Every year, network operators do a technology planning review in the fall, usually between mid-September and mid-November. The purpose of the review is to identify the technologies that will compete for funds in the yearly budget cycle that usually starts after the first of the year. I’ve tracked these review cycles for decades, and I got a fair number of responses from operators regarding the topics of their planning this year. Now’s the time to take a look at them, and to do that I need to do a bit of organizing of the responses to accommodate the differences in how operators approach the process.
My normal operator survey base includes 77 operators, but they don’t all have a formal fall planning process. I asked the 61 operators who do, from all over the world, for their input. Of those, 56 responded with information, and for 45 of these I got data from multiple organizations and levels within the operator. CTO and CFO organizations responded most often, with the CTO in the lead with a response from every operator who responded. Where both the CTO and CFO responded, I got responses from at least one other organization, and CEO data from about a third of the 45. We get our data under strict NDA and data use restrictions, so don’t ask for the details, please!
The one universal technology priority, one every major network operator cites, is the evolution to 5G technology and related issues. 5G is the only new technology that actually has universal budget support. Consumer broadband (wireline) is the second (with support among almost three-quarters of operators, excluding only the mobile-only players). Other than these two technology areas, nothing else hits the 50% support level, and that’s a point deserving of comment in itself.
CEOs and CFOs who commented believed that what I’ve called the “profit-per-bit” squeeze was their company’s biggest challenge. They see ARPU growth in mobile and wireline, business and consumer, as very limited, and yet they see their costs ramping up. I’ve tended to use the revenue/cost-per-bit curves as my way of representing the challenge (because the first operator who told me about this over 20 years ago used them), but today the CFOs draw the charts as a slowly growing ARPU contrasted with a faster-growing cost curve. Most don’t forecast a dire crossover, but about half suggest that the gap between the two, which is a measurement profit, is at risk of shrinking to the point where they need something to happen, and it’s the “something” that sets the planning priorities.
Ten years ago, two-thirds of operators believed that reducing capex was the answer, which is what drove the NFV movement that started about then. Five years ago, just short of two-thirds believed that reducing opex was the answer, and in fact the majority of the actual changes made by operators in the last decade to fend off the convergence of our curves were attacking opex, usually head count.
This can still be seen in the responses of operators at the VP of Operations level. They want to sustain their current service base by controlling equipment costs through a combination of pushing out purchases and hammering for discounts. They want to reduce operations cost by improving the tools, including wider use of artificial intelligence. There is fairly strong interest (62%, driven mostly by an 85% interest in open-model 5G) in alternative architectures for network equipment, but that interest is focused on open-model networking, which they see as a way of getting “discounts” from vendors as much as of getting gear at a lower price because of direct competition and leveraging commercially available hardware.
The CIO organization, responsible for OSS/BSS, is necessarily focused on opex benefits. While almost half of CEOs and CFOs are asking the question whether OSS/BSS should be scrapped in favor of something (as yet unspecified) new, the CIOs are reaping the benefit of the shift in focus to opex reduction. Among this group, the top priorities are customer care and online ordering, with the latter being considered as “significantly” complete and the former as “at less than half its full potential”.
Customer care views are sharply divided between wireline and wireless business units, of course, and it’s really the latter that received the planning focus this fall. Over three-quarters of operators said they believed that customer care was the largest reason for churn, and also the second-largest reason why wireline users selected a competitive service (price was still on top). Since customer acquisition and retention is the largest component of “network process opex”, it’s clear that addressing the issue is critical. CIO organizations all believe that there could be improvements made to customer care portals to reduce user frustration. Progress at the business service level has been rated as “good” but not so the consumer level.
The problem with consumer customer care is a point of connection between the operations people and the CIO people, because wireline customer care is most likely to involve field service people. Consumers aren’t likely to be able to do much on their own to help fix a network problem, and most probably can’t even play much of a role in diagnosing one without an online wizard (presumably accessed via a smartphone not the failed broadband connection!) to guide them. That’s the area where the CIOs are focused.
Field service, the “craft” people usually considered part of operations, likes the idea of a smartphone wizard, and about half of operators plan to work to improve this capability in 2022. Over a third say they already have a good strategy here, and the remainder think they’ll need more than just a year to get one ready.
This isn’t the only place where multiple operator organizations have symbiotic interest. Open-model networking is where operations and the “science and technology” or CTO organizations converge. Open-model networking represents the number-one CTO-level priority outcome of the fall session this year. As it happens, 5G is also the focus of interest for the product/service management organization, where the interest in increasing ARPU is the highest. That, in my view, makes open-model networking the most important technology point in the current cycle.
