The Operator as Innovator: Smartphones, Smart Apps and Smart PipesThe Operator as Innovator: Smartphones, Smart Apps and Smart Pipes
by Jennifer Pigg | February 2011
This custom publication has been sponsored by Juniper Networks.
I. Network Traffic Growth: Choose Your Hyperbole
Every day, service providers watch the needle climb on network traffic. Operational reports of Tier 1 mobile network operators (MNOs) that
have already introduced smartphones and absorbed the initial data traffic spike still show mobile traffic volume doubling every two years. On
both fixed and mobile networks, real-time video as a percentage of overall traffic is growing at a blistering rate. At the same time, user adoption
of video-capable mobile devices is soaring. Consider the following:
Streaming video accounts for an ever larger percentage of peak-hour traffic• . Streaming video, which accounted for just under
30 percent of traffic during peak usage hours in January 2010, accounted for over 42 percent of peak-hour traffic nine months later in
September 2010.
User-generated content (UGC) is exploding• . YouTube reports that it adds 27 hours of content every minute.
Netflix’s streaming traffic is now a flood• . Streaming video content provider Netflix now accounts for 20.61 percent of downstream
traffic in North America during peak hours, second in traffic volume only to generic HTTP sessions, according to statistics from deep packet
inspection (DPI) vendor Sandvine.
Smartphones sales are outstripping PC sales• . Yankee Group forecasts that sales of smartphones will reach 475 million units in 2012,
exceeding the sales of PC and notebook computers combined for the first time.
Apple’s iPad continues to sell like crazy• . Apple released the iPad in Q2 2010, and sold 3 million of the tablet computers in 80 days. By
the end of 2010, the company had sold over 14.8 million iPads.
As truly astounding as some of these statistics are, Yankee Group sees them as the tip of the traffic iceberg. Examining the usage and purchasing
trends of subscribers overall masks the impact of the segment of the population that is changing the way we communicate, but may still rely on
mom and dad to foot the bill.
© Copyright 2011. Yankee Group Research, Inc. All rights reserved.2
The Operator as Innovator: Smartphones, Smart Apps and Smart Pipes
II. The Gigabyte Generation
savvy, bandwidth-hungry users, is changing the way we view video
content—not only what we watch, but where we watch it (see
Exhibit 1).
The Low-Down on Upload
Users under the age of 40 are moving away from traditional TV and
toward more interactive experiences such as online gaming and UGC,
much of which ends up on YouTube. Today, over half of Internet
video content is UGC. This has important implications for service
providers, particularly mobile and cable operators that have networks
configured with a wide gulf between downstream versus upstream
capacity. The move to video- and graphic-intensive interactive applications,
as well as UGC such as photo and video upload, interactive video,
crowdcasting, collaboration and gaming, is challenging service providers’
ability to provision sufficient upstream capacity and manage network traffic
on a more symmetric basis. To meet this challenge, service providers
must add network intelligence and policy management at both the
network edge and the device side. And these devices are not confined
to the “three screens” of mobile phone, TV and laptop. Consumers
expect to be able to view content on their choice of screens, most of
which are mobile devices.
The influx of video traffic onto the mobile network is a symptom
of the Gigabyte Generation’s tendency to leave the land line
behind completely.
The Very Social Network
At the beginning of the previous century, three generations ago, we
had three ways to communicate with each other: in person, by mail
or—for 1.76 percent of the U.S. population—by telephone. Today,
the list is a little longer (see Exhibit 2 on the next page).
Exhibit 1: The Gigabyte Generation Prefers Their Video on Mobile Devices Source: Yankee Group’s Anywhere Consumer: US Consumer Survey - Wave 1-12, 2010
How often do you watch video on your… (by video, we mean TV, films, YouTube clips, etc.)?
