Latest Analyses, blogs and news
Nicaragua - Movistar extends its LTE network 28 May 2016
Nicaragua is the largest and least densely populated country in Central America. The country’s significant GDP growth since 2010 belies the low economic base, given that it has the lowest GDP per capita in the region, with some 60% of the population living below the poverty line. As a result, much of the economic drive has been the result of international assistance, particularly from the World Bank and other agencies.
The efforts underway to build a canal between the Pacific and Caribbean, largely with Chinese funding, which will incorporate deep-water ports, an oil pipeline, railroad and international airport, is an ambitious attempt to bring to deliver greater economic benefits, though the business case for the project remains uncertain.
Nicaragua’s telecoms market has mirrored the poor economic achievements, with fixed-line teledensity and mobile penetration also the lowest in Central America. The broadband market remains nascent, with population penetration at about 1.2%. Most internet users are concentrated in the largest cities because the rural and marginal areas lack access to the most basic telecom infrastructure. A number of internet cafés provide public access to internet and email services, but these are also restricted to the larger population centres.
América Móvil’s Claro has a clear lead in all of Nicaragua’s telecom sectors, including fixed-line, mobile, broadband, and pay TV. Mobile subscribers overtook the country’s main lines in early 2002, and now make up the significant majority of all lines.
Telefónica’s Movistar is the only company competing with Claro in the fixed-line and mobile market. In the mobile sector, Movistar holds almost one third of the market, but in the fixed-line sector, it has only about 10% of the country’s fixed lines in service.
Due to a weak regulatory structure and bureaucratic delays, further liberalisation has been slow to be implemented. The duopoly situation has dampened the competitive drive, and as a result there has been less effort than in neighbouring countries to improve quality and lower prices. However, other companies operating in the market include the Russian state corporation Rostejnologuii, Yota Mobile and IWB Holding.
The fixed-line market will probably continue to be stable, leaving growth principally in the mobile and broadband sectors. Competition in the mobile sector is expected to improve from late 2014 with the introduction of a new China-based operator following the auction of spectrum in the 1800MHz band. The broadband sector will be the main growth engine given the extremely low existing penetration rate coupled with consumer demand for services. In this regard, the longer-term prospect is promising.
For detailed information, table of contents and pricing see: Nicaragua - Telecoms, Mobile, Broadband and Digital Media - Statistics and Analyses
Radical changes for electricity utilities 27 May 2016
There is no doubt that the current business model of most electricity utilities around the world is under enormous pressure.
From many different directions – political, environmental and economical – the industry is under pressure and it has no choice but to change. This, of course, is far more easily said than done. Unlike the telecoms industry, which faced significant changes a few decades ago, there is no new product on its way for the electricity companies to tap into. The telcos developed mobile, broadband and ICT services, but it is much harder for the utilities to come up with replacement services.
While one obvious direction is to develop new businesses around renewable energy, micro-grids, smart street lights, EV, etc, the problem will be that once such models become successful the question will arise as to whether they should be delivered through the monopoly model of the utilities or through the market. We already see in some of the European countries that the regulator has stepped in on the request of other market parties and ruled that, for example, the operation of EV loading stations should be left to the market.
An option is to look at the utilities in a totally different way. If we look at the current business model it is hard to see the utilities surviving in their current form, and perhaps as early as the next decade serious structural industry failures will start to occur. Sure, the current models can be propped up through government regulations (eg, forced price increases for consumers), but this will be unpopular and unsustainable moving ahead. There is no doubt that the current value of the utilities for their shareholders is diminishing.
On the other hand, the utilities are well-positioned to build new energy companies along the lines mentioned above; but for regulatory reasons these new ventures will need to be developed separately from their monopoly business and, they will need different shareholding constructions.
However the overall total value of these new businesses could easily surpass the value of the dwindling incumbent business.
Both the social and economic benefits will be very significant as these new businesses will add new jobs; will save consumers money (energy efficiency); will be environmental friendly; and will be far more sustainable longer-term. This future energy model will also be a key driver for much broader innovation and will be a key infrastructure element for the emerging smart cities.
