Archive for the 'IP/NGN' Category

Pay per drink pricing: an enterprise perspective

December 14, 2010
10,100,1000? Why?

10,100,1000? Why?

This weekend Joe Weinman posted a two part article on GigOM, as a follow up to his earlier Market for Melons paper, in which he claims that usage based charging for consumer broadband is inevitable. According to Joe this change to metered broadband will be driven not by operators, but by rational consumer behaviour:

Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest—light users, by deciding not to subsidize the heavy ones, foster the vitality of the pay-per-use model.

Understandably this suggestion had many GigOM readers choking on their potato salad. Some “spirited debate” then ensued; he was preaching to the All You Can Eat crowd here after all, not the Weight Watchers.

What I found interesting was that this rational purchasing decision – the desire not to overpay – is actually something that I would attribute much more heavily to the business customers I speak to.

There is a certain amount of symbiosis between the consumer and enterprise wireline access market, especially from my viewpoint in the UK, given the wholesale market backdrop of the Openreach monopoly. However, the customer behaviour and attitude to cost is different. Whereas consumers have unpredictable binges on media content, enterprises have IT policies, with more tightly controlled, monitored and therefore predictable traffic patterns. So, in a tough economic climate, pay per drink should be attractive to the enterprise.

Here are my relevant observations from the field:

  • It is getting messy out there. Fierce price competition is not going away; enterprise customers have become extremely picky, sales cycles have become longer, and operators are desperately trying to reduce install and recurring costs to close deals.
  • Price sensitivity means there is much more activity at the point where “business” broadband (copper access) meet fiber access services. Less attention is being paid to the SLA and business-grade suitability of services.
  • There is clearly strong demand for more flexible pricing structures in enterprise services. The price gap between 10Mb and 100Mb fiber access is a major sticking point. Why must we pick from the set menu of 10/100/1000Mb fibre access?

It seems clear that any kind of pricing innovation in enterprise wireline would be very gladly received right now. I would say most IT Directors do not make the same irrational decisions that consumers might. This is a numbers game. Overpaying for a collection of underutilised 100Mb fiber access circuits at £2-3k install and up to £5-20k annually is a totally different matter to free install and £300 per year for home broadband.

I can’t say that metered fiber access is inevitable any time soon – too much is dependant on the wholesale pricing – but I’d say that the customer motivation to drive this is much stronger in the high bandwidth market.

Are any UK operators up to the challenge of being the first to offer usage based charging for enterprise, without waiting for Ofcom and Openreach to change the game?


Joe sent me a message to reinforce the point out that he was referring to wireline *and* wireless broadband, where tiered pricing is already taking hold. Point noted!

particularly at the point where business broadband and fiber access services intersect.

Bad news: The IPv4 barrel is almost empty. Good news: The network will be relevant again.

December 6, 2010

“He who talks more is sooner exhausted” — Lao Tsu

Buying Internet access is a simple decision for most people in the developed world.

We take it for granted that we will be able to reach everyone, and everyone will be able to reach us, so the only things to consider are “how much bandwidth do I get?” and “how much does it cost?”.

However, if the Internet started to split into two logical networks, you would want a network provider that connected you to both parts. If you wanted to reach everybody, the quality of the Internet access, IPv4/IPv6 integration, and the quality of support you received would be key differentiating factors.

The ubiquity of everyday, humdrum Internet access has brought about fierce price wars and consolidation in the IP transit market over the last decade. Right now Internet access is a digital commodity, but the impending IPv6 shakeup will change that .

The physical Internet will be expected to accommodate a new logical layer for which few have invested. Meanwhile a new way of working is going to be imposed on people who are starting from a knowledge and operational skill level of zero.

The consequence of this disruption is that something that we have come to consider simply as a cost of doing business will once again have strategic relevance. Internet access that could previously be relied upon to be a ubiquitous commodity, will become differentiated by variation in performance, user experience and support. We will need to ask new questions: Can I reach everyone I need to? Can they reach me? What is the user experience like? Will this service even work?

With one year to go before even the RIR supply of IPs is exhausted, it is now inevitable that the Internet will fragment and develop a split brain. When the RIRs themselves run dry, and the trade in IPv4 space really gets going, prices will escalate rapidly. Eventually it stops being commercially viable to buy IPv4 address space in order to maintain network growth.

There is simply no way the entire IPv4 Internet will be running dual stack by the time we see IPv6-only users, content and services start sprouting up. It’s also inconceivable that there will be any large-scale protocol NAT that can deliver a decent user experience. So this means, regardless of how much IPv4 you have bought or hoarded, if you don’t migrate to dual stack anyway you can expect to be branded a legacy network by competitors.

