5G network investment will push Capex for NFV and SDN

Investment in 5G network will push telecom operators to adopt a NFV and SDN powered network architecture.
CSP NFV SDN spending forecast
NFV / SDN-related spend growth will correlate with 5G deployments, according to a report from Technology Business Research.

5G technology is forecast by research firm Ovum to achieve 37 million in 2020, 156 million in 2021 and more than half a billion in 2022.

The number of 5G network launches will be 5 by end of June 2019, 11 by end of Q3 2019 and 13 by the end of 2019. An additional 17 operators have announced plans for deployment of 5G in 2019, according to 5G Americas.

More than 100 operators have announced their 5G deployment plans in 2020 and beyond and are testing, trialing and building their networks in stages of planned deployments.

Since CSPs will need to upgrade their networks to realize the full potential of 5G, this will drive CSPs toward the virtualization and cloudification of their networks. This trend will impact most of the major network domains from an NFV / SDN perspective over the next five years, according to TBR.

TBR notes that 5G core is inherently virtualized and that this will also naturally push CSPs deeper into the NFV / SDN space over the next five years as they transition to a stand-alone 5G network.

If Rakuten is successful in making the vRAN model work, it would embolden CSPs to double down on their own NFV / SDN initiatives, especially as it relates to vRAN. RAN is one of the costliest domains in the construction of a network, and it is a key area CSPs will be keen to virtualize to reap cost savings.

Cisco and Telenor announced their partnership – at the Mobile World Congress 2019 – to expand their joint innovation across cybersecurity, cloud and the digital workplace, and will explore Open Virtualized RAN (vRAN) solutions for 5G.

Ericsson and TIM have started to digitalize TIM’s radio access network in Italy starting in the city of Turin, where the first virtual Radio Access Network (vRAN) platform in a live advanced LTE network has been deployed.

TBR expects the use of white-box hardware in NFV / SDN environments will proliferate, accounting for 60 percent of NFV / SDN hardware spend in 2023, up from 15 percent in 2018. This industry shift toward white-box hardware will significantly disrupt incumbent OEMs’ business models, prompting them to evolve into software-centric companies.

Industry organizations such as the Open Compute Project (OCP) and initiatives spearheaded by operators such as AT&T will fuel the rapid uptake of white boxes, TBR said.

SNS Research estimates that service provider SDN and NFV investments will grow at a CAGR of approximately 45 percent between 2017 and 2020, accounting for nearly $22 billion in revenue by the end of 2020.

Spearheaded by internet giants, data center operators and large enterprises, the adoption of software-centric networking is also continuing to grow in the enterprise and data center segment.

SNS Research estimates that SDN and network virtualization investments in this segment accounted for $12 billion in 2017 alone.

The recent initiatives including Linux Foundation’s ONAP, ETSI’s OSM and SK Telecom’s T-MANO will assist in the rapid adoption of VNFs from multiple vendors.