Tag: 5G standalone

The Telco Cloud Manifesto 2.0

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
    • Recommendations
  • 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

Related research

Our telco cloud research aligned to this topic includes:

 

Capturing the 5G SA opportunity: towards a multi-vendor approach

The 5G SA opportunity

5G SA is an exciting prospect for telecoms operators. With many operators’ revenues from traditional connectivity beginning to stagnate, or even decline, there is increased pressure for operators to create differentiation and offer new services, including by expanding across the value chain from connectivity-only providers.

STL Partners has described this new era, whereby operators must shift their business models to adapt to the new demands, as the Coordination Age 2. From the 1850s until around 1990, the Communications Age enabled people to communicate over long distances via telephony. Next came the Information Age, in which people could directly access content and applications, increasingly provided by non-telecommunications players. In the Coordination Age, ‘things’ are increasingly connecting to other ‘things’, leading to an exponential increase in volumes of data, but thanks to advanced analytics and artificial intelligence (AI) we can also address some of the most pressing issues facing the world today: ensuring resource efficiency and improving productivity to help us to do more with less.

Operators need to define their role in the emerging coordination age


Source: STL Partners

Transitioning to the Coordination Age requires operators to shift their goals and business models accordingly. Operators will need to offer or enable tightly coupled network services and applications to different industries, and continue to refresh, optimise and scale at an unprecedented rate.

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The transformative potential of 5G SA

5G SA, in comparison to its NSA counterpart, is the evolution of 5G that can deliver on the promises associated with the next generation of cellular networking. 5G SA is intended to be cloud native and adopt cloud-native principles. Without SA, 5G networks are less able to quickly launch new services, enable new use cases, or introduce more scalable, automated operating models.

The opportunities to which 5G SA is expected to give rise have been explored extensively in previous STL research. The ‘full potential’ of 5G SA includes promises around higher throughput, greater capacity, the ability to leverage enhanced mobile broadband (eMBB), ultra-reliable low latency communications (URLLC), and massive machine type communications (mMTC). In summary; do more (including enabling more connections at any given time), faster (down to a latency of a few milliseconds) and at a lower cost (through a variety of actors, including lower power consumption than 4G). These new capabilities are exciting for operators: enabling operators to develop powerful new applications for their customers with truly differentiated use cases.

One particular opportunity that 5G SA represents is network slicing. Slicing can be defined as ‘a mechanism to create and dynamically manage functionally discrete, virtualised networks over a common infrastructure,’ and has been the subject of several STL reports. The increased flexibility and agility of network slicing can enable operators to provide unique policies and differentiated services to their enterprise customers and recoup the substantial investments that rolling out 5G SA requires. However, the benefits and opportunities of 5G SA have implications far beyond the new services it can enable. For the first time, 5G is cloud-native by design, with modular service-based architecture giving
rise to greater flexibility and programmability. Furthermore, it leverages IT concepts of virtualization, cloudification, and DevOps processes. This does not so much enable as actively encourage a more agile operating model. Some of the exciting features of 5G SA include:

  • Automation – Increased automation throughout the network, including deployment, orchestration, assurance, and optimisation can give rise to “zero touch” networks that do not require human intervention, and can self repair and update autonomously on an ongoing basis. The aim of network automation is to reduce human error and the time taken to resolve issues through closed-loop network assurance.
  • Disaggregation – Relies on an open standard network operating system whereby different functional components of networking equipment can be deployed individually and then combined in a modular, fit for purpose way, to suit the requirements of an operator’s network. This architecture relies on the interworking between the multi-vendor components within the 5G core. Disaggregation can allow vendors to offer best in class capabilities for each individual component, providing operators with unprecedented choice and customizability.
  • Avoiding vendor lock-in through a diversified supply base – One of the key benefits of a disaggregated approach to the 5G core is to break vendor lock-in that has tended to dominate legacy approaches. Vendor lock-in can be a key limitation on the speed of innovation and service deployment.
  • Agility – Adopting a continuous improvement and development means accelerated innovation and speed of deployment. A software-orientated infrastructure can enable changes in business processes such as product development management to happen at a greater pace and speed time to market for new revenue generating products and features.
  • Scalability through adopting ‘hyperscale economics’ – Explored by STL Partners in previous research, this term describes the emulation of business and software practices developed by hyperscalers to deliver service innovation at scale whilst simultaneously reducing the level of capex relative to revenue.

