Archive for November, 2013

The rapidly changing governance environment of international telecoms

Thursday, November 28th, 2013

Late last year I participated in the World Conference on International Telecommunications (WCIT-2012) in Dubai, organised by the UN agency the ITU.

I reported extensively on that event, which was aimed at updating the International Telecommunications Regulations. You can refresh your memory about the background and developments of WCIT-2012 in my blogs on the event.

Australia played a key role in trying to bring the various parties closer together, but in the end there simply was not the political will to work towards a compromise.

From the outset there were several reasons WCIT might fail, not the least of which was the fact that the various technological, political and regulatory issues facing the new much broader telecoms environment were not sufficiently separated and so could not be addressed in a rational and systematic manner. There are simply too many conflicting interests involved under the umbrella of the internet  which involve:  the users of the internet, their governments, independent private internet companies and national telecoms companies, some of which have been (or still are) owned (or partially owned) by their government.

Simply trying to ‘fix’ the various governance, regulatory and other industry issues currently under discussion in the traditional way is not going to work. Once we have unravelled those key problem areas we will see that in some of the most critical areas, structural reforms of the telecoms industry will be needed before we can move on.

Furthermore, in the fast-moving world of the internet in the wake of NSA (and no doubt similar activities from other countries) the lessons from the last six months indicate that internet governance solutions driven by national governments are losing credibility.

It also became clear at WCIT-2012 that the national telecoms organisations that have served us well in the management of the telecommunications market over the last 150 years have largely missed the boat in transforming their businesses following the arrival of the internet and the subsequent industry and market changes. At the same time some of the commercial interests that have emerged over recent years are leading to questions about privacy and other rights of individual users. At far too regular intervals companies such as Google and Facebook announce further intrusions into people’s individual privacy.

Given a decline in trust in national governments, the inability of the old technology champions in the telecoms world to guide this process further, and the increasing intrusion on privacy by commercial organisations, it is essential to first separate these issues before any international progress can be made on solutions or new structures in relation to the developments currently under discussion within organisations and activities such as WCIT, IGF, ICANN, ITU, etc.

The problem with ‘unravelling’ the issues at hand, however, is that this will lead to a decrease of power for individual countries and telecoms organisations and it could  limit the use of personal data by the internet companies, which they might not like.  They all benefit from a more complex environment which they would claim needs their leadership involvement to solve those issues.

Paul Budde

For more information see free report: Global – The rapidly changing governance environment of international telecoms

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New Zealand telecoms market to reach to $5.35 billion in 2014

Wednesday, November 27th, 2013

The Telecoms Market Moving Into 2014

Activity in the UFB market is progressing steadily, with a growing number of connections to schools, businesses and consumers. Premises are migrating from copper to fibre, and with it consumers are able to make greater use of IP-delivered content and services provided by faster speeds. Activity in the other telecoms markets has developed following the launch of LTE services by both Vodafone and Telecom.

The fixed-line voice market (voice calls and local access) continues to lose overall share of the telecom services market, partly caused by the drop in call prices and volumes as the uptake of mobile and other P2P services continues.

The fibre-backbone network will become the predominant infrastructure and it will provide its services to the other market sectors including energy, manufacturing, healthcare, education, as well as the rural sector through wireless access. With all these sectors involved we will see the telco businesses morph from the traditional telephony access provider to content service providers. Telcos, ISPs and the other service providers will have an opportunity to become the ICT providers to these market sectors.

The larger sectors, in particular, will create a large demand for value-added infrastructure services. All of this will assist the industry to double its size to more than $14 billion by 2020. In this report we provide scenario-based forecast for the mobile sector as well as some market forecasts and background information on the other markets in the economy.

Mobile Communications

In late 2013 Telecom launched commercial LTE services, competing with Vodafone which had launched the South Island’s first LTE network earlier in the year, complementing an existing service in Auckland.

Mobile market penetration, at around 120-125%, is growing steadily as operators provide add-on packs attracting increased usage at a lower cost. With spectrum auctions allowing for the expansion of LTE networks, and further regional deployment of 3G coverage under the RBI, we expect to see steady subscriber growth across the networks.

New Zealand’s third mobile operator 2degrees has enjoyed solid subscriber growth since launching services in 2009. The operator has around 20% overall market share of subscribers and a 12% share of mobile services revenue. Having secured spectrum in the 700MHz band in late 2013, the company may nevertheless find it difficult to compete against Vodafone and Telecom after the remaining block of 2x5MHz spectrum is auctioned: if either of the main players secure this block they would have twice the allocation of 2degrees.

