Next generation digital connectivity: How do network operators seize the moment?

Progress on the roll out of UK 5G and full fibre network infrastructure may have been slowed by the Covid-19 outbreak and UK government Huawei announcement, but political and consumer expectations of the perceived benefits continues to gain momentum.

Our previous perspective considered the ‘good, the bad and the ugly’ impacts that the network operators will face due to the announced Huawei restrictions and the proactive steps operators should put in place to manage. In this article below, we consider how operators can react to meet UK’s future digital connectivity aspiration.

Is there a demand for 5G and full fibre?

As global mobile data traffic is expected to increase by over 90% in the next two years [1], three core benefits of 5G networks are repeatedly mentioned: increased data speed, low latency and increased number of simultaneous connections. Large scale 5G rollout is also a key enabler to tackle network capacity and security issues that mobile operators currently face and meet the demands for new use-cases that include Internet of Things (IoT), Industry 4.0, automotive, mobile gaming, 5G home broadband, Virtual and Augmented Reality (VR & AR). As these new use-cases are mostly still in their infancy, network operators do not yet have a clear line of sight on a commercial return for their 5G asset build investment and the additional spectrum acquired but they do know they need to keep building to keep up with the rapidly growing 5G market.

Figure 1 - 5G core benefits compared to 4G

 

There is also end user need for higher performance full fibre broadband connections, that we believe has more current consumer use-cases than 5G. The demand for which was pushed up the priority list during the Covid-19 lockdown as consumers spent more time at home. Operators reported a 35-60% rise in daytime web traffic [2], with many households attempting to run video calls, video content streaming and online gaming simultaneously that has exposed limitations of many existing home broadband services. It has been estimated that if customers purchased the highest broadband speed available to their premise then the average broadband speed would be 224Mbps compared to the current average of 64Mbps [3], however the likelihood is that consumers will better understand their bandwidth demands as end user needs continue to surface and we reach a ‘new normal’ way of connecting from home. It is clear that by 2025, when the prevalence of new full fibre use-cases shown below develop, there will be a mass consumer market need for significantly higher bandwidth connections.

Figure 2 – Downstream Bandwidth requirements for future use cases [4]

 

What is currently being deployed?

5G to date is available in 98 major towns and cities via at least one mobile operator, though it’s difficult to understand the true coverage within the UK. 5G is deployed at a higher spectrum frequency than 4G and hence has a shorter range and a smaller coverage footprint (as little as 20m), which can be easily disturbed by buildings and trees. It is estimated that more than 40,000 outdoor small cells will be required in the UK within the next 5 years [5] to achieve the outdoor area densification required (particularly in urban areas). To assure the high speed 5G data transmission rates, a fibre backhaul is preferred compared to other wired or wireless backhaul. However building significant fibre backhaul links are both costly and time consuming, therefore should be deployed in combination with small cells to reduce network costs and optimise performance [6]. 

A 5G network can also provide a solution alternate to fixed broadband technology with a fixed wireless access (FWA) utilising mmWave frequency and providing the benefits of a relatively simple implementation. Facebook, earlier this year, commercially launched in UK their Terragraph 60GHz base stations able to deliver gigabit speeds and could provide an intermediate solution especially in areas which are costlier to deploy.

Figure 3 – 5G Fixed Wireless Access uses mmWave frequency instead of a fixed line for broadband purposes

 

Beyond 5G’s demand for supporting fibre infrastructure, fixed line broadband connections through Fibre-to-the-premise (FTTP) technology moves the UK away from using copper based solutions that underpin c.85% of UK broadband connections currently. A full fibre connection installed from your local BT exchange all the way to your home or business access point could eventually scale up to provide network speeds of 10Gbps. The UK government have optimistically brought forward their nationwide target of a FTTP network from 2033 to 2025, with operators undoubtedly also facing the upcoming challenge that a similar ban is expected on Huawei kit for fibre as it has for the 5G network, with Huawei currently having c.45% market share in FTTP [7].

Current reported plans from operators ambitiously present a view that the number of premises covered by full fibre will rise from 3.6 million at the end of 2019 to 34.5 million in 2025 [3]. This actually accounts to 113% of UK premises, which undoubtedly contains overlap. The alternate networks (e.g. CityFibre, Hyperoptic, Gigaclear) will also face an increased deployment rate as they collectively look to deploy close to 17 million premises in the next 5 years. However these numbers do not consider Virgin Media’s rollout plans, and with the government relaxing their FTTP target criteria to include other gigabit capable broadband technologies, this then allows for hybrid fibre/copper solutions e.g. using DOCSIS3.1 (Virgin Media) or G.fast (BT).

Figure 4 – Current reported plan for full-fibre for Openreach vs Alternate Networks [3]

 

The implementation of 5G and fibre networks are two major infrastructure costs that network operators are facing over the next 5 years and the rate of deployment required for all technologies will need to increase to support rising consumer demand. The total cost of developing a full-fibre broadband network is rising, especially as operators start installing it in harder to reach areas with average capex per subscriber ranging from £400-£550 [8] with the last build mile of a full fibre broadband connection accounting for 10-20% of the total FTTP cost [9]. Operators need to find ways to reduce this rising cost to ensure there will be a suitable return on investment when consumer use-cases advance and scale. 

Below are four calls to action that we believe must be addressed to support the challenges being faced.

 
1. Innovation mentality

Technology is changing at a faster pace than ever before and innovation is at the forefront. Senior business leaders must lead and drive a clear culture of fostering innovation within organisations and make resources available for innovation activities, especially across research and development. This is also applicable beyond technology innovation to encourage people to seek new ideas, launch trials and scale the best ideas to deliver new business value. Delivering a clear innovation strategy, with a set of design principles and a high-level operating model can combine to produce real benefits. However, innovation is futile without organisational agility, especially in the speed in which a proof of concept can be designed, tested, validated and deployed at scale. Organisational innovation systems need to be designed with as few barriers as possible but sufficient guidance to rapidly develop business cases for change.

