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Summary

 

Competition is intensifying among hyperscale internet players to strike partnership deals with telcos in key new areas of differentiation: 5G multi-access edge computing (MEC), cloud, and telco AI. In recent months, Google has formed some big telco partnerships, including with Reliance Jio, Vodafone Group, and Deutsche Telekom. Its latest, with Orange, shows both how deeply hyperscalers in general are embedding themselves into future and emerging telco networks, and how they are positioning for growth in new and emerging telco services based on a principle of co-innovation founded on technology expertise.

 

Google leverages its core expertise to play a key role in Orange’s technology roadmap and network future

 

Google’s July 28 deal with Orange will see Google supply its capabilities in cloud and AI technologies, while Orange will bring its expertise in ICT services and network infrastructure to the partnership. As such, Google will play a central role in how Orange develops cloud computing, MEC, and AI in areas such as retail, gaming, and industries. In terms of AI specifically, Google will apply its expertise to help Orange transform both its internal operations and leverage customer data to create new opportunities.

The deal represents a significant win for Google, as well as a major extension of its previous work with Orange, which, outside of RCS, has mainly been around submarine cable connectivity. Indeed, before this year’s deals with Vodafone, Deutsche Telekom, and Reliance Jio, Google’s primary area of telco partnership activity has focused on pushing telco commitment to its RCS messaging platform.

Orange and Google said that the partnership will “pave the way for the development of new advanced cloud, edge computing, and cybersecurity services that will open up business opportunities for both Google Cloud and Orange.” This is a particularly noteworthy part of the deal: the emphasis on collaboration, or co-innovation. This approach was identified by Omdia’s recent research into the way hyperscalers are moving into the telco space as a key characteristic of the way Google and its internet competitors are positioning to play a key role in future telecoms networks. Indeed, mid or long-term partnership deals, rather than one-off transactional deals, between telcos and internet players over the research period (2018–19) amounted to 21% of the total number of partnerships struck by all these companies. This accelerating trend underlines the extent to which internet players are becoming involved in network services and network technologies, of which Google’s latest deal with Orange is a great example.

 

Telcos’ desire to co-create new capabilities puts pressure on incumbent telco vendors

 

Hyperscalers’ encroachment into areas traditionally “owned” by telecoms infrastructure vendors began in earnest with telco deployments of cloud and AI. As these have accelerated in conjunction with 5G deployments, it is becoming clear that some leading service providers are looking to co-develop services with their suppliers, rather than get locked into deals to simply buy and deploy products.

Google’s latest Orange win will also be a wake-up call to other hyperscaler players with telco ambitions, in particular Microsoft and Amazon Web Services (AWS), both also extremely focused on developing market-leading positions around MEC, cloud and AI, and who, according to Omdia’s research, struck more partnerships with telcos for these and other key technologies between 2018 and 2019.

 

Figure 1: Partnerships by company types

Figure_1__Partnerships_by_company_types.png

Looking forward, it’s clear that telco service providers that invest in and effectively deploy new network technologies this year and next will be able to create a clear competitive advantage over rivals in the consumer market, and even more so in enterprise and industrial markets. As 5G deployments become more widespread, the network will become the foundation for (and major focus of) telco service provider differentiation. Those that clearly define the market they want to compete in, then invest in and deploy new technologies most effectively, will be in a strong position to offer new services and compete for these emerging opportunities.

 

Appendix

Further reading

 

Hyperscale and Telco Partnerships, GLB007-000362 (March 2020)

Hyperscale and Telco Partnerships Tracker: 4Q19, GLB007-000358 (March 2020)

2020 Trends to Watch: 5G Strategies and Services, GLB007-000328 (January 2020)

5G Launch Strategies: Networks, Pricing, Marketing, and Services, GLB007-000275 (August 2019)

5G Service Provider Tracker: 2Q20 GLB007-000408, (July 2020)

4G in Western Europe: Network Expansion and Subscriber Growth, TE0014-000418 (August 2016)

 

Author

Paul Lambert, Principal Analyst, Service Provider Strategies & Regulation

[email protected]

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