Network Consolidation Trend Brings Fresh Challenges for CSPs

In many emerging markets, communication service providers (CSPs) are often the biggest technology companies present, with the largest data centres and IT infrastructures in any given country or area. CSPs are therefore well placed to respond to the increase in demand for data resulting from the rapid deployment of the internet in emerging economies, whether via mobile or otherwise.

This provides CSPs with opportunities to offset the declines that they are seeing in voice revenue by offering IT services through various avenues. It is also leading to an increase in the size of network data centres and an increasing trend towards network consolidation.

Many CSPs in emerging markets have the core infrastructure in place to offer infrastructure and software as a service, as well as cloud computing. In many cases, the factors that are inhibiting these services are in fact more political than technological. In Pakistan for example, the government has delayed issuing 3G spectrum licences for the third time, despite the fact that operators have the necessary infrastructure in place. The current government and opposition have agreed to the postponement to avoid politicising the issue before the upcoming elections.

Despite the repeatedly stalled auctions, there has been a proliferation of affordable, internet-enabled handsets – these aren’t necessarily high-end, but they do use data. In certain markets, use of data is doubling every six months – particularly in markets such as Africa, which have gone from having very limited internet access to enjoying relatively high-speed internet in a short space of time.

Although leapfrogging older technology is an obvious advantage for emerging markets, the lack of landline infrastructure prevents services such as banking being offered as they would be in developed markets. In turn, this leads to CSPs stepping in to provide these services, and there is predictably massive uptake in subscribers. Unfortunately, their billing and revenue infrastructure is typically engineered for far lower volumes, which creates bottlenecks.

“There are a lot of ‘sticking-plaster’ solutions – a quick and dirty approach that works in the short term – but it’s now getting to critical mass and we’re seeing a lot more strategic architecture refreshes from operators”, says James Kirby, Strategic Development Director for EMEA at business support solutions specialist CSG International.

He continues: “CSPs in emerging markets are putting in the kind of infrastructure the developed world already has – for example, multinational operators are installing a regional hub that acts as a core competency centre with tier one software solutions. This will cover multiple countries, but requires a smaller team of people to run it.”

This attitude change in the developing world has been mainly driven by multinational operators buying up local operators and installing architecture that is more in line with a ‘developed world’ approach. The concept of a regional hub has taken off in both East and West Africa, with some of the continent’s largest operators setting up consolidated hubs in Ivory Coast and Uganda.

This allows for a reduction of the hardware footprint, which in turn can reduce costs by up to 90%. The refreshed hardware architectures can cope with the volume shock and reduce power consumption to lower operating expenditure.

Hardware that has been in place for 5-10 years is typically large, expensive to run, and uses a lot of power. This is a major problem as the local power grids in many emerging markets fail very frequently.

Consolidation such as this is a global trend, but especially common in emerging markets due to the issue of powering data centres. “As the internet becomes more of a service that they are providing, operators don’t just need PBX switches – there’s an increase in infrastructure to handle these new services, but power isn’t increasing at the same rate”, says Kirby. “They need to reduce and consolidate as much of their legacy architecture as possible to provide the capacity for new internet access points.”

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