Cloud native is the only way to truly unlock the benefits of 5G thanks to the automation, efficiency,
optimisation and mode of delivery that it enables. Ultimately, it allows operators to maximise the
opportunity of 5G to develop differentiated services to consumer and enterprises customers.

 

Table of Contents:

  • Executive Summary
    • Recommendations
  • Preface
  • The 5G SA opportunity
    • The transformative potential of 5G SA
    • 5G SA requires operators to develop and foster a new set of skills
    • Some open questions remain around 5G SA
  • The early adopter 5G SA landscape
    • Orange
    • Vodafone
    • Dish
  • Tier 2 and Tier 3 operator approaches to 5G SA
    • Adherents to a single vendor approach
    • Proponents of a multi-vendor approach
    • Several factors can influence an operators’ vendor strategy
  • Recommendations

Related research

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5G standalone (SA) core: Why and how telcos should keep going

Major 5G Standalone deployments are experiencing delays…

There is a widespread opinion among telco industry watchers that deployments of the 5G Standalone (SA) core are taking longer than originally expected. It is certainly the case that some of the world’s leading operators, and telco cloud innovators, are taking their time over these deployments, as illustrated below:

  • AT&T: Has no current, publicly announced deadline for launching its 5G SA core, which was originally expected to be deployed in mid-2021.
  • Deutsche Telekom: Launched an SA core in Germany on a trial basis in September 2022, having previously acknowledged that SA was taking longer than originally expected. In Europe, the only other opco that is advancing towards commercial deployment is Magenta Telekom in Austria. In 2021, the company cited various delay factors, such as 5G SA not being technically mature enough to fulfil customers’ expectations (on speed and latency), and a lack of consumer devices supporting 5G SA.
  • Rakuten Mobile: Was expected to launch an SA core co-developed with NEC in 2021. But at the time of writing, this had still not launched.
  • SK Telecom: Was originally expected to launch a Samsung-provided SA core in 2020. However, in November 2021, it was announced that SK Telecom would deploy an Ericsson converged Non-standalone (NSA) / SA core. By the time of writing, this had still not taken place.
  • Telefónica: Has carried out extensive tests and pilots of 5G SA to support different use cases but has no publicly announced timetable for launching the technology commercially.
  • Verizon: Originally planned to launch its SA core at the end of 2021. But this was pushed back to 2022; and recent pronouncements by the company indicate a launch of commercial services over the SA core only in 2023.
  • Vodafone: Has launched SA in Germany only, not in any of its other markets; and even then, nationwide SA coverage is not expected until 2025. An SA core is, however, expected to be launched in Portugal in the near future, although no definite deadline has been announced. A ‘commercial pilot’ in three UK cities, launched in June 2021, had still not resulted in a full commercial deployment by the time of writing.

…but other MNOs are making rapid progress

In contrast to the above catalogue of delay, several other leading operators have made considerable progress with their standalone deployments:

