The deployment of telco networks is a complex, expensive exercise that is governed by strict regulations once licenses are awarded. In the past, voice and data traffic growth has fueled—and justified—nationwide mobile or fixed network deployments, but it is not yet clear what new revenues 5G will bring. Given that managed services and network sharing are typical procedures in network deployment nowadays, are we about to experience the next evolution of telco network deployment? Will vendors play a larger role in next-generation networks?
Could Vendors Be the Future of Telco Networks?
Telcos are now faced with two enormous challenges: evolving their technology platforms to be able to react to market demands in a matter of days (rather than months or even years) and, at the same time, changing their culture, internal processes, and operations to monetize these very same technology platforms and address enterprise verticals. At ABI Research, we call this the “UnTelco” principle, where telcos and vendors move past connectivity and become enterprise application enablers. In UnTelco, vendors could be the key to the profitability of tomorrow’s networks. There are many reasons for this:
- Ericsson, Huawei, and Nokia are each running networks that support more subscribers than even the largest telco of them all: China Mobile. The research and development (R&D) capabilities, patent portfolios, global footprint, and the overall telco network expertise for each of these vendors are unparalleled.
- These vendors are already essentially running telco networks as part of managed service contracts, which is a popular way to reduce risk and network costs.
- Can the telco industry remain profitable with the concurrent deployment of multiple nationwide access networks at the same time? Will there be enough cash to essentially deploy three or four nationwide 5G networks across the world?
- Telcos have already offloaded several parts of their business that are not profitable: physical infrastructure, cell towers, and data centers. Some telcos have even offloaded their network deployment and management completely (e.g., TT-Netværket manages and deploys Telia’s and Telenor’s infrastructures and has a managed service agreement with Nokia).
It would seem that vendors are only a step away from deploying and managing telco networks and wholesale capacity or even network slices to telcos, which can sell them to enterprise verticals. In this arrangement, telcos can focus on the client relationship and on determining how to create new services.
A Possible, but Not Easy Transition
Of course, there are technical, business, regulatory, and many other hurdles to overcome before this becomes a possibility, but vendors do have a set of advantages that make them more than capable of running tomorrow’s networks. On the other hand, there are several arguments countering this:
- Several telcos are investing heavily in fiber deployments to prepare for 5G and the overall increase in data
- Tier One telcos would argue that losing control of their network deployment and technology would render them less capable of controlling their overall strategy, which would affect their commercial
- Virtualization, cloudification, and the overall resource centralization trend currently being introduced in telco networks would require a significant overhaul to be outsourced to a network as a service (NaaS) model.
The telco market also has a high cultural inertia and the NaaS idea may not even be considered a viable alternative due to its different and somewhat disruptive nature. In reality, vendors will have a larger role to play in next-generation networks and 5G, and for some Tier Two/Three telcos, the NaaS model may provide the much-needed breathing space to survive in a cutthroat environment. Tier Ones like AT&T, Verizon, China Mobile, and DT are not likely to abandon their network plans to depend on vendors, but in 10 years’ time, the NaaS model may be the established way of deploying telco networks.
For more information about my technology coverage areas, please visit my profile on ABI Research.
