The Telco cloud Manifesto: A growth enabler in the Coordination Age

In 2018 STL partners coined the term Coordination Age to describe how connectivity between people, computers, applications and ‘things’ is generating volumes of analysable data and how the use of advanced analytics and artificial intelligence would create the conditions enabling governments, enterprises, and consumers to understand the world in ways which would be game-changing for society.  A world where resources are better distributed and used more effectively than ever before leading to substantial social, economic, and health benefits.

A critical component of the Coordination Age is the universal availability of flexible, fast, reliable, low-latency networks that support a myriad of applications which, in turn, enable a complex array of communications, decisions, transactions, and processes to be completed quickly and, in many cases, automatically without human intervention.  The network remains key: if it is not fit for purpose the ability to match demand and supply real-time is impossible.

The historical ecosystem of relationships between telcos and their hardware and software suppliers has highlighted the constraints telcos face in embracing the Coordination Age. A relationship where proprietary, siloed vertical solutions and an over reliance on one supplier has left operator networks susceptible to inflexibilities and created challenges in terms of speed of innovation and adaptability. As a result, nimble internet players are capturing commercial opportunities where value increasingly comes from service innovation rather than heavy capital expenditure on the network.

The Coordination Age requires more from the network than ever before – applications require the network to be flexible, accessible and support a range of technical and commercial options. Applications cannot run independently of the network but need to integrate with it. The network must be able to impart actionable insights and flex its speed, bandwidth, latency, security, business model and countless other variables quickly and autonomously to meet the needs of applications using it.

The Telco Cloud is the enabler of this future age and represents the move to a network built on common off-the-shelf hardware and flexible interoperable software from best-of-breed suppliers that runs wherever it is needed.

The chart describes how the Telco Cloud will become a growth enabler for operators as it represents:

  • A new approach to the network
  • A fundamental shift in what it means to be an operator, in terms of technology, culture, processes, decision making and overall company organisation
  • A driver of future telecoms differentiation and growth;

STL’s recent report The Telco Cloud Manifesto discusses the challenges in realising the telco cloud vision and acknowledges that not all operators can take the same path or approach to more virtualised networks. The report offers three generic telco cloud implementation models for operators to consider in order to maximise the benefits of telco cloud while minimising implementation risks.

See our other in-depth research on Telco Cloud:

Mapping the telco’s cloud native approach

cloud native

Based on operator interviews and market understanding, STL Partners mapped telco approaches to cloud native across two dimensions with the aim of drawing insights and wider recommendations for all telco leaders considering their stance on cloud native.

Dimension 1 (the horizontal axis) reflects differences in telcos’ operating model visions, ambitions and capabilities. Dimension 2 (the vertical axis) is a measure of the operators’ market outlook expressed as the perceived level of pressure on their current business model.

Operators’ change ambition (dimension 1) can vary from “cautious evolution” to “ambitious transformation”:

  • Some operators are more cautious about their own capabilities and accordingly, their expectations on how they would deploy cloud native network code. They see themselves as operating others’ technology delivered to them in a turnkey fashion. This is more akin to how legacy networks have been deployed and managed. By limiting or deferring change and adopting a best-of-suite approach, they hope to evolve to cloud native operations over time. These tend to be smaller operators with significant legacy operations. These operators’ customer-facing teams have little visibility of or see little relevance for their customers in cloud native networking.
  • Other operators, with more ambitious transformation objectives, anticipate that they take a stronger, hands-on, more accountable approach in combining and operating others’ technology, potentially from multiple suppliers. This is more akin to how cloud native applications are managed in enterprise IT domains. At their heart, these operators see themselves as software-based technology firms. Although these tend to be larger operators or operator groups, we also found some smaller operators with a strong automation focus that fall into this group. Customer-facing teams also understand what cloud native networking means in practice and what it enables for customers.

