Nokia acquires Elenion to boost optical offering

Nokia plans to acquire Elenion, a privately-owned technology company whose proprietary silicon photonics design platform can lower the ‘per bit’ cost for network operators.

Through its acquisition of Alcatel-Lucent in 2016, Nokia has become one of the biggest suppliers of optical transport solutions. In the latest quarterly and full-year results, the IP routing and optical businesses registered healthy growth. This newly announced transaction looks to be an attempt to acquire unique technology know-how. The parties claim that Elenion’s silicon photonics design platform can, with its design toolset, improve the efficiency of the optical supply chain, and in turn, bring down the cost of data transmission on per bit basis for the operators.

The technology know-how can be highly relevant to Nokia’s core mobile business as well. The terse announcement stresses that Elenion’s silicon photonics technologies are highly integrated, low-cost, and ideal for short-reach and high-performance optical interfaces. This indicates that the technologies can be broadly applied in the dense radio networks expected for 5G, as well as the enterprise market where Nokia has made strong gains recently.

“As a world-class provider of silicon photonics solutions, advanced packaging and custom design services, Elenion provides a strong strategic fit for Nokia. Its solutions can be readily integrated into Nokia’s product offerings and address multiple high growth segments including 5G, cloud and data center networking,” said Sam Bucci, Head of Optical Networking at Nokia. “When combined with Nokia, Elenion technologies will accelerate the growth and scale of Nokia’s optical networking business, while enabling us to cost-effectively address new markets.”

“Nokia is an industry leader in networking systems, including advanced coherent optical interfaces and hyperscale datacenter solutions. Elenion benefits by having its technology incorporated into an industry-leading portfolio and with a company offering solutions across a wide array of networking applications,” added Larry Schwerin, CEO of Elenion Technologies. “Nokia’s strong optical industry leadership, size, scale, global reach, and ongoing commitment to investment in key technologies vastly accelerates the adoption of Elenion silicon photonics technology.”

The value of the transaction is not disclosed, and the companies expect the deal to close in Q1 2020 after regulatory clearance.

Three to decouple traffic growth from price with CityFibre backhaul

CityFibre has been announced as the new preferred supplier for 5G backhaul for Three, as the telco aims to increase competition among its suppliers.

Three is the first major telco to be wooed by the CityFibre team, demonstrating the progress of the business over recent years. CityFibre should no-longer be considered a petulant disruptor in the connectivity world, but perhaps this is an indication the infrastructure challenger is a genuine contender.

“This is a huge vote of confidence in CityFibre from a national mobile operator with big plans for 5G,” said Greg Mesch, CEO at CityFibre. “Three’s decision to leverage our rapidly expanding networks nationwide shows the critical role full fibre infrastructure has to underpin 5G rollouts and reinforces CityFibre’s position as the UK’s third national digital infrastructure platform.”

“A competitive fibre backhaul market is critical for the fast and efficient rollout of 5G,” said Dave Dyson, CEO at Three UK. “CityFibre are aggressively rolling out fibre across Britain and our strategic partnership with them will use the UK’s largest 5G spectrum portfolio to deliver the fastest 5G network nationwide.”

As part of the agreement, CityFibre will connect the 5G sites which are set to go live in the coming months as Three launches its commercial 5G services. CityFibre will also provide Dark Fibre services to Three, and small cell access points throughout its city-wide networks, providing the local fibre capacity required to support 5G services in busy urban areas.

After talking to Three, this is an effort to future-proof it’s backhaul relationships against the growing tides of data consumption in today’s 4G environment and the forecasted 5G era.

The surge in data consumption has been regularly discussed in recent years, especially with the emergence of 5G, but it is important to remember this was an existing trend in the 4G era. As applications become more data intensive, telcos have had to bring down the price per GB to meet the demands of consumers. Three suggests traffic across its network could increase 20X thanks to 5G, but in 2010 the average consumer only used 269 MB of data per month.

As it stands, the price of data transmission is directly linked to the amount of traffic which flows across a network; the price per GB is fixed irrelevant of the volume of traffic. Three has said by diversifying its supplier base and increasing competition, the aim is to decouple price from traffic growth.

An oversimplification of this process would be to imagine economy of scale. The more of a service which is purchased, the price per unit decreases. The relationships which are in place moving forward are obviously much more complicated than this, though it does appear to be a case of Three attempting to ensure it is not backed into a corner with a single supplier holding the aces.

While this is a headline which has the potential to turn heads, diversification is a process which has been on-going within the Three business for some time.

BT Wholesale, a customer of Openreach, was the primary supplier of backhaul services for Three during the 4G era, though in recent years it has been unbundling BT exchanges for years. In July 2018, Three announced a major project to unbundle 177 BT exchanges with SSE Telecoms, while it has already been working with CityFibre to provide backhaul services in Hull.

