Why and How To Go Telco Cloud Native ATT DISH and Rakuten September 2021

Executive Briefing Service
Telco Cloud
Executive Briefing
WHY AND HOW TO GO

TELCO CLOUD NATIVE:
AT&T, DISH AND RAKUTEN
As telecoms operations become increasingly softwarised, networking
functions are getting broken down into their individual components, and
reassembled as an essential part of the IT stack for industry-specific
applications and services. In this disaggregated telco value chain, is
there anything left that is distinctively 'telco'?
David Martin, Senior Associate Analyst | david.martin@stlpartners.com | September 2021

WHY AND HOW TO GO TELCO CLOUD NATIVE: AT&T, DISH AND RAKUTEN | SEPTEMBER 2021
Executive Summary
We are entering a new and deeper phase of societal computerisation and digitisation, which at STL
Partners we call the Coordination Age. This involves separating out processes, services and functions
from multiple areas of technology, the economy and society – and optimising, recombining and
automating them (coordinating them), so that they can better deliver on social, economic and
environmental needs and goals. The Coordination Age is all about enabling scarce resources of every
kind to be used more efficiently, automatedly, sustainably, and by a much wider range of actors, in
pursuit of individual and social needs.
As part of this deeper phase of computerisation, telcos are confronting a situation of disaggregation
of their technologies, their organisations and their business models.
The telecoms industry is facing disaggregation on several fronts
Source: STL Partners
Ultimately, telecoms is evolving into a branch of computing / IT, and the value that telecoms can bring
to the table in the Coordination Age is changing. This also means telcos are facing increasing
competition – as well as partnership opportunities – from computing / IT / cloud players, more
specialist / agile networking providers, and vertical-market actors delivering connectivity as part of
vertical-specific, Coordination Age use cases.
Three critical success factors for Coordination Age telcos

Through our research we believe that in order to be more that merely facilitators for others’
Coordination Age services, it is critical for telcos to retain control over network function design and
interoperability, and the physical means of delivery. We identify three specific areas where telcos
should retain control and expertise:
1. The cloud network function (CNF) development roadmap: CNFs are integral to developing the
new programmable and compute-directed services of the Coordination Age, so telcos cannot
realise the potential value from these services without retaining control over their CNFs.
© STL Partners EXECUTIVE BRIEFING 2

2. The ability to deploy their CNFs across multiple clouds and cloud operating systems: Equally
critical is the ability to deploy CNFs flexibly across any enabling cloud, so as to deliver the
capabilities of their network technologies where and when they are required. By aligning
themselves narrowly with a single public cloud provider – as DISH has done with AWS – telcos
run the risk of being locked in to a particular hyperscaler’s platform and network-function
ecosystem.
3. Control over the physical network elements and infrastructure through which Coordination
Age workloads are delivered (which may or may not mean ownership of them): Specifically,
radio (and primarily 5G radio) and optics. Open RAN, which introduces unprecedented levels of
programmability, scalability and cost efficiency into the RAN is a key technology for the future in
this context.
What capabilities will remain distinctively ‘telco’?

As a result of our analysis of the disaggregated telco value chain and technology stack, we identify six
core telco domains of expertise. Two of these are legacies from the Communications and Information
Ages – telephony and IP connectivity (especially broadband internet access) – which remain
absolutely critical services for society and the economy, but are low-margin and low-growth. Telcos
cannot base their long-term growth strategies purely on these. The other four domains are specific to
the Coordination Age, and maintaining involvement and control in some or all of these will be critical
to the long-term survival and prosperity of the telco species.
Six telco USPs in the communications and IT value chains
Our take on three pioneering cloud-native telcos

We analyse and compare the approach to generating new value of three very different pioneers of
cloud-native telecoms: AT&T, DISH Networks and Rakuten Mobile.

• AT&T: We view AT&T’s recent sale to Microsoft Azure of its private telco cloud as a smart move:
it hyperscales what remains in effect AT&T’s telco cloud, while removing it from AT&T’s books.
This is freeing AT&T up financially and operationally to innovate in a more agile way via its cloud-
native network-function practice, and its ownership and operation of a national 5G network.
• DISH Networks: DISH’s recent announcement that it is building its own telco cloud and 5G
network functions exclusively over AWS’s public cloud, we believe, effectively consigns DISH to
be an edge extension of the AWS cloud, with no obvious route to being able to operate and
design its network functions more independently across multiple clouds. This also risks making
DISH less able to develop its own edge / industry-specific use cases, and instead enabling those
of AWS’s application-developer ecosystem.
• Rakuten Mobile: Rakuten Mobile represents a bold attempt to occupy every possible segment
through which telcos have the potential to drive new value in the Coordination Age. This includes
a self-built telco cloud now marketed to third parties, CNF DevOps and CI / CD (continuous
integration / continuous delivery), dense nationwide edge distribution of SA core-enabled and
open RAN-based 5G supporting vertical industry-specific use cases, and net compute. It is a
project that is still in the beta phase, and it is too early to say if it will succeed. But if it does not,
the future for telcos is looking more uncertain and fragmented.

Table of Contents
Executive Summary ............................................................................................................................................... 2
Three critical success factors for Coordination Age telcos ....................................................................... 2
What capabilities will remain distinctively ‘telco’? ........................................................................................ 3
Our take on three pioneering cloud-native telcos ......................................................................................... 3
Introduction ............................................................................................................................................................. 7
The telco business is being disaggregated ................................................................................................... 7
Telco disaggregation is a by-product of computerisation.......................................................................... 8
The disaggregated telco landscape: Where’s the value for telcos? ........................................................... 11
Is there anything left that is distinctively ‘telco’? ........................................................................................ 11
The ‘core’ telecoms business has evolved from delivering ubiquitous communications to enabling
ubiquitous computing ..................................................................................................................................... 20
Six telco-specific roles for telecoms remain in play .................................................................................. 22
Radical telco disaggregation in action: AT&T, DISH and Rakuten .............................................................. 27

Servco, netco or infraco – or a patchwork of all three? ............................................................................ 27
AT&T Network Cloud sell-off: Desperation or strategic acuity? .............................................................. 30
DISH Networks: Building the hyperscale network ...................................................................................... 31
Rakuten Mobile: Ecommerce platform turned cloud-native telco, turned telco cloud platform
provider .............................................................................................................................................................. 34
Conclusion ............................................................................................................................................................. 37
Index ....................................................................................................................................................................... 38

Table of Figures
Figure 1: Transformation from the vertical telco to the disaggregated telco ............................................. 8
Figure 2: Evolution of physical telecoms network elements (Layers 0 and 1 in OSI hierarchy) ............ 12
Figure 3: The evolution of logical telecoms network functions (Layers 2–4 in the OSI hierarchy) ...... 13
Figure 4: The evolution of services delivered over telco networks ............................................................. 15
Figure 5: New competitors emerging in each telecoms age ....................................................................... 17
Figure 6: Services are driving the evolution from end-to-end physical networks, to seamlessly bridged
virtual and physical worlds ................................................................................................................................. 21
Figure 7: Six telco USPs in the communications and IT value chains ....................................................... 22
Figure 8: The disaggregated telco stack.......................................................................................................... 28
Figure 9: The standard, low-expectation telco ................................................................................................ 28
Figure 10: AT&T – the cloud-less, cloud-native telco .................................................................................... 29
Figure 11: DISH – 5G network as hyperscaler edge ...................................................................................... 32
Figure 12: The model Coordination Age telco – but still in beta mode...................................................... 34

