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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LPWA: Which way to go for IoT?

Introduction: Why is LPWA important?

The Internet of Things (IoT) space is huge and incredibly diverse. It spans everything from remote-control of commercial drones, to consumer wearables, in-building sensors and smart electricity metering. It has the potential to improve cities’ safety, industrial productivity and enhance human health and welfare. Each area has its own characteristics in terms of connectivity, management, platform and security requirements.

This briefing report focuses on “narrowband”, long-distance IoT connectivity – typically applications which operate at speeds of 1Mbit/s or less, and perhaps only transmit a few kilobytes per day. That contrasts with the high-speed, low-latency connections IoT connections that people reference for wearables like AR headsets, or those streaming real-time telemetry and cloud-access, from complex devices like robots or huge arrays of sensors.

It is frequently said that connectivity represents only a small percentage of the overall revenue and value opportunity around IoT. Yet while that is, objectively, true, it ignores the anchoring and potential “pull-through” on other layers, especially for LPWA and narrowband access, where optimisation for power consumption and coverage is critical for many use-cases. Provision of connectivity to a device or application gives the provider (or owner) a head-start on exploiting the entire solution stack, for example in terms of collection of operational data for machine-learning and analytics.

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Against that backdrop, it is understandable why telcos and their vendors and industry bodies are putting so much attention on IoT-centric networking. That encompasses everything from 5G headline use-cases about ultra-low latency connections, through to the desire to manage smart homes and cities’ infrastructure, or very simple sensors.

It is already clear that no one single technology – or even two or three – can cover everything to do with IoT. There are too many dimensions – between 5 and 10 important ones can be identified (see page 19 of the report) – which leads to a vast set of combinations. No vendor, and no operator, will be able to optimally cover everything, while for any given problem there is likely to be an overlap of “reasonable” solutions.

An important part of the mix, which STL Partners has considered before in 2016 is for low-power, wide-area LPWA connectivity. This is envisaged to connect many of the “billions” of endpoints which are widely anticipated – inexpensive sensors, actuators, personal devices, tags and other gadgets – and especially those spread over large distances (think 100s of metres, up to 10s of kilometres or more).

Typical LPWA / narrowband applications

In particular, LPWA focuses on low-bandwidth products, rather than those needing enough speed for video or rich telemetry to/from the cloud. Most, but not all, LPWA applications are fairly tolerant of delay/latency – temperature sensors or street-lights don’t need millisecond response times – but security may still be very important.

They need to be simple to deploy, inexpensive, energy-efficient, low-maintenance and use radio technology suitable for hard-to-reach locations. Most of the new LPWA networks can connect many end devices via a single base station, usually over a long (1-10km) distance. This brings trade-offs, however: slower data transmission rates and less-frequent updates/messages.

  • New cycle-sharing services, where the bikes don’t need special racks, but have remote-controlled padlocks and can be left/picked-up (and tracked) anywhere in an urban area.
  • Smart electricity/gas meters for homes – which may be in basements, or wherever the pipes/wires enter the building.
  • Asset-tracking, such as attaching beacons to expensive tools on large sites.
  • Smart lighting systems for cities, where lamp-posts can be switched on remotely – but also house sensors (e.g. for weather or traffic) which report back data to a central system.
  • Supply-chain management, such as monitoring of shipments of pharmaceuticals from manufacture to dispensary.

Shared bicycles’ locks have requirements for mobility & long battery life

LPWA applications

Key LPWA technologies & deployments

There are currently four main LPWA technologies that dominate IoT deployments and discussion: SigFox, LoRaWAN, NB-IoT and LTE-M (sometimes called LTE Cat-M1). There are also a number of other less-prominent solutions, which can be important for certain niches. Various hybrids and combinations are possible as well – plus many short-range solutions like Wi-Fi, ZigBee and Bluetooth, which are outside the main scope of discussion here.

The main four include two that are endorsed by the mobile industry “establishment”, as they are 3GPP standards that fit into the broader 4G family. In most cases, they are intended to work in dedicated (licensed) spectrum bands, typical for most mobile networks. The cellular LPWA variants include:

LTE-M: This is essentially a de-tuned, cheaper, lower-power version of “normal” LTE. It can also support VoLTE voice communications. It is focused on mid-range speeds of up to 1Mbit/s. An earlier version of LTE designed for M2M was called LTE-Cat1, although it is not in widespread use.

