Tag: Telefonica

The data-driven telco: How to progress

Becoming data-driven is an evolving journey

Telcos have started on the path to leveraging data more fully but techniques, technologies and their implications are continuously emerging and evolving – posing new opportunities and challenges for the teams responsible for plotting their course.

Although somewhat overused, the “data-driven” refrain provides a banner under which the Chief Data Officer (CDO) and other teams throughout the telco can remind the organisation of the importance of the work that they are doing.  As new technologies become available and capabilities such as automation progress in their sophistication, there will continue to be a steady stream of demands on the data team from across the organisation.  There will also be an increase in demand from outside the organization as telcos begin to play in multiple new ecosystems.

Enter your details below to download an extract of the report

STL Partners conducted primary and secondary research to determine the current priorities for telcos that have progressed some way down the data-driven track.  During our primary research, we spoke to four Chief Data Officers (CDOs) – or equivalent – at Orange, Zain, Telefónica and Vodafone and asked them about their core focus areas in the short- and mid-term and how they were driving forward the data-driven telco agenda. Topics for discussion included:

  • Their vision and expected future strategy
  • Their current focus areas
  • The work that they are undertaking to improve organisational structure and culture
  • Their priorities for future technology roll out.

As shown in the figure below, we note that some areas of priority remain unchanged from previous years and continue to be a focus in 2023, while new ones (shown in red) are appearing on the horizon.

Priorities for the CDO and their team

Roles of data-driven telco CDO

Source: STL Partners

Priorities are evolving from being focused specifically on accessing data and other relatively discrete A3 projects, to much more strategic and organisation-wide activities. As such, the scope of the CDO role is expanding.

Table of contents

  • Executive Summary
    • Recommendations
    • Vision and strategy
    • Organisation and culture
    • Technology
    • Next steps
  • Introduction
  • Priority 1: Select the right internal focus
    • How to select the most impactful projects
    • How to maintain a pipeline of successful projects
  • Priority 2: Create a joined-up organisation
    • A joined-up organization structure
    • Promoting the data culture
    • Skill sets of the Chief Data Officer (CDO)
  • Priority 3: Delivering a useable data set
    • Building a long-term data quality practise
    • Hybrid-cloud data deployment
  • Priority 4: Building data tools for all
  • Conclusion

Related research

 

Enter your details below to download an extract of the report

How to embed sustainability across a telco

Why telcos must embrace sustainability

On a macro level, the need to focus on sustainability is clear. We need to use the world’s finite resources more efficiently. They are depleting, and this is an existential threat to us and the planet. Governments and businesses are beginning to understand that the onus is largely on them to bring about the necessary changes. Telecoms operators have a vital role to play in this effort, as outlined in our vision for the Coordination Age.

For businesses, the need to embrace sustainability is no longer abstract, and the consequences of not doing so are now material. Telcos are acknowledging that their future success is linked closely to their ability to be credible and resilient with regards to sustainability. Increasingly, a more sustainable company is going to be a more valuable company. We can already see this; companies that are focusing more of their efforts on sustainability are performing better financially. Things will continue to shift in this direction. Each year sustainability is moving higher up the global agenda and climate action is becoming ever more imperative.

Enter your details below to download an extract of the report

All telecoms’ stakeholders have a vested interest in sustainability:

  • Customers – primarily enterprises – but also some consumers, want to purchase sustainable products so they can demonstrate progress towards their own net-zero targets or rest assured that they are taking responsibility and contributing towards a sustainable future. Nearly all operators we spoke with for this research reported rising demands to prove sustainability credentials in customer request for proposals (RFPs).
  • Employees want to work for a company that is sustainable and gain a sense of purpose from contributing to their company’s sustainability A recent survey from IBM found that 67% of respondents are more willing to apply for jobs with environmentally sustainable companies, and 68% are more willing to accept positions from such companies.
  • Governments are increasingly more prepared to help companies that are sustainable in the form of tax incentives, grants, loans and subsidies. The US government recently announced nearly US$400 billion in federal funding as part of its Inflation Reduction Act, much of which is aimed at tackling climate change. The European Commission has also adopted a package of proposals labelled The European Green Deal, and there are talks of further measures being adopted in response to US legislation.
  • Regulators will also increasingly favour companies that are sustainable and hurt companies that are not. Governments have their own ambitious net-zero targets, for instance the UK targets net-zero by 2050. They are likely to begin enforcing stricter regulations as they try to meet these targets.
  • Ultimately, all of this means that shareholders and investors are beginning to put pressure on companies to be sustainable, because the consequences of avoiding it will be too costly to a business over the long term.

There may be some very short-term gains to be made by sidestepping and ignoring sustainability, but these will quickly disappear. Even in the medium term, companies that cannot demonstrate concrete progress on sustainability will struggle to compete.

As Figure 1 demonstrates, getting to net-zero is not straightforward. Telcos that still have low hanging fruit to capture, such as AT&T and T-Mobile, can make faster progress, but those that are further along in their journeys such as BT and Telefónica must now work towards more incremental gains. Other operators risk facing rising challenges in sustainability depending on their strategies, as illustrated by Softbank which has pursued an aggressive M&A strategy to expand beyond telecoms since 2019. This reinforces the importance of ensuring buy-in and commitment at the C-suite and across the whole organisation.

Comparing carbon emissions of major telcos

Source: STL Partners

This report focuses on how to embed sustainability across key telco areas, including the sustainability team, the C-suite, network operations and IT, procurement, the consumer and enterprise units and the finance unit. Each section identifies key actions that these units can take and associated KPIs they can adopt in order to catalyse and measure progress. The research is based on interviews with eight telecoms operators globally as well as extensive analysis of telecoms sustainability initiatives.

Table of contents

  • Executive Summary
  • Why telcos must embrace sustainability
  • Sustainability team: Direction and agenda
    • Developing sustainability targets and agenda
    • Working towards sustainability targets
    • Facilitating and coordinating change
  • C-suite: Vision and structure
    • Vision building
    • Structure
    • Incentives are crucial to delivery on commitments
  • Sustainable network operations and IT
  • Sustainable procurement
    • Circular economy
    • Identifying sustainable suppliers and educating SMEs
    • Fair working practices
  • Sustainability in enterprise and consumer units
    • Delivering services in more sustainable ways
    • Sustainability-enabling products for enterprise
    • Helping consumers become more sustainable
  • Sustainability is now integral to telco finance and investment
    • Future proofing telcos
    • Green finance
    • Appealing to ESG investors
  • Index

  • Related research

  • Driving sustainability in telco metro networks
  • Telecoms sustainability scorecard
  • Net-zero enablement use case directory

Telco Cloud Deployment Tracker: Deploying NFs on public cloud without losing control

In this update, we present a review of telco cloud deployments for the whole of 2022 and discuss trends that will shape the year ahead. Fewer deployments than expected were completed in 2022. The main reason for this was a delay in previously announced 5G Standalone (SA) core roll-outs, for reasons we have analysed in a previous report. However, we expect these deployments to be largely completed in 2023. 

We also review deployments of NFs on the public cloud in 2022. While few in number, they are significant in scope, and illustrate ways in which telcos of different types can deploy NFs on public cloud while retaining control over the management and ongoing development of those NFs.

Enter your details below to download an extract of the report

CNFs on the public cloud: Recent deployments illustrate how to avoid hyperscaler lock-in​

Few telcos have yet deployed critical network functions on the hyperscale cloud, as discussed in this report. However, significant new deployments did go live in 2022, as did tests and pilots, involving all three hyperscalers:​

​Recent deployments and trials of CNFs on public cloud

Source: STL Partners

In our recently published Telco Cloud Manifesto 2.0, we argued that telcos thinking of outsourcing telco cloud (i.e. both VNFs/CNFs and cloud infrastructure) to hyperscalers should not do so as a simple alternative to evolving their own software development skills and cloud operational processes. In order to avoid a potentially crippling dependency on their hyperscaler partners, it is essential for operators to maintain control over the development and orchestration of their critical NFs and cloud infrastructure while delivering services across a combination of the private cloud and potentially multiple public clouds. In contrast to a simple outsourcing model, the deployments on public cloud in 2022 reflect different modes of exploiting the resources and potential of the cloud while maintaining control over NF development and potential MEC use cases. The telcos involved retain control because only specific parts of the cloud stack are handed over to the hyperscale platform; and, within that, the telcos also retain control over variable elements such as orchestration, NF development, physical infrastructure or the virtualisation layer.

In this report, we discuss the models which the telcos above have followed to migrate their network workloads onto the public cloud and how this move fits their overall virtualisation strategies.

Previous telco cloud tracker releases and related research

Enter your details below to download an extract of the report

Should telcos dive deeper into energy?

Introduction

Some telcos have been dabbling in the energy market for a decade or more, partly reflecting the interdependent nature of the two industries. In the past two years, energy has climbed up the agenda of telcos’ management teams, as the electricity and gas sectors experience another major wave of disruption.

In much of the world, energy prices have surged as a result of the war in the Ukraine and the subsequent sanctions against Russia. At the same time, the ongoing transition to renewable energy in response to climate change is opening up new sources of supply and bringing in new players. The cost of wind and solar power, and battery storage is falling steadily, while many policymakers are introducing further incentives to hasten the transition away from oil, natural gas and coal.

Enter your details below to download an extract of the report

In 2022, energy prices have surged around the world

Source: The IEA

In August 2022, for example, US President Joe Biden signed the Inflation Reduction Act, bringing with it, tax incentives and other measures that should significantly boost the deployment of renewable energy and storage (large-scale batteries). The Act earmarks US$369 billion to help bring about a 40% reduction in greenhouse gas levels by 2030, by supporting electric vehicles (EVs), energy efficiency and building electrification, wind, solar photovoltaic (PV), green hydrogen, battery storage and other technologies. For example, the Act introduces an investment tax credit for standalone energy storage, which can lower the capital cost of equipment by about 30%.

