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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Building telco edge: Why multi-cloud will dominate

Defining the edge

Edge computing will remain a focus for telecoms operators for the foreseeable future, both to optimise the network and enable new, third-party applications and services. In fact, 70% of survey respondents believe investment levels of edge computing for supporting third-party applications will increase over that for internal network infrastructure in the next five years.

This report explores how telecoms operators will build their edge computing business, infrastructure and services, and the role multi-cloud will take in this. Before diving into this, it is worth defining this confusing and complicated space. At a high level, edge computing refers to cloud-native computing (and storage) being brought closer to the end-device or source of the data, rather than centralised in a remote, hyperscale data centre.

The telecoms industry has been exploring the role of edge computing for over four years, starting when network functions virtualisation (NFV) began to make real strides. The initial interest was in mobile edge computing (MEC), but this has now evolved to multi-access edge computing to incorporate fixed networks and non-cellular networks too. Outside telecoms, there is edge compute capacity in regional data centres provided by third parties centres, e.g. data centre operators and cloud providers. These are often in untapped geographies, such as Tier 2 cities. In addition, there is edge compute at customer premises, e.g. business campuses or factories.

We outline the scope of edge computing below. There is a full spectrum of possible edges from devices to regional data centres. Some of these edge locations may be owned and/or operated by communications services providers (CSPs). The CSP edge contains the most relevant types of edge for CSPs: network edge and on-premises enterprise edge. They contain infrastructure either owned by a telecoms operator (e.g. a CSP data centre) or operated by one (e.g. network CPE at a customer site).

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The spectrum of edge computing locations

There are two main types of applications that can be processed on CSP edge computing:

  1. Telecoms applicationsthat run, protect and monitor the network – i.e. CSP’s own network functions;
  2. Consumer/enterpriseapplications – which CSPs may provide for third-party customers.

STL Partners has been supporting the telecoms industry in exploring the opportunity to provide services and solutions to third parties by leveraging their edge computing infrastructure. These could include enterprises deploying IT applications locally to comply with data sovereignty laws, developers using edge to optimise their applications, IoT solution vendors using edge to reduce latency for mission-critical applications, etc. Our survey highlighted the importance for CSPs in investing in the infrastructure for these applications. On average, CSPs believe that 40% of edge computing investments in the next 1-2 years will be used to support these applications, rather than be used for network functions infrastructure.

Defining edge computing within telecoms

Although the edge computing market is nascent, there are emerging use cases that seek to take advantage of edge computing’s main benefits. These include offering the flexibility that comes with the cloud more local to reduce latency, improving reliability, keeping data secure, and offloading processing from the end-device. However, use cases are at different stages of maturity; some will be deployed in the next two years in early adopter markets, others are more than five years away from commercial, wide scale deployments.

The maturity stages of edge computing use cases

Telecoms operators are keen to leverage edge computing to grow revenues, particularly in their enterprise business. There are different strategies emerging: one is to focus on enterprise connectivity and networking, another on developing a horizontal, cloud-like platform for developers, while a third focuses on building end-to-end solutions for specific verticals.

Types of edge services and business models

The challenge with any new technology is that it takes time to educate the market and engage the innovators who will build the applications that will leverage its potential. Edge computing is complex, because it has a unique ecosystem that spans several industries: cloud, telecoms, industrial, traditional ICT, plus specific vertical sectors. In order to build an edge-based solution, there needs to be adequate infrastructure (facility, hardware, connectivity, edge cloud) plus the applications and services, and these need to be integrated so they work together seamlessly.

The edge value chain

Regardless of the business model and services strategy a telecoms operator chooses to pursue, it will need to first determine how best to build its edge infrastructure to optimise results. This report will dive into three key questions CSPs are still trying to evaluate:

  1. How should telecoms operators build edge computing infrastructure that can support both enterprise applications and network functions?
  2. To what extent should telecoms operators work with partners, particularly the hyperscalers, to build their edge and take services to market?
  3. How can telecoms operators effectively work with the ecosystem?

Table of Contents

  • Preface
  • Executive Summary
    • There are three key factors to consider to build the CSP edge
    • The edge will be multi-(edge) cloud
    • CSPs must build capabilities and partnerships today to support their edge business
  • Defining the edge
  • Laying down the foundations: Options for building the CSP edge
    • Convergence
    • Organisation
    • Hyperscaler partnerships
  • There is no single edge – it is multi-cloud
  • Conclusions and recommendations: What CSPs should do next
  • Index

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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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Driving the agility flywheel: the stepwise journey to agile

Agility is front of mind, now more than ever

Telecoms operators today face an increasingly challenging market, with pressure coming from new non-telco competitors, the demands of unfamiliar B2B2X business models that emerge from new enterprise opportunities across industries and the need to make significant investments in 5G. As the telecoms industry undergoes these changes, operators are considering how best to realise commercial opportunities, particularly in enterprise markets, through new types of value-added services and capabilities that 5G can bring.

However, operators need to be able to react to not just near-term known opportunities as they arise but ready themselves for opportunities that are still being imagined. With such uncertainty, agility, with the quick responsiveness and unified focus it implies, is integral to an operator’s continued success and its ability to capitalise on these opportunities.

Traditional linear supply models are now being complemented by more interconnected ecosystems of customers and partners. Innovation of products and services is a primary function of these decentralised supply models. Ecosystems allow the disparate needs of participants to be met through highly configurable assets rather than waiting for a centralised player to understand the complete picture. This emphasises the importance of programmability in maximising the value returned on your assets, both in end-to-end solutions you deliver, and in those where you are providing a component of another party’s system. The need for agility has never been stronger, and this has accelerated transformation initiatives within operators in recent years.

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Concepts of agility have crystallised in meaning

In 2015, STL Partners published a report on ‘The Agile Operator: 5 key ways to meet the agility challenge’, exploring the concept and characteristics of operator agility, including what it means to operators, key areas of agility and the challenges in the agile transformation. Today, the definition of agility remains as broad as in 2015 but many concepts of agility have crystallised through wider acceptance of the importance of the construct across different parts of the organisation.

Agility today is a pervasive philosophy of incremental innovation learned from software development that emphasises both speed of innovation at scale and carrier-grade resilience. This is achieved through cloud native modular architectures and practices such as sprints, DevOps and continuous integration and continuous delivery (CI/CD) – occurring in virtuous cycle we call the agility flywheel.

The Agility Flywheel

agility-flywheel

Source: STL Partners

Six years ago, operators were largely looking to borrow only certain elements of cloud native for adoption in specific pockets within the organisation, such as IT. Now, the cloud model is more widely embraced across the business and telcos profess ambitions to become software-centric companies.

Same problem, different constraints

Cloud native is the most fundamental version of the componentised cloud software vision and progress towards this ideal of agility has been heavily constrained by operators’ underlying capabilities. In 2015, operators were just starting to embark on their network virtualisation journeys with barriers such as siloed legacy IT stacks, inelastic infrastructures and software lifecycles that were architecture constrained. Though these barriers continue to be a challenge for many, the operators at the forefront – now unhindered by these basic constraints – have been driving a resurgence and general acceleration towards agility organisation-wide, facing new challenges around the unknowns underpinning the requirements of future capabilities.

With 5G, the network itself is designed as cloud native from the ground up, as are the leading edge of enterprise applications recently deployed by operators, alleviating by design some of the constraints on operators’ ability to become more agile. Uncertainty around what future opportunities will look like and how to support them requires agility to run deep into all of an operators’ processes and capabilities. Though there is a vast raft of other opportunities that do not need cloud native, ultimately the market is evolving in this direction and operators should benchmark ambitions on the leading edge, with a plan to get there incrementally. This report looks to address the following key question:

Given the flexibility and driving force that 5G provides, how can operators take advantage of recent enablers to drive greater agility and thrive in the current pace of change?

