Telco cloud will drive network evolution

One of the core value propositions of telco cloud platform providers is that they offer to deliver to telcos a standardised and open, horizontal telco cloud that will enable them to deploy and operate multi-vendor, cloud-native network functions using standard orchestration and automation tools.

The key element that is presently facilitating this is the open-source Kubernetes container orchestration platform. Similar to OpenStack, there are various ‘flavours’ of Kubernetes: for example, those of Red Hat (OpenShift), VMware (Tanzu), and each of the big three hyperscalers, AWS, Azure and Google Cloud. But the difference is that, in part because of its open-source character, Kubernetes remains sufficiently generic across all its flavours to ensure that CNFs deployed to Kubernetes can be delivered and distributed across multiple clouds that use different Kubernetes versions. Accordingly, Kubernetes is a driver of multi-cloud and hybrid cloud operations: enabling NFs to be distributed, scaled and orchestrated far more easily and flexibly across multiple environments and locations – although telcos may still, initially at least, require support from SIs or platform vendors to orchestrate their services across multiple Kubernetes instances. This standardisation potentially eliminates much of the operating cost telcos have hitherto expended on private telco cloud development, and on testing, validation and integration of NFs to their private clouds. One of the vendors we spoke to even suggested that telcos should go further by using the hyperscalers as the development department for their NFs themselves. The respondent cited the example of AT&T and gave a positive assessment of AT&T’s divestment of its Network Cloud (private telco cloud) to Microsoft Azure. This included, according to our respondent, teams and activities involved in developing AT&T’s 5G Standalone (SA) core.

Network evolution through cloudification

Source: STL Partners

This could look very much like a cloud take-over of the telco network. But what counteracts this risk is telcos’ evolution of their own cloud-native operations and software practices, particularly CI/CD and DevOps. In our survey, vendors and telcos alike stressed how imperative it was for telcos to develop and manage their own CI/CD pipeline. Why is this? It is because this is the means for telcos to assert control and ownership over the development of their network capabilities and innovative services even as the NF and infrastructure building blocks they are using are becoming more generic, open and common to multiple third-party clouds, including those of other telcos and hyperscalers. Even if the development of the telco cloud and of the CNFs deployed by telcos is outsourced to platform providers, hyperscalers and vendors, the mastery of these cloud-native operational processes by telcos can ensure that telcos are not just passive recipients and consumers of the cloud products and services of others.

After all, DevOps implies an interdependence of NF software development and operation. So it is not the case that telcos will simply operate what others have developed: in the cloud-native world, operating a network successfully implies continuous development of it – continually improving and adapting network capabilities so that they can cost-effectively serve the needs of customers and applications.

For more details please see our report Telco Cloud: Short-term pain, long-term gain?

STL Partners related research:

Telcos see private cellular and edge as two peas in a pod

Telecoms operators see private cellular and edge computing as part of a larger revenue opportunity beyond fixed and public cellular. It is an opportunity for telcos to move from being seen as horizontal players providing increasingly commoditised connectivity services, to more vertical players that address value-adding industry-specific use cases. Private cellular and edge compute can be seen as components of a wider innovative and holistic end-to-end solution for enterprises, and part of the telcos’ ambition to become strategic partners or trusted advisors to customers.

We define a private cellular network as a dedicated local on-premises network, designed to cover a geographically-constrained area or site such as a production plant, a warehouse or a mine. It uses dedicated spectrum, which can be owned by the enterprise or leased from a telco operator or third party, and has dedicated operating functions that can run on the enterprise’s own dedicated or shared edge compute infrastructure. Private cellular networking is expected to play a key role in future wireless technology for enterprise on-premises connectivity. Private cellular networks can be configured specifically to an individual enterprise’s requirements to meet certain needs around reliability, throughput, latency etc. to enable vertical-specific use cases in a combined way that other alternatives have struggled to before. Although there are early instances of private networks going back to 2G GSM-R in the railway sector, for the purpose of this report, we focus on private cellular networks that leverage 4G LTE (Long Term Evolution) or 5G mobile technology.

Private cellular combines the benefits of fixed and wireless in a tailored way

private cellular and edge

Edge compute is about bringing the compute, storage and processing capabilities and power of cloud closer to the end-user or end-device (i.e. the source of data) by locating workloads on distributed physical infrastructure. It combines the key benefits of local compute, such as low latency, data localisation and reduced backhaul costs, with the benefits of cloud compute, namely scalability, flexibility, and cloud native operating models.

For more information about the video analytics opportunity at the edge, check our report Scaling private cellular and edge: How to avoid POC and pilot purgatory

Open RAN and vRAN deployments by operators

STL Partners updated (April 2022) its Telco Cloud Deployment Tracker with a more granular focus on Open RAN tracking the on-going shift towards disaggregation across vendor ecosystems. Overall, it is still very early days with open RAN and vRAN, with 33 deployments in total, but we expect this to accelerate over the coming year.

To date, there have been significantly more open RAN than vRAN deployments. However, vRAN is emerging as a potentially competitive alternative to pure open RAN: offering the same operational benefits and – in theory – multi-vendor openness, but without the overhead of integrating components from multiple vendors, and a ‘single neck to choke’ if things go wrong.

Operator Open RAN and vRAN deployments

Source: STL Partners

  • Vodafone is the leading player in terms of live deployments. It has partnered with Parallel Wireless for open RAN deployments in Ireland and Turkey, and with Mavenir in the UK and India. It is currently rolling out Samsung vRAN in the UK
  • Verizon is deploying 5G vRAN from Samsung and Ericsson
  • Telefónica’s trials in Germany, UK, Spain and Brazil are expected to be followed by large-scale commercial deployments from 2023 onwards
  • Etisalat’s deployment in the UAE with Altiostar is complete, while its Parallel Wireless deployment in Afghanistan is, we believe, still underway
  • Bharti Airtel has deployed vRAN small cells with Sercomm to improve indoor coverage, and open RAN in the macro network with Altiostar
  • Orange has an ongoing deployment of 2G, 3G and 4G open RAN in Central African Republic
  • Deutsche Telekom has deployed Mavenir open RAN in what it dubs its ‘O-RAN Town’: Neubrandenburg
  • Telecom Italia has hailed its October 2021 deployment in the south-west Piedmont region as one of the most extensive open RAN coverages in Europe

Notable greenfield deployments due to go live in 2022 are those of 1&1 Drillisch in Germany (based on Rakuten’s Symworld platform) and Dish Networks in the USA

See our latest April 2022 report Telco Cloud Deployment Tracker: Open RAN deep diveAccess our online Telco Cloud Deployment Tracker tool

See our Top 10 telco cloud vendors from the November 2021 tracker update.

Further research

Visit our Telco Cloud research stream

MWC 2022 – 10 Observations

SK Telecom Stand at MWC 2022 – STL Partners

GSMA’s Mobile World Congress – MWC 2022 revealed a subtle but significant shift taking place in the telco industry, showing how the market’s need is changing to ‘connecting technologies’ rather than ‘connectivity’. This has deep implications for the industry and telcos in particular.

Here are 10 observations the STL Partners’ research team came across as they traversed the halls of the Fira Gran Via Exhibition Centre, Barcelona at MWC 2022. A full overview and analysis of the event is available in our report: MWC 2022: Sensing the winds of change

1. CAMARA, the Telco Global API Alliance

Deutsche Telekom exhibited CAMARA, a new Telco Global API Alliance, which includes many leading telcos such as AT&T, Vodafone, Telefónica and Orange, as well as technology players such as Ericsson, Google Cloud and Microsoft. DT was at pains to demonstrate that it had learned from past mistakes, emphasising the inclusion of a wide range of partners – beyond just operators. Its first API came quickly to market within six months of establishing the alliance. The “Quality-on-Demand” API prioritises data packets to ensure high reliability and stability. One proof of concept (PoC) in Munich is enabling BMW to deliver Automated Valet Parking, where a BMW driver can leave their car at the entrance to a parking lot and the car drives autonomously to an available parking spot.

2. Becoming better partners

Operator’s discussed how to partner better, both on the network technology side as operations move to the cloud, and with start-ups, content and industry specific service providers to build and expand new services. Some operators expressed their wish to kill off request for proposals (RFPs) explaining how they can limit the scope of what can be achieved in a partnership, while also taking away from the customer outcome as the priority of the partnership. Some expressed instead a need to shift away from narrow partnerships with a specific focus, to more broad ranging ones that covering multiple areas across both B2C and B2B. 