Introduction
The telco business is being disaggregated
Telcos are facing a situation in which the elements that have traditionally made up and produced their
core business are being ‘disaggregated’: broken up into their component parts and recombined in
different ways, while some of the elements of the telco business are increasingly being provided by
players from other industry verticals.
By the same token, telcos face the pressure – and the opportunity – to combine connectivity with
other capabilities as part of new vertical-specific offerings.
Telco disaggregation primarily affects three interrelated aspects of the telco business:
1. Technology:
− Vertical disaggregation: separating out of network functions previously delivered by

dedicated, physical equipment into software running on commodity computing hardware
(NFV, virtualisation)
− Horizontal disaggregation: breaking up of network functions themselves into their

component parts – at both the software and hardware levels; and re-engineering,
recombining and redistributing of those component parts (geographically and architecturally)
to meet the needs of new use cases. In respect of software, this typically involves cloud-
native network functions (CNFs) and containerisation
Open RAN is an example of both types of disaggregation: vertical disaggregation through

separation of baseband processing software and hardware; and horizontal disaggregation by
breaking out the baseband function into centralised and distributed units (CU and DU), along with
a separate, programmable controller (RAN Intelligent Controller, or RIC), where all of these can in
theory be provided by different vendors, and interface with radios that can also be provided by
third-party vendors.
2. Organisational structure and operating model: Breaking up of organisational hierarchies,

departmental siloes, and waterfall development processes focused on the core connectivity
business. As telcos face the need to develop new vertical- and client-specific services and use
cases beyond the increasingly commoditised, low-margin connectivity business, these structures
are being – or need to be – replaced by more multi-disciplinary teams taking end-to-end
responsibility for product development and operations (e.g. DevOps), go-to-market, profitability,
and technology. This transformation is illustrated in Figure 1 below:

Figure 1: Transformation from the vertical telco to the disaggregated telco
3. Value chain and business model: Breaking up of the traditional model whereby telcos owned – or
at least had end-to-end operational oversight over – the technology, networks and infrastructure
across which they delivered and billed for their services. This is not to deny that telcos have always
relied on third party-owned or outsourced infrastructure and services, such as wholesale networks,
interconnect services or vendor outsourcing. However, these discrete elements have always been
welded into an end-to-end, network-based services offering under the auspices of the telco’s BSS
and OSS. These ensured that the telco took overall responsibility for end-to-end service design,
delivery, assurance and billing.
− The theory behind this traditional model is that all the customer’s connectivity needs should
be met by leveraging the end-to-end telco network / service offering. In practice, the end-to-
end characteristics have not always been fully controlled or owned by the service provider.
− In the new, further disaggregated value chain, different parts of the now more software-, IT-
and cloud-based technology stack are increasingly provided by other types of player,
including from other industry verticals. Telcos must compete to play within these new
markets, and have no automatic right to deliver even just the connectivity elements.
All of these aspects of disaggregation can be seen as manifestations of a fundamental shift where
telecoms is evolving from a utility communications and connectivity business to a component of
distributed computing. The core business of telecoms is becoming the processing and delivery of
distributed computing workloads, and the enablement of ubiquitous computing.
Telco disaggregation is a by-product of computerisation

Telco industry disaggregation is part of a broader evolution in the domains of technology, business,
the economy, and society. This evolution comprises ‘computerisation’. Computing analyses and
breaks up material processes and systems into a set of logical and functional sub-components,

enabling processes and products to be re-engineered, optimised, recombined in different ways,

managed, and executed more efficiently and automatically.
In essence, ‘telco disaggregation’ is a term that describes a moment in time at which telecoms
technology, organisations, value chains and processes are being broken up into their component
parts and re-engineered, under the impact of computerisation and its synonyms: digitisation,
softwarisation, virtualisation and cloud.1
This is part of a new wave of societal computerisation / digitisation, which at STL Partners we call the
Coordination Age. At a high level, this can be described as ‘cross-domain computerisation’: separating
out processes, services and functions from multiple areas of technology, the economy and society –
and optimising, recombining and automating them (i.e. coordinating them), so that they can better
deliver on social, economic and environmental needs and goals. In other words, this enables scarce
resources to be used more efficiently and sustainably in pursuit of individual and social needs.
NFV has computerised the network; cloud-native subordinates it to

computing
In respect of the telecoms industry in particular, one could argue that the first wave of virtualisation
(NFV and SDN), which unfolded during the 2010s, represented the computerisation and digitisation of
telecoms networking. The focus of this was internal to the telecoms industry in the first instance,
rather than connected to other social and technology domains and goals. It was about taking legacy,
physical networking processes and functions, and redesigning and reimplementing them in software.
Then, the second wave of virtualisation (cloud-native – which is happening now) is what enables
telecoms networking to play a part in the second wave of societal computerisation more broadly (the
Coordination Age). This is because the different layers and elements of telecoms networks (services,
network functions and infrastructure) are redefined, instantiated in software, broken up into their
component parts, redistributed (logically and physically), and reassembled as a function of an
increasing variety of cross-domain and cross-vertical use cases that are enabled and delivered,
ultimately, by computerisation. Telecoms is disaggregated by, subordinated to, and defined and
controlled by computing.
In summary, we can say that telecoms networks and operations are going through disaggregation
now because this forms part of a broader societal transformation in which physical processes,
functions and systems are being brought under the control of computing / IT, in pursuit of broader
human, societal, economic and environmental goals.
In practice, this also means that telcos are facing increasing competition from many new types of
actor, such as:
1 See our report, 5G: ‘Just another G’ – yet a catalyst of change, where we argue that 5G is not only a catalyst for industrial transformation
in general (as part of the Coordination Age) but will also drive the transformation of the telecoms industry and of telcos themselves.

• Computing, IT and cloud players
• More specialist and agile networking providers
• And vertical-market actors – delivering connectivity in support of vertical-specific, Coordination

Age use cases.

The disaggregated telco landscape: Where’s

the value for telcos?
Is there anything left that is distinctively ‘telco’?
In light of the increasing subordination of elements of the traditional telecoms value chain to functions
and competencies associated with other technology domains, industry verticals and types of service
provider, the question arises: is there anything left that is distinctively telco?
In other words, are there any competencies, assets and services that remain the preserve of a
telecoms ‘domain’ that is not fully subordinated to compute-driven services aimed at other verticals,
and offered more effectively by actors from other verticals, and par excellence from IT and software
players?
Before attempting to provide an answer to this question, in the table in Figure 2 below we set out a
model of the disaggregated sub-components of telecoms, broken down into three broad layers:
services, logical network functions, and physical network functions and infrastructure. In addition, we
break down the service, network-function and physical components into the three broad ‘ages’ of
telecoms: the Communications Age (c. 1850 onwards); the Information Age (c. 1990 onwards); and
the Coordination Age (beginning now).
The purpose of these tables is to identify how the roles of non-telco players have expanded in
ownership and operation of telecoms networks and the services they enable.

Figure 2: Evolution of physical telecoms network elements (Layers 0 and 1 in OSI hierarchy)
Telco operated Neutrally or non-telco operated
Communications • Transmission equipment delivering analogue (wave-form) signals via None

Age physical media: electrical (via copper wires) or radio, including 1G mobile
(NMT)
• Passive, physical network facilities, e.g. cables, wayleaves, cell towers,
facilities such as buildings and network sites, etc. Such facilities include
those hosting network hubs, interconnect points, Points of Presence (POPs)
and local exchanges / Central Offices (COs), etc.
Information Age • Transmission equipment delivering raw, digitally encoded (wave-form) • Internet peering points, IP exchange (IPX)
signals via physical media, e.g. electrical (via copper wires), radio and facilities
optical. Includes:
• Co-location hubs
− baseband units (BBUs) in mobile networks, starting with GSM (2G)
• Roaming hubs and exchanges
− fixed broadband access transmission equipment, e.g. DSLAMs (for • Data centres with dedicated hosting
broadband over copper from the exchange or cabinet); Passive Optical capacity / servers, evolving to cloud data
Network (PON) equipment (OLT, ONU); and Cable Modem Termination centres based on Virtual Machines / multi-
Systems (CMTS) in cable networks tenancy
− WLAN routers as radio units • Non-telco-owned / -operated long-haul, fibre
• Passive, physical network facilities, e.g. cables, wayleaves, cell towers, networks, including internet backbone
facilities such as buildings and network sites, etc. Such facilities include infrastructure
those hosting network hubs, interconnect points, Points of Presence (POPs) • CDNs
and local exchanges / Central Offices (COs)
Coordination • Transmission equipment delivering raw, digitally encoded (wave-form) Same elements as per Information Age above
Age signals via physical media, e.g. radio and optical. Includes: and, in addition:
− baseband units (BBUs), evolving in 4G and 5G to virtualised / cloud- • Private, and enterprise-, vertical- and use
native (vRAN) and disaggregated (open RAN) architecture, with the case-specific, cellular and other (e.g.

