Keynote presentation given at Asian Carriers’ Conference in Cebu, Philippines on 3rd September 2013. Describes how to create assured cloud services.

1. How to create
fit-for-purpose
wholesale data services
Martin Geddes
Martin Geddes Consulting Ltd
© 2013 All Rights Reserved
This presentation was given as a keynote at Asian Carriers’ Conference
in Cebu, Philippines on 3rd September 2013.

2. Consultancy on the future of telecoms.
Business model innovation.
Technology & product ideation.
Organisation development.
Public & private workshops.
I work with smart people on the hard stuff.

3. 1980s
Digital fixed
voice services
Evolution of wholesale telecoms
1990s
Mobile voice
and messaging Broadband
data services
2000s
?
2010s
What’s next?

4. Next ten to twenty years?
Packaged cloud
services
The growth is in new kinds of managed
cloud services.

5. And by ‘packaged’ you mean?
• Available when and
where you need it
• At a cost you can afford
• Right quantity and
quality
• Easy to consume

6. Key messages

7. Wholesale
voice services
historically
have a
sustainable
business model


8. Today’s wholesale
broadband data
services are
not fit-for-purpose
for future
applications needs.


9. Wholesale telecoms
businesses need to
fundamentally rethink
their service offering
for the cloud.


10. This requires new
fit-for-purpose cloud services with
a sustainable business model.


11. There is a
profitable future
for those who take
this path.


12. Digital fixed
voice
services
Mobile voice
and
messaging
Broadband
data services
Packaged
cloud
services
1980s and 1990s
2000s & 2010s
2010s & 2020s

13. 2010s & 2020s
Fitness-for-purpose
Purpose-for-fitness
Fitness-for-purpose
1980s and 1990s
2000s & 2010s
The thread that runs through this
presentation is ‘fitness-for-purpose’
Which we’ve lost, and need to regain.

14. 2010s & 2020s
Packet-based
statistical multiplexing
(using IP)
Time-division
multiplexing
Best of
both worlds!
1980s and 1990s
2000s & 2010s
These changes are intimately
tied to our technology
choices, and how we share
the network’s fixed and
finite resource.

15. How do
networks
create value?

There are some basic things we need to get
sorted out before we begin.

16. Meet Alice and Bob
It’s the end users who put the money into the system, and
decide whether we are creating value worth paying for.
Alice and Bob are end users.

17. Alice is a sales woman
Alice Smith
Sales Director
alice@widgetcorp.com
555-125-9876

18. Bob is her customer
Mustn’t
run out of
widgets!

19. Alice wants to
communicate with Bob
I want to
meet Bob to
sell more
widgets!

20. Alice doesn’t have to buy a
telecommunications service
Slow and expensive 

21. Alice has a choice of means of
communication
Email
Post
Phone

22. Alice ‘hires’ a telephone call
to reach Bob
Quick and cheap 

23. This is a ‘task substitution’

24. There is a chain of delivery
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier

25. Wholesale holds the
value chain together

26. Role of wholesaler
YOU
YOUR
CUSTOMER
YOUR
SUPPLIER
(Remember the audience for this presentation is wholesale
carriers and their suppliers.)

27. Money passes down this chain
Retail
origination
Retail
termination
Wholesale
delivery
$ $ $
$ $ $
PROFIT

28. Profit depends on four factors
BENEFIT COST
RISK INSURANCE
Are these
big or small?
Excess risk has to be
(self-)insured.

29. TELCOSEND USER
Benefits and Costs
BENEFIT
Made the
sales call Revenue
COST
Price of
phone call Tin, operational expenses

30. There are risks…

31. TELCOSEND USER
Risks
RISK
Didn’t make
sale
SLA breach
Unplanned capacity upgrade
Time wasted
Reputational
loss
Frustration
Churn
Regulatory non-compliance fines

32. TELCOSEND USER
Insurance
Second carINSURANCE Contingency fund (lawsuit, PR)
If Alice can’t rely on her communications service
delivering a good enough experience, she needs a
Plan B – and has to carry all the associated costs. For
a corporate user, that could be having multiple access
providers; for a consumer, you need to buy a DVD in
case Netflix doesn’t work.
Telcos spend a lot of
money dealing with
screw-ups.

