Telco Cloud: Why it hasn’t delivered, and what must change for 5G

Related Webinar – 5G Telco Clouds: Where we are and where we are headed

This research report will be expanded upon on our upcoming webinar 5G Telco Clouds: Where we are and where we are headed. In this webinar we will argue that 5G will only pay if telcos find a way to make telco clouds work. We will look to address the following key questions:

  • Why have telcos struggled to realise the telco cloud promise?
  • What do telcos need to do to unlock the key benefits?
  • Why is now the time for telcos to try again?

Join us on April 8th 16:00 – 17:00 GMT by using this registration link.

Telco cloud: big promises, undelivered

A network running in the cloud

Back in the early 2010s, the idea that a telecoms operator could run its network in the cloud was earth-shattering. Telecoms networks were complicated and highly-bespoke, and therefore expensive to build, and operate. What if we could find a way to run networks on common, shared resources – like the cloud computing companies do with IT applications? This would be beneficial in a whole host of ways, mostly related to flexibility and efficiency. The industry was sold.

In 2012, ETSI started the ball rolling when it unveiled the Network Functions Virtualisation (NFV) whitepaper, which borrowed the IT world’s concept of server-virtualisation and gave it a networking spin. Network functions would cease to be tied to dedicated pieces of equipment, and instead would run inside “virtual machines” (VMs) hosted on generic computing equipment. In essence, network functions would become software apps, known as virtual network functions (VNFs).

Because the software (the VNF) is not tied to hardware, operators would have much more flexibility over how their network is deployed. As long as we figure out a suitable way to control and configure the apps, we should be able to scale deployments up and down to meet requirements at a given time. And as long as we have enough high-volume servers, switches and storage devices connected together, it’s as simple as spinning up a new instance of the VNF – much simpler than before, when we needed to procure and deploy dedicated pieces of equipment with hefty price tags attached.

An additional benefit of moving to a software model is that operators have a far greater degree of control than before over where network functions physically reside. NFV infrastructure can directly replace old-school networking equipment in the operator’s central offices and points of presence, but the software can in theory run anywhere – in the operator’s private centralised data centre, in a datacentre managed by someone else, or even in a public hyperscale cloud. With a bit of re-engineering, it would be possible to distribute resources throughout a network, perhaps placing traffic-intensive user functions in a hub closer to the user, so that less traffic needs to go back and forth to the central control point. The key is that operators are free to choose, and shift workloads around, dependent on what they need to achieve.

The telco cloud promise

Somewhere along the way, we began talking about the telco cloud. This is a term that means many things to many people. At its most basic level, it refers specifically to the data centre resources supporting a carrier-grade telecoms network: hardware and software infrastructure, with NFV as the underlying technology. But over time, the term has started to also be associated with cloud business practices – that is to say, the innovation-focussed business model of successful cloud computing companies

Figure 2: Telco cloud defined: New technology and new ways of working

Telco cloud: Virtualised & programmable infrastructure together with cloud business practices

Source: STL Partners

In this model, telco infrastructure becomes a flexible technology platform which can be leveraged to enable new ways of working across an operator’s business. Operations become easier to automate. Product development and testing becomes more straightforward – and can happen more quickly than before. With less need for high capital spend on equipment, there is more potential for shorter, success-based funding cycles which promote innovation.

Much has been written about the vast potential of such a telco cloud, by analysts and marketers alike. Indeed, STL Partners has been partial to the same. For this reason, we will avoid a thorough investigation here. Instead, we will use a simplified framework which covers the four major buckets of value which telco cloud is supposed to help us unlock:

Figure 3: The telco cloud promise: Major buckets of value to be unlocked

Four buckets of value from telco cloud: Openness; Flexibility, visibility & control; Performance at scale; Agile service introduction

Source: STL Partners

These four buckets cover the most commonly-cited expectations of telcos moving to the cloud. Swallowed within them all, to some extent, is a fifth expectation: cost savings, which have been promised as a side-effect. These expectations have their origin in what the analyst and vendor community has promised – and so, in theory, they should be realistic and achievable.

