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Telecoms Industry


Major Industry Trends

Growing Popularity of Mobile Threatens Fixed-Line Sector

The telecoms industry can be divided into two principal sectors: fixed-line services, and mobile services. The mobile sector has proved the main engine of growth over the past decade, and it has proved a boon to many consumers in emerging economies with little or no access to fixed-line services.

The growth of mobile services is also threatening the position of traditional fixed-line operators in developed economies—particularly with the advent of smartphones, which combine the abilities of a powerful computer with the phone and allow users to access the Internet as well as simply making calls and sending texts. Meanwhile, mobiles are converging with tablets. Tablets are now available in seven-inch screen form factors, with some smartphones pushing up to a five-inch screen, and “voice” and “content consumption” patterns as computing appliance functions are also converging across mobiles and tablets.

New Mobile Technologies

In October 2013, IT research and advisory firm Gartner outlined the top technologies and trends that will drive mobile phones and other segments of the rapidly converging IT sector in 2014. Gartner’s findings are summarized in the following sections.

Mobile Device Diversity and Management

By 2018 the growing variety of devices, computing styles, user contexts, and interaction paradigms will make “everything everywhere” strategies unachievable. The unexpected consequence of bring your own device (BYOD) programs is a doubling or even tripling of the size of the mobile workforce. This is placing tremendous strain on IT and finance organizations. Company policies on employee-owned hardware usage need to be thoroughly reviewed and, where necessary, updated and extended. Most companies only have policies for employees who access their networks through devices that the enterprise owns and manages. Gartner says that organizations should set policies to define clear expectations around what employees can and can’t do and that in doing so they should balance flexibility with confidentiality and privacy requirements.

Mobile Apps and Applications

Gartner predicts that, through 2014, improved JavaScript performance will begin to push HTML5 and the browser as a mainstream application development environment. It recommends that developers focus on creating expanded user interface models, including richer voice and video functionality that can connect people in new and different ways.

Apps will continue to grow while applications will begin to shrink. Apps are smaller and more targeted, while a larger application is more comprehensive. Developers should look for ways to join apps together to create larger applications. Building application user interfaces that span a variety of devices requires an understanding of fragmented building blocks and an adaptable programming structure that assembles them into optimized content for each device. The market for tools to create consumer and enterprise facing apps is complex, with well over 100 tools vendors. For the next few years no single tool will be optimal for all types of mobile application, and thus Gartner believes that organizations should expect to employ several. It adds that the next development in user experience will be to leverage intent, inferred from emotion and actions, to motivate changes in end-user behavior.

The Internet of Everything

The Internet is expanding beyond PCs and mobile devices into business assets such as field equipment, and into consumer items such as cars and televisions. Yet, Gartner adds, most enterprises and technology vendors have still to explore the possibilities of an expanded Internet and are not operationally or organizationally ready to do this.

Imagine digitizing the most important products, services, and assets, says Gartner. The combination of data streams and services created by digitizing everything creates four basic usage models: manage; monetize; operate; and extend. These four basic models can be applied to any of the four “internets”—people, things, information, and places. Gartner advises enterprises to not limit themselves to thinking that only the Internet of Things (i.e. assets and machines) has the potential to leverage these four models. Enterprises from all industries—heavy, mixed, and weightless—can make use of these four models.

Hybrid Cloud and IT as Service Broker

Bringing together personal clouds and external private cloud services is an imperative, says Gartner. Enterprises should design private cloud services with a hybrid future in mind and make sure that future integration and interoperability are possible. A hybrid cloud computing service is one consisting of some combination of private, public, and community cloud services from different service providers.

Hybrid cloud services can be composed in many ways, varying from relatively static to very dynamic. Managing this composition will often be the responsibility of something filling the role of a cloud service broker (CSB), which handles the aggregation, integration, and customization of services. Enterprises that are expanding into hybrid cloud computing from private cloud services are taking on the role of a CSB.

Terms like “overdrafting” and “cloudbursting”—automatically adding or subtracting computing capacity to handle varying workloads—are often used to describe what hybrid cloud computing will make possible. However, the vast majority of hybrid cloud services will initially be much less dynamic than that. Early hybrid cloud services will likely be more static, engineered compositions (such as integration between an internal private cloud and a public cloud service for certain functionality or data). More deployment compositions will emerge as CSBs evolve—for example, private infrastructure as a service (IaaS) offerings that can access external service providers based on policy and utilization.

Cloud–Client Architecture

Gartner believes that cloud–client computing models are shifting. In the cloud–client architecture, the client is a rich application running on an Internet-connected device, and the server is a set of application services hosted in an increasingly elastically scalable cloud-computing platform. The cloud is the control point and system or record, since it holds all the data plus the applications and the billing records showing usage in a pay-per-use model. Applications can span multiple client devices and are accessed from the cloud via the internet or downloaded to the client device as mini apps. The client environment may be a native application or browser-based; the increasing power of the browser is available to many client devices, mobile and desktop alike.

