At a high level, one must ask, “How does new technology help service providers seamlessly introduce revolutionary products into their networks?”
Prior to the arrival of Cerent’s Multi-service Provisioning Platform (MSPP), the basic criteria for deploying more optical transport product was focused on CAPEX (capital expenses). However, the complete cost of operating a fiber infrastructure needed to be analyzed on a total cost per bit, which means the sum of CAPEX plus OPEX (operations expenses).
The sales and marketing team at Cerent pioneered the era of systems startups presenting the notion of the “economic value add” in the form of network profitability, a value proposition carried on by Cisco’s optical team after the acquisition of Cerent.
Cerent simply presented the fact that traditional networks consumed way too many resources to achieve the same thing as compared to next-generation, intelligent optical networks (i.e., MSPP-based ones). Such inefficiency in the network, which such a comparison revealed, hurt an operator’s return on investment (ROI) and cut into the service provider’s profitability.
However, we knew that even a savings of as much as two-thirds on CAPEX would not be AS beneficial to the service provider’s bottom line as a 30 percent savings on OPEX.
Because that 30 percent or more reduction in OPEX is realized on recurring costs.
The approach to engage prospects by touting a significant reduction in CAPEX easily opened doors for Cerent’s sales people. Then we strengthened the relationship with new-found clients by talking about the significant savings in their operational expenses.
A budgeted one-hour initial customer meeting often turned into an all-morning or all-day give-and-take session as to how the (R)evolutionary Cerent 454 could evolve that service provider’s optical infrastructure with significantly reduced OPEX.
Al Eshbaugh, ALLTEL’s director of engineering in Ohio, for example, recounted how, in late 1998, a 30-minute meeting lasted all day – from 9:30 in the morning to 4:00 that same afternoon. “I got kind of excited about [the Cerent 454],” he said, “and I called in four or five of my people. [Eric Clelland] didn’t leave until four o’clock in the afternoon that day. He went over everything really well. After he left I was excited. I worked with him a little further and we decided to try some of this stuff. It would do so much more than anything we needed. And it was 40 percent of the cost of anything else.”
As one Metro WDM representative at the time said, “Anything that takes costs out of the network will be well received in the market.” And such next-gen products were rapidly accepted into the telecom space. MSPPs became a hit, much more so than competing Metro WDM-based products.
Because of cost savings. The majority of the savings came from the smaller footprint and greater density of MSPPs. Reducing the number of required network elements from more than 200 to 25 or so, slashed CAPEX like never before. “Intelligent software” helped with the value proposition, too, with reduced time to provision a circuit, savings in power consumption and space, and management overhead. With fewer network elements needed to service the same amount of bandwidth and geography, multiple pieces of legacy equipment could be gracefully retired to further accelerate savings. MSPPs dealt effectively with traffic churn mitigating stranded bandwidth and making more efficient use of network resources.
MSPPs did more than save CAPEX and OPEX. Revenue enhancements from the availability of new revenue-generating services brought in hundreds of millions of dollars for service providers. Integration of data interfaces such as Ethernet ports enabled new money sources to go straight to the bottom line. Associated intangibles for operators of MSPPs included the inherent improvement of service level agreements (SLAs). More competitive SLA guarantees that could be offered with more responsive and reliable MSPP equipment attracted new customers and protected existing ones; Furthermore, fewer dollars were returned to upset end customers due to reduced violations of SLA requirements.
Revenue enhancements such as integrating data traffic (new services) on the same platform as voice traffic was just the beginning of the benefits of next-gen networks deployed in the early 2000s. Those aggressive service providers who subscribed to “time is money” rapidly deployed revenue-generating services before price erosion set in.
Time Warner Telecom (tw telecom) was one such service provider as this competitive provider ultimately built and grew a countrywide footprint in fifteen years, an operation that was so attractive that is was purchased by Level 3 in 2014.
With rapid A-to-Z provisioning capability, network operators recognized that the faster a circuit was provisioned, the sooner the allocated transport bandwidth generated operating income, which led to greater profitability. tw telecom knew this fact and prospered as a result.
Editor’s note: ALLTEL spun off its wireline business and combined with Valor, in 2005, to form what is now known as Windstream Communications. tw telecom was acquired by Level 3 in 2014.