11%
35%
38%
40%
47%
53%
66%
72%
85%
15%
34%
38%
35%
42%
61%
67%
79%
88%
5%
22%
20%
26%
27%
55%
45%
66%
78%
Mobile phone (n=3,151)
Video game console (n=2,400)
TV (VoD) (n=788)
TV (live TV) (n=3,684)
Older (45+)
Millennial/Mid-Age (18-44)
Teenagers (<18)
Base: Respondents who use the following at least once per week for viewing video
3© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
February 2011
Results from Yankee Group’s Anywhere Consumer: US Consumer
Survey - Wave 1-12, 2010 show a strong age bias: The younger
you are, the less tied you are to a land line for voice or text. The
home phone is not even among the top three preferred methods of
communications for three-quarters of respondents under the age of
45. Even social networking, for which our consumers like to use a
computer, will move to a mobile-device-dominated access method,
according to Yankee Group research.
Consider mixi, the ultra popular, exclusively Japanese social
networking site. In the second quarter of 2006, 83 percent of
mixi’s page views were accessed from a desktop device, while
17 percent were accessed via a mobile device. In four short years,
those numbers completely flipped. As of the third quarter of 2010,
mobile devices accounted for almost 84 percent of mixi’s 31.2 billion
monthly page views, according to the company’s October 2010
operational metrics.
Gigabyte Tastes, Megabyte ARPU
The financial realities facing MNOs are in counterpoint to the traffic
growth and flood of smartphones and tablet computers hitting the
network (see Exhibit 3).
Exhibit 2: The Connected Landscape Source: Yankee Group’s Anywhere Consumer: US Consumer Survey - Wave 1-12, 2010
Exhibit 3: Traffic vs. ARPU Dilemma Source: Yankee Group, 2011
4%
7%
6%
10%
15%
20%
62%
24%
71%
59%
6%
4%
9%
13%
19%
27%
29%
27%
50%
50%
55%
5%
4%
10%
6%
21%
32%
37%
26%
61%
38%
50%
1%
Something else
E-mailing from a mobile phone
Instant messaging on a mobile phone
Social networking from a computer
Instant messaging on a computer
Talking on a home phone
Text messaging from a mobile phone
E-mailing from a computer
Teenagers
Millennial/Mid-Age
Older
Please rank the following ways you communicate with your friends/peers/family. (Top 3 answers are shown)
n=2,516
$-
Petabytes of IP Traffic per Month
The Operator as Innovator: Smartphones, Smart Apps and Smart Pipes
How will today’s service providers compete with Google, Amazon,
Alibaba and Baidu, four of the top 15 publicly traded Internet
companies by market value in 2010 (the last two went public
only within the past six years)? The service providers are being
challenged to incubate the innovation necessary, shed their TDM
baggage quickly and cannibalize their legacy services to compete
with Web 2.0 innovators. On the other hand, incumbent service
providers own the network and must scale it to the Gigabyte
Generation, while over-the-top (OTT) players ride for free. Yankee
Group believes service providers have an opportunity to get in front
of the dumb-pipe pack and position themselves as active participants
in the Internet economy, rather than as incidental enablers. In doing
so, they will succeed in achieving the following four goals:
Lower their cost per bit•
Enable new products and services•
Participate in OTT revenue streams•
Increase their revenue•
First, however, they need the foundation for innovation: an efficient,
high-speed network with a low cost per bit.
III. Lower Cost Per Bit Through Network Design
This is something service providers understand well. They are very
focused on slicing network costs in terms of equipment, facilities
(space, power) and operational expense. In the past, this frequently
meant “sweating the assets,” or leveraging existing infrastructure
for as long as possible until it is fully depreciated and at or near
capacity. However, service providers are taking a closer look
at capital equipment TCO along with ROI. The gulf is widening
between product generations in terms of space, power, HVAC and
operational requirements (e.g., ease to configure, deploy, change
and manage). The rate of change we are experiencing in user
demand has left many of our service provider clients with networks
they admit are broken, even as they continue to move bits. Service
providers cannot achieve the cost per bit they need with legacy
infrastructure that demands excessive space, power, cooling,
maintenance and operational support.
