• At TelecomTV’s Great Telco Debate in late 2022, there were heartfelt calls for telcos to find salvation in the ‘pipe’
• It was agreed that networks and connectivity were the core competencies of the telco community and that by offering advanced connectivity services with renewed vigour in a rapidly developing cloud-oriented world they could contribute profitably to the ecosystem
• So what ‘connectivity-crucial’ business models and opportunities have emerged or been strengthened in 2023 and might advance further through 2024 and beyond?

Over the years, the participants at TelecomTV’s Great Telco Debate events have, when asked whether content or connectivity drives the network business model, consistently come down in favour of connectivity. That’s maybe not too surprising, given the makeup of the in-person audience, but the day-to-day reality of the communications networking and services sector is more nuanced than that, as each function depends on the other in the digital ecosystem – connections are only of value if they deliver something and content can only attain customer value if delivered via a connection. 

The uncomfortable truth for the telco sector is that, in recent years, greater ‘value’ and sustainable growth appears to have been chalked up by the “content and application” (ie cloud) players, an apparent disparity leading in part to the current ‘fair share’ kerfuffle over whether the big tech (or large traffic generator) firms should compensate telcos for the incremental network capacity investments they claim they’ve had to make due to increased data traffic volumes generated by big tech services, such as video streaming.

That debate is still unfolding, but a telco victory lap is unlikely: Critics point out that margin pressures at the telcos are more likely a result of them getting their sums and models wrong – too much investment going in the wrong direction at the wrong time.

Course correction required?

During the Great Telco Debate 2022, it was decided that a telco profitability turnaround required greater concentration on the connectivity ‘pipe’, leaving the content and cloud services sector to the big tech players and other specialists. Telcos could then partner to provide the crucial “beyond connectivity” network solutions to flexibly glue the constituent bits together – see For telcos, the ‘pipe’ is still the linchpin of success.

The way forward was neatly summed up by 2022’s debate moderator Chris Lewis announcing the pipe to be “the basis, according to all the witnesses, on which we’ll build the future of the industry.” At the same event, delegates vented their collective spleen over rigidities in the 10-year ‘G’ cycle for standards setting, seen as an inhibitor for telcos keen on being nimble and innovative – see An F for the Gs: 5G discontent surfaces for 2023.

In fact, attempts by telcos to veer wildly out of their lanes to adopt content-based business models (for instance) have all too often failed. For example, both AT&T and Verizon in the US beat a hasty retreat a couple of years ago from their entertainment and content businesses, while BT’s lack of traction with, and subsequent sale of, its sports TV adventure (to mention just three) reinforces the point.

That’s not to say content infrastructure and expertise shouldn’t feature at all in telcos’ technical arsenal, just that they should think very hard before being dragged too far from their familiar territory: Recent telco history strongly suggests that such adventures seldom end well.

So where does this leave us?

It leaves us wondering about those mooted pipe-focused applications and services. What might they be and can they drive the much-awaited telco profitability turnaround? How valuable can they become over what timescale? And will telcos need to partner to get involved? Or will they be able to go it alone or create a federation with other telcos to win the business? Questions, questions, questions…

Clearly not all can be answered yet, but we think the signs are good for a growing slate of “connectivity crucial” business models and that the past 12 months or so has seen several networking/connectivity roles either emerge or rise to prominence in specific industries or in combinations of industries. Here are five for starters, with more to follow through the year.

Exhibit 1: Generative AI and datacentre networking 

Generative AI (GenAI) hardly needs highlighting at this point as it hits its ‘peak of inflated expectations’ and every media outlet, both online and offline, sings its praises. The valuations of the dozens (nay, hundreds) of companies chasing the GenAI dream are probably due for a correction but, should that occur, GenAI will still be poised to drive gazilions of extra petabytes of data between datacentres.

This is good, as it all gets paid for, but there’s an opportunity here for telcos/DSPs to use their sophisticated networking skills to tackle the fast-growing datacentre-to-datacentre ‘pipe’ opportunity, not just by providing fibre capacity to connect the dots but to go right up and down the protocol stack to provide sophisticated extra network value by finessing cost savings, resiliency, security and alternative routing on a global basis.

A report on AI workloads recently published by industry research firm Dell’Oro Group reckons the bellwether datacentre switch market is poised to expand by around 50% thanks to GenAI-driven exponential increases in the number of accelerated nodes to handle the trillions of parameters required to feed the voracious AI models.

The result is that vastly greater capacity at faster data transfer speeds must be provided, but Dell’Oro points out that “network speed is not the only factor” – congestion control, adaptive routing mechanisms, and so on are of increasing importance too, and that will require new datacentre-scale fabrics to handle the increased volume and complexity. 

