Top ten trend predictions: Where will domestic telecom operators go in 2021?

After a complicated 2020, the wheel of time has entered 2021. Combining industrial policies and the development plans of various operators, the author predicts the development of domestic telecom operators in 2021.

NO.1 The industry structure of "1+2+1+N" is more stable

In addition to the three traditional telecom operators, China Radio and Television obtained a 5G commercial license in 2019. At the same time, there are many virtual operators, private broadband operators, and urban IoT private network operators in the market.

In an environment where the communications market is increasingly open, the above entities will continue to operate in their respective spaces, and the "1+2+1+N" industry structure will become more stable. "1" refers to China Mobile, which is currently the largest in size; "2" refers to China Telecom and China Unicom, which rank behind China Mobile in size, and both are leading in local regions and markets; the other "1" refers to China Radio and Television, which has full business capabilities. 2021 will be the starting year for its actual operations, and focusing on applications in the radio and television field is the starting point for its rise; "N" refers to virtual operators, private broadband operators, urban IoT private network operators, etc. In 2021, 5G resale and solution integration will be the breakthrough point.

NO.2 The focus of "speeding up and reducing fees" will shift from operators to Internet companies

Since 2015, the "speed up and fee reduction" policy has been going on for nearly six years. Telecom operators have empowered the industry by improving product quality and lowering prices.

While achieving positive results, the growth rate of telecom operators' revenue has slowed down. At present, telecom operators need to invest hundreds of billions of yuan in the 5G field. At the same time, the main contradiction of the digital economy is the insufficient empowerment of Internet platform providers.

Therefore, in 2021, the policy response to operators' requirements for "speeding up and reducing fees" will be relaxed, and higher targets will no longer be set; at the same time, based on the antitrust investigations against some Internet companies in 2020, they will continue to be pushed to assume the responsibility of releasing dividends to the industry.

NO.3 The proportion of government business income will continue to rise

The public customer business of operators has shown a lack of growth in the short term. The number of users has reached its peak, and even with the implementation of the "card cutting" campaign, after some robot users are cleared, it will decline; 5G can only bring a short-term increase in ARPU. In 2021, the expected growth rate of smart home, cloud VR and other fields is significant, but the scale is average and cannot become the main contributor to the public customer business dominated by pipelines.

The growth rate of government and enterprise business is remarkable, and its share in operators' revenue has increased every year. It is expected to continue this trend in 2021. The core reason is that with the rise of industrial Internet, the number of connections and revenue of IoT cards have increased significantly, which has driven the revenue of cloud services and ICT solutions, especially the revenue from new infrastructure ICT solutions such as cloud and edge computing.

NO.4 "Innovative" network services

In the field of mobile communications, 2G/3G networks have entered a comprehensive shutdown period. Operators have decided to basically complete the shutdown of 2G networks by the end of 2021, and the vacated high-quality frequencies will be used for the development of new networks; 4G/5G networks will be networks serving public users; and a cellular Internet of Things network structure with low speed relying on NB-IoT, medium speed relying on LTE Cat1, and high speed relying on 5G is about to take shape; the price reduction of 5G chips and modules will ensure the application and promotion of 5G networks; the scale of new 5G base stations may be close to one million, and China's leading advantage in 5G base stations is unshakable; more 5G private networks will be built or applied, and further integrated with industry scenarios.

In the field of fixed-line communications, access speeds have been further improved. For example, Shanghai Telecom has announced that fiber-optic access will be fully upgraded to 1000M. With the scale-up of operators' networking services and terminal retail services, Wi-Fi 6 will achieve high-speed indoor and outdoor coverage with 5G networks.

In the field of fixed-mobile convergence, 5G and Wi-Fi 6 will achieve seamless switching in some scenarios to ensure their complementarity; O-RAN-based gateway and micro base station integrated equipment will be piloted into user homes to promote indoor coverage.

NO.5 Focus on "cloud" to achieve capability improvement and business development

Faced with the dilemma of low-value pipelines, the path of direct competition with Internet companies has been proven to be unworkable. What operators need to do is to enhance the capabilities of infrastructure such as pipelines, and then increase the value share of infrastructure through value-added services.

