MTN Consulting: Top Telco Network Infrastructure (equipment) vendors + revenue growth changes favor cloud service providers

MTN Consulting reports [1.] that the top three Telco Network Infrastructure (NI) equipment vendors continue to be Huawei, Ericsson, and Nokia. They account for 37.4% of the total market in annualized 1Q23, or 34.8% in 1Q23 alone. While the trio has captured >40% share of the market for most of 2016-22, Huawei’s share has fallen recently, and all three giants have been pressured by vendors in the cloud and IT services space (e.g. Amazon, Microsoft, Alphabet, Dell, VMWare…).

Note 1. This MTN Consulting study tracks 134 Telco NI vendors, providing revenue and market share estimates for the 1Q13-1Q23 period. Of these 134 vendors, 110 are actively selling to telcos; most others have been acquired by other companies in the database. For instance, ADVA is now part of Adtran, but both companies remain in the database because of historic sales.

Focusing on the top three, Huawei has dropped in the last three periods (due to global sanctions), but remains dominant due to China.

Ericsson’s share decline was a function of lower RAN spending among its largest customers as the 5G rollout pace ebbs. The Swedish vendor hopes to offset this decline soon with new revenues from its blockbuster acquisition of network API platform vendor, Vonage. It expects the first revenues from the acquisition later this year and a ramp up further in the next two years.

Nokia, including (Alcatel-Lucent) ALU for pre-acquisition years, has also dipped as 5G RAN rollouts slowed. But it gained market share slightly in 1Q23 on account of 45% growth in its optical networks business along with some benefits from catch-up sales related to the supply chain challenges it witnessed in 2022.

China Comservice and ZTE have been trading the 4 and 5 spots off and on since early 2019. Notably, though, China Comservice is majority owned by Chinese telcos, and is not truly independent. Intel is in the 6th position due to data center, virtualization, edge compute and other telco projects, some done directly and some on an OEM basis.

CommScope remained at seventh position while NEC managed to surpass Cisco in the latest annualized 1Q23 period, as Cisco (9th position) witnessed a stark drop in its Telco NI revenues in 1Q23. Cisco’s decline is worrying, as its largest market (the U.S.) has a growing focus on 5G core, which Cisco has flagged in the past as key to the company growing telco revenues. Amdocs is ranked 10th due to its strength in network software.

Biggest Telco NI revenue changes on a YoY basis:

Three out of the top five vendors, in terms of YoY revenue growth, are the same for both single quarter and annualized 1Q23: Alphabet, Microsoft, and Lenovo. Two of these are cloud vendors (Alphabet and Microsoft) who are steadily improving their penetration of the telco vertical market with a range of solutions – digital transformation, service design, 5G core, workload offshift, etc. Lenovo is gaining traction with its disaggregated, virtual radio access network (vRAN), and multi-access edge computing (MEC) solutions. Clearfield is a small fiber company focused on the booming US market.

Other companies to show improvement in both periods include Tejas Networks which bagged a mega deal for a BSNL-MTNL 4G network; Rakuten Group (Symphony) benefiting from key deployments of its cloud-based Open RAN solutions; Harmonic which has benefited from strong cable access spending and a growing customer list; YOFC (a Chinese fiber company), and two large US-based engineering services-focused companies (DyCom and MasTec) benefiting from a fiber boom.

Declines in the 1Q23 annualized period include Cisco which continues to be worrisome on account of lower customer spending, though it noted improvement in supply chain constraints in the latest quarter. Extreme Networks, Casa, and Airspan all dipped, but noted that the supply chain challenges of previous quarters are improving. Cisco, the largest among the annualized decliners, remains optimistic about prospects as telcos move to 5G SA cores.

Supply chain issues improving:

For the past two years, vendors in the Telco NI market have been plagued with supply chain constraints. The situation is now easing though, if a review of vendor earnings from 1Q23 is anything to go by.  Most significant vendors confirm the assessment of three months ago: shortages in specific component areas continue to be an issue but are improving with time, with normalcy likely in 2H23.

Nokia notes that “Going forward, growth rates are expected to slow in the coming quarters as Q1 benefited from some catch-up, as supply chains normalize”. Ericsson echoed this, saying that “…the big effect really comes from the ongoing inventory adjustments, and that comes because they build up large inventories when supply chain was tight and those inventory levels are now normalizing. We expect these adjustments to be completed during Q2, but some could slip into Q3 clearly”.

Juniper has a slightly more cautious view – “While supply has improved for the majority of our products, we continue to experience supply constraints for certain components, and supply chain costs remain elevated”.

