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.

Enter your details below to request an extract of the report


 

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

Enter your details below to request an extract of the report


 

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.

Download the report extract

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?

 

Download the report extract