As policymakers and consumers seek out new energy propositions to try and contain rising costs and greenhouse gas emissions, some telcos, such as Telstra and Polsat Plus, are seeing strategic opportunities to build deeper relationships with households. To that end, they are pushing deeper into the energy market, investing in generation capacity, as well as developing retail propositions.

Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of energy, telcos could develop solutions and services that can help consumers and businesses manage their own consumption and sell excess power back to the grid.

This report explores why telcos may want to get involved in the energy market, what their options are and presents case studies, outlining the steps some telcos have already taken. It considers the key advantages/assets that telcos can exploit in the energy market, illustrated by short case studies:

  • Extensive distribution networks
  • Established brand names
  • Billing relationships and payment mechanisms (mobile money/carrier billing)
  • Existing connectivity and IoT expertise
  • Big buyers of energy and in-house energy management expertise

The subsequent chapters in the report include an in-depth review of Telstra’s end-to-end energy strategy, the economics of energy retailing and whether telcos should move into energy generation and storage. The penultimate chapter, which considers how to engage consumers, is followed by conclusions summarising how telcos can help address some of the challenges facing energy suppliers and buyers.

Table of Contents

  • Executive Summary
  • Introduction
  • Extensive distribution networks
    • Case study 1: Polsat Plus – bundling telecoms & electricity
    • Case study 2: Orange Energy Africa – distributing solar kits
  • Established Brands
    • Case Study 1: Singtel Power – taking on the incumbent
    • Case study 2: Building a Reliance Jio for energy
  • Billing relationships and payment mechanisms
    • Case Study: MTN Nigeria – Pay as you go solar
  • Existing connectivity and IoT expertise
    • Case study 1: Telefónica España – monitoring solar panels
    • Case study 2: Proximus – electric vehicle charging
  • Energy buying and management expertise
    • Case study 1: Vodafone – enabling energy data management
    • Case study 2: Elisa – balancing the electricity grid
  • In depth case study: Telstra Energy
    • The strategic justification
    • How the IoT and AI can help
  • The Economics of Energy Retailing
    • An even tighter regulatory regime
  • Telcos and energy storage and generation
    • Competition from other investors
    • Planning permission
    • Grid connections
  • Engaging consumers
    • Ripple Energy – consumer ownership
  • Conclusions

Related research

 

Enter your details below to download an extract of the report

Telco Cloud Deployment Tracker: Will vRAN eclipse pure open RAN?

Is vRAN good enough for now?

In this October 2022 update to STL Partners’ Telco Cloud Deployment Tracker, we present data and analysis on progress with deployments of vRAN and open RAN. It is fair to say that open RAN (virtualised AND disaggregated RAN) deployments have not happened at the pace that STL Partners and many others had forecast. In parallel, some very significant deployments and developments are occurring with vRAN (virtualised NOT disaggregated RAN). Is open RAN a networking ideal that is not yet, or never will be, deployed in its purest form?

In our Telco Cloud Deployment Tracker, we track deployments of three types of virtualised RAN:

  1. Open RAN / O-RAN: Open, disaggregated, virtualised / cloud-native, with baseband (BU) functions distributed between a Central Unit (CU: control plane functions) and Distributed Unit (DU: data plane functions)
  2. vRAN: Virtualised and distributed CU/DU, with open interfaces but implemented as an integrated, single-vendor platform
  3. Cloud RAN (C-RAN): Single-vendor, virtualised / centralised BU, or CU only, with proprietary / closed interfaces

Cloud RAN is the most limited form of virtualised RAN: it is based on porting part or all of the functionality of the legacy, appliance-based BU into a Virtual Machine (VM). vRAN and open RAN are much more significant, in both technology and business-model terms, breaking open all parts of the RAN to more competition and opportunities for innovation. They are also cloud-native functions (CNFs) rather than VM-based.

Enter your details below to request an extract of the report

2022 was meant to be the breakthrough year for open RAN: what happened?

  • Of the eight deployments of open RAN we were expecting to go live in 2022 (shown in the chart below), only three had done so by the time of writing.
  • Two of these were on the same network: Altiostar and Mavenir RAN platforms at DISH. The other was a converged Parallel Wireless 2G / 3G RAN deployment for Orange Central African Republic.
  • This is hardly the wave of 5G open RAN, macro-network roll-outs that the likes of Deutsche Telekom, Orange, Telefónica and Vodafone originally committed to for 2022. What has gone wrong?
  • Open RAN has come up against a number of thorny technological and operational challenges, which are well known to open RAN watchers:
    • integration challenges and costs
    • hardware performance and optimisation
    • immature ecosystem and unclear lines of accountability when things go wrong
    • unproven at scale, and absence of economies of scale
    • energy efficiency shortcomings
    • need to transform the operating model and processes
    • pressured 5G deployment and Huawei replacement timelines
    • absence of mature, open, horizontal telco cloud platforms supporting CNFs.
  • Over and above these factors, open RAN is arguably not essential for most of the 5G use cases it was expected to support.
  • This can be gauged by looking at some of the many open RAN trials that have not yet resulted in commercial deployments.

Global deployments of C-RAN, vRAN and open RAN, 2016 to 2023

Image shows global deployments of C-RAN, vRAN and open RAN, 2016 to 2023

Source: STL Partners

Previous telco cloud tracker releases and related research

Enter your details below to request an extract of the report

Will web 3.0 change the role of telcos?

Introduction

Over the past 12 months or so, the notion that the Internet is about to see another paradigm shift has received a lot of airtime. Amid all the dissatisfaction with way the Internet works today, the concept of a web 3.0 is gaining traction. At a very basic level, web 3.0 is about using blockchains (distributed ledgers) to bring about the decentralisation of computing power, resources, data and rewards.

STL Partners has written extensively about the emergence of blockchains and the opportunities they present for telcos. But this report takes a different perspective – it considers whether blockchains and the decentralisation they embody will fix the public Internet’s flaws and usher in a new era of competition and innovation. It also explores the potential role of telcos in reinventing the web in this way and whether it is in their interests to support the web 3.0 movement or protect the status quo.

Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of web 3.0, telcos could help develop solutions and services that can help bridge the gap between the fully decentralised vision of libertarians and governments’ desire to retain control and regulate the digital world.

As it considers the opportunities for telcos, this report draws on the experiences and actions of Deutsche Telekom, Telefónica and Vodafone. It also builds on previous STL Partners reports including:

Enter your details below to download an extract of the report

What do we mean by web 3.0?

The term web 3.0 is widely used to refer to the next step change in the evolution of the Internet. For some stakeholders, it is about the integration of the physical world and the digital world through the expansion of the Internet of Things, the widespread use of digital twins and augmented reality and virtual reality. This concept, which involves the capture and the processing of vast amounts of real-time, real-world data, is sometimes known as the spatial web.

While recognising the emergence of a spatial web, Nokia, for example, has defined web 3.0 as a “visually dynamic smart web” that harness artificial intelligence (AI) and machine learning (ML). It describes web 3.0 as an evolution of a “semantic web” with capacity to understand knowledge and data. Nokia believes that greater interconnectivity between machine-readable data and support for the evolution of AI and ML across “a distributed web” could remake ecommerce entirely.

Note, some of these concepts have been discussed for more than a decade. The Economist wrote about the semantic web in 2008, noting then that some people were trying to rebrand it web 3.0.

Today, the term web 3.0 is most widely used as a shorthand for a redistribution of power and data – the idea of decentralising the computation behind Internet services and the rewards that then ensue. Instead of being delivered primarily by major tech platforms, web 3.0 services would be delivered by widely-distributed computers owned by many different parties acting in concert and in line with specific protocols. These parties would be rewarded for the work that their computers do.

This report will focus primarily on the latter definition. However, the different web 3.0 concepts can be linked. Some commentators would argue that the vibrancy and ultimate success of the spatial web will depend on decentralisation. That’s because processing the real-world data captured by a spatial web could confer extraordinary power to the centralised Internet platforms involved. Indeed, Deloitte has made that link (see graphic below).

In fact, one of the main drivers of the web 3.0 movement is a sense that a small number of tech platforms have too much power on today’s Internet. The contention is that the current web 2.0 model reinforces this position of dominance by funnelling more and more data through their servers, enabling them to stay ahead of competitors. For web 3.0 proponents, the remedy is to redistribute these data flows across many thousands of different computers owned by different entities.  This is typically accomplished using what is known as decentralised apps (dapps) running on a distributed ledger (often referred to as a blockchain), in which many different computers store the code and then record each related interaction/transaction.

The spatial web and web 3.0 – two sides of the same coin?

Spacial-web-Web3-Deloitte

Source: Deloitte

For many commentators, distributed ledgers are at the heart of web 3.0 because they enable the categorisation and storage of data without the need for any central points of control. In an article it published online, Nokia predicted new application providers will displace today’s tech giants with a highly distributed infrastructure in which users own and control their own data. “Where the platform economy gave birth to companies like Uber, Airbnb, Upwork, and Alibaba, web 3.0 technology is driving a new era in social organization,” Nokia argues. “Leveraging the convergence of AI, 5G telecommunications, and blockchain, the future of work in the post-COVID era is set to look very different from what we’re used to. As web 3.0 introduces a new information and communications infrastructure, it will drive new forms of distributed social organisation…Change at this scale could prove extremely challenging to established organisations, but many will adapt and prosper.”

Nokia appears to have published that article in March 2021, but the changes it predicted are likely to happen gradually over an extended period. Distributed ledgers or blockchains are far from mature and many of their flaws are still being addressed. But there is a growing consensus that they will play a significant role in the future of the Internet.

