INNOVATION AND TECHNOLOGY

Two interconnected developments are shaping current challenges in the telecommunications industry: The ongoing increase in demand for additional bandwidth and the growing number of connection requests related to the rise in connectivity in day-to-day life.

The Telekom Austria Group is accounting for the dynamic increase in data volumes transported via its networks through extensive development activities. To prepare for future requirements, the Group is focusing both on the development of its network infrastructure as well as new products and services.

NETWORK FUNCTION VIRTUALISATION

Digital transformation remains one of the Telekom Austria Group’s top priorities. This also in- cludes the virtualisation of its network infrastructure, which was also continued successfully in 2016. The first virtualised network systems have already been transformed into state-of-the- art IT environments and gone into commercial operation at the Austrian, Bulgarian and Belaru- sian subsidiaries A1, Mobiltel and velcom. At all of the Group’s other subsidiaries, there are al- ready specific implementation plans for system virtualisation.

The concept of network function virtualisation (NFV) represents a paradigm shift within the telecommunications industry. As one of the first operators in Europe, the Telekom Austria Group had already successfully tested the NFV technology in a series of field trials in several countries in the 2014 financial year. In 2015, a virtual modem solution was successfully tested as part of an comprehensive strategy to virtualise key components in the Group’s communica- tion network. In this concept, the modem’s key functionalities are centrally controlled from the IT data centre. As a result, customers have a more flexible, secure and efficient internet connec- tion. Necessary changes are also managed centrally, updates are made automatically and the modem’s vulnerability is reduced.

In addition to a complete architecture of mobile network functionalities, services are also em- bedded in a virtualised and cloud-based infrastructure (multi-tier architecture). This allows for significantly more efficient operating processes at lower costs and quicker launches of new ser- vices. As a result, this technology gives the Telekom Austria Group an ideal platform for com- petitive innovations.

At the beginning of 2017, the Belarusian subsidiary velcom implemented the first fully virtu- alised commercial core network in the world as part of its ‘virtual one core’ flagship project. As a result, velcom has one of the most innovative virtual telecommunication core network archi- tectures based on OpenStack – an open-source software – and serial standard hardware. For vel- com, this resulted in a decrease in total costs of ownership of more than 50%. The new technol- ogy provides more flexibility and newer functions for voice telephony and internet customers.

LTE AND 5G

In 2016, the accelerated rollout of LTE (long-term evolution) led to a significant improvement in the supply of high-speed mobile internet. After the launch in Bulgaria in 2016, the Group now already offers LTE in Austria, Bulgaria, Croatia, Slovenia, the Republic of Serbia and the Repub- lic of Macedonia.

In order to achieve even faster mobile internet, the Telekom Austria Group is using LTE carrier ag- gregation at selected locations in Austria, Bulgaria, Croatia and the Republic of Serbia, enabling data rates of up to 300 Mbps. 2016 also saw a major innovation in mobile technology with data rates in excess of 500 Mbps in the A1 live network thanks to LTE triple carrier aggregation in con- junction with a new method. In which, frequency bands of 2.6 GHz, 1,800 MHz and 800 MHz are bundled and combined with 256 QAM, a complex modulation technique. As a result, a significant increase in bandwidths can be achieved compared to the currently widespread LTE standard. Dur- ing a field test, a transfer rate of 513 Mbps was achieved on a mobile router, while a transfer rate of 463 Mbps was achieved on a smartphone via the A1 live network. This is a key step in the develop- ment of the fifth generation of mobile telecommunications (5G).

Carrier aggregation, complex modulation techniques and massive MIMO (multiple-input mul- tiple-output) will also play a key role in 5G since these serve as a technological basis for high bandwidths and the particularly efficient use of available frequency bands. Technically, 5G is based on LTE, but a number of evolutionary steps need to be made until this new generation of mobile communications can be used. An increasing number of new services are being intro- duced, for instance, in the Internet of Things or for smart cities. The 5G standard is expected for 2019, although technical requirements and applications still need to be defined. Its implemen- tation is currently expected to begin in 2020.

BROADBAND ROLLOUT IN AUSTRIA

The Telekom Austria Group is also consistently pursuing its accelerated rollout of broadband in the fixed-line business, which began in 2015. At the end of 2016, 50% of all Austrian private and commercial addresses were already covered by A1 products with speeds of at least 30 Mbps or more on the fixed-line network. Coverage should reach 70% by the end of 2018.

In 2015, A1 showcased the new broadband technology VDSL2 35b, which allows for data speeds of more than 100 Mbps when combined with vectoring. On short distances, data speeds of 200 Mbps can even be achieved. While G.fast provides data rates of up to 500 Mbps on line lengths in the region of 200 metres, VDSL2 35b achieves significantly enhanced performance compared with conventional DSL technologies, particularly on line lengths of up to approximately 500 metres. This technology is therefore also suitable for less densely populated areas.

