Three Bold Predictions for Telecoms in 2018 and Beyond
It is that time again for the barrage of year-end predictions from industry experts flexing their business knowledge. While some may not pan out, they do get a healthy debate and discussion going that will hopefully advance the industry in a meaningful way. This blog post is no exception as we explore three bold predictions we think will happen to the industry this year. We explore some of the industry’s darlings -- network functions virtualization (NFV), 5G and open source. And without further ado…
Prediction No. 1 – Carriers (hopefully) finally realize the promise of NFV will not deliver as promised
Looking back over the last few years, the telecommunications industry heralded NFV as the magical tool that offers a new way to design, deploy and manage networking services by decoupling network functions from proprietary hardware. The benefits were to be: reduction of CapEx and OpEx, increased agility and quickened time to market. Will 2018 be the year when the industry finally comes to the realization that NFV is the panacea they imagined?
What was anticipated to happen in 18 months has yet not been realized in 2017 and this trend is going to linger in 2018 as carriers to invest in a smart, dynamic network to meet the current demand of business and consumer customers, but they missed the boat and are left to try and fit the square peg in the round home with NFV – particularly software defined wide area networks (SD-WAN) and virtualized network functions (VNF)?
Cannibalized by SD-WAN
SD-WAN is an incredible asset for the enterprise to manage expensive internet and data traffic for the best cost benefit. Up till now, enterprises looking for SD-WAN capabilities needed went to SD-WAN providers directly. Carriers were left out of the loop and lost out on the income. Like many things, the carriers have now discovered that leaving this service to start-ups and other vendors not only impacts their revenues, but also hurts their relationship with some of their most important clients.
Carriers have already invested heavily into their network and want to recoup these costs and make a profit. But even with traffic and bandwidth consumption increasing, they are left shaving off more-and-more from their profits thanks to things like SD-WAN. The costs of purchasing, maintaining and operating equipment works against the economic benefit of the carriers, but is demanded from its enterprise customers. While costs can be defrayed for big customers, it simply cannot scale in a way to be a huge revenue driver.
The problem with the little white box
Many argue a truly dynamic network is about delivering a seemingly limitless amount of virtual network functions. But again, to this point many are merely using VNF overlays on top of a universal customer premise equipment (uCPE) box.
These little white boxes sound logical, but the price per performance to deliver these VNFs is just not up to par with purpose-built devices. So it is a case of investing in high performance purpose built hardware versus cost cutting with a generic COTS device with variety of VNFs. Moreover, VNFs are usually not “cheaper” than the purpose built device, in some cases they are even more expensive since they can be flexibly turned up and down. Again, it’s a matter of cannibalizing the network and revenue for services.
It’s time to take off the rose-colored glasses and see that the promise of NFV for the telecommunications industry isn’t the magic pill we were all promised. Hopefully 2018 is the year we can turn the page and move to a better solution that works as promised.
Prediction No. 2 – Fishing for the Business Case: 5G Flounders
5G has been the talk of the industry for a while now and again it’s going to all the rage at Mobile World Congress. Unfortunately, one thing carriers have realized is that, in the aftermath of ongoing industry consolidation, taking risks isn't attractive. Building out the 5G infrastructure won't happen all at once, then, but in bits and pieces as open, programmable networking and new radio devices are available -- these being a must-have infrastructure for 5G to succeed.
But who is going to pay for it? Carriers overall, seem to believe that "if you build it, they will come". They've said that once the 5G capacity is there, consumers will pay more for 5G access, breaking out of their flat rate and package deal habits.
But this assumption is questionable in today’s consumer market. Will consumers really market move from the comfortable packages just because a premium service is offered? That expectation has never worked before, unfortunately, and we don’t believe it's going to work with 5G, either.
So, while SPs flirt with the idea of 5G, in 2018, they will continue to struggle to find the business case to make the risk-laden, radical infrastructure overhaul 5G requires into a business necessity.
Prediction No. 3 – Open Source Not a Revenue Source
The open source hype began a few years ago when carriers sought plausible solutions to their declining profitability. Drawing inspiration from other industries before them, carriers were looking to reduce one of the single, largest cost factors in their business – a.k.a. their network. The result? Open-source software of course.
There's just one problem. Industry expectations that vendors should provide innovation for free did not pan out. Not in 2018, certainly.
The factors that limit the potential are challenging to overcome and include:
- With hundreds of projects and bodies, some of which are working on alternate solutions to the same issues, is it any wonder why carriers and vendors are both confused? Needless to say, the hope that open-source communities will save the double-spend arising from reinventing the wheel is not being realized, and let’s not forget the many areas that are left un-serviced.
- One of the biggest benefits of open-source lies in it being able to ensure interoperability. Today however, interoperability is more of a marketing claim than a technical capability. In today's multi-tiered SP/vendor network environment, if solutions lack this technical capability they aren’t adequate to monetize.
- Lastly, cost reductions everyone hoped for by moving to open models haven't materialized. Innovation doesn't come cheaply, yet SPs have somehow come to believe that it will come virtually free.
To actually realize the open source potential, subtle (yet complex) changes must be made in both perception and execution. CSPs and vendors need to create a business environment where everyone’s revenue strategies are aligned, so that the industry can focus on value-added innovation rather than reconstructing a common infrastructure. Only when the goals of both sides are considered and formalized will these communities have a chance of success.