Telco operated Neutrally or non-telco operated
baseband processing no longer delivered pre-integrated with the Distributed Antenna System) wireless
Remote Radio Unit (RRU) equipment and transmission
− fixed broadband access transmission equipment, also evolving to a • Edge cloud data centres or appliances,
programmable, virtualised and converged architecture, e.g.: virtualised hosted on the enterprise premises, the telco
PON; virtualised Broadband Network Gateway (BNG) and BNG / mobile edge, hyperscaler edge, or third-party /
core convergence neutral edge data centre facilities
− software-controlled optical transport networks / IP-optical convergence
− WLAN routers as radio units

• Passive, physical network facilities, e.g. cables, wayleaves, cell towers,
facilities such as buildings and network sites, etc. Such facilities include
those hosting network hubs, interconnect points, Points of Presence (POPs)
and local exchanges / Central Offices (COs)
• Private telco cloud data centres, both centralised and increasingly at the
edge (e.g. built in existing telco edge facilities such as COs, aggregation
hubs or Mobile Switching Centres (MSCs)).
Figure 3: The evolution of logical telecoms network functions (Layers 2–4 in the OSI hierarchy)
Telco operated network functions Non-telco operated network functions
Communications • Dedicated, physical equipment delivering network functions (Physical None

Age Network Functions: PNFs), e.g.:
• Switches (circuit and packet), including in the 2G mobile core
• Dedicated, protocol- / domain-specific, packet-data transport systems
• Analogue telephone exchange equipment
Information Age • Dedicated, physical equipment delivering network functions (Physical None
Network Functions: PNFs), e.g.:

Telco operated network functions Non-telco operated network functions
− Transport-layer gateways and domain controllers

− IP switches and softswitches
− Routers: edge and core
− Session border controllers (SBCs)
− Various IP-network functions, e.g. Domain Name Server (DNS), Network
Address Translation (NAT), etc.
− Network Interface Cards (NICs)
− Evolved Packet Core (EPC)
− IP Multimedia Subsystem (IMS)
− Firewalls
− VPN appliances / clients
− WLAN routers / gateways (WiFi)
• Virtualised equivalents of the above PNFs (Virtual Network Functions:
VNFs), based essentially on the porting of these functions into Virtual
Machines (VMs) running on COTS compute hardware
• SDN controllers
The ultimate rationale of VNFs / NFV is to deliver connectivity in support of

Information Age services more cost-effectively and scalably.
Coordination • Cloud-native network functions (CNFs): disaggregation of existing PNFs / VNFs into smaller sub-components (containerised
Age micro-services) that can be developed, upgraded, distributed and re-orchestrated in different, multi-vendor combinations based
on the needs of the end service
• New network-function sets that are cloud-native by design from the outset, e.g. 5G SA core, and Open RAN
The fundamental purpose or rationale of CNFs is to support Coordination Age services. Network functions become ‘a function
of’ the application or service. They are subordinate to, programmable by, and adapted to the requirements of the application and
the associated compute. By the same token, the network functions are core enablers of the application and compute. As a
result, in the Coordination Age there is no distinction between telco and non-telco operated logical network functions.

Figure 4: The evolution of services delivered over telco networks

Telco-billed services Third-party billed services
Communications • Telephony (circuit-switched voice) None

Age • Text messaging
• Datacomms (packet-switched data)
• ‘Network services’, e.g. wholesale / regulated delivery of
access or transport connectivity (inc. interconnection) to
third-party operators / service providers, and others
• Enterprise and other bespoke comms and connectivity
services, e.g. LAN, WAN, voice VPN, dedicated lines (e.g.
private circuits, dedicated Internet access), etc.
• Public Internet access: narrowband / dial-up
Information Age • Broadband, ‘always-on’ Internet (fixed and mobile) • Web-delivered (so-called ‘OTT’) voice, two-way video, and
• IPTV and triple- / quad-play instant messaging, inc. Unified Communications
• IP-MPLS, IP-VPN, and dedicated enterprise IP connectivity • Access to / delivery of information (inc. search)
• Telco-delivered IP voice and multimedia services, e.g. IP • Web-based entertainment and multimedia content; content
telephony, hosted IP exchange, Unified Communications distribution (e.g. via CDNs)
(UC) • User-generated, interactive information and content; social
media
• Commerce and financial transactions
• Enterprise application development and delivery → SaaS
• SD-WAN: started as a vendor-delivered OTT service, and
later integrated with existing telco enterprise managed
services – optimising delivery and consumption of
Information Age-type enterprise apps and services across
multiple network domains.
Coordination • Standards-based fixed and / or mobile connectivity – including on demand – in support of vertical- and client-specific
Age coordination services developed and offered via ecosystem partnerships (B2B2X)

Telco-billed services Third-party billed services
• These services leverage technologies and infrastructure assets such as network slicing, standard API-based access to
programmable network capabilities, standard IoT service templates and functions, distributed network functions and compute
at the edge, including the customer premises, cloud-native network functions (CNFs)
• Bespoke connectivity (also potentially on demand) in support of similar coordination services developed and offered via
partnerships (B2B2X) or by the telco itself (B2B).
• This bespoke connectivity is based on cloud-native network function design: allowing network-software engineers to
recompose, reconfigure, reassemble and scale network functions around the variable requirements of the applications and end
services. These bespoke characteristics may require manual software development – whether by the telco or its partners.
Ultimately, however, the aspiration is for this to become automated and dynamic: based on the programmability and
‘instructibility’ of the network functions, enhanced by machine learning (ML) and artificial intelligence (AI).
• Development, delivery and management of whole coordination services and use cases, including responsibility for non-network
application and compute elements, and integration.
• The more interdependent the compute, application and network workloads, the more these services qualify as what we have
described elsewhere as ‘net compute’.
A vast range of telco and non-telco players can get involved in delivering the connectivity and / or designing the network
functions. The network functions are the service. When they are delivered ‘as-a-Service’, it means, in a sense, that the network
functions literally have no state outside of the service they enable.

More non-telco billed networking functions and services are making it

harder for telcos to differentiate
Initially, the non-telco players are active mainly in the services layer in the Information Age, but
increasingly – as the Coordination Age unfolds – also in the network-function and physical layers.
These are the players that are steadily encroaching on the telco ‘domain’ as such, and they represent
competition but also potential partners.
The table below shows the new players emerging in each telecoms age – on top of existing providers
in the previous ages.
Figure 5: New competitors emerging in each telecoms age
New players in the Communications Age

Physical network elements Logical network functions Services
• Telcos • Telcos • Telcos

• Specialist enterprise or • Specialist enterprise • Specialist enterprise
government networking and networking (e.g. LAN, WAN) networking and service
service providers, often using and service providers providers
dedicated, private facilities
• ISPs
• Resellers and service providers
using third-party telco
networks (inc. MVNOs)
New partners/competitors in the Information Age

• ISPs • Network equipment providers • OTT voice and messaging; e.g.

(NEPs) providing outsourced Skype, Facebook Facetime,
• Dedicated, specialist service
management of their installed Messenger, WhatsApp,
providers, e.g. IPX operators,
equipment / software, or Microsoft (e.g. Teams), Cisco,
co-location hub providers, data
indeed of whole networks, Zoom, etc.
centre operators, public cloud
NOCs, etc.
providers, etc. • Web content aggregators / ad-
• Systems and network funded search providers, e.g.
• Non-telco Internet backbone
integrators, e.g. in the case of Google
providers
the large ICT outsourcing
• Content streaming services,
• CDN operators contracts that took off in the
e.g. YouTube, Netflix, Spotify,
• Dark fibre and other wholesale early-2000s
Amazon, Apple, etc.
providers of dedicated / private
• CDN operators
/ leased network capacity and
facilities • Social media platforms, e.g.
Facebook, Twitter, Instagram,
etc.