Casa, Calix, and Ciena are also witnessing good improvements in supply chain and are expecting further improvements over the course of 2023. F5 Networks is benefiting from its strategy of redesigning the “hardest-to-get components” and “opening up new supply” sources.

Spending outlook:

Most large vendors appear to be cautiously optimistic about the spending outlook in Telco NI. While supply chain issues are expected to clear up by 2Q or 3Q 2023, MTN Consulting expects the market will start to flatten in the next few quarters. Per our latest official forecast, we expect telco capex – the main driver of Telco NI market – to reach $330B in 2023, and a small decline to $325B in 2024. However, it’s likely that both figures may be $5B or more too high. Ericsson, a key telco vendor, has signaled a cautious telco capex spend outlook in its latest earnings call: “In the second quarter, we expect operators to remain cautious with CapEx similar to Q1 and continue with the inventory adjustment that we have described”.

Lower expectations have been apparent on many 4Q22 earnings calls. DT, for instance, expects US capex will see a “strong decrease” in 2023, and thereafter stability. Verizon’s capex is set to fall nearly 20% YoY in 2023. Charter Communications cut its capex outlook for 2023 by about $500M, hitting both the low & high range. Orange expects a “strong decrease” (same wording) in total “ecapex” this year as its FTTH deployment peak has passed and it aims to increase its dividend. Canada’s BCE says that 2022 was the peak year in its accelerated capex program, and capex will begin to fall this year until capital intensity is back down to pre-COVID levels. Vodafone expects group capex in its current fiscal year to be flat to slightly down, as it pursues a “disciplined approach to capital allocation.” Telefonica says its declining capital intensity is proof that the investment peak is behind it. The MTN Group says capital intensity will decline from 18% to 15% over the next few years.

There are several factors to help explain lower expectations: some are company-specific, e.g. BCE is naturally reaching a latter phase in its buildout. There are also general factors, such as: rising interest rates; higher operating costs due to inflation, especially in energy; 5G’s failure to lift service revenues, leaving telcos highly dependent on volatile device revenues for any topline growth; and, cloud providers’ continually more aggressive pitches of new solutions to telcos. Cloud-based offerings can shift some capex to opex.

Amid all the cautious optimism, India as a market has emerged as a bright spot for the vendors. In 1Q23, Ericsson saw strong growth for its Networks business in India where it continues to rapidly roll out 5G. “It will make India a leading 5G nation and the leading nation for digitalization. And what we see is that the subscribers on 5G are using even more data than on 4G…” said Ericsson in its earnings call.

Ciena attributed its 60% YoY revenue growth in the Asia Pacific region to India, “which was up 88% year-over-year in Q2 to about $70 million, reflecting consistent strong demand from service providers in that market. India is going through a big cycle of 5G rollout and extension. And I think that’s going to happen over the next 1 to 3 years”.

Nokia also witnessed double-digit growth in both its Network Infrastructure and Mobile Networks divisions, reflecting the rapid 5G deployments in India: “…Q1 largely played out as we expected, with 5G deployments in India heavily influencing our Q1 top line.”

Telco Revenues Continue to Decline:

In 4Q22, global telco revenues plunged the most in more than a decade to post $429.6B, or -9.3% YoY – the fifth consecutive slump in a row. This impacted annual revenues and its growth rate for the year 2022 – they were $1,779.9B, down 5.9% YoY over the previous year. The sluggish top-line turned telcos cautious around spending on capex, the main driver for the Telco NI market, which declined for the second straight quarter to post $87.9B in 4Q22, down 5.1% YoY. This decline also knocked down annualized capex to $322.1B in 4Q22, from the peak of $330.0B in 2Q22.

On the brighter side, capex has held out better than revenues, pushing annualized capital intensity to a new all-time high of 18.1% in 4Q22. This was driven by a few countries who are in the midst of deploying 5G networks, notably India; while many more continue to scale up 5G to reach mass market coverage, and deploy fiber to support fixed broadband and to connect all the new radio infra (including small cells) needed for 5G.

Cloud vendors are also making critical inroads into the telco sector, aided by a growing number of stand-alone 5G core networks.

References:

Telecom’s biggest vendors – 1Q23 edition

MTN Consulting on Telco Network Infrastructure: Cisco, Samsung, and ZTE benefit (but only slightly)

MTN Consulting: Network Infrastructure market grew 5.1% YoY; Telco revenues surge 12.2% YoY

 

OneWeb Expands Connectivity Services in Europe and U.S.

OneWeb, the global Low Earth orbit (LEO) satellite network service provider, announced the expansion of its connectivity services throughout Europe and the majority of the United States. The expanded network availability marks a significant step as OneWeb progresses towards global services.

