A market in motion
Carriers are looking at ways to work more closely with generators of video traffic, from traditional broadcasters to disruptive OTTs. Guy Matthews looks at what can be done to cater more profitably for such customers
It would take more than five million years to watch all the video content that will cross global IP networks during any given month of 2021, predicts networking vendor Cisco in its latest Visual Networking Index. It forecasts that video will account for 82% of all IP traffic by that year, up from 73% for 2016.
Volumes of IP-borne video will jump threefold between now and 2021, fourfold in the case of internet video traffic. Video is a dominant factor in any conversation about network capacity, and something that every carrier must have a plan for.
Carriers and service providers have had a complex and at times tricky relationship with the originators and distributors of the moving image. But it is a necessary relationship for both parties. Carrying video traffic is an essential part of offering the ultimate end consumer the seamless omni-channel experience they crave. And developing a functioning relationship with a networking partner is an equally vital priority for both the traditional broadcast-ing industry and the over-the-top (OTT) video content provider. The problem is that carriers do not always end up with a return from the relationship that could be called optimal.
Stephan Schröder, visionary leader in telecoms wholesale with Deutsche Telekom ICSS, points to market research findings that illustrate how the balance of power between OTTs and network operators has been shifting.
“Unarguably, there has been enormous growth in internet peak traffic,” he says. “Globally it’s been rising at 33% per year, according to TeleGeography, even higher than that on our network where it has been rising at 52%, and much of that growth is to do with video. We are investing massively every year throughout the group just to cope with traffic growth.”
He quotes figures from market researcher Statista that “show us that the cumulated annual revenues of the six large OTTs – Google, Apple, Microsoft, Amazon, Facebook, Netflix – are growing at a rate of 14% per year, while the three largest European operators have shrunk their revenue by 2% over the same time frame. There’s food for thought there.”
The answer, he is certain, is for operators to find creative ways to work in a more integrated fashion with the video community, presenting fresh solutions that meet real needs: “Carriers must become more effective enablers for content delivery,” he warns.
“As carriers we must work to optimise the delivery chain. We must do this with efficiency but also with visibility and quality. We must do this in different ways, for example caching.”
He says that Deutsche Telekom has been proactive in exploring new types of service for video customers, such as providing flow optimisation. “CDNs can have low visibility on a carrier’s network capacity, causing misallocation of traffic handover points. The problem increases with the number of caches deployed in the network. By offering real time network mapping you are ensuring efficient network use and higher quality.”
He suggests carriers also evaluate, as Deutsche Telekom has done, predictive pre-positioning and multicast technology, to help reduce network loads and secure network integrity. “Network costs are driven by peak utilisation,” says Schröder. “Traffic delivery in off-peak times is the most efficient use of resources. We’ve been working with CDNs to help predict user behaviour through profiling. I should point out that they asked us to help them with this, so we can’t take the credit for thinking of it.”
As well as finding better ways to work with CDNs and OTTs, carriers also need to extract more profit out of relations with old school players in the video field. Many conventional broadcasters are struggling with the changing shape of their industry, for example with the popularity of on- demand content, advances in HD and 4K ultra-high deﬁnition TV, second-screen services and the move to remote production
Colt has for many years been the network partner of broadcast brands such as Canal+, Eurosport, France24, Globelynx, Eurovision and TF1. Tim Passingham, VP wholesale at Colt, explains that the operator supports these customers both directly and indirectly. “The direct side is part of our enterprise business, and indirectly we support many broadcasters through our wholesale business,” he says. “We support the OTTs as well. Obviously broadcast has changed massively since the days it was dominated by traditional players like the BBC and Canal+, and is now going in a Google and Netflix direction. We’ve seen our business shift too from traditional broadcasters to doing a lot more work with the web giants.”
Passingham says Colt has provided backing for broadcasters playing catch-up and building their own on-demand services. “It’s a big part of our business and one we see growing significantly as video grows significantly,” he claims.
“Video is the main growth engine of traffic on the internet.”