An increasing majority of infrastructure decisions focus on a “cap
and grow” strategy in which service providers use legacy solutions
to support some traffic (usually voice) and customers but channel
other traffic to an optimized, packet-based infrastructure. Since
innovation and capex are focused on the packet network, this
strategy results in a service provider with a network that:
Uses a converged, packet-based, multi-vendor •
architecture. The ideal is one converged IP network delivered
by a defined set of vendors. A restricted number of vendor
partnerships satisfies both the service provider’s need for
innovation and a competitive field (i.e., many vendors) as well as
its desire for simplified procurement, management and problem
escalation (i.e., one vendor).
applications cannot keep pace with the rate of innovation
we see in software development or that subscribers expect
in personalized services. In today’s environment, access to
resources is much more important than ownership of resources.
This calls for open APIs to invite rapid innovation at all layers of
the ecosystem: client, device and network.
Requires adaptive, self-healing, self-learning capabilities• .
The network must be able to adapt to the changes we see in
user behavior. The moves to virtualization, cloud computing
and mobile communications all mean that neither end of the
communications session—user nor data—can be nailed down
or predicted. This, coupled with the increase in traffic overall
due to data and video content, means the network must be able
to adapt to abrupt changes in demand gracefully and without
service provider intervention.
Service providers need to create a present mode of operation (PMO)
to future mode of operation (FMO) road map in partnership with
vendors that will help them unleash innovation while executing in an
integrated fashion. We detail the five requisite building blocks below.
5© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
February 2011
1. Data Center
Tier 1 carriers Verizon, Time Warner Cable and AT&T each have
between 20,000 and 26,000 servers. Akamai uses 73,000 servers
to provide its content hosting and Web optimization services.
Google dwarfs all other enterprises with over a million servers.
The mobile data center must be an integral part of every service
provider’s overall network strategy. The rollout of 3G and 4G
networks, along with the rapid uptake of smartphones and tablets
and the mobile applications they enable, is fueling demand for
data-center-hosted services, including rich mobile multimedia
and unified messaging applications. This, in turn, necessitates the
build-out of a highly optimized next-generation MNO data center.
To meet the expanding bandwidth and service delivery needs of
mobile subscribers, the data center must:
Support a low-latency, flattened network that eliminates •
aggregation layers.
switching, security, network services).
software upgrades.
and footprint.
security risk and vulnerability.
Service providers are moving to a converged IP core network.
Convergence at the core, however, means we are pushing
complexity out to the edge. The network building block addressing
access must evolve to provide an intelligent network edge featuring:
Multi-protocol support. •
traffic and traffic prioritization.
mobile network).
Secure transport. •
EPC, the core network architecture for the LTE mobile network
standard, provides converged IP mobile communications via the
following three core network elements:
Mobility Management Entity (MME)•
Of the 80 LTE trials and implementations Yankee Group currently
tracks, 90 percent are using a single vendor to supply the entire EPC
and 70 percent are using a single vendor to supply both the EPC and
the radio access network (RAN). However, service providers have
become more adept at interpreting the posture and positioning of
their suppliers in terms of strategic focus and incumbent strength.
As a result, Yankee Group estimates that less than 30 percent of
service providers use only one vendor to supply RAN, EPC and the
access network or high-performance core. IP commands a unifying
and critical role in the converged core and access network. Service
providers are insisting on best-of-breed IP solutions from vendors
with a stable, comprehensive and innovative product set, substantial
intellectual property, a large installed base and robust support
capabilities focused on IP.
Converge, flatten, simplify: This is the mantra of successful service
providers looking to deploy a network that is low-cost, scalable,
easily managed and able to react quickly to changes in bandwidth
demand driven by new devices, locations or applications. Service
providers’ main focus today is on deploying packet optical transport
with protection and restoration schemes that rival or exceed that of
their expensive SONET infrastructure.
