Making Sense of the Telco Cloud

In recent years the cloudification of communication networks, or “telco cloud” has become a byword for telecom modernisation. This Telecoms.com Intelligence Monthly Briefing aims to analyse what telcos’ transition to cloud means to the stakeholders in the telecom and cloud ecosystems. Before exploring the nooks and crannies of telco cloud, however, it is worthwhile first taking an elevated view of cloud native in general. On one hand, telco cloud is a subset of the overall cloud native landscape, on the other, telco cloud almost sounds an oxymoron. Telecom operator’s monolithic networks and cloud architecture are often seen as two different species, but such impressions are wrong.

(Here we are sharing the opening section of this Telecoms.com Intelligence special briefing to look into how telco cloud has changing both the industry landscape and operator strategies.

The full version of the report is available for free to download here.)

What cloud native is, and why we need it

“Cloud native” have been buzz words for a couple of years though often, like with many other buzz words, different people mean many different things when they use the same term. As the authors of a recently published Microsoft ebook quipped, ask ten colleagues to define cloud native, and there’s good chance you’ll get eight different answers. (Rob Vettor, Steve “ardalis” Smith: Architecting Cloud Native .NET Applications for Azure, preview edition, April 2020)

Here are a couple of “cloud native” definitions that more or less agree with each other, though with different stresses.

The Cloud Native Computing Foundation (CNCF), an industry organisation with over 500 member organisations from different sectors of the industry, defines cloud native as “computing (that) uses an open source software stack to deploy applications as microservices, packaging each part into its own container, and dynamically orchestrating those containers to optimize resource utilization.”

Gabriel Brown, an analyst from Heavy Reading, has a largely similar definition for cloud native, though he puts it more succinctly. For him, cloud native means “containerized micro-services deployed on bare metal and managed by Kubernetes”, the de facto standard of container management.

Although cloud native has a strong inclination towards containers, or containerised services, it is not just about containers. An important element of cloud native computing is in its deployment mode using DevOps. This is duly stressed by Omdia, a research firm, which prescribes cloud native as “the first foundation is to use agile methodologies in development, building on this with DevOps adoption across IT and, ideally, in the organization as well, and using microservices software architecture, with deployment on the cloud (wherever it is, on-premises or public).”

Some would argue the continuous nature of DevOps is as important to cloud native as the infrastructure and containerised services. Red Hat, an IBM subsidiary and one of the leading cloud native vendors and champions for DevOps practices, sees cloud native in a number of common themes including “heavily virtualized, software-defined, highly resilient infrastructure, allowing telcos to add services more quickly and centrally manage their resources.”

These themes are aligned with the understanding of cloud native by Telecoms.com Intelligence, and this report will discuss cloud native and telco cloud along this line. (A full Q&A with Azhar Sayeed, Chief Architect, Service Provider at Red Hat can be found at the end of this report).

The main benefits of cloud native computing are speed, agility, and scalability. As CNCF spells it out, “cloud native technologies empower organizations to build and run scalable applications in modern, dynamic environments such as public, private, and hybrid clouds. Containers, service meshes, microservices, immutable infrastructure, and declarative APIs exemplify this approach. These techniques enable loosely coupled systems that are resilient, manageable, and observable. Combined with robust automation, they allow engineers to make high-impact changes frequently and predictably with minimal toil.”

To adapt such thinking to the telecom industry, the gains from migrating to cloud native are primarily a reflection of, and driven by, the increasing convergence between network and IT domains. The first candidate domain that cloud technology can vastly improve on, and to a certain degree replace the heavy infrastructure, is the support for the telcos’ own IT systems, including the network facing Operational Support Systems and customer facing Business Support System (OSS and BSS).

But IT cloud alone is far from what telcos can benefit from the migration to cloud native. The rest of this report will discuss how telcos can and do embark on the journey to cloud native, as a means to deliver true business benefits through improved speed, agility, and scalability to their own networks and their customers.

