The future is cloudy: NFV 2020

As the first phase of ETSI ISG NFV wraps up and phase 1's documents are being released, it is a good time to take stock of the progress to date and what lies ahead.

ETSI members have set an ambitious agenda to create a function and service virtualization strategy for broadband networks, aiming at reducing hardware and vendor dependency while creating an organic, automated, programmable network.

The first set of documents approved and published represents a great progress and possibly one of the fastest achievement for a new standard to be rolled out; in only two years. It also highlights how much work is still necessary to make the vision a reality.

Vendors announcements are everywhere, "NFV is a reality, it is happening, it works, you can deploy it in your networks today...". I have no doubt Mobile World Congress will see several "world's first commercial deployment of [insert your vLegacyProduct here]...". The reality is a little more nuanced.

Network Function Virtualization, as a standard does not allow today a commercial deployment out of the box. There are too many ill-defined interfaces, competing protocols, missing API to make it plug and play. The only viable deployment scenario today is from single vendor or tightly integrated (proprietary) dual vendor strategies for silo services / functions. From relatively simple (Customer Premise Equipment) to very complex (Evolved Packet Core), it will possible to see commercial deployments in 2015, but they will not be able to illustrate all the benefits of NFV.

As I mentioned before, orchestration, integration with SDN, performance, security, testing, governance... are some of the challenges that remain today for viable commercial deployment of NFV in wireless networks. These are only the technological challenges, but as mentioned before, operational challenges to evolve and train the workforce at operators is probably the largest challenge.

From my many interactions and interviews with network operators, it is clear that there are several different strategies at play.

1. The first strategy is to roll out a virtualized function / service with one vendor, after having tested, integrated, trialed it. It is a strategy that we are seeing a lot in Japan or Korea, for instance. It provides a pragmatic learning process towards implementing virtualized function in commercial networks, recognizing that standards and vendors implementations will not be fully interoperable before a few years.
2. The second strategy is to stimulate the industry by standards and forum participation, proof of concepts, and even homegrown development. This strategy is more time and resource-intensive but leads to the creation of an ecosystem. No big bang, but an evolutionary, organic roadmap that picks and chooses which vendor, network element, services are ready for trial, poc, limited and commercial deployment. The likes of Telefonica and Deutsche Telekom are good examples of this approach.
3. The third strategy is to define very specifically the functions that should be virtualized, their deployment, management and maintenance model and select a few vendors to enact this vision. AT&T is a good illustration here. The advantage is probably to have a tailored experience that meets their specific needs in a timely fashion before standards completion, the drawback being the flexibility as vendors are not interchangeable and integration is somewhat proprietary.
4. The last strategy is not a strategy, it is more a wait and see approach. Many operators do not have the resource or the budget to lead or manage this complex network and business transformation. they are observing the progress and placing bets in term of what can be deployed when.

As it stands, I will continue monitoring and chairing many of the SDN / NFV shows this year. My report on SDN / NFV in wireless networks is changing fast, as the industry is, so look out for updates throughout 2015.

2014 review and 2015 predictions

Last year, around this time, I had made some predictions for 2014. Let's have a look at how I fared and I'll risk some opinions for 2015.
Before predictions, though, new year, new web site, check it out at coreanalysis.ca

Content providers, creators, aggregators:

"OTT video content providers are reaching a stage of maturity where content creation / acquisition was the key in the first phase, followed by subscriber acquisition. As they reach critical mass, the game will change and they will need to simultaneously maximize monetization options by segmenting their user base into new price plans and find a way to unlock value in the mobile market." 
On that front, content creation / acquisition still remains a key focus of large video OTT (See Netflix' launch of Marco Polo for $90m). Netflix has reported  $8.9B of content obligations as of September 2014. On the monetization, front, we have also seen signs of maturity, with YouTube experimenting on new premium channels and Netflix charging premium for 4K streaming. HBO has started to break out of its payTV shell and has signed deals to be delivered as online broadband only subscriptions, without cable/satellite.
Netflix has signed a variety of deals with european MSOs and broadband operators as they launched there in 2014.
While many OTT, particularly social networks and radio/ audio streaming have collaborated and signed deals with mobile network operators, we are seeing also a tendency to increasingly encrypt and obfuscate online services to avoid network operators meddling in content delivery.
Both trends will likely accelerate in 2015, with more deals being struck between OTT and network operators for subscription-based zero-rated data services. We will also see in mobile networks the proportion of encrypted data traffic raise from the low 10's to at least 30% of the overall traffic.

Wholesaler or Value provider?

The discussion about the place of the network operator and MSO in content and service delivery is still very much active. We have seen, late last year, the latest net neutrality sword rattling from network operators and OTT alike, with even politicians entering the fray and trying to influence the regulatory debates. This will likely not be setted in 2015. As a result, we will see both more cooperation and more competition, with integrated offering (OTT could go full MVNO soon) and encrypted, obfuscated traffic on the rise. We will probably also see the first lawsuits from OTT to carriers with respect to traffic mediation, optimization and management. This adversarial climate will delay further monetization plays relying on mobile advertisement. Only integrated offering between OTT and carriers will be able to avail from this revenue source.

Some operators will step away from the value provider strategy and will embrace wholesale models, trying to sign as many MVNO and OTT as possible, focusing on network excellence. These strategies will fail as the price per byte will decline inexorably, unable to sustain a business model where more capacity requires more investment for diminishing returns.

Some operators will seek to actively manage and mediate the traffic transiting through their networks and will implement HTTPS / SPDY proxy to decrypt and optimize encrypted traffic, wherever legislation is more supple.

Mobile Networks

CAPEX will be on the rise overall with heterogeneous networks and LTE roll-out taking the lion share of investments. 

LTE networks will show signs of weakness in term of peak traffic handling mainly due to video and audio streaming and some networks will accelerate LTE-A investments or aggressively curb traffic through data caps, throttles and onerous pricing strategies.

SDN will continue its progress as a back-office and lab technology in mobile networks but its incapacity to provide reliable, secure, scalable and manageable network capability will prevent it to make a strong commercial debut in wireless networks. 2018 is the likeliest time frame.

NFV will show strong progress and first commercial deployments in wireless networks, but in vertical, proprietary fashion, with legacy functions (DPI, EPC, IMS...) translated in a virtualized environment in a mono vendor approach. We will see also micro deployments in emerging markets where cost of ownership takes precedence over performance or reliability. APAC will also see some commercial deployments in large networks (Japan, Korea) in fairly proprietary implementations.

Orchestration and integration with SDN will be the key investments in the standardization community. The timeframe for mass market interoperable multi vendor commercial deployment is likely 2020.

To conclude this post, my last prediction is that someone will likely be bludgeoned to death with their own selfie stick, I'll put my money on Mobile World Congress 2015 as a likely venue, where I am sure countless companies will give them away, to the collective exasperation and eye-rolling of the Barcelona population.

That's all folks, see you soon at one of the 2015 shows.