Are blockchains the solution to financing smart cities? 27 May 2016
One of the most difficult elements in the development of smart cities is how to finance them. Local government doesn’t have the money for it and while state and federal governments might have more money to spend there is no way that their current tax funds could pay for even a fraction of the investments that are needed.
Indeed the reality is that in order to create a smart city – one that will be far more cost-effective to run, where significant money can be saved, and where costs and benefits can be more equally spread – massive up-front investments are needed.
At the same the benefits of a smart city are social and economic and can lead to very significant cost savings (there are many examples of 60%-80% cost savings – just look at the digital economy companies). But in general they don’t generate the large new revenues on which more traditional business models rely.
There are no easy solutions to this dilemma, but perhaps some new ideas are emerging that fit well into the new economic models that are beginning to emerge in the sharing economy.
Could Blockchains be of assistance here? While based on the same principle as bitcoins blockchains for smart contracts is perhaps the first mainstream application of this technology. Bitcoin has taken off in the market of criminals and shady businesses, and that is not necessarily how we as a society believe that new technologies should be developed. But, possibly at least in part due to the success of the criminal activity, the technology has received more attention and fortunately that has led to a far more constructive development.
What this technology does is establish a real-time, independent, reliable, transparent and incorruptible ledger where the various transactions take place in real time, with real-time payments being transacted between the parties involved.
This is crucial for the development of new business models, and it also reduces the administrative costs to near-zero.
I recently used the example of smart grids where distributed renewable energy and storage devices can be linked to a blockchain system wherein real-time transactions and payments are made.
It is also not too difficult to envisage that such a transaction-based system could be used in the broader sense of a smart city. If we look at many of the smart city projects that are being planned – and in some instances are already operating on a project or pilot basis – and add blockchain to it, the light clearly comes into view at the end of the financial tunnel.
A smart city will depend heavily on an IoT infrastructure linked to big data and data analytics.
If we have that data and are able to use it in sophisticated ways we can link that to smart city applications. Looking at the smart grid/blockchain example, what can happen here is that those who generate more renewable energy can easily make that and offer it cheaply to the market, and get paid for it. And the same goes for people who have invested in smart devices that can store – not just batteries but also hot water systems, fridges, etc. Energy can do the same or both. Those who save energy benefit, and those who don’t pay more for it.
Now think about systems such as Uber and AirB&B. With blockchain many other sharing economy businesses can be developed within a city, neighbourhood or community and, depending on the nature of the service, can be linked to a smart transaction and payment system.
This will be a much fairer system, since everybody can participate and will be rewarded to the extent of their participation in the sharing economy. It also allows those who care about the environment, society and sustainability to participate through separate distributed blockchain systems linked to specific services created for those groups. It provides the economic model that can underpin a much broader sharing economy model with a range of sub-models within it. For example, it can also apply to government services such as transport, garbage collection and community services. It enables services to be linked to transaction-based payment systems, but equally to a bartering model or to a model based on voluntary services.
Cities such as London, Milan and Singapore operate congestion-based tax systems for car use. This can also be managed through a blockchain-based system that provides accurate and fair information – based on real-time data from the actual (smart) cars wherever they are – about congestion. And ‘the system’ could charge accordingly, not just based on a one-size-fits-all model; or people can adjust the way they will reach their destination, thus avoiding the congestion charge.
These systems will provide people with accurate information, according to which they will change their behaviour in relation to energy use, transport, garbage collection/recycling, job and business opportunities and so on.
So how to proceed ….
First of all, blockchain is an open system so the barrier of entry is very low. Trust will be a key issue and if the various levels of government are going to take a lead here that would greatly stimulate its uptake. If it is implemented at the same time as IoT-enabled smart city systems the two parts could be seamlessly linked.
Banks are already taking great interest in the blockchain technology, so we can certainly expect models to emerge from that sector. While this is admirable, blockchain also offers a far more bank-independent distributed financial system – in fact this was the key reason for the invention and development of the blockchain technology.
