The new telcos: A field guide

Introduction

The traditional industry view is that “telcos” are a well-defined and fairly cohesive group. Industry associations like GSMA, ETNO, CTIA and others have typically been fairly homogeneous collections of fixed or mobile operators, only really varying in size. The third-ranked mobile operator in Bolivia has not really been that different from AT&T or Vodafone in terms of technology, business model or vendor relationships.

Our own company, STL Partners used to have the brand “Telco 2.0”. However, our main baseline assumption then was that the industry was mostly made up the same network operators, but using a new 2.0 set of business models.

This situation is now changing. Telecom service providers – telcos – are starting to emerge in a huge variety of new shapes, sizes and backgrounds. There is fragmentation in technology strategy, target audiences, go-to-market and regional/national/international scope.

This report is not a full explanation of all the different strategies, services and technological architecture. Instead of analysing all of the “metabolic” functions and “evolutionary mechanisms”, this is more of a field-guide to all the new species of telco that the industry is starting to see. More detail on the enablers – such as fibre, 5G and cloud-based infrastructure – and the demand-side (such as vertical industries’ communications needs and applications) can be found in our other output.

The report provides descriptions with broad contours of motivation, service-offerings and implications for incumbents. We are not “taking sides” here. If new telcos push out the older species, that’s just evolution of those “red in tooth and claw”. We’re taking the role of field zoologists, not conservationists.

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Field guides are collections/lists of natural & human phenomena

animal-species-telcos-stl-partners

Source: Amazon, respective publishers’ copyright

The historical landscape

The term “telco” is a little slippery to define, but most observers would likely agree that the “traditional” telecoms industry has mostly been made up of the following groups of CSPs:

  • MNOs: Countries usually have a few major mobile network operators (MNOs) that are typically national, or sometimes regional.
  • Fixed operators: Markets also have infrastructure-based fixed telcos, usually with one (or a small number) that were originally national state-owned monopolies, plus a select number of other licensed providers, often with greenfield FTTX fibre. Some countries have a vibrant array of smaller “AltNets”, or competitive carriers (originally known as CLECs in the US).
  • Converged operators: These combine fixed and mobile operations in the same business or group. Sometimes they are arms-length (or even in different countries), but many try to offer combined or converged service propositions.
  • Wholesale telcos: There is a tier of a few major international operators that provide interconnect services and other capabilities. Often these have been subsidiaries (or joint ventures) of national telcos.

In addition to these, the communications industry in each market has also often had an array of secondary connectivity or telecom service providers as a kind “supporting cast”, which generally have not been viewed as “telecom operators”. This is either because they fall into different regulatory buckets, only target niche markets, or tend to use different technologies. These have included:

  • MVNOs
  • Towercos
  • Internet Exchanges
  • (W)ISPs
  • Satellite operators

Some of these have had a strong overlap with telcos, or have been spun-out or acquired at various times, but they have broadly remained as independent organisations. Importantly, many of these now look much more like “proper telcos” than they did in the past.

Why are “new telcos” emerging now?

To some extent, many of the classes of new telco have been “hiding in plain sight” for some time. MVNOs, towercos and numerous other SPs have been “telcos in all but name”, even if the industry has often ignored them. There has sometimes been a divisive “them and us” categorisation, especially applied when comparing older operators with cloud-based communications companies, or what STL has previously referred to as “under the floor” infrastructure owners. This attitude has been fairly common within governments and regulators, as well as among operator executives and staff.

However, there are now two groups of trends which are leading to the blurring of lines between “proper telcos” and other players:

  • Supply-side trends: The growing availability of the key building blocks of telcos – core networks, spectrum, fibre, equipment, locations and so on – is leading to democratisation. Virtualisation and openness, as well as a push for vendor diversification, is helping make it easier for new entrants, or adjacent players, to build telecom-style networks
  • Demand-side trends: A far richer range of telecom use-cases and customer types is pulling through specialist network builders and operators. These can start with specific geographies, or industry verticals, and then expand from there to other domains. Private 4G/5G networks and remote/underserved locations are good examples which need customisation and specialisation, but there are numerous other demand drivers for new types of service (and service provider), as well as alternative business models.

Taken together, the supply and demand factors are leading to the creation of new types of telcos (sometimes from established SPs, and sometimes greenfield) which are often competing with the incumbents.

