Digital transformation: How do you build a smartly connected world?

Global telecommunications market trends are rapidly evolving and adapting to cope with the impact of the pandemic, which is why there has been a significant increase in the use of Internet services, yet just over 40% of the world’s population remains unconnected. The Colombian economy is no stranger to this phenomenon and therefore has had to adapt to these new dynamics that pose disruptive business models, updating of legacy technologies and more effective use of information and communication technologies (ICTs).

In the country the process of digital transformation has been developing continuously, but slowly, or so the figures of the study carried out by the Digital Economy Observatory show, where it is estimated that only “11.7% of the companies have a digital plan, 23.1% are thinking of implementing it and only 15.3% are measuring the impacts of this strategy on their companies”. The telecommunications sector has even been transforming its operating model due to the new needs of users and the influence of leading corporations in the industry.

Photo: NordWood

According to Hernán Yepes, regional manager for the Caribbean and Latin America of Padtec, a leading Brazilian company in fiber optic transmission systems in Latin America: “At the legal level, the regulatory framework has been expanding through initiatives such as Law 1978 of July 25, 2019, the ICT Law, which proposed the adoption of 5G technology and agreed to the goal of connectivity for more than 20 million Colombians, opening the way to continue the process of adaptation of Colombian companies to a line of digital competitiveness. In this way, Padtec explains from three fundamental perspectives (content redistribution, implementation of data centers in metropolitan areas and new opportunities for Internet providers), how the value chain of the telecommunications sector and its operation in Colombia has been transforming, opening the opportunity to create an increasingly intelligently connected world.

Content companies have revolutionized the telecommunications business

To begin with, there has been a migration movement from the long distance network market to metropolitan networks with the intervention of the largest content companies in the industry: Google, Amazon, Facebook and Microsoft are investing in underwater cable infrastructure and in the construction of data centers or the location of their servers within the networks of Internet operators at strategic points, to keep information closer to their users and provide them with a higher quality of service.

For this reason, the implementation of cloud platforms has had a significant boom, since through the content providers the basic structure of the broadband service has been modified. In this way, OTT platforms and digital content distributors install servers in the data centers of regional Internet providers to bring content to the end user more efficiently.

Now much of the traffic that used to be sent to servers located in the United States or Brazil is processed locally, decreasing the bandwidth required in long-distance networks and increasing the connectivity and latency requirements for metropolitan networks or data center interconnection networks.

With this operating structure, the content has its own CDN (Content Distribution Network), which is implemented by the ISP to give priority to the information coming from the OTT servers over traditional Internet traffic. According to the Cisco VNI Global IP Traffic Forecast report, the type of traffic that is expected to grow the most in the coming years is CDN traffic. Connections between countries will fall by 5%, regional connections will fall by 1% and metropolitan connections will increase by 6%.

Implementation of Data Centers

The idea of the Data Center Interconnection (architecture that connects two or more data centers in metropolitan and long distance environments), is being implemented by companies that provide Internet connectivity services in order to communicate their data centers nationwide with the minimum amount of intermediate equipment, thus reducing operational costs due to electricity consumption and optimizing latency.
For the construction of new data centers in Latin America, it is necessary to comply with quality standards defined by the ANSI (TIA)-492-A standard, regarding availability, network architectures, security, design and electrical efficiency through the Dense Wavelength Division Multiplexing (DWDM).

These trends will also be promoted by the penetration of content companies in the sector, which will transform the operating model and the way of transporting information in Latin America and the world.

The opportunities for ISPs

According to the report, The mobile economy 2020 of the GSMA organization, the investment in networks and the spectrum allocation initiatives that have been evidenced in Latin America accelerate the adoption process of 4G technology, which is expected to be 67% by 2025, while the penetration of 5G, for that year, is estimated to be 7%. With this panorama, an increase in the percentage of bandwidth will be evident, which by 2021 will represent approximately 20% annually and by 2025 will reach around 40%.

This transition of the sector will open new business opportunities for the ISPs, who must implement transmission means, such as optical fiber and technologies that allow them to handle the amount of traffic estimated in 2025, such as DWDM technology.

In addition, telecommunications companies have adapted their value proposal to be more competitive digitally. The digital transformation implies that they migrate to cloud storage and cybersecurity practices, which requires greater Internet capacity.

Due to the growing demand for traffic on residential networks as a result of the pandemic and the imminent increase in digital transformation penetration in the corporate segment, ISPs have a unique opportunity to address markets that are underserved by traditional operators.

For example, in Brazil, regional Internet providers implemented DWDM technology in their networks due to the large number of users in secondary populations and the large geographic distances they had to cover and currently managed to outperform incumbents in some regions.

On the other hand, in Colombia the populations have a lower number of users and the distances between populations are smaller, so Internet providers can cover the current traffic requirements with traditional data network technologies. However, with the increase in the bandwidth demand, in the short or medium term they must implement in their network technologies that allow them to grow the capacity of their networks such as DWDM technology.

Author: America Retail