Welcome to edition #19 of the Beyond the Next Billion newsletter. We are back after a few weeks on the road followed by the inevitable recovery to mailbox zero! This was exactly how the previous edition opened but the same patterns seem to keep playing out. That said, we will attempt to unpack a number of things from recent travels.
In this issue, we discuss the growing momentum behind broadband in the United States, the state of automation in telecoms in the context of learnings from the FutureNet Asia conference in Singapore, as well as some learnings from the India Mobile Congress on the state of play in the India telecom market. In contrast to recent editions, this version is set up to read in a more traditional blog format.
2023 IS A “BACK TO NORMAL” YEAR FOR BROADBAND IN THE US BUT MOMENTUM IS GROWING
A couple of months ago, we had the opportunity to visit the United States for an analyst event with a leading global vendor of broadband equipment. In the United States, 2022 was a record year driven by a surge of broadband investments in North America as service providers stockpiled network equipment to fund their expansion plans, but also to get ahead of and mitigate geopolitical headwinds that would impact the supply chain. Of this course, this trend was not restricted to the US only, as the overall macro trend of rising demand for broadband continues unabated, and this is manifesting in rapidly rising data traffic carried over fixed networks. Regardless of the region, the proportion of homes connected versus homes passed is still relatively low, implying significant opportunities still exist for broadband growth.
2023 is a year that has seen a return to “normal” conditions. Service providers in North America have decelerated their CAPEX spending and have drawn down on their inventories through much of 2023.Labour shortages in the US have also been a factor to a degree, and this has slowed down momentum in network expansion. That said, there is significant momentum in Tier-2 and 3 service providers, especially those in predominantly rural and remote areas of the United States.
At the analyst event, there were a number of customer presentations which are always useful at gauging actual momentum on the ground. These presentations included two from #NextLink and #SRT. Nextlink is the larger of these two regional providers, with its headquarters in Hudson Oaks, Texas and with coverage across significant parts of the American Midwest. Nextlink’s coverage is predominantly rural, and its CEO made a point of the fact that the requirements across each county tend to vary significantly. This requires them to deploy a diverse range of technologies, from fixed broadband to utilization of unlicensed 6 GHz spectrum, as well as licensed CBRS spectrum in the 3.5 GHz bands. Nextlink has benefited from recent US Government programs like Connect America Fund (CAF), the Rural Digital Opportunity Fund (RDOF), as well as the more recent Broadband Equity Access and Deployment (BEAD) program.
The latter is the biggest of these initiatives, with a proposed $42.5 billion being sanctioned by the Biden administration to build high-speed broadband networks in rural areas and bridge the digital divide. The BEAD program is also known for its Build America, Buy America provisions that would require equipment to be manufactured in the US, with 55% of the total cost of components to be “US sourced.” The latter requirement was always going to be controversial, but it also meant that some companies would be better prepared than others. With the announcement of a new facility on August 3rd in Wisconsin, Nokia has become the first supplier to take the plunge into domestic manufacturing through a tie-up with Sanmina.
Also interesting to note from these customer presentations were that the use cases for rural Internet access are, unsurprisingly, quite different from what one would expect in urban/suburban areas. The Nextlink CEO made a telling comment that the demand curve for broadband in rural falls off a cliff at around 90-100 Mbps, which is instructive for analyzing how they would plan their network spends. This is the service level that they are focused on as without this, customers would start to look at options like Starlink, though the setup costs for that would be much higher. The SRT CEO spoke about use cases for rural education, agriculture, tourism, and even remote working. One of the more atypical pockets of demand for SRT comes from the need for broadband connectivity for families that have relocated to the area to work at the Defense establishments in the area.
TELCO TRANSFORMATION PROJECTS ACROSS ASIA
We recently had the opportunity to attend the FutureNet Asia conference in Singapore, held in mid-October. This was one of the best conferences we have attended in recent years, with a high degree of senior representation from regional telcos and a great balance of content over two days. A number of themes were touched on at FutureNet Asia, including the overall acro theme of digital transformation for telcos, the potential transition from telcos to “TechCos”, network evolution in the context of 5G investments, automation in telco operations, new partnerships and business models that are emerging as a result of these changes, as well as the challenges that continue to bedevil the strategic goals set for the industry.
Telco to TechCo has become a recurring theme, despite it meaning different things to different people. We had written on this in the past (here), when we had opined more broadly about the need for telcos to replace their traditional orthodoxy and look to co-create value with industry partners. To this end, new initiatives like the TMForum’s Open Digital Architecture (ODA) and the GSMA’s Open Gateway Initiative are important moves towards making telcos more open and accessible, but also for laying a foundation for future monetization strategies. In the last edition of this newsletter, we had written about growing momentum behind the creation of telco APIs as a monetization strategy. “There is significant work still to be done on standardizing network APIs that are consumable but also in demand. The second point is critical to telco hopes of being able to monetize their network investments. Most initial discussions about telco APIs seem to focus on exposing advanced features like location and positioning through the telco network or enabling network slicing. However, the jury is still out on how much demand there will really be for these features, and more importantly, how much developers would be willing to pay.” At the FutureNet conference, there was plenty of discussion and statements of intent around telco APIs but also confirmation that it was still early days both in terms of availability as well as relevance.
