nfv, sdn and cloud is critical to the multiscreen, ott, 4k...

White paper

NFV, SDN and cloud is critical to

the multiscreen, OTT, 4K video

business case

September 2016

Gorkem Yigit

.

NFV, SDN and cloud is critical to the multiscreen, OTT, 4K video business case | i

© Analysys Mason Limited 2016 Contents

Contents

1 Executive summary 1

2 NFV/SDN-enabled multiscreen, 4K video services can generate up to USD2.1 billion benefits

for fixed CSPs 4 2.1 Virtualisation can help fixed operators improve customer retention through a value differentiation

strategy, but content remains crucial 7

2.2 vSTB with cloud DVR will be a major contributor to operational savings 9

2.3 Just-in-time capacity management enabled by vCDN elasticity will ensure cost-effective delivery of

ultra-high definition and multiscreen/OTT content 10

2.5 vProbes will help differentiate CSPs’ QoE from OTT players and underpin P2P and T2R savings 12

3 Amdocs NFV orchestration portfolio 13 3.1 Network Cloud Service Orchestrator 13

3.2 Amdocs Service Design and Create 14

4 Conclusions and recommendations 15

5 Appendix: NFV/SDN-enabled video service business case and ROI details 16 5.1 RoI modelling: main assumptions and parameters 16

5.2 Summary of costs and benefits of NFV/SDN enabled video services 20

6 About the author 23

7 About Analysys Mason 24

8 Research from Analysys Mason 25

9 Consulting from Analysys Mason 26

List of figures

Figure 1.1: Summary of NFV/SDN-enabled multiscreen 4K video service ROI analysis [Source: Analysys

Mason, 2016] .................................................................................................................................................... 2

Figure 1.2: Summary of main benefits of virtualisation compared with legacy physical solutions and

operations [Source: Analysys Mason, 2016] .................................................................................................... 2

Figure 2.1: Total cost of ownership (TCO) comparison of traditional physical and virtualised deployment

models of key video delivery components over five-year migration to multiscreen, OTT and 4K video

services [Source: Analysys Mason, 2016] ........................................................................................................ 5

Figure 2.2: Summary of capex and opex benefits from virtualised video delivery components and networks

[Source: Analysys Mason, 2016] ...................................................................................................................... 5

Figure 2.3: Comparison of operational costs per sub per year between legacy video operations and

NFV/SDN automated operations after migration is complete at Year 5 [Source: Analysys Mason, 2016] ..... 6

Figure 2.4: Summary of operational savings of NFV/SDN-enabled multiscreen video services [Source:

Analysys Mason, 2016] .................................................................................................................................... 7

Figure 2.5: Summary of NFV/SDN-enabled multiscreen video business case results [Source: Analysys

Mason, 2016] .................................................................................................................................................... 8

Figure 2.6: Main potential revenue benefits parameters used to build NFV/SDN enabled video service

business case for the composite NA CSP [Source: Analysys Mason, 2016] .................................................... 8

NFV, SDN and cloud is critical to the multiscreen, OTT, 4K video business case | ii

© Analysys Mason Limited 2016 1: Executive summary

Figure 2.7: Cashflow of the ROI analysis with the vSTB migration [Source: Analysys Mason, 2016] ......... 10

Figure 2.8: Cost savings enabled by vCDN elasticity in the face of rapid growth multiscreen and 4K capacity

demand [Source: Analysys Mason, 2016] ...................................................................................................... 11

Figure 3.1: Amdocs Network Cloud Service Orchestrator in Amdocs Network Blueprint [Source: Amdocs,

2016] ............................................................................................................................................................... 13

Figure 5.1: General modelling parameters [Source: Analysys Mason, 2016] ................................................ 17

Figure 5.2: Definition of the main operational processes impacted by NFV/SDN-enabled video service

[Source: Analysys Mason, 2016] .................................................................................................................... 18

Figure 5.3: Composite profile summary of NFV/SDN-enabled fixed video services [Source: Analysys

Mason, 2016] .................................................................................................................................................. 18

Figure 5.4: NFV/SDN-enabled fixed video services traffic profile for base case [Source: Analysys Mason,

2016] ............................................................................................................................................................... 18

Figure 5.5: NFV/SDN-enabled fixed video services traffic profile for multiscreen/4K case [Source: Analysys

Mason, 2016] ................................................................................................................................................... 18

Figure 5.6: ABR profiles [Source: Analysys Mason, 2016] ........................................................................... 19

Figure 5.7: Composite CSP’s content portfolio [Source: Analysys Mason, 2016] ......................................... 19

Figure 5.8: 4K penetration rates per year [Source: Analysys Mason, 2016] .................................................. 19

Figure 5.9:Average bandwidth per unicast streaming session [Source: Analysys Mason, 2016] ................... 19

Figure 5.10: Cloud DVR total deployed storage per year [Source: Analysys Mason, 2016] ......................... 19

Figure 5.11: CDN and network assumptions of NFV/SDN-enabled fixed video service in Year 0 [Source:

Analysys Mason, 2016] .................................................................................................................................. 20

Figure 5.12: Main cost parameters used in the model [Source: Analysys Mason, 2016] ............................... 20

Figure 5.13: Summary of capex and opex for Video SDP [Source: Analysys Mason, 2016] ........................ 21

Figure 5.14: Summary of capex and opex for virtual CDN [Source: Analysys Mason, 2016] ....................... 21

Figure 5.15: Summary of capex and opex for vCPE and cloud DVR [Source: Analysys Mason, 2016] ....... 21

Figure 5.16: Summary of capex and opex for vOLT [Source: Analysys Mason, 2016] ................................. 21

Figure 5.17: Summary of capex and opex for vProbe [Source: Analysys Mason, 2016] ............................... 21

Figure 5.18: Distributed vCDN cost and benefit analysis [Source: Analysys Mason, 2016] ......................... 22

Figure 5.19: NFV/SDN-enabled fixed video service revenue uplift benefit [Source: Analysys Mason, 2016]

........................................................................................................................................................................ 22

NFV, SDN and cloud is critical to the multiscreen, OTT, 4K video business case | 1


1 Executive summary

Amdocs commissioned Analysys Mason to evaluate quantifiable business benefits of implementing network

function virtualisation (NFV), software-defined networking (SDN) and cloud-enabled video services for fixed

communication services providers (CSPs).1 This white paper discusses the key findings of our businesses case

model which analyses potential cost savings and revenue generation and protection benefits that can be achieved

through a virtualisation-led transformation of the video management and delivery networks and operations.

Analysys Mason built a business case and return on investment (ROI) model for a developed market Tier 1

fixed operator that moves from a legacy IPTV service to multiscreen, over-the-top (OTT) and ultra-high

definition (UHD/4K) services by transforming its existing video delivery systems and networks. We analysed

the cost and revenue benefits of implementing NFV, SDN and cloud-based video delivery solutions and

processes in comparison to traditional physical solutions across a video service delivery platform (SDP). The

video SDP comprises a back-end content management system, head-end and digital rights management (DRM)

systems; a content delivery network (CDN); and customer premises equipment/set-top boxes (CPE/STB). We

further analysed the benefits of using NFV and SDN in the underlying CSP network, namely the backhaul and

access networks (the transport elements and OLT and routers/switches, respectively), the service edge (BRAS)

and probe systems. For the ROI analysis, we modelled a scenario wherein a North American CSP implements

NFV, SDN and cloud-enabled multiscreen 4K video services to execute a value differentiation strategy. This

strategy would aim to slow down the CSP’s accelerating video subscriber churn and capture new revenue from

its own OTT video service targeted at those (‘cord-nevers’ and ‘cord-cutters’) who do not want traditional pay-

TV services.