The rest of the report include these sections:

  • The many stratifications of telco cloud
  • Clouds gathering on telcos
  • What we can expect to see on the telco cloud skyline
  • Telco cloud openness leads to agility and savings — Q&A with Azhar Sayeed, Chief Architect, Service Provider, Red Hat
  • Additional Resources

The full version of the report is available for free to download here.

GSMA cosies up to O-RAN Alliance

The GSMA, the telco industry lobby group, has announced a new partnership with the O-RAN Alliance to accelerate the adoption of Open Radio Access Network (RAN) technologies.

Although the benefits of OpenRAN technologies are still widely disputed by opposing corners of the industry, there is clear momentum gathering. With telcos desperate to make the commercial realities of network deployment more attractive, it should come as little surprise new ideas are being embraced.

“As the demand for data and vastly expanded mobile communications grow in the 5G era, a global, cross-border approach is needed to rethink the RAN,” said Andre Fuetsch, Chairman of the O-RAN Alliance, and CTO of AT&T.

“The GSMA collaboration with the O-RAN ALLIANCE is exactly the sort of global effort that’s needed for everyone, operators and vendors alike, to succeed in this new generation.”

The promise of OpenRAN technologies is simple. Firstly, more competition will be introduced to the market to encourage diversity and resilience. Secondly, once hardware and software have been disaggregated, deployment costs will be decreased, and innovation can be increased as best-in-breed technologies can be selected for each segment. Finally, vendor lock-in will become a thing of the past.

The Telecom Infra Project (TIP) has recently released a report which demonstrates the drive of the mobile network operators (MNOs). 53% are now prioritising total cost of ownership (TCO) reductions as profits erode and capital expenditure expenses increase.

What is worth noting is that the MNOs are taking a realistic view on the development of this segment. 66% believe Open RAN technologies will be critical to the survival of numerous MNOs as ARPU falls, but it will be several years before a comprehensive, resilient and competitive ecosystem emerges. A third of tier-1 and half of tier-2 telcos believe they will have commercially launched OpenRAN by 2023, but this does not mean the death of traditional network infrastructure within a generation.

While all these promises sound very interesting, optimism is not shared by all in the industry.

“Not all openness is good and not all closed-ness is good,” Nokia CTO Marcus Weldon said this week.

The likes of Nokia, Ericsson and Huawei will give messages of support to OpenRAN in public, but there will always be an undertone of doubt, as is in Weldon’s message above. The OpenRAN movement fundamentally destroys their business model so it is not difficult to understand why they have resisted and not been as helpful as they could have been to date. Slowing down this movement provides a bit more time for profits without disruption to operations after all.

The OpenRAN ecosystem is not ready yet, despite what some might insist, though progress is being made. And while this partnership might seem like little more than a ribbon cutting ceremony it is also very important. Like Vodafone or Telefonica embracing OpenRAN trials, a partnership with the GSMA provides credibility for the technologies, encouragement for less adventurous and innovative telcos.


Telecoms.com Poll:

When will OpenRAN be ready to be embraced by the industry without reservation?

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New appointment arrives to clean up Three’s network fiasco

UK telco Three has announced the appointment of Carlo Melis as Chief Network Officer just as the Huawei saga starts to rear its head once again.

Over the course of the last week, the rumour mill has been churning at full capacity, with Huawei’s name popping up on more than one occasion. Prime Minister Boris Johnson is facing a backbencher revolt unless ‘high-risk’ vendors are removed from networks within years, while the National Cyber Security Centre (NCSC) is once again investigating whether the firm is in a sound enough position to work with UK telcos.

One might have said there were better times for Melis to join the business.

Arriving from Wind Tre in Italy, Melis has been working on network resilience during the on-going COVID-19 landscape though eventually his attention will turn to managing the spectrum portfolio and presumably creating a network which can rival market leaders within the UK. Much work has been done in recent years, though thanks to outside influences, Three is still in somewhat of a difficult position.

