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Notes From MWC: Driving Toward Efficient, Cloud-Native 5G

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Last week’s Mobile World Congress (MWC) conference represented a grand comeback for the largest communications tradeshow in the world, springing back to full form with 88,000 attendees to discuss the largest trends in communications, including cloud-native communications apps, sustainability, augmented reality/virtual reality, and 5G.

Fortunately, I did not see any of the more extravagant 5G hype, such as “see-through 5G cars.” Instead, there was a focus on practicality and “monetiziation,” as service providers and suppliers look to cash in on digital transformation and 5G dreams. It’s now accepted that 5G deployment has not lived up to expectations, and many industries are still waiting for its arrival to bring new forms of digital enablement.

We are, however, starting to see real traction in the proliferation of digital communications services, such as smart manufacturing, healthcare, mobile broadband, and smart retail. As you can see below, our database of more than 100 5G services shows these types of services just starting to blossom.

Looking for the Investor Payout

On the investor front, there is no doubt that 5G has been a dud. As a cheap ploy for stock touts, it hasn’t done much for the most obviously 5G suppliers, such as Nokia and Ericsson, whose shares have gone nowhere for more than five years. Large service providers such as AT&T and Verizon, saddled with debt and huge capital expense, have also been disappointing. T-Mobile USA, on the other hand, has been a big success with a laster focus on consumer broadband.

As Simon Leopold, an analyst with Raymond James, pointed out in a detailed investment note, the industry has work to do to draw more investor interest, as he digested the MWC proceedings:

“Participation by the investment community remained weak, however, with fewer buy-side and sell-side analysts than in prior years. Considering the less inspiring growth from 5G, the reduced interest does not surprise us; however, the event provides a great opportunity for meeting many industry participants. Additional tailwinds include Huawei displacements, unprecedented price inflation, and normalization of the supply chain.”

Some of the additional themes highlighted by Leopold, included:

  • Geographic shifts dominate the 5G market. Research firm Dell’Oro’s forecast predicts 1% global RAN growth in 2023, which includes a 7% decline from N. America and 4% from China, offset by 12% growth from Asia ex-China. The maturity of 5G in the U.S. and China drive the declines, according to Leopold, while the ramp in India fuels an offset, but with margin pressure.
  • Power efficiency. Energy and sustainability was a common theme in discussions, according to Leopold. Within the context of mobility, the vendors highlighted more power efficient radios. He also heard concerns that European operators will spend less because of their higher electricity costs, and the vendors assert that power consumption has become elevated in discussions and influence upgrades.
  • Supply chain improvement. Although there is little debate regarding the concept of an improving supply chain, the vendors differ regarding experiences through 2022 as well as expectations for the rate of recovery. Leopold wrote that the OEMs expect to begin to work down their own inventory, which can help with cash flow, and they acknowledge that in many cases their customers are doing the same.

One theme that may have disappointed was Open RAN (O-RAN), a set of interface standardizations intended to commoditize and drive down the costs of radio networks. According to my sources, O-RAN is still early days, requiring more ecosystem development and infrastructure.

A new report from Deutsche Telekom, Orange, TIM, Telefónica, and Vodafone promotes progress highlighting maturity, security, and energy efficiency of new Open RAN. Incumbent suppliers such as Ericsson and Nokia have proclaimed support O-RAN, but that may be more of a defensive posture than an offensive one.

Focus on Optimization and Efficiency

Operational efficiency and cost containment were certainly strong themes at MWC, along with sustainability. In addition to growing revenue with new services, the industry will deploy a more efficient infrastructure — which is of course the whole point of technology.

One area to watch is the slow but sure move to cloud-native operating platforms and commercial-off-the-shelf (COTS) hardware, which should bring automation gains, including lower capex and opex. This is the same theme driving the O-RAN discussion.

This was also a strong theme at a service provider panel hosted by Israeli cloud networking company DriveNets, one of the leaders in developing cloud-native infrastructure for service providers.

Igal Elbaz, Senior VP of Network at AT&T, told the audience that saving on costs was crucial as AT&T has seen its network traffic growing at 30% a year. This is the driver behind AT&T's adoption of DriveNets' cloud-based networking platform that can lower both capex and opex costs running cloud-native networking across COTS white boxes, which can scale out as the infrastructure inside hyperscale datacenters grows. AT&T and DriveNets said that DriveNets' platform is now running more than 50% of the traffic on AT&T's core network.

"Our profitability is at stake so we need to reduce our total cost of ownership [TCO]," said Elbaz.

Jean Louis Le Roux, Interim Executive VP, International Networks for Orange, reiterated this theme. In addition to improving TCO, Le Roux pointed out that European telcos must also reduce their carbon footprints and save energy.

"We are wasting tremendous amounts of energy in our networks today. With elastic scaling, we can operate more efficiently," Le Roux said.

Cloud Native Telco to the Fore

Cloud-native technologies appear to be getting more mainstream in operator networks. In another booth here, Red Hat’s Chief Technical Officer, Ian Hood, told me that Red Hat is seeing wide adoption of Kubernetes and development platforms by the telcos and suppliers alike, a trend he expects to continue for some time.

“The growth for us is in cloud native with OpenShift,” said Hood. “There is strength in applications development and deployment, whether that’s Lockheed Martin managing planes and drones or a bank managing [finances].” Hood said OpenRAN still requires more development that will take some time, but that Red Hat is fully behind it.

The bottom line for now seems to be that the communications industry is still working through its 5G monetization and cloudification issues. In the near term, improving operational efficiency by moving to cloud native may be a more practical goal.

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