Tuesday 15 November 2011

Report: Telecommunications Roundtable, November 2011

The telecommunications industry stands at the precipice of a key phase. With unprecedented challenges and opportunities likely to emerge in the near future, the Trade & Economic Office at the Embassy of Israel, together with UK Israel Business, has held its inaugural telecommunications roundtable last Thursday 10 November 2011. The occasion was first event organised collaboratively by the Trade & Economic Office and UK Israel Business. Chaired by telecommunications expert, Mike Grabiner, and hosted by CMS Cameron McKenna, the event brought together influential figures from all spheres of the telecommunications sector, including senior individuals from BT plc, Vodafone, Orange, T-Mobile, Telefónica O2 and Jersey Telecom.

Few things are as ubiquitous and pervasive to societies across the globe as telecommunications. Developing nations in particular have seen an exponential surge in the use of ‘new’ information and communications technology. In 1991, total access to both fixed and mobile telephones in the developing world stood at 2%. By 2004, the figure had burgeoned to 31%. In 2010, the International Telecommunication Union estimated that 57% of people in the developing world were subscribed to a mobile network. Africa, long dismissed by critics as technologically ‘stunted’, now boasts the fastest growing mobile market globally, with a 65% penetration rate.

Similarly, the use of the internet in the developing world continues to flourish. In 1994, a paltry 0.03% of the developing world utilized the web, but today 1.5 billion people from these regions are internet users. This represents a substantial 2,527.4% growth rate in Africa and a 1,987.0% growth rate in the Middle East over the past decade.

Whilst these staggering statistics routinely dominate the headlines, it would be imprudent to overlook the considerable growth still taking place in the developed world. Take for instance Vodafone’s European mobile data traffic, which increased by 115% between the first quarter and second quarter of 2009 alone. Across the Atlantic, AT&T registered a 30-fold growth in traffic between the third quarter of 2009 and the corresponding quarter of 2010. Elsewhere, approximate trends have taken place in Japan and China.

With this in mind, and after a sumptuous light breakfast, the telecommunications roundtable began in earnest. A key theme was quickly established, the issue of bandwidth. Across the world, there is an immense demand for more bandwidth. To buttress this assertion, attention was drawn to a recent Cisco forecast which estimates that global mobile data traffic will increase 26 fold between 2010 and 2015. Much of this is attributed to the growing use of smartphones which generate 10-20 times more traffic than non-smart phones. Attendees were then informed that during the same period, the total capacity of the world’s wireless networks will increase by about 10 times. The pivotal question thus arose as to how the UK would address these impending challenges, and the resultant demands on bandwidth.

As smartphones began to become a commonplace fixture on the market, operators made the crucial mistake of bundling free data into their pricing plans. As such, their pricing models were based on voice and text and simply did not account for the data. The current model for processing bandwidth and data traffic has therefore become an unsustainable burden, shouldered by the operators. They have in turn incurred extra costs as they have been forced to outsource additional supplies from fixed line operators such as BT. Consequently, it was thus concurred by all present that greater regulatory intervention is both indubitable and necessary.

Urgent changes need to be implemented by operators to provide a more equitable model with clear definitions on how bandwidth is paid for and managed. Indeed, few will disagree that the costs ultimately need to be passed back to the user. To this end, attendees at Thursday’s roundtable touted the idea of specialist ‘packages’ for gaming and video streaming as a potential solution. Others suggested that operators have to be more mindful of using unsustainable practices, such as subsidized mobile handsets. In this way, it is essential that operators make definite strides towards cutting back on their out-dated cost base. In our opinion, it is unlikely that any company will stand alone in carrying out sweeping changes. In such a competitive market, the cost of losing their customer base is simply too great. It is therefore imperative that regulators step in and oversee the process. Crucially though, the present regulation philosophy is sorely in need of reform. The challenge in this regard will be for regulators to balance neutrality with encouraging further investment to keep the industry buoyant. Perhaps most importantly, the solutions derived from this process should be organic and not technocratic, as attendees agreed that commercial solutions had not proved viable in the past.

Though the challenges are well-defined and critical, there is significant scope for real opportunities for trade between Israel and Europe in the telecommunications industry. In such a fast-paced industry, and on the back of the success of Thursday’s event, is hoped that similar roundtables will be held several times periodically throughout year.

This in turn will provide an ideal platform for more innovative Israeli companies to introduce themselves to the British and European markets. Indeed, as a leading innovator of telecommunications both ‘upstream’ and ‘downstream’, Israeli companies are well placed to adapt to the impending changes facing the sector.

Our thanks go to the team at UK Israel Business for their partnership in this event and we look forward to working with them again on future projects

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