If we tried to come up with a phrase that expressed the carrier directions as expressed so far in their financials and those of the prime network vendors, a good suggestion would be “business as usual.” There’s been no suggestion of major suppression of current capital plans, no indications of shifts in technology that might signal a provocative shift in infrastructure planning. We are entering the technology planning period for the budget cycle of 2016, a critical one in validating steps to reverse the revenue/cost-per-bit crunch operators predict. Why isn’t there something more going on?
It’s perfectly possible that one reason is that operators were being alarmists with their 2017 crossover prediction. Financial analysts and hedge funds live quarter to quarter, but it seems pretty likely to me that they’d be worried at least a little if there were a well-known impending crisis in the offing. Somebody might take flight and cause a big dip in stock prices. But I think it’s a bit more likely than not that the 2017 consensus date for a revenue/cost crunch is as good an estimate as the operators could offer.
Something that ranges over into the certainty area is that operators are responding, by putting vendors under price pressure, buying more from Huawei the price leader. Except in deals involving US operators where Huawei isn’t a player, we’ve seen most vendors complain of pricing pressures and at least a modest slowing of deals. Ciena said that yesterday on their call, though they say it’s not a systemic trend but rather a timing issue for a couple of players.
Another almost-sure-thing reason is that the operations groups that do the current network procurements haven’t been told to do much different. VPs of ops told me, when I contacted them through the summer, that they were not much engaged in new SDN or NFV stuff at this point. As they see it, new technology options are still proving out in the lab (hopefully). Their focus is more on actual funded changes like enhancements to mobile infrastructure.
The question, the big one, is whether one reason operators are staying the course is that it’s the only course they have. We’ve talked, as an industry, about massive changes in network infrastructure but for all the talk it’s hard to define just what a next-gen infrastructure would look like. Harder, perhaps, to explain how we’d fund the change-over.
That’s the real point, I believe, because in our rush to endorse new network technologies we’ve forgotten a message from the past. The notion of transformation of telecom infrastructure isn’t new. We had analog telephony, then digital and TDM, and then the “IP convergence”. What would we see if we looked back to the past and asked how the changes came about, particularly that last one to IP?
Packet networking was proposed in a Rand Corporation study in 1966, and we had international standard packet protocols and the OSI model just a decade later. We also had the foundations of the Internet. None of the stuff that evolved in that period was intended as a replacement for TDM. That role was envisioned for Asynchronous Transfer Mode, or ATM.
The theory behind ATM at the technical level isn’t relevant here, so I’ll just summarize it. You break down information into “cells” that are small enough so that the delay you’d experience waiting for a cell to be sent or received is small. That lets you jump priority stuff in front of that which isn’t a priority, which lets you mingle time-sensitive stuff like voice (or video) with data. This, in turn, lets you build a common network for all traffic types. ATM was actually intended to replace the public network, designed for it in fact, and there was an enormous wave of interest in ATM. I know because I was part of it.
I learned something from ATM, not from its success but from its failure. There was nothing technically wrong with ATM. There was nothing wrong with the notion that a single converged network would be more economical as the foundation of a shift of consumer interest from voice to data. The problem was that the transition to ATM was impractical. Wherever you start with ATM, you deliver technology without community. You can’t talk ATM with somebody because early deployment would be unlikely to involve both you and your desired partners in communication. You needed to toss out the old and put in the new, and that’s a very hard pill to swallow for operators.
Why did IP then win? It wasn’t technical superiority. It won because it was pulled through by a service—the Internet. Operators wanted consumer data, and the Internet gave it to them. The revenue potential of the Internet could fund the deployment of what was then an overlay network based on IP. More Internet, more IP, until we reached the point where we had so much IP that it became a viable service framework, a competitor to what had previously been its carrier technology—TDM. We got to IP through the revenue subsidies of the Internet.
What revenue funds the currently anticipated infrastructure transformation? We don’t have a candidate that has that same potential. The benefits of SDN or NFV are subtle, and we have no history as an industry in exploiting subtle benefits, or even harnessing them. That means, in my view, that we either have to find some camels’-nose service to pull through the change as the Internet did for IP, or we have to learn to systematize the change. I’ve offered an example of both in recent blogs.
IoT and agile cloud computing could both be candidates for the camel role. We could gain almost a trillion dollars in revenues worldwide from these services. We’re slowly exploiting the cloud already, and while it would help if we had a realistic understanding of where we’re going with it, we’ll eventually muddle into a good place. IoT is more complicated because we have absolutely no backing for a truly practical model, but I think eventually it will happen too.
That “eventually” qualifier is the critical one here. We probably can’t expect any new service to take off as fast as the Internet did, but the Internet took a decade or more to socialize IP to infrastructure-level deployment. My point with the notion of service operations automation is that we could do better. If we build, through a combination of cloud features for infrastructure and enlightened software data modeling, a petri dish with an ideal growth medium in it, we could build many new services and attract many new revenue sources. This could then drive the evolution of infrastructure forward as surely as one giant camel could have, and a lot faster.
Consumerism has blinded us to a reality, which is the reality of justification. I buy a new camera not because I need one but because I want it. That works for discretionary personal expenses up to a point, but it’s not likely the financial industry would reward, or even tolerate, a decision by operators to deploy SDN or NFV for no reason other than it was nice and shiny and new. It’s my belief that we can accelerate change by understanding how it has to be paid for. A useless technology will meet no financial test, and both SDN and NFV can be justified. If we want earnings calls that cite explosive deployment growth in these new things, we’ll have to accept the need for that justification and get working on making it happen.