Directeur de Business Unit Strategies, IDATE DigiWorld
the number of mobile customers worldwide should top the 8 billion mark by the end of 2018 (+16% compared with end of 2014) and increase by a further 200 million the following year (+14% between the end of 2015 and the end of 2019).
With global penetration more than 100% in 2014, subscriber growth is expected to gradually slow down over the next few years. The number of fixed Internet subscribers is increasing at roughly the same pace, but customer numbers are eight times smaller. The one billion mark is not expected to be reached before 2020 and traditional landlines continue to loose ground as VoIP and mobile gain ground.
The spread of broadband
the number of fixed broadband subscribers is expected to reach 900 million worldwide by the end of 2019. The number of LTE customers is shooting up, with services based on carrier aggregation no longer being limited to just the more developed countries.
Three major factors will play in favour of the spread of broadband:
• The success of bundled offers (fixed telephony, VoIP, TV, mobile telephony) and the appetite for video applications.
• The investment of telecom operators in the migration of their infrastructures to mobile or fixed broadband.
• The comfort provided by ultra-fast mobile broadband and the new uses it enables.
Revenue from telecom services
the global revenues from telecom services will grow from 1,111 billion in 2014 to 1,196 billion in 2019, representing an average annual growth of 1.8%.
• Revenues from mobile services will grow by 8% between 2015 and 2019 (+1.9% per year on average), reaching 729 billion EUR in 2019.
• Revenues associated with data transmission and Internet will grow more strongly (+18% between 2015 and 2019, i.e. +4.3% per year on average), to reach 319 billion EUR in 2019.
• The turnover of fixed telephony will continue to decline significantly (-11% between 2015 and 2019, i.e. a decline of 3% per year on average), to be at 147 billion EUR in 2018.
Disparate performances from operators in emerging countries
The top telcos in emerging countries experienced a slower rate of growth for their revenues in 2014, with the notable exception of América Móvil. China’s three telcos are reporting stagnant revenues, and China Unicom actually posted a 3.5% decrease. Their margins are come in line with industry standards: between 30% and 40% of EBITDA margins. Several of these operators are actively engaged in an international expansion into Africa and Latin America, but also into advanced markets, particularly in Europe.
European operators always in trouble
European operators continue to suffer. Virtually all of them, except for Deutsche Telekom and Telenor, saw their revenues shrink once again in 2014. Their spending on LTE and superfast fixed access networks (FTTx) has not yet paid off and helped to bolster ARPU.
For the publication of the 16th edition of the DigiWorld Yearbook (pre-order now), IDATE is organizing a conference based on the detailed analysis of the current situations and some forecasts by IDATE experts on the major digital sectors, the discussion will deal with the great trends and challenges that will disrupt the digital markets by 2025.
Director of Studies, IDATE DigiWorld
The connected object market today shows a real complementarity between the major players in terms of their current positionings, aligned with their core business.
In the longer term, however, IDATE DigiWorld anticipates that competition will grow in ferocity, around the platforms and services which are set to be the next source of revenues.
The automotive market
Around the connected car business, is key for Internet giants and telcos. Competition today is, in the main, on the platform side as both telcos and Internet giants are aiming to position themselves here today. Indeed, it is the platform that is the cornerstone of the next connected car strategy. Looking further ahead, the main competitors will most likely be OTT service providers, as they will offer services by exploiting the data generated by sensors in the vehicle – Uber-like companies are one example. Some industry incumbents are already engaged in the battle: earlier in 2016, GM invested half a billion USD in Lyft, the main competitor to Uber. The major involved players are AT&T and Verizon on the side of the telcos and Google (and Apple to a lesser extent) for Internet players.
The wellness market
This market is very recent. Telcos are absent from its value chain, with the exception of very limited volumes of cellular objects. They only focus on the distribution side, where the reselling business can grab them a sale commission on wearable objects, linked to smartphones. OTT Internet players are eying this promising consumer market for the opportunities it will offer in the near future to manipulate and monetise masses of personal data.
The healthcare market :
A specific market for a long time, its very promising market has been in the growing numbers of potential ‘clients’ as their age increases. The key objectives of healthcare applications are to optimise the treatment of disease and to save costs for national healthcare services. Even though solutions will be provided in partnership with experts, both telcos and Internet players will be push platforms and services.
