If we were to identify the most significant trend in networking, the thing that has the greatest impact on 2023 and beyond, what would it be? In my view, it would be the consumerization of networking. There was a time when business services were the major driver of network data services, but that time is now passing. In fact, it’s pretty much passed from the perspective of operator and vendor planning, at least for the enlightened players. What matters now is the consumer, and consumer-targeted services will now become the baseline services for businesses as well, not immediately but inevitably.
The biggest reason behind this important trend is a simple matter of numbers. There are, in the US for example, about seven and a half million business sites, of which about a million and a half are associated with businesses that have multiple sites, and about fifty thousand are associated with “central sites”. In contrast, there are about one hundred thirty million households, of which about one hundred and eighteen million have broadband. My modeling says that, today, just about one percent of broadband connections in the US are made to business sites.
Residential broadband is not only pervasive, it’s getting better. The baseline for modern broadband Internet is 50 Mbps and many areas have gigabit service options. This, when back 20 years ago, a major company headquarters might have 45 Mbps T3 services (in point of fact, there were only about eight thousand such locations with that capacity in the US). The cost for a broadband Internet connection is a very small fraction of the cost of business broadband, too.
Finally, a key driver of residential broadband is increased “Internet tolerance” associated with the explosion in online shopping. Almost all residential Internet users will do product research online, and about 85% seem to do at least some online shopping. This means that companies are probably relying on the Internet to support sales, and that in turn means that they’ve accepted the QoS limitations of residential broadband for their sales overall. That makes them less anxious about shifting what was traditionally internal company traffic to the Internet, perhaps with added isolation and security via SD-WAN/SASE. “Less anxious” doesn’t mean an instant transformation to a consumeristic network model, but it does mean that the transformation is happening now, and will accelerate over the next three years.
This shift has major consequences, the most obvious of which is that residential broadband access technology becomes the only significant wireline infrastructure, and being a broad player in networking depends increasingly on tapping into that somehow. Every player doesn’t need to be a broad player, of course, but there’s going to be increased pressure on most to at least have a role in consumer broadband, and you can see that with Ciena.
Ciena announced on November 22 that it had acquired Benu Networks and entered into an agreement for Tibit Communications, with the goal of enhancing its position in residential broadband. Ciena has other options to increase its market footprint, as I’ll talk about below, but it’s found it necessary to get into the consumer broadband space in a more serious (and closer-to-the-user) way. That’s likely because competitors who did enter the space would be at an advantage if Ciena didn’t counter the move. Access is the biggest consumer of fiber, and an optical player needs to be supporting the dominant technology.
The shift of focus to residential broadband doesn’t necessarily mean the death of business broadband, but it does likely mean that MPLS VPNs will begin to decline. However, it is possible (even likely) that operators will look for a way to use residential broadband infrastructure to deliver VPN technology, likely through a combination of separated business connectivity in the access network and SD-WAN on-ramps to replace MPLS. This facilitates a shift away from the current VPN gateway routers to appliances or even hosted instances. There is, for example, no reason why the SASE-like SD-WAN technology used in the cloud couldn’t be used as a cloud-hosted VPN on-ramp to a specialized business broadband connection. It could also be used as an on-ramp to traditional SD-WAN-over-the-Internet, of course.
That takes us back to the point about Internet QoS and “best-efforts-is-good-enough”. Remember that wave of online influence on sales? Well, we deliver material through the Internet and the cloud, and we’ve adapted both the software involved and the interaction models of our software to the limits of “best efforts”. It works. Now we’re seeing more applications that support workers rather than customers shift to the same model, because of remote work and also because the Internet/cloud approach delivers a rich GUI. This effort is also proving that the Internet can support “mission-critical” interactions. And the Internet is available; there is nothing technical or regulatory that stands in the way of businesses shifting all their traffic to the Internet. Yes, it might mean changing technologies and moving security measures around, but it’s feasible. And the Internet is cheaper, so ultimately it will win.
One could reasonably ask what the industry thinks of this. What I hear from all my contacts is interesting. Among network operators, I find that the majority of the junior-level people see things pretty much as I’ve described, and the senior-level people reluctantly agree. However, the juniors are of the view that this shift will be decisive by 2024 and the seniors think it might be decisive by 2027. Among network vendors, I see a similar divergence of viewpoint, but based perhaps a bit more on role. Strategy players and engineers who are in emerging-technology areas see things like junior operator types, and management and engineers involved in traditional product areas seem to be locked into the operator-senior viewpoint.
Ciena is interesting here, in that they are taking steps now that clearly required senior management approval. Not only that, there’s a whole other set of network evolutions driven by consumerism, one being the potential metro bonanza. If metro centers become the places where edge computing is hosted, then could the core be an optical mesh of those locations? A full mesh of the roughly-250 major metro centers in the US would require about 63 thousand fiber strands, but my model says that a two-tier structure would require less than 11,000 and a three-tier structure less than a thousand. With packet optics you could thus have all the edges only three optical hops max from any other. That would validate almost all of Ciena’s current product line, so why not bet there?
Answer: Because Ciena wants a “natural opportunity” and they’d have to drive metro to make a go of that space. While metro positioning by major network vendors is currently sub-optimal IMHO, if Ciena made a sincere effort to promote a new metro model, only two outcomes would be possible. First, their inherent product limitations (primarily optical, little data center exposure) would mean they’d fail. Second, they’d get a good story out, and their packet-product competitors (Cisco and Juniper) would then be motivated to jump in, and Ciena would be out-competed again.
So we’ve had a quiet revolution. If there is no mass market, then whatever market has the most mass gets the most attention. If there is a true mass market, then eventually it eats all the other markets in terms of opportunity, and it becomes difficult to play even in a niche without a position in the mainstream. That’s where Ciena is, and where every network vendor is. The times aren’t changing, they’ve already changed.