Mobile network operators are confronting three critical investment decisions in the early stages of 5G, Jonathan Davidson, SVP and GM of Cisco’s Mass-Scale Infrastructure Group, said this week at a JP Morgan event.

That trio includes the radio access network (RAN), IP and optical infrastructure, and the mobile core, he said, adding that the pickup and level of activity on each is largely dependent on financial returns and the spectrum position of each operator and the country they call home.

While operators and RAN vendors are quick to promote the multi-billion dollar contracts they sign, details about mobile network upgrades on IP, optical, and mobile core infrastructure is sometimes withheld or less forthcoming, but these are of equal importance and oftentimes precede RAN activities, according to Davidson.

Initial 5G investments are typically made around an operator’s need to build out IP infrastructure, “so it starts at the tower, it starts at the cell site and moves back. … It’s a rebuilding of the entire metro network,” he said. 

“When you get your first 5G phone, the first thing you want to do is a speed test. If that speed test is disappointing, you’re going to say ‘why did I just pay $1,000 for a new phone if it’s the same speed as my old phone?’” Davidson said. 

That first experience on 5G is important, and it’s only going to be good after an operator makes investments across all three areas — RAN, IP, and the core, he added.

Cisco’s vision for a flattened internet infrastructure that includes a routed optical networking portfolio featuring Acacia pluggable optics bolsters its position for IP and optical infrastructure upgrades. The vendor also has a well-established business in the network core space, and it’s increasingly eyeing opportunities in the RAN market, but only so far as it can push its orchestration software for the deployment of virtualized and open RAN.

Cisco views both, vRAN and open RAN, as a positive development for its business. “This movement to really create an open ecosystem around RAN is really important because that’s really the final closed ecosystem of infrastructure,” Davidson said. 

“Radio has been a closed ecosystem forever and we believe that an open ecosystem drives additional innovation. And typically innovation means that you have a lower cost structure for those who deploy that infrastructure,” he said. 

Cisco considers itself a supporter of the push to disaggregate network hardware and software more broadly as well, but that doesn’t mean it believes market dynamics will shift to that model at large any time soon.

“The majority of top-line revenue is going to come from selling fully integrated systems just because the dollar value of putting everything together is there,” Jonathan Davidson, SVP and GM of Cisco’s Mass-Scale Infrastructure Group, said this week at a J.P. Morgan event. 

Cisco Silicon One, a programmable silicon architecture introduced in late 2019, provides hyperscalers, data centers, and service providers with the flexibility to build their own system in various forms, he explained. 

The vendor slices this opportunity up into three models: silicon only, systems with no software, and fully integrated systems. “The hyperscalers often will pick fully integrated systems and then one of the other two models for their deployments depending upon the problems that they’re trying to solve for,” Davidson said. 

Traditional service providers, as he described it, are more interested in buying Cisco software that will run on white box hardware, but hyperscalers that use Cisco’s IOS XR operating system typically buy a fully integrated system from Cisco as well, according to Davidson. 

While Cisco CFO Scott Herren, during an earnings call last week, referenced Cisco’s current $14 billion annual run rate on software sales as a number that makes it “one of the biggest software companies in the world,” it is still primarily an infrastructure product vendor. Cisco products generated 71% of the company’s revenue, $9.1 billion, during its most recent quarter.

The white box hardware market, which has been growing every year since at least 2015, is a marker for what’s to come down the line, according to Davidson. “We view the white box market as an aggregate of the data center market share. It’s really a mechanism for tracking the hyperscale network needs because they are by far the largest users of white box switching,” he said, adding that Cisco is targeting this space to expand its total addressable market.