In a landmark development in the relationship between the two tech giants, it was announced in July that AT&T – the world’s largest telecoms company, and the second largest provider of mobile telephone services – will transfer management of its mobile network traffic over to Microsoft Azure, beginning with their 5G core.

How Microsoft and AT&T will each benefit

As part of the arrangement, Microsoft are set to acquire access to AT&T’s intellectual property, including the carrier-grade network cloud technology their 5G core network runs on, though AT&T will continue to operate its network independently.

By shifting to a public cloud provider, it is expected that AT&T will capitalise on the larger ecosystem of software developers who are busily creating technologies to extract additional functionality from the expensive 5G spectrum while building new features for users.

Meanwhile, Microsoft intends to use the newly acquired technology, together with the experience gained by supporting AT&T operate the network, to develop a product being referred to by the company as Azure for Operators. Through this product, it is believed Microsoft will seek to acquire core network business from telecoms firms in the 60 regions across the globe within which it operates by offering industry-specific solutions.

Reducing ‘cost per bit’ and driving efficiencies

A likely overall objective for the joint venture will be a reduced ‘cost per bit’ – the metric used to capture costs associated with data delivery for making comparisons across technologies, operators, or markets.
Efficiencies will also factor highly. By using Microsoft’s infrastructure, AT&T is no doubt also seeking to reduce its engineering and development costs significantly. And, with access to Microsoft’s cloud, AI, and edge technology, we expect they’ll be aiming to leverage this flexibility to quickly innovate and launch new 5G services and customer experiences.

Staff are also being transferred with interesting connotations for the future. AT&T design, development, and engineering experts are set to join Microsoft and apply their knowledge to expand the company’s technology skills.

A collaboration that could alter the playing field forever

This move towards 5G network slicing and cloud-centric models could mark the beginning of a shift in the demarcations between what we class a mobile operator and a virtual operator, with the key differences being communicated through propositions and marketing activity.

With the collaboration between Microsoft and AT&T being the first of its kind, it is likely that obstacles and challenges will be plentiful as the project progresses – particularly cultural as the software and telecoms industries increasingly converge.

Depending on the success of the partnership between these two industry titans, a major telecoms incumbent making the strategic decision to leverage early adoption of cloud technologies alters the playing field for everyone. The extent of that alteration and exactly which parties will be most affected will be revealed within the next three years as AT&T transitions. Whatever the outcome, this is a development we should all be watching closely.