• Online retailers, e.g. Amazon,

Alibaba
• Online banking and money
platforms, inc.: mobile money /
m-payment; contactless
payment via smartphone (e.g.
Apple Pay); large-scale
transaction-management
systems in retail and financial
services industries
• Application developers, ISVs
• Network equipment vendors;
SD-WAN vendors
• Systems integrators (e.g.
outsourced integration and
management of enterprise ICT)
New partners/competitors in the Coordination Age

• Tower companies: purchasing In the Coordination Age, there is no separation between network
telcos’ cell site and tower functions and services – network functions are delivered as a service
assets, and leasing them back and have no separate state outside of the service. And by ‘service’ here,
to telcos and others we mean both the connectivity and the compute-driven use case of
which it is a part:
• Specialist and vertical-specific,
private networking and OT • Telcos
providers
• Specialist enterprise networking and service providers, inc. private
• Neutral Host Network (NHN) cellular operators
providers
• Neutral Host Providers (NHPs)
• Hyperscalers
• End users / enterprises themselves
• End-user enterprises (privately,
• Equipment vendors (including providers of compute appliances
self-operated networks)
alongside network equipment)
• Systems integrators
• Software vendors
• Network equipment providers
• Semiconductor vendors
(NEPs) / vendors
• Systems integrators
• Independent data centre
operators • Hyperscale cloud providers (HCPs)
• Vertical- and use case-specific OT and other technology providers

New telecoms ages are also bringing new business models

As the telecoms industry has evolved, so have telcos and their partners’ business models, although
the biggest shift is yet to come in the Coordination Age.
In the Information Age, the key differences between telco-billed and third party-billed services are:
• Telco services: Services are switched and routed, and billed by service type, scale (e.g. number
of users), scope (e.g. number of service elements consumed), usage / volume (e.g. of data
consumed), and quality parameters (e.g. bandwidth, reliability, latency, etc.)
• Third party services: Services are routed and delivered peer-to-peer, i.e. not necessarily
originating from or under the control of the telco’s network, equipment, devices or systems,
including billing
In the Coordination Age, this gets more complex:
• Telco services: The standards-based connectivity services described in the tables above are
billed based on factors similar to those of telco-billed Information Age services. But the bespoke
connectivity services are billed based on the value to the customer, which in most cases
comprises the ecosystem partner(s) delivering the coordination service to the end customer
(B2B2X scenario), supported by the connectivity.
− In cases where the telco takes end-to-end responsibility for designing and delivering the end
service – and owns the relationship to the end customer (B2B) – billing can be based on the
overall value of the service to that customer. It is in this scenario that the telco has the
maximum potential to generate substantive revenue additional to the value of the
connectivity services alone – although, in a partnership that recognises the integral
contribution of telco connectivity services to the success of the overall use case, telcos also
have considerable opportunity to drive revenue growth (i.e. also in a B2B2X scenario).
− The actual billing in all instances may be handled by the telco’s existing or new billing
platforms, as well as other BSS functions such as CRM, CEM, etc.
• Third party services: The same services as telcos sell directly, or components of them, can be
billed by any of the ecosystem partners involved, whether billed to other partners (as part of a
B2B2X arrangement), or billed directly to the end customer if the provider in question owns the
overall solution or customer relationship.
The fact that all telecoms services in the Coordination Age can be billed by a third party illustrates a
key difference from the Information Age. In the Information Age, the connectivity is merely the delivery
mechanism for web services billed or monetised by third parties.
By contrast, in Coordination Age services, the programmable, flexible connectivity is an integral

component in enabling the service, and hence – in theory – there is more dependency on the telco
on the part of the application and service developers. This creates more potential opportunities for
telcos to expand their participation in the value chain by building their involvement in customising

and adapting the network functions and the connectivity, and even by participation in other
segments of the chain (such as application development, integration, etc.).
The ‘core’ telecoms business has evolved from delivering

ubiquitous communications to enabling ubiquitous computing
One of the most striking features of the above tables is the way in which, as one age of telecoms
succeeds another, more and more of the services, network functions and physical elements that make
up telco networks – and are enabled by them – are developed, implemented, managed and operated
by non-telco actors. This is a reflection of what we described in the Introduction as the progressive
computerisation of telecoms services and networks.
First, in the Information Age, the network evolves into essentially a data and computer network, which
is increasingly optimised technologically to deliver high bandwidth-dependent, digital services of all
types, developed and monetised by third parties. Then the network functions themselves are turned
into software (virtualised) in order, essentially, to deliver the resultant, exponential growth in data
volumes more cost-efficiently.
Now, in the Coordination Age, telecoms is evolving once again into an integral enabler of what could
be described as the computerisation and digitisation of the real, physical world of processes,
experiences and even natural events. This is, arguably, what is ultimately at play in the second wave
of societal computerisation described in the Introduction: an application of computerisation to
optimise, and autonomously manage and deliver, material processes across all sectors of the
economy and society, from agricultural production to high-tech industry and individuals’ engagement
with the material world. The overall goal of this is to ensure that the use of physical resources is
optimised around societal, economic, environmental and personal goals and needs.
In this context, the logical network functions described in the above table (those we have assigned to
Layers 2 to 4 of the OSI network stack) come to be subordinated to and subsumed within the compute-
and software-defined objectives of any given service or use case. And the physical functions and
elements of the telco network (Layers 0 and 1) become the material interface between the compute
and the physical processes it governs. This is illustrated in Figure 6 below:

Figure 6: Services are driving the evolution from end-to-end physical networks, to
seamlessly bridged virtual and physical worlds
The above graphic illustrates our view of how:
• At the beginning, telecoms was pre-computerised and analogue: its core function was as a
physical means to achieve a geographical extension of real-world, social interaction –
communicating verbally and transmitting documentation from point to point.
• In the Information Age, the telecoms network is computerised and digitised: it becomes an IT /
data network optimised for transmitting and processing vast volumes of digitally encoded
information (apps, workloads, content, voice, text, etc.). The telco remained in charge of the
network functions that facilitated this, but the value shifted to those apps, workloads, content,
etc. NFV / SDN was the attempt to replicate those network functions in software form. This was
primarily to enable the telco to perform the core function of the telecoms network in the
Information Age (transmitting and processing ever vaster volumes of data) more a more cost-
effective and scalable way. But NFV did not change the value equation or the fundamental
economics.
• In the Coordination Age, rather than seeing cloud-native as a means to achieve the goals of NFV
as defined above more effectively still, we should see it as the key change that enables telco

network functions to be comprehensively computerised: to be programmable and adaptable to

the specific operational and data-processing requirements of any given use case. But what
actually delivers that compute-driven functionality are the physical characteristics of the
network, e.g. ultra-low-latency and ultra-reliable radio located geographically close to the physical
application supported.
In this sense, the telco network – cloud-native network functions, plus physical functions and
geographical distribution – becomes the bridge between compute and the physical world. Hence, the
core function and business of telecoms has evolved from being – in the Communications Age –
the delivery of ubiquitous communication to that of enabling ubiquitous computing for the
Coordination Age: the ability to deliver compute-driven, real-world processes and responses
anywhere, at any time.
Six telco-specific roles remain in play

The discussion above takes a historical perspective. However, while we are now entering the
Coordination Age, the core roles for the telco in the Communications and Information Age remain valid
and valuable to society and the economy, even if challenging for the telco to generate sufficient
revenue and profit margin.
We discuss these six telco USPs in relation to specific telcos in the following section, Radical telco
disaggregation in action: AT&T, DISH and Rakuten.
Figure 7: Six telco USPs in the communications and IT value chains

1. Ubiquitous, utility communications – typically, telephony

(Communications Age role)
Circuit-switched and / or IP-based telephony is still a core telco service, though now a low-margin,
commodity one. Every business and almost every adult individual in Western societies needs a
telephone number as a basic confirmation of ID and – in the case of geographic numbers – of address.
And owning a smartphone that could not be used to make and receive phone calls would rightly feel
incomplete – like the first touchscreen-based iPods before they became the iPhone.
Clearly, also, telephony is a regulated service, precisely because it is so indispensable as a ubiquitous

and personal means of communication. Alongside ubiquitous IP connectivity (see below), the social
importance of ubiquitous voice communication is one of the things that justifies the award of national
spectrum licences to MNOs, including stringent geographic and population coverage requirements.
The question for us here, though, is whether telephony is such a core service that a provider that does
not offer it could still be counted as a telco. In other words – logically speaking – while a regulated
provider of telephony will always be a telco, can a company that does not offer telephony but does
provide many telco-type services still be termed a telco?
This is not just an academic question, because it goes to the heart of whether certain telco services
(and network functions – logical and physical) can be disaggregated (separated out and divested from
the business), without the telco becoming some other type of company that is no longer a ‘telco’. Can
a telco be a ‘non-CSP’? This question is as much about entrenched mindsets and identity as
economics – members of telco boards could be heard saying, “we can’t just drop telephony, we’re a
telco: it’s what we do!”
It is noteworthy that two out of three of the “disaggregated telcos” we compare below (AT&T and
Rakuten Mobile) have not relinquished the role of a telephony provider. In the case of the other telco,
DISH Networks, it is not yet clear whether it intends to offer a telephony service, at least from launch.
The question we would ask is: is it the case that if telcos were freed from their regulatory obligations
to provide telephony services, would that help them to move away from their traditional operating
model of massive investment in physical network assets and the consequent pressure to ensure
they generate a sufficient long-term return on that investment? Equally, would this enable telcos to
pivot their organisations and resources around software-centric products and agile processes,
resulting in more innovation, including potentially in the area of voice services themselves?
Up until now, no major telcos seem to have been willing to take the risk of dropping telephony
altogether. But maybe if they did so, and if licensing conditions allowed them to do so, this would
indeed help network investments and service innovation to be concentrated more on addressing the
challenges of the Coordination Age. Another thing that would assist in this would be a more liberal,
competitive approach to spectrum, with more spectrum being made available to smaller, regional
players that could focus on improving phone and data coverage in their service areas. (Arguably, the
emergence of secondary spectrum markets through systems like CBRS in the US are driving this shift
already.) This might make the case for national spectrum licences that include phone coverage
obligations less compelling.

