Microsoft will host AT&T 5G network on Azure

Microsoft will host AT&T's 5G core network on Azure in what industry observers said is a breakthrough deal for telecom and cloud providers.

The two companies announced the pact this week, saying Azure will process all 5G data traffic on AT&T's network. According to the companies, the move will reduce AT&T's hardware and development costs and increase its ability to scale. The firms did not disclose the deal's financial terms.

AT&T's network will run on a hybrid cloud, where some network functions take place on the public cloud while others run on-premises or at the network's edge. AT&T will manage the entire network through the cloud, controlling security, policies and DevOps work from a central place.

"We believe this is the first time a Tier 1 operator anywhere has committed to using a hyperscaler and cloud technology to service their existing customer base," said Shawn Hakl, Microsoft's vice president of 5G strategy.

Roger Entner, founder of Recon Analytics, said he saw the move as a giant leap forward for carriers' use of public clouds. He added that he expects most mobile carriers to have similar deals in place within the next three years.

"This is taking a sledgehammer and making a hole in the dam," he said.

Entner said other telecom providers had worked with cloud vendors in the past. For example, Dish recently agreed to run its 5G core and radio access network on AWS. However, that deal is smaller than the Microsoft-AT&T pact, which Entner said he expects will become a huge selling point for Azure.

"Telecom workloads are the most demanding workloads there are," he said, noting the need for constant uptime. "If you can run the core of a large telco provider like AT&T, with its 175 million connections, you can run anything."

As part of the deal, Microsoft will buy AT&T's Network Cloud software-defined networking technology, which has powered AT&T's 5G core since the company launched 5G in 2018. Microsoft will use that platform to bolster its offering for telecom providers, Azure for Operators. With Azure for Operators, Microsoft plans to move other carriers to the cloud -- last year, it bought Affirmed Networks and Metaswitch Networks to further that goal.

IDC analyst Karl Whitelock said the sale lets AT&T focus on its core business -- building out physical network infrastructure -- without getting bogged down with services.

Mike Gleason is a reporter covering unified communications and tools. He previously covered communities in the MetroWest region of Massachusetts for the Milford Daily News, Walpole Times, Sharon Advocate and Medfield Press. He has also worked for newspapers in central Massachusetts and southwestern Vermont and served as a local editor for Patch. He can be found on Twitter at @MGleason_TT.