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

1. Author: Guilherme Lopasso,
Marketing and Strategic Manager, Ericsson Region Latin America
Networked technologies needed to cope with
traffic explosion and new business models
SMART
PIPES

2. Although there is strong demand
for broadband, revenues are
mainly generated by data plans
priced at monthly flat fees, tiered
by connection speeds or monthly
data allowances (usually
measured in Gigabytes per
month). Despite their simplicity,
such price schemes for
broadband are unlikely to drive
revenue increases at similar rates
of data growth. Other
telecommunications services,
such as voice, messaging and
video (Pay-TV), suffer from the
competition of Over-the-Top
(OTT) service providers (e.g.,
Skype, WhatsApp, Netflix), which
overload operators’ networks but
do not generate direct revenues
for them.
Operators could seek new
business models that
meaningfully capture the value of
broadband. For example, some
customers might prefer data
plans that ensure quality of video
transmission without delays and
frozen screens instead of plans
based on data speeds or monthly
allowances. Other customers that
intensively use a specific
application, such as Facebook,
could be interested in a plan with
a special price, but with access
restricted to this application.
Therefore, operators should be
able to charge not only for
connection speed or data
amount, but also for application
and content.
From the OTT service provider’s
standpoint, there is value in
securing that their end users
have the adequate level of quality
of service. For example, Google
found that a 0.5 second delay in
accessing its web search page
caused traffic to drop by 20%,
In Latin America, the voice traffic
that flows through mobile
networks is expected to grow
639% annually over the next
three years, as shown in Figure
1. Revenues, however, will grow
only 62%. Regarding data
services, the mismatch is even
worse – while data traffic from
smartphones is expected to grow
74% annually, revenues will
increase only 14%.
which reduced advertising
revenues. A study conducted by
Akamai revealed that video
streaming viewers start to abandon
a video if it takes more than two
seconds to start up, with each
incremental delay of one second
resulting in a 5.8% increase in the
abandonment rate. Also, Amazon
reported that every 100 milliseconds
of latency costs 1% in sales. If
operators can ensure quality of
service to OTT service providers,
this could be charged on wholesale
plans. This new revenues source
would help offset the necessary
investments in network capacity.
Operators must modernize their
networks with architectures that can
scale with the expected double-digit
data traffic growth and provide
superior performance. Moreover,
networks must be aware of
applications and the content they
are carrying. This would lead to
innovative business models
targeting both end users and OTT
service providers.
TECHNOLOGIES FOR SMART
PIPES
Fourth generation IP networks
The fourth generation of IP (4G IP)
networking is the main component
of Ericsson's overall network vision
for the Networked Society. 4G IP
networking comprises equipment
and solutions that are scalable,
provide superior performance and
reduced costs by optimizing existing
over-layered networks, and are
aware of the several dimensions
related to the traffic being
transported: applications, contents,
users, devices and location.
An important component of 4G IP
networking is the Smart Services
Router (SSR) that can enforce traffic
CAGR 2012-2015
Voice traffic
Billions of minutes per year
1,20
2012 2013 2014 2015
1,33
1,45
1,55 9%
Data traffic - Smartphones
PentaBytes per month
24
45
78
127
2012 2013 2014 2015
74%
99
107
113
118
2012 2013 2014 2015
6%
2%
14%
Figure 1: Mobile traffic and revenues projections in Latin
America (2012-2015)
Sources: Juniper Research, Pyramid
Revenues
USD billions
Voice
Data
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.

3. control policies based on different
levels of service quality. To do that,
this type of equipment uses
technologies such as Deep Packet
Inspection (DPI) and Multiprotocol
Label Switching (MPLS), which
identify different types of traffic and
treat them according predefined
rules.
Content Delivery Networks
CDNs comprise distributed servers
that store frequently accessed
content. The servers act as local
buffers, avoiding traffic being
directed to the original content
server and traveling unnecessarily
through long paths within the
network. CDNs assure high
availability and performance of
content, and are especially useful
for securing video streaming quality.
Software Defined Networks
SDN is an emerging network
architecture model that defines a
software layer, called the control
plane, separated from the data
plane, comprised of network
hardware (switches and routers).
In the control plane, data traffic is
shaped and prioritized
with a highly granular level of
control. This architecture allows the
network administrator to manage
traffic loads in a flexible and more
efficient manner through network
equipment and data center servers,
which form the cloud computing
environment.
Network administrators can also use
SDN to expose network resources
and capabilities as Application
Programming Interfaces (APIs) to
application developers. Then, they
could use the APIs to develop
applications that can make use of
features such as Virtual Private
Networks (VPNs), without having
specific knowledge of the network
topology.
OSS/BSS and Big Data Analytics
Big data analytics are emerging
technologies for processing large
amounts of information, with the
purpose of discovering business
insights. For telecom operators,
“big data” means vast data banks
formed by records of network usage
and location, network management
and signaling data, and business
transactions with subscribers. All
this data is obtained through
Operations and Business Support
Systems (OSS/BSS).
Applying big data analytics to
OSS/BSS will provide insights
for telecom business innovation,
such as real-time promotional
offers, high-performance
advertising models, subscriber
churn analysis and real-time
retention measures, and
effective management of
partnerships with OTT service
providers.
The Network Society pushes
telecom operators to evolve both
their infrastructure and business
models. New network
technologies that address scale,
performance, content awareness
and business insights can help
operators to transform the
telecommunications business.
Content Delivery
Network (CDN)
Original
Server
(OTT
Service
Provider)
User
Nearest
CDN Server
Figure 2: Content Delivery Network
Logical map of network
Data Plane
Network OS
Routing Mobility
Packet
Forwarding
Packet
Forwarding
Packet
Forwarding
Packet
Forwarding
Figure 3: Software Defined Networks

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