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How to createfit-for-purpose
wholesale data services
Martin GeddesMartin Geddes Consulting Ltd
© 2013 All Rights Reserved
This presentation was given as a keynote at Asian Carriers’ Conference in Cebu, Philippines on 3rd September 2013.
Consultancy on the future of telecoms.
Business model innovation.Technology & product ideation.
Organisation development.Public & private workshops.
I work with smart people on the hard stuff.
1980s
Digital fixed voice services
Evolution of wholesale telecoms
1990s
Mobile voice and messaging Broadband
data services
2000s
?2010s
What’s next?
Next ten to twenty years?
Packaged cloud services
The growth is in new kinds of managed cloud services.
And by ‘packaged’ you mean?
• Available when and where you need it• At a cost you can afford• Right quantity and
quality• Easy to consume
Key messages
Wholesale voice services
historically have a
sustainable business model
Today’s wholesale broadband data
services arenot fit-for-purpose
for futureapplications needs.
Wholesale telecoms businesses need to
fundamentally rethink their service offering
for the cloud.
This requires newfit-for-purpose cloud services with
a sustainable business model.
There is a profitable future
for those who take this path.
Digital fixed voice
services
Mobile voice and
messaging
Broadband data services
Packaged cloud
services
1980s and 1990s
2000s & 2010s
2010s & 2020s
2010s & 2020s
Fitness-for-purpose
Purpose-for-fitness
Fitness-for-purpose
1980s and 1990s
2000s & 2010s
The thread that runs through this presentation is ‘fitness-for-purpose’
Which we’ve lost, and need to regain.
2010s & 2020s
Packet-basedstatistical multiplexing
(using IP)
Time-divisionmultiplexing
Best ofboth worlds!
1980s and 1990s
2000s & 2010s
These changes are intimately tied to our technology
choices, and how we share the network’s fixed and
finite resource.
How do networks
create value?
There are some basic things we need to get sorted out before we begin.
Meet Alice and Bob
It’s the end users who put the money into the system, and decide whether we are creating value worth paying for.
Alice and Bob are end users.
Bob is her customer
Mustn’t run out of widgets!
Alice wants tocommunicate with Bob
I want to meet Bob to
sell more widgets!
Alice doesn’t have to buy a telecommunications service
Slow and expensive
Alice has a choice of means of communication
Post
Phone
Alice ‘hires’ a telephone callto reach Bob
Quick and cheap
This is a ‘task substitution’
There is a chain of delivery
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
Wholesale holds thevalue chain together
Role of wholesaler
YOU
YOURCUSTOMER
YOURSUPPLIER
(Remember the audience for this presentation is wholesale carriers and their suppliers.)
Money passes down this chain
Retailorigination
Retailtermination
Wholesaledelivery
$ $ $$ $ $
PROFIT
Profit depends on four factors
BENEFIT COST
RISK INSURANCE
Are thesebig or small?
Excess risk has to be (self-)insured.
TELCOSEND USER
Benefits and Costs
BENEFITMade the sales call Revenue
COST Price ofphone call Tin, operational expenses
There are risks…
TELCOSEND USER
Risks
RISK
Didn’t make sale SLA breach
Unplanned capacity upgrade
Time wasted
Reputational loss
Frustration
Churn
Regulatory non-compliance fines
TELCOSEND USER
Insurance
Second carINSURANCE Contingency fund (lawsuit, PR)
If Alice can’t rely on her communications service delivering a good enough experience, she needs a
Plan B – and has to carry all the associated costs. For a corporate user, that could be having multiple access providers; for a consumer, you need to buy a DVD in
case Netflix doesn’t work.
Telcos spend a lot of money dealing with
screw-ups.
TELCOEND USER
The whole picture
BENEFIT
COST
RISK(failed call)
Made the sales call
Price of phone call
Didn’t make sale
Second car
Revenue
Tin, opex
SLA breach or churn
Unplanned capacity upgrade, fines
Time wasted
Reputational loss
INSURANCE Contingency fund (lawsuit, PR)
Frustration
Lots of (potentially hidden) costs!
Who profits and why?
CUSTOMER SUPPLIERWHOLESALER
BENEFIT
COST
RISK
ENDUSER
ENDUSER
INSURANCE
Who & how big?
How is the role ofwholesale changing?
BENEFIT
COST
RISK
INSURANCE
Voice Broadband Cloud services
Wholesale voice
services
What are the risks?
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
End user risk
Alice only pays her telco for asuccessful phone call
$
Retail telco risk passed to wholesaler
Retail telco only pays wholesalerfor a successful phone call
$
Wholesale telco risk is transferred
Wholesaler only pays terminating networkfor a successful phone call
$
The delivery technology was(and often still is) TDM circuits.