The smart home market
It will be the arena for immense competition in the next few years. It is considered as a growth area for fixed telcos which are already facing competition from cablecos. On the side of the OTT Internet player, smart home applications are seen as a complementary way to follow their consumers/audience, even though they have different approaches. Competition – again, it will be heavy – will on the platform and services side as all players will be wanting to manage the data.
Today, the industrial Internet market is considered as an extension of the Industrial M2M business for telcos. The Internet giants are notable by their absence, even though some could provide cloud-based tool: Google, and Amazon with its specific IoT AWS offering, are prime examples. Analogous with traditional online services, the main threat for telcos is that they yet again become the pipe, and only the pipe. They have, however, anticipated the connectivity commodity trend by offering data platform solutions and related services. The ARPU from connectivity is very limited and the telcos expect only a small share of connected devices will be equipped with a SIM card. Before services, telcos have backed their core business, by setting their eyes on LPWA technologies (SIGFOX or LoRa) or collaborating on LPWA-like cellular ones such as the NB-IoT ahead. They are also backing the next 5G technologies, which aim to empower various verticals, including healthcare, manufacturing, smart cities and the automotive. It will be a tough battle, given that Internet giants are global by definition. Moreover, compared with traditional Web services, the main difference is that Internet giants manufacture their own objects, providing almost an end-to-end solution of product, platform and services on top. Faced with this kind of solution, traditional players in the industry will also suffer from the invasive nature of the OTT Internet players and their fierce competition.
Find out more information on "Telco's Connected Objects Strategies" in our dedicated market report
Senior Consultant, IDATE DigiWorld
Handset value chain shake up – menace or salvation for operators?
Basile Carle, lead device expert at IDATE, raises the question he addressed in his latest study: “Smartphones as we know them today – beginning with the iPhone in 2007 – have clearly enabled operators to better monetize connectivity and therefore helped to generate a return on their earlier investments in 3G network rollouts. Paradoxically they have also accelerated the transfer of a portion of telcos’ share of the value chain over to newcomers, namely handset suppliers and over-the-top (OTT) – or online – vendors. The time has come to revisit the handset subsidies question! Why should operators continue to finance a device – i.e. the smartphone – when other players capitalize more and more on that device: players who threaten to turn operators into mere providers of connectivity, dumb pipes which, although essential are in danger of becoming a commodity?”
From feature phone to Smartphone 2.0 – changes in the value chain
The advent of the smartphone 2.0 triggered a shift in the value chain and a change in business models that forced operators to rethink the way they finance mobile handsets, and this within an increasingly competitive marketplace.
The changing value chain of smartphone distribution
Source: IDATE, Rethinking handset subsidies, December 2015
As competition becomes increasingly fierce, operators have altered their approach to subsidies, largely in an attempt to streamline their sales and marketing investments, especially as it became clearly that, more and more, handset suppliers were emerging as their competitors. This resulted in different strategies from operators, one consisting in rethinking subsidies themselves the other consisting in proposing alternatives financing solution in a SIM only and commitment free world.
When thinking again on subsidies themselves, a distinction needs to be made between subsidies whose purpose is to attract new subscribers, and those used to keep existing customers. Some operators subsidise new customers’ handsets as heavily as those of existing customers when their contract is up for renewal.
Other operators, however, are focused either on keeping old customers or on acquiring new ones. The decision will often vary depending on their market share. A leading operator will tend to be more concerned with keeping existing customers, whereas a challenger will probably take a more aggressive approach to attracting new customers than to keeping its existing ones.
If some operators have decided to continue to partially subsidise their customers’ handsets in exchange for a contractual commitment, most have also introduced SIM-only plans that separate the flat monthly fee from the cost of the handset, and so freeing customers of having to sign up for a minimum contract length. While users can keep their old handset, it nevertheless remains important for operators that new customers who sign up for these plans own a handset whose features enable them to take advantage of all of the functions supplied by the network, whether 4G, carrier aggregation, VoLTE, etc. … Hence the importance of proposing new financing solutions
Impacts of new handset subsidies’ plans
This new approaches in device subsidies has also had an impact on the devices themselves. Suppliers of high-end handsets initially suffered a drop in sales as customers were put off by the price of their products once subsidies were removed. But these companies have adapted to the new situation by introducing their own financing solutions.