At FutureNet, we were also able to moderate a panel discussion on “New Operating Models, Ecosystems and Partnerships – Breaking down the Barriers,” featuring a great panel of speakers from StarHub in Singapore, Telenor Asia as well as Sri Lanka Telecom. For those interested in the panel discussion, see the link here. We were able to cover a range of topics, from the types of new business opportunities and new customer segments that were emerging, to the kind of partners that telcos typically seek today, to the way contractual models are shifting towards longer term, risk-haring “partnerships” to the numerous challenges that still need to be overcome to achieve the digital transformation of telcos. These challenges included the need to shift to being more open, towards moving away from a CAPEX-intensive operating model to one focused on R&D and innovation, to the urgent need for skilling and many more.
Overall, the tone of the panel was optimistic but realistic about the future of the industry and its strategic direction. The panel was also reflective of the larger sentiment in the room from all the preceding speakers from a cross section of the operator community in South-East Asia. The last year has seen a number of initiatives from SEA operators, including mergers like Celcom-DiGi in Malaysia, True-DTAC in Thailand, and Indosat-Ooredoo in Indonesia. The Indosat CEO Vikram Sinha struck a particularly optimistic tone in a recent article on their transition to a TechCo. Beyond mergers, several telcos are keenly focused on an expansion of their enterprise businesses, as well as diversifying beyond mobile into Broadband. There are, of course, major players like Singtel who aer going the other way by divesting and shedding a number of plays in adjacent markets. Singtel has recently sold its TrustWave security acquisition, as well as Amobee and others in the past as it seeks a back to basics approach.
INDIA TELECOMS: A STAR ON THE RISE
In late October, New Delhi played host to the 2023 edition of the India Mobile Congress. The event was held at Pragati Maidan, with many newly renovated areas having been inaugurated for the G20 Summit and meetings a few months ago. Having visited this event in years past, the first impression was of a much larger scale, not just in terms of delegates but also exhibitors. There was a definite buzz about this event, and it also featured a number of keynote sessions and conference tracks on a range of topics. India’s major telcos, including Reliance Jio and Bharti Airtel, had massive booths reminiscent of Mobile World Congress in Barcelona. Vi and BSNL, currently the also rans of the Indian telecoms market, also had large booths but relatively sparse.
The main focus of the operator showcases at this event was, predictably, 5G in all its forms and avatars.
Gaming - I say avatar somewhat tongue in cheek as a big focus in all the operator booths was gaming. Indeed, Jio was even showcasing its mixed reality (MR) glasses. Sadly, we did not get an opportunity to get a demo due to excessive crowding at that time.
Fixed Wireless Access – FWA, or AirFiber as it is currently dubbed in India, was a major focus at this event. Both Jio and Airtel have launched FWA and were showcasing their outdoor and indoor units, or ODUs and IDUs in local parlance. Vi also had a demo station for FWA but no information on launch dates, which was to be expected given the overall uncertainty that continues to shroud Vi’s outlook these days. Mandala Insights has published an India FWA forecast (DM for details).
Satellite – not surprisingly, there was a lot of focus on low-earth and medium-earth satellite services by Airtel and Jio, respectively. Airtel has tied up with the OneWeb consortium and Jio has tied up with SES, which operates a constellation of MEO satellites. There is already significant debate ongoing in India on the best way to allocate spectrum frequencies for satellite services, so this is a space to watch.
Beyond the incumbent operators and vendors, one noteworthy development at this year’s IMC event was the number of booths allocated to Government ministries as well as significant space given to startups and Indian telecom vendors. Some of these vendors are larger, admittedly, like STL in the optical fiber space, Tejas Networks and others. But several are “up and coming”, including Lekha Wireless for Open RAN, Signaltron for small cells, Niral Networks and Tidalwave for private 5G and others.
The Government ministry showcases are a testament to the Prime Minister’s diktat that each ministry come up with use cases for 5G in their respective domains. While there were several use case concepts being shows, mining looks to be one of the early success stories. We happened to pass by a booth for the Ministry of Coal, which was showcasing a private 5G deployment on a mine somewhere near the border of Uttar Pradesh and Madhya Pradesh, the kind that would take a couple of days to reach. Of course, for those wondering why India has a Ministry of Coal and a separate Ministry of Mines, one can only surmise that it is a uniquely Indian phenomenon. The live demo being showcases involved a 4K feed running on a 5G private link from the mine to the booth at IMC on a 200 mbps feed. Pretty impressive resolution and latency! Besides Tidalwave, Niral Networks also has commercial deployments in mining.
Overall, there was a palpable buzz at this year’s IMC edition. 2023 has been a boom year for Indian telecoms, long a market that served as an also ran in the global agenda. With a bumper and record setting 5G deployment this year, a solid foundation has been laid for a sustained revival in the sector. Even Vi and BSNL are seeing light at the end of the proverbial tunnel, with Vi potentially securing much needed equity funding and BSNL benefiting from a massive government package with a 4G network launch in the near future built on Made in India telecom gear. In a mirror image of the macro picture of India doing its best to leverage the geopolitical opportunities that have been presented to it, the Indian telecom sector, and manufacturing in particular, has a small window of opportunity to build a sustainable base of manufacturing. To be clear, one should not expect or even project the next Huawei coming out of India but there is ample scope for a viable base of telecom gear coming out of India.