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Cloud Growth Boosts Demand for Dynamic Bandwidth
Dynamic bandwidth has been a market issue for years. Early bandwidth-on-demand (BOD) prototypes were tested more than a decade ago, and "burstable" usage-based billing (UBB) has long been a market norm as an option for dedicated Internet access (DIA) and earlier data services. But the emergence of the "cloud" is drawing intense new focus to dynamic bandwidth, promising major new growth, particularly for BOD options, and provoking the introduction of a range of related service offerings.

As customers rely increasingly on remote deployments of computer memory, the way networks are used shifts. By storing data processing resources in distant data centers in a utility model, the cloud phenomenon contributes to greatly increasing transmission volumes across wide area networks (WANs) and radically increasing data flow variability, which intensifies the appeal and market logic of more flexible and usage-sensitive billing.

Broadly defined, dynamic bandwidth manifests itself primarily in two major forms: bandwidth on demand (BOD) and usage-based billing (UBB). While these features have fundamental differences, and some don't even consider them in the same category, they overlap significantly and have functional similarities.

Although there will be continually increasing use of dynamic/flexible bandwidth in the next few years across the market, particularly in relation to the cloud, and particularly in growth of "bandwidth on demand," dynamic bandwidth will not account for anything like a majority of market bandwidth within the next three to five years. Despite the latter's growth, the good majority of market bandwidth, albeit a gradually declining majority, will stay with fixed pricing into the relatively indefinite future.

While developing optimal bandwidth flexibility will be critical to service provider competitiveness in the coming period, it is not always clear that providers will make more money from these services than they must invest to create them. Like any extension of service capabilities, these require investment. It has not been definitively demonstrated that customers will generally pay more for greater bandwidth "flexibility." While customers unquestionably often like the idea of BOD, there isn't strong evidence to show they are willing to pay more for it. In the IP space particularly, continual downward pressure on prices seems to make funding enhancements problematic. The business case for BOD has not been historically impressive, though the cloud helps by making it more of a virtual requirement.

Carriers will need to invest in dynamic bandwidth to keep the loyalty of customers they already have and attract more in an environment in which it will be, again, increasingly viewed as a virtual requirement, especially in relation to the cloud. Carriers may need to develop new systems, though their ability to profit from them in the near term is in question. ILECs are moving slower on BOD at this point than their somewhat smaller competitors that are more confident that developing differentiated new BOD options can help them gain market share.

Cloud Growth Boosts Demand for Dynamic Bandwidth examines dynamic bandwidth, comparing BOD and UBB, discussing the current trends and applications, and how the cloud is driving it. The report also provides "status reports" for 10 leading companies in the market.

Sample research data from the report is shown in the excerpts below:
Table of Contents (hri1013_toc_2.pdf)
While UBB and BOD may converge increasingly, they still manifest characteristic differences, as highlighted in the following excerpt. The key customer trade-offs between these options are cost, predictability and quality assurance. The degree to which they converge is likely to be more a function of commercial packaging and messaging i.e., how the carriers sell them than technology.
[click on the image above for the full excerpt]
Companies cited in this report include: AT&T Inc. (NYSE: T); CenturyLink Inc. (NYSE: CTL); Level 3 Communications Inc. (NYSE: LVLT); Lightower Fiber Networks; Reliance Globalcom, a division of Reliance Communications Ltd. (NSE: RCOM); Tata Communications Ltd. (NSE: TATACOMM); tw telecom (Nasdaq: TWTC); Verizon Communications Inc. (NYSE: VZ); XO Communications LLC; and Zayo Group.
Total pages: 14
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