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Table of Contents

  • Executive Summary
  • Agility is front of mind, now more than ever
    • Concepts of agility have crystallised in meaning
    • Same problem, different constraints
  • Ambitions to be a software-centric business
    • Cloudification is supporting the need for agility
    • A balance between seemingly opposing concepts
  • You are only as agile as your slowest limb
    • Agility is achieved stepwise across three fronts
    • Agile IT and networks in the decoupled model
    • Renewed need for orchestration that is dynamic
    • Enabling and monetising telco capabilities
    • Creating momentum for the agility flywheel
  • Recommendations and conclusions

2020 in review and focus on North America: How should telcos do cloud?

Tenth update of the Telco Cloud Tracker

This report accompanies the tenth release of STL Partners’ ‘Telco Cloud Tracker’ database. This contains data on deployments of NFV (Network Functions Virtualisation), SDN (Software Defined Networking) and cloud-native network functions (CNFs) in the networks of the leading telcos worldwide. This analytical report focuses on trends in North America, set in global context.

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Scope and content of the Tracker

The data in the tenth update covers the period up to the end of January 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. However, it also includes a smaller set of deployment data disclosed to us confidentially by operators and vendors. This information is added to the aggregate data sections of the ‘Tracker’ spreadsheet, which do not refer to the specific solutions supplied or the operators where they were deployed.

We apply the term ‘deployment’ to refer to the total set of virtual network functions (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 implement a virtualised mobile 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.

Accordingly, some of the deployments contained in the database comprise multiple elements, which are listed separately, including details about the category of NFV / SDN / CNF, and vendor and product name where known.

In addition to these mainly public-domain deployments, there are many non-publicised deployments that are inevitably omitted from the ‘Tracker’. However, the ever-growing ‘Tracker’ database now constitutes a considerable body of research that in our view offers a reliable snapshot of the overall market and the main trends in the evolution of telco cloud. In addition, as the ‘Tracker’ contains details only of deployments in live, commercial telco networks (either completed or in progress), this provides a useful corrective to the hype of some vendors’ pronouncements about agreements with operators, which often relate only to collaboration arrangements and preliminary trials, rather than commercial roll-outs.

The one exception to this rule of including only deployments that are implemented to support commercial services is a limited set of data on some of the current live network trials of open and / or virtual RAN (vRAN). The reason for making this exception is the very high level of interest currently in open RAN.

In terms of the telcos included, we limit the database mainly to Tier-One international and national telecoms operators, along with national fixed and mobile operators in smaller markets. For subsequent updates, we may expand the range and types of service providers included, because telco cloud is opening up opportunities for new players to provide cloud- and CNF-based connectivity and related services that are competing strongly with classic telco services.

SD-WAN in focus

In this update of the Tracker we have included a deep dive on SD-WAN, which was one of the main early drivers of SDN/NFV deployments, particularly among North American operators. It is worth exploring in more detail because, as it evolves into an increasingly cloud-centric and cloud-native service, it is emerging as another battleground between operators, hyperscalers and vendors.

5G is driving deployments – but will it drive business model change?

This is the first update to the ‘Telco Cloud Tracker’ in 2021, which provides an opportunity to review 2020 and discuss the key trends in 2021.

Despite the global pandemic, the pace of virtualised network function (VNF) deployments has continued at a strong level.

Total deployments by region, 2016 to 2021

Our projection is that the final number of deployments in 2020 will be at around the same level as 2019 (182 in total). Many live deployments are confirmed some time after the event, swelling the totals for previous years. Accordingly, some of the deployments currently recorded as ‘in progress’ will be added to the tally for 2020.

5G core dominates the scene but is done largely via single-vendor, ‘vertical’ NFV

The main driver of deployments in 2020 was 5G network launches around the world, particularly in the second half of the year. This meant that many Non-standalone (NSA) 5G cores – the platform supporting almost all live 5G networks – also went live, as is illustrated below:

 Deployments by leading network function, 2016 to 2021

We recorded 76 completed deployments of NSA cores in 2020, up from 56 in 2019. A further ten deployments were either completed or pending in the first quarter of 2021.

Table of content

  • Executive Summary
    • 5G core drives deployments
    • SD-WAN: Telco value moves from the WAN to the edge
    • The industry is facing an existential question: How should telcos do cloud?
    • Conclusion from North America analysis: Can a brownfield MNO be more cloud-native than a greenfield one?
  • Introduction
    • Tenth update of the Telco Cloud Tracker
    • Scope and content of the Tracker
    • SD-WAN in focus
  • 5G is driving deployments – but will it drive business model change?
    • 5G core dominates the scene but is done largely via single-vendor, ‘vertical’ NFV
    • The industry faces an existential question: how should telcos do cloud?
    • Focus on North America: four divergent answers to the existential question
  • SD-WAN: While WAN moves to the cloud, new software-defined value migrates to the edge
    • SD-WAN was one of the success stories of the first phase of SDN / NFV
    • SD-WAN has been largely made in America
    • Changes accelerated by Covid favour SD-WAN vendors over telcos – but telcos retain strengths in key areas
    • Main opportunities currently for telcos in SD-WAN, and challenge from vendors
    • ‘SD’ moves towards the edge, while ‘WAN’ moves to the cloud
  • Conclusion: Can a brownfield MNO be more cloud-native than a greenfield one?

 

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Why energy management is critical to 5G success

This paper explains why telco’s 5G roll-out, and their ability to monetise 5G, could be undermined by failing to address both the energy and wider sustainability issues that come with it. 5G must be deployed in an energy efficient manner to avoid spiralling costs and increased pressure from customers, investors and authorities. This report is aimed at the C-suite, but also at network operations and planners who are charged with deploying 5G, and the product and customer teams developing new 5G services that will create value and drive growth.

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5G: Designed to spur innovation and drive growth

Much has been written (not least by STL) about 5G technology being different – both in what it does and how it does it – from previous ‘Gs’. Among other things, 5G has been conceived:

  • To enable new operating models, spur innovation and introduce an explosion of tailored connectivity and tightly coupled applications (e.g. low latency, high reliability, IoT)
  • To sustain the growth in data traffic that we have already seen with 3G and then 4G

Although many operators globally have yet to launch 5G, the roll-out is gathering pace and expected to achieve significant global coverage by 2025.

Actual data traffic volumes will move to 5G networks faster than coverage or subscriber adoption. This is due to take up of new 5G services, the nature of consumer adoption cycles (earlier adopters are heavier users) and coverage concentration in more populous areas. For example, in South Korea 5G accounted for over 30% of all mobile traffic by the end of 2020, although only 15% of subscribers were on 5G and much of the country is still not covered.

STL Partners project that global 5G traffic may overtake 4G traffic as soon as 2026.

Projected 5G traffic volumes by region

The 5G energy challenge

5G networks, done right, can limit carbon emissions and even reduce the overall energy consumption of telecoms operators, but given the number of factors at play, things will not fall into place on their own.

5G can curb excess energy use…. if done right

In terms of energy required per unit of data transmitted, 5G networks are an order of magnitude more efficient than 4G networks (much of this due to the air interface, particularly MIMO arrays packing in a greater number of antennae). 5G networks can also be more ‘energy elastic’, with energy consumption more closely tracking network use: high at peak times, largely dormant at quieter times. Cloud-native 5G standalone core and virtualised RAN will make it far easier and cheaper to adopt performance improvements in hardware and software. Open RAN will spawn new commercial and operating models in RAN sharing / wholesale / neutral hosts.

However, as the higher performance and lower cost (per GB) of 5G services will result in increased use and accelerate traffic growth, this will negate some of the efficiency gains. Furthermore, to achieve coverage, 5G networks will initially represent another overlay network requiring additional equipment and energy. Due to the higher frequencies, 5G will need more cells than 4G networks and 5G cells will typically have peak power requirements higher than 4G sites. Initially at least, this power will be additional to that supporting existing networks.

Another complication is the cloud-native nature of 5G networks which means that these will run on commercial-of-the-shelf (COTS) servers. Although potentially cheaper to buy and more efficient to run than traditional telco equipment, such servers are designed to run in ‘data-centre’ technical facilities: with more specialised cooling and power requirements. Due to the nature of networks, these servers will be distributed across many, smaller ‘edge’ facilities as well as a few big ones. And, in addition to housing servers for network functions these distributed facilities may also support edge compute resources for telco customers’ 5G-enabled applications such as AR/VR.

