Cloud pricing presents conundrum

Inevitably, the cloud was a recurring topic at this week’s Capacity Asia event in Kuala Lumpur. The big question: what does demand for cloud-based services mean for wholesale carriers? The answer: not a lot, unless carriers can figure out a consistent business model that includes pay-as-you-go pricing.

Diarmid Massey, MD for global wholesale and carrier at Cable & Wireless Worldwide, said that a hybrid private/public cloud model makes sense because everyone’s cloud needs are different, and that carriers have the competitive advantage of offering secure access. But a wholesale cloud model is a tough sell.
 
“I’m not sure there’s a sensible business model,” Massey said during a cloud panel session. “Cloud is pay as you go by nature, whereas wholesale is where you sign a contract in advance for something for a couple of years. So we need to be able to move to on-demand pricing, and we’re not used to that.”
 
Massey added that the biggest challenge is creating cloud services with SLAs. “The idea is to provide the capacity so customers can run whatever they want – maybe video, apps or just Facebook – so we need deep knowledge of what they’re doing to provide the right SLAs. We have to get closer to the customer.”
 
Marc Halbfinger, CEO of PCCW Global, was far more pessimistic, saying that carriers have been too reactive and not aggressive enough in the cloud space, and that carriers need to “get their act together” in cooperating on infrastructure in a way that makes sense across the entire industry.
 
“IPX is giving us an inkling of a roadmap for it, such as determining QoS parameters for delivery. But we’re creating more variable costs instead of variable revenues,” he said.
 
Byron Clatterbuck, president of global carrier solutions at Tata Communications, said the more immediate cloud opportunity was targeting systems integrators and over-the-top providers.
 
“The OTT guys are becoming more like service providers themselves – buying network capacity, renting DC space, and so on,” he said. “There’s an opportunity to serve those types of customers, and enable them to go after the consumer market.”
 
Clatterbuck added that a revenue opportunity for wholesale cloud providers could be helping OTT cloud players crack local markets.
 
“Amazon is targeting SMEs, but not in India, for example. So the question for carriers is, do you understand the local market better than Amazon, and how can you leverage that into a revenue opportunity?”

 

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