Forecasting the 2018 telco landscape

Vision 2018

All media outlets love the last month of the year. We look back on the “highs and lows” of the last year, and predict what will happen during the next calendar year.

When it comes to telecommunications technology, this model breaks. We heard about 5G years ago, and were told back then we’d see it by 2020. Nowadays, we hear more about 5G, and are still told we’ll see it realized in about...2020.

This is a bit disingenuous, as 5G is an ecosystem and those take time to build and develop. But with all technology, there’s hype, and there’s failure. At the same time, there are small, often unheralded breakthroughs that prove their usefulness and become part of the landscape.

See Also

Vision 2018 Supplement Dec 2017
Vision 2018: yet more disruption in the telecoms

Predicting tech trends is a lot like roulette: who knows how fast the various forces are spinning, and where the ball is going to end up? Nowadays we connect our smartphones to our Wi-Fi networks and update our apps daily-a decade ago, we didn’t have smartphones and didn’t use apps for much of anything, let alone update them.

But look at those paradigm shifts over the last decade. Think the next decade will be any calmer? Think again.

So we asked some telco-savvy industry experts to give their opinion on the overhyped items of 2017, trends to look for in 2018, and what sort of surprise the industry might toss us in the coming year.

2017 Hype Child

NFV,” says Phil Marshall, CRO, Tolaga Research. “Throughout 2017 we were subjected to a litany of presentations touting the benefits of NFV, and while I agree that NFV is the way to go, I’m not convinced that there is a significant first-mover disadvantage which tends to get swept under the carpet.”

“In 2017, operators should have focused on the operational and organizational changes necessary to realize the benefits of virtualization,” says Marshall. “However, this has not happened, and until it does, NFV and particularly its management and orchestration will remain unnecessarily complicated.”

“Telco companies love to use buzzwords like AI, blockchain, and IoT without any real content to back it up,” says Jouko Ahvenanainen, executive chairman and co-founder, Grow VC Group. “Talk is cheap, but I would like to see more specific information. What do these firms really do to offer value to their customers?”

2017 Merger Mania

Mergers and acquisitions continue to proliferate in the telco space, and one analyst highlights a known disruptor whose 2017 buys indicate a pattern that may outline the future octopus-like profile of massive telcos.

Japanese tech giant SoftBank was in acquisition-frenzy mode in 2017, says Elizabeth Lim, senior analyst and research editor at Mergermarket. “SoftBank’s buys have been fairly representative of a market share grab taking place throughout the industry, and have ranged from medical testing start-ups to autonomous vehicle companies to AI and robotics firms,” she says.

As of Q3 2017, wrote Lim in a report, “[SoftBank] engaged in a record 27 transactions, more than 3x the number for the whole of [2016].” Deals closed in Q317 included “a $114m bid with Qualcomm Ventures for autonomous robot company Brain Corporation, and the full-on acquisition of US cyberdefense company Cybereason, among many others...most of SoftBank’s bids have been as part of various consortia-altogether, they have taken stakes in companies worth a combined $22b.”

2018 Success Story

“4G,” says Marshall. “While the industry beats the 5G drum, 4G is just hitting its stride for mobile broadband and other connected services like the IoT. While 2018 will be a great year for 4G adoption, I suspect that this success will be masked by 5G-noise and the seemingly endless array of 5G use-cases: use-cases that in large part could be handled with 4G technology.”

“I hope telcos focus on making their bitpipes faster, with better coverage, and pricing that’s simple and easy to follow,” says Ahvenanainen. “I can’t see what other things offer real value to customers. For example, data analytics and AI-does that really represent value to customers?”

NB-IoT will take off in 2018 and will be driven by China,” says Sherrie Huang, lead analyst and research program head, Analysys Mason. “China Telecom claims it achieved nationwide NB-IoT network coverage in May, while China Mobile and China Unicom continue to invest heavily in NB-IoT network deployment and business development,” says Huang. “Also the Chinese government regulator-the Ministry of Industry & Information Technology (MIIT)-announced policies and plans to promote NB-IoT standard for low-power, wide-area (LPWA) IoT services in June 2017”.

