Instead of worrying about the threat posed by some OTTs that offer competing services, the communications industry should be focused on enabling the OTTs and their customers to more easily buy and consume IP broadband services.
I had this revelation last month at the Light Reading 2020 Vision Executive Summit in Reykjavik, Iceland, where one of the hot topics was the role of so-called "over-the-top" services offered by third-party companies on top of the network providers' IP broadband services.
While much of the discussion was centered on the potential threat to future revenue streams posed by OTT providers as consumers and businesses are increasingly attracted to their services, I was surprised to find myself (somebody most people consider cynical, but I prefer hyper-realistic) as one of the more optimistic people in the room because where others see a threat I see an opportunity.
Understanding the OTT stats
We are naturally alarmed when we hear statistics about the number of users on Facebook, the volume of video traffic generated by Netflix, the eye-popping earnings reported by Apple or the scale of Amazon's web services. What we too quickly forget is that the global communications industry is one of the world's largest at nearly $2 trillion and is the foundation of all the aforementioned businesses. Facebook, Netflix, Apple, Google, Amazon and many other businesses would not exist without the broadband IP infrastructure that has been financed and built by the communications industry over the last 20-odd years.
But surely the OTT providers are taking revenue from communications providers, aren't they? Not really. The global communications business has been growing and continues to grow every year. Even services such as voice that are offered at very low prices by OTT providers are declining slowly on a global basis. And those declines have been more than offset by growth in IP broadband services. In fact, fixed IP broadband service revenue surpassed voice in 2014 and the same is expected to happen in wireless in the 2016-2017 timeframe. As more services and business models shift to the Internet the value of the IP broadband infrastructure will continue to grow.
The investment in IP broadband infrastructure over the past decade has been huge -- some estimate the total investment in the US alone at over $250 billion. Much of that investment is in physical infrastructure such as copper, fiber and wireless spectrum that is very difficult and time consuming to replicate or is limited by physics. As an industry we've built the foundation for countless businesses that will drive the global economy for years. We are now in a position to realize significant productivity improvements by applying the recent innovations in cloud computing pioneered by the OTT players to build more agile IP networks and automate workflows.
Cloud and the IP network
Cloud computing is driving the most fundamental changes in IP network infrastructure that we've seen since the late 1990s, and where there is change there is always opportunity. The IP network must become fully programmable across all layers to allow its resources to be dynamically consumed and optimized in response to ever changing application workloads. This forces a complete rethinking about how networks are built.
No longer can we build networks from the ground up, one layer at a time. Instead, we need to redesign each layer (physical, transport, switching, routing, etc.) to enable agility while optimizing costs across all layers simultaneously. And, of course, we need the software tools to automate and optimize configuration and consumption of the network resources (that's right -- I'm talking about software-defined networking). This new infrastructure will accelerate IP broadband revenue by enabling it to be more readily consumed and upgraded.
As we transform the IP network to make it readily consumable by the cloud applications that rely on it, we can also exploit cloud infrastructure to make the network more efficient. By virtualizing some network functionality and running in a cloud compute infrastructure (yep -- I'm talking about network functions virtualization) we can begin automating workflows that previously required physical installations. Network functionality can be introduced, decommissioned, and expanded via software which accelerates new service introduction and yields significant productivity improvements.
All of this is driven by the OTT providers. They create demand for and increase the value of the IP broadband infrastructure while pioneering new technologies such as virtualization and network programmability. You see, enabling the OTTs and their customers to buy and consume more IP broadband services more easily will be good for business. These are exciting times, even for a middle-aged cynic.
— Stephen Vogelsang, Vice President, Strategy & CTO – IP Routing and Transport Business Division, Alcatel-Lucent, special to The New IP