The Operator as Innovator: Smartphones, Smart Apps and Smart Pipes
At the same time, they acknowledge that sub-50-millisecond
SONET-like recoverability is an arbitrary goal, and the packet
network and the applications running over it are more tolerant
of longer restoration times of under 200 ms. With the
implementation of robust protection and restoration mechanisms,
service providers are able to transition away from the TDM
transport to a converged packet network.
5. Single-Layer High-Performance Core
In parallel with the migration to converged IP networks, service
providers are collapsing silos of service control, aiming to create
an environment for introducing new services and applications
quickly, cost-effectively and with minimal risk. The goal of
the next-generation service control layer is to maximize the
revenue potential of new services and applications in the face of
unpredictable service demand cycles. Successful service providers
will build a core IP network that is optimized for the dynamic,
unpredictable nature of the demand for their services. This
next-generation intelligent IP core affords service providers the
following capabilities:
It lets them distinguish among Layer 3 services and applications. •
It employs advanced traffic engineering to a diverse mix of services. •
It leverages adaptive intelligent functions in a •
virtualized environment.
A network based on these building blocks gives service providers
the foundation they need to keep pace with innovation, as well as
a platform on which they can introduce a variety and richness of
applications and services they could never offer before.
IV. Enabling New Products and Services
Service providers have worked with third-party application
developers for decades. However, their history of collaboration
has been marked with friction. A common complaint has to
do with the red tape service providers require developers to
unravel to do business together. These issues include difficult and
proprietary APIs, onerous application testing requirements and
reviews, and poor commercial models that favor splits on the
service provider side. Service providers developed the reputation
that they “just didn’t get developers,” and developers were content
to fish elsewhere for their revenue stream.
So who does “get” application developers? Not surprisingly, Apple
and Google. Apple’s barnstorming of the mobile industry continues
to fundamentally shift the balance of power among device hardware,
network and service developers. Apple simultaneously plays the role
of innovator, savior, disruptor and teacher. The iPhone’s excellent
user experience and vertically integrated App Store have prompted
the entire mobile ecosystem to look in the mirror and question its
future identity. Apple’s success—its App Store recently hit the 5
billion downloaded apps milestone—has prompted dramatic activity
within MNOs looking to emulate it with their own branded app
stores. Every single Tier 1 OEM and MNO has launched or will be
launching its own app store in the next 12 months, enabled by white
label app store solutions.
Open APIs can help overcome many of the problems between
developer and service provider. In addition to a commonly supported,
lightweight, Web developer-friendly API, they also provide a
consistent, commercial structure for revenue sharing. Open APIs
benefit all elements of the application value chain. Consumers get
choice and services tailored to what they want. Developers get access
to millions of subscribers through a single standard interface and a
simple, easy to-understand commercial model—without the hassle
that went into this process in the past. And carriers, by opening their
network assets up to third parties, gain access to long-tail applications
that make subscribers happy—without having to invent them
internally. Plus, they get a piece of the action.
Open APIs for an Expanded Ecosystem
The implementation of open APIs is the first step toward expanding
the service provider development ecosystem and exposing the
network and customer base to an infinitely varied application
environment. Yankee Group sees three business models that
successful service providers are, or will be, adopting to expand their
service offerings to subscribers and leverage the power of a large
and varied development community:
integration with open access devices and a standardized
modular infrastructure. It targets enabling complex services and
applications across a wide variety of devices and appliances, such
as converged telephony applications.
7© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
February 2011
distribute services offered by established third parties (such as
Apple in media entertainment, and Johnson & Johnson in health
care). This approach replaces the traditional service provider
walled garden, which stifles these opportunities with undue
control on the part of service providers. Service providers that
deploy Apple and Android devices are, in essence, implementing
harvest strategies but they are falling short on the personalize
side of the equation. These strategies should capitalize on the
device-side developer community, and personalize and enhance
key applications.
