Latest Analyses, blogs and news

Cloud Computing market - analysis mid-2015 28 Jul 2015

The uptake of commercial cloud services remains relatively low but the market is reaching a level that will see ongoing growth in years to come. Customers are increasingly relaxed about not having to build their own cloud because there is now trust and confidence in the commercial sector. And, rather than building their own IT systems, more and more they are looking to buy the specific services they need.

At the same time there is an increased adoption of hyper-scale cloud services, hybrid cloud offerings and a layered approach to cloud.

This trend is driven by the new companies entering the networking economy, as well as large enterprises who want to reach outside their organisation to their customers. The data flows generated by these developments is enormous and the management of this is becoming beyond the players themselves. At the same time the business model, especially from companies operating in the networking or sharing economy, is based on being light on assets and staff.

What is happening now is that these software-as-a-service organisations are realising that they can no longer limit their business to software services – they also need to provide the underlying ICT infrastructure.

This is resulting in the emergence of a new wave of cloud providers.  They include software licensing organisations, enterprise resource planning providers, internet of things providers, and database companies that are supplying their own cloud infrastructure. Interestingly, we also see a similar trend in the datacentre market, where companies are moving deeper into the cloud and looking for a holistic offering of services that includes bandwidth and cloud as well as datacentre facilities.

The importance of infrastructure becomes clear when looking at some data provided by Cisco.  According to them, in 2013 cloud-based activities accounted for 54% of total datacentre traffic, but by 2018 cloud will account for 76%, with a 32% CAGR, or a fourfold growth. Not being involved in infrastructure will put them at a clear disadvantage in the market.

Traditional (wholesale) telcos are feeling the pinch of service commoditisation and have an equal need to start looking at new business models. Traditionally these players are very slow to move, but nevertheless they will at least try to get a piece of the action too. They are also ill-prepared for the changes in data utilisation, generation, consumption and storage that will be created, for example, by cloud computing, IoT and M2M. Regulatory restriction on wholesale competition aimed to protect NBN Co, and the fact that this company will mainly install old infrastructure, will make their position even more difficult.

All of these market dynamics will lead to interesting battles between these different groups and the winners will no doubt be those who are able to harness the three different sectors and from that position deliver seamless services to their customers.

Paul Budde

How to move cybersecurity forward in a more positive way 28 Jul 2015

In 2013 I wrote a blog Telecoms as a spying tool, in which I mentioned that those who use the internet to spy indiscriminately will have to face the reality that such activities will only start a cat-and-mouse game – the technology will always be able to stay one step ahead of those who are using the internet for criminal purposes.

Since that time some very significant developments have taken place that have confirmed our prediction.

When we wrote that article encryption technologies had already been around for some time, but they were not being used by the majority of internet users. Some websites, particularly those from financial institutions and at least some of the government sites, used encryption technologies, but even at a business level security still had rather low priority. Data breaches that are still hitting the news show that this continues to be a problem for many of the organisations and people using the internet.

Beyond that, encryption was being used by those who wanted to avoid detection, such as criminals and terrorists.  However, in reality people who carry out illegal activities often make simple mistakes, and so in many cases those offenders were eventually caught, with or without the assistance of technology. This is still the case – mass surveillance usually contributes little or nothing to the capture of criminals or terrorists. More targeted approaches that have been used over the years, including the use of technology, have delivered far better results.

Obviously most people were fully aware that the police and security agencies were using technology to try and catch those criminals and there was little or no outcry about it, as people obviously understood the benefits of having vigilant security services. They trusted that those agencies would use the appropriate warrants to conduct their investigations, or that secret actions were at least overseen by their national parliaments.

However, the revelations of Edward Snowden showed that these tools were not only used to catch criminals. They were also used for mass surveillance purposes, and this revelation shocked the entire world. It became clear that very personal information from friendly government leaders was spied upon, and also that computers from companies such as Google were hacked into in order to obtain information on people without any warrant attached.

This immediately brought about a chain reaction (as in the cat-and-mouse example). Internet companies do have a legal obligation to protect the integrity of their ICT infrastructure, the security of their data and the privacy of their customers; and so this was a clear wake-up call for them to massively step up their security. If NSA can tap into these networks and services, others with criminal intentions will also find ways to do so. So encryption technologies were used, this time to introduce a far more general level of protection both at national government levels and in relation to consumer-based services from Google, Facebook and others. Furthermore massive amounts of money were pumped into this market to create even better encryption solutions.

