What is the next wave in Asian digital infrastructure, and when?
Guest post by Gayan Koralage, Director Strategy, EDOTCO Group ahead of TX Meetup Asia 2023
The Asian telecom infrastructure sector has entered a phase of short-term slow growth, largely attributed to the escalating global interest rates and prevailing macroeconomic challenges. This has led to a deceleration in investment cycles of radio access, primarily driven by mobile network operators. Nonetheless, an era of unparalleled expansion is on the horizon, fuelled by the transformative shift in current digital usage patterns and technological advancements. Below is a sneak peek of this unrivalled future and its opportunities.
The future of the internet is immersive. In the not-so-distant future, we will be able to experience the internet in a far more realistic and engaging way than anything we have experienced today. From the current 2-dimensional to 3-dimensional interfaces, the internet user experience will be in real-time, augmented and targeted to low attention span users; we can walk through the metaverse, interact with digital objects, and even feel the sensations of touch and smell.
This forthcoming wave of the internet has the potential to revolutionise various facets of our lives. For instance, students might delve into history through immersive experiences, engaging with virtual simulations that bring the past to life. Similarly, the realm of healthcare stands to undergo a profound transformation. Imagine doctors performing precision remote surgeries or providing therapy to patients through deeply immersive methods. Businesses are poised to harness the power of digital twins and machine-to-machine learning to enhance their operations and maintenance procedures. This could even lead to massive automation of oilfield platforms, rendering them unmanned and thus more efficient.
In this era, we will witness the definitive transition of generations – from “digital nomads” to becoming completely “digital citizens”. An era where we will see the integration of our GenZ and Gen Alpha as genuine inhabitants of this evolving world and witness the rise of a truly symbiotic relationship between humans and their technological counterparts – the machines. Simply put, the applications on your mobile devices today operate through the intricate interplay of Artificial Intelligence and big data tools to make decisions on your behalf, ranging from selecting groceries and crafting dietary plans to curating entertainment experiences, all tailored to the extent you empower them to do so.
The possibilities are endless.
Growth in digital infrastructure in recent years – the “Camel’s Hump” theory
The growth of digital infrastructure resembles a metaphorical “Camel’s Hump” – a cyclical pattern with periods of rapid growth followed by periods of slower growth but in an increasing trend. The growth trajectory extends over a horizon of 50-70 years, encompassing a series of ups and down within its cycles. As time progresses, these cycles are observed to become shorter and deeper in their swings.
There was a period of rapid growth in the early days of the internet, followed by a plateau in the mid-2000s. However, there has been a renewed focus on digital infrastructure in recent years, and we are now seeing another period of rapid growth.
Figure 1: Camel’s Hump of digital infrastructure
Various phases in the “Camel’s Hump”
A. Post-COVID growth phase (2021-2022):
The COVID-19 pandemic presented a myriad of challenges and opportunities for telecommunications companies, each uniquely tailored to the specifics of their markets. In most cases, the trends showcased significant growth in the digital infrastructure industry. The demand drivers are linked to data growth and trends in the telecommunication industry landscape in the post-pandemic growth era. Noteworthy drivers and trends within the Asian markets are observed as follows:
Infrastructure growth drivers
Trends in the telco industry
Working from Home policy – employees and students are now working more remotely.
Internet was tagged as a basic human right – which led to new coverage and capacity sites targets.
Jump in data growth across the region – fuelled by social media, gaming, 5G use cases and increased usage of smartphones.
Scarcity of spectrum allocated to MNOs – MNOs are required to ramp up infra rollout to ensure quality service to customers.
Accelerated growth in the digital economy – initiated during the pandemic
An influx of fresh capital into Asian markets – led to multiple SLBs in the regions
5G rollout and 3G sunrise
Government policies as a catalyst for 5G deployment
Figure 2: Summary of key growth drivers and trends in the telco industry
Figure 3: Investment in Asia Pacific (Bain)
B. Post-COVID macro challenges (2023-2024):
As we step into 2023, telecom operators are resolutely navigating the complexities of a rapidly shifting geopolitical and economic landscape, particularly within the dynamic Asian context. Throughout this period, the industry has encountered, and continues to confront, a multitude of challenges magnified by amplified macro indicators such as interest rates and inflation. The pace of the 5G rollout has been hindered, further compounded by the consolidation of MNOs, a decline in consumers' disposable incomes, and a delay in the radio access investment cycle, amongst other factors. Visualised in the Camel’s Hump diagram (Figure 1), the market is currently in a transient downturn, with the enticing prospect of a digital infrastructure Gold Rush awaiting on the other side of the hump.
