Consumption-based models are common for IT services, enabling customers to buy what they need and scale quickly, yielding time to market agility as documented by 451 Research, part of S&P Global Market Intelligence.

Source: 451 Research, part of S&P Global Market Intelligence - Voice of the Enterprise: Cloud, Hosting & Managed Services, Workloads and Key Projects, 2020

Now that telco and IT worlds are converging, communications service providers (CSPs) have the opportunity to go the same route, leaving behind their traditional capital expenditure (CAPEX)-based buying behavior in favor of flexibility, cost control and the agility to roll out new offerings.

CSPs will gain efficiency and growth from separating their infrastructure and service operations. Many are already seeking those advantages. Tower sharing is now a commonplace way to build out capacity while keeping costs in check. Spectrum sharing has surged in many countries around the world and new licensed spectrum is being auctioned off to private corporations and new mobile virtual network operators (MVNOs) in the US, Germany, Brazil and Belgium who see the advantage of entering a market without buying a core first.

And of course, open RAN (ORAN) will transform the vendor landscape in radio access networks (RANs) with cloud-native architectures, open interfaces and APIs (application programming interfaces).

With all these changes in the network and the ecosystem around it, it may be time for CSPs to evolve their buying behavior as well.

Good reasons to change

The CAPEX intensity of building and running a network has been a barrier that’s kept new players from entering the market. While that’s given incumbent CSPs some security, it’s hampered healthy competition and the innovation that goes along with it.

CSPs are also going through a complex digital transformation process. The adoption of security, cloud native and cognitive capabilities will change the way networks operate. In the meantime, webscale players have moved in fast, seizing opportunities where use cases demand digital agility such as cloud-based gaming and video streaming.

Many believe the webscale model is essentially a template for the 5G era. We at Nokia are partnering with players like Azure, AWS and Google to develop cloud-native solutions.

Who owns the infrastructure will matter a whole lot less going forward than who has the agility and responsiveness to launch new offerings instantly, customize effortlessly and tailor packages to customers’ needs. This will be true across the whole range of new use cases, from video surveillance and analytics, to remote machine control to, autonomous vehicles, e-Health and more.

Ready for alternative business models

Nokia was early to market with a consumption-based service for CSPs: a cloud-native, global core network-as-a-service (NaaS) called Nokia WING. CSPs can use it to spin up and roll out IoT services around the world without having to invest in local core infrastructure, which is typically one of the biggest CAPEX investments they have to make.

We’re ushering in outcome-based business models for telco artificial intelligence (AI) use cases through our Nokia AVA Cognitive Services. Instead of investing their own capital, CSPs pay for services based on OPEX savings or revenue improvements in the network. For example, if Nokia AVA Cognitive Services helps a CSP cut energy costs by 20 percent a year, the CSP simply pays a portion of those savings to Nokia — no CAPEX, no risk.

We deploy AVA telco AI use cases in the public cloud, implementing our Telco security framework with Microsoft Azure’s digital architecture mitigating the main barrier to IaaS adoption as indicated in the graph by 451 Research, part of S&P Global Market Intelligence. Forty-two percent of enterprises see information security concerns as the main barrier to IaaS adoption, The framework complies with worldwide data protection and national security regulation, anywhere in the world, according to their data residency, security standards and regulatory constraints.

As the building blocks come together for true consumption-based infrastructure, Nokia is proud to be leading the way in these alternative business models.

Source: 451 Research, part of S&P Global Market Intelligence, Voice of the Enterprise: Cloud, Hosting & Managed Services, Workloads and Key Projects, 2020

What CSPs stand to gain

Eventually, all soft network functions can be delivered as software-as-a-service (SaaS), and NaaS offerings will become truly zero-touch-fully automated and self-optimizing. Shifting to NaaS/consumption-based infrastructure will allow CSPs to break free from the CAPEX crunch and manage costs more predictably as OPEX. It will also reduce their risk by making it easier to deploy services, see what works, and adapt or abandon them as needed, without the time and cost of physical buildouts. Among the many advantages they gain, this will allow CSPs to enter new markets faster.

Consumption-based NaaS models also create opportunities for CSPs to collaborate with cloud providers and other ecosystem partners on service development and delivery.

While some CSPs will choose to keep building and running their own infrastructure, many will see that more flexible business models give them the scalability and agility to differentiate with new services quickly. At Nokia, we’re committed to helping CSPs reap the full value from new business models by building on our consumption- and outcome-based approaches.