JUSTIFYING NFV TO THE CFO: THE vCPE SERVICES BUSINESS … · 2018-01-09 · Residential virtual CPE (set-top-box and residential broadband CPE) for double- and triple-play services

Justifying NFV to the CFO: the vCPE services business case

© Analysys Mason Limited 2015

TM FORUM LIVE 2016

JUSTIFYING NFV TO THE CFO:THE vCPE SERVICES BUSINESS CASE

Larry Goldman

9 MAY 2016



Introduction to the business case model

2

Enterprise vCPE for managed network and security servicesfor large enterprises only Residential virtual CPE (set-top-box and residential broadband

CPE) for double- and triple-play services

Composite Tier 1 developed markets derived frombenchmarks, CSP interviews and secondary research 110k enterprise sites; 17m residential households

NFV/SDN first movers’ ROI for delivering enterprise andresidential CPE-enabled services Migration of existing customers to vCPE

CSP profile*

Focus

Use cases

5year migration with after initial 1year of investment Impact on CPE supply management (SM), order to cash (O2C)

& trouble to resolve (T2R) processes (capex & opex)

Otherconsiderations

* Model is flexible and reconfigurable to developing markets



Enterprise vCPE is a case for revenue; residential vCPE is acase for cost savings

3

Enterprise vCPE

Cloud VPN Bandwidthscheduling

WANoptimisation

ADCFirewall

• NPV = USD1.1 billion

• ROI = 156%

• Payback period = 3.1 years

• 47% cost savings per site

• 79% O2C improvement

Residential vCPE• NPV = USD0.5 billion

• ROI = 49%

• Payback period = 4.9 years

• 82% cost savings per household

• 68% order-to-cash cost reduction

IPv4/v6 NAT

Firewall TR-069DHCP

Set-top box



Enterprise vCPE: 79% improvement in O2C will underpinUSD1.4 billion new revenue

4

• VNI/vCPE reuse; lower priced COTSequipment; faster implementation

Trouble to resolve cost reduction

Order to cash improvement

42%42%

79%79%

• Automated delivery of NFV services

61%61%

CPE supply management savings Revenue upliftthrough upselland cross-sell

5%5%revenue benefit

over 5 years

EBITDAimprovement after

5 years

cost saving per siteper year, after

migration

USD1.4BUSD1.4B

~4 p.p~4 p.p

47%47%

NFV/SDN-enabledmanaged networkingservices:• Dynamic VPN or WAN

configuration• Self-service

bandwidth on-demand

• Data centreinterconnect services

• Security as a service• VNF as a service

• Reduced call handling, MTTFand fewer site visits



Residential vCPE: up to USD1.34 billion net cost savings candrive initial investments in digital home services

5

• Upgradingbroadbandbandwidth or tariff

• double-play totriple-play –adding video (e.g.IPTV)

• increasing cloudDVR storage

90%90%

68%68%• Automation of service changes/upgrades,

termination, and configuration• Fewer visits for ‘on-net’ services

54%54%• Fewer faults with plug and play kit• Reduction in site engineer visits• Reduced customer compensation

5%5%

Order to cash improvement

CPE supply management savings

Trouble to resolve cost reduction

Increase inupsell andcross-sell

• Cheaper CPE hardware & procuring• Efficient and effective reuse, upgrade, repair,

manage, pre-configure, and warehousing

net cost savingsover 5 years

cost saving perhousehold per year,

after migration

revenue benefitover 5 years

USD1.3B

82%

USD655M



CSPs need to reach a critical mass of 40% for enterprise and 50%for residential vCPE customer migration

6

Residential vCPE cashflowEnterprise vCPE cashflow

Excludes SME revenue and new site additions

0

20,000

40,000

60,000

80,000

100,000

120,000

-200

0

200

400

600

800

1,000

Year0 Year2 Year4 Steadystate

Num

ber

of e

nter

pris

e vC

PE

site

s

Cas

hflo

w (

US

D m

illion

s)

