Ovum: Low Latency Networks Underpin Service Provider Business Models

What is the inherent value of a low-latency network? In a nutshell “Latency performance underpins the entire network and therefore impacts the entire CSP business model,” said Ian Redpath, Practice Leader, Components, Transport and Routing, in Ovum’s report, “Monetizing high performance, low latency networks.”

Implementing and monetizing low latency networks is a complex topic, given that latency is affected by so many factors, including distance, network architectures, network equipment, and service processing algorithms, Redpath elaborated. Further, when embarking on latency improvement efforts, communication service providers must consider:
  • Future revenue sources
  • Optimal long-term target architecture to match future revenue streams
  • Near-term tactical business and service opportunities
Yet that complexity must be tackled, since latency has a very strong effect on user satisfaction and loyalty. And, several future trends, already underway to some extent, are driving the need to deploy low-latency, optical networks:
  • 4k video services will add network load
  • Cloud services will shift IT workloads into distributed data center environments
  • The Internet of Things will add billions of devices to the network
  • 5G will increase network density
All of these come with heightened latency requirements, making low-latency networks imperative to the future of service delivery, Redpath concluded, based on several fundamental tenants about traffic sources and sink points:
  • Population centers and enterprises are the economic engines of the global economy
  • Networks of the future will be more data centric
  • Secondary fail-over routes are becoming more important
“From the CSP perspective, latency is rising as a buying criteria in the high bandwidth portion of the market,” he said in the report.
In a study of this market, Ovum concluded that applications particularly requiring low latency include cloud service delivery and high capacity data center interconnect, with several vertical use cases also being involved:
  • Financial services
  • Oil and gas resources sector
  • Online advertising
  • Research and engineering
As they invest in low latency networks, Ovum advised, CSPs they should focus their revenue acceleration efforts on the most straightforward scenarios within a clearly defined space, such as primary high capacity data center access, financial extranet services, and automated, flexible networks.
For an in-depth look at these use cases and applications, and methodologies for monetizing low latency networks, read Ovum’s full report.