BuddeBlog

The discussion that is taking place about the trans-sectoral use of broadband is gaining momentum and many countries are now asking themselves serious questions about the future of their telecoms sector.

Until recently governments were convinced that they could separate themselves from the telecoms sector, and the key policies were focused on deregulation and privatisation. During the last few decades, however, this course reduced telecoms to the status of a commercial sector. Governments have accepted the priority placed by telcos on the interest of their shareholders and failed to understand the importance of telecoms as national infrastructure.

The Internet was a major ingredient in changing the direction of telecoms, particularly when broadband was added to the mix. In no time Internet and broadband penetration went through the roof, a clear indication that people were extremely interested in using these new technologies. More and more countries began to recognise the social and economic importance of this infrastructure. Political pressure started to emerge, aimed at governments in countries that were lagging behind in broadband infrastructure.

But many countries are now uncertain about how to proceed. They all understand the importance of telecommunications but are reluctant to resume a connection with this sector. In a new report Global Telecommunications – Industry Transformation – How to move forward? I examine here how the present situation came about, and unravels the various elements involved. It concludes by re-assembling the pieces of the puzzle and exploring ways to move forward.

Key elements that have led to the current situation include:

• Despite deregulation and competition the telecoms infrastructure largely remains a natural monopoly
• Market deregulation has delivered positive results but the dominant players from before that period are as dominant now as they were before.
• Regulation has not deliver the competition governments expected
• Deregulation and privatisation work against each other
• Telco’s income still come for 80-90% from basic (utilities based) services, telcos have failed to move higher up into the value added chain. However, these utilities services are priced at premium rates.
• Technology points towards fibre. Mobile broadband will develop in parallel.
• Awareness is increasing that broadband infrastructure will need to be used for e-health, e-education, smart grids, etc.

Based on the above I would draw the following strategic conclusions:

• Current regulatory regimes have not, or have only partially, delivered what they were intended for. They do not provide the necessary incentives for the changes that are needed.
• Despite decades of trialing other business models the incumbent telcos generally continue to be utilities-based operators, and as such telecoms infrastructure largely remains a utilities-based national monopoly.
• Fixed broadband will be critical economic and social infrastructure backbone for any country.
• Fixed infrastructure technology is pointing towards fibre.
• Some kind of trans-sector development will take place and the economic and social benefits from this will be substantial.
• Competition in itself should not be the only goal of regulation – a combination of competition and regulation can also deliver effective outcomes

We can be skeptical about how we get there; about how soon we need to be there; about how much this is going to cost; about who will pay for what; and so on, but I have not encountered many who fundamentally disagree with these broad conclusions.

What we need is leadership, from both politicians and the industry – an acceptance of the overall longer-term common goals and a willingness to sit down and work out the best way for each country to develop a national plan on how to achieve them. In other words, start with the vision first (where I believe industries and governments share common ground). Don’t start with the details of where, what, when and how. Let’s agree on the vision first and then together sort out the details in relevant implementation plans, using the many financial, economic, technology and business experts to create the right models for this.

It is most encouraging to see the unprecedented level of cooperation (including Telstra) that now exists in Australia in working through the enormous volume of detail that is required for the implementation plan. If we had started talking details first we would never have got to where we are now.

Having a vision first also allows for unexpected developments. It is impossible to look five or ten years into the future, but with a vision in place it is much easier to make any adjustments that might become necessary as a result of future developments. We need to have the flexibility built in to shift goals on an as-needed basis.

There is also no silver bullet available for reaching the broad goals laid out in the vision. Some cultures favour elements such as liberty and freedom from the state; others prefer a collaborative and negotiated approach. However most agree that government leadership is needed – both in situations where private funding is the preferred solution and in those where public funding is pursued. Perhaps the best in-between option is that of Public Private Partnerships.

And so, it is futile to begin working on the details without first establishing a vision. Interestingly, however, due to the universal nature of the broadband trans-sector concept, even countries that lack a well-articulated vision and strategy will eventually end up with roughly similar models, by default. One could ask ‘why bother?’ if it will eventually happen anyway, but I think that a well-defined national strategy is going to make the difference between economies and societies that will be successful in 2050 and those that will have fallen behind by that time.

