The Gbit/s race

Deloitte Global predicts for 2016 that the number of Gbit/s internet subscriptions on the globe will surge to 10 million by the year-end, a ten-fold increase, of which about 70% will be residential connections. Looking further ahead, by 2020 this increases to 600 million subscribers, 5 to 10 percent of all broadband connections. Of these, about 90% would be residential, and the rest for business.

As faster speeds become available, the range of applications using higher bandwidth increase and the number of screens/devices per person steady rises. The Media Research Group points at the explosion of the number of connected devices per broadband household: from only 1 – the laptop – in 2000, 6,3 in 2010 to 10 in 2015. Depending on the consultancy firm the Internet of Things will boost this to 25, 30 or more in 2020.

Also small businesses have experienced a significant increase in bandwidth demand, with the move to cloud-based services for a growing range of applications as key driver.

The logic in the Gbit/s race refers to:

• More data: the single applications running on a single device surging ever bigger slots of data, like video streaming;
• More screens: the total demand from an ever growing number of devices in a home or in other venues. Faster connection speeds enable more bursty connections, with files downloading and uploading faster, meaning that each deviceconnects for less time to the Internet, freeing up capacity for the next request for data;
• Commodification: the reduction of the average prices level of Internet access due to competition, and consolidation to capture network economies of scale.

Only a limited number of technologies are likely to be capable of Gbit/s: Fiber to the Home (FTTH) or Fiber to the Premise (FTTP) based on fiber technology and DOCSIS to speed-up cable broadband networks.

Mobile is eating the world

In a similar way the capacity of mobile networks rapidly expands, bringing more bandwidth to the end-user, more and more only connected through through “mobile devices eating the World”. The pace of the development of “mobile” is without precedence.

The race is on to set 5G standards for fifth-generation wireless technology, where it was a major topic at Mobile World Congress in Barcelona, where telecom equipment manufacturers including Samsung, Ericsson and Nokia are featuring 5G demonstrations. Many carriers and equipment providers also have been collaborating in university settings to be able to offer 5G wireless Internet speeds more than 100 times faster than anything available now. It is held to be ideal to support bandwidth-hungry applications around video, virtual and augmented reality and the internet of things (IoT), because it will support many radio interfaces and use radio spectrum much more efficient.

Telecoms and mobile operator AT&T has announced a 5G mobile network roadmap. It said it will conduct field trials of 5G technologies to provide wireless connectivity to fixed locations before the year is out.

The operator said it would embark on a laboratory-based collaboration with Ericsson and Intel to work on 5G systems this spring. In Ausin, Texas, it will perform outdoor tests and trials to take place over the summer.

As average data connections get faster, services become more bandwidth consumptive. New today unviable data-intensive services will emerge and new ‘data-gulping’ devices pop up.

In addition to the bandwidth usage triggered by human activity, the volume of background data usage grows. Every device is likely to require online updates on apps or operating system. And then there is the expected growth of the Internet of Things to add to network stress.

Capacity, reach, and capability

The primary motivation is to increase network capacity and extend the reach of voice services:

• A high capacity fixed network is the best way to bring high capacity mobile to the user. In the Netherlands some 80% of all antennae in mobile networks are connected to fiber. Increasing demand for data on mobile devices reinforces the value of the fixed broadband connection, limiting where and when cellular data is used;
• Spectrum is scarce and spectrum efficiency therefor imperative. VoLTE allows operators to move calls of 2G and 3G networks onto the LTE (4G) network. The often lower frequency spectrum can be used for data services and LTE supports up to twice as many voice users in a given bandwidth. The trust of the technology is to simplify difficult network expansion tasks. It improves the capacity of 3G and 4G networks and an efficient re-use of spectrum also enables the installation of small cells in previously unreachable places. Sparked by giants like Cisco, Verizon, Swisscom, and Deutsche Telecom Strategic Investments, Kumu Networks develops a full-duplex transmission allowing full use of one frequency for both sending and receiving at the same time, potentially doubling spectral efficiency.
• And it helps if mobile communication is immediately off-loaded to a fixed network over Wi-Fi. Smartphones have different antennae and often the user does not even know how it handles its communication over mobile or fixed (Wi-Fi) routes. In addition, the world of carriers has a growing attention to Voice over Wi-Fi (VoWIFI) to extend coverage, particularly indoor. The majority of mobile calls are made indoors, but providing good internal coverage can be technically complex and expensive. Femtocells (a low-range, low-power base station) or Wi-Fi-repeaters in consumer’s homes either bought by the customer or installed by the network operator to improve customer satisfaction and lessen the likelihood of churn.

The scene

In the DNA in the telecommunication industry economies of scale are dominant. It is a fact that the telecom spend in value chains decreases in value chains in many industries. Connectivity is growing at a lower rate then other parts of the value chain. Carriers are forced to beat the drums of efficiency and economies of scale (McKinsey/Datastream) and that's what they do.

Rupert Wood draws the bigger picture. In developed markets, mobile networks do not have anything like enough capacity or quality for many consumers seriously to consider switching all their data consumption to mobile. As long as fixed broadband represents better value for money, consumers will tend to cut the use of mobile data. Converged operators enjoy this phenomenon because any increased usage of data, including mobile data, actually reinforces the value of the fixed broadband connection.

(Research: Bob Bunnik)

The many transactions in the last 18 months have changed the telecom landscape in Europe. In particular, mobile operators merge to improve their market position and generate synergies.

Combinations of mobile and fixed operators create the ability to generate economies of scale on the network side and economies of scope in the service delivery

Epilogue

It is most unlikely that the speed race stops at the 1 Gbit/s milestone. In 2015 Salisbury  (North Carolina) is the first city to offer a 10 Gbit/s connection to its citizens, elsewhere the industry contemplates 50 Gbit/s connections. Internet speeds will continue to rise in the long term.

Author: Pieter van Hoogstraten