The objective here is to have less of a reliance on a single supplier, BT Wholesale and Openreach as a result, and to improve diversification. It is working towards creating a more sustainable and healthy vendor ecosystem.

This is of course not the end for the Three/BT relationship. CityFibre can offer services in certain regions across the UK but not everywhere. SSE Telecoms will help fill the void, though there are locations where it is not commercially attractive for anyone to build out moving forward. These areas, where Openreach is the sole supplier, are subject to a price ceiling consultation from Ofcom.

With the likes of CityFibre and SSE Telecoms aggressively expanding networks, Openreach will certainly face tougher competition in the coming years. For decades, Openreach has maintained a defacto monopoly on backhaul services across the market, though the telco desire for reduced costs and resilience through supplier diversity does seem to be translating into fresh competition.

CityFibre network:

Virgin and BT start b*tching in Bristol

BT is running ads in Bristol dissing Virgin Media’s fibre offerings and Virgin is having none of it.

The BT poster campaign says ‘Bristol. Don’t settle for Virgin’, inferring its own fibre broadband offerings are superior (or at least more reliable). Pretty tame stuff, we thought, but it seems to have seriously triggered Virgin, which immediately mobilized its west-country operation to plan a counterattack.

It took the form of a large van driving around Bristol, with the following slogan emblazoned on the side: ‘B******T Our fastest average speed in Bristol is 516Mbps. That’s loads faster than BT. Enough said.’ Pretty edgy stuff, we think you’ll agree. The smallprint says BT can only manage a pedestrian 300 Mbps in Bristol. The asterisked-out initial statement seems to be deliberately ambiguous, inferring ‘bullshit’ but also the hashtag #bornfast. See what they did there?

“BT’s broadband bunkum just couldn’t go unchecked,” said Cilesta Van Doorn, Brand and Marketing Director at Virgin Media. “Residents of Bristol won’t be fooled by BT’s babble and we look forward to welcoming anyone who wants to experience life in the fast lane with our superior ultrafast speeds. With a reliable future-proof network that is bringing gigabit speeds to Bristol and more of the UK, Virgin Media is, as always, leading the charge – catch us if you can.”

Fighting words from Van Doorn there, who followed through with a press release about the whole unpleasantness, but we would have been more impressed if VM had gone all-in and actually written ‘bullshit’ on the van. Alternatively, if asterisks are mandatory, how about writing something like ‘BT are a bunch of lying b*stards and we’re not standing for any of their f*cking b*llocks anymore.’ That would have been cool, as would any attempt to exploit the cockney rhyming slang potential of Bristol.

Opening-up to investment is the key to unleashing Britain’s full-fibre potential

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Mikael Sandberg, Chairman of VXFIBER examines the UK investment environment for fibre roll-out.

‘Unleashing Britain’s Potential’ – the slogan we saw blazed across the Conservative 2019 election manifesto. A document full of pledges to make Britain the land of milk and honey, it showcases the many opportunities Britain can offer, putting it, amongst other things, as the best place to start and grow a business. After all, the UK government is on a mission to take back control and ensure that the country continues to tap into the fruitful ‘Digital Economy’- becoming a nation of start-ups and successful scale-ups.

But, as we are all fully aware, the vital ingredient to this success – full fibre broadband connectivity -currently comes in at a mere 10% in the UK. Meek in comparison to fibre penetration in other parts of Europe, and the world, it begs the question; is the UK – and will it continue to be – a leading digital nation after all? We may have, again according to the Tory manifesto, ‘more ‘unicorns’ – new billion-dollar tech companies –than any other nation in Europe’, but unless the connectivity infrastructure issue is addressed how long can and will this last?

Connecting Britain – ensuring that every citizen has access to high-speed internet – does seem to be a key priority for the UK government, sitting alongside other regional development programmes such as the promised Northern Powerhouse rail link and the Midlands Rail Hub. Boris Johnson himself stated (pre-leadership and General Election) that he wanted a turbo-charged broadband revolution, giving all UK businesses and homes access to full-fibre by 2025. This will only be possible once the UK installs its full-fibre network by replacing the current copper infrastructure, which is currently not fit to deliver the UK’s digital future. This means every premise – including homes, businesses and public buildings – needs to have fibre served directly to it, not to mention the necessary fibre infrastructure to support 5G networks and beyond. But, one of the major challenges that the UK faces in rolling out fibre is financing.

