Networks are Key to the Cloud, Leaders Say, and Should Capitalize on the Its Potential

In recent weeks, several industry leaders have reiterated the potential for telcos to get more involved in the cloud—to finally embrace the movement deemed “Telco 2.0.” At the Cloud Connect Conference in Santa Clara, California, NTT America cto Doug Junkins reminded a standing-room-only crowd that, “The cloud is not the cloud without the network.” That same week, AT&T announced its virtual private cloud service—AT&T Synaptic Compute as a Service—through VMware. And just last week, Warren Chaisatien, Ericsson Strategic Marketing Manager, said, “At a time when telecom operators across the region are looking to differentiate themselves and looking for new revenue streams, cloud services offer growing and largely untapped potential.... Operators are in a unique position to utilize their expertise in managed services and take advantage of network features to enhance cloud offerings for users.”

There has even been a flurry of articles lately, as analysts discuss the specifics of how and where telcos should get involved with the cloud. All of this clamoring comes after several quiet months, where there seemed to be little conversation or activity in the way of telco investments in the cloud. Perhaps a new kind of “spring fever” is upon us.

And it's about time. In 2011 we saw telcos dip into the cloud services game by investing more and more in data centers—from giants like Verizon and TDS, to Kansas-based Twin Valley Telephone, North Carolina-based North State Communications, and New York-based Warwick Valley Telephone. For many companies, the hope was that revenue from data centers would allow them both to capitalize on the cloud hype and offset other losses with a new revenue stream. In some cases that strategy seems to have worked, at least in the short term. Last month Cincinnati Bell, one of the first publicly-traded LECs to invest heavily in data centers, reported that during an otherwise lackluster quarter, revenue from its data center unit had increased 21% in 4Q11, compared with 4Q10. The data center unit was its highest performing growth area.

But Junkins and others at the Cloud Connect Conference think there is more cloud revenue for the taking, beyond just data centers. Specifically, Junkins argued in his break-out session that telcos are already sitting on the golden ticket: the networks they already own. And telcos cannot afford to be, simply, a "dumb pipe." According to analyst David Berlind, Junkins's message was “practically a constant theme” throughout the conference—asserting that carriers are “uniquely positioned to be the preferred providers of an array of cloud-based services to enterprises.” This includes “everything from virtualized networks to public and private infrastructure-as-a-service (IaaS) offerings.” To Berlind, “It's just a matter of time before the telcos recognize the opportunities, realign their currently siloed businesses, and embrace more of a 'Telco 2.0' culture.”

In fact some analysts argue that, in order for telcos to remain relevant to consumers in a post-PSTN era, “data-centric” services, via the cloud, will have to become a priority. Possibilities include, of course, Enterprise Cloud Services—meaning data storage and processing, which some providers are already doing by owning and operating cloud computing facilities, or by partnering with other third parties. But there are also opportunities to participate in Consumer Cloud Services, which securely store consumer data and digital entertainment services.

For now, it's mostly the big companies like AT&T or Verizon who are making headlines with cloud services, data centers, and the like. But as I've talked with small and regional providers in rural areas recently, most of them admit that they, too, are exploring cloud services. For example, when I spoke to Peoples Telephone Cooperative marketing director Lisa Webber last month, she acknowledged that the Texas co-op was “looking into cloud services” and hoped to get involved in the near future. The same sentiments came from Paul Bunyan Telephone in Minnesota—in just about the same phrasing. Right now, that's usually as far as the discussion goes; rural telcos are interested in the cloud, but the question is, will they get involved in the cloud.