>New Service Provider Business Models

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>Recently I’ve been spending quite of bit of time in the lab doing IPv6 testing. I’ve been proving out some methods for providing both IPv4 and IPv6 services to customers. This also brought me to think about how to utilize a new business model to encourage IPv6 use and to put scarcity on IPv4 services, thus increasing IPv4 service cost because of the falling supply: http://mpreath.blogspot.com/2011/03/ipv6-deployment-scenarios-part-4.html.

Another problem area for service providers is the bandwidth consumed by over-the-top content providers such as Netflix, Hulu, and youtube. Cisco has published a very interesting document discussing the possible revenue options that can be used to compensate for this loss of bandwidth, and consequently loss of profit: http://www.cisco.com/web/about/ac79/docs/pov/TwoSided_Model_POV_083110_FINAL.pdf. This model of video distribution is here to stay, so a provider either must embrace it or just simply deal with it. This style of service is what consumers want and demand. Providers will have to be either “utility” providers that sell fat pipes only or they will have to be “innovation” providers that create user experiences.

I’ve thought about this a little bit and always come back to the vision of having Netflix, Hulu, and Youtube “vault” appliances.  Basically I see a rack-mount server appliance with a Netflix logo that downloads and caches Netflix content for access by local Netflix customers. Netflix can charge the server provider for the caching service, the providers Internet pipes aren’t saturated with video content, and customers can get a better Netflix video experience. Its a win for all three: content provider, service provider, and customer.

One interesting section in the article, and something that I hadn’t really given much thought, is the mix of subscription-based revenue and ad-generated revenue. An example offering would be IPTV service, supported both by subscription fee and targeted ads, that offers DVR, social media integration and access to over-the-top content (netflix, vimeo, youtube, hulu, etc.). A provider could earn revenue both through a subscription and from ads. These targeted ads could be used to generate enough revenue to lower the cost of the subscription thus increasing the number of subscribers. Interesting thought.

Service providers need to embrace these new concepts, models, and ideas in order to increase revenue and keep their customer-base.

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