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Towards NextGen NW equipment for emerging economies - Part I

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Deepa
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Ashim Roy, country manager, Stoke Networks

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BANGALORE, INDIA: High capex (capital expense) and opex (operating expense) of data networks is one of the key reasons of high cost of data services all across the globe. In developed economies, high annual ARPU (average revenue per user) does not impact profitability of service providers even with high capex/opex.

In developing economies, on the other and, low ARPU and high capex/opex combination is not a long-term sustainable financial model for the service providers. Vendor financing, managed services model and other creative financing approaches have emerged in the past few years. However, financial models alone cannot create an environment for wider deployment of broadband data services. There is an urgent need for low capex/opex networking solutions.

How did we get here?

For the past 50+ years data networking equipment architectures have been driven by three key considerations:

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1. Communications Standards are largely driven by big guns of the industry that includes large equipment vendors, service providers and large enterprise users. The vested interest of these industry leaders is to maintain their market share and keep the competition out. This has resulted in standards that driven by cartel-like environment in the data networking market and has led to relatively high priced services for the end users.

2. Reliability requirements as defined by service level agreement (SLA) that calls for five 9's availability for the networking equipment. Five 9's availability means equipment up time of 99.999%. In other words, the built-in reliability of the equipment must support down time is no more than 27 seconds per month. In comparison, four 9's (99.99%) and three 9's (99.9%) reliability requirement can be met with down time of 4 minutes and 28 seconds per month and 44 minutes and 38 seconds per month, respectively.

In developing economies the reliability of main and backup power is at best two 9s or 99%. Designing networking equipment with five 9's reliability for emerging economies is analogous to designing a BMW for dirt roads.

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3. High Price/Performance based on purpose built hardware and custom software. Network equipment vendors want to maintain their stranglehold, once they are in any network. This is achieved through purpose built hardware and custom software. This combination delivers high performance at a very high cost. In emerging markets high cost is a major deterrent to broader acceptance of data services. The high cost of data services continues to keep data services out of reach of rural subscribers. No wonder in India, tele-density is at 163% among the urban population and 41% among the rural population.

Apart from these key factors, data networking equipment architecture has been largely defined by the needs of developed economies (North America, Europe and APAC). The architectural decisions by the equipment vendors have rarely been driven by broader deployment of data services in emerging economies where typical ARPU is in the range 2 - 2.5 per cent of typical ARPU in most developed economies.

For the service providers to continue to remain profitable, the capex/opex for networking equipment must come down by an order of magnitude from their current levels for wider deployment of data services in these economies.

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The Solution

The macro economic condition in Europe, slow growth in developing economies and faster growth in developing economies implies that increasingly, architectural decisions for networking equipment will be driven by needs of developing nations. The key factors that have so far hindered deployment of low cost service offering will be tackled by entrepreneurs to deliver a new generation of products that are priced 'right' for the developing economies:

1. Communications Standards: R&D in software-defined networks (SDN) is paving the way for new open standards that are not driven by the interests of big guns of the network equipment industry.

2. Reliability: Infrastructure in the developing economies does not support five 9s type of reliability. Making reliability requirement for network equipment to track the reliability requirement of the power can conservatively reduce cost of equipment by a factor of 2 or more.

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3. High Price/Performance: Performance levels in developing economies must remain same as what is being offered in developed economies. What needs to come down is the price. The legacy approach of purpose built hardware, complex and low volume (expensive) network processors and custom software are the key contributors to expensive networking equipment. A combination of low cost parallel processing silicon, open source hardware and open source software can help bring down the capex and opex by almost an order of magnitude.

Combined impact of cost reduction through new standards such as SDN/ OpenFlow, more reasonable SLA for reliability and combination of open source hardware/ software with low cost, high volume silicon will bring down the capex/opex by at least an order of magnitude.

How do we get there?

Implementation of low cost, high performance networking equipment will require significant level of collaboration between technologists, academia and investors. We will see first set of equipment based on such collaboration over the next 12-18 months.

In Part II of this paper, we will review some of the key initiatives that will herald the era of secure data services that are lot more affordable than what is available today.

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