One of the ongoing themes in both SDN and NFV is that operators need these technologies to compete with the OTT players. We also hear that operators need a cultural transformation to do that, or that they need to form subsidiaries or buy somebody. We could almost claim to have a cottage industry here, people sitting around explaining what operators have to do to “compete with the OTT players”. It’s not that simple. Let’s lay out some basic truths.
Truth one is that most of the OTTs are in a less-than-zero-sum industry. Ad spending globally is declining, and at some point what can be made available to earn OTT profits would have to come out of what’s available to produce content or do something else essential. Operators are at least in a market where there’s a willingness to pay for services. A good Tier One still earns almost as much revenue as the OTT industry does.
Truth two is that operators don’t need new technology to compete with OTTs in a direct sense. Google and Netflix didn’t get to where they are through SDN or NFV. “Over the top” is what it says it is—on the network and not in it. Hosting content or providing ad-sponsored services doesn’t mean inventing new standards, particularly at the network level.
So what we have here, in the net, is that most of the presumptions of what operators should do are based on a couple false premises. Is staying the course then the right approach? No, and here are some further truths to prove it.
Truth three is that there is absolutely no way to sustain a business in transport/connection over the long term without public utility protection. Bits have been getting cheaper and cheaper in a marginal cost sense, and while that trend is certain to slow, it’s not going to slow enough to avoid constricting capital budgets. The network pricing model of today is eating its own future, and something has to turn that around. Revenues have to go up, costs have to go down, or both.
Which brings us to truth four; the network must always be profitable if operators are going to continue to invest in it. That means that even if services “over the top” of the network come along to provide relief, they can’t just subsidize an unprofitable network foundation. The operators, in that situation, would be competing against players who didn’t have to do that subsidizing and they’d never be able to match pricing.
Add these points up, and we can at least see what SDN and NFV have to do for us. It is critical that the cost of transport/connection networking be managed better than we’re managing it now. A couple decades ago, network TCO was a quarter opex and three-quarters capex; now that’s heading toward being reversed. So more truths.
Truth five is that neither SDN nor NFV are explicitly aimed at solving the problem of operations cost bloat. We have not proved at this point that SDN has a significant impact on opex because we’ve not proved we know how to apply it across the full scope of current services. The NFV people have effectively declared opex out of scope by limiting their focus to the hosting of service elements that are above transport/connection.
As to where, then, opex could be managed, we come to truth number six; we can’t make revolutionary changes to opex without revolutionizing something at the technology level. Our whole notion of network operations, from EMSs up to OSS/BSS, has to be framed in a modern context because we’ve seen opex bloat as a result of a growing disconnect between technology and business realities within the network and the support systems we’ve used.
Truth seven is that no transformation of OSS/BSS is going to work here, nor is any transformation in NMS or EMS or SMS or any other xMS. What we need to do is to define a management model that’s attuned to the evolution of both services and infrastructure. That model has to arise almost completely unfettered by concerns about how we’re going to get there. We have to embrace utopia, and then worry about achieving it as efficiently as possible. Otherwise we’ll take a series of expensive side-trips and end up in a couple years having spent more to achieve next to nothing.
How does this help the operators, though? More truths.
Truth eight is that there is a natural base of service opportunity awaiting exploitation, and it’s almost totally owned by the operators. They have the cell sites that support both mobile users and any realistic IoT models. They have knowledge of the movement of users, individually and en masse. They have, if they design their utopian operations mechanisms correctly, the best possible cost base and could produce the best cost/performance/availability combination. I did a presentation on this issue years ago, and the theme was simple. The network knows. Operators could leverage what the network knows, through operations practices honed to do the near-impossible task of keeping transport/connection services profitable. Do that and they cut their costs low enough that VCs will move on to something else and stop funding OTTs.
And truth nine is that all these future services will have to move toward fee-for-service and away from ad sponsorship to dodge that less-than-zero-sum-game problem. Operators are already there, in a position where their customers expect to pay for something. Would it be easier for operators to charge for services, or Google? If operators can take the simple step of finding stuff people will pay for, they can win.
Which brings us to the final truth. Services are an app. Experiences are an app. The cloud is an app. Everything that we expect users to consume, however it’s paid for, is an app. The notion of an app is the notion of a simple storefront hiding a massive factory and warehouse process behind. It’s critical that we frame our future in app terms because people consume them. It’s critical that we make the app substantive by exploiting what the network knows, that we link it to point-of-activity services like social and location-aware contextual responses to questions, because those are things that operators can do but that OTTs can do too. Operators have to gain some leadership there. But all this has to be done while making the network profitable.
SDN and NFV won’t change the world unless we change what we expect them to support. It’s not what they do, but what they enable that matters, and we have to get more direct links between SDN and NFV promises and the whole set of truths I’ve identified here if we want to move either or both technologies forward.
And in doing that, it’s not technology that’s the key, it’s operations. The future will be more complicated than the present. That’s always meant more expensive, and that cannot happen or we’ll never get to that future at all.