Predictions for carriers in 2013
There could be some big opportunities for carriers in 2013. Here, industry insiders and experts give their predictions for the year ahead.
Big year for big data
Carriers will be driven to explore new ways of monetising data-heavy services on their networks in 2013. The future for carriers as things stand is unsustainable – they simply cannot keep investing in infrastructure and receive such a lack of return from the increasingly powerful and wealthy OTT players. Introducing class of service has been heralded as a potential game changer for the carrier community and in the long term could be one of the factors that help carriers find greater equality with OTT players. Capacity’s money, however, is on ‘big data’. It’s the, not just big, but huge potential of big data that has made it one of the hottest software trends around. Using analytics, businesses are said to be able to tap into large volumes of internal and external data sets to help support decision-making, optimise operations and identify new areas of innovation. Although still in its infancy, some of Europe’s largest operators, such as Vodafone, Telefónica and Orange, have already been using data analysis for several years to help improve their management decisions. But experts are unanimous in their belief that operators can substantially increase their revenues and margins if they enhance the customer experience by using data analysis to improve internal processes. There are, however, some serious complexities carriers and the tech community will have to overcome first before being able to fully utilise the potential of big data. Let’s hope 2013 proves a breakthrough year.
SDN adoption to increase in 2013
IDC recently forecasted that the software defined networking (SDN) market could be worth $360 million in 2013, and that it will be the year of reckoning for the solution. I agree. SDN has the potential to transition service provider networks, as it has successfully demonstrated in the multi-tenant and hyperscale data centre. While SDN adoption is already happening (we count over 60 products announced already and over 30 million OpenFlow-enabled ports in the field), the Open Networking Foundation expects that the speed of introduction will continue to increase. Throughout 2013 we anticipate that we will see many more product commitments and new deployments of SDN from service providers and enterprises. We also believe that SDN has the potential to address Bring Your Own Device (BYOD) security issues in enterprise networks, help enterprises deal with big data as well as evolve to cloud computing, and indeed begin impacting the cloud in a significant way. SDN has forever changed the networking industry. It has proven to be a revolutionary approach to networking that brings software programmability to networks worldwide.
Wireless backhaul crucial in the US in 2013
The coming year won’t be easy, but we see continued opportunities in several key areas, including wireless backhaul, a crucial growth engine in wholesale for several years thanks to increasingly data-hungry smartphones, apps and users. In 2012, Ethernet accounted for 25% of the wireless segment’s wholesale spending. In 2013, fibre builds will continue, although with slowing growth and fewer greenfield opportunities. AT&T and Verizon have many more connections to transition to Ethernet; Sprint and T-Mobile have large new builds; and many other players are in the game. By 2017, wireless buyers will contribute about half of total wholesale local transport revenue, according to ATLANTIC-ACM projections, with 60% of that portion being Ethernet. Wholesalers targeting larger customers will continue to pursue partnership opportunities in vertical segments along the lines of Sprint’s M2M tie-in with Chrysler or Verizon’s cloud resale partnership with Princeton Hosted Solutions and Cornerstone. Wholesale, white label infrastructure-as-a-service will resonate with equipment-based value-added resellers and independent software vendors, while wholesale mobile solutions will appeal to original equipment manufacturers integrating connectivity functions in their latest devices. Finally, regulations will continue to alter the wholesale voice landscape. We expect US wholesale LD voice to decline by a CAGR of 19% from 2012 to 2017.
Machine-to-machine (M2M) comes of age
M2M is about to enter the next evolutionary stage: at the moment we collect data, but the real benefits of M2M will become apparent by analysing this data. Today, it is already possible to detect attrition in production facilities by analysing data in real time. Combined with machine learning algorithms, such applications will recognise more and more patterns and allow completely new insights into our businesses. But M2M is not a local-based business. In 2013, we will witness a number of strategic alliances, which will shape the future of the market. They will work to overcome a major challenge in the long run: to provide seamless services in all countries. Furthermore, alliances will be necessary to improve quality of service and establish M2M communication standards. In Europe, the main driver of M2M adoption will be the automotive industry. By 2015, new European Union laws will require all newly registered motor vehicles to be equipped with an eCall emergency call system. Automotive manufacturers will focus on integrating embedded SIMs to comply with this regulation, although Telematics and connected entertainment services will also jump the divide into mass-production. Meanwhile, healthcare will be a main driver of M2M in the US, spurred by US health insurances who are set to subsidise a great number of M2M solutions in 2013.
Focus on next-generation access technologies
We expect several regions to experience particularly strong growth, including: Ireland, which is continuing to establish itself as a popular European base for large global technology companies and which is expected to drive demand for ultra-low latency connectivity; and Iceland, whose government continues to support the development of new data centres powered by renewable energy sources. We also expect to see strong interest in next-generation access technologies. Optical fibre is still not widely available in the local loop. As regulation drives incumbent operators to replace these parts of the copper network, offering other operators access to unbundled fibre, many are actively investigating next-generation access technologies. Colt, for example, has been an early adopter of France Telecom’s new regulated Ethernet product, Core Ethernet LAN (CE LAN), which supports fibre and copper access on a single interconnect and replaces other wholesale technologies such as ATM-based Enterprise DSL. Demand for seamless data centre connectivity will also be a key theme of 2013. With the explosion in the use of cloud-based services, uninterrupted connectivity to the data centre has never been more important. While Colt owns and operates 20 carrier neutral data centres as part of its pan-European information delivery platform, other data centre operators wanting to capitalise on the growth of cloud-based services will need to ensure the highest levels of availability and will be seeking to partner with service providers who are at the forefront of data centre connectivity.
