NFV Made IoT Profitable for STC, Says Affirmed

One of the Middle East's biggest service providers might just have given a massive boost to the business case for NFV technology.

Saudi Telecom Co. (STC) , the telecom incumbent in Saudi Arabia, has started using a virtualized evolved packet core (vEPC) developed by Affirmed Networks Inc. to support Internet of Things (IoT) services on its commercial network.

That an emerging-markets operator is already using NFV to support live traffic is perhaps compelling enough, but STC's use of a vEPC is actually enabling it to make a profit on IoT services that would otherwise have been too costly to offer competitively.

So says Affirmed Networks, at least, and while STC is still considering detailed questions from Light Reading about its vEPC deployment, the service provider has not denied this claim outright.

In a joint statement released earlier this week, the Saudi Arabian operator acknowledged it was running live M2M services over a vEPC from Affirmed Networks and gave a nod to the commercial benefits of doing so, pointing out that NFV is "aimed at reducing costs" as well as improving the customer experience. (See Saudi Telecom Deploys vEPC for M2M Services.)

But during a conversation with Light Reading, Affirmed Networks went much further.

"What swung it for them was that to be competitive and actually have a profitable offering for M2M they had to make sure the infrastructure was virtualized and at a different cost point from the existing network," says Amit Tiwari, the vice president of product management at Affirmed Networks, when asked what persuaded STC to use a vEPC for live M2M services.

Affirmed Networks has been working with a few Tier 1 service providers on the rollout of its vEPC for M2M services, including US giant AT&T Inc. (NYSE: T), and it recently claimed that NFV technologies could reduce a service provider's operating costs by 67% and its capital expenditure by 68% in a white paper written with market research company ACG Research . (See Affirmed Networks Highlights NFV in Mobile Core.)

As yet, however, relatively few details have emerged about the real commercial benefits operators have seen from their early-stage NFV deployments.

Evidence that a vEPC has not simply lowered the cost of supporting particular services but actually made those services commercially viable would be a huge endorsement of NFV technology and could persuade other operators to accelerate their NFV plans.

It might also convince STC to start running more mainstream enterprise and consumer services over the vEPC -- something the operator has hinted it is considering by saying the vEPC is "initially" geared for M2M.

Tiwari says Affirmed Networks has already opened discussions with STC about expanding the vEPC into other areas. "The infrastructure they have deployed is fully capable of supporting consumer and enterprise traffic," he says. "There is no reason not to migrate those services over to this -- that is not what they [STC representatives] are saying publicly but that really is the play."

However, as indicated by Gabriel Brown, a senior analyst at Heavy Reading , it is one thing to use vEPC as an overlay to the existing core network for M2M, but quite another to replace the main core.

"With the overlay model for M2M there is an opportunity to optimize the deployment for that traffic model, and there is less risk of service disruption to your mainstream services." says Brown. "A lot of operators are not yet ready to virtualize the main core. One concern is simply that you don't want to risk all on this [emerging] technology until it's proven to work. Another is that a lot of operators have got a relatively new packet core and there's not a need to replace that at this stage. A lot of their activity today is about preparing for a refresh in a couple of years' time."

Although Japan's NTT DoCoMo Inc. (NYSE: DCM) has an extremely ambitious plan of virtualizing the main core by March 2016, that operator's thinking has been guided largely by a need to refresh what it already has. "DoCoMo is the leading operator in the sense of the main core network," says Brown. "A lot of the decision is to do with when you have made investments and what your current EPC looks like." (See DoCoMo on Track for Live NFV Deployment in Early 2016.)

Tiwari claims that technology from Affirmed Networks is now being used for a "full consumer EPC in several networks including for a very large Tier 1," but the vendor has not yet released details of that particular deployment.

He also says that Affirmed Networks is "engaged" with a number of other operators in the Middle East regarding vEPC rollouts: The vendor is clearly involved with Kuwait's Zain Group through its partnership with Elephant Talk Communications Corp. (NYSE MKT:ETAK), an MVNE providing a virtualized core network management platform to several service providers in the EMEA region. (See Affirmed & Elephant Talk Build a Virtual EPC .)

Light Reading has reason to believe that Etisalat , the incumbent in the United Arab Emirates, is one of the operators with which Affirmed Networks is in direct talks, though this was not confirmed by the vendor.

For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.

But the big question hanging over the small company, which currently has about 25 service-provider customers and 250 employees, is whether operators experimenting with new entrants will entrust one of them with an overhaul of the main core or prefer to deal with an EPC big gun, such as Cisco Systems Inc. (Nasdaq: CSCO), Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. or Nokia Corp. (NYSE: NOK).

"Affirmed Networks has very good mindshare for a new entrant and good engagements," says Brown. "But will the operator give them the full core network? We don't really know if they can transition that over yet."

Of course, Affirmed Networks is adamant that it can challenge the equipment incumbents in future and is quite scathing about its rivals' NFV capabilities.

"We are a quantum leap ahead of the legacy suppliers," says Tiwari. "We've heard from some customers that competing virtualized offerings are specifying what hardware should be used and what resources should be available -- that's really not meeting the basic tenets of NFV."

Tiwari insists that during the past couple of years Affirmed Networks has overcome service-provider concerns about relying on new entrants for large-scale NFV deployments. "We are actually carrying more commercial virtualized traffic today than all of our competitors put together," he claims.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

DHagar 11/12/2015 | 11:22:34 PM
Re: NFV Made Iot Profitable Iain, thanks for great report.  That is truly newsworthy.  It will take solid evidence and good business models to get people over the hurdle; which brings me to the second point.  It appears that the transitions from incremental to new platforms are as much a mindset/cultural issue as architectual/design?  If so, maybe this will unleash the opportunities for both NFV and IoT?
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