TIA 2012: Inside the Network
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Good morning everyone and thank you, Grant, for your warm introduction.
I appreciate the opportunity to speak with you today at TIA 2012. It’s exciting to be surrounded by the industry leaders who are focused on transforming the way we communicate. It’s amazing to see how far we’ve come in such a short time.
This morning I’d like to take a quick look at the key trends that are shaping our industry, and then give you my thoughts on creating an integrated, future-proof platform that can meet the needs of our customers today and tomorrow.
Recently, I was able to hear Ray Kurzweil describe how the current pace of innovation can help predict the future of IT. Kurzweil is a brilliant inventor and futurist, and he firmly believes that innovation is showing no signs of slowing down. From the days of Morse code to today’s 4G LTE networks and beyond, our progress can be charted as a smooth and predictable exponential curve. Through wars and recessions, from punch cards to microchips, innovation marches on at a reliable – and increasingly rapid – upward trajectory.
For example, the landline telephone took about 50 years to reach half of the U.S. population. The mobile phone only took 7 years, and social media just 3 years. Each new generation of technology paves the road for the next generation, but much faster than before – resulting in a virtuous cycle of ever-increasing innovation.
Kurzweil used the example of the human genome project, whose progress grew at an impressive rate that doubled every year. But even at this speed, only 1 percent of this immense project was documented after 7 years. At that rate, some people worried that the project might take hundreds of years to complete. But that was a linear projection. In reality, the project was almost finished. The pace continued to double each year, and it was completed only seven years later.
This means that timing is a critical part of innovation. If you don’t anticipate the accelerating pace of change, you’ll miss the boat. Or worse yet, maybe abandon innovation a bit too early.
This has a significant effect on our industry, where the transformation has been truly incredible. The Internet seemed to come out of nowhere to quickly reach a critical mass. The same is true for search engines, online video and social networks. The innovators who profited were the ones who were prepared for the trends as they emerged. The winners caught the wave and redefined the industry, while the losers wasted time protecting old business models.
The image onscreen illustrates how innovation waits for no one. This is the world’s first digital camera, created back in 1975. This innovative prototype – which ultimately led to Kodak’s downfall – was ironically developed by a project manager at Eastman Kodak and then largely ignored. The company thought they could delay progress to protect their lucrative film business. Instead, they provided an opportunity for innovators such as Sony and Canon.
As Wayne Gretzky said, “skate where the puck is going, not where it’s been.” To stay ahead of the curve, we need to understand where today’s trends are heading, and respond accordingly.
Today, one-third of the world’s population is using the Internet, and there are nearly six billion mobile phone subscriptions worldwide. As network power, processor speeds and storage capacity increase at exponential rates – coupled with the convergence of mobility, broadband and cloud technologies – new ways to communicate and collaborate are rapidly changing our society.
The borders that limited how we communicated in the old days – and by that I mean about ten years ago – are rapidly disappearing. For instance:
• Our wired and wireless lives are coming together, as the convergence of mobile and cloud technologies enable wireless devices to provide access to content anytime and anywhere.
• Online and offline lives are blending together, as social media increasingly organize our social lives.
• And the line between work and home is disappearing as secure network applications really do enable us to be two places at once.
Thanks to these recent innovations, a new generation of educated and interactive consumers is about to revolutionize our businesses, our schools and our culture. Today’s kids and young adults have never known a world without wireless or the Internet. With their sense of empowerment and a craving for new technology, these millennials will take a more active role in driving the development of our products and services.
Today we’re carrying vast amounts of computer processing power in our pockets, and we have access to more information than we ever could have imagined. It’s truly astounding to see.
And this is only the beginning. The rapid pace of change continues to expand exponentially.
We can see a glimpse of the future by looking at the enormous increase of IP traffic on our backbone network. Our users are fascinated with new smart devices, where anything that can be digitized is moving across our networks and migrating to the cloud. Global IP traffic is growing at a compound annual rate of 32 percent – basically quadrupling between 2010 and 2015.