  • DISH: Launched its SA core- and open RAN-based network in the US, operated entirely over the AWS cloud, in May 2022. The initial population coverage of the network was required to be 20%. This is supposed to rise to 70% by June 2023.
  • Orange: Proceeding with a Europe-wide roll-out, with six markets expected to go live with SA cores in 2023.
  • Saudi Telecom Company (STC): Has launched SA services in two international markets, Kuwait (May 2021) and Bahrain (May 2022). Preparations for a launch in Saudi Arabia were ongoing at the time of writing.
  • Telekom Austria Group (A1): Rolling out SA cores across four markets in Central Europe (Bulgaria, Croatia, Serbia and Slovenia), although no announcement has been made regarding a similar deployment in its home market of Austria. In June 2022, A1 also carried out a PoC of end-to-end, SA core-enabled network slicing, in partnership with Amdocs.
  • T-Mobile US: Has reportedly migrated all of its mobile broadband traffic over to its SA core, which was launched back in 2020. It also launched one of the world’s first voice-over-New Radio (VoNR) services, run over the SA core, in parts of two cities in June 2022.
  • Zain (Kuwait): Launched SA in Saudi Arabia in February 2022, while a deployment in its home market was ongoing at the time of writing.
  • There are also a number of trials, and prospective and actual deployments, of SA cores over the public cloud in Europe. These are serving the macro network, not edge or private-networking use cases. The most notable examples include Magenta Telekom (Deutsche Telekom’s Austrian subsidiary, partnering with Google Cloud); Swisscom (partnering with AWS); and Working Group Two (wgtwo) – a Cisco and Telenor spin-off – that offers a multi-tenant, cloud-native 5G core delivered to third-party MNOs and MVNOs via the AWS cloud.
  • The three established Chinese MNOs are all making rapid progress with their 5G SA roll-outs, having launched in either 2020 (China Telecom and China Unicom) or 2021 (China Mobile). The country’s newly launched, fourth national player, Broadnet, is also rolling out SA. However, it is not publicly known what share of the country’s reported 848 million-odd 5G subscribers (at March 2022) were connected to SA cores.
  • At least eight other APAC operators had launched 5G SA-based services by July 2022, including KT in South Korea, NTT Docomo and SoftBank in Japan and Smart in the Philippines.

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Many standalone deployments in the offing – but few fixed deadlines

So, 5G standalone deployments are definitely a mixed bag: leading operators in APAC, Europe, the Middle East and North America are deploying and have launched at scale, while other leading players in the same regions have delayed launches, including some of the telcos that have helped drive telco cloud as a whole over the past few years, e.g. AT&T, Deutsche Telekom, Rakuten, Telefónica and Vodafone.

In the July 2022 update to our Telco Cloud Deployment Tracker, which contained a ‘deep dive’ on 5G core roll-outs, we presented an optimistic picture of 5G SA deployments. We pointed out that the number of SA and converged NSA / SA cores. We expect to be launched in 2022 outnumbered the total of NSA deployments. However, as illustrated in the figure below, SA and converged NSA/SA cores are still the minority of all 5G cores (29% in total).

We should also point out that some of the SA and converged NSA / SA deployments shown in the figure below are still in progress and some will continue to be so in 2023. In other words, the launch of these core networks has been announced and we have therefore logged them in our tracker, but we expect that the corresponding deployments will be completed in the remainder of 2022 or in 2023, based on a reasonable, typical gap between when the deployments are publicly announced and the time it normally takes to complete them. If, however, more of these predicted deployments are delayed as per the roll-outs of some of leading players listed above, then we will need to revise down our 2022 and 2023 totals.

Global 5G core networks by type, 2018 to 2023

 

Source: STL Partners

Table of contents

  • Executive Summary
  • Introduction
    • Major 5G Standalone deployments are experiencing delays
    • …but other MNOs are making rapid progress
    • Many SA deployments in the offing – but few fixed deadlines
  • What is holding up deployments?
    • Mass-market use cases are not yet mature
    • Enterprise use cases exploiting an SA core are not established
    • Business model and ROI uncertainty for 5G SA
    • Uncertainty about the role of hyperscalers
    • Coordination of investments in 5G SA with those in open RAN
    • MNO process and organisation must evolve to exploit 5G SA
  • 5G SA progress will unlock opportunities
    • Build out coverage to improve ‘commodity’ services
    • Be first to roll out 5G SA in the national market
    • For brownfield deployments, incrementally evolve towards SA
    • Greenfield deployments
    • Carefully elaborate deployment models on hyperscale cloud
    • Work through process and organisational change
  • Conclusion: 5G SA will enable transformation

    Related research

    Previous STL Partners reports aligned to this topic include:

  • Telco Cloud Deployment Tracker: 5G core deep dive
  • Telco cloud: short-term pain, long-term gain
  • Telco Cloud Deployment Tracker: 5G standalone and RAN

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Telco Cloud Deployment Tracker: Open RAN deep dive

