|North America II 2014
|Network Virtualization leads to real revenue opportunities
|Chairman & CEO
Hassan Ahmed, Chairman and CEO, Affirmed Networks
Throughout his career, Hassan Ahmed has been driven by a simple motto: “attempt to excel in everything we do.” Hassan has led market leading companies, such as Cascade Communications, where he was Chief Technology Officer and Vice President of Engineering; and Sonus Networks, serving as Chairman and Chief Executive Officer for ten years. Under Hassan’s direction, Sonus grew from an idea, into the leading public company spearheading the transformation of telephony to VoIP.
Major change is never without its obstacles, and leading a company through all phases of the business cycle in all economic climates is one of Hassan’s strengths. When the telecom recession hit in 2001, leaving no company untouched, Hassan led Sonus to be one of the last companies affected by the economic recession and one of the first to emerge. His keen focus on motivating employees and concentrating on customers turned out to be key component for the company’s overall strength and success during a significantly difficult period.
Not only does Hassan have the immense knowledge and experience, but he also combines his charisma to be a personable leader. He promotes a healthy work environment by encouraging his employees to continue education.
As CEO and founder of Affirmed Networks, Hassan is attempting to excel at changing the wireless world by rethinking how mobile networks are built, how they are managed, and how operators’ business models expand to monetize them.
Network Functions Virtualization is the critical step that will allow MNOs to reach the next level of value-added service providers. Virtualization, and by extension Cloud technology, has transformed the enterprise IT landscape. Today, most major enterprises have either deployed virtualized servers in their data centers or are in the process of doing so.
Today’s Mobile Network Operators (MNOs) find themselves between a rock and a really good place. On one side is the stone-cold reality of mobile data in the new economy: consumers want more of it, but they don’t want to pay more for it. On the other side lies opportunity, as MNOs look to position themselves as a value-added partner through subscriber aware and intelligence services that personalize and improve the mobile experience. In the middle is the question that MNOs have wrestled with for years: How do we increase data capacity in our networks and monetize that investment when data is fast becoming just another commodity? The answer is virtualization.
The state of mobility today
Mobile data currently accounts for slightly more than half of all revenue generated by tier 1 mobile operators. That’s good news for an industry that has seen voice and text revenue slip in recent years as more service providers have been ‘forced’ through market competition (both from traditional and over-the-top providers) to adopt all-you-can-eat pricing plans for these services. As mobile device manufacturers such as Apple, Samsung, and Amazon place more emphasis on data-driven apps and services, the demand for mobile data will only grow. This is not speculation, but preparation for the inevitable.
The problem is bigger than ‘more data, more of the time.’ It’s fast becoming a case of more data at the same time, as consumer behavior changes and more subscribers find themselves running multiple, data-driven apps concurrently (e.g., streaming music on Spotify and checking messages on Facebook). Mobile data consumption isn’t a completely one-sided relationship, however. Increasingly, mobile subscribers are using their smartphones and tablets to do more than download YouTube videos (40% of which are delivered to mobile devices) or upload Instagram photos; they’re also using them to go shopping, and in growing numbers. As much as 20% of all eCommerce site traffic is generated from a mobile device, and when mobile subscribers make a purchase, it’s for the same average amount (US$137) as other customers. Mobile devices are becoming an integral part of the consumer experience and an important sales channel that businesses need to monitor and market to if they want to be successful in the future.
This is a tremendous opportunity for MNOs, which now find themselves in the enviable middle of billions of dollars of annual sales, but one that comes with its own price in the cost of delivering a secure and seamless mobile experience. As it stands today, MNOs have their work cut out for them. Recent polls show that 80% of mobile subscribers have experienced sub-satisfactory speeds from their mobile apps. Whether it’s fair or not, MNOs, and not the app providers, bear the brunt of this frustration. Clearly, MNOs need to solve the data capacity problem before they can capitalize on the mobile commerce opportunity.
Network Functions Virtualization: Capacity made cost efficient
Virtualization, and by extension Cloud technology, has transformed the enterprise IT landscape. Today, most major enterprises have either deployed virtualized servers in their data centers or are in the process of doing so. The shift to a virtualized architecture is driven by the need for flexibility, capability to launch services, scalability, operational efficiency, and, of course, cost. These same benefits can be carried over to communications service providers through Network Functions Virtualization (NFV). NFV applies the same principles of enterprise data center virtualization—centralized management, flexible deployment on industry-standard hardware, higher CPU utilization—but for specific network functions, such as media handling and load balancing, in order to improve capacity and performance in communications networks.
As an example, consider an MNO that wants to increase network capacity and scalability by adding more Evolved Packet Core (EPC) gateways. Increasing the number of physical boxes in the network carries with it a fixed cost that may not be easily recaptured through subscriber revenue. Using an NFV architecture, however, virtual EPC gateways can be deployed on existing hardware that would allow the MNO to easily and quickly scale up or scale down capacity as needed and in near real time. This ability to increase network capacity and improve performance without physically increasing the scale and cost of the network is an attractive option to MNOs that expect rising demand in mobile data traffic against a backdrop of flat or shrinking subscriber revenue.
Tier 1 mobile networks have already begun to adopt NFV strategies in their networks with impressive results. Through these early deployments, some best practices have begun to emerge:
• A consistent and virtualized network environment is best at providing network resources on demand;
• A wide variety of industry-standard servers can be used to host virtualized applications and network functions;
• Total cost of ownership comes down as MNOs use virtualization to not only reduce CAPEX/OPEX costs but also increase their internal efficiencies;
• MNOs should adopt a cap-and-grow strategy with their legacy technologies, especially those technologies facing escalating maintenance or end-of-life issues.
Building a better experience opens the door to new revenue opportunities
If all that MNOs accomplished through virtualization was a bigger ‘bit pipe’, they would still be headed down the dead end of commoditization. But virtualization actually opens the door for MNOs to leverage their role as a communications enabler to become a value-added service provider. This is accomplished through two means: new services and subscriber intelligence.
Pay-per-view video is an example of the kind of new services that MNOs can deploy once they solve the mobile data traffic problem. This year, the Tour de France launched a subscription-based streaming video service to mobile subscribers for US$15 per month. This model could easily be extended to other sports games, live concerts, movie channels, and virtually any major event. MNOs, now in the role of a valued and revenue-sharing service partner, can help service providers deliver these services with assured quality at a fixed cost. An added benefit of NFV is the ability to quickly set up the network resources needed to create and launch these services within the service provider network, in effect acting as a type of hosted Cloud provider.
One of the most exciting new opportunities for MNOs is in the area of subscriber intelligence. Mobile service providers are now collecting valuable data about subscribers that extends across hundreds of apps and websites. While an individual business or app provider may see a snapshot of a subscriber’s behavior through their site, MNOs are in a unique position to see the big picture across hundreds of apps and sites. This information, in turn, is valuable to site owners and app developers that would like to personalize page displays and marketing offers to individual subscribers.
Network Functions Virtualization is the critical step that will allow MNOs to reach the next level of value-added service providers. For content providers, enterprise customers and consumers, providing a fast and fluid mobile data experience is viewed as the most important role for MNOs right now. Yet this does not imply that they are doomed to the role of commodity players much as fixed-service providers were in the past. For operators, there is clearly light at the end of the bit pipe in the form of new services and customer intelligence that together provide a better, more personalized and compelling mobile experience.
Those MNOs that solve the mobile data traffic challenge first will also be the first to effectively pursue this next phase of growth. Virtualization holds the key to overcoming that challenge, enabling new and personalized services to drive more revenue in the future.