While there is a stereotypical lobbying complaint about “level playing fields”, the reality is that there are now a whole range of different telecom “sports” emerging, with competitors arranged on courses, tracks, fields and hills, many of which are inherently not “level”. It’s down to the participants – whether old or new – to train appropriately and use suitable gear for each contest.

Virtualisation & cloudification of networks helps newcomers as well as existing operators

virtualisation-cloudification-networks-STL-Partners

Source: STL Partners

Where are new telcos likeliest to emerge?

Most new telcos tend to focus initially on specific niche markets. Only a handful of recent entrants have raised enough capital to build out entire national networks, either with fixed or mobile networks. Jio, Rakuten Mobile and Dish are all exceptions – and ones which came with a significant industrial heritage and regulatory impetus that enabled them to scale broadly.

Instead, most new service providers have focused on specific domains, with some expanding more broadly at a later point. Examples of the geographic / customer niches for new operators include:

  • Enterprise private 4G/5G networks
  • Rural network services (or other isolated areas like mountains, offshore areas or islands)
  • Municipality / city-level services
  • National backbone fibre networks
  • Critical communications users (e.g. utilities)
  • Wholesale-only / shared infrastructure provision (e.g. neutral host)

This report sets out…

..to through each of the new “species” of telcos in turn. There is a certain level of overlap between the categories, as some organisations are developing networking offers in various domains in parallel (for instance, Cellnex offering towers, private networks, neutral host and RAN outsourcing).

The new telcos have been grouped into categories, based on some broad similarities:

  • “Evolved” traditional telcos: operators, or units of operators, that are recognisable from today’s companies and brands, or are new-entrant “peers” of these.
  • Adjacent wireless providers: these are service provider categories that have been established for many years, but which are now overlapping ever more closely with “traditional” telcos.
  • Enterprise and government telcos: these are other large organisations that are shifting from being “users” of telecoms, or building internal network assets, towards offering public telecom-type services.
  • Others: this is a catch-all category that spans various niche innovation models. One particular group here, decentralised/blockchain-based telcos, is analysed in more detail.

In each case, the category is examined briefly on the basis of:

  • Background and motivation of operators
  • Typical services and infrastructure being deployed
  • Examples (approx. 3-4 of each type)
  • Implications for mainstream telcos

Table of contents

  • Executive Summary
    • Overview
    • New telco categories and service areas
    • Recommendations for traditional fixed/mobile operators
    • Recommendations for vendors and suppliers
    • Recommendations for regulators, governments & advisors
  • Introduction
    • The historical landscape
    • Why are “new telcos” emerging now?
    • Where are new telcos likeliest to emerge?
    • Structure of this document
  • “Evolved” traditional telcos
    • Greenfield national networks
    • Telco systems integration units
    • “Crossover” Mobile, Fixed & cable operators
    • Extra-territorial telcos
  • Adjacent wireless providers
    • Neutral host network providers
    • TowerCos
    • FWA Fixed Wireless Access (WISPs)
    • Satellite players
  • Enterprise & government telcos
    • Industrial / vertical MNOs
    • Utility companies offering commercial telecom services
    • Enterprises’ corporate IT network service groups
    • Governments & public sector
  • New categories
    • Decentralised telcos (blockchain / cryptocurrency-based)
    • Other “new telco” categories
  • Conclusions

Related Research

 

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Airports: The roles of 5G & private networks

A deep dive into private networks for the aviation vertical

This report is intended to be both a specific examination of an important sector of opportunity for Private 5G (P5G) and an example of the complexity of major industrial sectors and campus-based environments. It also covers opportunities for MNOs.

Airports have been among the earliest sites for private cellular and remain a major focus for vendors and service providers, as solutions mature and spectrum options proliferate. They already generate huge investments into public cellular (indoor and outdoor) as well as being headline sites for Wi-Fi deployment and use. They also employ dozens of other wireless technologies, from radar to critical voice communications.

In the case of airports, the largest are so large and diverse that they actually resemble cities, with “private” networks serving an environment actually quite similar to a small national operator or regional MNO. For example, Dallas Fort-Worth airport spans 27 square miles – larger than the island of Manhattan or the principality of San Marino. They may have 100s of companies as tenants, and 10000s of employees – as well as passengers, vehicles and IoT devices. This may mean that they end up with multiple private wireless networks in different parts of the airfield – from the passenger terminal to maintenance hangars to hotels, to the car-rental facility.

They are also intensive Coordination Age ecosystems. Their effective operation involves the safe and secure management of millions of physical and digital assets across multiple parties, billions of dollars, and many lives.

