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After Carrier Network Virtualization, What Will Carriers Look Like?

Breaking News, Mobile World Congress, SDN
Craig Matsumoto
Craig MatsumotoMarch 4, 2015
7:15 am MT
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Assuming this new, virtualized world that we keep writing about becomes reality, what happens to today’s service providers?

A few of the big-vendor executives we talked to (or heard from) at Mobile World Congress this week had varying ideas, but they all seemed to agree that the nature of a service provider could be changing in the years to come.

The changes aren’t necessarily caused by software-defined networking (SDN) and carrier network virtualization, but they would stem from the same factors that are motivating those technologies. Namely, the pace and the very nature of the carrier business are changing — a theme that’s been an MWC undercurrent for years now. The demand for agile services and pervasive connectivity can’t be settled without changing the network, and with it, the carriers themselves.

Ericsson’s Hans Vestberg believes this will cause some carriers will turn into “service creators” by focusing on the IT transformation of particular industries such as healthcare, or choosing specialties such as the Internet of Things. “We have never seen in this industry a segmentation of carriers, but this is what is happening,” Vestberg said during Ericsson’s press conference Monday.

The motivation for carriers to specialize won’t come from cool technology. The transition would have more to do with another category of service provider that Vestberg noted: platform developers such as Apple and Facebook that will eat away at carriers’ businesses and their relevance to consumers.

For all our Mobile World Congress coverage, check out our MWC full coverage page

Time and Trust

Marcus Weldon, CTO of Alcatel-Lucent, disagreed, although he does think a bit of vertical specialization is likely.

Healthcare is one irresistible possibility, with a service provider offering to manage connectivity of all of a patient’s or hospital’s devices, he said. But he sees that as a feature, not a future raison d’etre for certain carriers. “It’s vertical-by-partnership, but I don’t think it’s vertical-by-platform,” he said.

Weldon thinks carriers can stay relevant by emphasizing time-saving and trust as benefit. Both arise from the carrier knowing a lot of context around whatever it is you’re doing. It knows where you are, possibly who you’re with, and what your past behavior has been. There’s a creepy angle to that, but for the moment, consumers really do consider service providers to be trusted parties, Weldon said.

“If they [carriers] get it right, they sell a contexed service that has more value than basic connectivity,” Weldon said. That let carriers avoid the “dumb pipe” syndrome, where they get paid solely for transporting bits and not for any of the cool, moneymaking services those bits create.

So, like Vestberg, Weldon thinks carriers will look toward specialization to avoid being mere bit-pushers. Weldon just doesn’t think a carrier will devote its entire business to a particular vertical market.

Disrupt or Die

Cisco CEO John Chambers took the most pessimistic view, saying a day of reckoning is nigh for carriers. But he believes that because he believes “it’s true for all companies,” he said at a press gathering on Tuesday.

Chambers noted that he’d said as much in front of the World Economic Forum, telling attendees that 40 to 50 percent of their businesses would soon be obliterated — “and then I said the same thing would happen to Cisco if we don’t disrupt ourselves.” That’s a reference to Cisco’s recent restructuring, in which the company shifted 40 percent of its employees to new priorities and replaced more than 30 percent of its leadership, all to match what Cisco believes is a shift in the very nature of business.

For carriers specifically, Chambers briefly noted that future consolidation is likely and that specialization is certainly a possibility. “You’ll see service providers go multiple ways,” he said.

Chambers’ doomsday theory overlaps the other points of view, I think. Vestberg’s tale of specialization certainly has the same survival-story feel to it. Weldon’s does too, if you think about it: Time-saving and trust would seem like an obvious path for carriers, but it also could imply that the carriers that don’t follow this path could be abandoned by customers.

Of course, there’s a self-serving angle here. The more frightened carriers become, the better chance vendors have of selling them platforms for SDN and other fancy acronyms.

Still, there’s some truth to what the executives are saying. The future does hold promise for service providers, but only for those willing to work at changing their businesses while they go about making their networks more “agile” and “cost-effective.”

MWC Disclosure: Craig Matsumoto was rejected for a Mobile World Congress press pass. He is attending MWC 2015 on a pass supplied by Brocade and plans to use the Ericsson stand as an ersatz press room.

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Craig Matsumoto

About Craig Matsumoto

Craig Matsumoto is managing editor at SDxCentral.com, responsible for the site's content and for covering news. He is a "veteran" of the SDN scene, having started covering it way back in 2010, and his background in technology journalism goes back to 1994. Craig is based in Silicon Valley. He can be reached at craig@sdxcentral.com.

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