Why "Cloud" is Strategic for Capacity Providers

“Cloud” is a key business concept and the underpinning of revenue growth strategy for capacity providers, not simply a new computing architecture for app providers. 

Simply, revenue growth hinges largely on serving the needs of content providers and data centers serving content providers. Content demand now drives the places bandwidth has to be supplied, why it has to be supplied, and therefore where transport revenues can be earned.

Instead of networks optimized for moving symmetrical narrowband traffic from one telco point of presence to another telco point of presence, the long-haul networks now mostly move asymmetrical broadband traffic from one data center to other data centers.

That shift to “east-west” (server to server) traffic, from “north-south” (client to server) is shaping demand for capacity, and therefore revenue, with a big role played by end user demand for content, and hence for content delivery networks.

About 51 percent of all Internet traffic will cross content delivery networks in 2017 globally, up from 34 percent in 2012, according to Cisco. And since much of that content is high-bandwidth entertainment video, CDN-related traffic flows now are crucial for transport services providers.

The other big change wrought by cloud-based content apps is dramatic change in the geography of demand.

In fact, Cisco estimates, metro traffic volume will surpass long-haul traffic in 2014, for example, and will account for 58 percent of total IP traffic by 2017.

In fact, metro network traffic will grow nearly twice as fast as long-haul traffic from 2012 to 2017, Cisco argues. And much of that traffic will consist of video.

Globally, IP video traffic will be 73 percent of all IP traffic (both business and consumer) by 2017, up from 60 percent in 2012.

Cloud architecture has other implications for transport providers, namely the way cloud-based apps are “assembled,” rather than simply served up whole to requesting users. That is one reason why east-west traffic is growing.

Transport provider revenue growth increasingly is driven by supporting customers needing to move large amounts of content--especially video--from one data center to another, to assemble full apps or pages served up to end users.

In fact, the bulk of global undersea traffic arguably now consists of video-based Internet applications, hosted from huge data centers. One way of describing such east-west traffic flows is that traffic moves between servers, not between an end user and a server.

Though the actual application the end user uses is a communication north-south (client to server), often much of the “app” gets assembled from multiple servers.

And those are some of the ways “cloud computing” is shaping transport provider revenue opportunities.