BuddeBlog

Malta enjoys effective cross-platform competition, with 52% of broadband connections being through Melita’s cable network, 46% through GO’s DSL network, and the remaining 2% through Vodafone’s WiMAX network.

More than half of all broadband subscriptions are bought in a bundle with other telecom services. Broadband speeds, once relatively slow by comparison with some European markets, are now among the fastest in the region. The government early mandated a minimum service of 4Mb/s, while Melita has a Fibre Power offer of up to 100Mb/s across most of its footprint. GO provides a service of up to 20Mb/s

The government has endeavoured to improve connectivity for islanders; in 2008 it set up ‘Project Blue Skies’ to subsidise broadband to households which had no or only dial-up internet connections.

More recently, the government – while acknowledging that the market alone is unlikely to deliver FttH-based broadband to all premises – has launched a programme to facilitate FttH infrastructure, particularly in areas considered commercially unviable by the main telcos.

The anticipated roll-out will initially concentrate on classic network hubs (schools, hospitals, businesses and public service providers), eventually reaching all premises nationally. A variety of investment and operational models will be assessed, with the aim of securing a model which will require the minimum public aid.

The call for expressions of interest is part of the ‘Vision 2015’ programme by which the government is aiming to maintain developments in the ICT, e-health and e-learning sectors. The current minimum 4Mb/s service will be upgraded to 100Mb/s in order to future-proof the country’s infrastructure and consumer requirements for IP-based services.

The main operational models under consideration include:

• A private model by which a private operator would build and operate the network, with public funds made available where required. The government would in exchange impose certain obligations on the operator.
• A joint venture model, wherein the network would be part-owned by the state while the private sector would build and operate the network.

For more information on Malta’s telecom market, see the updated report Malta – Telecoms, IP Networks, Digital Media and Forecasts.

Operators across Europe are fast developing their LTE strategies, in many cases having waited for appropriate spectrum to be made available while they assess products and services using test licences.

Consumer demand for mobile data is straining networks, while anticipated demand (taking into account that smartphones now make up 60-70% of all handset sales) will only exacerbate the problem in coming years.

MNOs have limited wiggle-room to meet demand for mobile data, which is why they are desperate to secure additional spectrum, either through auction or purchase from other operators.

Yet spectrum will go only so far. The key to their success with LTE, a technology on which they are counting to address the continuing slide in mobile voice revenue, partly rests with the fixed-line networks which will carry the lion’s share of traffic.

To this end Austria’s MNOs have looked to securing deals with fixed-line operators which have existing FttX infrastructure. T-Mobile Austria’s LTE development dates to 2009, when it trialled a service from 60 cell sites in Innsbruck. The service went live in late 2010, a month after T-Mobile secured blocks in the 2.6GHz band at auction. By early 2012 LTE networks also operated in Vienna, Graz and Linz, offering data speeds of between 40Mb/s and 80Mb/s. The network expansion is costing some €500 million to 2014, and the operator estimates that at least 25% of the population will use LTE by 2013.

In Vienna, to forestall network capacity issues T-Mobile signed an agreement with the utilities provider Wien Energie to use the latter’s fibre-optic network, Blizznet, to connect its 130 LTE base stations to Blizznet’s 2,000km fibre-based network. By the beginning of 2012 some 300,000 people in Vienna alone had access to LTE.

Similarly, Telekom Austria is tapping into its own fast-developing fibre network to support its nascent LTE service. In mid-2009 the company started rolling out FttH to about 150,000 households in Klagenfurt and Villach, providing speeds of up to 1Gb/s. The FttH network, dubbed ‘FiberCities’, complements the company’s roll out of VDSL2 in rural areas using existing fibre backbone infrastructure. About 4,000 mobile base stations are being connected to the fibre network to support LTE projects in Vienna and Lower Austria.

These issues are explored in depth in the updated Austria – Mobile Market Insights, Statistics and Forecasts report.

Key developments:

LTE to be available to a quarter of all Austrians by 2013; mobile TV streaming success with more than 50 channels available; 2011 Frequency Utilization Plan opening up 800MHz spectrum for 4G use; strong subscriber growth keeping mobile sector revenue steady, Telekom Austria forms TA Group M2M subsidiary to manage its involvement in the M2M sector; 3 Austria buys Orange; regulator data to June 2010; operator data to Q3 2011, market developments in early 2012.