Video is the big driver behind these trends. As recently as 2005, video was less than 10 percent of web traffic. By the end of this year, we expect it to be 50 percent. And if current trends hold, it will be as much as 90 percent in just a few years.
After a quarter of a century, the mobility marketplace is still growing and rapidly transforming. In fact, there are more mobile devices than there are people in the U.S. At the end of 2011 there were nearly 332 million customer connections – that’s a 105% penetration rate. Smartphones and tablets outsell PCs and can do most – if not all – of what people used to do tethered to their desks.
Mobile data and video traffic is expected to almost double by 2015. In fact, by the middle of this decade, mobile devices will generate more Internet traffic than all wired devices combined.
Some of this traffic will come from the emerging market for machine-to-machine communications, as connectivity is built deeper and deeper into the physical world. Intelligent chipsets are now embedded in electronics, appliances, medical monitors, cars, buildings and utility grids – and they’re connected to the Internet through secure wireless networks.
We see the revenues from M2M connections growing at more than a 40 percent rate over the next few years. More important, we see M2M ushering in a new era of innovation and productivity. It will enable solutions like connected homes, smart utility grids, network security, automated supply chains and more.
And finally, demand on the part of large enterprises for cloud solutions is also growing at a tremendous rate. In fact, we believe this shift in IT delivery will be bigger and ultimately more influential than when mainframe computing gave way to the PC. Businesses and institutions recognize this new delivery model as a radically more efficient and effective way to organize work in a rapidly globalizing world.
But increased cloud access is not just a business trend. Consumers are also beginning to take advantage of the cloud to provide worldwide access to their digital content.
As an industry, our goal is to anticipate where these trends will go. Tomorrow’s applications need to flow seamlessly across all of our integrated and intelligent communication networks to deliver anything to anyone on any device – quickly, securely and reliably.
That’s the vision Verizon has been investing in for many years, and it’s the reality we are striving to deliver to our customers. Over the last decade, we’ve consistently introduced new technology for superior networks that deliver enhanced capacity, availability, security and intelligence – from the core all the way out to the edge.
At the center of our circle of innovation are four foundational platforms.
The first foundational platform is LTE – a great example of the accelerating innovation curve. Eighteen months ago, Verizon launched the latest phase of the wireless data revolution with our 4G network – based on the superior LTE standard. Today, our 4G LTE network is the largest in the U.S., covering two-thirds of the population. We expect to cover at least 260 million people at the end of 2012, and we’ll practically blanket the country by this time next year.
4G LTE is the fastest-developing mobile technology ever, and it’s rapidly becoming the global standard. By all measures, LTE is a true game changer: it increases mobile speeds by a factor of 10, cuts latency in half and has stimulated a new wave of innovation in wireless that will take mobility to a whole new level.
In my view, LTE will be a powerful disruptive force in video. It’s the first mobile platform sufficient for watching high quality live video and is the basis of a rapidly developing over-the-top ecosystem for video content. LTE will also jump start the machine-to-machine era. This will revolutionize how businesses operate and make possible a whole new set of solutions in areas like health care and energy.
We’re doing everything we can to ensure we have the capacity to accommodate this exponential growth in demand for mobile bandwidth. We plan to invest $3.6 billion in AWS spectrum – a major asset that will help ensure we are able to meet the ever growing bandwidth demands of our customers for the foreseeable future. We’re doing all of this without affecting our reputation for network reliability.
Our second foundational platform is fiber-to-the premises, or FTTP. Verizon is well recognized for its leadership role in FTTP technology and deployment. Our FiOS network, which launched in 2004, is the gold standard for high-speed home and small business connectivity in the U.S. In 2012, we’ll pass 800,000 new homes and businesses, for a total of around 17.5 million. We plan to offer direct fiber connectivity to more than 18 million homes upon full completion of our build-out program.