Nokia itself is hoping that the web 3.0 movement will lead to rising demand for programmable networks that developers can harness to support decentralised services and apps. In June 2022, the company published a podcast in which Jitin Bhandari, CTO of Cloud and Network Services at Nokia, discusses the concept of “network as code” by which he means the creation of a persona of the network that can be programmed by ecosystem developers and technology application partners “in domains of enterprise, in domains of web 2.0 and web 3.0 technologies, in domains of industry 4.0 applications, in scenarios of operational technology (OT) applications.”  Nokia envisions that 5G networks will be able to participate in what it calls distributed service chains – the interlinking of multiple service providers to create new value.

Although blockchains are widely associated with Bitcoin, they can enable much more than crypto-currencies. As a distributed computer, a blockchain can be used for multiple purposes – it can store the number of tokens in a wallet, the terms of a self-executing contract, or the code for a decentralised app.

As early as 2014, Gavin Wood, the founder of the popular Ethereum blockchain, laid out a vision that web 3.0 will enable users to exchange money and information on the web without employing a middleman, such as a bank or a tech company. As a result, people would have more control over their data and be able to sell it if they choose.

Today, Ethereum is one of the most widely used (and trusted) blockchains. It bills itself as a permissionless blockchain, which means no one controls access to the service – there are no gatekeepers.

Still, as the Ethereum web site acknowledges, there are several disadvantages to web 3.0 decentralisation, as well as advantages. The graphic below which draws on Ethereum’s views and STL analysis, summarises these pros and cons.

Table of Contents

  • Executive Summary
    • Three ways in which telcos can support web 3.0
    • Challenges facing web 3.0
  • Introduction
  • What do we mean by web 3.0?
    • Transparency versus privacy
    • The money and motivations behind web 3.0
    • Can content also be unbundled?
    • Smart contracts and automatic outcomes
    • Will we see decentralised autonomous organisations?
    • Who controls the user experience?
    • Web 3.0 development on the rise
  • The case against web 3.0
    • Are blockchains really the way forward?
    • Missteps and malign forces
  • Ironing out the wrinkles in blockchains
  • Could and should telcos help build web 3.0?
    • Validating blockchains
    • Telefónica: An interface to blockchains
    • Vodafone: Combining blockchains with the IoT
  • Conclusions

Enter your details below to download an extract of the report

Telco Cloud Deployment Tracker: 5G core deep dive

Deep dive: 5G core deployments 

In this July 2022 update to STL Partners’ Telco Cloud Deployment Tracker, we present granular information on 5G core launches. They fall into three categories:

  • 5G Non-standalone core (5G NSA core) deployments: The 5G NSA core (agreed as part of 3GPP Release in December 2017), involves using a virtualised and upgraded version of the existing 4G core (or EPC) to support 5G New Radio (NR) wireless transmission in tandem with existing LTE services. This was the first form of 5G to be launched and still accounts for 75% of all 5G core network deployments in our Tracker.
  • 5G Standalone core (5G SA core) deployments: The SA core is a completely new and 5G-only core. It has a simplified, cloud-native and distributed architecture, and is designed to support services and functions such as network slicing, Ultra-Reliable Low-Latency Communications (URLLC) and enhanced Machine-Type Communications (eMTC, i.e. massive IoT). Our Tracker indicates that the upcoming wave of 5G core deployments in 2022 and 2023 will be mostly 5G SA core.
  • Converged 5G NSA/SA core deployments: this is when a dual-mode NSA and SA platform is deployed; in most cases, the NSA core results from the upgrade of an existing LTE core (EPC) to support 5G signalling and radio. The principle behind a converged NSA/SA core is the ability to orchestrate different combinations of containerised network functions, and automatically and dynamically flip over from an NSA to an SA configuration, in tandem – for example – with other features and services such as Dynamic Spectrum Sharing and the needs of different network slices. For this reason, launching a converged NSA/SA platform is a marker of a more cloud-native approach in comparison with a simple 5G NSA launch. Ericsson is the most commonly found vendor for this type of platform with a handful coming from Huawei, Samsung and WorkingGroupTwo. Albeit interesting, converged 5G NSA/SA core deployments remain a minority (7% of all 5G core deployments over the 2018-2023 period) and most of our commentary will therefore focus on 5G NSA and 5G SA core launches.

Enter your details below to request an extract of the report

75% of 5G cores are still Non-standalone (NSA)

Global 5G core deployments by type, 2018–23

  • There is renewed activity this year in 5G core launches since the total number of 5G core deployments so far in 2022 (effective and in progress) stands at 49, above the 47 logged in the whole of 2021. At the very least, total 5G deployments in 2022 will settle between the level of 2021 and the peak of 2020 (97).
  • 5G in whichever form now exists in most places where it was both in demand and affordable; but there remain large economies where it is yet to be launched: Turkey, Russia and most notably India. It also remains to be launched in most of Africa.
  • In countries with 5G, the next phase of launches, which will see the migration of NSA to SA cores, has yet to take place on a significant scale.
  • To date, 75% of all 5G cores are NSA. However, 5G SA will outstrip NSA in terms of deployments in 2022 and represent 24 of the 49 launches this year, or 34 if one includes converged NSA/SA cores as part of the total.
  • All but one of the 5G launches announced for 2023 are standalone; they all involve Tier-1 MNOs including Orange (in its European footprint involving Ericsson and Nokia), NTT Docomo in Japan and Verizon in the US.

The upcoming wave of SA core (and open / vRAN) represents an evolution towards cloud-native

  • Cloud-native functions or CNFs are software designed from the ground up for deployment and operation in the cloud with:​
  • Portability across any hardware infrastructure or virtualisation platform​
  • Modularity and openness, with components from multiple vendors able to be flexibly swapped in and out based on a shared set of compute and OS resources, and open APIs (in particular, via software ‘containers’)​
  • Automated orchestration and lifecycle management, with individual micro-services (software sub-components) able to be independently modified / upgraded, and automatically re-orchestrated and service-chained based on a persistent, API-based, ‘declarative’ framework (one which states the desired outcome, with the service chain organising itself to deliver the outcome in the most efficient way)​
  • Compute, resource, and software efficiency: as a concomitant of the automated, lean and logically optimal characteristics described above, CNFs are more efficient (both functionally and in terms of operating costs) and consume fewer compute and energy resources.​
  • Scalability and flexibility, as individual functions (for example, distributed user plane functions in 5G networks) can be scaled up or down instantly and dynamically in response to overall traffic flows or the needs of individual services​
  • Programmability, as network functions are now entirely based on software components that can be programmed and combined in a highly flexible manner in accordance with the needs of individual services and use contexts, via open APIs.​

Previous telco cloud tracker releases and related research

Each new release of the tracker is global, but is accompanied by an analytical report which focusses on trends in given regions from time to time:

Enter your details below to request an extract of the report

The three telco Metaverse strategies

The Metaverse offers opportunities beyond connectivity for telcos

The Metaverse is the increasingly accepted term for a set of interconnected virtual worlds. One way to think about the Metaverse is to see it as a 3D version of the world wide web in which organizations operate their own virtual 3D worlds, rather than 2D web sites. Represented by avatars, visitors to a virtual world can interact with other users or with avatars controlled by artificial intelligence. The term Metaverse entered the popular consciousness when Facebook renamed itself Meta in October 2021.

Enter your details below to request an extract of the report

The renaming of Facebook sparked a surge of interest in the Metaverse

Source: Google Trends

Whereas the existing Internet is essentially a 2D digital overlay of the world, composed of text, voice, images and video, the Metaverse will provide a 3D digital overlay. This is the way Nvidia’s CEO Jensen Huang, portrayed the Metaverse in a speech in November 2021. As a leading provider of graphics chips, Nvidia is thinking deeply about how to build a business case for the Metaverse, which could drive rapid growth in demand for its products.

For a fully immersive experience, the Metaverse will need to be accessed through virtual reality (VR) headsets, but it could also be explored by moving through 3D environments using a conventional handset, laptop or television. Indeed, it is important to stress that the fortunes of the Metaverse won’t necessarily depend on the fortunes of VR. Hundreds of millions of people already play video games in 3D, interacting with each other, without wearing headsets.

The Metaverse looks set to host both entirely fictional virtual spaces where people can socialise, play and enjoy entertainment, as well as simulations of the real world, where people can test new product designs, learn new skills or watch concerts and sports events they can’t attend in person.

The first part of this report considers how the Metaverse could create value and the obstacles that lie in its way. It also outlines the strategies of Improbable, Meta (formerly Facebook), Microsoft and Nvidia – four companies developing many of the key enabling technologies.

The second part explores the Metaverse strategies of telcos. Broadband networks and related telco services are fundamental to the smooth running of digital environments today, and will be the building blocks of the Metaverse. We believe that telcos could play a coordination role that will help prevent the Metaverse from fragmenting into silos that are unable to interoperate with each other.

Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of Metaverse, telcos can help people and businesses to interact and transact with each other safely and securely in 3D environments.

As it considers the opportunities for telcos, this report draws on the experiences and actions of SKT, Telefónica and Verizon, which are each deploying strategies to help coordinate the development of the Metaverse.

Table of Contents

  • Executive Summary
  • Introduction
  • What is the Metaverse for?
    • The lure of the virtual road
    • Corporate worlds take over from web sites
    • Dominance or democracy?
    • The non-fungible flexibility paradox
    • Facebook pursues metamorphosis
    • Microsoft has most of the pieces
  • What will the Metaverse mean for telcos?
    • Recreating the real world is challenging
    • Traffic implications for telcos
    • Opportunities for telcos
    • SK Telecom – the full stack standard bearer
    • Telefónica looks to play coordination role
    • AT&T and Verizon – connectivity plus edge
  • Conclusions
  • Index

Related Research

 

Enter your details below to request an extract of the report

MWC 2022: Sensing the winds of change

What did STL’s analysts find at MWC 2022?

