Ericsson battles Nokia and AWS in Telefónica's war of two cloudsEricsson battles Nokia and AWS in Telefónica's war of two clouds

Telefónica Germany's mobile network has become a cloud battleground between Ericsson's private full stack and the 'public' combo of Nokia and AWS.

Iain Morris, International Editor

June 11, 2024

7 Min Read
Amazon's Seattle headquarters
Amazon (headquarters pictured) is pitching its technology as a public cloud for telcos.(Source: Amazon)

For the next few weeks, Germany hosts the Euros, a top-flight football (soccer, to Americans) competition between 24 European countries. As teams clash on the pitch, an altogether different contest is taking place in the network of Telefónica Germany, one of the country's main mobile operators. Hailing from Sweden, Ericsson has for several years provided the network's "core" technologies along with the infrastructure platform that supports them inside Telefónica's facilities. Sporting a mix of Finnish and US colors, Nokia and AWS have recently popped up with a rival offer and an unorthodox style of play.

Telefónica Germany has now confirmed that each of these teams caters to precisely the same needs, providing "packet core" and other critical software functions used to pilot the mobile network. But their approaches are radically different. By contributing not only the software applications but also the infrastructure platform, Ericsson has what the industry commonly refers to as a "full stack." Because it is hosted exclusively in Telefónica's facilities, it is also the sort of private cloud deployment routinely observed in telecom.

The other side, by contrast, combines Nokia's applications with an AWS platform. Both AWS and Telefónica, moreover, have billed it as an example of using the public cloud for telco workloads. Strictly speaking, that should mean Nokia's software applications are hosted inside an AWS data center open to numerous other tenants. Their sharing of infrastructure, software and energy resources inside these vast data facilities is said to be what makes the public cloud so economical and so alluring to its customers.

Yet, just as a football fan cannot sit in both the England and Germany stands at the same time, so a Telefónica customer can't straddle what the operator calls "parallel" cores. Telefónica served about 45.2 million mobile customers at the end of March, according to group financial reports. All bar roughly 1 million are or will soon be on the Ericsson core, although entirely oblivious to the fact. That other 1 million are in effect the involuntary guinea pigs for the Nokia and AWS package.

In a recent exchange with Light Reading, Telefónica was coy about its plans for the vast majority of customers still on the Ericsson cloud core. But it previously acknowledged comments made by Mallik Rao, its chief technology officer, during an interview with Reuters. In the words of a spokesperson, Rao had said that "between 30% and 40% of customers could be switched to the new cloud core" in the next few years.

Premature celebrations

Such a migration would mean being less reliant on Ericsson and could have financial implications for the Swedish vendor. The question is: Why would Telefónica stop there? Telcos do not ordinarily maintain parallel cores because doing so naturally implies a duplication of resources and costs. Indeed, the push these days is toward single horizontal platforms that can support all a company's telco workloads and perhaps even the IT ones, too.

What seems likely, but remains unconfirmed, is that Rao will play cloud core referee, observing how the different approaches measure up before he makes any hard-to-reverse decision about the ultimate winner. Ericsson, the defending champion now under attack, has this week responded to the recent update on Nokia and AWS with its own statement about a "multi-year contract extension." If nothing else, it confirms those parallel cores will co-exist for a long time.

It should also quieten some of the cheering about telco adoption of the public cloud that followed news of Telefónica's deal with Nokia and AWS. This already sounded like a premature celebration before the final whistle, with the press release from Telefónica noting that applications would be stored either on Telefónica premises or AWS infrastructure. Purists will argue that use of Telefónica premises disqualifies this as a public cloud deal. Even Microsoft, AWS's main public cloud rival, describes similar arrangements as "hybrid cloud" deals. 

Given the rationale of the public cloud providers, any such hybrid cloud will not be as economically attractive as a fully shared public cloud. Some backing for this can be found in a report that Microsoft commissioned last year from Analysys Mason, a consulting and analyst firm. Over a five-year period, a telco using Microsoft's technology stack purely on-premises could save 38% on the total cost of ownership (TCO) compared with the expense of a do-it-yourself (DIY) cloud, said the report. When Microsoft's hybrid cloud was introduced, meaning a combination of on-premises and public cloud facilities, those TCO savings rose to 43%.

What's unclear from that report is what exactly constitutes a DIY cloud and whether one based on either of Ericsson's two offers – network functions virtualization infrastructure (NFVI) and cloud-native infrastructure solution (CNIS) – would count. Operators including BT, Deutsche Telekom and Verizon seem to be creating their own bespoke clouds rather than buying an off-the-shelf platform. Taking the applications and the platform from the same provider is probably easier and possibly less expensive. Ericsson, moreover, insists NFVI and CNIS are designed to host third-party applications as well as its own.

While Rao is regarded as a public cloud enthusiast, some telco professionals downplay the attractions of any outsourcing whatsoever. Among them is Geoff Hollingworth, the chief marketing officer of Rakuten Symphony, the vendor part of Japanese e-commerce company Rakuten. "Cloud is something you do, not something you buy," he said in a recent LinkedIn post, saying expenditure on the telco cloud is projected to rise from $24 billion this year to $139 billion in 2032 (it's unclear where those numbers come from) and that some are not seeing a return on that investment. "I believe BT Group took a lead on understanding how to do cloud first hand, and not outsourcing the problem to vendors."

A daring pairing

A telco that opts entirely for an on-premises rollout of Microsoft's technology spends less, according to the Analysys Mason logic, because the software giant supplies all the experts, tools and other resources needed to maintain the cloud. The only costs for the telco, essentially, are the as-a-service (aaS) fees charged by Microsoft. But this means that outsourcing is only economically advantageous if those aaS charges are lower than what a telco would spend on operating a DIY cloud. It's not obvious this is always the case.

Nor is Ericsson necessarily incapable of supplying the same automation promised by AWS and Microsoft. Last month, for instance, the Swedish company says it carried out a "world-first" in-service software upgrade (or ISSU) of core functions in Telefónica's live network. These ISSU upgrades can be done without much manual intervention as part of a "continuous integration and continuous delivery" (or CI/CD) model, the same approach championed by AWS and Microsoft.

The negative for Ericsson is an industry perception it remains wedded to its own platforms. Nokia last year said it would dispense with its NFVI and CNIS equivalents – Nokia container services (NCS) and Nokia CloudBand infrastructure software (CBIS) – and instead focus all energies on network software. Red Hat was named as Nokia's preferred cloud partner, picking up 350 employees in a deal. But Nokia emphasized its willingness to collaborate with any third party. This arrangement with AWS seems validation. Ericsson has no similar plans to scrap NFVI and CNIS, it recently told Light Reading.

While Ericsson insists it is up for partnership with any reputable third party, around 80% of its deployed network applications run on either NFVI or CNIS. This could be taken as a sign that pairing Ericsson's applications with another company's platform is difficult. Yet Ericsson claims that its core technology powers nearly 50% of all the world's live 5G standalone networks. Operators might simply like the convenience of the full stack and see insufficient benefits in pairing applications with a public cloud provider's platform.

Telefónica Germany, though, now becomes a kind of battleground between the full-stack, private cloud model of Ericsson and what Telefónica and AWS promote as a multivendor public cloud core. As a spectacle, it might not hold the appeal of the Euros. But if Telefónica is prepared to offer regular commentary on the results, it could be a must-see for its peers.

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About the Author

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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