What technological considerations do Communication Service Providers (CSPs) need to account for when migrating to a 5G Core (5GC) network?
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- More than 35 Communication Service Providers (CSPs) in 20+ countries have launched 30+ 5G Core (5GC) networks.
- Growing at a Compound Annual Growth Rate (CAGR) of 6%, combined Evolved Packet Core (EPC) and 5GC network application software revenue will jump from US$4.8 billion in 2022 to about US$6.6 billion by 2027.
- The growth rate for core network revenue is more significant in regions where Mobile Broadband (MBB) is still taking off, particularly in the Middle East & Africa.
- While EPC software revenue will experience a -5% CAGR throughout the forecast period, 5GC revenue will grow at a CAGR of 34%. 5GC revenue will increase from US$766 million in 2022 to US$3.4 billion in 2027.
- Signaling the tendency for CSPs to virtualize their 5G networks, Virtualized Network Function (VNF) application revenue will remain above US$3 billion throughout the 2022 to 2027 period.
“5G Non-Standalone (NSA) provides a good start for enhanced bandwidth and increased capacity needs at a lower cost per Megabyte (MB). But a transition to 5GC will unlock the enterprise opportunity. With 5GC, CSPs seek new value creation by expanding their existing consumer footprint and finding new growth, especially in the enterprise world.” – Don Alusha, Senior Analyst at ABI Research
Key Decision Items
Establish a Migration Strategy
CSPs should have a plan that, in the short term, supports 4G and 5G synergy. In the long term, this strategy paves the way solely for a 5G SA network. Wholesale 5G adoption must start with a commitment to End-to-End (E2E) network cloudification and digital transformation.
If CSPs allow their EPC technology to dictate how they should gradually transition to 5GC, this will limit 5GC networks to the lowest common denominator(s). As an incremental improvement, this approach is fine as an intermediary step, but it should not be the long-term destination.
Define How to Distribute Core Network Functions (NFs)
As the telecoms industry trends toward openness and disaggregation, 5G SA CSPs need to establish how to distribute their NFs in line with their geographical and business strategies/network capabilities. For example, with 5GC, packet core workloads can be hosted in private and public clouds, and a dedicated User Plane Function (UPF) can be deployed in edge campus scenarios to achieve local offloading. Alternatively, dedicated 5G SA and dedicated spectrum mean that private networks would be physically separated from public networks.
China Mobile, for example, establishes a centralized Control Plane (C-Plane) and distributes the User Plane (U-Plane) in different regions/subsidiaries. Not only does this approach allow China Mobile to improve operational efficiency and resource utilization, but it also caters to industrial requirements that are not static, uniform, or singular. It can also enable one terminal to support multiple connections.
Lay Out Your Cloud Blueprint
CSPs should invest time and consult with industry partners to come up with a reference point blueprint for suppliers to implement their software—not the other way around. Without a clear blueprint, it is likely that one vendor will steer CSPs in a singular direction, and another vendor will steer them in another.
CSPs can evolve their blueprint over time to move away from proprietary platforms into more standardized options. Cloud-native tooling adoption will occur in different steps and at different speeds. This makes a cloud-native blueprint a key guiding point for 5GC suppliers.
Consider Building, Not Buying, Non-3GPP Technology
With 3G and 4G, CSPs do not develop software. They procure it from multiple suppliers. Where possible, with 5GC, CSPs should consider building non-The 3rd Generation Partnership Project (3GPP) technology. That serves as a stepping stone for CSPs to familiarize themselves with Continuous Integration (CI)/Continuous Delivery (CD) pipelines, DevOps and modern practices of software, and the broader cloud-native ecosystem.
To obtain cloud and software skills, CSPs need to start small; experimenting and building their technology is the first step in that direction. Vodafone and Orange are two CSPs that are building their own non-3GPP technology. Furthermore, these two CSPs are going even further by carrying out small-scale system integration projects in-house with an eye on acquiring software capabilities.
Explore Value Creation in Enterprise and Industrial Domains
With 5GC, it is the first time that the industry is relying on the core network architecture to introduce something above and beyond MBB. Ultimately, the success of 5G SA will be judged by its ability to help CSPs innovate and generate new growth. CSPs should eventually think about how to explore enterprise and industrial domains, and introduce appropriate business models.
This process will need to be done based on individual circumstances and an appropriate roadmap by working closely with 5G suppliers. After all, the key commercial purpose behind the push to reconstruct existing cellular network architectures and introduce 5GC is new value creation beyond the consumer domain. As these efforts remain a work in progress, time and continued investments are going to be needed to establish best practices and a “winning formula.”
Key Market Players to Watch
Dig Deeper for the Full Picture
To learn more about the technological requirements for CSPs, the competitive landscape, and a broader industry overview of 5GC, download ABI Research’s 5G Core Market Status and Migration Analysis research report.
Not ready for the report yet? Check out our How Has the Macroeconomic and Geopolitical Climate Influenced the Telco Market Research Highlight. This content is part of the company’s 5G Core & Edge Networks Research Service.