Telecom firms need to rethink strategy
Dubai, July 5, 2010
Telecoms operators are being forced to rethink their strategy and make tough choices, with consumers demanding ever-greater bandwidth to support new applications and services, a report said.
Now operators are compelled to adopt a larger variety of access network technology and roll-out options, meaning substantial deployment costs, according to the new report from Booz & Company, a reputed research firm.
In addition, regulators and public policymakers are becoming more involved in setting expectations for broadband deployment, which calls on operators to take an active role in shaping regulatory policy.
Operators’ strategies for building next-generation broadband networks will have to be carefully tailored. Ultimately, operators will need to develop a plan with the right targets, matching their strengths to their long-term ambitions, building partnerships to roll out infrastructure efficiently and de-emphasising or exiting areas where infrastructure operations are not likely to remain profitable. The transformation promises to be challenging, but inaction in the face of the industry’s major trends is not an option, the report said.
Today’s telecom operators are facing a critical moment in their development. The deployment of next-generation broadband networks has moved to the top of the agenda for countries around the world, as leaders recognise that next-generation access (NGA) is crucial to their economic and social development. Consumers, too, are demanding NGA to support a new wave of applications and services.
“To succeed in this environment, operators need to rethink which technologies they will use to compete, how those choices may differ by region and over time, and whether their chosen strategies will require new NGA deployment models,” commented Bahjat El-Darwiche, a partner at Booz & Company.
Operators need to realise that they will be able to compete in some areas and not others, and determine where to invest heavily and where to withdraw, when to outsource, when to partner and when to build from within, he stated.
Already, an increasing number of households and businesses require applications that demand greater amounts of bandwidth from their broadband connections, such as IPTV, Web conferencing and cloud computing. Currently, many of these next-gener¬ation applications and services are being offered by players other than telecom operators, such as Google, YouTube, and Facebook.
“Although operators are not likely to match all of the innovations of these application developers, they will need to build enabling services for such applications and coordinate closely with developers, as this will not only drive demand for NGA but also create new revenue streams that can support NGA deployments,” commented Chady Smayra, senior associate at Booz & Company.
In making decisions about technology, operators have two critical dimensions to consider. The first is the array of technology choices for NGA, each of which comes with advantages and disadvantages. The competition between greenfield fibre – which offers long-term reliability, latency and bandwidth capacity – and upgrades of existing cable and DSL – which offer significant cost advantages – dominates the debate over technological choices.
The second dimension for operators to consider in terms of technology is the population density and building structures of the area where they plan to build networks, as well as the customer penetration they are likely to achieve in that area. Successful operators will increasingly explore wholesale strategies and cooperative agreements to manage the risks associated with high up-front costs and uncertain returns.
National governments are taking a more active role in shaping the new broadband frameworks, due to NGA’s power to transform national economies by improving productivity, innovation, and economic competitiveness. Broadband is viewed as essential public infrastructure and can deliver advanced and interactive government services. Greater policy activity could take several forms, for example, stronger regulation or direct investment in the broadband roll-out. It is therefore critical for operators to engage with regulators and policymakers in shaping the government intervention and regulatory framework that emerge.
As operators develop an NGA strategy, they must sequence their decision-making into a three-part process: role definition, target setting, and management and execution.
“It is essential for all operators to determine on a case-by-case basis where they have the scale to compete and thus where they should invest. Of course, this step in strategy setting may reveal that certain network assets are unlikely to be worth retaining or improving. In those situations, operators will want to prepare for an outright sale of assets,” said El-Darwiche.
“Flexibility is critical in adapting to rapidly changing market realities. For instance, former competitors might be potential partners in a roll-out. Operators will need to assess the impact of new developments, such as institutional, policy, and regulatory shifts, on their business,” concluded Smayra.-TradeArabia News Service