The coming era of next-generation broadband networks is bringing about the end of telecommunications operators' traditional deployment model, according to a new study of Booz & Company.
According to study operators are being forced to make tough choices, with consumers demanding evergreater bandwidth to support new applications and services and a larger variety of access network technology and rollout options, meaning substantial deployment costs. In addition, it said, 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 longterm 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.
"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," the study revealed.
"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," said 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."
"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," added Chady Smayra, senior associate at Booz & Company.
National governments are taking amore 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 rollout. It is therefore critical for operators to engage with regulators and policymakers in shaping the government intervention and regulatory framework that emerge.
"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.
"Because the overriding goal of national broadband plans is to facilitate future eco?nomic growth, governments will tend to favour technologies with a greater likelihood of long-term success. It is critical, therefore, that operators and governments work collectively on target setting to ensure a technology mix that is best suited to meeting capability as well as profitability requirements," said Smayra.
The NGA era promises to challenge operators that view the emerging range of broadband technologies and services as an extension of prior market offerings.
Customers expect a richer range of offerings in applications and services, as well as the networks to support them. Public policymakers increasingly demand a wider range of high-speed broadband coverage, especially in rural areas. Investors still expect reliable payback performance on infrastructure buildouts, even in a highly deregulated and competitive marketplace.
Operators will have to abandon their resistance to accommodating competitors in infrastructure access, as an effective NGA strategy will require operators to interact with the market on a wholesale and retail level at the same time. Business models will vary in different layers of the value chain, and operators' current vertical integration of these layers will diminish significantly, creating completely new business models, such as brokers of passive infrastructure. This period of change, while challenging, promises significant rewards to those operators that react strategically, quickly, and with enough force to create a lasting advantage.
By Mahmood Rafique
© Bahrain Tribune 2010
