Operators are looking to NFV and SDN to support the rollout of more flexible offerings, but what does this mean for their business model?

Iain Morris, International Editor

March 17, 2015

4 Min Read
Bandwidth On-Demand Raises Business Model Concerns

PARIS -- MPLS SDN World Congress -- Imagine if you could receive a bandwidth-on-demand service in a matter of minutes through a few simple clicks online. What if your small business could enjoy the kind of wide area networking (WAN) services that were previously available only to large enterprises? (See Might SDN & NFV Help Telcos Crack Open the SMB Market?)

It's a vision that could become a reality within the next few years according to service providers gathered at this week's MPLS SDN World Congress in Paris. By introducing SDN, NFV and Lifecycle Service Orchestration (LSO) technologies into their networks, operators are hoping to become as agile as web players like Amazon.com Inc. (Nasdaq: AMZN) while being able to guarantee secure, "carrier-class" services for their customers.

But as a panel session on the opening day of the event showed, there is still huge uncertainty about the deployment of these technologies, while the business models of the future have yet to be clearly defined.

A big question for operators is where to begin when upgrading their systems. "If you ask 10 executives in Telia Company you will get 10 different answers," concedes Yousef Ayad, a senior global product manager at the Nordic operator. "The priorities are not obvious but an easy answer would be to start with new cloud-based services that are not platform-dependent."

Nevertheless, Ayad believes the use of SDN, NFV and LSO will open up a whole new market for operators, allowing them to provide corporate WAN-like services to small and midsized enterprise customers. "TeliaSonera is currently investigating what it can do in that market," he told attendees.

Hong Kong-based PCCW Ltd. (NYSE: PCW; Hong Kong: 0008) is also exploring opportunities that are appearing as virtualization technologies are deployed. "Customers already come to operators for lots of cloud solutions," says Divesh Gupta, PCCW Global's assistant vice president of business operations. "We could virtualize Ethernet access to cloud resources and then bundle products together."

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

Bandwidth-on-demand services could hold enormous appeal for small businesses that might occasionally need a higher-speed service for a short period of time -- if, say, an important presentation to clients is taking place on the premises.

Yet -- as noted by panel moderator Carsten Rossenhoevel, the managing director of R&D for Germany's European Advanced Networking Test Center AG (EANTC) -- those business customers would naturally expect such a flexible, on-demand service to cost less than a dedicated offering. That could mean less revenue for operators, begging the question: Where is the business case?

France's SFR reckons new pricing models could help. Much as airlines raise prices sharply when seating space is running low, operators could match fees for bandwidth products to fluctuations in supply and demand, according to Jamy Rousseau, a product marketing manager for the French service provider. "If everyone asks at the same time you can put a high price on the bandwidth," he says. (See Opera Sees Toll-Free Data Catching On.)

For other players, however, the attraction lies in being able to support services that would otherwise be unavailable to end-users. Clearly, there is also a defensive element to the rollout of on-demand services. "If you were to offer only a fixed contract customers might go to another service provider," says PCCW's Gupta.

So exactly how long will businesses have to wait until they can obtain a carrier-class on-demand service in just a few clicks? Matthias Homann, a senior specialist in transport network design at Colt Technology Services Group Ltd , believes this scenario could be a reality for some services just two years from now, but admits there are plenty of challenges ahead. "There is still a lot of work to be done, especially in the BSS and OSS area," he says.

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

About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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