OneWeb said the expansion, which became first active at the end of May, adds service to 37 new European countries, including Austria, Italy, France, and Portugal, as well as the entire western US coast from Washington to California, the northeast coast from Maine to Virginia, and across the Midwest. This expansion also further enhances connectivity across Canada and additional maritime regions.

Stephen Beynon, OneWeb’s Chief Customer Officer, said: “This expansion is a significant step in our journey to delivering global commercial service for our customers. We are seeing increased demand for our service as we have expanded coverage and grown our portfolio of user terminals for different markets. Our technical experience in all corners of the globe, as well as the strong relationships we have with existing partners in Alaska, Canada and Europe, means OneWeb is well placed to support customers in these new regions as well as welcoming new partners to activate services for the first time. As our network coverage continues to grow, I am incredibly excited to serve more maritime, government, enterprise, and aviation customers than ever before.”

OneWeb completed launching its global constellation earlier this year and the business is working towards offering fully global service by the year end. OneWeb and its partners are continuing to add new ground stations and add further service across the world, as more of its over 600 satellites reach their final position in the constellation. OneWeb is on track to complete the full global rollout of ground stations by the end of the year.

Already delivering connectivity at 50 degrees north, OneWeb has been working alongside Distribution Partners to provide community broadband solutions, cellular backhaul, corporate enterprise services, and more throughout the Arctic region, connecting locations in Alaska, Canada, the UK, and beyond.

With the recent expansion, OneWeb’s partners are now expanding their services to new regions and enabling additional partners to integrate OneWeb’s LEO network into their solutions.

OneWeb says as a wholesale connectivity provider, it offers its services through partners such as telecommunications companies and internet service providers. These partners can seamlessly integrate OneWeb’s service into their suite of connectivity offerings, ensuring that end customers can enjoy high-speed, resilient, and low-latency internet connections, regardless of their geographical location.

Having completed the launch of its global satellite constellation earlier this year, OneWeb is working towards offering fully global service by the end of this year. The company, in collaboration with its partners, is actively adding new ground stations and expanding its services across the globe as over 600 satellites reach their designated positions within the constellation.

OneWeb said it remains on track to complete the full global rollout of ground stations by the end of the year, solidifying its commitment to connecting the world.

References:

https://oneweb.net/resources/oneweb-expands-services-launches-commercial-service-across-large-parts-europe-and-us

OneWeb Expands Connectivity Services in Europe and US

 

Lumen, Google and Microsoft create ExaSwitch™ – a new on-demand, optical networking ecosystem

Lumen Technologies today announced a new network interconnection ecosystem called ExaSwitch™, created in collaboration with Google and Microsoft. This platform empowers organizations with high bandwidth needs to route their traffic dynamically and quickly between networks, and without third-party intervention.

This ExaSwitch project was created by the initial participants to route traffic between large internet and cloud networks. Early adopters include Lumen, Google Cloud, Microsoft Azure and an additional large cloud provider. The ExaSwitch ecosystem will continue to strengthen as additional participants join, making it easier to automate, scale and manage capacity between the members.

ExaSwitch users will be able to connect their edge sites, data centers and central offices to the platform. With a self-service portal, they can set up connections in 400G increments, which can then be consumed on demand in 100G increments.  Lumen, the administrator for the initial ExaSwitch deployments, will be responsible for installing optical hardware at the location of each participant. Users can choose their own fiber source for connecting into ExaSwitch, which they can do either via the self-service portal or an application programming interface (API) portal managed by Lumen.

“The days of slow, legacy cross connects are over; ExaSwitch is the future of network interconnections,” said Andrew Dugan, Chief Technology Officer, Lumen. “Large network backbones no longer need a physical location to connect. Instead, optical switching will be used to establish high-capacity optical links between metro sites. And it’s so much more than just internet peering; it’s an on-demand network connection for quickly deploying needed capacity across all types of data traffic exchanges.”

“We like the ease, speed and cost efficiency of performing interconnects to network partners directly from our main sites,” said Steve Walter, Global VP of Network Operations, Google“ExaSwitch provides an agile, on-demand platform using proven technology that achieves that.”

“Creating a geographically distributed yet automated interconnection platform creates so many options to improve connectivity, resiliency, and speed to add capacity on to one’s network,” said Frank Rey, Partner, Azure Networking, Microsoft. “We are pleased at the opportunity ExaSwitch has to change the interconnection ecosystem.”

The ExaSwitch administrator will install optical hardware at the preferred location for each participant, who will choose their own fiber source for connecting into ExaSwitch. When two participants agree to connect, they can join quickly through self-provisioning, or an API portal driven and managed by the administrator. The real-time capacity deployment allows them to easily order, modify and delete services as needed. Lumen is acting as the administrator for the initial deployments.

