Boundaries Always Get Porous in Converging Industries

Public network services traditionally generate “connection” or “service” revenue. Local area connections mostly do not do so. Local area networks--cabled or wireless (Wi-Fi) typically generate hardware, systems integration or maintenance revenue, but rarely direct “connection services” revenue such as earned by connectivity providers selling private line, Ethernet WAN connections, connections to internet exchange points or public cloud computing services. 

The salient exceptions so far, have been business Wi-Fi connections at large public venues such as airports, sports stadiums or convention centers, as well as cross connects inside data centers. 

Consider shipments of Ethernet ports in 2021. The bulk of such shipments are to cloud service providers. Telcos are second, enterprises third. 

source: IHS Markit 

The point is that entities might use such ports for internal LAN communications, cross connect services inside data centers, edge-created enterprise WAN services or public network services. 

WAN services often are created directly by enterprises themselves, rather than purchased from connectivity suppliers, so it often is difficult to know precisely how much activity is “infrastructure” purchases by enterprises to create their own edge networks and how much is service revenue earned by service providers of one sort or another.

Tomorrow’s situation could change. In principle, as networks and server functions are virtualized, it might not matter very much where devices and resources are located. They might be within the same building, the same data center or at remote locations. 

Connections inside the same building tend not to carry service charges. But that could change, in some cases, with greater use of 5G private networks. Connections within a data center do generate service revenue (cross connects), as do some WAN connections between data centers, data centers and internet exchange points or between remote servers located almost anywhere. 

Much WAN traffic now is carried over private networks, some owned by hyperscale app providers and essentially in the same category as older LAN traffic, also exchanged over private networks. 

But most LAN traffic also has access to WAN connections as well. The observation is that former boundaries between private and public traffic, LAN and WAN, infrastructure and services based supply, are becoming more porous.