3. Metaverse

It didn’t take long to find the Metaverse at MWC 2022. As the buzzword de jour, it was pretty much everywhere, often accompanied by NFTs – non-fungible tokens or certified digital goods. MTN, SK Telecom and Telefónica were among the telcos talking up the Metaverse. MTN Group, for example, claimed to be first African company to enter the Metaverse by purchasing land in Africarare while SK Telecom presented its ifland social VR and virtual meet-up metaverse platform as part of its “4D Metaverse” exhibition which also demonstrated future urban air mobility transportation.  There was surprisingly little discussion about the one thing that will determine whether these concepts fly and flop – trust. Neeraj Roy, founder of Hungama Digital Media conveyed that it will be critical for “the seven big tech companies who’ve all sort of announced their plans of the Metaverse” to ensure their creations are interoperable – it ought to be a single Metaverse. If not, people won’t be able to move their digital identities and assets from one platform to another, limiting the usefulness of the whole concept. 

4. AR and VR Applications

Metaverse and VR applications were popular throughout the show highlighting an emerging ecosystem of VR/AR and 3D developers seeking to build metaverse applications for both consumer, enterprise and government (education). VR for enterprise solutions included facilitating company meetings, sales and marketing of products as well as company training. Meanwhile Korea Telekom (KT) also showcased its developmental K-pop dance coaching smartphone app called “KT Real Dance” which features KT video-based AI capabilities. Users dance to a virtual dance instructor displayed on their phone. 

5. Video and AI 

SKT showcased its camera and vision AI service which offers real-time safety applications for enterprise and smart city by analysing and processing live video in the cloud to monitor real-time human activity and provide alerts in cases such as patient falls in hospital settings, driver behaviour monitoring to detect when drivers’ heads drop as they are falling asleep and social distancing regulations. The camera and vision AI service is part of SKT’s efforts to enter the era of hyper connected intelligence connecting people, things and society. 

6. Sustainability

Operators such as Deutsche Telekom and Vodafone showcased their sustainability efforts which included Deutsche Telekom’s Fairphone 4, a modular 5G device with interchangeable parts that enable easy repairs and increase the overall lifetime of the device – which has a guaranteed service life of five years. Vodafone also highlighted that where customers hold on to their phone for an additional year, the device’s carbon lifetime impact is reduced by 29%. At MWC 2022, Vodafone announced its circular economy plan for extending the lifetime of devices and encourage reuse and recycling. 

7. Heavy and highly physical industry emphasis

There was a new emphasis on heavy and highly physical industries: ports, airports, mining, manufacturing, construction, energy, logistics and healthcare for example. In the next ten years STL Partners believes the efficiency and productivity issues of these businesses must be addressed. To reach sustainability and carbon goals anywhere near net-zero, the profile of emissions, waste and efficiency in these businesses must be radically improved. There were a plethora of examples and use cases on show, widely varying in quality and depth, but nonetheless demonstrating what can and is being done.

8. Telco cloud

Operators such as Telefónica outlined their progress in Open RAN deployment citing its four main markets: Spain, UK, Germany and Brazil where the operator is in its last phase of its pilot programmes. The operator indicated that carrying out interoperability testing (12 weeks minimum) is a timely exercise and that due to high integration costs, open RAN as of now is more, not less, expensive, than legacy RAN. Meanwhile, Dish Network’s Marc Rouanne spoke enthusiastically of the operator’s cloud native standalone core and open RAN architecture that delivered an all software, fully autonomous, self-healing network. Having outsourced all its cloud operation to AWS in 2020, Dish’s network architecture team consists of fewer than 20 people. 

9. Further Analytics, AI and automation use cases

Spirent, with IBM and Palo Alto Networks, demoed a slice management solution with integrated security. Spirent’s active assurance product emulates security attacks both at activation and on an ongoing basis. It also, provides assurance for validation of initial end-to-end provisioning and any further scaling by IBM Cloud Pak. Lastly, the Spirent solution emulates traffic loads that trigger faults to identify the fault, apply impact policy and automatically trigger remediation to the orchestrator.  

Nokia demoed the use of its Network Data and Analytics Function (NWDAF) product within the telco ecosystem. Nokia discussed the ability to share network insights with an ecosystem of partners; allowing them to understand real-time quality of experience and past trends. It also provides predictive analytics from the NWDAF data to allow simple controls for the partners such as spinning up new slices or traffic rerouting when future issues were expected. 

10. Xiaomi AIoT and Huawei

Xiaomi showcased a range of IoT consumer electronics, (some) with artificial intelligence (marketed as AIoT), including its popular electronic scooters. A representative of the Chinese electronics manufacturer highlighted its three-pronged strategy focuses on growing smart home, smartphone and its retail footprint (stores and telesales). The company has experienced increased demand for its smartphones, particularly from customers who were previously Huawei device owners. Huawei mobile services such as Petal Search, Petal Maps, the Huawei App Gallery (App Store) and Huawei Ads was a reminder to the removal of Google’s Android Apps and services from its devices. 

Reluctance to deploy VNFs on the cloud reflects a persistent, legacy concept of the telco

VNFs on public cloud: Opportunity, not threat

There have been very few significant deployments of VNFs on the public cloud, even by leading telco advocates of virtualisation and cloud-native. STL Partners recently outlined extent to which telco network functions (VNFs and CNFs) are being deployed on public cloud, and particularly that of the leading hyperscalers. See AWS, Azure and Google.

STL Partners believes the continued separation of the network and IT domains in the thinking and practice of leading telcos (i.e. telco NFs kept separate from public cloud) reflects the persistence of a legacy concept of the telco, and an unwillingness to embrace the full logic and benefits of the cloud. In particular, the very notion of a ‘private telco cloud’ seems anachronistic: it harks back to when the network did truly represent a distinct technology domain, i.e. when it was based on dedicated, function-specific equipment. In the wake of virtualisation, and now in the era of cloud-native, the network itself (at least, the intelligent systems that run it) has become pure software and computing. And this is software, moreover, that is deliberately designed to be portable across multiple, hybrid cloud environments.

By resolutely holding on to ‘ownership’ of their telco cloud and CNFs, telcos are in effect trying to artificially perpetuate a separation of the network from the cloud that is no longer valid, as the network has become cloud. This does not, however, mean that there are not other valid competitive, regulatory or indeed security reasons why it might be desirable to maintain some degree of separation between the telco and hyperscale cloud.

Indeed, behind the concern that the ‘core’ connectivity business of telcos could be swallowed up by hyperscalers – if telcos became dependent on them to run their networks – lies perhaps a more grave concern: that telcos would then lose the logical network as a control point allowing them to dictate the terms on which hyperscalers gained access to their physical infrastructure as part of new edge compute use cases.

The nightmare scenario would then be: hyperscalers dominating both the cloud and the network – the edge compute, the application software (via partners) and the delivery mechanism (via the network) – with telcos being relegated merely to construction, operation and maintenance of physical infrastructure at the behest of the hyperscalers, and their application and connectivity partners. Almost literally just subcontractors digging holes in the ground, and wiring up cables, antennas and access points.

Over the past two to three years, many leading telcos have concluded co-operation agreements with the three largest hyperscalers that grant them access to the 5G edge to offer it as just such an edge compute platform to their application partners: Network-as-a-Cloud Platform (NaaCP).

Telco and hyperscaler co-operation agreements 2019 – January 2022

Source: STL Partners

NaaCP will drive more VNF deployments on public cloud, and opportunities for telcos as outlined in STL’s Partners report VNFs on public cloud: Opportunity, not threat.

Closing the digital divide: How regional ISPs should innovate

The COVID-19 pandemic highlighted the severity of the digital divide globally, which cannot be solved by large telecoms operators alone. STL Partners’ research into regional ISPs demonstrates the role they can play, particularly by evolving their business model to open new opportunities.

What is the digital divide? 

The digital divide refers to the gap in connectivity between urban areas and rural areas. This “broadband gap” affects approximately 47% of the world’s population and 25 million people in the U.S. alone. In some cases, the digital divide is so stark that there are areas that are completely unconnected. In other cases, there are significant differences between the broadband speeds and quality of service in urban areas and rural areas.

