Thursday, August 28, 2014

How Fast Will Internet Usage Grow in Asia?

It often is the case in the communications business that “where we are” matters less than “where are we going?” In other words, observers have in the past noted that U.S. consumers used mobile phones less than consumers in Europe, by a sizable margin.

Likewise, U.S. consumers once used text messaging far less than European or Japanese consumers.

And it is a recurrent theme that U.S. high speed access prices are high, and speeds slow.

Some studies of U.S. high speed access suggest that actually is incorrect.

Of course, European policymakers no longer agree with that characterization, arguing that U.S. fixed and mobile speeds and prices actually are better than typically is the case in Europe.

In fostering competition, European telecom policies have created an investment problem, many argue.

The point is that where usage or adoption now stands can be a completely unreliable indicator of where adoption or usage is going, even over relatively short periods of time.

It would be correct, for example, to note that Internet penetration in Asia-Pacific region is among the lowest in the world.

In 2014, perhaps a third of the region’s people use the Internet, compared to about 26 percent in the Middle East and Africa, for example.

In Latin America, Internet usage is up to 54 percent.

But the rate of change is where observers seem to have disparate expectations. where things stand is not where the uncertainty lies. We tend to agree on where things now stand, We might not agree on fast things will change.

Researchers at eMarketer, for example, believe that by 2018, Internet use in Asia and the the Pacific will have climbed to just 41 percent, while adoption in Africa and the Middle East will have grown to about 31 percent.

By 2018, “no major shifts are expected,” eMarketer contends. Since most observers believe smartphones will drive Internet use, rates of smartphone adoption are viewed as key. And in that regard, eMarketer also believes progress in Asia will be incremental.

Though more than one-third of Asia-Pacific residents will have a smartphone by 2018, that will leave them below the worldwide average and still in second-to-last place, eMarketer says.

In other words, “by the end of our forecast period, the situation won’t be much different,” eMarketer predicts.

The International Telecommunication Union, on the other hand, notes that mobile Internet access in Africa grew by an order of magnitude between 2010 and 2014 alone.

And mobile Internet adoption is growing at about 16 percent annually, in Asia. At those rates, adoption doubles in less than five years. That implies 66 percent Internet adoption by about 2019.

In 2014, in developed nations, Internet adoption is about 78 percent, according to the ITU.

The point is that “where we are” is not the question. The big question is “what comes next?” How fast will Internet adoption happen, on the backs of mobile Internet adoption?

At least for now, opinions are widely divergent. Analysts at eMarketer see only incremental growth. Researchers working for the ITU think change will b e exponential.

To be sure, the averages obscure big differences. Adoption in Japan, South Korea, Taiwan, Singapore and Hong Kong is different from patterns in China. China’s patterns are different from those of most of South Asia and Southeast Asia.

But not all researchers think growth will be an incremental as eMarketer projects. To be sure, there is a big distance to be covered. But one might argue that growth rates have reached a nonlinear stage, where extrapolation from past trends will prove inadequate.

Adoption of smartphones is perhaps the one metric that most observers believe will drive Internet usage.

By 2019, the number of smartphone subscribers globally will have grown 2.5 times over the 2012 level, driven primarily by customers in Asia Pacific, the Middle East and Africa (MEA), and Latin America, according to Forrester Research.

That represents the difference between growth rates of a few percent a year, and growth rates as high as 14 percent, annually, in Asia, which is what Forrester Research estimates.

Asia, Africa and Latin America are home to 84 percent of the world’s population and will contribute a significant proportion of the next 2.5 billion smartphone subscribers.

Asia, Africa and Latin America Internet adoption estimates by IDC also suggest faster rates of growth much faster than foreseen by eMarketer, which does not share that optimism.

By the end of 2018, the situation won’t be much different, eMarketer argues. Smartphone penetration rates around the world tell largely the same story, eMarketer says.

But other researchers think growth and change will be far faster than eMarketer now expects.

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