There is obviously still a long way to go before we will see a widespread use of blockchain-based transactions, but I think we are onto something here.
Link to Global smart city reports
Smart Cities - Nation Building Now in the Hands of Cities and Communities
New IXP to improve internet connectivity in Honduras 26 May 2016
Among the poorest countries in Central America, Honduras has long been plagued by an unstable political framework which has rendered telecom reform difficult. Reform is critical if the country is to address some of the least impressive market statistics in the region.
The country had been on the cusp of bankruptcy for several years in the early part of the century, and though a group of banks had written off $3.5 billion of debt in 2007 accumulated debt since then soon reached $5 billion. The economic plight contributed to a series of crises within the government.
These practical difficulties have had real effects on the country’s telecom market. Fixed-line teledensity, at only 5.6%, is significantly lower than the Latin American and Caribbean average. Poor fixed-line infrastructure has been exacerbated by low investment and topographical difficulties which have made investment in rural areas unattractive or uneconomical. As a consequence, the internet has been slow to develop in Honduras: DSL and cable modem technologies are available but relatively expensive and thus take-up has been low thus far. Higher speed services are largely restricted to the major urban centres. Nevertheless, the demand for broadband is steadily increasing and there are been some investment in network upgrades to fibre-based infrastructure, though this is restricted to the main cities. Poor fixed-line connectivity has also inhibited the take-up of videostreaming services.
On the positive side, these factors have encouraged consumer take-up of mobile services, a sector where there is lively competition supported by international investment. As a result, mobile penetration is about 20% above the regional average. Revenue growth from the mobile sector looks promising in coming years as operators invest in their networks, expand their reach and upgrade their capabilities to accommodate mobile broadband services. Mobile data as a proportion of overall mobile revenue has increased steadily, though low-end SMS services will continue to account for the bulk of data revenue for some years.
Political developments during the last few years have not facilitated the much-needed reform of legislation governing the telecoms sector. Partly this is due to political stalemate and ineffective legislators, but underlying the difficulties are the close ties between executives at the incumbent Hondutel and key members of the government.
For detailed information, table of contents and pricing see: Honduras - Telecoms, Mobile, Broadband and Digital Media - Statistics and Analyses
The Middle East is the next target market for mobile gaming 25 May 2016
Generally speaking, the Middle East is one of the world’s fastest growing markets for online and mobile gaming. Traditionally gaming companies have not focused on the opportunities presented by this large market - but this is quickly changing as game developers begin to incorporate more localised content and Arabic language into their offerings.
Tamatem.co is one company in the MENA region which offers to publish mobile games in Arabic as well as the ability for consumers to download games. In 2015 mobile games developer Tapinator formed a partnership with Tamatem which will see it publish local versions of its most popular games in the region.
With high smart phone penetration existing in many Middle Eastern markets – mobile gaming is considered to be a key growth area going forward. The UK social gaming company Palringo is also reportedly finding success in the Middle East, offering access to multi-player chat games in various languages including Arabic.
A study by Strategy& found that the video gaming industry in the Middle East was worth around US$680 million in 2015 and was forecast to grow to US$2.3 billion in 2022.
Senior Analyst – Global and Middle East Markets
For related information, see separate report: Digital and Mobile Media - Apps, Entertainment, Social Networks and Gaming.
Can we please have a rethink of the NBN soon after the election? 25 May 2016
A recommendation in a recent report from Infrastructure Australia states: “The Australian Government should work with communities and businesses to maximise opportunities created by the National Broadband Network”.
Obviously this makes total sense. Back in 2001 I launched a campaign, The Broadbanding of Local Communities. In all, 70 councils from around the country were represented at the conference I organised and subsequently I assisted 50 of them in the following years.
When the FttH NBN started to become a reality, from 2007-2009 on, most of the local councils took a back seat and left the ‘broadbanding’ in the hands of the Federal Government.
