ACG Research

ACG Research
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Monday, December 8, 2014

ACG's Christmas Message

Nuage/ALU on the VNS Solution in an SP Context

Accelerating time to deployment, enabling differentiation, achieving policy continuity for services and applications from the endpoint to the cloud, and streamlining operations with the same automation and elastic system architecture at every key point in a network deployment aspirations widely pursued by both enterprise IT teams as well as service providers providing cloud and network services to business and enterprise customers. With the introduction of its Virtualized Network Services solution, building on the strengths of its already available Virtualized Services Platform for cloud and virtual data center networks, Nuage Networks is enabling the kind of pervasive agility its enterprise and SP customers have been searching for by bringing the benefits of cloud and virtual infrastructure technologies to enterprise branch and distributed network sites. 

Click here to download report of ACG’s analysis of the VNS offering and its contribution to achieving these goals in its Research Note on VNS.

For more information about ACG's SDN services, contact

Paul Parker-Johnson

ACG HotSeat Whiteboard on Nuage Networks: Seamless enterprise networking; data center to branch

Ray Mota, ACG Research, and Sunil Khandekar, CEO, Nuage Networks, 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 its 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.

ACG Innovation Spotlight with Rotem Salomonovitch of Nuage Networks

Paul Parker-Johnson, ACG Research, and Rotem Salomonovitch, Nuage Networks, discuss the cloud and how it is changing the way businesses consume and share information. The trouble with the cloud is its not ubiquitous; it is made up of distinct islands of capability. The compute resides in the data center, and the consumers reside remotely, in the offices and branches of corporations or at the households and on the move. In the car, on the train, at the airport (or even on the plane). These users, the consumers of the data in the cloud are mobile and that means this is a global problem.

The fabric that links the information flow across and through the cloud is based on static networking models, models that have not fundamentally changed for over 20 years; technology has evolved but the fundamental architectures have remained the same.

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.

For more information about ACG's SDN services, contact

Paul Parker-Johnson

The Word on Nuage Networks' VNS Solution

Paul Parker-Johnson catches up with Nuage Networks on the strengths of their new Virtualized Networking Services Solution. Find out what he has to say.

For more information about ACG's SDN services, contact

Juniper Networks: Leveraging the Benefits of Virtualization and Automation

Mike Marcellin, senior vice president of strategy and marketing at Juniper Networks, and Ray Mota, CEO of ACG Research, discuss Juniper’s significant new NFV announcements: a carrier-grade virtualized version of its MX Series Edge Router, the vMX, as well as new Contrail Cloud and Junos DevOps capabilities that enable customers to leverage the benefits of virtualization and automation. Service providers' technology, operations, and business model transformations are also key discussion points, as well as customer use cases for Juniper’s new NFV solutions. 

For more information about ACG's router services, contact

Forecast of Residential Fixed Broadband and Subscription Video Requirements

Residential fixed broadband usage has evolved from static search and information retrieval to multimedia content delivery on a wide variety of devices. The move from broadcast service, which is multicast across the metro network, to broadband video service, which is unicast, and the use of many more devices in each household will have a massive impact on the required bandwidth capacity of the metro network.

ACG Research presents a five-year projection of average household bandwidth requirements. Average household bandwidth requirements are estimated to be 2.5 Mbps in 2014 and will grow at a five-year CAGR in a range from 19 percent to 44 percent with a most likely value of 31 percent. 

For more information on Michael Kennedy, click here.

Contact for more information about ACG's business case analysis services.

Sunday, September 28, 2014

Business Case for Virtual Managed Services

Cisco Evolved Services Platform provides automated, optimized, and personalized services via orchestrating virtualized network functions running on cloud data center technology. It allows fast introduction of new services and reduces the TCO of managed services sales and service delivery processes. Virtual managed services provided via ESP reduce costs and increase operational efficiency to the point where service providers can now profitably sell to smaller businesses.

