The concept of integrating data centres with bandwidth backbone should be seen in the backdrop of plethora of announcements on opening up data centres across the world in the last few months. To name a few, Qwest partnering with IBM for a $5 billion deal for setting up 28 data centres, Intel's plan to spend $1 billion on 12 data centres, AT&T-BT alliance to invest $2 billion to build 14 data centres and New World CyberBase to invest $800 million to build 10 data centres. These business plans for massive data centre build-outs by network providers during the last few months point to the fact that these players are positioning themselves as what is called the CyberCarriers.

The deregulation of telecommunications markets worldwide has led to increased competition for offering voice and data transport services. Consequently, tariff for these services have fallen drastically. Faced with commoditisation, service providers are gearing up to upgrade their legacy infrastructure and add new network elements required to compete in a more data intensive environment.

The proliferation of the Internet provides the opportunity for existing enterprises to take advantage of this new medium and for new business models to emerge as Application Service Providers (ASP) portals and online market places. The emergence of the networked economcy is changing the way enterprises conduct businesses by allowing them to cost effectively leverage network hosting services.

The idea of CyberCarrier has been derived from the fact that tomorrow's carriers need to provide both bandwith and hosting services in an integrated fashion, along with speed, security and reliability. CyberCarriers offer a range of Internet related services including transport (core and access), hosting of content applications, managed services and even outsourcing of traditional enterprise IT infrastructure.

In fact, CyberCarriers derive their main strategic advantage from the ability to control all elements along with content hosting and distribution value chain. Significantly, this control they can do from the location where the content or application is stored to the location where the end-user resides and accesses the information.

From what is observed it is clear that although CyberCarriers have the potential to become the most significant enablers of the next generation Internet economy, they have to overcome several challenges. Let's have a look at how a CyberCarrier would look like: CyberCarrier's infrastructure will comprised two central elements: A data centre where the content or application is hosted and a core and access network to transport information from the data centre to the end user. However, the data centre and the network infrastructure would be integrated smoothly and with an easy access. This will be achieved by the latest data centre and network technologies such as optical networking equipment, high capacity storage and high performance servers. The overall solution will be transparent and permit end-to-end management by the CyberCarrier and end-user.

A recent study by Booz.Allen & Hamilton has found that to offer the breadth and depth of network hosted services, CyberCarriers must guarantee better, reliable, near instantaneous application responsiveness, unlimited bandwidth, always-on-availability and security levels perceived to be 100 per cent. These performance must be provided on an end-to-end basis from the facility where the content or application is hosted to the end-user.

Two types of service providers are projected to be the most likely candidates to migrate to the CyberCarrier model. These are the Network Service Providers (NSP) who focus on transport of voice and data, and the Data Centre Operators who provides hosting of content and applications. Although NSPs and data centre operators could become CyberCarriers, NSPs are the best positioned to migrate to this new model as it is easier for them to build and integrate data centres into an existing network infrastrcture than the data centre operators to build the transport networks. Moreover, NSPs already have customers who are likely to be buyers of network hosted services, thus driving up their revenues.

It is estimated that $1 of hosting revenues generates between $4 and$7 in incremental transport revenues. It may be recalled that recent studies show that the application and web hosting market is expecte to exceed $23 billion by 2003. Based on conservative estimates, this would translates into $92 billion of incremental transport revenues. Recognising this $115 billion opportunity in the next two years, greenfield carriers are rushing to this market as CyberCarriers by building integrated data centres and network infrastructures.

In fact, an assessment by Lucent Technologies has found that the total number of CyberCarriers would go upto 771 by 2003. This include the true CyberCarriers and the NSPs who are currently transforming into CyberCarriers. Another 481 CyberCarriers would be added in the next two years. Data Centre Providers which are numbered 139 would be added by another 454 in the next two years to take the total number in the category close to 600. ASPs with infrastructure which are numbered 74 would grow slower compared to other two segments to reach just 87 by that time.

The Cybercarriers are launching a global education campaign of customers on how they can gain strategic advantage by leveraging Internet and network hosted services. This comes of the fact that while ASP model has got lot of media attention, there are a lot of confusion around what ASPs are capable of, how application rental exactly works and what is feasible from a performance perspective. In brief, service providers migrating towards the CyberCarrier model need to work with emerging players, such as ASPs to educate and create mindshare among enterprises.