The Internet Market Trends. Source: AT Kearney: A Viable Future Model for the Internet

Transcription

1 Internet and CDNs

2 The Internet Market Trends Source: AT Kearney: A Viable Future Model for the Internet

3 The Internet Value Chain

4 Market Segments Capitilization

5 Internet Structure BE, connectivity market, two-sided

6 End user trends and Demand (I) High broadband penetration Increasing rate of Internet subscriptions 18 million households in Europe came online between 2005 and 2008 Internet overtakes infotainment business User spend online more time than watching tv, reading press or playing video games Internet consumption in 2010 will average 14,2 hours per week compared to 11,5 hours per week for TV Trend for Internet applications with need for QoS IPTV, video on demand, gaming

7 End user trends and Demand (II) To Generation Digital, TV means video, delivered on demand. In fact, one in seven year olds now watch no live TV at all Europe Logs On, European Internet trends of Today and Tomorrow, Microsoft, April 2009 Demand for video, gaming, social networks Growing volume of mobile phones integrating these applications Social networking integrating virtual goods, games Increasing market value of Over-The-Top providers active in these domains Content tailored to market segment and needs E.g. short videos that make them easy for people on the move to watch, targeting for mobile customers Mobile users typically pay to download content and apps from third party providers

8 Related Data and Projections (I) Hours per week spent on Internet increasing while other infotainment segments shrink

9 Related Data and Projections (II)

10 Social Networking versus

11 Major Consumer Trends Online services increasingly richer and migrating to a plethora of devices Different viewing capabilities, QoS requirements Seamless entertainment, IPTV Mobile part of the entertainment mix Smartphones increasingly popular and with built-in OTT services capabilities Mobile Internet will soon overtake Fixed Internet, Mary Meeker of Morgan Stanley ereaders expected to increase in popularity But still in infancy Increasing popularity of video and voice services over the Internet, high content generation and downloading rates

12 Pressures on the Internet

13 Performance Pressure (I) Exponential growth of traffic

14 Performance Pressure (II) New services More demanding in resources: Internet-TV, Catchup-TV, streaming Increasing penetration of multimedia devices Smartphones Changing usage patterns Always on Rise in mobile Internet Few to many flows E.g. Google 3 rd in overall global traffic carried > Tier-1 (such as Sprint, Cogent) Asymmetry 1:10 or 1:20 for content

15 Economic Pressure (I) Structural problem: pricing disconnected from usage (flat fee)

16 Economic Pressure (II) Investments required impact cost CAPEX OPEX Methodology:

17 9Bn

18 Mobile Traffic Growth Traffic growth requires deployment of new technologies and services (e.g. 3G) More capex and opex expenditures

19 Economic Pressure of Mobile Main findings:

20 Policy Pressure Regulated pricing Competition, unbundling Net neutrality debate

21 Key Issues Increased cost of handling the exponentially increasing traffic is not matched by additional revenues for a key market segment: network operators Pressures on Internet will only increase, calling for more difficult decisions on where to invest and when Identified limitations could hinder the future innovation of new services for business and critical applications due to high costs incurred E.g. telemedicine VoIP does not provide emergency calls

22 Potential solutions 1. Continue with the current commercial model and raise additional revenue required by modifying retail pricing schemes to increase average revenue per user (ARPU) 2. Introduce a data-conveyance charge to be paid by traffic senders based on the total volume of traffic they send 3. Develop optional enhanced traffic delivery services over the public Internet in a coordinated manner, with a price premium based on quality of service delivery 4. Develop new services where Connectivity Providers offer Online Service Providers managed services over their networks on a bilateral commercial basis

23 Key issues Does the model improve overall economic efficiency? Could the model influence end-users behavior (such as increasing/decreasing usage and penetration)? Could the model affect Online Service Providers behavior (for example, increasing/decreasing entry barriers, innovation and content accessibility or increasing prices excessively)? Does the model ensure the Internet value chain remains open and competitive? Does the model encourage more efficient use of available network capacity? How feasible is it to implement the model and what is the wider impact on key stakeholders?