Funding does not completely solve the digital divide problem 

It is no secret that the digital divide is a global problem now: as people’s lives become digitised further, access to the internet has become a fundamental need. The COVID-19 pandemic shone new light on the debate and brought it back to policymakers’ attention. In the U.S., for example, several funding initiatives have recently been introduced or expanded: Connect America Fund Phase II Auction (CAF II), the Rural Digital Opportunity Fund (RDOF) and Infrastructure Investment and Jobs Act. Additionally, the U.S. Department of Agriculture has launched the Rural Development Broadband ReConnect Program, and the FCC has been issuing grants to connect low-income households through the Emergency Broadband Connectivity Fund during the pandemic.

However, each of these hold limitations and, although they incentivise large telecoms operators and ISPs to accelerate network roll-out, they do not necessarily solve the challenges that service providers face in covering rural areas. Providing ubiquitous broadband coverage for these various terrains is challenging because return on investment for provisioning sparse populations is low, and carriers must navigate local permitting laws (which may differ by state, or type of land, e.g., tribal lands) to get access to rights-of-way.

There are specific challenges that regional ISPs face, which makes building their networks, upgrading core capabilities and infrastructure security, and rolling out services more difficult: 

  1. Making the business case
  2. Justifying the cost of technology
  3. Gaining access to skills and resources
  4. Modernising the network

Why innovation across the business model is key for closing the digital divide

STL Partners has written about business model innovation for decades, mainly focusing on traditional telecoms operators. Some of these learnings are applicable to regional ISPs, for example the need to expand ecosystems, however there are nuances within regional ISPs that are unique.

Following a research programme evaluating over 30 regional ISPs and interviewing leading players, we developed a framework that highlighted four key factors for business model innovation: technology, partnerships, financing models, and new services and customer segments.

Technology
• Use of new, innovative technology to accelerate access network build and optimize the network core for scale
Partnerships
• Working with unique companies and organizations to share skills, technology and increase value provided to customers
Financing models
• Accessing capital for investment through different models and partners - public or private
New services and customer segments
• Improving the business case by developing new services and taking these to (new) market(s)

Examples of regional ISP business model innovation

Our research identified numerous examples of business model innovation happening across types of regional ISPs:

1. Inland Cellular

Inland Cellular demonstrates the value of a partnerships, ecosystem approach to provide services to rural industries through the Rural Cloud Initiative

2. Alaska Communications

Alaska Communications highlights how technology can dramatically change the economics of the network and allow an ISP to scale more quickly

3. Bluewater Regional Networks

Bluewater Regional Networks showcases the value regional ISP services can bring to new customer segments – especially in B2B

4. Ting Internet

Ting Internet and Westminster share risk through innovative financial model using payback mechanism

5. Microsoft Airband

Microsoft Airband provides TV white space as an alternative wireless access technology

Recommendations for regional ISPs tacking the digital divide

Regional and rural ISPs are well-positioned to tackle the broadband gap through innovative business models. In order to taking a driving role in closing the digital divide while tackling business model challenges, ISPs should seek to evaluate different aspects. Firstly, this can be about how network infrastructure is funded for and looking outside traditional means. Secondly, it can be about exploring partnerships with new organisations and taking a more ecosystem approach to these, as opposed to linear supplier-customer models. Third, ISPs can explore new products and services that are easy to take to market, yet can make a huge difference to their business case. And, finally, innovative technologies open up new ways to cover large areas using more cost-effective means.

Discover more about on this topic

This article is based on a report commissioned by A10 Networks, which was prepared independently by STL Partners. 

Dalia Adib, Director – Consulting 

How STL Partners Consulting can support you

STL Partners has been supporting telecoms operators, including regional ISPs to develop new business models and open up new revenue opportunities. There are four main ways we can do this:

  1. Growth strategy: Analysing new markets for regional ISPs to enter into, e.g. new vertical industries or new service domains (e.g. smart home, ICT services and solutions, security, etc.)
  1. Business model development: Developing potential business models for new strategic opportunities and creating an ROI business case for these.
  1. Go-to-market strategy: Building a go-to-market strategy to determine how regional ISPs can enter these new markets, either through existing channels or new ones, plus the pricing and packaging the ISP must consider.
  1. Customer engagement: Creating thought leadership and collateral that can accelerate engagements with existing customers and new prospects to build brand leadership in new domains.
Get in touch to understand how STL Partners can support you:
dalia.adib@stlpartners.com
Or visit our website to discover more about our consulting work and expertise:
https://stlpartners.com/consulting 

What does AWS Private 5G mean to telcos and enterprise?

AWS launched its private networks service  to simplify the deployment for enterprise customers. This move further disrupts telcos’ position as the main cellular connectivity providers and lowers the entry barriers for new emergent players. But to what extent can AWS service support the diverse enterprise requirements and compete with telcos and other players in the market?

What is AWS offering?

AWS offers its new Private 5G service to customers in the US to tackle two significant issues with private networks deployments: complexity and cost. The service aims to:  

  • Simplify and accelerate the planning and deployment of networks

Private networks projects usually require collaboration among several different partners including technology vendors and system integrators to support the implementation across various phases. Enterprises invest considerable time, money and effort working with these partners and suppliers and going through several phases of planning the networks and sourcing equipment and then deploying, integrating, and configuring the network. This all might typically take weeks or months. AWS wants to streamline the process and shorten the time for customers in a way similar to how they consume computing resources through its AWS cloud services.

To order, customers use the AWS website to specify the location of their network and the capacity they require. AWS then ships the network components within days. These include small cell radios and servers as well as software to run the RAN and core network. AWS will also provide SIM cards to all the devices in the network. All components come pre-configured so that they require minimum effort from the customer aside from installing them, turning on the network and inserting SIM cards into devices. AWS will also manage the network, monitor its operations, and run software updates when needed.

  • Define and reduce the cost of deployment

This AWS streamlined procurement process is also supported by a clearer and easier pricing model that is likely to be quite attractive for many enterprises. It is a cloud-based pay as you go model with no upfront capital cost or fees per device. As opposed to per-device pricing models which can be cost-prohibitive for a network with a high number of connected devices, the AWS model only requires customers to pay for the capacity that they use. This means that they can run as many devices as they like without increasing the cost substantially, especially if these devices have simple data requirements. Customers can simply scale up or down as needed.

With this service, AWS is testing the demand for private networks and its ability to enhance its overall enterprise proposition. The service complements AWS existing services and will build on the need for edge and cloud compute, storage, analytics and other services. Similar to Wavelength proposition where AWS partner with telcos to support the delivery of network edge, AWS Private 5G can create partnership opportunities and sales channels for AWS to strengthen its enterprise business.

Where will it be launched?

The service is now available on preview to US customers only as it runs on the CBRS spectrum. The CBRS spectrum access model in the US with its two main tiers; the Priority Access License (PAL) and the General Authorised Access (GAA) has essentially laid the ground for this AWS service model by enabling access to spectrum for non-telcos. The GAA which is the lowest priority tier allows anyone to use the spectrum to deploy a private network under the management of a Spectrum Access Server (SAS). Many companies are already deploying and experimenting with LTE and 5G using the unlicensed GAA spectrum. However, GAA is still an opportunistic type of access and in some specific use cases or locations where customers might want to ensure their access, they can opt for a PAL license.

Following its US launch, AWS might want to expand their service globally. However, the disparities between countries and regions on how private networks are deployed might will not make that easy. Many countries such as the UK, Germany and Japan are allocating shared licensed spectrum for enterprises to support the deployment of private networks, but licensing models and frequency bands differ. AWS will need to understand these differences in every market and adjust its offering accordingly. In some regions where there is no enterprise shared spectrum, AWS might have to partner with or sell through telcos.

What kind of companies will deploy it?

Generally, there have been many examples of CBRS private networks across a wide range of verticals and use cases including in mining, manufacturing, transport, utilities and even healthcare and education. However, one of the challenges of private network deployments is that customers’ environments vary and there might still be planning and deployment issues that are unique to specific places and locations such as RF planning, assurance, integration with the enterprise IT and security, and coexistence with legacy radio and connectivity solutions. These deployment challenges are also affected by size of the deployment and its desired performance. While large enterprises might still leverage AWS service for its deployments, the turnkey nature of it makes more suitable for small to medium enterprises that are looking for a more reliable wireless network option.

