AT&T today sold its Network Cloud technology to Microsoft and shifted gears to move its 5G network core, workloads, and services to Microsoft’s Azure for Operators platform.

The underlying trend and realization AT&T confronted is clear: mobile network operators, no matter how invested and talented in cloud computing, are no match for the might of hyperscalers. 

The turn signals AT&T made by effectively abandoning internal development of a 5G core and transferring its Network Cloud technology and employees involved in that effort to Microsoft indicates that the operator’s nearly decade-long cloud-native journey hit a crossroads. Half-measured partnerships with cloud providers increase complexity and delay the realization of mobile network infrastructure residing in the cloud.

The shift marks a significant expansion of a deal AT&T inked with Microsoft almost two years ago that called for Microsoft to provide AT&T with cloud services supporting non-network applications and internal IT infrastructure. Now AT&T is moving the crown jewels of its network into Microsoft’s cloud and giving up control of its internally developed network cloud technology. 

“This is a significant move but not unexpected,” Chris Antlitz, principal analyst at Technology Business Research, told SDxCentral. 

AT&T and Microsoft declined to share financial terms of the deal, but added that the transfer of both software development and deployment of AT&T’s Network Cloud is immediate. Microsoft is also acquiring AT&T’s engineering and lifecycle management software for containerized or virtualized network services.

AT&T said a 5G standalone (SA) core, something the operator has yet to deploy, will be the first order of business and it plans to move its existing network cloud to Azure by mid 2024. 

Igal Elbaz, AT&T’s SVP of engineering and operations, declined to say when AT&T’s 5G SA core will be deployed or name other vendors involved. 

AT&T CTO Andre Fuetsch, in a statement, framed the sale to Microsoft as a “testament to AT&T’s leadership in network virtualization, culture of innovation, and realization of telco-grade cloud stack.” 

The operator did not, however, realize the full value of those efforts. It also suggests that AT&T’s insistence on internal and open source development delayed its deployment of a 5G SA core. 

“Most likely this will speed up AT&T’s migration to cloud native and will cost it less compared to the DIY (do-it-yourself) approach,” Antlitz said. “These are likely key reasons why AT&T opted to take this approach versus doing it itself via its own private cloud.”

AT&T loses some critical engineering talent, roughly 100 engineers, as a result of this deal as well. Ryan van Wyk, AT&T’s VP of network cloud that played an integral role in the development of the operator’s containerized core, has agreed to join Microsoft, according to Elbaz. “The AT&T Network Cloud team is receiving offers to join Microsoft’s Azure team,” he wrote in response to questions.

The operator will also play a lesser role in open source projects that were central to its previous vision. “This transaction impacts Airship and the AT&T teams that contribute to Airship and the Open Infrastructure Foundation,” Elbaz explained.

“Microsoft intends to continue to support the open-source components of Airship, contributing to these in various open-source communities, and Microsoft will continue to work with the Open Infrastructure Foundation,” he added. 

AT&T’s agreements with other cloud providers, including IBM Red Hat on IoT and multi-access edge computing, remain intact and ongoing, according to Elbaz. “This announcement is about mobility network functions” and “this alliance gives us a path forward to run our mobility network functions on Azure for Operators hybrid cloud with telco-grade capabilities on prem as well as in the public cloud,” he added.

Microsoft’s Azure for Operators platform includes services for the cloud, edge computing, IoT, network functions, and artificial intelligence. The hyperscaler’s 5G strategy links private Azure Edge Zones, Azure IoT Central, virtualized evolved packet core (vEPC) software it gained by acquiring Affirmed Networks, and cloud-native network functions it brought on board when it acquired Metaswitch Networks.

The world’s second-largest cloud provider plans to add AT&T’s network cloud technology to that mix and make it available to other operators. 

AT&T’s network virtualization journey began in earnest in late 2013 under previous leadership, which set out an ambitious goal to virtualize 75% of its network functions with SDN by 2020. The operator hit that target either three months early or nine months late, based on a series of confusing and previously contradictory executive statements.

The operator continues pushing a long-held goal to be a public-cloud centric company, and this expansive agreement with Microsoft could bolster that effort. The move also puts AT&T in a competitive position to be among the first operators to deploy its 5G network core in a public cloud.

Dish Network intends to run Nokia’s 5G SA core on Amazon Web Services (AWS) and claims its first 5G open radio access network (RAN) market, Las Vegas, will be activated this fall. 

“Moving something as critical as the 5G core into the public cloud is risky, but Microsoft has arguably some of the best talent and capabilities in the world for handling these complex workloads in the cloud at large scale,” Antlitz explained. “If anyone can do it, it would be the webscale companies.”