Telefonica: Increased Data Traffic Is a Good Challenge

Telefonica is one of the world’s leading integrated telecommunications operators. It provides communication, information, and entertainment solutions and it has presence in 25 countries. As of September 2012, Telefonica had 313.8 million customers. ZTE Technologies recently interviewed Ian Miller, Director of Radio Access Networks for Telefonica. He believes that the rapid growth in data traffic is a good challenge and brings opportunities. He talked about Telefonica’s LTE strategy and speculated on beyond 4G. He also shared his experiences in multinational operations and his impression of ZTE.

Rising to the Mobile Data Challenge

Q: Is the rapid growth in mobile data traffic an opportunity or pitfall for operators? How do you profit in the big-data era?

A: I think it’s definitely an opportunity. The rapid growth in data traffic is clearly a challenge, but it’s a good challenge to have, not a bad one. It’s good in the sense that customers want to use more of our services and want to transmit more data across our networks. That brings opportunities. It would be a much worse scenario if customers wanted to use fewer of our services. We would see declining traffic, and that would be a much bigger issue.

One of the key challenges we have is how to monetize this growth. We need to find new ways of converting data traffic into revenue by providing new services that customers truly value. One of the ways we are doing this is by establishing Telefonica Digital. We are looking at how to bring to the market new products and services that benefit our customers.

Q: Telefonica has adopted small-cell technology in its 3G and 4G networks. How do you solve the backhaul issue? Do you think the small-cell market will explode or is small-cell technology just hype?

A: No, I don’t believe it’s just hype. We’ve been actively working on small-cell technologies and solutions for many years—not just for 4G but also for 3G. We are trying to deal with some of the immediate challenges that have arisen on our 3G networks as a result of traffic growth. Like the majority of the industry, we expect a significant increase in traffic on our mobile networks in the coming years, and we see small cells as one of the main ways of coping with this growth. 

Some analysts are forecasting traffic growth of 50 to 100 times over the next ten years. LTE will improve efficiency, and new spectrum will also help, but this will not be enough, and we are looking to small cells to help us deal with a large proportion of this traffic growth. That’s why we’re going to need a significant number of small cells in the coming years.

We are experiencing several difficult challenges with small cells; we have to have the right products, and we also need the right locations to install them. Another very important issue is the backhaul solution. The ideal backhaul has to be fiber, but fiber is not always possible. Therefore, we need a toolbox of different solutions, including copper DSL solutions, as well as wireless solutions such as LTE TDD, Mesh WiFi, and non-line-of-sight (NLOS). We don’t believe that any one solution alone is ideal.

We have been investigating small cells for quite some time with a range of different projects, including paper-based analysis, joint activities with industry, simulations and field trials such as the one we ran at Barcelona MWC in 2012. We want to ensure Telefonica’s leading position within the industry in this space.

LTE: The Right Strategy for Telefonica

Q: LTE is gaining momentum across the world. What is Telefonica’s LTE strategy?

A: Telefonica is committed to LTE as the next technology for future mobile data evolution. We will deploy LTE in a number of businesses over the coming years. We predict significant benefits for our customers because LTE provides faster speed, lower latency, higher capacity, improved spectrum efficiency, and access to new spectrum bands. Regulators are making more spectrum available for LTE.

Over time, we expect that all of our mobile businesses will move to LTE, but the timing will depend on spectrum availability and market demands and drivers in each country. We have been trialing LTE for many years; however, the opportunity to deploy LTE in a commercial environment has been limited by spectrum availability. We are acquiring spectrum in many of our markets and have secured spectrum in Germany, Spain, Brazil, Chile and Nicaragua. Over the next couple of years we expect to acquire LTE spectrum in most of the main markets in which we operate, then we will start to deploy LTE services in those markets. LTE is the right technology strategy that Telefonica and probably most mobile operators will focus on.

Q: What do you think is the most difficult thing in your move to 4G? Is it spectrum availability?

A: I don’t foresee major issues. LTE technology is already proven and is known to work well. Spectrum availability and the timing of that spectrum determines how quickly we move to LTE. Beyond that one of the bigger challenges is backhaul. To fully capitalize on the speeds and capabilities possible with LTE requires upgrades to the backhaul at base sites. This is one of the longer lead time items in the rollout process and is something that we have been working on for some time.

