There’s been a lot of speculation on “who will buy NSN” these days, with candidates all over the map. If you look at the mix who have been suggested or who might be logical, you see that there’s an issue in the marketplace that would have to be handicapped before you could pick from them, or possibly reject them all. That issue is what powers the network of the future. Until you decide that, forget who an NSN buyer might be.
Bits, you say. Or Internet. Or content. Nope, it’s PROFIT. Operators will buy and deploy what makes money for them, and that’s been changing over time because of the cost-of-bandwidth and utilization curves. In the early days of broadband, cost per bit for fat pipes was a LOT lower than that for thin pipes, and this made aggregation a good business to be in. We built networks that were hierarchical because that concentrated traffic to successively fatter (and cheaper in unit-cost terms) trunks. But as technology has improved the cost curve has flattened out. It’s harder now to justify boxes inside the network because there’s less difference in unit cost per bit. This is the technical dimension of what’s behind the OTN craze. The business dimension is simpler; revenue per bit is falling so cost per bit has to fall faster.
The big question would be what wireless’ durability would be as a profit generator. The Street forecasts for wireless revenue suggest that in all major markets the ARPU growth in wireless will flatten in 2013 and decline beyond that. This would mean that just offering wireless bits would quickly become as profitable as just offering wireline bits, which means “not profitable”. In this situation it would be hard to get a payback from buying somebody like NSN…unless…
…unless there was some known kicker for profit growth that wireless could bridge to. A lot of people think that mobile content is the answer, and I think they’re wrong. First, mobile content in a true sense would demand a much larger investment in cellular infrastructure, and the willingness to pay for content doesn’t change much wireline versus wireless, which means that the revenue per bit couldn’t be much higher for this new buildout. Which means there won’t be one. Second, the percentage of consumers who view mobile content at least once per month has been pretty consistent according to research firm Comscore. The hours viewed per month has grown, but it’s still a single-digit fraction of TV viewing.
So what’s the driver? If there is one, I think it’s the cloud-hosted-services model. Most operators have now accepted that the services of the future will be built on networks but built IN cloud data centers. How that could be done is critical, and NSN does have some credentials in the cloud-as-a-service-layer business. Their vision aligns pretty well with the operations-driven view the TMF espouses, but I think that’s their problem. OSS/BSS guys have not driven the monetization bus in the surveys I’ve done. So NSN would have to create not so much an approach to cloud services that’s TMF-friendly as an ARCHITECTURE, a productized element, that’s monetization friendly. They could do this, but they’ve not done it yet, and until they do I think they pose a problem for any potential acquirer. The problem is “will I get my money out?”
SDNs can be an element in fixing this problem too. If we applied SDN principles to cloud-building we could likely reduce the cost of the cloud and also increase the value of cloud services by improving QoE. We could also make the network more of a partner in the cloud. NSN really doesn’t SDNs at this point; we can’t find any specific accommodation to the concept, which is too bad because if NSN were to create the “real” layered structure of SDNs I’ve talked about here before (the “cloudifier”, “SDN Central” and the “topologizer”) they could add a lot of value in network virtualization to pretty much anyone’s portfolio. So, NSN, get SDN-ish quick.