Figure 1.1 summarises the key findings from this business case ROI analysis. Figure 1.2 illustrates the main

benefits of virtualisation compared with traditional physical solutions and operations, highlighting the crucial

role of virtualisation in increasing competitiveness and service innovation in a rapidly changing and highly

competitive video services market.

1 Analysys Mason and Amdocs will look at the mobile video with virtual evolved packet core (vEPC) business case in a

forthcoming white paper.



Figure 1.1: Summary of NFV/SDN-enabled multiscreen 4K video service ROI analysis [Source: Analysys Mason, 2016]

Figure 1.2: Summary of main benefits of virtualisation compared with legacy physical solutions and operations

[Source: Analysys Mason, 2016]

Video SDP

on private cloud vCDNvSTB &

Cloud DVRvProbes

USD2.1 billion net benefits from:

10% cloud DVR storage upsell

22% 61% 57% 35%

59% reduction in operational costs

Capex/opex reduction in video management & delivery

36% capex/opex savings with vOLT



Virtualisation can generate USD1.8 billion savings and help CSPs compete for young consumers

End-to-end virtualisation and automated orchestration of video delivery networks and operations can reduce the

cost of delivery by 31% per subscriber over a five-year migration period and provide leaner operations at 59%

lower opex after the migration is complete. This will give CSPs significant advantage to respond to competitive

pricing threats by alternative service providers and help win over the younger generation of adults who typically

do not consider traditional TV services and demand more flexible terms and innovative, multiscreen services.

Moreover, providing 4K video to a sizable audience can be prohibitively costly for physical video networks;

just-in-time capacity management with virtualised CDN and more efficient traffic management with SDN can

help reduce cost per video bit significantly.

CSPs can implement a successful multiscreen/4K video strategy and generate 44% ROI with

virtualisation

Coupling rapid feature creation and personalisation enabled by virtualisation with high-quality, appealing 4K

content, CSPs can pursue a value differentiation strategy to retain high-value subscribers with premium services

while offering lower-cost, slimmed-down content bundles to cater to the needs of more cost-conscious

subscribers. Our ROI model for a North American CSP estimates that the reduction in subscriber churn plus

additional CSP-owned OTT service revenue outweighs the costs of transformation of the CSP’s entire video

delivery chain and the rise in content acquisition costs, which generates an ROI of 44% and NPV of

USD1.6 billion. However, it is crucial that the CSP migrates at least 50% of the old physical STBs to virtual

STBs, or the net benefits will diminish significantly or disappear (see Figure 2.6 in Section 2.1).

vSTB with cloud DVR can cut CPE costs by 57% and provide USD329 million upsell opportunity

STBs are a major cost item in video delivery and will continue to be so, especially with the emergence of

4K/UHD. Our model predicts a 57% CPE cost reduction, after the CSP fully migrates to vSTB, due to the

simplification of STBs by virtualising and moving certain functions to network, including storage with cloud

DVR. Cloud DVR not only eliminates costs in storage hardware of vSTB, but also enables new upsell

opportunities of around USD329 million thanks to a surge in demand to store 4K content and provide

multiscreen access to content.

High-quality video experience will be a key differentiator of CSPs from alternative service providers

As the video management and delivery systems become virtualised, CSPs will have to deploy vProbes to monitor the

traffic flowing in a virtualised video network. Moreover, vProbes can enable real-time proactive assurance on critical

video performance indicators that translate to a better level of quality of experience (QoE) for the pay-TV subscribers.

Their scalability to address a specific demand peak and then be redeployed elsewhere using the same licences means

the provision of 4K and multiscreen assurance via vProbes is 35% cheaper than physical ones.


© Analysys Mason Limited 2016 2: NFV/SDN-enabled multiscreen, 4K video services can generate up to USD2.1 billion benefits for

fixed CSPs

2 NFV/SDN-enabled multiscreen, 4K video services can

generate up to USD2.1 billion benefits for fixed CSPs

Increased availability of high-quality, compelling video content and live events/sports broadcasts has been

driving demand for video services worldwide. Fixed IPTV providers and cable or multiple system operators

(MSOs) enjoyed high average spend per user (ASPU) in developed markets with traditional video services and

improved customer retention by bundling high-demand video services with broadband Internet and voice.

Analysys Mason research shows that IPTV service revenue in developed markets, namely North America,

Western Europe and developed Asia–Pacific, has grown from USD8.4 billion to USD22.4 billion between 2010

and 2015, with a CAGR of 22%.2 However, rapidly changing video content consumption trends, encouraged by

alternative competitors and primarily driven by younger generation of adults called ‘cord-cutters’3 and ‘cord-

nevers’4 , are threating the promise of this revenue growth and putting strong pressure on fixed pay-TV

operators’ top and bottom line:

Streaming video providers such as Netflix, Amazon and Hulu disrupted the market by providing cost-

competitive, multi-device/multiscreen on-demand video services with exclusive and original content,

causing increased churn in traditional fixed broadband video services. This is exacerbated by content

providers/channels (i.e. HBO Now, Showtime) going direct to consumers with their own streaming

services.

Steady migration of broadcast video to multicast and unicast along with the emergence of ultra-high

definition (4K/8K/HDR) content is spurring fixed operators to invest in next-generation access networks to

meet the capacity demands. Also, several OTT video providers have spurred competition by launching

limited 4K content, ahead of many fixed operators.

Increasing content costs from the competition to acquire live sports broadcast rights and original and 4K

content and re-negotiations with content owners in order to make content available to all supported devices

and platforms are driving revenue margins down.

To counter these pressures and defend and grow video service revenue, fixed pay-TV operators need to launch

innovative and cost-effective multiscreen and OTT video services. These new services should target different

customer profiles/demographics and deliver exclusive, appealing, high-definition/4K content beyond TVs and

STBs to multiple devices and screens while ensuring a high-quality video experience that can differentiate them

from alternative service providers. This requires transformation of the entire video service delivery chain, from

core content management platforms to CPEs and underlying broadband networks, and operations improvements.

Analysys Mason built a business case for a developed market Tier 1 fixed operator which transitions from its

legacy video service with SD/HD content to ultra-high definition (4K) multiscreen (on-net only) and OTT (both

on-net and off-net) services. Our model demonstrates that the end-to-end virtualisation of video delivery

systems and networks can provide net USD1.8 billion cost savings compared with using physical on-premise

solutions and enable an additional USD329 million revenue from cloud DVR upsell over a five-year period.

Figure 2.1 below shows 31% virtualisation related cost savings per average household per year over a five-year

migration period compared with physical video delivery solutions and networks. This includes the costs of

2 Source: Analysys Mason Global telecoms market: trends and forecasts 2015–2020. See more at:

http://www.analysysmason.com/Research/Content/Regional-forecasts-/Global-telecoms-forecasts-Nov2015-RDDG0/

3 People who have never subscribed to a pay-TV service.

4 People who cancel a pay-TV subscription to switch to an alternative Internet-based service.



fixed CSPs

hybrid physical/virtual architecture and dual operations during the transition period, which limits the cost

savings that can be achieved with full virtualisation at Year 5.

Figure 2.1: Total cost of ownership (TCO) comparison of traditional physical and virtualised deployment models of key

video delivery components over five-year migration to multiscreen, OTT and 4K video services [Source: Analysys

Mason, 2016]

Figure 2.2 provides details on the virtualised components and the non-operations cost savings they drive. Figure

2.3 and Figure 2.4 detail the operational efficiencies driven by these same virtualised components.