Telco Cloud: Open RAN is a work in progress

This report accompanies the latest release and quarterly update of STL Partners ‘Telco Cloud Deployment Tracker’ database. This contains data on deployments of VNFs (Virtual Network Functions), CNFs (cloud-native network functions) and SDN (Software Defined Networking) in the networks of the leading telcos worldwide. In this update we have added some additional categories to the database to reflect the different types of virtualised / open RAN:

  1. Open RAN / O-RAN: Fully open, disaggregated, virtualised / cloud-native, with CU / DU split
  2. vRAN: Virtualised CU/DU, with open interfaces but implemented as an integrated, single-vendor platform
  3. Cloud RAN: Single-vendor, virtualised / centralised BU, or CU only, with proprietary / closed interfaces

Cloud RAN is the most limited form of virtualised RAN: It is based on porting part or all of the functionality of the legacy, appliance-based BU into a Virtual Machine. vRAN and open RAN are much more significant, in both technology and business-model terms, breaking open all parts of the RAN to more competition and opportunities for innovation.

Accordingly, the report presents data on only open RAN and vRAN deployments however a granular analysis of each category of RAN deployment can be carried out using the Telco Cloud Tracker tool.

Access our online Telco Cloud Deployment Tracker tool here

Download the additional file for the full dataset of Telco Cloud deployments

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Open RAN and vRAN deployments, 2018 – 2022

Open-RAN-Deployments-Apr-2021-STL-Partners

Source: STL Partners

Open RAN and vRAN

Both Open RAN and vRAN are virtualised (with the exception of NTT DoCoMo as outlined in the report), but ‘open RAN’ implies full disaggregation of the different parts of the RAN (hardware, software and radio), and open interfaces between them. By contrast, vRAN incorporates the open interfaces but is generally deployed as a pre-integrated, single-vendor solution: hardware, software and radio supplied by the same vendor.

To date, there have been significantly more open RAN than vRAN deployments. But vRAN is emerging as a potentially competitive alternative to pure open RAN: offering the same operational benefits and – in theory – multi-vendor openness, but without the overhead of integrating components from multiple vendors, and a ‘single neck to choke’ if things go wrong. Deployments in 2020 were mostly small-scale and / or 4G, including trials which continued to carry live traffic after the trial period came to an end.

The stark contrast between 2021 and 2022 reflects a slight hiatus in commercial deployments as work intensified around integration and operational models, trials, performance optimisation, and cost economics. However, major deployments are expected in 2022, including greenfield networks 1&1 Drillisch (Germany) and DISH (US), Verizon, Vodafone UK, and MTN (Africa and ME).

Scope and content of the Tracker

The data in the latest update of our interactive tool and database covers the period up to March 2022, although reference is made in the report to events and deployments after that date. The data is drawn predominantly from public-domain information contained in news releases from operators and vendors, along with reputable industry media.

We apply the term ‘deployment’ to refer to the total set of VNFs, CNFs or SDN technology, and their associated management software and infrastructure, deployed at an operator – or at one or more of an operator’s opcos or natcos – in order to achieve a defined objective or support particular services (in the spreadsheet, we designate these as the ‘primary purpose’ of the deployment). For example, this could be:

  • to deploy a 5G standalone core
  • to launch a software-defined WAN (SD-WAN) service
  • or to construct a ‘telco cloud’ or NFV infrastructure (NFVi): a cloud infrastructure platform on which virtualised network services can be introduced and operated.

The Tracker is provided as an interactive tool containing line-by-line analysis of over 900 individual deployments of VNFs, CNFs or SDN technology, which can be used to drill down by:

  • Region where deployed
  • Operator
  • Technology vendor
  • Primary purpose
  • Type of telco cloud function deployed
  • …and more filters

Telco Cloud Trial Deployment Tracker

Take a look at the trial of our interactive tool with live, commercial deployments of VNFs, CNFs and SDN technologies worldwide

Previous telco cloud tracker releases

Each new release of the tracker is global, but is accompanied by an analytical report which focusses on trends in given regions from time to time:

 

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Telco Cloud Deployment Tracker: 5G standalone and RAN

Telco cloud 2.0, fuelled by 5G standalone and RAN, is on the starting grid

This report accompanies the latest release and update of STL Partners ‘Telco Cloud Deployment Tracker’ database. This contains data on deployments of VNFs (Virtual Network Functions), CNFs (cloud-native network functions) and SDN (Software Defined Networking) in the networks of the leading telcos worldwide. It builds on an extensive body of analysis by STL Partners over the past nine years on NFV and SDN strategies, technology and market developments.