By the same token, this shift has enabled the emergence of new players in the marketplace. Companies that present themselves as local – i.e. national brands that created localised versions of what are often Chinese products – have forged themselves a position in the low-end handset segment, and are working to build up the market for handsets sold in retail outlets rather than by operators’ themselves.
Meanwhile, operators have been gradually going back to developing their own brand of handset. Contrary to the first wave of phones that carried operators’ brands, the goal here is less to sell handsets that are more or less locked into the operator’s own services than to get a better handle on costs. These branded products enable operators to earn a slightly higher margin than they do selling OEM products. So their appeal applies as much to subsidised solutions as unsubsidised ones.
By the time 5G is deployed, the (distant) prospect of seeing handsets become active components in the network’s operation – e.g. for relaying signals to the edge of the cell or to a dead zone – could trigger another rethink of handset financing. As the devices become part of the network’s equipment, it could once again be in operators’ interest to help finance them.
Get more insights on changing handset value chain and impacts for operators and manufacturers, through our dedicated market report
Debate over the crucial role that trust will play in the digital economy’s future
The 38th annual DigiWorld Summit will run from 15 – 17 November 2016, and have as its central theme: The Internet of Trust. It will be an opportunity to engage in a meaningful international debate over digital trust issues – starting with security and privacy – which have become major sources of concern for all of the ecosystem’s stakeholders.
As the number of reported cyber-attacks worldwide is growing by close to 40% a year, we expect that upcoming stages in digital technologies’ evolution will only amplify the phenomenon. And this to such an extent that any future scenario is possible: from a continuation of the current chaos to a breakdown in trust that would lead to the construction of a new digital economy, which will no doubt differ in many respects from the one we know today.=
• Are we reaching a tolerance threshold for online trust?
• How can veteran digital industry players (equipment suppliers, telcos, IT companies) capitalise on the current climate?
• Are verticals threatened by the situation or, on the contrary, on the winning side of trust and security issues?
• Do we need a new regulatory framework to govern, or reassure, market players and consumers?
The need for a profound reassessment of security and trust issues seems inevitable: massive increases in spending on security solutions, rise in protectionist behaviour (use of ad-blockers, battle against botnets, etc.), avoidance tactics (piracy and circumvention), clarification of the terms governing access to private data and the management of digital identities and online reputation… There is no shortage of issues and threats affecting the rate of adoption of digital technologies, but which could also prove to be opportunities for all market players.
> Use and misuse of trust
Will trust be a key parameter in tomorrow’s Internet?
• The privacy paradox: Usage is high, trust is low: Are we reaching a tolerance threshold for online trust?
• Digital trust at the heart of customer relations? How do Internet companies and verticals gain their customers’ trust?
• Can we trust digital world players? Can the Internet giants continue to be both the arbiters and targets of their users’ trust issues?
• Can the digital world trust us? Focus on piracy: Can businesses trust their customers?
> Trust technologies
A broad field of innovation for market leaders and start-ups
• Innovative security solutions: biometrics, etc.: What can we expect from the next wave of innovations in the arena of cyber security and data control?
• Blockchains and decentralized trust: Will today’s trusted third parties be cut out of the loop?
> Trust altering the digital value chain
Will trust be a game-changer?
• Trusted third parties & digital coaches: Will we see new trusted third parties emerge (banking, post, health…)
• Do we need more secure enablers? New growth enablers for telecom and IT industry leaders?
• What role for telcos? Monetise data or become trusted third parties?
> Business model crash test
Will the current and future business models for trust-sensitive advertising and IoT markets be suited to the new climate?
• Real time biding and programmatic ad buying: Can online advertising survive and adapt to the loss of trust?
• Big Data and the Internet of Things: Will successful trust management be key to the future of IoT and monetisation initiatives?
> Regulation of trust, and trust in regulation
How can regulation stimulate usage and innovation while also safeguarding against threats and transgressions in the digital economy?
• Trust and anti-trust: what about platforms? Can and must online platforms be regulated?
• Safe Harbor and Privacy Shield – the new deal: Can a balance be struck between conflicting European and US positions?
• Cybersecurity and terrorism: Are the future credibility of and trust in the digital economy bound up with the fight against global threats?
