In January 2023, I made some predictions about what could happen to mobile operators in the following 12 months. My theme was that operators were facing hard economic times and that would spur them to rapidly embrace a restructuring of their network to be more agile and a driver of new revenue services.
At the time, I wrote: “Change comes faster than usual and is unavoidable when times are hard. I predict we will see hard business decisions made around sustainability, supply chain industrialization, smart use of cloud, and improved automation and network delayering.”
Now that we have crossed the midway point of the year, I thought it would be interesting to note how 2023 has panned out so far.
Let’s take a look at the status of each of the five trends I predicted would take place:
The economy is as brutal as expected—especially in the tech sector—as we have seen waves of layoffs and financial losses. For wireless operators, the impact of this can be seen in their diminished return on invested capital (ROIC). In this analysis of 16 industry players, the average wireless telecom ROIC is just 6.15%. Factoring in inflation, investors are almost better off investing in a treasury bond.
What we have not seen in response to this economy is any operator make statements about a need to make radical changes to lower network costs. There is increasing momentum behind automation initiatives. But we’re not seeing changes like we did with operator customer service during the pandemic.
The other response has been an uptick in the potential consolidation of operators for scale. One example is the merger of Vodafone and Three in the UK, which will create the UK’s biggest mobile operator.
The lack of accelerated planning now is a surprise. It’s possible we will see it start to emerge in the second half of the year, but for now there is a strange calmness in the industry that just can’t last.
The industry has seen progress in the area of energy management. Rising energy costs have driven energy efficiency as a key deciding factor in all of the commercial opportunities and bid processes we’re involved in. The diversity of energy sources and supply have led to some very innovative ideas, including Finnish operator Elisa’s conversion of its network of cell site back up batteries into a Finland-size distributed energy storage (DES) solution. This DES allows Elisa to store energy when prices are cheap and sell it back when prices increase.
There is so much more we as an industry can do for energy conservation. At the moment the way many mobile networks are run is like leaving lights on in the house, at full brightness, 24/7, even if nobody is there.
For the industry, supply chain resiliency is a targeted discussion for all governments around the world. As geo-politics have become more complicated, all countries want a greater amount of resiliency of supply with respect to their critical communications infrastructure.
I have seen less focus in general on the industrialization of SKUs by mobile operators. This would help them optimize and limit the amount of variance, necessary inventory and specialized competence required for their networks. I do see general acceptance of open interfaces and disintermediation by all parties, operators, new vendors and incumbent vendors which broadens the number of vendors in the supply chain adding resilience.
This embrace of open interfaces and the disaggregation of hardware and software is good news because these are first steps to industrializing on common COTS hardware SKUs and operational approaches.
Many people have discussed having a cloud-first mindset, but the industry needs a cloud-smart mindset. MNOs are making very slow progress on cloud adoption. There continues to be an incoherent story on why the industry should embrace cloud and why it is important to view cloud as something an MNO should do rather than something they buy. Where the industry needs to get to is an understanding of cloud as shorthand for infrastructure programmability and accessibility, which then enables infrastructure automation.
This is starting. In the radio access network (RAN), virtualized RAN is being deployed at scale and seems to be accelerating faster than the adoption of Open RAN itself. Verizon has deployed 10,000 vRAN sites across the U.S. and plans to have a total of 20,000 by the end of 2025. The company has been open about the benefits it is seeing from deploying large scale vRAN. These findings all align with the benefits we have experienced in Rakuten in Japan, including greater hardware utilization, lower field costs, and higher levels of agility through automation and parallelism.
I stand by my predictions even though I acknowledge that for some of them there hasn’t been a lot of progress. I recognize that what I’ve predicted are really megatrends that require a change in approach – something the industry hasn’t done for many years. For the remainder of the year, I feel like the momentum behind energy conservation, vRAN adoption (delayering) and automation will create benefits that other operators will have to respond to.
The elephant in the room of course is what is happening in artificial intelligence (AI) and how that is relevant to telecom. I realize there is excitement in the industry around the potential of AI, but I wish the industry to heed my warning. There is great potential in the adoption of AI but that requires change, and the effectiveness of AI is as good as the data it has access to. Wanting change because of AI does not deliver change. All of us in the industry need to be learning, experimenting and instrumenting our data collection and management, to enable AI to be something that happens within our industry rather than sailing on by. A successful AI strategy requires a successful software implementation, that enables continuous integration, continuous delivery and rapid iteration of applications and models.
Let’s see where we are in January.