Telecoms and Software News

Disruptive technologies are giving fixed telcos a headache

Sally Banks

Disruptive technologies are giving fixed telcos a headache

With declining traditional voice revenues, slowing broadband growth and a global recession to contend with, operators are increasingly looking for ways to cut costs throughout their business. New technologies offer more efficient ways of running the network; however, the flipside of this is that they require significant investment. The business case is therefore sometimes difficult to establish, especially when operators are looking to sweat assets, maximise margins, and reduce or maintain current capital expenditure levels.

Business case hard to build for some technologies

As most of the new network technologies require significant investment and/or duplicate existing technologies, it is very difficult for operators to build a compelling business case to deploy them. Although many will achieve overall efficiencies in the network in the long term, the global economic climate is forcing many operators to delay decisions on new implementations when their existing networks can manage just as well with current demand.

Ovum's recent report Disruptive technologies and the wireline telco examines all the major technologies that impact wireline telcos and how they will be affected by them.

Fibre and LTE are potentially the biggest disruptors

As telcos look to offer more advanced IPTV offerings, and customers use more and more high-bandwidth applications, the need for greater fibre investment in the network becomes inevitable. The cost of deploying fibre (particularly in the last mile) is considerable and the return on investment uncertain, so this is a risky move, but one that operators may feel they have little choice but to make. Network-based competition does not fit well with such plans, and regulatory uncertainty could significantly affect either investment or the competitive nature of the markets. Regulatory bodies therefore need to set clear and detailed guidance, and do it quickly, if the industry is to move forward but remain competitive.

Incumbent wireline operators deploying fibre may therefore benefit from significant positive disruption in delivering higher broadband speeds and enabling new services. However, it may entail negative disruption for alternative operators that either wholesale from the incumbent or are looking to deploy their own competing fibre infrastructure.

The promise of greater bandwidth and capabilities for mobile broadband services is what is driving mobile operators towards LTE. Therefore for mobile operators, despite the difficulty in building a business case for LTE, it can be viewed as a positive disruptor (in a similar way that fibre is considered a positive disruptor for fixed-line telcos). For wireline operators, however, a mobile infrastructure that enables significantly improved mobile broadband capabilities provides a negative disruption. If LTE is deployed (particularly in emerging markets where fixed penetration is low and mobile penetration is much higher), and is used to provide broadband in areas not reached by the fixed network, then there is a real threat that wireline operators with no mobile arm will be rendered redundant.

ICT convergence provides opportunities for service providers

There are numerous opportunities for telcos in the IT space, especially from software-based services such as cloud computing and virtualisation, as well as Web 2.0 applications, which enable greater efficiency and flexibility within the telco from existing assets. The telco needs to ensure it leverages these opportunities effectively to stay ahead of its competitors.

The Web is already the most widely used development and deployment platform for digital applications and services in terms of number of developers, number of users and sheer volume of content and services. However, web principles of openness, interoperability of services and consumer choice are typically at odds with telecoms service provider requirements. Telcos should therefore seek to leverage web-based assets in developing new services and applications, to enhance the ability of web developers to build compelling applications via network APIs, e.g. those potentially offered via IMS. However, they need to do this in an open yet secure way and provide incentives for third-party developers to target their platform.

Advising on the commercial impact of technology and market changes in telecoms, software and IT services

Business case hard to build for some technologies

Fibre and LTE are potentially the biggest disruptors

ICT convergence provides opportunities for service providers

Advising on the commercial impact of technology and
market changes in telecoms, software and IT services