A unique international forum for debate and networking
> Thematic Forums
> DigiWorld Week
A full week of symposiums and partner events (13 – 21 November 2016)
> The DigiWorld Awards
Recognising the best digital start-ups created by French entrepreneurs abroad
Key facts & figures
Europe’s trailblazing conference on the digital economy
The DigiWorld Summit is an annual event organised and hosted by IDATE experts, with the support of DigiWorld Institute members. Every year it holds ultra high-level international debates on the core issues shaping the digital economy, with the finest speakers and industry insiders.
• Participants: 1,200 participants at the DigiWorld Summit and more than 5,000 at DigiWorld Week
• Speakers: 120 speakers from around the world; 400 at DigiWorld Week
• Partners and sponsors: over 100 partners and sponsors (businesses, public sector, media…)
• Social media: 15,000 tweets (trending topics) and 2,000 live followers
Speakers in 2015 included: Jimmy WALES, Founder, Wikipedia – Peter VERHOEVEN, Managing Director EMEA, Booking.com – Alex SCHLEIFER, Head of Design, Airbnb – Eric DENOYER, CEO, Numericable-SFR – Dan JUDKINS, Head of Global Design and Development, Hasbro Inc. – Carlo d’ASARO BIONDO, President EMEA strategic relationships, Google – WEN Rui, Director of national Business Development, Youku Tudou – Sebastien SORIANO, Chairman, ARCEP – Bruno LASSERRE, Chair, French Competition Authority… > for more, go to www.digiworldsummit.com
Director of Studies, IDATE DigiWorld
A Eur 30 billion worldwide market driven by automotive, consumer electronics & utilities
This IDATE DigiWorld report, published along a worldwide database, analyses the overriding trends and changes taking place in the M2M market around the globe. It explores the driving forces behind the market's growth and transformation, including an examination of major market trends, plus volume and value forecasts up to 2019 by geographical area and 25 countries.
Over the next few years, the M2M market will clearly be driven by three key verticals: automotive, consumer electronics and utilities.
• In recent years, the market has been driven by a few major verticals like Fleet management, Industrial asset management and Security. But the overall market in volume remains small, with potential for each market in tens of millions.
• In the upcoming years, there will be new major verticals (including Automotive, Connected consumer electronics and Utilities). Potential volume is definitely higher by expanding towards consumer objects (billions) rather than industrial objects only. Moreover, regulations will stimulate automotive in Europe and utilities though public policies in some regions worldwide. However, while they will theoretically drive the market, certain barriers could obstruct growth in these sectors. In the short term, some applications in these key verticals are recurrently delayed (as with the eCall regulation in Europe which is now expected to be rolled out from October 2018) and have a potential impact on the traditional M2M market. Moreover, the utilities market is seen as less attractive with business opportunity being somewhat limited for Telcos (concentrator will only be cellular connected). UK is a key exception as a cellular concentrator will be installed in almost all households (in two main regions out of the three).
• In the future, the market will be focused on emerging segments like healthcare with remote patient monitoring and smart homes.
The M2M market is still growing very fast
In 2014, the number of active M2M modules (all technologies included) reached 1.2 billion units. They will top over 4.1 billion by 2019 with a 29% CAGR.
• In 2015, the cellular market is expected to represent 290 million modules worldwide for a total market of 30 billion EUR. The annual growth of the M2M market is around 10% in value and 26% in volume, compared with 2014. Most revenues will come from software and IT services.
• Asia-Pacific will dominate Europe and North America in volume only. Europe will still lead in value, followed by Asia-Pacific. Since 2012, China has led the M2M world and has overtaken the USA in terms of cellular modules installed.
M2M players seeking business opportunities beyond their core expertise
M2M offers them attractive opportunities for Telcos, as, despite low and declining ARPU, projects offer high lifetime value, reduced churn rate and average deals representing thousands of SIM cards. Connectivity alone should represent more than 20% of total SIM cards for European telcos. Telcos are also trying to consolidate and reinforce their position on connectivity by looking at partnerships with LPWA providers, allowing them to address emerging applications.
Representing two thirds of the market, IT services are key in M2M and all players along the value chain are therefore attempting to position themselves by grabbing a piece of this lucrative market. Main players are looking at new services based on the cloud and Big Data (though analytics mainly), allowing them new business opportunities.
Finally, module providers are also challenged to break even in a market where unit prices are falling. In addition to services, they also attempt to offer connectivity services helping them provide end-to-end offering (MVNO acquisitions by Sierra and Neul purchased by Huawei).