However, the real leaders in local councils didn’t sit still. They began to lobby the government to be included in the first part of the rollout of the FttH network, and these councils are now the front-runners in Australia in the development of smart cities.
In the meantime other local councils have also embarked on smart cities and many more will follow now that the government has announced its own Smart City Policy.
Interestingly none of the councils – and I repeat – none of the councils that fully understand what a smart city is and what impact it has is indicating that all they need is the so-called multi-technology-mix (MtM) solution for the NBN. They all understand that the long-term solution has to be fibre all the way, and increasingly councils are questioning the deployment of the hundreds of thousands of boxes (nodes) in their streets, which they see as obstacles to getting fully-fibred cities.
True, many councils have absolutely no understanding of the concept of smart cities and/or the impact of the MtM NBN, but those in the know are not happy. Some are actively talking to the NBN company and are lobbying for extra money from their state government to increase FttH in their area, but for many others there is little they can do because the NBN company has a national monopoly.
There is already a backlash in towns that are half-fibred (the haves) and those who are now getting, or will be getting, the MtM (the have-nots) and councils have a real problem on their hands explaining this to those affected.
In other areas the FttN, often at least partly based on old infrastructure, is creating severe headaches with a total breakdown (for several months now) of the telecoms systems – people losing their phone connections for a week or more, slower ADSL speeds and congested FttN nodes. Congestion is also starting to occur on some of the fixed wireless systems, and in order to prevent congestion on the satellite the waiting list for new connections has already moved towards the end of the year.
I will be the first to accept that with any new system there are teething problems, but, talking to the councils in the affected areas, none of them are happy. And they are all becoming increasingly confused about the NBN as a whole.
They are deeply concerned about the impact the second-rate NBN will have on their citizens and their economic development and they see the MtM in shrill contract to government’s innovation policy. All of their start-up are demanding fibre connections. They are already getting a backlash from their affected citizens and they expect that the situation will only get worse as more and more people start to understand what a second-rate NBN will mean to them.
For several reasons a rethink of the NBN is necessary and overdue. As well as the abovementioned problem there is the looming funding challenge. Government investment money runs out at the end of the year, and with questions regarding the end value of an MtM NBN there are concerns that private industry will not be prepared to cough up the $20 billion (at least) that is needed to complete the job.
Enough reasons to sit down and regroup. I accept the reality that a Coalition government will not fund an FttH network, but accepting the advice from Infrastructure Australia mentioned above I suggest sitting down with local councils, communities and businesses to sort out what they want.
An obvious issue will be that many will want FttH. So the best way forward would be to open up the market and allow competition to come in to fix the problem. Fttdp is an obvious solution, as is FttH, and (who knows?) 5G linked to deep fibre in the street. If the NBN company changes its model and delivers fibre not to the node but to the street can we then get other companies to invest in either bringing FttH into the house or linking the home to an Fttdp or 5G solution?
Furthermore, as Tim Nulty has demonstrated, there are many rural communities that can be fibred by private companies without the need of the NBN company. If that is the case why not open up the market? There are plenty of examples of such community networks in the USA and in the Netherlands, and in some of the Nordic countries we see that nearly all of the councils are involved in facilitating FttH in their cities and towns. In the Netherlands more than half of the small towns now have FttH networks.
Another worrying element that requires a review is that perfectly good FttH and fibre-to-the-basement networks in multi-dwelling units, operated by private companies such as OPENetworks and LBNCO are being overbuilt by the NBN company, now bringing two superhighways to these homes. How silly is that? This at a time when the majority of Australians are screaming to get one good high-speed connection, and, perhaps even more ridiculous, people living on the other side of the street to those who have two high-speed connections don’t even have one, and the NBN company has indicated that they are not yet on their rollout plan.
It is highly unlikely that the NBN company of itself will ever be able to provide the return on investment the government had hoped for, so let’s face reality, write off at least a large part of it, and use private investors to finish that last mile. Again quoting from the Infrastructure Australia report: “Reforms should aim to deliver an effective and competitive rollout of the NBN, meet demand for telecoms over the coming decades and reduce service disparities between urban and regional areas”.