Figure 2.2: Summary of capex and opex benefits from virtualised video delivery components and networks [Source:

Analysys Mason, 2016]

Main benefits area Rationale

Video management and

delivery (vSDP and

vCDN)

61% reduction in in-house CDN costs with vCDN thanks to increased elasticity and

an on-demand pricing model. This includes the costs and benefits of using the

existing physical CDN in parallel with vCDN as the existing physical CDN is gradually

phased out over 5 years. See section 2.2 for more details on vCDN.

22% capex and opex reduction from private cloud-based video SDP. These costs

savings are in comparison to the alternative scenario of implementing on-premise

video SDP components (assuming both are greenfield). These components include

the core content management system (including advertising and recommendation),

encoders/transcoders and digital rights management (DRM). Section 2.3 provides

more details on cloud-based video SDP deployments.

NFV/SDN in backhaul

and access network

virtualisation and

vProbes

35% capex and opex savings from vProbes for video assurance compared with

physical probes thanks to their scalability to address a specific peak in demand and

redeploy those licences elsewhere when the peak has passed. This doesn’t include

packet data brokers which we assumed remain physical. See details in section 2.4



fixed CSPs


36% capex and opex savings from greenfield implementation of vOLT and SDN-

enabled vRouters/vSwitches in access networks as part of the new FTTx roll-outs to

meet growing video traffic and 4K/8K bandwidth requirements.

20% more efficient traffic and bandwidth management with SDN in backhaul

networks, which can increase capacity utilisation and defer capacity investments.

Moreover, SDN automated service configuration and activation in access networks

will contribute to order to cash (O2C) savings detailed in Figure 2.4.

vBRAS (broadband remote access servers) are an additional cost instead of savings,

but opex benefits from gradual decommissioning of legacy physical BRAS are

included in the business case.

The operational savings illustrated in Figure 2.3 and Figure 2.4 can be fully achieved at Year 5, after the CSP

has implemented end-to-end virtualisation and automated orchestration of the video management and delivery

chain and operations.

Figure 2.3: Comparison of operational costs per sub per year between legacy video operations and NFV/SDN

automated operations after migration is complete at Year 5 [Source: Analysys Mason, 2016]



fixed CSPs

Figure 2.4: Summary of operational savings of NFV/SDN-enabled multiscreen video services [Source: Analysys

Mason, 2016]


57% reduction in STB/CPE supply

management costs:

These savings are achieved through the use of lower-cost, multi-technology and

simplified STBs for multiscreen and 4K services. The savings also include

elimination of high-capacity storage hardware at the customer premises through

cloud DVR. These savings are reduced by the need for supporting 4K with HEVC

rendering and security in vSTBs and additional costs of cloud DVR software and

storage. See Section 2.1 for more details on vSTB and cloud DVR.

54% reduction in service development

costs:

By using virtualised SDP, CDN and CPE, CSPs can reduce development, test and

roll out/roll back cycles for new services and upgrades by 60% (man-hour

savings) and technology costs by 33%, which translates into an overall 54%

saving in service development costs.

77% reduction in O2C costs: These savings can be achieved thanks to faster service provisioning and

activation through NFV/SDN-automated vSTB, vOLT, vBRAS and vCDN scaling

and configuration and pre-created service and VNF templates, during the five-

year migration of traditional IPTV subscribers to new multiscreen, OTT and 4K

services.

65% reduction in plan to provision

(P2P) costs:

Closed-loop, continuous, just-in-time, end-to-end network capacity management

and optimisation of virtual elements (virtual caches, vProbes, vOLT, cloud-based

encoders and transcoders, etc.) based on real-time data from vProbes can

reduce time spent on network planning and design processes and costs of

assigning engineers to remote sites for manual capacity augmentations and

optimisation. Finally, the cost savings include deferred equipment procurements

due to higher utilisation of virtual functions (up to 70–80%, compared with 30–

50% for physical). However, CSPs will still need an overall network planning and

design function, into which video service capacity planning numbers will feed.5

59% reduction in trouble to resolve

(T2R) costs:

T2R cost reduction will mainly come from the remote orchestration capability

which supports proactive detection of potential problems (via the vProbes) and

closed loop automation for self-healing. These benefits will come from reducing:

site engineers’ time to resolve video service fault or issues; equipment faults,

given the simpler vSTB; and customer compensation for poor handling of faults.

2.1 Virtualisation can help fixed operators improve customer retention through a

value differentiation strategy, but content remains crucial

Virtualisation can help fixed operators improve customer retention by combining these cost efficiencies with

agile service development capabilities for multiscreen/OTT 4K video services through a value differentiation

strategy:

Provide high quality of experience (QoE) and premium 4K services to high-value customers with at least

the features (time-shift, place-shift TV, cloud DVR, analytics-driven recommendations, enhanced

identity/profiling) they are used to from streaming services, and with continuous service innovation that

will deliver market differentiation.

Target more cost-conscious subscribers with new, lower-cost service bundles with greater flexibility

(short/no commitment, service can be de/re-activated on demand). There is going to be price competition

5 Other major P2P costs such as site surveys, civil infrastructure analysis and field engineering costs from actual installations

will be borne centrally on behalf of multiple services and therefore are not within the scope of this business case.



fixed CSPs

for this segment’s business; virtualisation will be key to lowering per customer costs, as illustrated in Figure

2.1 above. Achieving the right balance in content offerings will be critical to prevent revenue

cannibalisation from higher-end subscribers.

Virtualisation of the video management and delivery systems and operational transformation alone are not

sufficient to achieve these benefits without high-quality, appealing content. To quantify the impact of

virtualisation on ROI and NPV, we modelled a scenario for a composite CSP in North America6 and

incorporated multiscreen/OTT availability and 4K into our business case. The new video service availability

results in churn reduction and new CSP-owned OTT service revenue benefits, but also in increased content

rights expenses. Our model predicts an NPV of 1.6 billion over a five-year period with an ROI of 44%, as

shown in Figure 2.5 below, which cannot be achieved using traditional physical solutions and operations. Figure

2.6 provides more detail on the benefits and their rationale.

Figure 2.5: Summary of NFV/SDN-enabled multiscreen video business case results [Source: Analysys Mason, 2016]

ROI parameters NFV/SDN-enabled multiscreen 4K video

Total costs USD5.0 billion

Total benefits USD7.7 billion

NPV USD1.6 billion

IRR 91.7%

Payback period 2.66

ROI 43.7%

Figure 2.6: Main potential revenue benefits parameters used to build NFV/SDN enabled video service business case

for the composite NA CSP [Source: Analysys Mason, 2016]


75% slow down on year-on-year

churn, which drives

USD3.6 billion revenue

protection

This churn reduction expectation is based on our interviews with developed market

operators which have launched/are planning to launch multiscreen, OTT and 4K video

services. The churn reduction includes some consumers’ shift to lower ASPU, slimmed-

down, lower-margin content bundles. Additional revenue growth will mainly come from

re-capturing cord-cutters and attracting new on-net and off-net subscribers with CSP-

owned OTT services. Increased service innovation and operational efficiency with

virtualisation combined with exclusive, high-quality content will increase CSPs’

competitiveness against alternative service providers and help them defend their

existing revenue. Moreover, fixed CSPs’ control over last mile networks and QoE can

give them a competitive advantage over their competitors in delivering 4K/8K video

services.

