Telco carriers promise an upgrade to business class with their cloud services. (Photo: Flickr/Luke Lai)

The telco carriers want to put you in business class when you fly through the clouds.

Coach may be fine for your digital vacation memories, the argument goes, but enterprise applications need the performance, security, and guarantees of the telco carriers. In short, the carriers say, turn to us for business-class cloud services.

Alcatel-Lucent aims to be the platform provider the carriers turn to enable these services. The Paris-based telecommunications equipment maker has announced a one-ring-to-rule-them-all cloud services platform that spans data centers and the network. The CloudBand platform promises carriers the means to offer businesses meaningful service-level agreements that guarantee performance levels like uptime.

Cloudband is a meta-platform that oversees the interactions among carrier networks, public clouds, and cloud computing platforms (whether its own or those from OpenStack, Joyent, Cloud.com and the like). Cloudband includes Cloudband Nodes, which are data center-based computing, storage and networking cloud platforms, and the CloudBand Management System, which coordinates services between the network and the cloud.

A key aspect of CloudBand is the ability of carriers to distribute CloudBand Nodes so that nodes are close to customers. This allows the carriers to optimize services based on network performance metrics like latency. CloudBand uses algorithms developed at Alcatel-Lucent’s R&D arm Bell Labs. The algorithms let carriers offer services based on location, cloud node availability, system response time, network usage, and service-level agreements, according to Alcatel-Lucent. CloudBand also allows carriers to balance loads across the system by moving services to regions of the network that have available capacity.

CloudBand is the right idea in an over-heated market that lacks substantive differentiation, said Camille Mendler, a principal analyst with Informa Telecoms & Media. “Many telcos have made a headlong rush into cloud without practicing what they preach internally, which is dumb [and] also jacks up their costs to deliver cloud services,” she said.

Verizon, Telefonica, NTT, Rostelecom, Orange, KT, Telmex, and other carriers have invested heavily in cloud infrastructure, said Mendler. “Telcos like investing in physical assets if they can afford them,” she said. “Of the $11+ billion telcos have committed so far in 2011 to cloud infrastructure, I’d say 80% or more of the deals/investments have involved data center assets.”

“But if you don’t build your datacenter right, you’re not going to achieve decent profit margins for cloud services,” said Mendler. Infrastructure as a service should deliver about 40% gross margin, she said. “Frankly, most telcos can’t yet claim that.”

For the most part, telcos are selling commodity cloud services that can only be differentiated by price, said Mendler. “I fear a race to the bottom in cloud service pricing, and [carriers] stupidly fighting against Amazon,” said Mendler. “It’s partly why I like the Alcatel-Lucent CloudBand proposition, because it could introduce quality differentiation in the market.”

Alcatel-Lucent’s platform could allow carriers to better control their IT and networking assets, which would open opportunities for them to differentiate their services, said Mendler. By offering truly end-to-end cloud services, the carriers would be able to offer better contractual guarantees, she said. “So-called SLAs (service-level agreements) governing cloud services in general are mediocre to pitiful in my experience.”

By definition, accessing a cloud service involves various IT and network elements: servers in a datacenter and wired or wireless connectivity to a connected device. “If you can control the ebbs and flows of network traffic and computing cycle needs, you’ve got a better chance of managing service demand [and] preventing or working around outages, which happen all the time,” said Mendler.

Whether CloudBand is able to deliver on its promise will be determined by the experiences of live paying customers, she said.

The carriers need to do something. Public cloud service providers are also targeting the business-class customers the carriers are focused on. “Amazon is upping its game,” said Mendler. Amazon’s AWS Direct Connect Service offers dedicated secure network connectivity to Amazon’s cloud services. Amazon tapped telcos Level 3 and Abovenet and interconnect maker Equinix to build its connection service.

Ultimately, telcos need to wean themselves from believing they need to own all the assets to deliver a given service, said Mendler. Customers are going to use multiple clouds from different providers, for different purposes and different quality and security levels, she said. “Telcos have to be prepared – as in the airline industry – for a future where they ‘code share’ with Amazon to get their customer to the right destination.”