Telecom was once seen as innovative and high growth industry, telecom companies were at the forefront of the first high-tech bubble during late 90’s and early 2000’s. Traditional telecom services of voice, messaging, video broadcast and data connectivity were profitable and operator were only competing with local rivals who were all protected by their respective regulatory frameworks. As a result, they became a bit too comfortable in their modus operandi and didn’t feel the urge to innovate further.
But, other Internet OTT (over-the-top) companies exploited the lack of innovation by telecom and kept introducing services with not only enhanced features but also global/ubiquitous reach and new business models. The result was emergence of other alternatives for multimedia applications to run over data networks and even replace the traditional telecom services. As a result, telecom operators find themselves as a mere connectivity provider which is very similar to other utilities like water and electricity.
This new role could be fine if it provided a sustainable business model but with cloud, mobility and social media, telcos are facing an explosion of data on their networks where they have to keep on investing to expand the capacity but resulting revenues are not growing in-line with the expenses. Result is reduced profitability and excessive pressure on both CAPEX and OPEX spending.
Now the rise of Network Cloud enabled by SDN (software defined networking) and NFV (network functions virtualization) has promised to address several of the challenges that exist for Telecom Operators worldwide and a major factor as why they are less competitive than OTT players.
Both SDN and NFV have taken the telecom industry by storm in the past two years. The level of excitement, buzz and industry activity during this time is unseen in telecom history. Perhaps this is as major a paradigm shift as moving from analogue to digital or from TDM to IP.
The industry has seen a rapid development in SDN/NFV technology solutions. The incumbent vendors are busy in evolving their SDN and NFV stories while it has become a lot easier than before for new players to not only enter the market but to pose a head-on challenge to incumbents in major network build-outs as was shown by AT&T during its selection of vendors for Domain 2.0: User-Defined Network Cloud.
It’s important to understand the benefits brought by network cloud in order to analyze whether the unprecedented hype surrounding SDN and NFV is justified or not.
Reduced disparity between costs and revenues
Using COTS servers and white label switches will have a direct impact on both CAPEX and OPEX due to shared hardware resources, reduced space, power and cooling requirements etc. When we couple the reduced costs with the ability to offer more innovative services (e.g. bandwidth on demand for enterprise applications or flexible, reconfigurable, virtualized data-centric network), the disparity between costs and revenues will decrease.
Increased flexibility, agility and resource utilization
Currently network resources are statically configured and cannot be moved when & where needed. The networks are planned and dimensioned for peak capacity which results in wasted infrastructure resources.
As with Cloud Computing, virtualizing network resources will enable dynamic allocation and hence dimensioning for average rather than peak.
Faster time to market (TTM)
Current telecom product development cycles are hardware-oriented which normally run from idea generation, development of business plan, definition of requirements, requests for proposals, evaluations/negotiations, shipment, deployment, typically complex OSS/BSS integration, acceptance testing and finally service introduction. The result is that, on average, it takes 12 – 24 months to introduce new service for telecom operators. While they are competing with OTT players who, by relying solely on software solutions and Cloud technologies, are able to bring a new service in less than 3 months. Network virtualization shall enable the same kind of TTM to that operators can respond must faster to changing market needs.
Reduced Complexity and easier inventory management
Today’s networks have enormous variety of proprietary hardware appliances which mandated operators to follow hardware obsolescence cycles to ensure ROI (return on investment). Keeping & tracking inventory & spares for all different kinds of hardware is also a major overhead in network maintenance.