It was the Roman poet Horace who first uttered the immortal words carpe diem over 2,000 years ago. Today it is mobile virtual network operators (MVNOs) who have a chance to seize the day and leapfrog their mobile network operator (MNO) counterparts.
With MNOs struggling to escape the clutches of their ageing, costly and inefficient data centers, MVNOs are in the enviable position of being able to move quickly. With no legacy infrastructure to worry about, they can jump straight to the public cloud and gain a first mover advantage in new, fast-growth markets such as the Internet of Things (IoT) and private LTE.
A Tipping Point
We have reached a tipping point: the maturing of the public cloud combined with the ability to run software EPCs (evolved packet cores) and other core network elements in the cloud is poised to transform the cellular industry. Market challengers such as MVNOs are finally able to flex their muscles and ditch their reliance on MNOs’ core networks without having to invest in, and run, their own expensive data center infrastructure.
By taking critical elements of the EPC (e.g. user authentication or handling data traffic) into their own control and running the core network in the cloud, MVNOs have the tools they need to innovate and move up the value chain quickly and cost effectively with new, differentiated services.
Until very recently, the idea of going cloud native with the core of a mobile network would have been unimaginable. But this is no longer the case. As well as the well-publicized financial benefits and flexibility and agility gains, the cloud is now a highly viable and attractive option for MVNOs for a number of other reasons too.
The Case for the Public Cloud
To start with, Amazon, Google and Microsoft are now substantially outspending carriers on infrastructure. As these big beasts compete with each other to increase their data center footprint across the globe, their spending is set to soar. So why would MVNOs stick with carriers’ antiquated infrastructure when they could be taking advantage of these cloud providers’ state of the art data centers?
Plus, given these high levels of investment, and the number of organisations that rely on the public cloud for mission-critical applications, it is evident that previous concerns about immature public cloud security are now misplaced. If anything, public cloud providers’ data centers are probably now more secure and probably better managed than those owned by carriers.
Another concern frequently touted in our industry concerns latency. But this can be proven wrong too. Most latency occurs because of backhaul to the mobile core network but, as over 50% of traffic that goes to the mobile networks originates from the public cloud, it makes technical sense to put a virtualised, distributed EPC in the cloud, where the majority of the content is. As an example, Microsoft Research’s Project Belgrade demonstrates the viability of running a complete core network on Azure, overcoming latency issues.
The IoT Opportunity
With these concerns eliminated, what are the prospects for MVNOs who leave the MNO fold for a new life in the cloud?
IoT is a market ripe for targeting.
Based on figures in the IoT Forecast Database Research published by analyst house Machina Research, the GSMA recently announced that mobile network operators are set to benefit from an estimated US$1.8 trillion IoT revenue opportunity by 2026 – boosted by the early deployment of commercial Low Power Wide Area Networks in licenced spectrum.
The good news for MVNOs is that it is going to be difficult for MNOs to turn a profit on this opportunity without dumping their data center assets and moving to the cloud. One tier one telecom operator spends up to $8 to run the core network infrastructure for each smart phone on its network; shouldering such high costs for connecting smart water meters and the myriad of low-amp IoT devices that will flood the networks would spell financial suicide.
By contrast, the far lower costs associated with running software core networks in the cloud makes IoT a viable market for MVNOs.
The unleashing of LTE in the unlicensed spectrum via CBRS and MulteFire means that, in theory, enterprises now have the option to build, manage and run their own private LTE networks. In reality, though, many enterprises will prefer to outsource the core to a trusted partner.
With their proven track record in operating mobile networks, and with CBRS and Multefire solving the spectrum issue, MVNOs are in a great position to offer cloud-hosted, cost-effective ‘private LTE networks as a service’ to enterprises – in particular in security-sensitive sectors such as banking, government, industrial or entertainment parks.
Clamoring for the Cloud
It’s an exciting time to be an MVNO. With so many opportunities opening up, it will be interesting to see which MVNO is the first to adopt a cloud-hosted model and stay one step ahead by taking control of critical elements of the core network.
And, when that MVNO reports cost efficiencies, greater revenue opportunities and increased profits, then competitors — both MVNOs and MNOs — will follow.
In his Satires book of poems, the poet Horace often exalts the new man, who is the creator of his own fortune. Which makes me believe that, were he alive today, he would be cheering on the ‘new men’ — the MVNOs — from the sidelines too.
Carsten Brinkschulte is the CEO of Core Network Dynamics.