There's never any shortage of predictions that the coming year will be revolutionary for the industry, but some developing telecom industry trends for 2010 show clear signs that the coming year may well be the most transformational in recent memory. Technology, service provider purchasing policies, equipment vendor strategy and consumer/enterprise spending trends are all in a state of flux. Any one of them could create a major shift in the market. All of them together could create a market transformation of historic proportions.
Given all that could happen, here are the five critical telecom industry trends most likely to have an impact on planners, buyers and sellers in 2010 and beyond. That all of these trends will exert some influence in 2010 isn't a chance; it's a certainty. If all are as pronounced as they promise to be, they will create a radical shift in the practice of network infrastructure deployment and exploitation. That will create the largest set of incremental opportunities we have seen in a decade or more.
|Top five telecom industry trends for 2010|
1. Commoditization pressure on the lower network layers. As fiber transport gets cheaper, the value of running fiber directly to points of traffic concentration increases. The trend to fiber-connect cell tower sites, for example, constitutes a good strategy in preparing for 4G rollout.
The same pressure is generating interest in creating agile optical networks and opto-Ethernet hybrid networks that would reduce complexity and management costs in part by creating a larger capacity pool to reduce concerns about congestion and traffic engineering. Some very large network operators are already issuing requests for information (RFIs) on this structure for their core networks, with some considering it in metro deployments as well. In 2010, the formulation of a new transport architecture based on optical and opto-Ethernet advances will create both risks and opportunities for vendors but will certainly cause a major shift in operator procurement.
2. Wireless transformation to data services. Wireless voice has been the major driver of landline losses, despite market hype about alternative broadband wireline voice services, but the increase in all-you-can-eat wireless voice pricing puts a cap on voice average revenue per user (ARPU) and makes it essential for wireless operators to broaden their services to wireless users in order to kick-start ARPU growth. Efforts to encourage a user transition to wireless data services have so far focused primarily on smartphone support, and while these fancy handsets create opportunities, they also cause problems. In 2010, the problems will have to be resolved, at least in terms of planning, to prepare for Long Term Evolution (LTE) and WiMAX rollouts already under way in markets like Asia and North America.
Network operators could increase ARPU by at least 30% if they could achieve widespread adoption of data services without significant cannibalization in voice revenues, and that creates the risk. The only real driver of consumer data services for wireless is Internet access; as a result, the smartphone revolution could simply cut operators out of the market for emerging services. Over-the-top (OTT) players have garnered most incremental service success for wireline broadband, after all. Since Skype is now going to be an independent business and Google's M&A shows it may be going after wireless users more directly, operators will need to counter this risk to ensure that their data plans net them a financial reward.
3. Explosion in provider consumption of vendor professional services. In the past, the network operators have tended to self-integrate based on a religious dedication to network standards. During the last year, though, these same operators jumped on professional services from equipment vendors and software/integration firms to build next-generation networks (NGNs) and manage them. This trend will accelerate in 2010.
Two main factors will drive the shift: the increased integration of information technology components (software, storage and servers) into services and the increased complexity of modern service ecosystems. It makes more sense to outsource the complex integration and management tasks, particularly in the near term, when the technology is in a state of flux.
One indirect indicator of this trend is increased provider support for procurement zones that divide their network purchases into inter-reactive product groups, then assign responsibility for each group to two key vendors. It's up to these prime contractors to offer integration within and between groups and to incorporate smaller vendors' products as needed. All of this makes it less risky to undertake major network changes.
4. Business model transformation focus on the service layer. With optical and lower-layer technology improvements continuing to commoditize bandwidth, and wireless showing signs of falling into the same unlimited-usage pricing model as wireline, operators realize they can't be successful in the long run selling bits alone. Operators have relied on vendors and standards to advance their technology goals, but neither has kept pace with market demands and opportunities.
Vendors are now starting to deploy service-layer solutions, some converted into products and others bundled with professional services. In 2010, we'll see what operators will accept in terms of the framework of a vendor service-layer solution and which specific service areas might be targeted by network operators. Service layer technology could be used to improve network operations, add new services to compete with over-the-top (OTT) players, or both. Operators could primarily target mobile users, wireline broadband and IPTV, or fixed-mobile convergence. The nature of the applications that drive early commitments may be critical in determining which vendors win or lose in 2010.
5. Merging network and IT infrastructure into a common cloud. Service providers need architectures to guide their infrastructure deployment. Some NGN standards -- like those of the Third Generation Partnership Project (3GPP) and International Telecommunication Union -- have implicit IT components, but they don't deal with the way these components are deployed in the data center environment. service oriented architecture (SOA) standards and the Information Technology Infrastructure Library (ITIL), operators assume relatively little risk by putting their operations and service platforms into a cloud infrastructure. Since the emerging network equipment vendor architectures for the service layer are also SOA-based, these architectures could be readily integrated into a cloud computing conception of network/IT integration.
About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is the publisher of Netwatcher, a journal addressing advanced telecommunications strategy issues. Check out his SearchTelecom.com networking blog Uncommon Wisdom.