These distributed edge sites need to be specified, equipped, commissioned, and operated differently than in the past. Failure to do so risks inefficiencies and a jump in both embedded and ongoing emissions. To compound things, these sites will not all be greenfield ones. In many instances, they will be collocated with existing equipment, or use refurbished space in central offices, branch exchanges or older self-contained technical enclosures delivered by truck.

To reduce energy consumption and OPEX at telco sites and across the telco networks, one answer would be to begin to de-commission previous generations of mobile technology. De-commissioning 2G, 3G and 4G mobile networks would have a net beneficial effect on the carbon emissions from all the networks.

However, there are issues with de-commissioning, given that customers and applications rely on 2G and 3G even in advanced economies, smart meters being a key use for 2G, for example. There are also regional divergences: while many Asian countries have fully de-commissioned 2G and countries such as Germany aims to have fully de-commissioned 3G by 2022, by the end of 2019F 46% of consumers of mobile connectivity in Africa still used 2G.

This attests to a wider challenge when evaluating how telcos can reduce their carbon emissions in the Coordination Age: different regions are at very different stages of 5G deployment and face different challenges and solutions with regards to energy management as a whole.

Regions with different 5G take-up face different energy challenges

An added challenge with deploying 5G in a sustainable manner is that telcos cannot lose sight of resiliency and cost. Energy performance and sustainability goals need to be aligned with financial and operational objectives and incentives, not competing with them. We set out how this can be achieved in this study.

Table of Contents

  • Executive Summary
  • Preface
  • Introduction
    • The Coordination Age – a new role and purpose for telcos
    • Resource efficiency and the Coordination Age
    • 5G: Designed to spur innovation and drive growth
    • Challenge 1: The 5G energy challenge
    • Challenge 2: A rapidly changing business climate
  • How can telcos pursue growth through 5G and meet the challenges of the changing business climate?
    • Adopt energy best practice in 5G design, procurement, deployment, and operations
      • Best practice operates at multiple levels…and across them
      • Focusing action for your operator
    • Drive customers’ transition to low emissions through 5G-enabled services
      • Who to target?
      • Specific steps in driving customer efficiency through 5G
  • Conclusions and recommendations
    • Preach what you practice
    • … as well as practice what you preach
    • Recommendations for telco leadership

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Cloud native: Just another technology generation?

Cloud native networking: Telecoms’ latest adventure

As a term, cloud native has currency in telecoms networking. 5G has contributed to the recent industry-wide interest in adopting cloud native applications for networks. This is because the 5G standalone core networks (5G SA) that operators are now planning (and some have started deploying) are intended to run as software that is specified and architected following cloud native principles.

Within telecoms, thinking about cloud native tends to centre on the next phase of moving network functions into a software environment, building on lessons learned with NFV/SDN. Viewed from this perspective, cloud native is the next step in the telecoms industry technology evolution: from analogue to digital circuit-switched to digital IP to virtualised to cloud native.

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Telcos’ business model is reaching end-of-life

The rise of mobile telephony and fixed and mobile broadband means that telecoms operators have enjoyed 20 years of strong growth in all major markets. That growth has stalled. It happened in Japan and South Korea as early as 2005, in Europe from 2012 or so and, market by market, others have followed. STL Partners forecasts that, apart from Africa, all regions will see a compound annual growth rate (CAGR) below 3% for both fixed and mobile services for the next three years. Ignoring pandemic ‘blips’, we forecast a CAGR of less than 1% per annum globally. This amounts to a decline in real terms.

The telecoms industry is reaching the end of its last growth cycle

The telecoms industry’s response to this slowdown has been to continue to invest capital in better networks – fibre, 4G, 5G – to secure more customers by offering more for less. Unfortunately, as competitors also upgrade their networks, connectivity has become commoditised as value has shifted to the network-independent services that run over them.

In other words, the advantage that telcos had when only telecoms services could run on telecoms networks has gone: the defensive moat from owning fibre or spectrum has been breached. Future value comes from service innovation not from capital expenditure. The chart below sums the problem up: seven internet players generate around 65% of the revenue generated by 165 operators globally, but have a c. 50% bigger combined market capitalisation. This is because the capital markets believe that revenue and profit growth will accrue to these service innovators rather than telecoms operators.

Tech companies are more highly valued than telcos

Understand, then emulate the operating model

Operators have been aspiring to learn from technology firms so they can transform their operations and services. But changes have been slow, and it is difficult to point to many ‘poster child’ operators that successfully made a move beyond pure telecommunications. Partly this is due to a mismatch between corporate announcements and their investment policies. Too often we hear CEOs express a desire to change their organisations and that they intend to offer a host of exciting new services, only to see that aspiration not borne out when they allocate resources. Where other tech companies make substantial investments in R&D and product development, operators continue to invest miniscule amounts in service innovation (especially in comparison to what is poured into the network itself).

Telco vs tech-co investment models

STL Partners believes that many of the network-related activities that will enable operators to reduce capital expenditure, such as cloud-native networking, will also enable them to automate and integrate processes and systems so they are more flexible and agile at introducing new services. So, an agile software-oriented infrastructure will enable changes in business processes such as product development and product management, partnering, and customer care – if management prioritises investment and drives change in these areas. Cloud native business practices and software were developed by technology companies (and then widely adopted by enterprise IT functions) as a means to deliver greater innovation at scale whilst reducing the level of capital relative to revenue.

Our belief is that financial and operational developments need to happen in unison and operators need to move quickly and with urgency to a new operating model supported by cloud native practices and technology, or face sharp declines in ROI.

Table of Contents

  • Executive Summary
  • Table of Figures
  • Preface
  • Cloud native networking: Telecoms’ latest adventure
  • Telcos’ business model is reaching end-of-life
    • Understand, then emulate the operating model
    • The coordination age – a new role for telcos
    • 5G: Just another G?
    • Cloud native: Just another technology generation?
  • Different perspectives: Internal ability, timing …and what it means to be a network operator
    • Organisational readiness, skills and culture
    • Target operating model and ecosystem
    • Assembly versus Engineering
    • Wider perceptions across the business functions
    • Operator segment 1: Risk of complacency
    • Operator segment 2: Align for action
    • Operator segment 3: Urgent re-evaluation
    • Operator segment 4: Stay focused and on track
  • Appendix 1
    • Interviewee overview
  • Appendix 2
    • Defining Cloud Native
    • There is consensus on the meaning of cloud native software and applicability to networks
    • Agreement on the benefits: automation at scale for reliability and faster time to market
    • …and changing supplier relationships

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Telco A3: Skilling up for the long term

Telcos must master automation, analytics and AI (A3) skills to remain competitive

A3 will permeate all aspects of telcos’ and their customers’ operations, improving efficiency, customer experience, and the speed of innovation. Therefore, whether a telecoms operator is focused on its core connectivity business, or seeking to build new value beyond connectivity, developing widespread understanding of value of A3 and disseminating fundamental automation and AI skills across the organisation should be a core strategic goal. Our surveys on industry priorities suggest that operators recognise this need, and automation and AI are correspondingly rising up the agenda.

Expected technology priority change by organisation type, May 2020

technology investment priorities telecoms May 2020

*Updated January 2021 survey results will be published soon. Source: STL Partners survey, 222 respondents.

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Key findings on operators’ A3 strategies

Based on deep dive interviews with 8 telcos, as well as insights from 8 more telcos gathered from previous research programmes.

  • Less advanced telcos are creating a set of basic structures and procedures, as well as beginning to develop a single view of the customer
  • Having a single version of the truth appears to be an ongoing issue for all – alongside continued work on data quality
  • As full end-to-end automation is not a realistic goal for the next few years, interviewees were seeking to prioritise the right journeys to be automated in the short term
  • Reskilling and education of staff was an area of importance for many but not all
  • Just one company had less ambitious data-related aims due to the specialist nature of their services and smaller size of the company – saying that they worked with data on an as-needed basis and had no plans to develop dedicated data science headcount

Preparing for the future: There are four areas where A3 will impact telcos’ businesses

four A3 areas impacting telcos

Source: Charlotte Patrick Consult, STL Partners

In this report we outline the skills and capabilities telcos will need in order to navigate these changes. We break out these skills into four layers:

  1. The basic skillset: What operators need to remain competitive over the short term
  2. The next 5 years: The skills virtually all telcos will need to build or acquire to remain competitive in the medium term (exceptions include small or specialist telcos, or those in less competitive markets)
  3. The next 10 years: The skills and organisational changes telcos will need to achieve within a 10 year timeframe to remain competitive in the long term
  4. Beyond connectivity (5–10 year horizon): This includes A3 skills that telcos will need to be successful strategic partners for customers and suppliers, and to thrive in ecosystem business models. These will be essential for telcos seeking to play a coordination role in IoT, edge, or industry ecosystems.