This report is a collection of our analyst’s views of what they saw at the 2022 Mobile World Congress (MWC 2022). It comprises our analysts’ perspectives on its major themes:

  • How the industry is changing overall
  • The impact of the metaverse
  • New enterprise and consumer propositions
  • Progress towards telco cloud
  • Application of AI, automation and analytics (A3)

We would like to thank our partners at the GSMA for a good job done well. The GSMA say that there were 60,000 attendees this year, which is down from the 80-100k of 2019 but more than credible given the ongoing COVID-19 situation. It was nonetheless a vibrant and valuable event, and a great opportunity to see many wonderful people again face to face, and indeed, meet some great new ones.

Enter your details below to request an extract of the report

MWC 2022 in context of its time

It is impossible to write about MWC 2022 without putting it context of its time. It has taken place three days after the Russian invasion of Ukraine started on February 24th, 2022.

Speakers made numerous direct and indirect mentions of the war, and it was clear that a sense of sadness was felt by everyone we spoke to. This slightly offset the enthusiasm and warmth that we and many others felt on being back together in person, with our clients and the industry.

Broad support for the Ukraine was visible among many delegates and there was no Russian delegation. While totally appropriate, the Fira was a little poorer for that as one of the joys of MWC is its truly global embodiment of a vibrant industry.

We all hope for a speedy and peaceful resolution to that situation, and to see our Russian and Ukrainian colleagues again in peace soon. Sadly, as we write from and just after Barcelona, bombs and shells are falling on civilians on the same continent and the route to peace is not yet evident.

As this new and shocking war has come in Europe while COVID is still in a pandemic phase it is a reminder that change and challenge never ends. The telecoms industry responded well to COVID, and now it must again for this and all the challenges it will face in the future, which include further geopolitical risks and shocks and many more opportunities too.

The biggest opportunity for telecoms, and telcos in particular, is to build on the momentum of change rather than rest on its laurels. The threat is that it will settle for a low risk but ultimately lower value path of sticking to the same old same.  We look at the evidence for telcos successfully changing their mindset in New enterprise business: Opening, if not yet changed mindsets.

Connecting technologies

This is my 11th MWC. I came looking for what’s changed and what it means. This is what I found. Andrew Collinson, Managing Director, STL Partners Research.

Cross-dressing and role play

Trying to leave the war at the door, what else did we find at the Fira? One of the mind-bending tasks of walking through the cacophony of sights and sounds of a huge industry ecosystem on display is trying to make sense of what is going on. Who is here, and what are they trying to tell me?

First impressions count. The simple things about how companies present themselves initially mean a great deal. They often show the identity they are trying to project – who or what they are trying to be seen as more than all the detail put together. The first impression I got at MWC 2022 was that almost everyone was trying to dress like someone else.

Microsoft showed photos of cell towers on its stand while all the telco CEOs talked about the “new tech order” and becoming techcos. McKinsey talked about its ‘old friends’ in the telecoms industry and talked about sustainability on its hard-edged stand, while AWS had an advert on the frontage of the Fira and a stand in the “Four Years from Now” zone.

We’re all telcos / techcos now

We're all telcos techcos now

Source: STL Partners, AWS, Microsoft, McKinsey

It’s all about “connecting technologies”

Regular readers of STL’s material will have heard of the Coordination Age: our concept that there is a universal need for better use of resources which will be met in part by the application of connecting technologies (e.g. fibre, mobile, 5G, AI, automation, etc.).

Once upon a time, it was simply people that needed to be connected to each other. Now a huge variety of stuff needs connecting: e.g., devices, computer applications, business processes, business assets and people.

A big question in all this is whether operators have really understood how outdated their traditional operator centric view of the world has become as the industry has changed. Sure, new telecoms networks still need to be built and extended. But it isn’t just operators using licensed technologies that can do this anymore, and the value has increasingly moved to the players that can make all the stuff work: systems integrators and other technology and software players. We’ll cover operators’ mindsets more in the section titled New enterprise business: Opening, if not yet changed mindsets.

Private matters

Private networks was also a big area of focus at MWC 2022, and understandably so too as there is a lot of interest in the concept in various sectors, especially in ports and airports, mining, and manufacturing. Much of the interest for this comes from the hype around 5G which has attracted other industries to look at the technology. However, while there are some interesting developments in practice (for example Huawei and others at Shenzen port in China), many of the applications are at least as well served, and in some cases, better served by other connectivity technologies, e.g. Wi-Fi, wired connections, narrow-band IoT, and 3G / 4G, edge computing and combinations thereof. So 5G is far from the only horse in the race, and we will be looking closely at the boundary conditions and successful use cases for Private 5G in our future research.

Would you pay for “unexpected benefits”?

One great stumbling block for telcos and other business used to traditional business thinking has been “how do you make a business case for new technology?”

The classic telecoms route is to dig around for a cost-saving and revenue enhancement case and then try to bend the CFO’s ear until they give you some money to do your thing. This is fair enough, to a point.

The challenge is, what do you do when you don’t know what you are going to find and/or you can’t prove it? Or worse still, you can only prove it after everybody else in the market has proven it for you and you are then at a competitive disadvantage.

One story I saw and see elsewhere repeated endlessly is that of “unexpected benefits”. This was a phrase that Alison Kirkby, CEO Telia, used to describe what happened when the value of its population movement data was recognised by the Swedish Government during the COVID crisis. It had pulled together the data for one set of reasons, and suddenly this very compelling use came to light.

Another I heard from Qualcomm, which told of putting IoT driven shelf price signs in retail. Originally it was developed to help rapid repricing for consumers in store, then COVID struck a few weeks after installation. This meant people switched to online shopping and the stores were then mainly used by  pickers assembling orders for delivery. The retailer found that by using the signs to help the pickers assemble their loads faster they could make the process about a third more productive. That’s a lot in retail.

This is the reality of transformational business models and technologies. It is incredibly hard to foresee what is really going to work, and how. Even after some time with a new way of working new uses continue to emerge. That’s not to say that you can’t narrow it down a bit – and this is something we spend a lot of our time working on. However, a new thing I will be asking our analysts to help figure out is “how can you tell when and where there are likely to be unexpected benefits?”

 

Table of Contents

  • Executive Summary
  • Introduction
    • MWC 2022 in context of its time
  • MWC 2022: Connecting technologies
    • Cross-dressing and role play
    • Would you pay for “unexpected benefits”?
    • Getting physical, getting heavy
    • Glasses are sexy (again)
    • Europe enviously eyes eastwards
  • New enterprise business: Opening, if not yet changed mindsets
    • Customer centricity: Starting to emerge
    • Becoming better partners: Talking the talk
    • New business models: Not quite there
  • The Metaverse: Does it really matter?
    • Can the Metaverse be trusted?
    • Exploding supply, uncertain quality
    • The non-fungible flexibility paradox
    • A coordinating role for telcos?
    • Don’t write it off, give it a go
  • Consumers: XR, sustainability and smarthome
    • Operators: Aiming for smart and sustainable
    • Vendors and techcos: Would you like AI with that?
    • More Metaverse, VR and AR
    • Other interesting finds: Commerce, identity, video
  • Telco Cloud: The painful gap between theory and practice
    • Brownfield operators are still on their virtualisation journey
    • Greenfield operators: Cloud native and automated from day one
    • Telcos on public could: Shall I, shant I?
  • AI and automation: Becoming adaptive
    • Looking out for good A3 use cases / case studies
    • Evidence of a maturing market?
    • Welcome signs of progress towards the Coordination Age

 

Enter your details below to request an extract of the report

Telefónica’s 10 steps to sustainable telecoms

Telefónica’s sustainability: A 20-year journey

Sustainability in the Coordination Age

As part of STL Partners’ research on the opportunities for telecoms operators and the wider industry in the Coordination Age, where the ultimate goal for operators, their customers, and society at large is to make better use of the world’s resources, we have explored how telcos can integrate sustainability into their activities. Previous research on this topic includes:

During the course of this research, we have identified Telefónica as one of the most proactive operators in sustainability. Through our interactions with Telefónica’s sustainability team, we have also found the team to be seriously committed, organised and successful in achieving buy-in to their vision from both the executive leadership team and several business units and opcos. This is a highly impressive achievement for such a large operator.

With the support of Telefónica’s sustainability team, through candid interviews with the team and their colleagues across the business, we have created this case study on their experiences in embedding sustainability across the business. We believe this will help other telcos intent on following a similar trajectory to understand how they can embed sustainability into their corporate strategies and day-to-day activities.

Enter your details below to request an extract of the report

How Telefónica got to where it is today

Since the creation of Telefónica’s first sustainability team in 2001, the operator has gradually built up its sustainability activities into a company-wide approach with cross team participation over the last twenty years. The first move in this direction came with the creation of the Climate Change Office in 2007, which included senior representatives from Operations, Procurement and Social Responsibility.

Over the last ten years Telefónica has implemented more than 1,400 energy efficiency projects and has carried an annual Energy and Climate Change Workshop with more than 30 vendors for 12 consecutive years, to exchange challenges and solutions to reduce their energy consumption and carbon emissions.

It has three main climate targets: energy efficiency and reducing energy consumption; utilising renewable energy; and reducing its carbon footprint to achieve net-zero emissions in 2040, including its value chain. Figure 2 outlines Telefónica’s sustainability journey and key inflection points through the years.

Key activities and inflection points in Telefónica’s

Telefónica's sustainability

Achieving buy-in across the organisation

Embedding sustainability into Telefónica has been a grassroots effort on the part of the small but hardworking Global Sustainability Department (hereafter known as the environmental team in this report) to find the proof points necessary to convince Telefónica’s senior management to build sustainability into the corporate strategy. The team has used a mixture of bottom-up and top-down approaches, with management support at crucial moments, which will be explored later in the report.