Pre-election – at the Tory Party Conference to be exact – the UK Chancellor Sajid Javid suggested that an additional £5 billion will be made available for connectivity upgrades, focusing on fast broadband access in harder-to-reach parts of the UK. And Ofcom’s recent four-point plan  is focused on tackling the remaining roadblocks to investment and supporting competition within the industry. However, we will now have to wait until March 11 to find out the exact figures that will make up the Chancellor’s ‘Infrastructure revolution’ post-Brexit Budget. And it begs the question – is there really enough money available from the public purse in order to make the necessary impact on our fibre penetration? And if not, where’s the money going to come from?

The government must continue to play its vital role as a catalyst for full-fibre deployment, and it has made positive steps via funding schemes as well as addressing policies/regulations that acted as a bottleneck in deployment (e.g. Barrier Busting Taskforce). However, due to the scale and the cost, it simply cannot do it on its own.  For the UK to achieve its ubiquitous full-fibre coverage target, there needs to be more collaboration and investment from both the public and private sector.  Support is needed from other sectors of society and perhaps those who potentially will gain profusely from the economic benefits connectivity brings.  Without third-party investment, it’s likely the original 2033 target will be missed by a mile, let alone Boris’ pipe dream of 2025.

Looking at the consumer, there is certainly more appetite.  This will be partly down to the customer being more educated on the different connectivity options.  Ofcom rules killing off dubious and misleading fibre claims from ISPs and the price of fibre connectivity dropping in recent years.  And thanks to increased demand from the consumer, the UK fibre landscape is looking like a more attractive investment.  Securing additional funds from third-parties is becoming a critical component of the mix.  Opening-up third-party investment opportunities will help back much needed fibre-to-the-premises (FTTP) roll-out in cities and regions across the country.

The UK telecoms and internet market is highly competitive in nature, and by regulatory standards, is “open”.  This makes it conducive to attracting third-party investment along different stages of the value chain. However, it’s important to note that there are many different business models that exist within the “open access networks” space.  As the very nature of this definition enables confusing references to be made to the traditional/incumbent vertically integrated model, to be termed “open access”. The term “open access” implies a resource that is made available to clients, other than the owner, on fair and non-discriminatory terms.

In the context of telecommunications networks, “open access” typically means the access granted to multiple service providers to wholesale services in the local access network. This enables them to reach the subscriber without the need to deploy a new fibre access network. There are a number of business models that exist depending on which role the different stakeholders’ take-up.  But one thing is for sure, aside from lowering the costs for service providers, open access can deliver what end-users want: choice of providers, choice of services, competitive pricing and high performance.

This shift in approach means that up to date and innovative fibre infrastructure is no longer really about telecommunications. Instead, it is about digital connectivity. By taking the telco operator out of the equation, investments can be made into the infrastructure. In fact, with this type of model, gigabit full-fibre becomes a strategic asset that real estate companies and municipalities should consider, along with bricks and mortar or other physical investments. It’s an approach that’s enabled the fast rollout of full-fibre connectivity in countries such as Sweden and South Africa. In both countries, investment is made directly into infrastructure projects, bypassing the corporate/incumbent telco entity, and enabling more money to flow through the system because of better penetration.

Indeed, by adopting this type of approach to broadband connectivity, investment will open-up individual regional or local digital infrastructure projects to multiple external investors and power Britain’s race to deliver universal high-speed broadband. This presents a huge and scalable opportunity and could even open-up a more sustainable territory for private investors.

If we start looking at fibre assets as infrastructure in its own right, it becomes apparent just how much opportunity there is for investment across the entire country. And whilst we might have an incredibly challenging objective of achieving universal fibre connectivity in the UK by 2033 (or 2025), perhaps it’s collaboration between the government, the industry and the investor community who will help us get there, or certainly bring us a lot closer to achieving our digital destiny.

After all, the economic (regeneration, innovation and business growth) and socio-economic benefits (access to healthcare, education and better delivery of public services) that internet access brings cannot be denied. So, bring on the UK government’s promised investment in technology and innovation, and its pledge of giving us one of the most important tools to flourish in the economy of the 21st century – full-fibre connectivity. But maybe to get there it needs just a little help from its friends – the third-party investment community.

 

Mikael Sandberg is co-founder and Chairman of VXFiber.  He is a serial entrepreneur in the telecom and broadband industry. Previously Mikael co-founded and managed two major broadband companies in Sweden. Prior to his operational roles, Mikael worked as a telecoms analyst in the City; management consultant with Analysys Mason and Arthur D. Little; and as Assistant Science Attaché at the Swedish Embassy in London. Mikael is a Swedish citizen living in the UK, and holds an MSc in Industrial Engineering and Management from Chalmers University of Technology, Gothenburg, Sweden and an MBA from School of Management, University of Bath, UK.

