PBX Market Dipped in 2012

"Following two years of modest growth, the PBX market had a tough 2012,” says Diane Myers, principal analyst for VoIP, UC, and IMS at Infonetics Research, part of a report to be released in early March 2013. It appears economic conditions played a role, as sales were depressed 10 percent in the Europe Middle East Africa region, which has been suffering from a recession.

Overall, the global PBX/KTS (private branch exchange and key telephone system) market represented $8.1 billion in 2012 sales, down four percent from 2011.

In 2012, the related unified communications segment grew eight percent, year-over-year, however. And IP PBX licenses (not including the value of hybrid licenses) grew 11 percent in 2012

North America and the Asia Pacific region saw net positive revenue gains in the PBX market in 2012, though, growing a modest two percent in North America and one percent in Asia Pacific, over 2011 levels.       

Cisco maintains its lead in global PBX/KTS revenue for the sixth consecutive quarter, while Avaya and Siemens also were in the top three suppliers for the year.

Just three suppliers in the enterprise telephony market posted year-over-year revenue gains in 2012: Cisco, Mitel, and ShoreTel.

Kenya-Based Safaricom Will Halt Feature Phones Sales to Focus on Smart Phones

Safaricom, the Kenyan mobile service provider, will soon phase out sales of feature phones to concentrate on selling smart phones.

“Safaricom is soon going to stop selling the cheap feature phones in all our retail outlets, as we try to skew the Kenyan market towards smartphones," said Nzioka Waita, Safaricom director.

The move shows increased confidence that cheaper smart phones will change end user demand preferences. 

On a larger level, the move provides one more illustration of how fast advanced mobile technology mobile technology has changed the communications landscape globally, in just a few short years. 

Consider that as recently as 2008, some estimates had fixed broadband connections outnumbering mobile broadband by about a four to one margin.

In 2012, the ratio was reversed, and there were four mobile broadband connections in use for every fixed connection. That sort of change--that fast--does not happen in the communications business very often.

The number of mobile broadband subscribers around the world surpassed that of fixed broadband at the end of 2010, in appears. So mobile broadband went from a 20 percent of market state to a 50 percent of market state in just two years, by some estimates.

After about another three years, mobile broadband grew to represent 80 percent of all broadband connections, by some measures. That is a breathtaking change, in terms of the speed of the change.

By 2015, it is anticipated that there will be 3.1 billion mobile broadband subscribers compared to 848 million fixed broadband subscribers. Safaricom seems ready to prove that forecast is accurate.

IBM to Double Investment in Mobile, as Part of "Mobile First" PlanI

International Business Machines Corp., the world’s biggest computer-services provider, will double its investment in mobile technology in 2013, not including acquisitions it could make. IBM also has dubbed the initiative "MobileFirst," a move that, at this point, should not surprise anybody.

According to analysts at the Yankee Group, enterprise workers rank smart phones and notebooks about equally, as key tools for their work. 

To be sure, the direction does not mean "mobile only." And some firms will not design their strategies around "mobile first," either, where it comes to content creation. 

Content consumption is another matter, though. Consumers are migrating away from PC-based Internet usage and are increasingly using mobile devices as their default gateway to the Internet, according to  International Data Corporation. That shift to "mobile first" Internet access is especially pronounced in the U.S. market. 

In fact, perhaps for the first time, the number of people using PCs for Internet access is shrinking, even as PC access grows elsewhere in the world. That doesn't necessarily mean the number of fixed access lines drops, only that PCs are not the devices using those connections. 



Other studies back up those contentions. The use of mobile devices to access the Internet is becoming the medium of choice, with 69 percent of all Internet users surveyed doing so daily, according to Mobile Web Watch 2012, a study of consumers in Europe, Latin America and South Africa conducted by Accenture..

In addition, consumers are using multiple devices to connect to the web, including smart phones (61 percent), netbooks (37 percent), and tablets (22 percent), the Accenture study suggests.

The study found that emerging economies such as Brazil, South Africa and Russia also have rapidly adopted mobile devices (more than 70 percent, on average) to access the Internet, Accenture says.

What Happens When a Problem is Solved?

Among serious broadband scholars, the broadband rankings argument is as much dated as it is silly, argues economist George Ford of the Phoenix Center for Advanced Legal and Economic Policy Studies.  

The defects of such rankings have been analyzed over the years, many times, by the Phoenix Center Ford says, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here and here

Most serious scholars of broadband policy have long abandoned the discussion, he says. "Nevertheless, those more interested in revolutions than facts keep hanging on to these comparisons," says Ford.

