Tuesday, 21 March 2017 14:27

The cloudy/sunny future of Communication Service Providers

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Does cloud mean a bright future for a Communication Service Provider?


Cloud computing is going to have significant impact on both IT and telecommunication architecture and its operations. This document reviews the parallel development of cloud and network technologies and discusses the opportunities and threats the gathering clouds on the sky bring to Communication Service Providers (CSP).

Cloud service

The term “Cloud” comes from telecommunications where the “Cloud” symbol was used on network diagrams to hide the details of the network architecture. In the IT world, cloud refers to the concept of delivering IT systems to users as a service through a telecommunications network. The “Cloud” symbol represents here the hardware and software installed in the data center and not the telecommunications network anymore. It means in practice that all popular services offered over the Internet (like Google App’s, Skype, Facebook...) are cloud services. Access to the cloud is provided by Communication Service Providers (CSP), and cloud users can usually select among a couple of independent network services to access a cloud. This results in a competition of CSPs for connecting users to cloud services. The biggest problem CSPs are facing here is that they tend to become a simple access point (“bit-pipe”) to cloud services, operating at a very low level of the value chain.

The path from mainframe to smart phone

Before defining the real term Cloud Computing let’s briefly review how cloud services developed. The idea of concentrating all hardware and software components of a system in a central location and access their services through thin clients is not new. Both dumb terminals connected to mainframes and Android smart phones using Google services apply this concept. The 50 years long path from mainframe to smart phone is described in the next chapters below.


Mainframes are big powerful computers that were deployed in large scale in the 1960s and 70s mainly for big corporate organizations to support their mission critical applications. A mainframe could serve hundreds of users simultaneously applying batch processing and time sharing techniques. Users were provided access to computer resources through dumb terminals. At that time the public telecommunications network was not designed for connecting dumb terminals from remote locations to a central mainframe system in a large volume and in a cost-effective way. This prevented mainframes to be used by smaller companies who couldn’t afford deploying their own systems.

Personal Computer

From the beginning of 1980s small and medium enterprises as well as domestic users started using a radically new type of computer, which changed the IT world: The IBM Personal Computer (PC). The PC’s price and operational cost was far more practical and affordable for both home and small business users. The IBM PC and its clones grew to dominate the market extremely quickly.


Parallel to the birth of the new PC world the TCP/IP protocol suite was standardized as the basis of a new world-wide network concept called Internet. The internet technology allowed interconnecting millions of PCs in a cost-effective way. Dumb terminals were rapidly replaced by PCs that allowed accessing legacy mainframes via the Internet. Enterprises soon started building their own PC cluster-based servers to provide support for their PC clients, quickly reducing the need for mainframes.

Data centers

To increase cost efficiency, big server farms and data centers have been created to provide support to remote offices. Since data connections are usually provided by CSPs, server farms and data centers are ideally co-located with the equipment of CSPs. As a consequence many CSPs offer co-location services for data centers. Data centers can be operated either by the enterprise itself or can be outsourced as a managed service, which led to the evolution of the private cloud service.

Applications on the Internet

Web 2.0 is a term that refers to applications that are offered by web servers on the Internet for information sharing, collaboration, social networking or other similar purposes. Examples include Gmail, Hotmail, Facebook, Twitter, LinkedIn, etc. While Web 2.0 services are accessed through a web browser there are several other services - like Skype or Google Talk - that require a special client application rather then relying on the web browser. These applications together with Web 2.0 services represent a special type of cloud service called public or community cloud.

Smart phones

Smart-phones like the IPhone and others running the Android OS are new types of terminals that are ideal thin clients of cloud services. They are usually sold by CSPs bundled with their network services. However CSPs were not successful in binding smart-phones to their own clouds because they cannot compete with the popularity of community clouds such like Google and Facebook, who offer their own IPhone or Android applications as cloud clients. These client applications can be freely downloaded and installed on a smart-phone by the user without the involvement of the CSP. Smart-phones can also be clients of private clouds. It is a great opportunity for a company to leverage the fact that their employees may already have their own smart-phones that are able to run client applications enabling the company’s private cloud service (e.g., Microsoft Exchange ActiveSync client). However, employees do not want to stop using their favorite community app’s like Facebook, Linkedin, etc. This can cause headaches for IT security managers since they have to make sure that the same security policy is applied on employee-owned devices as well as on company equipment.