CityFibre buys FibreNation from debt-laden TalkTalk for £200 million

CityFibre has announced it will acquire FibreNation from TalkTalk for £200 million, as the latter has struggled to source funds to help it meet the three million FTTH connections it targeted.

As part of the deal, TalkTalk will become a wholesale customer across both consumer and business markets. Work has already begun on the full-fibre network, offering services to more than 100,000 premises in York and Dewsbury, and even with projects set to break ground in Harrogate, Knaresborough and Ripon, reaching the 3 million objective was becoming more difficult to imagine.

With cash-rich backers in the form of Goldman Sachs, CityFibre can more realistically deliver on these promises. The firm has upped its target to 8 million FTTH homes-passed by 2025, up from 5 million.

“Today’s announcement establishes CityFibre as the UK’s third national digital infrastructure platform allowing millions more consumers and businesses to benefit from access to faster, more reliable services,” said CityFibre CEO Greg Mesch.

“The UK is a service-based economy, and this runs best on full fibre. Ensuring national coverage is critical and this can only be achieved by driving infrastructure competition at scale. This deal demonstrates the appetite from industry to see it established.”

Rumours of this transaction has been swirling through the industry for some time now, though it appears the talks were put on hold following the free-broadband-for-all pledge made by the Labour party ahead of last months’ General Election. Nationalisation of Openreach would certainly undermine investment decisions, though the duo now believe the deal should be complete by March.

For CityFibre, this is a page from the playbook of old. This is a firm which was founded after purchasing and merging several, independent distressed financial assets.

FibreNation was founded in 2018 as an independent company to deliver the TalkTalk fibre rollout strategy. Under the leadership of CEO Tristia Harrison, TalkTalk has evolved into a much more combative telco, attempting to disrupt the connectivity status quo and regularly criticising its more established rivals. Harrison’s management and PR approach seems very similar to CityFibre CEO Greg Mesch.

Taking advantage of the enthusiasm in fibre-connectivity, TalkTalk set out an ambitious target of reaching 3 million homes with full-fibre broadband by 2025. However, attracting investment from third-parties soon appeared to be the only means by which this could be done. This is where TalkTalk has struggled in recent months.

Infrastructure investor InfraCaptial, part of the M&G Group, looked to be the most likely candidate to foot the £1.5 billion bill, though talks fell through. Reports suggest InfraCaptial did not value an 80% stake in FibreNation in the same way as TalkTalk. Since that point, TalkTalk has been in discussions with the likes of iCon and Macquarie, though it seems CityFibre was the best option.

While TalkTalk will become the anchor tenant for the network as it is being deployed, this is far from best-case scenario. TalkTalk has said the funds will be used to ‘strengthen the balance sheet’, which could mean numerous things, though as the team reported net debt of £1.041 billion during the last earnings call, it would be fair to assume it will be used to reduce the burden.

For CityFibre, this is a win. The company was founded by collecting distressed fibre assets and merging into a single entity, and it has spoken about doing the same to fuel growth in the future.

CityFibre has ambitions to challenge the likes of Openreach and Virgin Media on a nationwide, scaled basis, though the number of ‘alt-nets’ is creating a fragmented competitive landscape. This is good for the consumer, as price wars will emerge, though it is not sustainable for the industry. However, if you have a cash-rich parent-company like CityFibre, it is a waiting game; smaller fibre companies will become financially stressed, presenting good value for network growth by acquisition.

Adding FibreNation’s assets into the mix, CityFibre will soon have a fibre footprint in more than 100 towns and cities outside of London. It is quickly achieving the scaled vision the management team have often spoken about and will soon become a much more viable rival to the Openreach wholesale business.

As a result of the agreement with TalkTalk, CityFibre has also had to restructure its partnership with Vodafone. The original agreement offered exclusivity for Vodafone to deliver fibre services for the time which networks were being deployed in each city, though the new agreement offers Vodafone 12-month exclusive basis as homes become available for service in each of the 12 towns and cities covered in phase one of the deployment. CityFibre will now be free to discuss terms with other ISPs.

With Vodafone and TalkTalk confirmed customers of CityFibre, and rumours swirling that it might be about to poach Sky from Openreach, the firm is adding commercial credibility to an extensive bank account. It does appear CityFibre is evolving from the moany, thorn in the side it was a few years back, to a genuine, nationwide alternative to Openreach.

UK government resists establishment appointment for Ofcom boss

The newly-elected Tory government is reportedly pushing back on Ofcom’s desire to give its top job to another member of the UK establishment.

Departed CEO Sharon White was a senior civil servant before she got the gig a few years ago and now that she’s moving on the opportunity exists to bring a different approach to regulating the UK communications sector. Late last year it was reported that Ofcom wanted another civil servant and apparent ‘safe pair of hands’ Melanie Dawes to get the gig, but the requisite approval from the government has not been forthcoming.

