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Monday, March 2, 2015

Voice over Wi-Fi: Cable versus LTE: Part II

In the article “How Big a Threat Is VoWi-Fi to the LTE Operator?” (Video: https://www.youtube.com/watch?v=o8hgAzT073Q) I illustrated the potential threat cable voice-over-Wi-Fi is to the mobile network operator. In Part II of the LTE threat I look at this issue from the CxO’s point of view of each organization.

Cable executives see VoWi-Fi as “nothing but upside.” VoWi-Fi enhances customer bundles, adds new revenue opportunities and is technically achievable. From a network perspective, their HFC networks are widely deployed, minimize access point backhaul issues, and have a presence in millions of homes and small/medium businesses. This physical presence gives them instant Wi-Fi access points on which they can add voice services. Additionally, they have a voice backend, and they are well positioned to handle the additional voice traffic throughout their network. Given these strengths, they can and will move fast, hence, “nothing but upside.”

Mobile network operator (MNO) executives see Voice over Wi-Fi as “nothing but threats” to subscriber relationships, top-line revenue and profits and CAPEX flexibility. These threats are visualized in a number of ways. MNOs lack a physical presence in the home beyond the end-user devices with most users already off-loading to broadband delivered Wi-Fi for performance and data cap reasons. Although LTE backhaul networks have substantial capacity it is questionable whether they can gracefully cope with an onslaught of Wi-Fi data traffic. No company will deploy a voice-only Wi-Fi network. MNOs that do not own fixed network assets have a more daunting competitive environment; however, those that do have fixed network assets still have substantial challenges. 

Cable is not without its own challenges. Given that they will be a new entrant to the mobile voice market they must meet certain baselines of quality of service, which will add to the deployment time, cost and complexity. Cable companies will never build out an LTE network. Never is a long time but, this is a safe bet. True, they can become MVNOs or be bold and buy Sprint or T-Mobile. Without LTE cable companies will not be able to offer the coverage MNOs can.

New Wi-Fi voice and data technologies are under development. Improvements to the over-the-air protocols to address fairness and contention are emerging but VoWi-Fi technologies are nascent and standards take time. All of this will delay cable’s first mover advantage. 

MNOs have advantages as well. The biggest, as well as the most technically challenging, is intelligently leveraging their fixed and mobile networks to gain real-time insights of both networks’ end-to-end conditions such as congestion. Then, using these insights they can provide a superior quality of experience to their subscribers, particularly those deemed as high-value subscribers. For example, a default “off-load-to-Wi-Fi” strategy may not make sense for all subscribers if the Wi-Fi network is congested and the LTE network is not. 

MNOs with small cells sites can upgrade them with LTE/Wi-Fi combo devices. The MNO has already solved the tough small cell site problems (real estate, backhaul, powering, etc.) so swapping out devices is manageable. Keep in mind that these small cell sites are not randomly dispersed. They are located in high-traffic, high-value locations. This enables the MNO to quickly expand its Wi-Fi network presence in these and high-value locations. Even more powerful is the ability to add Wi-Fi to its Self- Optimizing/Organizing Network investments. 

The MNOs have a bold strategy available to them. They can move fast too, and because they have a carrier-class LTE network on which to fall back they don’t have to start with a gold plated Wi-Fi network. They state that they want to be more like web companies and deploy services fast and improve them over time. On this point, they can walk the talk and rapidly deploy a data-only Wi-Fi network that’s “good enough” and let their subscribers use it for free until they attain the level of quality they really want. A lesson from the web world is capturing customers quickly, which is paramount to success. 

Voice-over-Wi-Fi has the real potential to be a major disruption to the service provider industry. Cable companies see this as nothing but upside, whereas mobile network operators see this as nothing but threats. Both have advantages and challenges. Cable has the footprint, voice backend and potential first mover advantage. Yet, as a new mobile voice entrant they have minimum quality thresholds they must meet to be credible. MNOs, on the other hand, lack a strong physical presence in the home and may face network capacity challenges with the addition of massive amounts of Wi-Fi data traffic. However, they have the ability, if bold enough, to take a page out of the web company playbook and move even faster to deploy a “good enough” data-only Wi-Fi network using today’s technologies and their current installed infrastructures.

