Managing "Over-the-Top" Web-Based Content and Services
Service providers are facing growing challenges from many sources, including non-facilities-based or "over-the-top" content providers who offer voice, video, and data services over the Web. Some of these services (such as IP voice from Skype and Vonage) may pose a direct competitive threat to service providers. Others (such as video posting and viewing on YouTube) may add significantly to the average users' bandwidth utilization at the same time that unlimited access service offerings are under pricing pressures. Despite these challenges, many service providers have recognized that over-the-top content and services provide an important opportunity to increase high-speed consumer broadband usage. Because Web-based voice and video content services in particular are highly time-sensitive, service providers have an additional opportunity to preferentially manage these applications to guarantee the quality of service (QoS) that their subscribers experience. Service tiers can be available monthly or as-needed on-demand to more equitably monetize the usage of individual subscribers. These and other more individualized service options are a big opportunity that can be turned into a source of new revenue. Service providers can also leverage their QoS capabilities for a share in advertising revenues in over-the-top traffic.
This paper describes the service and revenue challenges and opportunities posed by over-the-top, Web-based content and services and presents different approaches for service providers to monetize the mounting volumes of over-the-top traffic. Service providers can make incremental service infrastructure improvements to build an extensible foundation for a new kind of partnership with emerging Web-based companies. Cisco® technologies and products within the Cisco IP Next-Generation Network (IP NGN) service layer, the Service Exchange Framework, provide the environment that makes these solutions possible.
Overview
Changing Online Habits and Growing Bandwidth Consumption
Both the number of new Internet users and traffic volumes of existing users continue to grow worldwide. A study by the Ministry of Internal Affairs and Communications of Japan of seven Japanese ISPs representing 41 percent of the country's backbone traffic showed an increase in traffic of 45 percent in 2005 over 2004. A small segment of users, just 4 percent, accounted for 75 percent of the inbound traffic volume. But the bandwidth appetite of all users worldwide appears to be growing. A 2006 study by Cisco found that the average user's traffic volume is growing by 100 percent per year. This includes a major increase in watching TV and video programs and listening to music online. These change have prompted advertisers to shift more of their investments from traditional media to online venues.
Users today are much more sophisticated in their requirements for network connectivity than ever before. The days of the passive subscriber merely watching TV shows and browsing the Web are over. Now users want to access and post content on social networking Web sites such as MySpace, YouTube, and T-Mobile T-Community. They want to talk to each other using voice-over-IP (VoIP) while gaming, post large files or videos on Web sites for download, and customize their services and privileges on demand. They also want to use many types of Internet-accessible devices, from the PC to the TV, cell phone, and PDA.
Identifying New Revenue Opportunities
Research and the recent experience of many service providers have shown that customers are willing to pay for these enhanced services and personalized controls. Verizon Wireless estimated in 2006 that a desire for a better online gaming experience was the factor behind 20 percent of broadband purchases. The RealNetworks Rhapsody online music service has been licensed to major consumer electronics companies such as Nokia, TiVO, and Logitech. The service offers a subscription model or pay-as-you-go service for music downloads and has generated 1.65 million subscribers and revenue of US$30 million, with double-digit year over year growth, as of the third quarter of 2006. A 2006 survey by Park Associates found that 13 percent of Internet users currently downloading movies using over-the-top services would be willing to pay US$20 per film to do it legally and 18 percent of those downloading TV shows would pay US$5 per month for legal access.
The Web 2.0 era, innovative content, online communities, and increased collaboration and sharing between users have led to the increasing influence of over-the-top applications and associated content. These developments may in some cases constitute competitive threats to service providers, traditional telcos, and others as over-the-top providers offer substitutes to the services offered by wireline, wireless, and cable service providers. For example, a subscriber can now choose to substitute an over-the-top VoIP service for a VoIP service that is part of a triple-play service provider offering or for traditional voice service from a telco. Over-the-top content companies, such as online divisions of the Walt Disney Company and CinemaNow, are attempting to use the Internet as a means to disintermediate video distribution businesses-to eliminate the middleman-and bring movies directly to consumers over the Web. Besides threatening to replace more traditional providers of voice and video, these Web-based services can also monopolize bandwidth, leading to a degraded service experience for all subscribers if a fair-use policy is not imposed.
