There's a new trend of Operators showing inclination to own or develop their 5G core network partially. The blog discusses this new trend and industry repercussions.
Catenna has recently come across more than one instance where an Operator has either invested, acquired, or is closely collaborating with Telecom vendor to develop a 5G core network. With 5G telecom core software breaking the shackles of protocols and cohesive hardware, the complexity of building telecom software has diluted over time. Could this be the reason-giving wings to Operator's aspirations, or is this business transformation forcing them to look at in-house development?
We believe it's both.
The telecom industry, traditionally, had few major players offering all core network elements and many smaller ones focused on specific product functions. This is changing fast with 5G, thanks to 3GPP. With internet technology, open-source components, and user-control plane segregation, most telecom players (even the smaller ones) are offering complete core network functions as part of their portfolio. We believe it was the first trigger for Operators to go looking for investments and acquisitions of these smaller players. The investment enables the Operator to influence and customize these early efforts to extract maximum business value.
Moreover, most of the tier-1 operators have a sizeable workforce and even offshore offices for managing operations. With 4G/LTE services approaching the end of road and IoT lagging in the promise, most of the Operator's current tech workforce is having a hard time clocking 8 hours. Instead of getting into a cycle of firing and hiring with 5G on the horizon, the Operator is looking for alternate options to keep the existing workforce busy. However, the Operator is also pragmatic about how much of these network elements can they develop. Therefore, a mixed strategy of partnering and co-developing seems to be the chosen route.
Finally, this could be a bargaining chip that Operator could use to drive down the price point and force top telecom vendors (in pursuit of big RAN business) to forgo core network revenues.
It's too early to tell how this strategy will unfold, but this for sure will impact the CAPEX kitty that the Operator is deciding to set aside for 5G Core.