VNFs on public cloud: Opportunity, not threat

VNF deployments on the hyperscale cloud are just beginning

Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date

The past three years have seen many major telcos concluding collaboration agreements with the leading hyperscalers. These have involved one or more of five business models for the telco-hyperscaler relationship that we discussed in a previous report, and which are illustrated below:

Five business models for telco-hyperscaler partnerships

Source: STL Partners

In this report, we focus more narrowly on the deployment, delivery and operation by and to telcos of virtualised and cloud-native network functions (VNFs / CNFs) over the hyperscale public cloud. To date, there have been few instances of telcos delivering live, commercial services on the public network via VNFs hosted on the public cloud. STL Partners’ Telco Cloud Deployment Tracker contains eight examples of this, as illustrated below:

Major telcos deploying VNFs in the public cloud

Source: STL Partners

Enter your details below to request an extract of the report

Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’

The telcos in the above table are all of comparable stature and ambition to the likes of AT&T and DISH in the realm of telco cloud but have a diametrically opposite stance when it comes to VNF deployment on public cloud. They have decided against large-scale public cloud deployments for a variety of reasons, including:

  • They have invested a considerable amount of money, time and human resources on their private clouddeployments, and they want and need to utilise the asset and generate the RoI.
  • Related to this, they have generated a large amount of intellectual property (IP) as a result of their DIY cloud– and VNF-development work. Clearly, they wish to realise the business benefits they sought to achieve through these efforts, such as cost and resource efficiencies, automation gains, enhanced flexibility and agility, and opportunities for both connectivityand edge compute service innovation. Apart from the opportunity cost of not realising these gains, it is demoralising for some CTO departments to contemplate surrendering the fruit of this effort in favour of a hyperscaler’s comparable cloud infrastructure, orchestration and management tools.
  • In addition, telcos have an opportunity to monetise that IP by marketing it to other telcos. The Rakuten Communications Platform (RCP) marketed by Rakuten Symphony is an example of this: effectively, a telco providing a telco cloud platform on an NFaaS basis to third-party operators or enterprises – in competition to similar offerings that might be developed by hyperscalers. Accordingly, RCP will be hosted over private cloud facilities, not public cloud. But in theory, there is no reason why RCP could not in future be delivered over public cloud. In this case, Rakuten would be acting like any other vendor adapting its solutions to the hyperscale cloud.
  • In theory also, telcos could also offer their private telcoclouds as a platform, or wholesale or on-demand service, for third parties to source and run their own network functions (i.e. these would be hosted on the wholesale provider’s facilities, in contrast to the RCP, which is hosted on the client telco’s facilities). This would be a logical fit for telcos such as BT or Deutsche Telekom, which still operate as their respective countries’ communications backbone provider and primary wholesale provider

BT and Deutsche Telekom have also been among the telcos that have been most visibly hostile to the idea of running NFs powering their own public, mass-market services on the public and hyperscale cloud. And for most operators, this is the main concern making them cautious about deploying VNFs on the public cloud, let alone sourcing them from the cloud on an NFaaS basis: that this would be making the ‘core’ telco business and asset – the network – dependent on the technology roadmaps, operational competence and business priorities of the hyperscalers.

Table of contents

  • Executive Summary
  • Introduction: VNF deployments on the hyperscale cloud are just beginning
    • Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date
    • DISH and AT&T: AWS vs Azure; vendor-supported vs DIY; NaaCP vs net compute
  • Other DIY or vendor-supported best-of-breed players are not hosting VNFs on public cloud
    • Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’
    • The reluctance to deploy VNFs on the cloud reflects a persistent, legacy concept of the telco
  • But NaaCP will drive more VNF deployments on public cloud, and opportunities for telcos
    • Multiple models for NaaCP present prospects for greater integration of cloud-native networks and public cloud
  • Conclusion: Convergence of network and cloud is inevitable – but not telcos’ defeat
  • Appendix

Related Research

 

Enter your details below to request an extract of the report

NFV Deployment Tracker: North American data and trends

Introduction

NFV in North America – how is virtualisation moving forward in telcos against global benchmarks?

Welcome to the sixth edition of the ‘NFV Deployment Tracker’

This report is the sixth analytical report in the NFV Deployment Tracker series and is intended as an accompaniment to the updated Tracker Excel spreadsheet.

This extended update covers seven months of deployments worldwide, from October 2018 to April 2019. The update also includes an improved spreadsheet format: a more user-friendly, clearer lay-out and a regional toggle in the ‘Aggregate data by region’ worksheet, which provides much quicker access to the data on each region separately.

The present analytical report provides an update on deployments and trends in the North American market (US, Canada and the Caribbean) since the last report focusing on that region (December 2017).

Scope, definitions and importance of the data

We include in the Tracker only verified, live deployments of NFV or SDN technology powering commercial services. The information is taken mainly from public-domain sources, such as press releases by operators or vendors, or reports in reputable trade media. However, a small portion of the data also derives from confidential conversations we have had with telcos. In these instances, the deployments are included in the aggregate, anonymised worksheets in the spreadsheet, but not in the detailed dataset listing deployments by operator and geography, and by vendor where known.

Our definition of a ‘deployment’, including how we break deployments down into their component parts, is provided in the ‘Explanatory notes’ worksheet, in the accompanying Excel document.