The robust capabilities now offered by many mobile devices, the increased demand on networks, the cost of networks, and the need to manage bandwidth use create incentives, in some cases, to minimize the computing and storage footprint of cloud applications and to exploit the intelligence and storage of the client device. However, the increasingly complex demands of mobile users means that apps will demand increasing amounts of server-side computing and storage capacity, says Gartner.

The Era of Personal Cloud

The personal cloud era will mark a power shift away from devices toward services. In this new world the specifics of devices will become less important for the organization to worry about, although the devices will still be necessary. Users will use a collection of devices, with the PC remaining one of many options, but no one device will be the primary hub. Rather, the personal cloud will take on that role. It will be access to the cloud and the content stored or shared from the cloud that will be managed and secured, rather than the devices themselves.

Software-Defined Anything

As Gartner explains, software-defined anything (SDx) is a collective term that encapsulates the growing market momentum for improved standards for infrastructure programmability and data center interoperability driven by the automation inherent to cloud computing, DevOps, and fast infrastructure provisioning. (DevOps basically refers to work procedures that enhance communication and collaboration between software development and IT operations within an enterprise to speed up software production and avoid glitches.) As a collective term, SDx also incorporates various initiatives like OpenStack, OpenFlow, the Open Compute Project, and Open Rack, which share similar visions.

As individual SDx technology silos evolve and consortiums arise, look for emerging standards and bridging capabilities to benefit portfolios, but challenge individual technology suppliers to demonstrate their commitment to true interoperability standards within their specific domains, advises Gartner. While openness will always be an objective claimed by vendors, different interpretations of SDx definitions may be anything but open. Vendors of SDN (network), SDDC (data center), SDS (storage), and SDI (infrastructure) technologies are all trying to maintain leadership in their respective domains, while deploying SDx initiatives to aid market adjacency plays. Gartner says that vendors who dominate a sector of the infrastructure may only reluctantly abide by standards that have the potential to lower margins and expose them to competition, even when the consumer would benefit from the greater simplicity, cost reduction, and efficiency conferred by consolidation.

Web-Scale IT

Web-scale IT is a pattern of global computing that delivers the capabilities of large cloud service providers within an enterprise IT setting. Large cloud service providers such as Amazon, Google, Facebook, etc., are reinventing the way in which IT services can be delivered. Their capabilities go beyond scale in terms of sheer size to also include scale as it pertains to speed and agility. If enterprises want to keep pace, they need to emulate the architectures, processes, and practices of these exemplary cloud providers.

Gartner calls the combination of all of these elements “web-scale IT.” Web-scale IT looks to change the IT value chain in a systemic fashion. Data centers are designed with an industrial engineering perspective that looks for every opportunity to reduce cost and waste. This goes beyond redesigning facilities to be more energy efficient to also include in-house design of key hardware components such as servers, storage, and networks. Web-oriented architectures allow developers to build very flexible and resilient systems that recover from failure more quickly.

Smart Machines

Gartner believes that, through 2020, the smart machine era will blossom, with a proliferation of contextually aware, intelligent personal assistants, smart advisors (such as IBM Watson), advanced global industrial systems, and public availability of early examples of autonomous vehicles. The smart machine era will be the most disruptive in the history of IT. New systems that begin to fulfill some of the earliest visions for what information technologies might accomplish—doing what we thought only people could do and machines could not—are now finally emerging.

Individuals will invest in, control, and use their own smart machines to become more successful. Enterprises will similarly invest in smart machines. Tensions between consumerization and central control will not abate in the era of smart machine-driven disruption. If anything, smart machines will strengthen the forces of consumerization after the first surge of enterprise buying commences, Gartner concludes.

3D Printing

Finally, Gartner says that worldwide shipments of 3D printers are expected to grow 75% in 2014 followed by a near doubling of unit shipments in 2015. While very expensive “additive manufacturing” devices have been around for 20 years, the market for devices ranging in price from US$500 to US$50,000, and with commensurate material and build capabilities, is nascent yet growing rapidly. The consumer market hype has made organizations aware of the fact that 3D printing is a real, viable, and cost-effective means to reduce costs through improved designs, streamlined prototyping, and short-run manufacturing.

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Market Analysis

Smartphones Selling Well

Worldwide mobile phone sales to end-users totaled 1.8 billion units in 2013, an increase of 3.5% from 2012, according to Gartner. Users bought 490.3 million mobile phones in the fourth quarter of 2013, an increase of 3.9% compared with the same quarter in 2012. In addition, 2013 was the year in which worldwide sales of smartphones surpassed sales of the more basic (and generally cheaper) feature phone devices for the first time, with 968 million smartphone device units sold to end-users in 2013 out of a total of 1.8 billion mobiles sold. The overall global mobile device total was up 3.5% on 2012’s figure.

Gartner says that the tipping point for smartphones and feature phones was reached in the second quarter of 2013, when smartphone sales outstripped feature phone sales globally for the first time. At that point, Android accounted for 79% of the market. Overall in 2013, sales of smartphones accounted for 53.6% of overall mobile phone sales.

Smartphone sales grew 36% in the last quarter of 2013, taking a 57.6% share of overall mobile phone sales in that quarter, up from 44% year over year. That’s a slightly lower growth than smartphones were seeing in the second quarter (46.5%), but sales of smarter portable handsets that let users download third-party apps still outstripped sales of feature mobiles throughout the year.

