Now seen as an unstoppable force across much of the telecom industry, open source still has high-profile detractors as it up-ends traditional roles.

Iain Morris, International Editor

May 25, 2017

11 Min Read
Open Sores: Are Telcos on a Collision Course With Vendors?

These days, it takes a brave executive to stick up for proprietary technology. Developed inside the hulking fortresses of the mightiest vendors, it can easily be depicted as enslaving the many while enriching the few. Contrast that with the typical representation of the open source movement: Communal, democratic, redistributive. What's not to love?

The narrative surrounding open source is as tough to dispute as the image is to dislike. Sick of supplier "lock-in" and the "vendor prison," a few redoubtable telco heroes have stolen the keys and are freeing their fellow inmates. Their former jailers will have to adapt by similarly embracing openness, they say. (See DT: Telcos Must Escape Vendor Prison.)

Figure 1: Telcos Are Born Free, & Everywhere They Are in Chains Deutsche Telekom's Axel Clauberg says telcos are in a prison controlled by vendors during Light Reading's Big Communications Event last year. Deutsche Telekom's Axel Clauberg says telcos are in a prison controlled by vendors during Light Reading's Big Communications Event last year.

As difficult as that may be, it is hard to find a vendor that is openly critical of open source. Most claim to have bought into the vision. A few software companies, including Mirantis Inc. and Red Hat Inc. (NYSE: RHT), even have business models based entirely around the open source premise. "Open source does not mean free," points out Sandra Rivera, the general manager of network platforms for semiconductor giant Intel Corp. (Nasdaq: INTC), which also says it backs open source.

The trick is in moving "up the stack," in industry jargon. That essentially means deriving revenues from providing support and services around open source technology. Red Hat has demonstrated this is achievable. Its sales were up 17.5% last year, to about $2.4 billion, and its net profit soared 27.3%, to more than $250 million. Its share price has risen 14% in the last 12 months.

Figure 2: Hats Off Revenue and profit growth at Red Hat ($M) over the 2011-16 period. Source: Red Hat Revenue and profit growth at Red Hat ($M) over the 2011-16 period. Source: Red Hat

But companies that have thrived by selling proprietary technology have much to lose from this transition. And not all accept that open source will inevitably run riot. "I find it hard to see that very large portions of software in the telco industry will be open sourced because, ultimately, if there are no vendors then every operator has to build its own system," said Ulf Ewaldsson, the head of digital services for Sweden's Ericsson AB (Nasdaq: ERIC), during a recent conversation with Light Reading. "There is a tendency to think about doing that, but for the majority it is not close to being an option." (See Ericsson's Ewaldsson Takes Aim at Telco 'Conservatism'.)

Ewaldsson's comments have to be taken very seriously for three reasons: first, he is a senior executive at the world's biggest network equipment vendor after China's Huawei; second, he evidently regards open source as an existential threat; and third, he implies that open source would shift the balance of network power from the world's largest vendors to its leading operators, and leave smaller telcos in limbo.

For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.

Chief among those leading operators is US giant AT&T Inc. (NYSE: T). Just as Ericsson straddles the global equipment market, so AT&T looks all-powerful across much of the service provider landscape. Having already pioneered the rollout of software and virtualization technologies, AT&T has more recently become the biggest cheerleader for open source in the telecom industry.

ECOMP, a software platform it developed in-house, was this year released into the open source community under the auspices of the Linux Foundation. It is now a part of ONAP, an open source group that features several other big-name operators, including ECOMP partners Orange (NYSE: FTE) and BCE Inc. (Bell Canada) (NYSE/Toronto: BCE) as well as China's three national players. (See ONAP Makes Splashy ONS Debut.)

Next page: Operators as vendors

Operators as vendors
Confronted with Ewaldsson's remarks, and asked if traditional vendors should be worried about AT&T's transformation, Roman Pacewicz, the operator's senior vice president of offer management and service integration, seems bemused. The industry is moving from a "bottom-up application-based model" to a "top-down web approach," he says, and companies need to adapt. AT&T is not acting purely out of self-interest but is bringing others along on the ONAP journey, including carriers "large and small." And other brand names, including Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (NYSE: JNPR), are supporting AT&T's overarching model. (See AT&T Flexes On-Demand Muscle, Snags Ericsson.)

But there are clearly signs that AT&T is now building networks and even becoming a vendor in its own right. During this month's Big Communications Event in Austin, in a keynote session highlighting AT&T's open source efforts, John Donovan, the operator's chief technology officer, said his organization could now be viewed as a "technology integrator" as well as an architect that builds the products it needs. "We are doing traditionally vendor-led roles," he told conference attendees. (See AT&T's Donovan: Resistance to Change Is Futile .)

Figure 3: Service Provider or Vendor? John Donovan, AT&T's chief technology officer, talks to Light Reading's Carol Wilson at this year's Big Communications Event. John Donovan, AT&T's chief technology officer, talks to Light Reading's Carol Wilson at this year's Big Communications Event.

Other AT&T executives are spouting the same rhetoric. Mike Zeto, who heads up the operator's smart cities business, says AT&T is these days as much a "software player" as a connectivity provider. It is now developing smart city offerings that telcos without AT&T's capabilities will be able to resell on their own networks, he revealed to Light Reading last week. (See AT&T to Flog Smart City Tech to Other Carriers.)

