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13 December 2022

Operators lay modest but important foundation stones for 2023 growth

Special Report: Operators get creative for 2023

Wireless Watch is often cautious about, and sometimes critical of, operators’ slow progress towards the goals they set out at the dawn of 5G – to use the new networks to become digital service providers, to generate new enterprise revenue streams, to forge a new and mutually beneficial working relationship with the hyperscalers, to drive a new open network platform and ecosystem.

All four are goals that, if met, would shake up and transform the mobile telecoms industry and usher in new services, business models and suppliers. But in all cases, progress has been slow to match the fine words.

But of course, industries and incumbent players move slowly and have significant legacy skills and infrastructure to migrate, and high degrees of risk to take. No surprise that new entrants can move more quickly and appear far more exciting to observers. But behind the headlines, many operators are making some progress, and putting in place projects and changes that may seem incremental now, but represent the first step on a path to more radical change in future.

For our penultimate issue of 2022, then, we decided to look away from the barriers and stumbling blocks for a short while, and highlight some examples of these apparently modest, but significantly interesting, initiatives by five tier 1 operators – all of them committed to new architectures and business models, but all constrained by their established revenue streams, networks and regulatory environments.

In very different ways, new moves by Bharti Airtel in India, and Telefónica Group, show how operators are starting to think very carefully about their relationships with the major US hyperscalers. In China, recent financial results indicated that, in fact, the pattern of growth in digital services revenues has swung back towards the big telcos from the cloud giants such as Alibaba and Baidu. The same is not true in other regions, but operators – having, in most cases, lost the cloud services wars to the hyperscalers at an early stage – need to consider how to improve the balance of power as they build out 5G Standalone and potentially edge compute.

The ’true 5G’ + edge combination has all kinds of potential for operators to form a strong balance of mutual advantage with hyperscalers (the three US public cloud giants plus Meta), marrying respective expertise in distributed infrastructure management, and centralized scale plus developer platforms. Telefónica is said to be negotiating with all three US public cloud hyperscalers about running an API marketplace that could give operators a real stake in the 5G-enabled developer community – rather as Verizon appears to be doing via its edge-centric alliance with AWS.

Meanwhile, the two leading Indian operators, Airtel and Reliance Jio, have a particularly close relationship with the US hyperscalers, which have acquired stakes in the operators, and now Airtel is set to extend the partnership with Meta to cover many aspects of infrastructure, from Open RAN and slicing to subsea cables (see below).

Open RAN is also a big feature of the roadmaps of Telefónica, Vodafone and other major European incumbents, but so far actual deployment has been very modest compared to the telcos’ grand ambitions. The networks, unsurprisingly given their newness, have not been adequate for dense urban 5G environments, unless in greenfield scenarios (and even then, often with heavy customization). So Vodafone – the most ambitious of the European incumbents in its Open RAN trials – is laying an important stepping stone as it announces its first urban Open RAN project.

For most operators, real change in their fortunes and their value chain role will only come when they can identify genuine and significant new sources of revenue to improve their overall finances. Only then will most be able to embark on ambitious changes of architecture, or co-investments in edge compute or brand new infrastructure.

So the plans by many operators to add fixed wireless access (FWA) or new B2B services to their portfolios in 2023 may sound uninspiring compared to the digital services promised by SK Telecom in Korea or Rakuten in Japan. Swisscom and T-Mobile USA have both detailed such plans in the past week, to little fanfare. But such moves are worth noting, because they may prove just as important in boosting market share, revenues and profits in 2023, and laying the first foundations for more dramatic commercial and network changes to come in future.