AT&T: Sorry vendors, SDN is eating your lunch

The cold winds of disruption start to whistle through telco-tin-land

In news that will chill purveyors of big networking iron, AT&T last week told its earnings call it reckons its software-defined network (SDN) rollout will cut its capital expenditure.

While reports last week focussed on the company's revenue (US$33 billion for the second quarter), margins (36.3 per cent), and operating income ($5.7 billion).

With its LTE rollout winding down (310 million POPs built), the giant telco's capex is already slimming down from $20 billion in 2014 to “around” $18 billion predicted for this year, and that includes capex devoted to AT&T's expansion efforts in Mexico.

As Lightreading notes, the strategy will eventually reach all the way to customer self-provisioning.

Further into the future, however, Stephens expects SDN to squeeze capex, even though he said the main reason for the build (known as “Domain 2.0”) is to make a more flexible network.

“Our move to next generation networks is starting to make a real difference”, he said on the call.

There will still be opportunities for kit vendors: 5G is already on the company's mind, and it's eyeing off 600 MHz spectrum for future wireless services, something that would need a considerable build-out.

However, the more that AT&T can convert its core network into software running on generic Intel servers, the risk that something like 5G would demand a big capex spike is reduced, he said.

That's because the SDN vision, if it's realised, would mean most of the deployment cost associated with something like 5G would use far simpler base stations, with most of the intelligence in the network instead of the base stations.

Hence, Stephens said, “I think there's a real opportunity with some of the opportunities that are happening on a software-defined basis to bring that investment down”.

Given that companies like Ericsson and Cisco are seeing relatively flat spending from the service provider market, the idea that SDN will keep that market flat will hardly be welcome - especially since Verizon is on the same path.

AT&T's results announcement is here. ®

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