Companies covered in this report include:

Orange, 3 Austria, A1, T-Mobile, Tele2.

Henry Lancaster,

Senior Analyst, Europe

For more information see the updated reports:

Austria – Mobile Market Insights, Statistics and Forecasts;
Austria – Key Statistics, Telecom Market and Regulatory Overviews;
Austria – Broadband Market Insights, Analysis and Forecasts;
Austria – Digital Economy and Digital TV – Insights, Statistics and Analysis.

Cambodia has successfully managed its transition into a vibrant telecom market. Despite the country’s status as one of the least developed nations in the world and whilst it remains one of the poorer countries in Southeast Asia, Cambodia’s efforts to expand and upgrade its telecom infrastructure have certainly been bearing fruit. There was very little infrastructure remaining from before the tumultuous Khmer Rouge days. As a result, Cambodia bypassed rebuilding the fixed-line market and quickly launched into alternative technologies, jump-starting its telecommunications infrastructure with digital technology. Not surprisingly, mobile services have completely overwhelmed the market. By end 2010, there were nine mobile operators vigorously competing with each other in a market segment that was growing at a healthy rate. Coming into 2012 there were an estimated 13 million mobile subscribers (penetration 87%) in the country. The market was still in a very strong expansion phase as evidenced by the keenness shown by foreign operators seeking to be part of it. Most significantly some rationalisation had commenced in the market with two operators merging, thereby reducing the number of operators to eight.

Some limited fixed-line growth had earlier come about in Cambodia through investment under foreign assistance, but this mainly benefited the capital Phnom Penh and geographical coverage has not increased significantly since that effort in the 1990s. The number of fixed-line services remained relatively static for some years at around 50,000; by 2011 the numbers were starting to edge upwards. In the absence of any substantial fixed-line growth, however, mobile telephone services continue to completely dominate the overall telecom market in Cambodia. In fact mobiles represent more than 99% of the total number of telephone services in the country.

Wireless technology has been especially advantageous for Cambodia in achieving rapid network roll-out and replacement of a fixed network badly damaged by 20 years of war. In addition to the thriving mobile networks, wireless local loop has been useful for rapid provision of a limited number of fixed-line services. However, while Cambodia has exemplified the fact that wireless local loop offers a viable option for rapidly expanding telecom access in developing countries with low levels of fixed infrastructure, the potential of this technology has yet to be fully exploited in the country.

The expansion of internet services has also been overshadowed by the mobile phenomenon. Internet uptake rates remained disturbingly low for many years, presenting one of the lowest penetrations in the region. Of course, the limited fixed-line infrastructure has been a major inhibiting factor in the rollout of both dial-up and ADSL internet services. The internet market started to change in 2007 when wireless broadband services first began to appear in a serious manner. There has been a surge in the number of operators interested in mobile broadband and especially WiMAX. By 2011 there had been a major upturn in internet numbers on the back of the increased broadband penetration. Overall penetration remained low, however.

The country’s telecom regulatory regime appeared in total disarray in 2010. Early in the year the licensed WiMAX operators were waiting on their frequency allocations from the government. But the MPTC awarded the same frequency bands to another operator. This triggered a long-running dispute that was threatening to disrupt the WiMAX market. Given the strategic importance of wireless infrastructure in Cambodia this was shaping as a major blow to the country. By 2011 there appeared to have been some resolution of the problem and some of the licensees were rolling out their networks.

Market highlights:

• Cambodia’s mobile market continued on its positive expansion path in 2010/2011, although the annual growth was slowing;
• With mobile penetration of around 87% coming into 2012, the market has passed the 13 million subscriber milestone;
• Cambodia had nine licensed mobile operators in a crowded, highly competitive market that invited questions about its likely overcrowding and the possible need for some sort of early rationalisation. The expected rationalisation had started in 2010 with the first merger;
• The development of fixed-line services continues to be sluggish, although the market has picked up a little momentum;
• The internet segment has also been languishing for some time, but there are promising signs that the widespread introduction of wireless broadband services will see a long-term surge in growth;
• By 2010/2011 there was evidence that the anticipated surge was starting, after internet subscriptions grew by almost 100% in 2009.