Key benefits:

  • Participants use a self-service portal to configure and turn up connectivity with other participants much faster than they can now.
  • Connections are set up in 400G increments and can be consumed on demand in 100G increments, with each site capable of up to 25.6 Tbps of optical cross connects.
  • Participants will have the ability to connect their edge sites, data centers and central offices in major markets to gain diversity and save costs on cross connects.

“The ExaSwitch optical switching platform is an innovative on-demand ecosystem for automating, scaling and managing high-value interconnect services,” said Courtney Monroe, VP of Telecommunications Research for IDC. “It is poised to disrupt legacy manual platforms, as well as the way enterprises, and the IT ecosystem interconnect, procure and manage interconnectivity.”

Lumen is currently operating the ExaSwitch platform in three of the largest US interconnection hubs – ChicagoDallas and Virginia – with plans to expand to all major markets in North America with large internet hubs. ISPs, cloud providers, large content providers and enterprises can go to http://exaswitch.net to learn more about ExaSwitch and how to join this growing ecosystem.

Lumen earlier this year completed 400G wavelength upgrades covering 70 U.S. markets. The company’s SVP of Core Network Solutions told Fierce Telecom in January a single 400G wave requires only two cross-connects, which offers “huge cost benefits for the customers.”

About Lumen Technologies:
Lumen connects the world. We are dedicated to furthering human progress through technology by connecting people, data, and applications – quickly, securely, and effortlessly. Everything we do at Lumen takes advantage of our network strength. From metro connectivity to long-haul data transport to our edge cloud, security, and managed service capabilities, we meet our customers’ needs today and as they build for tomorrow. For news and insights visit news.lumen.com, LinkedIn: /lumentechnologies, Twitter: @lumentechco, Facebook: /lumentechnologies, Instagram: @lumentechnologies, and YouTube: /lumentechnologies.

SOURCE: Lumen Technologies

References:

https://www.prnewswire.com/news-releases/lumen-google-and-microsoft-create-new-on-demand-optical-interconnection-ecosystem-301847861.html

https://www.fiercetelecom.com/telecom/lumen-google-microsoft-unveil-new-optical-networking-platform

ACSI report: AT&T, Lumen and Google Fiber top ranked in fiber network customer satisfaction

Lumen to provide mission-critical communications services to the U.S. Department of Defense

Dell’Oro: Optical Transport market to hit $17B by 2027; Lumen Technologies 400G wavelength market

Lumen: DDOS attacks on the rise with telcos accounting for 76% in 1Q-2022

FT: A global satellite blackout is a real threat; how to counter a cyber-attack?

by John Thornhill, Innovation Editor at the Financial Times (FT)

What if the satellite communications networks encircling our planet ever go down?  Mobile phones will stop working, navigation systems will crash, television screens will go dark and financial transactions will fail.

The three most likely ways this might happen are: an intense geomagnetic storm resulting from a solar flare like that which occurred in 1859, known as the Carrington event; a cascading collision of space debris, called the Kessler effect; or a deliberate cyber attack.

On Sunday, a SpaceX rocket blasted off from Cape Canaveral with a special payload designed to reduce the last of those dangers. On board was a US government Moonlighter satellite, described as “the world’s first and only hacking sandbox in space.”

Once the satellite is deployed, five so-called “white hat” — or ethical — hacking teams at the Hack-A-Sat 4 competition in Las Vegas will try to hijack the Moonlighter and win a $50,000 prize for exposing its vulnerabilities.

“With Moonlighter, we’re trying to get in front of the problem before it is a problem,” one project leader told The Register.

Last year, on the day Russia invaded Ukraine, hackers launched a malware attack against Viasat’s KA-SAT satellite. They temporarily disrupted the communications of thousands of broadband users in Ukraine, as well as in Poland, Italy and Germany, where 5,800 wind turbines were also affected.

“We are all aware that the first ‘shot’ in the current Ukraine conflict was a cyber attack against a U.S. space company,” Kemba Walden, America’s acting national cyber director, has said.

Leaked CIA intelligence, reported by the Financial Times this year, warned that China was also building sophisticated cyber weapons to “deny, exploit or hijack” enemy satellites. The U.S. has not revealed its own offensive capabilities in this domain. But it is not only Chinese spy balloons Washington is worrying about. Whereas space used to be solely the domain of nation states, private companies are increasingly dominating the game as launch costs fall and satellites shrink in size.

