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Three reasons for going green for telcos – Ovum

Tony Chan | June 13, 2008 | 0 Comments

In a new report release this week, research firm Ovum highlighted three factors that can benefit the telecommunications sector as a result of the impacts of climate change. The report, entitled Surfing the green wave in telecom, takes a close look at the potential impacts and opportunities from the challenges presented by climate change on global operators from the perspective of a telco CFO.

“As environmental issues weigh on the public conscience and pocket books, telcos and their suppliers are debating their proper role. Going green must serve the overriding goal of making money for their shareholders. As such, three realities should drive action,” the report, authored by Ovum’s Matt Walker, said. “First, energy – electricity, mainly – has significant direct costs for telcos, and these costs are rising, in some cases, dramatically. Second, environmental and energy cost concerns give rise to a number of sizable business opportunities to service providers. Third, green is ‘in’: credible, sustained commitments by corporations to environmentally friendly practices can pay off with public goodwill.”

The report looks at and analyses energy consumption in relation to telecommunications infrastructure and services deployment in a number of specific markets, including the US and Japan, as well as carrier initiatives and projections.
By looking at available statistics from a number of telecoms operators across the globe, the report estimates the energy costs make up between 2-3% of total telecom operating expenditure, which would equal to US$8 billion for EMEA and US$6 billion for Asia Pacific in 2007.

In addition, the report says that figure can be higher for emerging countries and mobile operators. Because the production of electricity requires fuel, such as coal – whose price is determined internationally although country-specific subsidies does make adjustments to its price domestically for some markets. So despite lowered labour costs, the cost of electricity can be higher than developed markets as a percentage of total opex. At the same time, mobile networks, especially those reaching out to rural areas, will face high power costs due to high power costs in remote areas.

“There are likely some countries where power is upwards of 10% of a telco’s opex,” the report said.

Another major contributor to power consumption is the growth of data inside networks and data centres. Already data centre power consumption in the US have doubled from 2000 to 45 billion kWh in 2005, resulting in a bill of US$3 billion and equaling 1.2% of the total US electricity consumption.

The report also cites statistics from Japan’s Advanced Industrial Science and Technology Institute (AIST) that claim the growth in data would result in surging power demands from the country’s routers. Without dramatic efficiency improvements, routes in Japan can end up consuming 9% of the country’s total electricity by 2015, according to the AIST.

There is some good news however. High efficiency initiatives can reduce power surge in telcos. For example, the report cites projections by KDDI, which state that through high efficiency network infrastructure and facilities, the carrier can reduce its energy consumption by as much as 16% by 2011 with annual savings estimated to be as much as US$52 million.

At the same time, the report highlights a number of technologies that can be deployed by the industry to control and reduce energy consumption, including all-optical switching/routing, nanophotonics, large-scale integrated chips, energy-efficient Ethernet and more efficient network interconnects, all of which offer more efficient methods to move and handle data in the network as well as end equipment.
Meanwhile, the report highlights the potential business opportunities from climate change for the telecommunications industry. Applications such as high-speed broadband access – an essential component to teleworking, video and audioconferencing services, and offshoring that consumes international and domestic network services, centralized storage servcies, RFID, intelligent transport systems and telematics, all offer the telecoms industry a way to grow revenue top lines, the report highlights.

Lastly, the report concludes that being green is also essential for business success today. Citing an Ipsos-conducted global survey on environmental attitudes, the report notes that more than 50% of consumers are more likely to buy from companies with good environment reputations while 80% of the respondents prefer to work for such an organization.

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