AWS announced that its first deployment was in one of Amazon Fulfilment Centres to support reliability and mobility requirements for its warehouse operations. Dish Network and Koch Industries are both lined to become the first sales channel partners and utilise the service for their customers.

Of these two, Koch Industries in addition to Amazon’s own operation suggest that some of the use cases and sectors that AWS is targeting include factories, warehouses, and other industrial settings. In such locations, private networks can provide a level of reliability and support for mobility that Wi-Fi cannot. Amazon demonstrated how it used the technology to replace outdoor Wi-Fi coverage at a parking lot of its warehouse. The company explained that using private 5G was more cost-effective and quicker to deploy than Wi-Fi as it only required two small cells mounted on the corners of the warehouse. While to get a decent coverage with Wi-Fi, the company previously went through the trouble of mounting light poles for the equipment, extending fibre to support the mesh systems and also changing the outdoor electrical systems.

With the rise of industry 4.0 and as many companies have started going through digital transformation, AWS and other hyperscalers have managed to establish some presence in the industrial sector with their IoT platforms and solutions. This private network service, together with edge computing and other on-prem solutions, allow AWS to strengthen its position in the sector.

On the other hand, highly complex environments with very strict reliability, latency and security requirements and human safety mandates, such as transportation hubs and energy plants, are also increasingly adopting private networks to support their critical operations. The simplified AWS deployment model with its customer self-installation and pre-configuration aspects might be too generic for such scenarios. For example, Lufthansa Technik when deploying its private network in Hamburg Airport came to discover and deal with the issue of 5G signal degradation through aluminium alloy and carbon fibre and how that affects the communication between the aircraft cabin and the edge servers. It is not clear yet whether AWS will offer some additional support or customisation if certain customers require that, but this is already a big opportunity with plenty of customers that AWS can target with a horizontal offering.

Also, the ease of accessing and deploying networks in the unlicensed portion of CBRS, in general, has enabled uses cases in niche or emerging sectors such as education and healthcare including providing connectivity to students in rural counties during lockdowns or supporting hospital unit extension during crises, respectively. AWS pricing model can further support the adoption within these sectors and similar sectors where customers are severely constrained by the cost.

Are telcos losing the private networks market?

Over the last two years, telcos’ understanding of their position in private networks has gradually changed from wanting to do it all and, therefore, being highly protective of their role as the main connectivity providers to becoming more accepting of playing a collaborative role in private networks as the market dynamic changes. This has been further established as licensed and shared spectrum schemes started to become available to enterprises in different countries, easing the way to network ownership and deployment for many enterprises, especially large ones.

While telcos’ role might have been affected slightly, they have not completely lost the private networks race to hyperscalers and other emerging players quite yet. Many companies that wanted to own spectrum and build networks independently continue to partner with telcos to leverage their telecoms experience in building and managing networks. In some countries where regulators have decided against licensing spectrum to enterprise such as in China, telcos remain the main providers of private networks.

However, the AWS move represents a significant step in reshaping the market and changing thinking around private networks. It lowers the barrier to adoption and will help bring the technology closer to a wider audience, urging participation from the larger 5G and enterprise ecosystems and increasing the appetite for innovation in private networks and enterprise solutions. The service might also disrupt some of the future plans for telcos around network slicing as they aim to target SMEs with customised slices where dedicated private networks are not feasible. Also, telcos need to watch out for how AWS would structure and simplify billing for connectivity as this is something that telcos have not been good at historically.

And while AWS service might help with the rollout of many private networks, it might not be the answer to every problem. As more customers start to adopt the AWS service, there will be a better understanding of its actual capabilities, what types of deployments that customers can set up by themselves and where they need additional support, and what types of indoor environments and use cases that it is best suited for. This also will create opportunities for other stakeholders including telcos to partner with AWS or other technology providers with possibly similar offerings such as Cisco with its new hybrid 5G-Wi-Fi solution. Telcos can also develop their own solutions to fill the gaps.

The emergence of new service providers

Thanks to the “democratisation” of shared spectrum, virtualised networks, fibre and cloud – plus the demands of industry, government and local communities – a plethora of new service providers are emerging in the 5G-era.

New service provider types

New service providers

Source: STL Partners

In a recent report, New telcos: A field guide, STL Partners classified these into three main groups of service provider types, with the remainder grouped into a “miscellaneous” category for completeness.

  • “Evolved” traditional telcos: operators, or units of operators, that are recognisable from today’s companies and brands, or are new-entrant “peers” of these. The category includes separate systems integration / enterprise units of telcos, crossover between fixed and mobile operators and greenfield telcos, among others.
  • Adjacent wireless providers: service provider types that have been established for many years, but which are now overlapping ever more closely with “traditional” telcos. Examples include tower companies, neutral-host networks and satellite companies.
  • Enterprise and government telcos, i.e. large organisations shifting from being “users” of telecoms, or building internal network assets, towards offering public telecom-type services. They include industrial / enterprise specialist MNOs, government and municipal networks and utility companies offering telecom services.
  • Others: the catch-all category that spans various niche innovation models. One particular group here, decentralised/blockchain-based telcos, is analysed in more detail in the report. The category includes community networks, industrial systems vendors, property companies and advanced (“thick”) MVNOs.

Each of these groups poses different challenges to traditional telcos, depending on the specific national market, and the focus areas for each operator. For example:

  • The implications for incumbent MNOs in markets where greenfield operators like Rakuten Mobile and Dish have launched include the need to compete with lean new rivals, with no technology legacy or existing network loads. These “evolved” telco competitors are often willing to undercut prices substantially and make a huge splash of publicity. At the same time, their emergence is also leading to telco wariness in other markets, especially around M&A and market consolidation, in case regulators decide that mergers need to be paired with the arrival of a new entrant.
  • Tower companies (under the category of Adjacent wireless providers), while not new, own important parts of network infrastructure that used to be considered fundamental assets for MNOs. Players like Cellnex and Digital Bridge are now moving up the value chain and increasingly encroaching on the broader services space that 5G telcos are hoping to occupy themselves. This means that traditional operators risk being squeezed by technology application and hyperscale firms on one side, and players like these tower companies on the other. While this may mean that operators are able to become more opex-driven than capex dependent, it may also reduce the scope for vertically-integrated services innovation going forward.

The net effect of new service providers

While the net effect of the emergence of new service providers is hard to predict, what is clear is that it will be more difficult for traditional operators to monetise general-purpose networks in the future. Our report contains several recommendations for telcos as they navigate a new reality in which they will likely need to embrace customisation and localisation in order to compete with new, nimble and specialist players in multiple domains. 

MNO IoT security roles across the IoT stack

As part of our study IoT security: The foundation for growth beyond connectivity, we looked at the IoT security services of 12 MNOs to see what they are doing to address enterprise IoT security needs beyond that of secure connectivity.

The architecture stack for an IoT solution can be simplified into four layers: Data collection (sensors, devices for data gathering), data exchange (connectivity to enable transmission), data management (organising, analysing and acting on data) and data utilisation (applications). Each layer represents a surface area for a potential security breach. For this reason, enterprise customers require visibility at every stage in the deployment of an IoT solution, in order to monitor and respond to IoT security threats.

We analysed the services of the 12 MNOs based on the architecture layer that the services provide insight into to assess their current areas of focus (beyond connectivity) from an IoT security perspective. For the purposes of the analysis, the data management layer is broken down into three sub-layers (IoT platform, cloud services and data management) to reflect the different revenue streams operators are targeting in IoT security.

MNO’s IoT security offerings by architecture layer

Source: STL Partners

IoT security beyond connectivity

China Mobile offers the richest portfolio of IoT services, with offerings that provide visibility all the non-connectivity layers of the IoT stack. It offers the most insights to its enterprise customers; whether this is translated as billable insights, as part of a security offering, is not clear. Other operators such as Verizon and Telefónica S.A. offer services in four categories.

IoT platform analytics is the most readily available asset that IoT-oriented MNOs can leverage to address enterprises’ need to continuously monitor and respond to security events in their deployments, as well as to contextualise security incidents and events. Using cloud-based platforms, MNOs can to pull together data from their connectivity services (e.g. SIM and device statuses) and apply analytics to offer their IoT customers information about their deployments, such as cloud access and authorisation, privacy management, security updates and remediation. As IoT platform capabilities expand to enable easy integration of IoT status and data directly into enterprise systems through APIs, IoT operators that have their own platforms or have influence on the development roadmaps of the platform they are licensing will be better at supporting their enterprise customers.

