Data Centers are the Central Offices of the Early 21st Century

“Cloud computing” now is becoming so fundamental that it is driving international bandwidth patterns and growth. Since data centers are central to cloud computing, it likewise will come as no surprise that data centers have functionally displaced central offices as the network nodes that drive traffic across networks.

There also is a good reason why “hybrid cloud” is viewed as a big opportunity by many in the cloud ecosystem. Despite the growth of public cloud operations, private cloud will represent 69 percent of cloud workloads in 2018, says Kelly Ahuja, Cisco SVP.

"When people discuss cloud, they often focus on public cloud services or public cloud storage services,” Ahuja said. “Even with public cloud workloads having significant growth, by 2018, almost 70 percent of cloud workloads will still be private cloud-related.”

By 2018, 69 percent (113.5 million) of the cloud workloads will be in private cloud data centers, down from 78 percent (44.2 million) in 2013, and 31 percent (52 million) of the cloud workloads will be in public cloud data centers, up from 22 percent (12.7 million) in 2013, Cisco says.

Cloud operations also are growing as a percentage of total data center traffic. In 2013, cloud accounted for 54 percent of total data center traffic, and, by 2018, cloud will account for 76 percent of total data center traffic.

Over the next five years, Cisco forecasts a tripling of data center traffic. Consumer Internet usage will drive much of the increase.

By 2018, half of the world's population will have residential Internet access, and more than half of those users' (53 percent) content will be supported by personal cloud storage services.

Mobile usage likewise will drive traffic. The Asia Pacific and North America regions will account for a little over half of global mobile traffic by 2019.

But the Middle East and Africa regions will experience the highest CAGR of 72 percent, increasing 15-fold between 2013 and 2018.

Central and Eastern Europe will have the second highest CAGR of 71 percent, increasing 14‑fold over the forecast period.

Latin America and Asia Pacific will have CAGRs of 59 percent and 58 percent, respectively.

Between 2013 and 2019, mobile traffic will grow 11 times in the Middle East, Central Europe and Africa, according to Ericsson.

Through 2018, the Middle East and Africa region is expected to have the highest cloud traffic growth rate (54 percent compound annual growth rate [CAGR]); followed by Central and Eastern Europe (39 percent CAGR); and Asia Pacific (37 percent CAGR).

Between 2009 and 2013, Middle East International bandwidth demand grew 61 percent compounded annually, according to TeleGeography.

Sprint Promotion Reimburses New Customers for ETFs and All Phone Installment Balances

Despite assurances from some U.S. mobile executives that the mobile marketing wars seem to be moderating, Sprint just fired another shot.

Effective immediately, Sprint will reimburse all of the costs to switch from another carrier to Sprint.

That includes all  early termination fees and remaining payments on phone installment plans,  no matter what is owed.

Up to this point, carriers had been reimbursing “up to” some amount, and generally only reimbursing for early termination fees. Sprint’s move is a potentially significant escalation of such “switching inducements.”

Sprint currently had also been offering Cut Your Bill in Half promotions that literally aim to cut costs in half for new customers ditching their old providers.

Customers simply need to switch to Sprint and turn in their current phone. Sprint will refund the switching costs within about 15 days of successfully completing the online registration and providing a bill that shows the early termination charge or device balance due.

Cisco, Microsoft Partner to Support Service Provider Hybrid Cloud Business

Microsoft and Cisco have created a new product package designed to enable service providers  to offer Azure cloud services, probably especially to create and support hybrid cloud services.

Microsoft is contributing its Windows Azure Pack, while Cisco contributes its networking devices and servers.

The Cisco Cloud Architecture for the Microsoft Cloud Platform aims to enable service providers to create and sell hybrid cloud solutions to enterprise customers, a popular approach for enterprises adopting cloud computing.

The architecture is intended to support a variety of cloud services, including infrastructure as a service, platform as a service, software as a service, disaster recovery as a service, database as a service or backup as a service.