I hope you were able to hear Mike Ritter, Verizon Telecom’s chief marketing officer, give his keynote speech at the Connections conference last night. Mike described Verizon’s vision for the borderless lifestyle. Today, the average home has seven connected devices. With the spread of LTE and the growth of M2M connections, that number will grow dramatically in the years ahead.
FiOS is engineered to make the connected home the command center for all of this digital content, and we are continuing to improve speed and capacity to accommodate this explosive growth.
FiOS top speeds today are around 150 megabits per second, fast enough to download a two-hour HD movie in about 4 minutes. But the era of “big broadband” is right around the corner, as 3D video, digital home monitoring, high-capacity telework, smart energy management and in-home health care services become more prevalent. These and other bandwidth-intensive applications will continue to accelerate the IT needs of the digital household.
To stay ahead of this innovation wave, we’re going to double the top FiOS downstream speed to 300 Megs. That’s twice as fast as anything this country has seen, and will provide the connected home with enough bandwidth for all the HD programming, live streaming, 3D content and online gaming for years to come. You’ll hear more about this in the next few weeks.
We’re also extending FiOS to the business market. Ethernet services have been experiencing significant growth across all lines of business for the last several years as customers migrate from legacy services. We plan to use our FTTP/GPON infrastructure to offer Ethernet services to small and enterprise business customers. This will greatly expand coverage and availability of Ethernet and IP WAN services and reduce customer installation intervals. This also reduces future network capital requirements by reducing new construction activity for dedicated fiber builds and improves profitability by lowering service costs.
Our third foundational platform is Global IP, where we are riding the exponential curve with industry leading deployments of 100G in the backbone and other optical transport technologies.
Our global IP network operates in more than 150 countries on six continents, and we are constantly adding to its speed, redundancy and security. We have more than 200 data centers around the world and seven global Security Operation Centers.
The growth of cloud computing and content mobility places demands on our Public IP networks for ever-increasing capacity and high-speed connectivity. To reduce the costs and complexities due to these demands, our regional network design will be replaced with a single converged global network.
We see a transition to IP for all services, and our goal is to evolve to a single global IP network with a common MPLS core that keeps traffic moving seamlessly and securely from one network to another.
Verizon currently has four packet networks (Private IP, Public IP, SES and Wireless) that operate as separate backbones. With increasing demands for higher capacity backbone links, this mode of operation is costly and inefficient.
Advances in transport and router technology provide an opportunity to consolidate these packet networks onto one common backbone – reducing the number of trunks and routers necessary while increasing scale to support traffic growth.
Our 100G speeds in the long-haul fiber network are the fastest commercially available today, and we are about to extend that same functionality into our metro networks as well. By driving 100G closer to the edge, we will be able to provide higher access speeds and support the coming explosion of cloud applications, video distribution services and wireless technologies like LTE.
This deployment will create an end-to-end 100G path, allowing traffic to flow more efficiently and with greater speed, creating opportunities for new integrated industry solutions.
We will continue to transform our global IP network, setting the stage for the development and delivery of even more powerful and innovative integrated solutions for key industries such as health care, retail and financial services.
The fourth element of our foundational platform is our cloud computing infrastructure. Virtualized servers are storing all forms of digital information to be delivered to any user on any device, anywhere in the world. Experts believe that by 2015 fully 10 percent of the digital universe will be maintained in the cloud.
Cloud computing gives us the ability to virtualize IT resources such as computing, memory and storage, allowing multiple customers and multiple services to share resources within a secure cloud computing platform. Thanks to our Terremark subsidiary, Verizon is a leader in cloud computing. And by integrating our cloud assets with our network, we can put key network functions in the cloud that customers can access anywhere in the world.
Cloud services accelerate the innovation timeline and transform the way global institutions do business. We’re taking advantage of these capabilities ourselves. Take LTE, for example. Adding new features to the network typically requires coordinated change across multiple vendors and network elements. This is a complex, time-consuming, and often costly process.
With cloud computing, we can centralize much of this service logic into our data centers where features can be added at a lower cost and much more efficiently. This will be key as we move to an M2M world. We are working with several strategic partners to move these key 4G LTE support features to the cloud to speed these innovations to market.
