17/01/2012
Network operators have invested heavily in the wrong equipment and network strategy for decades. They continue to think and operate as 1960s-era telcos with copper mindsets. When fibre was rolled out into the long lines (during the 1980s and 1990s), network staffing reduced by more than 50 per cent, truck rolls went down by 90 per cent and building stock was cut back dramatically. As a consequence savings were huge and profits soared.
But then they stopped investing in the network and failed to get fibre into the local loop. They also failed to understand the importance of IP and continued to invest in technologies more suited to telephony.
Thus today they are trying to cope with a nightmare built by their own hand. Multiprotocol label switching (MPLS) networks, a euphemism for 'just glue together what you already invested in and make it work somehow', are now universal and dominant. Hence protocol conversions parallel the equipment stacks and bring about huge operational disadvantages and performance penalties. Perhaps even worse, the manpower needed to run the networks has increased instead of decreasing.
At the very point when they need money to sort all this, the network providers appear to have their backs to the financial wall and appear near moribund, with little opportunity to move.
But in reality they can do a lot!
Moving to IP architectures and away from old MPLS will reduce equipment stacks, energy costs, staffing, maintenance and real estate needs. But biggest of all would be the advantage afforded by rolling fibre into the local-loop - which can be made self-funding by streamlining overall operations. This would drop overall operating costs by 90 per cent or more - if companies stop thinking and operating like old telcos.
This new thinking means no equipment in the street; a reduction in building stock; IP based designs and decisions; programmed services; self deployment for rural communities; and hybrid delivery involving wi-fi and WiMax in some cases (3G just isn't up to the job).
It also means huge reductions in people, plant and truck roll, plus energy savings and raw material recovery in terms of copper, lead and plastic. Add to this the opportunity for duct and floor space rentals, and a plethora of new business opportunities, and the future doesn't appear so glum!
Optical fibre, wi-fi, WiMax, 3G, 4G and IP are real game changers and very real opportunities. If telcos don't rise to the challenge they will die and be replaced. And for anyone who thinks for a moment that they are too big to die, take a look at the automotive, steel and logistics industries. It might take a while but it could happen.
Peter Cochrane.
