Among the various conversations people had at the #PTC’22 conference are those about where networks are going, where the business is going and where revenue is to be found. Among the topics, 5G and Wi-Fi 6, network slicing, edge networks and the complications of in-home environments have been prominent.
Among the potentially most far-ranging were questions posed by Robert Pepper, Meta head of global connectivity policy. Use of open technology is simply the latest in a series of transitions that have happened in the networking business over the last 40 years, Pepper said.
“Disaggregated network elements are 40 years in the making,” Pepper said. The industry transitioned from analog to digital; then hardware to software functions, he noted.
The “next transition is from integrated and proprietary to open and modular networks,” he said.
There will be big repercussions for suppliers of networking infrastructure. Where telcos 50 years ago developed and made their own gear, they then switched to buying complete networks from a handful of global suppliers. That obviously created huge new businesses, but also made telcos “captive” to a few suppliers and “vendor lock in.”
Suppliers might like that state of affairs, but buyers (telcos) hate it, it is fair to say. In a broad sense, the shift to open and modular networks also represents a shift from vendor-led to operator-led infrastructure development and supply.
It also is fair to note that there always are private interests that benefit from any wider shift in framework. Perceived benefit hinges on where a firm or industry segment operates in the complete value chain.
Application supplier business models depend on ubiquitous, high-quality and low-cost internet access. Access providers are not similarly situated within the value chain. For app providers, high-quality, low-cost internet access is a prerequisite for business. For connectivity providers, access is the business.
For an app provider, internet access is a cost of doing business. For a connectivity provider access is the core revenue stream. What the former wants is lowest-possible cost and highest-possible quality, the latter wants highest-possible revenue with minimum-possible cost.
You might argue it is in Meta’s interest for internet access to be universal and good, as it is in a connectivity provider’s interest to reap the highest revenue from access services, with the highest margins consistent with long-term sustainability.
If Meta is right, economics are moving in the direction of what is favorable for application creators.
There are clear analogies in the data center or server businesses as well. Hyperscalers build their own servers, they do not buy them. Hyperscalers build and own their own wide area networks, they do not buy services from WAN suppliers on their core data center to data center routes.
Hyperscalers build their computing fabrics from modular arrays of servers, not monolithic mainframes. Whenever possible, they virtualize both compute and storage operations, rather than dedicating hardware to those functions.
Moderator Gary Kim, a PTC volunteer and consultant, noted that when the global telecom industry selected internet protocol as its next generation platform, it also--knowingly or not--chose a layered business model.
IP is not simply a framework for moving bits around; it is a business and revenue architecture as well, separating logical functions in ways that allow whole industry segments to emerge in a disaggregated way.
In other words, the salience of the term “over the top” is precisely the result of a “layered” approach to building communication networks. When we disaggregate edge devices and functions from transport layer functions, and those from application functions, the revenue streams and possible business models also are disaggregated.
That is why Meta, Amazon, Netflix and others can build businesses using networks without owning networks.
IP was not just a technology platform change. It was a profound business model change.
No comments:
Post a Comment