With AT&T's platform, Pacewicz acknowledges, operators and AT&T customers could even start to think about developing their own virtual network functions (VNFs) -- a role that Ericsson and other traditional vendors currently perform. This is starting to happen. DXC Technology, an IT company and a customer of AT&T's FlexWare on-demand service, has built a security VNF for inclusion in the FlexWare portfolio. It is also reselling FlexWare to its own customers.

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France's Orange, which last year became AT&T's inaugural ECOMP partner in the service provider community, is eyeing a similar transformation. "We can become software companies and develop our own VNFs," says Tayeb Ben Meriem, a technical expert with Orange. "If you are strong enough you can compete against the suppliers, and we have the capability."

Not everyone has that strength, though. Even Ben Meriem flags concern about the costs of playing the "integrator" role that AT&T's Donovan is embracing, and stitching together the software from different vendors. "We have the know-how but this might be costly and so maybe we outsource to a third party," he says. On ECOMP, notably, AT&T has brought in Amdocs Ltd. (NYSE: DOX) as a preferred systems integrator for operators that do not have the same kind of resources and in-house expertise. Nevertheless, that AT&T is pitching Amdocs to other service providers is perhaps another sign of its growing might in the open source era. (See AT&T Taps Amdocs as ECOMP Integration Partner.)

Next page: TIP top?

TIP top?
AT&T is not the only open source game in town, however, and others could have an even bigger impact. Outside the orchestration area, the Telecom Infra Project (TIP) led by Facebook has the laudable goal of reducing the costs of building networks through industry collaboration. Facebook's ulterior motive, it has been argued, is to bring Internet access to underserved communities and add users to its platform. But major operators such as Germany's Deutsche Telekom AG (NYSE: DT) have jumped quickly on board, and the ramifications for traditional vendors are grim. (See Facebook: TIP Will Open Telecom Hardware.)

Bruno Jacobfeuerborn, Deutsche Telekom's chief technology officer, alluded to those dangers earlier this year when arguing that 5G costs would have to fall dramatically to make rollout of the next-generation mobile technology economical. "We're doing testing with Facebook on infrastructure projects," he told Light Reading during the Mobile World Congress tradeshow in March. "We have to collaborate as an industry to drive the cost down -- we can't work in the same way as previously. This will change the landscape and some vendors will disappear and some new ones will come into the game -- it is going to be a disruptive moment in time." (See DT CTO: Costs Must Fall or 5G 'Won't Work' and The Growing Pains of 5G.)

Want to know more about 5G? Check out our dedicated 5G content channel here on
Light Reading.

Yet TIP's members include some of the world's highest-profile hardware makers, among them Cisco, Intel and even Nokia Corp. (NYSE: NOK), Ericsson's biggest rival after Huawei. Some vendors may simply have taken the view that fighting open source is like trying to hold the door shut against a Force 12 gale. "That is my suspicion," says Bryan O'Sullivan, an engineering director at Facebook, when asked if it was a question of "go with the flow or perish" for TIP's vendor members.

The danger for companies such as Cisco and Nokia is that joining associations like TIP simply hastens their decline. Ericsson is not a member, and nor is China's Huawei. O'Sullivan would not comment on the likelihood of bringing Ericsson into the club but says that Facebook talks with the Swedish player on a regular basis. "We always want more and the vendors themselves want more too, and building these relationships with them directly makes it easier for us to represent what we are looking for," he says. "We have specialized needs but they are not unique."

Figure 4: Lofty Ambition Facebook executives give reporters an insight into the social networking giant's research and development work in the UK. Facebook executives give reporters an insight into the social networking giant's research and development work in the UK.

Given Ewaldsson's remarks, it would be a surprise if Ericsson did become a TIP member. But it is hardly inconceivable. Other senior executives at the Swedish firm may feel differently in what is a period of considerable upheaval for both Ericsson and the wider industry.

In the meantime, the open source-based models that AT&T and Facebook are pushing remain somewhat unproven. And there are still a few vestiges of resistance in the service provider community. "It only provides half of the things we need -- the code but not the information model or the standards," said Shahar Steiff, an assistant vice president at Hong Kong's PCCW Ltd. (NYSE: PCW; Hong Kong: 0008), expressing skepticism, during the TM Forum Live conference in France earlier this month, that open source will give rise to new standards. "It is free but you have to spend a lot of money to implement it in your system." (See Open Source an 'Overrated Necessity,' Says PCCW.)

It is not just about standards, either. Critics doubt whether the open source movement, and the sort of players it is bringing into the market, can operate in the kind of disciplined manner that telcos have traditionally demanded. "Telco means five nines and that is something we sometimes forget," says Ewaldsson when discussing the impact of network virtualization. "We think that one of these projects can go to anyone that can build a cloud and that is not really good enough." (See Time for a Telecom Reboot.)

It is already clear that open source and the technologies surrounding it will up-end parts of the telecom industry. What remains uncertain is whether it can address some of the particular needs of the telecom sector, and just how much upheaval it will cause. The prospect of AT&T as a global technology vendor -- or even a telco building its own networks from scratch -- seems far-fetched, after all. "Operators are not systems providers and don't have the skill sets to develop things for a global market," says Bengt Nordström, the CEO of the Northstream market research and consulting business. "And operators still like to have vendors to point to when something goes wrong."

— 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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