ACG Research compared the total cost of ownership of the present mode of operations with the virtual managed service solution for two managed services offerings: 1) Cloud VPN service, and 2) Security service. It found that operation expenses (opex) were about 78 percent less for virtual managed service for both offers and that return on investment (ROI) for both virtual managed services offerings was more than 200 percent over a five-year planning period. The three largest sources of reduced opex are elimination of most truck rolls, many onsite maintenance and installation activities, and minimization of the costs to support onsite software.

Click for more information about ACG's business case analysis services.

Thursday, September 18, 2014

Infinera’s Cloud Xpress: Impressive Contribution to Cloud Providers’ DCI

Growth of cloud-based services shows no real signs of slowing down. This adoption rate is propelling providers of cloud services to construct new data center capacity, work to make data centers they already have run more efficiently and improve how they network their data centers internally.

In early adoption phases of cloud, there have been two dominant uses of data center interconnection (DCI). First is for connecting enterprise data centers to service providers’ data centers for hybrid and public cloud computing services.  The second use has been to connect providers’ ecosystem partner data centers to SPs’ data centers to mash up applications and federate cloud services.

As usage has grown, though, a new set of DCI requirements has emerged. These involve connecting providers’ own data centers at very high capacities. Two scenarios dominate this trend. The first is in metro or nearby data center connections, and the second is in hyper-scale data centers deployed at great distances from other sites and running at remarkable scale.

In the first use case operators will run out of power or space in existing sites and need to create additional capacity nearby. This can be in a metro area footprint or in an extended campus. DCI is critical in these deployments because many cloud applications work in a highly distributed model. They often need access to resources in neighboring data centers many times over before responding to a single user’s request. Thus, interconnections need to be simple and fast.

In the second deployment scenario, hyper-scale operators such as Google, Facebook and Microsoft search for remote locations where land and power are less expensive and build some of the world’s largest data centers there to run their services. Server counts in these sites range from 200,000 to 500,000 or more. The need for integration with systems in the providers’ other data centers is strong in mega-site deployments as well. This leads to extremely large capacities of DCI bandwidth being deployed both locally in clustered DC locations as well as over long haul transport for sites that are a half a continent or more away.

DCI capacities required in the intra-provider configurations range from 10s of tb/s in medium-to-large scale sites to several hundred tb/s in the largest mega-center locations. Because of the ongoing growth in the use of providers’ services, the unique needs of these DCI deployments have led to the emergence of a new type of high-capacity DCI solution.

Five requirements define the new breed:
  • Efficient and flexible scaling to 100s of tb/s of transport
  • Compact, rackable form factors
  • Low power consumption
  • Simple operation
  • Programmability for integration with service automation 

Underpinnings of these requirements
A dominant aspect of cloud data centers is use of infrastructure such as servers and storage systems that are modest in unit size but able to be pooled in wide ranges of capacity to serve the needs of application or service. This leads to a bias for systems installable in compact, rackable form factors that are easy to install and expand, often leveraging auto-configuration for integration into infrastructures at very large scale.

Form factor compactness demands low power consumption. If an individual server consumes, say, 150 watts in ongoing use, a rack of 40 such servers might consume 6 kilowatts, sustained. A data center with 100,000 such servers might consume 15 megawatts (approximately estimated). It’s easy to understand why cloud providers focus on wringing every possible watt out of solutions they deploy. DCI platforms designed in a more server-like package (versus a telco office orientation) are likely to consume less power, perhaps drawing a third less power per rack than alternatives. Across 10 racks’ worth of devices, if 150-200 kilowatts of power can be saved, a solution is heading in the right direction.

A final objective that fits with the ability to pool resources goal is to support open, programmable software for DCI capacity to be dynamically provisioned according to application needs. A variety of approaches can be taken to achieve this, including plug-ins for service control software rapidly evolving for use in cloud and virtual networking infrastructures as well as API toolkits to let large cloud providers integrate with their own service management platforms. In the end, programmability to support adaptation to providers’ goals for resiliency, path allocation, and application-driven solutions are the key requirements.