USD2.5 billion new revenue

generation potential from CSP’s

own OTT service and cloud DVR

upsell7

This revenue opportunity will come from:

Ability to rapidly develop cost-effective OTT services with various

service/bundle packages to target different segments, which can generate

up to USD2.2 billion new revenue over five years. This is based on a

conservative estimation of capturing a 5% market share from the pool of

cord-cutters and cord-nevers.

Up to USD329 million cloud DVR storage upsell, mainly from heavy-usage

consumers who will need more storage space because of the large 4K file

6 Video services market dynamics vary in different regions, for example North America is highly mature and the focus is on

reducing churn, while in Western Europe and developed Asia–Pacific, growth continues but is slowly decelerating. Some

emerging markets, such as China, are enjoying strong growth thanks to FTTx roll-outs.

7 Fixed CSPs could potentially generate new revenue sources from CDN wholesaling to OTT video providers by putting content

closer to subscribers for better QoE; however, due to net neutrality uncertainty, we excluded this benefit from our model.



fixed CSPs


size and an increasing number of devices that will access and save content.

Section 2.1 provides more details on cloud DVR with vSTB.

2.2 vSTB with cloud DVR will be a major contributor to operational savings

Analysys Mason’s residential vSTB model published in 2015 demonstrated significant capex and opex savings

and upsell benefits from virtualisation and centralisation of CPE functionalities in the network.8 The model

featured the use of lower-cost, simplified multi-technology terminals at customer premises. For this white paper,

we modified this reference model for the advanced video services; the vSTBs must include UHD/4K

decoding/output and content security capabilities as well as bare connectivity functionalities (Wi-LAN,

Ethernet), but UI, storage hardware and other functionalities (i.e. IP routing, NAT, DHCP, UPnP) can be

virtualised and moved to the network. To this end, we incorporated the deployment costs and upsell

opportunities of delivering cloud DVR services to the vSTB roll-out, because cloud DVR enables vSTBs by

making content accessible from any device, anytime and anywhere, thus eliminating the STB storage hardware

costs and limitations.

In addition to cost savings, cloud DVR creates new revenue opportunities through storage upsell mainly by

heavy-usage subscribers who will need more storage space to store 4K content compared to SD/HD content

(they will need about two times more, based on our five-year 4K take-up estimate). Cloud DVR provides a more

cost-effective way to capture this opportunity compared to physical STBs with more storage space. This is due

to cloud DVR being centralised, re-usable and providing cloud-based storage with just-in-time transcoding and

intelligent shared copy efficiencies.

Figure 2.7 shows that the critical mass of about 50% of households must be migrated to the new 4K multiscreen

service with vSTBs for CSPs to reap the benefits of their initial investments.

8 Source: vCPE services business case: potentially billions of dollars payback for fixed CSPs See more at:

http://www.analysysmason.com/Research/Content/Reports/vCPE-services-business-case-potentially-billions-of-dollars-

payback-for-fixed-CSPs-



fixed CSPs

Figure 2.7: Cashflow of the ROI analysis with the vSTB migration [Source: Analysys Mason, 2016]

2.3 Just-in-time capacity management enabled by vCDN elasticity will ensure cost-

effective delivery of ultra-high definition and multiscreen/OTT content

Traditional in-house CDNs for video services typically consist of appliance-based caching/streaming servers

that are cost inefficient: they are dimensioned based on peak-traffic forecasts, which results in overcapacity and

under-utilised resources. Moreover, manual capacity augmentation processes in CDNs are slow and costly, and

can potentially cause degradations in QoE when there are unexpected traffic spikes that cause overload and

congestion. Our model predicts that fixed video providers will face significant increase in capex and opex from

their existing physical in-house CDNs from the combination of increasing concurrent unicast viewing from

rapidly growing multiscreen/OTT devices with various ABR delivery requirements (HSS, HLS, HDS, etc.) and

the higher bandwidth requirements of unicast and 4K services. However, migrating to vCDN (virtual

caches/streamers, origin servers) for adaptive bit rate (ABR) delivery of live and on-demand content can reduce

these costs by 61% over a five-year period by providing:

just-in-time capacity management with automated scaling of vCDN resources based on real-time traffic

demands: this allows average-traffic-based dimensioning and on-demand, pay-as-you-grow licence/pricing

models

capex savings from replacing expensive, dedicated hardware with lower cost, general purpose commercial

off-the-shelf (COTS) servers: this enables multi-tenant, consolidated architecture for vCDNs and reduces

data centre costs (power, space and cooling)

faster and more cost-effective delivery of high-demand/concurrency programming: this includes live events

(Olympics, World Cup, Super Bowl, etc.) and on-demand content (e.g. season finales of popular TV shows)

more efficient, programmable traffic management and re-/directing video traffic to CDN POPs: using SDN

based on real-time load/congestion data from vProbes and other data sources.

Figure 2.8 below illustrates the increasing in-house CDN capacity and investment requirements to meet the

demands of new multiscreen, OTT and 4K services. Our analysis includes a five-year migration model to vCDN

0%

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fixed CSPs

with dual physical/virtual elements where the CSP gradually replaces its physical CDN elements with

virtualised solutions.9

Figure 2.8: Cost savings enabled by vCDN elasticity in the face of rapid growth multiscreen and 4K capacity demand

[Source: Analysys Mason, 2016]

We also analysed the commercial viability of pushing virtual caches deeper in the network from metro

aggregation points to exchanges in order to reduce backhaul costs and increase QoE by moving 4K content

closer to consumers. Our model showed that costs of stand-alone deployments of virtual caches at exchanges are

considerably higher than the backhaul network savings. However, we further analysed the scenario where the

composite CSP transforms its legacy exchange offices to data centre environments as part of its new fibre-to-

the-home (FTTH) roll-out and creates virtualised, multi-tenant platforms that can host vOLT, vCDN, vBRAS

and vCPE. We found that this approach can provide an additional ~1 percentage point ROI increase to the base

scenario (excluding the potential customer experience and churn reduction benefits) because aggregation and

orchestration of multiple virtual applications at the exchange creates economies of scope in NFV/SDN

investments (see Figure 5.19 in appendix). These benefits can also be further enhanced with additional

enterprise and potentially mobile services hosted from these same exchanges. However, transforming exchanges

to data centres will require significant investment in on-site engineering and preparation such as ensuring

compliance with NEBS and EIA/TIA-942 standards. These are not modelled in this business case and as such

they are not included in ROI results.

2.4 Cloud-based, unified content management back-end solutions using a DevOps

approach can help CSPs match the agility and efficiency of OTT competitors

As CSPs transition from traditional IPTV to 4K multiscreen and OTT video services, transformation of legacy

back-end video service delivery platforms (SDPs) will be crucial to compete against personalised and innovative

services from OTT players. Fixed CSPs will need new video SDPs that will provide unified management of

9 This excludes caching and optimisation of third-party OTT video services and non-video content. OTT video to off-net

subscribers is delivered via multi-CDN strategy with a partner global CDN. These costs are included in the overall business

case but excluded from the in-house CDN costs shown in Figure 2.8. Live channels are assumed to be delivered using

multicast to STBs, but unicast to all other user devices.

0

5

10

15

20

25

30

35

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Tota

l C

DN

inve

stm

ent

(US

D m

illions)

CD

N e

dge c

apacit

y (T

bps)

CDN edge traffic capacity (peak) CDN edge traffic capacity (average)

Physical CDN investment Virtual CDN investment

vCDN scalability based

on real-time traffic demands



fixed CSPs

multiscreen, OTT and 4K content delivery and security with cohesive experience across all supported devices

and platforms. Moreover, advanced analytics-based profiling, recommendations and advertising engines as well

as interactive features (in-game statistics, social media integration, contextual shopping, etc.) will be needed to

provide more engaging and immersive video experience, and further monetise the content.

