Lumen Technologies’ bet on artificial intelligence (AI) to drive networking demand continues to gain momentum, but related network upgrades are also allowing the company to gain traction in the rapidly evolving network-as-a-service (NaaS) space.

Lumen CEO Kate Johnson noted during the company’s most recent earnings call that Lumen has signed up more than 400 NaaS customers over the past year, which she noted was “a good start for sure.”

“I think what we're seeing is customers testing it,” Johnson said of that start. “They’ll try one port; they’ll try two ports; they have a good experience; they start to add ports and that's where we start to innovate and drive additional service innovation.”

That additional service innovation will include the ability to layer in security services, which Johnson said, “is an opportunity for us on the horizon to sell into every NaaS customer.”

Lumen CTO Dave Ward furthered that opportunity, telling SDxCentral in an interview that the ability to integrate that type of innovation more directly into the connectivity layer is a superior approach for enterprises, especially those interested in AI.

“My argument is the over-the-top SD-WAN and SASE [secure access service edge] technologies are not fit for purpose for AI,” Ward said. “They have to be tied to an underlay, which can give large amounts of capacity, and latency, and bandwidth engineered.”

Ward explained that Lumen’s approach toward this opportunity is through the use of APIs that will allow cybersecurity platform vendors to provide a more complete NaaS option to enterprises.

“It's a big ecosystem partner ability that appears to me to be the path forward,” Ward said, noting that the need will depend on enterprise use cases. “If you're a branch or a gas station, you're not doing AI workloads. But if you are a company that's doing inference or your campus, or you’re a headquarters or something along those lines, it clearly is going to be necessary. I just never want to say that SDN and SASE didn't create the most beautiful user experience that we've seen in IT in decades, but it can't do everything, and that's really the key point.”

Lumen’s growing NaaS footprint

Lumen’s NaaS opportunity is being bolstered by new connection deals and its AI focus.

The company recently scored AI-focused networking agreements with Amazon Web Services (AWS), Meta, and Google Cloud. Those built on an earlier deal with Microsoft Azure.

Johnson during the company’s most recent earnings call noted those deals helped push Lumen’s Private Connectivity Fabric (PCF) sales to more than $8 billion since mid-year.

Ward explained that these agreements to connect AI data centers are “enormous deals” that are getting a lot of attention, but the other end of that is “to get enterprises there.”

“We plan on using our capacity to get enterprises there and build hybrid AI architectures between private data centers and the big CSPs, or these big data center parks,” Ward said. “All of those architectures are going to emerge, or are emerging, and we're set up to go intercept them.”

That interception will be important for Lumen moving forward. The company’s most recent earnings continued to show lagging revenues, but analysts were positive on its sales momentum.

NaaS competitors

That momentum is important as more companies start targeting that NaaS opportunity.

On the big side are service providers that own and control large fiber and optical networking footprints.

Analysys Mason recently reported that traditional network operators like BT, Deutsche Telekom, Orange, Verizon, and AT&T are in prime position to capture one-third of the expected $8.7 billion investment enterprises are forecast to make in multicloud NaaS by 2028. The research predicts those operators will pocket 32% of that global enterprise spend on multicloud NaaS, which “offer platform-based NaaS having introduced sufficient automation and programmability in their IP networks.”

That opportunity is drawing considerable investments. This includes Lumen’s AI-focused upgrade push as well as a rash of networking acquisitions from the likes of Verizon and T-Mobile US.

Verizon’s management specifically pointed to AI-based opportunities in support of its pending $20 billion acquisition of Frontier Communications.

“Our portfolio of high-performance spectrum, the capacity of our fiber, and our ability to deploy and support mobile edge compute make us as the backbone of the AI economy and the partner of choice for players in the space,” Verizon CEO Hans Vestberg said during the carrier’s second-quarter arnings call. “We will power the best AI services for our customers. What sets us apart with AI is our network’s mobile edge computing capabilities and deep fiber footprint. By processing data closer to the source we enable real-time AI application that requires security, ultra-low latency, and high bandwidth. This is where our network shines, opening up possibilities that simply weren’t feasible before.”

On the other end are smaller players that are targeting more niche NaaS deployment scenarios.

A recent Dell’Oro Group report cited growing campus NaaS use cases that are drawing startups with “LAN-as-a-utility” offers. Siân Morgan, enterprise wireless LAN research director at Dell’Oro Group, pointed to vendors like Nile, Meter, Join Digital, and Ramen that “are ramping up to deploy a significant amount of campus NaaS equipment over the next year.”

Morgan noted that those startups will be facing off against segment heavyweights like Hewlett Packard Enterprise (HPE), which “maintains the largest breadth offers” in what Dell’Oro Group terms the campus NaaS “enabler category.” Overall, Dell’Oro Group predicts campus NaaS deployments will generate more than $940 million in annual revenues by 2028.

Despite that growing competitive landscape, Ward thinks Lumen is well positioned to capture those market opportunities.

“This is just fortuitous that here we are in the middle of this transition and we had the assets and that enable us to intercept it,” Ward said.