UK: Telecommunications Predictions 2010 (Part 2)

Last Updated: 9 February 2010
Article by Deloitte Technology, Media & Telecommunications Industry Group

Most Read Contributor in UK, August 2017
This article is part of a series: Click Telecommunications Predictions 2010 (Part 1) for the previous article.

To read Part 1 of this article please click here

Nixing the nines: reliability redefined and reassessed

In 2010, we expect enterprises to become increasingly pragmatic about their need for quality of service in the telecommunications services they acquire. Enterprises are less likely to default to 99.999 percent or "five nines" reliability for all services contracted. They are likely to start determining quality levels on a per-application or per-process level, rather than unthinkingly opting for the highest availability levels across their portfolio of services73.

A principal driver for this change is cost. A fragile economic recovery this year is likely to keep businesses focused on identifying unnecessary products or services74. Some businesses may decide to lower their reliability requirements from five nines, which is equivalent to just five minutes of downtime per year75. Moving to "three nines" would mean 525 minutes of downtime. Some enterprises may be comfortable with even fewer nines76.

Making the move to three nines may appear negligible in percentage terms, but the potential reduction in costs gained by tolerating an occasional failure could be quite significant. The service architecture could be downgraded, off-hour technical support could be reduced, or response times may be relaxed.

Enterprise tolerance of lower service levels will partly be conditioned by a rising failure rate across a range of technologies, and the ability for businesses to continue operating despite this. For example, the migration to VoIP introduced occasional dropped calls or bad connections to a previously failure-proof voice service77. Widespread adoption of mobile service has made business users more tolerant of variable call quality, including dropped calls, multiple attempts to obtain a connection, and in recent months, inconsistent levels of data network availability78.

This conditioning has also been partly driven by the consumer experience. Inconsistent consumer broadband services, with occasional outages lasting over a day, have conditioned some users to surviving without broadband, at least temporarily79. And the experience of using the Web has also helped, since only a minority of the world's largest websites has ever attained 99.999 percent80.

Many consumers' domestic telecommunications and technology set-ups already provide an additional layer of redundancy. Plus, business continuity planning catalyzed by worries about avian and swine flu has made enterprises better prepared for widespread work-from-home arrangements, should the enterprise network fail.

Some businesses' willingness to trade reliability for price has also been demonstrated by their interest in cloud computing, despite extensive (and often exaggerated) press coverage of outages at a limited number of providers81.

Bottom line

A key requirement for both providers and customers is to understand exactly what is meant, or implied, by service levels.

The telecommunications industry, mainly suppliers and their direct customers, may want to move to a more easily understood commitment. For example, they may select to identify an acceptable number of hours of downtime per period rather than an availability level expressed in the form of decimal points. This approach may make it easier to determine need as well as feasibility. Regarding the latter, providing two-hour repair commitments to sites in rural locations may be nearly impossible to deliver due to travel times. For a customer this may imply paying for a service that could never be delivered.

Service providers should determine how their enterprise clients are likely to perceive the notion of reliability. Some business customers may increasingly value reliability in the form of redundancy, for example in the availability of multiple complementary network infrastructures. Other customers may prefer to focus on latency and be prepared to pay a premium for ever-lower response times.

Executives responsible for procuring services should evaluate the implications of changes to any service level. They need to understand how each will affect internal applications, such as intranets, as well as those that interact with their own customers, such as websites.

As for externally facing sites, such as extranets, the general trend is likely to be towards greater resilience, particularly if sites are supporting business-critical applications such as order-placing or collaboration tools.

IT and telecommunications departments, which are typically responsible for agreeing to service level agreements, should constantly review internal users' requirements and tolerance levels for downtime. Otherwise, agreements could get "gold-plated." Internal users may be able to cope with lengthier downtimes due to the availability of alternative infrastructures: broadband-connected home PCs can be used if office PCs fail, and mobile broadband, or even coffee shops, can substitute for corporate Ethernet connections. Where alternative infrastructures are being used, such as home networks, or public WiFi hotspots, enterprises should ensure that communications remain as safe as they would be in the office.