Paul Budde

For more info see: Global Telecommunications – Industry Transformation – How to move forward?

As the EC strives to reduce its dependence on fossil fuels, the increasing penetration of renewables in Europe’s energy supply has led to a number of research projects to assess how generators monitor power quality and reliability. The SmartGrids Technology Platform (set up in 2005) is one of four bodies which developed a Strategic Research Agenda (SRA) as a resource for European and national programmes. The SRA initially aimed to develop an interoperable European smart grid which would also have matched the EC’s January 2008 Climate Action directive, targeting a 20% renewable energy across the EU by 2020, a 10% minimum market share of biofuels, and a 30% cut in emissions. This has been superseded by an initiative to utilise 90% renewable energy by 2050 (partly realised by adding intelligence to the region’s existing grids and building a cross-border smart grid infrastructure). In addition, the ZigBee Alliance (an association of companies creating wireless solutions supporting energy management in electronics applications) participates in the EU’s various standardisation efforts. The EC has also co-funded the Active Distribution networks with full integration of Demand and Distributed Energy RESourceS (ADDRESS) project, coordinated by Enel Distribuzione and 24 other partners from the energy sector, as well as universities and European research institutes. The aim is to develop a technical and economic ‘Active Demand’ platform enabling consumers to interact with the power system market via a real-time interface based on price and volume signals.

The European Parliament package of legislation to liberalise EU energy markets (approved in September 2009) enforces a number of Electricity and Gas Directives requiring 80% of consumers to be equipped with smart meters by 2020, and 100% by 2022. The European Parliament also approved the Energy Performance of Buildings Directive (EPBD) which requires all new buildings and renovations to use smart meters. Energy efficiency and reliability have been among the top motivating factors for smart meter deployments. The legislation is in line with increasingly stringent EC rules on energy conservation and the requirement for Member States to procure a greater proportion of their energy needs from renewable sources.

Overall, smart metering in Europe has emerged from its nascent state, when most deployments were pilots. The installed base of smart meters in Europe is expected to grow at about 16% annually to 2014, reaching almost 100 million units by then. The most progressive markets remain Italy, Sweden and France. Sweden made smart meters mandatory from July 2009, and by early 2010 the country became the first in the world to achieve 100% penetration for smart meters. Within the next few years it will be joined by Italy, Ireland, Norway and Finland, and by 2020 by many other countries including France, Spain and the UK.

Yet despite the progression in some markets, there nevertheless remains some hesitancy in other countries. The Netherlands postponed its mass roll out following concerns that remote monitoring of energy consumption would lead to privacy violations, while in Germany the government has been reluctant to impose a perceived surveillance technology.

Other hurdles to be overcome relate to regulatory and technical issues. Bandwidth constraints must be factored in since many deployments by necessity (e.g. in rural areas) depend on GSM technology, which invokes constraints from carriers. Broadband Powerline (BPL) is an obvious alternative, but one which no developer has considered. European distribution networks are not designed to accommodate large numbers of small and medium sized generators, and thus only a fraction of them can presently be managed effectively. Other issues relate to accommodating bi-directional electricity flows and maintaining consistent flows for household equipment.

Most utilities have also been put off instigating smart grid development by the infrastructure costs and low Return on Investment (RoI) involved. Globally, only about 8% of utilities have committed to smart grid deployments, but of these more than half have not started on projects. However, this is less a reflection of their reticence than their preference to see technologies improve, and so in coming years the market should show substantial growth.

For more information of smart meter developments, see:

Global – Smart Grids – Energy & Environmental Issues;

Smart Grids – Global Overview & Activities;

Global – Utilities Broadband – Trends & Analyses;

Europe – Smart Grid Developments – 2010.

