In a month, we’ll hit the start of what’s traditionally been a fall technology planning period that ends mid-November. Enterprises are a bit loose with regard to formal planning (I’ll provide my impression of their views next week), but the network operators have generally been fairly consistent in using this cycle to lay out the tech basis for future budgets. I’ve tracked the cycles for thirty or more years now, and I’ve always found them interesting. I usually start my coverage of the planning with a review of what operators say they’re looking at, then recap the results in late November.
It’s probably no surprise that the number one priority in this year’s cycle is 5G deployment and monetization. Operators have never doubted that they’ll deploy 5G, but most have been concerned about whether the deployment could actually generate any incremental revenue. There have been some slow but important shifts in how that’s working out.
Over the last year, the number of network operator planners who believed that 5G would generate “significant” incremental revenue fell from 43% to 33%. The number who believed it would generate “some” incremental revenue stayed at 35%, and the number who believed it would generate “little or no” incremental revenue rose from 22% to 32%. You can see from this that a significant shift in attitude on 5G revenue has occurred, a general disillusionment on revenue prospects.
Why operators are more pessimistic is also interesting. The largest reason, cited by almost two-thirds of operators, is failure of standards to develop quickly enough. Nearly as many (over half) said that 5G Core products were later than they had expected. Interestingly, less than a third said that the reason was that applications that were 5G specific were slow to develop. This set of attitudes is downright poisonous, because it demonstrates a stubborn “Field of Dreams” supply-side mindset is persisting. It’s up to the market to figure out what to do with what we deploy. Ha!
How do operators believe they’ll get out of their current mess? The rough third that says there will be little or no incremental revenue, not surprisingly, don’t think that there’s any getting out of it. They believe that the hopes for 5G revenue were misplaced, that the opportunity was over-hyped, or some other reason. The remainder of the operators are almost hoping that their vendors will have an answer.
As to where that answer might lie, there’s been another shift in thinking. Last year, well over two-thirds of operators thought that IoT would be the source of incremental 5G revenue, and that optimistic view is now held by only a third (mostly the group who still saw the potential for “significant” revenue). A bit over half now say that it will be network slicing that generates the revenue, and the remainder had no specific ideas.
I have to repeat my concern about what I see as a poisonous attitude here. There is no significant thought being given to what a service buyer would be doing with 5G, only to what 5G feature they would (hopefully) be doing it with. IoT is not an application, it’s a class of applications and operators have always associated it with the use of cellular service for some sort of telemetry.
OK, operators have no idea what would generate new revenue, really. Are they clueless or disinterested in the continued decline in profit per bit? No; that’s still a top concern overall, and by far the biggest concern at the CxO level. They’re looking for cost reductions, but here again they’re surprisingly non-specific.
Almost exactly 40% of operators say that both capex and opex have to be better managed. The remainder are almost exactly balanced between saying they have to reduce capex (28%) or opex (32%). None of the groups had much in the way of specific plans to achieve their goal, and in many cases what they did have to say in a specific planning sense contradicted their overall views.
The most-cited strategy to reduce capex, by far, was open networking. At the same time, though, operators indicated less support for and interest in things like O-RAN. Last year, this was a top priority, and this year it’s fallen to being interesting to a bit over half of operators. White boxes increased from being interesting to 22% of operators to 49% of operators, making it the big winner in terms of approach. Still, of that group of interested operators only a third had a specific vendor partner they even remembered hearing about. The vendor, by the way, was DriveNets.
Lifecycle automation was the top focus for capex reduction, with almost 70% citing it as a goal. However, the interest in lifecycle automation seemed concentrated in the CIO organization who owns the OSS/BSS space, with less than a quarter of network operations people saying it was a priority for their company. Only 11% of operators saw the need to integrate automation tools across the OSS/BSS/NMS boundary. OSS/BSS vendors were also the ones most often mentioned in this area, and the TMF was the body where most opex-focused operators saw critical work being done. All this points to a continued tendency for operators to fail to cross their own organizational boundaries in planning.
Most operators say that cross-organizational issues belong to the CTO office, but another interesting point from my data is that the CTO is losing influence. Five years ago, there was almost-universal support for the CTO organization in driving technology evolution within operators. This year, support has fallen by (and to) half, and the reason seems to go back to that disillusionment with standards that I mentioned earlier. Among CxOs in general, the view that “standards take too long and aren’t as useful as they should be” gets three times the positive response as the one that “we depend on standards for technology advance”. Today, operators say they depend on vendors instead.
How’s that working out? More contradictions, in short. Operators, you’ll recall, said they thought open-model networks would be their key to capex reduction, yet they had less commitment to open 5G. They say they’re depending on their vendors, but almost three-quarters of operators say their vendors aren’t supporting their goals, are trying to lock them in, are boosting their own bottom lines at the operators’ expense…you get the picture.
One result of all of this is a bit of flailing about with regard to new revenue opportunities. For example, 58% of operators say they think they have an edge computing opportunity, but only 30% plan to invest in carrier cloud. They hope to resell cloud provider edge services or partner with cloud providers for a share of the revenue. And, to make things even more complicated, the number of operators who believe that either OTT players should have to settle for their use of the network, or help pay for network infrastructure, rose from 19% in 2020 to 55% this year.
In all the years I’ve surveyed operators on their planning focus for the fall cycle, I’ve never seen a time when things were as disorderly as they are this year. Operators are truly clueless, IMHO. They think their vendors are similarly clueless, manipulating them, or both. Standards are essential but they don’t work fast enough and are often not relevant. Profit per bit needs to increase, but somehow without either strategies to reduce cost or strategies to raise revenues.
There’s a golden opportunity here for vendors. The general view at this point is that budgets for 2023 will provide for only very minimal spending growth, but a solid business case could double that level of expansion. Operators are not providing it themselves. Leadership is what’s lacking, vision to help frame a path to a better future. Will somebody provide it? Operators want someone to do that, and even believe someone will, but they can’t name anyone who’s on the right track. Absent some specific motivation, I think budgets and plans will simply stay the course, but with proper motivation significant progress could be made, and money spent. All this adds up to either a very interesting or very dull 2023 in the world of network operators and their infrastructure.