Using virtualized residential gateways (vRGWs) can reduce costs and improve profit margins substantially. According to a Nokia Bell Labs study, it is estimated that network operating cost savings of 20 to 40 percent can be realized on service assurance, fulfillment and lifecycle management, depending on market conditions.
vRGWs also enable additional savings on subscriber acquisition costs. And the overall cost savings can improve profit margins by 10 to 29 percent.
What’s the key to these cost reductions? vRGWs move some functions that are traditionally deployed on the residential gateway into the network cloud, along with centralized management and control. So service providers can introduce a simpler bridged residential gateway (BRG) with home device management, per-device service assurance and control capabilities.
When functions like IP routing, NAT, firewall and DHCP are moved into the network cloud (Figure 1), it doesn’t remove the need for a residential gateway device at the customer premises. But it becomes simpler and easier to operate, maintain and troubleshoot services.
These changes benefit customers too. They can use home device management to manage service usage, QoS and security policies for each of their connected home devices. And vRGWs can contribute to increased customer loyalty.
Figure 1. Virtualized residential gateway
Specific savings from vRGWs
The Nokia Bell Labs study found that a simpler residential gateway at the customer premises has far-reaching consequences on operational complexity, cost and profitability. Here’s a breakdown of potential savings by cost category:
Service fulfillment: 7 to 12 percent cost reduction
“Truck rolls” (technician visits to a customer’s home) can easily represent over 80 percent of service fulfillment cost.
- When residential gateways are simpler and include extended auto-installation capabilities, end point turn-ups can be faster, with fewer truck rolls to address service activation issues.
- New service features can be turned up faster too by leveraging network-based service capabilities. And fewer truck rolls are needed to address service upgrade requirements.
Service assurance: 63 to 67 percent cost reduction
According to service provider data, 30 to 40 percent of trouble tickets are related to network layer 3-7 issues. These problems can be resolved faster and more effectively using a centralized vRGW platform in combination with home device management capabilities.
- The vRGW model produces a simpler physical RGW at the customer premises. So there are fewer issues related to the RGW itself, as well as fewer truck rolls to resolve RGW issues. Plus, the success rate of first support calls improves.
- Superior analytics also help reduce the number of customer support calls because these capabilities allow more issues to be resolved before a customer complains. Consequently, fewer incidents require human intervention, and it’s easier to maintain a positive customer experience.
Life cycle management: ~66 percent cost reduction
Life-cycle management costs are relatively small compared to fulfillment and assurance costs. However, when service velocity and agility are enhanced, service providers can be more innovative and improve their time to market and revenue.
- Device management costs are also lower because the vRGW model reduces the number of physical RGW variants that need to be maintained and stocked (This efficiency results from moving a subset of functional requirements into the network).
- vRGW feature upgrades also allow centralized introduction of new service features. This approach reduces the need for pre-deployment tests and enables fast and consistent introduction of new service features.
The vRGW boost to customer loyalty
Using vRGWs, service providers can improve the customer experience and do a better job of managing services throughout their lifecycle. The Nokia Bell Labs study found that these enhancements can deliver measurable improvements in customer loyalty and time to revenue for service deployment.
For instance, customers stay with their current contract longer and are less inclined to switch providers. So less effort is required to retain existing or acquire new customers. As a result, service providers can enjoy additional savings of 12 to 37 percent on sales and marketing costs, in combination with improved time to revenue and revenue retention.
Besides operating cost savings that contribute to the bottom line, a virtualized residential gateway delivers measurable structural process improvements in customer experience, service delivery and assurance. These improvements facilitate a more innovative, agile and responsive organization that is better equipped for success as market conditions evolve.
Table 1 shows the key performance indicators that are improved by virtualizing the residential gateway.
Table 1. Improving KPIs with a virtualized residential gateway
Why vRGWs became the simple, smart solution
Today’s cloud-based applications and rich media content are driving an increasing demand for access speeds of 100 Mbps and up. In addition, a broader array of user devices and gadgets now connect to the digital home network, and the transition to IPv6 is well underway.
As a result, in-home residential gateways have become so complex that traditional implementations impede service velocity and agility. Service providers must juggle an increasing number of hardware makes, models and versions, while struggling to maintain a consistent and customer-friendly service experience.
These little boxes play an important role in delivering a customer’s services. So they pack a ton of features — and may require home installation by a technician, with repeated visits for problem solving or upgrades. As a result, the traditional residential gateway represents a large slice of service fulfillment, assurance and lifecycle management costs.
vRGWs have emerged as an effective way to reduce those costs, while keeping customers satisfied. To learn more, take a look at the related materials we’ve provided.
The case for a vRGW financial white paper