Cambodia – key telecom parameters – 2010 – 2011

(Source: BuddeComm)

For detailed information, table of contents and pricing see: Cambodia – Telecoms, Mobile, Internet and Forecasts

Nigeria is one of the biggest and fastest growing telecom markets in Africa, attracting huge amounts of foreign investment, and is yet standing at relatively low levels of market penetration. Far reaching liberalisation has led to hundreds of companies providing virtually all kinds of telecom and value-added services in an independently regulated market. After failing for the fourth time in 2011, a fifth attempt to privatise Nitel, the incumbent national telco, is currently underway.

The West African country has overtaken South Africa to become the continent’s largest mobile market with now over 90 million subscribers, and yet market penetration stands at only around 60% in early 2012. However, subscriber growth slowed significantly during the global economic crisis, re-accelerated in 2010 but then slowed again in 2011. Much of the remaining addressable market is in the country’s rural areas where network rollouts and operations are expensive. This in combination with declining ARPU levels is forcing the networks to streamline their operations and to develop new revenue streams from services such as third generation (3G) mobile broadband, mobile payments/banking, and others. At the same time the operators are rolling out national fibre backbone networks to support the ever increasing demand for bandwidth. At least two operators are rolling out fourth generation (4G) LTE networks.

Nigeria is also the most competitive fixed-line market in Africa, featuring a second national operator (SNO, Globacom) and over 80 other companies licensed to provide fixed telephony services. The alternative carriers combined now provide over 95% of all fixed connections, the majority of which has been implemented using wireless technologies. This gives the network operators the opportunity to also enter the lucrative mobile market under a new unified licensing regime and has helped them to secure hundreds of millions of US$ in investments from local and foreign investors.

Nitel’s monopoly on international fibre bandwidth via the SAT-3/WASC submarine cable system ended in 2009 when Globacom’s Glo-1 cable landed in the country, followed by the Main-One cable in 2010. Additional submarine cables are scheduled to go online in 2012, which will deliver a further boost to the country’s underdeveloped Internet and broadband sector. New powerful players from the fixed-wireless and mobile network operator camps have entered this market with 3G mobile and advanced wireless broadband services such as WiMAX. The Internet Protocol (IP)-based next generation networks currently being rolled out are enabling converged voice, data/Internet and video services. VoIP is already carrying the bulk of Nigeria’s international voice traffic. Applications such as e-commerce, online banking and e-payments, e-health, e-learning and e-government are rapidly evolving.

This annual report contains a market overview and analysis, key statistics, regulatory issues, profiles of major players, including financial results where available, and two scenario forecasts for the mobile market in 2013 and 2016.

Market highlights:

• The largest mobile market and the most competitive fixed-line market in the region;
• New competition in international fibre bandwidth is set to revolutionise the market;
• Profiles of major players, including financial results;
• Privatisation of Nitel underway again;
• Estimates for end-2012 for fixed-line and Internet market;
• Forecasts for mobile market to 2013 and 2016.

Estimated market penetration rates in Nigeria’s telecoms sector – end 2012

(Source: BuddeComm based on various sources)

For detailed information, table of contents and pricing see: Nigeria – Telecoms, Mobile, Broadband and Forecasts

Overall the Middle East continues to register strong mobile subscriber growth despite high penetration levels. Underpinning this growth is stronger competition from mobile network operators and to a lesser extent, Mobile Virtual Network Operators (MVNOs). A number of trends have emerged that are likely to influence future market direction. Key among these is increased subscriber growth due to both competition and mobile broadband.

Mobile subscription levels are high in part due to multiple SIM card ownership and demographic factors. Multiple SIM card ownership is common due to the high proportion of prepaid users relative to total users. With no lock in contract to any particular service provider, end users can purchase prepaid services to take advantage of market promotions. Another factor driving multiple SIM card ownership is the lack of mobile number portability in many markets and the emergence of MVNOs which can better cater to specific market segments. Demographic factors underpinning mobile subscriber growth include large expatriate populations in some Middle Eastern countries, particularly in the Gulf region. The latter deserves particular mention given expatriates make up the majority of the population in some cases and are quite fluid in nature, entering and leaving the host country on an as needed basis.

