As Commoditization Takes Toll on Telco Revenue, Providers Eye Network-as-a-ServiceAs Commoditization Takes Toll on Telco Revenue, Providers Eye Network-as-a-Service
The study acknowledged the ongoing commoditization of telecom, which has caused many channel partners to move beyond "circuit-slinging."
July 6, 2022
Telco providers can rake in the big bucks with network as a service offerings – if they get their act together.
A new study by ABI Research touches on the rise of network as a service (NaaS). Reece Hayden, ABI’s distributed and edge computing analyst, said the NaaS market will surpass $150 billion by 2030. Moreover, telco market revenue can exceed $75 billion by 2030. However, such a result requires that telcos transform their technology and operations, Hayden said.
“Telcos must seize the opportunity to dominate the NaaS market, as revenue generated from connectivity provision will continue to decline. However, their investment strategy, business, operational, and ‘go-to-market’ models are not ready to deliver a competitive NaaS solution, Hayden said.
As One Door Closes, Another Opens
ABI Research’s Hayden Reece
The study acknowledged the ongoing commoditization of telecom, which has caused many channel partners to move beyond “circuit-slinging.” But value remains in telecommunications, according to ABI. The firm argued in its study that the services overlaying the network matter more than the actual network infrastructure.
Eric Ludwig, co-founder of the partner firm Rise Technology Advisors, agreed.
Rise Technology Advisors’ Eric Ludwig
“Network as a service is a natural evolution away from capital-heavy and human-intensive service deployment. Like other technologies, organizations want the right size, to pay for what they use and to have a more nimble approach to networks and choice,” Ludwig told Channel Futures. “I think where the telcos have done well is in the choice on the hardware side. Where they struggle a bit is on the network side. One of the great promises of NaaS is the ability to use any wire from any supplier. If the telcos can do a good job of extending their agnostic approach to the ‘onramp’ (i.e. Internet access) they should be positioned well to grow in this space and defend their revenues and turf.”
Nitel chief revenue officer Mark Dickey said there remains opportunity around network.
“The commoditization of bandwidth is something that has been happening slowly for twenty years. But, while bandwidth becomes cheaper, network spend continues to grow,” Dickey told Channel Futures. “The real opportunity lies in addressing a broader market need for application performance. While that starts with bandwidth, there’s a whole layer of intelligence that customers require to run their networks and their businesses effectively.”
Other Providers Eye Network-as-a-Service
Nitel’s Mark Dickey
Hayden pointed to interconnection and infrastructure providers as companies poised as rivals to the telcos in the NaaS market. Hayden said that if telcos fail to evolve, the former will capture the market from them.
Dickey said telecom, interconnection and infrastructure companies each contribute to the same “NaaS value chain.”
“But a company like Nitel stands to offer the greatest customer value in leveraging services and assets from a spectrum of these providers to deliver the seamless managed experience technology consumers are looking for,” Dickey told Channel Futures.
ABI said that In order to stay relevant, the telcos must virtualize and automate their platforms and “restructure business and operating models with a look toward openness and partnerships.” They must also reposition themselves to focus on “vertical and enterprise size-specific sales strategies,” the research firm said.
“Because of the expanding scope of what NaaS means to customers, the selling motion can no longer be limited to location, bandwidth and price,” Dickey said. “Customer needs and customers themselves have become more sophisticated.
Hayden said telcos have a long way to go in bridging “technological, cultural, and structural gaps.”
“Although it seems like an expensive and risky uphill battle, developing NaaS will be crucial to the long-term upside. But, if telcos miss this opportunity and drop the ball, interconnection providers and hyperscalers will be waiting and willing to catch it,” Hayden said.
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