Conversely, over-the-top content and services represent major new opportunities for service providers as well. These applications and services can be a catalyst to promote deeper consumer broadband penetration. QoS-sensitive applications like video and voice create opportunities for guaranteed delivery that service providers are best positioned to deliver because they are responsible for the end-to-end connection. And with advertising revenue migrating from traditional radio and TV broadcasting to the Internet, service providers have an opportunity to share in this alternative revenue source as they manage that connection.
The technologies and products within the Service Exchange Framework of the Cisco IP NGN provide the application and subscriber awareness necessary to differentiate between network- and Web-based applications and allow the service provider to effectively manage bandwidth; optimize network resources; provide personalized services, including self-service features, to give subscribers new competitive service options and control; and tap into advertising revenues.
Choosing a Strategy
A strategy is necessary to manage this environment where cooperative competition exists between service providers and over-the-top content providers. In evaluating similar existing relationships, Cisco has defined a number of strategies, including:
Ignore the threat from Web-based content applications and services. Ignoring the threat posed by over-the-top providers is the least attractive strategy. The inevitable advance of technology requires that successful companies continually evolve to counter challenges to their dominance in specific technology niches.
Intermix traditional services with over-the-top services but introduce a fair-use policy to give service provider services priority and to fairly balance access among subscribers. The intermix strategy envisions a tiered bandwidth model where service providers allow tiered services to begin with lower bandwidth that is rate-limited. Subscribers to a lower-usage tier can select time-based or bandwidth-based services that put them in control of how much they download. If subscribers want more than, for example, 10 Gb of throughput per month they can upgrade their service package. Applications such as Turbo Button and bandwidth-on-demand allow subscribers to increase their bandwidth through self-service controls for specific time periods.
BT has implemented an intermix strategy where subscriber usage is carefully monitored and metered, allowing for traffic that is network-based as well as over-the-top but enforcing quotas on bandwidth usage, Figure 1.
Figure 1. Example of Intermix Strategy of BT Total Broadband Service with Multiple Options
Options 1-3 all provide up to an 8-Mb connection but limit monthly usage to 2 Gb, 6 Gb, and 40 Gb for options 1 to 3 respectively. The BT Web site for BT Total Broadband mentions that subscribers to the service pay only for what they need. If subscribers exceed their allowance for two consecutive months, they are charged for the excess bandwidth used. If the excessive use continues, BT contacts the subscribers to suggest another monthly agreement. However, BT makes an important distinction from content such as videos that are downloaded from over-the-top content providers and downloads from its own branded or co-branded sites. Customers downloading from the BT sites do not have this bandwidth counted as part of their monthly quota whereas downloads from the over-the-top providers are counted. This is a not-so-subtle method of allowing yet monetizing over-the-top traffic and giving the subscriber options based on price.
France Telecom discovered that 1 percent of its users were using 30 percent of the bandwidth and the top 10 percent of users accounted for more than 80 percent of all of the bandwidth consumed, similar to the Japanese study. Many of these heavy bandwidth users were using file sharing software and downloading large music and video files. France Telecom has now begun implementing a "Fair Use Policy for Broadband" based on intelligence in its network that can pinpoint individual users who are excessive bandwidth consumers. Subscribers who only occasionally have high bandwidth usage are contacted and asked to download outside of the peak hours of 6 p.m. to 11 p.m. If usage continues to be very high, France Telecom will get in touch with the subscribers and encourage them to reduce their usage. As a last resort, unresponsive subscribers will have their service suspended and possibly their account closed.
Both BT and France Telecom are examples of attempts by service providers to begin monetizing and applying fair-use policies to over-the-top activity, allowing it but applying new controls, charges, and restrictions to its unlimited use.
Improve the performance of over-the-top applications by partnering with providers of these services to create innovative new service offerings, provide preferential treatment for these applications, and potentially share ad revenue. If you can't beat them, partner with them. That's the theme behind this strategy.
Shaw Communications of Canada, for example, provides preferential treatment to traffic from such over-the-top providers as Vonage, Figure 2. Shaw Communications charges an extra C$10 per month for this service, which identifies the VoIP traffic using deep packet inspection technology from Cisco.
