Bandwidth 'has no value'

Network service providers must change their business models if they are to survive in an increasingly competitive environment, says Juniper Networks.

Paul Gainham, Juniper Networks' director of service provider marketing, EMEA, says service providers must move away from the idea that they can generate strong revenue from selling bandwidth to customers. "Bandwidth has no value."

This is especially true in emerging markets, where operators are being forced to sell ever-growing quantities of bandwidth, at decreasing prices, to stay competitive, he explains. Globally, consumers expect to buy increasingly large quantities of bandwidth for less money.

Operators in mature markets have also found their Internet traffic growth accounted for 50% to 90% of network capacity used. However, they did not make more money from the increased usage, he says.

Service providers are being forced to constantly upgrade their networks to expand capacity and keep up with demands for faster broadband speeds, yet they do not talk about how they are going to make money out of it, he notes.

"The Internet is not a humanitarian project. Those providing service have to find ways to make money from their network investments."

Gainham also argues that the problem of bandwidth losing its value will not remain unique to mature markets.

The problem will become more pronounced in emerging markets such as SA, as competition heats up and bandwidth becomes a commodity, he says.

Gainham suggests three strategies to deal with the challenge: the network service provider can become a utility, providing a basic communication service with no added value to the customer. Or, it could become a content player, he says.

"I believe the future for service providers lies in providing a distribution point for content," he explains. "They should look for partnering opportunities with content players."

He notes that the service provider has the infrastructure and know-how to enhance the content user's experience, encouraging them to want to spend more money. This will benefit the content provider and initiate a new revenue stream for service providers.

While the South African Internet market is still young, with less than 10% penetration, local network service providers have already implemented some of the strategies that Gainham suggests.

Fixed-line operator Telkom provides content through its Do Broadband offering, while iBurst plans to play in the space through its iGame portal.

Vodacom and MTN also provide numerous content offerings to their subscriber bases.

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