Telco perceptions of current business model pressure (dimension 2) ranges from “current model remains viable” to “current model is unviable”:

  • Some operators recognise that they are experiencing considerable immediate pressures on their existing telco models. Consumer revenues are in decline, due to intensifying competition from other operators, including current challengers and new entrants. Strong local tech competitors (including the hyperscalers) also constrain the opportunities for operators to grow their ‘share of wallet’ from enterprises. This being all the harder with largely undifferentiated applications and solutions. This pressure on revenues is coupled with a new wave of (5G) investment and a substantial ongoing cost base. The leadership knows that things must change and fast.
  • Other operators perceive that they face less pressure on their existing telco model. It may be that consumer demand and connectivity revenues are still growing for them and competition may have been less intense (e.g. a duopoly). These operators believe that they are in a strong position to expand their service offerings to enterprises without having to be particularly innovative; in many cases they have trusted brands and are seen as local tech leaders by enterprises and consumers. Regulatory and/or geographic market characteristics may provide barriers to entry. Although there are undoubtably operators who enjoy a favourable market environment, this is a shrinking group. Furthermore, perceptions can be misleading. They may be in for a shock.

STL Partners report Cloud native: Just another technology generation? contains recommendations for the leadership of telcos in each of the resultant four broad groups.

See our other in-depth research on Telco Cloud:

A new kind of telco? How Rakuten is pursuing economies of scope

New technologies, together with a supportive policy agenda and more flexible spectrum licenses, are lowering the barriers to entry in telecoms, while cutting the cost of connectivity. These trends could give rise to a new kind of telco, as exemplified by Rakuten Mobile in Japan and Reliance Jio in India. Although global internet platforms, such as Google and Amazon, are unlikely to expand deeper into consumer connectivity and risk a backlash from partners and regulators, smaller digital commerce players could enter this market as they push for an advantage in economies of scope against the economies of scale of the internet giants.

Rakuten’s push into mobile telecoms is part of a broader strategy to build deeper data-driven relationship with consumers in Japan: the chart above shows the central position of mobile connectivity within the large ecosystem of services it offers its customers. At the heart of the company’s strategy is a reward programme, which encourages consumers to use its shopping, content, and online banking products. As consumers use the same ID across 43 different services, Rakuten can award them loyalty points each time they buy something within the ecosystem. Presenting its financial results in November 2020, Rakuten Mobile estimated the total value of this membership (lifetime value minus customer acquisition costs) was 7.8 trillion yen (almost US$75 billion) at the end of the third quarter of 2020.

Rakuten’s focus on maximising customer lifetime value across a broad portfolio of services points to how telcos could build deeper and more valuable relationships with consumers.

See our in-depth research on driving consumer revenues:

The 5G-aliser: One year on

Building on solid foundations

After a hiatus as we kicked off the new year, we are back with the latest edition of the 5G-aliser. We first launched our tracker of the 20 key factors that could make or break 5G growth nearly a year ago, in March 2020. So how has the outlook for 5G evolved over the last year, and what are the key factors to look out for throughout 2021?

5G-aliser March 2021

Source: STL Partners, Total Telecom

The top layer of the 5G-aliser shows the high level change in supply and demand between March 2020, in grey, and March 2021, in dark blue. Supply only increased from 13% to 16%, as roll-out plans suffered throughout 2020 from delayed spectrum auctions, shifting priorities to meet remote working needs, and wildcard factors such as 5G conspiracy theories and geopolitical tensions between China and the US. 5G demand, however, has jumped more significantly from 5% to 13% over the same period, thanks in large part to growing availability of devices – in particular the iPhone 12 which has catalysed demand among high-end consumers. More on that later.

Looking at the big picture, 2020 was perhaps a slower year than anticipated for 5G growth, but taking some time to get the foundations in place is not a bad thing, and all signs are pointing to a big 5G rebound. The results from a recent STL Partners survey on telcos’ investment priorities for 2021, a re-run of a post-COVID survey from June 2020, show that 5G has had the biggest increase in priority over the last six months.

