Nº 4 2012 > Trends in telecoms
ICT market outlook
As the broadband revolution unfolds, large segments of the worlds population are being left behind, according to the 2012 edition of ITUs flagship report on Trends in Telecommunication Reform, this year entitled Smart Regulation for a Broadband World.
An estimated 2.4 billion people worldwide are Internet users, and Internet penetration in developing countries stands at 26.3 per cent. But that still leaves two-thirds of the world population not yet using the Internet, and even more without a broadband connection. The report opens with a concise overview of the trends reshaping the information and communication technology (ICT) landscape and then, chapter by chapter, delves into key areas such as national broadband policy, strategies and plans; open access regulation and strategies for financing universal broadband access; broadband enabled innovation; social media; m‑banking; intellectual property rights; and e‑waste.
Broadband subscriptions double
Fixed broadband subscriptions have more than doubled over the past five years to reach an estimated 591 million in early 2012. But fixed broadband penetration of 26 per cent in industrialized countries contrasts dramatically with penetration of just 4.8 per cent in developing nations. Affordability is largely to blame, especially in Africa where access often costs three times the average monthly income.
Mobile broadband booming
By the end of 2011, there were almost 6 billion mobile-cellular subscriptions, representing a global penetration rate of 86.7 per cent. Mobile subscriptions in developing countries increased by more than 14 per cent in 2011, but growth has slowed in developed countries, where many markets are saturated.
Mobile broadband has grown even faster than fixed broadband in terms of the number of users, reaching an estimated 1.19 billion subscriptions in more than 160 countries by the end of 2011. In developing countries, mobile broadband penetration reached an estimated 8.5 per cent by the end of 2011, up from 5.3 per cent just one year earlier.
Increasing competition among different mobile broadband technologies is pressurizing mobile operators to innovate in terms of service packages and pricing. Over 80 per cent of countries have 3G networks, and more than half of them also have operational mobile WiMAX networks. So far, Long-Term Evolution (LTE) networks have relatively limited coverage and installed base, although one in ten countries has at least one local LTE network.
Some African countries (for example, Benin, Cape Verde and Côte d’Ivoire) allocated WiMAX licences before allocating 3G spectrum, as a way of optimizing spectrum use and leapfrogging directly to the deployment of advanced mobile broadband services. The regulators in these countries allocated 3G licences in late 2011 or early 2012.
In developed countries, being connected on the move, over broadband-enabled phones, is becoming commonplace. More than 80 per cent of the population in the United States, close to 70 per cent in Australia and over 40 per cent in France were connected by the end of 2011. In Japan virtually everyone is connected, and mobile phones have become a primary Internet access device. By 2015, more than 70 per cent of all mobile phones in North America and over 60 per cent in Europe are expected to be broadband enabled.
Smartphone penetration in middle-income economies is expected to grow from 47 per cent in 2011 to 63 per cent in 2015, largely driven by economies of scale in China and India, resulting in cheaper handsets and mobile broadband services.
Within regions, there are disparities in the distribution of broadband-enabled phones, with certain countries accounting for the vast share of smartphones. Figure 1 shows the distribution of broadband-enabled phones in Asia-Pacific and the Americas.
Apps for everything
There is an app for everything, from marketing your artwork to copying photos from your PC to relaxing on a high-definition virtual beach. The Apple App Store leads in mobile (smartphone and tablet) applications — currently with more than 588 000. The number of applications downloaded on individual devices worldwide is counted in billions, and almost doubles every year. The smartphone mobile messaging application provider WhatsApp sends more than a billion messages a day (using Wi‑Fi or 3G).
Beyond generating revenues for app developers and advertisers, applications create a tidal wave of data traffic over mobile networks. Recent projections show that, by 2016, smartphones will generate almost half of mobile traffic — ahead of laptops and tablets (see Figure 2). This trend is unlikely to affect fixed broadband use, and does not imply the end of fixed connectivity.
The mobile and fixed platforms will continue to evolve in parallel and deliver different value for different people with different uses, through multiple devices. End users want mobile access networks, but backbone networks are likely to use high-capacity fibre optic technologies in order to handle the explosion in data traffic.
