SDN could reduce carrier opex by up to $9bn globally by 2017

While the technological benefits of using software defined networking (SDN) to help operators dynamically provision network applications and services have been well publicised, the economic benefits that the technology could bring are now being articulated.

Dawinderpal Sahota

February 11, 2014

3 Min Read
SDN could reduce carrier opex by up to $9bn globally by 2017

Mobile backhaul and optical networking specialist Tellabs has  published  research suggesting that SDN could  help operators reduce operating expenses by as much as $9bn globally by 2017. The firm explained that opex savings are expected to be much greater than capex savings across five key network applications in every year until 2017.

In August last year, research conducted by analyst firm Strategy Analytics for  Tellabs suggested that SDN could almost halve a perceived “backhaul shortfall” for operators and save them just under $5bn in capital expenses by 2017.

Tellabs said that the value of opex savings will be seen across five key network applications: wifi offload/video redirect ($3.14bn); cloud RAN ($2.17bn); local breakout/internet IXP ($1.83bn); metro aggregation/load redistribution ($1.22bn) and small cells ($591m).

The Asia Pacific region is expected to save the most over this time period as operators in many markets in this region continue to migrate to all-IP networks. The region is expected to see opex savings of $5.62bn as a result of implementing SDN, followed by North America ($1.26bn) and Western Europe ($1.25bn).

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“There’s been no shortage of hype around SDN and what we are putting our work behind is the quantification of it: from lab to commercial deployment,” Stu Benington, director for technology  and strategy at Tellabs told

“Operators need to be comfortable with the financial payback and the return on investment on these technologies, so quantifying those in a way that meets business requirements is very important and that’s why we’ve taken this very quantitative approach.”

Benington even went far as far as to claim that using SDN could enable operators to create new revenue streams, in a sector where operator margins from traditional services are being squeezed.

“We’re seeing now that the ultimate prize is using these technologies to generate revenue sources; to offer new types of services,” he said. He added that in every discussion the firm has with operator customers, they suggest new set of use cases which can indeed be implemented by taking advantage of the flexibility SDN brings to the network.

“It’s been a positive surprise – we thought it would be a bridge too far. One basic use case is the notion of bandwidth on demand.”

He explained that could include services such as “turbo boosts” that provision extra bandwidth for specific applications, based on the customer’s preferences.

“The user could be on an iPad and wants to provision something specifically for an application. They can use what they want and pay for it when they’re done,” he explained. “They just make a request, up pops a pricing menu, you can use it for what you need and turn it off when you’re done. It’s about matching network resources exactly with the end user’s willingness to pay.”

In March last year, Sanqi Li, CTO of infrastructure vendor Huawei’s carrier network business said that the SDN and network function virtualisation (NFV) will bring about more change than the industry has seen in the past century, particularly in terms of business models, and stressed that operators need to move beyond what is traditionally perceived as their position in the digital ecosystem.

“This next change is less about technology and more about business. The operator business model at present is rigid, slow, and hard to change. Network architecture today is closed, complicated, and still focused on elements that the carriers can control,” he said. He added that operator business models can be saved by SDN, characterising the move to this new architecture as a move from closed to open.

Tellabs is a subsidiary of private equity firm Marlin Equity Partners, which acquired the specialist in October last year for $891m. In December 2012, the firm also acquired NSN’s optical business Coriant.


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