“Three has been on an incredible journey, completely overhauling its network and IT infrastructure and laying the foundations for a 5G network that will dramatically transform the experience for its customers, at the same time as delivering major 4G improvements,” said Melis.

“I’m looking forward to joining Three, bringing my expertise to build on the great progress already achieved and to deliver a network that will stand the business in good stead long into the future.”

The last few months have certainly been an eclectic mix of ups and downs for the Three business. The fixed wireless access (FWA) proposition and campus network offering was looking healthy before Ros Singleton left the business. These business units are still functional, but look a little weaker without Singleton involved, however it is the more mainstream 5G programme which looks more precarious.

Announced at almost the exact same time as the departure of Phil Sheppard, who was effectively the company’s CTO, was the conclusion of the Supply Chain Review. Huawei was designated a high-risk vendor, and therefore limited to providing a maximum of 35% of a telcos network infrastructure equipment. This is a significant problem for Three which decided Huawei was going to be the sole supplier of RAN equipment for its 5G network.

These are the complications Melis needs to manage over the next few months. Alongside the teething problems of a new cloud core and ensuring the 4G network remains stable during this period of dramatically increased traffic, the 5G deployment strategy needs to be reimagined. Of course, this becomes difficult when even more uncertainty is introduced by rebellious politicians and the NCSC investigation.

It could have been a smoother start for Melis…


Telecoms.com Daily Poll:

Should privacy rules be re-evaluated in light of a new type of society?

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MTS delivers solid Q1 but provides cautious outlook

Russian operator MTS saw revenues grow 9% in Q1 but believes the whole-year performance is likely to be flat.

MTS has delivered a financially solid Q1 with a total revenue of RUB 119.6 billion ($1.7 billion), up by 8.9% year-on-year. The company’s OIBDA grew by 1.6% to RUB 51.5 billion ($730 million), while net profit improved 0.8% to RUB 17.7 billion ($250 million) compared to the same period of 2019. The strongest growth comes out of its mobile and fixed telecom services, but about half of the top line growth comes from the adjacent businesses, including fintech, digital services, and retail.

“…this is an unprecedented time that is impacting billions of people around the world, including millions of our customers and thousands of our employees,” Alexey Kornya, MTS President and CEO, said during the earnings call. “Connectivity has never been more critical and we are proud to be helping our customers stay in touch with their friends and family as well as colleagues and classmates.

“Overall, I am deeply proud of the MTS team and would like to express my appreciation for their professionalism in this challenging environment. Looking ahead, I am cautiously hopeful for the future, and our strategic focus is clear: supporting our customers today while not losing sight of our goals for tomorrow.”

As Russia entered COVID-19 lockdown only at the end of March, its impact was not reflected in the Q1 results. However, MTS does provide a glimpse into the impact on April and the first half of May.

Similar to other operators that have witnessed during COVID-19, MTS has seen increased traffic but a big drop in retail with many shops are closed. Meanwhile, the operator has seen and expects increased digital activities, in communication, media, and in financial product consumption. In mobile, MTS has received the regulatory approval to implement self-registration SIM cards through an app.

“Looking ahead, we plan to prioritize this channel at the key level to lower subscriber acquisition cost,” said Inessa Galaktionova, First VP for Telecommunications. MTS is “also broadening our SIM-based infection tracking across all of our sales channels.”

“Now more than ever, consumers are shifting to digital-first banking from online customer service to virtual cards and contactless payments,” said Andrey Kamensky, VP for Finance, on the earnings call, suggesting there could be greater benefit for MTS.

Looking at the full-year expectations, MTS’s management is more cautious. Citing concerns including reduced number of retail outlets as well as the impact of lockdown on roaming income, the operator projects a 0% to 3% growth in total revenues and -2% to 0% OIBDA move, compared with 2019.

