Enabling Eastern European operators to unlock mobile infrastructure and roll out profitable unified communications
Within Europe there are two contrasting scenarios. Whilst the majority of Europe has fixed broadband penetration at an average of 27.7 per cent, in the Commonwealth of Independent States (CIS), it sits at just 14.3 per cent. With the CIS having a staggering 140 per cent mobile penetration, the region has one of the largest gaps between mobile and fixed penetration in the world. This high level of mobile penetration has resulted in mobile networks playing a critical role in the socioeconomic development within CIS and in Eastern Europe in general. However, with the mobile market experiencing near saturation, operators need to look to alternative business models to create new, monetisable services and secure the future revenues of their business.
Unified communications opportunity
Despite the dominance of mobile, providing fixed connectivity to the unconnected population in Eastern Europe presents operators with huge opportunities for growth. In Western Europe, fixed connectivity has become increasingly important to a growing number of operators as they look to generate new revenue opportunities by offering bundled tariff packages. These bundled packages, where operators provide mobile and fixed internet services under a single bill, have undoubtedly gained rapid momentum in recent years, with a unified communications approach becoming central to operators’ business models. In their 2014 annual statement, for example, Vodafone commented that they have seen “more and more businesses and individual consumers seeking unified communications, or converged fixed and mobile services.” For Vodafone, the advantages of adopting the approach are clear, with the report stating that “mobile customer churn is typically three times higher than that of customers taking combined fixed and mobile services.” This sentiment is echoed by Dutch operator KPN, who noted that “bundled services are at the heart of our strategy,” as a unified approach will enable them to “reduce churn and optimise customer lifetime value."
The shift towards a unified communication strategy is starting to be seen in several Eastern European nations. However, the lack of fixed infrastructure in the region severely hinders operator’s ability to profit from this opportunity. The high infrastructure costs needed to roll out fixed networks to address this have often led to operators struggling to make the business case for investment. This has meant that whilst operators across Western European profit from bundled packages, many across Eastern Europe are not afforded the same opportunity.
Need for a low cost per bit
Deploying traditional fixed network infrastructure has historically required extensive capital (CAPEX) and operating (OPEX) expenditure. Building a fibre backhaul network, for example, not only necessitates a high initial cost outlay, but can also require a lengthy time to market and extensive regulation. These factors all mean that fibre networks can drastically reduce an operator’s ROI, deterring them from investing in fixed connectivity. This is a particularly challenge in Eastern European where operators have a substantially lower average revenue per user (ARPU) than Western Europe and other global regions. Operators in the region are therefore tasked with driving innovation and running networks at a much lower cost per bit in order to draw new revenue from the market. This presents a challenge: how can operators unlock the potential opportunities from fixed connectivity whilst maintaining low CAPEX and OPEX?
To address this challenge, operators in many countries have turned to a new wave of advanced microwave technologies. An example is point-to-multipoint (PMP) microwave, which enables the co-existence of mobile backhaul and enterprise access services over the same infrastructure, allowing operators to meet market demands for a fraction of the cost.
An innovation in wireless backhaul
With high levels of investment into mobile infrastructure across Eastern Europe, wireless technology offers operators a means of capitalising on this and maximising the underutilised opportunity presented by fixed broadband. One wireless innovation that has successfully generated revenues for operators in other low ARPU markets is PMP microwave. PMP microwave is already established in Europe, however recent developments have created a growing trend for operators across Africa and the Middle East to use the technology to deliver converged backhaul and enterprise access services.
In these markets, operators have been able to drastically increase their revenue opportunities by utilising spare capacity in their mobile backhaul networks to roll out fixed connectivity to businesses. This co-existence of multiple virtualised services within the same physical network is made possible through intelligent software now available through the latest PMP microwave technology.
Figure 1: Point-to-multipoint microwave backhaul.
PMP microwave technology, such as CBNL’s VectaStar platform, works by creating a sector of coverage from a single hub site. Multiple sites can be served by a single sector which enables equipment, spectrum and site rental costs to be amortised across a number of links. Analyst consultancy Senza Fili found this allows PMP microwave to deliver total cost of ownership savings of up to 50 per cent over fibre or point-to-point microwave.
The software defined networking (SDN) ability of VectaStar provides the flexibility to customise virtual networks and maximise the return on existing backhaul infrastructure. For example, dedicated capacity can be allocated to backhaul at the same time as defining tiered connectivity offers for enterprise access.
Importantly, PMP microwave (which operates above 6GHz) has the capacity to handle the most demanding LTE networks and is already proven in LTE backhaul deployments in other regions of the world. The high capacity which CBNL’s VectaStar PMP solution offers has led to it being deployed across 13 countries in Europe, as well as a further 30 worldwide.
Growth prospects for operators
The near saturation of the mobile market in Eastern Europe has meant that operators need to adopt innovative strategies to unlock new revenue opportunities. Whilst fixed connectivity was once unlikely to offer a strong ROI due to a lack of infrastructure, PMP microwave has created a profitable means for operators to capitalise on the opportunity. With the rise in market demand for bundled tariffs further compounding the case for operators to adopt a unified approach, converged networks looks set to play a major role in increasing connectivity in the region.
The long term growth prospects for wireless broadband in Eastern Europe are enormous, as operators are finding consumers and businesses hungry for transformational mobile and internet services. As operators look to efficiently scale network capacity whilst generating revenue, wireless technology holds the key to delivering the performance and profits operators require to enhance network competitiveness and agility in the region.
About the author:
Dr John Naylon is the Chief Technology Officer at Cambridge Broadband Networks (CBNL), a company he co-founded in 2000. CBNL is the global leader in carrier-class, multipoint microwave backhaul and access solutions. John has led development of CBNL’s VectaStar multipoint microwave product which is one of the world’s leading solutions for enterprise access, macro and small cell backhaul. He is a board director at CBNL and holds a degree and PhD in computer science from the University of Cambridge. CBNL’s high capacity VectaStar platform is deployed by over 70 communications providers across over 40 countries, including seven of the top ten global mobile operators — www.cbnl.com.
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