IP Communications

There’s a reason Wikipedia doesn’t yet have a definition for Telco 2.0 – it’s tough to define. On the one hand it’s everything traditional telcos aren’t (packet-switched communications, voice-enabling business processes, customer-centric); on the other hand, it’s “more” of what they are (more services, a “race to the bottom” for pricing voice). As Microsoft (News - Alert) defines it: “A new model known as Telco 2.0 is emerging as the telecommunications industry embraces the principles of Web 2.0 and technologies and services from the Internet world. In the Telco 2.0 era, operators will be able to offer hundreds of services that bring together numerous applications and types of content from a variety of sources to form composite services; in this world, the combinations of potential new services are nearly limitless.”

 

Certainly, the NGN should be inextricably tied to the concept of Telco 2.0. To get to the bottom of all this, Yours Truly recently had an extensive conversation with David Parks, Director of Product Marketing, at Ciena Corp (News - Alert)., who started off by saying, “We’re very focused on the trends and developments in this space, whether it’s Telco 2.0, Web 2.0, virtualization, the mobile Eeb, or what have you. All of these things are interrelated at different levels. At the end of the day, they have a pretty significant impact on carrier networks and obviously we’re very interested in helping carriers build those networks with our equipment. So we’re following these developments very closely in our efforts to translate what they mean to the service provider and the network infrastructure over which those services ride. We have something we call, ‘enabling the Service-Driven Network’ with our solutions, which is our answer to addressing many of these new business models, challenges and opportunities for new services. It’s more than a marketing tag (News - Alert)-line – there’s a lot of R&D that goes into it.”

 

“As for Telco 2.0 and Web 2.0 market trends,” says Parks, “traffic continues to grow at a pretty steady pace. In 2007 there was roughly a 75/25 percent split in terms of enterprise versus consumer bandwidth consumption where the enterprise had the 75 percent share. That model is changing over time so that by 2011 the consumer traffic will become a really big piece of the bandwidth pie, perhaps 35 percent. The total amount of traffic is growing as well. Depending on the research you believe, traffic is growing at roughly 25 to 30 percent CAGR [Compound Annual Growth Rate] from 2007 to 2011. The challenge is that it’s becoming more and more consumer-driven. At the end of the day, the consumer – by that I mean ‘residential user’ – is paying a lower price-per-bit than the enterprise customer. For service providers, it’s getting harder and harder to monetize that traffic growth. And that’s evident in the fact that you’ve got these strong traffic growth number but revenue growth is slow in a lot of areas, whether it’s broadband wireless or wireline, so it’s more a matter of ‘Why are these things not directly proportional to each other?’ You’d figure that when traffic goes up, your revenue should rise too. But the challenge is that the providers are having a hard time monetizing that traffic. That’s because there’s been a shift in perceived value from the end user, whether you’re an enterprise customer or a residential customer.”

 

“The perceived value – your willingness to pay somebody for something new – has shifted from the service provider to the application provider,” says Parks. “As a consumer, I get a flat-rate broadband access service. I pay the same the amount per month regardless of how much bandwidth I use and how I’m using it. I’m paying people like Hulu (News - Alert), Skype, Juiced and Sling Media for all of these services that are riding over that broadband connection. The same kind of trend applies to the enterprise. Let’s say you’re buying a network service from your service provider, but now I’m writing all of these new applications over that service that I’m paying money for, such as salesforce.com, Amazon Web services, Google apps – all of these new things that are riding on the network. Well, the service provider isn’t really monetizing any of that, other than the fact that they’re just selling more bandwidth. All of the applications that people are now using and buying over these network services are themselves becoming services.”