Last year, the U.S. launched 1,796 objects into space, 32 times more than in 2000. The lines between the military and civilian have also blurred as a result of dual-use applications, such as global positioning systems, making commercial satellites a target. And because of the difficulties of fixing satellites in space, designers add a lot of back-up parts, increasing the “attack surfaces” that hackers can exploit.

Viasat says it has learnt lessons from last year’s attack and has strengthened its defences. Basic cyber hygiene is essential in every link in the communications chain (the hackers accessed a misconfigured ground-based virtual private network appliance). Constant vigilance is required: the US company has been persistently attacked since the war began. And rapid response teams must be ready to re-establish control if a system is compromised.

“Anybody who claims perfect security is either lying or they do not know what they are talking about,” Craig Miller, Viasat’s president of government systems, tells me. “You have to be able to respond very quickly.”

There are three main ways to hack a satellite, according to James Pavur, a cyber security engineer at Istari, a US start-up. The first target is ground infrastructure, the most accessible attack surface but usually the best protected. Then, hackers can aim to intercept wireless communications between ground stations and the satellites — or spoof them. The third, and hardest, approach is to go after the “bird in orbit” by building, or exploiting, security backdoors in satellite components. So operators must secure their entire supply chain.

Most hacking attacks are hard to trace. Only four countries have the known capability to take out a satellite with a rocket — the US, China, India and Russia — although such attacks risk triggering the Kessler effect. But anyone from anywhere at any time can hack software. White hat hackers are a particularly valuable community in helping to secure critical satellite infrastructure, argues Pavur.

“There is a mindset of security through obscurity. But a sufficiently motivated adversary will find an ‘exploit’,” he says. Far better to discover those vulnerabilities first and fix them rather than trying to shelter in obscurity. The idea of crowdsourcing security sounds like an oxymoron. But white hat hackers have won round sceptics over the past decade. As software developers say: “Given enough eyeballs, all bugs are shallow.” That rule may even apply in space.

Write to: [email protected]

References:

https://www.ft.com/content/d5df1e81-f126-4a48-9a42-5b4aca842dcb

https://www.lse.ac.uk/ideas/projects/space-policy/publications/Cyberattacks-on-Satellites

https://interactive.satellitetoday.com/the-growing-risk-of-a-major-satellite-cyber-attack/

Reuters: Telcos draft proposal to charge Big Tech for EU 5G rollout; Meta offers a rebuttal

Big tech companies accounting for more than 5% of a telecoms provider’s peak average internet traffic should help fund the rollout of 5G and broadband across Europe, according to a draft proposal by the telecoms industry.  The proposal is part of feedback to the European Commission which launched a consultation into the issue in February. The deadline for responses is Friday.

Alphabet’s Google, Apple  Facebook-owner Meta, Amazon, Netflix and TikTok would most likely be hit with fees, according to industry estimates.  Google, Apple, Meta, Netflix, Amazon and Microsoft together account for more than half of data internet traffic.

The document, which was reviewed by Reuters and has not been published, was compiled by telecoms lobbying groups GSMA and ETNO. They represent 160 operators in Europe, including Deutsche Telekom, Orange, Telefonica  and Telecom Italia.  Telecom operators have lobbied for years for leading technology companies to help foot the bill for 5G and broadband roll-out, saying that they create a huge part of the region’s internet traffic. This is the first time they have tried to define a threshold for who should pay.

“We propose a clear threshold to ensure that only large traffic generators, who impact substantially on operators’ networks, fall within the scope,” the draft stated.  “Large traffic generators would only be those companies that account for more than 5% of an operator’s yearly average busy hour traffic measured at the individual network level,” it said.  The European Commission declined to comment.

Meta on Wednesday urged Brussels to reject any proposals to charge Big Tech for additional network costs. In a Facebook blog post, Markus Reinisch, Meta’s VP for Public Policy for Europe, described potential fees as a “private sector handout for selected telecom operators” that would disincentivize innovation and investment, and distort competition. “We urge the Commission to consider the evidence, listen to the range of organizations who have voiced concerns, and abandon these misguided proposals as quickly as possible,” he said.  Here are Meta’s takeaways:

  • Network fee proposals misunderstand the value that content platforms bring to the digital ecosystem.
  • We support the Commission’s goal of “ensuring access to excellent connectivity for everyone,” but network fee proposals will hurt European consumers and businesses.
  • We urge the Commission to consider the evidence, listen to the range of organizations who have voiced concern, and drop these proposals.