According to Gartner analysts, use of hybrid cloud will triple over the next three years. The percentage of organizations that prefer a hybrid approach will grow from seven percent to 20 percent in 2017, for example.

Is U.S. High Speed Access Market Competitive, or Not? Data Conflicts

The U.S. Federal Communications Commission has released the text of its order that federally preempts Tennessee and North Carolina law restricting municipal broadband service.

The FCC says it acted under provisions of section 706 of the Telecommunications Act of 1996

that authorizes the FCC to adopt policies promoting broadband infrastructure investment and competition.

Just how much competition exists, in the high speed access market, and how much is feasible, are matters about which reasonable people can, and do, disagree. The majority FCC view obviously is that too little competition exists, while others would argue competition is reasonably robust, and is increasing.

Others might argue there is a danger that competition could decrease, long term, based substantially on the worsening profitability of such services. That is not to argue that every provider is so challenged.

On the other hand, the most-important suppliers--cable TV firms and the largest telos--do face growing challenges to the basic business model.

Consider mobile Internet access pricing. From 2010 to 2013, U.S. mobile data pricing (per unit sold) declined by only single digits year over year.

But in the first nine months of 2014, data pricing dropped by 77 percent, according to industry analyst Chetan Sharma.

In the fixed business, Google Fiber has changed consumer expectations about market level speed and pricing, creating an expectation that a symmetrical gigabit service costs $70 a month. Other suppliers essentially now are working around the Google Fiber price leadership.

Consider what Sonic.net is doing. It now is selling gigabit connections, with voice service, for $40 a month, submarining even Google Fiber pricing of $70 a month for gigabit high speed access.

CenturyLink now is selling a gigabit service for about $110 a month, guaranteed for a year.

A 100-Mbps service costs $70 a month, with the price guaranteed for a year.

A 40-Mbps service costs $30 a month, guaranteed for a year. All those prices are for stand-alone service, with no phone service.

A year ago, a CenturyLink offer of 40 Mbps would have cost more than $77 a month.

The point is that some claim there is not enough ISP competition to create consumer benefit. Others would argue the price data suggests competition already is robust, leading to substantially lower prices offered by the suppliers in a position to sell to most households, and radically lower prices in some markets.

Without Abandoning Price Attack, Free Mobile Plans to Boost Profit

It long has been obvious that Illiad’s Free Mobile attack on French mobile market pricing would eventually have to pivot a bit to ensure sustainable profit margins. Illiad might now, after attaining market share of about 15 percent, be preparing to do so.  

The company now says it aims to boost operating profit by 10 percent in 2015. Earnings before interest, taxes, depreciation and amortization will grow more than 10 percent in 2015 after rising 6.6 percent to 1.3 billion euros ($1.4 billion) last year, Iliad said.

Oddly enough, significant mobile account additions hurt profit margins, as mobile accounts represent lower gross revenue and profit than the fixed line accounts.

Illiad might be banking on a shift of Free Mobile accounts from basic to enhanced service plans, specifically those supporting mobile Internet access.

That doesn't mean Illiad is going to abandon its price assault in the French market, only that it believes it can encourage a higher percentage of accounts to pay for mobile Internet access.

Is DSL Progress at a Limit?

With increasing stress on some service provider business models related to fiber to the home investments, the logical question is how much more can be done to prolong the life of the copper access infrastructure.

For 25 years, the answer has been "lots more." And some believe the progress is not yet at a limit.

The ability to deliver higher speeds over digital subscriber line or hybrid fiber coax,  for example, translates into lower retail costs, since the full replacement of the access network is avoided.

In that regard, it is worth noting that digital subscriber line has surprised even its would-be supporters. There was a time when the chief technology officer of a tier one global infrastructure supplier could say, privately, that “DSL won’t work.”

But smart people threw effort at the problem, and DSL did work. The big tradeoff has been distance versus bandwidth, so shorter access loops mean higher speeds are possible.