Access our Telco Cloud Tracker here

Download the additional file for the full dataset of Telco Cloud deployments

Scope and content of the Tracker

The data in the latest update of our interactive tool and database covers the period up to September 2021, although reference is made in the report to events and deployments after that date. The data is drawn predominantly from public-domain information contained in news releases from operators and vendors, along with reputable industry media.

We apply the term ‘deployment’ to refer to the total set of VNFs, CNFs or SDN technology, and their associated management software and infrastructure, deployed at an operator – or at one or more of an operator’s opcos or natcos – in order to achieve a defined objective or support particular services (in the spreadsheet, we designate these as the ‘primary purpose’ of the deployment). For example, this could be:

  • to deploy a 5G standalone core
  • to launch a software-defined WAN (SD-WAN) service
  • or to construct a ‘telco cloud’ or NFV infrastructure (NFVi): a cloud infrastructure platform on which virtualised network services can be introduced and operated.

The Tracker is provided as an interactive tool containing line-by-line analysis of over 900 individual deployments of VNFs, CNFs or SDN technology, which can be used to drill down by:

  • Region where deployed
  • Operator
  • Technology vendor
  • Primary purpose
  • Category of NFV/SDN technology deployed
  • …and more filters

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5G standalone (SA) will hit an inflection point in 2022

5G standalone (SA) core is beginning to take off, with 19 deployments so far expected to be completed in 2022. The eventual total will be higher still, as will that of NSA core, as NSA 5G networks continue to be launched. As non-standalone (NSA) cores are replaced by SA, this will result in another massive wave of core deployments – probably from 2023/4 onwards.

Standalone 5G vs non-standalone 5G core deployments

STL-5G-standalone-core-cloud-tracker-2021

Source: STL Partners

 

Previous telco cloud tracker releases

Each new release of the tracker is global, but is accompanied by an analytical report which focusses on trends in given regions from time to time:

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Why and how to go telco cloud native: AT&T, DISH and Rakuten

The telco business is being disaggregated

Telcos are facing a situation in which the elements that have traditionally made up and produced their core business are being ‘disaggregated’: broken up into their component parts and recombined in different ways, while some of the elements of the telco business are increasingly being provided by players from other industry verticals.

By the same token, telcos face the pressure – and the opportunity – to combine connectivity with other capabilities as part of new vertical-specific offerings.

Telco disaggregation primarily affects three interrelated aspects of the telco business:

  1. Technology:
    • ‘Vertical’ disaggregation: separating out of network functions previously delivered by dedicated, physical equipment into software running on commodity computing hardware (NFV, virtualisation)
    • ‘Horizontal’ disaggregation: breaking up of network functions themselves into their component parts – at both the software and hardware levels; and re-engineering, recombining and redistributing of those component parts (geographically and architecturally) to meet the needs of new use cases. In respect of software, this typically involves cloud-native network functions (CNFs) and containerisation
    • Open RAN is an example of both types of disaggregation: vertical disaggregation through separation of baseband processing software and hardware; and horizontal disaggregation by breaking out the baseband function into centralised and distributed units (CU and DU), along with a separate, programmable controller (RAN Intelligent Controller, or RIC), where all of these can in theory be provided by different vendors, and interface with radios that can also be provided by third-party vendors.
  2. Organisational structure and operating model: Breaking up of organisational hierarchies, departmental siloes, and waterfall development processes focused on the core connectivity business. As telcos face the need to develop new vertical- and client-specific services and use cases beyond the increasingly commoditised, low-margin connectivity business, these structures are being – or need to be – replaced by more multi-disciplinary teams taking end-to-end responsibility for product development and operations (e.g. DevOps), go-to-market, profitability, and technology.