Often technology product and marketing executives think of industry sectors as monolithic (“finance”, “retail”, “oil and gas” etc), typically aligning with familiar industry classification codes. The truth is that each industry has multiple sub-sectors and varied site types, numerous applications, several user-groups, arrays of legacy systems and technology vendors, and differing attitudes and affordability of wireless solutions.

STL Partners hopes that this exercise examining airports will prompt suppliers and operators to drill into other vertical sectors in similar depth. Depending on the response to this type of document, we may well write up other areas in similar fashion in future. (We are also available for private analysis projects).

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Sector trends and drivers affecting private 5G networks

This report is not the appropriate venue for a full analysis of the aviation and airport industry. However, a number of top-level trends are important to understand, as there is a fairly direct link to the deployment of cellular technologies and private 4G/5G.

Trends for airlines

Before the pandemic, there was a sustained growth in worldwide air-passenger traffic, fuelled by the growth of Chinese and Indian middle-classes, as well as inter-regional and long-haul flights in and between Europe, Asia, the Americas and the Middle East. Forecasts were continued for growth, with air-freight also increasing alongside passenger numbers.

This growth resulted in numerous impacts on aviation more broadly:

  • Construction of many entirely new airports, along with extra terminals and refurbishments at established sites. Examples have included immense new airports at Beijing, Doha and Istanbul. These developments typically include huge focus on efficiency, IoT and safety – all heavily reliant on connectivity.
  • Low-cost and “basic” airlines such as Southwest, EasyJet, AirAsia and others have grown rapidly (at least pre-pandemic). Some have built dedicated terminals. Many have a huge focus on fast “turns” of aircraft between arrival and departure. This needs enhanced coordination and communications between multiple ground-service providers to manage 50+ tasks, from baggage unloading to cleaning and refuelling.
  • Established airlines focusing on greater efficiency, novel route choices, new hub airports, better customer satisfaction via information and interactivity throughout their journeys, as well as pushing ancillary services such as contract maintenance. Again, connectivity plays a variety of roles, from hangars to in-flight wireless.
  • Major warehousing and logistics centres built at airports for companies such as Fedex and UPS, as well as eCommerce players such as Amazon starting to build fleets of planes and on- or near-airport facilities. These typically feature high levels of automation and wide use of robotics.
Long-term air passenger growth (pre-pandemic)

Long-term air passenger growth (pre-pandemic)

Airports as “hubs” for multiple businesses

Many airports now operate on-site business centres, hotels, large retail facilities – as well as growing sophistication of air-freight, contract maintenance services and aircraft refits. Each is often a business in its own right, with separate buildings – but must also coordinate with the central airport authority in terms of security, traffic, signage and vehicle movements.

As well as their own internal connectivity requirements for employees and a growing range of IoT systems, the site-owners are also responsible for wired and wireless links for stakeholders such as:

  • Transportation companies
    • Airlines, both within the terminals and at hangars / warehouses and nearby offices.
    • Shipping agents and freight forwarders
    • Logistics and package-delivery firms
  • Services providers
    • National mobile network operators
    • Retailers and other concessions
    • Vehicle rental agencies
    • Bus, rail, taxi & tour companies
    • Caterers
    • Fuel companies
    • Security firms
    • On-site hotels, warehouses and business parks
    • Insurance and finance organisations
  • Operations and public safety
    • Police and firefighters
    • Medical services
    • Air / port traffic control
    • Power and lighting providers
    • Construction contractors

Many of these groups could potentially justify their own investments in private cellular networks (as well as indoor coverage and Wi-Fi if they have dedicated buildings). An open question is whether airport authorities will try to deploy fully campus-wide networks, or whether a diverse array of separate infrastructures will emerge organically.

Industry transformation, automation and IoT-led innovation

As well as the airlines, the airport authorities have become ever-more focused on technology of the site overall. They are aware of operational efficiency, security and safety – and increasing the potential to earn extra revenues from passengers. A very broad array of existing and new use-cases are leaning on improved connectivity, such as:

  • In-building coverage (and huge capacity) for passengers and workers, all of whom expect both multi-network cellular and ubiquitous Wi-Fi availability
  • Prolific use of digital sign-boards for passengers, staff, plane/ship crews etc
  • Freight-tracking, including details about pallets and containers
  • Security cameras and sensors
  • Smart lighting for runways, loading areas and local roadways
  • Support of complex and mission-critical baggage-handling systems
  • Border and customs functions, including automated passport scanners with video analytics
  • “Smart building” technology ensuring optimal use of ventilation, heating, lighting and safety sensors
  • Robotic and remote-controlled vehicles, such as tugs or drones
  • Voice communications systems, now evolving from 2-way radios to cellular-based systems
  • Maintenance systems for aircraft in hangars – increasingly with high-definition video inspections, augmented reality for engineers, and strict requirements on documentation and record-keeping.