Now the Telegraph reports that the reason for this is the desire of the new administration to get someone who might actually know a thing or two about the telecoms business to run its telecoms regulator. The Johnson government is said to be very keen to shake up the permanent political establishment, with top adviser apparently very keen to have more people with skills other than climbing the political career ladder in key roles.

The report claims the government is going direct to industry to try to persuade grizzled, entrepreneurial types that becoming a regulator is more exciting than it sounds. One of the more fun bits may involve harassing the BBC, which today announced the departure of its Director General to enable a new one to get fully warmed up before they have to start justifying the license fee in a few years’ time.

The Telegraph spoke to a few anonymous industry folk who said they had been approached about the role, but didn’t fancy it because it takes so long to get anything done in the public sector and they reckoned the role would become politicised. It’s hard to argue against that perspective, when you add the intensely political climate around 5G and fibre to the BBC stuff. Finding an industry figure who it competent and driven, but also able to play politics won’t be easy, but it’s good to see a willingness to wait for the right person.

Openreach decides to connect more new builds on the house

UK fixed line infrastructure provider Openreach will now offer to connect new houses to full fibre for free on developments of 20 plots or more.

The previous threshold for freeness was 30, so that means at the current rate of building that an additional 13,000 new premises will get their fibre on the house, so to speak. Openreach says 99 percent of houses built that were eligible for this free service used it. Since the launch of its new build scheme in 2016 Openreach has connected 354,000 new homes with full fibre, implying the vast majority of builds are part of larger developments.

“We hope these new measures will provide the necessary incentive for housebuilders to adopt this future-proof technology across smaller developments so that no-one’s left behind,” said Kim Mears, MD of Strategic Infrastructure Development at Openreach. “We welcome the government’s intention – outlined in the Queen’s Speech – to amend legislation so that all new build homes are required to have the infrastructure to support gigabit-capable connections, and we will work closely with government and housebuilders on how best to deliver this.”

“The customer of today expects, in line with other utility suppliers to be provided with fast, reliable, uninterrupted service upon receiving the keys to their new home,” said Kieran Walker, Technical Director for the Home Builders Federation. “This further step improvement will assist housebuilders in ensuring their customers overall journey is positive one.

As you can see from the table below, Openreach has also lowered what it charges for 2-3 plot builds but compensated by raising the price for 4-9 plot builds. As ever Openreach is keen to stress how on-board with the government’s fibre ambitions it is and cites this move as further evidence of that. Now what about connecting those houses that have already been built too?

Ofcom promises to ‘supercharge’ fibre with four-point plan

Telecoms regulator Ofcom has proposed a four-point plan to accelerate investment in fibre networks at interest continues to gather momentum in the UK.

In what could turn out to be a catalyst to gather further momentum in the market, Ofcom has revealed a four-point plan to accelerate deployment. Interest in fibre connectivity has certainly increased across the country, though BT and Openreach have called for regulatory reform to further aid aggressive deployment plans. The plan is now open for consultation, with Ofcom set to publish its decision in early 2021 before the current rules expire in April 2021.

Firstly, caps will be placed on wholesale prices to encourage competition from new networks. Secondly, Openreach will be prevented from applying drastic discounts which could stifle competition. More flexibility will be offered in the rural regions to encourage investment however, and finally, Ofcom will deregulate Openreach’s copper products in areas where full fibre is built to help Openreach retire the network.

“These plans will help fuel a full-fibre future for the whole country,” said Jonathan Oxley, Ofcom Interim Chief Executive. “We’re removing the remaining roadblocks to investment and supporting competition, so companies can build the networks that will drive the UK into the digital fast lane.

“Full-fibre broadband is much faster and more reliable. It’s vital that people and businesses everywhere – whether in rural areas, smaller towns or cities – can enjoy these benefits. So, we’re making sure companies have the right incentives to accelerate full fibre to every part of the UK.”

Compared to other nations across the European bloc, the UK is in somewhat of sluggish position. Pointing the finger towards investments in G.Fast broadband upgrades as opposed to the more expensive, but longer-view, fibre products has generally been accepted as the main reason. According to OECD estimates, only 1.92% of total broadband connections in the UK are fibre, which leaves the state in a comparatively unattractive position.

Fibre connections as a percentage of total broadband connections
Country 2018 2016
UK 1.92 0.8
Germany 3.18 1.8
France 16.5 7.8
Poland 20.49 8.2
Portugal 45.2 32.3
Sweden 66.94 55.2

OECD Broadband statistics

“Today’s proposals appear to be a big step in the right direction to give clarity and investment certainty,” an Openreach spokesperson said. “Like the Government and Ofcom, we want to upgrade the UK to faster, more reliable full fibre broadband. We’re getting on with the job, building to 26,000 premises each week and we remain on track to reach 4m homes and businesses by the end of March 2021.

