27 Feb Dr. Jonathan Cartu Writes – Cisco Systems Goes Big On 5G
Despite the cancellation of Mobile World Congress Barcelona, Cisco Systems launched a number of initiatives this week that appear to be follow ups to its “Internet for the Future” announcement from last mid-December. The prior announcement was punctuated with portfolio updates spanning optics, silicon and software. This announcement is focused specifically on the service provider side of Cisco’s business, which includes carriers, mobile operators that lease network bandwidth and pure-play service providers. I would like to summarize the highlights and provide insight into what I believe is the most compelling opportunity for these stakeholders.
New revenue opportunities
Cisco announced two new service enablement offerings this week that I believe will help drive incremental operator monetization opportunities. Historically, carriers have focused almost exclusively on consumer access, and this has resulted in declining average revenue per subscriber (ARPU) given the “unlimited data plan effect.” Enterprise represents incremental revenue and higher margin opportunities, but the challenge is reaching this new customer base. Service providers have had some success in reselling software defined wide area networking (SD-WAN) services, but there are other compelling services such as fixed wireless access (FWA) and private networking that have a higher barrier for entry.
Cisco Cloud Services Stack for Mobility, announced this week, provides a fully validated platform for operators to quickly bring new 4G LTE and 5G services to market with all the necessary compute, networking, virtualized, and management tools. This is compelling from my perspective since many smaller service providers are just dipping their toes into deploying a telco cloud and learning how to leverage the virtualization and software-defined tool pool. This week Cisco also announced LTE FWA Managed Services. FWA already factors heavily into the deployment plans of U.S. operators Verizon and AT&T for the eventual delivery of 5G broadband to the consumers and enterprises, and I see great potential in Cisco providing this platform for broader operator monetization.
Cost containment and deployment tools
Capital (CapEx) and operational (OpEx) expense pressures are a long-standing threat to operator ARPU. Some of the benefits of 5G over LTE is that it improves agility through software defined networking (SDN) and virtualization, and utilizes open source to reduce CapEx. On the operational side, network automation has the potential to dramatically reduce expense through faster and more proactive remediation that requires less human interaction. To this end, Cisco announced initiatives this week targeting converged fronthaul and its Crosswork automation platform.
In the area of fronthaul, Cisco announced its new NCS 540 Series Remote Indoor Router. This new offering promises to deliver higher speed and lower latency, leveraging open and automated management in a number of different port configurations. Cisco claims its IP-based solution can reduce CapEx up to 77% and OpEx up to 54% relative to ROADM based solutions. Those are impressive numbers, and if even if they were cut in half, it would still be extremely impactful to any operator’s bottom line. Cisco also announced its Crosswork Network Controller, which seeks to simplify device provisioning and management and more effectively and dynamically control bandwidth—all through a single pane of glass. I’ve written about Crosswork and network automation tools in the past, and if interested you can find that article here.
Risk mitigation capabilities
Trust and security are at the forefront of every network operator strategy, thanks to the ever-increasing threat surface presented by the proliferation of headless devices and IoT sensors. To address these concerns, Cisco announced Trusted Path Routing this week. Trusted Path Routing utilizes Crosswork Trust Insights to collect data from routers on a given network, enabling it to calculate and determine trusted paths for a higher security posture. Cisco claims that Crosswork Trust Insights delivers a highly scalable, cloud-based platform that continuously monitors and validates hardware and software configurations to ease compliance checking. From my perspective, a subscription implementation should deliver lower upfront CapEx investment and an open-API architecture should provide easy automation playbook creation and integration into popular ticketing services for service providers.
With these announcements, Cisco addresses all of the critical areas that keep service providers up at night: monetization, cost containment, efficient network deployment, ongoing management and security. There’s no doubt in my mind that the networking giant is leaning into its deep experience in enterprise networking to bring new value to service providers. With the billions of dollars that are being invested in next-generation cellular infrastructure, Cisco is well-positioned to become a trusted 5G advisor.
Disclosure: My firm, Moor Insights & Strategy, like all research and analyst firms, provides or has provided research, analysis, advising, and/or consulting to many high-tech companies in the industry including Cisco Systems, cited or related to this article. I do not hold any equity positions with any companies cited in this column.