Changes in telcos investment priorities, Jan 2021Source: STL Partners Telco Priorities survey, January 2021, 144 respondents


To hear more on the full results of the survey join STL’s upcoming webinar series on the State of the Industry (sign up to all three webinars on March 9-11 below, or sign up to each session individually here).

Which levers will dominate in 2021?

Private networks will shift from push to pull: Private network deployments are expected to remain a strong source of 5G growth as winners of CBRS and other local spectrum auctions start rolling out new networks. The breadth and depth of ecosystem will grow, as more players come to market, and more proof points, use cases and business models emerge. In 2021, the market will extend from early adopters in ports and manufacturing to a wider range of businesses. Ultimately, this increased awareness and understanding of the potential value of the private networks means the market will rely less on push from regulators (in the UK, US and Germany), shifting to a pull from enterprises seeking to transform operations.

Open RAN a slow and steady burn: While Open RAN will continue to be an important area of exploration, in 2021 it will still just be creeping in at the edges of mobile networks in rural areas. Because it hasn’t been proven at scale, the most exciting area for Open RAN will be in private networks, especially as they begin to gather interest from more enterprises. The big variable here is greenfield operators – if they can demonstrate that Open RAN and cloud-native network functions can deliver carrier-grade performance and enhanced agility, as well as cost savings, that will be the tipping point for wider adoption. Achieving this will require further progress on interoperability, as well as supportive policies from government.

More spectrum opening up: The US had a record breaking spectrum auction, raking in a total of $81bn and signalling that operators are willing to pay almost any price to secure their 5G future. After many countries deferred spectrum auctions, these are finally getting underway, with France, Sweden and Australia completing auctions in late 2020 / early 2021, and Croatia, Bulgaria, UK, India and Brazil imminent. If auctions are as competitive in other countries as in the US, operators around the world will be under huge pressure to recoup their investments. This will catalyse innovation and investment around 5G-enabled services, and could also accelerate the disaggregation of the telecoms value chain as operators seek to lower debts by selling off towers and other infrastructure.

5G infrastructure costs and skills: A potentially underappreciated development in 5G infrastructure developments is equipment vendors’ efforts to reduce the size of 5G network equipment. Ericsson has nearly halved the weight of its midband 5G radio from 36kg to 20kg, delivering improved energy consumption and making it significantly easier on a practical level to install the equipment. At the same time, other vendors are re-hyping mmWave, with new repeaters helping to make the high band 5G tech more viable indoors and in built-up areas. The hot new player in the market here is Verizon partner Pivotal Commware. This is good progress, but unlikely to scale in 2021.

A richer 5G smartphone market – at the high-end and the low-end: Apple had its best ever quarter in the three months to December 2020 with iPhone sales of $65.6bn, driven partially by very strong sales in China. While it’s not clear what proportion of sales are attributed to the iPhone 12, the record sales clearly points to pent-up demand for high-end 5G devices. For many consumers, 5G is now “real”. There is also a growing range of more affordable 5G smartphones between $200-$300 on the market, and Jio has announced plans to launch a $70 5G smartphone which will no doubt be key to driving fast adoption once Indian spectrum auctions are completed.

While more spectrum access and a wider range of 5G devices will be key drivers of 5G supply and demand growth in the consumer market, this is unlikely to translate into higher revenues for operators. Many telcos are struggling to offer truly innovative consumer services and it’s not easy to move up the value chain.

So what should telcos do?

In many cases, 5G is only part of a much broader toolbox to address customers’ needs for improved productivity and efficiency. Based on STL Partners’ survey results, the industry gets that – operators top rated priorities are not network technologies, but transformation and new services. The challenge will be to sustain momentum for transformation and innovation once we start to return to some kind of post-COVID normalcy.