“IoT has been a hot topic in recent years, but for most of the telecom operators in emerging markets, network scale and business development are still in the early stages,” she says. “But this may change soon with LPWA standards, such as NB-IoT and LTE-M, maturing fast-and in 2018 the NB-IoT market will be driven by operator investments, vendor efforts and government policies. The large scale of IoT network deployments and the fast IoT business development in China will drive NB-IoT technology improvements, reduce device and equipment unit prices thanks to economies of scale, and encourage the development of the ecosystem.”  

“But while operators will see large NB-IoT networks and accompanying business scale-up, that won’t necessarily translate to sizable revenues for IoT connectivity services,” says Huang. “Filling in the gaps in IoT capabilities by in-house development, M&A, and partnerships will help telecom operators secure more influence across the IoT value chain and gain more revenue from IoT business.”

2018 Super Surprise

“The most positive surprise would be to make eSIM functionality,” says Ahvenanainen, referring to the soldered-in non-removable SIM cards that many feel represent the future: “eSIMs will make it as easy to buy a mobile subscription as connect to WiFi.”

“Better global roaming packages would also be a positive development,” says Ahvenanainen.

Ericsson will be acquired,” speculates Tolaga’s Marshall. “Predicting acquisitions is a dangerous sport, but worth considering in the case of Ericsson,” he says.

“There has been much speculation that Ericsson and Cisco might merge, which we believe would be a terrible idea,” says Marshall. “We believe that an acquisition needs to be more disruptive if it is to fuel Ericsson’s recovery. Other possible options: Ericsson goes private, or is acquired by a non-telecom player like ABB. As a long shot, perhaps Amazon-as it continues on its quest to disrupt the world’s legacy business models.”

“Another area that could see more deal-making in the near future is the SpaceTech industry,” says Mergermarket’s Lim. “Facebook has already said it is interested in building an “internet of the sky” to achieve scale while providing access to developing countries,” she says. “Further, growing cybersecurity concerns, intelligence needs, and navigational capabilities could spur more interest in companies that provide such services.”

“Finally, as companies like Amazon, Walmart, and Target continue to compete for customers and grow their market shares in the e-commerce and retail industries,” says Lim, “the logistics technology space could see an uptick in activity as businesses strive to deliver more efficiently to customers who are increasingly buying goods online. Tracking, delivery, and payment processing services could all be potential areas for investment.”

“Traditional telecom equipment/solution vendors may face an ‘over the cloud (OTC) challenge’ similar to telcos’ ‘OTT challenge’,” says Analysys Mason’s Huang. “Telcos found their traditional business model challenged by OTT service providers, who typically have non-telco background providing communication services over telco networks that supplanted the operators’ voice and messaging services.”

“But with network virtualization,” she says, “In the long run, the future telecom business model may change to that operators run a giant cloud platform and install applications from vendors over the cloud, and that’s how innovations gain traction. This will reduce the market entrance barrier for network equipment vendors and solution providers, as the need for huge capital expenditure and deep telecom network knowledge lessens.”

“Traditional telecom vendors will see challenges from small players and large incumbents from other markets such as software, IT and vertical industries, over the cloud,” says Huang. “As competition intensifies, telecom vendors may see falling margin level and declining revenues although major telecom vendors may still maintain their strengths in core functions during the foreseeable future. Collaboration within the ecosystem is one way for telecom vendors to reduce the impact.”

This article first appeared in Telecom Asia Vision 2018

 

About the author

Commentary

5G and data center-friendly network architectures

Matt Walker / MTN Consulting

Webscale and transmission network operators' interests are aligning as the 5G era dawns

Matt Walker / MTN Consulting

Webscale and transmission network operators' interests are aligning as the 5G era dawns

Rémy Pascal / Analysys Mason

The launch of 5G by South Korean operators serves as a first benchmark for other operators around the world