Network operators worldwide are facing pressure from a short-term economic downturn, but the bigger problem is a much longer-term erosion in the value of their stock-in-trade: transport bits.
The telecom services market is increasingly like a supermarket.
President, CIMI Corp.
Because business planners need to focus first on profit and revenue growth, today's fundamental market shifts mean that shorter-term planning will have to encompass a different vision of transformation and a different model of monetizing network investment.
The telecom services market is increasingly like a supermarket, with supermarket-like principles. Some services, like certain grocery items, will always be in demand but don't have much feature differentiation. These will become commodities in terms of price but will sustain the foundation of revenues and create customer loyalty. Other services, such as premium items in a store, will produce less revenue but command strong margins and boost profits. The transformation of the network marketplace to this model is the most significant goal for the industry.
Turning transformation on its head
Supporting this kind of transformation is still a hazy notion that could be called the Next-Generation Networks Services Architecture, or NGNSA. This architecture harmonizes the key components of next-generation network transformation:
- Service feature orchestration and syndication through developer partners, over-the-top partners, and traditional service provider partners.
- Business and operations management tools that are "service-focused" to align them with new directions in service creation and support a much higher level of automation of service lifecycle processes.
- Network infrastructure that can be quickly adapted to the traffic patterns and service-level agreement (SLA) needs of the widest variety of services, and tight coupling to the service layer of the network so network operators can differentiate their services from over-the-top solutions. This includes service delivery platforms (SDPs) for computing/software service components and network equipment for connection and transport.
The primary reason NGNSA notions are still fuzzy is the fact that activities are spread across a number of standards processes. While there are active liaisons between the bodies, standards are not moving in synchrony or even particularly quickly. Network operators that want progress this year and next are looking increasingly to vendors for leadership in these three areas and expecting those vendors to support the standards as they develop rather than waiting for them.
Nearly all major network operators worldwide report that they expect to buy into some vendor vision for integrated NGN services in the next year. For those operators, the choice of what approach to take is likely to be set by the priority they place on the three major NGNSA elements.
Complete solutions will drive partnerships
Of the three areas, the second (service operations and management) is probably the most developed in a standards sense, and thus network operators probably understand the positions of their vendor partners and have a good sense of convergence on standards approaches. But not every major equipment vendor has a service management strategy, and pressure to provide a complete solution is likely to create partnerships between management and networking vendors.
Service feature orchestration and third-party partner access to service elements for composition of retail services are likely to be the major focus of network operators in the near term. This area has not been active in the standards-setting sense for as long because the requirements of the space are less understood.
A number of announcements or commitments by equipment vendors in 2008 support the componentization, syndication and composition of services. And the architectures are only starting to emerge. The best approach here may be the most important single factor in creating NGNSA partnerships in the next two years or more.
Service-layer technology must create ROI
For the longer term, the last issue cannot be neglected. Service-layer technology that simply sits on top of connection/transport infrastructure ("anything over the Internet") empowers not only network operators but also over-the-top players.
What network operators need and want is a way of creating value from their networks in the form of something linked with, but stepping beyond, the movement of bits. Little has been done in an organized industry sense to create specific service-layer partnership with the network layer. This partnership would provide a special benefit to those who build and own the networks. Thus it would justify network infrastructure investment more effectively by sustaining a higher return on investment (ROI).
ROI has been important for network operators for years, but the importance of ROI is magnified by a combination of economic uncertainty and increased pressure to evolve off the older TDM voice platforms in favor of IP-based services, including voice. 4G technology is based on IP voice, and fixed mobile convergence (FMC) is facilitated if voice technology in both wireline and wireless is based on VoIP. Major tier 1 operators are already announcing serious VoIP offerings, and this will put additional pressure on service-layer deployment because the move is almost certain to lower revenue per call-minute over time.
A cloudy future for IMS
The fact that voice may be a driver for near-term change makes the IP multimedia subsystem (IMS) decision particularly important for operators. IMS is the approved and standardized way to manage mobile VoIP, FMC and non-voice mobile services. IMS is at least a candidate for supporting other NGN services such as video. Here again, standards may not keep pace with market requirements, and network operators may have to work with vendors prepared to take leading-edge positions on harmonizing IMS with service models beyond those involving SIP calling.
The ITU has suggested, in its NGN material, that IMS is one of several elements in what we have called here an NGNSA. But the precise role of IMS in that mix is not defined, nor are the other elements that would coexist with IMS. The vision of IMS's role in NGNSA may be the most critical of all in the near term because of the pressure to evolve voice services.
Network operators plan over a very long cycle -- typically about seven years. That means that economic disturbances in the field are less a factor than they would be to industries with shorter capital cycles. Long planning cycles also mean that network operators require a very high degree of confidence in every step of their solution to evolving service needs and opportunities. That requirement is likely to generate new relationships and new levels of cooperation with vendors in the coming years.
About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is a member of the IEEE, ACM, Telemanagement Forum, and the IPsphere Forum, and the publisher of Netwatcher, a journal in advanced telecommunications strategy issues. Nolle is actively involved in LAN, MAN and WAN issues for both enterprises and service providers and also provides technical consultation to equipment vendors on standards, markets and emerging technologies. Check out his SearchTelecom networking blog Uncommon Wisdom.