Table of contents

  • Executive Summary
  • Telcos’ current strategic direction
    • Deep dive into 8 operator strategies
    • Overview of 8 more operator strategies
  • How A3 technologies are evolving
    • Deep dive into 40 A3 applications that will impact telcos’ businesses
    • Internal capabilities
    • Customer requirements
    • Technology changes
    • Organisational change
  • A timeline of telco A3 skills evolution
    • The basic skillset
    • The next 5 years
    • The next 10 years
    • Beyond connectivity

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Microsoft, Affirmed and Metaswitch: What does it mean for telecoms?

What is Microsoft doing, and should telcos be worried?

Over the past two years, Microsoft and its cloud business unit Azure have intensified and deepened their involvement in the telecoms vertical. In 2020, this included the acquisition of two leading independent vendors of cloud-native network software, Affirmed Networks and Metaswitch. This move surprised many industry observers, as it represented an intensification of Microsoft’s involvement in telco networking.

In addition, in September 2020, Microsoft announced its ‘Azure for Operators’ strategy. This packages up all the elements of Microsoft’s and Azure’s infrastructure and service offerings for the telecoms industry – including those provided by Affirmed and Metaswitch – into a more comprehensive, end-to-end portfolio organised around Microsoft’s concept of a ‘carrier-grade cloud’: a cloud that is truly capable of supporting and delivering the distinct performance and reliability that telcos require from their network functions, as opposed to the mainstream cloud devoted to enterprise IT.

In this report, our discussion of Microsoft’s strategy and partnership offer to telcos is our own interpretation based on our research, including conversations with executives from Microsoft, Affirmed Networks and Metaswitch.

We examine Microsoft’s activities in the telecoms vertical in the light of three central questions:

  • What is Microsoft doing in telecoms, and what are its intentions?
  • How should telcos respond to Microsoft’s moves and those of comparable hyperscale cloud providers? Should they consume the hyperscalers’ telco cloud products, compete against the hyperscalers, or collaborate with them?
  • And what would count as success for telcos in relationship to Microsoft and the other hyperscalers? Are there any lessons to be learned from what is happening already?

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Microsoft’s telecom timeline

The last couple of years has seen Microsoft and Azure increasing their involvement in telecoms infrastructure and software while building partnerships with telcos around the world. This march into telecoms stepped up a level with Microsoft’s acquisition in 2020 of two independent virtual network function (VNF) vendors with a strong presence in the mobile core, among other things: Affirmed Networks and Metaswitch. Microsoft was not previously known for its strength in telco network software, and particularly the mobile domain – prompting the question: what exactly was it doing in telecoms?

The graphic below illustrates some of the key milestones in Microsoft’s steady march into telecoms.

Microsoft’s move on telecoms

Microsoft’s five partnership and service models

Microsoft Azure’s key initiatives over the past two years have been to expand its involvement in telecoms, culminating in Microsoft’s acquisition of Affirmed and Metaswitch, and the launch of the Azure for Operators portfolio.

As a result of these initiatives, we believe there are five models of partnership and service delivery that Microsoft is now proposing to operators, addressing the opportunities arising from a convergence of network, cloud and compute. Altogether, these five models are:

Five business models for partnerships

  • A classic telco-vendorrelationship (e.g. with Affirmed or Metaswitch) – helping telcos to evolve their own cloud-native network functions (CNFs), and cloud infrastructure and operations
  • The delivery and management of VNFs and CNFs as a cloud service, or ‘Network Functions-as-a-Service’ (NFaaS)
  • Enabling operators to pursue a hybrid-cloud operating model supporting the delivery of their own vertical-specific and enterprise applications and services, or Platform-as-a-Service (PaaS)
  • Rolling out Azure edge-cloud data centres into telco and enterprise edge locations to serve as a cloud delivery platform for third-party application developers providing low latency-dependent and high-bandwidth services, or ‘Network-as-a-Cloud Platform’ (NaaCP)
  • Using such Azure edge clouds – in enterprise and neutral facilities alongside telco edge locations – as the platform for full-fledged ‘net compute’ services, whether these are developed collaboratively with operators or not.

Table of Contents

  • Executive Summary
    • Microsoft wants to be a win-win partner
    • What should telcos and others do?
    • Next steps
  • Introduction
    • What is Microsoft doing, and should telcos be worried?
  • What has Microsoft done?
    • Microsoft’s telecom timeline
  • What is Microsoft’s strategy?
    • Microsoft’s five partnership and service models
    • The ‘Azure for Operators’ portfolio completes the set
    • 5G, cloud-native and net compute: Microsoft places itself at the heart of telco industry transformation
    • Cellular connectivity – particularly 5G – is pivotal
  • Telco-hyperscaler business models: What should telcos do?
    • Different hyperscalers have different telco strategies: comparison between Azure, AWS and Google Cloud
    • What should telcos do? Compete, consume or collaborate?
  • Microsoft’s ecosystem partnership model: What counts as success for telcos?
    • More important to grow the ecosystem than share of the value chain
    • Real-world examples: AT&T versus Verizon
  • Conclusion: Telcos should stay in the net compute game – and Microsoft wants be a partner
  • Appendix 1: Analysis of milestones of Microsoft’s journey into telecoms
  • Appendix 2: Opportunities and risks of different types of telco-hyperscaler partnership
  • Index

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Telco Cloud Europe update: Open RAN approaching tipping point

Telco Cloud deployments on track for growth again in 2020

Ninth update of the ‘Telco Cloud Tracker’: from ‘NFV’ to ‘telco cloud’

This report accompanies the ninth release of STL Partners’ ‘Telco Cloud Tracker’ database. This contains data on deployments of NFV (Network Functions Virtualisation), SDN (Software Defined Networking) and cloud-native network functions (CNFs) in the networks of the leading telcos worldwide. This analytical report focuses on trends in Europe, set in global context.

For this update and hereafter, we have changed the name of the database from ‘NFV Deployment Tracker’ to ‘Telco Cloud Tracker’. The name change reflects STL Partners’ new focus on ‘Telco Cloud’ as both a research stream and consultancy practice. But the change also corresponds to the fact that the telecoms industry has now embarked on the second phase of its journey towards more integrally software-based networks – the first phase of which went under the banner of ‘NFV’. This journey is not just about a migration towards ‘software in general’, but cloud-native software: based on design principles developed by the cloud industry, which have the potential to bring cloud-scale economics, programmability and automation to connectivity and connectivity-dependent services.

The Tracker database is provided as an interactive Excel tool containing line-by-line analysis of more than 760 individual deployments of NFV, SDN and CNFs, which can be used to drill down on trends by company and region.

We will produce further research and reports on different aspects of cloud-native software and its impact over the coming months.

Growth in 5G core offset by declines in other areas

Telco cloud deployments so far

After a slight drop in the overall number of deployments in 2019, 2020 is set to be a year of modest growth, as is illustrated by the figure below:

Total number of deployments worldwide, 2014 to July 2020

Source: STL Partners

The data for 2020 is split up into completed, ‘pending’ and estimated additional deployments. We have recorded 63 completed deployments between January and July 2020. Pending deployments (totalling 72) are those previously announced that we are expecting to be completed during 2020 but which – to our knowledge – had not yet gone live in the commercial network by the end of July. The estimated additional deployments are derived from extrapolating to the full year 2020 from the total of completed implementations in the first seven months. This results in around 45 further deployments. On this basis, the total for the year as a whole would reach around 180 deployments: just above the previous record year of 2018 (178).

