AT&T separating LTE core and radio contracts

AT&T (NYSE:T) is sticking closely to its new domain strategy for its deployment of long-term evolution, separating the contract for the 4G core network from the radio access network contract, won by incumbent 3G vendors Alcatel-Lucent (NYSE:ALU) and Ericsson (NASDAQ:ERIC). That clear separation in the network is not only a break in the way mobile operators have traditionally awarded contracts, but also gives the vendors who lost out on the radio deal another chance to land a lucrative AT&T contract as well as possibly opening the door for the growing number of mobile core specialists.

“The [mobililty management element] and packet core will be separate,” said Tim Krause, the Alcatel-Lucent vice president over the AT&T customer team. “It’s not in our award at all because of the way AT&T thinks about its domains. The core will be a different contract altogether.”

Traditionally operators have awarded the core contract as part of the radio access network package, allowing their vendors to install their own flavor of signaling and data gateways in an end-to-end deployment. But as data traffic has ballooned on the network, a class of competitive gateway vendors has emerged and many operators have started augment their traditional cores with such specialist core elements. Most of indicative of the trend was Starent Networks—now owned by Cisco Systems (NASDAQ:CSCO)—which rampaged through the industry over the last several years stealing contracts for packet data contracts serving node (PDSN) and gateway GRPS support node (GGSN) out from under the Tier 1 vendors’ noses. As 4G came to prominence, carriers pushed for such ‘best-of-breed’ provisions to be included in the LTE standards, forcing out the proprietary interfaces that often bound a vendor’s core equipment to its radio gear.

Even in 4G, the tie between radio vendor and core vendor remains strong. When Verizon Wireless (NYSE:VZ, NYSE:VOD) awarded its LTE contracts, it tapped its radio vendors, also Alcatel-Lucent and Ericsson, to supply the evolved packet core, and though Starent won a piece of the deal, it was hardly an upstart, since Starent supplies the PDSNs for Verizon’s 3G network.

AT&T’s complete severing of the packet core from the access network, however, creates an odd situation in wireless. Not only to specialist vendors get to compete for the core business, but technically even the Tier 1 vendors who lost out on the radio deal can throw their hat in the ring. AT&T hasn’t confirmed all of the vendors who are competing for the different pieces of its business, but the likes of Nokia Siemens Networks (NYSE:NOK, NYSE:SI) and Huawei definitely lobbied hard and could be candidates for the core deal. Cisco-Starent is likely also in the running and possibly even Tellabs (NASDAQ:TLAB), which bought 3G core vendor WiChorus last year, and Juniper, which is pursuing a 4G core strategy independent of 3G core partner Ericsson.

The field may look wide open, but Krause said that doesn’t mean it’s entirely even. Radio access vendors still have an advantage in their incumbent relationship with their operator and in their ability to provide an end-to-end solution. The 3GPP standards has taken huge steps toward creating a more open environment that would allow an operator to mix and match network elements, but every vendor still has specialized technology not in the standard designed to work across its elements. AT&T’s overarching philosophy will ultimately determine what approach AT&T takes, Krause said.

“Like any technology that is fairly new, the standards work is there to ensure interoperability,” Krause said. “Do they want the flexibility of being able to support different vendors in the core and the radio or do they want the reliability of an end-to-end solution?”