Gartner notes that mobile sales in saturated mature regions fell due to weaker demand during 2013, with emerging markets providing the engine for growth. Smartphone growth for the year was led by their adoption in Latin America (which had a 96.1% regional growth rate), the Middle East and Africa, Asia-Pacific, and Eastern Europe, where sales grew by more than 50% in the fourth quarter. The country with the highest individual smartphone sales growth was India, which turned in a 166.8% increase in the fourth quarter. China also contributed significantly to global smartphone sales, with a rise of 86.3% in sales during 2013.

Android OS’s 2013 global market share in 2013 amounted to 78.4%, compared to 15.6% for Apple’s iOS and just 3.2% for Microsoft’s Windows Phone platform (although the “third ecosystem” grew its global share). BlackBerry shrank to a marginal 1.9%.

Gartner said that it expected sales of Android phones alone in 2014 to approach the billion mark. However, it noted that “While the top three mobile manufacturers are dominating the global mobile phone market, their share collectively fell in the fourth quarter of 2013 and yearly as Chinese and regional brands continue to raise their share.”

Samsung’s dip in share was attributed to a saturated high-end smartphone market in developed regions, where its Galaxy-branded flagship handsets have previously been engines of growth. Gartner said the company needs to continue to develop its high-end handset offering, but that it also needs a clearer value proposition in the crowded mid-range, with simpler interfaces that stand out on more than price.

Although Apple achieved record smartphone sales in the fourth quarter of 2013, its overall smartphone market share declined in the quarter and the year. However, as smartphones took the majority crown from mobile phones in general, Apple increased its portion of the latter pie.

Gartner also notes that Apple added Japanese carrier NTT Docomo in September 2013 and inked a deal with China Mobile in the fourth quarter—deals which it expects to help raise iPhone grow in Asia.

Third-placed Chinese telecoms giant Huawei grew its smartphone sales 85.3% in the fourth quarter to retain its bronze position, year over year, with Gartner noting that overseas expansion delivered strong results for the company in the fourth quarter, with growth in the Middle East and Africa, Asia-Pacific, Latin America, and Europe.

Another Chinese phone vendor, Lenovo—which acquired Motorola from Google in February 2014—also saw some strong growth in the fourth quarter (63.1%) and in 2013 in general (102.3%). Gartner expects the Motorola acquisition to give Lenovo an opportunity to expand in the Americas and the patent protection to expand rapidly across the global market.

Smartphones are expected to continue to drive overall sales in 2014, with an increasing number of manufacturers realigning their portfolios to focus on the low-cost smartphone sector. That means that sales of high-end smartphones will slow as rising sales of low- and mid-price smartphones in faster-growing emerging markets shift the product mix to lower-end devices. And that in turn will lead to a decline in average smartphone selling price and a slowdown of revenue growth.

Fixed-Line Sector

The number of fixed-line subscribers around the world as a proportion of the population has been in decline since 2005, according to the International Telecommunication Union (ITU). The number of mobile broadband subscribers overtook the number of fixed-line subscribers globally in 2010. The figure for fixed-line subscribers amounted to an estimated 16.5 per 100 persons in 2013, down from 16.9 in 2012 and 19.1 in 2005, according to the ITU’s World Telecommunication/ICT Indicators database.

By contrast, there were 96.2 mobile phone subscriptions per 100 persons in 2013, compared to 91.2 in 2012 and 33.9 in 2005. Households with Internet access amounted to 41.3% in 2013, up from 37.4% in 2012 and 18.4% in 2005, while 38.8% of individuals used the Internet in 2013, up from 15.8 in 2005. New information and communication technologies (ICTs) continue to penetrate countries in all regions of the world, as more and more people are getting connected. 2013 saw persistent growth in ICT uptake worldwide, with an increase in all key indicators except the number of fixed- telephone lines, according to the ITU.

Due to the ubiquity of mobile telephones, the introduction of mobile broadband services in the majority of countries in the world, coupled with the availability of smartphones and tablet computers, has sparked a steep increase in mobile broadband subscriptions, which amounted to 29.5 per 100 persons in 2013, compared to 91.2 in 2012 and just 4 in 2007, the first year for which figures are available. The trend away from traditional mobile cellular services, such as voice and SMS, toward mobile web services and uptake is gradually shifting mobile traffic volumes from voice to data, with all that this implies in terms of speed, price, available spectrum, revenue, and investment. At the same time, fixed broadband Internet is still growing continuously—albeit at lower rates in developing than in developed countries, where mobile broadband services are fulfilling the demand for Internet access.

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Further reading on the Telecoms industry

Report:

Websites:

  • CCS Insight, market information, analysis, and intelligence for companies focusing on the mobile and wireless sector: www.ccsinsight.com
  • Gartner, IT research: www.gartner.com
  • Informa Telecoms and Media, business intelligence and strategic services for the global telecoms and media markets: www.informatandm.com
  • iSuppli, information on the electronics industry value chain: www.isuppli.com

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