Want more information or to discuss strategies to dominate the game changing market of voice-over-Wi-Fi? Cable companies, mobile network operators and vendors to both industries contact ACG at sales@acgcc.com to schedule an appointment to discuss these issues with our analyst Greg Whelan



Tuesday, February 24, 2015

ACG Announces 2014 Omega Award Winners

ACG Research announces the 2014 winners of the company’s first ever Omega Awards. The award honors excellence in two categories: message marketing with HotSeat, Whiteboard and Spotlight Innovation videos and operational excellence.

Juniper Networks earned the award for its HotSeat video “Defining High IQ Networking.” Rami Rahim, EVP/GM of the Juniper Development and Innovation team at Juniper Networks, and Ray Mota, CEO of ACG, discuss the definition of a high IQ network architecture and the significance to service providers and their customers. They recap Juniper’s recent announcement of new solutions that will help service providers automate networks, enable them to scale and dynamically create new services. The new NorthStar Network Controller is highlighted with use cases, as well as Juniper’s position and market differentiation on open standards.


Whiteboard Winner Nuage Networks was awarded the Omega for its “Seamless enterprise networking; data center to branch” video. Sunil Khandekar, CEO, Nuage Networks, and Ray Mota, CEO of ACG, discuss how the cloud is changing the way businesses consume and share information: for internal use or for sharing information with customers and business partners. The trouble with the cloud is it’s not ubiquitous; it is made up of distinct islands of capability. The compute resides in the data center, and the consumers reside remotely. Nuage Networks has shown that with SDN we can remove the static constraints within and across the data center to unleash the speed of consumption of information within the cloud. We now need to provide the same seamless environment for the branch environment and to improve the dynamic nature of the wide area network.



Trusted Vendor Award went to Cisco. The company continues to demonstrate operational excellence as measured by ACG’s financial index. Some of Cisco’s strengths include:    
  • Very high operating margins because of sales, solid gross margin, & expense  discipline; operating margin increased by 47.3% 
  • US commercial and enterprise orders increased by 10% YoY
  • Highest R&D potential (31.6%); allocated more than $1.4 B to R&D each quarter in past two years
  • High receivables efficiency ratio: 2.6; aligned credit policy
  • Effective asset utilization yielded $3.5 for each fixed-asset dollar
  • Dependency on debt is low; can acquire less expensive loans
  • QoQ Operating income jumped 52.5% in 3Q


The vendors’ performance scores are calculated using 11 ratios and Z scores, subdivided into two categories: sustainability and operational; the data originates from annual reports, and quarterly filings. The index examines standard financial ratios related to profitability and liquidity, which are validated by Wall Street. An average of all ratios across all vendors was defined as the index. The goal of the index service is to create an industry baseline that takes all of the vendors in targeted sectors and creates an industry average to determine vendors’ risk levels.

Check out the video of Ray Mota, CEO of ACG, giving out the awards.

Interested in becoming a star in your own video? Want to find out which vendors demonstrate operational excellence and sustainability? Check out our services or contact ACG at sales@acgcc.com for more information about services and products.

Congratulations to the 2014 Omega Award winners!

rmota@acgcc.com
www.acgcc.com

Monday, February 23, 2015

Making the Business Case: Network Analytics for the New IP

An analytics offloading use case conducted by ACG Research compares the total cost of ownership of Brocade’s architecture with two PMO alternative architectures. The Brocade architecture has 23 percent to 33 percent lower TCO than the PMO alternatives. Brocade’s advantage is due to its use of virtual network functions hosted on virtual machines and the agility and elasticity achieved though Brocade’s orchestration system. A network monitoring and customer experience management use case compares the TCO of Brocade’s virtual architecture to an appliance-based architecture (PMO) and finds a 43 percent TCO savings for the Brocade architecture.


For more information about ACG's business case analysis services contact info@acgcc.com.


mkennedy@acgcc.com
www.acgcc.com

High-Performance Business Consulting

ACG’s Growth Strategies consulting practice helps equipment vendors and network service providers develop and implement business and product strategies to accelerate growth.



For more information about ACG’s Growth Strategy and High Performance Business Consulting Services.

Click for more information about Brad Bradshaw.

For more information, contact sales@acgcc.com.

