Smart Pipes: Networked technologies needed to cope with traffic explosion and new business models


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All operators throughout the world face the challenge of dealing with a surge in traffic on their networks that put pressure on both investments and costs. On the other hand, revenues are not following the same pace of traffic growth.

Author: Guilherme Lopasso,
Marketing and Strategic Manager, Ericsson Region Latin America

Published in: Technology, Business
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Smart Pipes: Networked technologies needed to cope with traffic explosion and new business models

  1. 1. Author: Guilherme Lopasso,Marketing and Strategic Manager, Ericsson Region Latin AmericaNetworked technologies needed to cope withtraffic explosion and new business modelsSMARTPIPES
  2. 2. Although there is strong demandfor broadband, revenues aremainly generated by data planspriced at monthly flat fees, tieredby connection speeds or monthlydata allowances (usuallymeasured in Gigabytes permonth). Despite their simplicity,such price schemes forbroadband are unlikely to driverevenue increases at similar ratesof data growth. Othertelecommunications services,such as voice, messaging andvideo (Pay-TV), suffer from thecompetition of Over-the-Top(OTT) service providers (e.g.,Skype, WhatsApp, Netflix), whichoverload operators’ networks butdo not generate direct revenuesfor them.Operators could seek newbusiness models thatmeaningfully capture the value ofbroadband. For example, somecustomers might prefer dataplans that ensure quality of videotransmission without delays andfrozen screens instead of plansbased on data speeds or monthlyallowances. Other customers thatintensively use a specificapplication, such as Facebook,could be interested in a plan witha special price, but with accessrestricted to this application.Therefore, operators should beable to charge not only forconnection speed or dataamount, but also for applicationand content.From the OTT service provider’sstandpoint, there is value insecuring that their end usershave the adequate level of qualityof service. For example, Googlefound that a 0.5 second delay inaccessing its web search pagecaused traffic to drop by 20%,In Latin America, the voice trafficthat flows through mobilenetworks is expected to grow639% annually over the nextthree years, as shown in Figure1. Revenues, however, will growonly 62%. Regarding dataservices, the mismatch is evenworse – while data traffic fromsmartphones is expected to grow74% annually, revenues willincrease only 14%.which reduced advertisingrevenues. A study conducted byAkamai revealed that videostreaming viewers start to abandona video if it takes more than twoseconds to start up, with eachincremental delay of one secondresulting in a 5.8% increase in theabandonment rate. Also, Amazonreported that every 100 millisecondsof latency costs 1% in sales. Ifoperators can ensure quality ofservice to OTT service providers,this could be charged on wholesaleplans. This new revenues sourcewould help offset the necessaryinvestments in network capacity.Operators must modernize theirnetworks with architectures that canscale with the expected double-digitdata traffic growth and providesuperior performance. Moreover,networks must be aware ofapplications and the content theyare carrying. This would lead toinnovative business modelstargeting both end users and OTTservice providers.TECHNOLOGIES FOR SMARTPIPESFourth generation IP networksThe fourth generation of IP (4G IP)networking is the main componentof Ericssons overall network visionfor the Networked Society. 4G IPnetworking comprises equipmentand solutions that are scalable,provide superior performance andreduced costs by optimizing existingover-layered networks, and areaware of the several dimensionsrelated to the traffic beingtransported: applications, contents,users, devices and location.An important component of 4G IPnetworking is the Smart ServicesRouter (SSR) that can enforce trafficCAGR 2012-2015Voice trafficBillions of minutes per year1,202012 2013 2014 20151,331,451,55 9%Data traffic - SmartphonesPentaBytes per month2445781272012 2013 2014 201574%991071131182012 2013 2014 20156%2%14%Figure 1: Mobile traffic and revenues projections in LatinAmerica (2012-2015)Sources: Juniper Research, PyramidRevenuesUSD billionsVoiceDataAll operators throughout the world face the challenge of dealing with a surge in traffic on their networks thatput pressure on both investments and costs. On the other hand, revenues are not following the same pace oftraffic growth.
  3. 3. control policies based on differentlevels of service quality. To do that,this type of equipment usestechnologies such as Deep PacketInspection (DPI) and MultiprotocolLabel Switching (MPLS), whichidentify different types of traffic andtreat them according predefinedrules.Content Delivery NetworksCDNs comprise distributed serversthat store frequently accessedcontent. The servers act as localbuffers, avoiding traffic beingdirected to the original contentserver and traveling unnecessarilythrough long paths within thenetwork. CDNs assure highavailability and performance ofcontent, and are especially usefulfor securing video streaming quality.Software Defined NetworksSDN is an emerging networkarchitecture model that defines asoftware layer, called the controlplane, separated from the dataplane, comprised of networkhardware (switches and routers).In the control plane, data traffic isshaped and prioritizedwith a highly granular level ofcontrol. This architecture allows thenetwork administrator to managetraffic loads in a flexible and moreefficient manner through networkequipment and data center servers,which form the cloud computingenvironment.Network administrators can also useSDN to expose network resourcesand capabilities as ApplicationProgramming Interfaces (APIs) toapplication developers. Then, theycould use the APIs to developapplications that can make use offeatures such as Virtual PrivateNetworks (VPNs), without havingspecific knowledge of the networktopology.OSS/BSS and Big Data AnalyticsBig data analytics are emergingtechnologies for processing largeamounts of information, with thepurpose of discovering businessinsights. For telecom operators,“big data” means vast data banksformed by records of network usageand location, network managementand signaling data, and businesstransactions with subscribers. Allthis data is obtained throughOperations and Business SupportSystems (OSS/BSS).Applying big data analytics toOSS/BSS will provide insightsfor telecom business innovation,such as real-time promotionaloffers, high-performanceadvertising models, subscriberchurn analysis and real-timeretention measures, andeffective management ofpartnerships with OTT serviceproviders.The Network Society pushestelecom operators to evolve boththeir infrastructure and businessmodels. New networktechnologies that address scale,performance, content awarenessand business insights can helpoperators to transform thetelecommunications business.Content DeliveryNetwork (CDN)OriginalServer(OTTServiceProvider)UserNearestCDN ServerFigure 2: Content Delivery NetworkLogical map of networkData PlaneNetwork OSRouting MobilityPacketForwardingPacketForwardingPacketForwardingPacketForwardingFigure 3: Software Defined Networks
  4. 4. EricssonTorshamnsgatan 21-23SE-164 80 Stockholm, SwedenTelephone +46 10 719 13:000132 Uen© Ericsson AB 2013Ericsson is shaping the future of Mobile and Broadband Internet communications through itscontinuous technology leadership.Providing innovative solutions in more than 140 countries, Ericsson is helping to create the mostpowerful communication companies in the world.Ericsson - Barbados1st Floor Braemar CourtDeighton RoadBB 14017St. MichaelBarbadosPhone: +246 426 0993Ericsson - HaitiRue Lamarre # 20 Petion-VillePort-Au-PrinceHaitiPhone: +509 7011 063Ericsson Ab Branch Office - JamaicaPan Caribbean Building 6th floor60 Knutsford Boulevard Kingston 5KingstonJamaicaPhone: +1 876 960 0320Ericsson AB Branch Office - SurinameHofstraat 1PPS BuldingParamariboSR PA01 01SurinamePhone: +597 520 366Ericsson AB Branch - Trinidad and Tobago1st Floor, Briar PlaceSweet Briar RoadSt. ClairTrinidad & TobagoPhone: +1 868 299 - 0164The content of this document is subject to revision without notice due tocontinued progress in methodology, design and manufacturing. Ericssonshall have no liability for any error or damage of any kind resulting fromthe use of this document