As the telecom networks and the cloud converge in the 5G era, the structure of the market could change radically for vendors and service providers.
In theory, we could see traditional telcos morphing into infrastructure operators – investing in wholesale networks, but also in the cloud and edge platforms to support those networks, plus other services. A hint of this is seen in Telecom Italia’s plan to set up a division to provide cloud services, amid a deepening partnership with Google.
That would leave room for a greater diversity of service providers on top of the networks, catering for the huge variety of applications that enterprises and consumers could demand from 5G/FTTx. In that scenario, the webscale giants have the opportunity to be the glue between the infrastructure and service layers, and are already forming partnerships with, and investments in, traditional telcos. That will help them drive a convergence between their cloud assets and the operators’ networks, enabling co-investment and easing their own capex and opex burden, while positioning themselves to dominate the seats of power in the new networks – the orchestrators, the slicing engines and so on.
That will be enabled by the emergence of cloud-native, open architectures, but the success of the webscalers is not assured, of course. Some telcos will welcome a combined approach to the expensive and risky job of converting to a cloud model – examples include AT&T’s partnership with Microsoft Azure, Verizon’s edge deal with Amazon AWS, China Unicom’s investment from Alibaba and Tencent, TIM’s alliance with Google Cloud. Now, Facebook, Google and Microsoft all seem to be jostling to make investments in India operators and potentially reshape that huge market in their own image. And the worst case scenario for the operators is that they are sidelined altogether in potentially lucrative markets, as Microsoft could do, having acquired Affirmed and Metaswitch, by providing 5G/cloud services directly to enterprises, using either its own connectivity in shared spectrum, or a telco ‘bit-pipe’.
But other stakeholders will resist the moves by the cloud and web companies to steal the richest fruits of the telecoms value chain. The emergence of open network platforms is setting out an important battleground. These may have started as a way to break down traditional supply chains and introduce more competition and interoperability, as operators started to virtualize their networks. But open cloud infrastructure, orchestration platforms and edge computing frameworks have all been hijacked, in various ways, by operators for broader reasons than just driving down cost by diversifying suppliers.
These open platforms are also a way for operators to achieve huge scale by building networks more quickly and cheaply than in the past, and with common foundations, to achieve the kind of global reach that webscalers enjoy in their data centers. The impact is greatly heightened now the open networks movement has spread to the RAN, the highest element of network costs, and deeply political in the context of the US/China hi-tech feud.
A few of the operators which harness O-RAN and others to steal a march on more conventional rivals will come from other industries, including the cloud world, Rakuten being the prime example.
But many will be incumbents like Vodafone, Telefónica and AT&T, which see a chance to defend their leadership position in the value chain by adopting the methods of the webscalers.
The same is true on the vendor side. Some of the potential control centers of the new networks will be open to influence by the cloud giants, notably if the they start to implement technologies such as slicing engines and cloud cores themselves, in the Microsoft/Affirmed mode. In that case, the webscalers could sideline not just the operators, but vendors like Nokia which are also looking to broaden their addressable market by offering cloud-based cores and orchestrators for service providers or enterprises.
Seizing the lead in a pivotal piece of technology is important to strengthen one’s place in the emerging value chain – hence, we believe, Nokia’s intense interest in the RAN Intelligent Controller (RIC), a significant element of the O-RAN architecture, and one which could be deployed as the ‘brains’ of an AI-driven, sliceable, wholesale network in future.