References:

https://www.reuters.com/business/media-telecom/big-tech-accounting-over-5-traffic-should-pay-eus-5g-rollout-telcos-2023-05-17/

Network Fee Proposals Will Ultimately Hurt European Businesses and Consumers

https://www.euractiv.com/section/5g/news/eu-telcos-call-for-big-tech-to-share-5g-network-costs/

GSMA: Europe’s 5G rollout is too slow at 6% of mobile customer base

European telcos need to address very high 5G energy consumption

Strand Consult: Market for 5G RAN in Europe: Share of Chinese and Non-Chinese Vendors in 31 European Countries

 

MTN Consulting: Satellite network operators to focus on Direct-to-device (D2D), Internet of Things (IoT), and cloud-based services

Satellite network operators are being forced to expand their addressable markets in the near term, due to several factors: rising competition, with the emergence of players such as SpaceX along with several upstarts including AST SpaceMobile and Lynk.  A difficult funding climate resulting from a grim economic outlook and rising interest rates is a challenge.  There are also market concentration risks arising from the current focus on satellite broadband internet.

To address these challenges, satellite network operators are raising stakes in new pursuits and developing new offerings. MTN Consulting expects three new potential addressable markets to provide transformational opportunities for satellite operators in the next 2-4 years. These include Direct-to-device (D2D), Internet of Things (IoT), and cloud-based services.

Looking at these market opportunities, a thought may arise whether satellite operators are trying to disrupt the traditional telecom market. But the reality is that telcos will continue to be the primary service provider for wireless access. Telcos are also going to benefit from partnerships with satellite operators as they will aid in providing an enhanced experience for telco customers, reinforced by ubiquitous coverage. For satellite operators though, navigating the regulatory hurdles and ensuring constant capital flow are key concerns; several players from the current herd will vanish in the next 3-5 years.

The battle for space based Internet gained momentum in the year 2022 as several satellite operators, notwithstanding their size and years of operations, shifted gears with the launch of commercial broadband internet through low earth orbit (LEO) satellites. The space rush, aided by the advancement in satellite development and large-scale manufacturing, witnessed the sudden surge in large fleets of LEO satellites being deployed in recent years, as shown in Figure 1. As of May 2022, about 4,700 active LEO satellites are girdling the planet; that’s 16x the number of active LEO satellites deployed a decade ago.

Separately, MTN found that a number of large telcos have high debt, low margins, and/or weak top line growth, and may have to curtail spending in 2023-2024 in order to cope with this reality.  In particular:

  • Total telco debt in 4Q22 was $1.14 trillion, 17% due in next year
  • Software capex as a % of revenues was 1.9% in 2022, up a bit from 1.8% in 2021.
  • Spending on acquisitions amounted to 0.5% of revenues in 2022, the lowest figure since 2012.
  • At the industry level, the ratio of net debt to EBITDA in 2022 was 1.9, a bit up from 2021 but down from 2020.
  • A number of large telcos face short-term debt levels over 30% of total debt
  • Average margins for the industry in 2022 disappointed: free cash flow margin for the telco industry in 2022 was 11.4%, down from 12.6% in 2021; EBITDA margin was 33.7% (2021: 34.0%), and EBIT margin was 14.4% (2021: 14.9%).

References:

Satellite players bet on direct-to-device (D2D), IoT, and cloud for next big liftoff

Telcos pay 5G price: higher debt, lower margins in 2022

 

Omdia Surveys: PON will be a key part of network operator energy reduction strategies

Omdia (owned by Informa) surveys have found a “very high” number of telcos regarded PON as a key part of their energy savings programs. Omdia’s chief analyst Julie Kunstler said PON technology is fiber-asset efficient, easy to upgrade, and highly secure.

Speaking at a Light Reading webinar Thursday, Kunstler said another large cohort of network operator execs said they believed PON would play some role in their energy reduction strategies. “PON is energy efficient and this is definitely gaining attention.”  Kunstler said “a very strong movement” by operators was underway toward next gen PON, in particular XGS PON. “But perhaps more importantly, PONs are also supporting other types of customers and applications.”  She also noted PON technology was fiber-asset efficient, easy to upgrade, highly secure and allowed operators to choose when to upgrade. But she cautioned that in many telcos PON faced organizational obstacles because of the belief that it was for consumer services only and because of the silos between residential and business.

Anuradha Udunuwara, a senior enterprise solutions architect at Sri Lanka Telecom, said energy costs had become a bigger concern in the past 12 months following sharp hikes in power tariffs. He agreed that PON “definitely has an advantage… it is passive, so there is no energy consumption there.”

Udunuwara described PON as an “architectural option” that could support FTTX deployment. He said it was a myth about PON that it was for FTTH only. “It’s not confined to any of the variations of FTTX.”  He expected that in the long run services would converge on to a single access technology.

