Professional basketball great Koby Bryant once said “Everything negative – pressure, challenges – is all an opportunity for me to rise.” That is the story of 2018 for the global teleport industry. It has been navigating a period of unprecedented change in market demands, applications, pricing, costs and investment needs – and it has been creating opportunities for a new wave of growth in the process. Or as comic legend Milton Berle put it, “If opportunity doesn’t knock, build a door.”
Teleport Opportunities
In January, the World Teleport Association published, Teleport Opportunities 2018, the results of a survey of teleport operators around the world on the opportunities they were pursuing and the investment decisions they were making as a result. For teleport operators that specialize in serving media and entertainment customers, the top three investment priorities are OTT distribution, private cloud platforms and the Internet of Things (IoT). For operators specializing in data services, the top three priorities are gateway provision and collocation, mobility for commercial ground transportation, and IoT.
Those priorities form a clear picture of a changing market. Over-the-top distribution is growing by leaps and bounds, even as the majority of content still traverses satellite networks and the OTT business model has yet to solidify. As major originators of TV channels, teleport operators are perfectly positioned to redirect that content into the new online distribution channels, performing all the reformatting, encoding and content replacement needed to meet complex distribution requirements. (See the WTA report The Over-the-Top Video Distribution Opportunity.)
The cloud opportunity is multifaceted. Operators serving media customers are far more likely to invest in developing their own private cloud platforms to protect the media assets their customers entrust them with. Data-centric operators see value only in integrating AWS and other third-party clouds into their operations to reduce costs, gain flexibility and connect with new customers. (See the WTA report, Clear Skies or Stormy Weather? Cloud Services for Teleport Operators.)
And the Internet of Things? Bain predicts that the IoT market will be worth about US$520 billion in 2021, more than double the $235bn spent in 2017, with data centers and analytics being the fastest-growing segments. Teleport operators are not about to let opportunities on that scale pass them by.
How the Market is Changing
In the past year, WTA also updated its global estimates of the size of the teleport market in Sizing the Teleport Market 2018. The sector has seen consolidation as companies build scale to gain cost efficiencies and improve their competitive position. This has produced an industry that is smaller in the number of facilities it operates but larger in total revenues. The number of commercial teleports worldwide decreased by 3% from 2016 to 2018.
Over the same period, however, estimated total revenues of the teleport sector grew 6% from US$9.813 billion in 2016 to $10.384 billion in 2018. On that basis, average revenue per teleport rose 9% from $13.9 million in 2016 to $15.2 million in 2018. For the sector as a whole, consolidation did its job of creating fewer, more productive assets.
Consolidation has not been the whole story. In a mature technology market, while midsize companies become larger and the largest seek further increases in scale, new players enter the market to exploit new demand created by technology and market change. The teleport itself keeps undergoing radical change: packing far more services into fewer antennas, virtualizing operations into software that once required massive hardware investments, and substituting terrestrial networks for satellite distribution where they can.
The Next Generation
The emerging 5G standard is the talk of the mobile industry. But with mobile backhaul a significant business for teleport and satellite operators, it is also on the minds of teleport executives. The opportunity is impressive: providing even a small part of networks that require 100 times the backhaul capacity to serve a great density of cell sites and that use virtualization to centralize much processing at data centers (from which it must be “fronthauled”) instead of distributing it to base stations.
Ambitious operators, however, are looking past the present model, where less than 2% of all backhaul moves over satellite, to greater things. The 5G standard is not just a faster version of 4G; it aims to be an overarching architecture into which the full range of transmission technologies will fit. This accounts for the passion expressed by contributors to Factoring 5G into the Future about the need for teleport and satellite operators to have a voice in the specification that is due to be finalized in 2020. If that architecture is satellite-friendly, it has to potential to create major opportunities while helping mobile operators deploy farther and faster than, in their fiber-centric thinking, they currently expect.
Facing all these opportunities, teleport operators find themselves well-positioned to benefit from change. While their vendor-partner satellite operators face severe pressures on pricing and looming capacity gluts in some markets, teleports have become truly technology-agnostic. They use satellite where it makes sense – and lower prices for higher throughput are making it make sense in a growing range of applications. But they use every other form of transmission when it is a better price-performance match. In any case, transmission is no longer they primary business of the leaders in this industry. Their networks – and the expertise to connect them – will always have great value, but it is increasingly what they can do for customers in between the connections that bring the greatest success.
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Robert Bell is Executive Director of the World Teleport Association, which represents the world’s most innovative teleport operators, carriers and technology providers in 46 nations. He can be reached at rbell@worldteleport.org Factoring 5G into the Future is available free to members and for sale to non-members.