Figure 2. Shaw Communications' QoS Enhanced Service for VoIP
Similarly, Verizon Wireless has signed an agreement with the Google video-sharing site YouTube, giving customers preferential access to YouTube on their mobile devices. This translates to more minutes used, more data transfer dollars, and more revenue. Verizon has made a selection of YouTube videos available to its 57 million customers who subscribe to Verizon's "V Cast" media services, which costs US$15 a month or $3 for daily access. And Belgacom, the leading telecommunications company in Belgium, decided to form a partnership between its online digital music store, Skynet Music Club, and Apple's iTunes, the world's largest online music store, instead of competing with iTunes. Music download fees are merged into Belgacom's monthly telephone bills. According to the Brussel's Review, "...[now] Belgian parents may be complaining not only about their children phoning too much, but also about the cost of music downloaded by their offspring."
Imitate over-the-top providers by developing competitive Web-based applications and services. A good example of this approach is T-Mobile Germany's T-Community, Figure 3, an online community very much like MySpace, the social networking site.
Figure 3. T-Mobile's T-Community
T-Community is a social community where customers can store their personal profiles and use features such as blog, chat, and media archives. They can post photos, videos, and messages, just like MySpace and FaceBook. A starter page introduces consumers to Skype, so T-Mobile's approach is actually a hybrid of the "imitate and improve" strategies.
Over-the-top providers are helping to popularize applications that are introducing millions of consumers to broadband services. Consumers who were using dial-up services are converting to broadband so they can get on social networking sites, play multiplayer video games, post and download video, and enjoy many other online activities. As bandwidth usage continues to grow, these new time-sensitive applications from over-the-top providers will require preferential treatment if they are to be consistently dependable. That dependability will be a competitive advantage that service providers can promote.
Whether service providers work cooperatively with over-the-top providers or seek to imitate them and compete with some or all of their services, Figure 4, the winners will be the ones who can provide consumers with the best experience.
Figure 4. Choosing Collaboration, Competition, or Both with Over-the-top Providers
Consumers appear to be extremely loyal to some of these Web-based content sites. Some social networking sites in particular have become ingrained in the daily habits of young people. So the prospect of at least some collaboration between service providers and providers of over-the-top, Web-based services seems likely to be a successful strategy.
Network Intelligence for Strategic Management of Over-the-Top Services
The last three strategies for responding to the emergence of over-the-top services, involving different levels of collaboration and competition, require a network service delivery infrastructure that can identify all of the services reaching users and distinguish between them. This infrastructure must be able to accommodate traffic based on Internet Multimedia Subsystem (IMS) using Session Initiation Protocol (SIP) and non-IMS and non-SIP traffic. Service providers do not need to manage over-the-top traffic but if they wish to charge for these services, implement fair-use policies, or partner with over-the-top providers they must understand what these services are and where they originate.
Positioning the next-generation service provider to effectively master this newly-evolving content and services ecosystem requires intelligence within the network to identify subscribers and applications. It also requires the ability to create and enforce tiered service privileges and fair-use policies. The products and technologies available within the Cisco Service Exchange Framework of the Cisco IP NGN deliver these capabilities, Figure 5.
Figure 5. The Cisco Service Exchange Framework Intelligently Manages Service Coordination
Cisco Service Exchange Framework solutions support both IMS and non-IMS applications to provide more service opportunities, greater efficiencies, and better control within service provider networks. The Cisco Service Exchange Framework is extremely well aligned with the principles of the Telecoms and Internet converged Services and Protocols for Advanced Networks (TISPAN) architecture and it also provides significant additional functionality that is being requested by service providers today in the transport layer; authentication, authorization, and accounting (AAA) features; and policy-management capabilities. To manage network-based and over-the-top traffic, providers must have intelligent networks that enable them to operate, bill, and manage an unlimited number of IMS-based and non-IMS-based differentiated services over a range of fixed and wireless access mediums securely and profitably. In its ability to provide this broad functionality, the Service Exchange Framework stands alone in the industry.