The second major factor likely to underpin future subscriber growth is mobile broadband. Strong competition is lacking in many of the region’s fixed broadband markets due to non existent or immature regulatory regimes in relation to network access or unfavourable economics to support development of aGreenfieldoperator to engage in extensive infrastructure-based competition. In this void mobile network operators have emerged as viable competitors, given the reach of their existing networks, developed product distribution channels and well established customer base and brand. To present a viable alternative, mobile network operators have had to invest in 3G/4G networks and mobile backhaul. The increasing affordability of smartphones is improving the business case for deploying mobile broadband networks in the mobile markets of lesser developed countries.

However like mobile broadband operators everywhere, mobile broadband operators in theMiddle Eastare beginning to engage in price competition and are at risk of being relegated to merely access providers, losing a significant chunk of the value proposition to OTT players. Hence Middle East mobile broadband operators can learn much from more mature mobile broadband markets, where lack of spectrum, the increasing cost of upgrading infrastructure and ultimately, quality of service, are becoming key issues for operators.

See also:

• Global – Mobile – Smartphones, Touchscreen Tablets and Handset Market Insights
• Global – Mobile – Spectrum Hot Real Estate
• Global Mobile – Key Statistics and Trends at a Glance
• Global Mobile Broadband – The Fast Growth of LTE

Kenya’s telecommunications and broadband market is undergoing a revolution following the arrival of three fibre optic international submarine cables (Seacom, TEAMS and EASSy), ending its dependency on limited and expensive satellite bandwidth. The country’s international bandwidth increased more than eleven-fold in 2011. Prices had already fallen significantly following the liberalisation of international gateway and national backbone network provision in 2005, but they have now fallen by more than 90%, enabling cheaper tariffs for telephone calls and broadband Internet services. However, ISPs have only reluctantly passed on the cost savings to end-customers, which has prompted the industry regulator, the Communications Commission of Kenya (CCK) to consider price caps. In parallel, the regulator has mandated price cuts on interconnection tariffs and proposed new competition regulations.

Companies that started out as ISPs – such as AccessKenya, Kenya Data Networks (KDN) and Wananchi – are transforming themselves into second-tier telecom companies by rolling out national and metropolitan fibre backbones and wireless broadband access networks, offering converged voice, data and video/entertainment services. At least six major deployments of WiMAX technology are underway, and third generation (3G) mobile broadband services have been launched. Advanced services such as IPTV/triple-play, e-commerce, e-learning and e-government are now rapidly evolving.

The country’s incumbent fixed-line telco, Telkom Kenya, is revamping its infrastructure and services under the Orange brand with fresh capital from its new majority shareholder, France Telecom, and it has also re-entered the mobile market. A simplified and converged licensing regime introduced in 2008 has lowered the barriers to market entry and increased competition by allowing operators to offer any kind of service in a technology- and service-neutral regulatory framework. Several fibre infrastructure sharing agreements have been forged.

A price war has characterised Kenya’s mobile communications market since 2008, following the market entry of the third and fourth network, Econet Wireless Kenya (EWK, in which India’s Essar acquired a stake), and Telkom Kenya under the Orange brand. Subscriber growth is now forecast to slow gradually over the coming years, and rapidly falling ARPU levels have driven one of the incumbents, Zain (which was subsequently acquired by Bharti Airtel), deeper into negative earnings, leaving only the market leader, Safaricom, with a net profit, although reduced. Financial performance has improved again in the 2011 financial year.

The operators are developing new revenue streams from third generation (3G) broadband and mobile banking services, and the leading operator has begun LTE trials. With market penetration rates in Kenya’s broadband and traditional banking sector still very low, the mobile networks have an opportunity to relive the phenomenal growth rates seen in the voice sector in recent years.

This report contains an overview of Kenya’s mobile, fixed-line, Internet and broadband market, its emerging digital economy, profiles of the major players in all market sectors, relevant statistics, analysis, and forecasts for the mobile and internet market to 2013 and 2016.

Market highlights:

• Decreasing ARPU under intense competition between four mobile networks;
• Improving financial performance despite price war;
• Strong growth in mobile data revenue from broadband and m-banking services;
• Landing of international fibre bandwidth has revolutionised the market;
• International internet bandwidth increases more than eleven-fold in one year;
• Competing national fibre backbones enabling converged voice, data and video services at lower prices;
• Profiles of major players in all market sectors;
• The rebirth of Telkom Kenya under the Orange brand;
• The emergence of new second-tier telcos;
• Fibre infrastructure sharing agreements;
• LTE trials;
• Forecasts for Kenya’s mobile and internet market to 2013 and 2016.