“We’ll consider the range of proposals carefully and will continue to work with Ofcom and industry on getting the conditions right to help achieve the Government’s ambition of rolling out gigabit capable broadband across the UK as soon as possible.”

Although some might question the need for such speed, it won’t be too long before applications emerge which drive data usage through the roof. Let’s not forget, in 2010 average fixed broadband speeds were 5.2 Mbps, satisfactory at the time but horrifying for the consumer of today. Average speeds in 2019 were 22.37 Mbps and it will not be long before these are considered below par.

Aside from speed, it is also worth noting that fibre broadband connectivity also offers a very useful boost to reliability.

“It’s good to see Ofcom using its powers as a regulator to stimulate competition, drive investment and improve outcomes for consumers,” said Ed Dodman, Director of Regulatory Affairs at Ombudsman Services.

“Many of the broadband complaints we handle from consumers and small businesses are to do with issues around speed and reliability, so we support proposals that will lead to improvements in these areas across the UK.”

Although the OECD statistics do not paint the prettiest of connectivity pictures in the UK, momentum has been shifting in the right direction.

From a political perspective, the idea of gigabit speed broadband has taken hold. It might turn out to be nothing more than empty campaign promises, but it has raised the issue of fibre connectivity and the digital divide to the national conversation.

Looking at the consumer, there is certainly more appetite. This will be partly down to the consumer being more educated on the different connectivity options, Ofcom rules killing off dubious and misleading fibre claims from ISPs and the price of fibre connectivity dropping in recent years.

And thanks to increased demand from the consumer, the UK fibre landscape is looking like a more attractive investment. Goldman Sachs purchasing CityFibre is evidence of this, but other financial players are becoming increasing interested in communications infrastructure as a long-term investment. Securing additional funds from third-parties is becoming a critical component of the mix, especially with more alt-nets appearing.

In the short-term, the emergence of ‘alt-nets’ should only be viewed as a good thing. More providers will create more value for the consumer through increased competition and providing the telcos incentive to invest in fibre. However, you have to wonder whether the number of alt-nets in the UK is sustainable in the long-run.

The more providers there are, the more fragmented a market becomes. Fragmentation is the enemy of scale, making it more difficult to aggressively pursue expensive investments. There is of course a risk of over-build in certain markets, though the presence of these alt-nets creates an interesting M&A future for the UK.

CityFibre is a primary example of what happens when a market becomes too fragmented. This is a company which only exists because it was able to acquire several distressed fibre players and merge them into a single business. Some ambitious and cash-rich parties might look at the potentially fragmented market in the UK as another opportunity to consolidate and create another scaled player at some point in the future.

Although this move should not be considered the silver bullet from Ofcom, it is certainly very encouraging. The UK telecoms industry has been calling for regulatory reform for some time in pursuit of greater levels of certainty as well as a more favourable investment climate in the UK.

What we have here is an excellent example of collaboration. For the digital society of tomorrow to be more than a pipe dream, industry will have to come together with the investment community and Government, presenting a united front. This proposal is perhaps evidence the rhetoric is perhaps evolving into reality.

Industry offers a bunch of telecoms predictions for 2020

It wouldn’t be the last working day of the year without the good old predictions piece so here are a bunch we got together from assorted telecoms industry luminaries. It should be noted that 2020 is also the year in which all predictions pieces will have to find a new metaphor/play-on-words for being able to see into the future, which will be tough for everyone.

Reality bites

My key prediction is that 2020 will be the year realism finally hits. After years of hoping that 5G will miraculously lead to increased profit for the equipment providers and mobile operators, in 2020 it will be increasingly clear to investors that this is not going to be so and indeed it might actually reduce profits. Altnets will have to start demonstrating they can deploy fibre networks at scale and at a speed to match incumbents, and many will be found lacking. Quite how realism will manifest itself is hard to know. Keep an eye on those share prices and stay away from the Kool-Aid.

William Webb, Telecoms Consultant.

 

Fibre stimulation and content aggregation

Fibre build will be stimulated but the valuation of fibre businesses has so limited the investment players that the price of fibre companies has topped out and we’ll see consolidations. The stimulation of fibre means that 5G in new areas will become more possible, and SMEs and local initiatives will use it to do things the MNOs haven’t thought of or didn’t think of as profitable. The amount of roads being dug for fibre on top of all the other utility digs will bring all of London, Manchester and Birmingham traffic to a standstill at least once, hopefully not simultaneously.