As operators’ IoT portfolios progress from providing connectivity for a small number of M2M SIMs to larger scale deployments with thousands of IoT connections, the requirement for more sophisticated deployment, device management and monitoring services will grow to enable more intelligent applications. Similarly, security offerings will be required to evolve from point solutions, to more coordinated, integrated, and scaled propositions that address security requirements across the stack.

For more detail on this, please go to IoT security: The foundation for growth beyond connectivity

Other reports addressing the IoT include:

Eight barriers telcos face in achieving network convergence

Network convergence is not a new concept and is one that has been consistently explored and often pursued by CSPs for many years. Convergence has been seen as a means of reducing costs and operational complexity while network divergence was used to support innovation, given the challenges with traditional appliance-based technologies. However, speed and specificity have been the major force of network divergence. 

STL Partners report Revisiting convergence: How to address the growth imperative shows how the move to cloud native networking and increasing network disaggregation operators no longer have to compromise between network convergence and divergence and that the telecoms industry is now moving towards building a network as a common platform that can serve multiple needs and provide more tailored products and services.

This latest STL Partners’s report is based on an interview programme with 12 leaders from telecoms operators globally, conducted between July and September 2021. The participant group spans across different regions, operator types and roles within the organisation. 

Our research found many CSPs do consider the various forms of convergence (logical, horizontal, vertical) to be desirable (and in some cases even inevitable) but its is something they have at best only partially been able to undertake to date. 

Here are eight of the most common challenges CSPs face in their network convergence journey:

Barriers CSPs face

Source: STL Partners

  1. Legacy infrastructure and investments  – Heterogenous legacy technical infrastructure can arise for many reasons. Mostly this is because technologies were introduced at a time when independent silos were the only (or the only expedient) way to introduce new services. Operators put in completely new network stacks for new services. However, heterogenous infrastructure can also arise through acquisitions. One cable operator we spoke to had to grapple with multiple network architectures, topologies and technologies as a result of industry consolidation.
  2. Organisational skills, culture and processes Beyond the technical challenge, the existence of (fiercely independent) distinct teams and skillsets within the CSP add another layer of difficulty to the task of convergence. In many instances, the teams are under different leadership, with separate training backgrounds, ideals, and targets. In some extreme situations, the operator has been split into completely individual organisations, with each having little to no interaction with the other. 
  3. Ownership, governance and fiefdoms…or historic reasons – Some operators have complex shareholding and ownership arrangements. For example, the fixed line consumer business is 100% owned by a single entity but the mobile business has minority shareholders or the mobile network / mobile operations are a joint venture with a competing operator. One Asian operator we spoke to… [Download report]
  4. Legacy services and commercial constraints – Some operators have declining, yet still sizeable and profitable services such as ISDN or 2/3G services. Although there is little or no new investment in these legacy services, they incur ongoing licensing, operating and maintenance costs. They also represent a growing risk, particularly if they are no longer supported by vendors. There are also some ‘raw’ services that are thriving which are hard or impossible to support within a convergence network. For example, a wholesale operator we interviewed…[Download report]
  5. Regulation and compliance – Some licensing terms for public communications services stipulate that dedicated infrastructure be used for the service. Interpreted too literally, this could preclude certain forms of network convergence. Also, some authorities will want to satisfy themselves that any changes in the network do not raise a potential national security risk or limit their ability to fulfil their duties (e.g. lawful intercept). However, regulation or government influence is not always a barrier. As previously mentioned, in some cases, operators are still maintaining PSTN services but in others, there is government support for PSTN switch-off or copper network retirement, which will significantly impact legacy systems from railway points to elderly care alarms. This can act as a major catalyst of network convergence. 
  6. Operator independence – Related to innovation cycles, one of the concerns raised by interviewees was that convergence may reduce operators’ flexibility and freedom to determine they own technology roadmap. This loss of optionality is seen as a form of vendor lock-in although not necessarily expressed in those terms. For operators that have been able to ‘back multiple horses’, convergence represents a commitment and a risk of making some potentially expensive mistakes. However, STL Partners argue that the disaggregation that comes with the adoption of cloud native networking means that maintaining operator independence and achieving convergence are not mutually exclusive.
  7. Investor valuation – One of our interviewees, the CEO of a global ICT solutions provider, pointed out that investors and investment analysts were not keen on convergence as this could blur the distinct data sets that informs their understanding of performance and feed their valuation models. The objection here is that introducing investments and costs that cannot be tied back to specific revenue lines can be a (intentional or unintentional) smokescreen that reduces transparency and creates reporting discontinuities. There is also an increasing interest and activity happening around delayering and structural separation (or ‘spin outs’) of different parts of the telco business, including operators looking to sell their tower assets or other network infrastructure components. This can undermine the ability to abstract convergence value.
  8. Disconnected technology innovation cycles – Different technologies evolve at different speeds and along different cycles and depreciation schedules. One of the objections raised by two separate interviewees (both European operators) was that convergence would delay adoption of the latest developments in previously independent technology cycle. For example, …. [Download report]

Our report Revisiting convergence: How to address the growth imperative will weigh up the various forms of network convergence and detail the four key drivers CSPs are now focused on as part of this renewed pursuit of network convergence. 

Save energy and extend network coverage

Stratospheric Platforms Limited (SPL) has developed an alternative to traditional, terrestrial cell sites as a means of achieving network coverage in rural locations. The solution (Stratomast HAP) consists of a fleet of hydrogen-powered High Altitude Platform (HAP)-mounted antennas designed to provide 4G and 5G coverage to locations across the UK.

Rural areas typically have poor mobile coverage because it is unprofitable to deploy and run under-used network cells. Traditional cells consume large amounts of energy, when they are only required to deliver relatively small data volumes to a few customers. This is not only resource inefficient, it is also a big Capex and Opex outlay. STL Partners estimates a cumulative energy saving of over 4.5 million MWh for 4G networks in the UK up to 2035 if operators were to adopt High Altitude Platform (HAP)-mounted antennas and decommission inefficient terrestrial sites for rural coverage. The chart shows three scenarios based on rate of decommissioning.

Over 4.5 million MWh of energy savings in the UK by 2035

Modelling scenarios

Source: STL Partners

Our modelling shows that by 2035, the use of HAP-mounted antennas could save over 4.5 million MWh of energy in an accelerated scenario as a result of energy savings from two key mechanisms:

  • Cell sites not built: these are terrestrial cell sites which would have been built by operators to fulfil coverage goals but will no longer be required thanks to Stratomast HAP-type solutions. We forecast over 4,600 cell site build-outs could be averted.
  • Cell sites decommissioned: these are terrestrial cell sites currently part of the network which could be decommissioned by operators when HAP solutions serve the area. These will either be sites which are more expensive to run than they are to decommission, or sites which need renewal and are cheaper to decommission than to re-invest. We modelled different scenarios based upon the rate of decommissioning, in the most conservative estimate we would expect over 4,100 cell sites to be decommissioned between the four UK operators by 2035, with over 8,300 decommissioned in the fastest scenario.

Additionally, this type of solution can also help to reduce the carbon emissions used to provide rural mobile services by 95%. Even in the most conservative estimate, over 2.7 MTCO2 could be cumulatively saved by 2035 (at the peak of the accelerated scenario in 2027, nearly 0.5 MTCO2 are saved annually). This will advance the telco journey to net zero.

For more detail on this, please see our report Stratospheric Platforms: A faster route to mobile net zero.

Related research can be found on our Sustainability Hub.

Vonage: What is Ericsson’s end game?

Rationale for acquisition

In late November 2021, Ericsson announced it would purchase Vonage, a global cloud-based communications provider for $6.2bn. The acquisition is part of Ericsson’s expansion into the enterprise segment through Vonage’s communication platform as a service (CPaaS) offerings and follows on from Ericsson’s purchase of US-based Cradlepoint in late 2020. Cradlepoint’s enterprise solutions include wireless wide area networks (WAN) over LTE and 5G edge routers delivered as an all-in-one solution with more than a million (NetCloud) endpoints under subscription. Ericsson believes the enterprise market offers attractive software as a service (SaaS) revenue opportunities that can be scaled and aligned to strengthen its core business. Vonage is the latest acquisition in this strategic direction.

