The top 2018 telecoms market trends in networks, markets and technical developments

Prediction 1: 2018 will be the year of new networks

Who, what, where, why… how?

In 2017, the staggered process of the DFA ruling caused significant uncertainly in UK connectivity, with implications for the way that networks will be built out in 2018. The Ofcom proposal, which would have enabled rival ISPs to gain “physical access” to Openreach’s existing fibre optic cables has been revoked, with fresh consultations expected in 2018.

In the meantime, connectivity providers have been encouraged to find alternative routes to creating new networks. The need for these routes to be unique and truly diverse in order to overcome possible latency issues in congested areas is encouraging the telecoms industry to embrace its creative competency.

A section of the European Commission’s Digital Single Market Directive on access to existing physical infrastructure recommends that making use of all relevant and available physical infrastructure for the roll-out of communication networks will enhance efficiencies, minimise costs and accelerate the deployment of connectivity.

As more network is required, more use will be made of existing assets in 2018. It will see creative and innovative ways to deliver connectivity, such as using sewers, spare ducts, highways, overhead lines and rail networks for alternative network cabling, or physical fixed infrastructure including buildings and street furniture to reduce costs versus new digging projects, in order to bring services closer to customers, and reduce latency. However, this does not negate the need for the government to continue its involvement. As it pursues the digital status it has set out to achieve, the government must invest in the process of physically building and joining up networks, incentivising proposals and plans from alternative providers to help stimulate competition.

One such example of innovative networks in practice is the recent deal with Thames Water that has allowed SSE Enterprise Telecoms to deploy fibre optic cables within Thames Water’s waste water network – instantly creating new, cost-effective and diverse connections in key business areas. While this helps to avoid the disruption associated with traditional network ‘digs’, it also helps maximise use of redundant waste water networks in a cost-effective way.

This creative approach to new networks is also being seen at a government level, with electrification of the railway. In December 2017 the government set out proposals for how connectivity for passengers on all mainline routes could be dramatically improved by 2025, with Crossrail and HS2 developments inspiring the new policy. Each train could get speeds of around 1 Gigabit Per Second. To deliver the improvements, upgraded trackside infrastructure could be required for reliable connectivity in areas of high passenger demand and in hard to reach areas such as tunnels.

This process of creating new routes to market will undoubtedly gain further traction in 2018 in lieu of unlit fibre access.

Credible alternatives challenging the status quo

It is not just the way that networks will be created that will take on a different complexion in 2018, but also who is responsible for building them. With an ever-increasing demand for connectivity, network infrastructures require higher resiliency and improved diversity. 2017 saw a sharp uptake in companies partnering to achieve these new standards.

In November 2017, Vodafone and CityFibre announced a long-term strategic partnership to bring ultrafast Gigabit-capable full fibre broadband to up to five million UK homes and businesses by 2025. Each party has cited the respective technical capabilities and willingness to invest in the other as a significant factor in the agreement being reached. Such deals are symptomatic of the vast costs and resources required to create new networks from scratch, with operators (often rivals) opting for network deals with other companies to mutually benefit from cost-savings, technical abilities and access to new customer bases.

The UK government has also alluded to the need to “continue to create conditions that encourage investment in the UK’s digital infrastructure” and spoken of its aim of “encouraging the market towards ubiquitous ultrafast services”. But the government must also recognise the need to invest in building out networks in a way more attractive to alternative providers other than national incumbents.

For instance, the government recently rejected Openreach’s voluntary offer to deliver the proposed 10Mbps minimum broadband network due, in part, to other providers who were prepared to start legal action to prevent further monopolisation from BT.

This goes to highlight the increase in joint ventures that we will see in the UK in 2018 with the aim of solving key challenges relating to the digital economy. For instance, rural broadband completion requires robust infrastructure and backhaul, combined with to-the-premise connectivity capabilities. 2018 will play a key part in bidding for government projects, creating vendor-neutral allegiances (with new and old players) and laying the groundwork for projects to be delivered in the proposed timeframes.

The instigators of new network demand

The way that networks are being created and used is undergoing a significant transformation. New and evolving technologies such as SD-WAN are fundamentally altering the way that UK enterprises manage their network estate. Entire business communities are being created with connectivity at the heart, while successful digital transformation initiatives fundamentally rely on their network to underpin everyday operations. The rise in edge computing initiatives mean that data and services are being positioned closer to customer premises to solve latency issues by decentralising network processing.

The constant among these shifts is one fundamental truth – that new, future-proofed networks are necessity. 2018 will see a steep rise in new networks being created in order to meet demand against this business backdrop.

Rural broadband initiatives are one such driver of this change. In December, the government confirmed that universal high-speed broadband will give everyone in the UK access to speeds of at least 10Mbps by 2020. Yet delivering fibre-to-the-home goes significantly deeper than simply flicking a switch. These projects require robust infrastructure and backhaul that forms the spine of rural and to-the-premise connectivity, highlighting the continued need for investment in creating new networks.

