Enterprises are now at the mercy of public policy and consumer pricing. Anyone who needs to procure a WAN service offering should keep this in mind as they build out their organizations' networks.
No business that uses wide area network (WAN) services would be surprised to learn that its service options and service costs are strongly influenced by the regulatory policies of the countries in which they operate. These policies are based on broader goals for consumer education, entertainment, and health and welfare support. Thus, the consumer market is -- in effect -- setting the tone for public networking everywhere, and that tone is setting the commercial parameters of WAN procurement. Anyone responsible for planning WAN budgets over a multiyear period needs to be aware of how public and regulatory communications policies will impact their prices and choices.
Public policy will reduce WAN service options
The starting point is to realize that consumer Internet in general and video content in particular are the largest sources of traffic and traffic growth. Some analysts believe that by 2015 the entire intra-company communications load generated worldwide will be less than the consumer video traffic for one single major city. Thus, for simple survival, service providers must design their networks primarily to carry consumer Internet and video traffic. The more a business service conforms to the protocol and Quality of Service (QoS) specifications of consumer Internet services, the more likely it is that the business service will be available and inexpensive in the future.
Broadband access is typically the most expensive part of any business WAN service, and the fact that service providers are focusing on making consumer broadband Internet services more economical creates two important points. First, consumer broadband offerings are increasingly being marketed to businesses, either as the prime connection to an SMB or to branch office sites of larger enterprises. However, consumer broadband is also under profit pressure. As long as regulatory policies enforce strict neutrality, it is very likely that the spread of pricing between business and residential Internet connectivity will increase. This is because, generally, business broadband is where operators will try to recover from metro costs. Operators will tend to charge more for business-grade QoS since they can't apply QoS to residential services and obtain economies of scale.
Costs in usage pricing are likely to rise, as usage rates will increase and the cap point to apply usage rates will drop. Even residential broadband is increasingly subject to usage pricing, and business usage pricing tiers are certain to be lowered over time, which means that a given broadband connection will cost more in the future. That reverses current trends in small-site broadband connection cost, where historically the growth of consumer DSL and cable broadband have made best-efforts-level broadband available to smaller business sites at lower prices than previous small-site connection technologies, like frame relay.
Businesses are also very interested in high availability and QoS, and these two service features are very sensitive to public policy trends. The profit pressure on broadband means that operators are likely to increase the oversubscription of their network -- meaning that they will accept higher traffic loads without a corresponding increase in capacity. That raises the risk of packet loss or delay. In casual consumer broadband service, this may be tolerable, but for real-time business services like video conferencing, loss of QoS or more frequent service outages can create a serious loss of productivity.
Some businesses hope that there will be a “quality-for-a-price” option offered for small-site broadband services, but unless net neutrality trends are reversed worldwide, it appears that either such options would be expensive or simply not be provided. The problem is that offering QoS in an IP network adds to traffic-handling costs overall, and with only business broadband to pay the costs, the rates for QoS could be too high. In addition, some countries -- including the US -- are considering policies that could limit any quality enhancement to broadband Internet services.
For larger sites, consumerism and public policy are favoring a shift from TDM networking -- such as T1/E1 and T3/E3 leased lines, or SONET/SDH -- to carrier Ethernet WAN services because the packet infrastructure of the latter can also be used to aggregate residential broadband traffic. Over time, the cost spread between TDM and packet services for large sites is certain to expand, to the point where specialized fiber carriers for point-to-point TDM or dark fiber services may be the only source of non-Ethernet connectivity.
How public policy will affect mobile WAN strategies
Mobile services in general, and mobile broadband in particular, may be impacted significantly by shifting public policy and consumer trends. Up to the introduction of the iPhone, nearly all mobile data services were aimed at businesses. While this typically meant high prices for data plans, it also meant that data services were fairly reliable and available across an operator’s service area. Today, with consumer video demand surging unpredictably as videos go viral or events trigger simultaneous viewing interest, some major metro areas are driven to capacity collapse, which of course also impacts business users. One result of this is a likely steady increase in usage charges. Enterprises that have adopted a mobile data strategy to reduce hotel Wi-Fi charges may find that if usage charges increase and data plan costs increase, and at the same time more hotels offer free or lower-cost Wi-Fi, the 3G plan may become more expensive.
The security of corporate networks is another mobile issue that is arising out of consumerism and public policy support for consumer Internet. When users had no smart appliances of their own, their devices were controlled by the technology support organizations of their companies, and specialized devices that could be reliably supported and secured could be given to all workers who needed them. Today, we are seeing an explosion in consumer-owned phones and tablets and a growing trend toward accessing corporate networks via these devices. Since any form of per-site or per-traffic-type discrimination is prohibited by neutrality rules, operators will find it difficult to offer specialized business services to consumer smartphones and tablets, even if those devices are supplied by the businesses themselves. That means a greater cost of support and security for businesses.
The most economical communications services are those that leverage the infrastructure built to serve the mass market. Policy decisions and regulations guide how that leveraging can happen, and keeping an eye on both these factors is critical for stabilizing service costs and quality over time.
View Tom Nolle's blog, Uncommon Wisdom, to learn more about public policy.