Vodafone boss predicts a golden age for gadgets as mobile takes to the cloud

25 Jun 2009

Vodafone’s Charles Butterworth says the growth in mobile broadband proves 3G was a good bet.

The view from Charles Butterworth’s Sandyford office reminds me of one of those Chinese wall prints that tell a story. When he first took up the position as CEO of Vodafone in Ireland three years ago, the entire skyline was full of construction cranes. Now there’s just one.

Hindsight is 20:20, and more than a few business people in this country wish they could have seen what was coming. In Butterworth’s case, the big bet of recent years was the company’s investment in 3G infrastructure that has seen Vodafone spend €1m a week on a continuing basis in Ireland alone.

In post-telecoms-downturn Europe in 2002, operators had spent €160bn on 3G licences. For years, shareholders and investors questioned ongoing investment in the technology, and punters weren’t overly impressed with the mobile handsets.

It seems, however, 3G was the right bet after all. Devices such as the Google Android and Apple’s eponymous iPhone – not to mention a multitude of netbooks and mobile internet devices that rely on 3G networks to download applications, make video calls and download YouTube videos – prove 3G broadband was a visionary investment.

According to the latest figures from ComReg, more than 354,674 people subscribed to mobile broadband in the first quarter of this year, up 14.8pc on the previous quarter and up 90.6pc on the previous year.

The 3G infrastructure paves the road for future technologies such as HDPA, which could see speeds jump from 7.6Mbps today to 14.4Mbps by the end of the year, while future upgrades to Long Term Evolution (LTE) could bring about mobile speeds of 50Mbps.

But, during this time, Vodafone has changed from being a mobile operator to also being a fixed-line operator, acquiring broadband supplier Perlico last year for €80m.

Describing itself as a ‘total telecoms’ provider, Butterworth admits Vodafone is at a crossroads. The Irish economy’s digital infrastructure upgrade to next-generation networks (NGNs) is a topic hotly debated in the industry, especially over who should make the investment – the Government or the operators or both?

“Where we invest in the future is dictated, ultimately, by the view of our shareholders as to whether it’s a sound investment. We are a comp-any that clearly takes risks because our investments are longer term. We don’t make an immediate return on long-term investments, but still need to run as an efficient business at all times.”

Butterworth describes Vodafone as “technology agnostic”, meaning it now serves customers who use PCs, mobiles and netbooks and who want their connectivity either as a fixed-line connection or by mobile. But if future investments like LTE are to work out, a powerful fibre core network is vital to connect all the base stations in the country, not only for Vodafone but also for competitors such as O2, Meteor and 3.

“The economics of building and digging a fibre connection to every consumer’s home don’t add up and there are still clever things you can do with copper wire.

“But if we make the decision to invest in a core network that boosts connectivity to be on a par with anywhere in Europe or the US, issues like who will invest and who will own the network will arise. We need a regulatory framework that will encourage competition, drive innovation and ensure Ireland can compete.”

Butterworth does not believe a top-down investment by Government is needed.

“If intervention is needed, it needs to be a regulatory intervention. I don’t think the taxpayer should have to pay. If businesses like Vodafone are willing to invest using private money, that’s a good thing. But we need a level playing field. Competition drives investment and I’m a strong advocate of regulatory certainty.

“We need a framework that encourages alternative operators to invest. Singular investments by operators like mobile operators have done in the past won’t work. Co-building and co-investment are the words we need to use. The scale of a NGN will be massive to contemplate, it can’t be done by one provider on its own.”

Other steps that need to be taken, Butterworth urges, include freeing up the old 2G spectrum to allow mobile operators provide broadband throughout the country. Such a move would enable Vodafone to serve 3G speeds to 99pc of the country, for example.

He believes that the space in which Vodafone operates has never been more exciting nor challenging and says, if anything, we’ve entered into the golden age of gadgetry. The company is rumoured to bein line for the HTC Magic Android phone and is actively selling Dell netbooks with built-in 3G broadband.

“When the mobile industry started life, the mobile phone itself was the key selling feature and it will remain a very dominant selling feature. But there was little it could do except make calls and send and receive text messages. Today, the level of sophistication is immense because you have devices with Facebook and Google, not to mention GPS and sat nav.”

It’s a little-known fact that Vodafone already owns a substantial data centre in Clonshaugh, North Dublin that hosts data for the company’s operations here, in the UK and in Europe. The move to cloud computing and enabling businesses that want access to software and services on demand is a logical next step.

“I see the next phase of development in the mobile industry’s history as being services-led – the idea of what is fixed and what is mobile has become blurred. A customer will just want to access the services they need, whether it’s the cloud for business computing or downloading TV shows and music. First and foremost, it’s about access, whether it’s mobile or fixed, it no longer matters.

“How we develop our infrastructure going forward will be determined in part by how the regulatory environment works, but we’re not going to invest in a fixed-line network or build one from scratch on our own. Ultimately, we need to create business models out of this environment that deliver a return on investment.

“At the end of the day, 3G was a bet we took that had shareholders asking for several years why we did this. And yet that investment turned out to be the entire basis of the mobile broadband revolution in countries like Ireland, which rely on 3G,” Butterworth concludes.

By John Kennedy

This story is part of the Digital 21 campaign to encourage Ireland to develop a National Digital Development Plan, ensuring the country and its economy are strategically well placed to thrive in the 21st century. For more stories, and to add your comments, visit www.digital21.ie