Together, these four foundational platforms support Verizon’s strategy to be the leading global provider of secure industry solutions.
Our goal is to provide a seamless IP environment for voice, video and mobility that can deliver anything to anybody, wherever they are, on any device. We’re partnering with many of you already to deliver these kinds of game-changing solutions. Transitioning to the next era of the connected world will require tremendous innovation from the core of the network to the edge. The only way that happens is through partnerships and collaboration, and Verizon helped create an ecosystem designed to crank up the innovation engine across the industry.
For example, in the 4G LTE market we’re partnering with entrepreneurs and developers across the whole landscape. Our Innovation Program features two centers – the LTE Innovation Center in Waltham, Massachusetts and the Application Development Center in the San Francisco area.
Our Waltham lab provides a collaborative environment where partners can create LTE solutions and products and get them to market quickly and at scale. We actually take developers through the whole innovation cycle, from concept to market launch. We provide a test network, open-door labs and technology expertise to help entrepreneurs get their products and apps to market quickly.
So far, our work with some 125 developers and partners has resulted in 20 commercialized products and more than 100 prototypes, with many more in the pipeline. Our partners range from large manufacturers to small entrepreneurs. And our work has created an ecosystem of innovation across every segment of industry.
The solutions coming out of our innovation labs – and the many more M2M applications and cloud solutions on the horizon – have the potential to revolutionize how global organizations manage their operations. Inventories can restock automatically. Equipment will order up its own repairs. Entire supply chains will be automated. Energy use will be monitored and controlled.
Again, this revolution is just beginning. We’re committed to being a catalyst for change to help customers harness the innovation process to meet their strategic needs.
Just like in the human genome example, we can’t view innovation with a linear perspective. We need to be prepared for the incredible changes that will be coming our way faster than ever before. By anticipating the exponential trajectory of change, we can be prepared for new opportunities and growth. Best of all, by working together to create the integrated network of tomorrow, we’ll help create economic and social value for our industry and our nation.
But to do this effectively, we first need to find solutions to several issues that threaten to limit our ability to innovate quickly.
First of all, security and privacy must be preserved across our networks. The data on our customers’ devices needs to be kept secure across all platforms and applications. Verizon is using the unique intelligence we’ve gained from our annual data breach study and our own global backbone to introduce a new set of cloud-based security technologies that can pick up simple intrusions before they become widespread disasters. By detecting deviations from normal network behavior, we can recognize these cyber-crimes while they’re in motion and prevent them from doing damage to our clients’ networks.
But it’s not enough to just protect the data of large enterprises and government agencies. Smart devices contain important personal data like contact information, location or social security numbers that must be protected. We need to work together to make sure that this information remains private, and that we are transparent in how applications use personal data.
Second, we need to free up government spectrum that could be better used for commercial mobile services. The NTIA’s recent report focuses on this issue and suggests that one step industry and government can take is to explore options for a commercial player and a non-commercial entity to share spectrum. Government and industry must work together to find ways to use spectrum more efficiently, and our industry is anxious to do its part.
Just as important, we must ensure that we have a well- functioning secondary market for spectrum sales and transfers between industry players large and small. This will allow spectrum that is currently unused or underutilized to be used for better and higher purposes: meeting consumer needs.
More spectrum means more innovation in health care, improvements in public safety and greater educational opportunities for all Americans. And, more spectrum means that we can ensure that America leads the world in broadband infrastructure and innovation, and that our industry continues to serve as a vibrant growth engine for America.
Finally, we need to create open standards and new business models that enable the collaboration that will move our industry forward. Today’s highly complex information ecosystem requires a different way of working than the “do-it-yourself” models of the past, challenging all of us to embrace collaboration and innovation without sacrificing the security on which our networks depend.
We at Verizon look forward to a long and fruitful partnership with all of you as we work together to lead our industry forward in the years ahead.