Estimated market penetration rates in Kenya’s telecoms sector – end 2012

(Source: BuddeComm based on various sources)

For detailed information, table of contents and pricing see: Kenya – Telecoms, Mobile, Broadband and Forecasts

The poor economic climate has deeply affected the Irish telecom market since the second half of 2008. The government in 2009 underwrote some €50 billion worth of toxic debt accumulated by the three major banks. Mounting debts, compounded by low corporate tax and reduced income tax, obliged the government to accept up to €90 billion as a bailout from the EU and IMF in late 2010, while a four-year economic plan was devised aimed at driving down the country’s deficit from 12% to 3% of GDP by the end of 2015 by cutting €15 billion off state spending. Ireland’s last three budgets have already cut public spending by up to €14 billion. In early 2011 a new coalition government was formed between Fine Gael and Labour to help push through a revised economic programme.

The government’s indebtedness has made it difficult to honour its former pledges of public money to upgrade national telecoms networks, and so it has had to lean increasingly on the cash-strapped private sector. The telecom sector has also been affected by reduced consumer spend on all but essential services. While mobile and broadband services are considered a ‘safe’ revenue stream for operators, there is little extravagance among consumers, and so operators have faced reduced revenue and with it the cash to invest in networks, infrastructure and upgrades.

Over the past six years or so changes in telecom sector revenue have mirrored economic output, and as the current recession has deepened both GDP and telecom revenue have declined. Nevertheless, the contribution of the telecom sector to GDP has grown during the last three years, suggesting that the sector is moderately healthier than other sectors of the economy.

Ireland’s mobile penetration is on a par with the EU average, having grown at one of the fastest rates in the EU in recent years. The country also has an above average level of data revenue as a percentage of total mobile revenue Although blended ARPU has continued to fall steadily, it remains among the highest in the EU. Despite economic constraints ARPU should remain stable towards the end of 2012 as increased mobile data traffic outweighs a shift to prepaid usage among consumers.

Growth in the number of broadband subscriptions has slowed in recent quarters and is largely propped up by the mobile broadband sector. DSL remains the dominant platform, though a gradual shift to FttX networks will see this dominance decline in coming years. The cable sector has been supported by UPC’s investment in DOCSIS 3.0 technology, which provides considerably higher data rates than is currently possible through DSL.

Eircom’s dominance in the broadband market is gradually slipping, representing about 65% of subscriptions by the beginning of 2012. Greater efforts by the government and regulator have led to higher broadband penetration in Ireland, though the country still ranks near the bottom of OECD countries. In the EU it is ranked above only Greece. The slow process of LLU is a major reason for Ireland’s poor position: competitors via LLU provide only about 9% of all DSL accesses.

Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Market Highlights

• Ireland’s FttX networks have developed slowly as a result of eircom’s financial constraints. The cost of extending network builds beyond certain exchanges in the main towns remain prohibitive and so further developments during the next few years will be restricted. The absence of a regulatory mechanism to encourage network construction and investment has added to the sector’s difficulties.
• The MVNO market remains underdeveloped, with few operators involved. In early 2012 an existing MNO, O2, launch its own low-cost service targeted at the youth market.
• The regulator’s final decision on ASO will see the process completed in three phases during the first four months of 2012. Released digital dividend spectrum will be auctioned as part of the government’s efforts to raise €700 million, so fulfilling financial conditions reached with the EU and IMF.
• The chaotic DTTV market remains in limbo. The failure of Boxer (awarded three national DTTV multiplexes) as well as the One Vision consortium was compounded by the refusal of the third bidder for the DTTV service, the Easy TV consortium (comprising RTÉ and Liberty Global), to negotiate with the Broadcasting Authority of Ireland (BAI). The BAI has ruled out introducing commercial DTTV until after analogue TV services are switched off at the end of 2012, with services not to be launched until 2013. all three groups which contested the 2008 DTT contest have withdrawn from the process.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector inIreland. It provides further information on:

• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Mobile data market developments in coming years in light of spectrum auctions and new license awards;
• 3G developments, regulatory issues and technologies including HSPA and LTE;
• Broadband migration to an FttH architecture;
• Historical and current subscriber statistics and forecasts;
• ARPU statistics and forecasts.

