Australian handset trends showing need for supporting network upgrades

December 22nd, 2014, by

A number of trends in Australia’s handset market have emerged during 2014. By mid-year the number of mobile subscribers with internet access via mobile handsets reached almost 20.6 million. This represented a 4.7% growth year-on-year. However, the volume of data increased 97% in the period, with mobile internet subscribers on average downloading 630MB of data per month, or 1.9GB per quarter, representing a 90% increase year-on-year.

Clearly this growth is associated with the rapidly expanding LTE networks being deployed by operators. Telstra saw an 86% increase in the number of subscribers using its 4G services in the year to June 2014, while Optus reported a 124% increase. For its part, Vodafone now has more than one million 4G subscribers. This growth will continue into 2015 when Optus and Telstra will be free to make use of their 700MHz concessions nationally. Thus far they have been allowed to deploy LTE in this band in a number of regions on a trial basis.

In addition, smartphone market growth is very much a recycled affair, with new devices being purchased by existing users every 12 to 18 months. This is partly due to the longevity of battery life, the ability of phone batteries to hold charge, but there are also considerations of utility and fashion. Of all smartphones sold in 2014, perhaps 1.5 million will be to users acquiring a smartphone for the first time, either as a new market entrant or when upgrading from a feature phone.

As for the tablet market, a characteristic of Australian homes in recent months has been the adoption of two or more tablets. This reflects a consumer shift wherein tablets, partly due to their size and portability, are viewed as personal rather than shared devices. As such, the personal nature of tablets showcases that they are predominantly used for viewing video rather than for work.

In addition, a new market in phablets (devices with a screen size of between 5.5 and 6.9 inches) is emerging. This remains a nascent market, but in coming years manufacturers will offer a wider range of such devices to capitalise on the versatility of smartphones while exploiting consumer preference for larger screens. There is also an emerging trend in ‘wearables’, with over one million smartwatches and fitness bands sold in Australia in the first six months of 2014. There are only a few products available as yet, though by 2015 many more editions of smartwatches will become available. The newly released iWatch is naturally attracting Apple buyers, while a number of manufacturers are marketing devices for the Android platform. For more detail and analyses on these developments see Australia – Mobile Communications – Smartphones, Tablets and Handset Market

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Our future rests on e-health and e-education

December 18th, 2014, by

With the rise of digital platforms, the world is rapidly changing. In newspaper and book publishing, TV and radio, film, music, and other forms of media, we see that the walls that protected organisations within traditional models are crumbling. Yet, despite the obvious need to move with the times, many professionals and organisations are still grappling with the digital economy and questioning the impact it will have on them – or, even worse, are ignorant about it. In many cases, their own consumers are well ahead of them. The public sector is also seriously affected; it should learn from the problems in other areas, especially book and newspaper publishing. Healthcare and education are classic examples here.

Throughout the world, a significant portion of GDP is spent on healthcare. New technologies are increasing life expectations and improving our lifestyle. The cost of this, however, is enormous and it is difficult to finance these huge advancements through the public health systems. BuddeComm believes that the alternative to not embracing e-health is to accept a significantly inferior healthcare service in the future. Countries that are lagging in broadband infrastructure developments are going to face, not just a telecoms dilemma – but, more importantly, they are going to face a health crisis.

In countries with a clear policy for an advanced broadband infrastructure (i.e. National Broadband Networks/NBN), we see e-health emerging to allow us to enjoy these advances in medical technology at more affordable costs. On truly high-speed broadband networks, E-health is rapidly shaping up as one of the key killer apps. Millions of people around the world can potentially benefit from e-health applications. Cost savings through e-health are expected to be between 10% and 20% of total healthcare costs.

Education is another sector where digital economy plays a vital role. The use of IT and telecommunications technology within educational environments is set to increase dramatically as high-speed fibre-based broadband becomes more widely available. Simultaneously, the capability of internet services devoted to distance education is set to increase enormously over the next decade as well.

With smartphones and other mobile devices proliferating around the world, people are finding more and more uses for these tools that have become practically an extension of the self. In health and education, the use of mobile devices opens up unforetold possibilities. Without a doubt, the future of the world is tied to this small revolutionary tool, which has radically changed the way we think and interact with our environment. The potential of mobile devices is staggering – they are with us everywhere, able to provide performance support, knowledge checking, real-time diagnosis, medical recordings, and countless other services.

