Broadband Growth Should Shift Beyond BRICS

IDC predicts that emerging markets will contribute for 53 percent of 2012’s global information and communications technology growth. And a poll of 675 global IT and business professionals suggests Indonesia, Vietnam, Qatar and Myanmar are the countries to lead that growth.

But Israel, Iraq, Uganda and Cambodia were other countries also viewed as countries where growth could occur.

Notably, just five percent of respondents chose Brazil, Russia, India, China or South Africa as among the nations having the strongest growth, though the so-called BRICS nations have been at the top of global growth lists for some years.

Regionally, Asia-Pacific (exclusive of China and India) was cited by compared to 61 percent of survey respondents as the region most likely to lead revenue growth.

Even the Middle East seems a more promising market, with 15 percent of respondents
choosing it as the next boom region.

In part, the shift of growth expectations is a logical consequence of rapid development in the BRICS nations over the last decade. The International Monetary Fund has cut its 2012 and 2013 growth expectations for China, India and Brazil, for example. Those countries have made large
investments in their technology and telecom infrastructure. Though not yet at a saturation
point, those countries are fast approaching saturation, at least for mobile and computing infrastructure.

In Indonesia, for example, there are around 55 million internet users. But that’s just a tiny fraction (22 percent) of its 245 million population. But growth is going to be rapid. The number of internet users grew 29 percent in the most recent year.

Predictions point to 76 million users by 2015. Perhaps ironically, the majority of Internet users are accessing the web while on the go, and not from a desk. While mobile penetration is at 54 percent, PC penetration is just five percent.

But PC sales are grew 36 percent in the most recent year.

In Vietnam, 2012 information technology spending will have increased by 19 percent, IDC says. The total number of smart phones in Vietnam is expected to rise by five percent in 2012 to 21 percent.

The number of people using mobile phone services is expected to reach 90 percent of its population by 2015 and 95 percent by 2020.

By 2015, about 45 percent of the population will be using the Internet by 2015, up from about 30 percent in 2012.
Tablet penetration currently stands at two percent, but it’s expected to rise 92 percent by the end of 2012.

IDC is expects 15 percent year-over-year growth of information technology and communications spending in Myanmar in 2012. Internet usage is quite low, probably in low single digits, while mobile penetration rates likely are similar.

Around 80 percent of the Myanmar population of about 60 million people live in rural areas, pointing out the challenges of getting Internet service to most people.

Qatar’s state-backed Qatar National Broadband Network Company plans to build a fiber to home network reaching 95 percent from the current five percent, reaching 30,000 homes by the
end of 2012 and 300,000 by 2015.

In most emerging markets, wireless will be the preferred access method.  For example, in a recent project that Analysys Mason undertook involving nine countries in the Middle East and North Africa, Analysys Mason found that in Algeria it would be commercially viable to roll out fiber to the home to around 12 percent of the population and wireless technologies to around 70 percent of the population.

                                    Economic Viability of Various Access Technologies

Retail cost of service remains a key business issue, though. A study by Ovum found that South Africa had the most expensive broadband tariffs of 19 studies countries. Entry-level services in South Africa cost as much as $1,443 per year, with the prices of high-end services up to $6,000 per year.
Ovum found that lower end entry-level services cost as much as $1,211 per year in Nigeria.

In the countries that Ovum looked at, broadband services using HSPA (mobile 3G) technology were the cheapest option for entry-level users, with an average price of $223 per year.

Still, since broadband penetration in the developing world is only about  six percent , there is lots of room for growth. 

Google Cannot Afford to Become a National Fixed Access Provider

Google’s Kansas City, Kan. and Kansas City, Mo. 1-Gbps access network naturally tends to
encourage speculation about what else Google might have in mind, including the notion that Google might try something on a wider scale.

It isn’t a completely wild notion, given earlier Google investments in municipal Wi-Fi, Clearwire and even a commitment to make a minimum bid on 700-MHz spectrum. Add in Google’s production of its own Nexus smart phones and tablets, as well as tests of a mobile virtual network operator network in Spain (albeit only as a closed test using Google employees), and one can understand the speculation.

