Telefónica Germany turns to AWS, Nokia in cloud core threat to Ericsson

Hailed as Europe's first 'public cloud' deal by a brownfield telco, the Telefónica contract with AWS and Nokia will mean operating two cores in parallel. Or will it?

Iain Morris, International Editor

May 14, 2024

8 Min Read
Telefónica Germany CTIO Mallik Rao
Mallik Rao, Telefónica Germany's chief technology and information officer, is exploring different technology approaches.(Source: Telefónica Germany)

One 5G core for the main network is usually enough for any European telco, but Telefónica Germany suddenly has two. Until this year, it served its roughly 45 million customers using a core provided by Ericsson. The core is essentially the network cockpit, home to many of the important controls. But a second core appeared last week when Telefónica notified the world of plans to introduce Nokia and AWS where Ericsson had previously hogged the airspace. It's a deal with numerous implications.

First, it points to a scaling back of Ericsson. An operator might have a separate core for a discrete line of business, such as the Internet of Things or private 5G. But it would not typically run two mainstream cores in parallel unless it shifted from one to the other. This has recently happened in the UK at both Vodafone, which migrated from Cisco to Ericsson in this part of the network, and BT, which has just completed a switch from Huawei to Ericsson.

Telefónica Germany is very publicly moving customers off the Ericsson platform. In the "first phase," it aims to transfer 1 million customers this summer. But in the next few years, it reckons 30% to 40% could be moved, or between 13.5 million and 18 million customers. It will not share its outlook beyond this. It also downplays talk of ejecting Ericsson altogether.

To be clear, with a few important differences, Nokia and AWS seem to be addressing the same needs as Ericsson. The Swedish vendor describes its product as a cloud-native and dual-mode 5G core, covering both the evolved packet core (EPC) technology that came with 4G as well as an update for standalone 5G. Ericsson also provides the cloud platform that underpins these applications. Industry people refer to this as a "full stack" offer.

Public cloud breakthrough

What's different and notable about the newer arrangement is that Nokia's 5G core applications are combined with the AWS cloud. Last year, Nokia said it would abandon internal development of cloud platforms and instead work via third parties. Some 350 employees were transferred to IBM-owned Red Hat, named as Nokia's "primary" partner. The AWS tie-up, then, makes the case for Nokia's agnosticism.

The question is how much Nokia overlaps with Ericsson on the applications side. While each identifies as a provider of "packet core" technology, Telefónica Germany might have Nokia in mind for a specific market segment. In that case, the main threat to Ericsson would be from AWS. Telefónica Germany could theoretically ditch the Ericsson platform and move Ericsson's applications to the same AWS cloud that hosts Nokia.

This also makes the deal with Telefónica Germany significant for another big reason. Until now, no European operator has elected to host its core in a public cloud. Some use "full stack" products of the kind provided by Ericsson. Others, like BT and Deutsche Telekom, have built their own clouds. All are hosted in private cloud facilities, with some telcos voicing fierce resistance to the public cloud. The use of AWS is presented as a game changer.

Telefónica is certainly not shy about this categorization. "It's a public cloud deal," said a spokesperson for the operator when asked if this is strictly public cloud or an example of a public cloud provider playing a private cloud role. There have been various explanations for telco wariness before. Some operators fear a further loss of control – a ceding of power to Big Tech – and worry the public cloud might not meet service level needs. Europe's regulators also have strict rules about data ownership. Storing systems outside national boundaries is often not allowed.

AWS can tackle that problem partly by using the infrastructure it has deployed inside Germany. Yet there is a clear reference in the press release to data storage on Telefónica premises as well. Resources here would not typically be shared with third parties. Among other things, AWS provides Outposts, a server and technology stack that can be installed in customer facilities – rather than AWS data centers – for service, regulatory or other reasons. Purists may reject the public cloud label, noting that Microsoft uses "hybrid cloud" to describe similar arrangements.

New talent, old feet

Why this rather than the still relatively young Ericsson system? Mallik Rao, Telefónica Germany's chief technology and information officer, is clearly one for trying new and different approaches. Just a few weeks ago, his company began deploying Samsung's radio access network (RAN) technology in an area served by either Huawei or Nokia, its existing providers. A small rollout of Ericsson's RAN was publicized just a few weeks earlier. These activities are potential threats to Huawei and Nokia in the RAN much as AWS could eventually dislodge Ericsson in the core.

