Spotlight on Tech

Mobile Network Operators are in a Hole – and the Lifeline is Software

By
Naren Narayana
CEO, Rakuten Symphony India
Rakuten Symphony
May 26, 2023
5
minute read

In the 1990s, when digital proliferation began, mobile phones exploded into everyday life.

With the birth of the World Wide Web, the Internet opened a new door in 1993 with the launch of the source code for browsers that brought this collection of “linked network systems” to consumers.

Same opportunities, different paths?

Since the release of the first "G," mobile network operators (MNOs) have updated their networks every decade for the release of the next generation. The way these networks are built remain constant, using massive and costly proprietary systems, and the missed opportunities are now catching up.

Meanwhile, enterprises in other industries embraced the software-first ethos of the Internet infrastructure with data center buildouts and continue to evolve towards more efficiency and scalability. Figure 1 captures the transition from the data center in the 1990s’ limitations and innovation to today’s hybrid cloud.

Fig 1: Evolution of Enterprise IT
Fig 1: Evolution of Enterprise IT

But MNOs did not go down this path. In fact, telco virtualization efforts didn’t start until 2012.

As a critical service provider, the industry's slow embrace of innovation is unacceptable. It's also unsustainable. Although we've seen dramatic advances in bandwidth and increased dependency on mobile networks, truth be told, not many consumers want to pay for extra features. It is clear to see, and recognized by many analysts, that 5G is not solving the top line growth problems for telecom as promised. Rather, as MNOs continue to provide the enabling network foundation for new mobile services, it is internet firms and over the top (OTT) providers that are positioned to capture much of the new growth revenue.

A report from Omdia summarizes the situation: Telecom services revenue will fall 4.2% per user as new tech fails to deliver enough value by 2027. Thanks to higher bandwidth services, networks are facing increased network complexity, density and operational costs which hit both capital budgets and operational budgets. Industry observer Strategy Analytics says opex costs are growing faster than even the most optimistic predictions of revenue growth.

"Enterprise IT organizations can remotely upload software to a server in the data center and have a new service running in under an hour. The same thing for an MNO requires weeks or months to schedule a site visit for a hardware upgrade."
-Naren Narayana, CEO, Rakuten Symphony India

Another major impact is the lack of new service innovation. MNOs are the foundation for our digital lives – why haven’t they capitalized on that? Enterprise IT organizations can remotely upload software to a server in the data center and have a new service running in under an hour. The same thing for an MNO requires weeks or months to schedule a site visit for a hardware upgrade. 

Where do we go from here?

My colleague, Rabih Dabboussi, wrote that telco chiefs often ask him: “What is my killer app? How can you help me better monetize my network? What services, applications and digital experiences are you seeing around the world that we can learn from?”

His answer is that there is no such app, but rather success comes from prioritizing R&D investment, dramatically changing the operating model, staying very close to customers and the market to know what services are becoming popular, and having the operational agility and speed to deliver on those opportunities before others and with the right cost structure.

The enabler of all that wisdom is a network infrastructure that can evolve at the pace of innovation. Rather than an every decade generation, we call this an everyday generation – a “software-first” infrastructure “Mobile as a Software™.” And it is here today.

Software-first approaches are horizontal in nature and are built on disaggregated and virtualized platform-level architectures. Each layer of a business is managed independently from the layers below and above. Each layer integrates with and understands the other layers through data accessibility, and each layer cooperates with the other layers through programmable and open interfaces.

Fig 2: Software first supports a layered approach
Fig 2: Software first supports a layered approach

This approach allows organizations to allocate budgets to horizontal business capabilities. It frees each layer of the business to industrialize operations, capex and processes as effectively as possible. Software is no longer treated as an amortized part of hardware cyclical investments. This setup prevents each pipeline from making its own sub-optimized investments into hardware and cloud platforms. Each layer should have teams that specialize in the skillsets most valuable to that specific layer.

If you consider that the “breakthrough” 5G network was promised to deliver significant innovation and yet it is losing its appeal as a profit driver with every passing day, maybe it’s time to try something different. We have first-hand experience with Mobile as a Software and know that it delivers the lower costs and high performance needed to turn around a struggling industry. I hope you will join us on this quest.

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