The shift to an app-centric mobile environment has had a severe impact on the operator bottom line. No longer the masters of their own domain, they have found themselves on the back foot as subscribers are making fewer calls and sending fewer texts using traditional network services. IP-based alternatives from disruptive players like WhatsApp and Skype are having a direct
impact on ARPU. Even with data rates increasing dramatically, operators are still not reaping the benefits. It's a lose-lose situation as, according to IDC, operators have collectively spent $370 billion rolling out 4G. They are struggling to recoup these costs while still being expected to deliver consistent network performance. But there's light at the end of the tunnel in the form of Network Functions Virtualisation (NFV), which will take centre stage in 2015.
The problem operators face, and the reason NFV has become so important, is legacy networks are notoriously difficult to modify or upgrade, giving internet players a distinct advantage. As software that runs on top of a traditional hardware-based network, OTT applications can be rolled out almost immediately. They can also be ripped down overnight if no longer commercially viable. Given the popularity of IP-based voice and messaging, it's no surprise Juniper Networks predicts operators stand to lose $14 billion in revenues to OTT providers in 2014 alone. Unlike these internet players, operators are constrained by the inflexible nature of physical hardware, which means launching a new service can take months.
However, the transition from hardware-based to software-defined networks will simplify process management, reduce operational expenditure and let operators make changes to existing infrastructure in minutes rather than days. In essence, NFV is the key to unlocking a mobile network's hidden potential. It's a tool that will help operators escape being branded as
data transporters or dumb pipes, and allow them instead to fulfil the role of an integrated communications service provider.
Virtualisation will also let operators adopt the OTT culture of 'quick failing', trialling innovative services in rapid succession at a much lower cost and greatly reduced burn rate. With the elasticity and flexibility offered by a virtual network, coupled with visibility into what traffic is crossing it, operators will have full control over how they prioritise their own branded services
over OTT applications. Not only will this approach help increase brand loyalty as subscribers become accustomed to the greater quality of service they receive from their operator, it will also help generate new revenues.
The cost savings offered by NFV cannot be ignored either, especially as operators are still working to recoup their significant investments in 4G. Transforming the network environment in this way will lower the total cost of ownership though better asset utilisation and OPEX savings. But this will be a gradual process as operators cannot move to NFV overnight and are
currently still reliant on the deeply engrained physical network architecture they have spent decades building.
Ultimately, NFV is an enabling technology. It is not a silver bullet, but it is a framework that will let operators deploy their own branded services quicker, easier and more economically than before. But it's only be delivering the same quality of experience that subscribers have come to expect from the legacy network that NFV will truly make its mark on the operator bottom line.
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