Today, more than ever before, mankind is breaking down the barriers and creating a connected social fabric without borders. This not only helps us better communicate and work wherever we are, but increasingly it enables all layers of society to share content and create new ideas. Whether it is good or bad, the globally connected social fabric is ultimately changing the world order as we know it. As a result, this puts connectivity at the core of all of our daily lives and it is therefore fast becoming one of the most crucial building blocks of our civilization. From connectivity being seen as the least exciting segment of the telecom world only a few years ago, it is now becoming sexy again.
With large data pipes being delivered directly to the end users, a data-hungry world is leading to the deployment of multiple subsea cables across the globe. Data centers are popping up everywhere and public, private and hybrid clouds are multiplying at lightning speed. However, if many companies can build connectivity or clouds, only a few can connect everything into a global ecosystem. The next few years will therefore be decisive. Will operators, OTTs or media companies win the connectivity war to deploy global capacity to meet their growing customers’ needs. One thing is certain, the connectivity opportunity is big, the question is: ‘Who will be able to truly harness it’?
OPPORTUNITIES, OPPORTUNITIES, OPPORTUNITIES
Opportunity #1 – The connectivity storm
It is not a secret, data traffic is exploding. Estimates from Cisco, for example, state that global IP traffic will grow to 4.2 ZettaBytes in 2022. However, what is more startling is the fact that video traffic is growing so rapidly that it will account for 82% of the total IP traffic by 2022. This surge in all content type will safeguard the sustainable long term growth in terms of bandwidth demand. May it be to consume music, video or gaming, digital consumer services will continue to demand better connectivity services worldwide. The location of the traffic flow is also on the verge of a transformation. The massive increase in video traffic, coupled with the advent of IoT and M2M solutions, will undoubtedly put pressure on the edges of the network. However, expanding the number and distribution of data centers housing this content, together with the analytics associated with IoT, also has a big knockon effect on core transport solutions. This is especially true as the data in each and every center must be synchronized and backed-up in ever faster timeframes. As a result, the demand for global connectivity shows no signs of a slowdown. Furthermore, the exponential growth also applies to access speed – that is, our ability to gain access to this data in the shortest possible time. For example, mobile download speed is expected to more than double to 28.4 Mbps over the next 4 years, while fixed internet speed is expected to grow from 45.9 Mbps to 75.4 Mbps over the same period. This increases internet content and high bandwidth applications consumption, which will, itself, stimulate the traffic explosion further. Of course, users are also expecting to benefit from these digital services when they travel abroad, so demand for higher international mobile roaming traffic will also increase. A direct result of this data storm, coupled with the continued decrease in the cost of leasing transmission services, is the requirement for bigger and bigger pipes by operators supporting this demand. Ethernet has long been valued for the ease of use, and demands have risen such that 10Gbps connections are becoming the norm. In optical networks, the traditional 10Gbps wavelength grew to 100Gbps a long time ago and now 400G optical services are being offered around the world by the leading players. In some cases, operators have been able to upgrade their underlying optical networks to realize massively increased capacity – perhaps by as much as forty times what they originally expected when the fiber was installed. In response to these demands, carriers are enhancing and rolling out new capabilities on a global scale. Ethernet based private LANs can offer flexible bandwidth from as low as 1Mbps, all the way up to 10Gbps, to give their customers multipoint to multipoint connectivity. For larger demands, Ethernet private lines can increase that available bandwidth up to 100Gbps, providing guaranteed capacity around the world. Finally, offerings based on access to the optical wavelengths themselves are available for customers that need that flexible and cost effective solution.
Opportunity #2 – The cloudification of everything
Another key stimulus of IP traffic is the race towards ultimate efficiency, with the virtualization of our information world. Nowadays, almost all content, information or applications we interact with resides in either a public or private cloud, which results in the explosion of Cloud IP traffic. Again, as per Cisco’s estimates, the global cloud IP traffic will reach 19.5 ZB per year by the end of 2021, which will represent pretty much half of the total IP traffic generated globally. Unsurprisingly, consumer IP cloud traffic will mainly be generated by video streaming and social media consumption, while enterprise IP cloud traffic will come from compute and collaboration applications. Much of this is driving the growth of large cloud providers such as AWS, Google or Microsoft Azure, which are reporting growth rates of 50% annually. Additionally, enterprises will continue to demand reliable and secure connectivity from their cloud providers, as more critical applications are being moved to the cloud, representing a new opportunity for carriers. With the explosion of the cloudification of everything comes the emergence of everything as a Service. In the connectivity world, this translates into such offers as Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and finally Software as a Service (SaaS). However, enterprises must ensure they can gain the efficiency benefits of virtualizing and moving critical parts of their business to the cloud, while, at the same time, controlling for any security risks that may come with it. Not a simple problem to solve in large globally dispersed companies. Of course, one way to minimize the risk is to partner with experienced global operators for whom security is second nature. Some global operators have established their own cloud environments in secure colocation sites, fully integrated into their transport services, and make that capacity available to other operators and to their commercial customers. Carriers with their own investments in service providers around the world have the added advantage that their cloud centers can be in locations that are perhaps not as well supported by the more commercial cloud operators, which can be a major advantage if the business is in those regions. To gain a competitive edge, major carriers should establish one-stop shop arrangements, whereby enterprises can gain secure, resilient, quality managed connections to major commercial cloud services, as well as the carriers’ own offerings, to provide a fully managed hybrid environment. This can be complex, as it requires an understanding of the many regulations and the requirement from governments for secure and regulation-compliant policies. This required mix of national/international cloud process/ applications will, in addition, require the growth of international traffic to synchronize back-end applications and data.