Also, new European Union rules might encourage new providers to think about becoming specialized providers of service that is “roaming only.”

An analysis by Goldman Sachs should reassure potential “victims” that Google would not actually undertake an expansion of Google Fiber on a major scale in the U.S. market. The simple reason is excessive cost.

The analysis suggests that if Google really wanted to build out a new national 1-Gbps networks in most major U.S. cities, it would cost more than $140 billion. Most experienced telecom or cable executives would say it could easily cost that much, and take many years.

A more modest goal, of becoming a service provider for 50 million households, less than half of all U.S. homes, would cost perhaps $70 billion.

Ignore for the moment the likelihood that Google has lots of other users for its cash. Assume Google wanted to do so, and was willing to proceed by using internal funds, rather than borrowing money.

Goldman Sachs Telco analyst Jason Armstrong noted that if Google devoted 25 percent of its $4.5 billion annual capital investment,  it could build network out to about 830,000 homes each year, or 0.7 percent of U.S. households.

Armstrong estimates Verizon has spent roughly $15 billion building out its FiOS fiber network covering an area of approximately 17 million homes, by way of comparison.

At such a pace, Google would find it had to replace its first networks long before it even finished the first round of construction on the initial 25 million sites.

Also, if Google really wanted to do something about the economics of broadband access, you might argue the timetable and cost would be more amenable if Google spent money on mobile or at least wireless infrastructure instead.

Some estimate it will cost T-Mobile USA about $9 billion to build a national LTE network, for example.

The point is that 1-Gbps networks are expensive and time-consuming to create. Google’s primary interest likely is creating new market pressures for all other providers to match its own services in Kansas City.

The only issue is whether Google can do so by building in one city only, or would have to threaten building in other key cities as well.

But in all likelihood, Google would never want to waste capital by building a national network of fixed access networks. It is simply too expensive, and too limited, in terms of return from other investments it could make with that capital.

On the other hand, it is clear why speed matters to Google: speed matters for users and consumers.

Some 64 percent of consumers surveyed by Brand Perfect say slow loading was among the top two irritations when shopping online. Fast loading improves end user satisfaction, and also allows more ad inventory to be displayed.

PT Telkom to Deploy 100,000 Wi-Fi Access Points in Indonesia

Time has a way of settling old debates. 

So it is that PT Telekomunikasi Indonesia Tbk (PT Telkom), Indonesia's largest communications service provider, is deploying 100,000 Wi-Fi hotspots across Indonesia, to help PT Telekomunikasi Indonesia cope with rapidly-growing mobile data demand.

No more do service providers "worry" about whether Wi-Fi competes with, or complements, mobile data access.

Cisco says the new network of access points will create the largest Wi-Fi network operated by a single service provider in Asia.

PT Telkom expects mobile data traffic to double each year through at least 2016. The Cisco Visual Networking Index also predicts that mobile data traffic in Indonesia is expected to grow 32 times from 2011 to 2016, with an average per user consumption at 716 megabytes of mobile data traffic per month in 2016, a staggering 2,387 per cent increase from 30 megabytes per month in 2011.

Indonesian mobile data traffic will grow four times faster than Indonesian fixed IP traffic from 2011 to 2016.

And though Indonesia's mobile data traffic was two percent of total IP traffic in 2011, mobile data will represent 17 percent of total Indonesian IP traffic in 2016.

Tablets Have Rapidly Hit an Inflection Point

Within a two-year period, almost 20 percent of U.S. homes have become tablet owners, according to Nielsen Wire. That's fast. It is not uncommon for a consumer innovation to take as long as seven years to reach just 10 percent penetration.

Nielsen data still shows that entertainment video is the overwhelming choice of a screen used to consume video. Between 77 percent and 86 percent of all video consumed uses a standard TV screen. 

But tablets and smart phones both are heavily used while people are watching TV screens.

Is TV Becoming "Irrelevant?"