MTS is the latest of telecoms companies to show that the industry has withstood the uncertainties from COVID-19 well enough especially when it comes to coping with surging traffic, but it is certainly not immune to the impact. Factors ranging from reduced retail and roaming income due to lockdown to overall economic weakness are beyond the telecom operators’ control, but have or will have manifested on telecom operators’ quarterly and annual numbers.

A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


Facebook reignites the fires of its Workplace unit

Facebook has announced its challenge to the video-conferencing segment and a reignition of its venture into the world of collaboration and productivity.

Full story here


Trump needs fodder for the campaign trail, maybe Huawei fits the bill

A thriving economy and low levels of unemployment might have been the focal point of President Donald Trump’s re-election campaign, pre-pandemic, but fighting the ‘red under the bed’ might have to do now.

Full story here


Will remote working trends endure beyond lockdown?

It is most likely anyone reading this article is doing so from the comfort of their own home, but the question is whether this has become the new norm is a digitally defined economy?

Full story here


ZTE and China Unicom get started on 6G

Chinese kit vendor ZTE has decided now is a good time to announce it has signed a strategic cooperation agreement on 6G with operator China Unicom.

Full story here


ITU says lower prices don’t lead to higher internet penetration

The UN telecoms agency observes that, while global connectivity prices are going down, the relationship with penetration is not as inversely proportion as you might think.

Full story here


Jio carves out space for yet another US investor

It seems the US moneymen have a taste for Indian connectivity as General Atlantic becomes the fourth third-party firm to invest in the money-making machine which is Jio Platforms.

Full story here


Telecoms.com Daily Poll:

Can the sharing economy (ride-sharing, short-stay accommodation etc.) survive COVID-19?

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A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


Reports suggest the BT empire is beginning to crumble

No-one in the UK should be in the same league as BT, but poorly executed strategy has kept rivals within touching distance and now the foundations are reportedly being sold off.

Read the full story here


Microsoft doubles down on the telco cloud with Metaswitch acquisition

Don’t say you weren’t warned, telecoms industry. The tech big guns are trained on your home turf and they’re not afraid to splash the cash.

Read the full story here


Huawei threatened to pull investment from Denmark in response to new screening law

The head of Huawei Denmark sent a letter to the Danish Prime Minister indicating it would rethink its involvement with the country if special security requirements were imposed on it.

Read the full story here


Return to work messages start to appear as Twitter hands power to employees

One of the questions which has lingered over the last few weeks is whether the COVID-19 enforced digital transformation will persist in the long-term, though the answer is becoming a bit clearer.

Read the full story here


ETSI gets to work on new contact tracing app standard

With countries across Europe all trying to reinvent the wheel with their own contact tracing apps, standardization is long overdue.

Read the full story here


Reliance Jio signs a third deal to add another $1.5bn to its bank account

Vista Equity Partners has become the third-largest investor in Reliance Platforms, purchasing a 2.32% equity stake in the disruptive business for $1.5 billion.

Read the full story here


 

A look back at the biggest stories this week

Whether it’s important, depressing or just entertaining, the telecoms industry is always one which attracts attention.

Here are the stories we think are worth a second look at this week:


O2 and Virgin Media are merging to form BT-busting connectivity giant

Telefonica and Liberty Global have confirmed plans to merge UK operations, O2 and Virgin Media, to challenge the connectivity market leader BT.

Full story here.


privacyHalf of Americans approve of using smartphones to track infected individuals

Pew Research Center asked thousands of US adults what they thought about how personal data should be used to help tackle the COVID-19 pandemic.

Full story here.


CSPs are being cut out of enterprise 5G projects – study

A new bit of research conducted by Omdia and BearingPoint//Beyond has found that only a small proportion of B2B 5G deals are being done by operators.

Full story here.


Streaming venture leads Disney to 29% revenue surge

The Walt Disney company has reported a 29% increase for year-on-year revenues thanks to its streaming bet, but COVID-19 has forced the team to withhold dividend payments.

