Fast and Furious: Telcos Look to Quickly Begin the Decommission of Old Networks

During March and April 2012, PriceWaterhouseCoopers (PwC) conducted an extensive global study of the outlook for the decommissioning of telecommunications networks, rendering the report, “Clearing the Way: The 2012 Outlook for Telecom Network Decommissioning.” 

Thirty-one companies from around the world participated. The study, conducted primarily via an online survey, included the collection of information from executives worldwide at both wireline and wireless operators. Survey questions covered drivers, plans, readiness and key concerns associated with network decommissioning.

The survey was developed by PwC's global telecommunications practice, with data collection conducted by the firm's International Survey.

The key finding from the survey is that the telcos, at long last, are finally ready to eliminate their old networks – especially those that are still running really old 2G networks. The same is true for wireline operators, who have many miles of copper wire still in the ground, even as existing fiber or new fiber continues to make copper obsolete. Technically this is true, but from a pure economics perspective, copper not only continues to deliver broadband access into millions of homes, but often times there is a societal issue involved in terms of geographies being served at the lower ends of the income spectrum.

That is, copper remains cheap and prices can be kept low. It will be a balancing act for many years to come as to when copper will be removed.

Nevertheless, it’s about time for decommissioning to become real – the move will not only finally push all users into the 21st century, which needs to be accomplished, but also open up substantial spectrum on the wireless side to put to far better use as 4G/LTE environments. Spectrum for 4G/LTE is not necessarily the easiest thing to come by for any telco – which includes the big boys at Verizon and AT&T.

The survey found that telecom operators around the world are indeed planning to decommission their older networks; for the most part they will do so at the same time they upgrade their network technologies to improve performance and increase capacity:

• Almost 90 percent of wireline operators say they will do so.
• For wireline operators, the decommissioning of copper-based networks was the top priority. The growing use of advanced technologies such as fiber-to-the-home (FTTH) and Ethernet-over-fiber (EoF) is clearly causing operators to re-evaluate the costs of operating and maintaining copper networks.
• Just fewer than 60 percent of wireless operators said they intend to decommission legacy networks during the next five years.
• While more than 90 percent of operators who intend to decommission a wireless network said it would be a 2G technology, over a third also said they planned to decommission a 3G network, demonstrating the rapid pace of technological change and the shortened time to recover investments in 3G capacity.

PwC's Global Communications Industry Practice found that operators are targeting network decommissioning primarily as a means of reducing operating costs. Many wireless operators, for example, continue to operate 2G and 3G networks while deploying 4G technology. Similarly, many wireline operators are maintaining copper access, while overlaying it with fiber.

As we noted above, the issue of decommission and removal isn’t entirely clear cut – cost of service to users – especially for lower income populations – is a key issue that needs to be resolved moving forward.

However, the survey also clearly points out that demand for new telecom services continues to soar, and the only way to effectively address this issue – which essentially means the only way for the telcos to monetize the soaring demand – requires decommissioning. There simply isn’t enough bandwidth to go around for new services: PwC's survey found that nearly half of all executives responding said their company had experienced network traffic increases of more than 50 percent in the past year, while 30 percent of wireless operators from around the world reported traffic increases of more than 150 percent.

There are numerous scenarios however where the case for decommission is fairly straight forward. As Dan Hays, PwC's US Wireless Advisory leader points out, "The rollout of new communications technologies means that some older networks are becoming outdated and underutilized, and therefore more expensive to operate. When the cost of maintaining older networks becomes too high, decommissioning is often the only answer.

"While cost cutting was cited as the main attraction for potential network decommissioning, other factors included improvement in customer experience, elimination of redundant or overlapping wireless networks, and migration of traffic to more efficient networks. For wireless operators, traffic migration presents a significant opportunity, the report said, as 4G networks can potentially carry five to 10 times more traffic on the same spectrum as 2G or 3G networks. Decommissioning 2G and 3G spectrum opens a path for future high bandwidth use (for both speed and capacity). 

Turn it Off?

Telecom operators were split on strategies for asset removal in decommissioning. Over 75 percent said they plan to physically remove assets and equipment from their networks, with the vast majority hoping to sell or otherwise dispose of equipment. About a quarter of respondents said they plan to power down older networks and abandon them in place. 

"One key strategic element in decommissioning is the decision whether to simply turn the networks off, or to physically remove and dispose of the assets in them,” Hays said. “Operators risk damage to their reputations for environmental responsibility if they abandon their networks in place or dispose of them haphazardly. They must analyse the costs of asset removal, transportation, processing, and storage, against the potential benefits of tax savings, reuse, resale, and recycling, in order to maximize the overall proceeds of network decommissioning." 

On the Horizon

"Network decommissioning represents a great challenge for telecom service providers worldwide. Both wireline and wireless operators share similar concerns and risks focused on costs and the potential impact on ongoing service,” Hays added. “Strong planning and execution, including accounting for potential offsets to costs, will be critical to success."

While 73 percent of wireline network operators said they have decommissioning strategy and plans in place, just 48 percent of wireless operators concurred. Over 80 percent of both wireless and wireline operators expect decommissioning programs to take three to five years or more to complete. This may be because they often require modification of thousands of leases and removal of millions of assets. 

Adding to the complexity of decommissioning, only one-fifth of wireline operators and one-third of wireless operators said they were able to track all their assets. In fact, half of wireline operators and a third of wireless operators said that less than 50 percent of their assets were catalogued and managed.

Lots of Additional Complexities

The PcW report focused on what the telcos themselves believe, but there are numerous complexities to decommissioning than meets the eye. For all practical purposes the key pieces to be decommissioned can be gathered under The Public Switched Telephone Network (fondly referred to PSTN). There are significant issues with even defining what PSTN is and where the line crosses between it and today’s modern networks.

For the most part one underlying factor of PSTN is that it uses TDM-based technology. How simple will it be for networks to decommission a network that, for example, uses low cost but efficient copper to deliver VoIP services? The permutations for the operators to consider are complex – our example here is but a simple one – there are much larger complexities lurking everywhere.

The good news is that these complexities used to be a sufficient condition for simply doing nothing, whereas in today’s world, the need to monetize new services now renders that complexity condition as in sufficient to maintain the older networks – that is, simply doing nothing is now a harmful economic alternative – and that will ultimately drive true and full decommissioning. It’s good to see that it is finally starting to take place.

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