STL Partners has been talking extensively about the growing need for greater network intelligence amongst applications and platforms as a key opportunity to provide unique value in a B2B2X environment. We believe if Ericsson can leverage the developer community in the way it wants, it has the potential to become a strategic partner and a channel for operators to access developer communities, perhaps even challenge the hyperscalers by acting as an aggregation point for developers and network operators to engage with each other.

However, it may be too early to tell how Vonage’s existing developer community will see value and differentiation in the network APIs and 5G capabilities Ericsson and its operator base has to offer. Given many developers still do not have strong understanding of 5G technology, its capabilities and applicability to them, the opportunity for Ericsson rides on its ability to successfully encourage the developer community to see the value in leveraging these advanced network capabilities and programmability.

The Vonage Communication Platform

Founded in 2001 as a consumer VoIP provider, from 2013 Vonage has evolved through acquisitions into an integrated communications platform as a service provider (CPaaS) with sales of $1.24 billion in 2020 and $1.4bn expected in 2021. Of the company’s two business divisions, its cloud-based Vonage Communications Platform (VCP) accounted for over 73% of Vonage’s 2020 revenues serving over 120,000 customers, from SME to large enterprise business across a range of sectors (healthcare, finance, education, retail).

The Vonage Communication Platform (VCP) has three offerings:

  • Application Programming Interface (API) platform enables developers to embed communication services such as messaging, voice and video services into their applications and services. Through acquisition of Nexmo’s API platform and TokBox’s WebRTC programmable video integration, Vonage offers a range of communication APIs (such as voice, SMS, video, verify, messages and dispatch, number insight) enabling businesses to integrate programmable capabilities such as communication and authentication quickly into their products.

Vonage Communications Platform 

Vonage-vcp-platform-ericsson

Source: Ericsson Vonage Announcement Presentation November 2021

  • Unified Communications as a Service (UCaaS) – Vonage Business Communications (VBC) is the company’s cloud-native over-the-top unified communication service. Vonage also offer a Business Enterprise unified communication and collaboration service in the US (offering voice, data, video, mobile and contact centre services) for mid-market and enterprise customers delivered over a private secure IP MPLS network.
  • Contact Centre as a Service (CCaaS) solutions – Vonage Contact Centre is a cloud-based contact centre as a service (CCaaS) aimed at the middle market. The service integrates Vonage’s unified communications service and its APIs to deliver a full communication suite for enterprises.
    • Vonage’s unified communication (UCaaS) and contact centre (CCaaS) services come with third-party enterprise software applications to support workflow and productivity. Integrations include Salesforce, Microsoft Dynamics, Teams, NetSuite, Zendesk, and Hubspot, which are available via Vonage App Centre ecosystem. According to Vonage, its Contact Centre solution currently holds the esteemed position of “Premier partner status” on the Salesforce AppExchange with a five-star rating and number one ranking across 800 reviews.

In late 2020, Vonage’s API revenues overtook UCaaS and CCaas revenues highlighting the growing demand for its API solutions from its developer network. Vonage’s recent API business growth has been driven by the popularity of its messaging and video APIs. It’s API revenue grew 43% year-on-year in Q3 2021.

The Vonage acquisition offers Ericsson the opportunity to introduce network and API capabilities to a wide developer community. Announcing the acquisition, Ericsson CEO said the company’s first step will be to embed its advanced network capabilities into Vonage’s existing communication APIs which have the potential to be adopted quickly on the back of existing 4G and 5G network build outs.

API business driving VCP growth

Source: STL Partners, Vonage Q3-21 results

Multi-vendor and multi-operator developer ecosystem

In announcing the acquisition, Ericsson’s CEO pointed out how the company has already developed quality of service APIs, but up to now they have only been tested in operator networks around the world. Accessing Vonage’s developer community would put the APIs into the hands of developers and convert them from “nice to know” capabilities into user friendly and valuable APIs.

Ericsson wants an engaged developer community/ecosystem to take these APIs and advanced network features and design real-world applications leveraging the capabilities of 4G and 5G advanced networks. It believes it can unlock value from its network APIs and 5G advanced capabilities by combining its deep network expertise of 26,000 R&D specialists with Vonage’s 1.1 million global developer community, 780 API platform engineers and Vonage’s back-end connections across over 200 CSPs.

These 200+ CSP connections are made possible by underlying technology supplied by vendors such as Ericsson. The developer and API ecosystem will be open to competitor network vendors and the wider MNO community in order to ensure the fullest possible participation in 5G innovation for enterprise. Ericsson is confident its worldwide market share position (outside China) and network capabilities will give it a strong starting position in developing new applications and that the openness of this developer, vendor and MNO ecosystem will be good for the industry overall.

It is hoped this developer ecosystem can leverage next generation of 5G advanced services and functionalities such as latency (across device types for example), quality on demand and network slicing across industry verticals and that developer/enterprise innovation will drive usage of the CSPs networks, providing an ROI on their 4G and 5G network investments.

  • A key test will be whether the developer ecosystem will see the value in Ericsson network APIs and capabilities, and whether Vonage hosts the right app developers that can see value in and will actually use these new network APIs (e.g. slice configuration, dynamic traffic routing, bandwidth management etc.)

Up to now, telecom operators have established their own API platforms or used third-party API developer platforms to attract developers and foster innovation on their networks. Ericsson wants to ensure that it is compensated for the innovation that occurs on its next generation (5G) network equipment as opposed to losing value to over-the-top players. It may believe it can reach a more global developer community more efficiently than MNOs.

Competing with Twilio at API and ‘super network’ level

Given that Ericsson (among other vendors) supplies the underlying network technology to and has extensive relationships with network operators globally, it may be in a position to compete with other communication platform players such as Twilio by having the advantage of advanced 5G network knowledge and capabilities in addition to its close MNO relationship ties.
Twilio’s developer-first platform approach consists of four core elements; its Programmable Communications Cloud, it Super Network, its Business Model and its Engagement Cloud or Customer Data Platform.

  • Programmable Communications Cloud consists of the APIs that enable developers to embed voice, messaging and video capabilities into their applications.
  • The Super Network is Twilio’s software layer enabling its customer’s software (Amazon, Airbnb) to communicate with connected devices globally by connecting to CSP networks and internet service providers in 80 countries. Twilio has agreements in place with CSPs globally to route communication through their networks. The Super Network also contains a set of APIs giving Twilio customers access to more foundational components of the platform such as phone numbers, and SIP Trunking.
    • Twilio highlights its extensive carrier agreements ensure resiliency and redundancy for its customers. By using real-time feedback data on handset deliverability from carriers and across geographic markets, the Twilio Super Network can detect issues and make routing decisions quickly. It can optimise communications flow through its platform based on network quality and cost.
    • According to Twilio, network service provider fees account for a substantial majority of its costs particularly outside the US.
    • Twilio has said its Super Network provides it with massive volumes of data from end users, their applications and from communications. As more communication is handled by Twilio, the Super Network “becomes more robust, intelligent and efficient” improving its performance in terms of quality and cost, making it, according to Twilio, difficult for others to replicate.
  • Segment Customer Data Platform / Engagement Cloud – Twilio offers their customers (Amazon, Airbnb) the ability to gather and analyse customer data from across all their communication channels. This helps Twilio customers generate new customer insights which they can use for personalised targeted marketing communication.
  • Business Model – To empower developers to experiment and innovate on its platform, Twilio offers a low friction model that eliminates up-front costs, offers a free-trial and free developer resources, and more importantly, adopts usage-based consumption pricing.

Twilio customer engagement platform

Twilio-customer-engagement-platform

Source: Twilio investor presentation, March 2021

Mavenir and Telestax

There may be parallels between Ericsson’s tie up with Vonage and Mavenir’s (August 2021) acquisition of Telestax, a global communication platform as a service (CPaaS) enablement and application provider.

Mavenir has said it expects Telestax to enhance its Mavenir Engage solution, a cloud-based customer engagement and messaging monetisation solution offering RCS Business Messaging, A2P and P2A campaign management, templated chatbots, visual flow builders, payment integrations and advanced analytics. Mavenir’s CEO Pardeep Kohli has stated CPaaS can help service providers enhance their 5G enterprise offerings in areas such as IoT, Smart cities and Automotive. The rationale being that 5G capabilities and associated APIs will be integrated into these 5G enterprise use case verticals creating new value and new revenue opportunities.