NFV in North America in global context

We have gathered data on 120 live, commercial deployments of NFV and SDN in North America between 2011 and April 2019. These were completed by 33 mainly Tier-One telcos and telco group subsidiaries: 24 based in the US, four in Canada, one Caribbean, three European (Colt, T-Mobile and Vodafone), and one Latin American (América Móvil). The data includes information on 217 known Virtual Network Functions (VNFs), functional sub-components and supporting infrastructure elements that have formed part of these deployments.

This makes North America the third-largest NFV/SDN market worldwide, as is illustrated by the comparison with other regions in the chart below.

Total NFV/SDN deployments by region, 2011 to April 2019

total NFV deployments by region North America Africa Asia-Pacific Europe Middle East

Source: STL Partners

Deployments of NFV in North America account for around 24% of the global total of 486 live deployments (or 492 deployments counting deployments spanning multiple regions as one deployment for each region). Europe is very marginally ahead on 163 deployments versus 161 for Asia-Pacific: both equating to around 33% of the total.

The NFV North America Deployment Tracker contains the following data, to May 2019:

  • Global aggregate data
  • Deployments by primary purpose
  • Leading VNFs and functional components
  • Leading operators
  • Leading vendors
  • Leading vendors by primary purpose
  • Above data points broken down by region
  • North America
  • Asia-Pacific
  • Europe
  • Latin America
  • Middle East
  • Africa
  • Detailed dataset on individual deployments

 

Contents of the accompanying analytical report:

  • Executive Summary
  • Introduction
  • Welcome to the sixth edition of the ‘NFV Deployment Tracker’
  • Scope, definitions and importance of the data
  • Analysis of NFV in North America
  • The North American market in global context
  • SD-WAN and core network functions are the leading categories
  • 5G is driving core network virtualisation
  • Vendor trends: Open source and operator self-builds outpace vendors
  • Operator trends: Verizon and AT&T are the clear leaders
  • Conclusion: Slow-down in enterprise platform deployments while 5G provides new impetus

Why fibre is on fire again

Introduction

Fibre to the home is growing at a near-explosive rate

Every company faces the problems of mature markets, disappointing revenues and tough decisions on investment. Everyone agrees that fibre delivers the best network experience, but until recently most companies rejected fibre as too costly.

Now, 15 of the world’s largest phone companies have decided fibre to the home is a solution. Why are so many now investing so heavily?

Here are some highlight statistics:

  • On 26th July 2018, AT&T announced it will pass 5 million locations with fibre to the home in the next 12 months, after reaching 3 million new locations in the last year.[1] Fibre is now a proven money-maker for the US giant, bringing new customers every quarter.
  • Telefónica Spain has passed 20 million premises – over 70% of the addressable population – and continues at 2 million a year.
  • Telefónica Brazil is going from 7 million in 2018 to 10 million in 2020.
  • China’s three giants have 344 million locations connected.[2]
  • Worldwide FTTH connections grew 23% between Q1 2017 and Q1 2018.[3]
  • In June 2018, China Mobile added 4.63 million broadband customers, nearly all FTTH.[4]
  • European FTTH growth in 2017 was 20%.[5]
  • In India, Mukesh Ambani intends to connect 50 million homes at Reliance Jio.[6]

Enter your details below to request an extract of the report


Even the most reluctant carriers are now building, including Deutsche Telekom and British Telecom. In 2015, BT Openreach CTO Peter Bell said FTTH was “impossible” for Britain because it was too expensive.[7] Now, BT is hiring 3,500 engineers to connect 3 million premises, with 10 million more homes under consideration.[8]

Credit Suisse believes that for an incumbent, “The cost of building fibre is less than the cost of not building fibre.”

Contents:

  • Executive Summary
  • Introduction
  • Fibre to the home is growing at a near-explosive rate
  • Why the change?
  • Strategies of leading companies
  • Frontrunners
  • Moving toward rapid growth
  • Relative newcomer
  • The newly converted
  • Alternate carriers
  • Naysayers
  • U.S. regionals: CenturyLink, Frontier and Windstream
  • The Asian pioneers
  • Two technologies to consider
  • Ten-gigabit equipment
  • G.fast
  • The hard question: How many will decide to go wireless only?

Figures:

  • Figure 1: Paris area fibre coverage – Orange has covered most of the capital
  • Figure 2: European fibre growth
  • Figure 3: Top five European incumbents, stock price July 2016 – July 2018
  • Figure 4: DT CEO Tim Höttges and Bavarian Prime Minister Dr. Markus Söder announce a deal to fibre nearly all of Bavaria, part financed by the government

[1] https://www.fastnet.news/index.php/11-fib/715-at-t-fiber-run-rate-going-from-3m-to-5m-year

[2] https://www.fastnet.news/index.php/8-fnn/713-china-1-1b-4g-400m-broadband-328m-fibre-home-rapid-growth

[3] http://point-topic.com/free-analysis/world-broadband-statistics-q1-2018/

[4] https://www.chinamobileltd.com/en/ir/operation_m.php

[5] http://www.ftthcouncil.eu/documents/PressReleases/2018/PR%20Market%20Panorama%20-%2015-02-2018-%20FINAL.pdf

[6] https://www.fastnet.news/index.php/11-fib/703-india-unreal-jio-wants-50m-ftth-in-1100-cities

[7] G.fast Summit May 2015

[8] https://www.theguardian.com/business/2018/feb/01/bt-openreach-hire-3000-engineers-drive-to-fill-broadband-not-spots

Enter your details below to request an extract of the report