Next Generation of The Internet
Next Generation of The Internet
April 2013
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04/13
Point of View
The new electronic interdependence re-creates the world in the image of a global village.
Marshall McLuhan Philosopher of Communication Theory
No one could have imagined the fundamental impact the Internet would have on both society and the economychanging our lives forever. There are countless examples of how the Internet has transformed the way that we work, live, play, and learn. Take, for example, the ability to work from virtually anywherewhether on the beach, in a different country, or even from the comfort of our homes. Our hyperconnected lives have breached face-to-face and telephone communications. We are now connected to the network, spending a great deal of time onlinedoing everything from dating, researching products, shopping, and chatting with friends, to taking courses from leading institutions such as the Massachusetts Institute of Technology. We play games online with others across town, across the country, and even across the world. Video, music, and other forms of entertainment are just a click away. There seem to be no limits to Internet usage. The Cisco Visual Networking Index (VNI) projected that global IP traffic will increase nearly fourfold from 2011 to 2016, reaching roughly 110 exabytes per month.3 That amount of monthly traffic is equivalent to nearly 27 billion DVDs, 26 trillion MP3 songs, or 780 quadrillion text messages. It is almost impossible to project this phenomenal growth with any level of accuracy. The difference between the number of exabytes projected in the 2012 VNI forecast and the number of exabytes projected in VNI updates for 2013 is more than 200 exabytes, or the equivalent of more than all of the global IP traffic generated in 2010. Technology supply and consumer demand are colliding, driving phenomenal growth in the number of Internet connections and Internet-enabled devices. People now own multiple
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devices (almost all of which are connected to the Internet), creating more than 19 billion connections worldwide.4 And, more people are coming online each day: there are currently more than 3.4 billion Internet users globally.5 Technologies such as DOCSIS 3.0, fiber optics, and 3G/4G mobile access are significantly increasing broadband speeds. The YouTube generation is driving consumers hunger for online entertainment two years of video minutes are now consumed every second over the Internet.6 The extraordinary growth and transformation of the Internet is unprecedented, but what does the future of technology hold, and where is the Internet heading? Business executives, technologists, and policymakers are not only asking these questionsthey also are looking for a framework that will help them assess changes in the Internet, and the possible outcomes and implications of those changes for business, national policy, and regulation. Key questions include:
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What are the key drivers or disruptors that will shape the Internets future? What will the Internet and the Internet economy look like? How will this future change the information and communications technology (ICT) industry? What are the implications of the next generation of the Internet on national policies and regulations?
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A large portion of the future Internet will be mobile. Mobile will be the key means of expanding the Internet to more people, particularly those in developing countries and hard-to-wire places. Networks, devices, applications, and other core technologies will need to be built with mobile in mind, rather than retrofitted.
There will be fundamental shifts in the type of traffic that traverses the Internet, from the data center to the cloud. The Internet will provide the glue that combines multiple devices, networks, and data. The Internet will enable new cloud services.
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Figure 1.
VoiceThe global market for international voice traffic grew by only 4 percent in 2011, according to a report from TeleGeography.10 This figure would have been 13 percent had the report included Skype voice traffic. MessagingOperators lost $13.9 billion, or 9 percent, of messaging revenues to social messaging apps in 2011.11 Since the launch of KakaoTalk12 in South Korea, SMS usage is down by 40 percent and messaging revenues are down by 28 percent.13 VideoNetflix subscribers in the United States consumed 30 GB per month (80 GB per month for the Xbox 360) in 2012, resulting in 30 percent of peak-hour Internet traffic.14 A 2012 survey by Consumer Reports found that 25 percent of people who used streaming video reduced or eliminated their TV service.15 ConferencingForty-two percent of all Skype calls include video, equating to 300 million minutes of Skype video per day.16 MusicGlobally, online music sales accounted for 32 percent of record-companies profits in 2011; 3.4 million consumers subscribe to music services.17
OTT traffic will drive huge volumes of traffic over the Internet. Lucrative services of established ICT businesses will continue to be under threat. Traditional providers and OTT players will need to improve the economic model, aligning revenues and costs.
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Facebook has more than 2.5 billion pieces of content and ingests more than 500 terabytes of new content daily. Enterprises around the world stored more than 7 exabytes of new data in 2010, while consumers stored more than 6 exabytes (1 exabyte is equivalent to four times the entire content of the U.S. Library of Congress). For less than $600, consumers can buy a disk drive that can store all of the worlds music. McKinsey estimates that U.S. healthcare providers can save more than $300 billion annually through Big Datamore than double Spains annual health spending. Big Data could help retailers increase their operating margins by 60 percent.