The bolding is mine, just to counter the minister’s comment that we don’t need a better NBN because today only a few are taking up the higher speeds products. Or comments from another minister that 25Mbs is all that Australians need today to download movies.
Last but not least, the same report states “To prepare for a future sale, it will be important that NBN Co doesn’t enmesh different technologies in a way that cannot be separated later”. This, in my view, occurs when we put in the FttN nodes in order to mesh copper and fibre; and these nodes are the obstacles to moving ahead towards a full fibre network.
I am also happy to turn the arguments around, and as a matter of fact I have always been of the opinion that before we started building an NBN we should have asked ourselves what we, as a nation, wanted from it. That, then, would have established the requirements for such a project.
Infrastructure Australia puts it this way (abstracted) : “With the right infrastructure, such as high-speed broadband, these cities could enable more Australians to live in a smaller city and access employment opportunities in one of our major metropolises (making use of telecommunications to work from home or a local workplace)”.
I totally agree, but if that is an outcome we want from high-speed broadband we need to ask what infrastructure is needed (for decades to come) that will be able to deliver this outcome. The same question should be asked about the requirements of e-health, e-education, smart grids, smart cities and so on). We have never ever done this, and politicians don’t want to do it, as most likely it will tell them that the MtM won’t cut it, definitely not in decades to come.
So my comment to both parties is that, regardless of which party wins the election, let’s sit down and review the NBN. It doesn’t make sense to continue to move in the wrong direction simply because of politics.
Strategic smart city insights from my European tour 24 May 2016
The aim of my recent smart city trip to Europe was to obtain insights into the strategic development in various cities that have been involved in smart cities, some for up to a decade. Obviously there are valuable lessons to be learned from them.
I specifically was not interested in having a look at the various smart city projects; however during the many discussions I had people talked about some of them, and some of them also provided an excellent example of what starts to happen if you look at them in a strategic way. I deliberately don’t mention individual cities in order to provide my own analysis on the strategic issues as I see them.
Across all of the cities common issues occur like red threads. These are issues that we, too, have discussed many times, and they include:
- the need to develop smart communities from the perspective of the citizens;
- the need for a smart city vision under the strong leadership of mayors;
- the need for smart councils under the leadership of CEOs/general managers;
- better integration with private sector (business and investment models, innovative procurement);
- the need for long-term structural changes and the need for quick wins.
No smart city without a smart council
Even after many years of operating a smart city model these are still issues these councils have to work with. At a political level in particular mayors and councillors change and that often creates new disruption, especially if council-wide strong smart city management structures have not been created. In the end the smart city concept needs be embedded within every aspect of council and all of the directors and staff involved in running the council need to have embraced the concept and act upon it.
Only when that has happened will it be possible to develop a true smart city.
There is not yet one city in the world where this has happened smoothly, in a fully integrated way`. It is key for the smart city team/manager – which now exist in all of the cities I visited – to actually make themselves redundant. This is unlikely to happen anytime soon as the smart team is needed to create that horizontal structure, develop multifunctional systems, stimulate interoperability and stimulate, facilitate and educate throughout the organisation.
All of this needs to be internalised; in other words an outside bureau linked to the council doesn’t deliver the same outcomes as a fully-internalised smart city operation.
Also, at a national government level, the first steps are now being undertaken to create policies that will make it easier for cities to embark on this journey. Lessons learned include the fact that national and international cooperation between cities is very beneficial, as scalability and the ability to replicate are key to the creation of sustainable business and investment models. Rather than each city testing a pilot of its own projects it makes far more sense to form alliances, whereby certain cities develop certain projects and together learn from each other and work together. In the Netherlands the national government has appointed a smart city ambassador, who not only provides a coordinated role but at the same time is the central business point for all of the organisations involved in smart cities. Overseas business and project enquiries for smart cities are, in most cases, directed to the commercial partners. This creates national economic potential for those organisations and also takes the pressure off councils, which are often overwhelmed by the interest from the outside in their projects.
