Pay-TV’s weak 2Q video sub adds and recent stock volatility are only the latest evidence that OTT video is accelerating. For many service providers, dealing with increasing OTT streaming traffic is a major challenge as the traffic explosion puts pressure on them to control costs while increasing capacity. The problem is even more obvious when supporting large-scale OTT live video streaming.

Enter software-defined networking (SDN), a cost-effective approach suitable for the high-bandwidth, dynamic nature of OTT video. SDN manages network services through abstraction of lower-level functionality. AT&T senior evp of technology and operations John Donovan, shed some light on the ISP’s move to SDN during the company’s analyst day last week. The company plans to virtualize 5% of its network by year-end and aims to virtualize 75% of its network by 2020, according to the exec. AT&T first launched its software-defined Network on Demand service over its fiber footprint in Texas last year and has since expanded it to more than 100 cities. And the initiative has already paid off. The feature, which allows business customers to increase and decrease the amount of bandwidth they need in real time, has resulted in 95% improvement in provisioning cycle times, Donovan said. “What we’re doing is ambitious in scale and scope, and it’s aggressive in its time frame and investment… But it’s necessary and central to AT&T’s transformation,” he said.

Cable is eyeing SDN to save costs as well. With SDN and network function virtualization (NFV), CableLabs forecasts that by 2018 the combined technologies can significantly reduce operating and capital expenses, while increasing revenue by offering new dynamic services. CableLabs is bringing SDN and NFV to the industry through 2 projects. The Open Networking project explores how to virtualize cable access network hardware elements, particularly headend devices such as cable modem termination systems. The other project seeks to develop a virtual CPE prototype to demonstrate the applicability of these technologies on low-end devices. AT&T’s Donovan summed up the main benefits of SDN this way: It’s faster, cheaper and it modernizes legacy networks.

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