33. TELCOEND USER
The whole picture
BENEFIT
COST
RISK
(failed call)
Made the sales call
Price of phone call
Didn’t make sale
Second car
Revenue
Tin, opex
SLA breach or churn
Unplanned capacity upgrade, fines
Time wasted
Reputational loss
INSURANCE Contingency fund (lawsuit, PR)
Frustration
Lots of (potentially
hidden) costs!

34. Who profits and why?
CUSTOMER SUPPLIERWHOLESALER
BENEFIT
COST
RISK
END
USER
END
USER
INSURANCE
Who &
how big?

35. How is the role of
wholesale changing?
BENEFIT
COST
RISK
INSURANCE
Voice Broadband Cloud services

36. Wholesale
voice
services


37. What are the risks?
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier

38. End user risk
Alice only pays her telco for a
successful phone call
$

39. Retail telco risk passed to
wholesaler
Retail telco only pays wholesaler
for a successful phone call
$

40. Wholesale telco risk is transferred
Wholesaler only pays terminating network
for a successful phone call
$

41. The delivery technology was
(and often still is) TDM circuits.
No overlaps or collisions!
This isolated flows and assured end user
outcomes – audible voice calls.

42. Composable value chain with SLAs
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
Predictable application outcome

43. How did we do?
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
    

44. TELCOSEND USERS
Why?
BENEFIT
COST
RISK
INSURANCE







 







Low risk!

45. Predictable experience
• MOS or PESQ
score model
• Strong
understanding
of relationship
to network
properties

46. Predictable capacity requirement
Voice erlangs

47. VOICE SUMMARY
Telcos get paid for
delivering
fit-for-purpose
voice services

48. VOICE SUMMARY
Wholesaler
mitigated both
end user QoE
risk and supply
chain capacity &
SLA risk

49. VOICE SUMMARY
Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH TDM
(core)
TDM
(edge)
Very profitable
wholesale business!
How hot can
we run the
network?
How well can we
deliver the flows
within acceptable
loss and delay?

50. 
Broadband
data
services

51. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
MULTIPLEXING
TDM For bursty
data, TDM is
highly
inefficient, ev
en if it is very
effective

52. So we changed technology…
Time-division
multiplexed
circuits
Packet-based
statistical
multiplexing
TELEPHONY BROADBAND

53. Lost phase and flow isolation!
We gained higher resource efficiency,
but at the cost of losing flow efficiency

54. What a great deal
for Alice and Bob!
COST COST
Statistical multiplexing
gain makes everything
cheaper!

55. What a great deal
for Alice and Bob!
BENEFIT
BENEFIT
So many more rich
applications to choose
from!

56. But…
There’s a
catch!

57. What is the effect on Alice?

58. Alice now ‘hires’ a web
conferencing system to reach Bob
Richer, modern and more effective

59. This is a ‘task substitution’

60. End user risk
Alice bought ‘bandwidth’
(speed and mechanisms like 4G and FTTH)
$

61. ISP is blind to Alice’s needs
No visibility of application outcomes
$

62. Retail telco risk passed to
wholesaler
Retail telco buys ‘bandwidth’ transit.
Has no means of expressing
needs for application outcomes.
$

63. Wholesale telco risk is transferred
Wholesaler connects to receiving ISP,
but is carrying effective risk
of application failure
$

64. And what about Bob?
His ISP has no visibility of whether the
service is delivering a good outcome.

65. What are the risks?
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
QoE
RISK
QoE
RISK
PLAN B PLAN B

66. What are the risks?
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
Churn Churn

67. What are the risks?
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
Capacity
upgrade
risk
Capacity
upgrade
risk

68. And the wholesaler?
Incentivised to find cheapest means
of delivering ‘bandwidth’,
regardless of impact on user or rest of supply chain

69. Current wholesale data business is
structured in an unhelpful way.
1.Has become
disconnected from the
value end users are
seeking.
2.This misallocates cost
and risk.