This new breed of DCI solution will complement other transport solutions that implement shared network transport of various types in metro and long haul configurations. The two styles will be used by providers for different types of connections. Both will be used to support higher level service requirements for customer, partner, and internal operator data center connections.

The Cloud Xpress family introduced by Infinera is an innovative example of the kind of high capacity, small form factor, programmable DCI platform cloud operators are leaning toward for their internal DCI deployments. Cloud Xpress is initially targeted for metro deployments. Leveraging optical innovations Infinera has previously introduced and engineering them into a platform capable of 20+ tb/s in a single rack, Cloud Xpress is an impressive contribution to the state of the DCI art. If trials prove out successfully, Cloud Xpress has every prospect of helping cloud operators scale out their data center deployments and interconnect them with the capacity and elasticity they desire.

For more information about ACG’s services, contact

Paul Parker-Johnson

Metacloud Adds Versatility and Strength to Cisco’s InterCloud

Among the best promises of the cloud are flexibility in workload deployment and efficient, scalable orchestration of deployments regardless of location or underlying infrastructure. 

Cisco’s acquisition of Metacloud for integration into its InterCloud portfolio is an important step toward the InterCloud realizing these promises. Metacloud adds versatility and strength to the InterCloud service offering in at least three ways:

1. Metacloud’s innovative OpenStack as a Service solution allows businesses to deploy private clouds using OpenStack software without needing to invest in developing in-house OpenStack expertise (because their cloud is managed by Metacloud as a service).  This is a very powerful way to open up use of OpenStack software in business private clouds for companies that have not been ready to make that commitment to date. Although OpenStack is very appealing as a service delivery environment because of its rich open source community of technical contributors, it is still relatively young in terms of delivery packaging and integration options for adopters who do not have the resources to develop that expertise. Making the OpenStack environment available on an efficiently managed basis by Metacloud as the manager takes the sting out of adopting OpenStack for many businesses and allows them to concentrate fully on implementing the applications they’re interested in on a powerful open software base.

2. OpenStack as a Service, now from the InterCloud, can be deployed on top of infrastructures other than Cisco’s, in addition to being deployable on Cisco infrastructure systems (such as UCS and Nexus). This opens up access to the InterCloud ecosystem for customers without having to meet the criterion of running on Cisco underlying hardware in every case. In its truest sense, that is a crucial criterion for a serious cloud computing framework to meet: by being able to instantiate virtual compute, network, storage, and related applications in a truly open software environment without regard to specific underlying hardware implementations (other than that they integrate successfully into the OpenStack software framework) the flexibility of adoption paths available to customers for engaging with the InterCloud ecosystem of operators and application suppliers is multiplied by an order of magnitude. It doesn’t prevent the use of parallel ACI-based Cisco infrastructure systems. Rather, it opens up the option of using additional infrastructure environments quickly and efficiently by introducing the managed OpenStack as a Service framework.

3. By bringing a managed OpenStack solution to its InterCloud portfolio in support of private clouds, Cisco is laying the groundwork for extending the InterCloud’s services based on OpenStack to include hybrid and public services leveraging the OpenStack technology base. Making this additional implementation option available to end customers significantly enhances the versatility and appeal of the ecosystem it is developing. 

Time will tell how seamless and robust the OpenStack additions to the InterCloud portfolio will be. Customers will decide. However, if one were looking for signs that the InterCloud fabric might have the versatility and flexibility in deployment options the cloud computing community so highly values, the Metacloud acquisition would appear to be a compelling signal heading in that direction.

For more information about ACG's SDN services, contact

Paul Parker-Johnson

Wednesday, September 17, 2014

Worldwide Mobile IP Infrastructure Market Continues to Rebound

Wireless is fueling capex, which indicates continued positive growth in the second half of the year

The Worldwide Mobile IP Infrastructure market grew in 2Q and increased to $1.25 billion, 9.6 percent quarter over quarter. Evolved Packet Core (MME, PGW, SGW, and PCRF) also grew this quarter to $123 million, 7.2% quarter over quarter. Online video continues to fuel mobile data traffic and the industry expects a tenfold increase in five years.  