Federate and incubate: • This creates an environment for long-tail
applications to thrive and ultimately be harvested and personalized
should they prove commercially viable in their own right.
Network Policy and Security Are Critical for Differentiated Services
Service providers are in a unique position in that they have access
to both subscriber and network information. By leveraging this
rich data set, they can create and offer solutions in a way that
other ecosystem players, such as content providers and device
manufacturers, simply cannot.
functions can help control network expenses by offloading traffic
to a less expensive, better performing network. But they can
also enable new services, such as mobile broadband boost, which
can drive revenue by offering subscribers an improved viewing
experience when watching video on the road. The intelligent
network can add rich contextual information about when, where
and how subscribers are using their devices and applications on the
network. Service providers that are scratching their heads trying
to figure out how to personalize applications should be examining
the policy and usage information available to them and creating mini
mash-ups that add value to subscriber transactions and increase
service stickiness. Policy information can be leveraged to monetize
a wide variety of use cases across the service provider organization
(see Exhibit 4).
Security, for example, is an area where service providers can
leverage network policy and control to bring significant and
bankable value to subscribers and enterprises. According to Yankee
Group’s 2010 Enterprise survey, security is by far the top concern
preventing enterprises from moving more aggressively to a lower
cost, productive remote and mobile work force. Respondents are
primarily concerned with loss of intellectual property, securing
internal networks and controlling the spread of malware, among
other issues (see Exhibit 5 on the next page). Overall, enterprises
realize personal and corporate firewalls are increasingly permeable
and offering less protection from Internet bad guys. They are
looking to strong security solutions located in the network itself
and offered by ISPs, content providers and service providers.
Exhibit 4: Monetizing the Network with Network Policy Source: Yankee Group, 2011
Network IT Security Legal
Related Business Function
Policy-Enabled Use Case
The Operator as Innovator: Smartphones, Smart Apps and Smart Pipes
Long-Tail Apps: Infinite Diversity, Limitless Revenue Potential
Service providers continually ask Yankee Group to name the top 10
or 20 applications for monetizing the network. This question seems
to imply there is a finite number of applications service providers
can roll out and support, and they want to be certain they choose
the right ones. We have two observations:
There is no right set of applications, since leading applications •
vary by geography, subscriber community and network.
If there were a right set of applications, it would change tomorrow. •
Revenue opportunities will splinter among a plethora of services
and applications spanning the Internet, media, mobility and
machines. We saw this trend in the 1990s when the Internet
enabled the separation of product creation, inventory management
and distribution, allowing Amazon to differentiate itself through
its ability to profitably sell an ever-increasing variety of products
in smaller volumes. Wired Magazine’s Chris Anderson coined the
phrase “the long tail” in 2004 to describe, among other things, the
Amazon bookstore. The long tail phenomenon, however, extends
beyond Amazon book sales and is at the heart of the service
provider opportunity (see Exhibit 6 on the next page).
Embracing the long-tail model enables service providers to create
best-seller applications, which gain greater adoption through rich
service and application blending and personalization. It is not enough
for service providers to federate long-tail services and applications
or confine themselves to the safety of the short tail. Instead, they
need to incubate, orchestrate and enhance services and applications,
and seize each opportunity to coerce key applications into the
lucrative short tail.
