The UK’s decision to remove Huawei from all its 5G infrastructure by 2027 is a blow to the country’s operators and their 5G plans. It comes with open acknowledgement that it could delay 5G rollout by up to three years – clear proof of the dominance the Chinese vendor enjoys in the UK.
Taking out Huawei equipment and selecting alternatives from other vendors is expected to cost UK operators £2 billion. But that does not mean to say that UK operators need necessarily follow like-for-like and simply turn to the likes of Nokia or Ericsson for replacements. While some operators may see these larger network equipment vendors as a logical solution, for others they are very much part of the problem.
Vendor dominance on the wane
The likes of Huawei, Ericsson and Nokia have dominated the network equipment market for a long time. They have traditionally viewed the arrival of a new technology generation (3G, 4G, 5G) as a significant payday and have historically tied operators to proprietary technology and systems, layering managed services contracts on top. This approach essentially left operators with nowhere to go. Regardless of whether the technology was well suited to the operators’ needs, the bills kept coming. This model made the network equipment vendors massive and marginalized the competition – none of them could match the same economies of scale.
"The tides were turning against the network equipment vendors, however, even before the UK government ended Huawei’s hopes of regional expansion."
Jonathan Plant.
The tides were turning against the network equipment vendors, however, even before the UK government ended Huawei’s hopes of regional expansion. Leaving politics aside, the widespread virtualization of network functions, the arrival of webscale technologies and greater reliance on cloud infrastructure has served to dramatically weaken the network equipment vendors’ grip on global operators. The vast majority of network functions are now software, not hardware enabled. Technology upgrades are done in minutes via software updates. Cloud networks are de-centralizing supporting processing power away from a handful of datacentres and distributed to the network edge. Network architectures are unrecognizable and cloud players like Microsoft, Amazon and Google are the companies enjoying an increasing amount of operator attention.
Hitting the reset button
So, if UK operators are now hitting the reset button on their 5G deployment strategies, the majority will be looking for technology solutions that are ready to evolve within the architectures of tomorrow, rather than those of yesterday. That is not to completely dismiss the ability of Ericsson and Nokia and other network equipment vendors to keep up with new innovation, but it most certainly opens the door to technology specialists that previously haven’t had a look in. Suddenly all the component parts of the super deals of the past, comprising radio network infrastructure, core network solutions and supporting OSS and BSS become individual deals to be contested by generalists and specialists. In most cases, the specialists will be holding most of the cards.
The BSS market is a great example. In many instances, BSS has formed part of a network equipment vendor’s armory. Many of them offer policy, charging and billing technology and include this functionality at heavily subsidized prices while negotiating multi-billion dollar deals with individual operators, spanning several years. Now these deals may have seemed like good value to operators at the time of signing, but the opportunity cost created by inadequate functionality of this often-limited technology has served to restrict an operator’s potential, not build on it.
UK operators that have this BSS technology will have no choice but to rip and replace. While this will create some challenges and difficulties, it will also create new opportunities for them to rethink how they approach service creation and deployment; it will allow them to rethink how they go about monetizing their 5G assets and enable them to make some much-needed cost-cutting.
5G deployment and digital transformation
5G deployment for UK operators goes hand in hand with ongoing digital transformation projects. The same is true for operators around the world – it is not simply a UK phenomenon. Every operator around the world recognizes the importance of becoming a digital service provider. Fully embracing the commercial potential of 5G and overcoming its complexity depends on it.
"It is about creating platforms to support multiple business models for new services, delivered across a variety of channels, courtesy of multiple partners, in super quick time."
Jonathan Plant.
The journey from being a traditional telco towards becoming a digital services provider has many component parts, but many of them depend on an operator’s ability to become data-centric enterprises. This means embracing virtualised communications, cloud infrastructure and open-API platform architectures. It is about creating platforms to support multiple business models for new services, delivered across a variety of channels, courtesy of multiple partners, in super quick time.
The network equipment vendor technology stacks of yesteryear lack the agility and flexibility to adequately and cost effectively support this journey. They also lack the collaborative support an operator needs in building ecosystems to support the creation and delivery of new 5G services. Most successful specialist BSS vendors are built on innovation, prompted by partner collaboration – these are the most logical partners to help operators navigate this journey.
The political will of the UK government has undoubtedly caused short-term pain for UK operators deploying 5G technology. But then most of these operators have grown accustomed to managing transition and dealing with unexpected curveballs thanks to 5G network architecture and digital transformation projects.
The opportunity to stop and press the reset button will create value in the longer term as operators can contemplate whether the technology decisions they take in replacing Huawei will create and enable the commercial opportunities they need to maximize for 5G ROI. The operators that best evaluate and cope with short term pain and turn to specialist vendors for innovative alternatives to legacy approaches will be those that enjoy the long-term gain.