No overlaps or collisions!This isolated flows and assured end user
outcomes – audible voice calls.
Composable value chain with SLAs
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
Predictable application outcome
How did we do?
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
TELCOSEND USERS
Why?
BENEFIT
COST
RISK
INSURANCE
Low risk!
Predictable experience
• MOS or PESQ score model• Strong
understanding of relationship to network properties
Predictable capacity requirement
Voice erlangs
VOICE SUMMARY
Telcos get paid for delivering
fit-for-purposevoice services
VOICE SUMMARYWholesaler
mitigated both end user QoE
risk and supply chain capacity &
SLA risk
VOICE SUMMARY
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH TDM(core)
TDM(edge)
Very profitablewholesale business!
How hot can we run the network?
How well can we deliver the flows within acceptable
loss and delay?
Broadband data
services
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH
MULTIPLEXING
TDM For bursty data, TDM is
highly inefficient, even if it is
very effective
So we changed technology…
Time-division multiplexed
circuits
Packet-based statistical
multiplexing
TELEPHONY BROADBAND
Lost phase and flow isolation!
We gained higher resource efficiency,but at the cost of losing flow efficiency
What a great dealfor Alice and Bob!
COST COST
Statistical multiplexing gain makes everything
cheaper!
What a great dealfor Alice and Bob!
BENEFIT BENEFIT
So many more rich applications to choose
from!
But…
There’s a catch!
What is the effect on Alice?
Alice now ‘hires’ a web conferencing system to reach Bob
Richer, modern and more effective
This is a ‘task substitution’
End user risk
Alice bought ‘bandwidth’(speed and mechanisms like 4G and FTTH)
$
ISP is blind to Alice’s needs
No visibility of application outcomes
$
Retail telco risk passed to wholesaler
Retail telco buys ‘bandwidth’ transit.Has no means of expressing
needs for application outcomes.
$
Wholesale telco risk is transferred
Wholesaler connects to receiving ISP,but is carrying effective risk
of application failure
$
And what about Bob?
His ISP has no visibility of whether theservice is delivering a good outcome.
What are the risks?
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
QoE RISK
QoE RISK
PLAN B PLAN B
What are the risks?
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
Churn Churn
What are the risks?
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
Capacity upgrade
risk
Capacity upgrade
risk
And the wholesaler?
Incentivised to find cheapest meansof delivering ‘bandwidth’,
regardless of impact on user or rest of supply chain
Current wholesale data business is structured in an unhelpful way.
1.Has become disconnected from the value end users are seeking.
2.This misallocates cost and risk.
Why?
Broadband is like a statistical ‘game of chance’
There price we had to pay…
Time-division multiplexed
circuits
Packet-based statistical
multiplexing
TELEPHONY BROADBAND
Game of chance
was easy
Game of chance is
hard
Can’t compose services& create strong SLAsRetail
originationcarrier
Retailtermination
carrier
Wholesaledeliverycarrier
Unpredictable application outcomes
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGHHEAVEN
How to think about the problem
HELL
Network feels empty to
users, even when full and making lots of
money.
Network feels congested
even when no other
customers around
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH
IP(access network)
Access network has poor QoE and utilisation
Resource efficiency
Flow
effi
cien
cy
LOW MEDIUM
LOW
HIGH
HIGH
IP(access network)
HEAVENHEAVENHeaven gets further away
Over-provision to resolve contention problems
Resource efficiency
Flow
effi
cien
cy
LOW MEDIUM
LOW
HIGH
HIGH
Current approaches are infeasible to schedule at
high load
IP(access network)
Can’t assure applications with strong scheduling requirements
Resource efficiency
Flow
effi
cien
cy
LOW MEDIUM
LOW
HIGH
HIGH
IP(access network) Network collapses
Can’t run network ‘hot’
SUPPLY CHAINEND USER
Benefits, Costs and Hazards
RISK
Significant
High
INSURANCE Significant
High
BROADBAND SUMMARY
Telcos offeringpurpose-for-fitness
data services
BROADBAND SUMMARY
Wholesaler is exacerbating user QoE and
supply chain cost risks
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH
IP(access network)
IP(core)
Wholesale bizconstrained by
weakest link
BROADBAND SUMMARY
How did we do?
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
TELCOSEND USERS
Why?
BENEFIT
COST
RISK
INSURANCE
Lots of risk due to application performance hazards.
Opportunity!
Leaves a lot of potential value
unrealised.
