The telco market is experiencing a tremendous amount of activity with fierce competition within the traditional mobile network market from new entrants, open networks, and hyperscaler services. Meanwhile, the boundaries of the reach of each company are blurring. Telco network operators are at the center of this competition, but ABI Research believes their position is ideal to let them become much more than they are today. They have the technology and platforms to do so, but have yet to capitalize on them. They also have long-time excellence in customer experience management and are very familiar with direct, personable, and high-value contact with end users.
However, this is not a new market development; mobile operators have been discussing the enterprise opportunity, open networks, and advanced services for many years, but these have not yet materialized. This article is the first in a series of articles and aims to address the reason why telco operators need to reinvent themselves now. Subsequent articles will discuss how they can do so and which technologies will help them reinvent their business. Of course, reinvention will need to go beyond technology and the network itself to include operations and talent, but these articles will focus on the underlying technology platforms that operators can use as a starting point.
One thing is certain: telco operators cannot grow under the traditional consumer and connectivity-based business model they have been accustomed to for decades. They now have two options:
- Outsource or sell physical assets, including towers, data centers, and even network locations, and become a leader in the consumer business through price competition. Despite this being a short-term solution that may satisfy shareholders, ABI Research expects that an extreme strategy in this direction will not be sustainable in the long term.
- Embrace and accept the risk of new technologies and aim to reinvent the business to be able to compete in the enterprise market.
Learnings from MWC22
This year’s MWC focused mostly on the enterprise domain, contrary to previous shows that focused mostly on consumer technologies, including handsets, faster networks, and new applications. According to ABI Research analysts, approximately 80% of the service-related relevant show demos and exhibitors focused on enterprise use cases, meaning that the enterprise sector is a huge focus for many companies. However, there were two trends that resonated much more than others during the show.
Enterprise Cellular
It has now become clear that enterprise 4G and 5G are positioned as the next big opportunity and have attracted the interest of mobile and fixed operators, vendors, new entrants, international carriers, and Systems Integrators (SIs). The actual deployment of these networks is not clear; there are physically separated networks deployed on-premises (private), network slices providing enterprise services (public), and hybrid approaches that integrate components from both domains. Mobile operators were considering their position as one of unique value due to their spectrum assets, but there is competition from shared spectrum initiatives. Nevertheless, enterprise cellular will likely require both local and wide-area networking for most enterprise verticals, which is a major reason that telco operators need to become more flexible in their enterprise offerings.
Hyperscalers in the Market
Hyperscalers are also attempting to enter the telco domain with a dual strategy: become the platform of choice for telco networks and, at the same time, compete for a place in the enterprise domain through cellular products and services. Several hyperscalers have, for example, launched private cellular or on-premises product lines, competing against mobile operators and vendors.
These two trends indicate that mobile operators need to transform immediately, as they are not only challenged by their traditional competition, but also new entrants and hyperscalers that bring unique strengths to the market.
Operator Strengths
Mobile and fixed networks have now reached a level where they can provide high-quality broadband connections in a variety of scenarios. Current 5G networks provide astonishing data rates and capacity, something that could not have been expected a few years ago. For example, a Massive Multiple Input, Multiple Output (mMIMO) cell site (three sectors, 100 Megahertz (MHz) bandwidth) can transfer 240 Terabytes (TB) of data during a single day, which is the equivalent of millions of digital photos. Although the transport network and other parts of the network would be challenged, the radio network is more than capable of providing high-quality connections for many years to come. Mobile operators have thus become experts in deploying high-speed networks and this will continue to evolve with additional upgrades.
These very same networks are, in fact, distributed computing platforms, which consist of core networks, aggregation points, and base stations at cell sites, all of which are specialized servers running custom software. This distribution of processing and the capability to deploy such distributed computing elements is a highly sought-out commodity currently; therefore, hyperscalers like Amazon Web Services (AWS) are partnering with operators, rather than deploying these themselves. Hyperscalers lack experience in managing distributed networks, presenting an opportunity for mobile operators to upgrade their technology and network platforms. If they manage to do so, they will have a chance to become high-value partners for hyperscalers.
Both of these key strengths highlight that telco operators could have a bright future should they aim to transform their technology platforms.
Why Now?
As discussed earlier, telco operators are no strangers to these discussions and have been trying to address the enterprise segment for many years. However, there are two important trends that make the current market landscape very different from previous years and can provide the foundation for operators to radically transform:
- Enterprises are accelerating their digital transformation strategies, which have been further brought forward by the COVID-19 pandemic and supply chain constraints. These digital transformation projects include factory automation, logistics upgrades, and many more areas where operators can provide public and private wireless connectivity coupled with their expertise in running these networks.
- The demand for distributed processing is increasing, with public cloud processing no longer being scalable. For example, a machine vision application running in a smart city will require local processing for machine learning training and inference. Operator expertise in managing distributed processing platforms will be a vital strength to enable this market.
Takeaways
This article argues that telco operators are indeed uniquely positioned when considering current market requirements, their legacy in managing complex networks, and the enterprise opportunity. However, there is a lot to be done for them to address this space and become viable competitors, which will be discussed in subsequent articles.
On one hand, mobile operators are now aiming to reduce operational complexity and Operational Expenditure (OPEX) to remain profitable and sustainable. Doing so will not only allow them to reduce their network costs but to transform their existing networks to a more sustainable level, paving the way for green networks. In this manner, 5G and 6G can be used to transform many parts of the consumer and enterprise domains.
Leading telco operators are also attempting to progress beyond connectivity to include gigabit-level connectivity, automated networks, and distributed intelligence. Many operators are taking bold steps to evolve their operations, technology platforms, and business strategies, but it is almost certain they will need assistance from valuable partners that can provide much more than equipment and infrastructure. Further articles in this series will explore how telco operators can achieve this and what technologies will help them.
