Amazon Web Services Announces its Venture into Private 5G

While other analyst firms have been busy naming Microsoft as the “top innovator” for private 5G, it turns out that Amazon Web Services (AWS) is running the show, at least for now. With the announcement from December 2021 of its Private 5G solution during the re:Invent conference, the hyperscaler is the first of its competitors to venture into the private networks market with a commercialized offering.

The end-to-end solution relies on extensive partnership network. As AWS announced extensive partnerships with the likes of Mavenir and Athonet, it would not be surprising to see both providing components into this newly announced solution. As the solution primarily targets the US market and Citizens Broadband Radio Service (CBRS) deployments, the federated wireless reportedly provides spectrum access systems (SAS). The AWS business model for private 5G is purely consumption-based, as pricing is determined only by the coverage area and the bandwidth used. While the solution immediately targets the United States, expansion into other national markets with shared or local enterprise spectrum arrangements will be the next imminent step.

Even though the announcement reads as if AWS wanted to provide a full turnkey end-to-end private 5G solution to enterprises directly, this is not necessarily the case. After all, their incumbent expertise lies in processing payloads in their cloud or on-premises infrastructure (in the case of AWS with outpost). As they have realized that private cellular will ultimately become a sizeable opportunity, it will generate significant traffic that hyperscalers could host within their infrastructure.

However, even though the motivation behind entering the private cellular domain might be to attract more payloads to hyperscalers' infrastructure, it still changes the telecom industry in two important ways. Firstly, it marks the full entrance of consumption economics into the private network domain. While other private network offerings from Communication Service Providers (CSPs) or network infrastructure vendors (e.g., Ericsson and Nokia) have already shifted their monetization strategy from capital expenditure to operating expenditure, their main cost determinant still has been the number of connected devices. For enterprises under tight budgetary control, this fixed cost competent would still serve as a barrier to entry. As pricing for the AWS Private 5G offering is determined only by the coverage area and the required bandwidth, it removes this deployment barrier and will therefore become particularly interesting to small and medium-sized enterprises.

Secondly, hyperscalers are now getting involved in 5G infrastructure selling as well. While Microsoft has done so with the acquisition of Affirmed Networks and Metaswitch already, AWS is doing so through attracting partners to their marketplace by offering them market exposure. As ABI Research has predicted during the Transformational Technology Summit in March 2021, hyperscalers are adopting a system integrator position while also providing important cloud components. As mentioned earlier, all of this is to support the overall ambition of attracting new payloads into hyperscalers infrastructure.

However, while the industry is overly excited about this development, there are two important aspects that need to be considered to assess the real-life impact of this solution. Firstly, a consumption-based business model as proposed by AWS might not go far enough, as the most tangible value proposition for enterprise 5G lies in the applications it enables rather than in the technology itself. Consequentially, an Application-as-a-Service (AaaS) business model is expected to resonate better with enterprises than a consumption-based model that AWS is proposing. Certainly, AWS has a plethora of enterprise-grade micro-services (e.g., data analytics, service orchestration, workflow management, data processing at the edge, Edge computing IoT Management, and specific robotics applications), but customization would either be resource intensive or require the involvement of a third-party. Vertical-specific suppliers like Siemens are providing this already with their Industrial Edge Marketplace, which they could easily extend to Industrial 5G as well.

Secondly, with Mavenir as a partner for Radio Access Networks (RAN), AWS places all its bets on Open RAN for enterprises. With reported problems around supported density of connected devices and other technology immaturities, however, it is uncertain when Open RAN becomes a significant alternative for enterprise-grade cellular deployments.

Furthermore, at this point, it only supports a fully on-premises deployed private network with no interaction or resource sharing from the public network (known as public network integrated non-public network, PNI-NPN) and will therefore be interesting only for a subset of private network implementers that do not require connectivity beyond their enterprise site (e.g., for remote maintenance or asset tracking use cases).

At their announcement, AWS has been particularly careful to position their private 5G solution not as a competition to traditional infrastructure vendors and CSP solutions. Rather, AWS is positioning its solution as complementary to CSP, infrastructure vendor, and system integrator activities. Particularly, the positioning with respect to CSPs is an interesting in its nature: while the AWS Private 5G solution initially is only launched in the US American market (where CBRS can be used instead of CSP licensed spectrum), AWS has a clear plan to internationalize. To gain traction in markets where spectrum is solely available through CSPs, means AWS still is dependent on CSPs for now.

Therefore, this should serve as a wake-up call for CSPs, infrastructure vendors, and system integrators to get a solid hyperscaler strategy in place. As the likes of AWS, Microsoft, and Google have their incumbent expertise in processing payloads within their infrastructure, they will have limited interest in a direct to-enterprise market strategy and therefore continue to rely on channel partners. The most promising way of collaboration for CSPs, hyperscalers, and infrastructure vendors are co-creation initiatives that ABI Research has already been advocating in previous insights. Incumbent telecom players need to focus their efforts on their respective unique selling point. Access to licensed spectrum might be a short-term answer, but the power of licensed spectrum access will vanish with spectrum liberalization initiatives (shared spectrum or setting aside licensed spectrum for enterprise usage) gaining more and more traction.

Public network infrastructure might be a strategically more important asset in this context, as a range of enterprises will require connectivity beyond their premises. While a range of new entrants try to provide this connectivity for enterprises by partnering with satellite companies (Rakuten, for example, partnering with Ligado Networks), these partnerships have not generated noticeable market traction as of December 2021, as satellite costs are significantly higher than utilizing terrestrial infrastructure.

As network operators therefore have important enterprise-grade networking assets in their hand, it is on them to bring these assets to the table and form strategic partnerships with hyperscalers, to make sure they are not just becoming a sales channel for hyperscalers enterprise private networks solution. Co-creation between CSPs and hyperscalers is the most obvious answer to secure CSPs’ stake in the private network market.