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AT&T and Microsoft announced a deal today that will be a big one for both companies. AT&T said it will run its 5G core network on the Microsoft Azure for Operators cloud. In addition, Microsoft will acquire the AT&T Network Cloud platform that has been running the carrier’s 5G core since 2018 and which has been designed specifically to provide functionality critical to managing 5G services.

The deal seems to make sense for both companies. Like most carriers deploying 5G, AT&T is using a high level of virtualization in the network core. It already uses a cloud approach to manage 5G traffic.

Microsoft Azure for Operators is a cloud offering aimed specifically at communications providers that uses a hybrid and hyperscale infrastructure. By using it for the 5G core, AT&T expects to reduce engineering and development costs.

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Adding a higher level of virtualization is seen as key to economically providing 5G services and AT&T has been one of the biggest proponents of software control of network functions. That vision helped drive the company’s development of the Network Cloud platform.

The AT&T Network Cloud effort dates back to 2018 when the company launched the Airship open source initiative.

A key concept behind Airship is microservices, which AT&T described at the time as individual functions. The company said its development philosophy was to avoid creating monolithic enterprise applications but instead to assemble numerous microservices to create new applications.

The goal was to make it easier to upgrade, replace or reorganize functions within an application. The Airship approach was seen as central to the company’s 5G core plans and even back in 2019, the carrier saw the potential to make the platform available to other carriers eventually.

As a third party, Microsoft is likely better positioned than AT&T to sell that platform to other carriers. In today’s press release about AT&T Azure for Operators plans, Jason Zander, executive vice president of Azure for Microsoft, noted that “[t]hrough our collaboration with AT&T, Microsoft will expand its telecom portfolio to support operators with a carrier-grade cloud that provides seamless experiences across Microsoft’s cloud and the operator’s network.”

The AT&T Microsoft deal calls for Microsoft to assume responsibility for software development and deployment of the AT&T Network Cloud immediately and to migrate AT&T’s existing network cloud to Azure over the next three years.

Microsoft also will acquire AT&T “engineering and lifecycle management software used to develop and deploy a carrier-grade cloud that runs containerized or virtualized network service.”

Some AT&T “design, development and engineering experts” will become Microsoft employees, which will enable Microsoft to “expand the technology skills” obtained through the 2020 acquisitions of Affirmed Networks and Metaswitch Networks.

Microsoft expects to work on enabling “simpler and faster transition of network workloads to cloud.” That development effort should add value to Azure for Operators.

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