Our model demonstrates that the implementation of a unified video SDP solution on a private cloud

environment can reduce new service creation and platform operation costs by 54% and provide 32% lower TCO

compared with physical on-premise deployments by providing:

faster service development and delivery processes, including configuration, integration, testing, roll-out and

rollbacks as well as third-party service/API development and integration, for new markets, devices, service

packages, content and user interfaces (UI) through cloud-based environment with DevOps agile software

development approach

streamlined operations through unified, automated workflow for all live, VoD and OTT services

reduced capex and data centre opex through a cloud-based, multi-tenanted, consolidated architecture with

higher density, leading to reduced physical footprint

increased scalability to accommodate subscriber and traffic growth while ensuring higher service

availability and resiliency.

In addition to these benefits, centralised, multi-tenanted cloud-based SDP and in-house vCDN could enable new

B2B revenue from various verticals including wholesale, enterprise (hospitality, professional training, etc.),

cloud-based transcoding as a service and white-label business models, which would further enhance the business

case. However, these benefits are not included in our business case model.

The use of public cloud for implementing the unified SDP solution (excluding vendor managed services

offerings where the vendor bears the infrastructure costs), has the potential to reduce total investments for

smaller operators. However, it may not be a viable option for large Tier 1 operators due to high storage and

ingress/egress traffic charges in the long term.

2.5 vProbes will help differentiate CSPs’ QoE from OTT players and underpin P2P and

T2R savings

vProbes will need to be deployed in order to monitor the traffic that flows over virtual network interfaces in

NFV/SDN video networks; monitoring cannot be done using traditional physical probes. Moreover, CSPs will

need real-time service monitoring and proactive assurance to ensure higher QoS/QoE than alternative service

providers’ offerings; the increasing unicast and ABR video traffic with 4K content and multiscreen/OTT

services over managed and unmanaged networks and a large variety of devices with further push CSPs to invest

in proactive, real-time assurance. Automated, on-demand and cost-effective scalability of vProbes will play a

critical role in NFV/SDN-based video delivery by enabling 35% cheaper 4K and multiscreen assurance than

physical probes. This can be achieved through collection of real-time network, service, application and

subscriber intelligence, which will in turn enable:

more efficient plans to provision processes through continuous, just-in-time network capacity planning,

design and automation with closed-loop orchestration for automated scaling/healing of virtualised video

components (vCDN, virtual encoder/transcoders, etc.) as well as dynamic bandwidth allocation with SDN

across access and transport networks to meet capacity demands

reduced time to revenue costs through real-time monitoring and visibility into critical video performance

points, including: ingestion of unprocessed live/on-demand content from content providers; across


© Analysys Mason Limited 2016 3: Amdocs NFV orchestration portfolio

MPEG2–4, AVC and HEVC encoding/transcoding workflow; between origin and caching transport links;

and last mile delivery networks for faster root-cause analysis to resolve video service degradations

improved network security with analytics-driven intrusion detection and distributed denial of service attack

(DDoS).

3 Amdocs NFV orchestration portfolio

Successful implementation of NFV/SDN-enabled video services depends on the extent CSPs transform into new

virtualised next-generation (vNGN) OSS environments. Amdocs’ OSS domain knowledge and NFV/SDN

orchestration capabilities can deliver an end-to-end OSS suite to help CSPs transform towards the virtualised

next-generation networks.

Amdocs’ NFV solutions enable service providers to onboard and orchestrate multi-vendor VNF solutions and

assure new virtual and hybrid services. Amdocs’ NFV solutions are vendor-neutral and work with third-party

VNFs, and as such could help CSPs reduce their innovation curves. Amdocs’s offerings include:

VNF Onboarding Automation – automated Service Design and Create solution onboards VNF as part of

the service design, test and launch process. It enables service providers to try, fail, adapt and try again.

NFV Orchestration – leverages Amdocs Network Cloud Service Orchestrator for rapid multi-vendor VNF

instantiation. Vendor neutral, catalog-driven orchestration solution continuously designs, fulfils and assures

NFV network services, by supporting any third-party VNF.

3.1 Network Cloud Service Orchestrator

Amdocs Network Cloud Service Orchestrator is an open, catalog-driven solution. It continuously designs, fulfils

and assures network services, from virtual network functions (VNF) vendors, over mainstream CMS and SDN-

C.

Figure 3.1: Amdocs Network Cloud Service Orchestrator in Amdocs Network Blueprint [Source: Amdocs, 2016]


© Analysys Mason Limited 2016 3: Amdocs NFV orchestration portfolio

Dynamic service design and fulfilment

Automatic management of tens of thousands of instances in real time, over a distributed and multi-vendor

infrastructure

Support for services spanning virtual and physical resources

Integration with business support systems (BSS) and operational support systems (OSS)

Integrated policies and analytics for service performance.

One of the key drivers for NFV is the ability to build and operate best-of-breed network services and avoid

vendor lock-in. Amdocs Network Cloud Service Orchestrator is an open, vendor-agnostic platform, capable of

managing VNFs, over mainstream CMS, SDN and COTS computing hardware, making it easy to switch

vendors and make decisions without vendor lock-in.

Figure 3.9: Amdocs Network Cloud Service Orchestrator [Source: Amdocs, 2016]

3.2 Amdocs Service Design and Create

Amdocs Service Design and Create is a service development lifecycle solution that enables service providers to

design, test and launch new virtual and hybrid services in weeks and to respond quickly and cost effectively to

customer needs and market demands. While NFV orchestration manages the VNF lifecycle, Service Design and

Create addresses the critical gap on how to model, test and debug end-to-end virtual services.

Full service development lifecycle support

Service provider-governed templates for vendor VNF packages

Highly automated service and resource onboarding

Modular policy, threshold, KPI and workflow definitions

Automated test and debug of designs

Intuitive drag-and-drop graphical interface

Vendor-neutral service modelling to create virtual and hybrid services

Pre-built integration with Amdocs Network Cloud Service Orchestrator and Amdocs Master Enterprise

Catalog for auto-readiness.

In July 2016, AT&T announced that Amdocs will serve as an integrator for companies that plan to adopt

AT&T’s open source ECOMP platform. ECOMP is a comprehensive software suite covering the entire NFV

service lifecycle, bringing agility in service management in NFV and SDN functions services. AT&T has


© Analysys Mason Limited 2016 4: Conclusions and recommendations

already implemented ECOMP in its software-based networks and recently released its source. Amdocs will help

telecoms operators and cloud developers build their own software-controlled network services, deploying the

open source software into their own networks.

4 Conclusions and recommendations

Analysys Mason’s analysis of the NFV, SDN and cloud-enabled video services business cases yielded the

following conclusions:

Virtualisation will be crucial to CSPs’ ability to compete and defend existing revenues in highly

competitive video markets because it lowers the cost of delivery. CSPs will need to provide attractive,

unique content to entice customers and increase stickiness of different customer profiles. Customer

segments will have distinct consumption behaviour and service expectations that will change over time.

Therefore, CSPs will need content packaging that appeals to specific customer types and adapts to the

changing market landscape. CSPs have limited options to reduce content rights costs directly. As such, 31%

cost reduction per sub over the migration period and 59% operations cost reduction at Year 5 will be crucial

to preserve margins and retain cost-conscious subscribers with lower-cost, greater flexibility service

packages.

