Hyperscalers gobbled up telco-centric workloads and services at the highest rate to date in 2020, and that hunger will increase in 2021. 

Public cloud providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud are increasingly helping mobile network operators with “service and application development, shifting of workloads, and development and marketing of cloud services,” Matt Walker, chief analyst at MTN Consulting, wrote in a recent report.

“Managing costs is a central purpose of telcos’ willingness to partner with webscale partners,” he wrote, adding that the emergence of 5G and edge computing are strengthening hyperscalers’ ability to eat more services that have traditionally been operated internally by carriers. 

“While many observers, including more than a few telco executives, look at the webscale sector with trepidation, the smart ones are now pursuing collaboration,” Walker explained. “We expect this activity to accelerate in 2021 as telcos search for cost savings.”

While less entrenched vendors, particularly those in the open RAN space, expect public clouds “to become the new telecom providers going forward,” as John Baker, SVP of business development at Mavenir, recently told SDxCentral, Walker said this doesn’t simply mean clouds will take over mobile operators’ businesses.

“More likely is that the telcos will rely more and more on webscale infrastructure for incremental network functionality and capacity over time,” Walker wrote. Despite the rise of cloud in telecommunications, he expects network operators to retain control over a large portion of their respective network infrastructure.

“Change in the access portion of telco networks is measured by decades, not months or years, so there is some time to work out this transition,” Walker concluded. 

As network operators increase investments in the cloud, the majority of that spending is occurring in the mobile 5G core, according to Gorkem Yigit, principal analyst at Analysys Mason. More than half of mobile core investments are being directed to the packet core, driven by virtual evolved packet core (vEPC) 4G LTE capacity upgrades, 5G non-standalone deployments, IoT, and more recently, new 5G standalone cores, he explained. 

Analysys Mason expects network operators to cumulatively spend $114 billion on network cloud between 2019 and 2025.

Network functions, virtualized and cloud native, “account for the largest share of the total spending, approximately 50%, among all the components of the network cloud infrastructure,” Yigit wrote in response to questions.

Increased spending on network cloud infrastructure is primarily being shifted from traditional physical network costs, he added. “Total wireless capex worldwide is forecasted to grow only around 1% (on a compound annual growth rate) between 2020-2025 so there is not a lot of new money,” Yigit wrote.

Network virtualization, a years-long effort underway among many mobile operators, reached 6% of the total addressable market in 2019, and likely jumped to 10% in 2020, according to preliminary estimates by Analysys Mason. “We saw that the cloudification investments continued largely apace during the pandemic, but there were some delays due to uncertainty” and disruptions caused by travel restrictions and impacts on supply chains and 5G spectrum auctions, Yigit explained. 

While public clouds are ascending and gaining importance in telecommunications networks, traditional network equipment vendors like Ericsson, Nokia, and Huawei “continued to maintain their control over the entire network cloud with pre-integrated stacks,” he added. 

However, Yigit notes that a “sea change” is underway with greenfield operators like Rakuten Mobile and Dish Network building fully virtualized, cloud-native networks, and global operators such as Vodafone, AT&T, and Telefónica are building multi-vendor clouds.

As momentum picks up around the adoption of cloud-native infrastructure, the opportunity for other vendors will grow in kind, according to Yigit. He specifically named Affirmed Networks and Metaswitch Networks, both acquired by Microsoft last year, Mavenir, Altiostar, Casa Systems, VMware, Red Hat, Hewlett Packard Enterprise (HPE), and Dell as the vendors best positioned to gain market share.

Public clouds, according to Yigit, are still new to the market and fast becoming a force to reckon with, but they aren’t yet equipped to serve the most complex network edge requirements for mobile operators. Virtual radio access network (vRAN) architecture “requires real-time cloud platforms across the edge of the network that can meet the very stringent throughput, latency, and resiliency requirements of RAN,” he said. 

“Public cloud providers and cloud technology providers mastered the general purpose IT clouds and workloads but they are not yet capable of providing such a highly distributed, real-time, heterogeneous hardware-based network cloud stack today because they never had to before,” Yigit concluded.