Feeds

Building the actual real internet simply doesn't pay

Those fat pipes and extra Gs don't come cheap

Maximizing your infrastructure through virtualization

Analysis It isn’t unicorns that keep the internets running, but eye-watering amounts of capital investment by infrastructure operators. However a substantial chunk of that investment never pays for itself and most of it barely repays the cost of the capital, reckons consultancy PwC.

The telco industry as a whole spends $320bn on infrastructure globally, a six-fold increase in thirty years. PwC studied 79 mobile and fixed line operators who account for almost two thirds of this infrastructure investment and found that $65bn is wasted.

But wait, it gets worse. PwC calculated that overall the return on investment (RoI) on capex is just 6 per cent - which is lower than the cost of the capital itself of 9 per cent.

It’s only because the golden days of growth are over, notes the study, that Big Telco is finally having to confront the problem.

“About 70% of investments cover their cost of capital and about 30% generate very poor returns indeed. The difference is easy to explain. We calculate that most telecoms operators mis-allocate about 20-22% of their discretionary capex, but when you include the non-discretionary capex they’re required to make for regulatory reasons the percentage rises to about 30%.”

PwC also explores some reasons of the reasons behind the misspent capital – such as poor decision making, and the need to keep up with the latest technology. Two thirds of capex investment is driven by technology, such as 4G. That doesn’t sound so bad to me. What sounds worse is that it stops.

The report is almost a year old, but languishes in obscurity. So why blow off the dust now?

The reason should be obvious: we get the internet we pay for, and without serious capital expenditure, it will begin to resemble Dilbert’s Republic of Elbonia. Despite the growing clamour for the state to step in and save us all from evil telcos – nation states are bankrupt. The taxpayer won't pay for the latest and greatest internet infrastructure to the tune of $320bn.

Yet so many sideshows consume the tech press and demand popular attention – from "net neutrality", to the latest "internet is breaking" scare. This should help put things in perspective.

You can download the report from here. We’re obliged to the always-fab Martin Geddes for the pointer. ®

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
Sysadmin Day 2014: Quick, there's still time to get the beers in
He walked over the broken glass, killed the thugs... and er... reconnected the cables*
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
SHOCK and AWS: The fall of Amazon's deflationary cloud
Just as Jeff Bezos did to books and CDs, Amazon's rivals are now doing to it
BlackBerry: Toss the server, mate... BES is in the CLOUD now
BlackBerry Enterprise Services takes aim at SMEs - but there's a catch
The triumph of VVOL: Everyone's jumping into bed with VMware
'Bandwagon'? Yes, we're on it and so what, say big dogs
Carbon tax repeal won't see data centre operators cut prices
Rackspace says electricity isn't a major cost, Equinix promises 'no levy'
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.