As I explained previously, there will be a severe skills shortage in IPv6. Making sense of the technical transition and all the implications is exceedingly difficult; it involves taking a step back to get an objective overview of the Internet as a whole.

Disruptive effects can take various forms – market forces, technology and regulation. The beauty of this technical one is that we’ve known about it since forever. Everybody has had a chance to make sure they’ll not be left standing without a chair when the music stops.

So congratulations to those operators who have the nous to emerge as leading, capable providers in the confusing multi-protocol landscape that will emerge in the next 2-3 years. You just found your product differentiator again.

Opening up networks (Part II): Creating new value in the enterprise market

November 23, 2010

One obvious, ongoing trend amongst enterprises is the desire to consolidate technology and communications suppliers. In all businesses, the IT Directors and CIOs long for a more simple life; fewer vendor relationships to manage and just one bill for everything. So understandably, becoming a one-stop shop for all managed services is something to which all vendors now aspire.

We now have both feet firmly in the 21st century and, in our new IP-everywhere world,  a clearly horizontally divided communications market has emerged in which “cloud” is the buzzword du jour. The world is full of IT outsourcing companies and systems integrators vying for enterprise business, but none of them run their own carrier  networks. They consume the services of  network operators (the guys who shuttle your packets), who in turn are supplied by network owners (the guys who dig up the road).

Have you ever thought about just how much cost is incurred by support inefficiency in the standard carrier wholesale or reseller model? When building large scale enterprise solutions, things can sometimes get a bit silly:

  1. Network owner A selling Layer-1 infrastructure and supporting network operator B.
  2. Network operator B selling wholesale to operator C and supporting them.
  3. Network operator C supporting their channel partner, IT services company D
  4. Service company D supporting their enterprise customer.

From the point when the end user initially reports an issue to their provider D, just how much delay, human error and eventual customer agitation is introduced, with each additional support ticket that gets logged down the chain?

There is so much operational overhead, conflict and support headaches when human NOCs are chained together. The poor end-customer, being very far from the engineer who will eventually diagnose the fault, ultimately has a very poor experience during the resolution process.

If the cloud is really about enabling access to cheap data, to create value, can operators develop smarter wholesale services to improve efficiency and customer experience? What use is there for abstraction layers to unlock internal management data?

Imagine an operator offering a white-labelled transport network for a large managed services or outsourcing provider. This would take ‘wires only’ to the next level by removing not only customer IP router management, but also something else that a ‘one-stop shop’ shouldn’t really need: human NOC eyeballs performing routine 1st line monitoring and support of all those VPNs, tail circuits and network termination devices.

It seems to me that large systems integrators could utilise APIs to operator assets, running their own software tools, pulling data directly from their core services and customer edge devices.

The key to making the operator value proposition unique here is in removing the friction that normally occurs when the outsourcing provider is supporting their end customers. The provider also has the ability to use the management data in a way that suits them. Global systems integrators have their own route to market for large contracts,they just need a network component in order to build a solution.

Conventional wisdom amongst network operators is to attempt to offer more service wrap to customers, not less. There is a common fear in the industry that now dissuades all operators from concentrating on what they do best, which is delivering bits. Nobody wants to miss out on what is perceived as the smart, high margin business – the “value-add” in managed services. I think it is worth taking time to question this view, for there are other ways to make ourselves invaluable to our customers.

Network operators are the communications enablers that sit between solutions providers and end-user businesses. Surely there is some way to offer more value here by selling intelligence, not just capacity. This kind of smart wholesale looks like an exciting opportunity to me.

Opening up networks (Part I): There’s nothing wrong with being a plumber, if you have a really cool toolbox

August 25, 2010


“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Mark Twain

The Internet has developed an annoying habit of eroding 20th century business models that were based on the artificial scarcity of some resource or service. The music recording  and newspaper industries have been grappling with this difficult truth, because their business was based on the belief that the media distribution mechanism was what had value. The whys and wherefores of these economic effects are an extensive and widely discussed topic, so you can do the research if you’re interested, but while we’re on this subject I’d like to highlight one of the best articles I’ve read recently: Jeff Jarvis’ summary of how the relationship between privacy and publicity has now inverted.

So anyway, back to data pipe operators. There has been a storm brewing for the last decade: I’ll just recap on the main “threat” for the benefit of anyone who isn’t familiar with this topic. In telecoms we have an industry built historically on voice and messaging services. Direct user-to-user services. The IP revolution, and convergence of all services onto this medium, has meant the end of vertically integrated services that are tied to the network. When communication services become decoupled from the transport network the old-world services lose their scarce status. Do you remember the news headlines when Skype began to get popular? Just wait and see what happens after today’s Google Mail “voice” kick-off.

