The NBN and the new cloud battleground: Control Shift

As I’ve said before, at its simplest, cloud computing simply means “your data is on someone else’s server and you access it over the internet”.

Recently, a new front has opened up in the battle to control this increasingly competitive market.

The tale begins back in March, when Telstra announced a cloud computing partnership with network equipment maker Cisco as part of a major push into the south-east Asian cloud services market.

Telstra’s model is, in part, to offer large enterprises cloud services off its (and Cisco’s) datacentres, “bundled” with a dedicated fibre-optic link direct to its customers’ premises. Those premises, in turn, could be a CBD office building, major retail complex, data centre or warehouse.

In Telstra’s language, it’s gearing up to offer its government and big businesses customers a “network, applications and services” (NAS) model.

Then, earlier this month, Microsoft announced a new product called ExpressRoute that allows businesses to get a direct fibre-optic link to the tech giant’s cloud hosting service, which is known as Azure.

The interesting thing about Microsoft’s ExpressRoute is that it appears, at least from what has been announced so far, to be based on a broadly similar concept to Telstra’s NAS model.

SingTel, the Singapore-based parent company of Australian carrier Optus, has already signed on as a Microsoft partner, with Microsoft providing its Azure cloud services and SingTel offering the direct fibre optic links. It’s not going to let Telstra gain a foothold in south-east Asia’s cloud market without a fight!

Globally, SingTel and Telstra aren’t the only ones to be going down this road. Microsoft’s ExpressRoute partners currently include US telco giants AT&T and Verizon, along with UK incumbent telco BT, Equinix and Telecity.

Meanwhile, Cisco’s other partners include Canadian firm Allstream, European company Canopy, Ingram Micro, Logicalis Group, MicroStrategy, OnX Managed Services, SunGard Availability Services and Wipro.

Likewise, in Australia, it’s not just SingTel and Telstra which are gearing up for a slice of the fibre-and-cloud action.

Late last year, TPG purchased the wholesale arm of AAPT, formerly known as PowerTel, off Telecom New Zealand for $450 million.

While the deal didn’t include the retail arm AAPT SmartChat – iiNet had already purchased that back in 2010 – it did include a network of fibre optic cables laid through ducts in the CBDs in our mainland capital cities. Aside from offering direct fibre connections to apartment buildings in competition to the NBN, the deal also positions TPG to offer CBD-based businesses direct fibre links to cloud services.

In contrast, where rival iiNet is betting on the NBN, it maintains its own nationwide cloud-based content delivery network of its own.

This fibre-and-cloud NAS strategy makes sense to telcos, which are increasingly witnessing revenues from their once-lucrative voice call and SMS service businesses erode at the hands of VOIP providers and mobile messaging apps.

Meanwhile, for large enterprises, having a direct, dedicated fibre optic cable link to a cloud provider means having a low-latency, high-upload speed connection to cloud-based services such as Office 365 or their server backups.

However, when it comes to small businesses out in the suburbs having similar, direct fibre links to their cloud-based services, federal government policy is a mixed bag.

On one hand, the federal government’s new small business guides to cloud services implicitly acknowledge the growing importance of cloud-based services for businesses.

On the other, the federal government’s multi-technology mix model for the NBN means that many businesses out in the suburbs will be relying on slower, copper-based connections to their cloud services. Meanwhile, big businesses with office buildings in the CBD will have access to direct fibre links to their cloud-based services.

In short, we’re heading towards a two-speed economy. It’s small businesses in the suburbs which are likely to be left languishing in the slow lane.