Archive for June, 2014

High-speed broadband is pushing rich media ahead

Thursday, June 26th, 2014

OTT and the transformation of the media sector

The traditional media industry has been in turmoil since the rise of digital media platforms that impacted significantly upon many aspects of the media industry of old. These changes led to much unrest in the media sector. Major competing sectors include TV and radio broadcasting, newspaper publishers, film, music and video industries.

The digital media companies have become the clear leaders and to a certain extent there will be parallel developments – one driven by digital TV using the traditional broadcasting networks and one driven by broadband using new fixed and mobile telco infrastructure. In 2014 the advertising spending being directed towards digital media continues to grow, further escalating the problems for the traditional media.

It has become clear that over-the-top (OTT) is ‘the new normal’ for the media and telecoms industries – with the emerging all-IP networks media and telecoms services are basically moving to an OTT model. These services are seen as a threat by the traditional operators in these sectors and the companies offering them are perceived to be getting a free lunch over the broadband networks. The European telcos are calling for international regulation, and in the USA net neutrality is no longer a given.

While the story for the traditional players in the market is all about shrinkage significant growth is taking place in many of the new subsectors of the broader market, which includes video-based entertainment on the internet, mobile apps, social media and new forms of interactive entertainment.

Advertising and marketing in the digital age

Spending on advertising using digital media channels is continuing to grow in market share despite the growth of overall advertising spending being slowed down by economic conditions. In 2014 the advertising sector is focused on the future opportunities offered by multi-screen developments – in other words, a cross-marketing approach involving multiple devices including TV, touchscreen tablets, computers, laptops, mobile phones etc. In addition, advertisers and content developers/providers are eyeing off the potential opportunities offered by the OTT content distributed by smart TVs. Digital marketing as a whole remains a growth area, as marketers shift towards these types of advertising methods at the expense of traditional formats.

National broadband network – changing the media model

The national broadband network is the next disruptive stage. Again the media has largely been absent from this debate, but the NBN will create new changes with new options. The traditional media players can take a leadership role, looking at the trans-sector opportunities the NBN has on offer – or they can simply copy their outdated models onto the new infrastructure, perhaps by using the wholesale services of a telco.

Initial indications are that, rather than moving towards media innovation, they are looking at more of the same. The media companies do have strong brands and millions of customers, but how can they utilise this advantage?

New video media

Online video streaming is one of the fastest-growing digital formats and marketers are certainly recognising its potential. Online video streaming/web TV is being used by many different industries for advertising, marketing, demonstration, entertainment and communication purposes. The success of Google’s YouTube has been well documented and YouTube continues to dominate in terms of viewers and streaming. Netflix, initially operating alone in the iVoD sector, has also entered the streaming video market and is gaining prominence and expanding internationally. Improvements in mobile technology and the introduction of smartphones have also assisted the development of mobile TV/video and we can now see it has a bright future ahead.

Adding further competition to the already highly contested online video-on-demand sector, in 2014 Walt Disney and Apple announced the launch of a cloud-based service called Disney Movies Anywhere. Around a couple of billion online videos are watched worldwide each month. Online VoD has gained the attention of internet heavyweights, Google and Facebook.

The US is an interesting market to watch for VoD developments, with Hulu, Netflix and Walmart Vudu just three of the players vying for position. There is a movement towards creating online video “channels” over the internet, aimed at target audiences, and YouTube has established a number of popular channels of its own.

Driven by the successful US-based Netflix IPTV service from America, Foxtel has launched its long-awaited Presto IPTV service. Until now the traditional IPTV products by ISPs have failed to attract large paying-user bases – in 2014 there are only around 800,000 subscribers in Australia.

By far the largest growth in IPTV video entertainment comes from user-generated content services such as YouTube, Facebook and a whole new range of services of short, and even super-short, videos. Catch-up TV would be the second largest category.

BuddeComm estimates that downloading and streaming of video now constitutes well over 50% of all regular online video usage and that this will only increase over time.

A relaunch of the Telstra T-box, the arrival of FetchTV, and new plans from Quickflix and Netflix will lead the further growth in this market.

Rich media

As broadband speed and capacity increases a whole new range of rich media will be entering the market over the next decade, based on increased broadband quality. Rich media contains images and video and involves user interaction.