The operations organization, as I’ve suggested, is really behind the open-model networking idea as a path to getting better discounts from the current vendors, not actually shifting to open-model infrastructure. It’s like getting a collective low bidder, from a network model that’s inherently based on commodity technology with no incumbents, no lock-ins. While operations people typically don’t say “all I want is to squeeze a bigger discount”, their points of interest seem a careful balance between the competitive benefits of open-model networking and the risk of a nobody-responsible wild west.
The CTO organizations are primarily concerned about how an open model comes about. Since all the standards activities aimed at open-model networks (including NFV) came out of the CTO groups, these people are motivated to defend these early initiatives, but at the same time painfully aware that they’ve done very little to advance the open-model goal, despite the fact that open-model networking gets a planning priority nod from over 90% of operators’ CTO organizations. It’s one thing to define a model, but an open-model network requires that it actually work well enough to deploy widely. If NFV isn’t it, then what is, and what gets to it?
Interestingly, less than a third of CTO organizations said they believed that another standards effort, either within the NFV ISG context or outside it, was the answer. Nearly all said a new organization would take too long, and over half thought that it would also take too long to get NFV cleaned up. In fact, no “positive” approach got even fifty-percent support. The most support (47%) came for the idea that 5G O-RAN work would evolve to create an open model, but nobody expressed any specific notion of how that would happen. O-RAN, after all, is about RAN, not 5G overall, and 5G isn’t all of open-model networking.
If you pull out the viewpoints of technical planning staff people across all the operators’ organizations, the sense I get is that the experts think that “the industry” or “the market” is evolving to an open-model strategy, and that the evolution is being driven by much the same forces that have combined to create things like Linux, Kubernetes, Istio, and LibreOffice. In other words, open-source equals open-model. CTOs assume that open-source software models will develop, as O-RAN did, and that a dominant model will appear. That model will allow for variations in implementation but will set the higher-level features and likely the APIs.
The product management groups are divided between those who believe that enhancements to connection services can increase ARPU (41%) and those who think that only higher-layer (above the connection) services can create any significant revenue upside (57%). A small number believed in both approaches, and an even smaller number didn’t think either was worth considering.
I think that Ericsson’s recent M&A is aimed at the product management interest in new service revenues as a means of driving ARPU up. There is broad support for a new revenue strategy (77% among the planners involved in the fall planning said they thought new revenue was “essential” and almost 100% thought it was “valuable” in improving profits), and it’s interesting that Ericsson linked the Vonage acquisition to 5G, which is a budgeted technology. They likely see that operators would jump on something that could help them in 2022, and packaging the stuff needed for enterprise collaborative services could be at least credible.
This year, operators also had a specific “imponderables” focus in their planning. The obvious top of that list is the impact of COVID, and the planning cycle and surveys were complete before the announcement of flight cancellations and travel restrictions associated with the new Omicron variant. If there turns out to be a combination of a big winter surge in COVID worldwide (there already is in some areas) and if Omicron turns out to be higher-risk than Delta (particularly, if it’s vaccine-resistant) then we can assume we’ll see WFH boom again. If not, then we can assume a continued return to normalcy in communications needs. Operators are watching this all, but obviously they can’t yet make decisions.
Much of this year’s planning cycle focused on issues that were also discussed last year, meaning that we didn’t have a decision or weren’t able to implement it. This year, almost 60% of operators thought that they probably wouldn’t be able to address their planning issues satisfactorily in 2022 either, and that they’d still be trying to address most of these points in next year’s planning cycle. I think the laissez-faire approach to open-model networking that I recounted is, like this broad pessimism, a result of operators recognizing that they aren’t building demand by building supply, and that someone has to learn how to do both, properly. That’s progress, I guess, but those operators are still looking for someone else to do the learning, and the job.
There were no spontaneous statements to suggest operators were really seeing the responsibility for network and technology change any differently. They still see themselves as consumers rather than developers of technology, and their role in network evolution as being standards-setting, largely to prevent vendor lock-in. Even operators who have actually done some software development, and who plan to do more, are still reluctant to admit that they’re doing “product” work, and that explains why they tend to cede their software to an open-source group as quickly as they can. They admit that once this is done, their own participation is more likely to ease than to increase.
The network is changing, and the role of everyone who’s a stakeholder is doing the same. Some admit it, even embrace it, but not operators. That’s the biggest weakness in their planning process; they’re not planning for the real future at all.