Summary Bullets:

• The digital landscape is changing, bringing new technologies. Hyperscalers are having a more influential role in shaping the future direction of telecommunications.
• Telcos and hyperscalers should work together to co-create new initiatives including cross-selling, joint go-to-market strategies, and co-developing innovation and product.

The relationship between telcos and hyperscalers such as AWS, Microsoft, Google, and Meta, has always been multi-faceted. With the digital landscape continuing to evolve with the emergence of 5G, artificial intelligence (AI), and cloud-native technologies, hyperscalers are becoming more influential in shaping the future direction of telecommunications. This can both create benefits for telcos (e.g., agility through digitization) but it can also erode telco business opportunities (e.g., connectivity from telco infrastructure to cloud infrastructure). Should telcos take a stand against hyperscalers moving into their territory? Or should they look to collaborate and coexist together?

Telecommunication carriers have always been responsible for their network infrastructure across both fixed and mobile networks. With hyperscalers investing in their own infrastructure, predominately limited to data centers and subsea cables, it has put them in direct competition with telcos and now competing with the latter for business. Some telcos today are fearing that if hyperscalers continue to muscle in on their space, it could potentially undermine them in the future and effectively relegate them as “wholesale connectivity or dumb pipe” providers. This has led to some telcos leveraging their digital assets and local presence to compete against hyperscalers. However, some have welcomed the change and are looking to work together and collaborate to drive innovation and growth for its business and its customers. With some continuing to find their footing on how best to proceed, some carriers have already established strategic partnerships to gain much needed experience and support telcos especially when it comes to technologies such as cloud and data centers. Some recent examples include Lumen Technologies partnering with AWS, which saw the telco integrate AWS’s AI, machine learning, and security technologies into its system with Lumen providing its fiber connectivity to its data centers. Another example is between Vodafone and Google. The two have extended their current agreement for 10 years to include AI, cloud, cybersecurity, content, and devices. By collaborating with hyperscalers, telcos have the potential to unlock new revenue streams, especially across Internet of Things (IoT), edge computing, and AI, which requires low latency but also high bandwidth networks. Hyperscalers can also draw strength from working with telcos and leverage their experience and expertise around network infrastructure.

While telcos and hyperscalers need to find and establish the perfect equilibrium that works best for each other. It’s important that telcos look for a partner that can complement each other’s strengths. For telecommunications carriers, this would be leveraging its in-depth knowledge of networks and connectivity, including both fiber and wireless services, while continuing to enhance its strong relationships with their customers by delivering enhanced customer support and customer experience capabilities. While for hyperscalers, providing telcos access to their digital ecosystem including cloud services, data centers and access to their global reach. Additionally, the two should work jointly together and look to co-create new initiatives including cross-selling, joint go-to-market strategies and co-developing innovation and product development.