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February 26, 2014

Huawei Makes the Case for Mobile Broadband as Key Enabler of 'Next Industrial Revolution'

This year’s theme at the Mobile World Congress in Barcelona is “What’s Next.”  You will note that the theme does not include a question mark. The reason is that the annual gathering of the global mobility community is not only showcasing in many ways the promise of what is next, in terms of a raft of innovations that are coming at us at a blinding and accelerating speed, but it is also the place where industry leaders, whose ranks now include featured keynoter Facebook CEO Mark Zuckerberg, set forth their visions of the future, as well as the challenges that lie ahead. 

In this regard, of special note were the remarks by industry infrastructure dominant supplier Huawei.  At the company’s, Broader Way Forum, Ken Hu, Rotating CEO and Deputy Chairman, gave the keynote speech on why mobile broadband will be a critical component of what he and many have described as the “next industrial revolution.” This may sound like an unusual formulation for what can come next in the information/Internet age, but Mr. Hu made some interesting points about how information and communications technology (ICT) really has become the enabler for that burgeoning next industrial age and why mobility in particularly is at the heart of the engine driving us forward. 

Mobile Broadband Plays a Critical Role

A good place to start is with Mr. Hu’s opening remarks, where he noted that, “I believe the next big thing is a new industrial revolution, a revolution driven by ICT.” He iterated this point, highlighting three characteristics in this new industrial revolution.

  1. ICT continues to drive the deep convergence of the digital and physical worlds. It is no longer just a tool to improve efficiency, but an enabler and a catalyst for the transformation of all industries.
  2. ICT infrastructure is becoming as vital to our society as electricity and paved roads, and the level of ICT infrastructure development of a country or economy directly determines its competitiveness.
  3. Utilization of ICT is no longer just the concern of CIOs, CTOs, or the IT department. In fact, utilization of the Internet and ICT have become fundamental to the business mindset, requiring us to put customers at the center of all business elements and focus on customer experience in a way we never did before.

With this as context, he then explained mobile broadband’s key role. The issue is that despite the acceleration of 4G deployments and roadmaps already being built for 5G, as well as a host of other radio-based wireless solutions for creating a ubiquitous wireless global presence, challenges remain that must be surmounted. Cited were issues relating to terms of the investment model, end-to-end network costs, and collaboration across industries.

“First, we need to promote a more healthy investment model that makes MBB development more attractive to operators,” Mr. Hu explained. “Today, regulations should focus more on balancing investor interests with consumer interests. Additionally, the value chain has changed remarkably in today’s digital society. Regulations should encourage more reasonable value distribution and cost sharing among infrastructure operators, content providers, and consumers.”

The second challenge is reducing the cost of building and operating end-to-end mobile broadband networks. Huawei sees three key areas that significantly impact the cost of the network that must be addressed.

  • Spectrum cost. This is priority number one.  As Mr. Hu told the audience, “Currently, spectrum cost represents a significant portion of the entire mobile infrastructure investment. In some countries, it can reach 20 percent. This definitely deters investors from building new mobile networks, thus hindering market competition. Additionally, regional differences in spectrum utilization add another layer of cost. […] We therefore urge countries and governments to create a healthier spectrum allocation mechanism to reduce the cost of spectrum acquisition. We would also like to see regulators further improve spectrum utilization through better standardization processes that further reduce the cost of spectrum to carriers.”
  • Infrastructure sharing. The reality is that an old term from the 1990s, cooptation, should apply here.  There is a lot of expense duplication in the industry that just does not make sense, and Huawei see significant cost saving coming from cross-industry collaboration. It was noted that site acquisition and civil engineering can exceed 50 percent of mobile broadband rollout costs.  Hu noted, for example, that, “Duct sharing, infrastructure sharing (such as roads, railways, power lines, etc.) can reduce the cost of cabling and site operation for the network. Governments, international organizations, and industries need to collaborate better, and develop more reasonable policies and standards that promote cross-industry collaboration and thus reduce cost.”
  • Investment in innovation must be strong.  Hardware and particularly software innovation investments must be a priority investment to drive down both CAPEX and OPEX. Hu stated, “With equipment now capable of accommodating 3G, 4G and 5G technologies on the same platform, CAPEX is being reduced significantly. With next-gen technologies, we can now reduce the number of base stations and cell sites needed to deliver the same coverage, reducing both CAPEX and OPEX for equipment and sites, while increasing spectrum utilization efficiency and thus reducing cost. What’s more, software-defined networking (SDN) will allow operators and their enterprise customers to automatically provision services and balance traffic loads more efficiently, reducing CAPEX and OPEX even further.

The point that should create lots of interesting conversation around the industry is the following: Hu noted that that Huawei sees “the facilitation of cross-industry collaboration and broader application of the technology itself as key.”  He said, “To fully unleash the potential of mobile Internet where we are ‘all connected at zero distance,’ traditional vertical industries must transform themselves and collaborate with other industries. What’s more, development of the industry value chain requires collaboration among the device, network (pipe) and cloud. We believe that affordable devices in various form factors, 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.”

Interestingly, given all of the buzz being generated by the 1800 exhibitors and the tens of thousands of visitors to MWC, what’s next may not actually be the beginning of another industrial revolution, but rather the acknowledgement of the maturation of one in which we are already in the midst. 

What the Internet changed fundamentally and profoundly was the relationship between buyers and sellers.  One way to look at this is that the term “customer experience” – now all the rage – is nothing more than a recognition that, in ICT, the buyer now is driving the market.  Indeed, it is user expectations that “best efforts” fail to satisfy. Choice needs to be the rule and not the exception, and punishment for not meeting expectations will be fast and harsh. 

In fact, in many ways, all of the talk about actionable insights from Big Data and the use of sophisticated algorithms to anticipate our needs and fulfill them before we opt out of a transaction or choose to go somewhere else can be viewed as the seller looking to catch up with the customer.  We as customers not only expect more out of our providers, but demand it, and, if treated respectfully in a trustworthy manner, will pay for perceived premium performance.  That is what is driving us forward and why getting the cost and performance of mobile broadband right is so very important. 

This is why, when Huawei talked, the industry was there to listen and hopefully to learn. 

Edited by Blaise McNamee

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