At the same time, service providers should constantly look for ways to reduce their maintenance costs, such as by using remote maintenance via fixed or mobile telecommunications links, investing in Universal Power Supply (UPS) power protection, where local power infrastructure is poor, or by replacing existing equipment with more reliable hardware.

Contract 2.0: long-term solutions shorten and multiply

In 2010, we expect enterprise demand for telecommunications solutions to rise82, but contract terms to shorten from about 5 – 10 years to a minimum of about three years83. A sustained enterprise focus on costs is likely to stoke demand for solutions. The uncertain economic outlook and a general lessening of loyalty to technology platforms and providers are likely to keep contract lengths short. In a few cases, suppliers and customers may even decide that the most effective way to agree on price would be to revert to pay-per-use.

Best practices in telecommunications and technology procurement have generally favored long-term (up to 10 years) solutions-based contracts rather than pay-per-use billing. This approach usually needs to benefit both parties. For the supplier, long-term contracts enable a steady flow of income. For the customer, it should ensure better quality and lower costs. And for both, it implies a relationship founded on partnership. In 2008, the value of major (worth $1 billion or more) long-term technology or telecommunications contracts signed was $17.1 billion84.

But even in times of relative economic stability, it has been challenging to form, agree upon, and translate accurately, a contract that can cope with every possible eventuality. The agreement has to be able to cope with, for example, changes to the customer's location and the supplier's points of presence, variations in the size of the customer's employee-base in every location, and arrivals and departures at the boards of both supplier and client. The contract also needs to be flexible enough to respond to changes in technology, some of which can enable new working approaches, such as virtualization, cloud computing and video conferencing. And the contract should be able to cope with a range of exogenous shocks, such as variations in the price of oil85.

Until the global economy regains a measure of stability, agreeing to terms for longer than three years may simply become too difficult for the majority of deals. Long-term deals may become rarer. Responses to the recession, from suppliers and customers, may prove destabilizing to long-term contracts.

Suppliers may determine that reducing their scope of operations, geographic, functional or otherwise, is essential to improving cash flow, even if this means that existing contracts would no longer be honored86. Some customers may contract operations significantly; others may be on the cusp of a wave of acquisitions. Others still may want to make major changes to terms and conditions, perhaps dropping quality of service levels in general, or for selected services. A few companies may even want to move selected processes back on-shore87. And in general, customers will be looking to reduce cost at the same time that suppliers are likely to be focused on raising margins88.

Contract lengths may also be affected by the consumerization of technology and the growing propensity to change suppliers, or even to purchase on a pay-per-use basis. This tendency applied to the solutions market may well imply a desire for shorter-term contracts, and in a few cases may result in reverting back to the tariff.

Bottom line

A failed contract benefits neither supplier nor customer. The cost of litigation for the largest projects can run into hundreds of millions of dollars89 and can take years to conclude. Both parties should ensure that the contract is sufficiently robust to withstand the additional strains and stresses caused by an uncertain economic backdrop.

Contract terms may either need to be shorter in duration or else designed with built-in flexibility so that they operate like a series of shorter contracts. Robust contracts need to be rooted in reality. The agreement should be for a service that the supplier can realistically deliver, with sufficient margin to make the relationship worthwhile. Driving too hard a deal is unlikely to benefit either party over the long run.

Any contract is likely to suffer from a fundamental tension, such as a supplier's focus on margins versus the client's imperative to reduce costs. Suppliers and clients each have levers that can help them with their respective objectives, but they tend to produce short-term benefits. For example, suppliers can swap the team assigned to each client, deploying the alpha team only during bids, initial contract periods, and renewals. Clients can threaten to renegotiate if demands for extra services or higher quality of service levels are not met. But both approaches could cause resentment and may shift a partnership-based relationship to one riddled by mistrust.

