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Providers go for hybrid cloud as a service; Verizon wireline sale

In telecom news, service providers are making the move to hybrid cloud as a service offerings, while Verizon tries to blame net neutrality for the sale of some of its wireline operations.

An Infonetics Research report found that service providers are looking to hybrid cloud as a service as their next cloud offering, but providers face challenges in winning customers over. Meanwhile, Verizon will sell some of its wireline operations to Frontier Communications as carriers move away from a shrinking industry. And a Dell'Oro Group forecast said the global service provider router market will reach $11.5 billion in 2019 as demand for routers used for mobile backhaul and IP backbone networks grows in Europe and Asia.

Providers set sights on hybrid cloud as a service

Hybrid cloud as a service (CaaS) may be the new hot service provider offering, according to an Infonetics Research report.

Eighty-two percent of service providers plan to offer hybrid CaaS by next year by offering a wide range of cloud services and bundling off-premises cloud services with network connectivity, according to the report.

"Cloud service providers are catching the hybrid cloud CaaS wave, an emerging market where we can expect lots of innovation as the introduction of IaaS and SaaS off-premises cloud services begin to wane," said Cliff Grossner, Infonetics directing analyst for data center, cloud and software-defined networking.

The biggest challenge facing customers isn't technical, Grossner said. Service providers must overcome the barrier of customer concerns about losing control over private data. Providers must help customers "overcome resistance to procedural change or understand how to take advantage of off-premises cloud services," he said.

Verizon to sell some wireline operations

Verizon will sell its wireline operations in three states to Frontier Communications for $10.5 billion, the carrier announced.

The sale of its operations in California, Florida and Texas includes Verizon's voice, DSL and FiOS Internet and TV services. Following the sale, the carrier will concentrate its operations in the Northeast, where its wireline business has seen faster growth.

Wireline phone services have been shrinking over the years, and carriers like Verizon are setting their sights on mobile as a better opportunity for growth.

Local wireline phone service has been a shrinking industry for several years, and Verizon and other carriers see mobile as their greatest growth opportunity.

Verizon CEO Lowell McAdam said the Federal Communications Commission's net neutrality proposal was part of the reason why it was selling its wireline operations. He said the proposal is a potential threat to the growth of wired services by creating uncertainty in the telecom industry.

However, the sale to Frontier, based in Stanford, Conn., has been in the works for several years. The sale will have to undergo regulatory approvals and is expected to close in the first half of 2016.

Dell'Oro expects service provider router growth

The global service provider router market is expected to exceed $11.5 billion in 2019, according to a Dell'Oro Group forecast. Dell'Oro did not provide the projected size of the market this year for comparison. In December, Dell'Oro reported that the router market declined in the third quarter of 2014, falling almost 8% since December 2013.

Most of the market's growth will be driven by demand for routers used in mobile backhaul and IP backbone networks, said Alam Tamboli, senior analyst at Dell'Oro. Operators in Asia and Europe are investing heavily in LTE mobile networks and associated routers to better compete for subscribers. Global operators are expected to upgrade their core router platforms to new router platforms that offer a much higher capacity than previous platforms. Operators will upgrade their core router platforms to "significantly increase their backbone capacity at a much lower cost per bit transmitted," Tamboli said.

Dell'Oro's service provider router market forecast includes the service provider core and edge router markets.

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