The issue could be the difference between service providers making a healthy return on investment or facing a "very ugly" financial future, according to the study, which analyzes the impact of current campaigns in the U.S. to roll out 100-Mbit/s connections to 100 million homes and offices by the end of the decade.
The study, Telechoice Perspective on Super-Broadband Deployment Initiatives, says that if these plans go ahead, service providers will have to cope with a massive increase in traffic on metro and long-haul networks.
If nothing is done about prioritizing traffic, then service providers will face a bill of $840 billion over the next five years to upgrade their optical transport infrastructures to cope with the deluge, the study says. With prioritization, capacity could be used much more efficiently. A reduction of more than 40 percent could be made in optical transport infrastructure expenses.
The impact on profitability is even more dramatic, according to the study:
- If you assume a 2002 IP services market size of $6B and a 2002 profit margin of -20%, in either scenario, revenues increase to $613B by 2006. In the [unprioritized] scenario, industry costs increase to $554B by 2006 (10% margin); in the [prioritized] scenario, industry costs only increase to $422B by 2006 (31% margin)...
Cumulative profit over the 2002 to 2006 period is also dramatically different: The [unprioritized] scenario yields $114B (less than 15% of the CapEx) while the [prioritized] scenario yields $267B (45% of the CapEx).
In order for prioritization to work, carriers need to deploy MPLS rather than Internet Protocol (IP) services, according to Telechoice. And they need to come up with a way of forcing users to also deploy MPLS and categorize traffic so that the prioritization schemes supported by MPLS are actually brought into use. It notes that previous technologies such as Asynchronous Transfer Mode (ATM) have supported different grades of service, but users haven't been penalized for calling all of their traffic important. That's going to have to change, Telechoice says.
— Peter Heywood, Founding Editor, Light Reading