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Telco Versus Internet: Battleground Shifts to Network

When the telecoms industry considers the impact that Internet companies are having on its business, it tends to focus on the consumer market for digital services and applications. But as Internet content providers (ICPs) build out their net-works to better deliver their own services, they are be-coming a growing influence on the future direction of telecoms networks and technology.

A number of questions – to which there are no easy answers – are coming to the fore. Will future telecoms networks look more like Internet companies’ networks? Will all enterprises benefit from the same technology that Internet companies are deploying? What will the commercial relation-ship between telecoms opera-tors and Internet companies look like in terms of the buying and selling of network capabilities and technology?

For some time now the telecoms industry has been trying in vain to play catch-up with the giants of the Internet. Will attempts to follow their network strategies suffer the same fate as their attempts to replicate the services that they offer?

There is no suggestion that any players other than telecoms operators will own and manage the wholesale and public telecoms network on which the Internet operates. But when it comes to adding “value” to the digital networks of the future, it is less clear who has the upper hand.

Many telecoms operators are coming to believe that they need to embrace their role as video distribution networks. But until now, operators have had little success in developing “video” capabilities in the network that they can resell to third parties.

In the (enterprise) cloud services market, the growth of which is resulting in a massive global build-out of data centres, telecoms operators are just one of several sets of players jostling for market dominance (Internet companies, IT services companies, carrier-neutral providers, and enterprises themselves). The cutting-edge technology that will shape the future of our industry is being developed by Internet companies for their hyperscale datacentres.

Telecoms operators are attempting to follow the lead of Amazon, which has built a $5 billion enterprises cloud services business by giving third parties access to the network capabilities it originally built out for its own services. Building a bridge between the enterprise services business and the telecoms network – and a business case that brings the two together – is one of the big challenges that operators are setting themselves as they develop virtual network strategies involving technologies such as SDN and NFV.

Many of the technology vendors that have exclusively – or almost exclusively – relied on the business of telecoms operators until now are turning towards Internet companies or directly to enterprises for future growth. Telecoms operator capex globally will grow by just 1% per year over the next five years while that for ICPs will grow by 17% per year be-tween 2013 and 2019, according to Informa’s latest forecasts.

Studying the profiles of Internet content providers will provide us with insight into the technology and network strategies of companies as diverse as Netflix, Google, Facebook, and IBM. They will also give important pointers as to the extent to which these companies are positioning them-selves for future growth by developing their network and technology capabilities.

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