Friday, February 20, 2015

Worldwide Optical Market Increases Slightly in 4Q

Demand for rich media and OTT services to the home and mobile devices are market trends that continue to pressure providers to move DCs into the metro and enhance core infrastructures

The Worldwide Optical Networking market rebounded slightly in Q4 2014 to $3.375 billion in revenue, dipping 7.0 percent q-q but increasing 2.7 percent y-y. The year closed with annual revenue of $13.1 billion, 0.9 percent y-y increase. Demand for high-speed optical infrastructure remains steady, driven by increased sales of 100G interfaces in the Metro and LH WDM segments. “The 4Q revenue jump has been observed within the optical market for the last three out of four years. The year-over-year growth indicates a slight increase of spending but not necessarily a bullish market,” stated Dennis Ward, principal optical analyst, ACG.

Regionally, APAC is the top producing region though revenue declined 5.3 percent q-q. North America remained in the 2nd position, increasing 7.8 percent q-q and up 25.4 percent y-y. EMEA remained a strong 3rd at 11.4 percent q-q but showed a dip of 5.2 percent y-y. LAM improved with 6.3 percent q-q and 10.2 percent y-y growth.

The growth rate of 100G optical interfaces remains steady. The trend to support 4G and mobile Internet with its rich services is driving this as well as 400G trials in all regions. But 400G standards are still in flux. Although the Tier 1 communication service providers gear up for 2015, many of the optical equipment providers are finding a real market with the content service providers (CSPs) as they migrate their data centers into the metro closer to their customer bases. Some of these CSPs are looking for simple high- capacity solutions via dark fiber across the metro; others want more sophisticated long-haul solutions into the metro. “We see the demand for DCI bifurcating into two distinct market segments of products, small slot versus multislot solutions,” says Dennis Ward.  

Service provider SDN and NFV in combination with P-OTS/Metro WDM solutions are gaining traction in network infrastructure selection and deployments. P-OTS segment saw a quarterly dip in its revenue contribution but maintained its $.5 billion run rate, decreasing 7.9 percent q-q but increasing an impressive 28.9 percent y-y. The top five worldwide players in 4Q were Huawei, ZTE, Ciena, Infinera and Alcatel-Lucent, respectively.  

Metro WDM maintained its quarterly $1 billion run rate but decreased 0.7 percent q-q and 9.2 percent y-y. Metro traffic is predicted to grow faster than backbone traffic as more regional data centers are located closer to the user community. As much as 70 percent of the traffic is predicted to stay within the metro from which it originated, bolstering east-west traffic between data centers. The increase in DCI supports this trend and will drive the need for additional capacity by the traditional service providers, MSOs, cloud and data center operators.


For more information about ACG's optical services, contact sales@acgcc.com.




Wednesday, February 18, 2015

Worldwide Carrier Routing and Switch Market Posted Increases in 4Q

The Worldwide Carrier Routing and Switch market increased year over year q-q 1.5 percent and slightly increased 0.1 percent y-y, with revenues of $2.9 billion. The core routing segment posted revenues of $563 million, increasing 4.8 percent q-q but down 6.9 percent y-y. The edge/switching segment posted increased revenue of $2.3 billion, up 0.7 percent q-q and up 1.9 percent y-y. 

In 4Q14, the EMEA region increased revenue a solid 6.1 percent, and APAC grew revenue 4.7 percent. The Americas posted a decrease of 2.7 percent. 

Disruptive IT market trends continue to challenge the capabilities of networks and propel providers to consider software-defined networking as a vehicle to reduce service delivery costs and increase service velocity. This trend has affected the router and switch markets, resulting in limited spend in router and switch as carriers continue to explore SDN, trial SDN or implement SDN. The fourth quarter is usually an indicator for the coming year. 

TREND and DRIVER HIGHLIGHTS

Carriers’ ARPU is not sustainable and cannot maintain capex over revenues. Some carriers feel that flat revenue is acceptable; however, they do not seem to recognize that flat revenue is a race to the bottom. With capex the problem is not spending; it is about innovation, agility and operational costs and being able to compete more aggressively on deploying services. Explaining the repercussions of flat ARPU and exorbitant revenues ratios of ARUPs to an executive and any SPs with a “wait and see” position is going to be a challenge. Companies must understand that changing mindset is a top-level approach. 

