The opportunity in evolving IP services

Service providers can supplement broadband revenues, optimize networks
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Michael Kennedy, ACG Research

Kennedy

New, more sophisticated IP services are emerging, as are the associated service delivery platforms to meet the changing use and nature of the Internet. The new services feature personalization and better management of flow-based traffic—especially video and optimization services. Drivers for change in the Internet itself include explosive growth in the types of end-user devices, applications, cloud services and traffic. Increased mobility by location, across devices, and of resources (virtual machines and storage) within the cloud is also driving change. These underlying trends also are driving service providers to emphasize service monetization, better network scaling, and better resource utilization in their business models.

Systems vendors are responding to these changes in the Internet and service provider business models by developing IP services that deliver service monetization and network optimization. They also are rethinking the way IP services are delivered by enhancing IP routers with service delivery processor cards and experimenting with Software Defined Network (SDN) use cases.

Service providers place a high priority on developing new IP services that supplement basic broadband service revenue. The service provider's dilemma is that most broadband services offerings are flat-rate priced for specified maximum downstream and upstream data rates while subscribers perceive value mostly as a function of the content which is not directly linked to data rates. Value-added services (monetization services) provide vital incremental revenue for relatively modest investments in IP service delivery infrastructure (service engines in the form of appliances or services cards for routers.)

Many new IP monetization services are being proposed. They include personalization services and usage management services. Personalized services involve creating "billing buckets" by providing individual subscribers higher bandwidth based upon individual usage situations for an opt-in fee. For example, avid gamers might elect to receive higher bandwidth and faster response time when they are using gaming apps, but not for their other Internet usage.

Usage management services provide a more subscriber-friendly solution for subscribers who exceed their monthly usage limits. In the simplest form, two options are offered to the subscriber when the monthly usage limit is reached. Under option 1, the subscriber may elect to continue receiving service as usual by paying an additional service fee; if the subscriber elects not to pay then service is rate-limited until the end of the month. This is a more attractive approach to controlling excessive use than suspending service when the service limit is reached. It avoids offending good customers who may well wish to buy more service and it turns a service provider cost containment problem into a revenue opportunity.

Optimization services are used to increase the service provider's network utilization, reduce network operations expense, and improve network scaling. Demand engineering, peering control, and video caching and transcoding are three services that address these needs.

Service providers have practiced traffic engineering for decades to improve network utilization and minimize the number of router hops by finding optimal routes across networks, subject to various network protection schemes. Traffic engineering assumes that network demand at each node is a fixed quantity.  Demand engineering goes beyond traffic engineering by also optimizing placement of network demand at each node. For example, a network used to interconnect data centers would optimize the network using traffic engineering principles and optimize the placement of virtual machine loads in all the data centers.

Peering control is used at peering points where there is an imbalance between the traffic flows across the peering point. In these instances, the ISP that receives more content from another ISP than it sends must pay the second ISP for the net difference in the data flow. The peering control service reduces this imbalance by rate-limiting traffic flows from the second ISP to the first ISP during the peak usage period.

Video streaming and downloads now account for the majority of traffic on the aggregation and access networks, and are rapidly growing. Efficiently managing video traffic can substantially reduce network total cost of ownership. Network operators can reduce these costs by deploying video cache and transcoding. Video cache and transcoding are distributed throughout the aggregation network so that the distance between the subscriber and the source of video content is reduced. Transcoding reduces network capacity requirements by reducing the size of video downloads so that no more data is transmitted than is needed to fill the viewer's screen, whether it is a tablet, smartphone or laptop.

The uptake in the adoption of IP services is good news for service providers in that they address service providers' monetization and network optimization issues at relatively low incremental cost. IP services also provide a vehicle for systems vendors to enrich their IP router product offerings by providing new revenue sources and an opportunity to provide product differentiation in a mature market segment.

Michael Kennedy is a regular FierceTelecom columnist and is Principal Analyst at ACG Research. He can be reached at mkennedy@acgresearch.net.