Cisco continues to lead in the Worldwide Mobile IP Infrastructure market with nearly 40 percent share. Tracking its dominance in core routers, Cisco leads the IP Backbone market with 67.4 percent share. Cisco was number one in Mobile IP Backhaul with 40.3 percent share and in first place in Packet Core with 29.7 percent share. Ericsson holds 2nd place position in Packet Core (MPC + EPC) with 25.7 percent and 3rd place in total IP Infrastructure market with 12 percent share. Alcatel-Lucent, which claims 75+ IP mobile core customers worldwide, is second in the total IP Infrastructure market with 15.8 percent share.

Mobile spending continues is increasing globally as carriers in developed countries vie for top billing for fastest carrier, fueling LTE spending. 3G remains strong and continues to grow as developing economies upgrade and invest in this technology. Mobile infrastructure will continue to be a highly dynamic market for the next several years as vendors and carriers work through new technologies. Vendors will need to have solid strategies and execution plans in this demanding environment.
For more information about ACG's Mobile IP Infrastructure services, contact

For more information about ACG's Mobile IP Infrastructure services, contact

Monday, September 15, 2014

2Q Financial Vendor Index Results

ACG Research has released its 2Q Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

For more information about ACG 2Q Research's Vendor Financial Index click

Contact for more information about the service.

Thursday, September 11, 2014

Enlarging the Managed Network Services Opportunity through Virtual CPE

Virtual business CPE has the potential to create a win-win situation for small and midsize businesses and network operators. Small and midsize businesses are trying to develop network-centric business models, but networks present challenges that are beyond these businesses’ managerial and technical capabilities. Read more.

Click for more information about Michael Kennedy.

Tuesday, August 26, 2014

First Half Spending Boosts 2Q Router and Switching Market

Service providers are requiring more capacity because of an increase in mobility and agile cloud solutions, which are stimulating growth.

The Worldwide Carrier Routing & Switching markets increased revenue 7.0% in Q2 but remained flat 0.0% year over year. Global capex was up 5% q/q, and IT spending increased 6% q/q. In spite of this positive growth, ACG Research anticipates a challenging market in the second half of the year and lower service provider routing spend in Q3 with projects being pushed out to 2015. “AT&T and Verizon continue to surpass the industry average for operating margin. AT&T posted 17.2% operating margin while Verizon posted 24.4%. Many other SPs also saw solid margin gains, which had a positive impact for service provider equipment vendors in the first half of 2014,” states Ray Mota, CEO of ACG. “The router market outlook is uncertain because of architectural transitions, consolidations and larger then expected spending in the first half. The good news is that projects are not being cancelled but just pushed out.”

The rise in fixed broadband traffic and mobile broadband traffic on 3G/4G and LTE networks will continue to put pressure on providers’ networks. Streaming residential video is rapidly driving average household bandwidth requirements: 31% CAGR from 2.9 Mbps in 2014 to 7.3 Mbps by 2018. Smart phones, tablet, and next-generation devices as well as pressure on service providers to provide content-rich applications will force many service providers to upgrade their access, aggregation, and core networks, and mobile backhaul.

Q2 Total Worldwide Carrier Routing & Switching market posted revenue of $2.9 billion. Core Routing revenues were up 3.0% q/q but down 3.8% y/y. Edge Routing and Switching revenues increased 8.0% q/q and slightly up 1.0% y/y. 