There is arguably a case for re-evaluating public policy in these areas to reflect the relative importance
of telephony versus computing as the basis for awarding spectrum and infrastructure licences. These
are two distinct businesses operating on what has, hitherto at least, been a largely common
infrastructure.
Historically, however, regulatory obligations to provide telephony have been useful in creating almost
a non-commercial justification for telcos to build out national or regional network coverage. This
coverage is now placing telcos in a strong position to develop the connectivity platform to support
ubiquitous compute-based services.
2. Ubiquitous broadband access and IP connectivity (Information Age

role)
As with telephony, the delivery of ubiquitous, broadband Internet access and wide-area IP connectivity
is an essential service that telcos provide for society and is, to that extent, a ‘core’ activity. And equally,
because of its commodity and utility status, it is also a low-margin activity.
Broadband internet and IP-based enterprise networking have now superseded telephony as the main,
baseline source of telcos’ revenue. Consumers choose their CSPs based on their broadband services,
with telephony as an add-on (if that), and mobile plans are sold on volume of inclusive gigabytes of
data, with a generous volume of call minutes added on as a given. Consequently, while telephony
might seem to be a service that telcos could theoretically consider discontinuing if they were allowed
to – and the physical infrastructure that supports telephony could be sold off or handed over to a
structurally separate subsidiary – it is far less obvious that telcos could stop offering broadband as a
core service.
Even if broadband Internet access is a core service, it is not exclusive to telcos, nor is it strictly
necessary for telcos to own the infrastructure over which it is provided – as the example of many
successful service providers and MVNOs offering broadband over other telcos’ infrastructure clearly
illustrates.
So the question – similar to that confronting telcos in regard to telephony – is as follows: is it time for
telcos to cease regarding the ownership and provision of the infrastructure behind broadband Internet
access and long-haul IP networking as a core activity? Should telcos be merely Internet / IP ‘servcos’
and not ‘infracos’?
As in the case of telephony, telcos must balance the potential gain in agility and freedom of manoeuvre
this could engender against the loss of a future, strategic opportunity that deploying and operating
advanced broadband network infrastructure such as 5G mobile and Fibre-to-the-Premises (FTTP)
could ensure further down the line. As with telephony, the longer-term gain could come from the
Coordination Age services that broadband network infrastructure might put telcos in the position
to capitalise on.

3. Telco cloud: The platform for cloud-native network operations

(Coordination Age role)
We are using ‘telco cloud’ here in the sense of the private cloud infrastructure (NFV infrastructure:
NFVi) supporting telcos’ virtualised and cloud-native network functions (VNFs / CNFs), as described
in Figure 6 above.
Telco cloud is ‘core’ because in the era of the VNF and CNF, the telco cloud is the network. In other
words, the telco cloud provides the logical, software platform that controls and regulates the delivery
of data, services and application workflows across the whole telco infrastructure.
For a telco to renounce ownership or management of its virtual infrastructure – or to give up on the
task of developing and operating a private telco cloud altogether – is as radical or more radical a move
as giving up ownership or operation of the physical infrastructure supporting telephony and IP data
services. This is because it involves accepting that a telco need no longer be a ‘netco’ (operator of a
logical communications network), even while continuing to operate physical network assets. Yet this
is precisely what AT&T has recently done by selling its ‘Network Cloud’ (private telco cloud) to
Microsoft Azure.
We discuss this move and what it might mean for the concept of telco cloud, and for the industry,
further in the section AT&T Network Cloud sell-off: Desperation or strategic acuity?
4. Virtualised and cloud-native network functions (VNFs / CNFs)

(Coordination Age role)
Alongside telco cloud in the limited sense defined above, VNFs and particularly CNFs make up the
broader domain of ‘Telco Cloud’ set out in STL Partners’ recent Telco Cloud Manifesto. VNFs and
particularly CNFs, in conjunction with the NFVi, are arguably the driver of value for telcos in the
Coordination Age. They enable the performant, dynamically scalable and distributed network
functions required for Coordination Age use cases, and enable those functions to be programmed and
instructed by the requirements of those applications.
Consequently, it is arguable that maintaining responsibility for developing and operating VNFs /
CNFs is now a core telco function and what differentiates a telco from a non-telco service provider,
which merely uses network functions on an as-required and even on-demand basis for the delivery of
its own and others’ services (see discussion on DISH Networks: Building the hyperscale network).
5. Physical network functions and processes, i.e. Layer 1

(Communications, Information and Coordination Age roles)
Controlling the operation of the physical network functions and processes – such as optics, radio or
electrical transmission – remains a defining, core telco activity, even if it is not necessary to be a telco
to carry it out. This has been the case throughout the three ages of telecoms and is arguably more
mission-critical for telcos than ever as we enter the Coordination Age, given the status of telco
networks as the interface between the compute and application logic, on the one hand, and the
physical processes they control on the other (see Figure 6).

Accordingly, we argue that – alongside Telco Cloud in the broader sense – ownership and operation
of such physical network elements is a core, defining telco business in the Coordination Age. By
this, we are referring to the active, physical network elements (e.g. the radio or optics), and not the
passive network assets it relies on, e.g. cell towers, buildings, wayleaves or cables – so long as telcos
can still gain access to these to deliver their services. (See further discussion in Servco, netco or
infraco – or a patchwork of all three?)
On the other hand, if telcos were relegated to the role of physical network operation alone – while
hyperscalers and their application-developer partners took responsibility for the Telco Cloud
requirements for any given use case – this would greatly reduce the value and long-term growth
potential attainable by telcos in the Coordination Age.
6. ‘Net compute’: End-to-end service design and delivery (Coordination

Age role)
The largest addressable opportunity for telcos in the Coordination Age comes in the form of what we
term ‘net compute’, where the telco (or other service provider) takes end-to-end responsibility for the
compute function and application software behind a Coordination Age service, in addition to the Telco
Cloud and physical network-function aspects. We discuss this in the context of AT&T in the next
section.

Radical telco disaggregation in action: AT&T,

DISH and Rakuten
In this chapter, we compare three prominent examples of telcos that have been redefining their
position in the disaggregated value chain and setting out on somewhat divergent pathways for what
it means to be a telco in the cloud-native era: AT&T, DISH Networks and Rakuten Mobile. These provide
illustrations of the relative importance of the four core telco domains we discussed above, and the
implications for telco value and independence in not being present in one or more of those domains.
Servco, netco or infraco – or a patchwork of all three?

