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Guest View: SPs must embrace The Cloud

Jeff Schmitz | Jan. 22, 2014
Jeff Schmitz, Chairman of The CloudEthernet Forum (CEF) explains why...

The realisation that OTT operators had the smarter, more nimble business model was already a hot issue by 2007. Everyone was agreeing that telcos must "find new business models" to save them from being reduced to "dumb pipe operators". It was all very well saying that, but it was more an expression of need than an actual solution: for what might these new models be? Where will they come from and who will invent them?

By 2012 an answer had emerged. The cloud was evolving and it was opening up endless possibilities for new ways of doing business. It was already happening, but it was not the telcos who were driving cloud services - instead it was companies like Apple, AWS, Google and Microsoft. It was hardware and software vendors, booksellers, and businesses from other sectors that were first to grasp the opportunities. It was the telcos, with their sophisticated communications infrastructure, that made this possible, but they were not so quick to adapt as the new generation of smart entrepreneurs renting their bandwidth to launch new business.

These new OTT cloud providers were thinking like media companies, while telcos were thinking more like their printers. The printer counts the number of pages, while the media company counts its audience: so do telcos focus on their hundreds of thousands of subscribers, while cloud operators think in terms of millions of users. Today service providers should be thinking at least as much about services as about connectivity - in the way they thought about investments in Internet and mobile infrastructure years ago. Firstly that means looking for new services and sources of revenue. Second, and perhaps more important, it could mean their survival.

In 2012 AWS, Google and Microsoft accounted for 40% of all the Ethernet ports shipped worldwide. That gives some idea of the massive investment in Ethernet technology they are making, and yet the total being less than 50% also tells us that not one of these giants is yet big enough to dominate the scene and dictate its own cloud connectivity 'standards' for global usage. So we face a possible "platform war".

Past experience of platform wars show that they move towards a winner-takes-all scenario: when cost and choice become the primary decision criteria for most users, two different platforms can rarely co-exist, and certainly not on an equal footing. Winners can grab up to 70-80 percent market share, leaving crumbs to one-time market leaders.

The alternative would be to find a better balance between competition and co-operation. The outstanding success of Carrier Ethernet happened because vendors collaborated to create and certify global standards in the name of MEF - rather than battling each other to see whose technology could take the lead. It was still a "winner takes all" situation, but here the winner was everyone: the users who could buy certified services and equipment without having to waste time choosing technologies, the service providers and vendors who made faster sales, and world business for the acceleration of high performance, lower cost WAN services brought about by Carrier Ethernet.

 

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