Through our many conversations with Telefónica’s environmental team, perseverance stood out as the most important characteristic within the team. When they recruit new employees, their priority is to find people with the ability to come up with innovative ideas for meeting sustainability targets, resilience, and perseverance.

This determined and visionary approach means that the environmental team works intuitively and pre-empts other departments’ needs. By the time colleagues from other departments approach the environmental team with their requirements for sustainability-related projects (for example the finance team’s interest in launching a Green Bond), the team is already armed with a range of data, materials and resources needed to put together a business case for the activity. As a result of this preparation, the environmental team has been able to quickly support and capitalise on new opportunities as they have arisen, ensuring they can keep the momentum going whenever it builds.

However, the process of embedding sustainability into company strategy has not come without challenges and difficulties. In conversations with STL Partners, the environmental team said that one of the challenges of working with different teams has been picking the right moment to approach them with ideas. Telefónica also stressed the importance of finding strategic alliances and internal champions on other teams. Through strategic, considered and strong relationship building, the environmental team has found internal champions in their Spanish core network operations, finance, procurement, enterprise, and sales teams, who are fully on board with the Telefónica sustainability vision and strategy.

Although the environmental team is currently working with the marketing team to ensure its sustainability message and efforts is more present in its brands, the environmental team cited this as one of its top priorities in 2022. Aside from needing to build stronger relationships and buy-in, part of the challenge is working with the marketing team on how to accurately and effectively market sustainability, without appearing to be ‘greenwashing’.

Another challenge is adapting to the different ways in which the other teams operate when implementing sustainability initiatives across the company. For example, the sales team generally work towards quick deadlines with short-term results, hence it may be harder to create an aligned dialogue with this team. Having a strong insight into the way Telefónica works as an organisation, by working directly within other teams e.g., helping the sales team to complete RFPs, helps this challenge.

By embedding sustainability into the company in these ways, all departments see the benefit and engage with the process. Telefónica told STL Partners that its employees believe in sustainability on a personal level as well as seeing the business benefit and commercial opportunity. Employees are genuinely engaging with sustainability issues themselves and want Telefónica to work towards sustainability goals as a company. As one employee said to us, “you don’t have to work in the environmental team to want to protect the environment”.

Ultimately, this rigorous, patient, committed and collaborative approach to sustainability has enabled the team to achieve broad buy-in across Telefónica’s business units and international opcos. Throughout the report we will explore how it has done this in:

  • Core network operations
  • Finance
  • Enterprise services
  • International opcos.

Table of contents

  • Executive Summary
    • What makes Telefónica different to other telcos?
    • Next steps
  • Table of Figures
  • Telefónica’s 20-year sustainability journey
    • Sustainability in the Coordination Age
    • How Telefónica got to where it is today
    • Achieving buy-in across the organisation
  • Why Telefónica stands out among telcos
    • High level overview of achievements so far
    • How Telefónica compares with other telcos
    • How Telefónica collaborates with its peers
  • Network operations: The first step to embedding sustainability in Telefónica
  • Sustainable financing: A pioneer in telecoms
    • How the first Green Bond came to life
    • Subsequent green and sustainable bonds
    • Challenges and benefits
  • Eco Smart label and consulting services: Expanding from networks to services
    • How the idea came to life
    • Consulting services through Telefónica Tech
    • Eco Smart label in 5G services
    • Sustainability as a core component of digital transformation
  • Implementing sustainability across a global footprint
    • Aligning goals with individual market dynamics
  • Conclusion
    • Ten takeaways from Telefónica’s holistic approach
  • Index

 

 

 

Enter your details below to request an extract of the report

VNFs on public cloud: Opportunity, not threat

VNF deployments on the hyperscale cloud are just beginning

Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date

The past three years have seen many major telcos concluding collaboration agreements with the leading hyperscalers. These have involved one or more of five business models for the telco-hyperscaler relationship that we discussed in a previous report, and which are illustrated below:

Five business models for telco-hyperscaler partnerships

Source: STL Partners

In this report, we focus more narrowly on the deployment, delivery and operation by and to telcos of virtualised and cloud-native network functions (VNFs / CNFs) over the hyperscale public cloud. To date, there have been few instances of telcos delivering live, commercial services on the public network via VNFs hosted on the public cloud. STL Partners’ Telco Cloud Deployment Tracker contains eight examples of this, as illustrated below:

Major telcos deploying VNFs in the public cloud

Source: STL Partners

Enter your details below to request an extract of the report

Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’

The telcos in the above table are all of comparable stature and ambition to the likes of AT&T and DISH in the realm of telco cloud but have a diametrically opposite stance when it comes to VNF deployment on public cloud. They have decided against large-scale public cloud deployments for a variety of reasons, including:

  • They have invested a considerable amount of money, time and human resources on their private clouddeployments, and they want and need to utilise the asset and generate the RoI.
  • Related to this, they have generated a large amount of intellectual property (IP) as a result of their DIY cloud– and VNF-development work. Clearly, they wish to realise the business benefits they sought to achieve through these efforts, such as cost and resource efficiencies, automation gains, enhanced flexibility and agility, and opportunities for both connectivityand edge compute service innovation. Apart from the opportunity cost of not realising these gains, it is demoralising for some CTO departments to contemplate surrendering the fruit of this effort in favour of a hyperscaler’s comparable cloud infrastructure, orchestration and management tools.
  • In addition, telcos have an opportunity to monetise that IP by marketing it to other telcos. The Rakuten Communications Platform (RCP) marketed by Rakuten Symphony is an example of this: effectively, a telco providing a telco cloud platform on an NFaaS basis to third-party operators or enterprises – in competition to similar offerings that might be developed by hyperscalers. Accordingly, RCP will be hosted over private cloud facilities, not public cloud. But in theory, there is no reason why RCP could not in future be delivered over public cloud. In this case, Rakuten would be acting like any other vendor adapting its solutions to the hyperscale cloud.
  • In theory also, telcos could also offer their private telcoclouds as a platform, or wholesale or on-demand service, for third parties to source and run their own network functions (i.e. these would be hosted on the wholesale provider’s facilities, in contrast to the RCP, which is hosted on the client telco’s facilities). This would be a logical fit for telcos such as BT or Deutsche Telekom, which still operate as their respective countries’ communications backbone provider and primary wholesale provider

BT and Deutsche Telekom have also been among the telcos that have been most visibly hostile to the idea of running NFs powering their own public, mass-market services on the public and hyperscale cloud. And for most operators, this is the main concern making them cautious about deploying VNFs on the public cloud, let alone sourcing them from the cloud on an NFaaS basis: that this would be making the ‘core’ telco business and asset – the network – dependent on the technology roadmaps, operational competence and business priorities of the hyperscalers.

Table of contents

  • Executive Summary
  • Introduction: VNF deployments on the hyperscale cloud are just beginning
    • Numerous collaboration agreements between hyperscalers and leading telcos, but few live VNF deployments to date
    • DISH and AT&T: AWS vs Azure; vendor-supported vs DIY; NaaCP vs net compute
  • Other DIY or vendor-supported best-of-breed players are not hosting VNFs on public cloud
    • Telcos are looking to generate returns from their telco cloud investments and maintain control over their ‘core business’
    • The reluctance to deploy VNFs on the cloud reflects a persistent, legacy concept of the telco
  • But NaaCP will drive more VNF deployments on public cloud, and opportunities for telcos
    • Multiple models for NaaCP present prospects for greater integration of cloud-native networks and public cloud
  • Conclusion: Convergence of network and cloud is inevitable – but not telcos’ defeat
  • Appendix

Related Research

 

Enter your details below to request an extract of the report

How telcos can make the world a safer place

Telecoms networks can support public safety

In the wake of the pandemic and multiple natural disasters, such as fire and flooding, both policymakers and people in general are placing a greater focus on preserving health and ensuring public safety. This report begins by explaining the concept of a digital nervous system – large numbers of connected sensors that can monitor events in real-time and thereby alert organizations and individuals to imminent threats to their health and safety.

With the advent of 5G, STL Partners believes telcos have a broad opportunity to help coordinate better use of the world’s resources and assets, as outlined in the report: The Coordination Age: A third age of telecoms. The application of reliable and ubiquitous connectivity to enable governments, companies and individuals to live in a safer world is one way in which operators can contribute to the Coordination Age.

Enter your details below to request an extract of the report

The chapters in this report consider the potential to use the data collected by telecoms networks to help counter the health and safety threats posed by:

  • Environmental factors, such as air pollution and high-levels of pollen,
  • Natural disasters, such as wildfires, flooding and earthquakes,
  • Infectious diseases
  • Violence, such as riots and shooting incidents
  • Accidents on roads, rivers and coastlines

In each case, the report considers how to harness new data collected by connected sensors, cameras and other monitors, in addition to data already captured by mobile networks (showing where people are and where they are moving to).  It also identifies who telcos will need to work with to develop and deploy such solutions, while discussing potential revenue streams.  In most cases, the report includes short case studies describing how telcos are trialling or deploying actual solutions, generally in partnership with other stakeholders.

The final chapter focuses on the role of telcos – the assets and the capabilities they have to improve health and safety.

It builds on previous STL Partners research including:

Managing an unstable world

Prior to the damage wrought by the pandemic, the world was gradually becoming a safer place for human beings. Global life expectancy has been rising steadily for many decades and the UN expects that trend to continue, albeit at a slower pace. That implies the world is safer than it was in the twentieth century and people are healthier than they used to be.

