Shareholder attitudes on fibre are shifting – investor

Some telcos might have been afraid of committing to fibre deployment due to the vast expense and potential shareholder backlash, but attitudes are changing.

Over the last few years the need to invest in fibre has become increasingly evident, though progress is incredibly varied. Forward-looking telcos, Orange for instance, have been pumping cash into fibre deployment for years, while stuttering operators such as BT and Deutsche Telekom has chosen alternative technologies in an incredibly short-sighted move, maybe satisfy the bloodhounds in the annual general meeting, and the rising demands of the consumer.

While technologies such as G.Fast or vectoring might be appealing to the accountants, with the gigabit-economy around the corner, the shortfall is starting to look quite obvious. What was initially sold as a cunning move now looks to be nothing more than delaying the inevitable, with the overall result a net loss. But with attitudes towards fibre changing, the intensity of fibre rollouts might just increase. And it isn’t a moment too soon.

“We’ve seen the evolution of fibre as an asset class which is becoming much more accepted and more confidence in the take up and monetization potential of fibre,” said Chris Hogg, Investment Director at Amber Infrastructure, speaking on a panel session at Broadband World Forum in Berlin. “As an investor, we are getting a lot more confidence in the ability of the market to maintain the uptake level. It becoming a lot more visible and a lot easier to have confidence in these projects.”

Hogg’s position does offer him considerable credibility in making such comments, though he does work for a fund which specifically targets infrastructure projects and companies. This might not be the common attitude amongst the investor community. Kate McKenzie, CEO of wholesale network operator Chorus, does however confirm his position.

“We have definitely seen a change,” said McKenzie. “When we first started investors were sceptical about market adoption, but now investors are asking how they can go faster with the rollout.”

The issues from yesteryear were relatively simple. With profits being squeezed at the telcos thanks to the intervention and disruption of the OTTs, shareholders asked whether such vast expenditure on fibre was necessary. Firstly, did the network need such a facelift when it is dealing with the demands of the 3G and 4G world, and secondly, would the consumer appetite for fibre be there? Some investors doubted the business case, and these are the telcos who are falling behind when it comes to fibre rollout.

But what has changed over the last couple of years? Firstly, the consumer has demonstrated he/she is prepared to pay more for fibre connectivity. Secondly, new services emerged (Netflix for example), and new segments grew substantially (gaming) pushing the networks to the limit. Finally, 5G. The first point demonstrated there would be buyers for the new products, while the latter two suggested telcos would not even be able to offer adequate services unless the money was spent.

The takeaway here is simple; spend or die. Unfortunately for those who are late to the party, expenditure will squeezed into a smaller timeframe, while they’ll be playing catch-up in the time consuming task.

With 5G emerging, the investments in fibre become a little bit more palatable for investors however. With the incredible data rates promised with 5G, fibre is a necessity to ensure network performance. And while it might be able to act as a replacement for the last mile for broadband, fixed wireless access, the sites still need to be fibered up. It is as much an opportunity for connectivity as it is a threat to traditional broadband products.

“We’ll always need fibre to service the base stations,” said Dana Tobak, CEO of Hyperoptic, a UK fibre-to-the-premises broadband provider. “Some people think they’ll only need one connectivity technology in the future, but as our appetite grows, we’ll need more routes to the internet.”

For those investors who back fibre deployment plans over the years, well done. Those who were too timid, bad bet, there’s catching up to do now.

Regionalised monopolies or all-out competition? That is the question

It is always better to be a leader than a chaser, but sometimes you play the hand dealt. The UK is playing catch-up, but what is the right way forward; regionalised monopolies or bitter battle for the consumer?

This is a question which was addressed by Minister for Digital and Creative Services Margot James at the Connected Britain event this morning, and is currently being investigated by those running the Future Telecoms Infrastructure Review. The idea is to strike a balance between the two, but that is much easier said than done. Sitting on the fence, appeasing all contributors, is never a healthy situation.

As you can imagine, there are pros and cons for both sides. On the monopolistic side of things, the telco would be confident of capturing customers and therefore generating ROI. The rollout would be notably faster due to the guarantee of customers, either through direct-to-consumer services or wholesale, but then there is a risk of another Openreach saga being reached.

Looking at all-out-competition, the consumer wins as there would be a heated battle on price and performance to capture revenues, but deployment will be much slower. Telcos would have to spread investment further over different regions, while also not having the same level of confidence in securing revenues.

There are of course other options, collaborative investments in networks is one which springs to mind, though we are not entirely confident in the telcos ability to place nice with each other. The Future Telecoms Infrastructure Review will provide more insight, but the government is staying suitably tight lipped there.

“We are a matter of weeks away from delivering the review, I have the unenviable task of telling you the government’s view without telling you the government’s view,” said Raj Kalia, CEO of BDUK, the government department responsible for overseeing the deployment of future-proofed infrastructure.

While there was very little of substance said at the conference, pertaining to the review that is, we got the impression the government will be leaning more towards the network sharing model. This will be the telecoms version of herding cats, but perhaps is one of the most sensible. Investment risk for the telcos is reduced, while there is still the opportunity to monetize. Depending on how the government intends to ‘stimulate’ deployment, there might still be an element of regionalised monopolies, but with multiple telcos contributing to the rollout, risk is reduced for the consumer on the other side of the coin.