Full story here.


Silver Lake pays a premium for a chunk of Jio Platforms

Private equity firm Silver Lake has shelled out $750 million for a 1.15% stake in the Indian telco, which represents a 12.5% premium on the price Facebook recently paid.

Full story here.


Online gaming seems coronavirus proof, but is it recession proof?

Online entertainment and gaming companies are seeing COVID-19 surges in revenues, but are these businesses in a position to resist the pressures of a global recession?

Full story here.

O2 and Virgin Media are merging to form BT-busting connectivity giant

Telefónica and Liberty Global have confirmed plans to merge UK operations, O2 and Virgin Media, to challenge the connectivity market leader BT.

Since the end of the Supply Chain Review, the UK telecoms market has been relatively mundane, operating as one would largely expect, however this merger throws a cat amongst the pigeons. All of a sudden, the UK has become on the most interesting markets to watch, with the promise of a second convergence connectivity business to rival market leader BT.

“Combining O2’s number one mobile business with Virgin Media’s superfast broadband network and entertainment services will be a game-changer in the UK, at a time when demand for connectivity has never been greater or more critical,” said Telefónica CEO Jose Maria Alvarez-Pallete. “We are creating a strong competitor with significant scale and financial strength to invest in UK digital infrastructure and give millions of consumer, business and public sector customers more choice and value.”

“We couldn’t be more excited about this combination,” said Mike Fries, CEO of Liberty Global. “Virgin Media has redefined broadband and entertainment in the UK with lightning fast speeds and the most innovative video platform. And O2 is widely recognized as the most reliable and admired mobile operator in the UK, always putting the customer first. With Virgin Media and O2 together, the future of convergence is here today.”

Talks emerged earlier this week, though they certainly got to the official confirmation stage quicker than many were expecting.

As part of the agreement, a 50-50 joint venture will be created, with the promise to spend more than $10 billion on network development over the next five years. Synergies are expected to be as much as £6.2 billion, with 46 million subscribers, 15 million homes passed for broadband, 99% population coverage for mobile, 18,700 employees and £11 billion in revenue.

Full details on the deal can be found on a new website, proudly proclaiming the creation of a national digital champion.

This all sounds very promising, but when the merger is complete in mid-2021, which brand will survive?


What should a merged O2/Virgin Media company be called?

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“In the long run, we believe it would be better for the JV to retain the O2 brand at the expense of Virgin Media,” said Kester Mann of CCS Insight. “Both have a strong presence, but O2’s respected customer service, highly loyal customers and sponsorship of the O2 arena mean it is impossible to drop. A multi-brand approach serves only to duplicate costs and risks confusing customers.”

For convergence to work, there can only be one brand which survives. BT’s £12.5 billion of EE has arguably not paid off to date as the two brands still exist, effectively creating two separate business units inside the same group. There might be convergence benefits from an operational perspective, but to realise the gains from a customer and commercial angle, the businesses have to be fully consolidated and coherent.

BT has never really been able to take advantage of its assets. It has the largest mobile network, the largest broadband network, the largest public wifi footprint and the largest bank accounts to throw cash at content. Its inability to evolve into a convergence-defined business has opened the door for O2 and Virgin Media. But the question is whether the duo can learn from these mistakes.

Ultimately this is a major threat to the BT business, not because this is a combination which can potentially match the scale and depth of BT services, but these are also two currently healthy businesses which are coming together.

Financial Results for O2 and Virgin Media to March 31 (UK sterling (£), millions)
O2 Virgin Media
Total Year-on-year Total Year-on-year
Revenue 1,739 2.9% 1,266 -0.6%
Profit 516 2.4% 84 >1000%

Sources: Liberty Global Investor Relations and Telefonica Investor Relations

Usually, when mergers and acquisitions are discussed, one of the parties is a significantly stronger position than the other. It can still be good news, but there is plenty of work to do during the integration stages to ensure the new company is fighting fit. This is not the case with O2 and Virgin Media.

