5 Key Trends For Telecoms In 2017

December 12, 2016, Category: News

Propelled by growth in the digital economy and changing consumer demands, the industry is enjoying an unprecedented demand for network services. The forecast growth from new markets such as IoT applications is huge. 2016 saw mobile data traffic increase by 64% and residential/small business fixed broadband traffic grew by 40% in the UK alone. Technology investment is crucial to the industry’s ability to keep pace, and the UK government’s commitment of £1bn to progress 5G and fibre networks will be welcomed. High-speed broadband is increasingly being viewed as a fundamental human right, with calls for the industry to increase investment in networks to deliver improvements in fibre optic connectivity and 4G coverage. As ever, the industry has its challenges for telcos to manoeuvre. The economics of running a network remain complex and increased traffic does not automatically translate into increased profits. The proper functioning of the market still requires effective regulation to facilitate competition and protect consumers. However, the market must be allowed to develop and progress in a way that encourages commercial investment in new networks. One of the key challenges in the coming year will be for regulators to settle on a balanced approach to intervention as the EU regulatory regimes are overhauled. Against this backdrop, here are the five key trends we expect to see in 2017…

Progress on 5G and Fibre Deployments

Whilst it is looking unlikely that 5G services will be launched in the UK prior to 2020, 2017 will see progress in the development of 5G. Spectrum auctions of airwaves in the 3.4Ghz range (which can be used for 5G services) take place next year. As part of the Chancellor of the Exchequer’s Autumn Statement, the government has committed to invest over £1bn over the next 4 years on 5G and the roll-out of new fibre networks. This commitment is to be delivered through:

  • A £400m Digital Infrastructure Investment Fund (which is expected to be matched by private investment) to invest in new fibre networks
  • 100% business rates relief for new full-fibre infrastructure for a 5 year period
  • Funding to local areas to support investment in national fibre networks to meet both business and public sector demands (a consultation with industry on delivery methods is expected shortly)
  • Funding for a coordinated programme of integrated fibre and 5G trials

 

Cross-Market M&A

There is a strong desire by European competition authorities to maintain a level of in-country competition amongst mobile network operators, as demonstrated by the EU’s decision to block the merger of O2 UK and Three UK. However, it seems more likely that ‘cross-market’ mergers would be treated more favourably if they involve the merger of an operator with a business in a different sector or country. The industry will no doubt be closely following the review by US regulatory authorities of the AT&T and Time Warner deal.

Regulatory Reform

As part of the Digital Single Market review, the EU is reviewing the EU Telecoms Directives and has recently outlined its proposals for reform. In the UK, Ofcom are also carrying out their own review into communications. Both reviews are aiming to rebalance the regulatory regime to encourage further investment in high-speed networks. Proposals include a new universal service regime to provide guaranteed access to broadband networks with a minimum speed, and also a lighter touch approach to regulating providers in relation to networks which operate on a wholesale-only basis, or those that are co-funded by other operator investors.

Growth in IoT

The market for IoT-enabled devices is still in relative infancy, but rapid growth is predicted with ever increasing applications gaining traction in wide-ranging industries such as healthcare, energy and the automotive market. The latest research from Gartner suggests that the number of connected devices will reach 25bn connections in 2020 – that’s twice the number of mobile devices.

Diversification

Operators will continue to develop new service lines to increase profitability. Many operators already provide content services and we can expect to see further expansion into areas such as cloud services, financial services and content provision.

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