One comment was directed towards the UK’s fantastic ability to conduct investigations and reviews, as a substitution for genuine action, but all eyes will be directed towards the Department of Digital, Culture, Media and Sport, as well as the much lauded Future Telecoms Infrastructure Review over the next couple of weeks.

The 5G race to deployment…. but is it optimized deployment?

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Chintan Fafadia, Director of Product Management, RF Solutions, PCTel, details some of the considerations that you should factor into your 5G deployment.

The promise of 5G is that it will usher in a new age of intelligent networking, encompassing both human communications and the Internet of Things. It’s a game changing technology but implementing it will push the wireless industry to higher levels of complexity in network deployment and management. The 3GPP (the standards body for 5G) defines three major applications for 5G, all of which have major implications for how 5G networks will be built and optimized:

  • Enhanced mobile broadband
  • Massive machine-type communications
  • Ultra-low latency

Achieving the intents of these applications will require upgrading the entire fronthaul and backhaul network. On the fronthaul part, the most challenging aspect of 5G from RF perspective is employing millimeter Wave (mmWave) frequencies to achieve higher capacity. The challenge with mmWave is that they have short range (200 m to 600 m), are affected by weather conditions, have very narrow beam widths and are directional. Industry trials and planned deployments currently focus on rolling out 5G both in existing sub 6 GHz bands (called FR1 bands in 5G nomenclature) and mmWave bands (called FR2 bands in 5G nomenclature) initially planned in the range of 24 GHz to 40 GHz.

Before we dive deeper into 5G and its proposed RF spectrum, it will be worthwhile to understand how the industry has evolved in terms of RF deployments and spectrum usage. First generation cellular networks were initially deployed globally on 850/900 MHz bands. As technologies progressed, newer bands at higher frequencies were identified for 2G and 3G rollouts, including 1700 – 2100 MHz bands. However, in the mid-2000s, this new higher-end spectrum was considered less desirable. The primary reason for this was that carriers were focused on coverage.

More recently, the focus has shifted to capacity. With the advent of LTE and the hockey stick curves in data requirements and utilization, the industry has struggled for more spectrum irrespective of its frequency range and propagation characteristics. In fact, spectrum ownership in the higher frequency ranges (>2000 MHz) is now considered an advantage for capacity requirements. Higher-frequency spectrum enables cell site densification because the radio waves do not travel as far, leading to reduced RF interference from nearby cell sites and these bands have wider bandwidths. Now, even higher-frequency spectrum in the mmWave frequency range is being pursued to meet the even greater data capacity demands of 5G applications.

Before deploying 5G in the 24-40 GHz mmWave band ranges, operators need to characterize the propagation profiles for these frequencies in the field. Such high frequencies can be highly susceptible to non-line-of-sight losses, body losses, losses encountered from moving objects like cars and buses, and foliage losses. Their characteristics will vary not only by the topology and the urban or rural environment but also by the construction material used in buildings in different areas of the world. Most operators are planning to deploy these technologies in highly dense urban environments or in-building environments as a capacity improvement tool or for use in fixed wireless deployments as the high-speed link for the last mile (or kilometer).

Accurately planning for these deployments will require wireless network design tools with propagation models that have been highly calibrated to numerous different conditions and are able to map the spectrum behavior for each one of them. These calibrations can be done using simulations. However, a higher level of accuracy requires highly accurate field measurements. These measurements are collected using highly calibrated tools like scanning receivers, which can collect data for multiple bands and technologies simultaneously. Accuracy in capturing these propagation profiles for use in 5G designs enables maximum usage of spectrum capacity, the most expensive asset of any mobile operator’s portfolio. Network quality is considered a leading cause of customer churn with a clear majority of cellular network issues coming from the fronthaul.  Consequently, improving network quality is a high priority which can result significant cost savings for operators in 5G deployments.

Another pre-deployment aspect to be considered for 5G is spectrum clearing. Whether the intended rollout is in the currently used sub-6 GHz bands (between 600MHz to 2.4GHz), in the newly proposed 3.5GHz to 4.9 GHz mid bands, or in the mmWave bands, operators will have to ensure clean spectrum on 5G frequencies before deployment. Test tools such as scanning receivers are extremely useful in such scenarios to cover multiple applications at the same time by collecting data for spectrum clearing along with model tuning needs.

While these are the challenges the operators will face before deploying a 5G network, the challenges they will need to overcome for optimizing their deployments will be even greater. 4G networks aren’t disappearing and will be around for at least another decade. 5G networks will be deployed either alongside existing 4G networks or on top of existing 4G networks, using multiple 5G Non-Stand Alone and Stand-Alone modes. These deployment scenarios, along with the plethora of options available for subcarrier spacing and channel bandwidths within the 5G bands, will all add to the complexity of 5G post deployment testing. In addition, there are many other aspects of 5G, including massive MIMO, fixed wireless access vs mobility, and numerous 5G applications, which we will cover in future posts. Stay tuned.

 

Meet PCTel and learn more about their solutions at 5G World 2018, taking place in London, 12 -14 June.