Traditional voice minutes make juicy profit margins, whilst the data offerings that replace them do not. We have a digital communications industry converging on a commoditised data transport layer where price is the only key differentiator.

With the price of data connectivity tumbling, those margins will eventually become, in the words of Mr Creosote’s maître d’, “waffer thin”. Meanwhile the delta between data revenue and bandwidth usage is increasingly at an alarming rate, particularly for mobile operators. This is a big problem when you have a one-sided business model, where revenue comes only from selling these products to users.

And thus the scene is set for the following premise:

Long term growth in the telecoms industry will not come from just selling  connectivity.

Telcos’ (especially traditional, retail telcos) have a psychological inhibition – they really don’t want to be straight utility providers. After a century of business as usual, there is an entrenched belief within telcos, almost a sense of entitlement, that they should be the ones selling communications services to end users.  Consequently they fail to concentrate on what they still do best  – delivering bits – and instead we get what Rudolf van der Berg calls Apple and Google envy. The aspiration (as this 2007 Gartner report makes evident) is to be in consumer and enterprise IT “services”. Offering services is cool, being a digital plumber is not.

When the threat of ‘over-the-top’ providers began to take shape, somebody somewhere began talking about telcos being demoted to “dumb pipes”. Dean Bubley has pointed out that whoever coined the term “dumb pipe” has cost the industry untold millions. Indeed this negative response doesn’t get us very far. Particularly when, in reality, what is being threatened is merely the unwarranted assumptions of the industry. One of the knee-jerk reaction of those concerned was to start demanding payment from the likes of Google, on the grounds that they were getting a free ride.

The prevailing trend has been to go on the defensive, rather than changing the mindset of the business by considering the possibility that these threats might actually be perceived as opportunities. I am amongst those who think the industry needs to take a step back and accept that being a plumber is fine, when you happen to be in possession of a very flexible, intelligent toolbox. A toolbox that can create new value from the network and its data, and ultimately introduce new ways of doing business. After all, the network operator has the potential to understand the customer better than anyone, as Alan Quayle is keen to remind us.

Imagine the possibilities that could arise when we create an interface between the transport network, including all the high value data on it, and those who are best at innovation: software developers. In future posts on this topic I’ll take a look at some examples of what might be possible.


If the Internet shifts out of neutral, what might that mean for the Enterprise WAN market?

August 16, 2010

Shanghai Nights

During last week’s bombardment of Verizon/Google analysis I found myself  speculating on the possible “death” of net neutrality and the potential implications from my own perspective in the carrier industry. This was one of the questions that popped into my head:

What is the difference between:

  1. A private WAN
  2. A secure VPN on a prioritised/tiered, non-neutral Internet

Those two things could bear a striking resemblance to one another, couldn’t they?

Generally speaking, private wide area IP networks have value to business because they provide what the Internet does not – predictable, reliable performance. They deliver critical enterprise-grade performance in a world where all Internet traffic is treated as best-efforts, leaving everyone at the mercy of congestion and packet loss. If premium, prioritised Internet was on offer for the right price, leading the performance of Internet VPNs to dramatically improve, what would happen to the value proposition of the traditional IP WAN offering?

If you view the Internet in a political sense what it essentially boils down to is a collection of agreements to exchange traffic between networks. Those agreements determine routing policy; decisions on where to send traffic, based partly on efficiency but mostly on economics. It is the bread and butter of every autonomous system to apply policy to control where traffic should be sent to next. While it is technically possible to apply priorities to Internet traffic, in general this doesn’t happen. Most importantly if traffic does happen to be marked as requiring a QoS level this isn’t honoured between networks. So, whilst I concede that some engineering issues may exist, the main obstacle to QoS on the Internet is actually the absence of a common agreement to prioritise traffic marked as “premium”.

You might argue that any kind of meaningful agreement is unlikely, on the grounds that the industry will want to protect its higher-margin enterprise services. I recently stumbled across this fascinating interview with Malcolm Matson, in which he remarked that “the telco industry is probably the largest global cartel that mankind has ever known”. This is fairly accurate. However, if it becomes commonplace for anyone, not just content providers, to have the option to buy themselves out of best-effort Internet then it is feasible that we might see QoS agreements emerging between providers who don’t already play in the WAN market.

Admittedly, there are certain applications that will always demand a dedicated network with an SLA. However if the performance gap between this and “premium” Internet closed significantly, how many IT directors would still buy a global IP WAN?