Opportunity #3 – The ecosystem revolution
Throughout society, a significant wave of disintermediation is taking place, with multiple attempts to remove layers to close the distance between us, the consumer, and the source of the goods or services. Blockchain is one example that comes to mind and many others exist such as Uber and AirBnB, to name the most obvious. We seek disintermediation because we are seeking empowerment. While a similar trend is also taking place in the telecom industry, with large enterprises going directly to wholesale carriers for many large requirements, there is also a shift in the type of customers that carriers are now serving. While traditional fixed operators may be in decline, demands from new disruptive providers such as MVNOs, cloud computing providers, UCaaS providers and the very large multinational corporations are significantly growing. The shift by very large technology enterprises to partner with international carriers, even to the extent of sharing the costs of building new global cable networks, is providing significant new opportunities. As a result, a growing portion of international traffic will now be transported over hybrid networks or newly developed undersea cables in partnership with the largest global carriers. As some sources estimate that as much as 70% of the inter-continental traffic is generated by technology companies, this trend could have a transformational impact on the connectivity industry. This evolution also changes the dynamics within the operator-carrier ecosystem. More and more enterprises are reaching out directly to wholesalers for their connectivity services, getting rid of the retail service provider as a middle-man. They want to benefit from wholesale prices, capacity and service activation times. In return, wholesalers must learn to address this new segment with flexible, tailor-made, user-friendly interfaces to their software defined networking services. They will also need to be in a position to do much more hand-holding to some extent, as enterprises get to grips with building and managing their own networks. This can also be achieved by making this increasingly flexible. Offering secure SD-WAN and global multipoint Ethernet services to major enterprises will therefore become a key focus.
Opportunity #4 – The on-demand world
Finally, we now live in an on-demand world where everyone expects everything in realtime and as per their specific evolving requirements. Gone will be the days of rigid and static networks, dimensioned to meet the expected demand scenario. The urgent need for ultimate efficiency and minimal capital expenditure, coupled with the rise of virtualization of the network, is triggering an unprecedented revolution in the connectivity space: the creation of fluid networks. The explosion of traffic, discussed earlier in this article, is unpredictable. Who really knows what traffic patterns will be generated by the proliferation of augmented or virtual reality applications, IoT or 5G enabled services? In today’s reality, operators cannot afford to have long term fixed plans and over-dimension networks and certainly enterprises cannot do so either. No-one has the luxury of going through lengthy ordering and provisioning processes to meet sudden demands. With increasingly automated interfaces, customers can expect high quality connectivity from everywhere, and only the operators meeting these expectations will remain relevant. Rolling out enterprise-friendly services, such as IP-VPN and the various forms of Ethernet capability, provides a strong underlying infrastructure. However, equally important is the provision of systems that allow customers to dial-up the bandwidth where and when they need it for their urgent requirements. Carriers wanting to be at the center of the connected fabric will therefore need to move to a bandwidth on-demand type of business model. In fact, the deployment of many network functions on-demand, accessed via flexible and secure APIs, is likely to be a trend for the coming years. For example, large customers and service providers will want access to on-demand network infrastructure giving them the opportunity to make use of virtual services such as firewalls, remote access servers as they need them. Furthermore, carriers should consider going one step further by implementing such flexibility at all network levels including the optical network layer. Recent developments by leading vendors are enabling software-defined optical networking with the ability to “program” rather than “configure” their key underlying technologies. Then, and only then, will a fluid on-demand network become a reality.
GIGABIT ECONOMY SUCCESS MANTRAS
As we have seen in this article, there are multiple opportunities waiting to be harnessed. But not all organizations will be able to tackle them. Only the ones who have a focused connectivity strategy will be able to do so. There is no magic recipe, however for the carriers or service providers wanting to win the connectivity war, here are four key mantras to follow:
Network fluidity: Demands can change in an instant as trends develop and consumers adopt the latest technologies. Connectivity services that are flexible and available on-demand to meet those evolving needs will give major players the edge they need.
Cloud centricity: Major customers are looking for solutions that simplify the entire ecosystem around the adoption of cloud technologies, from diverse and secure access to simple management systems for hybrid public/private storage and analysis.
Customer-Partner centricity: As the customers of major carriers evolve, the new reality of transforming the way global networks are financed and built requires flexibility and partnerships with this new breed of customers. A key requirement for the future is a highly flexible and customer/ partner focused approach at all levels of global networking.
360° security: Everything must be designed, from the very first product outline, with security and privacy in mind. Connectivity solutions are so key to the modern world that nothing less than 100% security will be acceptable.
ABOUT THE AUTHOR
Isabelle Paradis President HOT TELECOM Isabelle is President and Founder of HOT TELECOM, one of the most innovative and creative telecom research and consulting companies in the industry. More recently, Isabelle has been working with many of the world’s telecom service providers to help them define their transformation strategy. She has published several articles and reports on the subject and has spoken at numerous conferences around the world to share her views on the future of the international telecoms business.
ABOUT TELEFONICA INTERNATIONAL WHOLESALE SERVICES Telefónica International Wholesale Services (TIWS) provides world-class wholesale services to fixed and mobile operators, service providers, carriers and OTT-Media companies. Our global portfolio includes Voice, Carrier Enterprise, Mobile and Satellite services, innovative Digital solutions and end-to-end solutions for enterprises.