 

“Look at virtualization,” says Parks. “Virtualization has a significant impact on all of this, but it has many benefits. It improves time-to-market and adds a lot of flexibility so you can scale things very quickly and cost-effectively. So the onset of virtualization has spawned things such as cloud computing and Software-as-a-Service [SaaS]. Those are becoming very widespread in terms of their adoption, both in the residential and business customer marketplace. That in turn is becoming extended even further into things such as the mobile web. So now you’re expanding the reach of all of these virtualized services to the mobile handset. That’s been enabled by the fact that the user experience on the mobile handset is now very good, as evidenced by such things as the iPhone (News - Alert) and the T-Mobile G1. They’ve made the user experience enjoyable, so now you can easily use your handset to access these various virtualized services. Finally, it’s making its way into the consumer video and gaming markets. At the end of the day, all of these things are really neat and innovative, but a service provider’s network really has to be able to adapt and monetize everything even though the environment is changing. There are opportunities, but challenges too.”

 

 

Parks elaborates, “We see three or four things that need to happen in today’s network. First, there should be more service awareness capabilities, especially in the access and the metro portions of the network, because that’s where you’re creating these different services, and that’s where most of this bandwidth growth is occurring. With such increased service awareness, that allows you to do things such as very quickly create, activate and assure those services. When that works it enables you to react to the next big application that appears and capitalize on it.”

 

“Second, you need the ability we call ‘dynamic capacity allocation’,” says Parks. “You’ve got to be able to respond to these unpredictable demand curves with very low touch capabilities, wherein things such as software automation are key. You need a unified control plane across products, a unified management system so that, as you need to redirect bandwidth and resources, you can do that in a software-enabled, automated fashion, as opposed to dispatching technicians and physically having to touch hardware and roll trucks, which isn’t feasible from either a time-to-market or economic perspective.”

 

“Third and finally, you need an integrated, service-aware, data-control and management plane capability, from the customer location at the edge all the way into the service provider’s core,” says Parks. “That ties together everything we’ve discussed and enables things such as greater service awareness and dynamic capacity allocation. So our answer to that is what we call the ‘Service-Driven Network’ and we’ve got a number of different ‘proof points’ of how to enable such a Service-Driven Network.”

 

“Getting back to Telco 2.0,” says Parks. “We’re seeing a lot of new service types and application mixes that are causing service providers to re-think some of their business models. Telco 2.0 is a major item in that regard. Rather than building a communication network, which is what providers have done historically, they’ve decided to build a service distribution network. We define Telco 2.0 telecom software and services that ‘sit over the top’ of other services, such as the Internet, the PSTN and even mobile networks. The application interfaces with those networks and provides services via such things as Web Services APIs, and the Internet is really used to attract and acquire subscribers. And there’s also the matter of how the subscribers manage some of these services.”

 

“The business advantages of Telco 2.0 are such that it doesn’t require massive infrastructure investments,” says Parks, “because in many cases these Telco 2.0 services ride on top of other networks. The applications can be really targeted and narrow so that a small number of subscribers can make that service successful. For example, you can charge per-transaction based on the value to the subscriber. Certainly in our discussions with service providers, we find them very focused on the whole Telco 2.0 space. They’ve got a number of initiatives underway to address it. AT&T, BT, Deutsche Telecom, KT, Telephonica – all of the major providers are trying to figure out how to capitalize on the Telco 2.0 space, the Web 2.0 space, and they’re examining what they’ve doing with things such as Telco API and how they can monetize things such as SaaS that rides over their respective networks. They’re even rolling out their own cloud computing offerings, as in the case of AT&T, which in late 2008 announced their Synaptic Hosting Service, a cloud computing service [functioning as a utility-based turnkey hosting solution that’s a complete hosting package, including managed servers, LAN, security, and storage, along with designated account support] that competes directly with the likes of Amazon Web Services and Google, not to mention other cloud computing providers.”

 

 

Telco 2.0 will continue to sprout as network operators and service providers with high bandwidth network infrastructure suddenly realize that Moore’s Law has also bestowed upon them tremendous data center resources, and that tying transport and computing together can yield things such as cloud computing services. Verizon has been making some rumblings in this area and, clearly, more and more network operators will be entering the space of Telco 2.0 and the mobile Web, with its high bandwidth wireless backhaul infrastructures capable of handling 3G and 4G services. All of this is geared to make end user’s experience as varied and positive as possible, which is perhaps the acid test for what Telco 2.0 is in the first place.