the future as the WSPs build out and move business customers to their own network infrastructures. The vise tightens.

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Private Networks Substitution

Numerous industry segments rely on high bandwidth and reliable communications as an essential part of their business: finance, manufacturing, power utilities, railways, healthcare, research and education, retail, municipalities, defense, and more. Communications link their distributed locations and distributed data centers, providing the smooth flow of information and control, which is the lifeblood and nervous system for their operations.

In theory, these industries could turn to CSPs to fulfill these requirements, but in practice, they build private networks to satisfy a large part, if not the bulk, of their communications needs. They do this for performance, control, and economics. Private networks are tailorable to specific business needs and first costs typically pay back within a few years compared to CSP services. The main downside is ongoing network management, but this is often contracted to system integrators.

These private networks substitute for CSP services and as a result are a huge missed revenue opportunity for the CSPs. This gap will likely continue to grow as private networks incorporate new technologies like 5G and IoT for distributed data gathering and control. System integrators devoted to specific industry segments will work with the WSPs to create even more customized communications solutions. CSPs themselves will be left with low dollar dark fiber infrastructure revenues, and only smatterings of higher margin managed communication services to fill the gaps or provide backup to the private network implementations.

Non-optimized Consumer Services

Consumer communications services have traditionally been shaped to fit only a few buckets like standard and higher speed Internet access, and limited or unlimited mobile data access. These were effective when consumers’ more simplistic usage patterns required fewer options. Today, the demands of home working, social distancing restrictions, the attractions of real-time gaming, and currently in its birth stages, virtual life within an AR/VR metaverse, are changing consumers’ needs.

This market is waiting to be stratified with a range of services with varying guarantees on bandwidth, latency, and availability. A gamer will certainly pay more for less latency, a full time worker for higher availability, and metaverse avatar (or the real person behind it) for bandwidth to interact with ever-richer virtual worlds. There is massive upside revenue potential from consumer communications services, if only these could be tapped.

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An Agile Services-Driven Network

The solution to all these challenges lies in the way that networks are constructed and managed. Currently, networks optimize on how to handle the most traffic with a minimum set of nodes and links. Services are often the afterthought that CSP marketing divisions “impose” on the network engineers. The result is that WSPs are squeezing CSPs, vertical industry segments that rely on communications are turning less to CSPs to fulfill their needs, and no effort is made to exploit growing consumer potential.

The response must be to optimize networks to be service-driven, providing the service agility to maximize profitability, and not just minimize cost. We pick up this discussion in the next part of this IP Wave blog series.

Sourced from: Ribbon Media Center. View the original article here.