According to Serge Melle, director of product marketing for optical networks at Nokia, a fibre-owning telco will already have existing connections to all the important locations within a country. “With the connectivity needs between datacentres and internet exchanges going through the roof, there’s therefore an opportunity for telcos to provide dedicated, focused services for both the operators of datacentres and the companies wanting to expand their datacentre connectivity ‘out of region’,” stated Melle. 

Exhibit 2: Connecting electric vehicle charging networks 

If ever there was the perfect setting for an advanced network specialist to ply its trade, it’s in glueing together electric vehicle (EV) charging networks and their conjoined services, such as banks and debit/credit card services as well as the charging units themselves. Charging networks are already a big thing, are going to get even larger and are currently [sorry] an urgent growth area in the UK in particular.

The UK government is understandably keen to see public EV charging deployed at greater volume to help meet its ambitious CO2 reduction targets as it’s thought inadequate public charging is stalling UK EV adoption.

Unfortunately, public charging has remained thin on the ground in the UK and retains a reputation for unreliability. With only half the car-owning public able to install home charging units (because of apartment living, lack of funds or the lack of a driveway or open area in which to install one) EVs are widely thought to be compromised on range for many drivers, since a long journey might see them run out of charge without being able to easily find a charger on the way. As a result, there has been a significant noisy revolt by internal combustion engine (ICE) enthusiasts and EV sales have slowed.

So the government is urging the EV charging industry to up its game and roll out tens of thousands more units in motorway service areas, supermarket car parks, shopping malls, places of work and so on to overcome the range problem – but from now on to make the chargers reliable, easy to use and intelligently deployed.

It can’t be over-stressed just how important a ‘glitch-free’ public charging experience is for many drivers steeped in decades of ICE motoring with its familiar conventions, codes of conduct and brand loyalties. The opportunity for network operators in this ecosystem lies in their ability to share their mobile phone and networking expertise to help ensure that EV charging is as convenient and straightforward as filling up at a petrol station (or making video calls on a smartphone). 

The charging networks are already off to a good start by adopting smartphone apps to guide the entire charging experience, from guiding the EV driver to the closest charger station, monitoring progress on the smartphone screen while the driver shops or works, and taking card payment at the end.

The telco opportunity here is to not only enable the very best cellular and IoT connectivity but also to develop specific digital platforms to help support such models and that’s what Vodafone, in its Pairpoint joint venture with Sumitomo, is aiming to do.

Exhibit 3: New uses for existing infrastructure

Telcos have an incredible physical presence thanks to their network infrastructure and real estate assets – can more be done with those assets beyond traditional connectivity?

The rise of the EV is providing one such opportunity. In the UK, BT is piloting a project whereby its street cabinets, which have robust power supplies, are extended to provide EV charging points, a neat additional use of existing infrastructure with extra green and sustainability points won as a bonus – see BT gets streetwise for the EV era.

Exhibit 4: Open caching

There’s nothing new about caching, but ‘open’ caching has real promise as a telco play since it can theoretically exploit federated telco scale to win some of the business that has spent the last 20 to 30 years being developed by content delivery network (CDN) specialists, such as Akamai.

Qwilt has built a global CDN and developed a federated caching model for telcos and service providers, using the Open Caching standard. It signed up Verizon in 2017, added BT in 2020, picked up the pace last year adding a variety of telcos to its roster, including Telefonica, Vodafone TIM Brazil, Telecom Argentina and Bharti Airtel, and this year has further expanded its reach in Latin America – see Qwilt weaves its way deeper into LatAm.

The basic concept is that participants agree to pool their content delivery and caching machinery and then service providers can choose their delivery partner for each stream from the available players located within striking distance of their user’s access network head end. It means telcos can participate in the delivery of consumer streams while branching out to support corporates with more demanding or specialised streaming requirements, and the service is particularly attractive for live sporting events. As such, it ticks a lot of boxes – see Cache rich: Why telcos weave Qwilt into their networks.

Exhibit 5: Working from home

The pandemic may be in the rear-vision mirror but far from rushing back to the office in 2022, the stats show that many of us are continuing to work from home more and go into the office less. In fact, ‘hybrid’ or ‘flexible’ working is gaining ground not losing it, and that has implications for telcos. Those who occasionally or episodically work from home are likely to specify (or have their company specify) enhanced home broadband services: Building in features like ‘smart’ Wi-Fi distribution in the premises, while prioritising security features, faster speeds, lower latency and greater reliability.

In addition to the “connectivity crucial” examples above, there are underlying drivers reinforcing the connectivity narrative. Demand for the telco ‘pipe’ will continue to rise, driven by dozens of growth applications, from internet of things (IoT), surveillance and video streaming, to near real-time industrial process monitoring, and everything in between. Watch out for further coverage of these trends throughout 2024. 

- Ian Scales, Managing Editor, TelecomTV