And although ultimately 2018 will not see the unveiling of 5G for commercial use, new standards and legislation are being agreed rapidly, and new fibre builds are underway to satisfy its eventual needs. New network development is key to underpinning new technologies. It is essential that new networks are built to cope with increased capacity requirements alongside the higher expectations of what the UK’s digital economy can achieve.

In 2018, SSE Enterprise Telecoms is committed to ’unbundling’ additional BT exchanges in prime business areas around the UK to deliver high performance connectivity services. This will result in a significant increase on the third phase of SSE Enterprise Telecoms’ Project Edge from 2017, and will increase the total number of exchanges served by its national fibre optic network to serve more business postcodes.

Prediction 2: There will be key market movements which will result in a step-change in telecoms

The energy grid becomes ‘smart’

Developments in the energy sector will also have a profound impact on the need for intelligent, future-proofed telecoms networks in 2018. This is underpinned by the government’s proposed transition to a low-carbon future.

There is an increased move towards a greater decentralisation of energy production, with consumers beginning to engage proactively in the market with the introduction of smart grids and smart meters in the home. The changes in the way that electricity is being produced and consumed are having profound implications for energy providers’ networks and the energy markets that support the system. Power flows that were traditionally unidirectional – from the transmission system, through the distribution networks to end consumers – are now increasingly two-way.

To cost efficiently manage decarbonisation of the energy system, a smarter, flexible approach needs to be developed. Many homes will evolve to support ‘connected living’, equipped with smart appliances, smart heating and lighting systems and with access to smart electric meters. But underpinning this must be a solid network infrastructure that is capable of allowing the consumer’s home to interact with the smart grid. In other words, telecoms networks are the mechanism through which the UK’s smart, low-carbon future must be managed.

The 5G spectrum debate continues

The investment required to enable 5G is too great for individual operators to shoulder alone, therefore the market will see alternative infrastructure aggregators emerge – building for multiple service providers and providing a genuine alternative to traditional wholesalers.

The Digital Economy Act 2017 introduced a new power for the Secretary of State to designate a statement setting out the Government’s strategic priorities relating to telecommunications and the management of the radio spectrum, with big implications for 5G.

2018 will be a potentially pivotal year for developing a future-focused spectrum policy to help ensure that spectrum is allocated in a way that supports the Government’s mobile ambitions to be a world leader. The Government wants Ofcom to complete the licensing of the 700 MHz and 3.6-3.8 GHz bands as soon as possible (before the end of 2019 at the latest) including the resolution of any legal challenges.

Today EE has around 45% of the UK’s immediately usable spectrum following its acquisition by BT. And with BT expected to fully merge BT’s consumer arm with EE in the next four years, 2018 will be a crucial year for laying the groundwork for how competitive a 5G auction may be. But the potential dominance of EE/BT as a single player has brought to light a potential monopoly in bidding for 5G auction. Having recognised this, Ofcom has decided to cap the maximum amount of mobile spectrum a British company can own to 37% in order to level the playing field. However, operator Three confirmed the business will seek a judicial review before the UK courts in relation to the competition measures that will apply in the upcoming spectrum auction, with a decision expected to be reached by early 2018.

SSE Enterprise Telecoms sees a possibility that the government may decide to licence spectrum in a way that enables pure-play service providers to take a stake outside of the traditional operators.

Prediction 3: Technology changes will impact networks?

SD-WAN hits the mainstream

Much like how it took several years for business to ‘get cloud’, 2018 will prove to be a pivotal year for the adoption of SD-WAN, which has been lingering in the background of the telecoms industry for several years without ‘taking off’. In 2018 it will make the move to ‘becoming mainstream’.

SD-WAN has had a tough battle in moving from a niche tech curiosity to a critical component of an IT strategy. Analyst house Ovum reported that at the end of 2016 just 2% of large global enterprises had chosen to base their future primary network on SD-WAN technology. But with the continued rise of cloud-based services and applications, the need to adopt innovative technologies like SD-WAN is growing. In 2018 it will move to the mainstream because enterprises are increasingly encountering difficulties in operating performance due to ageing legacy software, and the lesser security capabilities and higher price points of those legacy systems.

As the legacy gap widens, and more and more demands are placed on ageing networks, all things ‘software-defined’ will come to the fore. With a software-based approach, networks can be operated using several means of connectivity – be it using the public internet, Ethernet or optical solutions. SD-WAN is becoming increasingly attractive as it means enterprises are only obligated to pay for the level of service and assurance they require. Such a trend – much like the ‘Uberisation’ of consumer services – is also filtering into the enterprise world as software platforms facilitate greater use of responsive and flexible peer-to-peer transactions, near instantly. It is the flexibility of SD-WAN, and ability to manage the network estate in one place and without lengthy legacy contracts, that will drive its adoption in 2018.

2018 looks to be an exciting time for both the telecoms industry and for SSE Enterprise Telecoms. For more information on what we’re doing and the services we’re offering right now, click here.

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