No business has ever been saved by an acronym. No enduring market has ever been built on an acronym alone. That’s all true, but you’d never know it by looking around in the networking industry. We were “saved” by SDN, and then by NFV, and maybe by ZTA, and now we’re being pulled out of the fire by AI. I had an interesting exchange with a trio of operators in the last two weeks, and I think it offered a sense of what’s going on, and maybe even of what needs to be.
According to these operators (and quoting one), “there’s a powerful sense of being overwhelmed” impacting planners in all the major telco divisions (CFO, CIO, the operations unit, and the CTO). All three said their own “transformation” initiatives had been underway for nearly a decade, and all three said that they had enjoyed only “local” successes with it. “We’ve not transformed, not really,” said one, “what we’ve done is adapted.”
Back in 2015, I did a broad survey of operators’ views on the future. It covered 77 operators globally, and it showed that over 85% of them felt that their businesses would have to be “fundamentally changed at all levels” within a decade. They thought that over half their current network technologies would be replaced in that timeframe, that their operations practices would be “totally transformed”, and that the services they were selling in 2015 would represent just a bit more than half their revenue in 2025. The three operators I talked with were part of that survey; what do they now think?
“Did we say that?” one asked. “I guess we missed the goal we’d set.” All three of these operators said that the biggest technical reason why they fell short was that NFV didn’t meet their expectations. It wasn’t just that they depended a lot on the realization of NFV’s goals, either. The problem with NFV shook their faith in their old-model, standards-driven, technology and service evolution approaches.
Why do operators think that there was an NFV problem to begin with? These three cited three separate but symbiotic reasons. First and foremost, the Internet changed the timing of the communications services market forever. “What we called ‘services’ used to be tied to specific network infrastructure changes,” one explained. “The Internet was a kind of universal communications infrastructure and services were consumers of it, not part of it.” They agree that their early planning for transformation presumed that, as always, they would figure out what to build and offer it. The notion that services would come first never occurred to them.
The second problem was the way the Internet age collided with the operator’s technology planning processes. Remember that they were used to the idea that services were a product of infrastructure change, and infrastructure change that preserved competition among vendors meant standards. Standards processes have been a fixture of CTO organizations for decades, and nobody expects them to move quickly. After all, services come out of infrastructure, so there’s no hurry. But in the Internet age, services evolve on their own, and infrastructure standards delays delay the benefits of operator transformation. That’s what happened.
The final problem was the hype-wave problems in the networking industry, those darn acronyms. As soon as an idea gets media traction, every vendor and every publication jumps on it. Nothing much gets written that’s a useful guide for buyers, but every operator said that their senior management was infected with acronym-itis, and that forced them to launch projects around the acronyms. Since there was little substance to the drives, none of these projects really accomplished what operators had hoped for.
Ok, that was then and this is now. What do these three operators think will happen? Up to now, they’ve been almost totally united in their perspectives. Not with this question.
One of the three operators believes that there will be no transformation in a true sense. Instead, they see the pressure on profits creating open-model networking and reduced willingness to invest in infrastructure. They see their company staying a connection-services provider, having no stake in things like IoT other than any additional connectivity revenue it might create. In operations, they see new but still “local” mechanisms to reduce head count, mostly centering on self-service portals. No real zero-touch lifecycle automation.
The second operator thinks that her organization will slowly transform, with some carrier cloud services but without any real common carrier-cloud infrastructure policies. The result of this will be that they’ll get some new revenues, some new operations economies from lifecycle automation, but nothing so radical that an old-like operations type wouldn’t recognize “the network” of their future.
The third operator doesn’t think that either of those approaches would be survivable. “We’d end up needing government subsidies,” he says. This operator believes that cloud partnerships, open-model networking, and software-automation in lifecycle management will come along out of necessity. Not in 2020 or even 2021, but in 2022.
The views of these operators on 5G parallel their world view overall. One says that they’ll probably never really get to the 5G Core model, that most of their investment overall (and all of it in the near term) will be focused on the RAN and fixed wireless. The second thinks they’ll have some 5G core deployment by 2021, but that it won’t really add service revenues or change operations practices. The third still believes they’ll adopt 5G fully, and that it will in fact offer them some new service revenues and some opportunity for operations automation. The three views on transformation and the three on 5G align in the same order I presented them.
What do I think, based on my own experience and on the views of other operators? I think the second operator is right, and if I were an equipment vendor, I’d be worried no matter which one sees the future of operators overall.
The big news here in my view is that none of the operators see business going on as it has been. None of them believe they can sustain infrastructure investment under their growing profit pressure. They see everything, even 5G, more as an opportunity to rebuild their access networks around a common radio-network technology, one that because it doesn’t depend on per-customer wiring is less capital- and operations-intensive.
Where does our latest acronym, “AI” fit into all of this? All three operators made a common point, which is that you can have transformation only by transforming infrastructure. The idea that business practices somehow get AI’ed and that saves the old network model is ridiculous. These operators all see AI as an example of a “local” strategy, a way to make some specific and limited operations/administrative process more efficient. Is it helpful? Yes. Will it save the operators’ legacy model of networks and business? No chance.
I agree with them. In fact, of all the acronyms we’ve looked to for network operator transformation and salvation, AI has the least potential. It’s either a small part of a major shift, from “network infrastructure” to “carrier cloud infrastructure” or it’s a local adaptation. In the latter case, it can’t do what’s needed overall, and in the former, the “overall” that’s needed is something most operators don’t think they can achieve quickly.
And that “quickly” is an important qualifier. If the most optimistic operators are right and they achieve some real infrastructure transformation by 2022, that’s bumping up against an important limit. Operators don’t think they can go much beyond 2021 without a major shift to open-model networking. Once that move gets started, as I’ve said before, it will be very difficult to stop it.
The relationship between operators and services, operators and OTTs, is unstable and perhaps even parasitic. Some have argued that net neutrality rules have perpetuated it, but where such rules have been weakened, there’s been no corresponding improvement in operators’ infrastructure ROI. Some argue that’s because the removal of rules alone doesn’t create a shift in business policies. Would paid prioritization, settlement between OTTs and operators, help? Surely, but we’ve not yet explored the cost of these policy changes. We’d buoy operators’ profits at the expense of OTT profits. It may be too late to take the market risk of such a policy change.
Having nationalized or subsidized operators is another popular answer, but it’s not worked out where it’s been tried at scale (Australia comes to mind). Might it be more realistic to restore protected public utility status? No, because the challenge to operator profits doesn’t come from direct competitors as much as from arbitrage players, the OTTs.
OTTs aren’t exactly in rosy shape either, it’s just that they’re not facing immediate peril. Ad-sponsored businesses are limited by how much ad spending there is. A good example is that network TV is producing most of the online content, and it’s competing for ad dollars with the OTTs that are making money delivering the content. If the latter impoverishes the former, what’s left but ‘50s reruns?
We might have had a regulatory-driven solution to the dilemma a decade ago. It’s too late now. Therefore, we need to look at the business model for both operators and OTTs, and figure out how to build a symbiotic relationship.