Telecoms top 10 investment priorities, January 2021

Source: STL Partners Telco Priorities survey, January 2021, 144 respondents.

The limits of 5G

The final point to mention is that 5G has its limits. If we think about the trajectory of new technologies going from research, to full on R&D, then to realisation as companies begin deploying, testing and learning the real-world limitations, and finally maturity, 5G is in the realisation phase. As 5G makes it out into the real world, its shortcomings are becoming more obvious – such as high power consumption, limited baked in security, and not particularly wholesale or sharing-friendly. These are all driving the conversation around 6G design goals, which are beginning to gather steam. Stay tuned for this new factor top appear on next quarter’s 5G-aliser.

See our in-depth research on telcos’ investment priorities:

Telecoms priorities: A snapshot from our State of the Industry survey

5G made a genuinely astonishing leap in terms of priorities over 8 months. Back in May 2020, net sentiment was negative such was the doubt raised by COVID over near term 5G plans in many markets. In Q1 2021 it’s “full speed ahead!” – apparently, although commentary in the survey suggested that the business case for 5G, and best way to implement it, is still a matter of significant debate.

Recruitment also recovered from a negative position in May 2020, which of course is greatly heartening.

Also racing up the priority list were Telco Edge and Sustainability – the latter also recovering from a net negative sentiment in May 2020.

The other risers relate to an ongoing focus on resilience and transformation, in line with our commentary on how well the industry has responded to the need to improve core capabilities in resilience and agility.

Use the form below to register for our webinar on March 9th where we discuss the full results of our Telco Priorities survey, and be joined by Telia Group COO Rainer Deutschmann and STL/Disruptive Analysis’ Dean Bubley to discuss where the industry is heading. This is the first in a series of three STL Partners webinars between March 9th – 11th looking at the State of the Industry.

Skilling up telcos for A3: New roles and where they fit (Chart)

Our recent research explored the steps telcos are looking to take and should take in order to pursue data-driven strategies in automation, analytics and AI (A3).  Our surveys on industry priorities suggest that operators recognise this need, regardless of whether they are focused on their core connectivity business or seeking to build new value beyond connectivity. A corresponding organisational shift to support this strategic goal is implied, with new A3-specific roles created at all levels of the organisation.

Even to stay competitive today, operators should be setting up bodies to manage policies, procedures and technology in new A3 areas, as well as a dedicated team to undertake analysis around value creation and risk minimisation of new A3 implementations. They should also consider a central governing authority such as a Chief Data Officer to drive an A3 agenda at the highest-level. Beyond this “basic skillset”, in the next 5 years operators will need to create a centralised team to support automation efforts across the organisation with more business-focussed roles responsible for ongoing development of vision and strategy. Where these teams might sit across an operator’s organisational structure is suggested in the diagram above.

See our research on analytics, automation and AI:

The number and variety of stakeholders and interactions increases to support working from home (WFH)

Working from home

Working from home (WFH) has gone from an evolutionary trend to a mass movement instigated by the COVID-19 pandemic. In the early days of the pandemic, businesses were forced to adopt WFH as a matter of survival, but their motivation is changing with many now seeing WFH as part of a broader strategy to optimise operations across physical and digital worlds. WFH, on its own or as part of a hybrid “work from anywhere” environment, is likely to feature in business plans for the foreseeable future – impacting employees, processes and technology.

The number and variety of stakeholders and interactions increases to support working from home. Business IT functions must work with homeworkers and telco/ISPs, homeworkers must maintain good home connectivity (and physically connect devices within their home), telcos have a role in supporting the business IT function (e.g. monitoring service quality and maintaining service capacity). Businesses must plan to assume responsibility for accommodating, securing and managing this variety to provide business-grade networking standards. This requires better coordinated connectivity solutions.

