Telcos must adapt to virtualisation and changing customer needs in the Coordination Age. Our three new telecoms business models offer a realistic agenda for telcos to build up the stack into the IT layer – either by themselves or through partnerships.

Introduction

This report outlines three new telecoms business models that builds on previous research where we have outlined our vision of an emerging third age of telecoms called the Coordination Age. This is based on a global need to improve the efficiency of resource utilisation is manifesting in industries and individuals as a desire to “make the world work better”. We discuss this concept in detail in the following reports:

• How the Coordination Age changes the game
• The Coordination Age: A third age of telecoms

We believe that three new business models for telcos are emerging as part of the Coordination Age.

• The Soft-Net: the core business remains connectivity, but the softwarisation of the network through SDN / NFV enables the network to adapt and scale to support new, advanced connectivity services. This includes third-party digital and networked-compute services that depend on the physical network connectivity the Soft-Net provides.
• The Cloud-Net: also connectivity-focused, but with the production, delivery and consumption of services increasingly effected via the cloud (i.e. cloud-native). SDN and virtualisation enable capacity and services to be spun up, managed and delivered on demand over any physical network and device.
• The Compute-Net: the core business is to provide distributed, networked, compute- and software-based services, often for specific enterprise verticals. These depend on SDN and NFV to deliver the ultra-fast, low-latency compute, throughput and routing capabilities required.

The three new models represent distinct strategic options for telcos looking to either: optimise and evolve their existing connectivity business; create new value from cloud-based, ‘horizontal’ platforms; or expand into new vertical markets – or a combination of all three approaches. This is illustrated here:

Interdependence between the three future telco business models

Source: STL Partners

In other words:

• The Soft-Net operates the physical and virtualised infrastructure that delivers flexible, advanced connectivity in support of Cloud-Net and Compute-Net services (as well as well as legacy communications and connectivity services, delivered in a more scalable and cost-effective way)
• The Cloud-Net delivers flexible, on-demand connectivity over hybrid infrastructure (including that owned by multiple Soft-Nets) in support of the increasingly complex and variable networking requirements of globally distributed, digital enterprises
• The Compute-Net delivers vertically focused, compute-enabled processes and outcomes across all areas of industry and society. In doing so, it relies on networking and cloud platform services supplied by the Soft-Net and Cloud-Net, which may or may not be vertically integrated as part of its own organisation.

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The three telecoms business models link to NFV / SDN strategies

One of the distinguishing features of these models is the different modes of telco engagement in NFV and SDN they are potentially driven by. In previous analyses, we have identified three pathways towards NFV and SDN deployment. This is how they link to the three business models:

Figure 1: The three future telco business models and corresponding NFV pathways

Source: STL Partners, NFV / SDN deployment pathways: Three telco futures

In the rest of this report, we define these telecoms business models in more detail and illustrate how they present a pragmatic framework for telcos to focus their technology investments and develop valuable new Coordination Age services.

Contents:

• Executive Summary
• Introduction
• Three telco futures and Telco 2.0
• Chapter 1: Three telecoms business models for the Coordination Age
• Three new business models: but why ‘telco’?
• Business model analysis: Telcos’ vs competitors’ strengths
• Relationship between the Soft-Net, Cloud-Net and Compute-Net business models
• Chapter 2: Roles of the Soft-Net, Cloud-Net and Compute-Net in a ‘driverless car-as-a-service’ ecosystem
• A driverless car-as-a-service business involves coordination of data, processes and events across a broad supply chain
• Soft-Nets provide the mainly wireless connectivity
• Cloud-Nets provide the hybrid, on-demand wide-area networking
• Compute-Nets design and coordinate the ecosystem
• Conclusions
• The Coordination Age: A new purpose for telecoms, and three models for realising it
• Key takeaways for telcos

Figures:

1. The three future telco business models and corresponding NFV pathways
2. The Telco 2.0 infrastructure and service stack
3. Interdependence between the three future telco business models
4. Two examples of the three new business models
5. The three new business models overview
6. Telcos face some fierce competition as they move up the stack
7. Telco expansion across the three business models
8. Advantages and disadvantages of vertical integration
9. Mapping the Soft-Net, Cloud-Net and Compute-Net roles in a driverless car environment
10. Types of data and corresponding compute-based services in a driverless car-as-a-service ecosystem

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