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Friday, June 24, 2016

Arbitrage Everywhere: The inevitable multiple-connection network future

The previous inevitable risk: Encryption

For years, encryption of data was ignored by the telecoms industry as a possible risk. Operators and vendors hyped the potential of DPI, "app-aware networks", the "optimisation" of video, insertion/blocking of adverts, and assorted other ways to monitor or change end-user data traffic.

Yet in the background, the use of both encrypted websites (with HTTPS), and "tunnelled" VPNs was becoming more widespread. Many apps' traffic is encrypted between smartphone and server. Such techniques stop or impede a large amount of in-network management taking place - whether one views such as actions as "value-added" or "non-consensual interference".

To some of us, it was a matter of when and how, not if, encryption became (near-) ubiquitous, driven by Moore's Law and more-powerful devices, fears about security and privacy, and perhaps push-back against unwanted intervention by ISPs and other intermediaries.

The advent of Snowden's revelations and the parallel Net Neutrality controversies helped catalyse today's predictable situation - a lot of traffic has "gone dark", much to the chagrin of the telecoms community.

My view is that this was not just predictable, but inevitable. And lo, it has come to pass. 

The next inevitable risk for telcos: Multiple Network Connections & Arbitrage

We are now starting to see the signs of the next inevitability: arbitrage across multiple networks and connections - and more importantly, between multiple service providers. This is being aided by more/cheaper types of connection, ever-better software control of connectivity, and some creative hardware "hacks".

Some signs have been around for a while:
  • Least-cost routing by enterprises' telephony systems, especially to avoid international direct-dialling costs.
  • Multi-SIM mobile phones, to allow users to switch between networks and minimise prices
  • Rapid growth of (free) 3rd-party WiFi usage on smartphones, implicitly competing against cellular (paid) data services.
  • Redundant fibre connections into offices or data-centres, to add resiliency and reduce the risks of failure.
  • Cellular back-up for fixed connections of various types (eg branch-office routers) 
Of course, service providers themselves do much the same - multiple transit providers for voice, multiple sub-oceanic connections, and so forth. In some cases it adds reliability, in some it helps arbitrage costs.

But it is end-user controlled, or OS/device-controlled multiple connections, or those provided as a 3rd-party overlay, which are now becoming more important. And the next generation of multi-access options are now emerging:

  • Enterprise SD-WAN, typically using multiple "vanilla" Internet connections as a cheaper option vs. MPLS WAN connections, providing a sort of quasi-QoS. I recently wrote a post on this (link) and also a full report as part of my work on STL Partners' Future of Networks research stream (link)
  • Multi-IMSI SIM cards, either for cheaper roaming (eg Truphone) or cross-network coverage (eg Google Fi)
  • eSIM / eUICC - which may allow end-users to switch between operators more quickly, although probably not in real-time. (Note: I am currently concluding detailed research on the potential of eSIMs - watch this space, or drop me a message)
  • Potential combinations of licensed & unlicenced connectivity in multi-standard LPWAN chips, perhaps via the ETSI/Weightless partnership (link)
  • Various device-to-device and mesh technologies, that can pool or share connectivity between multiple users within close proximity.
  • Multi-point cellular network technologies, especially with MIMO/beam-forming linking a device to multiple cell-sites simultaneously (from the same single-operator network, though)  
One important thing to recognise is that the time for switching / control of the multi-network function varies significantly - it may be realtime, it may take seconds or minutes or even hours to complete. There are also differences in whether the main purpose is "bonding" to increase aggregate throughput, or for resiliency, least-cost routing or differential performance/security characteristics of various types. However, all are still specific examples of the same underlying trend and concept.
With the advent of 5G or later variants of 4G, we can also expect to see various home-broadband multi-access combinations linked with fibre or cable emerge. We may also see multi-radio cellular devices connecting to different MNOs' networks simultaneously, although that would have power-consumption implications (which might be OK for in-vehicle use, or public-safety workers' outfits with large batteries).

There are undoubtedly other forms of multi-connection system or business model that may evolve - and may also be accelerated by 5G standardisation, SDN, SDR, or other imminent changes.

Arbitrage Everywhere

But all of this is actually an example of a wider phenomenon - smarter software is creating the possibility of "arbitrage everywhere". From a telecom point of view this means that any device, any application, any location, any user has the ability to use cheaper/easier/alternative connectivity.

The criteria for selection, switching or bonding network access will proliferate and become more sophisticated over time. We may see differential routing based on application or traffic type, security optimisations, trade-offs of computing resource vs. battery power, desire for privacy, a function of cloud-service providers - there will be a widening variety of possibilities. Here, we will also see machine-learning and AI start to get involved as well - something I discussed in another recent post (link).

The other variable is the owner/controller of the "arbitrage layer". It will be a mix of direct user-control, OS-level automation and connection-management, telco-control, and others such as external SD-WAN and XaaS providers.

This will have a particular impact on telco providers wanting to offer their own network-integrated services. If they cannot be sure that a given user or device is always connected via their network, it is questionable how much value can be based on offering those functions only sometimes. This is particularly important when considering things like network QoS, or "telco cloud", or perhaps mobile-edge computing (MEC). Obviously many things (especially IoT things) will remain single-connection, or perhaps multi-connection from the same provider. But many others will move, inevitably, towards multiple connections, from multiple network providers. This trend is already seen in areas such as SD-WAN and WiFi/cellular use.

Network arbitrage and selection is itself only one aspect of broader trend. Software will generally get smarter, and allow us to source products or services from multiple providers. Price arbitrage is already common in some sectors (eg online flight booking, or comparison websites), but we should expect it to become a ubiquitous feature of our lives in many other regards.

When everything is virtualised, it becomes easier to choose between 2, 3, or N variants from different providers. We can use them simultaneously, or switch between them. Networks are just one domain to face this inevitability.

If this topic if of interest to you - or related areas around network evolution, 5G, SDN/NFV, and future strategic developments of service providers & related value chains, - then please get in touch via information AT disruptive-analysis DOT com to discuss opportunities for workshops, due-diligence projects or speaking engagements.


Pete Cladingbowl said...

Astute as usual Dean and scary for some....
I think the AI hubs will be at the new multiplexing points outside of telcos, at what we currently call internet exchanges, which will increase in number and geographical distribution.

Martin Geddes said...

This article should be mandatory reading for telco CFOs everywhere.

InfoStack said...

The arbitrage started in 1984. We're just continuing a pattern. What few realize is that vertically integrated edge access providers are falling behind on a real cost/bit basis by 20-30% annually just from a supply side perspective. And that doesn't include their disadvantage of seeing only one side of a 2-sided session on the demand side as you recently pointed out in your metaswitch video.

The end for vertically integrated carriers may come sooner than people realize. They simply cannot sustain all the opex and capex associated with serving partial or limited demand.

David said...

Arbitrage requires devices support. If we look at Europe, multi-sim devices did not become popular, probably due to the pro/cons of relatively small differences between operators price plans and convenience/easyness of use. What is it changing now?