With this explosion in encryption, consumer devices, having data in them, are now also being encrypted. The reality is that encryption is rapidly becoming the norm.

In this cat-and-mouse game law enforcement agencies are complaining that the techniques they used before are not working as well as they did in the past – in fact, for them it is only getting worse. We are already hearing political murmurings, in the UK and Australia for example, that encryption technologies should be banned. This is a clear indication that those politicians have very little idea about technological developments – that they are largely unaware that encryption has already become a very critical part of internet services. Banning encryption is not only counter-productive in an economic sense; it is also too late, since large amounts of information have already been encrypted over the last two years.

The encryption explosion has other impacts too.  The cellular networks that used to use deep packet inspection (DPI) to do traffic management are now unable to manage traffic in the same way.  Microwave links that use compression to increase capacity are no longer able to carry the same amount of traffic.  Content filters and firewalls that used to be used to control access to information are unable to perform these functions anymore without explicit intervention by the client to load compromised security certificates, etc.

However these technical issues will no doubt be resolved over time.

Nevertheless the whole spying affair has totally backfired on those spy agencies that used these tools in ‘illegal’ ways, and as a consequence the whole web is going dark. It is predicted that by the end of the year the majority of US internet will be encrypted, and even email traffic is now being encrypted on a broad basis.

So within a few short years the internet world has changed.  So what needs to be done in order to assist police and security agencies in doing their job?  Law enforcement agencies still of course have the ability to investigate websites and to get content with warrants.  But the reality is that this is becoming a much harder task and will take many more resources than it used to. Governments are trying to insist on access to key materials to allow them to decrypt data in flight as they did before.  But this is a very hard thing to enforce without creating holes in the internet and the networking economy that can be exploited by others as well.  The internet has become far too important in an economic sense to allow for undermining the communication security of everyone simply in order to enhance the ability to intercept traffic.  And it is also Snowden that reminded us that the government can't keep secrets that well either.

There is no good solution here, only tradeoffs.  The risk to security by trying to embed holes for law enforcement is unwise and unworkable.  This is an international problem and needs international cooperation – and how will it be possible to get all of the countries to play along? If the certification authorities are deliberately compromised in the cat-and-mouse game new ones will simply spring up that will create an alternate system, maybe run by companies in countries that are less democratic and have even less oversight.

On the other side, technology companies have developed tools to detect network compromises, and it will be more difficult (but of course not impossible) for criminals and terrorists to exploit these holes than it used to be.

Totally predictable within a complex, dynamic technological environment, the natural result of government overreach in this spying affair, is the encryption explosion – especially as it has become clear that adequate supervision is not being applied.  The draconian political reaction that we see in the ‘Five Eyes’ countries clearly shows that some of these lessons have not been internalised by policymakers.  In other less democratic countries this might also be the case but we obviously hear very little about that from them.

Technology usually doesn't operate with the degrees of freedom that policymakers want, and engineers are almost always faster than policymakers in adapting to new rules and laws.  It's a losing battle to try and contain that technology.

What this means is that there is a need for governments to be more open and transparent, and to work with the industry in a legitimate way to address some of the problems we all face (terrorism, cybercrime, child pornography, and so on). Governments who are simply playing the cat-and-mouse game are not likely to achieve outcomes that benefit both their people and the institutions that are needed to keep us safe.

Paul Budde

See also: Australia - Digital Economy - Cyber Crime, Privacy and Copyright issues

Islamic militias in Libya undermine investor confidence 27 Jul 2015

Libya’s civil war has crippled the country’s economy and disrupted its telecommunications sector. It is estimated that more than S1 billion worth of telecom infrastructure was destroyed, including about 20% of the country’s mobile tower sites. Reconstruction efforts continue to be stymied by political and military disturbances which affect much of the country, while with two opposing administrations, in Tripoli and Tobruk, there is no consensus as to how to rebuild infrastructure on a national scale. In early 2015 the state telco (along with many other businesses) decamped to neighbouring Malta, and since then both rival administrations have fought in the Maltese courts in an attempt to assume control of the company. GDP growth fell to a negative 14% in 2013 and negative 24% in 2014, affected by intensified civil unrest, though there are indications that positive growth of up to 7% may be possible for 2015.

