AT&T, CenturyLink and Verizon SD-WAN play will face MPLS replacement, competitive provider pressure, says analyst

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AT&T, CenturyLink and Verizon may have been aggressively rolling out SD-WAN services as part of their broader network virtualization efforts, but analysts warn that the challenge lies in potentially cannibalizing their lucrative MPLS business and aggressive competitors. 

“The motivation for large ILECs launching SD-WAN may perhaps be more complex given all of the large carriers have meaningful and lucrative MPLS/private line businesses to defend,” Cowen and Company said in a research note.

It’s clear that the large telcos have been fast on the SD-WAN trail, announcing service launches and a series of customer trials and deployments.

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CenturyLink and Verizon have been the two early aggressors in the SD-WAN market, rolling out the service across a wide part of their respective territories.

Verizon currently has 90 active SD-WAN implementations and 16 full-scale deployments. It also has 30 participants taking part in a universal CPE program trial. Virtual CPE services will soon be available in over 30 global markets, allowing business customers to take advantage of software-based services that reside in the telco's cloud network.

However, the telco told FierceTelecom in a previous interview that MPLS growth has not stopped, although it is not at the same rate the telco saw in previous years.

Likewise, CenturyLink, which launched its SD-WAN service last summer, is in over 10 enterprise customer trials. The service provider allows customers to conduct a proof-of-concept trial to get used to the service.

AT&T, while not formally announcing a formal product yet, previously began a collaboration with VeloCloud to release an SD-WAN solution sometime this year.

Besides protecting their MPLS base, large telcos also have to battle a growing base of competitive service providers like Global Capacity, GTT and Windstream offering SD-WAN.

“The large ILECs face losing this business to smaller insurgent competitors, which will likely happen to a certain degree,” Cowen and Company said. “The large carriers should command their own SD-WAN leadership, becoming their own substitute, but in the process face isolated customer attrition and/or top-line pressure as existing customers migrate to lower priced (but lower cost) solutions.”

Competitors get aggressive
It’s clear that competitive service providers, particularly those with a business service focus, are finding utility in offering SD-WAN services.

Windstream, which just recently completed its purchase of EarthLink, is driving a wider breadth of SD-WAN services into the market, enabling it to deepen its foothold in the mid-market business sector.

Prior to being acquired by Windstream, EarthLink announced its own SD-WAN product. At that time, the service provider had already won a large contract with restaurant chain TGIFriday’s. In all, EarthLink deployed the solution for 41 customers across 1,706 locations.

Windstream has also rolled out its own SD-WAN service, one that's gaining interest among its smaller and medium-sized business customers.

Similar to EarthLink’s SD-WAN offer, Windstream is giving mid-sized enterprise customers access to the same technology advantages that large enterprises enjoy, including custom-designed networks and services, as well as a support team.

“Windstream is aggressively pushing SD-WAN as it fits perfectly into its solution set (especially bolstering its UCaaS services), enabling the carrier to successfully steal more share in the mid-market,” Cowen and Company said. “Meanwhile EarthLink's acquisition of Boston Retail Partners (which specializes in the retail verticals) could prove fortuitous for Windstream.”

But other competitors like GTT, which just gained its own fiber network via its acquisition of Hibernia Networks, could be another potential threat. Unlike AT&T and Verizon, GTT’s sole focus is on providing services to multi-national businesses.

“With the virtualization of networks, we could see a renaissance of the asset light resellers, with companies such as GTT, excelling at wholesaling/packaging together network components, as a natural player to succeed in the SD-WAN marketplace,” Cowen and Company said.

Cable: A natural SD-WAN fit?
As cable operators try to appeal to larger businesses, SD-WAN could be a potential weapon to attract new customers looking for an alternative to traditional ILECs. However, while none of the cable MSOs have formally announced a product yet, analysts say they are a natural fit for SD-WAN.  

Cowen and Company said that cable MSOs can leverage their well-embedded broadband networks and small to medium business (SMB) base to tout an SD-WAN offering.

“Cable/MSO’s seem to be a natural winner in the SD-WAN space,” Cowen and Company said. “The MSO’s already have the last mile internet connection and have made tremendous in-roads with the SMB marketplace.”

Charlie Reed, a partner at strategic consulting firm Atlantic-ACM, told FierceTelecom in a previous interview that while he agrees cable could launch an SD-WAN solution, it will likely be based on a proprietary home-grown technology.

“We expect it to be some SD-WAN offering that’s a bit more proprietary,” Reed said. “They might try to use some of their own broadband partner’s networks to stay off the public network."