05 Mar 2018
As consumer appetite for new technology increases, telecommunications operators have embarked on their own wave of innovation to provide sufficient data capacity.
With the number of connected devices forecast to increase 30 per cent to $US23 billion globally by 20201, operators are planning to deploy 5G networks and other next-generation technologies to meet the demand.
“New technologies and applications such as automated vehicles, drones, IoT, and big data services will significantly increase the traffic on mobile networks,” says Chris Holt, Macquarie Capital Managing Director in the Technology, Media and Telecommunications group.
Networks of the future will need to accommodate many more devices than today to support new use cases including machine to machine communications and commercialised drones, as well as more video and other higher bandwidth applications. A recent whitepaper from ARM anticipates there to be 1 trillion IoT devices by 2035.
Telecommunications companies are facing multi-dimensional pressures, but we've reached a point where we're going to see these pressures help bring creative solutions to the market.
In the US, the four major operators Verizon, AT&T, T-Mobile and Sprint have announced plans to start moving to 5G networks – said to be over 10 times faster than 4G – in 2018.
AT&T says it will have 5G networks in several US cities by the end of the year, including Dallas, Waco and Atlanta.
Another challenge is that consumers are more selective about what they will pay for their service, forcing operators to upgrade their infrastructure in a lower spending environment.
According to Cisco, consumer spending on traditional voice and data plans will fall almost 15 per cent to $US657 billion by 2020.
“There's an imbalance between data demand and the ability for mobile operators to charge their customers for that increased data usage,” says Holt.
“Speed and scale requirements are increasing exponentially while at the same time, consumers are reducing their spending.”
But Holt says this challenge is creating opportunities for innovation in the sector and accelerating the transition to next-generation technologies that can work more efficiently, reduce operating costs and better support a more connected world.
As operators adopt 5G networks, they are moving consumers off of legacy 2G and 3G technologies which still cover about 75 per cent of connections2 in the global telecommunications market.
Companies are also finding ways to free up expensive wireless spectrum, which enables mobile data transmission, and to deploy it in a more efficient manner.
And they are exploring how to better compete with new entrants such as Over-The-Top (OTT) players, who are disrupting traditional telecommunications and cable companies by offering streaming services over the public internet.
The global OTT market is expected to reach $US165 billion by 2025. 3
To counter this challenge, traditional operators are turning to newer technologies such as Network Function Virtualisation (NFV), which uses software to supply network services that were previously run through expensive, proprietary, hardware-based solutions.
The value of the global NFV market is expected to grow from $US2.7 billion in 2015 to $US15.5 billion in 20204 and represents the shift towards software solutions that will increase the speed and flexibility of networks, enhance security and reduce costs.
As the shift toward these next-generation technologies accelerates, Holt says the industry will become more creative in what it can offer consumers and it will be able to do so more efficiently.
“Five years ago, 5G and the Internet of Things were buzzwords. In 2018 they're fast becoming a reality,” he says. “Telecommunications companies are facing multi-dimensional pressures but we've reached a point where we're going to see these pressures help bring creative solutions to the market.”