Fixed video virtualisation will enable the successful value differentiation needed to increase

subscriber retention. Virtualisation can provide agile service development and personalisation capabilities

that will help level the playing field against alternative/web-scale service providers to retain high-value

customers with innovative services. Value differentiation can be enhanced through cloud-based SDP,

vCDN and vSTB, which will enable rapid feature creation and personalisation. As highlighted in this white

paper, this can potentially protect up to 3.6 billion existing revenue by stopping subscriber losses. However,

such differentiation cannot be achieved without implementing virtualised video delivery networks and

acquiring an agile development capability.

Just-in-time capacity planning capability will become increasingly important in order to maintain user

experience as content consumption becomes more unpredictable. CSPs’ control over low-latency metro

edge locations will be crucial in 4K video delivery.

CSPs should consider the following recommendations:

CSPs must virtualise the entire video delivery network to fully achieve the estimated cumulative

savings and enable necessary capabilities: CSPs should adopt an end-to-end virtualisation and

orchestration approach across entire video delivery networks in order to achieve closed-loop automated

operations; it is the closed-loop automation that will be the main enabler of the service agility and

operational efficiencies. There will be a necessary migration phase with hybrid architectures, during which

CSPs will incur cost before they reap the bulk of the savings, as demonstrated in this business case.

CSPs should demand pay-as-you-grow, on-demand licensing models to achieve the scalability benefits

of virtualisation: CSPs should press vendors for on-demand, pay-as-you-grow licensing models for

virtualised components, particularly for vCDN and vProbes, to allow payment for the actual use of

resources and achieve TCO reductions of 61% and 35%, respectively.

CSPs should focus on STB simplification, as the STB will continue to be a major cost item: STBs are

unlikely to disappear in the next 10 years due to the emergence of 4K/UHD, but over this time they will be


© Analysys Mason Limited 2016 5: Appendix: NFV/SDN-enabled video service business case and ROI details

increasingly simplified and commoditised, and more of their functions will be virtualised and moved to

network cloud for automated operations and cost savings.

5 Appendix: NFV/SDN-enabled video service business

case and ROI details

This section includes the main assumptions, cost and benefit parameters and results of the ROI analysis for the

NFV/SDN-enabled video service business cases for fixed video services, and is structured as follows:

Section 5.1 describes the main modelling assumptions of NFV/SDN-enabled video service business cases

for fixed video services.

Section 5.2 details the costs and benefits and summarises the results of the NFV/SDN-enabled video service

ROI model for fixed video services.

5.1 RoI modelling: main assumptions and parameters

Our main assumptions in developing the NFV/SDN-enabled video service business case and ROI models are as

follows:

CSPs ultimately pass the initial acquisition costs of STBs on to customers as part of their service fee during

the contract term. The cost is borne by the supplier in case of defective STBs.

After the initial investment, virtualisation provides a pay-as-you-grow cost trend (less tiered investments),

in cases where there are volume licence cost reductions for VNFs. The exception is vSDPs, which require

quick migration of all customers onto the new platforms for service continuity.

We have assumed that the vSTB is plug and play and does not need on-site installation personnel.

We have assumed that one third of subscribers use two STBs for multi-room viewing.

Training and sales and marketing costs are excluded and are expected to be part of CSPs’ ongoing budgets.

The composite CSP was assumed to have 25% FTTH coverage at Year 0 and to reach 100% coverage at the

end of the analysis period (Year 5). Only vOLT costs and savings are included in the business case and all

other roll-out costs are excluded.

The composite CSP is a large developed market Tier 1 fixed operator and has existing peering agreements

in place – as such, Internet transit costs are excluded.

No additional service revenue was factored in with the new multiscreen 4K service (except cloud DVR

upsell) from existing subscribers. The new service is assumed to be a defensive move to reduce churn,

rather than an attempt to generate new revenue.

New OTT service revenues mainly come from non-subscribers (75%) and non-triple play subscribers

(25%).



Third-party OTT caching (e.g. transparent caching) is excluded because large OTTs such as Netflix and

Google prefer to provide their own caches with large CSPs for free, and HTTPS encrypted content hampers

transparent caching.

The CDN is modelled as a hierarchical architecture. Edge servers reside in metro aggregation points, mid-

tier caches are in IP service edges and origin servers and first-level caching are back in the core network.

Live TV is assumed to be delivered as multicast to STBs only while it is unicast streaming to all other user

devices.

OTT service to off-net users are delivered via a global CDN (priced based on bandwidth sustained) while

in-house CDN is used to support video delivery to all on-net users.

Video SDP back-end is priced based on the number of installed STBs while the price of its OTT module is

based on the number of registered user devices.

Head-end encoders/transcoders for 4K are modelled as physical appliances, not virtualised on COTS

servers, due to high CPU/GPU performance requirements.

Cloud DVR costs are estimated based on the composite CSP customers’ programme recording and

consumption trends instead of static recording hour-based allocations, which allows resources to be

oversubscribed. The concurrency is assumed to be 20%. Just-in-time transcoding is used to reduce storage

costs of multiple formats for multiscreen ABR. Cloud DVR upsell revenue is assumed to be USD12 per

month.

Total addressable market for OTT services, which mainly includes cord-cutters and cord-nevers, is assumed

to be 33 million at Year 0, growing to 48.5 million at Year 5, at a CAGR of 8%.

5.1.1 General modelling parameters

Figure 5.1: General modelling parameters [Source: Analysys Mason, 2016]

Assumption Value Rationale

Discount rate 12% This weighted average cost of capital (WACC) is in line with the current

economic environment in mature markets

Length of analysis Six years: one year of

initial investment (no

migration) and a

three- to five-year

migration period

We assumed the first year has no migration and the initial investment and

testing would be completed in 12 months at most. For various scenarios,

the specifics vary, for instance

Video SDP: one-year migration of the unified video SDP

platform to the private cloud. Investments in 4K

encoders/transcoders grow with the increasing number of 4K

channels and on-demand content

vCDN: to cater to increasing traffic demand, vCDNs work

alongside physical CDNs for five years, but gradually phase out

physical CDNs

vProbes: they are to co-exist with physical probes to enhance

capacity

vSTBs: gradual migration from old physical boxes at the rate of

new service take-up



5.1.2 Definition of key operational processes

Figure 5.2: Definition of the main operational processes impacted by NFV/SDN-enabled video service [Source:

Analysys Mason, 2016]

Definition/activities

STB Supplier

Management

Comprises the costs of procuring STBs, including hardware, software and related services, as well as

managing returns of faulty equipment and warranties

O2C Comprises the costs of the overall new service fulfilment and change processes, from the customer

order to service and network provisioning, CPE/STB configuration, testing, delivery, installation and

service activation

T2R The costs of clearing video service faults, configuration problems and other complaints by contact

centres (Level 1/2 support), network operations centre (NOC) (Level 3 support) and field engineer

teams/truck rolls

Service creation Consists of the time needed to develop, launch, improve, validate, test, roll out, upgrade and

customise video services

P2P This includes network planning and design for video services and CPE/STB stock management based

on regional need/thresholds

5.1.3 The composite CSP profile

Analysys Mason consolidated the characteristics of various large Tier 1 CSPs in developed markets, mainly in

North America, that provide multi-play residential service bundles, namely double-play (fixed voice and

broadband Internet) and triple-play (fixed voice, broadband Internet and TV) while offering IPTV, OTT video,

multiscreen, 4K, catch-up television and cloud-DVR. Figure 5.3 summarises the composite CSP’s

organisational attributes used for developing the NFV/SDN-enabled fixed video services business case.

