How Does Your Garden Grow?

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Our reliance on telecom is amazing – we stay connected in ways that we seldom even think about. I find myself—and see folks everywhere—texting, emailing, calling, listening, watching, all day long. I see other doing the same thing at bus stops, in coffee houses, in their cars…oh wait a minute, we shouldn’t talk about that one….

The point is, you’d think this would translate into telecom providers enjoying an avalanche of revenue, but this is often not the case.  There are many reasons why. Bandwidth growth is unpredictable, and it’s difficult to “monetize” high-value content when it crosses multiple networks. Content providers and edge network operators are trying to change their business models to make themselves more profitable, and this means that traditional service providers have to move on a dime to convert new opportunities into revenue.

Meanwhile, costs have to be kept in check. With 72% of every revenue dollar going to operational expenses, it doesn’t make sense to create new services without a relentless pursuit of cost reduction.

This means rethinking how networks are operated. And that’s why I think today’s announcement is so important. By combining our independent control plane system (the JCS 1200—the industry’s first and only such platform) with our largest core router (the TX Matrix Plus), we are bringing virtualization—a technology widely used in data centers to increase efficiency—to the core of the network.

This essentially enables multiple hardware-virtualized routers to be created from within a larger system, sharing some resources but still maintaining physical and logical separation. Each of these routers may be used to support different networks or services: one for video services, one for wireless, wholesale, voice services, etc.

And why is this important? Aside from the efficiency advantages of virtualization, there are a variety of new business models that evolve naturally from the shared resources, risk mitigation, and operational tuning made possible from a virtualized core. One key model is the expansion of the “walled garden” concept that is often used to handle video and voice applications that need lower latency and jitter compared to what is typically available  on public networks.

Whereas “walled gardens” typically have a negative connotation (because they are keeping things out), the concept can be turned on its head: rather than limiting the quality of over-the-top services, service providers can use virtualized networks to assure superior quality for certain over-the-top video or other content (in exchange for some sort of revenue sharing model).  Such “open garden” networks can be hosted in the carrier’s network, in the partner’s network, or in a CDN network. In this way, carriers add value in the delivery of content, which provides them with a business model to generate more new revenue.

Another emerging business model is the Virtual Network Operator (VNO), in which service providers create secure and private IP backbones for other service provides. This is ideal for service providers of all sizes and types when access to capital may be restricted but network expansion needs to continue in order to support business growth. Where permitted, they can expand their networks by “leasing” dedicated IP backbone networks from large infrastructure-based carriers.

A third possibility is the pure sharing of IP resources. This business model is very popular with mobile service providers who share base stations and other access resources—witness the agreements between Vodafone and Orange which the operators expect to save and consolidate resources. There are many reasons why this might be an advantageous business model for IP networks as well.  

These are just a few examples—I’m sure service providers will be able to come up with many more possibilities when they realize the potential of virtualization in the core. What do you think? I’d be interested to hear from readers if they can think of additional business models enabled by the secure virtualization of core resources.

Message Edited by ac on 02-19-2009 03:03 PM