Network of abstractions

As network operators transition from voice-only to multi-application service providers, they will have to make more efficient use of network resources. They cannot provide all applications or content; third parties will gain importance. What third parties get when using the network should be dependent on their business model and the price they are willing to pay for such usage.

Network abstraction allows for a selective exposure of key network functions, including fixed and mobile networks, operations support systems/business support systems and other elements. Key capabilities include presence, location, user profile and quality of service. Primarily software based, network abstraction allows for the integration of capabilities while exposing them to third parties.

Network operators feel the need to serve an ever-increasing number of third parties with standardized, effective and modular production environments. They must also simultaneously maintain their relevance and attractiveness in the wake of rising virtual application providers and other free riders. In order to do both, these operators must implement network abstraction, which provides an opportunity to increase dependency on the network — especially in the case of quality of service.

However, opening the gates of the network is not without risk. While a handful of operators have visibly pioneered this space (FT/Orange, BT, KT and Sprint), many more have considered it. But many still hesitate to fully appreciate the opportunity — both in terms of revenues and in terms of costs. Most operators are slow in taking the first step, evolving their production environment toward an architecture layered with modular transport, control, service and abstraction.

The network abstraction debate has yet to evolve beyond the technology option level. It is a strategic question: Which capabilities to expose, when and to what level of sophistication?

In order to focus on a manageable set of capabilities, operators should first consider identifying capabilities that are both technically feasible and commercially viable. Presence, location and messaging always seem to fit that bill, but any solution naturally needs to be operator-specific.

Secondly, network operators will need to consider regulatory, financial and commercial factors. Here's our acid test of key questions:

Regulatory: Is exposure already compulsory? Will the regulator make exposure compulsory?

Financial: Are existing revenues at risk? Could new revenue streams be generated? Are competitors already exposing?

Commercial: Can the operator differentiate by either retaining or exposing capability?

Asking these questions will help to identify which capabilities are commoditized (and thus should be exposed), which network capabilities touch the existing business model (negatively or positively) and which network capabilities provide a meaningful opportunity to differentiate.

In many cases, the answers will not be clear-cut. For those undetermined capabilities, further analysis should be undertaken to assess whether an aggressive or a defensive market strategy is a better fit for the firm.

For carriers, network abstraction offers the benefits of allowing for more effective internal production environments; supporting new business models; reducing the complications of network exposure; making free riders more network-dependent and potentially accelerating convergence.

In addition, it is clear that third parties increasingly want to use networks to serve their own clients with their own services and applications. This explosion in digital offers will considerably expand the number of business models an operator should enable.

The emergence of network abstraction makes the usual distinction between full service provider and dumb pipe obsolete. Operators will be able to have differentiated strategies by service areas. In some they will focus on a wholesale offer, and in others they will move up the stack and offer retail platforms or full applications. In any case, intelligence is getting modular; it can be equally built as much into a wholesale model as in a retail model.

Marc Smit is a principal at CSMG Adventis, and Diethard Buehler is a vice president for CSMG Adventis. They can be reached at Marc.Smit@csmg-global.com and Diethard.Buehler@csmg-global.com.