Critical elements for the future of the global digital economy include Machine-to-Machine (M2M) and Big Data. Without a doubt, there is much interest throughout the world in the M2M market. But what we are seeing is only what is happening on the surface. Most of the M2M activities are taking place unnoticed. As for Big Data, despite its potential advantages (particularly in the healthcare sector), there are still concerns surrounding privacy. While the Big Data that is floating around somewhere in clouds is becoming increasingly critical to business operations, very few companies have a good understanding of where their data is at any given time.

For detailed information, table of contents and pricing see: Global Digital Economy – The Crucial Role of E-Health, E-Government and E-Education

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COP20

December 17th, 2014, by

Economic gains from climate change adaptation and innovations

Without a doubt climate change is one of the most contentious social, economic and political issues of our time. The negative effects of climate change can be seen all around us, but addressing them does not fit easily into the current political arena of most of the developed economies, where the message has generally been – leave everything to the market and it will sort itself out and the market will get rid of unwanted elements. In general this approach has delivered us great wealth over the last few decades, but it also has had nasty side effects, such as an escalation of social inequality, environmental degradation, pollution, a high level of political interference from vested interests – which is hampering competition and innovation, and silo thinking.

This market-driven approach makes it very difficult for the governments in neoliberal economies to address the issue, as addressing calamities such as climate change requires direct intervention from these governments.

Over the last 30 years governments have increasingly reduced their direct involvement in the market, and consequently their expertise in these areas has dwindled. A reduction in the bureaucracy has been compensated for by advice and activities from private enterprises who, over those years, have increased their involvement in the market. But in a capitalistic economy these private experts are there primarily to look after the interests of their shareholders, and with problems like climate change they are confronted with a range of measures that will be needed to address these problem, but which will have a negative effect on their businesses; they are therefore unlikely to address this is any serious way without very clear national and international government policies. Unfortunately for the Australia industry the political messages are confusing and contradicting each other.

We have seen fabulous economic growth over the last 70 years.  The first 30 years of this period saw a more guided economy, which delivered the national wealth for all, and which we are still enjoying. Since then the move has been more towards individual wealth. Now, it seems, a rebalancing is needed, but the necessary measures will have a direct, and unwelcome, impact on individual wealth and on the incumbent companies that are required to change.

The resources industry is an extremely important part of the Australian economy and this makes rebalancing in the wake of climate change more difficult here than elsewhere. This is further hampered by the fact that there is increased lobbying power of the vested interests against more serious action.

Despite all of that the COP20 conference in Lima (the Conference of the Parties meeting of the United Nations Framework Convention on Climate Change) agreed on the phasing out of fossil fuels by 2050. True, there are no binding agreements around this, but from now on we will see more and more changes happening that will lead to that goal. The Paris conference will be the next focal point for this, in one year’s time. Very importantly,  the Lima declaration – perhaps kick-started by the announcement by the USA and China at the G20 – send out a clear message to investors in these sectors that there will be more risks attached to investments in the fossil fuel sectors in the future.

This is particularly worrying for a country such as Australia, which relies heavily on commodities such as coal and oil. What that means for the economy has become very clear in December 2014 Mini Budget. Significant drops in commodities exports have delivered a disturbing blow-out of the government’s budget, so it is not hard to see what the effects will be for Australia of COP20 and follow-up developments.

As with so many issues the world is facing at the moment, transformation is the key word, and again this is very difficult for the vested interests, who have more to gain by maintaining the market dominance they have created in the ‘old’ economy. Changing their business models to be better positioned for the ‘new’ economy is risky, costs money, might increase competition, and could decrease revenues.

However, as with all major economic changes, a whole range of new opportunities, new business models and new money will become available once the change is embraced.

While many countries are feeling the effects of climate change, Australia will be one of the most affected, not just by climate changes, but by the economic changes that this will bring with it.