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Table of Contents

  • Executive Summary
  • Introduction: Telco cloud deployments on track for growth again in 2020
    • Ninth update of the ‘Telco Cloud Tracker’: from ‘NFV’ to ‘telco cloud’
    • Scope and content of the Tracker
  • 5G core drives new growth in 2020
    • Deployments are on the rise again
    • Growth has been consistent across almost all regions
    • Europe also on track to maintain its record of year-on-year growth
    • Deployments in Europe are still dominated by the major players, but smaller telcos are catching up
    • Vendors: Ericsson in close second place behind Cisco owing to strong presence in mobile core
  • Open RAN at a TIPping point in Europe
    • European telcos are playing a leading role in open RAN
  • Conclusion: Growth being driven by 5G – with open RAN waiting in the wings
    • Worldwide surge in NSA 5G core deployments
    • NSA 5GC is now nearly the leading VNF overall in Europe
    • … with cloud-native, SA 5GC coming down the pipeline
    • … and waiting in the wings: open RAN
    • These overlapping waves of innovation will make telco cloud mainstream

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Telco edge computing: How to partner with hyperscalers

Edge computing is getting real

Hyperscalers such as Amazon, Microsoft and Google are rapidly increasing their presence in the edge computing market by launching dedicated products, establishing partnerships with telcos on 5G edge infrastructure and embedding their platforms into operators’ infrastructure.

Many telecoms operators, who need cloud infrastructure and platform support to run their edge services, have welcomed the partnership opportunity. However, they are yet to develop clear strategies on how to use these partnerships to establish a stronger proposition in the edge market, move up the value chain and play a role beyond hosting infrastructure and delivering connectivity. Operators that miss out on the partnership opportunity or fail to fully utilise it to develop and differentiate their capabilities and resources could risk either being reduced to connectivity providers with a limited role in the edge market and/or being late to the game.

Edge computing or multi-access edge computing (MEC) enables processing data closer to the end user or device (i.e. the source of data), on physical compute infrastructure that is positioned on the spectrum between the device and the internet or hyperscale cloud.

Telco edge computing is mainly defined as a distributed compute managed by a telco operator. This includes running workloads on customer premises as well as locations within the operator network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs. Depending on where the computing resources reside, edge computing can be broadly divided into:

  • Network edge which includes sites or points of presence (PoPs) owned by a telecoms operator such as base stations, central offices and other aggregation points on the access and/or core network.
  • On-premise edge where the computing resources reside at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.

Our overview on edge computing definitions, network structure, market opportunities and business models can be found in our previous report Telco Edge Computing: What’s the operator strategy?

The edge computing opportunity for operators and hyperscalers

Many operators are looking at edge computing as a good opportunity to leverage their existing assets and resources to innovate and move up the value chain. They aim to expand their services and revenue beyond connectivity and enter the platform and application space. By deploying computing resources at the network edge, operators can offer infrastructure-as-a-service and alternative application and solutions for enterprises. Also, edge computing as a distributed compute structure and an extension of the cloud supports the operators’ own journey into virtualising the network and running internal operations more efficiently.

Cloud hyperscalers, especially the biggest three – Amazon Web Services (AWS), Microsoft Azure and Google – are at the forefront of the edge computing market. In the recent few years, they have made efforts to spread their influence outside of their public clouds and have moved the data acquisition point closer to physical devices. These include efforts in integrating their stack into IoT devices and network gateways as well as supporting private and hybrid cloud deployments. Recently, hyperscalers took another step to get closer to customers at the edge by launching platforms dedicated to telecom networks and enabling integration with 5G networks. The latest of these products include Wavelength from AWS, Azure Edge Zones from Microsoft and Anthos for Telecom from Google Cloud. Details on these products are available in section.

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From competition to coopetition

Both hyperscalers and telcos are among the top contenders to lead the edge market. However, each stakeholder lacks a significant piece of the stack which the other has. This is the cloud platform for operators and the physical locations for hyperscalers. Initially, operators and hyperscalers were seen as competitors racing to enter the market through different approaches. This has resulted in the emergence of new types of stakeholders including independent mini data centre providers such as Vapor IO and EdgeConnex, and platform start-ups such as MobiledgeX and Ori Industries.

However, operators acknowledge that even if they do own the edge clouds, these still need to be supported by hyperscaler clouds to create a distributed cloud. To fuel the edge market and build its momentum, operators will, in the most part, work with the cloud providers. Partnerships between operators and hyperscalers are starting to take place and shape the market, impacting edge computing short- and long-term strategies for operators as well as hyperscalers and other players in the market.

Figure 1: Major telco-hyperscalers edge partnerships

Major telco-hyperscaler partnerships

Source: STL Partners analysis

What does it mean for telcos?

Going to market alone is not an attractive option for either operators or hyperscalers at the moment, given the high investment requirement without a guaranteed return. The partnerships between two of the biggest forces in the market will provide the necessary push for the use cases to be developed and enterprise adoption to be accelerated. However, as markets grow and change, so do the stakeholders’ strategies and relationships between them.

Since the emergence of cloud computing and the development of the digital technologies market, operators have been faced with tough competition from the internet players, including hyperscalers who have managed to remain agile while building a sustained appetite for innovation and market disruption. Edge computing is not an exception and they are moving rapidly to define and own the biggest share of the edge market.

Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market while partnering with hyperscalers in edge computing.

Table of contents

  • Executive Summary
    • Operators’ roles along the edge computing value chain
    • Building a bigger ecosystem and pushing market adoption
    • How partnerships can shape the market
    • What next?
  • Introduction
    • The edge computing opportunity for operators and hyperscalers
    • From competition to coopetition
    • What does it mean for telcos?
  • Overview of the telco-hyperscalers partnerships
    • Explaining the major roles required to enable edge services
    • The hyperscaler-telco edge commercial model
  • Hyperscalers’ edge strategies
    • Overview of hyperscalers’ solutions and activities at the edge
    • Hyperscalers approach to edge sites and infrastructure acquisition
  • Operators’ edge strategies and their roles in the partnerships
    • Examples of operators’ edge computing activities
    • Telcos’ approach to integrating edge platforms
  • Conclusion
    • Infrastructure strategy
    • Platform strategy
    • Verticals and ecosystem building strategy

 

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ngena SD-WAN: scaling innovation through partnership

Introducing ngena

This report focusses on ngena, a multi-operator alliance founded in 2016, which offers multi-national networking services aimed at enterprise customers. ngena is interesting to STL Partners for several reasons:

First, it represents a real, commercialised example of operators working together, across borders and boundaries, to a common goal – a key part of our Coordination Age vision.

Second, ngena’s SDN product is an example of a new service which was designed around a strong, customer-centric proposition, with a strong emphasis on partnership and shared vision – an alternative articulation, if you like, of Elisa’s cultural strategy.

Third, it was born out of Deutsche Telekom, the world’s sixth-largest telecoms group by revenue, which operates in more than fifty countries. This makes it a great case study of an established operator innovating new enterprise services.

And lastly, it is a unique example of a telco and technology company (in this case Cisco) coming together in a mutually beneficial creative partnership, rather than settling into traditional buyer-supplier roles.

Over the coming pages, we will explore ngena’s proposition to customers, how it has achieved what it has to date, and to what extent it has made a measurable impact on the companies that make up the alliance. The report explains STL Partners’ independent view, informed by conversations with Marcus Hacke, Founder and Managing Director, as well as others across the industry.

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Shifting enterprise needs

Enterprises throughout the world are rapidly digitising their operations, and in large part, that involves the move to a ‘multicloud’ environment, where applications and data are hosted in a complex ecosystem of private data centres, campus sites, public clouds, and so on.

Digital enterprises need to ensure that data and applications are accessible from any location, at any time, from any device, and any network, reliably and without headaches. A large enterprise such as a retail bank might have physical branches located all over the place – and the same data needs to be accessible from any branch.