Security and safety concerns

Airports have always had to contend with security issues, from immigration to fire-safety, anti-terrorism, theft and smuggling operations. This has required continued evolution of screening systems, cameras, staff access control and multiple layers of analytics software.

This translates to private cellular in a number of ways:

  • Desire to update legacy critical communications systems (e.g. TETRA radios) to more-capable LTE or 5G equivalents, to enable data, video and other applications.
  • Requirement for networks with a bias towards data uplink rather than downlink, especially for HD video and other security  This may mean a preference for separate frequencies to the public networks, in order to accommodate a different mix of up/down traffic.
  • Involvement of a wide range of systems integrators and critical communications specialists with a long history of deploying reliable wireless  Many are adopting 4G and 5G skill-sets internally.
  • Requirement for 100% coverage of the airport environment, both indoors and outdoors as far as the perimeter fence. This may be outside the coverage of many public networks, especially for higher-frequency 5G

Complex wireless environment

It is important to recognise that airfields have a huge array of different technology systems, many of which depend on radio communications or other electromagnetic use-cases. Some of these – such as radars – can occupy frequency bands quite close to those used for 4G or 5G mobile. There are also assorted niche applications, for air traffic control, critical communications among ground workers and emergency services, satellite connectivity for aircraft, scientific instruments for weather forecasting and many others. Wi-Fi is used intensively, both inside the terminal and across some outdoor areas. Some airports have sections used by the military as well as civil aviation, with yet another group of radio types and frequencies employed.

This has several implications:

  • Unlike many other sites, cellular communications is not the most important use of spectrum  Mobile networks – whether public or private – need to fit alongside a huge variety of other services and functions.
  • Some frequency bands that are offered by regulators on a local basis for private 4G/5G may not be available for licensing at airports, as there may be important incumbent users.
  • Airports take increasing interest in overall spectrum management tools, as well as site surveys and the ability to intervene rapidly in case of problems.
  • The aviation industry has a large number of wireless and RF specialists, some of whom are likely to be cross-trained in cellular  This makes it more capable than many sectors to adopt private networks rather than always relying on public MNO service.

Covid-19 Pandemic

Since early 2020, the aviation and airline sector has been decimated by travel restrictions imposed because of the pandemic. Traffic and passenger levels at many airports fell to 20% of pre-pandemic levels or lower. However, as vaccination programs enable the re-opening of travel, growth is starting to occur again.

Various after-effects of the pandemic will increase the need for automation, connectivity and communications. There are new security-checks on vaccination and testing status, more cameras for fever-detection and mask-compliance, automated sanitising of surfaces and much more. Many airports have needed to reconfigure the layouts of their terminals to accommodate testing centres, facilitate social distancing, or sometimes close areas in order to reduce costs. This puts a premium on wireless connectivity that can be adapt to new circumstances rapidly.

Another impact of the last 2 years has been growth in the importance of cargo shipments, from both dedicated freight terminals and in commercial airliners. This has led to new warehouse facilities being constructed, as well as different types of asset tracking and loading vehicles being employed. Again, this has driven the need for better connectivity.

Table of content

  • Executive Summary
    • Overview
    • Recommendations for Airport Operators & Airlines
    • Recommendations for Mobile Operators
    • Recommendations for Regulators & Policymakers
    • Recommendations for Vendors
  • Introduction
    • Sector trends and drivers affecting private networks
  • Evolving airport use-cases for 4G/5G
    • Understanding airports’ layout
    • Background: Public cellular at airports
    • From public to private connectivity: growth in B2B wireless
    • Specific use-cases for private 4G / 5G at airports
  • Airports – a subset of “campus” networks
    • Characteristics of campus networks
    • Adjacent trends
    • Campus networks: who is responsible?
  • Building & operating airport private networks
    • Supply-side evolution for airport networks
    • Airport stakeholders
    • Monetisation opportunities
    • Airport private network case studies
    • Can public 5G network slicing work instead of private 5G?
    • Where does Wi-Fi & other wireless technology fit?

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