Director of Studies, IDATE DigiWorld
A market that could more than double by 2025 to reach €3,000 billion
IDATE DigiWorld has released the latest edition of its forward-looking report on the future of Internet and telecom markets. It delivers four development scenarios for the digital economy along with a quantitative forecast up to 2025.
When trying to picture the future of the industry for the purposes of this study, we identified a number of developments with the power to influence various dimensions of the digital economy. The starting point was to divide these trends into two categories: key trends and major uncertainties.
Key trends are developments that have clearly emerged and for which it is possible to assume, with reasonable certainty, how they will play out over the years ahead.
• For instance, with respect to technologies, one element that is quite certain is that network technologies will deliver better performance ten years from now than they do today. Even though 4G is still being rolled out and the 5G standard is not yet fully defined, it seems clear that 5G will deliver higher bandwidth, lower latency and better efficiency in terms of energy and spectrum usage than previous standards.
• Beyond this, looking at usages, the trend towards mobile will surely last. The adoption of smartphones, tablets, wearables and other connected devices (including cars) will continue to be on the rise and make mobile by far the dominant way to access the Internet.
• Business models and regulatory trends are also to some extent predictable. The value chain will continue to evolve with digital products cutting traditional players out of the loop. Regulation is very likely to shift towards more ex-post control and more symmetric obligations between players at the same layer of the value chain, but across layers, as with OTTs and telcos.
The major uncertainties can be categorised in a similarly broad way.
• For example, certain technological evolutions or changes in business models might push the industry to develop in one direction or another. The Internet of Things allows connecting any object to the Internet and may unleash enormous innovation potential. Yet, despite the maturity of its technologies, the business model remains largely unclear today.
• Consolidation in the telecom sector will continue but the end game is not yet predictable. Will consolidation remain a national phenomenon or will the market be dominated by a few regional, perhaps even global, players and who could they be?
• Will consumers continue to prefer paying for ‘free’ Internet services with personal data, or will they ultimately adopt more privacy-conscious paid offers?
In order to bring all these different elements together, four contrasting yet plausible scenarios for the "digital economy" industry in 2025 are developed in this study, identified as Mall, Open, Automated and Trust. They are projected against a two-by-two matrix whose axes are defined so as to capture a very heterogeneous "digital economy" industry, yet sufficiently focused to give discussion some meaningful guidance.
• One axis is the intensity with which personal data are being used. The intensity of personal data usage is an indication of the range of services telcos and Internet players will provide.
• The other dimension is the presence of enablers in the market. Enablers provide rather specialised solutions, which other companies can leverage to build their own businesses on.
Four development scenarios for the digital economy
Combining these different hypotheses allowed us to establish the four most plausible future scenarios:
• “Mall” scenario: Digital economy players adopt a strong focus on retail and customer owner-ship, seeking to be the one-stop user shop for all things digital, including content and devices. There is full-blown competition between Internet players and the telcos, each of them aggregating and marketing a branded bouquet of digital products and services.
• “Open” scenario: This digital economy ecosystem features seamless inter-operability and openness: open access, open innovation and open data. The Internet market is richly innovative and competitive. With token loyalty, users migrate to other innovative applications or services. Telcos focus on providing retail and whole-sale connectivity, with specialised services.
• “Automated” scenario: Sales, service production and customer care become largely softwarised. Customer requests configure service patterns automatically. Sophisticated data analytics are used mainly for internal purposes. Players leverage open standards and generic solutions to implement low-cost production.
• “Trust” scenario: This scenario comes to challenge the digital world as we know it, with rising insecurity and cyber-surveillance. Users rely on only a handful of players able to provide them with high levels of security and data protection, thanks in large part to technologies developed in-house. Business models based on targeted advertising and the public cloud both lose ground, while security solutions and paid services are on the rise.
Digital economy 2025: scenario matrix
Source: IDATE, The Digital Economy in 2025, January 2016
A market set to double over the next decade
Departing from a global market worth close to €1,500 billion in 2015, each scenario sketches out a very different value generating potential between now and 2025. The most optimistic “Mall” scenario forecasts a market that will double in value, climbing to close to €3,000 billion – which translates into average annual growth of 7% – whereas under the most pessimistic “Automated” scenario the market still grows to €2,200 billion by 2025, or by an average 4.2% a year
The market’s forecast breakdown, between Internet services on the one side and telecom (access) services on the other, also varies substantially, ranging from 49% for telecoms under the “Open” scenario to 60% under the “Trust” scenario. Of course, compared to the more than 75% share in 2015, this corresponds to telecom services steadily losing market share to Internet services.
Value growth for Internet and telecom services markets, by scenario, 2014-2025
Source: IDATE, The Digital Economy in 2025, January 2016
More information on The future of Telecom and Internet ecosystems in our report "Digital Economy 2025"
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