Find out more details regarding market M2M in our dedicated market report
Head of Wireless Business Unit
Regional initiatives on 5G are already under way in Japan, South Korea, China, USA and Europe. Cooperation is also being established between these regional initiatives in order to foster R&D and standardization work.
Even though standardisation for 5G has not yet started, there is already a broad consensus on what kind of performance 5G technology will have to support.
• 5G will have to be suited to a whole raft of services, ranging from consumer services to any vertical market in the industry, going through public safety organisations. Whereas 4G was rather conceived purely as a mobile broadband technology, 5G will have to be flexible enough to allow new services or business models to emerge.
• 5G will thus have to function on any kind of spectrum, be it low or very high spectrum, shared, licensed or unlicensed. It will need to collaborate more easily with other technologies (terrestrial or not), perform perfectly in both densely-populated and rural areas, and operate in traditional cellular mode as well as in new mode, such as in mesh/relay mode when necessary.
• 5G will also have, of course, to be more spectrally efficient but also more energy efficient to allow new use cases, new devices or objects to emerge and communicate with the resources available. Together with energy efficiency, cost efficiency will play an important role in 5G.
• In terms of concrete specifications, METIS, the EU-funded project, defines 5G as a technology to support mobile data volumes 1,000 times higher per area; numbers of connected devices 10 to 100 times higher; typical user data rates 10 times to 100 times higher; battery life 10 times longer for low power MMC; and end-to-end latency five times lower.
5G will not just be about improved throughputs but about the good throughput for the right user, on average and not just in theory. Although 4G has improved throughputs quite a lot as compared to 3G, there is a sizeable difference between peak throughputs and average throughputs. As an example, with 5G, the target is to provide 50 Mbps connectivity everywhere, thus addressing both coverage and capacity issues.
The efforts to reach standardisation of 5G will begin with the Release 14 of LTE but will continue in further releases. The 3GPP has started to make plans for its upcoming standardisation with the submission of the technology to the IMT 2020 process in ITU-R. Under 3GPP plans, work on requirements should start by the end of 2015, lasting until end-2017, when proposals should begin for standardisation work to gradually start in the first half of 2018, lasting until 2020. This standardisation process should first enable 5G deployment below 6 GHz while the final specification will have to enable the support for all the candidate bands.
The IMT-2020 requires that the technology be submitted by June 2019 with a high-level description, and by October 2020 with a complete description. The first submission is aimed at enabling an initial evaluation of the technology against the IMT 2020 requirements. The initial plans of 3GPP are to have the technology in frozen stage by December 2019.
Looking further into details, the various initiatives worldwide do agree, relatively speaking, on the same roadmap to be followed. There should be an initial focus on mobile broadband use case in order to secure the transition between LTE and 5G since this is the main LTE use case.
In this first phase, the focus would be on lower frequencies but there does not seem to be any consensus on what ‘lower frequencies’ means. Some players – a minority of them, it should be said – consider that these development and standardisation efforts should focus on frequencies below 6 GHz while others, such as Ericsson, Nokia and Qualcomm, think that the frequency bands between 3 and 30-40 GHz should be addressed straight away in the first phase while the second phase would address the whole frequency range envisioned, i.e. from 1 GHz to 100 GHz.
Learn more about the nascent 5G framework in our in-depth market report
Directrice d'études, IDATE DigiWorld
What will the Internet look like in Africa and the Middle East?
The IDATE DigiWorld teams of experts have published the second edition of the special report exploring the ins and outs of the digital economy in Africa and the Middle East
By and large, Africa and the Middle East are experiencing the same market shifts that telecom services in the West have undergone over the past two decades, albeit in their own particular way: slowing growth rates due to a relative saturation of the mobile telephony market, which is the sector’s chief driving force, combined with often stiff competition that weighs on margins. And a body of users that still remains to be conquered who have more modest purchasing power than operators’ existing customers.