Suppliers looking to increase margins may want to focus on specialization rather than scale. Leading an all-encompassing global solution may offer significant gross revenues, but profits may be eroded away by the strain of a cross-border project and third-party supplier management. Customers may determine that a best-of-breed solution may be more easily delivered by directly managing, rather than outsourcing, relationships with specialist providers.

For a contract to work, both parties must be able to quantify the value for money that a contract provides to either supplier or customer. If, in the absence of quantitative evidence, either signatory believes they are not benefiting from a contract, they may choose to tear up the agreement. If benefits are quantifiable but neither team has an adequate measurement system, tensions may flare.

The line goes leaner. And greener

DTT TMT predicts that in 2010, the global telecommunications sector is likely to focus heavily on reducing direct and indirect CO2 emissions. On a per-line basis, emissions could fall by an average 10 percent – albeit against a background of increasing numbers of lines90.

The global telecommunications industry, serving over four billion customers with an average of 1.5 lines each91, generates 183 million tons of CO2 annually. This amounts to about 0.7 percent of global emissions92, a carbon footprint that compares favorably with those of the automotive and aviation sectors.

Operators' focus on reducing emissions will be driven by two key factors, with cost being the common denominator. In developed countries, a primary motivation for making lines lean will be cost reduction. In developing countries, where networks are still adding subscribers93, cost control is likely to be the imperative.

In mature telecommunications markets, where mobile broadband is one of the few services experiencing any significant growth, operational efficiency is one of the last major profit levers remaining. A 10 percent reduction in carbon footprint could still deliver tens of millions of dollars of recurrent savings for a large operator94. Operators may also factor in the potential cost of carbon credits as an additional incentive to run their networks efficiently.

For fixed-line operators, the long-term strategy for reducing network energy consumption is likely to focus on next-generation, fiber-based networks. These promise lower operational costs relative to today's copper-based networks, with an expected 30 percent to 40 percent reduction in power consumption95. This is due to the variable power modes available (copper networks are normally always on), a reduction in the number of switching centers required (although more data centers may be required), and reduced need for heating or air-conditioning as a result of greater temperature tolerances.

Plus, the greater the bandwidth speed that DSL is engineered to deliver, the greater the potential energy savings from switching to fiber. This is because faster speeds over a DSL connection may require an increase in electronic interfaces and a commensurate increase in power consumption96.

Mobile operators are likely to focus on reducing the cost of their radio network. Power-consumption per base station can reach 1,400 watts97 and energy costs per base station are estimated at about $3,200 per annum with a carbon footprint of 11 tons of CO2 98. The radio network can represent up to 80 percent of an operator's entire electricity consumption99. The cost of backup, particularly in developing countries, can be carbon-intensive due to the use of diesel-fuelled generators. Operators in these areas could consider using fuel cells as alternatives100.

The latest base stations consume up to 50 percent less power and are also said to be more reliable, which translates into fewer site visits101. Newer base stations function without external cooling, which reduces power consumption and maintenance overheads, and requires a smaller physical footprint. The absence of air conditioning alone can reduce the carbon footprint by 30 percent102.

Power and cost efficiencies available from new base stations may prompt some networks to swap out their existing network of base stations103. An additional motivation for replacing existing base stations may also be to enable 4G upgrade capability.

Mobile operators may also consider a greater degree of network sharing. Operators' network sharing to date has focused mainly on sharing cell towers, or what is called "passive sharing"104. However, regulation permitting, mobile operators could undertake "active sharing" which involves sharing more strategic elements, including antennae and backhaul transmission.

In developing countries, operators are likely to focus on reducing energy costs for base stations located outside of the national electricity grid, which are already growing by an estimated 75,000 per year105 or 30 percent CAGR106. Off-grid base stations' carbon footprints are generated first through their diesel consumption then by the delivery of the diesel to the site, finally by trips taken to maintain each base station. Operators are likely to look at a range of options for reducing each base station's cost base, with renewable energy (most likely a combination of solar and wind), under consideration as an alternative sources of power107.

