SINGAPORE—Mobile network operators (MNO) need to act quick and adapt new technologies to address growing demand for more and faster data, as well as flat-to-decreasing per subscriber revenue, to survive and compete in the 5G era, an industry expert said.
5G Americas board member John Baker cited The Zetabye Era report by Cisco in 2017, which showed in a five-year span the inverse proportion between increasing global connections and decreasing MNO revenue. The report projected that by 2020, there will be 23 billion device connections, while MNO revenue will drop from $807 billion in 2016 to $657 billion.
“If operators don’t start picking up on new technologies, they’re going to lose out long term,” said Baker, who’s also the SVP, Business Development, of American software-based telecommunications networking provider Mavenir.
Together with Mobile World Live, Mavenir published a white paper that detailed its mission to transform mobile network economics to reduce cost for MNOs, while generating and protecting revenue.
The company presented that the need for economic transformation is rooted on growing pressure to meet ever-increasing capacity demands, especially at the dawn of the 5G era, wherein billions of people and trillions of things are to be connected.
“The decisions operators make today for upgrading 4G networks to cope with current demand will ultimately affect their ability to compete, and even survive, in the 5G era,” the white paper stated.
Wireless operators are well aware of this. Global capital expenditures for the mobile industry between 2018 and 2020—widely considered as crucial years for 5G expansion—are estimated at $479 billion.
The current capex levels, however, constrain wireless operator profitability and keep them from participating in new service revenues.
China Mobile has reported that it spent 22.3 percent of its revenue from telecoms services, or $11.4 billion, on capex in the first half of 2018. Meanwhile, AT&T has declared capex of $5.9 billion in the third quarter of the same year, while Deutsche Telekom has reported $3.4 billion in the same period.
Despite the investments, demand is seen to continue to grow at unprecedented levels. According to Cisco’s Visual Networking Index, mobile data traffic will increase sevenfold between 2017 and 2022 with a 46-percent annual growth rate. Gartner also forecasts that the number of Internet of Things connected devices will surge from 8.7 billion in 2017 to 20.4 billion in 2020.
Aside from pressure to meet capacity demand while containing costs, mobile operators also have to compete with Web-scale companies like Facebook and Google that offer the market with “similar or even more innovative services at a lower cost base.” Operator revenue from SMS text messaging, for example, has diminished with the advent of free messaging apps, such as WhatsApp, FaceTime or Facebook messenger.
As current infrastructure architectures cannot cost-effectively scale to meet demand, nor provide the flexibility to allow rapid introduction of revenue-generating services, Mavenir proposes that the key to prosper in the 5G era is for wireless operators to build cost-efficient, flexible and agile networks to deliver innovative services, and grow the top and bottom lines. “The technology shift marks a distinct departure from a traditional telco mindset to Web-scale deployments and speeds, including fundamental changes in how operators engage with suppliers as they adopt new and innovative software licensing models,” the white paper stated.
In an interview with Telecom Review, Mavenir Head of Region in Dubai Mark Charman said the main technology enabling the change is known as Network Functions Virtualization (NFV), where the cloud data center can deploy software nodes on top.
“The cost per gigabit is decreased significantly, offering operators the necessary cost savings for the move to 5G,” he said.
The vision for NFV is a radical transformation in the way that networks are built and services are delivered to achieve cost savings in capex and
opex, as well as accelerate service deployment and time to market.
Virtualization, as the white paper stated, enables mobile operators to deploy software-based network functions on general purpose hardware, rather than install proprietary appliances every time they need a new network function, service or application. Basically, the benefits of NFV are cost savings, deployment flexibility and service agility.
Mavenir is touted as the “industry’s only end-to-end, cloud-native network software provider,” with more than 250 operator customers in 140 countries. The company is focused on accelerating software network transformation and redefining network economics for communications service providers by offering a comprehensive end-to-end product portfolio across every layer of the network infrastructure stack.
“In Mavenir, we could change the current economics by virtualization, automation and innovation,” said Sam Saba, Mavenir head of Apac Region. “In essence, we see ourselves as the disruptor to the traditional.”
Virtualization fosters new architectures in Radio Access Network (RAN) that enable mobile operators to dramatically improve performance and reduce costs.
Of the three distinct types of RAN architecture, which includes the common Distributed RAN (DRAN) and the Centralized RAN (C-RAN), the Virtualized RAN overcomes traditional RAN limitations by leveraging virtualization.
vRAN significantly reduces total cost of ownership, or TCO, compared to traditional DRAN, and brings flexibility, scalability and cost savings to network virtualization to the mobile network edge.
Data from Mavenir showed that the vRAN model yielded 37 percent capex and opex blended cost savings compared to DRAN, 23 percent compared to C-RAN, and 48 percent cost savings of small cells compared to macro cells over a five-year period.
“The RAN industry is about to see significant transformation,” Baker said.