Data demand and supply are almost in perfect equilibrium, creating the right conditions for Big Data. The economy, global competition, runaway costs, and increasing customer demand are forcing businesses and governments to find new ways to increase value, improve customer experience, and become more efficient. Getting smarter with Big Data is key to addressing these issues. On the supply side, the power of technology has increased dramatically, while costs have decreased. Flexible databases and analytical toolsand the ability to create and capture mountains of dataare making the world of Big Data a reality. Networks and the Internet have a critical role to play in the future of Big Data. First, they are the collectors and disseminators of data, gathering it from the millions of Internet-enabled devices, applications, and sensors, and storing it in the right place for analysis and further action. Second, they are creators of critical information on location, presence, device type, application, and more.
The Internet will become the ultimate source of Big Data, seeing all of
the data and linking it to the intelligence embedded in the network. Businesses and governments will have to establish key policy issues on privacy, security, intellectual property, and liability.
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Figure 2.
Note: In Figure 2, Korea refers to South Korea. Source: Organisation for Economic Co-operation and Development, December 2011
Markets will become more global in regard to services, applications, and technology. Governments and businesses will need to navigate diverse and possibly complex legal, regulatory, and policy environments. The Internet will become a global service delivery platform for increasing the efficiency and effectiveness of business, learning, and government services.
Cleverer. More features are being added to new devices, and many of these features are hardly used. Just look at the number of jacks on the back of a new television set or the complexity of the menu on a new digital camera. Connected. Most new devices are no longer stand-alone products that have some form of network connectivity, such as Wi-Fi, Bluetooth, or a local access network (LAN). Converged. Most new devices do several things once performed by stand-alone devices. For example, telephones no longer just make phone calls: smartphones
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enable users to send and receive email, listen to music, surf the web, and take quality photos. Tablets, for example, take multitasking even further, allowing such capabilities as easy video conferencing.
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Cooler. Devices now have incredibly short lifecycles. A typical cell phone, for instance, is good for 12-18 monthsnot because of inadequate technology or poor manufacturing, but because devices have become a fashion and status statement. Cheaper. Inexpensive manufacturing and modularity are driving down device costs. For example, DVD players and home routers that once sold for hundreds of dollars can now be bought for as little as $50.
Devices will drive demand and shape the requirements for the next generation of the Internet. Most consumers will equate the Internet with devices. The technical, political, and economic structure of a future Internet must support multiple, previously unimaginable devices.
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60 percent of knowledge workers use a mobile device at work 42 percent of employees own the smartphones they use for work 84 percent of IT leaders are seeing BYOD growth in the enterprise 89 percent of companies enable BYOD in some form Number-one demand among employees: they want an any device, anywhere work style
Implications of BYOD
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BYOD is blurring the lines between public and private enterprise networks. Public networks will need to be similar to private networks in terms of security, reliability, and availability. The Internet will be at the core of enterprise IT architectures.
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Smart gridsSmart utility grids are increasing efficiency in energy distribution. Intelligent vehiclesExamples include cars that self-diagnose, communicate with service centers, inform other vehicles of their existence, monitor safety, and have the latest road and weather conditions. Connected healthcare and patient monitoringExamples include smart pills that patients can ingest to help doctors diagnose and treat diseases. SensorsExtremely small sensors can be placed on plants and animals, and then connected to the Internet, revolutionizing food production. Internet Routing in SpaceA program from Cisco designed to launch the Internet into space. Connected educationBetter use of technologies will help scale teachers, faculty, and educational content, increasing new ways of learning and giving students the flexibility to learn at their own pace, anywhere, anytime, using any device.
Currently, IoE comprises a loose collection of disparate, purpose-built networks that, interestingly enough, mirror the early days of the Internet when multiprotocol networks were eventually connected via IP.
Implications of IoE
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IoE will create a need for open standards, particularly for plug and play; todays standards are mostly proprietary. IoE will turn information into actions that create new capabilities, richer experiences, and unprecedented economic opportunity for businesses, individuals, and countries. IoE will generate and drive huge volumes of data onto networks.
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Source: What Do Consumers Want from Wi-Fi?: Insights from Cisco IBSG Consumer Research, Cisco IBSG, May 2012
Four key technological and social forces are converging, giving rise to the new mobile: 1. ApplicationsApps are becoming richer, more data-intensive, and less mobile in nature. 2. DevicesMobile devices are becoming the preferred personal connectivity device. 3. Rise of Wi-FiThe ability to get low-cost wireless speed and connectivity to fuel new bandwidth-hungry devices and applications is increasing. 4. Nomadic useData consumption happens on mobile devices and on networks, but not necessarily while on the go.