Cloud computing

The term “Cloud computing” is different from the term “Cloud”. While a cloud is a service provided over the network, Cloud computing is an architecture that allows provisioning cloud services in a scalable way to support a pay-as-you-grow business model. There were lots of technologies used to achieve the required scalability, most of which are still used. A few worth mentioning include clustering, load balancing, distributed computing and virtualization. Using these technologies in an intelligent way to enable the packaging of computing resources such as CPU, memory and storage as a metered service is called utility computing.

Infrastructure level

Utility computing allows cloud providers to offer Infrastructure as a Service (IaaS). Users of IaaS can install their own software including operating systems, development environments and applications on virtual machines. An example of IaaS service is Amazon Elastic Computing Cloud (Amazon EC2).

Platform level

There are also cloud providers who offer services at a platform level that include a pre-defined development environment. This model is called Platform as a Service (PaaS) and supports applications appropriate for the selected development environment. Two examples of PaaS are Google AppEngine (using Python) and Facebook plug-in App’s. Another more trivial example is a simple web-hosting provider that offers Apache/PHP/MySQL platforms for creating dynamic web pages, which is often included as part of a CSPs’ service portfolio.

Application level

Cloud applications represent the highest level of the cloud computing architecture. Services offered at this level are called Software as a Service (SaaS) that refers to the fact that cloud providers are asking service fees instead of selling licenses.

Deployment models

Cloud computing architectures can be grouped in three main categories: Private, Public and Hybrid clouds (community cloud, mentioned earlier, is a special sub-class of the public cloud). The entire architecture of a private cloud is dedicated for the same organization while a public cloud serves multiple organizations using the same platform or infrastructure. Due to security considerations, an enterprise may not want to deploy all of their applications on a public cloud. In this case a hybrid cloud model can be employed that combines the best aspects of public and private cloud services.

Cloud computing for CSPs

Cloud computing is a disruptive technology since it significantly changes the way IT systems will be operated. This applies to both enterprises as well as Communication Service Providers. CSPs can use cloud services for their own systems, provide cloud services to their customers, support other cloud providers’ services or find smart ways to tap into the revenue stream of those cloud providers that use their network to connect users. Each of these scenarios is described in details in the following paragraphs.

Using cloud services

CSPs can use utility computing to form a more flexible and scalable common infrastructure for different components of their heterogeneous service provider platforms, even across different vendors’ systems. This does require that the different vendors have developed cloud-aware applications that are certified to run on virtual machines. This results in a private infrastructure cloud that can host applications like Voice mail, SMSC, MMSC, OSS, BSS, etc. There are, however, some systems that cannot be optimized for cloud services. Network components that handle direct traffic (e.g., routers) are not recommended for operation in a virtualized infrastructure. These systems are designed by vendors as bundled hardware + software solutions sometimes referred to as appliances. In most cases appliances require proprietary hardware. The conflicting industry trend of emerging IT appliances is pushing the IT industry to the opposite direction of clouds. Beyond private clouds, CSPs may prefer not to buy systems from vendors but rather use them as managed services provided by equipment vendors. A vendor can offer these types of cloud services either as a hosted private cloud or as a public cloud.

Providing cloud services

CSPs provide network connections that allow their customers access to cloud services. These services are sometimes called Network as a Service (NaaS), with a similar naming convention what is used for the different levels of cloud services. NaaS, however, is not a cloud service by itself, but is rather an enabler of other cloud services. There are also value added services that have been provided by CSPs for quite some time that can be considered cloud services, although they are not applied on real cloud computing architectures yet. A few examples include Voice mail, SMS, MMS, or IP-Centrex that offers hosted PBX services. Cloud computing opens a great opportunity for CSPs to become significant players in the cloud market and reposition themselves further up the value chain. They have a number of significant competitive advantages, including:

  • CSPs operate their private clouds for hosting certain network systems and have experience in cloud operations.
  • CSPs can co-locate their cloud architecture with their network architecture to enable high-speed access to the service.
  • CSPs sell smart-phones to their subscribers bundled with their mobile data service and - as was mentioned earlier - smart-phones are ideal clients of cloud services. Smart-phones can be sold with pre-installed and pre-configured cloud applications customized according to CSPs needs.
  • CSPs can control the quality of service (QoS) of the network connection between the user and the cloud. For example they can assure special QoS parameters for a video streaming service.
  • CSPs can authenticate their customers based on SIM cards in mobile devices or line IDs of the physical connections that increase the level of IT security.

Admittedly some of the competitive advantages described are valid only in case cloud services for enterprises. CSPs are facing serious challenges when they try to get market share with community clouds and compete with services like YouTube, Gmail, Facebook, Skype, MSN, etc.

