According to a Bell Labs study, service providers can reduce opex by up to 40% by moving critical residential gateway functions to the cloud. Virtualizing these functions make it easier and cheaper to install, operate and maintain home networks for both service providers and their residential customers.
Virtual customer premises equipment (vCPE) has long been thought of as the first place that service providers will go when moving to New IP networks not only because they expect the ROI to be quicker but also because vCPE play a critical role in connecting users (both business and residential) to the Internet. (See 2020 Vision: Brocade on Virtualization & Automation and AT&T Already Reaping New IP Rewards.)
Virtualized residential gateways (vRGW) move functions like IP routing and network address translation (NAT) to the cloud along with centralized management and control. According to Bell Labs this move lets service providers introduce a more simplified, bridged gateway model making it easier for the user to successfully install, operate and maintain their home network, thus significantly minimizing service calls or home visits. (See also Virtualized Residential Gateways Yield 40% Savings – AlcaLu.)
When Bell Labs kicked off the project a year and half ago, the value of virtualizing the residential gateway was not so obvious, according to Thomas Weishaeupl, senior expert, Bell Labs Consulting. "We came to the conclusion that it was really not about capex -- you still need a CPE. You cannot avoid putting something there and you cannot get rid of the box," he said. "You can make it simpler, but the business case has to be sustained by something else."
That "something else" included the better management of homes so that service providers can have better insight into the functions and services. "The top line numbers and benefit is in the range of 20 to 40%," he added. "Behind this are also changes in fulfillment and assurance processes, and also in customer experience, which gives you an uplift in the revenue space because you can reduce churn and keep your subscribers happy."
Weishaeupl said that this study shows that it "makes sense to go for virtualization," but he added it does not always have to be the first step for virtualization for each operator. "If some operators have needs in certain spaces in the network they may do something there instead."
When it comes to "making sense to go for virtualization", Bell Labs estimates that a vRGW can reduce the costs of service fulfillment, assurance and lifecycle management up to 40%. In addition to reducing operating cost and improving the customer experience, a virtualized gateway model allows new services to be introduced more rapidly and consistently across the installed base of residential gateway devices.
A few details from the study include:
Service fulfillment: 7-12% cost reduction -- a simpler residential gateway, extended auto-installation capabilities and network-based service capabilities lead to faster turning up of upgrades or new services and fewer home visits by technicians to address service activation or upgrade issues. Home visits can easily represent over 80% of service fulfillment cost.
Service assurance: 63-67% cost reduction -- service provider data shows that 30-40% of trouble tickets are related to issues deeper in the network. These can be resolved better by virtualizing and centralizing these deeper functions in combination with home device management capabilities.
Life-cycle management: approximate 66% cost reduction -- although life-cycle management costs are relatively small compared to fulfillment and assurance costs, enhanced service velocity and agility improve service innovation, time to market and revenue.
For more on the financials of the study, you can read the full whitepaper, but here is a graph that sheds some light on the cost savings per category and opex vs capex.
— Elizabeth Miller Coyne, Editor, The New IP
Breakdown of Operating Cost Savings
Source: Alcatel-Lucent, "The Case for a Virtualized Residential