The challenge for the likes of Colt, he says, is that as volumes of video traffic go up, the price for carrying it goes down. “Carriers can end up running to stand still. That’s why you’ve got to invest in new technology and work smarter, which we’re trying to do. We’re increasing bandwidth in our core network. That’s vital, given the sheer volume of video being consumed. As well as that quantity angle you’ve got a quality angle too. As consumers we’re watching things in much higher definition.”
A related area that Colt has invested in is supporting beleaguered mobile operators by backhauling their growing video load.
“Half of all YouTube videos are now generated on a mobile device and transmitted via the mobile network,” points out Passingham. “Traditional backhaul arrangements in mobile towers is struggling to keep up with this. We work with these mobile operators to help them with these greater volumes. In a 5G world, fibre backhaul will be even more important. There’s gaming too, which has become very similar to video in terms of quality. There’s not much between a video game and a feature film these days.”
An increasingly obvious characteristic of the movement of video traffic is that it is truly global, meaning that carriers that can facilitate the passage of this traffic from anywhere to anywhere will be in demand.
Brian Morris is vice president and general manager of media and entertainment with Tata Communications, a carrier with a virtually unrivalled global reach and a long-standing innovator in video networking as well.
“We enable seamless global transport and management of your content as a cloud-based service,” he says. “It’s not just about the transport, as it was in the past. You can acquire content anywhere in the world you want, manage it and redistribute it.” He claims Tata offers end-to-end solutions for content creators, owners and distributors, and employs a large team of team of video-centric experts to serve them.
“We also have people who understand IP and networks, and that marriage means we really understand how to manage, move and process video. We’ve built out media hubs across the globe. We touch every part of the planet with high-reliability video circuits. Others have a slice of what we offer but don’t compete globally.”
Others have a more regionally focused video offer, such as Telstra which has made good business out of moving video traffic around Asia and between Asia and the west coast of the US.
“We’ve got a division dedicated to broadcast and a separate one dedicated to OTT,” says Paul Abfalter, director of OTT and emerging markets with Telstra. “Depending on where they are in the food chain, we’ll look after them at the network and infrastructure layer. We have a good relationships there with all the major CDNs and a lot of the OTT and video providers. Going up the stack a bit, we have products that look after the video distribution side.”
Abfalter says Telstra is the major partner for many OTTs for Asia and for trans-Pacific, as well as cloud companies looking for a dense pan-Asian network. He explains that the nature of this OTT demand means that Telstra has had to learn to provision network solutions in a much shorter time frame than it has typically been used to.
“We’ve seen quite a few players in video and content that have underestimated what they needed a bit, so we’ve found ourselves having to develop a solution for them in double quick time,” he says.
“We built an intra-Asian CDN for a major US OTT after it took off for them in Asia in ways they weren’t expecting, so we had to scramble to build that in record time in late 2016.”
A more predictable relationship is to be had, he says, with organisers of big sporting events. “We’re one of the major suppliers for the Olympics, for example,” he points out. “That’s the sort of thing we can plan for a bit more up front. OTTs can’t necessarily plan much in advance, so our sales cycle is shortest there, two weeks in one case.
“We have the headroom for that because of the extent of the capacity we have in Asia, particularly in the hot triangle of Singapore, Hong Kong and Japan where most of the demand is. We’ve got connectivity into small countries as well.”
He says Telstra is working closely with OTTs at the infrastructure level, in the form of helping them build data centres and co-fund submarine cable systems.
“Quite a few are now building their own cables and looking for telecoms partners to help,” he says.
“We’re Google’s partner in a new cable build between Singapore and Perth. We’re also working with smaller up and coming OTTs, perhaps reselling CDN services to them. We enhanced what we can offer in this market a lot when we bought Pacnet two years ago.”
It is evident that carriers now see video content and OTT players more as an opportunity than a threat.
Research commissioned by software vendor Comarch and carried out by Heavy Reading reveals that 42% of telcos surveyed are choosing to partner with OTT providers such as like Netflix and WhatsApp by bundling services. But while the revenues are there, making an actual profit from video can call for much investment as well as great creativity.