All of that raises a question: what happens when a public policy problem actually is solved? Does institutional momentum simply propel organizations along, even if the original problem is solved, or being solved, or solved well enough that we should spend time on other pressing problem?

One sees this rather frequently in other areas, where government programs, for example, continue to operate long after the original problem has been fixed. Many private charitable organizations find the answer is to adopt a new mission, and solve some other related problem. That makes sense. If a particular disease has become quite rate, perhaps it makes more sense to try and eradicate a different disease. 

The issue with broadband rankings not only is that it is difficult to do properly, but that it might even be a problem that is fixed, mostly fixed or being fixed. That isn't to say broadband should not, can not or will not get better. Most observers are certain it will keep getting better. 

The point is that some legitimate problems exist, but that essentially incorrect charges of major and wholesale problems do not help, simply because it is largely a waste of time to spend significant resources trying to fix what already has been repaired. 

Granted, not everybody will agree when the repairs are finished, on a subject as complicated as Internet access. But the perfect should not be the enemy of the good. 

Is Value of Mobile Broadband Destined to Decline?

The hands-down value of a mobile network, compared to a fixed network, is mobility. And given the dramatic surge of mobile adoption over the last four years, at least some fixed network executives naturally will be worried about the long term value of any fixed broadband network.

As recently as 2008, some estimates had fixed broadband connections outnumbering mobile broadband by about a four to one margin.

By 2010, just two years later, the number of mobile broadband subscribers around the world surpassed that of fixed broadband.  By 2012 mobile broadband subscriptions outnumbered fixed subscriptions about three to one.

By 2015, it is anticipated that there will be 3.1 billion mobile broadband subscribers compared to 848 million fixed broadband subscribers, meaning mobile will outnumber fixed about five to one.

One might argue that change has happened so fast that most people have not yet had a chance to figure out what it means. For one thing, mobile now has become the dominant way people access the Internet globally. On the other hand, mobile access also has meant that access speeds are relatively slow, compared to fixed access.

But there is a line of thinking that widespread 4G could change value propositions and market shares even more. 4G Americas reports that 150 operators worldwide have now launched commercial LTE services in 67 countries, 50 of which were launched in the past five months.

"4G Americas expects more than 100 LTE network launches in 2013, the group 4G Americas says. The group expects  63 million LTE connections at the end of 2012, with subscriptions doubling in 2013 to 134 million LTE connections.

With 4G access speeds now replicating, in many cases, digital subscriber line speeds, some service provider executives will be seriously looking at ways to use LTE as a primary access network, displacing the fixed network.

Up to this point, raw speed and price per bit have been major advantages for fixed networks. But 4G could be disruptive, encouraging more service providers to substitute LTE for fixed network access.

Oddly enough, the use case, if not the value proposition represented by a mobile network, might be changing, and in an unexpected way. At the same time LTE threatens to open a new front in the mobile substitution process (as mobile voice has displaced a significant amount of fixed network voice), the ways people behave might arguably be strengthening the value proposition for fixed access.

Oddly enough, the changes enhance the role of the fixed network role, compared to the role of the mobile network.

Ironically, as valuable as fully mobile access is, people often do not use the mobile feature as much as one might suppose.

In fact, as early as 2010, hugely significant percentages of total device access used the fixed network (Wi-Fi) rather than the mobile network,  Analysys Mason has argued.

Proportion of mobile network traffic that is generated indoors, by region

Ironically, just as 4G is starting to narrow the gap between mobile broadband and fixed broadband, users-perhaps reacting to the higher cost of mobile broadband-have been shifting their smart phone usage to the fixed networks. That works because most “mobile device” Internet access happens at home, with a significant percentage at other locations where it is possible to default ot Wi-Fi access.

That is not to say people would behave in just the same way if prices per bit were the same, on both fixed and mobile networks, and if usage allowances could be shared as easily on mobile networks as on fixed networks. All other things being equal, people probably would not care which network was used, if the cost of fixed data usage, and mobile data usage, were roughly equivalent.

The point is that, given the current circumstances, people are shifting most of their smart phone Internet access activities to the fixed networks, and appear to be doing the same with their tablets. One easily can argue that mobile service provider shared data plans are precisely an attempt by mobile service providers to narrow the value-price gap with fixed services.

At the same time, one might argue that fixed networks now account for half to 80 percent of all mobile device access, in addition to supporting all the other devices people traditionally have used on their fixed network services.

If, in a few years, as much as 90 percent of mobile Internet access uses a fixed network connection, one might also argue that most of the value of mobile broadband is devalued.  

One might argue that could, or must, lead to lower per-bit prices for LTE access, and higher per-bit prices for fixed services, since it is the fixed services that supply 90 percent or more of the value of all Internet access.