Service providers are making significant investments, and companies such as AT&T, Verizon, Sprint, and T-Mobile are actually seeing solid profits. Sprint, which was late to market, posted profits in the 20 percent to 30 percent range. Verizon posted profits in the high 40 percent to 50s percent range. Most vendors saw decreased revenue in Q4, which can be attributed to the special promotions or end-of-year give-a-ways impacting their profit margins between 5–10 percent. 

Wireless is still a priority because of the revenue it is generating. Carriers’ aggregated ARPU for fixed data is flat. Fixed voice ARPU is starting to decrease. Mobile voice is also decreasing. From an aggregated perspective mobile data is flat. Although some carriers report profit margins most worldwide carriers (67) report that ARPU is flattening or decreasing. 

ACG is projecting the following in capex spending for 2015:
North America  -3%
Latin America  -4%
EMEA         +1.3%
APAC         -5%
China         +6%

2014 has been an interesting year for carrier routing, which has been affected by shifts in capex spending in wireline, mobile, SDN, and NFV. Operators are focused on monetizing their increasing data traffic, which is driving demand for mobile broadband. The need for more control of the network has produced more options available at the higher layers, such as software programmability and network analytics. This is where the long-term value is as hardware becomes simpler and more cost effective. New systems are being built on flexible platform architectures that are intelligent and open to enable programmability. With the creation and delivery of these intelligent platforms, developers and vendors can upgrade and share their systems rather than locking them down.

For information about ACG's router and switching services, contact sales@acgcc.com.



Tuesday, February 17, 2015

Delivering Policy Continuity at Scale in Cloud IT and Managed Network Services

Markets have been busy recently with announcements of solutions to help service providers benefit from powerful innovations in SDN, NFV and cloud computing systems. Solutions are emerging for fixed and mobile network environments, and for business and consumer applications. Pockets of solutions are emerging to address one part or another of an operator’s end-to-end environment, for example, increasing elasticity in mobile packet cores, simplifying business customer premise (CPE) configurations, and instantiating VNFs dynamically into cloud-based IT services.

While progress in pockets is good, designers also have to keep in mind that customer experiences exist on an end-to-end basis, at each point of consumption and across the aggregated performance of each domain involved in the service. Indeed, by embracing the cloud-based paradigm we are pursuing a goal in which services–and the policies that control them–are dynamically managed across the collection of resources that support them.

At its highest level, this is a job for service-level orchestration, for platforms that ‘think’ about a service end-to-end. Domain-specific solutions that optimize for local requirements can be integrated into a total service using northbound plug-ins and APIs. In essence a new design challenge for SPs has emerged: to optimize the mosaic of new virtual elements while still achieving a high-quality operation. How efficient (or complicated) this is depends to a degree on how efficiently the ‘gold vein’ of consistent service policies can be deployed into an end-to-end path at scale. How well an SP can do this will affect both quality of experience for the customer as well as total cost of ownership and return on investment for the SP.

One approach to mastering this challenge is to build using solutions that employ a consistent framework for managing policies across multiple domains, such as end-user CPE, wide area networks, and cloud computing data centers. The overall goal could be approached by focusing on key building blocks of the end-to-end service environment and managing its policies consistently, thereby getting a start on the overall goal. For example, managing networking resources consistently would be one way of achieving continuity at scale, at least for the network underpinning user applications. This approach requires a policy management system that aligns the network ‘northbound’ consistently with the operator’s requirements and propagates policies for enforcing those requirements in a scalable manner to each virtual element that is deployed in multiple domains.
This is an ambitious, some might say, lofty goal. Yet realizing the goal of delivering services for many individual customers on demand and at scale and with consistently orchestrated quality requires just such a far-reaching implementation.

Of the solutions that have arrived to market recently, one that embodies these attributes well is Nuage Networks’ virtualized networking portfolio. Nuage’s VNS solution (Virtualized Network Services for distributed enterprise sites) and VSP (Virtualized Services Platform for cloud-based data center services) use a common policy manager, the Virtualized Services Directory (VSD), to orchestrate policies across all of its domains. At the same time, VSD uses a consistent northbound interface to orchestrators such as OpenStack and CloudStack-based platforms. With this versatility and scale, Nuage is realizing the goal of managing an operator’s policies efficiently, on demand, and at scale to a widely distributed set of resources.