Traditionally, this sort of connectivity was achieved over the wide area network (WAN), with enterprises investing in private networks (often virtual private networks) to ensure that data remained secure and reliably accessible. Traditional WAN architectures work well – but they are not known for flexibility of the sort required to support a multicloud set-up. The network topology is often static, requiring manual intervention to deploy and change, and in our fast-changing world, this becomes a bottleneck. Enterprises are still faced with several challenges:

Key enterprise networking challenges

Source: STL Partners, SD-WAN mini series

The rise of SD-WAN: 2014 to present

This is where, somewhere around 2014, software-defined WAN (SD-WAN) came on the scene. SD-WAN improves on traditional WAN by applying the principles of software-defined networking (SDN). Networking hardware is managed with a software-based controller that can be hosted in the cloud, which opens up a realm of possibilities for automation, smart traffic routing, optimisation, and so on – which makes managing a multicloud set-up a whole lot easier.

As a result, enterprises have adopted SD-WAN at a phenomenal pace, and over the past five years telecoms operators and other service providers worldwide have rushed to add it to their managed services portfolio, to the extent that it has become a mainstream enterprise service:

Live deployments of SD-WAN platforms by telcos, 2014-20 (global)

Source: STL Partners NFV Deployment Tracker
Includes only production deployments; excludes proof of concepts and pilots
Includes four planned/pending deployments expected to complete in 2020

The explosion of deployments between 2016 and 2019 had many contributing factors. It was around this time that vendor offerings in the space became mature enough for the long tail of service providers to adopt more-or-less off-the shelf. But also, the technology had begun to be seen as a “no-brainer” upgrade on existing enterprise connectivity solutions, and therefore was in heavy demand. Many telcos used it as a natural upsell to their broader suite of enterprise connectivity solutions.

The challenge of building a connectivity platform

While SD-WAN has gained significant traction, it is not a straightforward addition to an operator’s enterprise service portfolio – nor is it a golden ticket in and of itself.

First, it is no longer enough to offer SD-WAN alone. The trend – based on demand – is for it to be offered alongside a portfolio of other SDN-based cloud connectivity services, over an automated platform that enables customers to pick and choose predefined services, and quickly deploy and adapt networks without the effort and time needed for bespoke customer deployments. The need this addresses is obvious, but the barrier to entry in building such a platform is a big challenge for many operators – particularly mid-size and smaller telcos.

Second, there is the economic challenge of scaling a platform while remaining profitable. Platform-based services require continuous updating and innovation, and it is questionable whether many telecoms operators are up to have the financial strength to do so – a situation you find for nearly all IT cloud platforms.

Last – and by no means least – is the challenge of scaling across geographies. In a single-country scenario, where most operators (at least in developed markets) will already have the fixed network infrastructure in place to cover all of a potential customer’s branch locations, SD-WAN works well. It is difficult, from a service provider’s perspective, to manage network domains and services across the whole enterprise (#6 above) if that enterprise has locations outside of the geographic bounds of the service provider’s own network infrastructure. There are ways around this – including routing traffic over the public Internet, and other operators’ networks, but from a customer point-of-view, this is less than ideal, as it adds complexity and limits flexibility in the solution they are paying for.

There is a need, then, for a connectivity platform “with a passport”: that can cross borders between operators, networks and markets without issue. ngena, or the Next Generation Enterprise Network Alliance, aims to address this need.

Table of Contents

  • Executive summary
    • What is ngena?
    • Why does ngena matter?
    • Has ngena been successful?
    • What does ngena teach us about successful telco innovation?
    • What does this mean for other telcos?
    • What next?
  • Introduction
  • Context: Enterprise needs and SD-WAN
    • Shifting enterprise needs
    • The rise of SD-WAN: 2014 to present
    • The challenge of building a connectivity platform
  • ngena: Enterprise connectivity with a passport
    • A man with a vision
    • The ngena proposition
  • How successful has ngena been?
    • Growth in alliance membership
    • Growth in ngena itself
    • Making money for the partners
  • What does ngena teach us about successful innovation culture in telecoms?
    • Context: the need to disrupt and adapt in telecoms
    • Lessons from ngena
  • What does this mean for other telcos?
      • Consider how you support innovation
      • Consider how you partner for mutual benefit
      • What next?

NFV goes mainstream: How cloud-native is contributing to growth

This report accompanies the latest update of the NFV Deployment Tracker (June 2020).  It provides an analysis of global tracker findings and covers deployments from 2011 until March 2020.

About the NFV Deployment Tracker

The NFV Deployment Tracker is a regularly-updated database of commercial deployments of Network Functions Virtualisation (NFV) and Software-Defined Networking (SDN) technologies by leading telcos worldwide. It builds on an extensive body of analysis by STL Partners over the past five years on NFV and SDN strategies, technology and market developments.

The Tracker is provided as an interactive Excel tool containing line-by-line analysis of nearly 700 individual deployments of NFV and SDN, which can be used to drill down on trends by company and region.

The NFV Deployment Tracker

Overview of STL Partners NFV Deployment Tracker

Source: STL Partners

Previous reports have focussed on trends in specific regions, in addition to global findings. These include:

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NFV/SDN continues to grow at different speeds in different regions

NFV deployments continue to grow…

In total, our database now contains information on 689 NFV and SDN deployments comprising 1,401 individual functional elements, i.e. an average of just over two components per deployment. As has been the case since we began collecting data, the number of deployments (as defined by STL Partners) continues to grow year on year; although the trend as illustrated below requires some explanation:

Deployment growth continues – despite an apparent slowdown

Source: STL Partners

Pending deployments are those regarding which there is uncertainty surrounding completion.  STL Partners expects some of these will be allocated to 2019 as it discovers that they were completed in that year. 2019 could yet emerge as a growth year, and if not, 2020 looks set to exceed the totals for 2018 and 2019.

…but the rate and drivers of growth vary by region

If we make a more meaningful comparison – between 2019 and the first three months of 2020 (including pending deployments), on the one hand, and 2018, on the other – we see that the number of deployments has continued to grow in each region, apart from North America, where the market is maturing and the pace of new deployment has subsided.

Regional deployment growth, with the exception of North America

Source: STL Partners

Overall, the Asia-Pacific region has accounted for the largest number of deployments across all years: 232 (33.7%) of the total – just ahead of Europe on 226 (32.8%). North America has generated 135 deployments (19.6%), followed by the Middle East with 57, Latin America on 30, and Africa with 15.

Table of contents

  • Executive Summary
  • About the NFV Deployment Tracker
    • Scope
    • Definitions
  • Introduction: NFV/SDN continues to grow – but at different speeds in different regions
    • NFV deployments continue to grow…
    • …but the rate and drivers of growth vary by region
  • In detail: understanding the growth
    • 5G ushers in Phase 2 NFV in developed markets…
    • …while Phase 1 core virtualisation spreads to other markets
    • SD-WAN also goes global
    • SDN was a critical component in longhaul network upgrades
    • vRAN and open RAN enter the stage
    • A second wave of telco cloud deployments is also underway
    • NFV MANO deployments were geared to supporting multi-vendor VNFs over telco clouds
  • In detail: deployments by operator
    • Vodafone, & Telefónica: telco cloud builders innovate at the core and edge
    • China, Japan (& Finland): leading cloud-native deployment
    • AT&T & Verizon: virtualisation programmes near completion
  • In detail: deployments by vendor
    • Cisco & Nokia: generalists leading overall and in 2019/20 respectively, boosted by 5G cores
    • VMware: thriving on telco cloud and SD-WAN
    • Ericsson: leading on 5G cores
    • Huawei: real position is unclear
  • Conclusion: NFV’s first phase has delivered, but tougher challenges lie ahead
    • NFV has become a more and more integral part of telcos’ service portfolios and infrastructure
    • NFV has proven its worth in addressing the challenges of today…
    • … while cloud-native NFV is also getting underway, and may help address the challenges of tomorrow
    • Phase 2 NFV: innovating our way out of the crisis
    • What next?
  • Appendix: Glossary of terms

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Telco edge computing: What’s the operator strategy?

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Edge computing can help telcos to move up the value chain

The edge computing market and the technologies enabling it are rapidly developing and attracting new players, providing new opportunities to enterprises and service providers. Telco operators are eyeing the market and looking to leverage the technology to move up the value chain and generate more revenue from their networks and services. Edge computing also represents an opportunity for telcos to extend their role beyond offering connectivity services and move into the platform and the application space.

