Co-operation with hyperscalers can reap rewards – but only if telcos complete the hard work of cloudification first.
Nearly two years on from our first Telco Cloud Manifesto published in March 2021, we are even more convinced that going through the pain of learning how to orchestrate and manage network workloads in a cloud-native environment is essential for telcos to successfully create new business models, such as Network-as-a-Service in support of edge compute applications.
Since the first Manifesto, hyperscalers have emerged as powerful partners and enablers for telcos’ technology transformation. But telcos that simply outsource to hyperscalers the delivery and management of their telco cloud, and of the multi-vendor, virtualised network functions that run on it, will never realise the true potential of telco cloudification. By contrast, evolving and maintaining an ability to orchestrate and manage multi-vendor, virtualised network functions end-to-end across distributed, multi-domain and multi-vendor infrastructure represents a vital control point that telcos should not surrender to the hyperscalers and vendors. Doing so could relegate telcos to a role as mere physical connectivity and infrastructure providers helping to deliver services developed, marketed and monetised by others.
In short, operators must take on the ‘workload’ of transforming into and acting as cloud-centric organisations before they shift their ‘workloads’ to the hyperscale cloud. In this updated Manifesto, we outline why, and what telcos at different stages of maturity should prioritise.
Two developments have taken place since the publication of our first manifesto that have changed the terms on which telcos are addressing network cloudification:
- Hyperscale cloud providers have increasingly developed capabilities and commercial offers in the area of telco cloud. To telcos uncertain about the strategy and financial implications of the next phase of their investments, the hyperscalers appear to offer a shortcut to telco cloud: the possibility of avoiding doing all the hard yards of developing the private telco cloud, and of evolving the internal skills and processes for deploying and managing multi-vendor VNFs / CNFs over it. Instead, the hyperscalers offer the prospect of getting telco cloud and VNFs / CNFs on an ‘as-a-Service’ basis – fundamentally like any other cloud service.
- In April 2021, DISH announced it would build its greenfield 5G network with AWS providing much of the virtual infrastructure layer and all of the physical cloud infrastructure. In June 2021, AT&T sold its private telco cloud platform to Microsoft Azure. In both instances, the telcos involved are now deploying mobile core network functions and, in DISH’s case, all of the software-based functions of its on a hyperscale cloud. These events appear superficially to set an example validating the idea of outsourcing telco cloud to the hyperscalers. After all, AT&T had previously been a champion of the DIY approach to telco cloud but now looked as though it had thrown in the towel and gone all in with outsourcing its cloud from Azure.
Two main questions arise from these developments, which we address in detail in this second Manifesto:
- Should telcos embarked or embarking on a Pathway 2 strategy outsource their telco cloud infrastructure and procure their critical network functions – in whole or in part – from one or more hyperscalers, on an as-a-Service basis?
- What is the broader significance of AT&T’s and DISH’s moves? Does it represent the logical culmination of telco cloudification and, if so, what are the technological and business-model characteristics of the ‘infrastructure-independent, cloud-native telco’, as we define this new Pathway 4? Finally, is this a model that all Pathway 3 players – and even all telcos per se – should ultimately seek to emulate?
In this second Manifesto, we also propose an updated version of our pathways describing telco network cloudification strategies for different sizes and types of telco to implement telco cloud. We now have four pathways (we had three in the original Manifesto), as illustrated in the figure below.
The four telco cloud deployment pathways in STL’s Telco Cloud Manifesto 2.0
Source: STL Partners, 2023
Existing subscribers can download the Manifesto at the top of this page. Everyone else, please go here.
If you wish to speak to us about our new Manifesto, please book a call.
Table of contents
- Executive Summary
- Pathway 1: No way back
- Two constituencies at operators: Cloud sceptics and cloud advocates
- Pathway 2: Hyperscalers – friend or foe?
- Cloud-native network functions are a vital control point telcos must not relinquish
- Pathway 3: Build own telco cloud competencies before deploying on public cloud
- AT&T and DISH are important proof points but not applicable to the industry as a whole
- But telcos will not realise the full benefits of telco cloud unless they, too, become software and cloud businesses
- Pathway 4: The path to Network-as-a-Service
- Pathway 4 networks will enable Network-as-a-Service
- Conclusion: Mastery of cloud-native is key for telcos to create value in the Coordination Age
Our telco cloud research aligned to this topic includes:
- VNFs on public cloud: Opportunity, not threat
- Telco cloud: short-term pain, long-term gain
- Telco Cloud Deployment Tracker: Will vRAN eclipse pure open RAN?
- 5G standalone (SA) core: Why and how telcos should keep going