New 5G distributed network architectures have arrived. As Communication Service Providers (CSPs) begin to harness new 5G network capabilities, create new innovative services, and leverage new go-to-market approaches - now they must also address how monetization should evolve.
Consider the coming standalone 5G market. Through a survey of more than 100 experts from 55 different CSPs worldwide, MATRIXX found that 82% of those surveyed intend to deploy a 5G standalone core network by the end of 2023, as shown in Figure 1.
Change is coming, but what does this mean? The industry has been through core upgrades before – from 3G to 4G – why should standalone 5G be any different?
New services, new models, and new monetization
The point of 5G is that it’s not simply another ‘G’. In this same survey, we asked CSPs the primary business drivers for deploying 5G standalone core network. Enhanced consumer offerings, services like A/R and V/R, are indeed some of the expected evolutions beyond current offerings. Yet when you consider the others in the top 5, enterprise opportunities like network-as-a-service, tailored industry solutions, and private network are all entirely new areas of focus. Requirements on deployment and operations of these new services also highlight a critical evolution of the operating models where agility, scalability, and cost effectivity will take priority.
The web scale imperative
Underpinning this new operating model is the adoption of web scale principles, including the distributed architecture of the cloud native, 5G standalone core. For the legacy vendor ecosystem that has historically dominated the entirety of the CSP stack, the move to cloud native is causing a massive change in the ecosystem.
In the recently completed MATRIXX survey, when asked about their cloud native infrastructure intent, the CSP responses stood out for one key reason. When considering the list of providers that CSP’s are evaluating, nearly all of them are entirely new to the telecom market. In fact, with a few possible exceptions, none had a telco practice of substance until recently.
With cloud native 5G enabling the separation of network function and hardware, what’s immediately obvious is that it indicates a loosening of the vice-like grip that legacy telecom infrastructure providers have maintained for years now. These are new players, bringing entirely new capabilities and ways of operating that will become the standard for CSP’s going forward. In fact, based on past disruption within other industries that have adopted cloud native practices, it is reasonable to assert that operators will leverage these new providers as a driver to reassess the entirety of their business practices.
What types of disruption can we expect? In the near term, most anticipated change will be a quickening of the pace of operation, as CSP’s look to harness the agility, scalability and cost-efficiencies that have become hallmarks of the hyperscalers. In the future, the more exciting possibility is that these new infrastructure players represent just the first widening of the telco ecosystem, as the new 5G architecture makes it increasingly easier for yet more new players to enter. Which is why it is also not surprising that the telcom industry is becoming increasingly active in open source initiatives such as Telecom Infra Project (TIP), Cloud Native Computing Foundation (CNCF), Linux Foundation Networking (LFN) and others. As cloud native takes center stage for CSPs, they have a vested interest in ensuring that best practices and collaboration across this new ecosystem best serves their unique needs.
Monetization strategy changing on multiple fronts
Pre-5G, hyperscaler-like agility, scalability and cost-efficiency were not considered essential monetization requirements. As a result, it has been the norm to build out legacy IT operations to maximum possible capacity and then struggle to adapt as the market evolved. The adoption of cloud native architectures, built for rapid change, promises exactly the opposite. The promise of webscale is the ability to quickly and easily scale resources and services in a highly elastic environment. Just as importantly, it’s the ability to widen the provider ecosystem, opening entirely new value streams. For CSP monetization strategies, realizing the benefit of both these imperatives will mean extending cloud native flexibility and agility to how new products and services are packaged and sold.
Until recently, rigid architectures required CSPs to engage with customers reactively, not the other way around. Regardless of how much they may have wanted to embrace innovation, the creativity of commercial teams was limited by the heavy reliance on customization and framework solutions. The result? Product, service and pricing strategy innovation consisted primarily of incremental and expensive improvements to the products already sold. Webscale changes all of that.
On a practical level, new cloud native infrastructure will mean that CSPs will increasingly adopt a culture of continuous innovation, with highly flexible and scalable monetization capabilities becoming a critical capability to accelerate growth. For this to be realized, CSPs need to abandon today’s rigid, customization-intensive approach that slows service launches. In its place, monetization platforms that are highly configurable across the entire service lifecycle, will play a crucial role in accelerating time to market.
CSPs leaders demand cloud native IT and networks
Orange Group CEO and GSMA Chair Stephane Richard called for fundamental change across the entire CSP IT and network landscape during his keynote for TM Forum’s Digital Transformation World Series 2020 online event. Richard said he is “fully convinced the industry also needs a rapid shift to an open, modern, software-based technology architecture that enables new operating and business models” because the current IT landscape is “too complex, too rigid, and too cost intensive.”
Looking ahead, a key component of IT transformation will be the creation of what the Linux Foudation Networking open-source initiative Anuket calls “a common model, standard reference infrastructure specifications and conformance and performance frameworks.” Sitting at the crossroads of IT, networks, and webscale infrastructure, monetization must align with where IT and networks are evolving. This means new monetization solutions must be built on cloud-native technology, leverage open and API first design, enable dynamic services, digital-first experiences, and continuous innovation.
The arrival of 5G distributed network architectures is a defining catalyst for CSP change. Changes that necessitate new approaches and investments across infrastructure, IT and Networks in order to unlock the promises of 5G. CSP success will be realized not purely through new and innovative services that leverage these investments, but through new reveue streams created by adopting new webscale monetization capabilties.