Alcatel-Lucent reported routing and switching revenue of $603 million, increasing 17.3% q/q and 2.8% y/y. ALU’s solid quarter in routing is primarily attributed to the company’s gains in the IP Edge Routing segment, Multiservice edge routing and mobile backhaul. Cisco posted router and switching revenue of $1.46 billion, flat -0.05% q/q and -4.3% y-y. Cisco, which had a solid Q1, is transitioning from a hardware-based revenue to an annuity model, which impacted Q2. Juniper Networks has router revenue of $579.8 million, increasing 12.2% q/q and 12.5% y/y. Juniper continues to focus on launching new products and initiating cost reductions to drive growth. With software defined networking gaining traction as a solution for deployment, Juniper expects to capitalize on the anticipated increase of SDN and network function virtualization.

  • Data center interconnect is a vital part of the service provider edge; 6% of the overall edge market is dedicated to data center interconnect. 
  • Operators are more focused on the drivers in the edge of the network. The outlook for routers: the edge segment, which is projected to reach $12.2 B in 2018, is three times the size of the core router market, which will increase $3.3 billion in 2018.
  • Service providers are struggling with both internal and external challenges: rapid technology adoption, ongoing support for legacy technologies, heterogeneity of technologies and multivendor networks. External challenges include loss of high-margin legacy services, over-the-top providers, low-cost providers, regulations, increasing traffic, and competition from their own suppliers.
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Wednesday, August 13, 2014

Business Case for NFV/SDN Programmable Networks

ACG Research analyzes three programmable High-IQ network use cases that were created by Juniper Networks. The analyses show the benefits derived from the deployment of programmable networks for service providers. A cloud customer premise equipment and virtual firewall (vCPE) use case replaces physical CPE with a simple on-premise Ethernet device and moves IP virtual private network  and firewall functions to the cloud. This produces a 36 percent five-year net present value increase as compared to the physical CPE solution. A real-time network self-optimization use case replaces manual traffic engineering processes. This produces a 27 percent five-year total cost of ownership  savings compared to the manual processes. An elastic traffic engineering use case for a national all IP core network demonstrates the advantages of an SDN solution as compared to the present mode of operations. The SDN solution reduces bandwidth and associated link capital expenses by 35 percent while maintaining all network service level agreements.

For more information about ACG's business case analysis services, contact

Wednesday, August 6, 2014

Demand for All Things Video, the Implications

Although video has transformed public and private networks and continues to drive network deployments it also dwarfs all other network traffic types, for example, Netflix can account for upwards of 40 percent of local Internet traffic. The massive amount of bandwidth required drives the need for capacity in all parts of the end-to-end network. If you solve this problem for video all other traffic, voice, email, web and even IoT benefits as well.  

Consumers have an unending appetite for all things video. They are watching TV shows, movies, YouTube, Vines, Facetime or Skype on every device they have. Advertisers are increasingly moving to video ads and away from static banners. Truly live TV is exclusively sports and news. Appointment TV is a thing of the past. Everything is becoming on demand.

The implications of these trends cannot be underestimated. Not only do they impact all aspects of the telecommunication and Internet ecosystem, they impact the movie and television industries in a major transformation way. As these businesses struggle to adapt to overwhelming innovative forces they only know one thing for certain: They don’t want video assets to go the way of music.

Service providers, facing a hypercompetitive zero-sum market, are attempting to adapt and upgrade their physical networks, data center, core, metro and access to support video traffic. The race to 1Gbps per home is well underway. Back office systems are adapting as well. Marketing departments are creating new service bundles with higher data caps and source funded noncap traffic, such as taking an order to sending a bill, all of which need to be supported. Legal departments are impacted too. Issues such as net neutrality, asymmetrical interconnects, must carry and spectrum acquisition are just of few of the array of legal issues facing service providers globally.

Mobile operators are in no way immune from video. As they address their coverage and capacity issues video traffic is front and center. More smart phones mean more handheld video screens, which use more bandwidth and have much longer connection times. Here too, all aspects of the mobile operators business are impacted. Small cell deployments, WiFi integration and SON plus the emerging requirements of 5G must address the demand for video.

