Digital News Bytes – June 2021
Some noteworthy digital trends currently impacting the Telecoms/TMT sector are outlined below:
- Digital infrastructure/Infratech investment trend – Investors are showing increasing interest in digital infrastructure (including fibre, towers, submarine cable and data centres), and infrastructure technology (Infratech) (including software platforms, or other technology assets or systems) as new viable asset classes in their own right. The opportunities presented by potentially long-term reliable wholesale revenue streams will need to be balanced with geo-political, regulatory, cybersecurity and technology risks in what are still nascent markets. In 2020, Fidelity found that 36% of institutional investors had invested in digital assets, but 80% indicated that they would be interested in investing. In June 2021, McKinseys highlighted the viability of Infratech as an asset class that is an increasingly essential component of infrastructure investments and operations – but also pointing out the challenges of technology obsolescence, systems integration, and data integrity risks. The investment potential of these asset classes is a trend gaining momentum, no doubt accelerated by the pandemic, but there is still a way to go in creating investor clarity on valuations and business cases.
- The rise of Hybrid Cloud AI – Artificial Intelligence (AI) is now a recognised tool for businesses to enhance customer and operational performance. A recent Forbes report has found that 60% of CIOs expect AI and machine learning to become critical to their business in the next five years. So it is no surprise then to see the rise of hybrid cloud AI services, like Artificial Intelligence-as-a-Service (AIaaS), which represent a growing area of off-the-shelf AI tools that enable companies to implement and scale AI at a lower cost than a full, in-house AI. AIaaS providers will need to consider not just commercial terms, such as pricing and any customer lock-in to reflect costs, but also issues in relation to data governance, privacy and security, and the potential for AI regulation.
- Alliances at the Edge – Legacy telecoms systems may have a natural advantage in meeting the increasing demand for improved latency at the Edge to enhance customer experience. Leveraging traditional telco customer locations and network points which are close to or at customer premises as low latency 1 megawatt edge locations (in addition to any new digital smart city and/or internet of things network edge locations), in collaboration with tech companies, would exploit network and computing strengths to drive value in 5G and other low latency use cases. In the UK, there have been recent notable tie-ups in this respect between Microsoft and O2 to trial on-premise mobile edge computing within a private 5G network, and Amazon Web Services and Vodafone’s deployment of Multi-access Edge Compute (MEC) services in the UK designed to support mobile edge computing applications on the back of a 5G network.
- The new ESG imperative – Environmental sustainability has gathered new steam. Pre-pandemic, European and international targets as well as industry collaboration for reducing data centre carbon emissions to drive smarter energy use and efficiencies savings were already in play. Post-pandemic, environmental social responsibility (ESR) has taken on a new imperative, driven by a new social climate, but also investor concerns about economic efficiencies of these data hothouses (quite literally). Data centre providers, like Microsoft have introduced sustainability programmes, and COLT has announced that it is making corresponding investment in green tech/renewables to offset its carbon footprint. The pandemic has also raised awareness of social responsibility in the context of our everyday reliance on the connected world – Vodafone has recently announced in June 2021 a new social initiative of connecting an additional 1 million people to the internet by 2022 to reduce “digital poverty”. Carbon pledges and ESR statements are now becoming the new normal.