As telecoms consultants, we are exposed to a broad range of clients giving us a real-time pulse of what is happening in the telecoms market.
Because of this, we are aware of market trends both from the supply side and users, and we understand the impact of telecoms legislation and government policy upon market response and investor dynamics.
Based on our recent interactions with investors, operators and policymakers, this article discusses how we expect the telecoms market to shape up in 2021.
Fibre, fibre and more fibre
We are likely to see an increase in fibre deployment activity from new market entrants and smaller Internet Service Providers (ISPs) including those operating fixed wireless networks. Fixed wireless network operators are worth watching particularly as they have an existing customer base acquired at relatively low cost which they can convert to fibre.
ISPs with an existing customer base pose less risk than a new market entrant for investors. Fibre assets offer a recurring revenue potential creating long-term income certainty for savvy investors.
There is recent evidence of increased ISP activity. According to Ofcom data, 35 operators applied for Code Powers in 2020 giving them certain rights to deploy telecoms networks. This is a significant increase from 2017 when only eight applications were received by Ofcom.
Between December and November 2020 alone, six operators applied to Ofcom for code powers to roll out fibre networks across the UK (mostly in England). A handful of the six has indicated plans to deploy their own fibre infrastructure rather than using Openreach infrastructure suggesting they will be taking their fibre networks where incumbent operator footprints are currently limited.
Fibre activity is not just limited to new entrants, however. Liberty Global (the owner of Virgin Media) through subsidiary Liberty Networks applied for Code Powers in 2020 signalling its intent to construct and operate a highspeed broadband network across the UK. It is thought that the network will be deployed over Openreach infrastructure where available and newly constructed fibre infrastructure elsewhere.
Further, Virgin Media’s own network expansion strategy has also been based on full-fibre further driving its rollout. One factor for this recent spike in fibre activity may be due to the increase in home working and online learning. As a result of Covid-19, many of us strive for faster and more reliable broadband connections at home.
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According to Ofcom, the pandemic accelerated the adoption of online services to keep in touch with friends and family. Another factor may be that the UK is still one the most underperforming fibre markets in Europe making it attractive from a market opportunity perspective.
The FTTH council which gathers fibre coverage data from across Europe reports that the UK has a market penetration rate of 2.8% which is more than double last year’s 1.3%. The UK is significantly behind leaders Iceland with 66% penetration.
Based on our own observations, a third factor is down to local authority ambition. Forward-thinking local authorities engaging in fibre intervention programmes are more likely to benefit from fibre investment and a hike up the fibre rankings. Last year, Renfrewshire Council benefited from a circa £40 million privately led investment in full-fibre taking fibre availability across the region from 7% of premises to over 70%.
Initiatives such as the Scottish Government’s R100 programme and the UK Government’s £5 million ‘Final 20’ programme – once they get going later this year in earnest – are also likely to enhance fibre coverage in rural areas.
The public sector is taking on IoT
Although the concept of smart cities and the Internet of Things (IoT) have been with us for a while there is still little evidence of mass deployment in our towns and cities or of tangible societal impact. Intelligens Consulting expects this to change and anticipates IoT deployments to ramp up in 2021.
Throughout 2020 a number of local authorities engaged in IoT pilots particularly for low intelligence and low complexity tasks across a range of use cases. These use cases included, for example, ‘smart gritting’, where sensors are deployed and augmented by existing weather data to determine when gritters should be dispatched, improving road safety.
Another example involves the deployment of parking sensors to save drivers time and stress in searching and paying for parking spaces. As well as this, sensors are being deployed to measure temperature, humidity, and carbon dioxide levels in council properties, providing early alerts on issues such as problems with ventilation and potential dampness which has already identified real costs savings and social benefits.
Although these use cases can hardly be described as leading edge, they are an essential first step to rolling out mass IoT networks which can lead to wider societal change. These entry level use cases will build confidence in the technology, support the case for change and provide a solid technology platform which can be evolved over time to support other use cases as they emerge.
Based on client interactions Intelligens Consulting is witnessing an increased interest from within the public sector to deploy IoT networks to improve productivity, service delivery and to generate costs savings – and this interest is likely to intensify throughout 2021.
Investment in IoT is also ramping up, signalling higher deployments in 2021. Connexin has announced plans to expand its LoRaWAN IoT network across the UK on the back of successful pilots and fundraising to support the expansion. In addition, Salesforce announced an investment in an IoT firm to expand UK IoT projects.
As well as this, IoT connectivity is now available across many Scottish cities, towns, villages and rural areas through the Scottish Government’s £2.7 million investment in IoT Scotland.
In theory, the take-up barriers for local authorities should be significantly reduced increasing the appeal of deploying IoT solutions.
2021 – The year of the private 5G network.
Intelligens Consulting has previously written that 5G densification and the accompanying urban transformation is unlikely for a number of reasons and this status quo is likely to remain throughout 2021.
5G’s high-performance capabilities are achieved through the deployment of densified small cell networks. However, the cost of deploying small cells is significant even when considering neutral host shared infrastructure models. Mobile Network Operators (MNOs) often cite the lack of demand or use cases as reasons for not densifying 5G networks.
However, in our experience, even some of the most ambitious use cases could be delivered using a mix of existing communications technologies. As a result, deploying 5G small cell networks are unlikely to generate any increase in MNO revenues limiting the investment case for now.
Although the case for densifying 5G networks is limited the case for private 5G networks is becoming increasingly prevalent. Private 5G offers the potential to transform private wireless networks promising higher speeds, lower latency and greater connection reliability and security than WiFi. These characteristics are well suited to smart manufacturing sectors using robotic automation for large-scale manufacturing for example.
Such private 5G installations are starting to appear in leading-edge R&D facilities to allow manufacturers to trial new business models, technologies and concepts, by connecting equipment, monitoring data in real-time and supporting machine learning algorithms through private 5G networks.
In another example, a 5G private network is planned for Belfast Harbour port’s main operational areas enhancing safety, security and sustainability across the Harbour Estate at a time of rising demands placed on transport and logistics.