Video might just be a lot of ones and zeros, but the impact of massive amounts of video is disrupting the entire telecommunication industry. It is safe to say that decisions made by the entire ecosystem, service providers, equipment vendors, software vendors, semiconductor vendors, must address the onslaught of video traffic.

Tuesday, July 29, 2014

Cisco NCS 6000: Building Converged and Application Intelligent Networks

To address its increasing traffic growth on its fixed and wireless networks, Telstra recently announced it will utilize the Cisco NCS 6000 platform in its network. Driving this need—which is not limited to Telstra—is the growing demand for cloud services, video and media services. Service providers are looking for cost-efficient solutions that address this growth as well as solutions that scale for the Internet of Everything and M2M networks.

Why the Cisco NCS 6000? Although other products enable intelligence on the network, Cisco differentiates by offering a solution that gives providers a programmable and intelligent network. The NCS 6000 has 1 TB/s per slot line cards with 10 port 100GE line, offering high density that can decrease the per unit cost for data transported, which results in a smaller/lower carbon footprint. This unit decrease further supports Telstra’s “green goal” of reducing its carbon footprint. 

When looking to build a converged network, it makes sense that Telstra would turn to Cisco, its trusted partner. The company has been using Cisco’s products in the core and is also a strategic partner for new cloud services. The NCS 6000 will provide Telstra with a platform to build an intelligent network that dynamically enables new products and services within the network.  

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Tuesday, July 22, 2014

Demand for Security Solutions Driving Consistent Market Growth

The total available market for Worldwide security solutions is projected to increase from $16.3 billion to more than $25 billion by 2018 (CAGR 9.1 percent). Market growth is being driven across multiple segments by increasing complexity and sophisticated nature of security threats. Additionally, mobility, cloud and the evolution of the Internet of everything are changing the IT security landscape, creating opportunity for those vendors that present a multifaceted approach to protection.

ACG Research anticipates a further melding of the vendor and product landscape as security continues to cross over from discrete point solutions to all encompassing product portfolios. New and innovative solutions have and will continue to instigate a shift in how firms think about their security. This is particularly true when it comes to mobile device management. Increased mobile device penetration, bring your own device and consumerization of IT are driving the demand for sophisticated infrastructure to accommodate a mobile environment where employees have secure access to corporate data. ACG Research forecasts double-digit growth of more than 17% across this segment.

For more information about ACG's security services, contact

Friday, July 11, 2014

Programmable Carrier Networks: A New Architectural Approach

Programmable carrier networks, a new, eclectic, emerging architectural approach, incorporate concepts such as SDN, NFV, shared mesh protection, path computation element protocol and cloud computing concepts and blends them with established transport, switching, routing and network management techniques. The objective of this merger is to overcome the barriers created by traditional network architectures that carriers are encountering as they try to accommodate high and volatile traffic volumes and unpredictable traffic patterns as well as respond to the innovative business models of cloud-based and OTT service providers.

Monday, July 7, 2014

IoT B2B Ecosystem: How Can SPs Retain Their Maximum Share?

The OneM2M joint standards groups partition the Internet of Things (IoT) ecosystem by access domain, network domain and application domain. Within these domains the service providers (SP), specifically wireless SPs, are in the network domain and are responsible for the operational and business system services of the devices (OSS/BSS), for example, SIM provisioning, monitoring and management of the device over the “air,” routing traffic from the device to backend systems and applications or to other devices in the network, billing and recording of device activity based on bandwidth usage or further analytics associated with the application deployed. In a legacy machine to machine (M2M) scenario the value chain for the SP was clear; however, with the new IoT ecosystem this and business models have changed. How can SPs obtain the most value and retain reasonable financial margins within today’s IoT ecosystem?

