Rich Communications Services was intended to be the multimedia successor to SMS (short message service). It still seems likely to do so, though the way it may do so illustrates some key changes in communications value and control, ultimately reflected in business models.
The GSMA has promoted the use of RCS since 2008, primarily as a way of making carrier text messaging behave as do chat apps. But application-based messaging such as iMessage, WeChat, Slack, Skype, Viber, Android Messages, also are built on SMS.
So RCS was envisioned as a “telco” messaging platform to rival app messaging. As with a few other salient telco initiatives, it has not quite worked out that way.
In the U.S. market, AT&T and T-Mobile have opted to use the Google Messages platform, based on RCS. So instead of a “telco alternative” to app messaging services, RCS--as developed by Google Messages--becomes the AT&T and T-Mobile default for advanced messaging, not a carrier version.
Telcos once hoped to become significant platforms for mobile app stores, data center hosting services and cloud computing as well. Many have moved into roles as video entertainment providers or content owners. They still hope to create roles in edge computing and internet of things value chains.
History suggests it will be an uphill battle. Already, many major tier-one telcos are opting to become partners with hyperscale computing-as-a-service suppliers, rather than compete. Some telcos already are outsourcing their compute facilities to hyperscalers.
AT&T will move its 5G core network to the Microsoft cloud. The switch means Microsoft’s Azure Cloud provides a path for all of AT&T’s mobile network traffic to be managed using Microsoft Azure technologies.
As is typical for many outsourcing deals, the provider of the outsourced functionality also will absorb AT&T employees who presently operate the function.
As part of the deal, Microsoft will gain access to AT&T’s intellectual property and technical expertise to grow its telecom flagship offering, Azure for Operators.
Microsoft also is acquiring AT&T’s carrier-grade Network Cloud platform technology, which AT&T’s 5G core network runs on. AT&T’s Network Cloud platform has been running AT&T’s 5G core at scale since the company launched 5G in 2018.
Unlike some outsourcing deals, AT&T will continue to operate its core network, using Microsoft as the hardware platform. AT&T expects the deal will reduce its engineering and software development costs.
Microsoft will assume responsibility for both software development and deployment of AT&T’s Network Cloud immediately and bring AT&T’s existing network cloud to Azure over the next three years, AT&T says.
The point is that for all the wisdom of telcos “moving up the stack” and “adding more value,” that has proven exceptionally difficult. If that cannot be done, at scale, telcos are likely facing the alternative strategy of sharply reducing costs and consolidating.
On the scale of potential strategies, ranging from a low-cost “bit pipe” optimized for cost to the “full featured application provider” roles, history suggests the former, not the latter, will be the ultimate fate for most service providers.
Many note the centrality of connectivity for modern life. All true. But Wi-Fi also is central, and that is not a major revenue driver--if a revenue source at all--for service providers. It will not be a pleasant thought, but perhaps that ultimately is the fate of the global public networks business.
Telcos used to drive global bandwidth needs and supply. Now hyperscale app providers do so, primarily relying on their own facilities. Wide area networks now are computer networks, albeit with some highlighted apps.
Increasingly, WANs are not public networks, though an important role remains for public networks (voice as a last resort; public safety communications; military communications; internet access for consumers).
Consolidation is definitely on the table in coming years. Beyond that, in many markets, common carrier operation might be the last resort. So a 50-year move towards privatization and deregulation might ultimately, in many markets, drastically revert towards common carrier market structures, at least for fixed networks.
Wireless and mobility networks, with different cost structures, might remain the place where facilities-based competition remains more common.
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