The other persistent limitations include line noise and the availability of spare wire pairs to bond.

Oddly enough, in many cases the abandonment of voice services by a majority of former users means there are more available copper pairs to be bonded for the remaining potential customers.

Roughly speaking, 50 percent fewer customers also means roughly 50 percent more copper pairs available to be bonded into high speed access lines.

Within some distance parameters, it is believed possible to push beyond 10 Gbps. The issue is the distance at which this is possible, how well the existing physical plant corresponds to ideal laboratory conditions, and the service provider’s ability to pull fiber deep enough into a serving area to support short access loops.

At least as Alcatel-Lucent’s Bell Laboratories sees matters, progress is not at a limit. That is a fundamental change from some thinking in the early 1990s.

In principle, and with the caveat that distance matters, speeds ratcheting to 40 Gbps are conceivable.

The lesson here is clear. When we say “something cannot be done,” that is a conditional statement. We mean “something cannot be done today, by us, at a cost that allows commercial operations and business models.”

Conditions can change.

There are other implications. When one tries to measure “quality,” one has to pick quantifiable metrics. Among the issues is whether the metrics one chooses represent quality as viewed by the supplier, or quality as seen by the customer.

In the end, the only metric that matters is the customer’s metrics for quality. So even if we believe fiber to the home is "better," and represents "better quality," that might only partially match customer perceptions.

The old adage that "customers don't care" about how you provide a service, only that you do so" is germane. All marketing hype aside, tests tend to show that beyond about 10 Mbps, any single user is unable to perceive an advantage compared to access at higher speeds.

Those requirements will grow over time, as they have since people began using the Internet widely, but the principle remains: end user experience increasingly is not dictated by the bandwidth of the local access loops.

Nevertheless, supplier choices do matter, because end user assessment of quality includes a “price” evaluation, not simply a “performance” perception.

That matters since all supplier costs inevitably are reflected in end user retail prices. If faster DSL allows lower retail prices, that is a "better" choice for many ISPs than ripping out all access network copper and substituting fiber to the home.

To a startling degree, headline speeds are a marketing necessity, but not necessarily an end user perceivable value. Beyond a certain point, headline speed increases yield no discernible end user advantage. 

That might not matter. Marketing concerns often dictate the ability to sell faster speed service, even if such enhancements do not lead to higher end user quality of experience.

No matter. ISPs will seek to deliver high speeds, because that is what successful marketing requires.

Bell Laboratories Technology comparison
Technology	Frequency	Maximum aggregate speed	Maximum Distance
VDSL2	17 MHz	150 Mbps	400 meters
G.fast phase 1	106 MHz	700 Mbps	100 meters
G.fast phase 2	212 MHz	1.25 Gbps	70 meters
Bell Labs XG-FAST	350 MHz	2 Gbps (1 Gbps symmetrical)	70 meters
Bell Labs XG-FAST with bonding	500 MHz	10 Gbps (two pairs)	30 meters

FCC Releases Text of Net Neutrality Order

The Federal Communications Commission has published its Open Internet order. It is 400 pages long, so no, I haven't read it yet! (update: I'm trying to read it carefully and it is tough going. The actual text of the order is not so daunting, the footnotes and "how we got here" attempts to justify are what makes it slow reading)

It does seem clear that the rule is only the beginning of the process, as the use of terms such as "reasonable" means a continuing, case by case review of discrete actions. (In fact, now that I'm plowing through it, it reminds me of another book-length law recently passed where the actual implementation is where much of the actual rules will be developed)

The Commission also says it will launch a separate proceeding to bring mobile data roaming obligations into conformity with the new rules, and possibly apply common carrier obligations to data roaming.

Internet domain interconnection, long a voluntary set of agreements between the networks, now will be governed by common carrier rules. That is likely to have unexpected consequences.

In fact, much of the actual implementation seems to lie ahead, as the use of the test of "reasonableness" means a case by case method of ruling will be required.