70. Why?
Broadband is like a statistical
‘game of chance’

71. There price we had to pay…
Time-division
multiplexed
circuits
Packet-based
statistical
multiplexing
TELEPHONY BROADBAND
Game of
chance
was easy
Game of
chance is
hard

72. Can’t compose services
& create strong SLAs
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
Unpredictable application outcomes

73. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
HEAVEN
How to think about the problem
HELL
Network feels
empty to
users, even
when full and
making lots of
money.
Network feels
congested
even when no
other
customers
around

74. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
IP
(access network)
Access network has poor QoE and
utilisation

75. Resource efficiency
Flowefficiency
LOW MEDIUM
LOW
HIGH
HIGH
IP
(access network)
HEAVENHEAVEN
Heaven gets further away
Over-provision to resolve
contention problems

76. Resource efficiency
Flowefficiency
LOW MEDIUM
LOW
HIGH
HIGH
Current approaches are
infeasible to schedule at
high load
IP
(access network)
Can’t assure applications with
strong scheduling requirements

77. Resource efficiency
Flowefficiency
LOW MEDIUM
LOW
HIGH
HIGH
IP
(access network)
Network collapses
Can’t run network ‘hot’

78. SUPPLY CHAINEND USER
Benefits, Costs and Hazards
RISK
Significant
High
INSURANCE Significant
High

79. BROADBAND SUMMARY
Telcos offering
purpose-for-fitness
data services

80. BROADBAND SUMMARY
Wholesaler is
exacerbating
user QoE and
supply chain cost
risks

81. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
IP
(access network)
IP
(core)
Wholesale biz
constrained by
weakest link
BROADBAND SUMMARY

82. How did we do?
Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
    

83. TELCOSEND USERS
Why?
BENEFIT
COST
RISK
INSURANCE







 







Lots of risk due to application
performance hazards.

84. Opportunity!
Leaves a lot of
potential value
unrealised.

85. 
The re-think

86. Effective task substitution is
very sensitive to QoE hazards

87. BENEFIT BENEFIT
Benefits to the user of both
methods are similar

88. COST
COST
POTENTIAL PROFIT POOL
The costs are very different

89. COST
COST
ACTUAL PROFIT POOL
RISK
Hazards to the user take value and
profit out of the system
INSURANCE

90. Retail
origination
Retail
termination
Wholesale
delivery
$ $ $
$ $ $
PROFIT
Operator profit is also very
sensitive to the QoE hazards
RISK RISK

91. Operator cost risks
Our experience is that these
hazards are poorly modelled in
broadband networks (if at all)
SLA breach
or churn
Unplanned
capacity upgrade

92. Summary so far
BENEFIT COST RISK
1. There is value in
effective task substitution
2. There are associated
benefits, costs & risks
3. It matters how big these
are, and how they are
allocated

93. Where do these come from?
RISK

94. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
QoE hazard
Cost hazard

95. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
Requires lots and lots
of good coincidences
& very few bad
coincidences
HEAVEN

96. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH HEAVEN
By tipping the odds
through effective
scheduling

97. Summary so far
Failed call
Plan B
SLA breach or churn
Unplanned capacity upgrade
TELCOSEND USER
Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
HELL
HEAVEN
1. Networking is a statistical
game of chance
2. That schedules resources
and determines
application performance
3. That controls the QoE and
cost hazards for both the
user and network operator

98. How can we get the best
of TDM and IP?
1. How can we increase benefits
(substitute for more valuable tasks)?
2. How can we lower costs by running
networks hotter?
3. How can we quantify, mitigate and
allocate hazards appropriately?