Virgin Media might have experienced a bit of a downturn over this three-month financial period, but this could likely be attributed to dampened customer acquisition amid the COVID-19 outbreak, while O2 has demonstrated year-on-year increases once again.

While these are healthy businesses right now, some might have suggested limited success in the convergence game would have caught up eventually. This is a very encouraging move forward, getting ahead of negative impacts, though a renewed assault on TV/content is needed. Neither, despite what Virgin Media claims, have done very well in this segment.

Current subscriber numbers for O2 and Virgin Media
Mobile Broadband Content
O2 35,266,217 29,085 *
Virgin Media 3,179,500 5,271,000 3,687,400

Source: Omdia World Information Series

*Too early to tell how successful the partnership with Disney+ to add a content element to O2 bundling has been

One area which should be allocated to the risk column, though it is a very minor risk, is the prospect of regulatory intervention.

“Unlike when O2 attempted to join forces with Three in 2015 but was blocked by the European Commission, I don’t expect there to be any major hurdles to this deal going through,” said Dan Howdle, consumer telecoms analyst at Cable.co.uk. “After all, with BT’s purchase of EE given the all-clear in 2016, it’s difficult to see how a case could be made to block it.”

These are both telecoms companies, but service overlap is minimal. Core competencies lie in different segments, and while there have been attempts to launch into parallels, success has been woeful. These are complementary companies with little material service overlap.

When considering whether competition authorities will be interested, you have to ask whether the merger would make single business units stronger or is the company stronger by association with parallel services. O2’s mobile business will not be enhanced materially by Virgin Media’s MVNO proposition, and Virgin Media will not benefit from O2 at all in the fixed connectivity game. There does not seem to be any case for objection on the grounds of competition.

Aside from the direct impact for both Virgin Media and O2, the rest of the market could be spurred into action.

“Vodafone UK appears the biggest loser as the deal lays bare its weak position in the market for converged services,” said CCS Insight’s Mann. “It also looks certain to scupper its virtual network partnership struck with Virgin Media in 2019. We think this deal will trigger a ripple effect on the UK market: Vodafone, Three, Sky and TalkTalk will all be assessing their positions and further deal-making can’t be ruled out.”

This is a challenge to the industry and will create a rival to BT in mobile, broadband, convergence and enterprise. However, it is also worth remembering the ‘also rans’.

Unless the ambitions of rivals are inspired by this threat, the prospect of a tiered connectivity industry could emerge, with those offering bundled services on top and the pureplay service providers on the bottom.

The UK has quickly become one of the worlds’ most interesting telecoms markets, thanks to the permutations which could be inspired by this merger.

Tier One Tier Two Tier Three
  • BT (mobile, broadband, content)
  • O2/Virgin Media (mobile, broadband)
  • Sky (content and broadband)
  • Vodafone (mobile and broadband)
  • TalkTalk (broadband)
  • Three (mobile)
  • MVNOs
  • Alt-nets

OpenRAN lobby group forms in US with 31 founding members

A new lobby group has emerged in the US, known as the Open RAN Policy Coalition, with a mission to guide policy making and encourage the promotion of the OpenRAN movement.

OpenRAN is of course gathering momentum across numerous different segments of the telecoms industry, though it is still in its embryonic days. It will be years before OpenRAN can materially challenge the status quo in the network infrastructure ecosystem, but assistive government policy and a generous regulatory environment could certainly accelerate this roadmap.

“As evidenced by the current global pandemic, vendor choice and flexibility in next-generation network deployments are necessary from a security and performance standpoint,” said Diane Rinaldo, Executive Director of the Open RAN Policy Coalition, though we aren’t too sure how the two are related.

“By promoting policies that standardize and develop open interfaces, we can ensure interoperability and security across different players and potentially lower the barrier to entry for new innovators.”