Under the Gaddafi regime, virtually the entire telecom and internet sector was in government hands, with the unique situation of three government-owned mobile networks supposed to compete with each other. One of these networks, Libyana, was to have been privatised through an IPO in late 2014, though instead elements of the operator’s mobile network were split off to create a separate operator serving the eastern part of the country.

A new Telecommunications Law has been drafted and the government is in the process of establishing an independent regulatory authority. Since the downfall of the old regime, 25 ISPs have already been licensed to compete with the government-owned former monopoly, as well as 23 VSAT operators.

Despite the destruction, Libya’s telecommunications infrastructure is superior to those in most other African countries. Massive investments had been made by the former government into a next-generation national fibre optic backbone network. There was considerable expansion of DSL and WiMAX broadband services, and new international fibre connections and upgrades made to existing ones. Libya also had one of Africa’s first Fibre-to-the-Premises (FttP) deployments. The first terabit international fibre optic cable landed in the country in 2010, followed by a second in 2013. Investments into telecommunications infrastructure totalling S10 billion were earmarked for the 15 years to 2020, though given the civil strife in recent years it is difficult to say how much of this will be put into effect.

With one of the highest market penetration rates in Africa, the mobile voice market is approaching saturation, supported by some of the lowest tariffs on the continent and one of the highest per capita GDP levels. Opportunities remain in the broadband sector where market penetration is still relatively low. So far only one of the mobile networks has launched third-generation (3G) broadband services. Fixed-line penetration has fallen significantly as a result of the war but is also expected to see a renaissance, including fibre, as the demand for very high-speed broadband increases.

For detailed information, table of contents and pricing see: Libya - Telecoms, Mobile and Broadband - Statistics and Analyses

Interest in 5G is heating up 27 Jul 2015

Interest in further developing the next generation of mobile technologies, known as 5G, is certainly heating up with a spate of recent joint venture announcements. In July 2015, for example, three companies signed a joint agreement to work together to further develop 5G. Softbank, Huawei and ZTE plan to focus their efforts on Multiple-Input and Multiple-Output (MIMO) and spectrum efficiency technologies.

In addition it was announced in July that the Chinese solutions provider, Huawei, would also work on various 5G projects in collaboration with Europe’s 5G Infrastructure Public Private Partnership (5G PPP).

Ericsson announced its latest move to further develop 5G; signing a MoU with Turkey’s Turkcell which will see them collaborate on various 5G research projects.

SK Telekom and Intel announced a partnership this month which will specifically explore 5G chipset requirements and the development of MIMO.

A further consortium emerged in 2015, which again involves Huawei, along with Samsung, Intel, Nokia, Ericsson, Alcatel-Lucent, Orange and Telefonica. The joint venture is known as mmMAGIC and it too will test a number of solutions.

These are just some of the most recent examples of the global collaboration that is taking place to further advance mobile technologies in preparation for the future. The ITU plans to have 5G standards finalised by 2020 and it recently formalised its timeline to reach this goal.

Kylie Wansink

Senior Analyst – Global and Middle East Markets

For related information, see separate reports: BuddeComm Intelligence Report - LTE-A and 5G - a Glimpse into the Future.

Tanzania’s Zantel acquired by Millicom for $1 plus debt obligations 26 Jul 2015

Tanzania’s economy has been showing solid growth rates of between 5% and 8% every year since 2000, despite the global economic crisis which has affected many economies since 2008. For the period 2013-2017, the International Monetary Fund predicts stable GDP growth at around 7% per annum.

The government has actively embraced the principles of competition and a private sector including foreign participation as a means of rapidly advancing economic and social development. Policy reforms have led to the telecom sector becoming among the most liberal in Africa. However, high import tariffs on telecoms equipment and taxes on telephone facilities by various authorities are still placing a burden on investors and operators.

Tanzania has two fixed-line operators (TTCL and Zantel) and eight operational mobile networks, with four additional players licensed under a new converged regulatory regime. With four major operators – Vodacom, Bharti Airtel (formerly Zain), Tigo and Zantel – mobile penetration is approaching 70%, with annual subscriber growth of more than 20%. In recent years a price war among these players has adversely affected the smaller operators, which have suffered from customer churn.

The new converged licensing regime has brought a large number of new players into the market. The liberalisation of voice over internet protocol (VoIP) telephony as well as the introduction of third and fourth generation (3G, 4G) mobile services and wireless broadband networks is boosting the internet sector which has been hampered by the low level of development of the traditional fixed-line network.

