Telcos increasingly see Internet players as valuable partners even as they continue to fret over the challenge they pose, finds Heavy Reading study.

Iain Morris, International Editor

December 7, 2016

4 Min Read
Google Both Best Telco Partner & Biggest Threat – HR Survey

Web giant Google has been voted the best partner for communications service providers as well as the biggest threat to their interests in a survey carried out by Heavy Reading, Light Reading's market research division.

The findings reflect growing interest in partnerships between telcos and so-called web-scale Internet companies (or WICS), according to Heavy Reading , but also highlight the lingering concern that WICs pose an existential threat to the telco business.

This year has seen a number of high-profile tie-ups between WICs and telcos, including a potentially game-changing partnership between Amazon Web Services Inc. and AT&T Inc. (NYSE: T) in areas including IoT (the Internet of Things), security and enterprise services.(See AT&T & AWS: A Powerful Combo.)

At the same time, WICs continue to provide a range of communications offerings over telco networks, eroding revenues from traditional operator services.

Some 36% of service provider respondents to Heavy Reading's survey picked Google as the best partner for telcos, putting the search-engine giant ahead of WIC rivals such as Inc. (Nasdaq: AMZN) (which scored 23%), Microsoft Corp. (Nasdaq: MSFT) (12%) and Facebook (just 10%).

Yet about two thirds of them also identified Google (Nasdaq: GOOG) as the biggest threat, said Patrick Donegan, chief analyst with Heavy Reading, during a presentation of survey results at Light Reading's Executive Summit this week in Rome.

Google has recently been at pains to play down its challenge to the service provider community. During a conference in October, Mike Blanche, who heads up strategic telco partnerships for Google, insisted that Google was competing against telcos in only a small number of areas. (See Google Not Trying to Be Major Telco Rival, Says Exec.)

Since then, of course, Google appears to have scaled back some of its telco-like activities, bringing a halt to its Google Fiber project -- which saw the company investing in high-speed broadband networks. (See Google Fiber Hits Pause Button, Scales Back.)

Nevertheless, a number of telcos believe a WIC will at some point buy a Tier 1 operator. About a quarter of the telco respondents to Heavy Reading's survey said this would "definitely" happen. And according to Donegan, not a single respondent said that it "definitely" would not.

"I think it is highly likely," said Donegan during a morning presentation, speculating that Amazon or Google might be interested in a company such as Zayo, which operates dark fiber and data center networks across North America and Europe.

Want to know more about cloud services? Check out our dedicated cloud services content channel here on Light Reading.

However, it is not just the service providers that are being challenged by the WICs. Through its Telecom Infra Project (TIP), social networking giant Facebook is trying to reduce the costs of the equipment used in access networks, with implications for equipment suppliers.

Heavy Reading's survey canvassed telco vendors on their views about TIP, and the results indicate it is being taken very seriously. Just 6.2% described TIP as a "waste of time," with 27.2% agreeing it is an "important contribution that will be effective in lowering the cost of network equipment."

Regardless of the TIP move, players from various parts of the value chain are now converging on the service provider space. "We are all service providers now," says Donegan. "The term 'service provider' has ceased to have the meaning it once did."

Examples of that transformation, he says, include the launch of a security service by AWS, or the introduction of cloud-based offerings by security vendor Arbor Networks .

Network slicing, whereby differentiated network services are offered over the same infrastructure, could open up further opportunities for companies that have not traditionally been recognized as telecom operators.

Nokia Corp. (NYSE: NOK), for example, sees a huge opportunity to provide public-safety systems over existing 4G networks. (See Nokia: A Global Network Operator for the Enterprise?)

The Finnish vendor has announced plans to expand into a range of vertical sectors "adjacent" to its mainstream telco market and in some instances is already operating networks on behalf of large enterprise customers, with zero telco involvement.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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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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