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Service providers: spend, spend, spend


Growth in revenue for communications service


providers (CSPs) remained modest in 2014, according to research from Ovum, the telecoms analyst company. CSPs will have to do more with less, using new technologies, network designs, vendors, and operating models, as they face spending more than US$2tn in capital expenditure between 2014 and 2019, the analysts concluded. In its report,


Communications Service Provider (CSP) Revenue & Capex Forecast: 2014–19, Ovum expects that in 2014 capex will likely be US$346bn, with fixed CSPs accounting for 41 per cent of the total and mobile the remainder. Ovum expects flat capex in 2015:


Ovum’s principal network


Over the entire 2014–19 forecast period, CSP capex will total over $2tn


infrastructure analyst and author of the report, Matt Walker said: ‘CSPs have invested fairly heavily in 2013–14 across both fixed and mobile networks to support broadband rollouts. But this capacity will be absorbed, and technology and feature upgrades will drive capex back up to about $354bn by 2019. Over the entire 2014–19 forecast period, CSP capex will total over $2tn.’ CSPs face constant


pressure to invest in networks. Technology does not stay still. Users continue to put more pressure on the networks. New players from


adjacent markets threaten to steal customers and revenue streams, if CSPs don’t keep up. This has meant that CSPs have


fixed capex will decline but mobile will grow by roughly the same amount, yielding neither increase nor decrease overall. The years 2016 and 2017 are likely to be weak in terms of capital investment, for both the fixed and mobile segments. Ovum expects a modest recovery in 2018–19 as a new wave of fixed broadband, fixed cloud/ data centre, and mobile broadband upgrades start rolling out in several large markets.


continued to spend heavily on networks in the last five years, re-investing an average of nearly 18 per cent of revenues per year into capex. Going forward, Ovum expects CSPs’ capital intensity (capex/revenue ratio) to fall slightly, to roughly 17.4 per cent on average from 2014–19. Walker noted that CSPs have faced


a tough revenue climate for several years now, and learned to keep a lid on capex through a number of tactics such as network sharing. Walker said:


‘We’ve seen rapid growth in network-sharing agreements over the last year or two. Network and tower sharing projects reached a hundred by end 3Q14, up 32 per cent from last year.’ Even in China, mobile revenue growth slowed rapidly over the last few quarters, and a new tower-sharing venture is meant to help operators lower their cost base and increase efficiency. CSPs are also adding software


intelligence into their networks. Mobile operators have been deploying software-defined radios for many years, which may lower the initial capex requirements of radio upgrades. Software-enabled features also appear in most other parts of the network, even in optical transmission and fixed broadband equipment. Vendors typically spend 50 to 70 per cent or more of product R&D on software, revealing its importance to


future network operations. Another area of interest for R&D investment is software-defined networks (SDN) and network functions virtualisation (NFV). While not necessarily offering immediate capex savings, one clear aim of CSP proponents of SDN/NFV is to lower both operations and capital costs, along with new service/feature deployment. Walker concluded: ‘While CSP


capex is tightly constrained, adjacent markets are starting to invest heavily in networks. Internet content provider (ICP) capex will reach nearly $57bn in 2014, up from $18.3bn five years ago. We expect network capex from the ICPs – which include Google, Apple, Facebook, Alibaba, and many others – to continue growing over the next few years. These providers represent an attractive growth market opportunity for vendors selling technology.’


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Corning acquires Samsung fibre business


Corning is to acquire Samsung Electronics’ fibre optics business, with the deal due to be completed by the end of the first quarter of 2015. This highlights a move by Corning


to expand within Asian broadband markets as Samsung is a large provider of optical fibre and cable for customers in South Korea, China, and Southeast Asia. Corning will integrate Samsung’s fibre optic business with manufacturing facilities in Gumi, South Korea, as well as in Hainan, China, into the Corning Optical


Communications business segment upon closing of the acquisition. Clark Kinlin, executive vice


president, Corning Optical Communications, said: ‘We are very excited about the growth opportunities in Korea and the emerging economies in Southeast Asia. Once we are joined by Samsung Electronics’ experienced workforce, I look forward to the team building out Corning’s global scale and scope to better meet customer needs for innovative fibre optic solutions.’


The demand for broadband is expanding every day. Fibre optic networks are rolled out worldwide. Size and topology of networks vary per region. Therefore TKF innovates continuously, to improve our fl exible, cost-effi cient and easy to install ACE solutions.


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