There are so many options for access these days that you could be forgiven for failing to be up to date with developments and trends in this vital market. For resellers, the key issue is thought to be ‘how do I determine the right level of connectivity for my customers?’
Much is changing in the communications market and when you consider the technologies in play it’s no wonder that connectivity and access options for users are amongst the most diverse set of possibilities available.
Looking ahead however many observers believe that it is becoming clear that the top-level battles for revenues will be fought out between fixed and non-fixed access technologies.
For the big telco and service provider incumbents the idea of growing their revenues in this environment presents a challenge.
Telcos have faced many problems over the last 15-20 years. An oversimplified way of looking at this is to say that for a long, long time telcos deployed a single technology, for example, analogue PSTN service, and then when a new technology came along, say ISDN, they ditched the old technology in favour of the new and transitioned, in their own time and at a pace that suited them.
As their markets became increasingy liberalised the telco had to face competition that played by different rules. The new players not only offered up the same technology as the telcos but at the same time introduced newer technology for connectivity – let’s generically call it IP, that was pounced upon by vendors keen to deploy their shiny new applications that could digitally transform business outcomes.
Telcos were no longer handling technology in series but were faced with losing business to new players operating and introducing alternative cloud based solutions in parallel. A process now firmly established in the market on a global scale and only accelerating as analyst firm Cavell pointed out when they published their latest research at the end of September this year.
Cloud communications are now seriously biting into traditional operators’ revenues. Cavell says the market has grown by 25.8% in the last year to reach a total of 8,628,953 Cloud communications users across the European countries that are covered by the analyst firm. Most of this growth is from established markets such as the UK and Netherlands but overall, the market is at distinct stages of Cloud Communication adoption. Countries such as the UK, Netherlands, Germany and France lead the market in terms of numbers of users with each country having over a million users; between them they have 6,616,074 seats of the total users in the market (80% of total users).
As businesses throughout Europe increasingly embrace the move to IP, the incumbents are suffering despite their attempts to change to meet changing market conditions. According to their 2016 annual reports, key players in the European telecommunications market KPN, Swisscom, and Proximus have been experiencing a significant decline in their fixed business voice revenues, mainly caused by the rise of Cloud communications, with KPN seeing an 18% loss in just 12 months, Swisscom 11% and Proximus 8%.
The Game is Changing
Matthew Townend, Research & Consulting Director of Cavell Group stated, “Change is here, it is happening now, it is no longer the speculation of analysts, it is the reality we all have to live with. We are seeing some service providers have a worrying ostrich-like behaviour, while our forecast shows continuing, robust growth across all of the markets that we cover, underlining they should be increasingly concerned about cloud communications and potential revenue loss.”
In the non-fixed world 4G services for connectivity have been laid out across the UK and, according to the 2017 Ofcom CMR, there are 52.4 million 4G subscribers in the UK. Vodafone has invested heavily in their network – £2 billion in the last couple of years will be matched by the same amount in the next two years and after that we can look forward to the progressive introduction of 5G. Despite the hyperbole 5G is likely to be a game changer for any market and any application it touches – providing the pricing is right.
It’s difficult to dig down to granular detail these days in the Ofcom UK CMR reports so all we can add regarding the overall state of the UK comms market is that it is flat with a 5-year compound growth rate of minus 2.2% which kind of confirms the Cavell analysis report.
UK telecoms revenues grew by 0.4% in real terms (i.e. adjusted for inflation) in 2016 to £35.6bn.
This has been driven by the growing take-up of superfast broadband services, which resulted in a 9.5% increase in the average monthly price of a residential fixed broadband connection, to £20.45, in 2016.
However, if you look at the total operator (telco) reported revenues for the last six years you can trace a progressive yearly decline from £39.7bn in 2011 to £35.6bn.
There are a number of UK market statistics that on the face of it appear to be a paradox. Take for example the fact that Ofcom reports that the average revenue per fixed line increased in 2016, despite falling call volumes.
The main driver for this was a 5.0% increase in average line rental and bundled call revenue, to £15.76 per month, equating to 75% of total average monthly spend. Average line rental prices have increased by 34% in real terms over the last decade, despite a fall in the underlying wholesale costs related to providing these services.
What Channels Say…
Sachin Vaish, MD of Vaioni Wholesale firmly believes that businesses these days rely on their network connection more than ever.
“Connectivity, now often described as the newest utility, is as essential to businesses as electricity. Any loss of connectivity is not just damaging to brand, it can cause serious losses in productivity and sales. As Businesses are producing a phenomenal amount of data, the ability to access and transfer data fast is critical to a business’s success, along with the increased emphasis on the importance of mitigating the risk of downtime.
Downtime is a major concern for any business, the loss of employee productivity and sales, combined with the damage to brand reputation can have an enormous impact on a business of any size. The rapidly fast adoption of cloud services, which has enabled businesses to take advantage of the fantastic opportunity to use the best in technology, shows no signs of slowing down. This means that cloud-ready connectivity has never been more critical, it is no longer just about being able to communicate effectively with customers, if your customers are reliant on the Cloud, the internet connections resellers buy have to work and have a meaningful SLA, meaning that you need to ensure that the connectivity is “cloud-ready’, specifically designed and configured to support your business and provide a secure path to the Cloud.”
Vaish continues stating, “We offer our reseller community the widest possible choice of speeds and access technologies, delivering extraordinary cloud-ready connectivity competitively, alongside our 100% SLA, as standard.
Whilst price will always be a leading factor when choosing a new connectivity provider, we always advise resellers to focus more on the overall service offered by their connectivity provider; looking at speed, reliability, downtime and connectivity options above cost of service.”