A potential innovation angle that could offer significant value derives from the improved flexibility that a 5G network can provide through network slices, which gives operators the ability to virtualise the network and be able to provide enterprises a premium network Quality of Service (QoS). This would allow operators to then distribute their Radio Access Network (RAN) and core network, which can be scaled depending on requirements, and allows them to manage their network and bandwidth utilisation. 

Figure 5 – The 5G can be sliced to isolate end-to-end networks for the different performance requirements for the multitude of use-cases that will be supported by 5G

 

2. Performance and process improvement 

Alongside innovation, process improvements are also critical as legacy enterprise processes and the orchestrating tools and systems rarely meet all the requirements for the new infrastructure being deployed. Re-engineering and automating processes will reduce costly manual effort, but this requires investment and time to upgrade the current suite of tools to accelerate the deployment lifecycle through the plan, design and build stages. Network automation is also beneficial in managing the testing and health checks required post-installation, allowing infrastructure to then effortlessly transfer to operations.

Operators should also ensure processes are owned by the business, adequately documented and there is process compliance. This activity can highlight gaps between the ‘as-is’ and a reimagined future way of working, determining the transformation changes required. Lasting and sustained change requires different considerations as operators continue to work with a range of managed service providers (MSPs) and small works contractors (SWCs) often faced with challenges in holding them to account. A collaborative mindset is required when working with third parties, with an emphasis in providing frequent training to ensure there is a clear understanding of processes and awareness of any upcoming changes.

3. Implementing tighter project management controls

Targets, KPIs and performance metrics are numbers that must be reported on and a central Portfolio Office to support infrastructure deployments should not be seen as a hinderance, but provide opportunities to improve productivity, deliver one source of information truth and work with teams to drive delivery. Portfolio Offices can provide the insight and analytics required to determine delivery performance and should look to develop live reporting to track targets that reassure key stakeholders that  delivery is on track. Subsequently, if those targets are missed, an early view of progress can help identify potential blockers and issues.  

Large infrastructure deployment programmes also require defining a strategic roadmap to ensure there is alignment across the different programmes, projects and areas of the business engaged in the programme. A well-defined strategy provides a holistic view to senior executives, outlining the mission and strategic plan to help prioritise activities on the critical path. Often, these strategic planning exercises get overtaken by short term objectives and problem solving though, so it is key that the focus is put on the goals to increase the rate of deployment. These strategies and plans need to be continuously reviewed throughout delivery and teams need to be prepared to respond to external and internal factors, which could cause priorities within the business to shift, as was seen through the Covid-19 pandemic.

4. Working better in partnerships
 

Despite the government conducting a consultation to review the process of granting planning permission to support 5G deployment, operators should look to build and develop relationships to work closely with local communities and councils. Historically the process in raising permits, managing street works and approving planning permissions can take a significant amount of time, adding to cost and time of a deployment project. Through a clear and succinct communications and engagement strategy, operators should shift the focus from the potential fees and revenues of the development, to sharing the benefits of better connectivity and showcasing what the use-cases could deliver for stakeholders. Operators can also look at their product line that can provide mutual benefits, for example, some vendors have integrated radios products inside streetlamps, allowing the operator the cabling they require whilst the city benefiting from new lighting. 

These partnerships do not just apply to councils, but should include working with other organisations and individuals to support their delivery model e.g. civil engineering firms, water utilities and transport bodies. It is also worthwhile to work with other network operators and Ofcom, being transparent in regard to delivery plans as sharing network infrastructure where operators use the same small cells and backhaul could be advantageous. In fibre deployment, it has been seen that the sharing of the duct and pole infrastructure (physical infrastructure access) is an obvious way to drive down the roll out cost of full fibre networks but improvements are required in the process, so it is fit for purpose for the scale of UK deployment required.

What are the next steps?

As we move towards the ‘new normal’ post the Covid-19 pandemic and emerging technology continues to develop and be made commercially available, users will demand a faster and more stable fixed line and mobile connection. There are also many other challenges operators continue to face including the challenges with their supply chain, recruitment and workforce training. The government will need to work with operators to address these challenges, financially and through collaboration, especially supporting areas that will not be deemed commercially viable. 

The key takeaways for network operators are to:

  • Maintain focus on ways to increase deployment rates to keep up with the wider market, whilst also focusing on initiatives to reduce build Capex

  • Build a transformation mindset into the organisation. Innovation and change needs to be continuous and nurtured by senior business leaders to improve current ways of working

  • Have a clear and concise infrastructure strategy, that will help support delivery performance and align all business units to achieve the ambitious targets

  • Continue engaging and building relationship with other organisations, the government and even competitors to collaborate and work on the significant infrastructure challenges being faced

Moorhouse’s experience in the four calls to action mentioned in this article have provided significant value for our clients and if you would like to get in touch to discuss the above challenges and opportunities for your organisation please contact Dom Tritton, Jon Weall or Hasit Mehta.

[1] https://cyrekdigital.com/pl/blog/content-marketing-trendy-na-rok-2019/white-paper-c11-741490.pdf
[2] https://newsroom.bt.com/the-facts-about-our-network-and-coronavirus/
[3] https://www.endersanalysis.com/reports/winners-and-losers-uk-fibres
[4] https://bit.ly/3169Zu2
[5] https://bit.ly/33VfkGu
[6] https://doi.org/10.1371/journal.pone.0207330
[7] https://bit.ly/33V2LLb 
[8] https://bit.ly/3dt5YF0 
[9] https://bit.ly/2H6fwti 

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Author

Hasit Mehta Senior Consultant