Why to Watch the Nokia/Verizon Private Wireless Deal

On its face, Verizon’s October 20 joint announcement with Nokia seems to be a validation that private wireless networking is poised to pick up steam in the final months of 2020.

The release outlines the two companies’ plans to offer private 5G networking-as-a-service to Verizon Business’s international customers using Nokia’s Digital Automation Cloud as a solution centerpiece. It also dovetails with an announcement the operator made with Microsoft to use Azure edge-cloud capabilities to help enterprises manage workloads on private wireless networks.

This is a proof point of several key trends that Futuriom has been watching: 1) The cloudification of edge communications services continues, extending public cloud to deeper into the communications domain; 2) The potential emergence of private wireless as an important market for 5G and edge compute.

While 2020 has seen several longstanding private wireless pilot projects get off the ground, this particular announcement with Nokia might be more about Verizon following a longstanding strategy favored by Verizon CEO Hans Vestberg than about private wireless momentum itself.

Why is Verizon Focused Outside the U.S.?

It is probably worth looking first at some reasons why Verizon seems to be prioritizing international opportunities over potential projects in the U.S. After all, with the first CBRS auction wrapping up last month, it appears that the stage is set for private wireless networking in Verizon’s backyard to start heating up.

While early projects are almost certainly in the works, countries such as Germany have made private spectrum available to enterprises at generally lower prices than what are being commanded in the U.S. auctions. What’s more, the fact that the Office of Economic Development (OECD) ranks the U.S. 28^th in fiber connectivity out of the 37 countries it studies in its broadband statistics portal is a powerful indicator that some key private wireless enablers are lacking in Verizon’s home markets; in this case, access to fiber-based backhaul. So, while private wireless will happen in the U.S., this announcement alone is an indicator that even the country’s largest operators are looking elsewhere for early project experience.

Vestberg's History Points to Pilot Project

This brings us to Vestberg’s past strategies, and why early project experience in private wireless will be critical for network operators looking to play a central role in the private wireless ecosystem. At Ericsson, Vestberg went full bore in moving the company toward a managed services strategy aimed at helping network operators with digital transformation initiatives related to the move to all IP networking, the cloud, and early network automation efforts. While the financial results of this strategy at Ericsson proved to be mixed (partially due to the expense and duration of these pilot projects), it did provide the company with substantial experience that it is now putting to use as 5G is forcing operators to get serious about network automation efforts.

Fast forward to 2020, and a look at places where Verizon has crafted strategic agreements (e.g., its 5G roaming agreement in fiber-rich South Korea, among others), and the scenario of the potential for gaining early project experience for private 5G seems to be a key upside for Verizon. While the ultimate revenue potential for Verizon to be a partner in an as-a-service scheme in overseas markets might not become a giant revenue item, it will provide the operator with valuable project experience in overcoming the many deployment and operations complexities that face private wireless deployments.

The Nokia Angle

Speaking of complexity, although equipment vendor hype will tell you that they all have scores of private wireless customers signed up, the reality for enterprises kicking the tires on the concept is that it is an expensive proposition that holds plenty of financial and operational risk. No financial budgeting in a Fortune 500-scale company happens without give and take on other investment priorities.

The fact that a private wireless network represents a big new budget item vis-à-vis other more immediate digital transformation needs in nearly all of these companies cannot be overlooked. Then there is the challenge of being able to deploy, operate, and maintain applications on a private wireless network once it is in place. Very few, if any, companies have the capabilities to accomplish this using their current IT networks. Here is where the Nokia Digital Automation Cloud could be a valuable element of the Verizon/Nokia offering; making a capex-friendly as-a-service arrangement more enticing.