THE COWEN INSIGHT
There is a paradigm shift. The cloud is taking over core network functions for telcos, enabling a $30B+ greenfield opportunity called private networks. Telcos stand to win, but a key debate is over how much share cloud providers take. We provide a framework around the “Telco vs. Cloud” debate, Private Networks, and include detailed questionnaire responses from 11 companies across TMT.
OPPORTUNITIES PROVIDED BY PRIVATE NETWORKS
The aim of this report is to explore investment implications around the emerging “telco vs. cloud” debate. Specifically, telcos are partnering with cloud providers to handle their core network functions. This shift is happening because of the promises of opex and capex savings and greater network flexibility and control. It also includes next-gen capabilities such as a $30B+ mostly greenfield opportunity called private networks.
BENEFITS OF PRIVATE NETWORKS
These private networks, including Private 5G (P5G), will allow enterprises to virtually own, control, and modify their own networks like never before. This includes controlling end-user devices, bandwidth allocation, wireless spectrum allocation, data traffic flow, and perhaps most importantly, collecting and analyzing their proprietary data.
The possibilities are endless. Private networks can transform every enterprise vertical and drive the long-awaited fourth industrial revolution. Use cases include autonomous vehicles, massive Internet of Things (IoT), manufacturing & healthcare IoT, and big data analytics.
TELCOS VS. CLOUD PROVIDER DEBATE
The debate revolves around how much cloud providers, who now help run telco core networks via partnerships, take (or steal) within the enterprise telco landscape. The private network landscape is also beset with many entrants beyond telcos and cloud providers looking to seize on the opportunity, including equipment OEMs, system integrators, startups, SD-WAN providers, and enterprise DIYs.
Telcos are best positioned with the physical assets, network complexity expertise, reliability, field workforce, and enterprise relationships. However, another discussion involves whether this opportunity will be enough for telcos to replace the declining legacy services with new opportunistic players entering the land-grab. As telcos partner with cloud providers to run their core networks, they are essentially letting the fox in the hen house in what could be tenuous relationships.
MACRO TMT VIEWPOINTS ON TELCO, CLOUD, AND PRIVATE NETWORKS
In this report, five TMT analysts across the telco, software/cloud, network equipment, and communications infrastructure space provide context around the “telco vs. cloud” and “private network” debates. We provided a backdrop on telco core network functions to help answer the question, “What is a private network and private 5G?”. This question is applicable wherever the cloud service providers play a role. Additionally, the still-fluid business and revenue models provide a framework for the competitive landscape and go-to-market strategies and provide context around potential winners and vulnerable players.
We also provide results from our comprehensive survey around the “Telco vs. Cloud” debate in which we polled 11 management teams across various TMT disciplines including Telco providers, Cloud Providers, software, hardware, and Communications Infrastructure.
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