Future network operations
Network issues in the medium term
Capex will remain the biggest challenge, followed by regulation and issues related to network migration, margin improvement and customer experience.
Key trends over the next two to three years
- During the next three years through 2015, the industry will undergo the transition to next generation and “all-IP” networks. This transition needs to be rapid, together with the related trade-off with capital expenditure.
- Operators will see continued migration from voice to data, requiring them to tackle questions around how to monetize data. Fixed and mobile services will converge fully as consumers seek a true multi-screen presence and experience.
- This convergence at the service level will be mirrored by ongoing consolidation of market players, often with the aim of combining complementary capabilities and portfolios. The trend toward saving costs and risks through asset sharing will continue.
- There will be an increased emphasis on customer service, and a greater focus on brand building and customer retention. The shift from the network to customer service as a source of differentiation has already happened in mature markets, and will increasingly occur in emerging markets.
- A vital area of uncertainty remains the direction that regulation will take. Tracking and responding effectively to regulatory change will be key priorities for operators worldwide.
All of these trends are reflected in operators’ views of the medium term issues they will face, as shown in Figure 7.Respondents anticipate that capex will remain the biggest challenge, followed by regulation and then issues related to network migration, margin improvement and customer experience.
Figure 7. Issues facing operators in the next 2–3 years
Source: Ernst & Young operator interviews
Capital investments in the medium term
The industry’s capital investment profile over the coming two to three years will largely be “more of the same,” with a continuation of:
- Current investments in fiber
- Roll-outs of IP-based core converged networks, both mobile and fixed
- Mobile backhaul, transmission and coverage
In many markets, there will also be a need to invest in mobile spectrum. However, one significant change will be an increase in IT capex, focused particularly on upgrading customer support systems and enhancing service provision.
Anticipated impacts of capex trends
Most respondents believe the continued need to fund heavy capital investment in their networks in the medium term will have two main effects:
- The first will be greater interest in new and different operating and ownership models, especially around network sharing and other infrastructure deals. Some respondents also raised the possibility of more joint ventures and outsourcing in the IT domain.
- The second impact of ongoing capex pressures will be new and renewed managed services contracts with increased scope, as operators decide to outsource ever more elements of their network infrastructure and operations.
However, the operators in our study raise a number of questions about further outsourcing, leading some to consider in-sourcing services that have previously been outsourced.
This trend is being driven partly by frustration with the lack of control and flexibility over outsourced network operations, and partly by a belief that the major cost efficiencies have now been achieved, meaning the operator can take back a streamlined operation.
Operators also wish to have better control over the customer-facing parts of the operations. As fiber is rolled out, the third-party providers of services such as roll-out support have become responsible for installations in customer premises, including set-top boxes in people’s homes. This area is seen as key to the customer experience, and operators are wary of entrusting it to external suppliers.