While vendors are run in parallel, Rao will have an opportunity to compare them, rather like a soccer manager looking at the final-minutes substitution of young talent for old feet. With the combination of AWS and Nokia used alongside Ericsson, he can observe two very different styles: a hyperscaler platform hosting other companies' applications; and the full stack that Telefónica has had for several years.

The AWS pitch is largely about costs. Instead of buying and maintaining servers on premises, the operator effectively becomes an AWS tenant paying for what it needs on shared infrastructure deployed at massive scale. "Elasticity" is a critical word for Ishwar Parulkar, the chief telecom technologist at AWS. "You don't have to provision servers up front if you want to move subscribers over," he told Light Reading. "When you're ready to move subscribers, you can scale up. When you want to reduce that, you can scale down."

Manual effort should also be reduced, simply because the telco does not have to spare resources for managing infrastructure. The AWS cloud, moreover, is highly automated, says Parulkar, who highlights other key attractions such as resiliency and energy savings. "We have this concept of availability zones in data centers, which is multiple copies of the application," he said. Sharing infrastructure among customers lowers energy costs for each, he added. Another claim is that software can be continuously updated without disruption to the customer.

Telefónica should also gain access to various other AWS technologies, such as the Arm-based Graviton chip, highly regarded by some telco people for its power efficiency. "That's a potential path right now," said Parulkar. "It becomes very easy once you have the core in the public cloud to start tapping into these other powerful services and benefits that the cloud has to offer."

On overall cost savings, AWS has no figures to share. But a white paper published last year by Analysys Mason, a consulting and analyst firm, clearly champions the managed, hyperscaler approach over what it calls the DIY alternative (the paper was written, it should be noted, at the behest of Microsoft and uses Azure as the point of comparison). An operator using Azure's hybrid cloud platform for the 5G core would realize total cost of ownership (TCO) savings of 43% over a five-year period, versus the TCO for a DIY cloud, it said.

That Figo feeling

Still, not everyone is yet convinced. Some technologists continue to question the economic attractions of the public cloud for large organizations with predictable workloads. A few chief technology officers within telcos seem to regard the platform for telco workloads as a core competency, something they would not wish to outsource. BT, Deutsche Telekom and Verizon are among those with some kind of DIY approach.

Telcos increasingly say they want a single "horizontal" platform for all telco workloads (and possibly standard IT ones, too). AWS and other hyperscalers are arguably in the strongest position to provide it. Yet the benefits may fade at the "edge" of the network, where only one category of applications needs supporting and there is less opportunity to share resources.

Even Parulkar acknowledges there would be challenges in putting the RAN on the AWS platform. "RAN could also run on this, but one of the things about the RAN is it needs to be very close to the users," he said. "You can't run RAN in a national-level data center."

Asked if it plans to put other telco workloads, besides the core network, on the AWS platform, Telefónica instead drew attention to its cloud RAN deployment with Ericsson. Here, as with the Ericsson core, it takes a full stack from the Swedish vendor that includes its cloud-native infrastructure solution (CNIS). The small Samsung RAN, meanwhile, runs on a platform provided by Wind River. As limited as these RAN deployments are, this all looks siloed rather than horizontal.

Perhaps counterintuitively, the deal with Nokia and AWS will lead to a mushrooming of platforms (and vendors) in the Telefónica network rather than any consolidation. AWS will help with transferring customers from the old Ericsson platform to the new one it manages. But operating two parallel platforms does not sound like a low-cost or efficient option for Telefónica in the long run.

To return to the soccer analogy, when Real Madrid lavished £25 million (US$31.4 million, at today's exchange rate) on Manchester United's David Beckham in 2003, some commentators were confused. Luis Figo, a talented Portuguese footballer, already played for the Spanish club on the right wing, from where Beckham would normally curve dead balls and crosses into the danger zone. Today, Ericsson may have some of that Figo feeling.

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About the Author(s)

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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