Sub-Saharan Africa: the world’s fastest growing Internet access market
Forecast average annual growth rates
Under these circumstances, the transition to mobile data services, thanks to expanding 3G coverage and the deployment of 4G, marks a natural and promising progression. We expect to see the strongest increase in Internet access of anywhere in the world, particularly in sub-Saharan Africa, both because these countries lag so far behind and because of growing demand amongst the local population. The availability of smartphones that are affordable for a large percentage of the population, combined with initiatives such as Zero rating for basic service bundles, are helping things along. As a result, high-speed mobile density could climb from 20% in 2015 to 44% in 2019. However, it is not yet certain that this growing Internet market will allow the region’s telecom services industry to maintain the roughly 5% annual growth rate that it did from 2010 to 2014. We must also factor in demographics and steady economic growth – which, although still not strong enough, is nonetheless substantial compared to what we are experiencing in Europe – along with other elements that should enable Africa, on the whole, to avoid the long slump that telcos in Europe have suffered.
In addition to outfitting cities with Internet access infrastructure, attention needs to be paid to – and original solutions devised for – rural areas that must not be overlooked, so that the pace of the population explosion in cities can be reined in.
There is no shortage of proof that Africa and the Middle East are capable of real innovation in multiple digital economy sectors
Faced with these imperatives, the ability to finance massive investments in 3G and 4G cellular network rollouts, in national and regional backbones, and in the equipment needed for businesses (optical and satellite connections in business parks and districts, cloud solutions) require operations to be optimised so that margins can improve. Outsourcing and sharing tower infrastructures, consolidation in markets with too many players with a tiny market share, initial and ongoing training of personnel, and the search for synergies with electricity supply programmes are among the core paths to advancement that businesses and public policies will likely focus on. As in other markets, the importance of stable and balanced regulation that establishes a strong interplay of competition policies and support for investment and innovation cannot be underestimated.
Evolution of fixed and mobile usage and density
Lastly, telecommunications policies do not exist independently of the social, economic and regulatory issues surrounding usage and the development of innovative online services. We already have proof that Africa and the Middle East are capable of innovation in a number of digital market sectors. Mobile payment and money transfer solutions, in a region where banking structures are often lacking, are among the most oft cited examples, along with applications devoted to development, education, sustainable farming, managing utilities (water, electricity), health and tourism.
But we also need to add e-commerce and entertainment to the list, thanks to the first video game hubs in South Africa in particular, and those that have ties to well established film and TV production conglomerates. The countries are not all progressing at the same pace, and not all enjoy the same political stability, but our optimism forces us to see positive signs in the clusters emerging in certain markets, in the first incubators, the trading and collaboration networks being forged at the regional level, in some instances with the support of Internet heavyweights from the West now staking a claim.
Mobile density in Africa & the Middle East
Head of radio technologies & spectrum practice, IDATE DigiWorld
IDATE has just released a report on “Mobile operators’ investments”
This paper, published with the support of Ericsson and Qualcomm, investigates the level of mobile revenues, investments (Capex) and usage in Europe, as well as the interrelation between those metrics. The study compares the EU5 (France, Germany, Italy, Spain and the UK) with the other world mobile leaders, namely the USA, Japan and South Korea.
The results show that Europe is falling behind other regions in the use of mobile technology to benefit businesses and consumers and may be jeopardizing the region’s future ability to fully take advantage of evolving wireless technologies. The relative decline of revenue in recent years for Mobile Network Operators (MNOs) appears to be due to policy decisions aimed at maximizing short-term consumer benefits at the expense of long-term investment incentives. The data suggest this strategy is backfiring. The lower revenues in Europe have deterred MNOs from investing, which in turn delays the roll-out of networks and the adoption of services by consumers. Consequently, the unit costs of some services to consumers are higher than in other regions.
Investment in mobile communication infrastructure creates local employment and significantly contributes to growth, as an enabling factor for the digitalisation of other industries.
The Digital Single Market initiative is an opportunity to adopt a pro-investment and pro-innovation mobile regulatory framework, enabling Europe to lead in mobile communication through its attractive market size, growth potential and technology expertise. The findings and data of this study suggest consumers, businesses and individual European economies will benefit from policy makers’ adoption of a balanced regulatory framework that encourages investment in mobile infrastructure and technologies.