In reality, the market requires triple the capacity in the next decade from towers, fibre, data centres and small cells etc.
C. Market reset (2024-25 onwards):
Digital infrastructure is here to stay.
Much like the lifespan of railroads, digital infrastructure is expected to last for a 50 to 70-year lifecycle before the entire model is pivoted, akin to the way railways were replaced by individually owned cars in the late 1800s, subsequently repurposed for cargo transport. In the context of telecom towers, any potential disruptions, such as a shift towards connectivity facilitated by Low Earth Orbit (LEO) satellite constellations like Starlink, would still preserve the significance of these towers. This is because satellites have inherent limitations in providing higher bandwidth compared to ground-based infrastructure.
Looking ahead, we foresee a series of technological trends that will catalyse extensive deployment of digital infrastructure across the region.
Top five tech trends outlook
Impact on the TowerCo
Industrialising machine learning
Increased requirement of capacity sites, edge computing and data centres to support ecosystem
Rollout of Wireless low-power networks, 5G/6G cellular, Wi-Fi 6 and 7, low-Earth-orbit satellites, and other technologies support various digital solutions.
Focus on improving latencies to improve the hyper-connected capabilities, i.e. street furniture, IBS etc.
Cloud and edge computing
Deployment of cloud and edge computing across locations such as hyper-scale remote data centres, regional centres, and local nodes to improve latency, data-transfer costs, adherence to data sovereignty regulations, autonomy over data, and security
Future of mobility
Street furniture and capacity sites for mobility technologies aim to improve the efficiency and sustainability of land and air transportation using autonomous, connected, electric, and shared solutions.
Figure 4: Summary of tech trends and impact on TowerCo
What does it take for TowerCo to build a digital future?
To capitalise on the emerging opportunities within Camel’s Hump theory, telecom players such as TowerCos must undergo a profound business model transformation and reimagine their operational approaches. In essence, TowerCos must identify a strategic sweet spot where their endeavours yield mutual benefits for TowerCo and MNOs.
The imperative changes encompass the following key facets:
· Enhanced Agility – Eliminating bureaucratic obstacles enables swift decision-making processes within organisations and simplifies deployment processes and tools.
· Reinvent Supplier Strategy and Model – Leveraging on strategic partnership becomes pivotal in driving down the unit cost for 5G infrastructure and fibre deployment.
· Lean Approach – Strategically reconsidering the activities to be kept in-house to optimise resource utilisation.
· Embrace Digitalisation – With a significant portion of network functions transitioning to the cloud, companies must adeptly manage this evolution.
This paradigm shift not only secures their relevance but also augments their capacity to thrive in the evolving telecom landscape.
Digital infrastructure, much like any other form of infrastructure, is poised to remain a lasting presence. Its indispensability is unquestionable. The true opportunity, however, lies in delving deeper into the access infrastructure layer, enhancing its offering within this domain, and extending its influence into the realm of transport. This entails augmenting capabilities in areas such as fibre, satellite bandwidth and potentially even expanding into the storage layer, encompassing data centre and edge computing solutions.
To remain relevant and ride the tide of the Camel’s Hump-like trajectory, TowerCos must embrace agility and undergo a comprehensive digital transformation. This shift demands a meticulous focus on reshaping the cost structure and, where necessary, re-evaluating the existing business model. A sustainable and mutually beneficial ecosystem will be established when a harmonious “sweet spot” equilibrium is struck - a juncture where the true value of the services and products offered aligns seamlessly with the discerning needs of customers, fostering a symbiotic relationship of lasting resonance.
EDOTCO will be present at the TowerXchange Meetup Asia on 28 & 29 November at Shangri-La, Kuala Lumpur. I will be happy to take questions or exchange views on the future of telecommunications infrastructure in Asia.
About the writer
Gayan Koralage is a prominent trailblazer within the EDOTCO Group, having played a pioneering role since its inception. He is a seasoned speaker and writer, recognised as a thought leader within the mobile and neutral-party-host telecom tower industry, focusing on critical topics such as the business rationale for 5G, network disruption, digital economy, digital transformation and inter-generation opportunities. In his current capacity as the Director of Group Strategy, he assumes a pivotal role in shaping the organisation’s long-term strategy, overseeing pricing strategies and commercial initiatives. Since 2013, Gayan has been the driving force behind EDOTCO’s inception and expansion, propelling it to prominence as one of the top six tower companies globally. His efforts have led to an impressive presence across nine Asian markets, solidifying EDOTCO’s status as an industry leader.