The supply chain crisis is the worst it’s been for 50 years and industry leaders expect issues to last until 2023. For the telecoms sector, this is causing major disruption. While Cisco customers and partners are navigating brutal supply chain issues of up to 300 days of delays, Ericsson CEO Borje Ekholm recently blamed supply chain problems for causing an increase in costs for the Swedish vendor in Q2, says Darren Pearce, Group CEO of TXO.
Supply chain delays put additional pressure on telecoms operators who are trying to extend their connectivity to meet government targets for 5G and fibre network deployments, like the UK government’s pledge to deliver gigabit broadband to 85% of Britain by 2025 and phasing out 2G and 3G by 2033.
One solution is joining the circular economy. By reusing, repairing, refurbishing and recycling used equipment, 84% of global operators believe they can help solve supply chain challenges and accelerate network deployment, according to research by TXO. Over the next five years, 75% of operators say they’ll recycle equipment, 52% will be repairing equipment, 49% will resell it and 44% say they will buy refurbished equipment.
But what is the circular economy, what are the benefits and how does it help overcome supply chain issues?
Circular economy explained
The European Parliament defines the circular economy as “a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible.”
What this means is that the circular economy keeps materials and products in the economic system for as long as possible by extracting the most amount of value from them while reducing the environmental impact by creating fewer new products.
In telecoms, the sector refurbishes and recycles network equipment that has been previously owned. Selling pre-owned equipment involves inspecting it and restoring it to a sellable condition by putting it through a rigorous screening and testing process.
How telcos access it
There are two main ways that operators are accessing the circular economy today:
- Demand side: Operators that want to source pre-owned equipment because they need resilience in their network from parts that are no longer available from OEMs, or they want to source an alternative to buying new.
- Supply side: Operators want toresell or recycle old equipment so they can generate revenue and save space and resources. To resell, they’d work with a specialist intermediary to source a buyer and manage the sale.
To support the supply side, operators need to gain a clear understanding of what’s in their network and inventories. Many operators have networks and warehouses full of equipment that has often not been catalogued, tracked or effectively added to inventories which could be reused, resold or recycled. Operators also have a lot of old equipment within the network, using up power, that could otherwise be added to the circular economy. Getting a complete end-to-end understanding of their inventory is one of the most important first steps for operators that want to join the circular economy.
While the circular economy needs a balance of operators engaging on both the demand and supply side, we haven’t reached this point yet, with the current model looking more like a ‘semi-circular economy.’ The main reasons for this are that operators shy away from buying pre-owned equipment as they believe new equipment is much more reliable and of higher quality. Larger operator groups are also typically tied into Service Level Agreements (SLAs) with the major OEMs. But once they reach the end of their SLAs, they have an opportunity to embed the circular economy into their purchasing strategy.
Additional benefits of joining the circular economy
As well as helping to overcome supply chain challenges, operators also site several other benefits of joining the circular economy:
Lowering carbon emissions: this is a key benefit of joining the circular economy, according to 72% of operators. 67% of operators also expect to reach net-zero carbon emissions by 2040, 44% by 2030s and 23% this decade. But, despite this optimistic outlook, almost every major company in the telecoms sector now has a net-zero target with a deadline of 2050, according to BCG.
Reducing costs: While operators are under pressure to upgrade their networks, they need to do it cost-effectively. 57% of operators believe that joining the circular economy can help reduce costs.
This is a priority for Altnets, which are emerging as an alternative to the major operators but don’t have the same sized budgets.
Aside from cost saving through buying refurbished equipment, operators can make additional revenue by re-selling old equipment that is no longer in use or rarely used, and so wastes power. This approach enables them to significantly reduce their CAPEX by offsetting revenue generated against purchases of new equipment. OPEX can also be reduced by eliminating warehousing costs of obsolete inventory.
Minimising waste: 70% of operators believe joining the circular economy offers huge advantages by minimising waste. While mobile operators have already successfully refurbished a huge volume of mobile phones as part of the circular economy, expanding their refurbished capabilities to include network equipment is a natural next step.
However, waste is still a big problem for the industry. The GSMA estimates that around 50 million tons of e-waste is produced every year, a figure that continues to rise. E-waste is electrical or electronic devices either discarded or reaching the end of their useful life. If e-waste isn’t recycled, it goes straight to landfills and is hugely damaging to the environment.
Moving towards a seamless and sustainable future
The circular economy helps the telecoms sector navigate supply chain issues by enabling operators to buy pre-owned equipment instead of new. Not only does this enable them to avoid the year-long wait for new equipment, but they can also accelerate network deployment in line with government targets and meet their sustainability goals. While there are some perception challenges which are hindering operators from joining, like pre-owned equipment is lower quality and unreliable, these perceptions are myths. But the supply chain crisis is now forcing operators to rethink their approach and consider joining.
The author is Darren Pearce, Group CEO of TXO.