Network operators have learned that services targeting plain "Internet access" as their goal have little chance...
of earning a durable return on infrastructure investment.
Over the top (OTT) players like Google, Facebook, Yahoo, Twitter, YouTube and Hulu have all found business models that exploit user broadband connectivity to earn advertising revenues through some form of content delivery.
Not surprisingly, network operators want to play a role in content delivery that goes beyond simply carrying the bits, which are quickly becoming a commodity in terms of price.
There are several views about the role that operators could play and considerable variation in their approaches to content strategy.
Four main paths to developing a content strategy
At the high level, network operators can monetize content by offering one or more of the following options along with their existing services portfolio:
- Retail content portal. Arrange for content through relationships with producers; host and deliver it to consumers subject to some kind of commercial relationship (pay-per-view) or sponsorship (advertising).
- Content host. Rely on other companies to obtain content for distribution, fulfill retail relationships or both. The notion of the network operator as a provider of a content delivery network (CDN) is an aspect of this monetization strategy.
- Critical adjunct services for content delivery. These could include, among others, identity management, digital rights management, content transcoding, location-based services, content policy management and parental control.
- Premium paths for content delivery to consumers. Offering expedited delivery or special Quality of Service (QoS) to content as an extra-cost option, paid either by consumers or content providers.
The choice of a content strategy and model is influenced by a variety of factors, but the most significant are regulatory requirements set by the jurisdictions where carriers operate.
For example, the worldwide interest in net neutrality, which guarantees non-discriminatory Internet traffic handling, raises concerns that premium paths for content delivery might create a violation or, at minimum, generate a requirement to wholesale such paths to competitors. Either puts any investment in the capability at risk.
Regulations may also demand that some elements of a content strategy must be implemented by a separate subsidiary. Rules governing how this subsidiary operates, and which parent-to-subsidiary service interfaces might have to be shared with competitors, may also affect content policy.
Mobile broadband, service layer, cloud all key content strategy considerations
The portal content strategy is also considered a risk by many network operators because it involves direct competition with over-the-top players that have already established a free content delivery model over the Internet. It's also true that few network operators are comfortable with the highly consumer-oriented business and advertising model needed to be a retail provider.
As a result, network operators are currently more focused on the second and third categories -- becoming a content host and providing critical adjunct content delivery services. There is also more focus on content models for mobile broadband than fixed broadband because mobile regulations are currently more forgiving (which could change over time) and because operators generally enjoy more account control over mobile customers.
Regardless of which approach network operators consider, it is clear they will choose their path in the context of an overall content strategy, as well as in the context of developing assets at the service layer. This means that content strategies are being considered broadly across all four options, whether or not regulatory concerns and competitive pressures might close off two of them. It also means that a solid content strategy is expected to closely align with cloud computing services rollouts, since these are the foundation of most network operators' build-out plans.
Challenges and benefits of introducing content delivery services
Offering a CDN service is seen as an early content strategy goal by at least 75% of the world's major network operators. By providing CDN hosting, operators can earn revenue from content delivery, even for over-the-top video. It also reduces the investment that network operators must make in core Internet connectivity, which carriers say has the lowest revenue return per bit of all infrastructure investments. Operators are considering several approaches, including partnering with a major CDN provider, implementing a CDN software package, and creating a CDN service from components.
Offering a CDN service is seen as an early content strategy goal by at least 75% of the world's major network operators.
President, CIMI Corp.
One of the major challenges is that logical evolutions of CDN services involve things like identity and digital rights management, content interactivity, location-based services and other areas that fit into the third category of content support. While it's not necessary to implement all of these pieces just to enter the CDN market, some early planning for integrating them with a carrier CDN offering may be critical in positioning the content strategy in the future.
The need to integrate CDN services with hosted features that might also be integrated into other services creates a dependence on cloud computing, since it would be expected that a carrier cloud would host most of these other hosted features. But that's not the only reason CDN-cloud integration is important.
A growing number of network operators believe CDN content storage should adopt a cloud-compatible database model, which should then integrate explicitly with the Home Subscriber Server (HSS) for mobile services and interactivity support. Cloud-centric databases are still evolving, the supplier landscape is being redrawn through mergers and acquisitions, and vendors are not yet positioning such database management systems (DBMS) as elements in a CDN.
There are significant benefits -- beyond just avoiding regulatory and competitive issues -- for network operators that address the middle two content opportunity areas first. These leverage operator core competencies and define the areas where content support is likely to overlap with the service-layer tools created for other opportunities. They'll create a stronger platform for future revenue growth and facilitate the reduction of dependence on pure transport and connection revenues, which is essential in addressing the shifting economics of a broadband-driven future.
About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is the publisher of Netwatcher, a journal addressing advanced telecommunications strategy issues. Check out his SearchTelecom.com networking blog Uncommon Wisdom.