We have seen console games change dramatically, with games, music and movies merging, integrating and moving online. Online gaming and gambling can take players from outside the boundaries of their home countries where these online activities may or may not be sanctioned by the authorities. The global market is an expanding one where virtual online gaming and gambling is a growth market.

In the meantime mobile phones have become the preferred devices for a large number of rich media apps. This is putting pressure on the mobile networks, which in turn require more fibre backbone networks in order to be able to handle the increased capacity.

The newspaper publishers are among those hardest hit by the massive changes that are taking place as a consequence of rapidly changing digital technologies.

New e-business models will need to be developed. The printed media could use their broad appeal to attract customers and then, once these customers are inside their applications and services, they could explore new rich media business models that would enable them to monetise these visits.

Mobile TV

There has been a great deal of hype surrounding mobile TV in Australia, but so far the concept developed by the mobile network operators has not taken off. Operators were given a wake-up call with the introduction of the iPhone, as this started to separate content from carriage. Developments have now seen mobile TV – both paid and free services from the MNOs available unmetered – so perhaps this will see greater uptake by the mobile watcher.

Into 2014 we are still seeing the popularity of mobile devices such as phones, and consumers are increasingly taking up tablets, which are better suited for mobile viewing. As a result data is being consumed at a higher rate. The availability of mobile TV from Foxtel (Mobile Foxtel) and the growing popularity of ABC’s iView platform, as well as similar catch-up services from SBS and the main commercial TV channels, are steadily driving up mobile viewing levels.

However, increasing mobile video usage from mobile devices requires more and more data bandwidth. This is compounded by the mobile apps that are being developed for the mobile market and which allow mobile TV and video to be streamed, both on WiFi and over 3G or 4G. These apps, available for Apple and Android devices, are becoming data hogs on mobile networks.

This report provides an overview of the mobile TV market in Australia, including analyses on marketing strategies and background information on the technologies and players behind the service.

Smartphones and tablets

Apple must surely rue the day Android arrived on the scene, as over the past few years Android OS has continued to erode the lead it acquired when it first launched the iPhone. In 2014 the leading smartphone handset worldwide is Samsung Galaxy (based on Android), with over 35% market share, while the iPhone captures less than 15%.

The news is no more positive for Apple when looking at mobile operating systems, with Android OS accounting for around 80% global market share.

Looking at the touchscreen tablet sector, however, the Apple iPad retains its dominance in 2014. Again Samsung is hot on its heels and Apple will need to act quickly to remain in the lead. At this stage the rise of Samsung is mostly at the expense of lesser tablet players.

The next frontier will be new markets that can be built on the smartphone platform. Of course this market is already well and truly underway, with over 2 million apps now available from Google Play and the Apple app store. Another threat to the smartphone business is the limitations of the mobile broadband infrastructure. You can develop all of these new applications and services but if the infrastructure cannot handle the capacity there will be little use for them. Developed markets are now eating up new spectrum with a voracious appetite.

For detailed information, table of contents and pricing see: Australia – Digital Entertainment and Media Market

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Tanzania – M-payment platforms gain traction with co-operation from banks

Thursday, June 26th, 2014

Tanzania’s economy has been showing solid growth rates of between 5% and 8% every year since 2000, despite the global economic crisis which has affected many economies since 2008. For the period 2013-2017, the International Monetary Fund predicts stable GDP growth at around 7% per annum.

The government has actively embraced the principles of competition and a private sector including foreign participation as a means of rapidly advancing economic and social development. Policy reforms have led to the telecom sector becoming among the most liberal in Africa. However, high import tariffs on telecoms equipment and taxes on telephone facilities by various authorities are still placing a burden on investors and operators.

Tanzania has two fixed-line operators (TTCL and Zantel) and eight operational mobile networks, with four additional players licensed under a new converged regulatory regime. With four major operators – Vodacom, Bharti Airtel (formerly Zain), Tigo and Zantel – mobile penetration is approaching 70%, with annual subscriber growth of more than 20%. In recent years a price war among these players has adversely affected the smaller operators, which have suffered from customer churn.

The new converged licensing regime has brought a large number of new players into the market. The liberalisation of voice over internet protocol (VoIP) telephony as well as the introduction of third and fourth generation (3G, 4G) mobile services and wireless broadband networks is boosting the internet sector which has been hampered by the low level of development of the traditional fixed-line network.

