The biggest future threat to network operators may be a present threat. Microsoft’s decision to offer Azure customers the option to have their entry and exit traffic carried on Microsoft’s own network rather than on the Internet is a signal that cloud providers may be flexing their own muscle in network services, as telcos stick their heads in the sands on services at a higher layer.
It’s long been known that Google has an enormous private IP network that links all its worldwide assets; this existed before Google started offering cloud computing, but it’s grown since then. Amazon and Microsoft also have these networks, and it’s that truth that Microsoft is supporting and that the network operators should be fearing, but that’s not the end of it.
Content delivery is a major mission for the Internet, and in terms of volume of traffic it’s the largest mission. Content delivery networks (CDNs) were created to reduce the performance issues associated with delivering content across the web of interconnects that make up the Internet. These CDNs consist of cache points at the inside edge of the access networks for the ISPs, linked by trunks that then deliver content to the caches for use. Thus, they also have “networks”.
Even edge computing might turn out to be a threat to network operators. The edge is distributed close to the user by definition, designed to offer a low-latency processing path. If edge points were connected to a private wide-area network by the edge provider, that network would then be an alternative for handling all sorts of traffic.
Alternative network service providers are emerging, but how much would they threaten the network operators, really? In the case of Microsoft’s Azure network, the direct threat is to public Internet handling of into- and out-of-cloud traffic. It’s not likely that this would have a serious impact on enterprise IP service revenues, as long as that was the only target, and that may not always be the case.
If Azure cloud traffic jumps onto Microsoft’s network, and if we assumed for the moment that Azure was the front-end for all an enterprise’s applications, then wouldn’t that enterprise be able to drop any corporate VPN? It would sure seem likely, but not many enterprises would have all their user traffic going to Azure or any other cloud. On the other hand, suppose Microsoft just decided to offer a VPN service based on the same Azure-linked network? Maybe they add in an SD-WAN element that does the traffic routing. Wouldn’t that then replace a VPN? Seems likely that it could.
If cloud providers, edge providers, and even CDN providers were to get into this game, the current network operators would be in a position of competing for IP transport with players whose IP backbones were justified in part by other, higher-level and higher-margin, applications. Any public cloud relationship an enterprise had might become a wound through which business IP service revenues bled away from the network operators. They might end up being nothing more than access providers.
Which, if you think about it, is just what would happen if we assumed that the SD-WAN craze made the Internet the IP transport network of choice. Every site would pay for Internet access, of course, but other IP services (notably MPLS VPNs) would be unnecessary. That could happen even without cloud providers entering the business network game, but it would be more likely if they did because the effects of SD-WAN and alternative IP providers would be combined.
The combination of cloud/edge provider and CDN competition on one hand, and SD-WAN adoption on the other, could force network operators who believed that businesses were their big opportunity to shift their thinking away from core transport to either special access (5G slices, for example) or finally accept the need to offer higher-layer services, taking the cloud provider’s competitive battle to those providers’ own turf.
I don’t think there’s an operator CFO on the planet that would smile at the thought of getting into higher-layer services and competing in any way with cloud providers. What would then rescue operators from the risk? It seems likely that it would have to be 5G, but how exactly could that help?
5G creates most service features in what would be considered the access network. In effect, a mobile 5G network is a kind of halfway point between a traditional IP network and a switched connection-oriented network. It has to be able to do a bit of both, which might perhaps make it a contender as the foundation of network-as-a-service, and NaaS might be a good strategy for an operator to counter a cloud provider.
How? The one thing an operator has over a cloud provider is ubiquity. Microsoft and other potential operator competitors don’t have nearly the number of points of presence as traditional telcos or cable companies. Thus, any service offering that seems to be promising indiscriminate connectivity across a large area would favor the traditional operators. NaaS is such a service because it focuses on connecting relationships.
Juniper’s financial-industry talk on its “Session-Smart Routing” would seem to take aim at the NaaS opportunity by facilitating session, meaning relationship, awareness at the service level. Even 5G, which is likely to be used as a site-connection service to businesses, wouldn’t offer that granularity. Juniper’s positioning of the concept has been tentative, though. My Wall Street sources didn’t like the financial industry presentation, for example. They wonder whether Juniper is torn between aggressive presentation of their recently acquired assets and sustaining their position with the old familiar stuff.
That may be the same problem operators have, of course. NaaS is different, and “different” doesn’t play well in a conservative industry, which telecom surely is. The question is whether vendor caution and operator caution are locked in a deadly embrace here. Operators can’t adopt what nobody sells or promotes. It’s a major risk for an executive to sponsor a transformation that the vendors themselves don’t seem committed to. Thus, we may have to wait for vendors to advance their own positioning.
The public cloud providers may not be interested in waiting. Virtual networking, including traditional VPNs, are perfect examples of the black-box approach. What’s inside the network is opaque, and features and services are projected through the visible edge. The cloud providers in general, and giant Google in particular, have for a decade been using advanced network technology inside rather than building box networks. Microsoft’s announcement is an indication that they see the opportunity to take advantage of these new models in providing “old” services.
You can’t win a purely defensive war, only control how fast you lose. If cloud providers are happy to invade telco space, and telcos are content to let the cloud providers hold their own home turf, they’re accepting inevitable defeat. Telcos, beware.