Since July 2016, A1 has also been offering its customers a hybrid modem that combines mobile and fixed-line infrastructures in order to provide fixed-line products with higher bandwidths. The modem’s smart technology allows the bandwidths of both technologies to be combined. If necessary, A1’s hybrid modem can supplement the performance of DSL fixed-line connections with LTE. As a result, data speeds of up to 150 Mbps can be achieved and more households can be reached with higher bandwidths.

Once again, A1’s hybrid modem highlights network convergence as one of the key pillars of the Telekom Austria Group’s strategy. This is because the significant and ongoing rise in data vol- umes and future applications will be manageable only by means of highly efficient fixed-line and mobile networks.

MACHINE-TO-MACHINE COMMUNICATION

In addition to the growing data traffic, machine-to-machine (M2M) solutions and the accompa- nying connection requests are the reasons for the dynamic increase in requirements in terms of the network infrastructure.

M2M involves the automated transfer of data between machines, devices, sensors or central servers used for remote controlling and monitoring with or without human interaction. Due to the wider availability of affordable technology – for instance, sensors, screens and processors with significantly higher processing power while the size of devices decreases – the possible applications of these connected services seem almost unlimited. As a result, billions of devices will be connected via the internet within the next decade. This is why M2M has significant growth potential and M2M applications are expected to increase by more than 20% each year until 2020.1) By connecting machines smartly, positive effects on energy and traffic efficiency as well as traffic safety and security, climate protection and the reduction of the CO2 footprint can also be achieved.

The Telekom Austria Group provides holistic M2M solutions from a single source, including cost and resource-efficient fleet management, extensive smart metering services, meter data management and rollout services, as well as modular solutions for industrial automation or re- mote maintenance. Smart M2M technologies are accounted among the basics for the imple- mentation of future-oriented concepts of Industry 4.0 or the Internet of Things (IoT) in the course of digitalisation. In order to bundle the competencies in the areas of cloud, Internet of Things (IoT) and artificial intelligence (AI), the subsidiary ‘A1 Digital International GmbH’ was established to exploit its potential across the Group in a concerted effort.

PARTNER FOR DIGITALISATION

In this context, the Telekom Austria Group not only sees itself as a provider of the connectivity required based on its infrastructure, but also as a holistic digitalisation partner in the area of business and industry. Solutions are provided from a single source – from the concept to ongo- ing operations (for more details, see ‘Digitalisation’).

The smart meter rollout in Graz serves as a good example here – around 187,000 electricity me- ters will be replaced with smart meters within the next four years. In addition to the replace- ment of electricity meters, overall planning for technician assignments, part of material logis-

tics and A1’s customer project management, is also being organised.

Overall, the Telekom Austria Group has gained significant expertise in the area of smart meter- ing in recent years. In Austria alone, 95% of electricity meters are to be equipped with intelli- gently connected smart meters by the end of 2019. At the moment, this figure is approximately 10%. Related activities and investments in meter systems, data transmission, installation, oper- ations and central IT infrastructure need to be as future-proof, cost-efficient and as low-risk as possible and take place fast. With its highly secure networks and M2M expertise, the Telekom Austria Group presents itself as an ideal partner here.

R&D AS A FOUNDATION FOR THE FUTURE

To assert its leadership in the field of technology and infrastructure, the Telekom Austria Group focuses on many areas of research and development (R&D). Research partnerships with scien- tific and industrial partners and joint projects with national and international institutions pro- vide a key basis for the development and launch of technologies of the future for market and customer-oriented communications solutions.

In 2016, the Telekom Austria Group had research partnerships with the Vienna University of Technology, the Christian Doppler Laboratory for Wireless Technologies for Sustainable Mobili- ty, the Christian Doppler Laboratory for Dependable Wireless Connectivity for the Society in Motion, and the Josef Ressel Centre for User-friendly Secure Mobile Environments. A1 Telekom Austria AG also promotes innovation by new companies with a start-up initiative that provides expertise and infrastructure to help make innovations a reality.

In addition, the Telekom Austria Group is a partner of the Industry 4.0 platform and is address- ing the interoperability of Internet of Things (IoT) platforms within the pan-European H2020 project symbIoTe which is supported by the European Union and is also expected to bolster re- search in the IoT until the end of 2018.

More virtualisation: The Group is focusing its innovation efforts particularly on developing its infrastructure concentrating on network function virtualisation (NFV) and on creating new cloud-based products and services.

1) Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft; https://www2.deloitte.com/content/dam/De- loitte/de/Documents/technology/TEC-Whitepaper-M2M-communication.pdf