Exhibit 5: Enterprises See Security as the Roadblock to Mobile Workers Source: Yankee Group’s Anywhere Enterprise: 2010 U.S. Enterprise Mobility/IT Decision-Maker Survey, Wave 1-2
Main security issues in supporting remote and mobile workers
11%
19%
24%
26%
42%
59%
60%
De-provisioning temporary, contract or other external parties after they no longer require network access
De-provisioning internal users when they leave the organization
Providing separate network infrastructures for employees versus guests
Management of heterogeneous mobile devices
Controlling the spread of malware from mobile employees or external parties with network access
Providing secure access to the internal network for remote or mobile employees
Potential loss of data or other intellectual property
n=328
9© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
February 2011
solutions for subscribers and likewise innovative payment schemes
for application developers. For example, there are dozens of
applications for which users do not want to pay an additional
monthly fee, including:
SMS me if a 911 call is made from my house.•
Activate a GPS locator on my pet’s collar.•
Give me better service quality for the big game.•
However, users are willing to pay each time they use these
applications. Similarly, service providers should be able to establish
a risk-sharing agreement with developers whereby developers get
paid when the service provider gets paid. The ability to support this
revenue split between service provider and partner transparently is
critical to reducing the cost structure and improving the margin of
long-tail apps for the service provider. Intelligent automation of online
charging systems to handle all charging and billing events will decrease
B/OSS costs and enable service providers to innovate with ease.
V. Turning OTT Players into New Customers and Partners
Video and voice OTT services can present service providers with
a revenue opportunity instead of a threat. The greatest concern to
service providers with OTT video services is the business model.
While consumers may claim to want OTT video on their TVs, their
willingness to pay for it remains relatively low as they continue to
equate Internet content with “free.” The same could be argued
about content considered traditional pay TV fare but viewed on
devices other than TVs. In that case, we believe most consumers
would have a highly negative reaction to paying for content they
believe they’ve already paid for via their pay TV service subscription.
OTT video providers, such as Skitter TV and Sezmi, are actively
pursuing a telco partnering strategy in areas where service
providers are convinced a rational business model exists. This allows
traditional telcos to enter the video arena with significantly reduced
cost structures by leveraging existing broadband infrastructure and
wireless and/or broadcast frequencies.
Exhibit 6: The Long Tail Comes in Many Flavors Source: Yankee Group, 2011
Number Sold Usage and Adoption
Doonesbury
YouTube
Facebook
IPTV
MMS
Application/Service
Long Tail of Books at Amazon Long Tail of the Anywhere Network
Harry Potter and the Sorcerer’s Stone
Turbo Connect
Political Observer
The Operator as Innovator: Smartphones, Smart Apps and Smart Pipes
On the voice side, early service provider trials with OTT VoIP
have been limited in scope and success, and voice-over-4G (Vo4G)
standards such as VoLTE are not yet mature. 4G networks need
to achieve a level of consistent coverage before Vo4G rolls out.
As a result, Yankee Group expects Vo4G services will not achieve
significant rollout before 2013. Instead, MNOs will continue to
leverage their 3G and 2G networks for the next several years,
possibly into the next decade, negating the need for a quick move of
voice onto high-performing 4G data networks.
Because of this, service providers are choosing to partner rather than
compete with OTT players like Skype, Google, Vonage and others.
While some users will always gravitate to the free/lowest cost option
and some will always gravitate to the higher cost/higher quality option,
the real battle is for the users in between. As the XYZ generations and
their voice-limited, UGC habits arrive, Yankee Group believes today’s
service providers will actively partner with OTT competitors.
To capture new opportunities afforded by wider-economy services,
service providers must first take stock of the key assets, services
and enablers they can offer OTT partners. Service providers must
determine which assets add significant value or are differentiated
in such a way that an Internet (OTT) competitor could not
easily deliver the service without the service provider’s direct
participation in the value chain. Examples include location-based
advertising combined with user demographics, or home energy
management services that use location technology to trigger
in-home actions when a consumer (and his or her device) passes a
geofence (e.g., turning on the heat when the consumer is five miles
from home).
Some of the key assets service providers can present to an
interested, upstream third party are shown in Exhibit 7.
Exhibit 7: Service Providers Have a Rich Set of Bankable Assets to Offer Upstream Partners Source: Yankee Group, 2011
Service Provider
Network security, billing and authentication
Other services: Field support, customer care, technical help desk
11© Copyright 2011. Yankee Group Research, Inc. All rights reserved.
