Reader Forum: From pipes to clouds: Strategic operator directions for 2011 and beyond

Having originally built and marketed “high-speed” broadband pipes as the access to the Internet, network operators have been disconcerted as these pipes have quickly contributed to a major loss of the operators’ value to Internet sites and over-the-top (OTT) players. Subscribers are certainly using these networks, as the dramatic increase in Internet traffic shows, but they turned to the Internet to access content and OTTs for services, which, in many cases, are free and directly compete with the same services network operators rely on for revenue. For example, voice over IP (VoIP) services such as Skype, have cannibalized landline and long distance services, while OTT video from providers such as Netflix, draw subscribers away from cable and satellite providers. Above all, the increased video streaming is flooding the network while not generating any additional revenue.
To reclaim a bigger portion of the service value that broadband brings to the user, network operators need to deliver more than just connectivity. They need to offer value-added services. Some of these services may be in the form of applications and content delivered directly to end-users, essentially competing with OTT offerings. Another class of services operators may offer is in-line services, which are applied in the path of traffic and controlled via policies. Such services may include limits on traffic volume consumed, Quality-of-Service (QoS) enforcement, content delivery from within their network in the form of Content Delivery Networks (CDNs) and exchange of information with content providers (e.g. supplying the conditions of a wireless link).
Operators understand this and have taken various steps to bolt such in-line services on top of their standard-based core network. Since specific sets of in-line services apply to packets associated with a given user or application, operators had to invest in products such as service-aware subscriber gateways (GGSNs), Deep Packet Inspection (DPI) systems and other products that maintain the notion of a session.
The problem is that the scalability and robustness of IP networks is highly dependent on minimal and autonomous treatment of packets in network junctions whereas the whole notion of a session has to do with global end-to-end awareness. This has led to the introduction of costly high function devices that are superimposed inside router infrastructure. These devices require complex control and complicated integration with policy and subscriber databases, as well as reliance on side effect behavior of IP technologies designed for other purposes (e.g. DNS currently used for load balancing of such devices).
This complexity presents a major competitive obstacle requiring a new network-based approach for session awareness. Fortunately, a solution is available in a form of grid networking that virtualizes the service layer of the operator.
Virtualization: The new network paradigm
To implement services, particularly in a flat all-IP Long Term Evolution (LTE) environment, and apply market strategy that reclaims value from OTTs, operators must change the way they view their network. They need to virtualize their operations, moving away from a pipe-centric paradigm to an application-centric, cloud-based one that focuses on agility, simplicity and cost effectiveness. Grid computing solutions that employ multiple servers to work together as a single entity can virtualize even the largest networks. This approach is highly flexible and scalable as well as cost effective, since it is based on industry-standard servers rather than proprietary hardware. These virtualized grid networks operate as a single unified pool of resources in which a request for service is allocated to the application server best able to handle the request. As a result, users receive better service, and operators derive more value from broadband.
Virtualization enabled by grid computing can revolutionize how operators connect subscribers to content and services by providing real-time awareness of subscribers, networks and applications to optimize every subscriber application flow. This ability enables smart clouds that can improve performance by matching applications to the appropriate resources.
Cloud-based virtualization monetizes the network
The smart cloud offers many ways for operators to monetize their existing broadband networks, either by delivering their own applications or by adding value to OTT services.
• With virtualization, operators can enrich subscribers’ connections to Internet sites and applications, giving them a comprehensive approach to adding value by leveraging subscriber information, such as demographic information and parental control; and partnering with Internet application service providers (ASPs).
• Via the cloud, operators can orchestrate the delivery of personalized bundles of services to every subscriber, resulting in increased ARPU, improved subscriber loyalty, lower CAPEX and improved service velocity.
• By optimizing the delivery of media and applications, smart clouds reduce the load on operator networks and improve subscribers’ quality of experience.
In a virtualized cloud network, each subscriber-application session and its associated context is given personal treatment. This ‘fused awareness’ of all aspects of a session flow allows operators, for the first time, to provide a tailored end-user experience for each session. Bandwidth and low-level network characteristics such as packet size can be optimized, and a custom path through the network created using information about the location and health of servers. Multiple application servers may work together to meet specific requirements. The end result: if a subscriber is watching a video, for example, fused awareness enables the operator to improve video quality on the fly –and charge for it.
Virtualization now
The time to seriously consider the benefits of network virtualization and cloud networking is now. As operators change their paradigm and move their networks from pipes to clouds, they can reclaim the value OTT players have won. Fused awareness enables operators to add value by providing the appropriate level of service to each application and to develop tiered pricing plans for different service levels. By customizing applications on a per-session, per-subscriber basis, operators can deliver a unique, highly personalized subscriber experience.
Virtualization also positions operators to handle increasingly bandwidth- and resource-intensive applications such as streaming music and video. Operators who develop an effective virtualization strategy will be able to allocate the required bandwidth to ensure their customers receive high-quality video sessions and gain new OTT revenues by charging for the added value. Finally, a virtualized, cloud-based infrastructure will enable operators to create—and charge for–their own applications to further increase revenue.
Dr. Yaron Simler joined ConteXtream in July 2009 as CEO. A veteran of the cable and satellite industries, Dr. Simler brings a rich multidisciplinary management experience and considerable knowledge and expertise in many aspects of the industry as well as a intimate familiarity with the U.S. and worldwide communication markets. Prior to joining ConteXtream, he spent three and a half years as president and CEO of Scopus Video Networks, during which he took the company public, grew its revenue by 25% and sold it to Harmonic.