The longer the country waits to embrace the change the more economic damage will occur. It will need all of the next 30 years to build the transition, and no time should be wasted. Unfortunately, however, the current political climate points in the opposite direction. If the country continues to drag its feet and be forced into the transition kicking and screaming it will cost the economy dearly.

At Lima the reality of climate change bit in. The delegates were no longer talking about climate change mitigation; they were talking about adaptation. Furthermore, at the last minute innovation was added as a tool that will be counted in relation to how countries implement the changes.

This would be an opportunity for Australia to plan its transition. How can we become the technology leader on managing the change? Our energy industries have much to lose, but equally a lot to gain if they embrace technologies to their advantage.

We have great expertise in energy but can we change our approach – from fossil fuel energy to sustainable energy? With our abundance of solar and wind we should use these forms of energy to move forward. We need to link the digital economy to the green economy. By doing this we will create a whole new range of opportunities and new jobs that will increase the sustainability of our economy and safeguard the lifestyles of our citizens. The energy sector is too important to Australia for us not to be more strategic about it. We simply cannot afford that.

We need a nationwide discussion on how Australia can maintain its leading position in this sector within the context of climate change adaptation.

Electricity companies and COP20

At the COP 20 also The Global Electricity Initiative’s 2014 report was presented to the delegates. Interestingly this was based on the views of CEOs of utilities from countries which together account for about 80% of the global installed generating capacity, emphasises that a meaningful price for CO2 is crucial in facilitating significant change in the fuel mix of the global electricity sector.

The report highlights the ability to make sound investment choices in the electricity sector is heavily dependent upon the existence of long-term stability in policies and regulation. This stability is direly needed. The European Council’s climate agreement and the historic accord between the US and China to reduce their CO2 emissions have sent encouraging signals. Now, it is crucial to build on the momentum in Lima in reaching a focused and comprehensive agreement for Paris next year and to kick-start the action to provide sustainable energy for all.

Other key issues addressed by the report:

  • 96% of the utilities see new advanced energy storage technologies as crucial success factor to growing the share of renewable energy.
  • they are also working on other advanced technologies such as smart grids and carbon capture and storage (CCS).
  • utilities support the objective of bringing energy to all by 2030. However, they express concerns that universal access to energy, in particular in Africa and Asia, will not be achieved unless governments, industry and the international community take immediate concerted action.

Paul Budde

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Venezuela – Regulator raises Bs.F.4.6 billion in multi-spectrum auction

December 16th, 2014, by

Mobile broadband expansion anticipated in 2015

With a slower economic growth, high inflation and falling prices for the country’s key export commodity, the general outlook for 2015 is not promising. Nevertheless, the country’s telecom market is expected to grow steadily, led by 3G and LTE services as well as by satellite-based pay TV services and the nascent IPTV sector.

Growth in the number of fixed lines has fallen sharply in recent years, to only 0.4% in the first half of 2014, and fixed-line revenue now account for a shrinking portion of total telecom revenue. In line with consumer trends in the use of services, the share of mobile, internet, and pay TV revenues has been rising. A number of private operators compete in all telecom sectors, but the country’s state-owned telecom incumbent CANTV dominates the fixed, mobile, and broadband markets.

Along with the main competitors Movistar and Digitel, all operators have ambitious investment plans, largely aimed at improving their networks and expanding the reach and capabilities of new technologies including FttP and LTE

Mobile penetration in Venezuela is below the South American average. The mobile market is recovering from the downturn suffered during Venezuela’s economic recent recession, but estimated growth is low compared with previous years.

Despite the slump in subscriber growth, the volume of data traffic has been increasing exponentially. Spurred by the huge popularity of social networks in Venezuela, the country has experienced a surge in the demand for smartphones, and with it the need for more capable networks and higher data allowances.

Three major players operate in the Venezuelan mobile market: Movilnet, the market leader and mobile subsidiary of state-owned CANTV; Movistar, the Venezuelan unit of Spain’s Telefónica; and Digitel, a locally owned private company.

Fixed broadband penetration and speeds are also lower than the regional average. CANTV is the country’s exclusive ADSL provider, while a few cable TV companies also offer cable broadband services. The Venezuelan government has launched a National Fibre-Optic Backbone project to guarantee a uniform distribution of high-speed internet access nationally, with CANTV in charge of implementing the project. The government intends to lease capacity on the National Fibre-Optic Backbone to cooperatives and small companies.