Thus, while it is possible to start transitioning infrastructures to virtualized designs one domain at a time, it is also possible to build on an architecture that consistently spans multiple domains on an end-to-end basis. In this way, an operators may simultaneously increase efficiency and increase the quality of customers’ experiences. In doing so, they would measurably accelerate their progress to delivering cloud-based services on demand across an entirely virtualized service delivery infrastructure with consistent end-to-end policy control.


For more information about Paul Parker-Johnson click here.

For more information about ACG's SDN services, click here.


Paul Parker-Johnson
acgcc.com 

Monday, February 16, 2015

How Big a Threat Is VoWi-Fi to the LTE Operator?

For years Wi-Fi was looked upon as the off-load network. MNOs were glad to off load massive amounts of data traffic onto these low-end, best effort, “free” networks, providing, of course, that their LTE networks were at or near capacity. Priority one, keep the billing meter running and only off load once the meter is maxed out. How could these $100 access points running off consumer-grade best-effort broadband become a threat? After all, MNOs have spent 10s of billions on a carrier-class LTE infrastructure.

The cable operators realized that they have a near ubiquitous high-capacity network and adding Wi-Fi access points was an opportunity. As we have seen numerous times in the past, when cable companies see they have an opportunity they quickly take advantage of it. Today, Comcast claims to have more than four million access points, which will grow to eight million by the end of the year. Yes, about half of these are in subscribers’ homes where (unbeknownst to them) they are a public access point for their neighbors.

Now, along comes voice over Wi-Fi (VoWi-Fi). This solves one of the age-old industry dilemmas: Great mobile voice outside OR great mobile data inside. Small cells and DAS are solving the indoor voice problem today; however, they are starting from an installed base near zero, and deployments are nontrivial and customized per venue. Outdoor small cells also face the added challenges of power and backhaul.

Wi-Fi is as close to a ubiquitous technology you will find. Enterprises, small business and residential consumers all have become accustomed to having access to Wi-Fi everywhere. There are clearly technical challenges to deploying quality carrier-class VoWi-Fi, but these are all solvable. After all they have been solved in the LTE market. Examples include MIMO antennas, seamless roaming and improved Doppler tolerances.

Thus, one can assume that VoWi-Fi will work and will “off-load” a significant percentage of indoor voice calls from the LTE network. Should MNOs be concerned? Let’s do some simple math to try to answer this question. It’s widely reported that approximately 80% of mobile traffic originates indoors. In five years what percentage of indoor voice traffic will be on the Vo-Wi-Fi network and not on the LTE network? Let’s assume 50%. This is reasonable because iPhone and Samsung smart phones support VoWi-Fi calling, and mobile subscribers are very aware of the cost of exceeding their mobile data caps. Therefore, the MNO will see a 40% reduction in voice traffic over the RAN and EPC. The BIG question is what the impact on revenue will be. If we assume that the revenue impact is only 5%, a $20 billion/year MNO would see a $1 billion reduction in cash flow. If the cable companies only see 25% of that amount, that’s $250 million in cash to them. The difference is assumed to be lost to price reductions. 

MNOs, MSOs and service providers looking at offering VoWi-Fi services will need help to address this threat and opportunity and develop winning deployment and go-to-market strategies. Likewise, vendors in this ecosystem need to be cognizant of the multidimensional dynamics of the VoWi-Fi opportunity. ACG Research can help develop your business and marketing strategies.  We can provide a range of services from complete strategy development to creating high-impact differentiated messaging to product launch support. 

How big a threat is VoWi-Fi to the LTE operator? Today, the answer is not much. Tomorrow, the answer is simply when is tomorrow. 

Contact ACG for more information as to what we can do to help you at successfully offering VoWi-Fi services.


Greg Whelan

Wednesday, February 11, 2015

Business Process Redesign Is Essential to NFV/SDN Success

Leading telecom operators began the network function virtualization initiative several years ago in recognition of the need to reduce cost increases and increase revenue growth rates to sustain profitability. While much technical process on NFV and related SDN technology has been made, I believe business process redesign is needed to change the organization and people's jobs if the financial benefits are to be realized. 


mkennedy@acgresearch.net
www.acgresearch

New SDN Apps Bring a More Open Lens to the Future of Network Operations

Some vendors are starting to leverage a truly open architecture for optimization of unified fabrics with extensible service control applications.

