Thursday, July 19, 2012

If SPs become a dumb pipe everybody loses

If service providers become a dumb pipe, everybody loses – even Google.

The answer – Network APIs

Since the worldwide web took off over a decade ago we’ve all witnessed and benefited from constant innovation bring us new services and new applications.  Imagine life without web-based maps and directions or watching videos on your mobile device. Much of this innovation was a result of higher and higher bandwidth to each home and office.

Facilities based service providers do the heavy lifting of building and maintaining a network.  The heaviest lifting occurs in the outside plant part of the network.  Whether copper, coax or fiber the outside plant needs to withstand extremes from the cold of winters to the burning suns of summers.

Over-the-top providers (OTTP) have received essentially a free ride over the SPs networks including the high speed core, metro and the access networks.  OTTP have been benefiting from the build out and upgrades the SPs are investing in.  SPs are struggling to generate any-play bundles that add value, increase revenues and margins and attract and retain customers.  OTTP want the network to be a free dumb pipe.  However, SPs fear is becoming this dumb pipe.

Up to now, everyone has benefited from the constant increase in affordable bandwidth.  SPs have continuously invested in network equipment to remain competitive and to reduce OPEX.  OTTP providers have utilized this increase in bandwidth with a constant stream of innovated applications with an increasing amount of video and rich media.  They’ve benefited with an increase in number of users thus revenues.  Consumers have also benefited from the SPs and OTTP investments by enjoying an exponential increase in compelling and useful applications.

History – SPs continue to invest – everyone wins.

SP revenues go up
SP’s network investment goes up
Bandwidth goes up
Innovation engine continues
OTTP revenues go up
Consumers benefit from new compelling applications and services

If the OTTP get their way and the SPs do in fact become a dumb pipe everyone loses.  If SPs are an electric-like bandwidth utility with fixed margins their infrastructure investment will become flat or will decrease.  Equipment will be depreciated over 20 to 30 years like Class 5 PSTN voice switches were in the past.  Bandwidth will remain flat with best effort transport only. OTTP will suffer because the end user experience will become “hit or miss” and consumer will abandon sites and application with poor performance. The bandwidth hungry innovation engine will slow to a crawl.  Consumers will be impacted with a sudden halt to new cool applications and services that improve their lives.

If SPs become a dumb pipe – everyone loses

SP’s revenues become flat or decrease
SP investments go flat or decrease
Bandwidth remains flat
Innovation slows
OTTP revenues become flat or decrease
Consumer do not benefit from new cool applications and services

The Solution

SP’s need to create value to get the OTTs to want to pay them.  A network API strategy properly implemented is the solution.

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