Competition is a problem, removing Huawei could be disastrous – Vodafone CEO

With all eyes in directed towards Mobile World Congress this week, Vodafone CEO Nick Read took the opportunity to vent his frustrations.

Competition is unhealthy, accusations are factually suspect, protectionism is too aggressive, the trust with customers has been broken, collaboration is almost non-existent. From Read’s perspective, there are plenty of reasons the 5G era will be just of much of a struggle for the telcos as the 4G one.

And of course, it wouldn’t be a telco press conference if there wasn’t a reference to Huawei.

“I would like a new contract for the industry, I want to go out and build trust with consumers and businesses,” said Read. “This will require us to engage government and build the vision of a digital society together.”

Read has reiterated his point from the last quarterly earnings call, there needs to be more of a fact-based conversation around the Huawei saga. There is too much rhetoric, too much emotion, and perhaps, too much political influence.

Huawei is the punching bag right now, but any ban or heavy-handed response to US calls for aggressive action would be a consequence for everyone.

As Read points out, Huawei is a significant player in almost everyone’s supply chain, controlling roughly 28% of mobile infrastructure, while Nokia and Ericsson also have market share in the 20s. Removing one of these players from the market will further compound a problem which plagues the industry today; the supply chain is too concentrated around a small number of vendors.

There simply isn’t enough diversity to consider removing a key cog to European operations.

Of course, you have to consider the status quo. The US is happy to ban Huawei as it has never been a significant contributor to its infrastructure. Should the same ban be enforced in Europe, negotiations would be de-railed, and operations disrupted. Read suggests this would set 5G plans back by two years across the bloc.

The issue here is of confidence to invest. Why would telcos enter into deep negotiations when future conditions have not been set in stone. This is already evident in Vodafone’s decision to pause work on the core with Huawei; delaying these important initiatives could push Europe further behind global 5G leaders. Telcos need confidence, certainty and answers. The longer reviews go on, the more precarious the situation becomes.

This is one of the many challenges the industry is facing. There is an ‘us versus them’ mentality when it comes to telcos. Read is referencing the relationship with regulators and government, suggesting a lack of collaboration which is negatively impacting the ability to operate, but it is also evident in the relationship with the consumer and competitors. Collaboration is a key word here.

One example of collaboration is in the UK where the National Cybersecurity Centre effectively monitors Huawei equipment. This model could be rolled out across Europe, though Read’s stressed the point that there would have to be a harmonised approach. Fragmentation is the enemy here, and it would stifle progress. If there is a European level of monitoring, or even if it is taken down to nation states, it doesn’t actually matter as long as it is consistent.

The Huawei ban is set to become one of the talking points of this years’ MWC, that is not necessarily an idea anyone will be surprised about, but what we are not sure about is the disruption. Will it slow 5G development? Has the uncertainty already slowed 5G development? Will the anti-China rhetoric, dilly-dallying and confusion kill Europe’s ambitions in the global digital economy?

The Africa Conundrum: OTTs can’t be allowed to screw telcos again

The last decade has seen the rise of the OTTs at the expense of the telcos; if the Africa connectivity issue is going to be addressed, this is a trend which cannot be replicated.

If you head back to the 90s and early 00s, the telcos ruled the world. The mobile revolution was in full swing, with the telcos hoovering up cash through tariffs built on text messages and voice minutes. It was a glorious time, but then came the OTTs, and some would say the telcos felt a bit used and abused.

Nothing has changed over the last couple of years; the OTTs still enjoy a much more lenient regulatory environment allowing them to monetize data and services on a different scale to the telcos. This is unfair, after all the telcos have mountains of data waiting to transform into fortunes, but this isn’t the point we are getting at. The point here is much more basic; OTTs reap the rewards of the digital age without having to build the networks which facilitate it.

All over the world this is a relationship which ultimately screws the telcos. They spent billions on building the infrastructure, but the OTTs are the ones getting rich. It is the status quo which many operators have come to accept, however grudgingly. But it cannot happen in Africa, and there is one simple reason; incentive.

During the 90s and 00s, the telcos built the infrastructure and had an opportunity to monetize it. Years passed where we paid a fortune to the telcos for SMS messages and voice minutes, and then the OTTs came along. This might have destroyed the traditional telco business model, but at least they were given the opportunity to generate some ROI in the early days.

In many places on the African continent, the basic infrastructure is not there. This means there are greenfield projects without the promise of monetization; forking out the cash with the fear there might be a few OTTs out there just waiting to take advantage of your hard work and significant investment. If this trend continues in Africa, there is no incentive for the telcos to build the infrastructure in the first place.

“To tackle the infrastructure challenge, you have to go back to the root cause; it isn’t commercially viable,” said Charles Murito, the head Googler in Kenya.

Google seems to be one of the tech giants who are helping address the basic issue of connectivity. Across the continent, there are numerous projects where Google is contributing hard cash to roll out infrastructure. But there aren’t many other supporting voices from the OTT community.

During one of the panel sessions at AfricaCom this week, the topic of discussion was network sharing. It sounds like a good idea, one which has been floated in other regions as well, but there has been little evidence of it been taking beyond glorious promises so far.

One of the jobs of the government should be to encourage investment. In Africa, this is especially true considering the connectivity issues which the continent is facing. One of these responsibilities should be to create a regulatory environment which demonstrates to the telcos that there will be a ROI.

This is certainly easier said than done, but Airtel’s Purumedh Gupta highlighted this should come with cross-border infrastructure projects, the harmonization of SIM registrations, rural connectivity and the removal of fragmentation across the continent. In short, a consolidated effort.

Sometimes this will start with government funding into infrastructure projects. In this sense, it reduces the financial burden, but also provides the telcos with a  bit more security; there is confidence from the government behind these projects. It also creates an independent focal point for network sharing. Don’t forget, most of the time these telcos are fierce competitors; getting them to play nice is a tricky task.

Ultimately, the telcos need to see there is an opportunity to make money, which brings us back to our original point. The OTTs, who so readily benefit from connectivity, need to create a model where they assist the telcos. This could be from upfront investment in the infrastructure, like Google has done, or assurances there will be some sort of revenue sharing scheme moving forward. The connected economy could easily be known as the sharing economy; if the wealth is not dispersed throughout the ecosystem, it fails.

The OTTs have made billions off investments made by the telcos; that is the operating model of this fast growing segment. It might be a successful business in Europe, but it won’t work in Africa; the basic infrastructure is not in place, and it never will be if there is no incentive for the telcos. In short, the OTTs cannot be allowed to screw the telcos again.