The less-exciting reality

At STL Partners, we track the progress of telco cloud primarily through our NFV Deployment Tracker, a comprehensive database of live deployments of telco cloud technologies (NFV, SDN and beyond) in telecoms networks across the planet. The emphasis is on live rather than those running in testbeds or as proofs of concept, since we believe this is a fairer reflection of how mature the industry really is in this regard.

What we find is that, after a slow start, telcos have really taken to telco cloud since 2017, where we have seen a surge in deployments:

Figure 4: Total live deployments of telco cloud technology, 2015-2019
Includes NFVi, VNF, SDN deployments running in live production networks, globally

Telco cloud deployments have risen substantially over the past few years

Source: STL Partners NFV Deployment Tracker

All of the major operator groups around the world are now running telco clouds, as well as a significant long tail of smaller players. As we have explained previously, the primary driving force in that surge has been the move to virtualise mobile core networks in response to data traffic growth, and in preparation for roll-out of 5G networks. To date, most of it is based on NFV: taking existing physical core network functions (components of the Evolved Packet Core or the IP Multimedia Subsystem, in most cases) and running them in virtual machines. No operator has completely decommissioned legacy network infrastructure, but in many cases these deployments are already very ambitious, supporting 50% or more of a mobile operator’s total network traffic.

Yet, despite a surge in deployments, operators we work with are increasingly frustrated in the results. The technology works, but we are a long way from unlocking the value promised in Figure 2. Solutions to date are far from open and vendor-neutral. The ability to monitor, optimise and modify systems is far from ubiquitous. Performance is acceptable, but nothing to write home about, and not yet proven at mass scale. Examples of truly innovative services built on telco cloud platforms are few and far between.

We are continually asked: will telco cloud really deliver? And what needs to change for that to happen?

The problem: flawed approaches to deployment

Learning from those on the front line

The STL Partners hypothesis is that telco cloud, in and of itself, is not the problem. From a theoretical standpoint, there is no reason that virtualised and programmable network and IT infrastructure cannot be a platform for delivering the telco cloud promise. Instead, we believe that the reason it has not yet delivered is linked to how the technology has been deployed, both in terms of the technical architecture, and how the telco has organised itself to operate it.

To test this hypothesis, we conducted primary research with fifteen telecoms operators at different stages in their telco cloud journey. We asked them about their deployments to date, how they have been delivered, the challenges encountered, how successful they have been, and how they see things unfolding in the future.

Our sample includes individuals leading telco cloud deployment at a range of mobile, fixed and converged network operators of all shapes and sizes, and in all regions of the world. Titles vary widely, but include Chief Technology Officers, Heads of Technology Exploration and Chief Network Architects. Our criteria were that individuals needed to be knee-deep in their organisation’s NFV deployments, not just from a strategic standpoint, but also close to the operational complexities of making it happen.

What we found is that most telco cloud deployments to date fall into two categories, driven by the operator’s starting point in making the decision to proceed:

Figure 5: Two starting points for deploying telco cloud

Function-first "we need to virtualise XYZ" vs platform-first "we want to build a cloud platform"

Source: STL Partners

The operators we spoke to were split between these two camps. What we found is that the starting points greatly affect how the technology is deployed. In the coming pages, we will explain both in more detail.

Table of contents

  • Executive Summary
  • Telco cloud: big promises, undelivered
    • A network running in the cloud
    • The telco cloud promise
    • The less-exciting reality
  • The problem: flawed approaches to deployment
    • Learning from those on the front line
    • A function-first approach to telco cloud
    • A platform-first approach to telco cloud
  • The solution: change, collaboration and integration
    • Multi-vendor telco cloud is preferred
    • The internal transformation problem
    • The need to foster collaboration and integration
    • Standards versus blueprints
    • Insufficient management and orchestration solutions
    • Vendor partnerships and pre-integration
  • Conclusions: A better telco cloud is possible, and 5G makes it an urgent priority

Telco NFV & SDN Deployment Strategies: Six Emerging Segments

Introduction

STL Partners’ previous NFV and SDN research

This report continues the analysis of three previous reports in exploring the NFV (Network Functions Virtualization) and SDN (Software Defined Networking) journeys of several major telcos worldwide, and adds insights from subsequent research and industry discussions.

