Rattling the Network Infrastructure Value Chain

Network ownership debate is reignited by 5G

It’s an interesting time to be a network infrastructure analyst, given how the mobile network value chain is being pushed and pulled in different directions by 5G. This is prompting a rethink of how we build networks, what we use them for and what we consider as infrastructure, as telecom networks become increasingly software-driven and cloud-centric.

In a world impatient to experience the potential of 5G services, will there still be value in owning the infrastructure? Where is the network operator in the value chain? Whose network is it anyway?

The debate about the value of owning a telecom network has batted around the industry for a while. Mobile network operators not only invest heavily in licences for mobile spectrum, but also spend billions on networking equipment, and so must make sure their investments don’t lose value as revenue opportunities expand beyond connectivity into new value-added services.

Similarly, service providers, particularly hyperscale Internet giants, also invest significant, often greater sums, in cloud-native infrastructure and systems, albeit at different layers of the technology stack, so they’re certainly not getting a free ride on the network. It’s their activity that creates much of the huge volume of data traffic that drives the need for, and arguably the value in, ever-evolving network infrastructure. So if at times these and other service, content and application providers murmur frustration that telecom network operators aren’t delivering the connection speeds, availability and network flexibility their service environments need, perhaps they have a point.

The value of owning infrastructure is related to the cost of infrastructure, but they aren’t exactly the same thing — the cost of infrastructure is only part of the value equation. The other part is what the infrastructure allows you to do, or perhaps what it enables you to control and the revenue that generates. Given the complex service environments coming together within the broad framework of 5G, should network operators stick to building and operating telecom infrastructure and leave the delivery of services beyond connectivity, such as cloud-native services, to others with the necessary skill sets?

If so, how does that bode for operators? Will 5G lead telecom infrastructure to become commodified? To an extent, there’s hint of this in the concept of radio access network (RAN) sharing. Mobile operators are partnering on infrastructure costs and ownership, in effect taking advantage of each other’s spectrum assets, to compete on service delivery — perhaps an admission that the value here is less about the infrastructure itself than in the customer relationship. For now, not all mobile networks are made equal, so the “my network is faster than yours” angle still underpins mobile operators’ marketing campaigns, at least to consumers.

But 5G opens up new service opportunities that push for other capabilities beyond “speeds and feeds”, such as reliability, availability, flexibility, scalability and latency, the latter of which is vital for some edge computing uses. These opportunities place more complex demands on telecom infrastructure, related to network intelligence, processing power and virtualization, shifting the emphasis from hardware to software.

In the new service model, network operators have to balance traditional telecom operations with areas outside their expertise, such as IT, big data and analytics, artificial intelligence and automation for network decision-making. So it becomes necessary to seek partnerships and collaboration with new players (new to the telecom sphere, at least) such as IT and computing companies and Internet giants. But how this rearranges the value chain isn’t yet certain and remains a talking point in the industry.

The question of what defines a network operator takes on yet another dimension with the increase in private mobile networks, where enterprises create their own 5G network by working with mobile operators or by owning modest swathes of radio spectrum and building their own infrastructure.

This also prompts a re-evaluation of the role of network equipment providers. In the 5G RAN space, these are primarily Ericsson, Huawei, Nokia and ZTE, all of which are busily strengthening their channels to enterprises and industry sectors to deliver private network solutions. However, their own traditional base of equipment supply is under scrutiny: 5G is driving a shift toward Open RAN, potentially creating disruptive opportunities for a more diverse community of technology providers with software-defined solutions to thrive in the mobile infrastructure space.

So yes, it’s certainly an interesting time to be an infrastructure analyst! Unlike previous generations of mobile networking technology, which firmly and literally built on the foundations of the previous generations, 5G rips up the playbook. It goes to the heart of the questions: what sort of networks do we want, who should build and operate them and how much are we willing to pay to use them? With the layers of technology behind services ever more complex, network infrastructure has arguably never been more valuable, but maybe the value chain for it needs rethinking.

All this makes for many interesting and new scenarios about services on 5G networks, and the disruption we may see in the market, and we’re starting to put our thoughts together about this topic for our annual Predictions event in October. I will be analysing these and other network-related themes such as Open RAN, private mobile networks, mobile crosshaul evolution, network performance, and the road map to 6G in my new role at CCS Insight, and look forward to many interesting discussions with you all.

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