09 October, 2023

Future connectivity: new study finds radical change is coming and highlights investment challenge

Brussels, 9 October 2023 – Europe has set bold policy objectives to achieve full 5G and fibre coverage by 2030. At the heart of a digitally transformed Europe lies the expansion and evolution connectivity networks. As the European Commission is in the midst of an analysis on the future of the telecom industry and of its infrastructures, a study by Deloitte requested by ETNO (later referred to as The study) highlights the key technology trends and investment requirements that will drive digital transformation. You can read its executive summary through this link.

From 5G standalone to fibre, from terrestrial/satellite connectivity to open RAN and quantum encryption, the report illustrates how new connectivity technologies will contribute to EU policy objectives in the fields of network security, innovation and sustainability. Furthermore, it outlines policy approaches undertaken around the world to align the next generation of connectivity with the pursuit of strategic policy objectives, for potential consideration in the EU debate.

Seven technologies defining the future of connectivity

Reimagining how networks are built, deployed and operated will define the next wave of innovative services across Europe. The study identifies seven technologies in which the EU should lead if it is to stay ahead of the game: 5G standalone, FTTH and FTTx roll-out, Open RAN, network virtualization and softwarisation, edge computing, quantum encryption as well as low-earth orbit satellite communications.

The report underscores the central role of such technologies in unlocking Europe's digital potential and driving the green transition, delivering a range of benefits to European citizens, SMEs and large businesses. On one hand, these innovations will bring increased agility and flexibility to networks, while making them more cost-effective and environmentally friendly.

For example, Open RAN will introduce interoperable hardware and software interfaces, while Network Function Virtualization (NFV) and Software Defined Networking (SDN) will enable a steady progress towards network automation powered by Artificial Intelligence and Machine Learning. Similarly, Edge Computing, Quantum Encryption and LEO Satellite Connectivity will further optimise the use and performance of networks and improve network security and encryption.

The investment challenge: both networks and enabling technologies are capital-intensive

Upgrading Europe’s connectivity requires substantial investment. According to the study, infrastructure deployments for FTTH / FTTx, and 5G SA represent the most capital-intensive items, each demanding over €100 billion by 2030. Among the enabling technologies, Open RAN, NFV, and SDN are expected to also have a significant impact in terms of capital expenditure, each falling within the €10 billion to €100 billion range by 2030. In addition, LEO satellites, edge computing, and quantum computing will require a further, but more modest investment, of around €10 billion each.

The telecom sector remains dedicated to sustaining its investment efforts. Over the past decade alone, the sector has invested more than €500bn across Europe. However, the European Commission has identified an investment deficit for ECNs of at least €174bn, underscoring the need for more robust efforts to meet the Digital Decade's connectivity targets.

The study identifies various challenges faced by the telecom sector. Factors such as substantial market fragmentation, coupled with low average revenue per user and a rising average volume of data per user, have eroded considerable value from Europe's telecom operators. Furthermore, telecom operators may face further profit margin pressures due to challenges in monetizing new services, limited opportunities to scale, and a shift of value within the ecosystem towards current and emerging competitors.


Analyzing Europe’s policy approaches

The study examines a series of policy approaches based on international benchmarking that governments globally are using to support the availability of autonomous, resilient, and sustainable networks, while boosting innovation and improving economic competitiveness.

First and foremost, investment needs in connectivity should inform fresh policy approaches. While increased investment in high-speed internet infrastructure remains the core enabler, the study sheds a light on other key areas such as: improving the security and resilience of networks, promoting digital equity and affordable connectivity, cloudification of public services, and support to new technologies.

Secondly, the study acknowledges important on-going global policy developments around the financial contribution from large content application providers as well as a review of merger control processes in view of creating market scale.

Finally, the study notes that other key policy areas include: standards and requirements to improve security and supply chain resilience as well as funding education programs to develop IT expertise.


Media inquiries:

Alessandro Gropelli, Deputy Director General: gropelli@etno.eu

Gabriel Daia, Senior Communications Manage: daia@etno.eu 

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