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Mobile devices will need to support a huge amount of data and bandwidth in the home. Privacy and security will be essential requirements for meeting customer expectations. Technical and business integration will become the standard across multiple types of access networks.
AccessThe access layer will continue to be a HetNet (heterogeneous network) of macrocellular, Wi-Fi, small-cell, and fixed access. These technologies will logically converge to provide users with seamless Internet access. CoreThe core layer is moving to converged all-IP networks, where a packet is a packet whether it has originated on a mobile network or on a fixed broadband network. Content deliveryGiven the huge amounts of dataespecially entertainment contentthat people are and will be consuming, it will become increasingly important to locate the right content as close to the consumer as possible to ensure an excellent customer experience and improve network operations and economics. Because of this, SPs are embedding content delivery networks (CDNs) into their networks, as well as working to create a common federated approach to form a global distribution network. Network data centersAs mentioned earlier in this paper, cloud is driving the convergence of the network with the data center. Data center traffic is already in the zettabyte era, and by 2015, 34 percent of that traffic will be cloud-based.25 This means that the success of the cloud service will be intimately linked to the availability and operations of the network.
Network operators will need to manage, operate, and integrate multiple networksall based on IP. The Internet will no longer be just about networksit will extend to things, intelligence, computing, and data centers.
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Figure 5.
One thing is certain: the New Digital Explosion will change the ICT industry. The industry is facing what Cisco IBSG calls the Internet business paradox. Despite current demandand explosive projected demandmost players across the ICT value chain will (if they already have not) be challenged with converting this demand into money. A number of key factors are conspiring, increasing this challenge:
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Technology price compression and obsolescence are decreasing margins and product lifecycles. Aggressive competition is decreasing margins and making product differentiation harder. The rights of content owners are often neglected, making it difficult for them to extract the true value from their content. Consumers increasingly expect much of the technology they use and content they consume to be free (such as music and Wi-Fi), thereby greatly reducing the number of monetization opportunities. The fickle, fashion-conscious nature of technology consumers means that they are always shifting to the next big thing.
Following are major challenges that each key segment of the ICT industry value chain will face in the New Digital Explosion:
Content Providers
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Alternative business models finding new ways to monetize content New distribution modelsdeveloping new channels to distribute content Multi-rights ownershipenabling consumers to acquire content for legal use on multiple devices
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Network Providers
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Revenues / costsunderstanding how to balance costs and revenues from the growth in OTT traffic HetNet integrationincorporating multiple technologies into the network architecture OTT collaborationseeking new win-win partnership opportunities
Equipment Providers
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Cost leadershipdriving down costs to provide competitive prices Innovationinvesting in R&D to create market-leading products Product leadershipembracing open standards to drive new-market adoption
Software Providers
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Innovationcreating new, market-leading applications Cloud integrationusing cloud delivery models Mobile enablementensuring that all applications are mobile-friendly
Internet Services
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Business modelsseeking new ways to make money Cloudfinding ways to benefit from the cloud for enabling innovation, improving customer experience, and reducing costs Value chaincollaborating with other segments across the value chain
Devices
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Innovationgenerating a compelling portfolio of market-leading devices Beyond handsetsmoving beyond people-centric devices to the IoE world of machines and sensors Connected homedeveloping a portfolio of consumer devices that integrates with your devices and those of your competitors Cloud extensionclosely integrating devices and the user experience with the cloud
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2. InnovationInnovation will be essential to business and national success. Encourage innovation through education, financial incentives, and a supportive political environment. 3. StandardsPromote open and global standards. South Korea, for example, has become a technology juggernaut by embracing Android and Code Division Multiple Access (CDMA) technologies. By contrast, the Japanese electronics industry lost its preeminent position by adopting unique, domestic standards. 4. Consumer protectionBig Data and cloud will increase the importance of customer data and privacy. Governments must work within national and international legal structures to ensure consumer trust. 5. OpennessNet neutrality, international cooperation, and non-protectionist industrial policies will become critical in encouraging competition and opening up global markets for technology leaders. 6. Economic modelsDevelop, operate, and enforce frameworks that enable balanced investments in content or infrastructure, with revenues derived from other services such as peer-to-peer pricing. Make arrangements with network operators/OTT providers to balance network costs and OTT revenues.
