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The industry’s overall shift towards global software-centric networks and operations is taking a hit from the current global economic outlook and Covid-19, with telco cloud revenue from 5G core deployments set to fall short of the 2020 forecast $9bn by 25%, according to analysis by ABI Research.
Its report, Taking stock of Covid-19: The short- and long-term ramifications on technology and end markets, found that growth stagnation at a macro level will almost certainly have a negative effect on the demand side – enterprise verticals – while it noted that sales in the enterprise domain are expected to fuel innovation and diffusion of 5G core roll-outs and new telco digital offerings.
ABI said telco cloud revenue from 5G core deployments will undoubtedly fall 20-30% short of the forecast $9bn in 2020, and that the investment shortfall in modernising telco networks may be between $2bn and $3bn in the short term.
“The 5G market was growing faster than anticipated, with 2020 expected be the starting point for 5G standalone [SA] core commercial deployments in communications service providers’ [CSPs] networks,” said Don Alusha, senior analyst at ABI Research. “But that expectation may take a little longer to materialise.
“That is due, in part, to the fact that Covid-19 will almost certainly derail further trials and testing to verify the processing performance and stability of 5G SA networks. In the short term, the industry may have no choice but to protect existing consumer revenue. CSPs will accompany that defensive approach with small-scale projects that aim to seek operational efficiencies without necessarily committing to new investments for 5G SA networks and intelligent software.”
One bright spot found by ABI’s report was that there was widespread agreement that the enterprise market will drive investment in 5G and fuel further growth and a belief that, in the long term, the turmoil emanating from Covid-19 will serve as a springboard for the industry to mull over alternative growth options.
“The industry’s positioning in the global production frontier remains anchored to hard-to-duplicate network assets and infrastructure that continue to yield results on the consumer front,” Alusha added. “The brief ‘pause’ in production processes of some major economies should give the industry an opportunity to ponder avenues so that it can reinvigorate itself.
“With 5G SA core, fibre-optic network and dynamic new software, it is now possible for the industry to usher in a new era of prosperity, innovation and collaboration for enterprises, communities and individuals.”
Concluding, ABI said there was no doubt that impending 5G SA core network deployments and cloud-native software give the industry an edge over competing forces. But the analyst cautioned that these gains would not come without addressing challenges, particularly an across-the-board internal organisational retooling.
“Sooner or later, those at the upper echelons of both the supply and demand side of telecoms will almost certainly realise that they need to preserve the current order of doing business if they are to sustain that edge,” said Alusha. “Further prosperity and innovation will stem from new forays that are either built atop that edge in a vertical fashion or leverage new, highly complementary horizontal capabilities.”
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