In determining user requirements Tim Mercer, CEO of Vapour Cloud, says “Of course the reseller must ask key questions from the customer. But the ability to determine and deliver the right level of connectivity actually begins much further up the supply chain.
The end goal – the customer’s requirements – must remain in sharp focus. But then they must consider:
What applications are being delivered across the connectivity?
Do we – and our partner – have the ability to truly support these applications/services?
Is our partner technically proficient enough to understand the client’s needs and work within the guidelines set?
These may seem odd questions to ask but a number of providers are still attempting to capitalise on emerging markets by ‘dabbling’ in the connectivity space. Admittedly they will have some circuits and connectivity experience but the sad truth is that not all will have the knowledge to take into account everything that will go down the line, and what that line truly has to cope with now and in the future, as a result.”
Mercer says 2018 will see big shake-ups in this respect.
“Back-ups can be consuming for the internet line, for example. So, within the next five years, I bet free dedicated lines will be provided, much like call costs are included within bundles today. As this becomes the norm, it will help to sift out the less proficient providers that cannot truly provide the connectivity knowledge and capacity that the industry needs.
This is not to say these providers are not experts in some areas of comms. They may be a PBX supplier delivering great circuits for SIP, for instance. But they cannot perhaps understand the connectivity complexity that comes with more advanced and evolving applications, not just within voice and the internet, but with browser-based security too for example.”
24 Seven MD, David Samuel believes that mobile can be the saviour of connectivity woes.
“In recent years, the need for LTE connectivity has grown alongside general demand. Despite the improvements in coverage and reliability of 3G and 4G, households and businesses are still very much reliant on fixed connections.
There appears to be a widespread view that fixed connections are much more reliable than 4G, but is that really the case? It’s not uncommon for fixed connections to have outages, due to a whole manner of reasons, which of course isn’t ideal when we so heavily rely on staying connected. When a fixed connection encounters problems, it can take days, if not weeks to remedy the problem, which most businesses would find debilitating.
Mobile connectivity on the other hand, has become increasingly reliable, and when it does go wrong, is an issue which for the most part is solved within a matter of hours, rather than the weeks it can take to reinstate a fixed connection. In many cases, we’re now hearing that 4G is being adopted as a back-up connection, suggesting that in cases where fixed connections encounter problems, mobile connectivity is perceived as a suitable alternative. If 4G was rolled out to its full potential, mobile connectivity may have the potential to be a genuine first choice.”
Mike van Bunnens, MD at Comms365, would appear to agree that mobile is a viable alternative means of connectivity when he says, “4G mobile data networks offer the maturity, reliability and performance required to deliver internet service to be used as primary connections or as failover services, and are increasingly being adopted by UK Enterprises and SME companies for the following reasons.
As a fast deployment option while waiting for a fixed line connection to be installed; as a supplementary internet resource to enhance performance where traditional broadband is poor quality; and for the most pressing business need – resilience. Furthermore, by using a Software Defined Networking (SDN) control platform at the datacentre, both fixed line and 4G connections at a company’s site can be bonded together to optimise bandwidth performance and intelligently route internet traffic, thereby maximising delivery usage and cost of this essential resilience model.
Whether used as a primary, secondary or as a key component of a bonded solution, 4G has a very important role to play for UK business.”
The Triangle of Possibilities
“How do you determine the right level of connectivity for your customers? Easy, just get your protractor and geometry set out!”
So says Pangea Operations Director, Chris Romeika, who goes on to note, “Today the connectivity market has folded itself into two key types of access – fixed and non-fixed. If you’re reselling these services in the Channel or working on a solution for a client with connectivity requirements, then deciding where to put the hard earned cash is a critical decision that can’t be easily reversed. So, let’s recap the two main types of connectivity access.
In the fixed arena, we have xDSL (i.e. FTTC (Fibre to the Cabinet), ADSL, SDSL), Ethernet, and FTTP (Fibre to the premises). There are also the older and less popular technologies – i.e. ATM and ISDN (don’t mention Frame Relay!). Most of these are reliant on an exchange or junction box near to the premises.
In the non-fixed arena the main player by far is cellular, with 4G services leading the charge when it comes to aiming for parity with some of the fixed line mediums. Other wireless forms of access are Wi-MAX and point-to-point links services such as Wi-Fi and microwave. If the requirement for bandwidth is specialist and low (i.e. M2M and traditional IoT solutions) then Sigfox and LoRa join the arena, along with new players such as LTE-M and NB-IoT, which are designed to retrofit into cellular networks.
If one thing is certain, when going through the decision-making process for a connectivity solution, one will encounter what some refer to as the ‘triangle of priorities’.
The financial outlook for telcos is mixed. Traditional revenue streams are under pressure but the opportunity to make a significant play within new markets is there to be exploited albeit in a highly competitive environment. The continued migration to superfast fixed broadband services resulted in a 9.9% real-term increase in fixed internet revenues in 2016, to £5.7bn. Superfast products are generally more expensive than their standard broadband equivalents. The migration to superfast broadband is reflected in a changing mix of technologies used to deliver fixed broadband services. The total number of fibre broadband lines, predominantly fibre-to-the-cabinet (FTTC) but also some fibre-to-the premises (FTTP), increased by 21% to 6.7 million in 2016, while the number of cable broadband lines reached 4.9 million (up 4.8% since 2015). Conversely, the number of standard (ADSL) broadband lines fell to 13.6 million in 2016 (down 6.2% year on year).
As my old physics teacher always told me – connectivity is all about series and parallel. Nothing has changed.
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