The Network as a Profit Center

By: Robert Machin

Networks and connectivity have been the bedrock of the modern internet era, and new network technologies such as 4G LTE will bring broadband access to people previously outside the reach of the internet—not just in developing regions such as central Africa and many parts of Asia, where the number of new users will exceed one billion, but also in rural areas of developed countries, where previously the delivery of fiber or even fast DSL wasn’t economically or technically feasible.

New networks represent the global democratization of broadband internet access, and they open the door to many social and commercial benefits, including remote medicine and education as well as machine-to-machine (M2M) applications that make agriculture, transport and many other industries more efficient.

However, with significant ongoing investments being made in new network technologies and additional capacity, many in the telecom industry are finding it difficult to see new networks as anything other than an expense, and for good reason—IDC report in January that LTE infrastructure spending topped $10 billion in 2012, and predicts is could be double that amount by 2016.  Without question, in order for the network to be a profit center, it will be imperative that carriers monetize their investments, new and old alike.

A penny for every time you’ve heard the term “dumb pipe”

If you had a penny for every time you’ve heard of the demise of the “dumb pipe,” you probably wouldn’t be reading this right now! Yet here we are, and although networks are getting smarter and more efficient, each successive generation of mobile-device technology is creating more and more demand—for entertainment, information, video, messaging, and anything else that can be carried over a broadband network. And new applications of the technology, such as M2M and Wi-Fi substitution, will continue to create high demand for network capacity.

So, the question remains: how can carriers keep up with the global demand for bandwidth, withstand the commoditization of their most valuable resource and, given the incredibly high capital and operating expenditures (CAPEX and OPEX) associated with building and maintaining networks, profit from their investments?

Quite the haul

As public demand has shifted from fixed-line and voice to mobile and data, so too have profit opportunities. Monetizing the network can take many forms, and one of the most interesting profit opportunities of late has been backhaul and network sharing. With more and more devices coming online, carriers are increasingly dependent on offload and backhaul to meet users’ mobility demands and maintain a positive customer experience. Universal broadband and a common IP service platform have increased interoperability between networks, allowing transport to be optimized and offloaded across any appropriate fixed or wireless network, including owned and partner networks. The upswing in mobile-data use has actually led to an increase in profits for fixed operators that can offer offload facilities.