As a technology set, OpenRAN disaggregates radio, hardware and software components of telecoms networks. The objective is to offer the opportunity for telcos to build networks through a modular design, selecting each component on its own merit as opposed to proprietary technologies which bundle everything together and potentially create vendor lock-in situations.

Theoretically, networks should be cheaper to deploy as there would be greater diversity in the supplier ecosystem with specialists emerging in each segment.

The purpose of this group is as most would expect; to influence government policy for OpenRAN technologies and to encourage enforced diversity in telecoms supply chains. The group will push for policies which are more overtly in support of open and interoperable wireless technologies, funding R&D, lower barriers for 5G deployment and use government procurement to support vendor diversity.

Much of what is being said is hardly different from the corporate and meaningless jargon which litters the industry thanks to the influence of PR agencies who have little more than surface knowledge, but some of the policy objectives are quite interesting:

  • Signal government support for open and interoperable solutions: Perhaps this is suggesting the group will push governments to pick a camp and actively promote open technologies
  • Use government procurement to support vendor diversity: Should the lobby be successful, maybe there will be regulatory requirements to incorporate open technologies into any network which receives public funds
  • Avoid heavy-handed or prescriptive solutions: Could these mean an end to proprietary technologies through legislation?

For some, this might seem like a worrying development (Ericsson, Nokia or Huawei are hardly going to be thrilled) but the move has been welcomed by others in the industry.

“The launch of the Open RAN Policy Coalition shows the momentum building behind a more competitive, innovative, technology ecosystem,” said Attilio Zani, Executive Director of the Telecom Infra Project.

“At the heart of TIP’s work is the development and deployment of open, disaggregated, standards-based solutions – that are developed in conjunction with the operators. This, together with a supportive policy environment that allows new technology to flourish, will create greater opportunities for new entrants and a more diverse supply chain that will ultimately transform the industry to deliver the high-quality connectivity that the world needs – now and in the decades to come.”

The emergence of a formal lobby group is another step towards the breakthrough of Open RAN technologies, though momentum is already gathering very quickly in the US.

In protest against China emerging as the powerhouse of the 5G era, the US Government has been quick to jump on the Open RAN bandwagon. This preference serves two purposes for the US Government; firstly, it dilutes the influence Chinese infrastructure vendors have on the industry, and secondly, it stimulates the creation of US infrastructure companies. There aren’t many US names in the RAN game currently.

Earlier this year, a bill was introduced to Congress to provide up to $1 billion of federal funds to create Western-based alternatives to Chinese equipment providers Huawei and ZTE.

“Every month that the US does nothing, Huawei stands poised to become the cheapest, fastest, most ubiquitous global provider of 5G, while US and Western companies and workers lose out on market share and jobs,” said Senator Mark Warner, a particularly vocal critic of China.

“Widespread adoption of 5G technology has the potential to unleash sweeping effects for the future of internet-connected devices, individual data security, and national security. It is imperative that Congress address the complex security and competitiveness challenges that Chinese-directed telecommunication companies pose.”

OpenRAN technologies are not a market-ready alternative for traditional RAN equipment in most circumstances now, though there is swift progress being made. With the likes of Rakuten and Dish championing open networks, the status quo is beginning to shift, which will only be accelerated with political support. The formation of this lobby group to compound existing support in the US political aisles is a very interesting development.

Founding members of Open RAN Policy Coalition:

Airspan, Altiostar, AWS, AT&T, Cisco, CommScope, Dell, Dish Network, Facebook, Fujitsu, Google, IBM, Intel, Juniper Networks, Mavenir, Microsoft, NEC Corporation, NewEdge Signal Solutions, NTT, Oracle, Parallel Wireless, Qualcomm, Rakuten, Samsung Electronics America, Telefónica, US Ignite, Verizon, VMWare, Vodafone, World Wide Technology, and XCOM-Labs.