However, operators will be faced with tough competition from other market players such as cloud providers, who are moving rapidly to define and own the biggest share of the edge market. Plus, industrial solution providers, such as Bosch and Siemens, are similarly investing in their own edge services. Telcos are also dealing with technical and business challenges as they venture into the new market and trying to position themselves and identifying their strategies accordingly.

Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market.

Following this introduction, we focus on:

  1. Edge terminology and structure, explaining common terms used within the edge computing context, where the edge resides, and the role of edge computing in 5G.
  2. An overview of the edge computing market, describing different types of stakeholders, current telecoms operators’ deployments and plans, competition from hyperscale cloud providers and the current investment and consolidation trends.
  3. Telcos challenges in addressing the edge opportunity: technical, organisational and commercial challenges given the market
  4. Potential use cases and business models for operators, also exploring possible scenarios of how the market is going to develop and operators’ likely positioning.
  5. A set of recommendations for operators that are building their strategy for the edge.

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What is edge computing and where exactly is the edge?

Edge computing brings cloud services and capabilities including computing, storage and networking physically closer to the end-user by locating them on more widely distributed compute infrastructure, typically at smaller sites.

One could argue that edge computing has existed for some time – local infrastructure has been used for compute and storage, be it end-devices, gateways or on-premises data centres. However, edge computing, or edge cloud, refers to bringing the flexibility and openness of cloud-native infrastructure to that local infrastructure.

In contrast to hyperscale cloud computing where all the data is sent to central locations to be processed and stored, edge computing local processing aims to reduce time and save bandwidth needed to send and receive data between the applications and cloud, which improves the performance of the network and the applications. This does not mean that edge computing is an alternative to cloud computing. It is rather an evolutionary step that complements the current cloud computing infrastructure and offers more flexibility in executing and delivering applications.

Edge computing offers mobile operators several opportunities such as:

  • Differentiating service offerings using edge capabilities
  • Providing new applications and solutions using edge capabilities
  • Enabling customers and partners to leverage the distributed computing network in application development
  • Improving networkperformance and achieving efficiencies / cost savings

As edge computing technologies and definitions are still evolving, different terms are sometimes used interchangeably or have been associated with a certain type of stakeholder. For example, mobile edge computing is often used within the mobile network context and has evolved into multi-access edge computing (MEC) – adopted by the European Telecommunications Standards Institute (ETSI) – to include fixed and converged network edge computing scenarios. Fog computing is also often compared to edge computing; the former includes running intelligence on the end-device and is more IoT focused.

These are some of the key terms that need to be identified when discussing edge computing:

  • Network edge refers to edge compute locations that are at sites or points of presence (PoPs) owned by a telecoms operator, for example at a central office in the mobile network or at an ISP’s node.
  • Telco edge cloud is mainly defined as distributed compute managed by a telco  This includes running workloads on customer premises equipment (CPE) at customers’ sites as well as locations within the operator network such as base stations, central offices and other aggregation points on access and/or core network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs.
  • On-premise edge computing refers to the computing resources that are residing at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.
  • Edge cloud is used to describe the virtualised infrastructure available at the edge. It creates a distributed version of the cloud with some flexibility and scalability at the edge. This flexibility allows it to have the capacity to handle sudden surges in workloads from unplanned activities, unlike static on-premise servers. Figure 1 shows the differences between these terms.

Figure 1: Edge computing types

definition of edge computing

Source: STL Partners

Network infrastructure and how the edge relates to 5G

Discussions on edge computing strategies and market are often linked to 5G. Both technologies have overlapping goals of improving performance and throughput and reducing latency for applications such as AR/VR, autonomous vehicles and IoT. 5G improves speed by increasing spectral efficacy, it offers the potential of much higher speeds than 4G. Edge computing, on the other hand, reduces latency by shortening the time required for data processing by allocating resources closer to the application. When combined, edge and 5G can help to achieve round-trip latency below 10 milliseconds.

While 5G deployment is yet to accelerate and reach ubiquitous coverage, the edge can be utilised in some places to reduce latency where needed. There are two reasons why the edge will be part of 5G:

  • First, it has been included in the 5Gstandards (3GPP Release 15) to enable ultra-low latency which will not be achieved by only improvements in the radio interface.
  • Second, operators are in general taking a slow and gradual approach to 5G deployment which means that 5G coverage alone will not provide a big incentive for developers to drive the application market. Edge can be used to fill the network gaps to stimulate the application market growth.

The network edge can be used for applications that need coverage (i.e. accessible anywhere) and can be moved across different edge locations to scale capacity up or down as required. Where an operator decides to establish an edge node depends on:

  • Application latency needs. Some applications such as streaming virtual reality or mission critical applications will require locations close enough to its users to enable sub-50 milliseconds latency.
  • Current network topology. Based on the operators’ network topology, there will be selected locations that can meet the edge latency requirements for the specific application under consideration in terms of the number of hops and the part of the network it resides in.
  • Virtualisation roadmap. The operator needs to consider virtualisation roadmap and where data centre facilities are planned to be built to support future network
  • Site and maintenance costs. The cloud computing economies of scale may diminish as the number of sites proliferate at the edge, for example there is a significant difference in maintaining 1-2 large data centres to maintaining 100s across the country
  • Site availability. Some operators’ edge compute deployment plans assume the nodes reside in the same facilities as those which host their NFV infrastructure. However, many telcos are still in the process of renovating these locations to turn them into (mini) data centres so aren’t yet ready.
  • Site ownership. Sometimes the preferred edge location is within sites that the operators have limited control over, whether that is in the customer premise or within the network. For example, in the US, the cell towers are owned by tower operators such as Crown Castle, American Tower and SBA Communications.

The potential locations for edge nodes can be mapped across the mobile network in four levels as shown in Figure 2.

Figure 2: possible locations for edge computing

edge computing locations

Source: STL Partners

Table of Contents

  • Executive Summary
    • Recommendations for telco operators at the edge
    • Four key use cases for operators
    • Edge computing players are tackling market fragmentation with strategic partnerships
    • What next?
  • Table of Figures
  • Introduction
  • Definitions of edge computing terms and key components
    • What is edge computing and where exactly is the edge?
    • Network infrastructure and how the edge relates to 5G
  • Market overview and opportunities
    • The value chain and the types of stakeholders
    • Hyperscale cloud provider activities at the edge
    • Telco initiatives, pilots and plans
    • Investment and merger and acquisition trends in edge computing
  • Use cases and business models for telcos
    • Telco edge computing use cases
    • Vertical opportunities
    • Roles and business models for telcos
  • Telcos’ challenges at the edge
  • Scenarios for network edge infrastructure development
  • Recommendation
  • Index

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Cloud gaming: What’s the telco play?

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Drivers for cloud gaming services

Although many people still think of PlayStation and Xbox when they think about gaming, the console market represents only a third of the global games market. From its arcade and console-based beginnings, the gaming industry has come a long way. Over the past 20 years, one of the most significant market trends has been growth of casual gamers. Whereas hardcore gamers are passionate about frequent play and will pay more to play premium games, casual gamers play to pass the time. With the rapid adoption of smartphones capable of supporting gaming applications over the past decade, the population of casual/occasional gamers has risen dramatically.

This trend has seen the advent of free-to-play business models for games, further expanding the industry’s reach. In our earlier report, STL estimated that 45% of the population in the U.S. are either casual gamers (between 2 and 5 hours a week) or occasional gamers (up to 2 hours a week). By contrast, we estimated that hardcore gamers (more than 15 hours a week) make up 5% of the U.S. population, while regular players (5 to 15 hours a week) account for a further 15% of the population.

The expansion in the number of players is driving interest in ‘cloud gaming’. Instead of games running on a console or PC, cloud gaming involves streaming games onto a device from remote servers. The actual game is stored and run on a remote compute with the results being live streamed to the player’s device. This has the important advantage of eliminating the need for players to purchase dedicated gaming hardware. Now, the quality of the internet connection becomes the most important contributor to the gaming experience. While this type of gaming is still in its infancy, and faces a number of challenges, many companies are now entering the cloud gaming fold in an effort to capitalise on the new opportunity.