Further consumer take-up of mobile broadband services is anticipated following the auction of digital dividend spectrum in the 700MHz band, as this spectrum is put to use to deliver mobile data.

Broadband

New Zealand has enjoyed one of the highest yearly increases in fixed broadband penetration in recent years. The overall number of broadband subscribers grew by just under 10% in 2013, maintaining the momentum seen since 2010. The principal growth areas have been in the mobile broadband and fibre sectors. The number of fibre subscribers will continue to increase substantially over the coming years as the ultra-fast broadband service for urban dwellers sees increased uptake among consumers.

The uptake of mobile broadband will be bolstered by the expansion of mobile technologies based on LTE, and be supported by the Rural Broadband Initiative rollout which will add a large number of mobile cells to new areas. Although growth in the number of mobile broadband subscribers will slow as mobile penetration becomes further saturated, a further stimulant is expected from the impetus of the younger demographic migrating from fixed-line to mobile-only broadband services.

The uptake of fibre was slow during the first year of deployment as such new developments must compete with existing technologies and many customers have waited for existing contracts with ISPs to expire before switching to a new provider.

The number of mobile broadband subscribers increased by around 10% in 2013, while the number of mobile internet handset connections grew by almost 30%. Higher growth rates have been stymied by the lack of ubiquitous mobile broadband coverage, as well as the high cost of such services on a short-term basis. Some of these issues should be addressed in coming years through the extension of services based on LTE by Vodafone and Telecom, and by their anticipated introduction from 2degrees in 2014. The national availability of reliable and fast mobile broadband services will be crucial if all citizens are to take advantage of new opportunities offered.

Competition in the delivery of mobile broadband from the telcos is pushing down prices while contributing to even greater regional coverage. The commitment from the government and the ongoing multi-million dollar investment in delivering widespread access to high-speed broadband may present a further hurdle for wireless providers, given that the national UFB/RBI infrastructure will close most of the gaps in coverage.

Digital Economy and Digital Media

The digital economy across New Zealand will have the necessary infrastructure for development to ignite e-government, e-commerce and digital media across the country once the Ultra-fast broadband / Rural Broadband Initiative (UFB/RBI) is completed during the next 5-10 years.

By the end of 2014 almost 400,000 premises will be connected to the network, increasing to about 1.2 million by 2019. Businesses and residences will be able to access data rates ten times faster than current rates, enabling them to operate services in the cloud and take better advantage of opportunities within the global market place. The digital economy will be driven by some of the digital media companies that continue to play an increasingly important role in the telecommunications markets.

Broadcasting

FTA television and the pay TV sector are revising their business models to adapt to the growing trend among consumers to view online content rather than linear TV. The trend has become acute during the last two years as telecom infrastructure has improved, allowing a greater proportion of consumers to take advantage of content from YouTube and other video sites, as well as catch-up services. The broadcasting and digital media industries are having to keep up with these changes in the market place.

Pay TV penetration in New Zealand was around 50% by late 2013. The introduction of the cut-price monthly subscription model, Igloo, in late 2012 may increase household penetration but the real threat is that this model will cannibalise the existing user base as customers churn to cheaper monthly rates. As the UFB consumer base eventually increases other competitive threats by other media models will see uptake of other media based subscription services, lowering the viability of the current model.

For detailed information, table of contents and pricing see:

New Zealand – Telecoms, Mobile, Broadband and Forecasts

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Stagnation in telecoms market set to continue in 2014

Wednesday, November 27th, 2013

Revenues are stagnating

BuddeComm estimates that the overall telecoms services revenue passed was about $42.5 billion in 2013, slightly down on 2012 as a result of lower revenue from Vodafone and Optus. Indeed, growth has been subdued since 2011, largely due to competitive pressure on pricing among operators, as well as continuing economic uncertainty among some sectors of society which has lessened discretionary spend. This is expected to continue into 2014 and 2015, with revenue either stagnating all together or only slightly growing to about 1-1.5% annually. Most fixed-line and mobile voice services are now at levels where consumers would not tolerate price increases, so opportunities to drive increases in consumer and business expenditure in the short term are limited to mobile data services based on 4G/Long-term Evolution (LTE) technologies, fibre, and cloud-data housing.

