The pressure to create new profit sources for network operators is starting to generate some momentum in the network technology and architecture space, but it’s too early to call a trend in part because there are still a lot of profit options being pursued. Not only that, even those who might see the same profit goal could well see a different path to achieve it.
One thing that seems likely to happen is that network operators in general and cable operators in particular will push the boundaries of the FCC’s tolerance for IP-non-Internet or “specialized services”. In the Neutrality Order (itself under appeal, if you recall) the FCC declined to say that specialized services were a violation of neutrality principles, instead looking at the question of whether the services were being separated so as to put OTT services at a competitive disadvantage and undermine the open Internet. The problem of course is that anything that can be delivered on IP can be delivered on the Internet in a technical sense, but the business model for offering services that require performance stability, high availability, or security may be difficult to achieve using the Internet. That in part is why IP video services from telcos have generally been exempt. But how much can the operators push the FCC on what’s excluded?
Another profit point is the managed services over IP. Some services, like home monitoring, are seen by users as more critical and thus more credible when sourced by a trusted provider. Nearly all buyers trust their common carrier the most, followed by the cable company, followed by OTT players. The profit margin on these services are also thin, and that makes them more interesting to the carriers whose internal rates of return are historically low.
My surveys still show that operators are more interested in the “Big Three” monetization targets; content, mobile and cloud. I’ve seen the last of the three leaping into the forefront at most operators, not because it’s the most financially interesting (operators see the total revenue and total ROI for the cloud space to be lower than the other two) but because the path to the market is much more clear. In fact, most of the “managed services” drive is likely to be implemented on cloud infrastructure. Some operators also think that Amazon’s continued reduction in cloud service pricing is an indication that basic IaaS is going to be a commodity market that will, as it builds, kill off its supporters with low profit and high cost. That would give operators an opportunity to again use their low IRR to step in and take advantage of the pent-up opportunity.