The changing dynamics in the telecom wholesale market have brought to the fore both challenges as well as opportunities for future growth. On the brighter side, data capacity requirements have been growing and will continue to grow at a fast pace, mostly driven by increasing penetration of smartphones and the move to cloud.
“Telecom operators and their wholesale carrier arms are being pressured to make substantial investments to cope with this growing demand,” says Luis Cirne, telco partner at Oliver Wyman MEA. On the flip side, however, the erosion of voice and SMS revenues is challenging the business case to continue these investments, raising real questions about their return on investment. To this extent, the ubiquity of OTT apps replacing international calling and messaging has brought wholesale carriers the same shifting environment as it has for local telecom operators.
“Intense, sometimes irrational price competition on data services has eroded the economics for investment across the value chain, impacting wholesale carriers alike,” Cirne says.
Looking at the fast pace the market seems to be evolving at, the need to diversify has been identified as key to thrive. According to Cirne, while the key target segment for carriers in the past was other carriers to serve the requirements of the local telecom operations, most of the business growth now is coming instead from a very recent segment made up of cloud players with huge data requirements. “Any carrier who is not actively reshaping its offer and go to market to successfully address this segment is in risk of missing out on a relevant opportunity.”
As an example of efforts of carriers to be equipped to meet the changing market demands, PCCW Global along with HKT Trust acquired Console Connect, a provider of global direct connect solutions. In an interview with Capacity Media, PCCW Global CEO Marc Halbfinger said: "Every network-based service provider needs to now increase the depth of its capability around software development, agile development to ensure services can be delivered to end users at the retail level and wholesale level as efficiently as possible."
Serving global data centre and cloud players directly is an opportunity which if not addressed properly can quickly turn into an existential threat. “We are witnessing a number of global players showing their interest in coming to the region (e.g. Google’s talks with Aramco), and if they are not adequately served by wholesale carriers, they will very likely invest in their own infrastructure,” Cirne says.
He further notes how telecom players typically struggle in addressing the needs of such global players with the right value proposition (which should ideally be driven by wholesale), as the struggle between wholesale and enterprise segments typically favours the enterprise. “This means that global players are offered retail propositions rather than wholesale ones, which leads to these players talking to other wholesale carriers or start building their own infrastructure.
“So carriers need to manage a delicate balance to ensure global players are adequately served and do not see advantages in self-providing their connectivity needs, while minimising the operator’s retail market erosion.”
Keeping pace with market dynamics, Epsilon launched its Infiny platform last year to give users on-demand access to its suite of connectivity solutions. Users are able to procure and manage Epsilon’s services via Infiny’s web-based portal, APIs, and Android and iOS mobile apps. They can use the self-service platform to procure local, regional and global port-to-port, port-to-Cloud, port-to-Internet Exchange, SIP Trunking and last mile DIA and SD-WAN services.
According to Jerzy Szlosarek, CEO at Epsilon, “Infiny is the result of more than a decade of simplifying how our partners connect and deliver services around the globe. We have taken our core set of services and made them available via a simple and powerful platform. It removes the friction from voice, data and local access services and delivers truly cloud-centric networking.
“We have reduced the complexity of global networking to a mobile app and web based portal, delivering networking as a utility in the form of a fully adaptable API. This is a step change in our industry.”
datamena, a UAE-based telecommunications service provider, partnered with Epsilon, to deploy Infiny platform and hence connect its enterprise customers directly to world-leading cloud service providers and destinations around the world at the click of a button. “The cloud is reshaping the ICT ecosystem in the Middle East. Networking needs to keep up with this rapid speed of change. The Infiny by Epsilon platform enables us to quickly move to serve new demand and support our partners’ growth in the Cloud,” according to Hany Fahmy Aly, executive vice president - enterprise business, du.
Mardia van der Walt, SVP ICSS, views the continually evolving telco market as an opportunity to discover new growth areas and create fresh business models. “Upcoming trends will disrupt existing wholesale models. Securing our position in the overall ecosystem and value chain will be a challenge. I see our role as an enabler of connectivity focussing on enabling interworking between the various industry players.” One factor, that acts as a key differentiator for ICSS is that it provides its security portfolio across all business areas, she says.
The market is abuzz with the mention and announcements around new technologies like 5G, IoT and artificial intelligence (AI). Everybody wants to get a share of the pie of the transformational potential of these technologies. Will these help the wholesale players carve a differentiator for themselves? “All these technologies should, in theory, be beneficial for wholesale carriers as they drive data usage and data capacity requirements,” says Cirne. In addition, new technologies also bring new use cases which require new services and features (e.g. bandwidth on demand) and as such an opportunity for carriers to add value and stay relevant. Cirne further adds: “More conventional advantages such as true redundancy are also becoming more important. For example, in the Middle East being able to offer both sea cables and true terrestrial connectivity is a valid differentiator to mitigate the risk of cable cuts.”
The provision of seamless, high-quality, end-to-end managed connectivity solutions which incorporate carrier-grade terrestrial networks, Points of Presence (PoPs) and metropolitan area networks that reach all the way to the premises of clients’ customers requires significant ongoing investment, according to Chris Wood, CEO of WIOCC. “For example, Africa’s carriers’ carrier WIOCC has spent in the region $300 million on submarine cable system capacity and upgrades, terrestrial backhaul, local loop, PoPs and its IP network.”
An example of how direct connectivity solutions are provided to enterprises is the Johannesburg Metro Fibre Internet Access (MFIA) network, deployed by WIOCC in 2017. This is now enabling small to mid-sized Internet Service Providers (ISPs), wireless ISPs (WISPs) and operators to offer reliable, cost-effective, direct access to the global internet, over a redundant network, to enterprises in more than 2,000 business premises on 95 business parks and numerous shopping malls across business districts in Johannesburg and Pretoria. “WIOCC’s investment in building this network means that smaller ISPs can also now connect to its IP Transit and Ethernet services at their own premises, and carriers can use MFIA services to interconnect end-user locations throughout Johannesburg,” according to Wood.
“To support the growth plans of OTTs, content providers and others looking to broaden their reach into new territories in Africa, capacity wholesalers must continue to invest in the right network infrastructure.”
The market for carriers has got even tougher now that they have to compete against global players as well who do not necessarily need to abide by the same regulation as them. Carriers need to navigate different regulatory regimes if they want to offer services across different countries, according to Cirne. “Carriers are starting to evolve their approach, looking for opportunities to collaborate with other carriers in the hope of being able to compete with global players at least at a regional level. Regulators can also contribute to this, collaborating to ease constraints across markets and harmonising licensing and regulation.”