Using the Sovereign Cloud to Protect Telco Networks

This Research Highlight summarizes ABI Research’s latest findings on sovereign clouds, exploring how they address increasing cybersecurity and geopolitical challenges for enterprises and the telecoms industry. It highlights the growing need for localized cloud solutions to ensure data security and compliance. Readers can expect:

• Trends driving sovereign cloud adoption, including data sovereignty and Gen AI use
• Insights into compliance with regulations like GDPR and CCPA
• Strategies to overcome carrier concerns about cost and scalability
• Steps to build trust through partnerships and transparency

Market Overview

As cyberthreats grow and global tensions increase, organizations are seeking greater control over their cloud environments to protect sensitive data and ensure compliance. Sovereign clouds, which prioritize local infrastructure and regulatory alignment, are emerging as an essential solution to reduce dependence on foreign providers and counter risks from laws like the U.S. Clarifying Lawful Overseas Use of Data (CLOUD) Act. ABI Research Principal Analyst Leo Gergs emphasizes their role in enhancing security, resilience, and economic competitiveness. These clouds are particularly critical for enterprises and governments handling regulated data under laws like Europe’s General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA), which dictate strict rules on data storage and processing.

In the telecoms industry, the adoption of Generative Artificial Intelligence (Gen AI) underscores the shift to sovereign cloud deployments. The report projects that Gen AI in telco networks will reach US$47 billion by 2029, starting with Business Support Systems (BSSs) using third-party Large Language Models (LLMs) in public clouds. As telcos expand to sensitive Operational Support Systems (OSSs) for tasks like network optimization and security, sovereign clouds will be essential to meet data sovereignty demands driven by geopolitical concerns. However, carriers hesitate due to high costs, scalability limits, and integration challenges. This Highlight outlines trends and actions to advance sovereign cloud adoption.

“The broadening threat surface of cloud environments operated transnationally is driving organizations to seek greater control over their cloud environments for enhanced security, resilience, and economic competitiveness.” – Leo Gergs, Principal Analyst

Localize Cloud Solutions

A key trend in cloud computing is the push for data sovereignty, driven by strict regulations and geopolitical risks. Laws like GDPR and CCPA require data to stay within specific regions, while extraterritorial laws raise concerns about foreign access. Sovereign clouds, with localized data centers, ensure compliance and limit reliance on overseas providers, a need amplified as telcos use Gen AI for sensitive tasks like regulatory-compliant customer interactions.

Providers should establish local data centers to guarantee data residency and align solutions with regional laws. Collaborating with regulators to stay updated on compliance needs strengthens offerings. Focusing on sovereignty now positions providers to meet enterprise and telco demands for secure, compliant clouds.

Form Local Partnerships to Ensure Regulatory Compliance

The findings highlight the importance of local partnerships and organizational adjustments to deliver true data sovereignty. Multi-national hyperscalers must prove that their local cloud setups are shielded from external access, adjusting hiring and structures to comply with jurisdictional rules. Partnerships with local entities enhance credibility, particularly for telcos expanding Gen AI use.

Providers should collaborate with local regulators and businesses to tailor solutions to regional needs. Hyperscalers can restructure operations to ensure jurisdictional isolation, hiring locally to reinforce sovereignty.

Related Analyst Insights:
Will Hyperscalers Lose Steam as Homegrown Sovereign Clouds Emerge?

Impetus for Sovereign Cloud Deployments Will Accelerate, Driven by Cloud Providers and Telco Sovereign AI Partnerships

Overcome Carrier Concerns with Scalability

Our report notes carrier reluctance toward sovereign clouds due to higher costs, limited economies of scale compared to hyperscalers, and difficulties integrating with global multi-cloud systems. These concerns, along with fears of vendor lock-in and reduced service reliability, slow the adoption of the sovereign cloud. This is especially true for Gen AI workloads like AI-powered security threat detection.

Technology providers should develop flexible sovereign cloud models that integrate with multi-cloud strategies, reducing lock-in risks. Offering cost-effective solutions through automation and optimized infrastructure can ease scalability worries. Addressing these barriers will encourage mobile carriers to adopt sovereign clouds for critical applications.

Strengthen Cloud Transparency

Building trust is a critical trend, as enterprises and telcos require robust security and clear compliance in sovereign clouds. The report stresses the need for strong measures like encryption and threat detection, alongside transparency through regular audits and detailed Service-Level Agreements (SLAs). When using Gen AI in telcos, such as real-time network optimization, these features are vital to protect sensitive workloads.

Providers should implement advanced security protocols and conduct frequent audits to verify compliance with local laws. Clear SLAs and transparent reporting build confidence among customers. Prioritizing these elements ensures that sovereign clouds meet the high standards required for enterprise and telco trust.

Key Companies Covered

• Amazon Web Services (AWS)
• IBM
• Oracle
• Snowflake
• VMware by Broadcom

Get the full report

For a comprehensive analysis of sovereign clouds and how to lead in secure cloud solutions, download the full report. The report takes a deep dive into the top challenges in implementing the sovereign cloud for telecom and our analyst guidance on how to overcome these hurdles. Moreover, some of the top sovereign cloud technology providers are analyzed.