Strategy&PwC: Challenges for operators in the 5G era
How will telecom leaders build and profit from the transformative technology 5G will bring? This is the question posed by Strategy&PwC in a new report.
Sink or swim, Making strategic choices for the telecom industry of the future, takes an in-depth look at 5G and how this technology, which harnesses super-high speeds, extra-wide bandwidth, near-zero latency and low electric power, will transform how consumers and businesses use data.
“This will inevitably lead, as the internet and the smartphone did, to entirely new ways of looking at the world around us, and new telecom business models,” comment the authors of the report Wilson Chow Global Technology, Media and Telecommunications Leader, Partner PwC China and Rolf Meakin Global Telecommunications Advisory Leader.
Channels of the future
By 2025, zetabytes of data will interlace billions and billions of connected objects. This will range from HDTVs. refrigerators and clothing to industrial machines along with smart homes and connected cars, all controlled through voice-controlled smartphones and other portable devices.
“As this entirely virtual world arises, interconnected with the analogue physical reality of everyday objects and actions, today’s telecom operators will face a challenge that shapes their business model and their enterprise,” outlines the report.
Challenges for operators in the 5G era
The promise of 5G is huge - but fulfilling that promise will be no easy task says Strategy&. “The technology offers the potential to manage the exponential growth in demand for data across telecom networks while presenting opportunities to supply even more data.”
According to the report this in turn enable three overarching business applications:
• Extreme mobile broadband, supporting consumer and business use cases such as virtual reality gaming and connected medical scanners
• Critical machine-to-machine communication, enabling reliable and low-latency applications such as automated factories and smart mobility
• Massive machine-type communication, supporting systems demanding high scalability and low power, such as smart cities and drone-based logistics
“The capital investment needed to fulfil 5G’s promise is huge. Low-latency applications will also require edge-computing infrastructure. Moreover, operators will need to develop or buy the software and device management capabilities needed to run 5G networks,” says the report.
According to the report if operators are going to make the investment pay off, they must devise a strategy that will give them the right to win in their markets. Many operators have found it hard to resist the temptation to diversify into other industries such as French telecom company Orange. Although this move was a success other results have been mixed.
“Telecom leaders considering this strategy should consider if they have the capabilities needed to compete in the industry they’re looking to enter and if the targeted industry is ripe for disruption.”
The other side of the coin involves telecom companies that already possess strong infrastructure and networking capabilities and see a way forward in leveraging those capabilities.
“By creating and maintaining industry-leading networking infrastructure; reducing costs to a minimum; and managing customer, partner, and regulatory relations skilfully, these operators can provide investors with a reliable long-term dividend stream.
“The key to success as an infrastructure player lies in developing a network that’s fast and flexible enough to be different things to different kinds of customers.”
The capable partner
A partnership approach may be the most promising option, says Strategy&, allowing both the telecom operator and its business partners to profit from the sale of 5G connectivity. If operators are to go this route, they will have to develop and perfect their partnering capabilities.
The 5G technology will be able to connect as many as 1 million end points per kilometre. “That’s a million potential points of attack for malicious hackers and cybercriminals. Other possible victims are the hugely complex networks, cloud structures, data centres and applications that tie everything together.
“Securing all this will be difficult, to put it mildly. One solution will be to take what we call a zero-trust approach, which involves identifying, profiling, and assessing the potential security risks inherent in every device connected to the network, and then allowing access only to the services each device needs to perform its function,” comments the report.
5G networking is creating endless possibilities for telecom operators.
“If their organisations are to grow and prosper in this world, telecom leaders must be imaginative, even daring, in considering their strategic options.”
Why Alibaba Cloud is doubling down in Southeast Asia
Alibaba has announced expansion of its cloud business within Southeast Asia, with the introduction of a digital upskilling programme for locals alongside acceleration of its data centre openings.
