The telecom cloud era is here, and AI is ushering in Telco 4.0, but service providers remain cautious

Let's dive into telco through the years by examining the transitions from Telco 1.0 and Telco 2.0 to Telco 3.0 and the new era upon us - Telco 4.0.

As businesses across multiple industries transform their operations and customer experiences with cloud computing and artificial intelligence, telecommunications service providers have been slow to move. Many are still trying to understand just how these technologies will impact their networks and service offerings in both the near and long term.

Historically slow cloud adoption rates for core network functions have left service providers stuck in the Telco 1.0 (TDM) and Telco 2.0 (on-premises VoIP) eras with legacy network infrastructure that’s costly to manage and upgrade. That’s led to stagnant revenue growth over the last decade as they continue to face operating complexity and shrinking margins, while also ceding voice and unified communications market share to prominent tech vendors and over-the-top (OTT) providers.

Alianza offers an alternative path that aims to fuel innovation and create new opportunities for service providers whose more than 95 million residential and business wireline connections are well positioned to transition to cloud-native technology. Moving core communications systems to the cloud is how we define the Telco 3.0 era. 

Telco through the years

Let’s unpack the telco timeline that’s shaped the industry to date.

The very essence of telecommunications is the delivery of a line or a path over which two things can communicate. It’s evolved from the dots and dashes of Morse code as the first system for long-distance communications, to voice transmission with the invention of the telephone, to data flowing over service providers’ IP networks. Regardless of what’s being transmitted, the fundamental service has remained the same. During the entire history of telecom, innovation really has focused on just two things: extending service reach and optimizing service delivery.

Think of Telco 1.0 as the “olden days” of telecom with analog calls on the copper wires of the public switched telephone network, where TDM switching eventually replaced the human switchboard operators who manually connected calls. More than 27.2 million U.S. households and businesses continue to rely on that plain old telephone service initially introduced in the late 1800s, according to the Federal Communications Commission.

The late-1990s marked the beginning of Telco 2.0 as SIP-based VoIP enabled calls over service providers’ IP-based networks. VoIP platforms started to replace TDM switching, and today there are approximately 68 million-plus VoIP connections in service across the country.

But a knowledge drain is challenging service providers still entrenched in Telco 1.0 and 2.0 as workers with legacy voice network expertise are retiring, and new candidates with those skills aren’t entering the job market.

Today, the Telco 3.0 era is upon us, and it’s all about taking telecommunications into the cloud. This is Alianza’s world, and we draw on deep Telco 1.0 and 2.0 expertise to guide service providers through their cloud journeys.

Alianza is solely committed to service providers as the foundation of the telecommunications industry and regularly helps them migrate their legacy BroadSoft-, Metaswitch-, and Genband-based networks to modernize and automate core communications networks in the cloud. The move to our cloud communications platform enables them to deliver next-generation voice and unified communications services to their residential and business customers.

Market intelligence firm IDC expects cloud-native deployments of telco network workloads to accelerate this year. It projects global revenue for telco cloud infrastructure software to grow to $27.3 billion in 2027, from $12.9 billion in 2022, across core transport, mobile infrastructure, mobile backhaul, and access networks and virtual customer premises equipment. But service providers face a range of challenges, according to IDC, including a “lack of in-house expertise in cloud-native orchestration and infrastructure, difficulty defining and implementing comprehensive security, and operational complexity of managing on-premises, cloud, and multi-cloud networks.”

Built on Amazon Web Services’ (AWS) industry-leading cloud, Alianza’s software-as-a-service platform helps cover those gaps and enhances service provider agility. It can reduce their capital expenditures, enable network scalability, and eliminate the need for disruptive maintenance, patching, and security enhancements.  

Alianza’s full-stack portfolio of telecommunications offerings includes residential and business voice, enterprise messaging, video collaboration, SMS, and customer contact center capabilities. These capabilities allow service providers to continue owning the end-to-end customer experience within a streamlined vendor ecosystem to generate new revenue and claw back dollars now going to behemoth tech brands and OTT providers.  

And here’s a critical point. Once communications platforms have moved to the cloud, service providers can take advantage of artificial intelligence (AI), which is the defining technology of the Telco 4.0 era just on the horizon. I would make the claim that AI is perhaps the most impactful technology since humans harnessed electricity and likely will be the most transformative technological change of our lifetimes.

The AI imperative

AI became table stakes for technology executives and knowledge workers after OpenAI’s November 2022 release of ChatGPT. The generative AI chatbot is a large language model trained on massive amounts of text to interact conversationally with users and produce text, music, and digital art. It quickly went viral and now claims more than 100 million weekly active users. 

Alianza is working with AWS to use AI to enrich communications happening over service provider networks. While AI capabilities today are primarily targeted to large enterprises, we’re focusing on democratizing access for the 33 million small- and medium-sized businesses (SMBs) that form the backbone of the American economy. We’ll bring the power of AI to the traditional phone calls that SMBs still depend on to get business done.  

Data is the new currency, and the ability to collect it and derive insights from it can empower businesses of all sizes. That’s difficult with siloed core telco infrastructure tied to legacy TDM- and softswitch-based communications networks. But data is much easier to access once those core systems migrate to Alianza’s cloud platform and from there, we’ll be using AI capabilities to leverage it in remarkably interesting ways. 

Stay tuned for the next blog post in this innovation series to learn how Alianza will approach these new opportunities. It’s a big part of the next evolution in cloud communications that Alianza will continue to deliver on for service providers and their end-user customers.