Products and technologies designed for the Cisco Service Exchange Framework can be tightly integrated to support a myriad of subscription and operational services that give service providers much greater control over the traffic traversing their networks. There are three main products that support these functions, Figure 6, delivering policy management, authorization and subscriber intelligence, and deep packet inspection to distinguish between different types of traffic.
Figure 6. Products and Technologies in the Cisco Service Exchange Framework
Available today, these products deliver real value in a time of dynamic change and heightened competitive pressures. They let service providers know who is on the network, what they are doing, where they are located, and what devices they are using, no matter where the service originates and on what device it is being accessed. They include:
• Policy management: The policy function that determines which resources are available to each subscriber is distributed, allowing the network or a centralized policy-management system to detect policy triggers or make policy decisions. Providers can implement the Cisco Broadband Policy Manager or third-party solutions (such as Broadhop or Camiant) for centralized policy management or providers may implement a distributed model using policy-management functions supported in the Cisco Intelligent Services Gateway (ISG).
• Intelligent edge routers: With functions such as the Broadband Remote Access Server or Cisco ISG, the network can automatically detect when users are accessing the network and determine both the type of service each user wishes to access and the type of device that is being used. The Cisco ISG supports subscriber aggregation and management functions including authorization and authentication, policy enforcement, and distributed policy management.
• Service Control Engine: The Cisco Broadband Policy Manager and third-party solutions can communicate with the Cisco Service Control Engine (SCE) to enable deep packet inspection1 for peer-to-peer management and network optimization to meet subscription service-level agreements (SLAs) and efficiently manage network bandwidth utilization for over-the-top content and services.
One of the characteristics of established broadband environments is that the AAA solution has often been in place for many years, is highly customized, and supports very large numbers of users. As a consequence, it is necessary to implement the policy-controlled environment with minimal disruption to this component of the network. The Cisco Service Exchange Framework can be integrated with existing AAA systems with minimal impact or with Greenfield networks. The Cisco Service Exchange Framework can also be used with AAA products such as Cisco Network Registrar and Cisco Secure Access Control Server (ACS).
Deploying Cisco Personalized Subscriber Management Services
With the Cisco Service Exchange Framework's integrated policy-management capabilities, service providers have the unique ability to individually coordinate personalized service-level needs or individual subscriber experiences instead of simply providing generic or commoditized access services. Cisco Personalized Subscriber Management solutions are configurations of the Service Exchange Framework to support specific applications. For more information on Cisco Personalized Subscriber Management applications, see link below.
Network Service, Advertising Collaboration Catching On
Cisco service provider customers are already using the Service Exchange Framework to collaborate with Web-based content providers, offering their customers greater value. All of the service provider examples mentioned earlier rely on the Cisco IP NGN architecture and product and technology solutions, and can enable Service Providers like BT and Belgacom to host the Apple iTunes store on their Internet platforms and charge Apple for the privilege. Cisco solutions enable France Telecom to create a fair-use policy that notifies users if their bandwidth usage is excessively high, leaving less bandwidth and lower speeds for other users. And Cisco solutions also make it possible for Shaw Communications of Canada to provide preferential treatment to Web-based applications that require stringent QoS (like VoIP from Vonage or Skype) for an extra fee or for Verizon Wireless, in an agreement with YouTube and other third parties, to provide QoS for content viewed on cell phones or PDAs.
Conclusion
Cisco Service Exchange Framework solutions represent an acknowledgement of the changes taking place among subscribers who require more bandwidth, content from various off-net and on-net sources, more personalization, and self-service. The Cisco IP NGN's Service Exchange Framework and its associated products and technologies make an array of Personalized Subscriber Management solutions possible. They hold the promise of new service revenues, greater subscriber differentiation for competitiveness, and the ability to not only manage network resources better but to turn over-the-top traffic into new collaborative ventures that can benefit the profit line.
For More Information
Cisco Service Exchange Framework
Cisco Personalized Subscriber Management
Cisco Service Exchange Framework Enables Compliance with Wireline TISPAN Standards
Supporting IP Multimedia Subsystem for Mobile, Wireline, and Cable Providers
1The inspection and classification of packets to determine their source and what type of traffic they represent