Monday, May 23, 2016

How Will AT&T's Virtualized Network Affect its Suppliers and Retail Sales Partners?

It isn’t as easy to describe the likely impact of network functions virtualization (NFV) on the retail end of the business as it is to envision the implications for network infrastructure supplier impact.

By definition, virtualization means new and existing apps can run on a single hardware platform, rather than having dedicated equipment for each app. That should mean less spending on network equipment, so less capital expense, and arguably lower operating expense.

At a high level, that also implies lower revenue for telecom network equipment suppliers.

This will be a big deal for AT&T and many of its networking equipment suppliers.. “We are now forecasting that by the end of this year 30 percent of our network functions will be virtualized,” said Ralph de la Vega, AT&T vice chairman. “ And by 2020, it will be 75 percent.”

“we’re moving all of our service to this on-demand platform over time,” he said.

In principle, there should be implications for retail sales, or on-going customer support operations. As AT&T rolls out “Network On Demand,” retail enterprise customers will be able to  dial up, or dial down, bandwidth on demand. “If the customer has a five megabit per second circuit and they want to go a 20, they go to the portal, they make a change and in less than 90 seconds, the new service is provisioned,” said de la Vega.

“There is no need to call a sales person, there is no need to order equipment, there is no need to setup another connection it happens in 90 seconds,” de la Vega said.

For AT&T, that could often translate into higher revenue, if the direction of changes by most customers is “up,” rather than “down.”

“And what I love about it is my revenue cycle is 90 seconds,” said de la Vega.

In principle, that same bandwidth on demand feature could be available to medium-sized or smaller businesses as well.

De la Vega used the example of a small cancer center with 12 locations. That sort of mid-market customer can, assuming the bandwidth is available at all locations, dial up and then dial down bandwidth, allowing it to send big files episodically, at any of the locations.

That could have some impact on retail sales channels, if the “moves, adds and changes” revenue becomes a matter of customer self service.

That could drastically limit the amount of MAC revenue any retail agent--or AT&T itself--earns from bandwidth services.

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