NB-IoT: This is 3GPP’s first attempt at an ultra-low power, long battery-life standard. The NB stands for Narrowband, meaning below 100kbit/s data speeds, and often considerably less than that. This means can fit into quite small slices of spectrum.

EC-GSM: As well LTE-M and NB-IoT, 3GPP is also working on a more-modern version of 2G connectivity, especially suitable for countries or rural regions which do not yet have 4G coverage, yet need an improved version of GPRS M2M, for low-power applications like agriculture. It has had little traction so far.

5G “Massive” MTC: One of the main promised use-cases of 5G networks is for ultra-dense, low- power IoT networks – potentially tens of thousands of nodes per cell, or even more. This is commonly referred to as “massive IoT” or MTC (machine-type communications). While there may be evolution of NB-IoT towards that (e.g. NB-IoT2), the full 5G version is only likely to emerge in 2020 or beyond.

Outside of the “mainstream” cellular-industry IoT connectivity technologies created by 3GPP, there is a wide variety of other options. Some of these have been created by individual vendors which retain core rights to the IPR, while others have been standardised by other IT/networking bodies such as IEEE. Mostly, they work in unlicensed spectrum – which makes them cheaper to deploy (especially in limited areas), but risks interference.

Table of Contents

  • Executive Summary
  • Introduction: Why is LPWA important?
  • Typical LPWA / narrowband applications
  • Key LPWA technologies & deployment
  • Status and deployments
  • LoRa / LoRaWAN
  • SigFox
  • Strategic considerations
  • Multiple dimensions determine the “best” LPWA for each use
  • LPWA delivery models: Service, private, solution or other?
  • Spectrum considerations
  • IoT developers and ecosystem
  • Hybrid and multiple networks
  • Conclusions and recommendations
  • Vertical solutions?
  • Conclusions

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Connectivity for telco IoT / M2M: Are LPWAN & WiFi strategically important?

Introduction

5G, WiFi, GPRS, NB-IoT, LTE-M & LTE Categories 1 & 0, SigFox, Bluetooth, LoRa, Weightless-N & Weightless-P, ZigBee, EC-GSM, Ingenu, Z-Wave, Nwave, various satellite standards, optical/laser connections and more….. the list of current or proposed wireless network technologies for the “Internet of Things” seems to be growing longer by the day. Some are long-range, some short. Some high power/bandwidth, some low. Some are standardised, some proprietary. And while most devices will have some form of wireless connection, there are certain categories that will use fibre or other fixed-network interfaces.

There is no “one-size fits all”, although some hope that 5G will ultimately become an “umbrella” for many of them, in the 2020 time-frame and beyond. But telcos, especially mobile operators, need to consider which they will support in the shorter-term horizon, and for which M2M/IoT use-cases. That universe is itself expanding too, with new IoT products and systems being conceived daily, spanning everything from hobbyists’ drones to industrial robots. All require some sort of connectivity, but the range of costs, data capabilities and robustness varies hugely.

Two over-riding question themes emerge:

  • What are the business cases for deploying IoT-centric networks – and are they dependent on offering higher-level management or vertical solutions as well? Is offering connectivity – even at very low prices/margins – essential for telcos to ensure relevance and differentiate against IoT market participants?
  • What are the longer-term strategic issues around telcos supporting and deploying proprietary or non-3GPP networking technologies? Is the diversity a sensible way to address short-term IoT opportunities, or does it risk further undermining the future primacy of telco-centric standards and business models? Either way telcos need to decide how much energy they wish to expend, before they embrace the inevitability of alternative competing networks in this space.

This report specifically covers IoT-centric network connectivity. It fits into Telco 2.0’s Future of the Network research stream, and also intersects with our other ongoing work on IoT/M2M applications, including verticals such as the connected car, connected home and smart cities. It focuses primarily on new network types, rather than marketing/bundling approaches for existing services.

