BuddeComm is an independent research and consultancy company, focusing on the telecommunications market and its role within the digital economy. Specializing in high-level strategic and statistical research BuddeComm’s industry analysis encompasses 190 countries, 500 companies and 200 discrete technologies and applications.
We spoke to Managing Director Paul Budde about the biggest developments in the telecoms industry and how the digital economy is transforming the financial market.
Q1. What are the key trends influencing the telecoms industry today? How will these trends develop over the coming years and what kind of impact will they have on the consumer and professional markets?
Paul: The telecoms industry represents one of the most dynamic sectors in the world. Only 25 years ago 90% of activities were in relation to making telephone calls over fixed telephone lines. Now with telecom within the broader ICT industry it is underpinning all of the new developments in relation to the digital, sharing and interconnected economies. It facilitates new social and economic developments in all sectors such as e-health, e-education, e-business, smart grids, smart cities, e-government, and so on.
Furthermore it is a key attribute in improving people’s lifestyle delivering a whole range of social benefits. This is not just the case in the developed world, where the smartphone is now all omnipotent. One only needs to look at the effect mobile phones have on the lives and the livelihood of many of the people in Africa, Asia and South America, it is just mind-boggling even with simple applications such as SMS.
The impact on the business and professional markets is that ICT is increasingly becoming a critical business element in their day to day operation and we see that many sectors and individual organisations will have to transform themselves in order to stay competitive and to participate in the rapidly changing business models in which ICT as a business tool is increasingly becoming a critical tool.
The fact that worldwide close to 70% of the global population now have access to telecoms services through mobile phones, the internet and social media shows that the developments are very much grassroot driven, in other words this is demand rather than supply driven.
That being the case the future of telecoms is very bright indeed as people will want to access more and more services through the means of telecommunications. This will drive the already massive investments that are taking place worldwide in infrastructure, devices and services: ICT investments are estimated at around US$3.5 trillion every single year.
Q2. What challenges face the broadband market in 2016 and how are telecom providers responding? What kind of technology are telecom providers using to improve their broadband services?
Paul: It is clear that the incumbent telecommunication providers have great difficulties in keeping up with the demand in telecoms services. Some US$200 billion is spent every year to fix problems in their networks, this is on top of their normal maintenance activities.
The new digital services that people and businesses expect, require infrastructure that has high capacity, has low latency, high levels of reliability, is secure, protects privacy and so on and only fibre networks can deliver this. We already see that this year for the first time there is percentage wise more fibre in the global telecoms infrastructure than copper and this will slowly but steadily increase over the next 5 to 10 years. This also applies to mobile networks, in the end mobile networks are fibre networks with only a last mile wireless component.
Governments start to understand the critical need of high quality broadband networks for their social and economic development and are developing policies that are aimed at improving the quality of their national infrastructure. I am the co-initiator of the UN Broadband Commission for Digital Development and globally there are now 140+ countries that have national broadband plans in place. Of course implementing these plans is not easy, but every year good progress is made.
As a telecoms advisor to national governments I have personal experience with the development of broadband policies in the USA, UK, Ireland, Netherlands, Australia, New Zealand and Qatar and several of these countries are among the world leaders in these developments.
Q3. How do you envision the net neutrality issue to unfold over the coming years? Will it be affected by any the points raised in questions 1 & 2? How are different governments approaching the issue?
Paul: The recent decisions taken in the USA make total sense, it is rather ridiculous that the incumbent telecoms operators here could present themselves as ISPs and claim that broadband was a content service rather than infrastructure and by successfully claiming this for 20 years they were not subject to a range of telecoms regulations. This in turn has stifled competition, innovation, good quality customer services and the development of fibre optic networks in the USA.
Within the net neutrality arrangements the incumbent operators will now have to treat their broadband businesses in exactly the same way as they in the past had to provide other telecoms services such as telephony, in other words they can’t discriminate on the basis of others paying them premium prices for premium services aimed at favouring certain services over others.
Europe has similar regulations in place, so this will now set the scene for a global approach to net neutrality. This doesn’t stop telecoms operators from providing specific network management services for specific services but they will need to pass the test that they are not discriminatory in nature and in general they will be judged ex-post, so those scaremongers that are predicting that this will stifle the industry will be proven to be wrong.