DigiWorld Summit 2015
IDATE will contribute to the debate at the upcoming DigiWorld Summit on 17, 18 and 19 November (Montpellier): “Digital Infrastructure” with:
• Michel COMBES, COO, Altice
• Thierry BOHNOMME, Senior executive Vice President, Orange Business Group
• Santiago Fernandez VALBUENA, Group Strategy Officer, Telefonica
• Alain FERRASSE-PALE, President & Managing director, Nokia France
Information & Registration:
Director of the Innovation Business unit, IDATE
VOIP and instant messaging have not harmed EU telcos
IDATE has today published a new report, which shows:
• The introduction of VOIP and instant messaging have not harmed traditional European telcos and associated overall revenues
• In fact, there appears to be a small net benefit: losses to SMS revenues have been balanced by overall increases in revenue from data-tariffs -- driven by demand for services such as VOIP and instant messaging
• While there have undoubtedly been tough challenges for traditional telcos in Europe over the last 10 years, this report shows the biggest challenges have come from EU regulation and internal competition in the telecom industry, especially for voice calls (mobile termination, roaming, transition of telcos to managed VOIP, etc…)
The report does acknowledge that there has been some impact in two specific areas in Europe:
• In countries where SMS price was artificially high (in some cases more than 10 times the price of SMS in other European countries) the decline in SMS revenues was accelerated by instant messaging services, such as Whatsapp. However in countries where SMS has been cheaper or provided as part of an unlimited tariff, Whatsapp and other instant messaging services have had negligible impact on carrier revenues.
• VOIP calls have eaten into international voice calls but the relative losses here are small and in some cases the competing VOIP services have been provided by the carrier themselves.
> Written with financial support from Google, the report is available here.
> Indepth market elements can also be found in reports regurarly published in the DigiWorld Reasearh catalogue from IDATE: “Communication Services”
Head of radio technologies & spectrum practice, IDATE
Now mainstream for MNOs and key issue for smart city
Mobile data traffic is continuing to grow fast. To cope with the data surge, MNOs are in a very complicated situation, where they need both to provide improved coverage or capacity to customers and to proceed with great caution on spending. This latest IDATE report presents the state-of-the art of the small cell and Wifi opportunities to close the gap and highlights strategies at play. It also gives the flavour of future scenarios.
Wifi is not brand-new. It has been playing a key role in releasing network congestion for years because it is not expensive. Seamless connectivity and handover between cellular and Wifi are addressed carefully. Carrier Wifi solutions that promise an enhanced customer experience and security through Passpoint/Hotspot 2.0 are currently implemented by players. Wifi has also been widely adopted to provide voice services through Wifi calling, also known as VoWiFi.
All in all, small cell and carrier Wifi are needed for a smooth transition to 5G, scheduled at the earliest for 2020. IDATE forecasts the small cell market is at last close to take-off. We foresee a huge growth of the small cell market driven by a robust increase in mobile data traffic:
• Macrocell densification continues in Europe as population coverage has not yet reached the 95-100% range.
• Alongside macro cells, MNOs are increasingly relying on carrier Wifi and small cells to cope with mobile data surge in cost-cautious times. Small cells have extended beyond the first devices dedicated to residential use and moved to urban, enterprise and rural areas. Technical innovations facilitate the management of small cell interference with the macro network. Small cells give the opportunity to come closer to the user and to increase customer experience. They can be installed in street furniture, for instance.
• In this face-off between cellular and Wifi, different players want to take a share of the cake.
Wifi-first players appeared in 2014 in the USA with a disruptive proposition: customers are using primarily free Wifi and they switch to paid cellular when Wifi is not available.
With Wifi, cablecos are on the road to offer quad-play services. Mobile is both an additive strategy to grow into a new market segment and a defensive strategy to cement cable’s stronghold in households.
OTTs were very successful in creating innovative services and in expanding them to many different devices. With a 20 USD plan, Google Fi is able to threaten MNOs in the USA and to attract young price-sensitive customers. Apple was very successful in eating into MNO revenues with popular iPhone services.
Small cells as a strategic path to the smart city
Small cells can use existing street furniture such as lamp posts, billboards or bus stops to come closer to the customers: JCDecaux pioneered the concept of subsidizing public street furniture in exchange for rights to advertise. Installation can also be done on municipality furniture such as lighting poles and traffic lights: Philips promotes actively the LED technology. Supporting digital lamp posts, it signed a partnership with Ericsson to integrate Ericsson’s small cell equipment in lamp posts.
Towards hyper density and emergence of smart cities
Source: IDATE, Small cells and Wifi offloading, August 2015
Find out more information on "Small cells and Wifi offloading" in our dedicated market report
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