Cloud nein: are 5G customers better off on public cloud?

In a world first, Telefónica is moving its core network to a public cloud, and taking one million 5G subscribers in Germany with it. What does cloudification mean for its customers, and for other telcos still clinging to physical infrastructure?

Telefónica Germany will move one million 5G customers to Amazon Web Services this month, according to a report by Reuters.

This represents Amazon’s latest, boldest foray into the telecoms market, after it was rumoured last year to be partnering with an unspecified US telco to offer a low-cost or free mobile tariff through Prime.

While some telcos have moved non-core operations, this is the first time an established mobile operator is moving its core network to the public cloud; Dish Networks was the first telco to deploy its 5G core network onto AWS, though this was done as a greenfield setup, without migrating existing customers.

Telcos have traditionally operated on a model heavily reliant on physical infrastructure investments, wary of public clouds handling a mobile network, the shared nature of the cloud infrastructure introduces potential vulnerabilities.

However, as network demand outpaces infrastructure growth, the need for lower latency and increased capacity is putting increasing pressure on operators to enhance their infrastructure.

Enter public cloud, which in theory will cut costs, increase scalability, and enable the transition to a more service-oriented model.

Cloud-based telecom services can offer greater flexibility and choice to customers.

The scalability and redundancy of cloud infrastructure, and separation of workloads into microservices can result in faster response times and fewer service disruptions, leading to a more seamless and satisfying user experience.

Powered by Nokia’s cloud-native 5G architecture, the rollout will enable Telefónica Germany to deliver advanced services beyond traditional voice and data services, with “extended reality and network slicing” in particular touted as some of the biggest benefits.

And for Amazon, it’s a step towards billions more in revenue; over the last couple of years, worldwide cloud spending was at $76 billion and increasing, following a period of “abnormally low rates.” They’re unlikely to stop with Telefónica either, as AWS’ VP Jan Hofmeyr has said that the company expects to ink deals with other operators soon - earlier this year, AWS announced a partnership with NTT Docomo to deploy 5G Open RAN in Japan.

According to Telefónica’s CTIO Mallik Rao, however, he wants to “see it working for at least one to two quarters and have a roadmap to move at least 30-40% of my customer base by 2025-2026.”

The transition to public cloud will not take place overnight, but as the lines between connectivity and cloud provider continue to blur, there’s the potential for both partnership and competition, particularly in emerging, enterprise-focused areas like IoT and edge computing.

By turning to the cloud, telcos can offer new value-added services directly to customers, differentiating themselves in the market and generating revenue streams beyond traditional connectivity services, including security, computing and storage.

In doing so however, they risk becoming beholden to large public cloud providers like AWS, Azure or Google Cloud, locking them in and then ramping up their prices. And if – or when – cloud providers have the capability to bypass telcos entirely and offer their own connectivity services and integrated solutions at competitive prices, this could really threaten telcos’ position in the market.

Tying themselves to any given cloud also puts firms at risk of outages and catastrophic errors on the providers’ side; the very same day as Telefónica’s announcement, Google accidentally deleted the Cloud account of an Australian pension fund due to an “unprecedented misconfiguration,” cutting off a million customers for a week. Though Google stressed that such a mistake had never happened before, the possibility of another fault is of great concern for companies depending on a cloud provider – luckily for the pension fund, a backup at another provider saved them from a total data wipeout.

The implications for traditional telcos are vast; should they opt to avoid the public cloud route, they’re likely to lose ground to those other telcos who actively embrace it, and offer a leaner, better customer experience as a result. Equally, they may want to avoid relinquishing control of their networks – and the data therein – to a third-party provider.

While the migration of core networks to the public cloud presents certain threats to traditional telcos, it also offers opportunities to reposition themselves for long-term success through diversification, innovation and collaboration. Telcos that effectively navigate these challenges and capitalise on the burgeoning opportunity for cloudification could benefit from long-term gains in efficiency and cost savings.

Is public cloud always the right way to go for telcos? Read our interview with Cerillion’s Chief Technical Architect, Andy Blackman, on the options for migrating BSS/OSS to the cloud.