One of the great opportunities in software-defined networking is to amplify the efficiency of network and service operations teams by allowing them to leverage a powerful set of logically centralized and abstracted control functions for the infrastructures and services they manage.

While this model is simple to articulate it takes great vision and talent to realize in the world of real, deployed solutions that deliver the result.

The goal is only partially realized by the use of SDN controllers themselves. Controllers indeed do help simplify by normalizing and abstracting control plane functions for the given domain. In parallel, though, operators are driving to achieve additional optimizations, efficiencies, and innovations by leveraging what I call SDN Service Control applications that work in tandem with the centralized SDN controller code. Examples of focus for these include traffic analytics, service level monitoring and management, and custom traffic steering design for various operating goals (application performance, service availability, cost optimization, etc.).

The dynamics for how these goals can be pursued vary a bit between internal data center and adjacent wide area network infrastructures. I focus on data center implementations here.

The end game we’re looking at is one where the logically centralized and streamlined controls for the network being managed dynamically serve the needs of the applications and users relying on it for their services. In many data centers this will include a sizable overlay virtual network running in parallel with a high-performance physical underlay network. It will include a blend of control plane and value-adding service control apps to make it all work automatically and with maximum performance, efficiency, security, and stakeholder satisfaction (phew!).

A challenge in getting to this end game is achieving these results in a streamlined, integrated manner for both underlay and overlay networks. As implementing SDN in data center environments has gotten started, we’ve largely had operationally separate deployments of underlay and overlay networks. Services such as VXLAN and virtualized router modules are operating in their own logical scopes, and a sometimes heterogeneous fabric of underlying physical network nodes is implementing its own L2 and L3 functions in parallel. Each piece can do its part on its own, but it doesn’t create an especially streamlined operational model.

Some amount of overlay and underlay integration has occurred. From the open networking point of view, a number of OpenFlow controllers have started to bring a degree of integration of underlay switches with a range of centralized control plane functions. And in a proprietary context, Cisco’s ACI framework and APIC service control system have brought a range of application policy controls to both overlay and underlay network infrastructures—the only glitch from an optimization point of view is it’s not being implemented on a fully open platform.

Neither of these early stage developments has brought a design that unlocks the potential of the open network control environment of SDN with the power of value-add that can be obtained from service control applications running in parallel with the SDN controller that have the ability to optimize both the virtual and the physical network environments according to the operator’s service delivery requirements. Most SDN controllers delivered to date open up control of either a virtual overlay or a physical underlay but not both. And while the APIC is logically elegant within its own technological silo, it’s not opening up the opportunity for streamlining to the same extent—across a heterogeneous SDN infrastructure—as a solution leveraging, say, and Open Daylight-based set of network control plane functions could.

A glimpse into a more open framework for streamlining whole data center networking fabrics has started to appear in a set of recently introduced SDN service control applications from Big Switch and Brocade. Each has the attribute of bringing a distinct set of added value to managing a data center’s SDN deployment, while leveraging the abstraction of the SDN controller as a means of streamlining the deployment of the application’s work. In this manner they have the potential of leveraging the versatility and openness of the SDN control plane for implementation of the service controls they are generating in either a virtual or a physical deployment or both.

Simplifying analytics, traffic engineering, and application policy controls in this way brings an order of magnitude increase in the level of efficiency that an operations and service management team can achieve toward the services they are managing.


Big Switch’s Fabric Analytics module and Brocade’s Volumetric Traffic Management and Path Explorer applications are each pursuing this path. Examples of implementations approaching this design have been developed in wide-area or transport SDN solutions such as Cisco’s WAE and NCS solutions and Ciena’s recently introduced Agility software suite. But in the data center the Big Switch and Brocade applications are early entrants in the market that are starting to leverage a truly open architecture for optimization of unified fabrics with extensible service control applications. Whether additional similar applications arrive in the market using a similar model in the near future will be interesting to see. But in the meantime, kudos to both suppliers for advancing the state of the art in managing open data center fabrics with the versatility and extensibility of their designs.

For more information about ACG's SDN services, contact sales@acgcc.com.


Paul Parker-Johnson
ACGcc.com