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Endnotes
1. 2. Tubes: A Journey to the Center of the Internet, Andrew Blum, Harper Collins, May 2012. The Undersea Cable Report 2013, Terabit Consulting, http://www.terabitconsulting.com/undersea_cable_report.html
3. Cisco Visual Networking Index (VNI), February 2012. 4. Ibid. 5. Ibid. 6. Ibid. 7. International Telecommunication Union, June 2012. 8. Cisco Global Cloud Index, 2012. 9. Sizing the Cloud, Stefan Reid and Holger Kisker, Forrester Research, Inc., April 21, 2011, http://www.forrester.com/Sizing+The+Cloud/fulltext/-/ERES58161?objectid=RES58161 10. International Call Traffic Growth Slows as Skypes Volumes Soar, TeleGeography, January 09, 2012, http://www.telegeography.com/press/marketingemails/2012/01/09/international-call-traffic-growth-slows-as-skypes-volumessoar/index.html 11. Ovum Estimates that Operators Lost $13.9 Billion in 2011 Due to Social Messaging, Ovum, February 21, 2012, http://ovum.com/press_releases/ovum-estimates-thatoperators-lost-13-9bn-in-2011-due-to-social-messaging/ 12. KakaoTalk is a downloadable software application for mobile devices that enables users to send and receive messages, including photos and videos, both on a one-toone basis and in groups for free. 13. GSMAs RCS Initiative and Viewing Messaging Technologies as a Service Platform, Open Mobile Alliance (OMA) Messaging Workshop, July 12, 2012. 14. The Global Internet Phenomenon Report: 2H, 2012, Sandyvine Intelligent Broadband Networks, http://www.sandvine.com/downloads/documents/Phenomena_2H_2012/Sandvine_ Global_Internet_Phenomena_Report_2H_2012.pdf 15. Best Streaming Video Services: Amazon Instant Video, iTunes, and Vudu All Did Better than Netflix, Consumer Reports, September 2012, http://www.consumerreports.org/cro/magazine/2012/09/best-streaming-videoservices/index.htm 16. A Day in the Life of Skype #Infographic, The Big Blog, Skype.com, September 2011, http://blogs.skype.com/en/2011/09/a_day_in_the_life_of_skype_inf.html 17. Sales of Digital Music Increase 8% in 2011, Internet Retailer, January 23, 2012, http://www.internetretailer.com/2012/01/23/sales-digital-music-increase-8-2011 18. Big Data: The Next Frontier for Innovation, Competition, and Productivity, McKinsey Global Institute, May 2011, http://www.mckinsey.com/Insights/MGI/Research/Technology_and_Innovation/Big_ data_The_next_frontier_for_innovation
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19. What Do Mobile Business Users Want from Wi-Fi?: Insights from Cisco IBSG Research, Cisco IBSG. November 2012, http://www.cisco.com/web/about/ac79/docs/sp/What_Do_Mobile_Business_Users _Want_from_Wi-Fi.pdf 20. Taking Care of Business in the Mobile Cloud: Cisco IBSG Research Uncovers New Opportunities for SPs To Prosper in the Mobile Cloud Market, Cisco IBSG, November 2012, http://www.cisco.com/web/about/ac79/docs/sp/Mobile-CloudBusiness_IBSG.pdf 21. BYOD: A Global PerspectiveHarnessing Employee-Led Innovation, Cisco IBSG, 2012, http://www.cisco.com/web/about/ac79/docs/re/BYOD_Horizons-Global.pdf 22. The Internet of Things: How the Next Evolution of the Internet Is Changing Everything, Cisco IBSG. April 2011, http://www.cisco.com/web/about/ac79/docs/innov/IoT_IBSG_0411FINAL.pdf 23. Embracing the Internet of Everything To Capture Your Share of $14.4 Trillion: More Relevant, Valuable Connections Will Improve Innovation, Productivity, Efficiency & Customer Experience, Cisco, 2013, http://www.cisco.com/web/about/ac79/docs/innov/IoE_Economy.pdf 24. What Do Consumers Want from Wi-Fi?: Insights from Cisco IBSG Consumer Research, Cisco IBSG, May 2012, http://www.cisco.com/web/about/ac79/docs/sp/SP_Wi-Fi_Consumers.pdf 25. Cisco Global Cloud Index, 2012. 26. Japans Dimwitted Smartphones: Electronics Makers Sony and Sharp Play Catch-Up to Apple's iPhone; 'The Golden Age of TV is Over, The Wall Street Journal, August 16, 2012, http://online.wsj.com/article/SB10000872396390443517104577574470875390872. html
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