The first two reports that STL Partners produced contained detailed discussion of the operators that have publicly engaged most comprehensively with NFV: Telefónica and AT&T.

Telefónica embarked on an ambitious virtualization program, dubbed ‘UNICA’, toward the start of 2014; but its progress during 2014 and 2015 was impeded by internal divisions, lack of leadership from top management, and disagreement over the fundamental technology roadmap. As a result, Telefónica has failed to put any VNFs (Virtualized Network Functions) into production; although it continues to be a major contributor to industry efforts to develop open NFV standards.

By contrast, AT&T’s virtualization program, the User-Defined Network Cloud (UDNC) – launched at the same time as Telefónica’s, in February 2014 – has already contributed to a substantial volume of live NFV deployments, including on-demand networking products for enterprise customers and virtual EPC (Enhanced Packet Core) supporting mobile data and connected car services. AT&T’s activities have been driven from board level, with a very focused vision of the overall transformation that is being attempted – organizational as much as technological – and the strategic objectives that underlie it: those of achieving the agility, scalability and cost efficiency required to compete with web-scale players in both enterprise and consumer markets.

The third report in the series – ‘7 NFV Hurdles: How DTAG, NTT, Verizon, Vodafone, Swisscom and Comcast have tackled them’  – extended the analysis to the SDN and NFV deployment efforts of several other major operators. The report arrived at a provisional model for the stages of the SDN / NFV transformation process, outlined in Figure 1 below.

Figure 1: The SDN-NFV Transformation Process

The transformation process outlined in the chart suggests that elaborating the overall SDN architecture should ideally precede the NFV process: logically if not always chronologically. This is because it is essential to have a vision of the ‘final’ destination, even if – or especially as – operators are navigating their way through a shifting myriad of technology choices, internal change programs, engagements with vendor and open-source ecosystems, priorities and opportunities for virtualization, legacy system migration models, and processes for service and business remodeling.

The focus of this report

This report re-examines some of the analysis undertaken on the players above, along with some additional players, to derive a more fine-grained understanding of the virtualization journeys of different types of telco.

We examine these journeys in relation to five dimensions and the analysis focuses on the choices operators have made in these areas, and how things have turned out so far. This, in turn, allows us to pinpoint six telco segments for SDN and NFV deployment.

There is no ‘one size fits all’ approach to SDN and NFV. However, because the operators we examine have a similar rationale for engaging in SDN- and NFV-led transformation and display sufficient commonality in their approach to deployment, STL Partners has been able to make three core best-practice implementation recommendations.

 

  • Executive summary
  • Contents
  • Introduction
  • STL Partners’ previous NFV and SDN research
  • The focus of this report
  • Virtualization journeys: 6 telco segments
  • The Story So Far: AT&T and Telefónica
  • ‘NFV Business Model Transformation Pioneers’: BT, China Mobile, NTT and Verizon
  • ‘Smart Piper Incumbent’: AT&T and Deutsche Telekom
  • ‘Fly Blind Incumbent’: Telefónica and Swisscom
  • ‘Agile Adopter’: Tele2
  • ‘Utilitarian adopters’: Vodafone and SingTel
  • ‘Cableco 2.0’: Comcast and Liberty Global
  • Conclusion and Best Practice Recommendations

7 NFV Hurdles: How DTAG, NTT, Verizon, Vodafone, Swisscom and Comcast Have Tackled Them

Introduction

This report is one of a series analyzing the progress made by leading operators in the application of NFV and SDN, and the lessons learned so far. The two most recent reports, AT&T: Fast Pivot to the NFV Future and Telefónica’s NFV: An Empire Divided? provided insights into those companies’ successes and challenges in this regard. These reports also build on the insights from our Telco 2.0 Transformation and Enterprise Cloud and ICT Research Streams.

No other Tier One operator has committed itself publicly to ambitious virtualization targets along the lines of Telefónica or AT&T. However, this does not mean that operators are not planning, or indeed have not already embarked on, similar transformation programs, with virtualization thus far proceeding mainly on an element-by-element and service-by-service basis. The migration to increasingly software-defined networks (SDNs) and the implementation of network functions virtualization (NFV) are now an unavoidable direction of the road ahead; and no operator that seriously intends to survive in the long term is not already drawing up a roadmap.

