Investors and shareholders are increasingly losing their patience with telcos, which have promised that their enterprise revenue will soon overtake their consumer business. At the same time, enterprise end users are not yet convinced that today’s 5G can address their pressing key pain points in line with the IMT-2020 vision most 5G suppliers are preaching.

Since the beginning of 5G, enterprise business models and use cases have been promising a massive opportunity with 5G, including network slicing, low-latency services, network flexibility to bring more intelligence close to the enterprise, and more, none of which have materialized. There are several facts that indicate that telcos have tried to address enterprise use cases, they have largely failed, and are now “retreating” toward a business future that is more in line with their legacy. We can’t tell what this future is, but it may not likely be what 5G promised for enterprise applications and network slicing.

The Facts

Several market events allude to the fact that telco operators have somewhat lowered their 5G ambition to risk, innovate, and transform their business from connectivity-centric to a Platform-as-a-Service or even Software-as-a-Service. Some of these examples include the following market announcements:

• In June 2021, AT&T announced that it is selling its 5G mobile core network assets, including employees and intellectual property, to Microsoft Azure. By doing so, AT&T has effectively outsourced its core network to Azure. The core network will eventually be the enabling platform for network slicing and advanced 5G features, meaning that AT&T has effectively outsourced a core part of its potential future innovation platform to a hyperscaler.
• In May 2022, Google Cloud acquired MobiledgeX. The controlling stakeholder for the company was Deutsche Telekom (DT), but there were multiple investments by large telcos, including Samsung and VMWare. MobiledgeX was expected to federate telco edge locations and offer a consistent Application Programming Interface (API) to developers, which could eventually develop applications that would be deployed in any operator network that was connected to the platform. Despite this being one of the most aggressive and necessary edge initiatives in the market, it was sold to Google Cloud, which competes against operator edge strategies.
• In June 2022, Vodafone hinted that its Internet of Things (IoT) business is about to be spun off to a separate entity, which may allow this new company to partner with competing operators to create the scale needed for the IoT low-profit, high-volume business. However, expertise in IoT and low-power wireless will likely be necessary to take advantage of 5G’s promised Massive Machine Type Communications (mMTC) profile, which is one of 5G’s three pillars. Without an IoT business or expertise, Vodafone would forfeit one of the key areas for 5G.

All the above announcements are likely good news for investors and shareholders, and perhaps short-term profitability, but not good news for strategists looking at the long-term evolution of telco business models.

Can Telcos Really Evolve?

The discussion above brings us to this question, whether telcos can really evolve, or they should abandon all these initiatives and limit their ambitions to their connectivity legacy for the future. They are experts in connecting people, devices, and enterprises, and this will remain a profitable business, albeit with shrinking profit margins. Unfortunately, previous attempts to modernize the telco business have failed, including what was called walled gardens, smart pipes, Network APIs, and even several operator digital initiatives, including Telefónica Digital. It could be said that telcos couldn’t manage to transform to value-added service providers when they had minimal competition outside the established telco value chain, let alone now with hyperscalers, vendors, specialized system integrators, and many other new entrants competing for the very same enterprise wallets. The same promise came with the IoT and the very same is now taking place with Metaverse, which is becoming the next big thing for many Tier One telco operators globally. Time will tell if they will be successful, or whether 6G will let them blend the physical and virtual worlds, but their history does not give us any promising expectations. There are several opportunities in the enterprise domain, especially for operators with decades of experience in managing networks, but they have not yet succeeded to monetize this key strength.

So, what is the answer to these questions? Can telcos really transform?

DISH and Rakuten: A Fresh Perspective

The answer could well be the approach greenfield operators are taking to service the telco business. These companies can be counted on the fingers of one hand for now: DISH in the United States, 1and1 in Germany, and Rakuten in Japan, which are entering a fiercely competitive environment and need to make a difference, be highly efficient, and innovate from day one. Rakuten has created its own network stack and is now offering it commercially to other operators through Rakuten Symphony, while DISH has opted for an even more interesting deployment approach.

Thanks to a fully cloud-native network approach from day one, DISH will deploy network components in the Amazon Web Services (AWS) cloud, including Local Zones and even radio Distributed Units (DUs) in AWS Outposts. DISH has chosen Oracle for its 5G core Service-Based Architecture (SBA) and a selection of vendors for its radio network, including Altiostar (now part of Rakuten), Fujitsu, and Mavenir. Other vendors include Cisco, Dell, IBM, and Confluent. The difference in terms of this deployment is that DISH is planning its network as a platform that will host an application marketplace for enterprises, giving them on-demand access to network capabilities. ABI Research expects that Dish—and all other greenfield operators—are designing their networks the very same way Amazon designed their internal operations: as platforms to be consumed both internally and externally.

Not All Is Lost

These greenfield operators will likely show the rest of the world, and the operators they compete against, how their new networks can be used as a competitive differentiator, even against hyperscalers. These new entrants are agile, have no legacy networks or relationships to maintain, are deploying cutting-edge technology, and are ahead of 95% of telco operators that are brownfield. In the enterprise domain, which is still largely untapped, this may be a very unique set of strengths that will make the greenfield operators much more attractive than existing operators, even Tier Ones.

These greenfield operators will likely create ripples throughout the enterprise market and Tier One telco operators will likely be forced to follow, although it is not clear how they will be convinced to risk and break free from their 1) Subscriber Identity Module (SIM) and connectivity-based legacy and 2) from their “comfortable” relationships with large infrastructure vendors. Of course, it’s not all black and white in this discussion; connectivity-related business models will be important in the future and large infrastructure vendors have a large role to play in the future. However, regardless of whether they are forced or not, Tier One telco operators will need to make tough decisions to address the enterprise domain. Rakuten is already showing the world how the deployment of a new network can be accomplished in a completely new manner, while Dish is taking this a step further and using the public cloud for its network and an application marketplace for enterprises.