BuddeComm’s annual publication, Ireland – Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in Ireland.

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

The telecom market was worth an estimated CHF18.1 billion in 2011, showing a slight increase year-on-year compared to a near 8% increase between 2006 and 2007. This reflected the continuing economic turmoil which has resulted in lower consumer spend on many discretionary telecom services. In addition, revenue has been hit by the continuing effects of falling prices resulting from competition and regulatory measures.

The major operators have maintained their investments in the sector, with the lion’s share being directed to upgrading mobile networks with technologies including HSPA and LTE, as also in fibre-based broadband infrastructure. Although liquidity issues coupled with lower operator revenue during the past two years have dented overall investment, which has fallen steadily since 2008, some rebound may be expected in 2012 as a result of Swisscom’s continuing efforts in its FttH network and operator interest in the forthcoming mobile spectrum auction.

Overall telecom revenue has been propped up by the broadband and mobile sectors. Mobile tariffs remain above the average EU prices, while local fixed-line calls are also comparatively high. In the mobile sector, Orange Switzerland in early 2012 was bought by the private equity firm Apex Partners for €1.6 billion. France Telecom sold the unit as part of a portfolio review that will see it focus on fast-growing emerging markets in the Middle East and Africa. The move followed the 2010 purchase of Sunrise by the private equity investment group CVC Capital Partners. This suggests significant faith in the health and viability of Switzerland’s telecom sector among key investment houses.

Switzerland retains one of the highest broadband penetration rates inEurope, supported by excellent cross-platform infrastructure with near-comprehensiveDSLavailability and a well developed cable TV market, a legacy of network builds in the late 1980s. The fibre sector has become increasingly prominent, largely through the competitive pressure which the main cableco UPC has placed on Swisscom. As UPC has incrementally increased its broadband offerings to 100Mb/s Swisscom has been pressed to maintain investment in its VDSL and FttH infrastructure. The build-out of the latter has been greatly facilitated by a number of cooperative deals with municipal and regional utilities, themselves the fruit of regulatory efforts to ensure that costs are kept to a minimum through shared infrastructure. Assessments by the Competition Commission obliged Swisscom to renegotiate some of the partnerships. The regulator’s series of Round Tables in early 2012 established that operators had developed sufficient progress in network sharing agreements, the development of uniform technical standards, the laying of multiple fibres and the principles of access on equal terms and conditions. These developments will help propel Switzerland as a real leader in fibre deployment in coming years, while the country’s regulatory approach to fibre network access and wholesale charging will remain an example of an efficient and fair access regime.

Switzerland – Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Key highlights

• DSL remains the dominant broadband access platform though FttX developments will see the DSL subscriber base diminish from 2012/2013 as consumers are migrated to fibre networks. The cable sector is likely to retain its market share given operator investments in DOCSIS3.0 technology.
• The regulator’s planned auction of a wide range of spectrum in 2012 will provide greater certainty for operators planning their investment and network upgrade strategies. Including digital dividend spectrum in the sub-GHz band will greatly enhance the development of mobile broadband offerings based on LTE.
• Swisscom planned to launch commercial LTE services by the end of 2012, following trials in late 2011 and a five-year contract with Ericsson to upgrade mobile-core and radio networks.

I regularly bring this issue forward, similar to the discussion in relation to the structural separation of the fixed networks, which I began just over a decade ago.

What we are seeing in the mobile industry is an infrastructure and a spectrum crunch.

The amount of spectrum needed to satisfy people’s demand from mobile phones, tablets and soon a range of other smart devices is limitless. Mobile carriers are scrambling for spectrum, but it is already known that the spectrum that will become available from the digital dividend (reuse of broadcast spectrum) will not be enough.

Another strategy to obtain access to spectrum is to consolidate. In the USA AT&T tried to merge with T-Mobile in order to lay their hands on their spectrum, but for anti-competitive reasons that was blocked by the FCC.

In Australia Optus is buying the minnow vividwireless. Because of its small size there won’t be a major regulatory problem here, but it highlights the quest for spectrum. And it must be said that had Optus wanted to buy VodafoneAustralia, for example, it would no doubt have created regulatory issues.

