One of the most important factors that will shape the future of the mobile industry is how the role of the webscalers evolves. The Internet giants have already reshaped the user experience and with it, the device landscape, and have largely driven the change in mobile network usage that has come with consuming most content and data streamed from the cloud.
However, for the Internet players which are also cloud infrastructure and services giants – Amazon AWS, Google and Microsoft Azure and their Chinese counterparts, Baidu and Alibaba – there are further opportunities to take a bigger share of the value chain, largely at the expense of operators again. As networks become cloud-based and operators seek to expand their content, enterprise and IoT activities, there is the chance for the webscalers to provide the cloud and developer platforms that will underpin 5G networks, and even to enable a new connectivity landscape by supporting non-traditional service providers, offering 5G access in shared spectrum and network-as-a-service models.
Dominating the 5G cloud will not be a shoe-in for the webscalers. In many developed economies, operators have largely given up on building and operating huge clouds themselves and are eager to partner with the giants. However, as the cloud gets distributed out to the edge, sometimes in parallel with 5G, there will be a new opportunity for operators to take the upper hand in providing the critical underpinnings of new enterprise and consumer experiences.
And in many markets, the US giants are hardly present, and the value chain is still up for grabs. This partly explains the investments that all three US majors are making in Indian operators, and they will doubtless turn their attention to major sub-Saharan African markets, where telcos are the main cloud providers, in future. In some Asian markets, network and cloud companies are closely entwined, as with Japan’s NTT group, and while China has its own webscalers, their relationship with the three telcos is a closer and more complex one than that between, for instance, Verizon and AWS.
The major western operators have largely accepted that they cannot keep the web giants out of their 5G value chains altogether, so they are seeking to preserve a leadership role by leveraging their obvious advantages – large amounts of spectrum, decades of experience building and running cellular networks, device ecosystems, one-stop billing, thousands of locations in which to place edge nodes, and so on. They are also trying to protect themselves by playing with more than one of the cloud giants, encouraging enterprises to take a multicloud approach in which the telco could potentially be the primary relationship.
But while they may have challenges, in their core markets in north America and Europe, AWS, Azure and Google Cloud will be impossible to ignore and hard to outwit. Amazon and later Microsoft had been making all the running in the telecoms space, but recently, Google has come to the fore with some key operator partnerships and a joined-up edge platform and clear plans. It brings various advantages – the Android ecosystem and developer base; its proven ability to lobby regulators and drive availability of new spectrum; its assets in machine learning and its developments in hosted 5G core (which may extend, one day, to hosted open vRAN). These weapons can enable alternative operators as much as established telcos but that may be all the more reason for other MNOs to follow Orange, Verizon and Telecom Italia and get close to Google.
When Microsoft acquired two virtualized core network players, Affirmed and Metaswitch, it gave a glimpse of a world where enterprises, private network operators, new cellular entrants and even smaller MNOs might rely on cores and even RANs provided on an as-a-service basis by a webscaler. In a market like India, these disruptive models could be adopted more quickly than in the webscalers’ heartlands because of intense financial pressures on the telcos, and the willingness of Reliance Jio to take alternative approaches. This is another factor in the mounting efforts by Google, AWS and Facebook to extend their influence in the Indian telecoms and enterprise worlds.
As 5G matures and the competitive landscapes shape up in the coming years, the actions of the webscalers will play a major part in shaping the options that are open to the established operators, as well as supporting opportunities for a wider diversity of services providers too.