Figure 5.3: Composite profile summary of NFV/SDN-enabled fixed video services [Source: Analysys Mason, 2016]

Attribute Description

CSP market Mature developed markets, mainly North America

Type of services offered Multi-play (voice, broadband and TV) residential services

Number of customers (Year 0) 16 million total subscribers, of which ~7 million are triple-play customers with 9.4 million

STBs installed and 3.5 million other user active devices installed to access video

services (CAGR 45%)

Average customer revenue USD90 (triple-play), USD45(slimmed-down bundle), USD20 (OTT service)

5.1.4 NFV/SDN-enabled fixed video service traffic profile

Figure 5.4: NFV/SDN-enabled fixed video services traffic profile for base case [Source: Analysys Mason, 2016]

Data consumption ( PB) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total

Annual STB unicast 1184 1348 1534 1747 1989 2264 10 066

Annual multicast 6150 6393 6645 6907 7180 7464 40 739

Other unicast video 5572 7252 9081 11 170 13 564 16 545 63 185

Other Internet data 8359 10 879 13 621 16 755 20 346 24 817 94 777

Total data consumption 21 265 25 871 30 881 36 580 43 079 51 091 208 767

Figure 5.5: NFV/SDN-enabled fixed video services traffic profile for multiscreen/4K case [Source: Analysys Mason, 2016]


Annual unicast 1184 2492 4095 6739 9401 11 996 36 415




Annual multicast 6150 7730 10 726 14 952 16 999 19 687 76 243

Other unicast video 5572 7252 9081 11 170 13 564 16 545 63 185

Other Internet data 8359 10 879 13 621 16 755 20 346 24 817 94 777

Total data consumption 21 265 28 353 37 523 49 617 60 310 73 045 270 620

Figure 5.6: ABR profiles [Source: Analysys Mason, 2016]

ABR profiles Kbps

Profile 1–270p 400




Profile 5–2160p 15000

Profile 6–2160p 18000

Profile 7–4320p10 25000

Profile 8–4320p 32000

Figure 5.7: Composite CSP’s content portfolio [Source: Analysys Mason, 2016]

Content type Value

Live channels (HD) 150 (Year 0)–150 (Year 5)

Live channels (SD) 250 (Year 0)–0 (Year 5)

Live channels (4K) 5 (Year 1)–130 (Year 5)

VoD Library 50 000 titles (STB), 25 000 titles (multiscreen)– average duration 95 mins

Figure 5.8: 4K penetration rates per year [Source: Analysys Mason, 2016]

Take-up Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

4K live TV penetration 0% 2% 5% 15% 27% 30%

4K VoD penetration 0% 1% 4% 12% 22% 24%

Figure 5.9:Average bandwidth per unicast streaming session [Source: Analysys Mason, 2016]

Bandwidth (Mbps) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Multiscreen 1.54 1.70 2.02 2.84 3.95 4.29

TV/STB 2.69 3.32 4.82 6.69 7.33 8.21

Figure 5.10: Cloud DVR total deployed storage per year [Source: Analysys Mason, 2016]

Bandwidth (Mbps) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Cloud DVR storage (PB) 213 700 1393 1949 2247 2589

10 8K is included in the model for the sake of completeness. Its penetration was assumed to start after Year 2 and remains

limited throughout the analysis period (5% at Year 5).



Figure 5.11: CDN and network assumptions of NFV/SDN-enabled fixed video service in Year 0 [Source: Analysys

Mason, 2016]

Network elements Value

CDN Edge POPs 25

CDN Mid-Tier POPs 3

Peak to average traffic ratio 3.4

% of peak-hour traffic in a year 10%

Cache hit ratio 70% (Edge) and 25%(Mid-Tier)

Total cache servers (Year 0) 140

Household per exchange 12 000

Total number of exchanges 1300

OLT ports 128 (16 lines per port)

5.2 Summary of costs and benefits of NFV/SDN enabled video services

Figure 5.12: Main cost parameters used in the model [Source: Analysys Mason, 2016]

Costs Value Rationale

Customer service

representative (CSR) wage

USD200/day This benchmark was used frequently in the model to analyse

improvements on T2R processes – Level 1/2 support

Video service operations

staff wage

USD250/day This resource level was used to estimate new service development

and roll-out costs

Field engineer wage USD270/day This benchmark was used frequently in the model to analyse

improvements on O2C and T2R processes – Level 3 support

Senior engineer (Level 3

support) wage

USD400/day This resource level was used wherever applicable. These resources

are mainly used as NOC support to care calls and field engineers as

well as for video service network planning

CDN appliance (physical) USD50 000 Dedicated server plus cache/streaming software (maximum capacity:

40Gbps)

CDN VNF (software only) USD5000 Cache/streaming software (10Gbps capacity blocks)

CDN storage USD0.3 per GB CDN storage costs per GB

Cloud DVR storage USD0.1 per GB Data centre storage costs for cloud DVR. It is assumed to be lower

than CDN costs per GB due to much larger-scale implementation

4K STB USD200 Triple-play STB with residential gateway functions, 4K support and

2TB storage capacity for PVR

vSTB USD100 Simplified vSTB with 4K support and no storage capacity for PVR. UI

and residential gateway functionalities are virtualised and moved to

network cloud

Legacy STB USD100 Composite CSP’s existing installed STBs for triple-play subscribers

with residential gateway functionalities (no 4K support) and 500GB

storage capacity for PVR

Field visit USD15/visit Analysys Mason benchmark

CPE repair workshop USD10/CPE Analysys Mason benchmark

Content cost 50% of service

revenue

(Year 0)

Content costs will grow due to:

Higher costs of 4K content; we assumed this to be a 10%

increase in existing content spending based on current

market environment



Costs Value Rationale

Additional costs of making content available OTT. This is

calculated as 40% of OTT revenue as CSPs typically already

have multiscreen distribution rights of existing content to

some extent

Backhaul costs USD3600 per

Gbps per year

This is an estimate for a large Tier 1 operating its own backhaul

network. The calculation is based on average backhaul wholesale

fees minus wholesale providers’ margin

Figure 5.13: Summary of capex and opex for Video SDP [Source: Analysys Mason, 2016]

Cost

(thousand USD)

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total

Total vSDP cost (27 355) (12 214) (14 737) (17 007) (15 435) (15 890) (102 641)

Physical SDP cost (35 065) (15 681) (18 617) (22 067) (19 768) (20 234) (131 435)

Cost savings 7710 3466 3880 5059 4332 4344 28 793

Figure 5.14: Summary of capex and opex for virtual CDN [Source: Analysys Mason, 2016]

Cost

(thousand USD)


Total vCDN cost (8027) (7927) (8371) (8631) (7894) (9013) (49 865)

Physical CDN cost (10 723) (14 628) (21 851) (25 679) (25 659) (29 492) (128 034)

Cost savings 2695 6701 13 479 17 047 17 764 20 478 78 168

Figure 5.15: Summary of capex and opex for vCPE and cloud DVR [Source: Analysys Mason, 2016]

Cost

(million USD)


Total vCPE and

cloud DVR

(791) (9 18) (1 020) (886) (704) (547) (4 870)

Physical STB (664) (828) (987) (1058) (1151) (1159) (5848)

Cost savings (127) (89) (33) 171 446 611 978

Figure 5.16: Summary of capex and opex for vOLT [Source: Analysys Mason, 2016]

Cost

(million USD)


Total vOLT costs (113) (105) (114) (120) (123) (67) (644)

Physical OLT costs (163) (160) (181) (196) (205) (131) (1039)

Cost saving s 50 55 66 76 82 63 394

Figure 5.17: Summary of capex and opex for vProbe [Source: Analysys Mason, 2016]

