Jan. 16, 2020

LightCounting releases new report titled “Impact of 5G and Cloud on Transformation of Telecom Networks”.

While this was inevitable, it was still symbolic that the revenue of the TOP 15 Cloud companies, also known as Internet Content Providers (ICPs), exceeded the sales of the TOP 15 Communication Service Providers (CSPs) in 2019. ICPs are closing the gap with CSPs in terms of capital expenditures, illustrated below, including investments into their networking infrastructure.

The CSPs are determined to change this situation over the next decade. 5G and edge compute applications must open up new streams of revenue. The immediate benefit of 5G deployments will be sales of 5G ready smartphones, which are likely to lift the revenues of CSPs in 2020. CSPs in China are charging a bit extra for 5G services and metering data usage, which will also help. However, CSPs expect a much more significant boost to their revenues to come from new applications, including autonomous driving, automation in health care, manufacturing, and logistics. The timing of these applications is unclear, but many of these should start generating revenues in the first half of the new decade. There will likely be new applications that we are not even aware of yet. Despite the uncertainty, CSPs are investing in next-generation networks. The risk is high, but fear of missing out is intense, and no company wants to be left behind the competition.

Figure: Revenue and Capital Expenditures (Spending) of TOP 15 CSPs and ICPs

Cloud report figure

Apart from the financial results, 2019 was an outstanding and exciting year for a majority of the CSPs and specifically AT&T. Even Wall Street was impressed by AT&Ts efforts to transform itself, propelling the company stock up 30% for the year. To further sweeten the revenge for CSPs, Amazon’s stock was flat in 2019. It was a “down to Earth” year for Amazon, running Whole Foods and launching a fleet of delivery vans in the US, giving up on groceries shipped by drones for now. AT&T reached higher up to the Cloud and started to rip off the benefits of upgrading and virtualizing their networks. The first 5G services launched by AT&T in 2019 were “born in the Cloud,” enabling faster deployments and software upgrades.

The highlights of 2019 include:

  1. 5G deployments added urgency to the transformation of telecom networks and helped CSPs to see benefits from their efforts in network virtualization. A lot more of this to come in 2020.
  2. The open-source projects of CSPs continued to mature during the year, and recently formed O-RAN gained support from all leading CSPs and a majority of their suppliers.
  3. Equipment suppliers have taken the lead in network automation, including development of AI-enabled functions.
  4. Amazon and Microsoft signed partnerships with Verizon and AT&T, respectively, recognizing the value of access networks for delivering cloud services and future edge compute applications.
  5. Cisco announced their new “Silicon One” strategy, which emphasized innovation in software, Silicon and Optics and plans on offering products based on these technologies a la carte, instead of integrating them into “black boxes.”

The report focuses on the changing marketplace facing CSPs and the impact of 5G, cloud services, and new technologies on their business and networking infrastructure. The move to transform networks is still in early stages, but CSPs have already consigned to history the traditional way of building networks using proprietary platforms and complete software stacks from individual companies.

More information on the report is available at https://www.lightcounting.com/products/the-cloud-report_9/

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