On the international side I had a meeting with the Global Smart City & Community Coalition. This organisation links city councils and their mayors together and specifically concentrates on the social and economic benefits that can be created for their citizens.
Lack of finance and innovative procurement systems
Other recurring issues were the lack of finance and innovative procurement systems. As complex, interoperable and multifunctional smart city developments need to be embedded within the existing council structure, the inflexible and cumbersome procurement systems often make this simply impossible. The financing of smart cities needs to be based on partnerships with private industry and on sound, long-term business and investment models. Financial models need to allow for learning on the job, adaptations to developments as they occur, risk-taking, and the reality that some projects will simply fail. All of this is counter to the nature of traditional councils. The cultural changes that are required are among the most difficult elements of smart city development.
While there are little or no revenue-generating smart city models, the savings models are very substantial, and at the same time the big issues of today such as demographics, climate change, changes in social behaviour and changes in technology are forcing councils to change. Citizens expect cities to become more citizen-friendly, more liveable, fun to live in, and to create economic opportunities for them. Councils cannot afford to ignore this, or citizens will simply move away – we are already seeing this trend, worldwide.
The massive changes that are taking place in the economy as we speak are leading to a massive loss of traditional jobs – and there is more to come. The smart city will have to be the platform for new job creation, which will increasingly depend on new innovative small businesses. The smart city will be the platform for start-ups, many of which will need to become the economic engine of our future. This living lab platform is also essential for the education sector, since most new jobs for the future have not yet been invented.
For all of this it is essential that cities develop a vision that will inspire their citizens and their businesses, and mayors play a key role here. This and a ‘smart council’ – along the lines described above – are the most essential elements for the creation of successful and sustainable smart cities. Technology is not the issue, and, while R&D is another important element, there is now plenty of R&D to guide us. We need to move into action. From now on R&D should be linked to live projects.
With that in mind, in reality the most successful smart city projects so far are greenfield projects, such as new suburbs, transport upgrades, inner-city redevelopments and so on. It is far easier to implement the integration, interoperability and digital infrastructure needed for a smart city in such situations. Most of the time the extra cost of new technologies is compensated for through sharing models, and the social and economic benefits of doing it smart outweigh any potential extra costs (often less than 10% of total costs).
These are great projects to learn from and to build up the management expertise needed to take it from greenfield to brownfield.
Regarding brownfield – look at pain points, complaints, ideas and suggestions from citizens and try and to use ICT to improve the situation. While a fully-integrated smart city model will take many years to develop and build, some easy short-term gains also need to be made. This is important to show the citizens what smart city applications can do for them and it allows the political leaders (individual councillors) to show some scores on the board.
But always start with a vision and an end goal in place.
The key to ‘smart’ – apart from people – is digital infrastructure, linked to data management (big data, data analytics, cloud computing, data centres).
The central element of any smart city project is data management. Access to executable data on all levels is what allows a city to become smart. Once the technology and expertise for these ICT elements are in place, everyone involved needs to learn how to best use it and manage it. It is impossible to develop the exact outlines of this, so the best starting point is to have a high-level governance model, particularly in relation to privacy and security, and to develop the data hub as we develop the smart city. Councils will need to take the lead here to establish the data hub and create an open data policy. All relevant organisations linked to a particular project will have to contribute their data to it in that same context.
Furthermore, there is not one city that doesn’t see a fully-operational fibre optic networks as the most essential part of their digital infrastructure, with mobility linked to it through mobile and IoT networks. Apart from linking people and businesses to a fibre network, cities are starting to link all sorts of other infrastructure to that network (light poles, EV charging stations, roof-top solar power, public transport infrastructure, physical infrastructure). The smarter they make their city the more obvious it becomes to them that a citywide (national) fibre optic network is essential. Key elements for them are the robustness of the network, capacity, security and low latency, only end-to-end fibre based networks can deliver such infrastructure.
More from Paul's desk from the BuddeBlog…
More News & Views from the BuddeBlog…