Cost

(thousand USD)


Total vProbes cost (11 027) (15 816) (26 533) (27 955) (21 851) (23 258) (126 442)

Physical probes

cost

(15 515) (23 729) (38 961) (42 943) (34 907) (37 822) (193 879)

Cost savings 4488 7912 12 427 14 987 13 056 14 563 67 437



Figure 5.18: Distributed vCDN cost and benefit analysis [Source: Analysys Mason, 2016]

Cost/benefit Distributed vCDN in exchange as part of CO virtualisation initiative

Number of exchange POPs 1000

Total number of caches deployed at

exchange POPs (Year 5, including

redundancy)

4000

Streaming capacity 10 Gbps per server, 80% utilisation threshold

Additional implementation cost

(USD million) compared with original

scenario

67.7

Backhaul savings (USD million) 117.6

ROI impact 1.07 percentage point (from 43.69 % to 44.76%)

5.2.1 NFV/SDN-enabled fixed video revenue benefits

Figure 5.19: NFV/SDN-enabled fixed video service revenue uplift benefit [Source: Analysys Mason, 2016]

Benefit (million USD) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total

Subscriber before

churn reduction

(million)

7.13 6.91 6.71 6.44 6.12 5.75

Subscriber after churn

reduction (million)

7.13 7.07 7.02 6.95 6.86 6.76

Revenue protection 0 289 471 687 929 1189 3565

OTT revenue 0 189 268 382 544 774 2156

Cloud DVR 0 19 49 73 91 94 328


© Analysys Mason Limited 2016 About the author

6 About the author

Gorkem Yigit (Analyst) is the lead analyst for the Service Delivery Platforms programme and

a contributor to the Software-Controlled Networking and Network Orchestration programmes,

focusing on producing market share, forecast and research collateral. He started his career in

the telecoms industry with a graduate role at a leading telecoms operator, before joining

Analysys Mason in late 2013. He has published research on NFV/SDN services business cases,

identity management in the digital economy, and has been a key part of major consulting

projects including Telco Cloud Index and IPTV/OTT procurement. He holds a cum laude MSc degree in

Economics and Management of Innovation and Technology from Bocconi University (Milan, Italy).

Analysys Mason does not endorse any of the vendor’s products or services discussed in this white paper.

11

11

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© Analysys Mason Limited 2016 About Analysys Mason

7 About Analysys Mason

Analysys Mason is a trusted adviser on telecoms, media and technology (TMT). We work with our

clients, including communications service providers (CSPs), regulators and end users to:

design winning strategies that deliver measurable results

make informed decisions based on market intelligence and analytical rigour

develop innovative propositions to gain competitive advantage.

We have more than 250 staff in 12 offices and are respected worldwide for exceptional quality of

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clients in more than 100 countries to maximise their opportunities.

Consulting

Our focus is exclusively on TMT.

We support multi-billion dollar investments,

advise clients on regulatory matters, provide

spectrum valuation and auction support, and

advise on operational performance, business

planning and strategy.

We have developed rigorous methodologies

that deliver tangible results for clients around

the world.

For more information, please visit

www.analysysmason.com/consulting.

Research

We analyse, track and forecast the different

services accessed by consumers and enterprises, as well as the software, infrastructure and technology

delivering those services.

Research clients benefit from regular and timely intelligence in addition to direct access to our team

of expert analysts.

Our dedicated Custom Research team undertakes specialised and bespoke projects for clients.

For more information, please visit www.analysysmason.com/research.

Consumerand SMEservices

Digitaleconomy

Regionalmarkets

Networktechnologies

Telecomssoftware

Strategyand planning

Transactionsupport

Performanceimprovement

Regulation and policy

http://www.analysysmason.com/consulting

http://www.analysysmason.com/research


© Analysys Mason Limited 2016 Research from Analysys Mason

8 Research from Analysys Mason

8.1.1 We provide dedicated coverage of developments in the telecoms, media and technology (TMT)

sectors, through a range of research programmes that focus on different services and regions of

the world

The division consists of a specialised team of analysts, who provide dedicated coverage of TMT issues and

trends. Our experts understand not only the complexities of the TMT sectors, but the unique challenges of

companies, regulators and other stakeholders operating in such a dynamic industry.

Our subscription research programmes cover six key areas.

Each subscription programme provides a combination of quantitative deliverables, including access to more

than 3 million consumer and industry data points, as well as research articles and reports on emerging trends

drawn from our library of research and consulting work.

8.1.2 Our custom research service offers in-depth, tailored analysis that addresses specific issues to

meet your exact requirements

Alongside our standardised suite of research programmes, Analysys Mason also has a Custom Research

team that undertakes specialised, bespoke research projects for clients. The dedicated team offers tailored

investigations and answers complex questions on markets, competitors and services with customised industry

intelligence and insights.

For more information about our research services, please visit www.analysysmason.com/research.

PROGRAMMES

Service Assurance

Customer Experience Management

Customer Care

Revenue Management

Analytics

Network Orchestration

Software-Controlled Networking

Service Delivery Platforms

Service Fulfilment

Telecoms Software Market Shares

Telecoms Software Forecasts

PROGRAMMES

Digital Economy Strategies

Digital Economy Platforms

Future Comms and Media

IoT and M2M Solutions

PROGRAMMES

Mobile Services

Mobile Devices

Fixed Broadband and Multi-Play

SME Strategies

PROGRAMMES

Fixed Networks

Wireless Networks

Spectrum

Consumer and SME services

Digital economy

Regional markets

Telecoms software

Network technologies

PROGRAMMES

Global Telecoms Forecasts

Asia–Pacific

The Middle East and Africa

European Country Reports

European Core Forecasts

European Telecoms Market Matrix

Researchportfolio

http://www.analysysmason.com/research


© Analysys Mason Limited 2016 Consulting from Analysys Mason

9 Consulting from Analysys Mason

9.1.1 For 30 years, our consultants have been bringing the benefits of applied intelligence to enable

clients around the world to make the most of their opportunities

Our clients in the telecoms, media and technology (TMT) sectors operate in dynamic markets where change is

constant. We help shape their understanding of the future so they can thrive in these demanding conditions. To

do that, we have developed rigorous methodologies that deliver real results for clients around the world.

Our focus is exclusively on TMT. We advise clients on regulatory matters, help shape spectrum policy and

develop spectrum strategy, support multi-billion dollar investments, advise on operational performance and

develop new business strategies. Such projects result in a depth of knowledge and a range of expertise that sets

us apart.

We look beyond the obvious to understand a situation from a client’s perspective. Most importantly, we never

forget that the point of consultancy is to provide appropriate and practical solutions. We help clients solve their

most pressing problems, enabling them to go farther, faster and achieve their commercial objectives.

For more information about our consulting services, please visit www.analysysmason.com/consulting.

Consultingportfolio

Strategy and planning

Transactionsupport

EXPERTISE

Commercial due diligence

Regulatory due diligence

Technical due diligence

Regulation

EXPERTISE

Policy development and response

Margin squeeze tests

Analysing regulatory accounts

Expert legal support

Media regulation

Postal sector costing, pricing and regulation

Regulatory economic costing

Net cost of universal service

Performance improvement

EXPERTISE

Market research

Market analysis

Business strategy and planning

Market sizing and forecasting

Benchmarking and best practice

National and regional broadband strategy and implementation

EXPERTISE

Performance analysis

Technology optimisation

Commercial excellence

Transformation services

EXPERTISE

Radio spectrumauction support

Radio spectrummanagement

Spectrum policy and auction support

http://www.analysysmason.com/consulting

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