To this end, "cloud-network integration" is a key plan for infrastructure construction of telecom operators, aiming to create a "cloud-pipe-edge" integration model. Among them, China Telecom proposed the "cloud-to-digital transformation" strategy, China Mobile built an end-to-end unified management platform, and China Unicom increased the scale of edge computing center construction. It is expected that relevant infrastructure construction will be strengthened in 2021.

At the same time, at the business level, due to the integrated development of 5G+F5G, cloud business will become the core focus. Services such as cloud VR, cloud terminal, and cloud desktop will be launched one after another, and it is expected to become the focus of operations in 2021.

NO.65G news opens up a new situation of competition between operators and OTT manufacturers

Operators do not have an advantage in directly competing with OTT manufacturers in terms of applications, content, etc.; therefore, operators need to inject infrastructure-related capabilities into the competition, which is where operators have an advantage.

In 2021, 5G messaging and smart home applications are expected to become the core of competition. Although the interface effect of 5G messaging is similar to that of social tools such as WeChat, there are differences in the implementation method. It can be delivered more stably and can better support the development of government and enterprise services.

As for smart homes, the characteristics of indoor networking and the need to install home terminals are the channel capability advantages of operators; the foundation of cloud-network integration can ensure the storage and sharing of large amounts of data; and the frequent occurrence of video camera leakage incidents highlights the importance of operators' security capabilities.

NO.7 Safety will become a new core competitiveness

The foundation of a strong cyber power is cyber security. Information Security Technology Protection 2.0, protection of critical infrastructure, card-cutting operations, personal information protection, and anti-harassment are important keywords in recent years and are also the focus of work in 2021.

First, telecom operators need to further promote the construction of internal management systems and internal technical capabilities to ensure their own security.

Second, telecom operators need to cooperate with relevant national departments to achieve national cybersecurity based on intelligent infrastructure (cloud, pipeline, etc.). For example, SIM cards that illegally spread content and artificial traffic should be cut off; and applications and content operated in the cloud should be scanned and monitored.

Third, telecom operators need to empower security for the public, enterprises, etc. in the social economy. Based on the increasing attention paid to security by the whole society, the security capabilities of operators will become their core competitiveness.

Currently, operators have begun to build a security ecosystem and create advanced products such as blockchain, demonstrating their determination in this market.

NO.8 The promotion of autonomous and controllable development will be strengthened

In 2020, hostile actions from the Western world have injected new momentum into autonomous control. As a telecom operator operating the country's core infrastructure, it is inevitable that it will be taken seriously.

First, focusing on the R&D of proprietary capabilities and products can not only reduce dependence on the industrial chain and avoid business interruptions, but also lead the industry direction. For example, China Mobile has already achieved a full set of proprietary products including chips, modules, operating systems, platforms and terminals in the field of Internet of Things.

Secondly, when purchasing from abroad, especially when it comes to core infrastructure and core businesses, the requirements for independent control will be enhanced, including a preference for domestic manufacturers, and higher requirements for the proportion of independent equipment and required independent components.

NO.9 The efforts to promote the reform of state-owned enterprises through mixed ownership reform will be strengthened

State-owned enterprise reform will be one of the key words during the 14th Five-Year Plan period, and mixed ownership reform is an important means to enhance their market competitiveness. Telecom operators have played a pioneering role among state-owned enterprises and have achieved good results.

In addition to the units that have already carried out mixed-ownership reform, some units have also been included in the list of mixed-ownership reform. It is expected that 2021 will be an important year for promoting mixed-ownership reform. Units that have already carried out mixed-ownership reform will deepen and accelerate their completion; units included in the list will start; units with mixed-ownership reform plans will carry out preliminary work and strive to be included in the new list.

In the specific mixed-ownership reform actions, breakthrough actions are expected, including the employee shareholding ratio, the external shareholding ratio, and the mechanism for selecting and employing personnel.

NO.10 Build more small ecosystems in each segment

From "walled garden" to "ecological garden", operators' industrial cooperation has gone through several development stages. In recent years, operators have carried out ecological open cooperation with multiple partners, and will achieve comprehensive expansion in emerging business areas.

Judging from the development trend in 2020, it is expected that in 2021, operators and multiple partners will build clear cooperation ecosystems in various segments, such as security, cloud VR, etc. The construction of small ecosystems can focus more on vertical fields, promote cooperation enthusiasm, and promote the formation of cooperation results.