Global gains in life expectancy are slowing down

health and safety

Source: United Nations – World Population Prospects

But a succession of pandemics, more extreme weather events and rising pollution may yet reverse these positive trends. Indeed, many people now feel that they live in an increasingly unstable and dangerous world. Air pollution and over-crowding are worsening the health impact of respiratory conditions and infections, such as SARS-CoV-2. As climate change accelerates, experts expect an increase in flash flooding, wildfires, drought and intense heat. As extreme weather impacts the food and water supplies, civil unrest and even armed conflict could follow. In the modern world, the four horsemen of the apocalypse might symbolize infectious disease, extreme weather, pollution and violence.

As the human race grapples with these challenges, there is growing interest in services and technologies that could make the world a safer and healthier place. That demand is apparent among both individuals (hence the strong sales of wearable fitness monitors) and among public sector bodies’ rising interest in environment and crowd monitoring solutions.

As prevention is better than cure, both citizens and organisations are looking for early warning systems that can help them prepare for threats and take mitigating actions. For example, an individual with an underlying health condition could benefit from a service that warns them when they are approaching an area with poor air quality or large numbers of densely-packed people. Similarly, a municipality would welcome a solution that alerts them when large numbers of people are gathering in a public space or drains are close to being blocked or are overflowing.  The development of these kinds of early warning systems would involve tracking both events and people in real-time to detect patterns that signal a potential hazard or disruption, such as a riot or flooding.

Advances in artificial intelligence (AI), as well as the falling cost of cameras and other sensors, together with the rollout of increasingly dense telecoms networks, could make such systems viable. For example, a camera mounted on a lamppost could use image and audio recognition technologies to detect when a crowd is gathering in the locality, a gun has been fired, a drain has been flooded or an accident has occurred.

Many connected sensors and cameras, of course, won’t be in a fixed location – they will be attached to drones, vehicles and even bicycles, to support use cases where mobility will enhance the service. Such uses cases could include air quality monitoring, wildfire and flooding surveillance, and search and rescue.

Marty Sprinzen, CEO of Vantiq (a provider of event-driven, real-time collaborative applications) believes telecoms companies are best positioned to create a “global digital nervous system” as they have the networks and managed service capabilities to scale these applications for broad deployment. “Secure and reliable connectivity and networking (increasingly on ultrafast 5G networks) are just the beginning in terms of the value telcos can bring,” he wrote in an article for Forbes, published in November 2020. “They can lead on the provisioning and management of the literally billions of IoT devices — cameras, wearables and sensors of all types — that are integral to real-time systems. They can aggregate and analyze the massive amount of data that these systems generate and share insights with their customers. And they can bring together the software providers and integrators and various other parties that will be necessary to build, maintain and run such sophisticated systems.”

Sprinzen regards multi-access edge computing, or MEC, as the key to unlocking this market. He describes MEC as a new, distributed architecture that pushes compute and cloud-like capabilities out of data centres and the cloud to the edge of the network — closer to end-users and billions of IoT devices. This enables the filtering and processing of data at the edge in near real-time, to enable a rapid response to critical events.

This kind of digital nervous system could help curb the adverse impact of future pandemics. “I believe smart building applications will help companies monitor for and manage symptom detection, physical distancing, contact tracing, access management, safety compliance and asset tracking in the workplace,” Sprinzen wrote. “Real-time traffic monitoring will ease urban congestion and reduce the number and severity of accidents. Monitoring and management of water supplies, electrical grids and public transportation will safeguard us against equipment failures or attacks by bad actors. Environmental applications will provide early warnings of floods or wildfires. Food distribution and waste management applications will help us make more of our precious resources.”

Vantiq says one if its telco customers is implementing AI-enabled cameras, IoT sensors, location data and other technologies to monitor various aspects of its new headquarters building. He didn’t identify the telco, but added that it is the lead technology partner for a city that’s implementing a spectrum of smart city solutions to improve mobility, reduce congestion and strengthen disaster prevention.

Table of contents

  • Executive Summary
  • Introduction
  • Managing an unstable world
  • Monitoring air quality
    • Exploiting existing cellular infrastructure
    • Is mobile network data enough?
    • Smart lampposts to play a broad role
    • The economics of connecting environmental sensors
    • Sensors in the sky
  • Natural disasters
    • Spotting wildfires early
    • Earthquake alert systems
    • Crowdsourcing data
    • Infectious diseases
  • On street security
  • Conclusions – the opportunities for telcos
    • Ecosystem coordination – kickstarting the market
    • Devices – finding the right locations
    • Network – reliable, low cost connectivity
    • Data platform
    • Applications
  • Index

 

 

Enter your details below to request an extract of the report

Are telcos smart enough to make money work?

Telco consumer financial services propositions

Telcos face a perplexing challenge in consumer markets. On the one hand, telcos’ standing with consumers has improved through the COVID-19 pandemic, and demand for connectivity is strong and continues to grow. On the other hand, most consumers are not spending more money with telcos because operators have yet to create compelling new propositions that they can charge more for. In the broadest sense, telcos need to (and can in our view) create more value for consumers and society more generally.

Download the report extract

As discussed in our previous research, we believe the world is now entering a “Coordination Age” in which multiple stakeholders will work together to maximize the potential of the planet’s natural and human resources. New technologies – 5G, analytics, AI, automation, cloud – are making it feasible to coordinate and optimise the allocation of resources in real-time. As providers of connectivity that generates vast amounts of relevant data, telcos can play an important role in enabling this coordination. Although some operators have found it difficult to expand beyond connectivity, the opportunity still exists and may actually be expanding.

In this report, we consider how telcos can support more efficient allocation of capital by playing in the financial services sector.  Financial services (banking) sits in a “sweet spot” for operators: economies of scale are available at a national level, connected technology can change the industry.

Financial Services in the Telecoms sweet spot

financial services

Source STL Partners

The financial services industry is undergoing major disruption brought about by a combination of digitisation and liberalisation – new legislation, such as the EU’s Payment Services Directive, is making it easier for new players to enter the banking market. And there is more disruption to come with the advent of digital currencies – China and the EU have both indicated that they will launch digital currencies, while the U.S. is mulling going down the same route.

A digital currency is intended to be a digital version of cash that is underpinned directly by the country’s central bank. Rather than owning notes or coins, you would own a deposit directly with the central bank. The idea is that a digital currency, in an increasingly cash-free society, would help ensure financial stability by enabling people to store at least some of their money with a trusted official platform, rather than a company or bank that might go bust. A digital currency could also make it easier to bring unbanked citizens (the majority of the world’s population) into the financial system, as central banks could issue digital currencies directly to individuals without them needing to have a commercial bank account. Telcos (and other online service providers) could help consumers to hold digital currency directly with a central bank.

Although the financial services industry has already experienced major upheaval, there is much more to come. “There’s no question that digital currencies and the underlying technology have the potential to drive the next wave in financial services,” Dan Schulman, the CEO of PayPal told investors in February 2021. “I think those technologies can help solve some of the fundamental problems of the system. The fact that there’s this huge prevalence and cost of cash, that there’s lack of access for so many parts of the population into the system, that there’s limited liquidity, there’s high friction in commerce and payments.”

In light of this ongoing disruption, this report reviews the efforts of various operators, such as Orange, Telefónica and Turkcell, to expand into consumer financial services, notably the provision of loans and insurance. A close analysis of their various initiatives offers pointers to the success criteria in this market, while also highlighting some of the potential pitfalls to avoid.

Table of contents

  • Executive Summary
  • Introduction
  • Potential business models
    • Who are you serving?
    • What are you doing for the people you serve?
    • M-Pesa – a springboard into an array of services
    • Docomo demonstrates what can be done
    • But the competition is fierce
  • Applying AI to lending and insurance
    • Analysing hundreds of data points
    • Upstart – one of the frontrunners in automated lending
    • Takeaways
  • From payments to financial portal
    • Takeaways
  • Turkcell goes broad and deep
    • Paycell has a foothold
    • Consumer finance takes a hit
    • Regulation moving in the right direction
    • Turkcell’s broader expansion plans
    • Takeaways
  • Telefónica targets quick loans
    • Growing competition
    • Elsewhere in Latin America
    • Takeaways
  • Momentum builds for Orange
    • The cost of Orange Bank
    • Takeaways
  • Conclusions and recommendations
  • Index

This report builds on earlier STL Partners research, including:

Download the report extract

AI is starting to pay: Time to scale adoption

=======================================================================================

Download the additional file on the left for the PPT chart pack accompanying this report

=======================================================================================

AI adoption yields positive results

Over the last five years, telcos have made measurable progress in AI adoption and it is starting to pay off.  When compared to all industries, telcos have become adept at handling large data sets and implementing automation. Over the last several years the telecoms industry has gone from not knowing where or how to implement AI, to having developed and implemented hundreds of AI and automation applications for network operations, fraud prevention, customer channel management, and sales and marketing. We have discussed these use cases and operator strategies and opportunities in detail in previous reports.

For the more advanced telcos, the challenge is no longer setting up data management platforms and systems and identifying promising use cases for AI and automation, but overcoming the organisational and cultural barriers to becoming truly data-centric in mindset, processes and operations. A significant part of this challenge includes disseminating AI adoption and expertise of these technologies and associated skills to the wider organisation, beyond a centralised AI team.The benchmark for success here is not other telcos, or companies in other industries with large legacy and physical assets, but digital- and cloud-native companies that have been established with a data-centric mindset and practices from the start. This includes global technology companies like Microsoft, Google and Amazon, who increasingly see telecoms operators as customers, or perhaps even competitors one day, as well as greenfield players such as Rakuten, Jio and DISH, which as well as more modern networks have fewer ingrained legacy processes and cultural practices to overcome.