TV content aggregation will become a key battleground as the myriad of service and bundling options (Britbox, Now, AppleTV, Amazon, Netflix, Disney, etc etc) starts to drive viewers round the bend and into bankruptcy.  This means smart rights owners will start to disaggregate their content on the basis of micropurchases per episode, maybe even per view and the provider of the best EPG may well be able to own the viewer and a portion of their data and advertising revenues without needing to spend billions on content.

Ros Singleton, UK5G Chair

 

Consumers will say “meh” to 5G

Much of 5G marketing is as we might expect it to be. One operator is hyping it as offering speed “like you’ve never seen before”, with an “instant connection” to the content you love most. Another touts “ultra-fast speeds and ultra-low latency”. But the reality is that the main benefits of 5G are complex and not best communicated with such simple messages. In fact, to date, there’s no real evidence that consumers are terribly interested in 5G, and the current rhetoric claiming that the technology is offers faster speeds than ever before is unlikely to change that. Instead, we’ll see operators focus on enterprise customers as early adopters of the technology, and rather than emphasising the speed of 5G, we’re likely to see marketing focus on 5G benefits for specific use cases.

Gavin Hayhurst, Product Marketing Lead, TEOCO

 

A move to speed-based pricing for mobile

The fact that operators aren’t charging a premium for 5G services currently does not mean they can’t in future. The fixed broadband world has offered speed-based pricing for some time and it stands to reason that mobile operators will continue to follow suit. 5G enhanced mobile broadband does offer considerable improvements in network speeds and capacity and consumers are increasingly used to paying more for the best connectivity. Industry analyst group, CCS Insight, predicts that most 5G operators will move to speed-based pricing by 2021. This will be especially true of operators looking to offer converged mobile broadband and fixed wireless access connectivity in a 5G age.

Niall Norton, CEO, Openet

 

The rise of the private network

There will be a rise of 5G private networks in the next 2 years in many cases with involvement of operators. A private 5G network is a local area network (LAN) that will use 5G technology to build and create a network. The network thus created is expected to carry along all the features of 5G network including reduced latency and higher speeds. Private networks for enterprises will be the most direct option for large businesses that want to benefit from 5G capabilities. However these networks may be offered by CSPs or directly by infrastructure and cloud and other software vendors.  Businesses, especially those involved in manufacturing and other industries, are looking forward to using private 5G networks to get high-level granular views on their sales and operations. Operations and monetization of these networks will be key to success of these networks.

Ari Banerjee, VP of Strategy at Netcracker

 

Telcos fully evolve their focus from NFV to cloud native

Regardless of the number of public cloud partnership announcements we continue to see, operators will continue to heavily invest their resources into evolving to cloud native principles. This includes the shift from VNFs to CNFs irrespective of the choice to leverage public cloud platforms or not. This shift and investment to cloud native is what will enable dynamic network capabilities, and massively streamline the cost and time to market for digital services. So, there will be less hype around ‘cloud’ itself, and much greater focus on cloud native evolution happening inside the carriers’ data centers.

Jennifer Kyriakakis, Co-founder and VP, Marketing, MATRIXX Software

 

eSIM devices and 5G to stimulate the launch of pure digital parallel brand businesses

 The pressure for moving faster to digital, automated businesses and turning new technologies like eSIM and 5G services into tangible consumer propositions will further drive operators to launch parallel brand propositions. There will be a fully focused mission to deliver excellence in digital self-care, without the constraints of legacy BSS systems and old business processes.

Jukka Heiska, VP Business Development, Qvantel

 

Let’s learn to play nice again

Policymakers should work to build a consensus with industries, businesses and other nations to reinforce the principles of free trade and rejuvenate the global trading system. Tariff barriers have reduced global commerce and international co-operation and this has had an indirect and damaging impact on cyber security. Policy makers and business should come together to reinvigorate the global trading system and agree strong, new cyber security rules that apply to all – supported by robust monitoring mechanisms that help build confidence.

Victor Zhang, President, Global Government Affairs, Huawei

 

5G indoor coverage will gather momentum

In 2020, building owners will request that current wireless coverage systems be easily upgradeable to 5G. This offers the perfect, cost-effective solution. Venue owners and operators want longevity and ROI for purchases; what they don’t want is to have to buy a whole new system in a year or two, as demand for 5G in-building coverage grows. From a technical standpoint, upgrading platforms to 5G will mean wider frequency bands (e.g. 400MHz in band 3.5). I expect 3.5GHz to be in most indoor environments, however, this will not increase coverage: 3.5GHz is all about boosting capacity.

