Telcos uncertain when cloud spend will pay off

Jessica Scarpati
23 May 2011
Consumer, business telecom cloud services have pros and cons
Although most of the attention on cloud services has focused on the enterprise market, service providers aren't ruling out consumer cloud services as a viable market—especially as Amazon, Google and Apple deploy or plan to deploy consumer cloud services. Most recently, Amazon announced a Storage as a Service application, Cloud Player, for storing and playing music files in its cloud; Apple has long been expected to release a competing consumer cloud service for iTunes.
AT&T is currently focusing on the enterprise and small- to midsized business (SMB) markets for telecom cloud services, but consumer applications around mobility are "a huge opportunity," Breen said in an interview after the panel discussion. Smartphone and tablet users would likely pay a small monthly fee to back up data saved on their device to a cloud environment, and the data would be recoverable if the device is lost or stolen, he said.
"We think that's something that over time will find its niche," Breen said. "[Consumer] applications that are more tied to the cloud for storage ... is something that will monetize and pay dividends for us."
But profiting from the consumer market is not without its challenges. Service providers must ensure they have a high-quality product and pricing model from the start, a goal that doesn't always match carriers' track records, said John Trembley, director of product marketing at Netformx, a network design software vendor, and another panelist.
"The industry has a very bad habit of taking something that's quite not ready for primetime and making it free ... and somehow when it magically gets better, [providers say], 'We're going to charge for it,'" Trembley said in an interview after the session. "That's a dangerous path for consumers."
Hulu made that mistake when releasing its subscription-based Hulu Plus product in late 2010 after offering - and maintaining - a free service for the past two and a half years, Trembley said. Although Hulu is a private company and not required to disclose its numbers, its CEO recently wrote in a blog post that Hulu Plus is expected to surpass 1 million subscribers this year; by comparison, about 27.5 million viewers watch its free content each month, according to research firm comScore.
Enterprise customers will be more willing to pay for telecom cloud services, but they also have their challenges, Trembley said. Some IT pros will resist buying cloud services, fearful that it will put them out of a job—such as an enterprise telecom pro who avoids cloud-based VoIP services, he said.
Enterprises are also often unaware of the hidden costs in private cloud services, such as the need to invest in Layer 3 switches or more wide area network (WAN) bandwidth to support a new service delivery model, Breen said. However, he didn't expect that to be a deal breaker.
"Companies who used to have a T1 in the building because they had all the brains in there now have to buy an OC3," Breen said. "[But] the business owner looks at it from the ROI perspective, and it's usually a favorable ROI."
Jessica Scarpati is a news writer at
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