O2 completes full convergence U-turn amid Virgin Media merger talks

Two years ago, O2 CEO Mark Evans said he was not convinced by the idea of convergence, but as merger talks between O2 and Virgin Media swell, the telco has entered into moonwalking mode.

The negotiations between O2 parent company Telefónica and Virgin Media owner Liberty Global, which have been confirmed by Telefónica’s group corporate communications team, would being together two of the UK’s connectivity heavyweights, significantly shifting competition dynamics in the telecoms market.

“A deal between O2 and Virgin Media has much logic,” said Kester Mann of CCS Insight. “Notably, it would offer each side crucial assets it severely lacks: a mobile network for Virgin and a fixed-line arm for O2. Should it come to fruition, it would transform the UK telecoms industry and a create a giant converged provider to rival BT.”

As Mann highlights above, the merger of the two parties would certainly create a converged telco capable of challenging the market dominance of BT. For one reason or another, the convergence trend was passing these telcos by, but uniting powers is a very interesting move.

At Virgin Media, this is a team which attempted to make waves with bundled service offering, but never really cracked the equation. The TV element was always a bit weak, while not owning its own mobile network was always going to put it a step behind the main players.

Current subscriber numbers for O2 and Virgin Media
Mobile Broadband Content
O2 35,266,217 29,085 *
Virgin Media 3,179,500 5,271,000 3,687,400

Source: Omdia World Information Series

*Too early to tell how successful the partnership with Disney+ to add a content element to O2 bundling has been

At O2, the executive team always made a point that the telco was a mobile connectivity business and it would not get distracted by side-missions into content or broadband. This stubborn position has of course been watered down over the last year or two, and now it appears Telefónica is embracing the convergence trend without prejudice.

To date these are companies who have been successful focusing on core competencies, but the world is of course changing, with the risks to pureplay telcos very noticeable.

“Neither company is immune to the driving need for a converged network and services,” said Paolo Pescatore of PPF Foresight.

“This is the next battle ground in the UK. Virgin Media has been one of the pioneers in this area but has been let down without a mobile network, late to market in 4G and a struggling TV business. Whereas O2’s sole focus on mobile and championing consumers will run out of steam at some point.”

What is of course worth noting is that this is a deal which is far from complete. Firstly, the duo would have to agree on a price, secondly, existing partnerships would have to be unwound, one of the brands would have to be folded into the other and finally, regulatory approval would have to be sought.

Both of these UK telcos are successful components of international corporations. Group level executives would want to ensure there the business benefits suitably financially, while also maintain a high enough stake in the merged business moving forward. This could prove to be a prickly point during the negotiations.

In terms of the existing partnerships, Virgin Media signed a very prominent MVNO agreement with Vodafone in recent months, while O2 offers MVNO services to Sky. These deals would likely have to be examined during the negotiation periods to ensure a merged party does not offer to much assistance to rivals.

Although O2 and Virgin Media are successful brands in their own right, one would have to give way to the other. BT and EE co-exist in the same group function, but the full benefits of convergence cannot be realised with two distinct brands. The teams would have to figure out which brand survives, and which one dies.

Finally, regulation. This has been an irritation for UK telcos in recent years as European authorities seem very dismissive of consolidation demands from the industry. As service overlap between O2 and Virgin Media is minimal, we suspect this will not be too much of an issue, though the likes of BT, Vodafone, Sky and Three will likely kick up a stink as the merged entity is a threatening prospect.

Should all the pieces fall into place, this is a move which could benefit both parties considerably. O2 would gain more access to fibre assets, Virgin Media to mobile infrastructure and both would be able to offer a broader portfolio of services.

Convergence is a business model which offers considerable gains in terms of customer loyalty, operational efficiencies, net promoter score, average revenue per user and momentum in diversification ventures. However, the barriers to entry are high, time consuming and very expensive. This is far from a finished deal, but it would create a much more competitive force and a potential catalyst for disruption in the UK market.