Following the launch of 3G mobile broadband services, the mobile networks are becoming the country’s leading internet service providers on the back of their extensive national infrastructure and existing subscriber bases in the voice market. Operators are hoping for revenue growth in the mobile data services market, given that the voice market is almost entirely prepaid and voice ARPU continues to fall. To this end they have invested in network upgrades, with both Vodacom and Smile Communications developing services based on Long-term Evolution (LTE) technology. A fast developing source of revenue is from mobile money transfer and m-banking services. In mid-2013 Bharti Airtel estimated that in Tanzania over 10% of GDP is transacted through mobile commerce.

In March 2013 the regulator reduced interconnection rates by 70%. Combined with a stringent registration policy, requiring new customers to have a physical ID, the reduced rates dampened growth in the number of mobile subscribers for some operators.

The landing of the first fibre optic international submarine cables in the country in recent years has revolutionised the market which up to that point completely depended on expensive satellite connections. In parallel, the government has switched on the first phase of a national fibre backbone network to connect population centres around the country. However, the cost of international internet bandwidth has so far not come down by as much and not as quickly as expected.

For detailed information, table of contents and pricing see: Tanzania – Telecoms, Mobile and Broadband – Market Insights, Statistics and Forecasts

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Tunisia – MNOs call for committee to manage launch of LTE services

Wednesday, June 25th, 2014

As a result of heavy investments in the telecom sector since the mid-1990s, Tunisia has one of the most developed telecommunications and broadband infrastructures in Northern Africa, sporting some of the continent’s highest market penetration rates and lowest prices. The events of the ‘Arab Spring’ revolution in 2011 drove the country into a mild recession, but GDP growth returned to pre-crisis levels the following year and is expected to remain stable at around 4.5% from 2015 onwards. Nevertheless, subsequent political difficulties have had an impact on the telecom sector, notably causing the delay in the sale of EIT’s 35% interest in Tunisie Telecom, the country’s fixed-line incumbent which offers a full range of services.

The mobile sector has experienced exceptional growth since the introduction of a second GSM network in 2002, operated initially by Egypt’s Orascom under the name Tunisiana and now by Qatar Telecom (Qtel) which rebranded it to Ooredoo. France Telecom/Orange entered the market as the third operator in 2010 and launched Tunisia’s first commercial 3G mobile service, followed by Tunicell in 2011 and Tunisiana in 2012. HSPA+ services with up to 42Mb/s using dual carrier technology are now available, while there are moves to develop commercial LTE services by the end of 2014 or early 2015.

Ooredoo and Orange are also licensed as fixed-line operators and have launched DSL and Fibre-to-the-Premises (FttP) services. In addition, eleven ISPs compete in this sector, supported by a nationwide fibre optic backbone network and international access via submarine and terrestrial fibre. The former government encouraged and promoted internet use but at the same time kept tight control by restricting access to certain websites. A reform of the country’s Telecommunications Act was initiated in 2013 and government internet censorship was officially abolished. In addition, laws supporting e-commerce and digital signatures have been passed, which has led to one of the most active e-government and e-commerce sectors in Africa.

In mid-2014 the regulator put in place a number of new measures and rules centred on consumer rights in the telecom sector. It also affirmed its commitment to implement a universal service regime and Number Portability in a bid to encourage market competition, as well as develop a mechanism to encourage infrastructure sharing agreements among operators.

For detailed information, table of contents and pricing see: Tunisia – Telecoms, Mobile and Broadband – Market Insights and Statistics

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NBN – telecoms or digital infrastructure – a SAU question

Tuesday, June 24th, 2014

BuddeComm sees one of the major problems of the NBN to be that, on the one hand, it is promoted as national infrastructure, a national utility, essential for e-health, etc, but on the other the associated legislation and regulations are based on it being just another telecoms network.

This creates all sorts of issues, particularly in relation to the financial basis of the project. Is its infrastructure there for the national good, with economic and social benefits derived from it which far outweigh any financial gains? Or is it a telecoms network that needs to make money from traditional telecoms services?

We have discussed this issue in some detail on several occasions during the last couple of years – for instance, in the article: Is the NBN Co business model flawed?