The re-think
Effective task substitution is
very sensitive to QoE hazards
BENEFIT BENEFIT
Benefits to the user of both methods are similar
COST
COST
POTENTIAL PROFIT POOL
The costs are very different
COST
COST
ACTUAL PROFIT POOL
RISK
Hazards to the user take value and profit out of the system
INSURANCE
Retailorigination
Retailtermination
Wholesaledelivery
$ $ $
$ $ $
PROFIT
Operator profit is also very sensitive to the QoE hazards
RISK RISK
Operator cost risks
Our experience is that these hazards are poorly modelled in broadband networks (if at all)
SLA breachor churn
Unplanned capacity upgrade
Summary so far
BENEFIT COST RISK
1. There is value ineffective task substitution
2. There are associated benefits, costs & risks
3. It matters how big these are, and how they are allocated
Where do these come from?
RISK
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH
QoE hazard
Cost hazard
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH
Requires lots and lotsof good coincidences
& very few badcoincidences
HEAVEN
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH HEAVEN
HOW?
By tipping the odds through effective
scheduling
Summary so far
Failed call
Plan B
SLA breach or churn
Unplanned capacity upgrade
TELCOSEND USER
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH
HELL
HEAVEN
HOW?
1. Networking is a statisticalgame of chance
2. That schedules resources and determines application performance
3. That controls the QoE and cost hazards for both the user and network operator
How can we get the bestof TDM and IP?
1. How can we increase benefits (substitute for more valuable tasks)?
2. How can we lower costs by running networks hotter?
3. How can we quantify, mitigate and allocate hazards appropriately?
Cloud services
The cloud economy
Different demands to those of voice and today's broadband.
Understanding the nature of future demand, and how to create appropriate supply, is the key to future success. People want to achieve
higher-value task substitutions: teleworking, education, healthcare. These require dependable networks and application outcomes.
What has to change?
NOW FUTURE
PURPOSE-FOR-FITNESS
FITNESS-FOR-PURPOSE
The Cloud Economy
We mustassure application
outcomes
RISK INSURANCE
What do we need?
“Application Erlangs”
Alice ‘hires’ a Lync applicationto reach Bob
What has to change?
NOW FUTURE
SUPPLY-PUSH
Selling commodity bandwidth
inputs
DEMAND-PULL
Selling differentiated
application outcomes
End user risk
Alice buys an assuredMicrosoft Lync cloud service
$
What has to change?
NOW FUTURE
MONOSERVICE NETWORKS
Weak exploitation of stat mux trades
POLYSERVICE NETWORKS
Strong exploitation of stat mux trades
Multiple classes of service
Economy Standard Premium
Airlines offer multiple tiers of service, based on comfort, rather than arrival time (bar a bit of queue-jumping at check-in). In networks, the tiers of
service are based on how much you can time-shift traffic.
Resource efficiency
Flow
effi
cien
cy
LOW HIGH
LOW
HIGH
IP(access network)
Run access network hotterand also get good QoE
IP(access network)
Retail telco risk passed to wholesaler
Retail telco buys assured transitto its final destination
$
What has to change?
NOW FUTURE
UNASSURED DELIVERY
Qualily and cost unbounded
ASSURED DELIVERY
Quality and cost bounded
Wholesale telco risk is transferred
Wholesaler buys assuredtermination suitable for Lync
$
What has to change?
NOW FUTURE
TRANSPORT SERVICES
Locally optimised delivery
LOGISTICS SERVICES
Globally optimised
supply chain
New value chain
YOU
YOURCUSTOMER
YOURSUPPLIER
Although these might be new market
entrants coming from a cloud and
distributed computing angle…
What has to change?
NOW FUTURE
WEAK CONTRACTS
Boundaries misallocate risk
and cost
STRONG CONTRACTS
Risk quantified and costed end-to-end
Quality Transport Agreements
Strong and composable statistical delivery contracts
Profit!
Example services:Bulk content cost reduction
$$$
BULK DATA DELIVERYBulk content providers are paid to mark time-shiftable traffic to reduce peak loads and network cost for ISPs. Wholesalers
are ‘market makers’.
Example services:Small cell assured backhaul
ASSURED BACKHAUL
$ $3GPP standards were all built for a TDM world. Things are not working out that well moving to IP. Quality-assured IP backhaul would restore the necessary properties for
small cells to work well.
Retailorigination
carrier
Retailtermination
carrier
Wholesaledeliverycarrier
CLOUD SUMMARY
CLOUD SUMMARY
Telcos get paid for delivering
fit-for-purposeapplication services
CLOUD SUMMARY
Access suppliers and customers
fully exploit statistical
multiplexing
CLOUD SUMMARY
Wholesaler becomes digital logistics supply chain manager
CLOUD SUMMARY
BENEFIT
COST
RISK
INSURANCE
New ‘application erlang’wholesale business model
Think logistics, not transport
It’s all about the trading space, matching supply to demand, offering a variety of quantities, qualities and cost, and doing it over multiple timescales.
www.martingeddes.com
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