Enter your details below to request an extract of the report

Enter your details below to request an extract of the report

Telecoms has a high AI adoption rate compared with other industries

AI pays off

Source: McKinsey

In this report, we assess several telcos’ approach to AI and the results they have achieved so far, and draw some lessons on what kind of strategy and ambition leads to better results. In the second section of the report, we explore in more detail the concrete steps telcos can take to help accelerate and scale the use of AI and automation across the organisation, in the hopes of becoming more data-driven businesses.

While not all telcos have an ambition to drive new revenue growth through development of their own IP in AI, to form the basis of new enterprise or consumer services, all operators will need AI to permeate their internal processes to compete effectively in the long term. Therefore, whatever the level ambition, disseminating fundamental AI and data skills across the organisation is crucial to long term success. STL Partners believes that the sooner telcos can master these skills, the higher their chances of successfully applying them to drive innovation both in core connectivity and new services higher up the value chain.

Contents

  • Executive Summary
  • Introduction
  • Developing an AI strategy: What is it for?
    • Telefónica: From AURA and LUCA to Telefónica Tech
    • Vodafone: An efficiency focused strategy
    • Elisa: A vertical application approach
    • Takeaways: Comparing three approaches
  • AI maturity progression
    • Adopt big data analytics: The basic building blocks
    • Creating a centralised AI unit
    • Creating a new business unit
    • Disseminating AI across the organisation
  • Using partnerships to accelerate and scale AI
    • O2 and Cardinality
    • AT&T Acumos
  • Conclusion and recommendations
  • Index

Enter your details below to request an extract of the report

Consumer strategy: What should telcos do?

Globally, telcos are pursuing a wide variety of strategies in the consumer market, ranging from broad competition with the major Internet platforms to a narrow focus on delivering connectivity.

Some telcos, such as Orange France, Telefónica Spain, Reliance Jio and Rakuten Mobile, are combining connectivity with an array of services, such as messaging, entertainment, smart home, financial services and digital health propositions. Others, such as Three UK, focus almost entirely on delivering connectivity, while many sit somewhere in between, targeting a single vertical market, in addition to connectivity. AT&T is entertainment-orientated, while Safaricom is financial services-focused.

This report analyses the consumer strategies of the leading telcos in the UK and the Brazil – two very different markets. Whereas the UK is a densely populated, English-speaking country, Brazil has a highly-dispersed population that speaks Portuguese, making the barriers to entry higher for multinational telecoms and content companies.

By examining these two telecoms markets in detail, this report will consider which of these strategies is working, looking, in particular, at whether a halfway-house approach can be successful, given the economies of scope available to companies, such as Amazon and Google, that offer consumers a broad range of digital services. It also considers whether telcos need to be vertically-integrated in the consumer market to be successful. Or can they rely heavily on partnerships with third-parties? Do they need their own distinctive service layer developed in-house?

In light of the behavourial changes brought about by the pandemic, the report also considers whether telcos should be revamping their consumer propositions so that they are more focused on the provision of ultra-reliable connectivity, so people can be sure to work from home productively. Is residential connectivity really a commodity or can telcos now charge a premium for services that ensure a home office is reliably and securely connected throughout the day?

A future STL Partners report will explore telcos’ new working from home propositions in further detail.

Enter your details below to request an extract of the report

The UK market: Convergence is king

The UK is one of the most developed and competitive telecoms markets in the world. It has a high population density, with 84% of its 66 million people living in urban areas, according to the CIA Factbook. There are almost 272 people for every square kilometre, compared with an average of 103 across Europe. For every 100 people, there are 48 fixed lines and 41 broadband connections, while the vast majority of adults have a mobile phone. GDP per capita (on a purchasing power parity basis) is US$ 48,710, compared with US$ 65,118 in the US (according to the World Bank).

The strength of the state-funded public service broadcaster, the BBC, has made it harder for private sector players to make money in the content market. The BBC delivers a large amount of high-quality advertising-free content to anyone in the UK who pays the annual license fee, which is compulsory to watch television.

In the UK, the leading telcos have mostly eschewed expansion into the broader digital services market. That reflects the strong position of the leading global Internet platforms in the UK, as well as the quality of free-to-air television, and the highly competitive nature of the UK telecoms market – UK operators have relatively low margins, giving them little leeway to invest in the development of other digital services.

Figure 1 summarises where the five main network operators (and broadband/TV provider Sky) are positioned on a matrix mapping degree of vertical integration against the breadth of the proposition.

Most UK telcos have focused on the provision of connectivity

UK telco B2C strategies

Source: STL Partners

Brazil: Land of new opportunities

Almost as large as the US, Brazil has a population density is just 25 people per square kilometre – one tenth of the total UK average population density. Although 87% of Brazil’s 212 million people live in urban areas, according to the CIA Fact book, that means almost 28 million people are spread across the country’s rural communities.

By European standards, Brazil’s fixed-line infrastructure is relatively sparse. For every 100 people, Brazil has 16 fixed lines, 15 fixed broadband connections and 99 mobile connections. Its GDP per capita (on a purchasing power parity basis) is US$ 15,259 – about one third of that in the UK. About 70% of adults had a bank account in 2017, according to the latest World Bank data. However, only 58% of the adult population were actively using the account.

A vast middle-income country, Brazil has a very different telecoms market to that of the UK. In particular, network coverage and quality continue to be important purchasing criteria for consumers in many parts of the country. As a result, Oi, one of the four main network operators, became uncompetitive and entered a bankruptcy restructuring process in 2016. It is now hoping to to sell its sub-scale mobile unit for at least 15 billion reais (US$ 2.8 billion) to refocus the company on its fibre network. The other three major telcos, Vivo (part of Telefónica), Claro (part of América Móvil) and TIM Brazil, have made a joint bid to buy its mobile assets.

For this trio, opportunities may be opening up. They could, for example, play a key role in making financial services available across Brazil’s sprawling landmass, much of which is still served by inadequate road and rail infrastructure. If they can help Brazil’s increasingly cash-strapped consumers to save time and money, they will likely prosper. Even before COVID-19 struck, Brazil was struggling with the fall-out from an early economic crisis.

At the same time, Brazil’s home entertainment market is in a major state of flux. Demand for pay television, in particular, is falling away, as consumers seek out cheaper Internet-based streaming options.

All of Brazil’s major telcos are building a broad consumer play

Brazil telco consumer market strategy overview

Source: STL Partners

Table of contents

  • Executive Summary
  • Introduction
    • The UK market: Convergence is king
    • BT: Trying to be broad and deep
    • Virgin Media: An aggregation play
    • O2 UK: Changing course again
    • Vodafone: A belated convergence play
    • Three UK: Small and focused
    • Takeaways from the UK market: Triple play gridlock
  • Brazil: Land of new opportunities
    • The Brazilian mobile market
    • The Brazilian fixed-line market
    • The Brazilian pay TV market
    • The travails of Oi
    • Vivo: Playing catch-up in fibre
    • Telefónica’s financial performance
    • América Móvil goes broad in Brazil
    • TIM: Small, but perfectly formed?
    • Takeaways from the Brazilian market: A potentially treacherous transition
  • Index

Enter your details below to request an extract of the report

Telco edge computing: What is the operator strategy?

To access the report chart pack in PPT download the additional file on the left

Edge computing can help telcos to move up the value chain

The edge computing market and the technologies enabling it are rapidly developing and attracting new players, providing new opportunities to enterprises and service providers. Telco operators are eyeing the market and looking to leverage the technology to move up the value chain and generate more revenue from their networks and services. Edge computing also represents an opportunity for telcos to extend their role beyond offering connectivity services and move into the platform and the application space.

However, operators will be faced with tough competition from other market players such as cloud providers, who are moving rapidly to define and own the biggest share of the edge market. Plus, industrial solution providers, such as Bosch and Siemens, are similarly investing in their own edge services. Telcos are also dealing with technical and business challenges as they venture into the new market and trying to position themselves and identifying their strategies accordingly.

Telcos that fail to develop a strategic approach to the edge could risk losing their share of the growing market as non-telco first movers continue to develop the technology and dictate the market dynamics. This report looks into what telcos should consider regarding their edge strategies and what roles they can play in the market.

Following this introduction, we focus on:

  1. Edge terminology and structure, explaining common terms used within the edge computing context, where the edge resides, and the role of edge computing in 5G.
  2. An overview of the edge computing market, describing different types of stakeholders, current telecoms operators’ deployments and plans, competition from hyperscale cloud providers and the current investment and consolidation trends.
  3. Telcos challenges in addressing the edge opportunity: technical, organisational and commercial challenges given the market
  4. Potential use cases and business models for operators, also exploring possible scenarios of how the market is going to develop and operators’ likely positioning.
  5. A set of recommendations for operators that are building their strategy for the edge.

Enter your details below to request an extract of the report

What is edge computing and where exactly is the edge?

Edge computing brings cloud services and capabilities including computing, storage and networking physically closer to the end-user by locating them on more widely distributed compute infrastructure, typically at smaller sites.

One could argue that edge computing has existed for some time – local infrastructure has been used for compute and storage, be it end-devices, gateways or on-premises data centres. However, edge computing, or edge cloud, refers to bringing the flexibility and openness of cloud-native infrastructure to that local infrastructure.

In contrast to hyperscale cloud computing where all the data is sent to central locations to be processed and stored, edge computing local processing aims to reduce time and save bandwidth needed to send and receive data between the applications and cloud, which improves the performance of the network and the applications. This does not mean that edge computing is an alternative to cloud computing. It is rather an evolutionary step that complements the current cloud computing infrastructure and offers more flexibility in executing and delivering applications.