These questions are now coming up again, in the discussion regarding the Special Access Undertaking (SAU) which NBN Co has to file with the ACCC. As would be expected, NBN Co developed these SAUs based on its requirements as a telecommunications operator, but is this really in the national interest? Are prices and conditions for its telco wholesalers all that matters, as per the good old telecommunications regulations of the past? Or should we be looking at other elements to measure the performance of the NBN and its operator, NBN Co, in the market?

These SAUs are being presented as if no progress has been made since the old regime, with its decades-old battles regarding access prices and other conditions. Isn’t the NBN all about innovation, digital productivity, supporting e-health, and in general creating social and economic benefits for the nation?

Where are the KPIs of these activities covered in the SAUs, or for that matter in any other undertaking or document? How will NBN co deliver on this? How will they be measured?

The NBN has the potential to transform the entire industry – and indeed significant elements of the economy – but it appears that none of this is recognised or measured in any way by the ACCC or the government.

While one could argue that NBN Co should come up with its ideas and suggestions, they may – perhaps correctly – hide behind the fact that this is not in their charter and that the government has not put any requirements along these lines in their charter.

The ACCC could take a similar position and turn a blind eye by saying this is not our problem – it is an issue for the government to solve.

I have advised both the Government and the Opposition that we believe this to be a key issue that will need to be discussed, with a proper resolution after the elections. This was not received with a great deal of enthusiasm by either side. For obvious reasons the government does not want to discuss any upcoming changes and to date the Opposition hasn’t even recognised the importance of the NBN for the delivery of social and economic benefits.

This could be part of a review as NBN Co’s CEO Michael Quigley has proposed; or the Opposition could put it on its agenda for review. My concern is that most people prefer to talk about the plumbing and the pros and cons of one technology over another and the various costing involved in it all. We are lacking visionary politicians who will dare to take the more difficult, complex, but very strategic act approach of asking why we are building the NBN and, based on the answer to this, put the right policies in place to underpin those goals, which in my view should include the national social and economic benefits derived from the NBN’s digital productivity opportunities.

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Global broadband market heading in the right direction

Tuesday, June 24th, 2014

The global broadband market is heading in the right direction with both average broadband speeds going up – and broadband pricing, on the whole, coming down. This combined with the growing demand for fibre network infrastructure creates an environment that is full steam ahead for fixed broadband.

With more than 100 countries now involved in the rollout of FttP; there is increased evidence that commercial demand exists for this infrastructure. In developed economies; FttP demand will, over the next 5 years, grow to between 30%-50% of the population. Competition aimed at the top end of this market will trigger a broader rollout.

Looking at previous developments in the internet/broadband market; it is safe to say that from now on demand for FttX connections will – around the globe – only increase. Countries are increasingly viewing the developments in broadband infrastructure as a utility, similar to models used for gas, electricity and water, and such a model is the key to universally affordable broadband access.

Attracting infrastructure funds to the telecoms industry remains one of the largest obstacles in developing national fibre infrastructure. However, there is one exception where we do see investors being active in the market and that is in backbone infrastructure. Pressured by competition from the wholesale providers using their copper networks as well as from increased competition from the mobile operators; national telcos are forced to invest more and faster in fibre networks in order to stay competitive.

With hundreds of countries adopting broadband policies; national broadband networks are now the accepted best practice for deploying broadband infrastructure. None of these countries’ policies are identical; they are all different – they reflect the political, social, economical, financial and geographical conditions that prevail in each case.  However all agree that a broadband infrastructure is needed to face the economic and social challenges that each country is facing, and the broadband infrastructure is perceived by all to be critical for the development of the digital economy, healthcare, education, e-government and so on. We also see that all the resource-rich countries have embarked on large-scale FttP projects in order to diversify their economies.

BuddeComm’s new report, Global Broadband – Demand for Fibre Networks Grows, provides important insights into the global fixed broadband market and includes trends, analyses, statistics and case studies. It provides analyses on the progress of broadband and fibre networks around the world and the key considerations when developing National Broadband Networks. In addition the report includes valuable regional overviews written by BuddeComm’s Senior Analysts.

For detailed information, table of contents and pricing see: Global Broadband – Demand for Fibre Networks Grows

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