The lingering economic crisis in Europe has morphed from one characterised by the collapse of faith in the banking system and the consequent restrictions on liquidity which slowed economic, output to one in which the long-term health of national economies is being questioned. This has had a knock-on effect for the euro, a currency which since its creation has been vulnerable to the flaws inherent in the weaknesses of the European Central Bank. Having intervened during the 2007 credit crisis by loaning billions of euros to banks to stabilise the financial system, it has been called upon again to mitigate the meltdown of southern European economies.

Naturally, Europe is nervous. Greece is at the forefront of the current crisis, though the wolf is very much at the doors of at least half a dozen other nations. The sentiment in Germany, meanwhile, is very hostile at the notion that the country’s responsible taxpayers should bail out indigent economies. In short, these realities are causing all EU countries to cut their budgets as quickly and forcefully as the politicians can manage.

Thus far, the focus on cost cutting has ranged far and wide, affecting civil service pay, pensions and just about all government departments. One area which should be given a financial boost, however, is ICT, which has the capacity – if properly managed – to save billions of euros in government spending. The UK’s Cabinet Office recently published its Structural Reform Plan wherein it set out a number of policies to reform and rationalise the civil service and drive through efficiency measures. One of the Cabinet’s main concerns appropriately relates to ICT. Proposed measures include increasing the powers of the Cabinet’s Chief Information Officer (CIO) to improve the value for money of ICT infrastructure, rolling out departmental asset registers on ICT infrastructures, developing a revised approach to ICT procurement to enable a greater use of SMEs, and reducing the cost structure of ICT in central government while supporting technologies which increase citizen involvement.

These measures are potentially crucial, since governments themselves must see the value of their own information systems before they can truly benefit from the cost savings generated by the larger trans-sector picture, whereby not just all government departments will be properly interconnected, but so too will other infrastructure sectors for which governments have ultimate responsibility (transport, power distribution etc).

For more information on broadband markets and transactor policies, see:

Europe – Broadband Market – Overview & Statistics;

Europe – Regulatory Environment;

Europe – Broadband – Regulating fibre access;

United Kingdom – Broadband – Fixed Network Overview, Statistics & Forecasts;

Global Next Generation Telecoms – Trans-sector Vision and Broadband Development.

Egypt’s third mobile network operator, Etisalat has invested US$1.4 billion into the operation since launch in 2007 and is planning to spend the same amount again over the next three years. This investment is expected to be matched at least partially by its competitors, Vodafone Egypt (VFE) and Mobinil (backed by Orascom and France Telecom), as they gear up for the fourth mobile licence to be issued. Fixed-line incumbent Telecom Egypt, with assets of over US$5 billion and already a minority shareholder in VFE, has expressed interest in the licence. Etisalat paid almost US$3 billion for its licence three years ago.

In parallel, the Egyptian government is preparing a US$1 billion plan aimed at boosting broadband penetration fourfold over the next four years.

For more information, see BuddeComm’s updated series of Egypt reports with market overviews, analysis and key statistics, profiles of the major players, and scenario forecasts to 2012 and 2015 for the country’s mobile, fixed-line, Internet and broadband markets.

For further information see:

Egypt – Key Statistics, Regulatory & Fixed-Line Telecoms Overviews;

Egypt – Convergence, Broadband & Internet Markets;

Egypt – Mobile Market – Overview & Statistics;

Egypt – Telecoms Market Statistics & Forecasts.

Cuba still has the lowest mobile phone penetration in Latin America, one of the lowest levels of Internet penetration, and is among the five lowest in terms of fixed-line teledensity. Cuba’s fixed-line services remain a monopoly in the hands of government-controlled Empresa de Telecomunicaciones de Cuba SA (Etecsa), while mobile services are provided exclusively by Cubacel, a subsidiary of Etecsa. There remains substantial state control over the right to own and use certain communications services, including the right to access the Internet. The Obama administration has recently relaxed some of the embargo rules pertaining to telecommunications, in an attempt to improve freedom of communication and information for Cubans. Despite this, and although Raul Castro is more reform-minded than was his brother Fidel, the genuine liberalisation of Cuba’s telecommunications sector is expected to occur slowly over the next five to ten years.

For more information on developments in Cuba’s telecommunications markets, see Cuba – Telecoms Mobile and Broadband.