Ericsson’s view of the market opportunity

Overall Ericsson believes Vonage will see strong growth across its three VCP offerings as enterprises accelerate their digitalisation. Ericsson cites analyst expectations of 17% growth in the CPaaS business up to 2025 and a total addressable market (TAM) worth $69 billion by 2025.

It expects Vonage to outperform due to its strong position in the API market, citing Vonage’s 7% share of the API market today. Ericsson expects the total API market to be worth more than 50% of the global RAN market by 2025 and conservatively estimated the global API market to be worth $8bn by 2030.

The question is: what role is Ericsson seeking to play as a result of this acquisition? If Ericsson is able to successfully leverage Vonage’s developer ecosystem to drive the use of 4G and 5G APIs, then it could play an interesting role as a strategic partner and channel for operators as a means of accessing developer communities. Ericsson could position itself a potential alternative to the hyperscalers as an aggregation point for developers and network operators to enable both to engage with each other. However, whether Vonage’s existing ecosystem of developers see 5G as a means of competitive differentiation (either by enabling new types of applications or enhancing existing ones) or whether Vonage’s customer base will be interested in leveraging 5G capabilities, is still up for debate.

Vonage Communication Platform future market opportunity

Ericsson-estimate-API-marketTAM

Source: Ericsson Vonage Accouchement Presentation November 2021

During 2021, Vonage found itself under the scrutiny of the activist investor Jana Partners, who urged management to consider selling all or parts of the business. The activist investor believed Vonage’s growing API business was undervalued (compared to pure play API players such as Twilio) and that its overall valuation was weighed down by its legacy consumer VoIP business for which it is better known. In February 2021, Vonage abandoned plans to sell the consumer VoIP business citing the unit’s $600m projected cash flow generation over the next five years.

Top 10 telco cloud vendors

STL Partners recently updated (November 2021) its Telco Cloud Deployment Tracker, a our comprehensive database of live, commercial deployments of virtualised and cloud native network functions (VNFs and CNFs) and SDN technologies by leading telcos worldwide. It builds on an extensive body of analysis by STL Partners over the past eight years on NFV and SDN strategies, technology and market developments with over 900 individual deployments. 

Our recent analysis of vendor deployments between 2018 and 2022 shows the current top 10 telco cloud vendors to be:

Source: STL Partners’ Telco Cloud Deployment Tracker

1. Ericsson – has come from third place in 2018 to top in 2020 and 2022, overtaking Nokia due to its greater number of 5G core deployments

2. Nokia –  remains strong in core, with several 5G SA core deployments slated for launch in 2022

3. Cisco –  has strengths in multiple parts of the telco cloud stack, particularly SD-WAN, transport SDN and orchestration

4. VMWare –  deployments both in telco cloud infrastructure and SD-WAN

5. Huawei – Huawei has declined sharply, owing to political pressures to remove its tech from Western mobile networks

6. Fortinet – has a growing presence in telco networks, linked to both SD-WAN and SASE

7. Mavenir – Open RAN and IP multimedia systems

8. Metaswitch Networks – IP voice and multimedia platforms

9. Affirmed Networks – diverse, cloud-native core and orchestration solutions

10. Juniper –  SDN and telco cloud platform components

Access a trial of our Telco Cloud Tracker here

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:

5G-aliser: Time to pump up the volume

What’s the 5G-aliser for?

In early 2020, as a growing number of operators were launching commercial 5G services, it was clear that there were a wide range of factors that would affect the development of the market, from availability of spectrum and devices, to demand for high bandwidth services and private networks, and maturity of underlying technology and standards.

To make sense of how 5G would evolve – and amuse ourselves in the process – the STL Partners research team, Dean Bubley (of Disruptive Analysis and who runs STL’s Network Futures research stream) and the editorial team Total Telecom came up with the 5G-aliser. By plotting progress on the primary, secondary and wildcard factors impacting 5G development on the 5G-aliser, we understand which ones become more or less important over time, and can also build a high level view of supply and demand.

Over the last 18 months, we’ve revisited the 5G-aliser every quarter to track progress. Although both supply and demand have nudged up during this time, sadly no 5G drivers have come anywhere close to hitting number 11 on the dial yet. On the graphic, the absolute level measures total impact on 5G maturity, while the relative level measures the change since 2020 – allowing room for deterioration driven by COVID-19 or other external factors.

How 5G has evolved in 18 months to November 2021

Source: STL Partners, Total Telecom

In our latest update to the 5G-aliser, we estimate that supply of 5G including the ecosystem of devices and services around it has grown by 50% in the last 18 months, while demand has roughly doubled (change shown by the shadows of the needles on the dials). However, total supply and demand remain low as many of the elements that will truly bring the 5G market to life – mass market IoT, network slicing, O-RAN – are a long way from maturity.

What did Total Telecom Congress think?

At the end of October we shared the 5G-aliser at Total Telecom Congress and opened it out to feedback from those attending the event.

Overall, it was well received and drove good conversations about the maturity of 5G, the key factors affecting its development, and the inflection points which will catalyse a more significant move in the needle than has occurred since we launched the 5G-aliser in March 2020.

Here are the highlights from the feedback and discussion with participants from telecoms operators, technology companies and analyst firms at Total Telecom Congress.

Should 5G demand be higher?

Someone from one of the UK’s leading mobile operators pointed out that there is significant demand for the increased bandwidth on its 5G mobile network. Even though the more advanced 5G capabilities and use cases are still in development, the first 5G use case – enhanced mobile broadband – is rapidly maturing. In this sense, the low level of demand on the 5G-aliser may not match more developed market operators’ experience. However, from a global perspective, with forecasts of 550-600 million 5G subscribers by the end of 2021, it is still in early stages of adoption.

Nevertheless, this is a valid point and we have reflected it in the latest update of our 5G-aliser by splitting out the supply and demand levels of 5G devices and services in our calculations. Supply of 5G devices and services remains constrained, especially as disruption and high demand in the semiconductor sector continue to ripple out, for example with Apple reporting a shortage of chips for its iPhones. However, demand is growing fast, particularly in North East Asia and developed markets. As a result of this break out, demand now outstrips supply on the 5G-aliser.

The challenge is that this form of demand will not deliver sustainable growth for operators – there is no change in business model, and premium tariffs will only deliver short term uplifts. There were some suggestions on how operators might monetise this demand further:

  • Consider moving to speed tiered pricing. Although this can be expensive and difficult for operators to deliver, since it implies the ability to deliver top speeds across the entire mobile network, it is also one of the most effective strategies seen thus far for driving mobile ARPU, as seen in the Finnish market with Elisa and DNA. It is popular with customers because the value they get from it is tangible, they can see it.
  • Explore opportunities to provide “critical QoS guarantees” on wholesale connectivity to enterprise customers in a B2B2X environment. The hypothetical customer discussed at the roundtable was Amazon, which participants thought would potentially be interested in leasing capacity on a 5G mobile network to offer fallback connectivity for Amazon Ring, as well as any other consumer IoT devices.

Aside from the overarching supply and demand discussion, there were good suggestions on more granular analysis of 5G drivers, which we will follow-up on in future iterations:

  • Fixed wireless access: This is an important driver of demand for 5G for many telecoms operators, but the consumer versus private 5G opportunity is likely to play out very differently.
  • Spectrum: This should be split out into licensed, unlicensed and local/private spectrum. This is particularly important when considering how 5G will penetrate indoor / campus environments, where neutral hosts may play a stronger role than MNOs, and also for customers like large events and sports stadiums that need coverage for all mobile networks in order to deliver a good experience.

What will the 5G-aliser look like in 2023?

Given the overall limited development of 5G, with standalone cores only just starting to be deployed and no operator having yet fully rolled out Release 16, the most common question from the audience was “what would change this picture?”

To answer this question, we put together our view of what we think the 5G-aliser will look like two years from now. By the end of 2023, we expect demand will outstrip supply by a more significant margin (shown as red dials on the graphic). This is because the new capabilities 5G can deliver will be available to enough customers for it to be more tangible and real than it is today, but many elements such as O-RAN, network slicing, edge computing, and application developer communities and tools, are unlikely to have scaled yet.

Better understanding of 5G’s benefits means demand will further outstrip supply by 2023

Source: STL Partners

AT&T / WarnerMedia’s HBO MAX performance

In October 2016, AT&T announced it would acquire Time Warner and completed the acquisition in June 2018 for $85.4bn ($108.7bn including debt) branding the business as WarnerMedia.

