Speaking at the Cowen and Company Media, Technology and Telecom investor meeting today, Krish Prabu, CTO and president of AT&T Labs, said that when the company has met its goal of virtualizing 75 percent of its network by 2020, it will see savings in operational expenses of up to 40 percent or 50 percent. That cost savings will occur, says Prabu, because lots of manual operations will be replaced by automated scripts and procedures.
In addition, AT&T also expects to see an improvement in the company’s margins. “In a highly virtualized world in 2020, the operating benefits will start to materialize, and you will see improvements in margins,” he adds.
Prabu’s comments are not surprising, as AT&T has long said that one of its reasons for virtualizing its networks was to drive more cost savings. In fact, AT&T CEO Randall Stephenson said in the company’s fourth-quarter 2015 earnings call earlier this year that SDN represents a rare opportunity for the telco to reduce its costs. “We’re driving the industry to software-defined networks, and I have seen few opportunities over my career to drive down the cost to deliver service like this,” he said.
However, not all service providers are expecting their costs to drop once they virtualize their networks. In an interview with SDxCentral at Mobile World Congress last February, Yves Bellego, director of technical strategy at Orange, said the main driver behind deploying SDN is not to reduce costs. “Cost is not our message,” he said. “We have achieved cost savings in the past years with other programs.”
But don’t expect SDN to also lead to a decline in telco capex spending.
According to Prabu, the amount of data traffic on the network is expected to grow a magnitude of 10 times or more, which means that AT&T will have to continue to invest in its network to keep up with that demand. However, Prabu noted that by virtualizing its network, AT&T will be able to continue to grow its network and maintain the same cost structure. “Our design goal is to handle the growth in traffic,” he says.
Interestingly, competitor Verizon has also said that it doesn’t believe SDN will result in lower capex for the company because 5G will require a very dense network. In other words, to make 5G possible, Verizon will have to deploy more small cell sites (often called microsites) and more fiber to backhaul the traffic on the 5G network, which is costly.
SDxCentral Senior Editor Linda Hardesty contributed to this article.