Info Flomer, VP Business Development and Technology, Cobham Wireless

 

Innovation in spectrum will enable the rise of new 5G players

5G will see new, disruptive players entering the market in smart cities, IoT devices and private networks. All these new players will also require spectrum, driving innovation in regulation and allocation. Multiple countries, including the USA, Japan, Germany and the UK are already regulating bands of spectrums to be available through shared and priority access, and to be dedicated to enterprise applications. But in 2020, as 5G begins to takes hold, this will encourage innovation, disruption, and competition in that market. Traditional CSPs will evolve to open cloud networks, network sharing, network slicing and new spectrum to attain the cost structures, agility and innovation to compete in 5G.

Angela Logothetis, CTO of Amdocs Open Network

 

Huawei, Nokia and Ericsson will lose out to open-minded vendors

As we enter the 5G era, the traditional, closed model for building the RAN is no longer sustainable. In developed markets, the race to deliver 5G is in full swing and operators are spending considerable amounts building out their next generation networks. They need a new approach that will allow them to deploy and cost-effectively run 5G technology efficiently alongside their 2G, 3G an 4G networks. 2019 saw significant moves towards OpenRAN, illustrated by Vodafone’s announcement that it would be opening its entire RAN in Europe to OpenRAN vendors during TIP Summit. In 2020, the momentum behind OpenRAN will continue to grow as other operators realise it can help them reduce costs, drive more competition between technology vendors, and stimulate higher levels of innovation in the industry.

Steve Papa, CEO at Parallel Wireless

 

Cloud partnerships and super-aggregation

I think the recent partnerships between cloud computing behemoths and network operators – Amazon and Verizon and AT&T and Microsoft being particularly notable – will accelerate innovation applicable to the full spectrum of cloud-dependent services and applications, more effectively supporting latency-sensitive use cases than ever before. We’ve been speculating about 5G use cases for some time and these edge-computing-enabled 5G networks will offer the first large scale environments in which to test, prove and deploy the wild innovations which will eventually define the 5G era. They also pose some interesting questions around the how value chains will form around the use cases which eventually scale.

CSPs who integrate the most popular video services into a single aggregated platform – offering federated capabilities such as payments and billing, search and recommendation, ad sales and targeting, subscriber retention, video data distribution, audience data analytics, etc, to all partnered video services – will offer a better UX and achieve better retention and usage rates compared to offering them separately. Integrating Netflix into a partner’s UI, billing system and bundling strategy has been commonplace for a while and we’d expect that to extend to more and more services. One CSP described it to me as “operating the mall, not the shop” but because Analysts need to give fancy names to things to charge more to talk about them, we call it “super-aggregation”.

Ed Barton, Chief Analyst, Entertainment at Ovum

 

The Balkanisation of the business world

There’s no way US President Donald Trump, who seems likely to be re-elected in 2020, and Chinese Premier Xi Jinping, who has dispensed with the inconvenience of elections entirely, will give any ground to each other in the foreseeable future. As a consequence the trend established this year for waging a cold war via trade and business will continue. Chinese telecoms giant Huawei was the focus of this activity in 2019 and it will be joined by others from both countries, with companies becoming bundled in with trade tariffs as the great global pissing competition escalates. China is already moving towards national self-reliance in PCs and other industries are bound to follow. The US will reciprocate and regions such as Europe will increasingly be asked to pick a team. 2020 may mark the high-water mark for globalisation as China and the US increasingly seek to become self-reliant in order to deprive each other of chips to use in the great geopolitical game.

Scott Bicheno, Telecoms.com Editor

BT streamlining continues with sale of Spanish managed services

UK telecoms group BT is in the middle of a major streamlining operation and the latest casualty is its Spanish managed ICT services business.

The business is part of BT’s Global Services unit, which is the main focus of the current restructuring programme. Earlier this year BT raised around €100 million by flogging some Dutch infrastructure and this Spanish operation includes some infrastructure too. It’s being snapped up by Portobello Capital as private equity continues to show increased interest in telecoms infrastructure.

“Today’s announcement is another key milestone in the execution of our strategy to make Global a more agile and customer focused business,” said Bas Burger, CEO of BT Global. “The transaction is great for BT, for our people and for our customers. Through agreements with the Spanish business, it provides continuity to both our multinational and local customers. It also enables us to focus on what we do best: providing secure connectivity and digital solutions to multinational companies globally.”

“We are very pleased to invest in one of the leading providers of managed telecommunications services to the corporate market in Spain,” said Luis Peñarrocha, a founding partner of Portobello Capital. “We look forward to continued investment in the development of the business for the benefit of new and existing customers in the region.”

The price of the transaction wasn’t disclosed, but the business turns over nearly a quarter of a billion pounds a year so we must be talking serious cash. Assets in the transaction include a 5,600 km owned and leased optical fibre network, fully owned city fibre networks in Barcelona and Madrid and three data centres.