Unlocking the value of NFV

Telecoms.com periodically invites expert third-party contributors to submit analysis on a key topic affecting the telco industry. In this article Ravi Chittimoori, Product Segment Owner, Infrastructure, at Tektronix Communications, explains how virtualising the mobile network environment will bring service agility to the forefront.

Operators are feeling the pressure. Traditional voice and SMS revenues are down and ARPU has fallen dramatically. Nimble OTT players are running rings around them, rolling out products and services far quicker than operators can manage.

The shift to an app-centric mobile environment has had a severe impact on the operators’ bottom line. However, this is not just a result of technology moving on, it’s because the rules of the game have changed. No longer the masters of their own domain, operators have found themselves on the back foot as subscribers are making fewer calls and are sending fewer texts using traditional operator-provided services.

IP-based alternatives from disruptive players like WhatsApp and Skype are having a direct impact on ARPU. Even with data rates increasing across the network, operators are not reaping the benefits. It’s a lose-lose situation for operators who, according to IDC, have collectively spent $370 billion on rolling out 4G. They’re struggling to recoup these costs, yet are still expected to deliver consistent network performance. But there’s light at the end of the tunnel in the form of Network Functions Virtualisation (NFV).

NFV has been making waves in recent years as it represents the evolution of mobile networking, promising to virtualise physical network infrastructure and create an environment that’s much more flexible than the legacy systems currently in use. When operators first introduced the NFV initiative as part of the ETSI ISG, hardware-related CAPEX and OPEX reductions were considered the main drivers behind adoption of virtualisation. In the last six months, however, service agility has overtaken traditional considerations to become the fundamental reason behind the move to NFV.

The problem operators face, and the reason NFV has become so important, is that legacy networks are notoriously difficult to modify or upgrade. Deploying a software patch or rolling out a new service on a physical telecoms network can take months to complete. Not only is this a time consuming process, it’s also incredibly expensive. This approach to launching new network services has left operators lagging behind more nimble players. To successfully counter the threat from the OTT players they must be able to launch new services or update existing services in a matter of weeks rather than months, and network function virtualisation is the way to make this a reality.

A recent report from Juniper Research suggests operators stand to lose $14 billion in revenues to OTT players in 2014 alone, so there’s no question they need to reverse this revenue erosion – and NFV has a key role to play. Operators have long fought with app providers, who seem to make no effort to understand the delicate balance that exists within the mobile network. After all, operators face a daily challenge to ensure a consistent quality of service for subscribers and prevent network congestion. App providers on the other hand don’t seem to care very much about the impact of their services, only that they work as intended.

With NFV, operators have a chance to fight back by creating their own products and services that can be prioritised over OTT applications. Not only will this help generate new revenues, it will also increase brand loyalty as subscribers become accustomed to the greater quality of service they receive from native operator applications.

Used in this way, NFV represents a significant change in the way operators target revenue streams. Traditionally, they have been in the business of service operations rather than technology innovation. But as revenues continue to be squeezed by OTT players this is no longer the case. Operators now recognise the importance of being able to roll out new services as quickly as their online counterparts. They understand how this puts them in a better position to compete, which in turn further drives the need for NFV.

Moving to NFV also grants the ability to trial new services at a much lower cost and greatly reduced burn rate. It encourages operators to adopt the OTT culture of “quick failing”, by which they can trial a number of new services in quick succession. In doing so, they can easily identify the most popular subscriber services, jettisoning those that have no positive impact on their bottom line. This is where the true value in NFV lies – allowing operators to deploy their own branded services far quicker and easier than before.

It’s not just about directly competing with OTT players. NFV will also open up a variety of new revenue streams, including a range of benefits for enterprise customers. Until now, a large corporation has been at the mercy of an operator’s slow upgrades process, but with NFV a new company-wide service could be implemented in a matter of weeks. Enterprise customers will be in a position to create bespoke applications for their end users, using an operator’s network as the backbone to deliver and develop these services.

Despite the many benefits, NFV is not without its challenges. Moving into a fully automated and virtualised network environment makes service assurance far more complicated. Operators have always relied heavily on the ability to monitor and troubleshoot their legacy networks to identify where subscribers are having issues. This approach has been streamlined in recent years to the point where network problems can often be resolved before the subscriber even becomes aware of them.

But adopting the most effective test and measurement tools is arguably even more important in a virtualised environment, particularly if operators will be continuously testing new services. To effectively compete with OTT players and to move as quickly as they can, operators will need service assurance tools that can keep up. To beat the OTT competition at their own game, operators need to ensure their branded applications can deliver the quality of service required.

The other fundamental issue that needs to be resolved before NFV can become mainstream, is standardisation. Currently there are no industry specifications about what a network functions provider is required to deliver. For now, each operator has its own expectations about how NFV will be applied to its network environment. There is no one size fits all model, but this will change in time as adoption increases.

There’s still a long battle ahead to gain market share. NFV is not a silver bullet, but it is an essential cog in a much larger machine working to revolutionise mobile networking. Whether or not it will succeed hinges on how it is executed by operators, which depends on having the right service assurance tools in place.

Ravi Chittimoori is currently Senior Product Manager and lead on network virtualisation and NFV at Tektronix Communications. Ravi has an MBA from the University of Texas and a background in computer science and engineering. Prior to joining Tektronix Communications, Ravi was a software design engineer for Inet Technologies.