Cash Flow Total vCPE sites

Competitive pricing willreduce benefits

Criticalmass:~40%

of sites

0

2

4

6

8

10

12

14

16

18

-400

-200

0

200

400

600

800

1,000

1,200

Year0 Year2 Year4 Steadystate

Cus

tom

ers

mig

rate

d (m

illion

s)

Cas

hflo

w (

US

D m

illion

s)

Cash Flow Total vCPE customers

Competitive pricing canreduce cost benefits

Criticalmass:~50%of customers



Key assumptions used in the model

7

• Pay-as-you-grow VNF license after initial (Year0)investment, and PnP vCPE to reduce site visits

• vCPE reuse and procurement benefits were detailed

• Pay-as-you-grow VNF license after initial (Year0)investment, and PnP vCPE to reduce site visits

• vCPE reuse and procurement benefits were detailedvCPE PnP and PAYG

• Benefits are NOT calculated on elapsed time, asscheduling is lengthy

• Benefits are NOT calculated on elapsed time, asscheduling is lengthy

Savings on actual man-hours

• Cost duplication (existing and new spend) is includedin the model

• Cost duplication (existing and new spend) is includedin the modelMigration model

• No field visits needed for ‘on-net’ vCPE connections• No field visits needed for ‘on-net’ vCPE connectionsNo field visits for ‘On-net’

• P2P, access network build, training, sales andmarketing, new line installation

• P2P, access network build, training, sales andmarketing, new line installationBAU excluded



Overview of enterprise vCPE architecture used in the model

8

Virtual CustomerPremises Equipment

(vCPE) Virtual Provider Edge(vPE)

Self-careportal

Cloud VPN

Bandwidthscheduling

WANoptimisation

ADCFirewall

Service request,Drag & Drop

design

Automated ordercapture, service

translation

VNF store

VPN ADCFW WoC

Zero-touch,automated

network scaling &configuration

Rapid remotedelivery of

VNFaaS

Service orchestration

Servicefulfilment

Servicefulfilment

Network orchestration

SDNcontroller VIM

Serviceassurance

Serviceassurance

vNGN OSS



Overview of residential vCPE architecture used in the model

9

vNGN OSSEnables

Virtualised controlof CPE

Service layer

vBRAS

vCGNATIPTV Other services

vDHCP UPnPTR-069

IPv4/6 Set-top box Service orchestration

Servicefulfilment

Servicefulfilment

Network orchestration

SDNcontroller VIM

Serviceassurance

Serviceassurance

Residential customerpremises equipment

(CPE)Accesspoint Switch

Modem



Enterprise and residential vCPE have key differences which werefactored into the model

10

Enterprise vCPEEnterprise vCPEHigh ARPU – revenue caseHigh ARPU – revenue case

Higher growth marketHigher growth market

Lower total costs with stronger PAYGmodel

Lower total costs with stronger PAYGmodel

Lower data centre costs withenterprise vPE

Lower data centre costs withenterprise vPE

Price erosion affects revenue benefitPrice erosion affects revenue benefit

Residential vCPEResidential vCPELow ARPULow ARPU

Low growth marketLow growth market

Lower total costs with stronger PAYGmodel – cost savings case

Lower total costs with stronger PAYGmodel – cost savings case

Higher data centre costs forresidential vCPE build out

Higher data centre costs forresidential vCPE build out

Price erosion eats into cost savingsbenefit

Price erosion eats into cost savingsbenefit



vCPE is in the network virtualisation front seat thanks to thisbusiness case, thanks to strong voices in the industry

11

“SDN-enabled network-on-demand is drivingup to 95% improvement in our provisioning

cycle times and getting rave reviews.”

John Donovan, AT&T

“Telefónica mainly expect its vCPE solutionto reduce costs, but also to deliver new

services to residential customers in at leasthalf the time it takes today.”

Telefónica Group, 2014

“Some customers don’t, and never will,see the need to pay for a special set-top

box to watch TV.”