This report examines some of the potential road blocks in the way of NFV, which account in part for the caution displayed by other big operators about embarking on major virtualization programs and broadcasting what they are doing. These questions are discussed in relation to Deutsche Telekom, NTT, Verizon, Vodafone, Swisscom, and Comcast, and how those operators have addressed some of the challenges.

Our next report will bring together high level recommendations for operators based on these and other analyses, to outline a roadmap for best practice in this particular aspect of the transformation of the telecoms industry to new business models.

What’s holding back NFV?

1. Operators have been laying the SDN foundations

One of the reasons why no other Tier One operator is emulating either Telefónica’s or AT&T’s approach is that many operators have been taking their time to elaborate and implement their overall SDN, NFV and cloud strategies. Many potential and actual approaches to the dual challenge of SDN and NFV exist, depending on the overall strategic objectives. The approach favored by some of the operators reviewed here has been to elaborate the SDN framework as a precursor to virtualizing particular network functions – although there are different paths that can be followed in working through the technological challenges; and in practice, the roadmap is never fully plotted out until the twists and turns of the journey have been charted.

The logical reason why SDN has been seen by many as a preliminary to NFV is that, put briefly, SDN offers more flexible and efficient ways to design, test, build and operate IP networks. It does this by separating out the intelligence about how the network operates, and how traffic flows, from the networking device, and placing it in a single controller with a perspective of the entire network. Taking the ‘intelligence’ out of many individual components also means that it is possible to build and buy those components for less, thus reducing some costs in the network.

Like SDN, NFV splits the control functions from the data forwarding functions. However, while SDN typically does this for the switches making up a local-area network, for example in a data center, NFV focuses specifically on wide-area network functions like routing, firewalls, load balancing, CPE, etc. Both SDN and NFV aim to leverage developments in Common Off The Shelf (COTS) hardware, such as generic server platforms utilizing multi-core CPUs, or merchant switch systems-on-chips, which are used to host and deliver those functions as Virtual Network Functions (VNFs).

Figure 1: Moving to SDN sets the scene for NFV

Source: STL Partners

SDN can consequently be viewed a prerequisite for NFV: enabling virtualized network functions (VNFs) to be deployed in the most effective and resource-efficient way as part of an overall network management framework in which infrastructure and computing resources are allocated dynamically to support fluctuating service usage and network demand.

A perhaps more fundamental – even ‘existential’ – reason why SDN can be seen as ‘coming before’ NFV is that the SDN framework defines what the communications network actually is in the new software-centric and IP-centric universe. Once network functionality is stripped out of the dedicated hardware that has traditionally run it and is pushed out into the cloud in the form of virtualized functions, then the telecoms network itself has in effect become merely a virtual network that anyone can in theory replicate with relative ease. SDN is the glue that binds all of the distributed, cloud-based functionality together and makes it operate as (if it were) a traditional telecoms network: delivering equivalent and ultimately superior levels of performance to networks running on dedicated hardware.

SDN is, then, in both senses – operational and existential – what enables operators to remain in control of the new virtualized networks. Operators have therefore been understandably cautious about embarking on NFV before their SDN frameworks are in place. And this process is being protracted still further because the industry in general has still not reached agreement on open SDN and NFV standards.

 

  • Executive Summary
  • Introduction
  • What’s holding back NFV?
  • 1. Operators have been laying the SDN foundations
  • 2. Operators have started from the enterprise and the cloud
  • 3. Operators are having to negotiate fundamental architectural issues as they go along
  • 4. OSS / BSS evolution and integration: Swisscom and Comcast
  • 5. Security
  • 6. Limited-scope NFV
  • 7. Skill sets and culture change
  • 2015: the year the foundations of NFV were laid?

 

  • Figure 1: Moving to SDN sets the scene for NFV
  • Figure 2: The new network is built out of the cloud-based SDN
  • Figure 3: Multi-vendor VNF integration process for Vodafone Italy’s VoLTE deployment
  • Figure 4: Collapsing classic BSS / OSS hierarchies through SDN and NFV
  • Figure 5: Re-engineering the cable network
  • Figure 6: The Emerging SDN-NFV Transformation Process