“Oftentimes, sales and marketing teams don’t feel comfortable about PON, simply because they don’t understand it,” Kunstler said. “Many believe its point to multipoint topology is for residential only and that it’s simply best effort and there’s no technical ability to support enterprise services.”

“A lot of education is needed within some operators to explain to the sales and marketing team that PON is not just best effort and that you can actually commit to rates,” she pointed out.

“Not all enterprises need point to point. They don’t all need their own dedicated fiber, and many of them really don’t want to have to pay for dedicated fiber.”

Kunstler said selling business services over PON increased the ROI over that access infrastructure. “With 10G PON, you can easily support one gig symmetrical, two gig symmetrical five gig symmetrical and so forth, and 50 GPON, which will be here within a couple of years, can even support more bandwidth.

By using that optical distribution network for more than just residential, operators were already moving to a converged access approach. “You have more revenues over a single access network. You have a single network to upgrade. You have improved optics and you have improved energy savings.”

References:

https://www.lightreading.com/broadband/rising-energy-costs-are-latest-factor-in-pon-adoption/d/d-id/784593?

Dell’Oro: XGS, 25G, and Early 50G PON Rollouts to Fuel Broadband Spending

AT&T to deploy FTTP network based on XGS-PON in Amarillo, TX

ZTE PON ONT obtains EasyMesh R3 certification from WiFi Alliance

Dell’Oro: PONs boost Broadband Access; Total Telecom & Enterprise Network Equipment Markets

 

 

Omdia: Consumer Telco Opportunity Challenged by Global Tech Giants

Market research firm Omdia (owned by Informa) says all growth areas for telcos will experience significant competition from hyperscalers – specifically the global tech giants Google, Amazon, Meta/Facebook, and Apple.

Omdia’s Quantifying the Consumer Telco Opportunity – 2023 report is an in-depth report providing analysis and insights drawn from Omdia’s related data tools as well as individual operator case studies.  The market research firm says that other than core fixed-line and mobile data services, almost all of the potential growth for telcos in the consumer sector over the next few years will come from ‘non-traditional categories.  Those include video streaming, digital gaming, streaming music, and smart home (whatever that means).

“Service providers must look beyond data and diversify into adjacent digital markets to enable continued growth of their telco consumer businesses,” said Omdia’s Jonathan Doran. “Many have already invested in TV and online video entertainment, but there are other fast-growing markets telcos can also explore. Adopting the right go-to-market strategy and business model for each individual service area will be critical to striking the balance between achieving market success and mitigating financial risk. In many areas, telcos will need to accept that competing head-on is unrealistic and developing partnerships with such players is not only more pragmatic but will also serve to strengthen their own products and brands” observes Doran.

“Omdia’s Digital Consumer Operator Strategy Benchmark shows that the more service providers actively invest in a given service area – including through partnerships – the bigger market impact they have, which in turn better positions them to take a bigger slice of overall market revenue”

Big tech is already there and doing a decent job of selling all these digital goodies direct to consumers without the help of operators. Every time telcos have tried to compete directly in adjacent markets is has all gone horribly wrong so, as well as picking their fights more carefully, they are advised to consider an ‘if you can’t beat em, join em’ approach.

“In many areas, telcos will need to accept that competing head-on is unrealistic and developing partnerships with such players is not only more pragmatic but will also serve to strengthen their own products and brands,” said Doran. “Omdia’s Digital Consumer Operator Strategy Benchmark shows that the more service providers actively invest in a given service area – including through partnerships – the bigger market impact they have, which in turn better positions them to take a bigger slice of overall market revenue.”

The Omdia chart below illustrates product types by growth potential (horizontal axis), relevance to the Communications Service Provider (CSP) core proposition (vertical axis) and forecasted relative 2027 market size. As you can see, most consumer digital products are pretty far from the CSP core proposition, but Omdia forecasts they will collectively amount to a $500 billion market by 2027. How much of that will find its way into the pockets of telcos as a result of partnering with Big Tech remains to be seen, but even a small fraction is better than nothing.

Amazon, Microsoft and Google are not only three of the biggest players in the digital consumer space, they also dominate the public cloud market, which network operators are constantly urged to turn to for its efficiencies and flexibility. It’s possible to imagine a time most of what we get from and operator is actually supplied, and monetized, buy one of a small number of hyperscalers. It’s not clear whether that represents a positive development for the telecoms industry.

References:

https://omdia.tech.informa.com/pr/2023/04-apr/fast-growing-digital-consumer-services-markets-worth-513bn-by-2027-according-to-omdia-research

https://telecoms.com/521154/study-highlights-increasing-dependence-of-operators-on-hyperscalers/

 

IEEE Techblog recognized by Feedspot!

