HUNTSVILLE, Ala. -- ADTRAN Connect -- Europe has lagged North America when it comes to gigabit deployments, but that is beginning to change. This is driven in large part by European Union requirements for gigabit connections to public institutions and workspaces, according to ADTRAN's Ronan Kelly, CTO of the EMEA & APAC Regions. Wireless operators also wield significant influence, as they look to acquire fixed-line assets or partner with those operators to create a backhaul network for 5G.
Speaking to press and analysts here last week, Kelly said a commercial model still must be developed that lets operators capture service value beyond simply fatter pipes.
Europe has been about 18 months behind North America, where about 90% of the gigabit services targeted to consumers have taken place to date, said the ADTRAN executive. That changes with new EU rules that mandate gigabit services to all schools, transportation hubs, public service locations and many enterprises, as well as 100 Mbit/s connections to all rural and urban households as a critical driver of renewed interest in gigabit services in Europe.
"The net effect of this is that we are going to see about 10% of premises within Europe will have gig connectivity. To reach that 10%, the number of homes that will be passed, that's going to have a tremendous pull-through effect for consumers as well, not to mention the fact that their consumer expectations will also be higher," Kelly said, noting this shift will impact his company's European strategy and emphasis. Consumer engagement will lead to, among other things, greater emphasis on symmetric services to deliver increased capacity in the upstream portion of a broadband service, he said.
"Those demands are here today; they are not futurist," Kelly commented, noting that virtual reality, live streaming, artificial intelligence and the "cloudification of everything" all play a part in these demand shifts.
There also are significant market forces at work, Kelly pointed out. Wireless operators are losing a major source of income as the EU phases out roaming charges for European citizens within Europe, a move that will cost wireless providers about $1 billion euro in revenue from what had been a "cash cow," he said.
That produces a natural push to consolidation: While Europe has about 50% more potential customers than the US, it has more than 100 different networks and 50-plus discrete operators, Kelly said.
"So suffice to say, anyone with an ounce of sense would say that now that roaming has been removed from the market, as we push to 5G, and there is a big demand across the industry for spectrum harmonization, the market can only move in one direction and that is toward consolidation," he added.
Many of the large wireless operators are all pushing into acquiring fixed-line footprints to "build scale and competence in that space," Kelly said. Part of the push for scale is to build up a large audience base against which they can distribute the very high cost of content.
"In addition to that, as we go to build out a 5G network over the next couple of years, you are going to need a substantial backhaul network," he said.
For 5G to deliver on its gigabit claims will require a significant small cell build out and those small cells will need backhaul, likely on fiber. That has led to M&A activity and joint ventures to get those fiber networks in place, Kelly said.
All of that won't be enough, he warned. "For many operators to start growing the bottom line, they are going to have to start doing things differently," Kelly said. "And that is where the whole software-defined access and virtualization piece comes into this."
Because wireless operators and the GSMA have been looking at network slicing for some time now, the notion of software-defined access and virtualization are already very familiar to those folks. "When you talk about SD-access, it's a real short conversation -- they are already open to it," he commented. "Whereas with fixed-line operators, it is more of a push."
That culture piece will have a lot to say about who becomes the leaders in software-defined access, Kelly said.
There is also, however, "an overwhelming need for a new commercial model," he said. Key to that is enabling network operators to begin using some of the information they have about their customer's behavior -- within limits.
"Today, the consumer pays for everything," he said. "What they are looking for is to be able to monetize the network in a different direction, to bolster the shortfalls from OTT, revenue losses, etc., back toward the sources of some of those services."
Today's newer access platforms provide greater visibility into the consumer, and carriers that have scale are in the best position to use those insights -- in ways that Google, Amazon and Facebook already do -- to be able to monetize their platforms to deliver insights to providers of OTT and video services, for example, he said.
And while that will likely bump up against Net Neutrality, Kelly sees some softening on that front and thinks it may be possible to "tease out" some of these new revenue options.
— Carol Wilson, Editor-at-Large, Light Reading