How do the tier-1 telecommunications carriers fit into cloud?
The large telecommunication service providers or carriers might seem well-positioned to provide and benefit from the cloud computing model. The tier-1 carriers (e.g. AT&T, France Telecom, NTT Docomo, Vodafone) have the infrastructure, enterprise customer base, and the geographic reach to provide cloud services over great distances. Additionally, they are well-versed in multi-tenancy; all I have to do is look at my monthly communications bill to get a glimpse in the detailed reporting of my mobile roaming and texting use.
However, though in a good position, these carriers need to add new proficiencies to their core competencies to meet the demands of the different size organizations that comprise their potential customer base for cloud computing services. Much like the late 1990s when deregulation in the telecommunications industry and the shift of voice services to the Internet and the emergence of new data services, carriers need to navigate the changes to offset declining revenues in some of their traditional services with new cloud-based offerings.
The Cloud Electric
A common analogy to the evolution of cloud computing is the history of electric companies. When the copper infrastructure was just getting rolled out, many communities saw regional providers spring up to harness the local water power as they had recently done to turn the gears in the many mills that brought prosperity to the cities and towns that could now adopt the new technologies of the times (i.e. the electric light bulb). Many affluent local consumers invested in these local electric companies to often see them go bust because they did not have the infrastructure to scale and manage down costs.
While many managed services providers will venture in to cloud offerings, tier-1 carriers may be the best positioned in the long run to provide public cloud services. Let’s look at the advantages tier-1 carriers possess and the challenges they face reaching their potential in the cloud computing market.
Carrier Advantages
Carriers know how to manage a service-oriented business. More importantly, carriers’ operations can deal with the top IT cloud concerns regarding performance and security. Overall, carriers have the marketing and operations model in place with a strong infrastructure to be efficient.
Carrier advantages include:
- Service-Orientation: Carriers have enterprise (as well as individual and group) plans with classes of services and a rigid separation and accounting of contracted use, not unlike what gets delivered in cloud models. They also know multi-tenancy, and how to manage a services business and the allocations of cost and revenue down to a fraction of any denomination. Service assurance and revenue assurance solutions and practices are a key part of the foundation of the carrier business.
- Performance: The network makes the cloud and carriers own the network. Carriers have the bandwidth and know how to optimize a multi-protocol network environment. Equally important, carriers know how to deliver on service-level agreements. They are well-experienced in ensuring a certain continuous level of availability to both residential and commercial customers which is why we feel it when we experience an outage. Carrier networks are architected with hardened redundancies usually exceeding the five 9s availability standard and the capabilities of most enterprises.
- Security: Because of many regional and industry regulations, carriers are well-versed in the other side of multitenant services—ensuring the integrity and privacy of voice and data traffic across their networks. Duplicating this core competency is next to impossible for lower tier carriers. That’s why many focus on value-add services offerings and use the larger carriers’ networks, though at a greater cost than the tier-1 carriers themselves.
Carrier Challenges
While carriers have the infrastructure and many of the business practices in place, they are challenged to provide delivery of a breadth of business services with enterprise-class management tools, and the application and service portability required to truly implement the hybrid cloud. Carriers are much more adept at providing services off of a menu than opening up the kitchen for on-demand user-defined snacks. In general, they are not known to be agile.
Carrier challenges include:
- Business-class Services: Large carriers are slow to respond and with the commoditization of infrastructure-as-a-service (IaaS), they need some retooling and infrastructure modification—both technology and staff—to compete in the emerging platform-as-a-service (PaaS) and software-as-a-service (SaaS) business models more characteristic of cloud. To be effective, much like their enterprise counterparts and customers, carries need to expand their self-service capabilities and virtual infrastructure to not only provide public cloud services but to enable the hybrid cloud model where service provisioning, operations, and management will be spread between provider and customer and possibly shared with other providers.
- Standardization: Also, like enterprise IT, carriers have been hampered by the lack of standards, including simple application-interfaces for developers—whether constructing new Web- or mobile-based applications and services for end-users or management applications for controlling new cloud environments. Without standards, new applications and services cannot be stood up quickly. While not unique to carriers, they will have to pick up their pace in adopting new standards to compete against the more nimble upstarts.
- Portability: Related, but separate, portability between private and public clouds is hindered without common interfaces. Reminiscent of the time when telephone numbers were tied to specific carriers, it was not until deregulation of the industry in the mid-late 1990s that number portability came about and you could take your telephone number with you when changing carrier plans. Fortunately, new standards are falling into place like REST (which is much simpler than its predecessor SOAP) for standing up new applications and services and the Internet Engineering Task Force (IETF) Application-Layer Traffic Optimization (ALTO) protocol for monitoring network status and topology. Now, with more standardization in Web-based APIs, it should become increasingly easier to move applications and services among different hosting environments, meaning among public, private, and hybrid clouds.
Boom or Bust
The tier-1 carriers could carry the bulk of the workload for the public cloud over time but are not known for being the fastest to change. This characteristic slow-to-market behavior will provide opportunities for more nimble emerging communications and managed services providers in the short-term, similar to the boom in competitive local exchange carriers or CLECs more than a decade ago.
Like those times, enterprises will need to choose their business partners wisely and carriers will need to be wary of unbridled growth and keep their hands on the reins. If like the telecom boom, there will be a bust when the less well-run providers go out of business as the competitive landscape levels out over time.