The question of which part of the telco stack operators should focus on as services, logical network
functions, and physical network functions and infrastructure are disaggregated and opened up to
alternative providers is sometimes framed as: should telcos aim to be servcos, netcos or infracos?2
Our analysis in the preceding and in present sections suggests that no single, obvious template has
yet emerged but that, at the very least, some combination of maintaining control over virtualised
network functions, telco cloud infrastructure (NFVi), and active, physical network elements and
operations is the minimal viable condition for telcos to be more than just dumb pipes in the cloud-
native Coordination Age.
In this chapter, we will be using the following grid as a framework for our analysis. This incorporates
the main elements of the disaggregated telco stack as we broke them down in The disaggregated
telco landscape: Where’s the value for telcos?
In Figure 8 below, the areas labelled ‘N/A’ represent types of service, network function or infrastructure
that do not apply to the telecoms age in question. For example, there were no digital services as we
presently understand them in the Communications Age, such as web search, content streaming,
ecommerce, etc. Similarly, telco cloud and VNFs / CNFs are a phenomenon of the Information Age
and particularly the Coordination Age. By the same token, Physical Network Functions (PNFs) – by
which we mean logical network functions that are tied to dedicated, physical equipment (such as
routers, switches, EPCs, etc.) – become a thing of the past in the Coordination Age.
2‘Servcos’ are ‘infrastructure-agnostic’ service providers: it does not matter which network, and sometimes which network domain, the
services are delivered over. ‘Netcos’ are service providers that own, develop and / or operate the VNFs and CNFs that enable the services.
And ‘infracos’ are owners and providers of the physical network functions (e.g. radios and optics) and / or infrastructure (e.g. towers and
cables).

Figure 8: The disaggregated telco stack
Before setting out which quadrants we assign AT&T, DISH and Rakuten to, it is worth setting out a
baseline model. This is what we might call the ‘low-expectation, standard telco’ – a telco that does not
seek to expand its business or technology model much beyond standard, classic telco services, such
as communications and connectivity delivered via single-vendor, proprietary network functions.
Figure 9: The standard, low-expectation telco

The above diagram illustrates how the ‘low-expectation’ telco focuses on classic telco services and
activities: commodity communications and connectivity, operation of PNFs, a limited measure of NFV
and telco cloud (mainly what we call Phase 1 NFV involving VNFs rather than CNFs), and operation
and maintenance of physical network functions and infrastructure (Layers 0 and 1). Telcos of this kind
generally have not developed any digital (i.e. web-based) services of their own, and do not expect – or
are not expected – to develop their own Coordination Age applications and use cases (‘net compute’),
but aim only to provide the connectivity supporting these. This is why the ‘other types of services’
column remains blank.
By comparison, when applied to AT&T, we see a dramatic effect of telco disaggregation:
Figure 10: AT&T – the cloud-less, cloud-native telco
With AT&T, the most striking instance of disaggregation, illustrated here, is the divestment to
Microsoft Azure of the operator’s private telco cloud (which it called its ‘Network Cloud’), announced
in June 2021. It is now Microsoft, not AT&T, that has the responsibility for running and developing the
cloud infrastructure that AT&T’s VNFs and CNFs – particularly its 5G core – operate on.
However, AT&T is most definitely retaining responsibility for developing, implementing and
operating its CNFs, as illustrated in the graphic. These include the 5G Standalone (SA) core, which
AT&T is still developing. The operator has not disclosed which vendor, or combination of vendors and
its own internal development team, are supplying the SA core. But it is clear that it will be cloud-native
and is intended to offer the flexibility and scalability to support Coordination Age use cases (edge
compute / net compute).

On net compute, AT&T has already announced a number of projects that it is either taking the lead on
itself, or is developing in partnership with Azure and third-party application developers.3 Hence, we
have indicated that it will offer Coordination Age services over its telco infrastructure. By contrast,
AT&T has offered little by way of digital / web-based services of an Information Age type, apart from
maybe its unsuccessful foray into satellite broadcasting via DirecTV (which is the subject of a
forthcoming STL Partners report). We have included only a single tick in this quadrant.
Similarly greyed out are the PNF column (with PNFs phased out from AT&T’s network for all but legacy
services and functions) and the passive, physical network assets column. This reflects the substantial
sell-off and lease-back arrangements AT&T has carried out with tower companies such as Crown
Castle and American Towers. These deals have not, however, impeded AT&T in its roll-out and
operation of 5G radio infrastructure and services – and hence, the ‘operation of physical network
processes’ column has double ticks.
AT&T Network Cloud sell-off: Desperation or strategic acuity?

Some critics have suggested that AT&T’s Network Cloud sell-off is an expression of AT&T giving up
on its original aspirations to develop and operate its own telco cloud and VNFs / CNFs, free from
dependency on third-party vendors or, indeed, hyperscale cloud providers such as Azure.4 AT&T, they
say, is holding its hands up in surrender and admitting that private telco cloud is going the way of
telco-owned enterprise cloud in the 2000s: that telcos simply cannot compete with the scale and
resources of dedicated, public cloud providers.
There is an element of truth in this: AT&T is choosing to partner rather than go it alone. And we at STL
Partners agree that telcos have no alternative other than to partner with the hyperscalers, who can
offer them access to considerable resources for managing and operating their increasingly cloud-
based networks, and innovating services at scale. But does the AT&T / Azure deal in fact represent
too much of a transfer of telco cloud IP and autonomy to a hyperscaler?
We believe, on the contrary, that AT&T’s move is clever and strategic, for the following reasons:
1. It reflects and factors in what could be described as the ultimate logic of telco-network
cloudification: That once your network functions and infrastructure are fully cloudified (and
AT&T has been at the vanguard of NFV and cloudification from day one), then the VNFs / CNFs
ought in theory to be capable of being deployed and run on any cloud, not just the private telco
cloud. This is one of the things that cloud-native actually means: the ability to port containerised
CNFs to any virtualised or indeed bare-metal infrastructure platform.
2. It removes the Network Cloud as a cost driver and frees AT&T to innovate in a more agile way:
If AT&T no longer actually needs its Network Cloud as the exclusive platform for its CNFs, then it
represents a smart move to sell it on to a hyperscaler that has the resources and scale to
3See STL Partners report Microsoft, Affirmed and Metaswitch: What does it mean for telecoms?
4For these reasons, we placed AT&T in the ‘DIY’ telco cloud category in our recent Telco Cloud Manifesto [inc. a ref.]. However, ‘telco cloud’
there referred to the totality of telcos’ cloud-based operations, including VNFs and CNFs alongside cloud infrastructure (NFVi). AT&T is still
very much a DIY practitioner when it comes to network-function development and operation.

develop it to its full potential. The Network Cloud is thereby taken off AT&T’s books as a
depreciating fixed asset. AT&T no longer has the operating expense of running and developing it,
and it has more possibilities to innovate and deploy CNFs in the context of different use cases
and environments, without feeling obliged to deploy them on the expensively and internally
developed Network Cloud.
3. Ironically, perhaps, this is a way for AT&T to fast-track the adoption of its Network Cloud
platform as a global standard for telco cloud: AT&T’s original telco cloud blueprint, dubbed
‘ECOMP’ (Enhanced Control, Orchestration, Management and Policy), was open-sourced in 2017
as part of ‘ONAP’ (Open-source Network Automation Platform), one of the leading open-source
programmes that aimed to deliver global NFV MANO (NFV Management and Orchestration)
standards. ONAP failed in this broader objective, but not without generating vast amounts of IP
and software engineering know-how, which contributed to the ongoing development of the AT&T
Network Cloud and its CNFs.
Now that Azure has taken on the task of developing and operationalising the Network Cloud, this
means that it is effectively AT&T’s platform, environment and IP that will become one of the de
facto global standards, as part of Azure. AT&T just hyperscaled its telco cloud, and this creates
huge potential for AT&T to roll out cloud-based services worldwide and to integrate its offerings
with partner networks that adopt its platform via Azure.
4. Rather than surrendering to a hyperscaler, AT&T is following through on the ultimate logic of
virtualisation: It is becoming a ‘cloud-less, cloud-native telco’ means that AT&T has more
options to develop new CNF-enabled use cases and services over any telco cloud environment.
And the ability to do so, in an agile way, remains very much at the heart of its strategy.
DISH Networks: Building the hyperscale network

Similar to AT&T, the new US 5G entrant DISH Networks is also deploying its CNFs – including SA core
and 5G open RAN – on a hyperscaler’s cloud, that of AWS. However, in contrast to AT&T, DISH is
deploying its network purely on AWS’s existing, standard cloud platform, rather than porting a
dedicated telco cloud over from DISH to AWS. The impact of these deployment decisions is illustrated
in the grid below.