In that sense, saying that the value of the wired networks is backhaul, whether for for small cells, macrocells or Wi-Fi, does not devalue the fixed network, but highlights its new role.

In a large sense, the access network always has been about backhaul, if “access” to network resources can be described as backhaul. Also, in a large sense, all access methods, no matter what the final “tail” circuit might be, have simply been ways to connect an end user device to the resources of the core network.

In an odd way, that could be more true than ever in a world where most devices are either mobile or untethered, and even in a world where mobile broadband is reasonably fast, even compared to many other terrestrial alternatives.

Wouldn't it be ironic if faster mobile access both allowed mobile networks to compete with fixed networks, and, at the same time, value shifted to the fixed networks?

Users Now Create Their Own Access

In the latest sign that the distinction between public and private networks has blurred, the Federal Communications Commission now has decided private use of consumer signal boosters requires service provider approval for operation.

Signal boosters are used indoors, typically, to boost indoor mobile phone signal strength. Sometimes they are used in cars for this purpose, as well.

But the FCC now has decided that the signal boosters can interfere with wireless networks and cause interference to a range of calls, including emergency and 911 calls. So the FCC now has adopted new rules stipulating that use of such devices is contingent on non-interference to licensed mobile service provider signals.

Under the FCC’s new rules, users will need to register their booster with the customer’s wireless provider. Unless the mobile service provider agrees, the booster cannot be used.

Though aimed at preventing signal interference, the new rule illustrates the changing nature of access. Increasingly, users are weaving together a mix of access networks and techniques to create their own services, combining public and private access methods.

Wi-Fi networks are the best example, but the signal booster issue also is part of the same trend. What that might mean, or should mean, for other efforts, such as municipal broadband , will be hotly debated.

But there is no doubt that, in a genuine sense, end users now stitch together their own access networks and services, blurring and blending the lines between public and private. It is likely to get murkier over time, not clearer, what the precise mix of methods might wind up being. 

Widespread use of Wi-Fi is a prominent example. But potentially new allocations of spectrum for use on a non-licensed basis could be a big factor as well. New proposals for 5 GHz Wi-Fi  provide one example.

For a decade and a half, some observers have argued that Wi-Fi networks could emerge as alternatives or replacements for the mobile network. The speculation seemed to peak in 2002 and 2003, when there was lots of speculation about potential community or metro Wi-Fi networks. These days, Wi-Fi generally is seen as a complement to the mobile network.

Some might argue that the mobile network now is secondary, in some cases, to Wi-Fi networks.

Olivier Baujard, Deutsche Telekom's chief technology officer, says that in the Netherlands, “mobile” phones actually are used more as untethered devices. where 45 percent of traffic is from home, 45 percent is from work, and only 10 percent is while "walking, driving a car, taking a bus, or things like that." In other words, the mobile network is the access mechanism only about 10 percent of the time.

The ability to substitute Wi-Fi for mobile connections is less robust in areas of lower density, though. Buit Wi-Fi covers most of the places where people are, most of the time. Some 80 percent of the time, people connect to the mobile Internet from their home, office, or other indoor location—all areas that are addressable by Wi-Fi. Cisco says.

The other angle is that most of the apps people use are not specifically tied to “mobile,” on the go use cases. According to Cisco, about 66 percent of all smart phone application use involves email, web browsing, gaming, productivity tools or video calls that do not intrinsically involve a “mobile” use case.   

In addition, 80 percent of people's data traffic comes from just three cell phone towers--one near home, one near work, and one someplace in between, the Deutsche Telekom executive said.

Is 100-G About to Drive a New Wave of Core Network Spending?

"After ending 2012 on a flat note, things are looking up for the optical market in 2013," says Andrew Schmitt, Infonetics Research principal analyst for optical at Infonetics Research. "Our conversations with equipment providers continue to trend positive, particularly in North America where 100 Gbps spending is about to ramp. The general consensus remains that an optical cycle for equipment in the core is emerging, what we call the 'optical reboot.'"

"Meanwhile, there are positive rumbles in the EMEA region, where 2012 ended with a spending flourish and carriers are cutting dividends to plow capital into general capex," Schmitt says.

The preliminary indication for China is that 2013 also will be a huge year for 100G as well. China is about half of the global 40 Gbps wave division multiplexing equipment market, and 2013 will be the peak year for 40G worldwide, Schmitt says.

The global optical network hardware market grew two percent in the fourth quarter of 2012, quater over quarter, but was down 13 percent year over year.

For the full year 2012, total optical equipment spending was down 10 percent worldwide

The SONET/SDH optical segment fared much worse, falling 30 percent in 2012.