Perceptions of "irrelevance" are not helpful to any would-be supplier of a product. But at least for some segments of the U.K. population, TV is becoming irrelevant.

Some 17 percent of U.K. teens would miss television if they did not have it, but 53 percent of female respondents would miss their mobile phones if they did not have them, according to Ofcom.

There are potentially significant implications for the video entertainment ecosystem, if those behaviors on the part of teens become adult habits.

Conversely, TV is among the most-favored media used by older adults. When asked what media would be missed the most, people over 75 are far more likely to miss their TVs the most (65 per cent), followed by radio (15 per cent) and newspapers/magazines (eight per cent).

The picture is very different for young adults aged 16 to 24 who would most miss their mobile phone (28 per cent), followed by the internet (26 per cent) and TV (23 per cent). 

Kids spent 17 hours each week accessing the Internet, about the same amount of time they spend watching TV. Nearly all (90 percent) of 12 - 15 year olds in the U.K. access the Internet every day, and weekly Internet usage continues to rise steadily. 

The point, obviously, is that television, as a product, already is less popular among younger consumers than among older consumers. Internet and mobile seem to be essential. 

So television marketers have a big problem: how to change the product to create more relevance for some consumer segments who, at present, don't find they want the product.

Packaging and pricing won't matter if it is the basic product some consumers find irrelevant. 

Order of Magnitude More Small Cells in Metro Areas by 2015

The number of cells required to meet the capacity demands of just one square kilometer of a busy city center will increase to more than 40 by 2015, according to Actix, a supplier of analytics. Today, that same area often is served by five to seven macrocells. 

See infographic format here. 

By 2015, a new micro and pico small cell layer will need to be added to existing inner city networks, which today typically comprise five to seven 3G macro cells serving one square kilometer. 

For a typical central business district this could see the number of cells rising from 20 to more than 160, Actix says. 

“In the next three years, mobile data is projected to grow by at least ten times, which is equal to 3,000 GB per square kilometer per day," says Bill McHale, Actix CEO. 

What is the Best Way for AT&T or Verizon to Generate Billions of New Revenue?

What is the best way for a tier-one carrier to generate an extra $1 billion in annual revenue?

Long term, you might argue carriers will need to explore a range of potential new businesses. That’s why you hear all the movement around home security, mobile payments, mobile wallet, machine-to-machine applications, health care applications, content delivery networks, over the top apps and so forth.

In the near term, Verizon Wireless and AT&T might wring even greater returns simply by reducing original equipment manufacturer device subsidies, without taking what some might say are the “drastic” steps T-Mobile USA is undertaking to end all retail device subsidies.

Oppenheimer analysts think that AT&T and Verizon Wireless, for example, will be able to cut payments to device manufacturers by significant amounts.

AT&T’s subsidies could drop from 15 percent per phone to five percent over time, Oppenheimer predicts.

With more than 100 million phones being sold every year, Oppenheimer thinks the carriers could save up to as much as $100 per phone, or $10 billion dollars in annual savings. That’s a lot more new revenue than AT&T or Verizon Wireless are likely to generate from the other new initiatives.

Beyond that, Oppenheimer analysts even think there is a chance AT&T and Verizon Wireless could recapture some of the influence they used to have before the advent of loosely-coupled networks.

There is at least a possibility that carriers could host, invest in and own applications provided in a carrier context, with the greater importance both of mobility and cloud computing. Some might find that thesis a bit optimistic.

But there is little question AT&T and Verizon Wireless are in a different strategic position than their counterparts in other regions such as Western Europe.

Globally, telecom revenue is growing. But not in Western Europe, it appears. The mobile industry’s combined revenues from voice, messaging and data services in the EU5 economies (United Kingdom, France, Germany, Spain and Italy) will drop by nearly 20 billion Euros, or four percent a year, in the next five years, and by 30 billion Euros by 2020, according to STL Partners.

The obvious implication is that mobile service providers in the United Kingdom, France, Germany, Spain and Italy will have to create new revenue streams worth 30 billion Euros, just to stay where they are, by 2020.