So with limited availability of spectrum and significant regulatory problems the industry is facing some serious challenges.

The spectrum problem is also evident in the marketplace. Many people will have noticed that their mobile call quality has deteriorated over the last year or so and the network problems with VodafoneAustraliaare also well-known. All this relates to network capacity problems. Operators have to manage their networks so as to cope with all of the new mobile data traffic and some of that traffic management involves prioritising traffic, which can lead to deterioration elsewhere.

On the physical infrastructure side there is another crunch. In order to cope with the traffic and the spectrum limitations operators can build smaller cells and then reuse the spectrum. However an infrastructure configuration of this kind is far more expensive to roll out.

To give an idea of the scale of the challenges mobile operators are facing – in order to provide proper LTE services in London more than 70,000 base stations are needed. How many operators are in a position to do this? Interestingly, all of these sites will need to be linked to a fibre network. The question becomes – are we still talking about mobile networks, or are we talking about mobile feeders into the fibre network?

While Telstra is winding down its WiFi network the reality is that more and more mobile traffic needs to be offloaded from the mobile network through WiFi hotspots onto the fixed network. Many households are now experiencing congestion problems when 4 or 5 devices are trying to connect to the WiFi modem in the home. All smartphones and tablets automatically switch over to the WiFi modem if that is available. This, of course, is much cheaper for the user but it also works to avoid a collapse of the mobile network. In Australia it is estimated that 80% of smartphone and tablet usage is within the home, office or internet cafe. As a side issue, this also clearly shows the need for fibre-to-the-home networks.

Mobile operators would not voluntarily offload mobile broadband usage through WiFi connections to the fixed network if it was not strictly necessary, as they do not get any money from people using the WiFi network. So that really is a clear indication of the seriousness of the problem.

At BuddeComm we have been predicting that these developments will lead to an urgent need for a more efficient use of infrastructure and of spectrum. If further network problems arise – and there is no doubt that this will happen – there will be an increased request for better quality services, similar to the warning by the Australian bank regulators to the banks regarding their network outages. These infrastructures are no longer a luxury; they are essential for the functioning of the society and the economy.

In the case of mobile networks, consolidation will eventually need to take place. With 800 global mobile operators, the cost structure associated with so much duplication will not support future infrastructure and spectrum investments. However, because of competition issues consolidation will need to be based on structural separation. This would also fit in very well with the digital economic developments, which require far more open access in order to provide the applications and services that are increasing by the day.

Since the arrival of the iPhone in 2007 the platform has ceased being the network – it has become the smartphone. This is the most fundamental change in the history of the mobile market.

The winners will be the first mobile operators who have the vision and understand that the mobile network has fundamentally changed to become basically a fibre network with mobile feed-ins – with smartphones, tablets and other smart devices as the platforms on which to build new business models. Competing on mobile/fibre infrastructure through duplication will not be the smartest way forward.

 Operators and service providers will have to abandon the old mobile infrastructure and business models and align themselves with open digital economy models. Already many mobile services are moving into the cloud and are purely data-based (not voice). Soon there will be no need for the current complex mobile (voice-based) infrastructure structures. Such operations could be run at a fraction of the current cost. If the operators use this opportunity they could remain a competitive voice in the broader mobile ecosystem; if not, they will become road-kill on the (fibre) superhighway. There is no way that the outdated IMS technology, for example, can turn the clock back – the future lies in web-based OTT applications. We questioned this technology as far back as 2005.

The current developments in LTE, linked to the growing number of smart devices, are only speeding up these transformation processes. This is led by the operators. However these operators continue to cling to outdated business models, as if nothing is changing. Such an attitude will only lead to situations similar to what happened when Apple introduced the iPhone, an event that took the mobile operators completely by surprise and changed the mobile industry forever.

Also the lock-in options for SIM cards are under threat, as we reported last year, and several jurisdictions are now looking at this issue. Roaming – a goldmine for the operators – is under threat, with new International Mobile Subscriber Identity (IMSI) cards.

With all these rigid systems linked to their mobile networks service innovation and market leadership has slipped away from the operators. Rather than looking at innovations for their customers carriers are looking at optimising their networks (eg, LTE). Seventy-five per cent of the current Apple products didn’t exist five years ago. Compare this with the product offerings from the telcos. Apple put innovation and customer experience ahead of profits – the telcos do the reverse. And which group of shareholders are smiling now?