At the same time as fixed-line telephony is declining, the mobile broadband market is growing steadily and is set to become a major income revenue stream for providers. Nevertheless, mobile broadband data revenue growth will be far short of the growth anticipated from mobile broadband data on networks. While mobile voice remains the dominant source of revenue for Mobile Network Operators (MNOs), it will soon be overtaken by mobile data revenue. In time, much of the voice traffic will be data packet via technologies such as Voice over Long-term Evolution (VoLTE). Data traffic caused network constraints on 3G networks over the last couple of years, since the infrastructure was not designed for the rapid increase of traffic, and so MNOs have had to invest in network upgrades to ensure that customers receive a reliable service.

The release of 4G/LTE mobile broadband and increased uptake by consumers and businesses will certainly ease the issue in the short term, but as user uptake increases so will the amount of bandwidth consumed. Mobile data usage increased by nearly 80% year-on-year to mid-2012 with nearly seven terabytes downloaded over the air in a three-month period.

Telstra continues to dominate the overall Australian telecom market with about 60% market share of overall revenue in 2013. This market share has been falling steadily since the highs that it held in the early 2000s, of around 80%.

The 2nd tier market

Developments in this market have been dominated by industry consolidation, a process that is set to continue over coming years. Moving towards a structurally separated regulatory environment with a NBN at the horizon, size really does matter.

The other important development has been Telstra’s aggressive activities to increase its market share, particularly in the mobile and broadband sectors. This has been detrimental to a number of 2nd tier players, as has been reflected in their declining revenue in 2013. Nevertheless, there was an overall recovery in total revenue among these players in 2013, reflecting the benefits of scale brought about by market consolidation. Overall revenue for these operators, of about $3.9 billion, still accounts for less than 10% of the total telecoms market in Australia.

This report provides an overview of some of the larger 2nd-tier market players with key revenue figures for the market with brief financial and operational overview on the companies with analysis and data provided in several formats including easy-to-read charts and tables.

Broadband

The NBN will become the predominant infrastructure, and as a utilities-based network it will also provide its services to other sectors, such as healthcare, education and business. With these sectors involved we will see the industry developing specific new business models around infrastructure, ICT and retail. IPTV and other media and entertainment applications will also begin to play a more important role. The question remains – how successful will the telcos be in retail space?

With the uncertainty over the NBN a key concern moving forward is how far operators should invest in DSLAM infrastructure: the National Broadband Network (NBN) structure initially would have rendered DSLAMs obsolete with Fibre-to-the-Premises (FttP) networks in place. However, with the NBN under a strategic review, and with the Coalition government determined to promote a Fibre-to-the-Node (FttN) architecture, supplemented by copper-based VDSL technologies, the transition from DSL to fibre-based infrastructure is likely to be on a far smaller scale.

Business broadband expansion continues with many individual employees now also being connected to mobile broadband, smartphones and tablets are increasingly becoming a part of the business ICT environment. Wireless broadband uptake by business has also seen an increase of numbers into 2013, while business with fast fibre spreads greater than 24Mb/s have seen a huge uptake over the past year.

This report also provides insight into a range of topics covering the usage of internet and broadband services in the residential sector, including overall statistics of the $19 billion residential telecoms market. It also includes BuddeComm estimates of the market as well as data from a number of market surveys covering consumer usage and behavioural patterns, in addition to internet and broadband usage statistics.

Mobile Market

Overall mobile services revenue growth by the MNOs over the last financial year has fallen year-on-year. We should expect to see slower revenue growth from Telstra and Optus into 2014, with revenue again negative for Vodafone. While the issues that saw Vodafone revenues slide are unique, the company will continue to be affected by the loss of subscribers, price competitiveness and the cost of investing in infrastructure as it struggles to compete in the LTE-arena.

The number of mobile subscribers continues to grow steadily, and by mid-2013 mobile penetration had reached more than 130% as a significant proportion of subscribers make use of multiple phones or SIM cards. While growth is likely to continue in the next few years in as subscribers take to smartphones, this will slow in line with higher penetration, being about 2% into 2014.

Telstra remains the market leader with more than 14 million subscribers, Optus has around 9.5 million subscribers, and Vodafone has seen subscriber number fall to just over three million.

In 2013 there are more than 5.5 billion mobile broadband subscribers. The release of additional 4G networks and increases in capital expenditure by the mobile network operators will see increased market penetration of the availability of these 4G/LTE networks. The MNOs will be expecting a greater return on their investments, but BuddeComm expects that uptake will slow down to an annual growth rate of around 3% with ARPU continually falling as market pricing drives uptake.