Telcos are uniquely positioned to provide such coordinated solutions, as they touch every part of the service delivery chain. Consumer (personal) and business connectivity are core telco competencies which can be brought together to address this opportunity:

  • Consumer connectivity products should articulate the support for all household needs, including WFH.
  • Business products should enable the agility that a business needs to adapt to future changes, while easily embracing their employees’ consumer connectivity.

Telcos have an opportunity to help businesses with strategic WFH initiatives by providing well-positioned WFH-optimised services.

See our research on COVID impacts and WFH

Telco data monetisation: COVID-19 insight services

A key area of interest for telecoms operators seeking to build new businesses from their core assets is data analytics, aggregating their rich customer insights to bring value to customers in advertising, government, and other industry verticals.

Singtel’s DataSpark has had some success in telco data monetisation with propositions for customer groups such as:

  • Land-use and transport planners to understand when, how and why people travel;
  • Out-of-home media companies to understand user location and travel habits around outdoor advertising assets;
  • Radio network planners to optimise site capex.

These capabilities have been particularly valuable to its government customers during the COVID pandemic. In the example below, DataSpark provided this visualisation of local population movement for the Australian Transport and Tourism Forum (TTF), which shows the impact of TTF’s decision to close its border with New South Wales on the 8th July 2020 to manage the impact of the COVID-19 pandemic. Location data used here was collected from network probes and enriched by GPS signals, leveraging software that DataSpark has been developing since 2017.


telco data analytics

Source: DataSpark

While DataSpark has built up a range of internal and external data analytics capabilities, scaling the business remains a key challenge.

DataSpark has been set up as an autonomous business unit within the Group Digital Life business division of Singtel. This has given it the benefit of being able to shape its own destiny, but has also limited its access to core Singtel assets and made it more difficult to win business. In our research we explore DataSpark’s options within Singtel going forward, drawing lessons for other telcos building new businesses in analytics and other adjacent markets.

See our in-depth research on telco data monetisation:

2021: A year of growth or efficiency-seeking?

We’ve been taking an early look at the input so far to our 2021 Telecoms Investment Outlook survey and the initial results suggest that there are some major changes afoot.

Below is a sneak preview at what we’ve found so far from just under 100 industry executives. If you haven’t contributed, please take a few minutes to do so here.

We’d like your contribution as it will help us make the insights as robust as we can. We will send you the full results and anything you tell us will be treated in strict confidence.

Give your views on 2021 Telecoms Investment Priorities.

Growth vs cost-cutting

So a fundamental consideration looking ahead is whether 2021 will be a year of optimism and growth, or cost-cutting and efficiency for telecoms?

The initial findings suggest both, though with a significant upswing in confidence in backing 5G in 2021 compared to 2020.

You might expect this upswing for 5G given optimism that markets will open up again with the vaccines, but it’s also striking that the priority given to automation (in a broad sense, not just the network) has also increased.

Technologies (selected answers): Weighted net investment priority scores

Network 2021 priorities

Note: Weighted score = (2 x % saying ‘major increase’ + 1 x % saying ‘minor increase’ – 1 x saying ‘minor decrease’ – 2 x saying ‘major decrease’)

Industry leaders are looking ahead with more confidence

Among the ‘leadership and culture’ metrics, there are notable upswings in forward-looking priorities (as opposed to ‘stop everything!’).

Leadership opportunities (selected answers): Weighted net investment priorities

Leadership 2021 priorities

Meanwhile, in the Enterprise services category, security services have overtaken conferencing in terms of investment interest.

Enterprise opportunities (selected answers): Weighted net investment priority scores

Enterprise 2021 priorities

What’s your view?

These are just a few selected highlights of what the research covers. We’d really value your input if you can find a few minutes. We will share the results with everyone who contributes and your personal input will be treated in strict confidence.

There are plenty of further questions on other leadership priorities and technologies, and no doubt other uncertainties and changes to come.

So do spare us a few minutes if you can. Many thanks and Happy New Year!

Give your views on 2021 Telecoms Investment Priorities here.