Well, it’s catch-up Friday today, and there are a number of items that cropped up this week but didn’t make the cut for dedicating a blog entry. If you put them together you can see some forces acting to create industry change—not in a giant push but in nibbles.
There’s a report that FCC Chairman Wheeler has said that he believes that OTT players should be able to pay ISPs for premium handling. If true, this is a pretty significant policy shift from the Genachowski camp and the current Neutrality Order. I’ve never liked the “consumer-must-pay” approach because I think it reduces the incentives for investing in better Internet infrastructure, and so reversing that view would in my view help the industry—not to mention providing consumers with better video and enterprises with better cloud access.
The problem with the “consumer-must-pay” approach is that consumers will in the main elect to roll the dice on quality. The supplier of video or cloud, on the other hand, would very likely want to use service quality as a differentiator. If the OTT supplier can pay when they want, then the ISPs are likely to make QoS available. If the consumer has to pay (and they won’t) nobody will even offer QoS. That’s why reversing the current approach would almost surely increase the flow of revenue from OTT to ISP, which would help fund network enhancements.
The argument on the other side (which Genachowski was perhaps a bit too ready to accept as a former VC) is that smaller OTTs might not have the money to pay for QoS. That’s like saying “We won’t allow BMWs to be sold because everyone can’t buy one.” If the VCs want to fund a content or cloud company, let them expect to pay for premium carriage if that’s what the market ends up with. We’re at the stage where we need innovation more on the network side than in new sources of OTT video or new cloud providers.
Another interesting note is that Juniper made two announcements of enhanced product functionality, one relating to improvements to its Junos Pulse mobile agent technology and the other to VPN capabilities. The changes to Pulse provide the basis for creating a cooperative mobile-management ecosystem, something that Juniper could have done three years ago (and should have) but that’s now critical given that Juniper has ended its mobile-specific product initiative (MobileNext). The VPN changes provide for application-specific rather than device VPNs. While this is also positioned at the mobile level, it could be a step to something important.
If you look at SDN applications you realize that we’re kind of playing with half the deck. We have SDN solutions for the data center and application-specific networks there, but we can’t network to application users remotely on a per-application basis. If we had that capability we could build a whole new model of application networking and security, one where communities of users with the same access rights were connected to communities of applications. Combinations other than those explicitly allowed would just not connect, which creates an explicit rather than a permissive model of communications. It’s critical for full exploitation of mobility but important for everything.
The obvious question is whether Juniper now intends to make an application-specific networking push based on its Pulse collateral, something that’s truly a differentiator. At an even higher level, does this mean that the new Juniper CEO (who takes over next month) is going to drive not to consolidate Juniper’s costs till the company implodes, but rather focus Juniper’s innovation? I said before that how Juniper goes in terms of consolidate/innovate will have a major impact on the competitive dynamic and thus on the industry, so we need to see how this one plays out.
We’re also seeing some contradictory attitudes on Huawei emerging. On the one hand, Huawei’s CEO is saying that they are going to stop even trying to sell equipment to US carriers because of US government suspicion that Huawei might be an on-ramp for spying from China and the PLA in particular. On the other hand, the UK has approved a Huawei security center. You could argue that the US feels it’s at a greater risk here, or that they know something that the UK doesn’t. You could argue that Huawei is a victim of a combination of US politics and lobbying by US networking companies (Cisco, of course, comes to mind). Cisco is said to believe that its success in China is being impacted by its lobbying against Huawei here.
I’ve talked to carrier engineers worldwide and I’ve yet to find one who believes that a network vendor like Huawei could or would build a back-door into their equipment to create an opportunity to spy or to interfere with network operation. Most say that if you wanted to disrupt a network, you’d disrupt it the same way you’d gain access to a power plant or a defense database or a list of usernames and passwords—hacking. The hacking risk, which has also been identified with China, is a far larger risk that we’re already facing. Is a back-door risk even real, much less a significant incremental one?
Cisco needs a level playing field in China, and that’s probably not going to happen if Huawei doesn’t have one in the US. I think we can expect to see either a shift in policy here, or a hardening, and either of these will be a force in shaping how the industry goes in 2014. Huawei unbridled will put enormous pressure on vendors who have been able to dodge Huawei’s pricing power in the US market. Cisco bridled in China will inevitably hurt its numbers, and if all US networking companies were to be treated in China as Huawei is here, it could knock a noticeable amount of profit off their balance sheets.
The market in 2014 is going to be a sum of forces, big and little. As we move into Q1 we should have a better notion of where they’re going to push us all.