Pay TV is the fastest growing telecom sector in Venezuela after mobile broadband, and accounts for 15% of all telecom revenue in the country. The market leaders are DirecTV, Inter, SuperCable, NetUno, Movistar, and CANTV.

A new report by BuddeComm provides an overview of Venezuela’s telecom market and regulatory environment, accompanied by statistical data and analyses. It reviews the country’s broadband and pay TV markets, providing broadband scenario forecasts for the years 2015 and 2020. The report also assesses the mobile voice and data markets, including operator profiles and an analysis of their strategies as the market moves to wider consumer use of mobile broadband services into 2015.

For detailed information, table of contents and pricing see: Venezuela – Telecoms, IP Networks, Digital Media and Forecasts

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NBN – this is as good as it gets

December 15th, 2014, by

While we can argue that what Australia will get from NBN 2.0 is a second-rate version, the reality is that, with the new deal with Telstra now inked, for the foreseeable future this will be as good as it will get.

It looks as though all parties agree that under this new contract the multi-mix-technology can and will be rolled out. However Telstra covered itself, with NBN Co taking care of any unexpected extra costs related to the MTM rollout. The minister is happy with that arrangement and is convinced that these costs will not blow out – but only time will tell.

Further to that we will never know never know if the MTM version will indeed be cheaper. It is hard to trust the government on this. The previous government claimed that it would be able to deliver the first-class FttH version for roughly the same cost as this government will deliver its second-rate version. Both these plans were costed around the $40 billion mark.

In the meantime we wasted another year where very little broadband progress has taken place in Australia. This has happened repeatedly over the last two decades, with the result that Australia is at the bottom of the OECD heap in high-speed broadband connections. Increasingly we now hear ordinary people (not just the geeks) complaining about the quality of their broadband; and it will get worse before it gets better, as no major results of these new arrangements are expected to hit the road in any significant way before the end of next year.

As we have said repeatedly the big winner from all of this continues to be Telstra. It had already negotiated a fantastic deal under the previous government, and under the new deal with the current government that lucrative deal remained in place, with a range of new concessions on top of it – and for Telstra, changes for the better.

The overall deal stayed the same, so theoretically that will result in a smooth transition. Instead of simply disconnecting and discarding the old copper and HFC cables, they will now be transferred to NBN Co – hardly any skin off the noses of Telstra and Optus. However, in order to make the arrangements for a more complex multi-technology-approach work, some of the more detailed elements of the contract required dramatic changes. This was the main reason it took so long for these negotiations to be completed, and at the same time it allowed Telstra to negotiate for a range of changes.

It opted to hand over the infrastructure assets in exchange for the right to continue to use the HFC network to deliver their Foxtel pay TV services.

The company has secured asset disposal restrictions if NBN Co were to sell the HFC or copper network after ownership is transferred. In certain circumstances these restrictions would require a buyer – such as another large retail service provider – to enter into a direct agreement with Telstra to purchase the assets.

Also, with at least some first-hand experience, certain simplifications to the contract have been included that will have a positive effect on Telstra’s costs.

But Telstra’s greatest (extra) financial wins this time are in the area of maintenance. NBN Co has no skills – and also no capacity – to undertake the maintenance of the ageing copper network. There is no doubt that this network still has some life left, but the mid- to longer-term question is when will it become more costly to maintain old infrastructure in comparison with deploying new infrastructure. At a certain point in time this will have to be done anyway. In the meantime, however, these ongoing increasing maintenance costs are becoming an interesting new revenue stream.

Costs will only increase as the infrastructure ages, and therefore a significant amount of money will need to be spent by NBN Co to maintain it; and Telstra is the only company with long-standing expertise in this field, especially in the more value-added areas of infrastructure planning, design, construction and maintenance. While there will be room for competition in the actual physical work, Telstra will be hard to beat in those other areas.

Both the minister and NBN Co have indicated that they understand that the new contract has the potential to increase the dominance Telstra already has in the market. However the question will be whether the delivery of the MTM NBN or the protection of competition will get priority.

Paul Budde

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