If you take a look at the revenue pulled in by the top telecommunications companies worldwide it paints a rosy picture, with figures surpassing £1tr. But this doesn’t reflect the reality that the industry has seen dwindling profits over the past decade. The top five operators in Europe (Telefonica, Orange, Vodafone, Deutsche Telecom and Telecom Italia) for example, have collectively reported operating profit that is 46% lower in 2018 than in 2010.

Fortunately, there are paths to profit that telecoms service providers can adopt. One crucial way that service providers (SPs) can improve their outlook is through the opportunities provided by the growth of telco cloud technologies like Network Function Virtualization (NFV) and Software-Defined Networking (SDN).

By investing in telco clouds, SPs can modernise their own infrastructure to reduce costs, streamline operations and increase service agility; while at the same time creating higher-margin service offerings, particularly to enterprise customers, that promise new sources of revenue growth.

Telecoms service providers: Investing in the 5G Era

Due to 5G’s extremely high bandwidth and ultra-low latency capabilities, 5G will create new applications and services, offering new opportunities for SPs – if they’re ready.

Google recently announced that Stadia, its gaming platform, will offer 4K streaming gaming services to devices using the Chrome browser and similar services, such as NVIDIA’s GeForce Now, are also being launched. Google and Nvidia will, therefore, need to host graphics processing unit compute at highly distributed edge cloud environments to meet the capacity and ultra-low latency needs of the service, in order to do this at scale. SPs, contrarily, are already well-positioned to host this, and other services, to reap new revenues within their pre-existing infrastructure.

To be a worthy competitor in this space and fight for high-margin services, SPs must invest in an agile, reliable, automated and secure telco cloud platform, with high-performance SDN to run virtual network functions for both their own network infrastructure as well as third-party partners.

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Telco Cloud: A variety of business models

SPs have numerous options for capitalising on business models in the cloud era. The main three to consider are connectivity, platform and digital services. The path SPs should take will primarily depend on their long-term strategic goals and investment profile. In many cases, SPs may choose to begin as a connectivity service provider and evolve over time to a platform or digital service provider as they make further telco cloud investments to build their technology, people and process expertise.

Connectivity service providers:

SPs can leverage their own infrastructure footprint to offer co-located, multi-tenant services to cloud providers and enterprises who need to distribute their applications or network services to locations around the world where they have no direct presence on the ground. The need for distribution is often driven by applications and services that are compute-intensive and latency-sensitive, thus requiring closer proximity to the end-user. This is in order to avoid the inefficiencies of funnelling traffic to and from a central data centre.

Platform service providers:

SPs can use their telco cloud and NFV infrastructure to offer cloud Infrastructure-as-a-Service, and the higher value Platform-as-a-Service through a more comprehensive, managed virtual environment. Investment in an open-source, flexible and secure NFV infrastructure is crucial, as this is most certainly a multi-tenant environment. In addition to general technology investment, the offering requires focused investment in automation technology to streamline the remote deployment and operation of a dynamic telco cloud environment.

Digital service providers:

SPs with content assets can use their own platform to develop and deliver digital services, programming and original content to the end-user. Here, SPs compete directly with over-the-top (OTT) streaming providers who are already reaping the profits from cloud services and SP connectivity. Content service offerings, delivered through an agile telco cloud platform, can be bundled with other services (such as high-speed connections) to create a more powerful overall value proposition to consumers. As well as helping to reduce churn, this type of service would increase competition from unrestricted growth in OTT services.

Every service provider needs a telco cloud to support their evolution from their existing operational model, to a model which embraces an NFV and SDN based infrastructure. This new infrastructure should be built with the flexibility to support a wide variety of services, with a much lower cost of delivery. With the inevitable onrush of new 5G-enabled services over the next few years, service providers are in the prime spot to grasp new revenue by welcoming and adopting the capabilities of telco cloud, which is finally ready to deliver on its long-held promise.

Read more: Managing the double-edged sword of the cloud: Security vs productivity