Traditional M2M Business Models
Established M2M business models, which are limited in scope and structured, were quite clear and the revenue share among the domains was evenly distributed and predictable. Leading SP network operation field specialists acknowledge that the device provider, network provider and the application provider each receive one-third of the revenue.  A customer would request a defined service, such as a fleet/asset tracking service, from the service provider who most likely had a purpose-built solution. Depending on the quantity of assets that needed to be tracked, the service provider would know precisely how many unintelligent devices and SIMs to purchase from his device supplier, servers from the network provider and software packages to order from the applications provider. The SP would be responsible for provisioning its custom OSS/BSS systems and application services and provide the management. The customer would pay for the devices and software licenses upfront and either pay the SP per connection or by bandwidth usage. The device and software vendors would require a maintenance fee, which the SP would pass on to the customer. This is now an obsolete business model.

Present M2M/IoT Business Models
In the new M2M/IoT ecosystem SPs’ role and business models have changed. According to Network specialists, the device vendor gets around 20 percent; the network provider gets 15 percent and the application provider gets 65 percent. The new enhanced M2M devices have advanced processors that make them more intelligent, aware and thus more valuable. Because of enhanced hardware and firmware these devices can be embedded with antennas that can speak directly to the internet via 3/4G cellular or via WiFi routers. In most cases the radio access portion of the network domain has not been upgraded (2G or 3G wireless) so the expense is less. SPs use OSS/BSS platform partners because the OSS/BSS layer must be enhanced to accommodate the intelligent access devices. Application layer services are leveraged between application platform providers’ partnerships. These providers employ their own device, storage, cloud suppliers and application designers. To compete SPs have to engage in various business arrangements and complex strategic alliances with equity interests and exclusivity clauses. The negative effect is revenue fragmentation; however, providers can charge the customer more and thus raise the overall average revenue per unit. In this fragmented and crowded environment, how can the SPs continue to earn their full value?

Service Provider-Centric Use Cases
To earn their full value in the M2M/IoT ecosystem, SPs have to select their verticals and use cases very carefully. What are the characteristics of a monetizable use case for SPs? Service providers must adopt use cases that require a highly managed infrastructure and within these verticals should be mission critical and/or life dependent as well as wireless connectivity. These use cases will warrant more liability and require more regulatory demands but will enhance the importance of the SP’s network. The SP will maintain the value in the IoT ecosystem and customers will pay premium for the enhanced quality service. The following are examples of service provider-centric vertical use cases:
  • Healthcare: Remote heart/lung/brain monitoring for patients in transit; remote surgical services (monitoring/surveillance)
  • Transportation: Fleet/Asset tracking services where environmental controls for cargo/livestock need monitoring; telemetry (driverless vehicles); highly critical vehicle diagnostic monitoring and proactive resolution services
  • Manufacturing: Airborne robotic devices; off-shore mobile device control and monitoring services
  • Utilities: SCADA monitoring and proactive purification services for gas, water, soil, etc.
  • Government: Surveillance of mission-critical items; disaster recovery bots
  • Telecommunications: Banking processes and monitoring in remote areas

Wednesday, June 11, 2014

Residential Broadband, Video Usage Drives Operators to Redesign Their Metro Networks

Residences' move from viewing broadcast TV to Internet TV and businesses' pervasive use of rich multimedia content and cloud services are forcing service providers to re-architect their metro networks. The resulting network designs are bringing network content and intelligence closer to end-users. Click here to find out why.

For more information about Michael Kennedy, click here. To read more articles, click here.

Tuesday, June 10, 2014

IoT In Perspective, Ready for Reality?

Kevin Ashton, cofounder of the Auto-ID Center at MIT that created the Radio Frequency Identification (RFID) global standard, is credited with the expression “Internet of Things,” envisioning a “system where the internet is connected to the physical world via ubiquitous sensors.” His vision in 1999 is not far from today’s reality. Technology has advanced to a point where almost anything can be “sensor-ized” to collect, store and transfer data. Interestingly enough, RFID tags were designed to categorize, itemize and quantify things. Hence the question, how big is the IoT market today?