Figure 11: DISH – 5G network as hyperscaler edge
DISH is basing its architecture on the pre-existing AWS cloud

In contrast to AT&T, which ported its pre-existing Network Cloud architecture to the Azure cloud, DISH
presents a patchwork of disaggregation, with many segments of the telco stack and value chain
occupied by partners rather than DISH itself – as well as several segments left blank.
The most stand-out point, as noted above, is the fact that DISH is using the AWS public cloud to serve
as the telco cloud hosting its CNFs. We remarked in the previous section that dispensing with the
private cloud is almost tantamount to doing without the network itself. This is because, in the post-
NFV / cloud-native era, the private cloud constitutes the physical network infrastructure, e.g. servers,
networking between data centres, etc. This makes it the replacement or equivalent of the physical
network functions (PNFs) and links of the legacy network in the era before virtualisation.
AWS has gone further down this path than AT&T, in that the Network Cloud that AT&T will now be
sourcing from Microsoft was at least developed around AT&T’s network functions and architecture.
By contrast, DISH is mapping its network functions on to AWS’s architecture with, for example, the
distributed components of the open RAN Baseband Unit (BBU) – the Distributed Unit (DU) and the
Central Unit (CU) – being sited at AWS Outposts (on-premise data centres) and AWS Local Zones
(metropolitan or industrial area data centres) respectively.
Effectively, this turns the DISH 5G network into an edge extension of the AWS cloud, designed to
support the delivery of low latency-critical services offered by AWS’s application developer ecosystem.

This is an instance of what we have termed elsewhere a ‘Network as a Cloud Platform’5, i.e. the use of
telco edge sites hosting 5G CNFs (e.g. distributed core and 5G open RAN) as platforms for the delivery
of AWS partner applications and use cases.
DISH may not be in charge of its destiny as a telco

Another point of contrast is that DISH is not taking ownership of its CNF development roadmap to the
same extent as AT&T. In the terms of our Telco Cloud Manifesto, AT&T takes a ‘DIY’ approach to
network-function design and deployment, while DISH’s approach is that of ‘vendor-supported best-of-
breed’. This means that its CNFs and other network software (e.g. OSS) are being developed by a
group of preferred vendors – e.g. Altiostar, Mavenir and Nokia – whose software has been custom-
integrated and -adapted to the VMware virtualisation platform and to AWS’s orchestration system and
other software tools.
There is nothing wrong with this sort of bespoke integration. Indeed, this is an integral part of multi-
vendor, cloud-native deployments. However, there is no indication that the DISH platform is intended
to be truly open, such that cloud-native components from one vendor could easily be swapped out for
components from other vendors, or that open RAN components from other vendors, including radio,
could be plugged in to the existing set of vendors.
Equally, unlike AT&T, DISH is not publicly assuming direct responsibility for ongoing CNF
implementation and development, in the Continuous Integration / Continuous Delivery sense. The
question that then arises is, to what extent will DISH’s supposedly cloud-native network reinstate
vendor lock-in, including obviously lock-in to AWS’s orchestration, APIs and platform tools? The
impression all of this creates is that DISH’s network is being designed as much – if not more – around
the priorities of AWS and its application developer partners, than around those of DISH. At any rate,
DISH will not be free to move its network functions and workloads around multiple public cloud
providers, and independently pursue ‘net compute’ opportunities with other hyperscalers.
If DISH is not in charge of its telco cloud or its network functions, is it

still a telco?
As DISH is not taking complete charge of its own CNF roadmap, we have entered only single ticks in
the ‘Development and operation of network function software’ column in Figure 11 above. For the
same reasons, we have inserted a question mark in the quadrant for Coordination Age services, as
there has been no indication that DISH is aiming to develop its own edge / net compute services
leveraging the cloud-native 5G network. Rather, the network is merely a platform for the creation and
delivery of such services by AWS’s partner ecosystem.
The question then arises: can DISH truly be regarded as a ‘telco’ in its own right, as opposed to
simply a 5G-enabled, edge extension of the AWS cloud? As we argued in the first section, maintaining
control over essential network functions is a core differentiator for telcos in the Coordination Age –
especially if the telco in question does not host those network functions in its own cloud. In the
absence of this control, the telco arguably becomes merely a pipe for the delivery of others’ value-
5 See STL Partners report Microsoft, Affirmed and Metaswitch: What does it mean for telecoms?

generating services. Even the ownership and operation of 5G spectrum and radio is not a USP. Other
5G wireless networks are available, including – in the edge / net compute space – the emerging private
networking players. That said, once DISH achieves national US coverage, it will inevitably become the
primary channel for the delivery of AWS services from the telco edge, trumping the likes of Verizon,
which has also gone with AWS as its primary telco MEC platform provider.
Interestingly, DISH has benefited greatly from the cost and resource efficiencies involved in telcos’
divestment of their tower infrastructure. It is rolling out its cell sites almost exclusively over physical
facilities leased from towercos, rather than building out such infrastructure itself (hence, the single
ticks in the ‘passive, physical network assets’ column of Figure 11). It has also reportedly been driving
a hard bargain over prices.
One last observation from Figure 11 is that DISH may emerge as the first significant example of a
telco without a telephony offer. This is perhaps another marker of how DISH cannot be viewed as a
true telco – for better or worse – given that telephony remains a core telco service even to this day.
Rakuten Mobile: Ecommerce platform turned cloud-native

telco, turned telco cloud platform provider
Rakuten presents a further, illuminating comparison with AT&T and DISH. It is another cloud-native
telco but one which has targeted a distinct combination of elements within the disaggregated telco
value chain – as illustrated in Figure 12.
Figure 12: The model Coordination Age telco – but still in beta mode

Rakuten has colonised the disaggregated telco value chain – turning

into a telco in the process
Rakuten is a paradox: it is an example of a non-telco player (in this instance, an ecommerce provider)
moving into the telco domain – an aggressive, incoming player of a type that is often viewed as a
competitive threat to telcos as it carves out portions of the disaggregated telco value for itself. But at
the same time, it provides a model of hope for telcos, precisely because it shows that the telco
business can in theory be a value-add and differentiator in the Coordination Age.
In fact, as Figure 12 illustrates, Rakuten is right across the whole disaggregated telco value chain:
occupying every single quadrant of the grid that it could occupy. The only blank quadrants relate to
legacy PNFs and Communications Age physical processes and assets that do not apply to this self-
declared champion of cloud-native.
Rakuten’s approach differs from those of AT&T and DISH in the following key respects:
• Unlike both the US players, Rakuten is a web-scale, digital service provider, i.e. this is its core
business (hence, the ticks in the Information Age / digital services quadrant). In addition, it has
set its sights on developing industry-specific, edge compute services leveraging its cloud-native,
distributed 5G SA core and open RAN network functions (ticks in the Coordination Age /
coordination services quadrant). In adopting such a distinct strategy of vertical integration
between its services business and the network, Rakuten clearly views the ability to design and
build its network functionality, coverage and infrastructure to its own specifications as an
important differentiator. However, significantly, it is the (non-telco) services vision that is
driving this.
• Rakuten has opted to self-build its own telco cloud, assembled from a best-of-breed combination
of vendor solutions running over the Red Hat distribution of the OpenStack cloud OS. But unlike
AT&T, Rakuten is not only retaining this private telco cloud but is now marketing the Rakuten
Cloud Platform aggressively as a telco cloud platform for other telcos. In a sense, though,
Microsoft is also now marketing the (former) AT&T Network Cloud as a telco cloud platform for
other telcos. Rakuten has not accepted the argument that only hyperscalers can develop and
deliver telco cloud at global scale.
− The RCP arguably represents ‘vendor-supported best-of-breed’, like DISH, rather than DIY
best-of-breed as with AT&T’s Network Cloud. However, while there may have been a lot of
dependency on lead vendor Cisco and on external systems integrators during the roll-out of
Rakuten’s initial, Non-standalone (NSA) 5G core and 4G open RAN-based services, Rakuten
has now explicitly taken charge of its telco cloud platform architecture and business,
alongside its vendor partners.
• It is for these reasons that we have also put ticks in the ‘development and operation of network
function software’ column in Figure 12 (in contrast to DISH). Although Rakuten did not originate
any of its CNFs, it has openly espoused a CI / CD approach, and indeed it has boasted about the
large number of software updates and upgrades its DevOps teams complete on a daily basis.