Brian L. Roberts, Comcast

“Thank you for pointing out the firstmover advantage.”

Incumbent EMEA CSP

“We were doing a vCPE business case andneed to reconsider now.”

Tier-1 global vendor



Key takeaways – this case is “IF to go forward with vCPEservices”

12

• Enterprise vCPE case for revenue• Enterprise vCPE case for revenueUSD1.4 BillionUSD1.4 Billion

• Residential vCPE case for savings• Residential vCPE case for savings82%82%

• First mover’s advantage is real• First mover’s advantage is real156%, 49% ROI156%, 49% ROI

• Order-to-cash automation and self-provisioningprovide tactical opex savings and strategic revenueincrease

• Order-to-cash automation and self-provisioningprovide tactical opex savings and strategic revenueincrease

79%, 68%O2C improvement

79%, 68%O2C improvement

Next step: “HOW to go forward with vCPE services”Next step: “HOW to go forward with vCPE services”


© Analysys Mason Limited 2015 13

1 For more details, see Analysys Mason’s Global telecoms market: trends and forecasts 2015–2020.2 For more details, see Analysys Mason’s M2M device connections and revenue: worldwide forecast

2014–2024.

IPTV service revenue, worldwide1 IoT/M2M connectivity-related revenue and average revenue perconnection (ARPC)

The next NFV/SDN business cases will be driven by video servicesfor vCDN and vEPC, and IoT and M2M services for vEPC

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

10

20

30

40

50

60

70

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

ARPC

(USD

)

Reve

nue (

USD

billio

n)

Automotive and transport

ARPCOther

Financial servicesHealthcare IndustrialPublic sector

UtilitiesRetail

Security

2832

3538

4143

0

5

10

15

20

25

30

35

40

45

50

2015 2016 2017 2018 2019 2020

Reve

nue (

USD

billi

on)

8.7%

Source: Analysys Mason Source: Analysys Mason



NFV/SDN for fixed video will enable cost-effective transition to multi-screen/OTT and 4K/8K services to protect and grow revenue

30%Capex

savingsfrom using

Cloud videoSDP vs. on-

premise

vCDNcapex

savings• Increased

scalability formanagingtraffic peaks

• CSP-ownedvCDN vs.Global CDN

Networkefficiencieswith SDN

• vProbes –Video trafficoptimisation

• Deferrrednetwork capex

Cloud DVRvs. STB

DVR• Centralised,

re-usablecloud storagesavings

• Cloud storageupsell

Opexsavings

from• Reduced

time-to-market

• Increasedefficienciesin P2P, T2Rand O2C

Serviceupsell &reducechurn

• Multiscreen/OTTservicestargetingnewsegments

Analysys Masonreport to bepublished in

June/July 2016



Mobile video case is will be driven by a mix of new revenue and costsavings – convergent CSPs are likely to have the biggest benefits

15Model results & updates

Monetisemobile video

• Sell & upsell newmobile videoservices (i.e.unlimited OTTvideo, originalcontent etc. )

Mobileadvertising

• New revenuefrom mobile &location-basedadvertising i.e.events,sponsorshipsetc.

Video trafficoptimisation

• Mobile-specificvideo/contentoptimisation

• Mobile-edgecomputing(MEC)

Fixed-mobileconvergence

• SDP and CDNoverlaps fordelivering bothfixed and mobilevideo services atlower cost andhigher revenue

Mobile vCDNsavings

• CSP-owned vCDNvs. Global CDN

Analysys Masonreport to bepublished in

June/July 2016



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Contact details

Larry GoldmanPartner – Head of Telecoms [email protected]

CambridgeTel: +44 (0)1223 460600Fax: +44 (0)1223 [email protected]

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Documents

JUSTIFYING NFV TO THE CFO: THE vCPE SERVICES BUSINESS … · 2018-01-09 · Residential virtual CPE (set-top-box and residential broadband CPE) for double- and triple-play services