Market analysis: early findings QoS and network investments from an operators point of view

Transcription

1 Market analysis: early findings QoS and network investments from an operators point of view September 2008 Niklas Z Kviselius ( niklas.kviselius@hhs.se) Bertil Thorngren ( bertil.thorngren@hhs.se) Stockholm School of Economics

2 Overall purpose 1. Mapping commercial actors that are relevant for the project. 2. Reality check with these actors (network operators) on assumptions in the project of market potential and timing. 3. Determine what trends and variables that are crucial to track in the project in the coming years.

3 Method first steps Semi-structured interviews with major Swedish Telecom operators focusing on providing a baseline for the project. This baseline should be followed up (year 2, year 3) in order to track changes in outlook on demand and technical options. These interviews should be complemented ASAP with other key actors.

4 Future research: Mapping of actors Important to look at the side picture and follow up on: Demand side: what is driving network investments? Supply side: what technologies can improve networks? From a technical perspective as well as business process / value chain perspective.

5 Video as a case in point: Healthy to check what is happening outside the Transport/Core Network

6 Analysis based on comments from: Major network operators active in Sweden: TeliaSonera:Director R&D and Business Innovation Bredbandsbolaget (Telenor ASA): Strategist, Networks Division, Technically responsible for real-time services Tele 2: Manager Fixed Internet Residential The Swedish Urban Network Association: CEO All offer triple-play and own networks connected households Second largest broadband operator with 25% market share Sold its broadband operations in Denmark, Portugal, France, Belgium, Italy and Spain In Sweden, Tele2 TV signed contracts for some 30,000 households.

7 Recapitulation of some project assumptions/rationale: 1. Network operators are moving towards an all-ip strategy. 2. Time-critical communication will increase in demand. 3. Packet-based (IP) networks are not optimal for time-critical communication e.g. realtime video and audio QoS argument. protection of the communicated data as well as authentification - Security argument differentiating services with the option of creating several tariffs Differentiation argument. MAIN QUESTION: Is there currently or in the future a demand for deployment of complementary network technology (addressing time-critical communication)?

8 Reality check 1: The all-ip paradigm Operators: are deploying a current strategy towards using an all-ip network platform for services as part of next-generation network (NGN) transformations would complement an all-ip strategy if the demand for time critical services (i.e. real-time video) increases for now it is more important to maintain flexibility.

9 Time-critical communication: the case of video Traffic increasing but time-critical communication not largest share.

10 Video has some important distinctions Internet TV Watching full TV programs or video clips over the internet. Internet TV is delivered over an unmanaged network. IPTV IPTV delivers scheduled TV programs and video-on-demand (VoD) over a managed networkusing the internet protocol, enabling the quality of service (QoS) to be guaranteed. IPTV can be delivered over different managed networks (i.e. cable or telecom) and requires a set top box. Managed distribution Distribution with a controlled quality of service, as opposed to a best effort service definition. Linear TV A service where the viewer watches a program at the particular time it is offered on a particular channel. Interactive TV TV with interactive components, e.g., enabling viewers to watch a program when and where they wish.

11 IPTV and Internet TV progressing.

12 Massive online video gaming more relevant driver for QoS than super computers and telemedicine?

13 Reality check 2: Video as a time-critical (and bandwidth hungry) service Operators: see a potential future profit in video services (e.g. VoD, IPTV) in their service offering. however today more see IPTV and VoD marketed through triple play as an element for securing the loyalty of broadband customers than a means of increasing revenue or margins. willingness to invest in network technology that better can handle video is correlated to the profitability of these services.

14 Quality of Service (QoS) Technical network QoS can be a mix of: latency capacity for transfers during a longer period of time delay changes in delay (jitter) sercentage of lost packeges size of each package But in the end of the day the truth lies in the eye of the beholder and QoS is subjective. There are few objective and accepted measurement methods for QoS among Telcos. Telcos need real-world metrics to be able to verify the health of the video signal. The ability to measure (quantitative metrics to evaluate what essentially is a subjective evaluation) the quality of the video signal delivered to real subscribers will directly affect the success of these services. Baseline expectations have already been set by cable and satellite network operators. Operators compete with perceived quality of existing services. Using real-world tests in the trading environments of toptier investment banks, we have discovered that the majority of latency is generated within the banks' own applications. Net2S (Frederic Ponzo, Managing Director, Net2S uk/)

15 Sometimes QoS problems are obvious

16 The issue of QoS complex There are signs of congestion Video takes up larger share of network traffic. A few broadband customers use "excessive bandwidth (e.g. sending 20,000 high-resolution photos, downloading 50,000 songs, or viewing 8000 movie trailers in a month.) Rapid increases in Internet usage could strain the capacity of the data lines and gear that make up the network, severely slowing traffic and even knocking out service. But: Compression standards are evolving. Storage space is getting cheaper implying that non-realtime video can be buffered to a larger extent. Truly time-critical communication still sensitive.

17 Reality check 3: QoS for video Operators believe that best effort in the network will be sufficient for the next 1-2 years to ensure that end-customer experience of quality of service will not decrease due to potential congestion are open to network solutions applying different QoS-levels for different customers and (or services) depending on their specific demands and willingness to pay. ultimately measure QoS in the network via customer satisfaction (customers support calls and customer churn rate ) believe that solutions like DiffServ and MPLS can remedy potential QoS problems due to congestion. manages QoS in the network by not accepting customers for whom decent service levels can be provided do not see any commercial motives for drastically improving QoS for time-critical services (yet).

18 Concluding discussion: Is there currently or in the future a demand for deployment of complementary network technology (addressing time-critical communication)? For an operator this depends on demand for time-critical services/applications in the coming years. Invest in flexible mainstream network technology or specially design the network to be streamlined e.g. for video? Competitive situation at the moment targets price competition and management of increasing volumes of data. Competition strategies targeting quality (over minimum levels) and/or differentiation are secondary. QoS is partly managed through simply not accepting customers that would be too expensive to serve with minimum QoS levels. Questionable if video services will be profitable (for network operators) in the long run still because of competitive reasons they have to deliver at minimum QoS. Quality (or lack of) in Core network difficult for an individual operator to control.

19 Backup slides

20 Bredbandsbolaget information to potential customers.

21 Mobile broadband: another substitution threat for fixed operators? The rates of take-up and development of mobile broadband have taken many in the fixed broadband business and, indeed, the mobile business by surprise, raising the spectre of another damaging round of fixed mobile substitution. Mobile broadband will probably never be able to rival the access speeds of fixed broadband, but, in terms of headline monthly subscription prices, it is already cheaper than fixed broadband in many markets. How real a threat does mobile broadband pose? How will its subscriber base be split into new broadband users, complementary users and substitutive users? And how real are the constraints on what mobile operators could achieve, or, indeed, would want to achieve?

22 Intelligence from Telia 1994

23 Access Network fiber build-out strategies.

24 Triple play holds up revenues.

25 VoIP advancing.

26 Broadband equipment worldwide.

27 FTTH deployment levels.

28 Demand for the project s outcomes partially dependent on the role of video for Telcos in the future

29 Online video still on the way up.