Structural changes can of course be undertaken on a voluntary basis. This does not necessarily require regulation; however, history tells us that it is very hard for telco companies to make such decisions without being forced to do so. By that time many of the other business opportunities will again have slipped through their fingers.

Expect more of this kind of commentary over the next few years. We expect the crunch to happen between 2013 and 2015.

See also:

• Global – Mobile – Smartphones, Touchscreen Tablets and Handset Market Insights
• Global – Mobile – Spectrum Hot Real Estate
• Global Mobile – Key Statistics and Trends at a Glance
• Global Mobile Broadband – The Fast Growth of LTE
• USA – Mobile Market Insights, Statistics and Forecasts
• LTE Insights – LTE in the UK – Deployment Plans, Operator Strategies, Spectrum and Forecasts 2012 – 2015 – Q3 2011
• Australia – Mobile Communications – Spectrum Overview

A few weeks ago I walked into a Woolworths store and there was a large sign advertising the company’s new shopping app.

I am not a big shopper but I was curious and thought that I should download the app. But I didn’t – there was no WiFi connection and I wasn’t sure about the size and didn’t want to play around with it in the shop.

So I still don’t have the app on my phone.

This situation came back to mind when I was talking to Selina Lo, the CEO of Ruckus Wireless, a company specialised in enterprise WiFi. It was at that point that I thought this was a missed opportunity for Woolworths.

If it had had a WiFi hotspot I would have downloaded the app and the company would have instantly had my attention. It could, for instance, have suggested I use the app on my smartphone while shopping. I could be sent shopping tips, recipes, specials, and I would have used it, even if it was just for the fun of it.

Here are some more ideas and suggestions for locations to attract the attention of people by using the combination of WiFi and apps:

• Think about shopping centres providing access to shopping guides, maps, specials, discount vouchers, etc.
• Train and bus stations with latest updates, alternatives, etc.
• At airports they scan smartphones and they could potentially trace people to get them to the plane on time, instead of those annoyingly repetitive public address announcements about people holding up flights.
• Sport fields and stadiums could offer WiFi-based services showing certain angles or other games on your tablet, just for a few dollars on top of your ticket.

The imagination is the only thing stopping you from adding many more examples to this list.

Increasingly enterprises are coming to understand the power of telecoms in combination with smartphones, tablets, etc, so there certainly is increased interest.

Telcos could play a key role here as well. Often they already have base stations at prime locations that could be used for such enterprise offerings, or they could add another one based on business they could generate this way. It will be hard to charge the user for access, but enterprises could pay for a well-managed service.

It all comes back to BuddeComm’s conviction that such ‘wholesale’ and enterprise opportunities are still largely being ignored by the telcos, by both the fixed and the mobile operators. Having said that, things are changing and new business models are being implemented to make such services more attractive.

In the past it was often cheaper for an enterprise to do it themselves than to use a telco. They felt cheated and, often for that reason alone, dropped the project as the enterprise customer found it all too complex and had other more important things on their mind.

But we are entering a new era. Key developments that will speed up enterprise WiFi are:

• Fibre is now available in many enterprise locations that would warrant a WiFi connection. This makes the running costs of the service very low;
• The Internet of Things is another development that will see more and more devices connected to the network – for example, every electricity utility station or transformer could soon potentially become a hotspot;
• Smartphones and tablets are going to see an increased demand for such services; and
• Enterprises have an opportunity to be in contact with their customers at key locations.

Of course, all of this is linked to other developments, such as the fact that most internet downloads on smartphones and tablets take place at WiFi locations in the home, office, cafe, etc. In relation to tablets, 65% of them only have a WiFi connection.

SmartTV and other entertainment devices will be connected through Gigabyte WiFi to the fixed network.

All of these enterprise and residential developments will increase the need for an FttH network. As soon as gigabit speeds are available in the home, businesses and at public locations the biggest bottleneck will be the national broadband infrastructure to support it. Australia is showing foresight here as it is building a nationwide FttH network.

See also:

• Global – Mobile Broadband – WiFi has Key Role in Telecoms
• Australia – Mobile Broadband Market
• Australia – Mobile Broadband – Major Operators
• Australia – National Broadband Network – Fixed Wireless and Satellite Networks