The Executive Briefing report IoT – Impact on M2M, Endgame and Implications from March 2015 outlined three strategic areas of M2M business model innovation for telcos:

  • Improve existing M2M operations: Dedicated M2M business units structured around priority verticals with dedicated resources. Such units allow telcos to tailor their business approach and avoid being constrained by traditional strategies that are better suited to mobile handset offerings.
  • Move into new areas of M2M: Expansion along the value chain through both acquisitions and partnerships, and the formation of M2M operator ‘alliances.’
  • Explore the Internet of Things: Many telcos have been active in the connected home e.g. AT&T Digital Life. However, outsiders are raising the connected home (and IoT) opportunity stakes: Google, for example, acquired Nest for $3.2 billion in 2014.
Figure 2: The M2M Value Chain

 

Source: STL Partners, More With Mobile

In the 9 months since that report was published, a number of important trends have occurred in the M2M / IoT space:

  • A growing focus on the value of the “industrial Internet”, where sensors and actuators are embedded into offices, factories, agriculture, vehicles, cities and other locations. New use-cases and applications abound on both near- and far-term horizons.
  • A polarisation in discussion between ultra-fast/critical IoT (e.g. for vehicle-to-vehicle control) vs. low-power/cost IoT (e.g. distributed environmental sensors with 10-year battery life). 2015 discussion of IoT connectivity has been dominated by futuristic visions of 5G, or faster-than-expected deployment of LPWANs (low-power wide-area networks), especially based on new platforms such as SigFox or LoRa Alliance.
  • Comparatively slow emergence of dedicated individual connections for consumer IoT devices such as watches / wearables. With the exception of connected cars, most mainstream products connect via local “capillary” networks (e.g. Bluetooth and WiFi) to smartphones or home gateways acting as hubs, or a variety of corporate network platforms. The arrival of embedded SIMs might eventually lead to more individually-connected devices, but this has not materialised in volume yet.
  • Continued entry, investment and evolution of a broad range of major companies and start-ups, often with vastly different goals, incumbencies and competencies to telcos. Google, IBM, Cisco, GE, Intel, utility firms, vehicle suppliers and 1000s of others are trying to carve out roles in the value chain.
  • Growing impatience among some in the telecom industry with the pace of standardisation for some IoT-centric developments. A number of operators have looked outside the traditional cellular industry suppliers and technologies, eager to capitalise on short-term growth especially in LPWAN and in-building local connectivity. In response, vendors including Huawei, Ericsson and Qualcomm have stepped up their pace, although fully-standardised solutions are still some way off.

Connectivity in the wider M2M/IoT context

It is not always clear what the difference is between M2M and IoT, especially at a connectivity level. They now tend to be used synonymously, although the latter is definitely newer and “cooler”. Various vendors have their own spin on this – Cisco’s “Internet of Everything”, and Ericsson’s “Networked Society”, for example. It is also a little unclear where the IoT part ends, and the equally vague term “networked services” begins. It is also important to recognise that a sizeable part of the future IoT technology universe will not be based on “services” at all, although “user-owned” devices and systems are much harder for telcos to monetise.

An example might be a government encouraging adoption of electric vehicles. Cars and charging points are “things” which require data connections. At one level, an IoT application may simply guide drivers to their closest available power-source, but a higher-level “societal” application will collate data from both the IoT network and other sources. Thus data might also flow from bus and train networks, as well as traffic sensors, pollution monitors and even fitness trackers for walking and cycling, to see overall shifts in transport habits and help “nudge” commuters’ behaviour through pricing or other measures. In that context, the precise networks used to connect to the end-points become obscured in the other layers of software and service – although they remain essential building blocks.

Figure 3: Characterising the difference between M2M and IoT across six domains

Source: STL Partners, More With Mobile

(Note: the Future of Network research stream generally avoids using vague and loaded terms like “digital” and “OTT”. While concise, we believe they are often used in ways that guide readers’ thinking in wrong or unhelpful directions. Words and analogies are important: they can lead or mislead, often sub-consciously).

Often, it seems that the word “digital” is just a convenient cover, to avoid admitting that a lot of services are based on the Internet and provided over generic data connections. But there is more to it than that. Some “digital services” are distinctly non-Internet in nature (for example, if delivered “on-net” from set-top boxes). New IoT and M2M propositions may never involve any interaction with the web as we know it. Some may actually involve analogue technology as well as digital. Hybrids where apps use some telco network-delivered ingredients (via APIs), such as identity or one-time SMS passwords are becoming important.