Q: Telefonica is a top multinational company with presence in 25 countries. Could you tell us your experience in global operations? What challenges has Telefonica confronted and how has it overcome them?

A: From a personal point of view, working in global operations for Telefonica has been very positive. I previously worked for Telefonica UK, but working in a global team has given me great insight into the extent of the Telefonica Group’s activities outside the local market. It can be quite tough working in global operations though. Our role is to drive synergies and best practice across the group. At times, that can be quite difficult because the local businesses also have their own particular challenges.

One of the key ways we try to address this is through building trust and good relationships with the local businesses. We work very closely with them to understand their specific needs. We usually find that their challenges are not unique and that often other businesses have already solved these challenges beforehand. Therefore, we work hard to foster collaboration across the different businesses—getting them to work together and not re-invent the wheel.

A good example of this is LTE. Telefonica Germany was the first business in the group to deploy and launch an LTE network and services, and they are now sharing their experiences with other businesses that are just starting to deploy LTE. With these mechanisms, we drive collaboration and best practice across the Telefonica Group, and that leads to efficiencies and improvements for our customers.

Telecom Future Beyond 4G

Q: What is the future of telecommunications beyond 4G?

A: Today, most communications are person-to-person communications or person-to-internet communications. I think we will see massive growth in connected “things,” that is, device-to-device and machine-to-machine communications. GSMA is predicting 24 billion connected devices by 2020, 50 percent of which will be mobile devices.

We will start to see many everyday appliances that will have wireless elements for communicating with each other and common control systems. Things from cars to cameras will automatically download information back to central repositories. Heating and cooling systems, even fridges and washing machines, will connect back to a network. I think that will be one of the main ways that communications will develop. 

This will bring new challenges to our networks. We will have to cope with a large number of connections that may have very different requirements—from high volume HD video streaming through to very small quantities of telematics type data. We need networks that can efficiently carry these different types of data.

As our lives become more dependent on these connected devices, the fundamental demands and network requirements we have today will be ever more important. By this I mean that excellent coverage deep into buildings, sufficient capacity to support the high volume of devices, and good quality will be expected. These are the things customers will take for granted. If many devices and machines are connected, people will expect them to work wherever they are, at any time of the day or night. 

We believe that LTE will be around for a very long time, and we are more likely to see continual improvement in LTE rather than any radical shift towards a new technology.

Q: Do you think that 3G and 4G will coexist for a very long time?

A: I think that’s debatable, but we do expect to support legacy technologies for many years. I think a lot will depend on how quickly new devices enter the market and how many customers adopt those new devices. At the moment, there are still a large number of legacy GSM devices in our networks. Therefore, we expect to support these legacy networks for many years.

Face Challenge Together with ZTE

Q: Telefonica began cooperating with ZTE in 2008 on wireless products. What is your opinion of this relationship? What are its strong points? What is your advice?

A: Without a doubt, ZTE’s strong point is its flexibility to meet Telefonica’s needs in each operating business in the pre-commercial phase. That’s very beneficial for Telefonica.

ZTE can provide a good product at a competitive price, and we are pleased with the technology that ZTE offers.

We also feel that ZTE is very good at introducing products rapidly into the market. The time-to-market for new ZTE products is shorter than for other solutions. Overall, things have been going quite well.

Q: Telefonica chose ZTE to reconstruct its wireless networks in Panama and Ecuador. Can you update us on the progress of projects with ZTE?

A: These projects are going reasonably well now. There were some challenges in the beginning, particularly on the technical side. We had some interference issues because of local market conditions, but we have worked through these with ZTE. There are often challenges when introducing a new vendor; in particular, you have to get the local teams familiar with the new products, equipment, and support people. 

Telefonica would like to encourage ZTE to continue to strengthen its relationships with its local teams by sharing as much information as possible. In this way, local teams will better understand ZTE’s products and solutions and also Telefonica’s requirements and businesses. The key to a long-term relationship is building strong and consistent local support teams that can cooperate with Telefonica’s local teams in Panama and Ecuador.

Q: What will future cooperation with ZTE look like?

A: We’d like to develop the relationship with ZTE. We’re going to continue to share Telefonica’s views on how we see radio networks evolving, and we’d very much like ZTE to continue working with us to evolve our networks.

We think ZTE has some very innovative ideas. We’re keen to work with ZTE to bring those ideas and concepts to fruition. Together, we will address the challenges brought about by data traffic growth in our networks.