Everyone probably agrees that broadband Internet is the revolution of our time. Whether we’re talking about wireline or wireless, even business versus consumer, the explosive growth of broadband access to the Internet has transformed much of telecom. What we used to think of as the prime services (voice calling) is now an afterthought OTT service. If broadband has driven so many changes in the recent past, what might it do in the future, and how might it change itself along the way?
The first problem broadband has to face is delivery. Most countries built out their telecom infrastructure with regulated monopolies, or even with network services as an arm of the government (“postal, telephone, and telegraph” or PTT). Today, few countries have regulated monopolies to supply network services, which means that service providers have to be profitable. That poses a major challenge in the era of broadband.
Twisted-pair telephone connections are far from ideal in delivering broadband services. Long copper loops don’t work well with digital broadband even at distances of a couple miles, and if there are intermediate nodes fed with digital trunk lines that divide into those loops, the intermediate structure has to be modernized to even do digital-subscriber-loop (DSL) delivery. Plus, despite advances in DSL technology, it’s very difficult to get beyond 20 Mbps. In many countries, including the US, broadband services to the consumer already get to a gigabit per second.
The US demonstrates the challenge of old infrastructure versus new services, and video in particular. Telcos and cable companies compete today for broadband customers, but cable companies had to deliver channelized video from the start, and so they deployed “community access television” or CATV cable, shielded cable capable of much higher data rates than unshielded copper twisted pair. This meant that cable companies had an advantage in the broadband race. Telcos had to deploy fiber to the home to get equivalent capacity, and that could be difficult.
Why? “Demand density”. The potential profitability of a base of network service consumers is directly related to their economic power per square mile (or kilometer, or whatever measure you like, as long as it’s consistent). Where demand density is high, a mile of broadband feed passes a lot of dollars, and so returns decently on investment. Why do you think Verizon jumped into FTTH with FiOS and AT&T didn’t? Verizon has a demand density that’s almost ten times that of AT&T. Demand density is also why you can’t get FiOS everywhere, and why Verizon sold off customers and lines in areas it thought wouldn’t be suitable for FiOS.
Both cable and FTTH have relied on the revenues generated by linear TV services, and we are clearly past the golden age of that opportunity. Both telcos and cable companies are struggling to even keep the customers they have. What that means is that if deploying broadband in the past was difficult to justify from an ROI perspective, it’s only going to get harder.
One impact of that shift is that there’s much more focus on mobile broadband today. Mobile infrastructure uses RF for the last mile, so it’s less expensive to deploy as long as you don’t need enormous per-user capacity. The push to 4G LTE and now to 5G is largely driven by the fact that older radio access network (RAN) technologies didn’t support enough aggregate customers and bandwidth per cell, so would drive up deployment costs too much. Because RAN modernization is the hot piece of 5G, there’s a real chance that the transitional model of 5G, the so-called “Non-Stand-Alone” or NSA version, which focuses on New Radio (NR) will be the only thing that really gets going.
Another impact of demand density is the 5G millimeter-wave hybrid with fiber to the node (5G/FTTN). If running fiber to the home is too expensive, how about running it to a neighborhood and using ultra-short-wavelength 5G to carry nearly a gig per user the rest of the way? However, 5G/FTTN isn’t for carrying linear TV, only streaming, which means that the competition to get faster broadband to the user will inevitably favor streaming TV delivery.
The reason, of course, why fiber to the home is too expensive is that the return on fiber at anything other than very high demand density is too low. The reason it’s too low is that broadband Internet is a complicated ecosystem, particularly with video content. We’ve seen proof of that in the interest of network providers in buying content providers—AT&T and Time Warner are the recent example. But Wall Street says that even the content providers have been facing profit pressure. We see more commercials, more low-cost programs (reality shows) being produced, and shorter seasons. All of that encourages consumers to stream alternative video, and many stay with streaming eventually.
If a content producer can’t get bought out by a network operator, they have to think about creating their own direct pathway to the consumer, meaning their own streaming portal. Many do that, to a degree, already. That forces the operators who own content to compete with content providers who simply ride over the top (OTT) on their networks. That, in turn, means that if you are a network operator, you can’t afford to run your network at low (or negative) margins and make it up in video content profits. Your competitors won’t have the network cost as a boat anchor.
Content producers individually going direct to consumer through streaming portals would result in a rather expensive competitive overbuild, so what would likely happen is a combination of consolidation among content producers who aren’t bought by network operators, and growth in the service of providing content streaming as a service to producers. Content delivery networks (CDNs) like Akamai might well reap a lot of this, but network operators could also supply caching as a service.
They’d have the facilities, because if operators are going to own content, supply OTTs with delivery pathways (reluctantly, of course), or both, they’ll want to maximize their delivery efficiency, especially for scheduled content like live TV. Forward caching of live events prevents wasteful simultaneous delivery of the same material to a bunch of customers. Owning caching would also be the natural pathway to providing ad insertion; you cache the ads too.
From a traffic perspective, content is everything. Content is also increasingly cached close to the edge, and that means that most traffic will go only from an edge-cache position into the access network. It’s almost like the “old Internet” of websites connected globally stays the same underneath this enormous pool of cache/access bandwidth.
From a network infrastructure perspective, these factors add up to a network that’s rich in the access area, feeding a set of edge (meaning local office) hosting/caching facilities. Vendors who have strong edge positions, particularly wireless RAN offerings, may be advantaged by the shifts, as would optical players whose offerings will deliver more bandwidth to the edge, which requires more fiber.
Conventional switching and routing may not do so well, comparatively. Metro would also grow, but not as fast, and the core side would have the least pressure. In fact, because consumer networking would be so driven to be an edge-to-cache relationship, it might well mean that business services would be a greater driver of traditional wide-area network evolution. Business sites, after all, are widely distributed. Business networking demands are not as content-centric, and so will change more slowly. All that “Internet-index” stuff on growth, in other words, may end up creating very shallow network impact.
Broadband changed our world, and broadband obviously changes the network that supplies it. The interesting thing is that broadband changes behavior, which changes the perceived value of services, which changes the specific ways we’ll consume broadband. The result is a kind of feedback loop, and it’s going to be transformational for vendors and operators alike. The next ten years should be very interesting.