Q4. How is the digital economy influencing the global financial system? Do you expect any significant changes in how money is handled to occur in the next decade, and what will this mean for the consumer?
Paul: Developments, strongly facilitated by the ICT industry, are leading to massive economic transformation processes. We see that whole industry sectors have been replaced by new ones and that traditional business models have been replaced by new ones. The key reason for these transformations is that it can in some instances takes out up to 80% of the costs of those traditional business models.
These processes are relentless and are going to further force other sectors to transform as well, developments linked to this include cloud computing, data centres, data analytics (big data), machine-to-machine (M2M), the Internet-of-Things (IoT) and blockchain.
Especially the latter will have an enormous effect on the financial market, also here it is going to take significant costs out – in this case in transaction processes. How this all will pan out is still uncertain but the fact that nearly all banks are seriously looking into this is a clear indication that it potentially will have an enormous effect on their businesses.
By taking the complexity out of these systems others can now far more easily participate in these processes and the question is if these banks always will still need to be the middleman in many of these processes? In the digital, sharing and interconnected economy other arrangements for transactions can also be developed and bitcoin (as a subset of blockchain) is one such an option. While its success so far has been mainly limited to criminal activities and the so called dark internet, that is not to say that our inventive mind will not come up with better applications in the near future.
In the developing world we see that mobile payments are revolutionising the financial world here. In these countries most people don’t have credit cards, often not even bank accounts and through their mobile phones, linked to mobile payment systems, we see whole new financial systems being developed where the banks are no longer necessarily the leading parties.
In the communities-based sharing economy we see, in some cases, money disappearing altogether – people exchanging services in-kind – and, in other situations, the sharing economy facilitates extending voluntary services within the various communities. This will no doubt lead to other social innovations being developed.
Q5. What other industry do you find the most interesting outside of the ones you cover? Have you ever considered covering this industry?
Paul: The interesting aspect of telecoms as a key social and economic facilitator has given me the opportunity to become involved in many other sectors from e-health, e-education and e-government to smart grids and smart cities and we provide reports on all of these markets. Obviously we are looking at the other industries very specifically from those ICT transformation elements, but it most certainly has widened our scope of research reports. This had made this industry so rewarding and fascinating for me, there hardly goes a day by without having a wow element attached to it.
At the moment we are heavily involved in smart cities, here we see that telecoms can facilitate the development of smart local councils/municipalities. Thanks to developments in ICT it allows them to look at infrastructure not from their traditional silo based structure but from a multifunctional approach. This also requires massive changes to the culture of local councils in relation to their structure but also in the way they conduct their procurements. On the industry side, the ICT industry, in order to be commercially successful needs to operate in a far more collaborative way; it needs to put the smart city outcomes for the people involved central to its participation rather than putting its own commercial outcomes above it. In my consultancy work I can now see the first successful attempts that will lead to truly smart cities developed by smart people. We also have several reports that are guiding local government as well as the industry involved on how to develop this new and exciting new market.
This links also in with developments in smart transport, smart grids, the integration of renewables and EVs into the various networks as well as developments in smart buildings and smart homes, bringing other professions into this ICT equation such as architects and city planners, all very fascinating.
As Paul notes, the telecoms industry has become one of the most dynamic sectors in the world, facilitating a host of new social and economic developments in a wide variety of industries. High-quality broadband networks are paramount to these developments, as is a global approach to net neutrality. The digital economy is transforming the financial system, leading to social innovations and less costly business models. We can expect the telecoms industry to take on a bigger role in social and economic developments, such as in the development of smart cities and smart grids.
We'd like to take this opportunity to thank Paul for his time and for providing us with such in-depth responses to our questions.
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About the Analyst:
Paul Budde is the Managing Director of Paul Budde Communication Pty Limited, trading as BuddeComm, an independent telecommunications research and consultancy organisation.
Paul has acted as policy adviser to Governments in Australia, New Zealand, USA, Netherlands. Ireland, Qatar and the UK, and led a team of international experts in the creation of five BigThink reports for the Obama Team. Paul has also been involved in the development of the concept of trans-sector thinking; looking at the economic and social multiplier effect that infrastructure has to offer to other sectors such as healthcare, education, energy and the environment.