Views in the market are that it is difficult to quantify simply because the concept is too broad and connections are hard to evaluate. Clearer explanations as to what a “connection” is within the IoT sector needs to be defined further. Nevertheless, some companies have generated numbers. Cisco made an attempt to embrace the concept within the explanation of the “Internet of Everything”. Using “Value at Stake” the worldwide market size was predicted to be $14.4 trillion in 10 years, where 45% or ~ $6,480 billion was attributed to machine to machine (M2M) connections. This is particularly interesting to service providers (SPs) because they will own these connections. If we analyze this number linearly, then for one year, the expectation for the worldwide M2M market size is about $648 billion.

Source: Cisco IBSG, 2013; Note: To make the numbers work, the actual IoE should be $14.160 trillion.

But what is the potential value per connection in a year? Revenue estimates for SPs and total cost of ownership (TCO) evaluations for customers are definitely of interest. The total number of M2M cellular connections last year was around 132 million. Thus: $648 B/1 yr x 1 yr/132M connections = $4,909/connection in a year (~ $409 per month).

Last year (August 2013) the top number of M2M connections for U.S. companies:

Service Provider
M2M Connections (Millions)
Revenue(M) (Yr: $4909/conn)
AT&T Mobility

Therefore, if the potential values are in the correct order of magnitude for M2M, (not considering the CAGR sifts, etc.), then the increase in connections because of IoT will essentially bring increased revenue to SPs. Is that really true? Much of the margin depends on the revenue shared between the SP’s platform partners as well.

IoT Platforms: The M2M/IoT platforms that are being deployed—some have taken several years to develop—have several vendors within their ecosystems. Bigger SPs had to partner with these platform providers to enter the M2M/IoT market quickly. The following are platform providers for the major U.S.:

Service Provider
Platform Provider
Engagement Year
Jasper, Axeda
2009, 2012,
Zelitron SA, Qualcomm, nPhase, Axeda
2003, 2010, 2010, 2011
T-Mobile (now part of Sprint)
Raco Wireless

What kinds of business partnerships have the SPs made with these platform providers? What are the present revenue sharing models and who owns the customers in these scenarios? To what key verticals and monetizable use cases do SPs need to turn their solutions to maximize their profits within these partnerships? For example, what percentage of that monthly revenue of $409 actually goes to the SPs? Can a customer transfer between SP/PP solutions and expect a seamless experience? These are not new questions; however, the issues are still here and need to be explored again with fresh eyes since the technology and market landscape is changing.

For example, virtualization within the core of SPs; networks are giving new agility, efficiency and interoperability choices. Equipment providers such as Ericsson, Alcatel-Lucent, Juniper and Cisco are developing innovative software defined networks- and network fabric virtualization-based appliances in software and hardware to assist SPs in revolutionizing their core OSS/BSS delivery platforms and edge Radio Access Network facilities to rapidly and easily create solutions that can propel the managed M2M/IoT industry forward and fight off over-the-top competition.

What’s the bottleneck? It is not the technology but the ability of the industry to cooperate in normalizing the horizontal layer of the network (actually where the platform providers sit) to serve the verticals appropriately. One of the answers is to urge the standards bodies to more aggressively converge ideas toward this end. OneM2M, the Global Partnership developing standards for M2M communications enabling large-scale implementation of IoT, is in the process of spearheading this effort. However how are they doing with the specification normalization?

In reviewing the OneM2M Technical Report Doc # oneM2M-TR-0003-Architecture_Analysis_Part_2 it is clear that the seven Standards Developing Organizations are well on their way toward integrating a basic framework of functional elements that will prove invaluable in normalizing the playing field. These types of specifications will assist the platform and equipment providers technically so they can clearly see how to design solutions to help the SPs deploy more economical and simpler solutions to the market to effect better results or “outcomes.” The OneM2M 10th Technical Plenary committee met in Berlin, Germany, on 4/11/14 and confirmed that it will be releasing its initial complete specifications for IoT in August 2014.  

Dennis Ward