Three ways to build better digital infrastructure

Ken Hu
Deputy Chairman, Huawei Technologies
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As the physical and digital worlds continue to converge, information and communication technologies (ICTs) have become the new engine that propels our world, having a profound impact on our daily lives. Expectations from ICT infrastructure will only rise, and there are key strategic planning issues that we must consider today as we prepare for a sustainable and ever-changing future.

Changes in the way people communicate in the 21st century have created major challenges for telecom operators. The building, maintenance and upgrade of infrastructure are all very capital-intensive, with shorter equipment lifecycles and operators’ stagnant revenues further complicating things. To balance the needs of the future with the pressures of today, three things will need to happen: agreements on regulatory and industrial policies that encourage future infrastructure investment; reductions in the total cost of building and operating networks; and a new level of industry collaboration where infrastructure is shared to maximize the economies of scale and returns on investment.

Establish the right regulatory and industry policies to encourage infrastructure investment

In the heavily regulated ICT industry, today’s fragmented regulatory regimes add unnecessary costs for infrastructure operators. Greater standardization in areas such as spectrum and technology would help reduce the cost of R&D, network deployment and operation.

Spectrum cost currently represents a significant portion of the entire mobile infrastructure investment, exceeding 20% in some countries. This definitely deters mobile network investment, and by extension market competition. Regional differences in spectrum utilization add another layer of cost. Today, the United States and Asia-Pacific have different frequency usage models, a pricy divergence.

The Next Generation Mobile Networks (NGMN) Alliance sensibly recommends that an additional 500 MHz of spectrum be allocated to International Mobile Telecommunications (IMT). Countries and governments must create a healthier spectrum allocation mechanism that reduces the cost of spectrum acquisition, and regulators should further improve spectrum utilization through better standardization processes.

From a technology perspective, competing standards exist for 4G networks, requiring a range of more complex equipment and handsets to be designed and built to work with all of them. As we move towards the development of 5G, converging today’s LTE-FDD and TDD into a single LTE-Advanced (LTE-A) standard would be a key stepping stone towards the goal of global network harmonization.

Policies and regulations should encourage growth and create a healthy market environment to enable all stakeholders to invest in the digital infrastructure.

Reduce the cost of network infrastructure

The industry is rapidly approaching a period where the distinctions between fixed line access (fast and reliable but static) and wireless access (lower speed, less reliable but more flexible) are diminishing. We can now transmit data over high-speed wireless networks (3G, LTE and, in the near future, 5G), allowing infrastructure operators to use wireless technology exclusively for access and fixed fibre networks for core and regional super-networks.

Wireless access is cheaper and faster for an operator to deploy than fixed. With wireless speeds expected to reach 10 Gbps over 5G by 2020, operators can begin to rely on mobile access to significantly reduce overall infrastructure costs. Small cell technology in the home and business will also help boost wireless connection speeds in areas where coverage remains an issue.

Networks are traditionally hardware-driven, making them expensive and inflexible. Today’s software-defined networks (SDNs) will allow operators and their enterprise customers to automatically provision services and balance traffic more efficiently, reducing both CAPEX and OPEX. In tandem with self-organized networks, SDN will simplify network maintenance, thus reducing operating expenses even further. The implementation of voice over LTE will unify voice and data networks, driving down costs even more.

In addition to reducing the cost and improving the efficiency of new network buildouts, operators need to start looking for opportunities to shut down legacy networks. GSM or 2G networks, with their very limited data capability and diminishing revenues, continue to incur significant maintenance and repair costs. Japan has already responded by shutting down its 2G services.

Infrastructure sharing is also fundamental to reducing costs. Site acquisition and civil engineering are significant deployment costs. Sharing of civil engineering such as ducts, towers and power lines can reduce them significantly. Governments, international organizations and industries need to develop more reasonable policies and standards to promote cross-industry collaboration and reduce cost.

Enhance collaboration both within ICT and across industries

There is a need for industry collaboration to harmonize technology globally so that economies of scale for digital infrastructure are maximized, with market fragmentation avoided. This will require vendors, operators and the entire system to intensify their cooperation to maximize synergy.

For evolving cloud-based services, we need common global standards for the technology architecture. Industry players from both the traditional IT and telecom fields must commit to robust cooperation that creates a more transparent and interoperable cloud environment, and ensures sound growth for the ICT industry.

Development of the industry value chain requires synergy between the device, network and cloud. Affordable devices, and a wide variety of applications for individuals, households and enterprises will not only be the driving force behind broadband network development, but also the purpose of it.

For mobile services, the industry needs to migrate 4G (LTE-FDD, TDD) to converged LTE-A. 5G should have a single standard, and even 5G and next-generation Wi-Fi standards should use the same or a very similar physical layer technology. This requires cross-sector collaboration that includes the likes of semiconductor companies as well as telecom equipment vendors.

The opportunities ahead for the ICT industry have never been more exciting. But the element of the future that is the least clear – the network – has a central role to play in this evolution. The decisions made today and over the next few years will leave an indelible mark on the future of society, as well as the industry itself. The industry must tread carefully but deliberately, with new models, new rules and new principles for a new future.

This blog is published ahead of the release of a World Economic Forum report, ‘Delivering Digital Infrastructure: Advancing the Internet Economy’, on 29 April. Find out more about the Delivering Digital Infrastructure initiative

Author: Ken Hu is Deputy Chairman of Huawei.

Image: A man uses his tablet computer in Shanghai September 24, 2013. REUTERS/Aly Song

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