Cisco remains near-term cautiously optimistic about the long-term opportunities of its service-provider business, despite the segment torpedoing the vendor’s most recent fiscal quarter, which led to Cisco announcing plans to slash 5% of its global workforce.

Jonathan Davidson, EVP and GM for Cisco Networking, explained during a “tech talk” hosted by Barclays and conducted at this week’s MWC Barcelona 2024 event that the service provider market had indeed hit a lull, which he said was driven by a few compounding issues.

The first was a lull in spending on new equipment, which Davidson attributed to service providers overbuying during the pandemic.

“When COVID first hit, there was a tremendous assessment by the communications service providers to really make sure that the last mile was up to snuff, to handle all of that traffic that necessarily was going down to all of our homes, or that was coming out of all of our homes, because that was not typically how the networks were built,” Davidson said. “So there was a big investment that went in during that period.”

This investment push coincided with mobile telecom operators in more advanced economies starting to deploy their 5G networks. This resulted in a huge surge of spending tied to both the fronthaul 5G technology and back-end support services needed to support the technology.

That spending also hit a lull as many of those forward-leaning operators have completed their initial 5G builds. These have been focused on either non-standalone 5G core technology, which many are still sitting on, or on more advanced 5G standalone (SA) core technology that does not need any new immediate investment. Davidson said this lull has been compounded by operators in less advanced countries waiting longer than expected to make their 5G deployment plans.

“We would have expected them to start making 5G decisions because if you make decisions now, those rollouts would happen a couple of years from now, and we're not seeing the pace of those decisions happening,” Davidson said, adding that this is likely due to lingering 5G monetization concerns.

“There's definitely more work to do there,” Davidson said. “We have seen a lot of people who have invested early in 5G looking for ways to monetize any of their assets that they have deployed.”

Cisco also sees opportunity to help operators deploy new spectrum resources to help bolster current network capacity or deploy new services. Davidson specifically cited work by operators in deploying 5G-based fixed-wireless access (FWA) systems that if they continue to grow will require operators to boost capacity.

The vendor is also participating in some near-term 5G opportunities.

Cisco earlier this month worked with Dish Network on a network slicing proof-of-concept (PoC) running in a hybrid cloud environment and could be used to power enterprise applications that require service level agreements (SLAs). The PoC used Cisco hardware and software, including the NCS and ASR routers, Nexus switches and Crosswork Network Controller that Dish is already using in its cloud-native 5G SA network.

It's also working with T-Mobile US to combine that operator’s 5G network and managed services provider (MSP) with Cisco’s Meraki cloud-managed networking devices and platform.

Despite those opportunities, Davidson toed the company line put forth by Cisco CEO Chuck Robbins that the vendor’s service provider business is likely to remain challenged through the end of this year. However, Davidson curbed that by stating Cisco remains bullish long term.

“A lot of great opportunity there as the 5G rollout continues,” Davidson said. “Like everyone's aware, this is kind of a 10-year cycle, and we are, I would say. three or so years into it.”