The rise of advanced broadband (IMT‑Advanced or 4G) networks and devices is not expected to take off fully in developing countries over the next five years, while in developed countries there will be a core of around one tenth of the mobile broadband market piloting the technology by that time.
To date, only a handful of networks are operational, and their reach is limited. Hong Kong China PCCW’s “UK Broadband” launched the world’s first 3.5 GHz TD‑LTE network in London in March 2012, while China Mobile is planning to deploy some 20 000 TD‑LTE base stations across the country by the end of 2012, growing to 200 000 by 2013.
Machine-to-machine and the Internet of things
The number of networked devices overtook the global human population in 2011. According to industry forecasts, there will be 15 billion connected devices by 2015 (Intel’s 2009 estimate) or 2019 (Google’s 2011 estimate), and perhaps 50 billion by 2020 (Ericsson’s 2010 forecast) — by which time, connected devices could outnumber connected people by five to one. Cisco predicts that a growing amount of Internet traffic will originate from non-PC devices — rising from 3 per cent of consumer Internet traffic in 2010 to 13 per cent in 2015.
Detecon estimates that the machine-to-machine (M2M) market was worth some USD 5.07 billion in 2011 across a range of sectors. Other analysts predict total M2M airtime revenue to grow to USD 7 billion in 2016, up from USD 2.2 billion in 2010, while GSMA estimates that M2M could create an extra USD 1.2 trillion in revenue for mobile operators by 2020, up sevenfold from revenues in 2011. Consumer electronics will account for most of this (USD 445 billion), followed by the automotive industry (USD 202 billion), health care (USD 69 billion) and utilities (USD 36 billion).
ITU has launched an M2M focus group to study activities under way in various standards development organizations in the field of M2M service layer specifications. The ITU focus group will identify key requirements for a common M2M service layer to facilitate communications across different platforms.
Cisco forecasts that IP traffic will reach the zettabyte threshold in 2015. Much of the growth of traffic is driven by video, with 50 per cent of all consumer Internet traffic forecast to be video traffic by 2012. Growth in Internet traffic is being driven both by the increase in high-capacity services in developed markets and by the growth of broadband and Internet access in developing markets.
Industry in a state of flux
The industry is in a state of flux, undergoing transition in technologies, the emergence of new players, the displacement of revenues, and changes in business models. For example, telecommunication revenues in Africa may well reach USD 69 billion by 2016, up from USD 40 billion in 2010, according to some industry observers. Others predict a decrease in mobile market revenues in Western Europe by 2013 because of the economic situation, slower mobile uptake and price competition.
A tidal wave of data traffic generated by apps and devices such as tablet computers is pushing at the limits of existing network capacity. At the same time over-the-top services such as cloud computing and online shopping are compromising the incentives of telecommunication operators to fund costly additional network roll-out.
Internet Protocol (IP)‑based messaging via apps such as WhatsApp and Viber (mainly over smartphones) and free calling are disrupting the business of traditional telecommunication operators, who fear that their revenues will be cannibalized by over-the-top free riders using the infrastructure without investing in networks.
Innovative over-the-top players are enjoying healthy growth in revenues. Revenues from mobile app stores tripled to reach USD 15 billion in 2011, up from USD 5.2 billion in 2010. Meanwhile Facebook, the biggest social media company operating in the cloud, generated a profit of USD 1 billion from some USD 3.75 billion in revenues in 2011. Facebook derives 85 per cent of its revenues from advertising. And in May 2012, the company raised USD 16 billion through its initial public offering.
In a nutshell, Trends in Telecommunication Reform 2012 has focused on regulating the ICT sector in a broadband world. The report concludes that the nature and the reach of the ICT sector have fundamentally changed, and broadband holds the key to realizing the full benefits of the new applications, services, and business that exist in a digital society.
This article is adapted from Trends in Telecommunication Reform 2012: Smart Regulation for a Broadband World. The report was prepared by a team led by Nancy Sundberg, Youlia Lozanova and Makthar Fall of the Regulatory and Market Environment Division of ITU’s Telecommunication Development Bureau (BDT). The report can be bought from the ITU website at: www.itu.int/pub/D-REG-TTR.13-2012