MPLS 'Could Save Billions' Says Study

Users need to be "forced" to deploy Multiprotocol Label Switching (MPLS) and start setting priorization bits in the traffic they send over broadband networks, according to a study released this week by TeleChoice Inc., a market research consultancy (see MPLS is Key to Profits, Says Study).

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
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lu-alum 12/4/2012 | 10:45:37 PM
re: MPLS 'Could Save Billions' Says Study Give me a break! That's a pretty friggin big and incorrect assumption.
optigirl 12/4/2012 | 10:45:36 PM
re: MPLS 'Could Save Billions' Says Study Where do these consultants come up with these bright ideas? I think it has a lot to do with who pays the tab and Telechoice is one company with whom I have previous experience that is for sale. They also did some DSL work for a company a friend of mine worked for and there was some equity for hire if you know what I mean. Right now Tellium has them on retainer so try and add two and two together for the answer.....

Back to the subject:

The logic that these people are employing show some lack of understanding about the telecom industry.

1. Carriers are simply not going to spend money any longer if they are not making money in return.

2. These ideas about 100Mbs being delivered to homes is so far off from reality in the future that they are not worth taking seriously.

3. What makes you think that even if there is such traffic out there that major providers will agree to haul it? There is simply no rule that says they have to support the traffic if there is no money in it for them.

4. However, if there is such a demand for bandwidth then there will be corresponding revenues to support it as someone is going to have to pay the tab. Or are we still living under the assumption that carriers are going not going to charge for the services?

5. Based on their numbers, even by going to the traffic prioritization model, they are saying that carriers will be spending, on average, $100 Billion a year for the next 5 years for optical equipment?????

6. Telechoice is saying that if the carrier world does not dump IP for MPLS we are looking at a disaster???

I don't get it. Anyone else care to comment on this because my colleagues and I are pretty much dumfounded by what we see here.
TeleDump 12/4/2012 | 10:45:35 PM
re: MPLS 'Could Save Billions' Says Study Do you know if they sell drugs on the side?

Back to the topic:

This is clearly somebody does not understand the telecom industry and try to make a buck on that industry.

Now, I am setting in the IETF MPLS meeting and nobody believe this stuff.
light_rock 12/4/2012 | 10:45:35 PM
re: MPLS 'Could Save Billions' Says Study "...but users haven't been penalized for calling all of their traffic important. That's going to have to change, Telechoice says."

Let's see...the way for carriers to reap all these rewards is to "force" users to adopt MPLS and to prioritize traffic...and the way to do that is to penalize the users. Sounds like a winning strategy to me :-)
Belzebutt 12/4/2012 | 10:45:34 PM
re: MPLS 'Could Save Billions' Says Study 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

This reads like a paragraph out of one of those forecasts made in 2000.
MP_UK 12/4/2012 | 10:45:34 PM
re: MPLS 'Could Save Billions' Says Study Yeah, yeah - MPLS is the solution to EVERYTHING, I bet it even makes cups of coffee when it's not solving third world debt.
So what services exactly is it that everyone is crying out for which means we'll be forced to use MPLS? VoIP, I don't think so, many incumbents have a voice network anyway. And what makes MPLS so obviously the QoS mechanism of choice anyhow, I wonder if Telechoice (or their sponsor,) have heard of DiffServ? And I don't see how you can stop customers labeling all their traffic as top priority whichever protocol you use.
Telechoice's report seems to be a VERY thinly disguised ploy to get carriers buying truck loads of networking gear they probably don't need, unless, perhaps, there are 100M homes with 100Mbps connections in eight years time - think I'll wait and see. Who did they think was going to believe this?
objectivity 12/4/2012 | 10:45:33 PM
re: MPLS 'Could Save Billions' Says Study Optigirl -

While I agree with some of your comments, at least TeleChoice is willing to start the debate, and back it with some analysis, even if there is disagreement about assumptions.

You may want to check out a recent Dow Jones Newswire, "VCs Hit Up Washington For a Broadband Policy," at the following URL:


A quote from the newswire follows:

'"I think there is huge potential there that is untapped and unrealized," said Connie Correll, executive vice president of TechNet (www.technet.org), a lobbying coalition composed of U.S. technology executives.

TechNet has a goal of deploying 100-megabit-per-second broadband connections to 100 million homes and businesses by the year 2010. A national policy is imperative, Ms. Correll said, to establish the kind of environment required to meet that goal.

"Our ultimate goal is to have the White House announce a nationwide policy, which we believe they may do in the next month or so," Ms. Correll said. "Every other [Group of Seven nation] has a broadband policy except for the United States."'

I will reserve final judgement until I see the report. Thanks for your informative post.

- O

I'mRael 12/4/2012 | 10:45:33 PM
re: MPLS 'Could Save Billions' Says Study
Once you get on, it's tough to get off!

Gonna need an OffRamp for all those OnRamps out there.
optigirl 12/4/2012 | 10:45:32 PM
re: MPLS 'Could Save Billions' Says Study Where is the analysis? This report is an attempt to help out a client and if you read the posts so far I don't believe that anyone is taking this seriously.

Look, I would absolutely love it if carriers would spend that sort of money on optical. Hell, we could all retire rich if it were so. But, the last thing this world needs is another consultant on the take putting out stuff like this. They are not starting a debate. They are spreading hype, fear and basically bs in order to make a buck and help out whomever paid them to do this report.

The other points that you cited about the Broadband Lobby are something we keep hearing about but offer no substance. Who's going to pay for all of this stuff? The tax payers? Are we going to subsidize the carriers any more than we do? Don't tell me we are going to get even more government regulation as a result of such an initiative. Oh yeah, then let's not forget that the government gets some say so on what goes over these pipes and that starts to get really scary.

The crucial issue falls to:

"How does the telecom industry make money?" Business models don't work cost us all in the end.
lu-alum 12/4/2012 | 10:45:31 PM
re: MPLS 'Could Save Billions' Says Study I read the same article in the Journal this morning, but just because you see the same data used twice doesn't make it any more valid. I'm thinking that Technet might be a tad biased. It's actually laughable. For years there's been a test market in Palo Alto for 100Mb/s connections, and it's so expensive that they can't get anyone to use it. If you can't get people in P. Alto to sign up for the service, how do you expect to the rest of the nation to even consider it?
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