Transformation from the vertical telco to the disaggregated telco

3. Value chain and business model: Breaking up of the traditional model whereby telcos owned – or at least had end-to-end operational oversight over – . This is not to deny that telcos have always relied on third party-owned or outsourced infrastructure and services, such as wholesale networks, interconnect services or vendor outsourcing. However, these discrete elements have always been welded into an end-to-end, network-based services offering under the auspices of the telco’s BSS and OSS. These ensured that the telco took overall responsibility for end-to-end service design, delivery, assurance and billing.

    • The theory behind this traditional model is that all the customer’s connectivity needs should be met by leveraging the end-to-end telco network / service offering. In practice, the end-to-end characteristics have not always been fully controlled or owned by the service provider.
    • In the new, further disaggregated value chain, different parts of the now more software-, IT- and cloud-based technology stack are increasingly provided by other types of player, including from other industry verticals. Telcos must compete to play within these new markets, and have no automatic right to deliver even just the connectivity elements.

All of these aspects of disaggregation can be seen as manifestations of a fundamental shift where telecoms is evolving from a utility communications and connectivity business to a component of distributed computing. The core business of telecoms is becoming the processing and delivery of distributed computing workloads, and the enablement of ubiquitous computing.

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Telco disaggregation is a by-product of computerisation

Telco industry disaggregation is part of a broader evolution in the domains of technology, business, the economy, and society. This evolution comprises ‘computerisation’. Computing analyses and breaks up material processes and systems into a set of logical and functional sub-components, enabling processes and products to be re-engineered, optimised, recombined in different ways, managed, and executed more efficiently and automatically.

In essence, ‘telco disaggregation’ is a term that describes a moment in time at which telecoms technology, organisations, value chains and processes are being broken up into their component parts and re-engineered, under the impact of computerisation and its synonyms: digitisation, softwarisation, virtualisation and cloud.

This is part of a new wave of societal computerisation / digitisation, which at STL Partners we call the Coordination Age. At a high level, this can be described as ‘cross-domain computerisation’: separating out processes, services and functions from multiple areas of technology, the economy and society – and optimising, recombining and automating them (i.e. coordinating them), so that they can better deliver on social, economic and environmental needs and goals. In other words, this enables scarce resources to be used more efficiently and sustainably in pursuit of individual and social needs.

NFV has computerised the network; telco cloud native subordinates it to computing

In respect of the telecoms industry in particular, one could argue that the first wave of virtualisation (NFV and SDN), which unfolded during the 2010s, represented the computerisation and digitisation of telecoms networking. The focus of this was internal to the telecoms industry in the first instance, rather than connected to other social and technology domains and goals. It was about taking legacy, physical networking processes and functions, and redesigning and reimplementing them in software.

Then, the second wave of virtualisation (cloud-native – which is happening now) is what enables telecoms networking to play a part in the second wave of societal computerisation more broadly (the Coordination Age). This is because the different layers and elements of telecoms networks (services, network functions and infrastructure) are redefined, instantiated in software, broken up into their component parts, redistributed (logically and physically), and reassembled as a function of an increasing variety of cross-domain and cross-vertical use cases that are enabled and delivered, ultimately, by computerisation. Telecoms is disaggregated by, subordinated to, and defined and controlled by computing.

In summary, we can say that telecoms networks and operations are going through disaggregation now because this forms part of a broader societal transformation in which physical processes, functions and systems are being brought under the control of computing / IT, in pursuit of broader human, societal, economic and environmental goals.

In practice, this also means that telcos are facing increasing competition from many new types of actor, such as:

  • Computing, IT and cloud players
  • More specialist and agile networking providers
  • And vertical-market actors – delivering connectivity in support of vertical-specific, Coordination Age use cases.

