By most measures, 2016 is poised to be a banner year for connectivity providers, as new channels for communication come to market, older network models are repurposed and lines are drawn in the sand between established and disruptive services.
Here‘s my rundown of what will be behind the biggest headlines that connectivity providers and the businesses that depend on them will be talking about in the coming year.
New submarine cables will go live
For what seems like ages, the market for submarine cables has been largely subdued. The same submerged data channels have been aging for some time while being forced to service an ever-growing demand from a growing number of markets. As a result, regions that are far-flung from major data hubs have had to deal with increasingly slow latency or a complete lack of access to these business centers, squandering growth opportunities.
In 2016, however, there are a several cables coming online. The SeaMeWe 5 and AAE-1 cables are two such examples, which will connect businesses in Singapore and Hong Kong to Marseilles. These cables will also bring new connectivity check points in Yemen, Cambodia, Indonesia and a number of other markets. Businesses that are currently restricted to native markets will now have access to endpoints worldwide.
The new cables will inevitably free up traffic on existing ones and this will help drive down the cost of access to cables. This will benefit businesses that had previously not been able to affordably enjoy connectivity to expand their enterprise.
Providers will also change the way these cables interact with both PoPs and endpoints. Rather than utilizing cable landing stations that are operated by one or two backhaul providers within a given market, some of these new cables will terminate directly within a carrier-dense data center, giving the providers using the cable access to a large consortium of vendors and providers to work with on backhaul and other operations. As a result, carriers will deliver new and better services to their cloud and content customers.
SDN disruptors will gain market traction
Software-defined networks (SDNs) aren’t a new phenomenon, but how they’re being utilized will likely continue to evolve this year. As a result, disruptors like Megaport and IX Reach will likely gain market share at the expense of legacy offerings that are less tailored to the needs of businesses looking for a more innovative approach.
Since 2013, SDN has been listed as the number one source of tech sector disruption as it encompasses a flourishing startup market that’s estimated to be worth as much as $51 billion. Other research shows that the SDN market will have grown more than six-fold between 2013 and 2017.
Compared to many of the older SDN services, the disruptors hitting the market or expanding in 2016 have better designed portals that allow users to easily and seamlessly create virtual networks. This simplified approach will be quite disruptive for many of the large network service providers and really start to commoditize some of the services that they provide.
Telcos will abandon their cloud offerings
Over recent years telcos and others have tried to diversify their service offerings and increase revenue by venturing into the cloud market. Unfortunately for them, it’s becoming clear that this investment into cloud isn’t going to pay off and they may have done better sticking to the services they’re known for providing.
Market leaders Amazon, Microsoft and Google are already so dominant that the telcos can’t find room to break out, and are being shoved out of the way as a result. For example, in June last year Colt announced that it was going to pull out of the cloud marketplace and put greater focus on its core services, including its network, voice and data center services.
Big content providers will continue to build out their own networks
Those same three dominant cloud providers will continue to rely less and less on traditional carriers to deliver their services. Whether it’s dark fiber or laying down their own submarine cables, these players want to control the pathways over which they service their customers.
There are a lot of benefits in utilizing private networks. For starters, content providers won’t have to rely on engagement between different carriers across the globe. This will not only make it easier for these providers to expand, but they will have a more consistent and controlled cost base and can better ensure quality of service to their new clients.
Content Delivery Networks will diversify services
Content Delivery Networks (CDNs) will continue their strong growth in 2016, but they will seek out additional revenue streams within existing customer bases. For instance, CDNs have the opportunity to sell security and cloud connectivity services to existing customers rather than having to rely solely on bringing new customers into the fold. Customers may be more likely to accept services from and over networks they are already using, giving CDNs a great opportunity to increase revenues.
Internet exchanges in Europe will face increased financial pressure
As IP traffic prices continue to lessen, Internet exchange providers (IXPs) in Europe are being pressured to constantly reduce prices to remain competitive, and this is challenging their business model . Driving this point home is the fact that bigger members of major exchanges have stopped using these markets altogether. Instead, these companies are exchanging traffic directly between one another, bypassing the exchange altogether.
IXPs will look to introduce new services and expand into new geographies, both in neighboring markets and overseas. For example, DE-CIX has taken this approach in the last couple of years and has now expanded into France, the United States, Turkey and Italy. Overall, IXPs are caught in the midst of a much more competitive and commercial environment than they had been in the past.
By all indications, 2016 will be even more tumultuous than 2015 has been for connectivity providers, but all of the perceived chaos will be in favor of a much more connected world.