Network virtualization: Why CSPs need to get their heads into the cloud

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Terrestrial networks will soon be eclipsed by virtualized networks. Virtualization has enabled new business models and heightened competition for CSPs, but it also presents an opportunity for them to fight back against non-traditional competitors who have been funneling away high margin business. CSPs that understand business implications and correctly position themselves will emerge stronger and in a more profitable position. Those who fail both understanding network virtualization and implementing processes and business models to support it will be relegated to low margin infrastructure providers for non-traditional challengers or will disappear.

Virtualized networking has lagged virtualized compute. Despite some initial alignment needs, virtualizing the network can collapse costs by 70% or more in some areas, such as the evolved packet core.  This is an area of disruption that forward thinking companies will lead in order to gain a competitive advantage.

Virtualized networks and as-a-Service Cloud offerings will help CSPs compete with the following non-traditional challengers:

Over the top (OTT) Providers: OTT providers are web-based providers of services, often entertainment and communications related applications. These challengers are offering value added services that CSPs have been eyeing-and investing in-for years.

CSP answer: Some CSPs are bundling Cloud-based communications applications and entertainment offerings with their traditional fixed and wireless services to counter OTT competition. Other CSPs are partnering with OTT providers and selling the OTT providers’ services as part of a Cloud-based offering to the end customers within a premium bundle. Another solution some CSPs have found is to collaborate with each other to launch their services on a joint platform.

Mobile Virtual Network Operators (MVNOs): MVNOs are service providers who use the Network of an incumbent CSP to provide communication Services to a targeted demographic. MVNOs can range from Full MVNOs who own their own networking and router functionalities to Branded Resellers whose only focus is on sales, marketing and sometimes only branding. Discount retailers in many areas have entered the Branded Reseller business. Mobile Virtual Network Enablers (MVNEs) provide billing, business support systems (BSS) and operations support systems (OSS) to MVNOs. Mobile Virtual Network Aggregators (MVNAs) are micro-targeted service providers who purchase bulk airtime from various MVNOs and add their own services to the mix.

CSP Answer: Many CSPs own or have a significant share in MVNOs and players along the MVNO value chain. CSPs use the MVNO model as an opportunity to differentiate themselves to specific customer segments. Often these customer segments are migrant workers, ethnic minorities and youth. CSPs enter foreign markets as MVNOs as well.  Network virtualization will be a key enabler to MVNOs, as it will provide them with a pay-as-you-go method of provisioning their services. Moreover, they will be able to maintain their lean organizations while bringing value-add services to market quicker than they are currently able to do.

Additional ways that network virtualization will help CSPs compete:

  • Better streaming and targeted advertising through partnerships with Content delivery networks (CDN): CDNs are as-a-Platform services that enable Communication Service Providers (CSPs) to compete in with non-traditional challengers by delivering content locally and outside of the CSPs’ network.  CDNs also present CSPs with monetization opportunities through localized advertising.   CDNs are networks of content distribution servers that can extend across the globe. Their role is to replicate and provide content from their servers to local clients.
  • Ability to scale for growing traffic demands: Mobile operators are having difficulties provisioning for the huge data growth forecasts, especially aligning to fixed architectures under control of incumbents. Additionally, CSPs can offload certain peak traffic demands into virtualized networks. Increasingly sophisticated enterprise communications applications will also allow traffic to be offloaded into a software defined environment.  Routing traffic and load balancing are areas that are expected to see huge amounts of research and innovation in the coming years.
  • Enable delivery of a wide range of Value Added Services and Enterprise Applications: Not only will Cloud enable as-a-Services enable CSPs to scale their services, they will also allow for cost effective provisioning and delivery of increasingly sophisticated and media rich services. In order to stay competitive with OTT providers and other challengers, CSPs need to be able to bring services quickly to market without eating into their bottom line. As-a-Service Cloud solutions will allow for greater financial as well as technical flexibility, as CSPs will be able to pay for IT demands as needed.

About the Author: Elizabeth Press

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