Figure 4: ‘Digital’ and IoT convergence

Source: STL Partners, More With Mobile

We will also likely see many hybrid solutions emerging, for example where dedicated devices are combined with smartphones/PCs for particular functions. Thus a “digital home” service may link alarms, heating sensors, power meters and other connections via a central hub/console – but also send alerts and data to a smartphone app. It is already quite common for consumer/business drones to be controlled via a smartphone or tablet.

In terms of connectivity, it is also worth noting that “M2M” generally just refers to the use of conventional cellular modems and networks – especially 2G/3G. IoT expands this considerably – as well as future 5G networks and technologies being specifically designed with new use-cases in mind, we are also seeing the emergence of a huge range of dedicated 4G variants, plus new purpose-designed LPWAN platforms. IoT also intersects with the growing range of local/capillary[1] network technologies – which are often overlooked in conventional discussions about M2M.

Figure 5: Selected Internet of Things service areas

Source: STL Partners

The larger the number…

…the less relevance and meaning it has. We often hear of an emerging world of 20bn, 50bn, even trillions of devices being “networked”. While making for good headlines and press-releases, such numbers can be distracting.

While we will definitely be living in a transformed world, with electronics around us all the time – sensors, displays, microphones and so on – that does not easily translate into opportunities for telecom operators. The correct role for such data and forecasts is in the context of a particular addressable opportunity – otherwise one risks counting toasters, alongside sensors in nuclear power stations. As such, this report does not attempt to compete in counting “things” with other analyst firms, although references are made to approximate volumes.

For example, consider a typical large, modern building. It’s common to have temperature sensors, CCTV cameras, alarms for fire and intrusion, access control, ventilation, elevators and so forth. There will be an internal phone system, probably LAN ports at desks and WiFi throughout. In future it may have environmental sensors, smart electricity systems, charging points for electric vehicles, digital advertising boards and more. Yet the main impact on the telecom industry is just a larger Internet connection, and perhaps some dedicated lines for safety-critical systems like the fire alarm. There may well be 1,000 or 10,000 connected “things”, and yet for a cellular operator the building is more likely to be a future driver of cost (e.g. for in-building radio coverage for occupants’ phones) rather than extra IoT revenue. Few of the building’s new “things” will have SIM cards and service-based radio connections in any case – most will link into the fixed infrastructure in some way.

One also has to doubt some of the predicted numbers – there is considerable vagueness and hand-waving inherent in the forecasts. If a car in 2020 has 10 smart sub-systems, and 100 sensors reporting data, does that count as 1, 10 or 100 “things” connected? Is the key criterion that smart appliances in a connected home are bought individually – and therefore might be equipped with individual wide-area network connections? When such data points are then multiplied-up to give traffic forecasts, there are multiple layers of possible mathematical error.

This highlights the IoT quantification dilemma – everyone focuses on the big numbers, many of which are simple spreadsheet extrapolations, made without much consideration of the individual use-cases. And the larger the headline number, the less-likely the individual end-points will be directly addressed by telcos.

 

  • Executive Summary
  • Introduction
  • Connectivity in the wider M2M/IoT context
  • The larger the number…
  • The IoT network technology landscape
  • Overview – it’s not all cellular
  • The emergence of LPWANs & telcos’ involvement
  • The capillarity paradox: ARPU vs. addressability
  • Where does WiFi fit?
  • What will the impact of 5G be?
  • Other technology considerations
  • Strategic considerations
  • Can telcos compete in IoT without connectivity?
  • Investment vs. service offer
  • Regulatory considerations
  • Are 3GPP technologies being undermined?
  • Risks & threats
  • Conclusion

 

  • Figure 1: Telcos can only fully monetise “things” they can identify uniquely
  • Figure 2: The M2M Value Chain
  • Figure 3: Characterising the difference between M2M and IoT across six domains
  • Figure 4: ‘Digital’ and IoT convergence
  • Figure 5: Selected Internet of Things service areas
  • Figure 6: Cellular M2M is growing, but only a fraction of IoT overall
  • Figure 7: Wide-area IoT-related wireless technologies
  • Figure 8: Selected telco involvement with LPWAN
  • Figure 9: Telcos need to consider capillary networks pragmatically
  • Figure 10: Major telco types mapped to relevant IoT network strategies