5G can support cloud gaming traffic growth

Cloud gaming requires not just high bandwidth and low latency, but also a stable connection and consistent low latency (jitter). In theory, 5G promises to deliver stable ultra-low latency. In practice, an enormous amount of infrastructure investment will be required in order to enable a fully loaded 5G network to perform as well as end-to-end fibre5G networks operating in the lower frequency bands would likely buckle under the load if lots of gamers in a cell needed a continuous 25Mbps stream. While 5G in millimetre-wave spectrum would have more capacity, it would require small cells and other mechanisms to ensure indoor penetration, given the spectrum is short range and could be blocked by obstacles such as walls.

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A complicated ecosystem

As explained in our earlier report, Cloud gaming: New opportunities for telcos?, the cloud gaming ecosystem is beginning to take shape. This is being accelerated by the growing availability of fibre and high-speed broadband, which is now being augmented by 5G and, in some cases, edge data centres. Early movers in cloud gaming are offering a range of services, from gaming rigs, to game development platforms, cloud computing infrastructure, or an amalgamation of these.

One of the main attractions of cloud gaming is the potential hardware savings for gamers. High-end PC gaming can be an extremely expensive hobby: gaming PCs range from £500 for the very cheapest to over £5,000 for the very top end. They also require frequent hardware upgrades in order to meet the increasing processing demands of new gaming titles. With cloud gaming, you can access the latest graphics processing unit at a much lower cost.

By some estimates, cloud gaming could deliver a high-end gaming environment at a quarter of the cost of a traditional console-based approach, as it would eliminate the need for retailing, packaging and delivering hardware and software to consumers, while also tapping the economies of scale inherent in the cloud. However, in STL Partners’ view that is a best-case scenario and a 50% reduction in costs is probably more realistic.

STL Partners believes adoption of cloud gaming will be gradual and piecemeal for the next few years, as console gamers work their way through another generation of consoles and casual gamers are reluctant to commit to a monthly subscription. However, from 2022, adoption is likely to grow rapidly as cloud gaming propositions improve.

At this stage, it is not yet clear who will dominate the value chain, if anyone. Will the “hyperscalers” be successful in creating a ‘Netflix’ for games? Google is certainly trying to do this with its Stadia platform, which has yet to gain any real traction, due to both its limited games library and its perceived technological immaturity. The established players in the games industry, such as EA, Microsoft (Xbox) and Sony (PlayStation), have launched cloud gaming offerings, or are, at least, in the process of doing so. Some telcos, such as Deutsche Telekom and Sunrise, are developing their own cloud gaming services, while SK Telecom is partnering with Microsoft.

What telcos can learn from Shadow’s cloud gaming proposition

The rest of this report explores the business models being pursued by cloud gaming providers. Specifically, it looks at cloud gaming company Shadow and how it fits into the wider ecosystem, before evaluating how its distinct approach compares with that of the major players in online entertainment, such as Sony and Google. The second half of the report considers the implications for telcos.

Table of Contents

  • Executive Summary
  • Introduction
  • Cloud gaming: a complicated ecosystem
    • The battle of the business models
    • The economics of cloud gaming and pricing models
    • Content offering will trump price
    • Cloud gaming is well positioned for casual gamers
    • The future cloud gaming landscape
  • 5G and fixed wireless
  • The role of edge computing
  • How and where can telcos add value?
  • Conclusions

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NFV Deployment Tracker: Asia-Pacific points to the future of NFV

About the NFV Deployment Tracker

The NFV Deployment Tracker is a quarterly-updated database of commercial deployments of Network Functions Virtualisation (NFV) and Software-Defined Networking (SDN) technologies by leading telcos worldwide. It builds on an extensive body of analysis by STL Partners over the past four years on NFV and SDN strategies, technology and market developments.

The Tracker is provided as an interactive Excel tool containing line-by-line analysis of nearly 600 individual deployments of NFV and SDN, which can be used to drill down on trends by company and region.

Figure 1: The NFV Deployment Tracker

Overview of STL Partners NFV Deployment Tracker

Source: STL Partners

Each new release of the Tracker is global, but is accompanied by an analytical report which focusses on trends in a given region. Previous analysis includes:

This report accompanies the seventh update of the NFV Deployment Tracker, providing an overview of global trends, and a deep-dive on what’s happening in the Asia-Pacific region.

Scope and definitions

The NFV Deployment Tracker covers verified, live deployments of NFV and SDN in commercial telco networks. We do not include proofs of concept, commercial trials or mere agreements to deploy, unless these eventually result in a full commercial deployment.

The data derives mainly from public-domain sources, such as press releases by operators and vendors, or reputable industry media. We also include undisclosed deployments that the operators concerned have informed us about on a confidential basis. These are subsumed within the aggregate data sets analysed in this report but are not itemised in the detailed information contained in the Excel spreadsheet.

We include only telecoms operators, and not other types of company that rely on communications infrastructure and services to deliver their own services (such as cloud providers, internet exchange and hub operators, vendors, systems integrators, etc.).

The telcos included are mainly Tier One providers: those that rely on their own national and international, end-to-end facilities to deliver B2C or B2B services. However, we also include information on incumbent or dominant operators for smaller countries – which are not big enough to be defined as Tier One – as well as particularly innovative deployments by smaller or start-up players in significant markets.

Data in this report covers deployments from 2011 until August 2019.

Global context: NFV is definitely not dead

Global NFV deployments still growing; Asia-Pacific in the lead

We have gathered data on 572 live, commercial deployments of NFV and SDN technology worldwide between January and August 2019. These deployments include 1,161 VNFs, software sub-components and infrastructure elements for which information is available. Overall, the volume of new deployments worldwide has increased every year since 2011.

Figure 2: NFV deployments are picking up speed

NFV deployments by region and year 2011-2019

Source: STL Partners NFV Deployment Tracker

The total of 132 deployments for 2019 in the above chart includes both completed and pending implementations (we define pending as ongoing deployments that have not yet been verified as completed, but which we expect to be concluded in 2019). In addition, the 2019 total shown here runs only up to the end of August 2019; so we are confident that the full-year total for 2019 will exceed the 147 deployments recorded in 2018.

In fact, the number of deployments in Europe and the Middle East in 2019 to date has already exceeded the total for each of these regions for 2018 as a whole. In Asia-Pacific, the volume for the first eight months of 2019 (38) is already around 80% of the 2018 total (49) – meaning that the region is likely to show growth overall by the end of 2019. It must be noted that, by contrast, deployments in North America have declined significantly.

When measured purely in terms of deployments, Europe led the world for the first time in the first eight months of this year. However, in the previous three years – and overall – the Asia-Pacific region has deployed more than any other. We have gathered data on 203 live, commercial deployments of NFV and SDN technology in the Asia-Pacific region between January 2012 and August 2019 – 35.5% of the global total. This means that Asia-Pacific is the largest market for NFV and SDN.

Figure 3: Asia-Pacific leads in total NFV deployments worldwide

Asia-Pacific leads in global NFV deploymentsSource: STL Partners

Table of contents

  • Executive summary
  • About the NFV Deployment Tracker
  • Scope and definitions
  • Global context
    • Global NFV deployments still growing; Asia-Pacific in the lead
    • Growth in 2019 driven by virtualised 5G mobile cores
    • Mobile core virtualisation is the dominant driver of NFV overall
    • SDN retains its dominant role in Asia-Pacific
    • Vendors of mobile network cores performing strongly
  • Asia-Pacific in focus: leading on innovatio
  • More Asia-Pacific operators are embracing NFV and SDN
  • Pushing the boundaries of mobile core architecture
  • Winning the race to operationalise the 5G standalone core
  • Innovating on SDN-based, on-demand networking services
  • Ambition to innovate for economic and social development
  • Conclusion: Asia-Pacific both leads on past deployments and points the way ahead
    • Asia-Pacific leads the NFV/SDN market in two main ways
    • The region also points the way ahead for the industry
  • Appendix: Glossary of terms

Three new telco business models: Soft-net, Cloud-net, Compute-net

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:

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.

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