The Race to Connectivity
This article summarises a panel discussion at the CMS annual Technology, Media and Communications Conference 2018.
In January 2018, the UK government announced that 19 out of 20 households and businesses now had access to superfast broadband connectivity. This is clearly welcome news as broadband connectivity is a significant driver of productivity in the economy. However, geographical connectivity coverage is not always a true reflection of how much of the population has actual access to superfast broadband.
This is not only true in the UK but in many countries around the world. As various governments struggle to meet their connectivity targets, there are serious conversations that need to be held with the world’s biggest telecommunication and media companies to help determine where technology investment priorities should lie.
Shadi Mahassel, co-founder and chief executive of SURFnCODE, a team of product, technology and investment professionals who have been building products at Skype, Apple, Microsoft and Amazon, says the issue of connectivity is become ever more pressing. “From the smart doorbell to smart speakers that are becoming everyday appliances, everything is becoming connected. Interconnectedness is the new norm and when we look at the amount of data these devices are both consuming and generating, it is phenomenal,” he explains. “Smart cars consume anything from 100 gigabytes to 10 terabytes a day and that is just from the cars that are around today. Can you imagine if every car on the road was producing just a fraction of that amount of data what it would do to the networks that exist today?”
This interconnected world is not only clearly driving demand for connectivity but it is happening at a much faster rate than most companies and governments have anticipated. The key question that still has to be answered is which technology should be prioritised? Should the greatest focus be aimed at next generation 5G networks? The fifth generation of mobile communications is still in its infancy but has the potential to offer new and enhanced capabilities - at a cost, of course. However, any 5G investment also needs to be weighed against resources need for fibre and fixed line connectivity.
Sam Blackie,partner at Deloitte, says he believes that 5G offers all sorts of innovative applications and benefits including: enhanced speed of broadband; an increased number of devices that can be seamlessly connected in a particular place at the same time; and a dramatic reduction in latency, the delay before a transfer of data begins following an instruction.
However, Mr Blackie says that although there is much excitement about potential uses for 5G he questions whether the new technology was actually needed to deliver many of them. He also believes there is still a material gap in the evidence on how much 5G will cost and who will fund it. Putting Britain at the forefront of the 5G revolution could require a huge investment – experts say at least 400,000 new masts could be needed to support the super-high frequencies used by 5G, which limit how far signals can travel. “The concern I have is that I have seen very little evidence for the cost profile of 5G – how much is it going to cost?” he asks.
There is also no clear view yet as to whether 5G will ultimately replace fibre and copper cable, or in time be superseded by 6G. Stefan Stanislawski, fibre project development and head of fibre strategy at PT Zambia, says: “I am very sceptical about 5G and I don’t’ know what problem it is trying to solve. In our projects in London we put a gigabyte [of fibre] by default into flats into London [which supports a network of Wi-Fi] – so in the home or office there is already a lot of capacity. The one thing I do know is that whatever telecoms companies spend on 5G they are still going to need a lot of fibre and it needs to be close to the customer.”
Piotr Muszynski, founder, co-owner and chief executive of FixMap, agrees there are a host of issues to be resolved related to both the cost and unclear business case assumptions for 5G investments and its payback profile, adding: “In 2014 and 2019 in the whole of Europe we spent €144 billion for fibre networks and we expect to add to those investments around €225 billion for 5G deployment only. It [5G] won’t be affordable for telecommunications companies only and we have to ask - who else would finance commercial networks?”
Whatever the exact shape of the future connected world there is an equally important need to ensure there is an adequate regulatory framework to support it. This is challenging, according to Deloitte’s Mr Blackie, especially within the realm of 5G technology where regulators need to figure out how the incremental cost of the new technology is to be met. Technology that requires increased network and spectrum sharing could also raise questions of collusion under anti-trust legislation while regulators have to maintain an overarching aim to create the best value, from a GDP point of view, from emerging technologies.
Mr Muszynski says rather than focusing on any one technology, or regulatory framework, a more evolutionary outcome is more likely. “To date what we have seen is an evolution of the network based on demand. We have data created by users and we have built networks to provide a solution [for that],” he says. “With 5G, however, we are starting to build a solution for machines which are talking to other machines. We are creating the network [to support] the Internet of Things and all the different sensors that will be at work in streets, factories, towns and cities worldwide.”