Olivier Baujard, Cto Of Deutsche Telekom

Olivier Baujard,chief technology officer for the Deutsche Telekom Group, will be giving a keynote speech on day two of the Broadband World Forum taking place on the 27-29 September 2011 at the CNIT, La Defense, Paris, France. Ahead of the conference, we speak to him regarding his thoughts on the challenges and opportunities facing one of the biggest telecoms players on the global stage.

Could you provide an overview of the state of play in your local broadband market?

I would say that both fixed and mobile are seeing growing demand, but the dynamics are extremely different between them. While both are positive, the challenges to meet, service and monetise that growth are very different.

Mobile data growth is by-and-large the most impressive, showing double or even triple digit growth year-on-year depending on the maturity of the market.

This is derived from a combination of higher and higher penetration of data hungry smartphones, such as the iOS and Android based ones. These terminals generate two to three times more usage than other smartphones and five to ten times more than none smartphones. Penetration is growing, and this is directly impacting the volume of mobile data. And all this in the midst of what we call a worldwide financial crisis.

The challenge of mobile data, though, is the monetisation of that growth. This is something that the industry has to solve. We are working on it because the current investment and cost per capacity is at risk of being unsustainable in the next two and three years. So not only do we need more spectrum, but we will also need new technologies and capacity. We need a different business model where the monetisation and costs are not only borne by asset heavy operators.

For the fixed infrastructure it’s all about double and triple play traction. In countries where we can provide content rich and TV services the demand is extremely high. This opens up an opportunity to deploy our VDSL and xDSL infrastructure and also triggers the plans for Fibre-to-the-Home (FTTH) that we have started to devise, and this is a very CAPEX intensive activity.

Is mobile broadband now more important than fixed line to you and to your customers?

There is an immediate, personal, appetite for mobile broadband – or wireless. It’s triggered by attractive terminals such as tablets and smartphones. It is definitely a ‘pull’ market, as that’s what the customers want. They want wireless access to the internet, to social networks, and content rich services like music and video. That is universal, across all our markets.

The future of fixed is massive broadband, while narrowband, as well as areas where there is poor broadband, is captured by mobile. But mobile and wireless will be more limited when it comes to real triple-play offerings, combining TV, internet and voice. Where there is a market for that there is a need for fixed as well.

Where does Wi-Fi fit into your strategy?

Wi-Fi is technically not a mobile but a wireless offer. However, it is a good solution for bridging the gap between mobile and fixed. We can upgrade our customer experience by using more Wi-Fi, when at home, or indoors. Customers get immediate access to full fixed broadband and still have a mobile experience.

What’s your strategy around LTE?

Our strategy is that we will deploy LTE to expand our mobile broadband capability and we will start where we have higher demand and the spectrum for it. We won’t deploy LTE just for the sake of being the first [operator] in a particular market. It’s a tool in our toolbox of wireless and mobile broadband service. And this toolset is composed of HSPA, LTE and WLAN.

As soon as we have secured spectrum, and in markets where the demand is high enough, we will deploy LTE. Not only for capacity reasons but for broadband quality performance as for many services LTE is superior to HSPA.

We have already launched 800MHz in Germany as well as 1800MHz, and 2600MHz in Austria. We believe that 800, 1800, 2600 and maybe 2100 will be the reference [frequencies] in Europe used by most operators.

Part of the 800MHz license obligations in Germany required us to cover ‘white spots’ to provide a fixed LTE  service to the few per cent of German homes that were not within reach of fixed broadband services. This obligation will be completed between now and early next year.

With all the focus on next generation radio technology do you think that enough focus has been made on backhaul?

We have learned in the past two or three years that the bottleneck in terms of capacity of our network was not always in the radio part but too often in the backhauling and we have learned from that so it doesn’t happen again.

The backhaul challenge will be the same in reality in both an HSPA network and an LTE network. As a consequence, in each of our networks we have a systematic broadband backhauling plan, as a companion to the deployment of LTE and HSPA, to ensure that the backhauling component is compatible with the access capacity. We continue to invest in fibre and point-to-point microwave.

There have been discussions amongst carriers that the major OTT players should contribute to network costs. Where do you stand on this?

There is a need for continuous huge investment in network assets, mobile as well as fixed, which will not vanish. There is a need for CAPEX for infrastructure and innovation in the infrastructure.

Now in the current model only a number of players have this burden. At the same time the regulation and business models have not evolved. That’s a real problem and this has to be solved.

Earlier this summer there were a number of European-led discussions amongst different companies from the content media, and there were some recommendations of how we can solve that issue. And this will be solved most probably by a double sided business model where not only the final user pays, but also the companies that make money out of their final customer getting access to their rich application and content.

If we don’t want to collapse the industry, to spoil innovation, or nationalise – and I’m not sure we want that to happen – then we have to find a way out.

In your view, how should the broadband industry improve and what challenges does it face?

I’m convinced that the industry will have to improve in [delivering] ease-of-use and [to provide a] clear value perception by the customers. And it’s not an overnight thing. There must be a sense of perceived value in what they get. This has to be created first, and maintained second.

I’ll give you an example. The data roaming issue for mobile users is a long lasting discussion between the operators, the consumer associations and the regulators. We have decided to make a big shift with new roaming tariffs that we implement all across Europe, to make it simple.

And we have deployed new packages for all our customers where they will know in advance what they will be paying – and it’s a tenth of what they used to pay in the past, by the way. But we have decided to simplify the tariffs.

What we expect from that is that we will get more trust from our customers so they will use more data when roaming. It is not philanthropy; we believe it will be the right way to develop our business.

The second challenge is how the infrastructure can be financed. That’s a big problem both in fixed and in mobile. In fixed it’s only a CAPEX issue. It’s not a technology or a capacity issue, it’s a money issue.

In mobile, it’s a combination of money and feasibility, because acquisition of sites is almost impossible, as is spectrum. So we could have a situation where there is no technical solution for the capacity demand.

But in fixed, give me the billions and the right of way I need, and then I can roll out FTTH everywhere to 95 per cent of the homes, and then we can get broadband to everybody.

The Broadband World Forum is taking place on the 27-29 September 2011 at the CNIT, La Defense, Paris, France.