Network innovation as an engine for growth: A manifesto

Network Innovation

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New technologies have made innovation in the network imperative for telcos’ survival. But the focus and scope of innovation varies by the type of company telcos aim to become.

Telcos must be more innovative

Telcos can once more be network technology innovators

In the past, through their R&D departments and research labs (the most famous example of which was Bell Labs), telcos played an active role in innovating the technologies, equipment and infrastructure of the original networks of the Communications Age: those centred on public switched telephony and the first packet data services.

As telecom became the battleground of technologies that did not form part of the original public switched telephone network (PSTN) and public telecom infrastructure – i.e. cellular wireless, and IP and the internet delivered across fibre-optic backbone and access infrastructure – the role of network innovation has been outsourced to domain specialists, leading to the technology landscape that is familiar to us today: characterised by a multitude of vendors and technology companies with expertise in specific, siloed areas.

The more recent drive towards network cloudification has been perceived by many telcos as threatening to take network and network service innovation completely out of their hands and passing control over to IT, software and cloud specialists, most notably the hyperscale cloud providers (HCPs).

In reality, together with the parallel trend of network disaggregation, cloudification creates greater opportunities for telcos to take charge of network and service innovation, not fewer.

We define disaggregation and cloudification as follows:

  • Network disaggregation: the breaking up of closed, proprietary network equipment, infrastructure and software into smaller, open, modular functional components that can be separately programmed and optimised, and managed and orchestrated in a multi-vendor way via common, horizontal platforms.
  • Network cloudification: the replacement of dedicated, physical network appliances and domain-specific infrastructure by virtualised network functions (VNFs) and infrastructure that either broadly replicate the function set of the physical network functions (PNFs) in the form of virtual machines (VMs), or involve redesigning those network functions from the ground up using cloud-native principles: based on software microservices (cloud-native network functions, or CNFs) running in containers.

Both trends are a manifestation of a broader softwarisation and computerisation of networking, whereby network functions and services of every type are ultimately defined and managed through software, and are susceptible to being optimised and transformed through programming logic.

Network innovation has become more democratic

These trends mean that networking becomes more open and ‘democratic’: network services can be innovated by any organisation with the necessary software, IT, radio, optical networking and infrastructure skills. This democratisation of networking can be seen as working against telcos’ perceived, vested self-interest, in that it opens up network service provision to a host of new competitors, including from the software and IT world. However, it can equally be seen as acting in telcos’ favour because it allows them to compete on a more level playing field against the network function, IT and software vendors as well as service providers.

The same can be said of physical networking: the combined effect of disaggregation and network technology innovation has created an environment where vendors control the innovation and non-telco competitors can specialise in delivering parts of the end-to-end service and value chain that might previously have been controlled by telcos.

The dominance of the vendors has been fuelled by waves of investment in successive cellular wireless generations, optical networking, and fibre-optic transport and access. While these innovations have enabled the present-day user experience of ubiquitous and instantaneous access to communication, information, content and services, they have ended up not generating adequate profit margins for operators – in part because of the very availability and ubiquitousness of that connectivity. Operators have eagerly adopted and implemented these waves of software-based and physical networking innovation, driven on by vendors keen to push their wares; but rewards have been few.

So, what is different now – and how can telcos turn a profit from network innovation?

Cloudification and disaggregation offer telcos different modes of innovation

Network innovation

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 Table of contents

  • Executive summary
    • Telcos must decide what type of operator(s) they aim to become – and prioritise investments accordingly
    • Network innovation has become imperative – but which, how and when?
    • Three new visions for telco growth
    • Next steps
  • Telcos must be more innovative
    • Telcos can once more be network technology innovators
    • Network innovation has become more democratic
    • Cloudification and disaggregation enable four modes of innovation
  • Telcos, infracos, servcos and techcos
    • Different modes and pace of innovation for different telcos
    • Telco, infraco, servco and techco are divergent businesses
  • The telco, infraco, servco and techco have different focuses for innovation
    • The importance of right-sizing network innovation
  • Conclusion: Innovation – what, when and how?

 

 


David Martin

David Martin

David Martin

Senior Analyst

David Martin has specialised in telco cloud at STL Partners since 2016, writing numerous strategic reports on different aspects of the topic. He also originated STL’s Telco Cloud Deployment Tracker: a major database of commercial telco cloud deployments by leading operators worldwide. He is a telecoms analyst of around 25 years’ experience, having also worked for leading analyst firms including the now Analysys Mason and Omdia. David obtained a First Class degree in French and German at Trinity Hall, Cambridge, where he also pursued doctoral studies in French.