Alexander Britkin is the CEO of NFWare.
Telecom and internet service providers have turned to faster networking technology—whether it be 5G, DOCSIS 4.0 or fiber-optic cables—to boost sales and profitability. But even with these new network technologies in place, financial returns are low.
In the five years from 2019 to 2023, according to Boston Consulting Group, the telcos it surveyed delivered a median annualized total shareholder return (TSR) of 6%, which compares to a TSR of 13% for the S&P 1200 index. Of the 33 industries whose financial returns are tracked by BCG, telecom was near the bottom of the list in 31st place.
Because of these challenges, service providers are looking for technologies that can reset and reduce their expense levels and allow them to build a more flexible network that offers a faster way to launch new services. One solution they are turning to is network functions virtualization (NFV), which can lower the costs of building networks.
The Past And Present Of NFV
NFV was introduced in 2012 and created a lot of hype and discussion. At first, there was skepticism about whether the technology could deliver the performance and cost reductions that were promised. The market was so young that some promised benefits, like carrier-grade reliability and multi-vendor software integration, took time to be realized.
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Because of the business and technology advantages—which, in addition to expense reduction, include reduced time to market for network services, supply chain flexibility, network automation and autonomy—operators started to deploy NFV in their networks.
Today, the hype has died down, but NFV is still quietly winning over the industry and growing rapidly on its way to being a mainstream technology.
But still, adoption is not universal. According to IDC, the worldwide capital expenditures for telecommunications providers in 2028 will be $308.6 billion. On the other hand, research from IMARC Group indicates that the market for NFV technology will be $62.76 billion in 2028. This leaves room to grow.
How NFV Works
NFV uses a hypervisor to enable networking, network security and other functions to run as software appliances in the form of virtual network functions (VNFs) that run within a virtual machine (VM) that isolates and dedicates server resources to that VNF.
The NFV approach replaces legacy single-function hardware appliances like routers, firewalls and others with VNF applications that run on commercial-off-the-shelf (COTS) servers. These servers are sold in volume, which reduces the cost dramatically. Using COTS servers means more companies can develop applications for the network, introducing competition and innovation. The combined effect is intended to offer a dramatic reduction in network capital and operating expenses.
To illustrate the benefits of NFV, consider the comparison between NFV-based virtual carrier-grade NAT (vCGNAT) and legacy CGNAT. This comparison could be done for any network function; it just happens that I know this one best.
• Cost Efficiency: NFV-based vCGNAT reduces the need for specialized hardware, lowering CAPEX. OPEX is also reduced through automation and simplified management.
• Scalability: vCGNAT can be scaled dynamically based on demand, unlike legacy systems that have fixed networking cards and processing performance and require manual hardware upgrades.
• Deployment Speed: New services can be deployed faster with vCGNAT due to its software-based nature, compared to the lengthy procurement and installation processes for hardware appliances.
• Flexibility: NFV-based solutions offer greater configuration and deployment flexibility allowing operators to quickly adapt to changing network conditions and requirements.
5G also represents a big catalyst for NVF. The battle to virtualize the radio access network (RAN)—which is the most compute-centric aspect of the network—has been won, and the standards committees are including virtualized approaches in the network standards. As the world sees the success of NFV in 5G, the seed is planted that all network functions can be virtualized.
Current Technology Challenges
One of the technologies that could slow the growth of NFV is cloud-native containerization, which is another virtualization technology that is used for some network functions.
With this approach, each cloud-native container is designed to hold just the application and share the rest of the infrastructure resources such as the operating system. This makes containers fast to deploy and very compute efficient. Also, applications can be run as microservices that serve a few customers but can be combined quickly to handle more customers.
Contrast this with the NFV virtual machine (VM) that isolates the application and all dedicated infrastructure services (i.e., OS). This is less efficient because deploying a VNF involves more software and configuration and thus takes longer. However, having control over the infrastructure should result in less competition for resources from other VMs, resulting in more deterministic performance and higher security.
The ideal applications for containers are website and cloud computing applications, AI and machine learning and others. The shared infrastructure nature of containers means they don’t have the dedicated resources for many of the resource-intensive applications like routing, NAT and other applications that must process packets continually.
These high-bandwidth network functions need dedicated hardware resources, and NFV is designed to support isolated applications. Containers were designed for cloud environments where resources are not guaranteed and change frequently.
The Future Of NFV
The future of NFV looks promising as it continues to evolve and mature.
As operators increasingly embrace NFV, the technology will play a critical role in the deployment of 5G networks, driving further innovation and efficiency in telecom operations. While cloud-native technologies might be a growth threat to NFV, there’s also the possibility that the two will work together to enhance capabilities and offer operators powerful virtualization options to meet the demands of modern networks.
As the industry continues to innovate, NFV should enable operators to deliver faster, more flexible and cost-effective services, ensuring their competitiveness in a rapidly changing landscape.
NFV represents a transformative shift in how telecom networks are designed, deployed and managed. Despite initial challenges, the technology has proven its value and is set to become a cornerstone of next-generation telecom infrastructure.
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