This doubling down of its cloud business in Southeast Asia comes as the company faces stiff competition at home in China from rivals including Pinduoduo Inc and Tencent and seeks to up its game in a region considered to be the fastest-growing in cloud adoption to compete with leading global cloud providers AWS, Google and Microsoft.
Alibaba Cloud, the cloud computing arm of Chinese e-commerce giant Alibaba and second biggest revenue driver after its core e-commerce business, finally turned profitable for the first time in the December 2020 following 11 years of operation, thanks largely to the pandemic which has spurred businesses and consumers to get online.
Southeast Asia growing demand for cloud
In 2020, there was a noticeable increase in interest towards cloud in SE Asia, with the population embracing digital transformation during the pandemic and SMEs across the region showing increased demand for cloud computing.
Such demand has led to the expectation that Southeast Asia is now the fastest-growing adopter of cloud computing with the cloud market expected to reach US$40.32bn in Southeast Asia by 2025 according to IDC.
And there are plenty of players vying for a slice of the cloud pie. While AWS, the cloud arm of Amazon, is the leading player in Southeast Asia (and across all of APAC apart from China), Microsoft and Google are the next two most dominant players in Southeast Asia with Alibaba coming in fourth.
“There is no doubt that during the past year we have seen the acceleration of digital transformation efforts across all industries,” explains Ahmed Mazhari, President, Microsoft Asia. “Asia now accounts for 60% of the world’s growth and is leading the global recovery with the digitalization of business models and economies. Cloud will continue to be a core foundation empowering the realization of Asia’s ambitions, enabling co-innovation across industries, government and community, to drive inclusive societal progress.”
Alibaba’s commitment to Southeast Asia
At its annual Alibaba Cloud Summit, the Chinese company announced Project AsiaForward, an initiative designed to upskill local developers, small-to-medium-sized companies and connect businesses with venture capital. Alibaba said it would set aside US$1bn over the next three years to develop digital skills in the region, with the aim of helping to develop 100,000 developers and to help grow 100,000 tech startups.
But that’s not all. The company, which recently opened its third data centre in Indonesia, serving customers with offerings across database, security, network, machine learning and data analytics services, also announced it would unveil its first data centre in the Philippines by the end of 2021.
Furthermore, that it would establish its first international innovation centre, located in Malaysia, offering a one-stop shop platform for Malaysian SMEs, startups and developers to innovate in emerging technologies.
“We are seeing a strong demand for cloud-native technologies in emerging verticals across the region, from e-commerce and logistics platforms to FinTech and online entertainment. As the leading cloud service provider and trusted partner in APAC, we are committed to bettering the region’s cloud ecosystem and enhancing its digital infrastructure,” says Jeff Zhang, President, Alibaba Cloud Intelligence.
What other cloud providers are pledging in the region
This pledge by Alibaba to upskill both individuals and businesses follows Microsoft’s announcement in April that it was planning to upskill Malaysia’s population and would invest US$1bn over the next five years to build a new data centre centre in Malaysia.
This is the latest in a long line of pledges to the region by the US tech giant, which is fast accelerating the growth of its cloud datacenter footprint in Asia, expanding form seven 11 markets, and recently adding three new markets across Asia – Malaysia, Indonesia and Taiwan. Back in February, it announced plans to establish its first datacenter region in Indonesia and to skill an additional 3 million Indonesians to achieve its goal of empowering over 24 million Indonesians by the end of 2021.
And recent research by IDC shows that Microsoft’s most recent datacenter expansions in Malaysia, Indonesia and Taiwan alone are set to generate more than US$21bn in new revenues and will create 100,000 new jobs in the next four years.
Also last month, Tencent announced it has launched internet data centres in Bangkok, Hong Kong, Tokyo to add to its second availability zone opened in Korea last year and plans to add an internet data center in Indonesia, and Google has also been pushing into the enterprise space in Southeast Asia for several years now.
Expanding data centers allows cloud providers to boost their capacity in certain countries or regions.