When Spread Networks unveiled an ultra-fast link between New Jersey and Chicago back in 2010, fibre was the obvious medium of choice. It was plentiful and it offered enough bandwidth capacity to satisfy the high frequency trading community. And with a round trip speed of just 13.33 milliseconds (mS), it looked hard to beat. Two short years later, wireless network operators have slashed the latency by a staggering 36.9%, demonstrating round-trip speeds as low as 8.4 mS. Two years ago, wireless solutions didn’t even register on the radar screen. Today, we are at the forefront of network deployments throughout Europe, including the all-important London to Frankfurt corridor. Zurich and Milan will be next and soon we will be able to seamlessly connect major exchanges between Chicago and Europe as Far East as Moscow. It was thought that wireless providers would compete heavily on routes such as these with fibre-based carriers but in fact, some fibre operators are already offering their clients a premium latency service using wireless. NeXXCom is now working on multi- generational technologies that will reduce network latency to the asymptote of latency at the speed of light. These Neural Radio Networks™ will be able to adapt to their environment and adjust their performance based on proprietary predictive analytics and weather conditions. The rate at which high frequency traders are turning to wireless technology is effectively making it an essential requirement in the application. Fibre carriers will adopt wireless overlay networks or see clients migrate to faster solutions.
SDN could bring the most fundamental change to networks in decades
In the space of just a few years, innovation in online technology has exploded with new concepts from social networking and cloud computing to smartphones redefining the IT marketplace. But network layer innovation, by comparison, has been mired in an era of incremental improvement and commoditisation that has produced more of the same – more speed, more distance, better coverage, more packet networking – all be it at a lower cost. Software defined networking (SDN), coupled with federated identity management, offers the promise of the most fundamental change to networking in decades. Going beyond incremental improvement, SDN has the potential to refactor the telecommunications market into a much more integrated piece of the larger computing infrastructure that sits above it. Further, true federated identity offers trusted protection for users and providers alike – enabling Metcalfe’s Law for cross-provider and cross-application services, eventually producing a much richer delivery of public cloud and advanced applications. In the next decade, I would hope application developers no longer need to separate network planning and application development but instead can seek a robust set of cloud providers who bundle network solutions – managed through federated identity – into their offerings with the right mix of software or infrastructure-as-a-service. That future implies a much tighter coupling of network providers with cloud service providers and a much more applications-driven and user-driven view of networking.
Preserving the open internet through bit-mile IP interconnection
The economic and social impact of the internet rivals that of almost any of mankind’s inventions. It seems certain that the future potential of the internet is near limitless, provided it remains free and open. Some network operators don’t see it that way. At the recent World Conference on International Telecommunications, ‘sending party pays’ models for IP interconnection were advanced. Such models require that internet innovators (the networks sending most internet content) make arbitrary payments to last-mile broadband providers to reach end users. Such rules will negatively impact internet innovation by allowing these incumbents to unfairly discriminate against competing third party content. And importantly, this scheme does nothing whatsoever to fairly compensate any party proportionately to costs incurred. Better ideas exist. A ‘bit-mile interconnection approach’, which measures both the volume of internet traffic exchanged and the distance it is carried by the sending and receiving networks, provides for settlement-free interconnection if both networks share the effort of carrying content in approximately equal measure. If traffic balances are not equal, this system fairly compensates network service providers for the imbalance. The model also helps ensure that the internet of the future remains free, open and innovative.
A looming transatlantic capacity crunch?
Demand for intercontinental capacity will continue to grow at the rate of 30%-plus but it will be offset by remoreseless price degradation as technological advances enable us to get more out of our networks. Existing systems have long outgrown their original design capacity: only through continual upgrades are operators able to meet this fast-growing demand. Large buyers of capacity are witnessing firsthand, however, that demand has started to outpace technological improvements and a transatlantic capacity crunch could well be on the horizon. We are increasingly seeing buyers wanting to secure dark fibre ahead of such a crunch – they prefer to buy now, rather than risk having to back new construction projects a few years down the line, noting that ‘current owner economics’ are based on 2002-04 asset write down values. Given low bandwidth pricing, it remains impossible to supply additional plain vanilla capacity through the deployment of new submarine cables in ultra-competitive markets such as the Atlantic. Over $2 billion of proposed submarine cables are under contract but are conditional on financing. To get financed, new cables must meet three crucial criteria: superior latency, new diversity and cheaper capacity. The emphasis on diversity is particularly relevant following the super storm ‘Sandy’ and mounting fears of increasingly regular seismic activity.