99. 
Cloud
services

100. The cloud economy
Different demands to
those of voice and
today's broadband.
Understanding the nature of future demand, and how to create
appropriate supply, is the key to future success. People want to achieve
higher-value task substitutions: teleworking, education, healthcare. These
require dependable networks and application outcomes.

101. What has to change?
NOW FUTURE
PURPOSE-FOR-
FITNESS
FITNESS-FOR-
PURPOSE

102. The Cloud Economy
We must
assure application
outcomes
RISK INSURANCE

103. What do we need?
“Application
Erlangs”

104. Alice ‘hires’ a Lync application
to reach Bob

105. What has to change?
NOW FUTURE
SUPPLY-PUSH
Selling
commodity
bandwidth
inputs
DEMAND-PULL
Selling
differentiated
application
outcomes

106. End user risk
Alice buys an assured
Microsoft Lync cloud service
$

107. What has to change?
NOW FUTURE
MONOSERVICE
NETWORKS
Weak
exploitation of
stat mux trades
POLYSERVICE
NETWORKS
Strong
exploitation of
stat mux trades

108. Multiple classes of service
Economy Standard Premium
Airlines offer multiple tiers of service, based on comfort, rather than arrival
time (bar a bit of queue-jumping at check-in). In networks, the tiers of
service are based on how much you can time-shift traffic.

109. Resource efficiency
Flowefficiency
LOW HIGH
LOW
HIGH
IP
(access network)
Run access network hotter
and also get good QoE
IP
(access network)

110. Retail telco risk passed to
wholesaler
Retail telco buys assured transit
to its final destination
$

111. What has to change?
NOW FUTURE
UNASSURED
DELIVERY
Qualily and cost
unbounded
ASSURED
DELIVERY
Quality and
cost bounded

112. Wholesale telco risk is transferred
Wholesaler buys assured
termination suitable for Lync
$

113. What has to change?
NOW FUTURE
TRANSPORT
SERVICES
Locally
optimised
delivery
LOGISTICS
SERVICES
Globally
optimised
supply chain

114. New value chain
YOU
YOUR
CUSTOMER
YOUR
SUPPLIER
Although these might
be new market
entrants coming from
a cloud and
distributed computing
angle…

115. What has to change?
NOW FUTURE
WEAK
CONTRACTS
Boundaries
misallocate risk
and cost
STRONG
CONTRACTS
Risk quantified
and costed
end-to-end

116. Quality Transport Agreements
Strong and composable statistical delivery contracts

117. Profit!


118. Example services:
Bulk content cost reduction
$
$
$
BULK DATA DELIVERY
Bulk content providers are paid to mark time-shiftable traffic
to reduce peak loads and network cost for ISPs. Wholesalers
are ‘market makers’.

119. Example services:
Small cell assured backhaul
ASSURED BACKHAUL
$ $
3GPP standards were all built for a TDM world. Things are not working out that well
moving to IP. Quality-assured IP backhaul would restore the necessary properties for
small cells to work well.

120. Retail
origination
carrier
Retail
termination
carrier
Wholesale
delivery
carrier
    
CLOUD SUMMARY

121. CLOUD SUMMARY
Telcos get paid for
delivering
fit-for-purpose
application services

122. CLOUD SUMMARY
Access suppliers
and customers
fully exploit
statistical
multiplexing

123. CLOUD SUMMARY
Wholesaler
becomes digital
logistics supply
chain manager

124. CLOUD SUMMARY
BENEFIT
COST
RISK
INSURANCE




New ‘application erlang’
wholesale business model

125. Think logistics, not transport
It’s all about the trading space, matching supply to demand, offering a variety of
quantities, qualities and cost, and doing it over multiple timescales.

126. www.martingeddes.com
Learn more, subscribe to my newsletter.

127. Martin Geddes
mail@martingeddes.com
Get in touch to do business.