Editor’s note: AT&T deepens emphasis on the public sector and software-mediated network services to improve Business Solutions revenue. And FirstNet looks to be a boost as well, says Technology Business Research Analyst Steve Vachon in the second part of his review of AT&T earnings announced Wednesday. (Part one is linked with this post.)

HAMPTON, N.H. – .To improve Business Solutions revenue, which decreased 2.7% year-to-year in 2Q17 due primarily to lower legacy voice and data revenue, AT&T is targeting growth from government customers.

In April AT&T announced it is consolidating its government and education operations, which generated about $15 billion in sales in 2016, into the new Global Public Sector division to improve cohesiveness and foster partnerships across agencies in different sectors.

Additionally, AT&T will be able to provide first responders with more reliable connectivity through its collaboration with First Net, which has already attracted contracts from five states as of July.

Virtualizing its network

AT&T will improve the profitability of Business Solutions long-term by adopting NFV and SDN technologies. Integrating open-source technologies and white box hardware will provide cost savings by enabling the carrier to become less dependent on more costly, proprietary infrastructure.

Additionally, TBR expects the acquisition of Brocade’s Vyatta network operating system will enable AT&T to meet its goal of virtualizing 75% of its network by 2020.

In addition to cost savings, AT&T is creating revenue streams by introducing new software-mediated network services to its portfolio, including an upcoming SD-WAN service in collaboration with VeloCloud. However, AT&T will be disadvantaged by its relatively late entry into the SD-WAN market as competitors including Verizon and CenturyLink have already begun to cement leading positions within the segment.