Following the launch of 3G mobile broadband services, the mobile networks are becoming the country’s leading internet service providers on the back of their extensive national infrastructure and existing subscriber bases in the voice market. Operators are hoping for revenue growth in the mobile data services market, given that the voice market is almost entirely prepaid and voice ARPU continues to fall. To this end they have invested in network upgrades, with both Vodacom and Smile Communications developing services based on Long-term Evolution (LTE) technology. A fast developing source of revenue is from mobile money transfer and m-banking services. In mid-2013 Bharti Airtel estimated that in Tanzania over 10% of GDP is transacted through mobile commerce.

In March 2013 the regulator reduced interconnection rates by 70%. Combined with a stringent registration policy, requiring new customers to have a physical ID, the reduced rates dampened growth in the number of mobile subscribers for some operators.

The landing of the first fibre optic international submarine cables in the country in recent years has revolutionised the market which up to that point completely depended on expensive satellite connections. In parallel, the government has switched on the first phase of a national fibre backbone network to connect population centres around the country. However, the cost of international internet bandwidth has so far not come down by as much and not as quickly as expected.

For detailed information, table of contents and pricing see: Tanzania - Telecoms, Mobile and Broadband - Statistics and Analyses

Chad and Cameroon sign fibre optic partnership 25 Jul 2015

In recent years Chad’s economy has been supported by revenue from oil exports, though revenue derived has been negatively affected by the falling price of oil since late 2014. This income has enabled the government to propose a number of infrastructural projects, but in overall terms little has gone to improving the country’s telecom infrastructure. Chad has one of the least developed telecom markets in the world, with penetration rates in all sectors – fixed, mobile and internet –well below African averages. Nevertheless, recent regulatory developments and renewed commitments from existing players in the sector have showcased the potential for investors to develop services in a with such a low starting base.

The mobile sector is developing steadily under the auspices of two foreign-owned players – Bharti Airtel (formerly Zain), and Millicom (Tigo). Each has considerable experience with operating mobile networks in the region. The national telco and fixed-line operator, Sotel Tchad (ST) operates the country’s third mobile network.

ST has also rolled out a CDMA2000 fixed-wireless system that supports broadband internet access using EV-DO technology. The mobile networks offer basic mobile data services using GPRS and EDGE technology. The country’s first 3G/4G mobile licence was awarded in April 2014.

Landlocked Chad finally gained access to international fibre bandwidth in 2012, but it still lacks a national backbone infrastructure to support efficient broadband services. All long-distance connections are currently made via satellite. However, the World Bank-funded Central African Backbone (CAB) project has now laid the foundation for the development of a broadband market. The government is seeking partners to expand the national fibre network and launched an international tender for the sale of an 80% stake in Sotel Tchad in April 2014.

For detailed information, table of contents and pricing see: Chad - Telecoms, Mobile and Broadband - Statistics and Analyses

Zimbabwe’s government proposes mobile network infrastructure sharing 24 Jul 2015

Zimbabwe’s economy continues to recover from a decade of recession under gross mismanagement by the country’s political leaders. The normalisation of Zimbabwe’s economy is reflected in the International Monetary Fund’s (IMF) forecast of continuous annual GDP growth at around 4% from 2014 onwards. Despite the overall economic difficulties in recent years, the telecom sector has shown considerable promise since the government allowed foreign currencies as alternative legal tender. Mobile penetration has increased more than seven-fold within four years and broke the 100% penetration barrier in 2013 on the back of 3G mobile broadband subscriptions.

The three mobile networks Econet, NetOne and Telecel Zimbabwe are investing in network upgrades to support data services and their fast-expanding m-commerce and m-banking facilities.

NetOne’s parent, TelOne (formerly PTC) still holds a de-facto monopoly on fixed-line services in the country. The government is planning to privatise up to 60% of TelOne and NetOne, either through an IPO or a strategic partnership with a foreign investor. TelOne has been awarded the country’s fourth mobile licence but hasn’t launched a service yet.

Limitations in international bandwidth for the landlocked country for many years held back development of the internet and broadband sectors, but this has changed since fibre optic links to several submarine cables have been established via neighbouring territories. Massive expansion of 3G mobile broadband services across the country has meant that more than half of the population now has access to the internet. The first commercial LTE services were launched in 2013, while investment in LTE technologies, for which the regulator has assigned spectrum, continues.

For detailed information, table of contents and pricing see: Zimbabwe - Telecoms, Mobile and Broadband - Statistics and Analyses

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