Future network operations

Network issues in the long term

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The issues that the telecoms industry expects to face over the longer term are largely those it is currently grappling with, as shown in Figure 8.

Figure 8. Issues facing operators in the longer term

Issues facing operators in the longer term

Source: EY operator interviews

Operators expect to face acceleration in mobile sector consolidation, along with further consolidation among industry vendors.

However, these issues are set to intensify and escalate as competition increases and consumers continue to migrate toward digital behaviors.

The industry will see a continuing long-term increase in demand for IP-based services — especially ubiquitous mobile broadband access. To help free up the necessary capital for investment in these services, operators will take steps to optimize their investment returns, including carefully managing the timing of closing old networks, while simultaneously executing plans to reduce the cost base and improve the customer experience.

For fixed operators in particular, a key challenge will be finding an economically viable solution to mass-market fiber build to the home.

Operators expect to face acceleration in mobile sector consolidation, along with further consolidation among industry vendors. The availability of spectrum to meet demand will also continue to be an issue for the long term.

Impact of long-term trends

The long-term trends outlined above will significantly affect the industry’s ownership structures and operating models. Figure 9 illustrates what survey respondents expect the effects to be.

Figure 9. Impact of long-term issues on telecoms market

Impact of long-term issues on telecoms market

Source: EY operator interviews

These effects will emerge against a background of evolving market dynamics and changing economics that will increase the potential for new network ownership models based on joint ventures.

However, the extent to which these models are adopted will depend on three unpredictable variables:

  • The readiness of industry regulators and competition authorities to grant approval for such deals
  • Operators’ perception of the value and importance of ownership, which is likely to differ by market
  • The level of investment required in next generation networks, which will also differ by market

Over time these variables may push the industry towards possible further consolidation and a wider spectrum of business/operating models.

Policymakers and regulators could well play an important role in such a development, as they may seek to ensure universal access to high-speed networks for all parts of the population. This could result in a push toward a national broadband infrastructure, owned either by the state or by pure infrastructure providers.