The telecom industry is witnessing a rapid digital transformation, and the adoption of public clouds has become a critical aspect of this evolution. However, operators remain hesitant to move their core applications to the public cloud, citing a range of challenges and concerns. In an industry where reliability, security, and latency are paramount, telcos are faced with the decision of whether to entrust their critical systems and data to external cloud providers. This article explores the reasons behind telcos’ reluctance, using statements from David Hennessy, CTO of Three, and examining the financial struggles of Dish Network’s wireless unit as a cautionary tale.
Dish Network’s financial struggles
Dish Network’s wireless unit reported staggering losses of $1.5 billion for the first nine months of 2023, compared to approximately $515 million the previous year. These significant financial struggles raise concerns about Dish Network’s ability to serve as an advocate for public cloud adoption within the telecom industry. Telcos look to successful case studies to gauge the viability and benefits of migrating core telco workloads to the public cloud, and Dish Network’s challenges dampen enthusiasm.
Telcos’ reluctance to adopt public cloud for core workloads
While many telcos have chosen to leverage public cloud infrastructure for standard IT applications, core telco workloads remain largely untouched. The decision to keep these critical workloads in-house stems from regulatory and security concerns associated with storing systems and data in foreign-owned cloud facilities. Telcos are subject to strict regulations and are responsible for safeguarding customer data, making them cautious about entrusting it to external providers.
Worries about hyperscalers’ market power
Another factor contributing to the reluctance is the fear of market power and potential monopolistic behavior from hyperscale cloud providers like AWS, Microsoft, and Google. Telcos are concerned about becoming too reliant on these dominant players and the influence they may exert over the industry. The potential lack of competition and pricing control further raises concerns among telcos, influencing their decision-making process.
Challenges with service quality and latency
The geographical distance between hyperscale data centers and customer neighborhoods can impact service quality and increase latency. Telcos recognize that the delivery of reliable, low-latency services is crucial to meeting customer expectations. By keeping core workloads within their own infrastructure, telcos can better control and optimize service quality, ensuring superior performance for their users.
Three’s stance and alternative options
The CTO of Three, David Hennessy, firmly rules out a public-cloud deal as a substitute for the company’s existing core infrastructure. This decision reflects the reservations many telcos have regarding public cloud usage for core networks. Instead, hyperscalers like AWS and Microsoft now offer to bring their technologies into telcos’ own properties, enabling telcos to maintain control over their critical network functions while benefiting from the technologies and services of these cloud providers.
Telcos’ reliance on hyperscalers is due to skills and scale
One challenge faced by telcos, particularly smaller ones, is the lack of skills and scale needed for efficient in-house development of cloud technologies. Many telcos rely on hyperscalers for certain applications and services, leveraging the expertise and resources these providers bring. The specialized knowledge and infrastructure of hyperscale providers ensures telcos can take advantage of cloud technologies without the burden of extensive in-house development.
While public cloud adoption in the telecom industry continues to grow, telcos remain cautious about moving their core applications to these external environments. Concerns regarding regulatory compliance, data security, hyperscalers’ market power, service quality, and latency are influencing their decisions. Furthermore, the dependency on hyperscalers due to skills and scale limitations adds to the complexity of migrating core workloads. As the industry evolves, telcos will need to find a balance between leveraging the benefits of public cloud and mitigating potential risks. Future developments and emerging solutions are poised to address these challenges and reshape the telecom landscape.