The IEEE ComSoc Techblog was voted #2 best broadband blog:

https://blog.feedspot.com/broadband_blogs/

2. The IEEE ComSoc Technology Blog

The IEEE ComSoc Technology Blog  Piscataway, New Jersey, US
Featuring the latest in breaking telecom/networking news and analysis, the IEEE ComSoc blog is written by several expert bloggers. IEEE Communications Society is a global community of professionals with a common interest in advancing all communications and networking technologies.
Also in Telecom Blogs
 techblog.comsoc.org

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..and #13 best telecom blog in the world:

https://blog.feedspot.com/telecom_blogs/?_src=alsoin

Many thanks to Vinny Rodriquez and Khanh Luh for making our blog so successful!

 

 

 

ABI Research: Major contributors to 3GPP; How 3GPP specs become standards

Three large network equipment vendors (Huawei, Ericsson, and Nokia) have been leading in both the number of contributions and approved contributions for 5G technologies to The 3rd Generation Partnership Project (3GPP). This is particularly the case with specifications related to User Equipment (UE) specifications and functionalities that are developed under RAN1, RAN2, RAN4, RAN5, SA2, SA3, and CT1 Working Groups (WGs).

Editor’s Note: 

The 3GPP Organizational Partners (OP) are the seven Standards Developing Organizations (SDOs) – from China, Europe, India, Japan, Korea and the United States.  The OPs are:

ARIB  The Association of Radio Industries and Businesses, Japan

ATIS  The Alliance for Telecommunications Industry Solutions, USA

CCSA  China Communications Standards Association

ETSI The European Telecommunications Standards Institute

TSDSI Telecommunications Standards Development Society, India

TTA  Telecommunications Technology Association, Korea

TTC Telecommunication Technology Committee, Japan

Participation in 3GPP is made possible by companies and organizations becoming Individual Members (IM) of one of the OPs.

  • 3GPP specifications are not standards, they have no legal standing. They become “official” standards once one or more of the OPs transposes them, as ETSI has done many times.
  • 3GPP specs become ITU-R recommendations when they are submitted to ITU-R WP5D by ATIS, discussed and agreed upon, then sent to WP5 plenary in November for final approval.  That procedure was followed to create the ITU-R M.2150 recommendation which features 5G-NR.

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The list of the most active companies within 5G 3GPP standards is listed in the table below:

Top Ranked by Total Contributions Approved Contributions Total Contributions Company Category
Huawei 15,266 43,753 Incumbent Infrastructure Vendor (End-to-End)
Ericsson 11,601 36,375 Incumbent Infrastructure Vendor (End-to-End)
Nokia 7,553 23,112 Incumbent Infrastructure Vendor (End-to-End)
Qualcomm 5,523 18,471 Chipset
Samsung 3,548 16,464 Incumbent Infrastructure Vendor (End-to-End)
ZTE 3,415 15,291 Incumbent Infrastructure Vendor (End-to-End)
Intel 2,151 10,770 Chipset
LGE 1,396 10,139 Handset/UE Vendor
CATT 1,934 9,792 Government/Institution/SDO/Academics
vivo 1,205 8,367 Handset/UE Vendor
MediaTek 1,848 7,766 Chipset

Source: ABI Research

Key Takeaways:

  • Counting contributions alone is insufficient to identify leaders in 3GPP standardization processes. However, it is a crucial step in recognizing active contributors and identifying innovation.
  • More than 400 companies from the industry have participated in 3GPP standardization; however, only a handful of companies are consistently active in driving 3GPP 5G standards.
  • Huawei, Ericsson, and Nokia have, so far, been leading in both the number of total and approved contributions for 5G technologies to 3GPP.
  • Network infrastructure vendors are significantly more active than any other company categories, followed by handset vendors, chipset vendors, network service providers, and government research institutions.
  • UE-related WGs (i.e., RAN1, RAN2, RAN4, RAN5, SA2, SA3, and CT1) take 80% of total contributions. RAN1, RAN2, RAN4, and SA2 are the most important WGs, impacting the entire mobile industry and receiving massive interest.

References:

https://www.rcrwireless.com/20230329/opinion/huawei-ericsson-and-nokia-are-the-most-active-companies-contributing-to-5g-3gpp-standardization-analyst-angle

https://www.3gpp.org/about-us/partners

ITU-R M.2150-1 (5G RAN standard) will include 3GPP Release 17 enhancements; future revisions by 2025

Busting a Myth: 3GPP Roadmap to true 5G (IMT 2020) vs AT&T “standards-based 5G” in Austin, TX

 

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