Telefonica Germany-AWS Affiliation Points to a Much Greater Role for Public Cloud in 5G Mobile Core

Glen Hunt, Principal Analyst

Summary Bullets:

• Telefonica Germany / O2 plans to build its 5G core network in the AWS public cloud, along with a host of 5G network functions to support Industrial Internet applications, beginning in 2021.

• The announcement raises intriguing questions about the future role that AWS and other public cloud platforms may be carving out in telecommunications infrastructure, and who will ultimately succeed in helping operators manage – and profit from – 5G network deployments.

Amazon Web Services (AWS) announced on September 2 that Telefonica Germany / O2 would become the first German network operator to build a 5G core network in the public cloud, along with a host of 5G network functions to support Industrial Internet applications. Telefónica Germany / O2 will put its cloud-based, Ericsson-supplied 5G core network into commercial use in 2021.

Because the press release describes the project in sweeping terms, it is useful to define the scope and focus of the project. O2 and its partners are performing a proof of concept in which they will put an instance of Ericsson’s 5G core on AWS’s public cloud. To deliver sufficiently low latency, they are using AWS’s Outposts near their enterprise customers. The PoC will support enterprise services; judging from the partnership’s examples, the first use cases will be campus and branch applications. These fixed wireless cases are easier to serve than mobile services because they are limited to defined areas and address circumscribed sets of users, devices, and network slices.

The AWS affiliation is emblematic of a clear 2020 trend in which network operators have largely overcome their resistance to placing key network functionality into the public cloud. However, while previous activity has primarily focused on, e.g., supporting BSS functionalities, Telefonica Germany’s plans will have key 5G core network functionality on AWS.

Enterprises have moved many of their workloads to the cloud; as a result, AWS and other cloud platforms have garnered valuable operational experience in high availability, distributed service operations. Network operators are naturally looking to reap the same operational benefits (scalability, cost reduction, etc.) as their enterprise counterparts, many of which are their customers.

AWS and other public cloud platforms have also established a strong reputation for data protection. Moreover, placing this functionality on in-country cloud resources helps operators ensure compliance with stringent German and European data residency and protection regulations.

AWS’s project with Telefonica raises intriguing questions about the future role of public cloud providers in support of 5G network functionality. Based on a white paper published by AWS in July it is clear that – in the company’s own words – “Setting up and managing 5G mobile network functions on AWS allows for global scalability, cost reduction, elasticity, and hundreds of augmenting features (e.g., AI, Analytics, IoT, DevOps).”

AWS believes its hyperscale platform is the right one to support 5G core and RAN transformation. In addition, it has been aligning its orchestration assets to align with telco NFV MANO components, an indication that it is likely eyeing a larger role in support of important 5G innovations such as network slicing.

So while the Telefonica/AWS affiliation is eye-catching, it should also represent a “shot across the bow” for network operators — and especially traditional network equipment vendors. A few questions to consider:

• Is this the first move by AWS (and other public cloud providers) to take over more of the value chain that currently is occupied in the 5G core by Ericsson, Huawei, Cisco, and the like? As AWS’s architecture increasingly aligns with the 3GPP it is arguably in a stronger position than network vendors to support cloud-native, containerized network architectures.

• Similarly, does AWS’s intensive focus on orchestration represent a threat to traditional infrastructure orchestration (at exactly the time that orchestration is poised to take on a larger role in driving 5G role)?

• Are public cloud providers in a stronger position than network equipment providers to deliver 5G value for key vertical markets? AWS has far more vertical relationships than Ericsson so arguably has much more ability to drive private 5G deployment value. Who should own those customer relationships?

• How far will service providers allow AWS and other hyperscalers into their networks? Today’s edge applications generally require access to central offices or customer premises. Mature 5G will require workload execution at or near the radio edge, which the telcos control. Hyperscalers would love to gain access to that layer of infrastructure, but will need to present a compelling enough business case to the telcos.

The move to cloud-based mobile networks is not a new concept. Several vendors announced mobile solutions for cloud infrastructures, such as Affirmed Networks Unity Cloud, Microsoft Azure Edge Zones, and others. Incumbent mobile network suppliers also support cloud-based solutions, paving the way for more deployments. In the not too distant future, we expect that seamless private and hybrid cloud models will become the norm.

Ultimately the biggest question may be where network operators perceive the true value of 5G coming from as this cloud evolution plays out.

 

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