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Fibre Optics in Cities

Mayibuye Magwaza Senior Associate 2, PwC South Africa 29 September, 2020

Reading time: 8 minutes

Cities are increasingly operating as dynamic enterprises that require enormous amounts of bandwidth, and fibre optic networks are an obvious solution to deliver this. Furthermore, many cities have elected to lay their own fibre optic networks, rather than pay a private provider for access.

Take a closer look, however, and the picture becomes more complicated. Installing a fibre optic network may be relatively simple but maintaining and running one can become a complex business, involving new operating models, challenging procurement cycles, difficult financial questions and even intercepting communications. In this post on fibre, we will explore some of the challenges involved in cities running in-house fibre networks.

Fibre optics

The need

Cities increasingly need data and bandwidth to run their operations as digitally connected systems become both more common, and more fundamental to the way that cities work. Office employees need high-speed internet access. City workers, ranging from call centre agents to social workers, need access to centralised city databases. Voice over IP systems need data. Video conferencing hoovers up bandwidth. Digital meter reading systems need to send reads back to the main servers (or up into the cloud). 

As cities become more connected, the internet becomes an ever more important tool, impacting more and more parts of the municipal value chain. Even in South Africa, which is typically slower to adapt to these trends, the need for bandwidth when running a city is very apparent, and most of the eight major metros in the country already have or intend to lay fibre optic networks.

Before rushing into building a fibre optic network, it’s important for municipalities to understand their options and how they relate to their specific situation. The decision of what kind of network to lay needs to be driven by cost and use case. For a small rural town to roll out its own fibre optic network would probably be a poor decision as the cost would dwarf its budget, the complexity of managing it would overwhelm its capacity and the town simply wouldn’t need that much bandwidth anyway. Generally speaking, there are three options that are worth considering:

  • A cellular network. This can be implemented very quickly, since it simply involves signing a contract with existing cellular companies and connecting to their network. It has the great advantage of being quick, widely available and easy, but in the long run costs could escalate as bandwidth is charged for according to usage.
  • Radio masts possibly augmented by a cellular network. This has some set-up costs and may be hampered by geography (most radio systems require line of sight or similar characteristics) but is still relatively quick and easy to establish, and at low cost.
  • Fibre optic cables, which provide enormous amounts of bandwidth, and can also be opened up for other operations, such as private sector organisations, to piggyback onto. However, they require more resources to set up, and, as we shall see, come with a peculiar set of challenges.
Network satellite

Fibre, but for whom?

One of the key upfront decisions that cities need to make is whether they intend on just building a network for the municipality’s use, or if they plan on building a system for a wider user base. The latter option often ties into a vision of fibre for the community, where municipalities deploy fibre optic infrastructure and seek to provide a platform for other organisations — schools, businesses and even end users — usually as a ‘public utility’ type system. 

The city of Stockholm in Sweden is perhaps the ideal example of this type of model. Their ‘Stokab’ system keeps the city focused on building and owning the fibre optic networks, but allows customers to lease passive fibre networks, as well as space in nodes and hubs, so that they can install their own communication equipment. This network connects medical centres, industrial facilities, households and 600 schools. A 2013 report indicated that Stockholm boasted some 1.25 million kilometres of fibre , and that the high levels of connectivity had dramatically boosted the local economy.

In any event, operating models need to be clearly understood, regardless of whether the network is municipality exclusive, or intended for wider usage. Policymakers often overlook these kinds of questions around operating models, and what they require to implement. A few key issues can arise out of this oversight.

The first is financial. Once the network is laid, the cost of running it must come out of a budget. There are a number of possibilities. Cities can have departments as anchor tenants, with the network paid for out of a general operating expenses budgets, or even setting up a branch or directorate to run it. However, if this issue is not thought through, a network can be built, and then have no way of being continuously run without ad hoc budgets.

The second lies in staffing. Assembling the right set of human resources to run a network can be a serious challenge. Pre-existing job descriptions and skill bonuses are not necessarily aligned to those needed to run a fibre optic network and acquiring the right set of scarce skill in a competitive labour market can be challenging. This requires working with HR departments to review job descriptions and understand how scarce skills can be acquired and retained. Ultimately, revisions to HR frameworks may be necessary for this to take place.

Upgrades and procurement

Another challenge emerges from the way that technology rapidly changes. The complex networking hardware, such as routers and switches, that are required to run the network routinely become obsolete within a few years. Unfortunately, manufacturers often stop supporting them, which means parts of the network infrastructure become obsolete and create a risk for the wider network. At the same time, city procurement cycles often work in longer time periods than network equipment lifecycles, which creates real challenges even before the issue of continuous expenditure on hardware is addressed.

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Skills

Running and administering a modern fibre network comes with its own human resource requirements. While a city may well have some IT technicians, their skill sets may or may not align with those needed to run a fibre optic network. Thus, a skills audit should be undertaken early in the process, and checked against the skills required to run a fibre network. In addition, it may be necessary to examine the city’s skills framework and talent acquisition strategy to see if skills can be acquired and replaced where needed, at market competitive rates — or developed in-house.

Network security

Cybersecurity is a major issue for modern cities. This is a transversal issue, which extends far beyond the network itself: it involves training employees, patching software and being relentlessly vigilant about an entire suite of issues. The fibre optic network needs to be physically secured as part of this effort, along with the various additional components, such as switches and the like.

Importantly, as the Internet of Things (IoT) becomes increasingly fundamental and prevalent, securing fibre optic networks will increasingly become a matter of infrastructure security. Transport systems and other infrastructure will become increasingly dependent on networks being secure and available. An attack on the network could cripple vital infrastructure and cause disruptions that approach those of a disaster.

Regulatory burdens

Operating a network can also come with regulatory burdens, which cities may not always be prepared for. For example, in South Africa, the Regulation of Interception of Communications and Provision of Communication-related Information Act of 2002 (RICA) provides that any telecommunications operator or network operator must make provision for law enforcement to carry out communications interception on the network. If a city develops its own fibre optic network, it may become subject to this provision, meaning that it needs to build its networks to allow for this — an added regulatory and financial burden.

This means cities must not only be prepared for the technical, organisational and financial aspects of running a fibre optic network, but they must also be prepared to play legal roles, which they may not be used to or prepared for. Are they ready and willing to carry out these roles? Do they have the institutional capacity and legal capacity to fulfil their responsibilities?

What are the lessons here?

Firstly, cities must begin by assessing their needs, and their capacity to manage networks. Attempting to leapfrog to too advanced an infrastructure level can leave them overextended.

Where possible, cities should try and own basic infrastructure, but they should be aware of their own limitations. Public-private partnerships are not a free pass either, as cities need to understand their ability to carry out proper project management and oversight of contractors. Failing to understand service level arrangements can cause problems. Similarly, a limited pool of properly skilled contractors to select from can make it hard to properly manage tendering and issues of collusion. Fundamentally, managing contracts comes with its own set of risks, and cities need to know whether they can handle them.

Conclusion

As technology evolves, cities must evolve beyond their original roles. Embedding advanced technology solutions means not just purchasing turnkey solutions or even implementing new ways of working, but embracing entirely new roles, with their concomitant new processes, responsibilities and challenges. 

Despite this being difficult, it is nevertheless necessary as cities must deepen their capacity and anticipate these challenges as they embark on new digital journeys. As they do this, however, smart policymakers must be clear on what they need, what they’re trying to do, and how this will impact their city’s existing structures, plans and resources.

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Mayibuye Magwaza

Mayibuye Magwaza

Senior Associate 2, PwC South Africa

Tel: +27 (0) 21 529 2400

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