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Despite complexity and market challenges, CSP spend on NFV/SDN will grow at a 32.4% CAGR from 2019 to 2024 to nearly $147B

Key Insights

NFV/SDN spend will scale through the forecast period as leading CSPs broaden their transformation initiatives and as other CSPs begin their transformational journeys.

Operators will increasingly invest in virtualized network solutions, including vRAN and virtual network cores, to reap the full benefits of 5G.

The pool of vendors capable of aiding telecom operators in their network transformations is growing as cloud service providers and Japan-based vendors join the fray.

TBR’s NFV/SDN Telecom Market Forecast details NFV and SDN trends among the most influential market players, including both suppliers and operators. This research includes current-year market sizing and a five-year forecast by multiple NFV and SDN market segments and by geography as well as examines growth drivers, top trends and leading market players. TBR’s NFV/SDN Telecom Market Landscape includes key findings, market size, customer and geographic adoption, operator and vendor positioning and strategies, and acquisition and alliance strategies.

COVID-19 fallout unlocks unique opportunities for the telecom industry to build out edge infrastructure

vRAN will become a major driver of edge compute scale-outs

Communication service providers (CSPs) that are driving forward with virtualized radio access network (vRAN), most notably Rakuten and Dish, will build many thousands of edge sites over the next few years to support their vRAN topologies. These edge sites will need to be located within 10 miles of the remote radio unit to meet the strict time synchronization requirements of vRAN. Additionally, these edge sites, which will house the virtualized baseband unit, can be multipurposed, supporting more workloads than just RAN traffic, which could unlock new monetization options for these CSPs.

Total CSP Edge Compute Spend 2019-2024E

CSP spend on edge compute infrastructure will grow at a TBR-projected 54.5% CAGR from 2019 to 2024 to reach $90B by 2025

TBR estimates CSPs will own or lease over 1.2 million local edge sites (i.e., mini data centers) globally by 2025, up from nearly 9,000 sites globally at the end of 2019. The primary driver of edge build-outs during the forecast period is telcos’ and cablecos’ network transformations, which entail migrating to a cloudified and virtualized network, and webscales’ edge initiatives to support their cloud businesses and digital ecosystem endeavors.

In this new architecture, network functions will be virtualized and housed in NFV infrastructure, which is essentially a data center. Network sites, such as central offices, have been the primary edge compute locations to date, with cell site builds expected to ramp up significantly in 2021 and become the primary locations for the CSP edge by 2025. Converted retail store locations and customer premises locations are other site types where CSPs will locate their edge infrastructure. For more information pertaining to the market size and for further breakouts of the data, see TBR’s Telecom Edge Compute Market Forecast.

TBR’s Telecom Edge Compute Market Landscape, which is global in scope, deep dives into the edge compute-related initiatives of stakeholders in the telecom market including telecom operators, cable operators, webscales and vendors that supply the telecom market. The research includes key findings, market size, regional summary, technology trends, use cases, operator and vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

Mavenir ready to prove it is possible to transform mobile network economics

TBR perspective  

Mavenir’s message is resonating with the market, and its reputation among CSPs is strengthening. In a few short years, the upstart vendor has gone from an M&A amalgamation of disparate businesses to a cohesive, relevant vendor that is now being considered alongside incumbent Tier 1 network vendors for projects at leading CSPs worldwide.

Mavenir is a legitimate contender to supply solutions that will comprise the new webscale-like network architecture CSPs are eager to implement to stay competitive and participate in new value creation in the digital era. The vendor’s greenfield play to provide cloud-native solutions is unique and is a key differentiator from incumbent OEMs that continue to push their relatively expensive, inflexible and closed systems. CSPs are intrigued by Mavenir’s virtualization offerings, not only with the low price points and total cost of ownership (TCO), but also with the performance of their systems in trials and now, with vRAN in some select commercial production environments.

TBR believes Mavenir will become one of the leading telecom network vendors in the digital era and will take measurable share from incumbent vendors during the 5G network build cycle, not only in RAN, but also in the mobile core and digital enablement-related platforms. Though Mavenir is a small fish in a sea of goliaths, the company is able to hold its own by trumpeting its software-first mantra as a means of redefining mobile network economics.

Mavenir’s assessment of where the market needs to go is spot on. CSPs must evolve to become more webscale-like in nature, adopting a network architecture that is dynamic, agile and able to support the demands of the digital era as well as new business models that can be scaled and supported at fundamentally different economics compared to the traditional architecture. More of the same will not work anymore, and CSPs must think and act differently to stay relevant and profitable in the digital era. CSPs are intrigued by the claims Mavenir is making pertaining to radically different mobile network economics and there is desire among CSPs to hear from the vendor about how it can deliver on those promises.

TBR believes Mavenir’s biggest, most impactful play is in the RAN space, which is an approximately $40 billion market and is ripe for significant disruption. RAN is the domain that will be the catalyst to transform Mavenir from a relatively small vendor by revenue (around $500 million this year) into a multibillion-dollar global powerhouse.

Mavenir provided a corporate strategy overview and updates on each of its business units at its third annual analyst day. The vendor is well aligned with underlying trends in the telecom industry, particularly network virtualization and open infrastructure. Mavenir now claims to have product offerings across several network infrastructure domains, including RAN, mobile core, IMS (particularly, VoLTE and RCS), Unified Communications & Collaboration (Mobile Business Fabric), network security and digital enablement platforms, such as for private networks, OSS/BSS and mobile advertising (Aquto). The company’s software-first, hardware-agnostic approach is timely as communication service providers (CSP) accelerate their transformations into digital service providers.

Cost of ‘intelligent connectivity’ must decline significantly for intelligent world to unfold

TBR perspective

Realizing the intelligent world presented by the mobile industry at Mobile World Congress Barcelona 2019 (MWC19) will require a fundamental change in how networks are architected, including a radical reduction in the cost of providing connectivity. It will also require business transformation for companies tied to the old world, namely communications service providers (CSPs) and their incumbent vendors.

It was readily apparent at the event that technology is advancing at a much faster pace than the establishment of business cases that economically justify deployment of the technology. The reality for the mobile industry is that the cost of building, owning and operating networks is too high and networks are too inflexible to support the business realities of the digital era, whereby connectivity is relegated to a commodity service and the value lies in the platforms and applications that run over the network. The industry has known this for years, but changes have been minimal, until maybe now.

The entrance of Rakuten to the mobile industry could be a game changer and provides a glimpse into what a digital service provider will look like. In what could arguably be the most important takeaway from the entire event, Rakuten’s approach to building and operating a network could signify a paradigm shift in the industry. Not only will Rakuten’s network be agile, flexible and dynamic to provide digital services, it will also enable a dramatic reduction in the cost of connectivity.

The theme of MWC19 was “intelligent connectivity” and centered on how 5G, IoT, AI and big data are coming together to enable the intelligent world. Against this backdrop, Rakuten stole the show with the evangelization of its end-to-end virtualized and cloud-native network, which is being deployed across Japan this year. Rakuten’s network provides a glimpse into what the intelligent network of the future will look like.