Supporting cloud services

This chapter presents two different technologies that help CSPs to support or complete cloud services: Content Delivery Network (CDN), and Policy and Charging Control (PCC) system.

Content Delivery Network

Cloud providers who offer high data volume content to their users (e.g., movie streams) need serious network capacity for content delivery. A Content Delivery System (CDN) helps optimizing the usage of network resources by storing the content on different network nodes as close to the users as possible. CSPs providing their CDN service to content providers’ cloud service can significantly increase the quality of user experience and reduce network load and costs.

Policy and Charging Control

Another way for CSPs to generate revenue from cloud services is by offering special network service packages or data plans for either cloud providers or cloud users. A data plan can be tailored to special features of a certain cloud service. For example a video sharing portal requires constant bit rate, a voice over IP application requires low latency, etc. Beyond the QoS parameters CSPs can also customize charging schemes. This would allow, as an example, free unlimited Facebook access for mobile users if they subscribe to the “Facebook data plan”. The system that allows CSPs defining customized data plans is called Policy and Charging Control (PCC). The PCC architecture is defined by 3GPP standards that also define an interface (Rx) for connecting the PCC to cloud applications. This interface enables applying always the right QoS and charging policies for certain cloud applications.

To tap into the revenue stream of cloud providers

There is a serious issue with 3GPP’s Rx interface. None of the most popular public cloud providers have deployed it yet, and have no business motivation to do so. Popular community clouds like Google, Facebook and Skype already recognize that CSPs are not able to compete with them using their own in-house cloud services. Additionally, CSPs compete against each other to provide access to the popular community clouds. CSPs do, however, have a potential way to tap into the revenue stream of popular cloud providers without having a commercial agreement with them, using a technology called Deep Packet Inspection (DPI). DPI is an appliance that analyzes and classifies all Internet traffic handled by the CSP. DPI detects which cloud application a certain subscriber is using and reports it to the Policy and Charging Control Rules Function (PCRF) which is the central element of PCC. The PCRF checks which data plan the user is subscribed to and applies the relevant QoS and charging rules that are also aware of the used cloud application. Please note that keeping the application signatures of DPI up to date may not be easy. For example, if Skype issues a new protocol version it may bypass the DPI detection algorithm until the DPI vendor recognizes the change and develops the necessary signature update. In an ideal world there is no need for DPI since cloud providers are co-operating with CSPs and use the standard interfaces for the interworking.


The background technologies of cloud computing and telecommunication have been developing symbiotically for the past 50 years. Each sector had to adapt to the needs and capabilities of the other’s. These days cloud become a disruptive technology and is expected to cause significant change in the IT and telecommunication industries. This will mean a variety of challenges for Communication Service Providers. They will need to adapt cloud technology for their internal systems and utilize their unique capabilities for getting strong positions on the cloud providers’ market. CSPs cannot compete with popular community clouds but can easily become significant cloud providers of enterprises.


  1. Unisys - Exploiting the Cloud for Mission - Critical Workloads via the Hybrid Enterprise - http://www.disruptiveittrends.com/trends/cloud
  2. Michael Armbrust, Armando Fox, Rean Griffith, Anthony D. Joseph, Randy Katz, Andy Konwinski, Gunho Lee, David Patterson, Ariel Rabkin, Ion Stoica, Matei Zaharia - Above the Clouds: A Berkeley View of Cloud Computing - http://radlab.cs.berkeley.edu/
  3. Comverse - Comverse Data Management & Monetization: Accelerate Data Profitability and Market Innovation! - http://www.comverse.com/mobile_internet_hub_white_papers_reports_and_ articles
  4. Accenture - Six Questions Every Telecommunications Senior Executive Should Ask About Cloud Computing - http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture_Six_ Questions_Telecommunications_Cloud_Computing.pdf
  5. Michael Hugos - Cloud Computing is the Future of Telecom - http://blogs.cio.com/cloud-computing/16501/cloud-computing-future-telecom
  6. Dave Michels - Cloud Computing for Telecom? Why Now? - http://www.ucstrategies.com/unified-communications-strategies-views/ cloud-computing-for-telecom-why-now.aspx
  7. Sun CTO - Cloud computing is like the mainframe - http://itknowledgeexchange.techtarget.com/mainframe-blog/sun-cto-cloud-computing-is-like-the-mainframe
Read 1486 times Last modified on Tuesday, 21 March 2017 11:17

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