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Digging Deeper Into Three UK's Transformation Program

James Crawshaw
7/20/2018
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British "challenger" mobile operator Three UK is undergoing a very interesting network transformation, as we have already reported. (See Three UK's Core Network Transformation Requires New Approach to Assurance.)

Its ongoing revamp make it a useful testbed for the industry, so we asked to meet with CTO, Bryn Jones, at the operator's headquarters in Reading, UK, to learn more.

Mobile data growth driving the need for 5G
Like most mobile operators, Three UK, which has almost 10 million subscribers, continues to experience strong mobile data growth; Jones expects it to continue growing at 30% each year, which poses a challenge for an operator whose customers already consume an average 7GB of data per month, 3.5x the UK average. As such, Three UK is focused on evolving its 4G capabilities, by deploying carrier aggregation (CA) and MIMO technologies and refarming its spectrum, as it lays the path to 5G. The CA and MIMO capabilities will not only support its growing mobile data demand but also "supercharge" its fixed wireless access (FWA) business, called Relish, that it acquired from PCCW last year. (See 3 to Bag 5G Spectrum With £300M UK Broadband Move.)

Jones notes that Three UK's transformation is also about becoming digital, agile and creating an organization that is simpler for customers to deal with. When probed on what exactly he means by "becoming digital" and "agile," Jones stresses the importance of omnichannel engagement (seamless across web, app, store and cell center). Agility, for Three UK, is about embracing cloud: Jones says that latency-critical applications (around 20% of the total) will continue to run in Three UK's private cloud but that the remaining applications can be run on public cloud platforms such as AWS and Azure. Additionally, Jones says that agility refers to the use of standard-based solutions (3GPP and TM Forum) that are configured rather than written from the ground up as bespoke software.

Keeping network costs under control
Key to Three UK's transformation is a refresh of its IT systems and mobile network (core and RAN). As reported previously, it is "partnering" with Nokia Corp. (NYSE: NOK) for core network and telco cloud (NFV). This project is due to go live at the end of 2018, with virtual network functions (VNFs) running in 21 data centers in urban areas across the country. Jones indicates that telco cloud will support network slicing, enabling opportunities for new revenue streams from IoT and enterprise services.

Three UK is currently tendering for 5G RAN capabilities. Its current RAN suppliers are Nokia (3G) and Samsung (4G). Next year, Three UK plans to conduct a 5G trial with thousands of sites being upgraded to support 5G and 4G enhancements (carrier aggregation, MIMO and 3G spectrum refarming). It will also trial 5G FWA. Three UK has a history as a canny purchaser, having spent significantly less on capex than its UK mobile competitors in recent years: £1.76 billion (US$2.3 billion) over 2013-2017 compared with £3.13 billion ($4.1 billion) for EE, £3.32 billion ($4.33 billion) for O2 UK and £4.39 billion ($5.73 bilion) for Vodafone UK.


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Migrating to a greenfield IT stack in the cloud
On the IT side, Three UK has a long-standing relationship with IBM and Tech Mahindra, which will continue to manage its IT operations. IBM Corp. (NYSE: IBM), Tech Mahindra Ltd. and Tata Consultancy Services Ltd. (TCS) are the systems integrators building the greenfield IT stack and will continue to operate and evolve the stack once data has been migrated. Three UK has selected several new suppliers for its new IT stack, including Matrixx Software Inc. , Vlocity Inc. , Salesforce.com Inc. and CSG International . The company is planning for the new IT systems to go live by mid-2019.

Three UK has taken industry standard packages -- billing system, order management and so on -- and plans to "bolt them together" using industry standard middleware such as Tibco. This contrasts with the spaghetti of legacy IT systems it has today (around 300 different applications in total) that are highly customized and expensive to maintain and change.

Three UK will gradually migrate customers to its greenfield IT stack deployed in the cloud and retire legacy IT systems when possible. As Three UK's IT and network services converge onto similar platforms, it is considering how to transform organizationally. Overall the aim for Three UK's IT transformation is to accelerate time to market and improve customer service with a "pure omnichannel experience," while keeping operational expenses flat by increasing efficiency.

Building out the fiber network
Historically reliant on leasing fiber network capacity from its mobile competitors BT (EE) and Vodafone, Three UK will increasingly partner with SSE Enterprise Telecoms (the telco arm of electric utility company SSE) in order to connect its core network to its 14,000 cell sites. The plan is to unbundle hundreds of BT local exchanges (central offices) in metropolitan areas. SSE Telecom will then connect equipment at the exchange to its fiber links to Three UK's cell sites and data centers. Jones says this will form the foundation for Three UK's macro cellular network, its deployment of small cells and its FWA infrastructure. It also gives the operator the potential to offer fixed-line VDSL services to consumers (over BT's unbundled local loop), though this is not currently included in the business plan.

Jones noted in an official announcement about the fiber plans: "By significantly increasing our access to fibre, we are putting our network on the best footing possible to take advantage of the benefits of 5G technology."

— James Crawshaw, Senior Analyst, Heavy Reading

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