Despite the COVID-19 pandemic, which created real disadvantages in a number of areas, AT&T successfully launched HBO MAX in May 2020.

Indoor restrictions affected its 5,550 retail store footprint, which would have been heavily involved driving HBO MAX adoption, especially across its wireless, broadband and pay-TV offerings. Cinema closures impacted movie releases and resulted in AT&T adopting a unique hybrid distribution model whereby movies would be released on HBO MAX simultaneously alongside the theatrical release. Live sports also shut down as did content production for HBO MAX originals.

In June 2020, one month after launch, AT&T reported a combined subscriber base of 36.3 million US HBO and HBO MAX subscribers, up from 34.6 million domestic customers at the end of 2019. The operator reported a total of 4.1 million subscribers had activated their MAX account. Almost three million were retail HBO MAX subscribers18 and more than one million were wholesale subscribers through AT&T. In effect, a large number of HBO subscribers from wholesale partners had yet to switch across to HBO MAX.

AT&T noted that while more rapid activation occurred amongst existing HBO digital subscribers, more had to be done to educate and motivate the exclusively linear subscriber base and AT&T would work with wholesale partners to drive the activation rates.

In Q4 2020 the WarnerMedia unit wrote down $780 million of its business due to the impact of COVID-19 on content production and inventory with $520 million accounting for the closure of theatres and the dual same day release of movies on HBO MAX.

AT&T finished 2020 with almost 6.9 million retail HBO MAX customers and a cumulative HBO MAX activation rate of 17.1 million subscribers.

In April 2021, AT&T reported 11 million customers combining one or more of its connectivity products with HBO or HBO MAX, and that same day theatrical releases had been a catalyst for HBO MAX subscriptions despite underpinning a write down to the business.

In October 2021 AT&T reported a global HBO and HBO MAX subscription base of 69.4 million subscribers consisting of 45.18 million domestic and 24.23 million international. Domestic wholesale subscribers fell in Q3 2021 reflecting AT&T’s decision to “no longer cede customer control through Amazon’s channels offering” and close this element of Amazon’s wholesale platform.

AT&T now blends HBO and HBO MAX subscriptions and no longer reports HBO MAX activations.

HBO MAX performance from launch

In 2019 AT&T originally set out to obtain 50 million HBO MAX domestic subscribers by 2025. It now raised global expectations to 70–73 million by the end of 2021 on the back of launching its AVoD domestic service as well as HBO MAX (SVoD) internationally in Latin America in June 2021 and in Spain and Northern Europe in October 2021. AT&T expects the bulk of HBO MAX subscriptions to come from Latin America in the second half of 2021. It expects to have between 120–150 million subscribers by 2025.

The graphic below compares HBO MAX ARPU to competitors Netflix and Disney+.

Netflix, Disney, HBO/HBO MAX ARPU, Q3 2021

AT&T Spins off WarnerMedia

In May 2021, AT&T announced it would spin off WarnerMedia into a new entity with Discovery, a media company specialising in unscripted content. Subject to approval by mid-2022, the deal is worth $43bn to AT&T in the form of cash, debt securities and WarnerMedia’s retention of certain debt. 

STL Partner’s report Lessons from AT&T’s bruising entertainment experience looks at AT&T’s media purchases of DirecTV and Time Warner which combined cost the company over $175bn. AT&T believed owning TV and streaming subscription video on demand (SVoD) services would take its broadband communications business into the next decade, spurring growth in fixed and mobile broadband, reducing churn, growing advertising and new revenue streams in global SVoD streaming. However, global streaming services require significant investment in original content production as does rolling out 5G and fibre nationwide, and AT&T found itself unable to do both under one roof with the approach it applied.

Our report looks at AT&T’s decisions and actions over six years running DirecTV and WarnerMedia and their consequences, and the lessons for others attempting adjacent market moves and M&A.

 

A role for telcos in public safety

The pandemic, environmental concerns and increasing incidence of natural disasters and social unrest are serving to focus public attention on what can be done to preserve health and ensure the safety of people and property going forward. STL Partners supports the position that telecoms companies are strongly placed to help address these concerns. The vision is that telcos can connect large numbers and types of sensors to monitor different events in real-time. Telcos can harness the data collected by these sensors, cameras and other monitors, combine it with data already captured by mobile networks (e.g. subscriber location) and thereby alert organisations and individuals to imminent threats to their health and safety.

Public safety solutions now

Telecommunications providers are already involved in solutions of this kind:

  • KT Corp. is involved in Air Map Korea, which collects data from public telephone booths, telecom poles, and base stations nationwide to provide air pollution information through an app, as well as other service channels such as GiGA Genie and Olleh TV.
  • LG Uplus offers a consumer proposition (in partnership with Weather I) leveraging a small device to measure fine dust, temperature, and humidity indoors in order to provide the user with ventilation advice.
  • BT will integrate Everimpact’s climate monitoring system into next generation Street Hub units (i.e. telephone box replacements) in order to combine Everimpact’s satellite data and AI technology with air quality and CO2 data (collected via BT sensors) to provide local councils with the ability to track emissions.
  • IQ FireWatch, which uses AI and connected cameras to detect fires both visually and through heat disturbances, is being deployed in the Napa Valley by Illuminations Technologies – a relative of a large private telecommunications infrastructure provider.
  • ShakeAlert is working with Google and others (public and private mass alert system operators and cellular carriers) to send earthquake alerts to the Android operating system in smartphones in California (Google has also begun using accelerometers in Android phones to detect tremors).
  • The South Korean government has used a combination of electronic transaction data, mobile phone location logs, and surveillance camera footage to track (and publish) the movements of people who tested positive for Covid-19.
  • Magenta Telecom (Austria) is trialling the use of drones for search and rescue missions in Vienna, where 200 people a year fall into the Danube River.

Our report, How telcos can make the world a safer place, provides further detail on these solutions, and more. It considers opportunities for telcos to use data from connected devices in conjunction with data from its networks to tackle health and safety issues. It looks at who telcos are partnering with in trials as well as actual solutions and highlights prospective business models and the potential revenue streams that could result. In theory, at least, individuals, organisations, insurers and governments should be prepared to pay for systems and solutions that help protect them against serious threats to health and safety, such as infectious diseases, pollution and wildfires. In practice, it can be more difficult to sell systems that prevent an often-nebulous negative impact, rather than generate a clear positive benefit.

For more insights on the consumer opportunity, go to Recharging consumer revenues.

CSPs in Asia Pacific are generally more favourable to having converged edge infrastructure

The original concept for edge computing in the telecoms sector stemmed from network virtualisation efforts. CSPs were building distributed data centre-like facilities to support their network function infrastructure and consolidating network functions onto server infrastructure in place of functional hardware appliances. This meant there was spare capacity in those facilities to support customer applications and maximise economies of scale by sharing as much of the infrastructure as possible.

However, reality has diverged from the theory. The requirements for network functions are different to that of IoT/IT/business applications that will be hosted at the edge. Network teams have arguably stricter security rules for controlling data and access and the type of hardware for network functions is different than that needed for enterprise applications. For example, radio access network functions need specialised hardware, such as field programmable gateways (FPGAs) and hardware accelerators. By contrast, video analytics, gaming or AI-intensive applications may need GPUs and other technologies for enhancing graphics processing.

Despite these limitations, there are different elements of the stack that can be shared between network functions and consumer/enterprise applications, beyond the site itself. Our survey demonstrated that there is a wide range of opinions in the telecoms industry on the level of convergence. Only 12% of respondents globally believe that edge infrastructure should be entirely converged (facility, hardware, application platforms and orchestration). On the other side of the spectrum, 13% of respondents feel that the infrastructure should be entirely separate and only the site itself should be shared. However, there are slight differences across regions.

CSP respondents in North America were least supportive of having completely converged infrastructure, whereas Asia Pacific operators prefer convergence. One of the reasons for this is organisational dynamics, which will be explored in the next section. Another reason could be the level of maturity of the operator’s edge strategy; CSPs in North America and Europe have gone through a process of initially attempting to share the infrastructure and operating models, but have since found it to be too challenging to manage each domain’s different needs. As a result, most CSPs in those regions prefer a degree of separation in the hardware and software stacks.

Find more about the findings of our survey and why edge infrastructure will be multi-cloud in our report Building telco edge: Why multi-cloud will dominate