• Unlike AT&T and DISH, Rakuten has largely not sourced its mobile network sites from tower
companies but has established and built out its sites from scratch. This approach is closely
allied to Rakuten’s adoption of open RAN. For example, Rakuten has deployed thousands of ‘far
edge’ and ‘edge’ data centres – at lesser or greater distance to the radio – designed to deploy
flexible configurations of virtualised, open RAN-compliant DU and CU functions alongside edge
compute infrastructure. Clearly, Rakuten views ownership of and control over its edge facilities –
both network-function and compute – as giving it the freedom to deploy the crucial combination
of compute and ultra-low-latency radio that will form the basis of many Coordination Age use
cases.
But Rakuten Mobile is still only a project in beta

Rakuten exemplifies every characteristic, and more, that defines for us what it is to be a telco in the
Coordination Age: a self-built, private telco cloud, a CNF DevOps practice and CI / CD processes, and
a focus on building flexible, open RAN-based 5G connectivity and physical infrastructure out to the
edge in support of vertical-specific, edge compute / net compute use cases.
In other words, this is a cloud, software and physical networking architecture that is fitted out to be
the bridge between ubiquitous compute and the physical processes and events it is intended to drive,
embodying the role of the telco network in the Coordination Age.
Having said this, it is also a massive gamble. Rakuten’s initial estimate for the cost of building its
mobile network in Japan was around JPY600 billion (around USD5.5 billion). But in February 2021,
Rakuten reported that the final cost was likely to be 30% to 40% higher. At the same time, Rakuten
reported that its mobile unit had posted a USD2.1 billion loss in the financial year ended December
2020.
However, it is too early to rush to judgement on the project, which is still only in the beta phase. For a
start, as of September 2021, Rakuten had yet to launch its Standalone (SA) mobile core. This is what
will enable the industrial and vertical-specific use cases that represent in our view the key telco USP
in the Coordination Age, and have the potential to drive long-term value growth. And this should also
drive the consumer adoption that has thus far been lacking, as users will see a considerable
improvement in bandwidth, which in turn will make early use cases such as gaming, AR / VR and
ultrafast / ultra-reliable mobile broadband a reality.
Rakuten may well have picked out the truly valuable parts of the disaggregated telco value chain – but
it has yet to deliver on them.

Conclusion
Ultimately, new telco value depends on retaining control over network function design and
interoperability, and the physical means of delivery.
While it is still very early to gauge what a Coordination Age telco might look like – if indeed such a
thing has any value in the new era – three factors emerge from our study as critical to ensuring that
the telco can be more than merely a facilitator of the Coordination Age services of others:
1. Control over the CNF development roadmap: As CNFs are integral to developing the new
programmable and compute-directed services of the Coordination Age, telcos cannot realise the
potential value from them without retaining control over their CNFs.
2. The ability to deploy their CNFs across multiple clouds and cloud OS: Equally critical is the
ability to deploy CNFs flexibly across any enabling cloud, so as to deliver the capabilities of their
network technologies where and when they are required. By aligning themselves narrowly with a
single public cloud provider – as DISH has done with AWS – telcos run the risk of being locked in
to a particular hyperscaler’s platform and network-function ecosystem.
3. Operational control over (though not necessarily ownership of) the physical functions and
infrastructure through which Coordination Age workloads are delivered: Specifically, we mean
radio (and primarily 5G radio) and optics. Open RAN, which introduces unprecedented levels of
programmability, scalability and cost efficiency into the RAN is a key technology for the future in
this context.

Index
5G, 3, 4, 6, 9, 12, 14, 24, 29, 30, 31, 32, 33, 35, 36, DISH, 3, 4, 5, 6, 22, 23, 25, 27, 28, 31, 32, 33, 34,
37 35, 36, 37
AT&T, 3, 4, 5, 6, 22, 23, 25, 26, 27, 28, 29, 30, 31, edge compute, 29, 35, 36
32, 33, 34, 35, 36 logical network functions, 11, 14, 20, 27
AWS, 3, 4, 31, 32, 33, 37 Microsoft, 4, 17, 25, 29, 30, 32, 33, 35
Azure, 4, 25, 29, 30, 31, 32 NFV, 7, 9, 13, 21, 25, 29, 30, 31, 32
B2B2X, 15, 16, 19 Open RAN, 3, 7, 14, 37
cloud-native, 3, 4, 5, 6, 7, 9, 12, 14, 16, 21, 22, 25, passive network assets, 26
27, 29, 30, 31, 32, 33, 34, 35 physical network functions, 11, 25, 27, 29, 32
CNF, 2, 4, 25, 31, 33, 36, 37 Rakuten, 3, 4, 5, 22, 23, 27, 28, 34, 35, 36
DevOps, 4, 7, 35, 36 spectrum, 23, 24, 34
disaggregation, 2, 5, 7, 8, 9, 14, 22, 27, 29, 32

Research Consulting Events
www.stlpartners.com

Why and How To Go Telco Cloud Native ATT DISH and Rakuten September 2021

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Why and How To Go Telco Cloud Native ATT DISH and Rakuten September 2021

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Executive Briefing Service

WHY AND HOW TO GO

David Martin, Senior Associate Analyst | david.martin@stlpartners.com | September 2021

The telecoms industry is facing disaggregation on several fronts

Source: STL Partners

Three critical success factors for Coordination Age telcos

© STL Partners EXECUTIVE BRIEFING 2

What capabilities will remain distinctively ‘telco’?

Six telco USPs in the communications and IT value chains

Source: STL Partners

Our take on three pioneering cloud-native telcos

© STL Partners EXECUTIVE BRIEFING 3

© STL Partners EXECUTIVE BRIEFING 4

Radical telco disaggregation in action: AT&T, DISH and Rakuten .............................................................. 27

© STL Partners EXECUTIVE BRIEFING 5

Figure 4: The evolution of services delivered over telco networks ............................................................. 15

Figure 5: New competitors emerging in each telecoms age ....................................................................... 17

Figure 8: The disaggregated telco stack.......................................................................................................... 28

Figure 9: The standard, low-expectation telco ................................................................................................ 28

Figure 10: AT&T – the cloud-less, cloud-native telco .................................................................................... 29

Figure 11: DISH – 5G network as hyperscaler edge ...................................................................................... 32

© STL Partners EXECUTIVE BRIEFING 6

− Vertical disaggregation: separating out of network functions previously delivered by

− Horizontal disaggregation: breaking up of network functions themselves into their

Open RAN is an example of both types of disaggregation: vertical disaggregation through

2. Organisational structure and operating model: Breaking up of organisational hierarchies,

© STL Partners EXECUTIVE BRIEFING 7

Figure 1: Transformation from the vertical telco to the disaggregated telco

Source: STL Partners

Telco disaggregation is a by-product of computerisation

© STL Partners EXECUTIVE BRIEFING 8

enabling processes and products to be re-engineered, optimised, recombined in different ways,

NFV has computerised the network; cloud-native subordinates it to

© STL Partners EXECUTIVE BRIEFING 9

• Computing, IT and cloud players

• More specialist and agile networking providers

• And vertical-market actors – delivering connectivity in support of vertical-specific, Coordination

© STL Partners EXECUTIVE BRIEFING 10

The disaggregated telco landscape: Where’s

© STL Partners EXECUTIVE BRIEFING 11

Communications • Transmission equipment delivering analogue (wave-form) signals via None

© STL Partners EXECUTIVE BRIEFING 12

Telco operated Neutrally or non-telco operated

− software-controlled optical transport networks / IP-optical convergence

− WLAN routers as radio units

Communications • Dedicated, physical equipment delivering network functions (Physical None

© STL Partners EXECUTIVE BRIEFING 13

Telco operated network functions Non-telco operated network functions

− Transport-layer gateways and domain controllers

The ultimate rationale of VNFs / NFV is to deliver connectivity in support of

© STL Partners EXECUTIVE BRIEFING 14

Figure 4: The evolution of services delivered over telco networks

Communications • Telephony (circuit-switched voice) None

© STL Partners EXECUTIVE BRIEFING 15

Telco-billed services Third-party billed services

© STL Partners EXECUTIVE BRIEFING 16

More non-telco billed networking functions and services are making it

Figure 5: New competitors emerging in each telecoms age

New players in the Communications Age

• Telcos • Telcos • Telcos

New partners/competitors in the Information Age

• ISPs • Network equipment providers • OTT voice and messaging; e.g.

© STL Partners EXECUTIVE BRIEFING 17