24 Make users pay more No signals to online providers Need for differentiated user tariffs Application adaptations to lower bit rates Hard to implement in a highly competitive market

25 Make the Service Provider pay Need for a collective agreement among ISPs Sender pays model Revenue sharing

26 Differentiated quality services Need for industry-wide standards on QoS delivery Agreements among ISPs, billing etc.

27 Bilateral agreements CDNs-ISPs Bilateral agreements: CDNs cache content, access ISPs provide for QoS in last mile (like VPN services) No need for wider consensus Already happening

28 CDN interconnection CSP A makes only one business agreement with provider A CSP A CDN provider A authoritative CDN CSP A CDNI CDN provider B User agent ISP access CDN Also: handling of nomadic users overload handling and dimensioning resiliency By interconnecting, CDN providers obtain geographic extension without compromising the quality of delivery without incurring additional transit and other network costs that would result from serving content from geographically or topologically remote locations ISPs handle third-party content: offer better QoE to their customer authoritative CDN reduces HW capacity and footprint ISP derives incremental revenue by deep cashing in access CDN ISP reduces traffic load on its access network, controls traffic

29 End 2 End CDN QoS The evolution and future business models for CDNs

30 Sources On Cooperative Settlement Between Content, Transit and Eyeball Internet Service Providers Complexity of Internet Interconnections: Technology, Incentives and Implications for Policy X. Tang, J. Xu, On replica placement for QoS-aware content distribution, In IEEE INFOCOM, March D. Applegate, A. Archer, V. Gopalakrishnan, Optimal content placement for a large-scale VoD system, In ACM CoNEXT, Philadelphia, USA, Dec

31 The world as we know it Layering of ISP s Transit & Peering schemes Vanilla CDN s QoS only inside same AS/ISP

32 Problems/Challenges Lack of Inter-AS QoS Do-it-Yourself CDN Embedding Properties on CDNs Real World Business Examples Reversed Value Flows

33 Layered ISP s Lower Levels(Tiers) buy transit(connectivity) from upper or same level ISPs Tier1 ISPs don t buy transit Full Mesh between Tier1 ISP s Peering agreements between them

34 Transit & Peering Transit price $/Mbps Price drops constantly b/w almost commoditized Settlement-Free Peering Over existing links Rules about peering policy of ISP

35 Vanilla CDNs Overlay Networks, designed to deliver Content from the optimal location Points-of-Presence in many ASes & geolocations Requests re-directed to closest to client CDN PoP Content Providers pay to host content on a CDN under promise of better/lower latencies

36 Vanilla CDNs (cont.) Network Owned Level3, Limelight, AT&T all/most servers in same ASN Or not Akamai, MirrorImage, CacheFly, PantherExpress..CDNs place their servers(pops) directly in other ASNs Source: 2008, Patrick Gilmore, akamai, Peering with other Networks

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38 CDN pricing

39 CDN findings Closest node is NOT enough Google,2009 research.google.com/archive/imc191/imc191.pdf Price of Content hosting almost commoditized Price Wars(akamai vs. LLNW,EdgeCast,Level3) Weight on new services Relations between cost & content & endusers

40 So the current world.. The Transit and CDN Markets are doomed The days of simple Internet Transit or vanilla CDN services are numbered and any business model that is based on margins on something going to zero are doomed

41 Content Distribution Model 1: Traditional Cable Paramount offers an early release Pay-Per-View Movie Premiere. Assume that Paramount advertises: an opening night pay-per-view movie for $13 on the cable system or on a subscribers Internet service, and the end-user clicks on the movie to purchase it With the traditional pay-per-view cable revenue split model, Paramount would typically receive 50% of the revenue from the movie, and the rest would go to distribution chain (the cable company), about $6.50 per video

42 Content Distribution Model 2: BestEffort Internet Studio pays ISP for Internet access and/or a CDN paying on a metered basis. The upstream ISP or CDN pays for distribution as needed along the distribution chain for best effort service peering $0.30 transit transit $0.40

43 Content Distribution Model 2: Potential Challenges Despite the larger profit margin here, there are challenges: BE Internet service for large long-lived streams under conditions of network stress results in poor QoE and loss of revenue. Congested peering links and peering disputes BE transit service does not scale well for content with unpredictable demand characteristics. ISPs often prefer more circuitous traffic path to maintain their peering traffic ratios. As a result, the shortest path from content to a CDN is sometimes not used It may make sense to pay a little more money for a better end-user experience!

44 Content Distribution Model 3: MediaGrid Overlay Network Paramount is willing to pay Tata a little extra for a high-quality "Media Grid" service ( ASQ path ) Assume Tata offers Media Grid Service to Paramount for 75 cents per GB -> $3 in total to deliver the movie Two scenarios: Cascading revenue flow (without caching) Revenue flow with cache

45 Model 3: Cascading Scenario

46 Model 3: Caching Scenario In this scenario, revenue is proportional to the cache hits; everyone along the path is compensated for the first distribution, and after that, only when their caches are hit. This incents big caches at the edge for popular content, and the widest dissemination of caches to increase cache hits and corresponding revenue.

47 Conclusions End-to-End QoS is possible under cooperation of all stakeholders As end user pays, reverse value flows unfold Additional revenues should compensate additional costs of all value chain actors ISP and CDNs morphing Deep caching as an emerging business