VNFs On Public Cloud Signifies a New Approach for Cash-Strapped Telcos

In August 2017, ZTE announced that they have deployed the world’s first carrier-grade vIMS and RCS on Amazon Web Service (AWS). The announcement came after several years of effort by ZTE to create a virtualized network function (VNF) on the public cloud that offers carrier-grade capabilities. This also allows ZTE to expand their network function virtualization (NFV) product portfolio.

ZTE’s vIMS and RCS service runs as virtual machine (VM) on AWS EC2, which means Metaswitch’s Clearwater IMS remains as the industry’s only vIMS in container architecture (which is also open source), before the industry starts to see the emergence of container-based VNFs in the next two years.

In the past, rolling out IMS related services, such as RCS, VoLTE and VoWiFi, required the deployment, testing, configuration, and calibration of new network hardware. The movement towards NFV reduces the cost of network operation and expansion, but the complexity remains. The decoupling of hardware and software does create better economics but also creates demand for interoperability testing, not just between x86 hardware and network functions, but also for interfaces between VNFs from different vendors.

Now, using AWS-based IMS, small operators and MNVOs with limited capital expenditure can roll out new services in an efficient and scalable manner, with supposedly little compromises on service quality. At the same time, ZTE also hopes this move will lower the barrier for major telcos who wish to use public cloud as a platform for testing and launch of new services. Many major telcos are using AWS for business enterprise services and are definitely familiar with the strength of AWS.

On the other hand, there are many challenges associated with VNFs on public cloud. Topping the list is jurisdiction. Data sovereignty regulations require companies to keep data within national boundaries. Now, AWS data centers are only available in a handful of countries, namely the United States, Canada, Germany, Ireland, India, Japan, Singapore, South Korea, Australia and the UK, hence limiting the reach of ZTE’s vIMS solution. Even in these countries, ZTE cannot guarantee that data will not leave the country within the Amazon cloud – which is a serious concern for several telcos.

Aside from data protection regulations, telcos are also forced to operate their networks under strict KPIs and QoS requirements. Having vIMS and RCS deployed in public cloud environment means telcos are under the mercy of AWS network performance. AWS has suffered from multiple outages, with the most recent happened in February 2017. On the contrary, Telcos with vIMS in their own private cloud can respond and manage outages more effectively, as they maintain control over these functions. 

Across the world, VoLTE and VoWiFi deployments have been picking up pace, as these functions are supported by more and more chipsets and devices. More than anything else, this announcement reflects significant development in RCS. As highlighted in ABI Research’s previous insight, the industry has been hampered consistently by slow adoption and deployment of RCS. At the moment, Chinese telcos are leading in RCS deployment, via native smartphone support provided by phone manufacturers and Google. By moving vIMS to AWS and lowering the barrier of entry, ZTE is looking to encourage Chinese MVNOs and even MVNEs to integrate commercial services with RCS. Other than China, major telcos in Canada are also looking to launch nationwide RCS. However, in all of these markets, the success of RCS remains questionable when there are established competing apps, including Wechat, Facebook Chat, WhatsApp, KakaoTalk and Viber.

Despite still in early days, ABI Research believes more and more network vendors will follow ZTE’s footstep to provide VNF-as-a-service model.  Undoubtedly there are difficulties in interoperability with both EPC and BSS/OSS from other vendors, but as telcos continue to explore cost-effective options to deploy greenfield networks, public cloud may just be the ideal tool. This is especially true for small telcos and other webscale players who are looking to get into telco services. One such candidate is Alibaba in China. The webscale giant has already acquired ZTESoft, ZTE’s BSS and OSS solution arm. Its existing partnership with China Telecom and investment in China Unicom makes Alibaba a potential disruptor in Chinese telco sector.