AT&T’s Stephenson says virtualization provides ‘stunning’ cost savings

AT&T's network costs have been dropping more than 7% per year due to network virtualization. (Pixabay)

AT&T CEO Randall Stephenson said today that the company’s efforts to virtualize its network have provided “stunning” cost savings. 

Speaking at the Goldman Sachs Communacopia conference this morning in New York, Stephenson said the biggest cost AT&T has is the cost to run its network and its IT shop. “That's our biggest element in our P&L,” he said. And he credited the company’s efforts to virtualize 75% of its core network functions as paying off in big cost savings.

“What it’s done to our cost takeout has been stunning,” he said. “We are now roughly 17 quarters where the cost of this has been going down year-over-year 7% to 8%. That's a stunning development.”

Stephenson also gave a shout-out to AT&T Communications CEO John Donovan, who recently announced his retirement effective October 1.

RELATED: AT&T's Donovan sets a date for retirement

Donovan has been a very public face for the company and has been particularly relevant for FierceTelecom readers as he led the charge on network virtualization for AT&T and helped the telecom operator break away from the dreaded “vendor lock in.” Donovan has worked closely with open source groups to completely transform telco networking.

Stephenson today credited Donovan for this work. “This is a big deal because when you virtualize these functions and then you create operating systems that manage them and you put those operating systems in the open source community, that's what we've been leading, that's what John Donovan and his team have been leading.”

He added that open source and virtualization “inoculates” a telco from problems that could arise with a Chinese vendor or Chinese competitor who may try to dominate the global supply chain. He said, "I think the global telecom community owes [Donovan] a thank you for what he has led here.”

It’s not known why Donovan chose to retire at this time. It’s possible that he felt he was not the “heir apparent” to Stephenson. The two men are actually about the same age (in their late fifties). Shortly after Donovan announced his retirement, AT&T said that John Stankey would assume Donovan’s role along with his existing responsibilities leading AT&T’s WarnerMedia unit.

At the Goldman Sachs conference today, Stephenson defended AT&T’s choice of Stankey as the company’s president and chief operating officer. Stankey will also continue to head up AT&T’s WarnerMedia unit.

RELATED: AT&T’s board has not asked Randall Stephenson to retire

Stephenson said today that he’s “been asked a thousand times” if Stankey is his heir apparent. “First of all, the board hasn’t informed me I’m retiring yet,” joked Stephenson. “But I will say if Stankey is successful at running this play over the next year, he’s in a pretty good position.”