February 2011
Network user awareness• . Network owners can present
full subscriber context, including static information like
demographics and profile, as well as dynamic information such as
location, state of presence, credit status, etc.
Abstraction of user information• . Service providers can
provide an abstraction of user information to enable targeted
marketing without violating privacy regulations. This allows
service providers or their partners to introduce new models
for monetizing services where the service provider manages
commercial transactions.
discern end-user device usage and capability to ensure the best
user experience.
Network services• . Network owners can expose key services
such as voice, SMS, SMS-short codes, voice mail, software as a
service (SaaS) and more.
owners can provide secure access to services via single sign-on
(SSO) or xSIM, as well as account management and
billing capabilities.
desk—exposing these capabilities can serve to reduce friction
and overhead for upstream partners and provide utilization
upside, turning cost centers into profit centers.
VI. The Operator as Innovator: Recommendations and Conclusions
The Internet disrupted traditional service provider business models
by offering users an unlimited application ecosystem including OTT
media applications, social networks and gaming applications. This is
making new players such as Amazon, Facebook, Google and Flickr
a controlling force in the customer experience, while threatening
traditional service providers with disintermediation.
There is no reason service providers must accept the confines of
a utility provider role, however. They are in an ideal position to
insert themselves into the value chain. A move in this direction will
benefit the user, as well as the service provider itself. Yankee Group
believes service providers can leverage many points of insertion into
the value chain. We recommend service providers:
Look beyond managing costs and traffic• . This is where
service providers need to start. If this is where innovation stops,
however, service providers will relegate themselves to a utility.
Service providers must convert cost per bit (opex/capex) to
value per bit because it is not a fixed-per-bit-revenue game. All
bits are created equal, but some are more equal than others.
Work only with those vendors that can take you from •
PMO to FMO seamlessly. Vendor partners must be able to
meet the needs of your existing network and provide a transition
strategy to your future network that preserves your investment
while meeting the needs of the Gigabyte Generation network.
Insist on an open, flexible, extensible architecture• .
Service providers must be able to respond quickly to changes
in user demand and traffic, and this means continually shrinking
service and application development and rollout life cycle. The
only way to achieve this is with a network architecture purpose-
built to accommodate change.
these goals by themselves. Literally thousands of potential
partners are waiting to help service providers that are willing and
motivated to be collaborative partners.
Service providers are at a crossroads, and they can decide whether
they want to turn around, go sideways or move forward (see Exhibit 8
on the next page).
The Operator as Innovator: Smartphones, Smart Apps and Smart Pipes
All these paths can be profitable. The paths toward utility and service provider are well charted, known quantities, even though they are undergoing
some changes. The path of operator as innovator has its challenges, but with proper innovation and execution, the rewards can far exceed those of
today’s business models.
Service providers have three unparalleled assets: They own the network, today’s customer relationship and rich subscriber information. Yankee
Group believes those service providers that take the path to innovation while simultaneously leveraging these assets will increase shareholder
value, bring value to their subscribers and become full participants in the Internet economy.
Exhbit 8: Which Path Will Service Providers Take? Source: Yankee Group, 2011
Operator as Innovator
ROI: 7-10 percent
ROI: 5 percent
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For more information, visit http://www.yankeegroup.com
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Headquar ters
Jennifer Pigg, Vice President Jennifer Pigg is a vice president in Yankee Group’s Anywhere Network research group. Her area of expertise is Anywhere Network Infrastructure, technology and management, including carrier convergence infrastructure, carrier Ethernet services and transport, mobile backhaul, packet optical transport, active and passive optical networking, core and edge routers, and multi-service aggregation devices. She also examines the technology challenges facing service providers as they address shifts in the Anywhere Network, such as peer-to-peer content delivery, the approach of IPv6 and cloud computing. On the infrastructure management side, she writes on network OSs, Domain Name System (DNS) and policy management.
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