The Edgeware Blog

The Video Effect Part 2 - Operators, CDNs & Monetization

At CommunicAsia 2011 in Singapore BT’s Sean Bergin chided operators for not investing in backhaul to enable mobile networks effectively.  Sean was quite correct but the problem of backhaul and lack of investment in other areas is going to have much more wide reaching effects on the viability of the Internet in general considering the massive expansion of traffic that we covered in The Video Effect Part 1.

In a recent report, analyst organization A.T.Kearney outlined the effect of this massive expansion on operators and specifically on their ROCE (Return On Capital Employed) which has a direct result on their stock price.  They clearly plotted the effect of annualized traffic growth on ROCE assuming current investment levels.

One possible solution to this issue is for operators to monetize their networks in a different way.  Rather than becoming a “victim” of the expansion, operators can implement their own CDN (Content Delivery Networks).  This concept allows an operator to charge a content provider to deliver the content to their subscribers.  It is a highly complex argument requiring an operator to show some form of clear differentiation both to be able to sell the service to the content provider and possibly subscriber as well as avoiding the inevitable discussions around “net neutrality”.  However this is a rapidly growing market that is being closely monitored by the analysts and commentators in this sector.

In the next post we will examine the various solutions, competitors and the potential ROI for operators of implementing their own video delivery network capability………keep reading!