 

Table of contents

  • Executive Summary
    • Three critical success factors for Coordination Age telcos
    • What capabilities will remain distinctively ‘telco’?
    • Our take on three pioneering cloud-native telcos
  • Introduction
    • The telco business is being disaggregated
    • Telco disaggregation is a by-product of computerisation
  • The disaggregated telco landscape: Where’s the value for telcos?
    • Is there anything left that is distinctively ‘telco’?
    • The ‘core’ telecoms business has evolved from delivering ubiquitous communications to enabling ubiquitous computing
    • Six telco-specific roles for telecoms remain in play
  • Radical telco disaggregation in action: AT&T, DISH and Rakuten
    • Servco, netco or infraco – or a patchwork of all three?
    • AT&T Network Cloud sell-off: Desperation or strategic acuity?
    • DISH Networks: Building the hyperscale network
    • Rakuten Mobile: Ecommerce platform turned cloud-native telco, turned telco cloud platform provider
  • Conclusion

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SK Telecom’s journey in commercialising 5G

SK Telecom (SKT), Verizon and Telstra were among the first in the world to commence the commercialisation of 5G networks. SK Telecom and Verizon launched broadband-based propositions in 2018, but it was only in 2019, when 5G smartphones became available, that consumer, business and enterprise customers were really able to experience the networks.

Part 1 of our 3-part series looks at SKT’s journey and how its propositions have developed from when 5G was launched to the current time. It includes an analysis of both consumer and business offerings promoted on SKT’s website to identify the revenues streams that 5G is supporting now – as opposed to revenues that new 5G use cases might deliver in future.

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At launch, SKT introduced 5G-specific tariffs, that coupled large data allowances with unique apps and services designed to ensure data consumption and demonstrate the advantages of 5G access. 5G plans were more expensive than 4G plans, but the price of 5G data per MB was less than that for 4G to tempt customers to make the switch.

SKT’s well-documented approach to 5G has been regarded as inspirational by other telcos, though many consider a similar approach out-of-reach (e.g. for other telcos, coverage issues may limit their ability to charge a premium, or 5G-value-adding services may be lacking).

This report examines the market factors that have enabled and constrained SKT’s 5G actions, as it moves to deliver propositions for audiences beyond the early adopters and heavy data users. It identifies lessons in the commercialisation of 5G for those operators that are on their own 5G journeys and those that have yet to start.

5G performance to date

This analysis is based on the latest data available as we went to press in March 2021.

There were 10.9 million 5G subscribers in South Korea at end-November 2020 (15.5% of the total 70.5 million mobile subscriptions in the market, according to the Ministry of Science and ICT) and network coverage is reported to be more than 90% of the population (a figure that was already quoted in March 2020). Subscriber numbers grew by nearly one million in November 2020, boosted by the introduction of the iPhone 12, which sold 600K units that month.

SKT’s share of 5G subscribers was 46% (5.05 million) in November, to which SKT added a further 400K+ in December, reaching 5.48 million by the end of 2020.

The telco took just four and a half months to reach one million 5G subscribers following launch, significantly less than it had taken with 4G, which had attained the same milestone in eight months following 4G’s commercial launch in 2011.

SKT quarterly 5G subscriber numbers (millions)

SK Telecom 5G subscribers

Source: STL Partners, SK Telecom

SKT credits 5G subscriber growth for its 2.8% MNO revenue increase in the year to December 2020, however the impact on ARPU is less clear. An initial increase in overall ARPU followed the introduction of higher priced 5G plans at launch, but ARPU has fallen back slightly since then, possibly due to COVID-19 economic factors.

SKT total ARPU trend following 5G launch

SK Telecom 5G ARPU

Source: STL Partners

In its 2020 year-end earnings call, SKT reported that it was top of the leader board in South Korea’s three customer satisfaction surveys and in the 5G quality assessment by the Ministry of Science and ICT.

As a cautionary note, Hong Jung-min of the ruling Democratic Party reported that 500K 5G users had switched to 4G LTE during August 2020 due to network issues, including limited coverage, slower than expected speeds. It is unclear how SKT was affected by this.

 

Table of Contents

  • Executive Summary
    • Recommendations
    • Next steps
  • Introduction
  • 5G performance to date
  • Details of launch
  • Consumer propositions
    • At launch
    • …And now
  • Business and enterprise propositions
    • At launch
    • …And now
  • Analysis of 5G market development
    • What next?
    • mmWave
  • Conclusion
  • Appendix 1

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