Bottom line

While the telecommunications sector's carbon emissions compare favorably with some other sectors, there is still considerable room for improvement. Equipment manufacturers should continue all possible approaches to improving network efficiency. For example, networks are normally powered at all times, even though their usage varies. Most networks are largely idle at night – at these times and other periods of low usage, networks should be powered down108. Manufacturers could look to some of the innovations developed to maximize power efficiency in mobile phones and see how these could apply to network components.

Device manufacturers should also continue to strive to reduce emissions caused by their devices. Initiatives such as turning off chargers once batteries are full and setting a single standard for chargers could have a massive impact109. Deployment of such innovations to a quarter of the world's mobile users could reduce the power consumption of a billion people. However, the growing use of smartphones may counter some of this progress. Smartphones tend to have larger screens and more powerful processors relative to the voice-centric phones and feature phones they are replacing110.

Operators with fixed and mobile operations should also consider the merits of shifting voice and data traffic between fixed and mobile networks to reduce overall energy costs. The industry may want to consider how a move to metered broadband usage might discourage excessive network usage. Operators should also evaluate options for reducing emissions generated by maintenance teams. More reliable network technology could translate into fewer site visits. The range of vehicles used in a network operator's fleet could be rationalized to include a greater proportion of smaller vehicles. It may be that most engineers could carry the necessary tools and parts to service most jobs in a compact car, rather than a van.

In addition to reducing internal energy consumption, the mobile industry should remain focused on reducing indirect energy consumption, particularly the amount of energy used when charging phones.


73 One survey from 2007 found that 97 percent of respondents wanted 99.999% telecom network uptime. Source: Government IT Managers Need Carrier-Class Network Reliability, Says New Federal User Survey, Tellabs, 26 February 2007:

74 IT service levels: It's time to drop your standards, ZDNet Asia, 3 March 2009:,39044229,62051794,00.htm

75 Cloud Computing opinion: The goal of "Five Nines" – 99.999% availability – is meaningless, Cloud Computing Journal, 15 September 2008:

76 Don't scale: 99.999% uptime is for Wal-Mart, 37 signals, 6 December 2005:

77 What are critical issues with VoIP service? NetworkWorld, 31 July 2008:

78 For example see: T-Mobile users still reeling from outage, CNET News, 4 November 2009,

79 For example see: BT blames broadband outage on software, CNET UK, 2 December 2005,,39029694,39194680,00.htm ; Virgin Media suffers broadband email outages, Top 10 Broadband, 28 August 2009, /; and A cut cable took out BT broadband in East London over the weekend, affecting tens of thousands of people, IT Pro, 6 April 2009, ; and Telstra broadband outage, AdvanceIT News, 20 July 2008,

80 3 of the top 20 websites managed 99.999% reliability in 2007. Source: 99.999.... The quest for reliability on the Internet, Gigaom, 20 May 2008: /Availability of the top 16 social networks in the first quarter of 2008 varied between 98.72 percent (37 hours of downtime) and 99.96 percent (1 hour 5 minutes of downtime). Source: Social network downtime Jan-Apr 2008, Pingdom, 6 May 2008:

81 For example see: 5 reasons Gmail's fail is not the end of cloud computing, Pingdom, 30 September 2009, e2%80%99s-fail-is-not-the-end-of-cloud-computing/

82 The general trend appears to be towards more contracts, but lower total contract value. Source: Outsourcing contracts annual review 2008, Gartner, 9 April 2009.

83 Ibid.

84 Ibid.

85 The price of energy can have a major impact on the underlying technological architecture. Mainframes, with their low cost per transaction, are generally more favoured when oil prices are high. In July 2009, oil was at $147 per barrel but by February 2009 had fallen to $40. Source for the price of oil: Peak oil – Nov 10, Energy Bulletin, 10 November 2009:

86 DEAL TALK-HP could prune outsourcing services –sources, Yahoo Finance, 18 August 2009:

87 Enabling offshored call centers to move back on shore, Outsourcing Journal, September 2009:; and Backshoring: just PR, or long-term business strategy?, Network World, 27 May 2009:

