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13 November 2019

MNOs need to move quickly to the cloud, or be outgunned by new entrants

There is a long list of ways in which operators aim to change the economics of their networks when they move to 5G. One of the most important is to move towards fully cloud-based architectures, so they can take advantage of the same economies of scale and flexible, programmable architectures of the webscale world.

In the first wave of deployments, most operators have taken only baby steps along this road – a virtualised, but not cloud-native, packet core perhaps; or a migration of some data center functions to the cloud. A few telcos, notably AT&T, are forming strategic alliances with cloud giants, often focused first on enterprise customers, but with a longer term roadmap towards rolling out whole networks on private, or even public, cloud.

There is logic to this step-by-step process. Only in 2020 will deployment of the inherently cloud-native 5G core begin, and then only by a few operators. It will take some time before platforms stabilize for open, fully cloud-based RAN and core. But the danger is that the established operators will be blind-sided by new entrants which can harness cloud economics almost from day one.

This is how Rakuten, Reliance Jio, and even potentially the USA’s Dish Network say they will roll out 5G with capex budgets that are half those of their incumbent rivals, and far lower operating costs. After a wave of consolidation, new players are entering many markets, often from the media, web and broadband worlds.

Cloud-based deployment is not simple, even for those with existing web cultures and no legacy networks to support. The setbacks to Rakuten’s much-vaunted 4G and 5G-ready build-out were predictable, given the short timelines and ambitious goals, but they will not be terminal, and the Japanese ecommerce player remains a poster child for a new way to be a mobile operator.

It is important, then, that established operators, and their key suppliers, accelerate their efforts to adopt cloud-based platforms and form alliances with cloud partners. The past week saw Telecom Italia and Nokia announcing new strategic partnerships, and others will follow.