Edge computing offers mobile operators several opportunities such as:

  • Differentiating service offerings using edge capabilities
  • Providing new applications and solutions using edge capabilities
  • Enabling customers and partners to leverage the distributed computing network in application development
  • Improving networkperformance and achieving efficiencies / cost savings

As edge computing technologies and definitions are still evolving, different terms are sometimes used interchangeably or have been associated with a certain type of stakeholder. For example, mobile edge computing is often used within the mobile network context and has evolved into multi-access edge computing (MEC) – adopted by the European Telecommunications Standards Institute (ETSI) – to include fixed and converged network edge computing scenarios. Fog computing is also often compared to edge computing; the former includes running intelligence on the end-device and is more IoT focused.

These are some of the key terms that need to be identified when discussing edge computing:

  • Network edge refers to edge compute locations that are at sites or points of presence (PoPs) owned by a telecoms operator, for example at a central office in the mobile network or at an ISP’s node.
  • Telco edge cloud is mainly defined as distributed compute managed by a telco  This includes running workloads on customer premises equipment (CPE) at customers’ sites as well as locations within the operator network such as base stations, central offices and other aggregation points on access and/or core network. One of the reasons for caching and processing data closer to the customer data centres is that it allows both the operators and their customers to enjoy the benefit of reduced backhaul traffic and costs.
  • On-premise edge computing refers to the computing resources that are residing at the customer side, e.g. in a gateway on-site, an on-premises data centre, etc. As a result, customers retain their sensitive data on-premise and enjoy other flexibility and elasticity benefits brought by edge computing.
  • Edge cloud is used to describe the virtualised infrastructure available at the edge. It creates a distributed version of the cloud with some flexibility and scalability at the edge. This flexibility allows it to have the capacity to handle sudden surges in workloads from unplanned activities, unlike static on-premise servers. Figure 1 shows the differences between these terms.

Figure 1: Edge computing types

definition of edge computing

Source: STL Partners

Network infrastructure and how the edge relates to 5G

Discussions on edge computing strategies and market are often linked to 5G. Both technologies have overlapping goals of improving performance and throughput and reducing latency for applications such as AR/VR, autonomous vehicles and IoT. 5G improves speed by increasing spectral efficacy, it offers the potential of much higher speeds than 4G. Edge computing, on the other hand, reduces latency by shortening the time required for data processing by allocating resources closer to the application. When combined, edge and 5G can help to achieve round-trip latency below 10 milliseconds.

While 5G deployment is yet to accelerate and reach ubiquitous coverage, the edge can be utilised in some places to reduce latency where needed. There are two reasons why the edge will be part of 5G:

  • First, it has been included in the 5Gstandards (3GPP Release 15) to enable ultra-low latency which will not be achieved by only improvements in the radio interface.
  • Second, operators are in general taking a slow and gradual approach to 5G deployment which means that 5G coverage alone will not provide a big incentive for developers to drive the application market. Edge can be used to fill the network gaps to stimulate the application market growth.

The network edge can be used for applications that need coverage (i.e. accessible anywhere) and can be moved across different edge locations to scale capacity up or down as required. Where an operator decides to establish an edge node depends on:

  • Application latency needs. Some applications such as streaming virtual reality or mission critical applications will require locations close enough to its users to enable sub-50 milliseconds latency.
  • Current network topology. Based on the operators’ network topology, there will be selected locations that can meet the edge latency requirements for the specific application under consideration in terms of the number of hops and the part of the network it resides in.
  • Virtualisation roadmap. The operator needs to consider virtualisation roadmap and where data centre facilities are planned to be built to support future network
  • Site and maintenance costs. The cloud computing economies of scale may diminish as the number of sites proliferate at the edge, for example there is a significant difference in maintaining 1-2 large data centres to maintaining 100s across the country
  • Site availability. Some operators’ edge compute deployment plans assume the nodes reside in the same facilities as those which host their NFV infrastructure. However, many telcos are still in the process of renovating these locations to turn them into (mini) data centres so aren’t yet ready.
  • Site ownership. Sometimes the preferred edge location is within sites that the operators have limited control over, whether that is in the customer premise or within the network. For example, in the US, the cell towers are owned by tower operators such as Crown Castle, American Tower and SBA Communications.

The potential locations for edge nodes can be mapped across the mobile network in four levels as shown in Figure 2.

Figure 2: possible locations for edge computing

edge computing locations

Source: STL Partners

Table of Contents

  • Executive Summary
    • Recommendations for telco operators at the edge
    • Four key use cases for operators
    • Edge computing players are tackling market fragmentation with strategic partnerships
    • What next?
  • Table of Figures
  • Introduction
  • Definitions of edge computing terms and key components
    • What is edge computing and where exactly is the edge?
    • Network infrastructure and how the edge relates to 5G
  • Market overview and opportunities
    • The value chain and the types of stakeholders
    • Hyperscale cloud provider activities at the edge
    • Telco initiatives, pilots and plans
    • Investment and merger and acquisition trends in edge computing
  • Use cases and business models for telcos
    • Telco edge computing use cases
    • Vertical opportunities
    • Roles and business models for telcos
  • Telcos’ challenges at the edge
  • Scenarios for network edge infrastructure development
  • Recommendation
  • Index

Enter your details below to request an extract of the report

Cloud gaming: What is the telco play?

To access the report chart pack in PPT download the additional file on the left

Drivers for cloud gaming services

Although many people still think of PlayStation and Xbox when they think about gaming, the console market represents only a third of the global games market. From its arcade and console-based beginnings, the gaming industry has come a long way. Over the past 20 years, one of the most significant market trends has been growth of casual gamers. Whereas hardcore gamers are passionate about frequent play and will pay more to play premium games, casual gamers play to pass the time. With the rapid adoption of smartphones capable of supporting gaming applications over the past decade, the population of casual/occasional gamers has risen dramatically.

This trend has seen the advent of free-to-play business models for games, further expanding the industry’s reach. In our earlier report, STL estimated that 45% of the population in the U.S. are either casual gamers (between 2 and 5 hours a week) or occasional gamers (up to 2 hours a week). By contrast, we estimated that hardcore gamers (more than 15 hours a week) make up 5% of the U.S. population, while regular players (5 to 15 hours a week) account for a further 15% of the population.

The expansion in the number of players is driving interest in ‘cloud gaming’. Instead of games running on a console or PC, cloud gaming involves streaming games onto a device from remote servers. The actual game is stored and run on a remote compute with the results being live streamed to the player’s device. This has the important advantage of eliminating the need for players to purchase dedicated gaming hardware. Now, the quality of the internet connection becomes the most important contributor to the gaming experience. While this type of gaming is still in its infancy, and faces a number of challenges, many companies are now entering the cloud gaming fold in an effort to capitalise on the new opportunity.

5G can support cloud gaming traffic growth

Cloud gaming requires not just high bandwidth and low latency, but also a stable connection and consistent low latency (jitter). In theory, 5G promises to deliver stable ultra-low latency. In practice, an enormous amount of infrastructure investment will be required in order to enable a fully loaded 5G network to perform as well as end-to-end fibre. 5G networks operating in the lower frequency bands would likely buckle under the load if lots of gamers in a cell needed a continuous 25Mbps stream. While 5G in millimetre-wave spectrum would have more capacity, it would require small cells and other mechanisms to ensure indoor penetration, given the spectrum is short range and could be blocked by obstacles such as walls.

Enter your details below to request an extract of the report

A complicated ecosystem

As explained in our earlier report, Cloud gaming: New opportunities for telcos?, the cloud gaming ecosystem is beginning to take shape. This is being accelerated by the growing availability of fibre and high-speed broadband, which is now being augmented by 5G and, in some cases, edge data centres. Early movers in cloud gaming are offering a range of services, from gaming rigs, to game development platforms, cloud computing infrastructure, or an amalgamation of these.

One of the main attractions of cloud gaming is the potential hardware savings for gamers. High-end PC gaming can be an extremely expensive hobby: gaming PCs range from £500 for the very cheapest to over £5,000 for the very top end. They also require frequent hardware upgrades in order to meet the increasing processing demands of new gaming titles. With cloud gaming, you can access the latest graphics processing unit at a much lower cost.

By some estimates, cloud gaming could deliver a high-end gaming environment at a quarter of the cost of a traditional console-based approach, as it would eliminate the need for retailing, packaging and delivering hardware and software to consumers, while also tapping the economies of scale inherent in the cloud. However, in STL Partners’ view that is a best-case scenario and a 50% reduction in costs is probably more realistic.

STL Partners believes adoption of cloud gaming will be gradual and piecemeal for the next few years, as console gamers work their way through another generation of consoles and casual gamers are reluctant to commit to a monthly subscription. However, from 2022, adoption is likely to grow rapidly as cloud gaming propositions improve.

At this stage, it is not yet clear who will dominate the value chain, if anyone. Will the “hyperscalers” be successful in creating a ‘Netflix’ for games? Google is certainly trying to do this with its Stadia platform, which has yet to gain any real traction, due to both its limited games library and its perceived technological immaturity. The established players in the games industry, such as EA, Microsoft (Xbox) and Sony (PlayStation), have launched cloud gaming offerings, or are, at least, in the process of doing so. Some telcos, such as Deutsche Telekom and Sunrise, are developing their own cloud gaming services, while SK Telecom is partnering with Microsoft.

What telcos can learn from Shadow’s cloud gaming proposition

The rest of this report explores the business models being pursued by cloud gaming providers. Specifically, it looks at cloud gaming company Shadow and how it fits into the wider ecosystem, before evaluating how its distinct approach compares with that of the major players in online entertainment, such as Sony and Google. The second half of the report considers the implications for telcos.

Table of Contents

  • Executive Summary
  • Introduction
  • Cloud gaming: a complicated ecosystem
    • The battle of the business models
    • The economics of cloud gaming and pricing models
    • Content offering will trump price
    • Cloud gaming is well positioned for casual gamers
    • The future cloud gaming landscape
  • 5G and fixed wireless
  • The role of edge computing
  • How and where can telcos add value?
  • Conclusions

Enter your details below to request an extract of the report