To date, established communications service providers (CSPs) have had the resources to take on the Capital Expenditure (CAPEX) intensity of building and running a network, says Friedrich Trawoeger, SVP cloud and cognitive services at Nokia.
However, new technologies and methods such as Open RAN (radio access network), spectrum and tower sharing are presenting the opportunity for CSPs to leave behind their traditional CAPEX-based buying behaviour in favour of flexibility, cost control and the agility to roll out new offerings.
Given all the recent challenges, now is the time for CSPs to be evaluating their business models to take advantage of the opportunities in front of them. They have a few challenging years ahead, with the adoption of 5G and related required implementation of cybersecurity, cloud native and cognitive capabilities, which are changing the way networks operate.
The CAPEX intensity of building and running a network has been a barrier that’s kept new players from entering the market. While that’s given incumbent CSPs some security, it’s hampered healthy competition and the innovation that goes along with it. Now software-based networks are adopted around the world it might be time to rethink CAPEX based buying behaviour.
It’s time for a new business model
With all these changes in the network and ecosystem, including the arrival of 5G, CSPs need to take a step back and evaluate if it’s still worth the capital investment in network infrastructure. Especially when they are unsure of the return on investment alongside time-intensive builds.
There is a way to be more cost-effective.
Consumption-based models are common for IT services, as they enable customers to only pay for what they need and scale quickly. The telco and IT worlds are converging. As a result, CSPs have the opportunity to embrace the changes that have delivered significant benefits in the IT industry. By leaving behind their traditional CAPEX-based buying behaviour, CSPs can introduce flexibility, cost control and the agility to roll out new offerings quicker.
In fact, many are already investigating the approach of shared infrastructure and assets and its advantages. Tower sharing and spectrum sharing are some examples that we can observe already taking place across the world. These practices enable CSPs to keep costs in check. Core infrastructure as a service can help smaller players (such as new MVNOs mobile virtual network operators) to find their place in the market.
Opening up the market
This is also seen increasingly with Open RAN, which promotes interoperability of protocols and interfaces, and opens the market for more vendor competition. This model will radically transform the landscape of radio access networks (RAN) and will give CSPs more choice, but also will require seamless interaction of these different elements.
Who owns the infrastructure will cease to be the over-riding concern when the advantages of agility, and speed instantly become clear. Remote upgrades in a DevOps or CI/CD mode will become the norm in a fast-changing landscape where a range of new use cases, from remote machine control, to dynamic digital twins, autonomous vehicles need different requirements. It’s a great opportunity for CSPs to grow revenue in new markets, but does the way CSPs buy need an update?
Network as a service – a new opportunity
We have begun to hear about an alternative, consumption-based service called network as a service (NaaS). NaaS is a business model for delivering enterprise-wide area network services virtually on a subscription basis. Therefore, services such as spinning up and rolling out e.g. IoT (Internet of Things) services around the world can be done easily, without the need (for the CSP) to invest in local core infrastructure, enabling huge savings in CAPEX costs.
A CSP could just buy the capacity required as a specific multi-national enterprise customer wants connectivity in countries where the CSP doesn’t own the infrastructure. It makes sense. Artificial intelligence (AI) use cases can be rolled out instantly once a CSP is successful.
Shifting to NaaS or consumption-based infrastructure will allow CSPs to break free from the CAPEX crunch and manage costs more predictably as operating expenditures (OPEX). It will also reduce their risk by making it easier to deploy services, see what works, and adapt or abandon them as needed, without the time and cost of physical buildouts.
Among the many advantages they gain, this will allow CSPs to enter new markets faster. The consumption based NaaS models also create opportunities to collaborate with cloud partners and other ecosystem partners on service development and delivery.
While some CSPs will choose to keep building and running their own infrastructure, they need to evaluate all the options available to them. This may be the best model for their business, but it shouldn’t be the only option considered.
With the technological advances available and more consumption-based services coming to market in the telco industry, a more flexible business model could provide the scalability and agility they need to differentiate with new services fast. And to compete in the ever changing and challenging marketplace they now operate in.
The author is Friedrich Trawoeger, SVP cloud and cognitive services at Nokia.
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