88 Vodafone uses sales outsourcing for savings, Pareto:

89 For example see: Opinion: BSkyB vs EDS: time to rethink IT services contracts, The Lawyer, 15 June 2009: ; and British Gas allowed to proceed with IT Project Jupiter 4365 million lawsuit, IEEE Spectrum, 11 November 2009:

90 For a view on energy consumption for mobile networks, see: Mobile networks can cut serious emissions with efficiency tech, earth2tech, 2 September 2009, /

91 At the start of 2010, there is likely to be about one line for every one of the 6.7 billion people on the planet, with at least 4 billion mobile subscribers; 1.3 billion landline subscribers; 600 million mobile broadband and 500 million fixed broadband connections. Sources: Mobile world celebrates four billion connections, GSM World, 11 February 2009: .htm#; and Telephone lines of the world map, World by map: .

92 Telecoms can lead the Green revolution, ITU Telecom, 7 October 2009:

93 Mobile marvels, The Economist, 24 September 2009:

94 Telecom's green future, NXTcomm, 18 June 2008: /; one vendor estimates that for an operator in a mature market, energy represents up to 10 percent of operational costs; source: Renewable energy and efficiency targeted to lower telecoms costs, Nokia Siemens Networks, 4 November 2009: .

95 Focus Group on ICT & CC, ITU, 1-3 November, 2008 (FG ICT&CC-C-12Rev.1); and Green telecoms networks – a waste of energy?, Mobile Europe, 18 November 2009:

96 Nexans extends copper's lifeline with the introduction of its LANmark-7A supporting 40 gigabit Ethernet, Nexans press release, 2 October 2008:

97 Some generations of base station running WCDMA and HSPA consume over 1,400 watts. For more background, see: "Sexy Flexi" takes top price: world's most energy efficient base station wins Best Network Technology advance at GSMA Global Mobile Awards 2009, Nokia Siemens Networks, 18 February 2009,

98 Green issues challenge basestation power, EEtimes Europe, 19 September 2007:

99 Ibid.

100 Ballard passes key milestone for hydrogen fuel cell deployments in India, Fuel Cell Works, 3 July 2009: /

101 Nokia Siemens intros 2G/3G/4G green base station, Von, 2 May, 2009:

102 T-Mobile Austria upgrades network using Nokia Siemens Networks' Flexi base station, TMCnet, 25 September 2009:

103 T-Mobile Austria to improve customer experience and reduce its impact on the environment, UMTS Forum, July-September 2009: /

104 Passive sharing encompasses the sharing of non-strategic components contained within the mast, including power supply, air-conditioning, alarm systems, as well as the physical building. For more information, see: Active Radio Access Network (RAN) sharing amounts to a $60 billion cost saving potential for operators, ABI research, 2 April 2009,$60+Billion+Cost+Saving+Potential+for+Operators

105 Telenor Pakistan base stations use solar power, EETimes Asia:

106 Green Base Stations: Renewable energy becomes a reality in cellular infrastructure, ReportLinker, September 2009: ; also see: Green power for off-grid cellphone towers, Seeking Alpha, 18 February 2009,

107 Combinations of solar and wind are likely to be used given solar's inefficacy at night; wind can be used to provide energy at night time. Source: Dialog Telekom to deploy ten solar and wind-powered base stations is Sri Lanka, GSM World, 17 February 2009:

108 Mobile networks to be reworked for energy efficiency, organizations demand, Microwave Engineering, 23 October 2009:

109 The single charger standard agreed by the ITU based on input from the GSMA has two benefits. Firstly in reducing the number of chargers required. Secondly through turning off the charger once the battery has been recharged. Source: Single phone charger for all mobile phones gets ITU support, Cellular News, 22 October 2009,

110 For background on how smart phone power consumption is being controlled, see: Multi-core ARM chips slated for Smartphones next year,, 16 June 2009,

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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This article is part of a series: Click Telecommunications Predictions 2010 (Part 1) for the previous article.
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