For detailed information, table of contents and pricing see:

Australia – Telecoms Industry – Statistics and Forecasts

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Syria’s telecoms market impacted by the ongoing civil war

Tuesday, November 26th, 2013

Syria’s telecom sector continues to be impacted by the ongoing civil war. Reports include instances of information warfare, proposed sanctions against telecom companies, damage to telecoms infrastructure and loss of connectivity to the global Internet. The deteriorating situation is having an impact on market development with regulatory developments delayed. However given the utility nature of telecoms, services are likely to be restored once fighting ceases.

Fixed-line services remain the monopoly of state-owned Syrian Telecommunications Establishment (STE), which has upgraded its infrastructure to support delivery of broadband services. However the ongoing civil has damaged infrastructure, resulting in the need for repairs.

Broadband subscriber data indicated strong growth although the ongoing civil war is likely to impact future growth prospects. Recognising the potential of applying ICT to improve both social and economic development, Syria has taken steps to develop a digital economy. E-government services are available, with a national e-government policy in place to guide developments. To support e-health development public funding has been made available for ICT equipment, software, pilot projects, skills training and scholarships. E-health initiatives also extend to the mobile sector (m-health), with m-health initiatives undertaken.

Syria’s mobile market is served by a duopoly comprised of two operators, MTN Syria and Syriatel. Both have been impacted by the ongoing civil war, with base stations taken out of commission. Mobile data services are becoming an increasingly important source of new revenue as the mobile voice market begins to mature. With 3G/HSPA implemented and network modernisation undertaken, the focus for mobile data is beginning to shift to mobile broadband offerings.

For detailed information, table of contents and pricing see:

Syria – Telecoms, Mobile, Broadband and Forecasts

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A tough five years for Nokia

Tuesday, November 26th, 2013

For many years Nokia was the dominant handset supplier worldwide – however since 2009 Nokia’s market share has been in decline, due to the rising popularity of smart phones and in particular the Apple iPhone and phones based on Google Android.

It was interesting to observe how over the last five years Apple and Google threatened the cosy mobile handset market and stole the lead from Nokia.

In response to the Apple iPhone and Android, Nokia launched its first touch screen smartphone (N97) in late 2008. Apple and RIM had dominated the worldwide smart phone market at that point and Nokia needed to act fast to combat this rising threat. Nokia then further developed its smart phone offerings and launched the Nokia N8 smartphone in late 2010.

In 2008 Nokia purchased software licensing company Symbian (for over $410 million) and announced it was creating an open source platform. Nokia’s purchase of Symbian was seen as an attempt to dominate in the smart phone OS environment and Nokia turned the business into the Symbian Foundation in collaboration with AT&T, LG Electronics, Motorola, NTT DoCoMo, Samsung, Sony Ericsson, ST-NXP Wireless, Texus Instruments and Vodafone.

In July 2009 Nokia sold off its support unit called Symbian Professional Services to Accenture for an undisclosed amount. The unit was responsible for Symbian OS customer engineering and customer support and it is thought this function was more suited to an independent body such as Accenture.

Nokia had become to feel the impact of the competitive threats however and in June 2010 publicly declared its earnings would be lower than expected; resulting in an immediate drop in its share price. Nokia attributed this decline to the extremely competitive smart phone environment. Nokia’s own smart phone offering, the N900, did not perform as well as required against some of the other players such as RIM, Apple iPhone and Google Android.

In late 2013, amidst its continuing decline in market share; Nokia agreed to sell its Devices & Services unit to Microsoft for $5.4 billion. The deal will be finalised in early 2014 and Nokia will see 32,000 staff moved to Microsoft.

However it is not the end of Nokia by any means. It will be left with around 56,000 employees and will retain its Nokia Solutions and Networks (NSN) unit which accounts for 90% of Nokia’s revenue. The year 2014 will be watershed year for Nokia however as it attempts to again re-invent itself in this challenging market.

With Apple and Google now setting the rules, the mobile operators and their vendors are now paying the price for a decade-long tyranny of closed proprietary mobile phone systems.

Table 1 – Nokia’s handset supplier global market share decline –2007; 2009; 2011; 2013

Operating System

2007

2009

2011

 20131

Approximate global market share

Nokia 39% 37% 24% 15%

(Source: BuddeComm based on various industry sources, 2013)

Note:1Data is for Q3 2013.

Kylie Wansink, Senior Analyst – Global Markets

For related information, see separate report:

 

Global – Mobile – Smartphones, Wearable Devices, Handsets and Tablet Insights and Stats.

 

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