AT&T sees its ongoing network virtualization investments around software-defined networking (SDN) and network functions virtualization (NFV) as beginning to bolster cost savings across the carrier. Those savings are also becoming a self-generator of funding into those virtualization efforts.
Speaking at today’s MoffettNathanson Media and Communications Summit, AT&T CFO John Stephens said the carrier’s ability to virtualize 34 percent of its network functions by the end of last year is now helping AT&T to hit its year-end 2017 goal of 55 percent virtualization.
“As a factoid, 34 percent of our networks at the end of the year were virtualized, and we will be at 55 percent by the end of this year,” Stephens said. “Think about what cost savings that brings. And the savings from the prior work you do starts paying for this investment. Last year we were paying for the investment to get up to 34 percent. Now that 34 percent is fully generating huge amounts of savings and is a sub-funder for things going forward.”
AT&T expects to have 75 percent of its network operations controlled by virtualized platforms by 2020.
As an example of how investments into virtualization and digitization are bringing cost out of the organization, Stephens said AT&T has been able to flip the ratio of billing inquiries through increased use of automation.
“We used to do 20 percent automated and 80 percent manual, and now it’s flipped,” Stephens said. “Now millions of calls are going away or are opportunities to automate things. You have seen us continue to maintain margins, and that’s going to continue.”
AT&T last year 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 50 percent. That cost savings is expected from manual operations being replaced by automated scripts and procedures.
Verizon recently told the investment community it expects to see cost savings from its network virtualization plans. In laying out areas of planned network streamlining, John Stratton, president of customer and product operations at Verizon, cited SDN and virtualization as cornerstones of those efforts to drive down the cost of carrying data across its network and opening up new markets.
The financial implications of software-defined wide area networking (SD-WAN) were also questioned, with Stephens acknowledging the move toward SD-WAN could clip revenues from part of AT&T’s business, but that it was not going to turn away from the need to advance services.
“On an embedded base there is some risk, but quite frankly that risk through the legacy services might have been there anyway,” Stephens said. “So from our perspective, protecting that base by looking to the future, we will always look to the future.”
Stephens added that in looking ahead, AT&T sees SD-WAN as increasing the “stickiness” of customers to the company and potentially leading to the uptake of additional services.
“We have made some investments in SD-WAN and are looking forward to making it a part of our product offering, understanding that giving customers a better experience internally leads to them buying more products and services from you and then that changes the total revenue picture,” Stephens said.
AT&T is working with VeloCloud on SD-WAN.