IP networking: Building value through network subscriber and application awareness

Michael Kennedy, ACG Research

Michael Kennedy, Principal Analyst, ACG Research

Network subscriber and application awareness are two ways that IP networking is being extended beyond Layer 2 switching and Layer 3 routing. This expanded networking functionality is being driven on the demand-side by service providers' need to differentiate their services from both competitors and among internal lines of business where service cannibalization is a serious problem; and on the supply-side where more flexible hardware architectures make it possible to combine transport, switching, routing, and DPI capabilities in the same system chassis.

The most straightforward use of network subscriber and application awareness is to create incremental revenue for basic service offerings. Tiered pricing plans have the largest incremental revenue potential. Though tiered pricing is commonplace in other consumer markets, it is not often offered for IP networking services. The economic concept is simple. Demand curves always slope downward with increasing price--as prices increase the number of subscribers decrease. Flat rate pricing provides the same price to all potential subscribers. Potential subscribers unwilling to pay this price contribute nothing.  Some subscribers, however, are willing to pay more than the flat rate. This is "money-on-the-table" under flat rate pricing. Tiered pricing captures additional revenue from potential subscribers unwilling to pay the flat rate and from those subscribers willing to pay more than the flat rate.


...subscriber-aware video caching can be used to deliver a standard definition OTT video at a discounted price, HD video at the standard price

Network subscriber and application awareness can be employed to create a tiered-price plan. For example, subscriber-aware video caching can be used to deliver a standard definition OTT video at a discounted price, HD video at the standard price, and 3D video at a premium price. The investment needed to implement tiered pricing is modest.  A DPI-based software module is needed and additional processing capacity must be added to policy control engines.  Incremental ROI exceeds 100 percent.

Similar subscriber and application awareness capabilities can be used to insert subscriber specific advertizing into broadband applications. Service providers can obtain premium prices from advertisers because ad success rates are enhanced by subscriber and application awareness.

Parental controls are another application of subscriber awareness with very high ROI. ROI is high because the basic service offer and the infrastructure required to deliver it do not change.  The service provider incurs the relatively small cost of policy-based routing software.

Other subscriber- and application-aware networking initiatives have a more indirect impact on service provider revenue and cost but are no less important in strengthening service differentiation and competitive position. One such application is monitoring video Quality of Service (QoS) and Quality of Experience (QoE) scores. Video is monitored for both IP and MPEG quality.  The monitoring results are used to reallocate video cache and to make routing changes downstream in the network.  This same type of video monitoring can be used to improve the utilization of transport facilities. Quality and capacity management is particularly valuable in mobile backhaul applications. Backhaul is a significant cost to mobile operators while mobile subscribers are highly sensitive to service degradation caused by inadequate backhaul capacity.


Monitoring enterprise VPN and VoIP services at the subscriber and application level also creates service differentiation.

Monitoring enterprise VPN and VoIP services at the subscriber and application level also creates service differentiation. Enterprises use VPNs for mission critical applications. The ability to provide enterprises their own portals that demonstrate compliance with SLAs on a port by port basis provides a competitive advantage over service providers that cannot offer such clear proof of SLA compliance. The ability to monitor QoE goes even further in demonstrating service quality in that it measures user satisfaction service levels. Such monitoring is particularly important because legacy frame relay data and circuit switched voice services have accustomed subscribers to very high quality levels.

Subscriber and application awareness also increase the trust level associated with network-based security services. Elements of network-based security include IPSec for secure IP networking, application aware security, and role-based security. IPSec improves the overall security of IP networking while application aware security enables security policies that differ according to the application.  For example, web browsing activities can be assigned low security levels while financial or process control applications can be assigned high security levels. Subscriber awareness provides the capability to enforce role-based security where for example the company treasurer would be permitted to access financial applications but not be given access to manufacturing process control applications. Network-based security services with subscriber and application awareness also enhance security in a modern working environment where the traditional IT concept of a security perimeter no longer exists. The same level of security is provided regardless of an employee's location or type of communications device.

Network subscriber and application awareness provides competitive differentiation opportunities to systems vendors as well as to service providers. Simple Layer 2/3 Ethernet switch-routers are nearly commodities. Systems vendors can create product differentiation by adding network subscriber and application awareness functionality to their products and thereby maintain premium product prices.

Michael Kennedy is a regular FierceTelecom columnist and is Principal Analyst at ACG Research. He can be reached at [email protected].