Will OpenFlow lower your phone bill?

The mobile industry is in trouble. It has built out an intelligent network that is expensive to run, but all its retail customers want it to be is a dumb pipe. At a conference Wednesday, a Verizon (s vz) executive explained the problem with its profits and detailed how he wants to use OpenFlow and software-defined networking to lower his costs.

Stuart Elby, VP and network architecture & technology chief technologist for Verizon Digital Media Services, laid out how the promise of software-defined networking could make the company’s cost curve match its revenue by cutting down on the need for expensive gear that is costly to buy and even more costly to operate. In a conversation before his presentation, Elby explained how Verizon’s network can view every single packet on the network, but how keeping track of those packets is both a big data problem and expensive from a network management perspective.

For a while already, Verizon has been trying to host as much of its network as possible on commodity boxes, running commodity servers and some Sun (s orcl) boxes at the core of its network and keeping the big, expensive gear from the likes of Juniper and Cisco (s csco) at the edge of the network. Elby was cagey about how his preference for lower-cost bit delivery might affect Verizon’s big suppliers, especially since he was seated onstage next to David Ward, CTO of Juniper (s jnpr). When Elby said he wasn’t planning on ditching any of the recent Juniper boxes he’s just bought, Ward quipped, “I appreciate that, Stu.”

However, Elby is dealing with his costs exceeding his revenue, which he explained was coming in “a matter of years,” although he didn’t specify how many. The chart above is not limited to Verizon. Nick Mckeowan, an ONF board member and a pioneer of the protocol, said that he has seen charts like that one from other carriers, including Deutsche Telecom. It’s also a topic we at GigaOM have covered many times in the past.

So how exactly does a new protocol help?

OpenFlow is a protocol that allows someone to separate the intelligence inside a switch and router from the hardware itself. The promise of OpenFlow is that operators can create software-defined networks that are programmable. For more on the topic, see this video explaining it or this GigaOM Pro article (sub req’d). For an operator, it could make it far easier to direct the packets flowing around their networks because they could have more freedom and flexibility in programming their networks to do whatever the operator wanted.

Elby, for example, proposed several use cases, including traffic steering, which involves understanding what service a packet represented and what the subscriber’s plan was and then shunting that traffic over to the most appropriate path. This might mean recognizing that a succession of packets coming from Netflix is a streaming movie, so it could be sent on its way without further investigation, or it could eventually be a way to manage heterogeneous networks.

Another example comes form the data center world, which Verizon doubled down on when it bought Terremark this year for $1.4 billion. Elby describes a scenario where a customes trying to send huge files from one data center to another could guarantee their delivery by upping their bandwidth capacity on demand as opposed to paying for a consistent connection. In this way, Verizon begins to deliver capacity as a service in a manner similar to how Amazon (s amzn) delivers compute as a service.

Elby described more options, but the message underlying his talk was that OpenFlow and software-defined networks could lower Verizon’s costs, but it also turns Verizon into a service provider with a change in the type of cost model it will have. Understanding the technology as Verizon implements it and how it will change its spending on equipment and operating its network is one thing. Understanding the new business models that Verizon can implement as it provides what can become a multi-tenant, shared network model even for enterprise clients is another. It’s going to be fun, but I’m not sure if it will actually result in a lower mobile phone bill.