More Consolidation in U.S. Mobile Market is an Easy Call

The U.S. mobile data market predictably continued to grow in the second quarter of 2013, up more than four percent quarter over quarter and more than 14 percent year over year. 

On a broader level, one might easily make a prediction that market prospects for smaller regional service providers now are disappearing, though, as growth has shifted to the four largest national service providers.

Us wireless market_q2_2013_update_aug_2013_chetan_sharma_consulting from Chetan Sharma

How Much Will Global Telecom Revenue Grow in 2013?

Despite obvious stresses, global telecom revenue has tended to grow, in nearly every year. There tend to be dips when global recesssions occur, as in 2008, or in the wake of major market crashes, such as in the wake of the Internet bubble burst of 2000.

Global trends also are a mix of declining, flat to slow growth in developed regions, with growth in emerging markets.

Looking just at enterprise and government segment spending, 2013 looks like a one percent to two percent growth business in 2013. 

Global information technology spending is projected to total $3.7 trillion in 2013, a two percent increase from 2012 spending of $3.6 trillion, according to the latest forecast by Gartner.

But enterprise and government telecom spending actually declined in 2012, and might grow less than one percent in 2013, according to Gartner.

                      Worldwide IT Spending Forecast (Billions of U.S. Dollars)

	2012 Spending	2012 Growth (%)	2013 Spending	2013 Growth (%)	2014 Spending	2014 Growth (%)
Devices	676	10.9	695	2.8	740	6.5
Data Center Systems	140	1.8	143	2.1	149	4.1
Enterprise Software	285	4.7	304	6.4	324	6.6
IT Services	906	2.0	926	2.2	968	4.6
Telecom Services	1,641	-0.7	1,655	0.9	1,694	2.3
Overall IT	3,648	2.5	3,723	2.0	3,875	4.1

Source: Gartner (July 2013)

Fixed broadband is showing slightly higher than the overall telecom services rate. The impact of voice substitution is mixed as it is moving faster in the consumer sector, but slightly slower in the enterprise market, though, according to Gartner.

Gartner’s latest annual survey of 1,959 CIOs worldwide from all industries was conducted in the fourth quarter of 2012 and represents CIO budget plans reported at that time. It included 398 public-sector CIOs from all tiers of government around the globe.

But there will be significant regional differences. The United States, Eastern Europe, Middle East and Africa will grow much faster than Asia-Pacific or Western Europe as a whole, for example.

To be sure, other forecasts are more optimistic. As recently as two years ago some forecasters actually were suggesting global telecom revenues could double in just about five years. That now seems hopelessly wrong.

The global telecommunications industry was not immune to economic forces in 2012 that slowed growth from earlier predictions, according to Insight Research.

Spending for wireline services contracted in 2012, while spending on wireless services grew modestly.  

According to the new industry market study, telecommunications services revenue worldwide will grow from $2.2 trillion in 2012 to $2.7 trillion in 2018 at a combined average growth rate of 3.8 percent.

So Insight Research continies to be more optimistic than do Gartner or Forrester Research analysts.

Mobile subscriber growth compounded with rising usage  will raise wireless revenues by 31 percent from current levels, yet wireline revenues will remain flat until substantial economic recovery kicks in, Insight Research predicts.

Ethernet, cloud, and mobile solutions revenue will show double-digit annual percentage growth, though.

In North America, mobile revenues will grow by 35 percent and wireline broadband revenues will grow by 19 percent over current levels.

Telekom Austria and KPN Wholesale Fiber Network a Sign of "Peak Telecom?"

Telekom Austria and Dutch group KPN have formed a new optical fiber wide area network linking 35 countries, and allowing Telekom Austria to use KPN's network for its customers in western Europe while KPN can use Telekom Austria's network in central and eastern Europe.

Under some circumstances, that would simply represent another bilateral deal between two carriers with complementary network assets. But one might argue we are not seeing normal circumstances in the European telecom market. 

Since about 2008, fixed network revenues have dipped about three percent annually, while mobile revenues have declined about eight percent annually. 

In other industries, such as the oil business, similar trends (declines)  have lead forecasters to talk about "peak oil" and the corollary, the decline of oil production. In Europe, one might wonder whether we already have seen "peak telecom."

If so, and if service providers cannot quickly figure out ways to reverse the revenue declines, mergers and acquisitions are inevitable, as that is one proven way to temporarily bolster declining revenues in a declining business.

It perhaps is noteworthy that the new deal links two firms in which Mexican telecom magnate Carols Slim has investments. The new fiber network is not necessarily an indication of what might happen in the future. But given Slim's obvious interest in becoming a player in European telecommunications, an eventual merger between KPN and Telekom Austria would not be out of the question. 

Both assets could play a role in Slim gaining a foothold in the lucrative German market. 

Orange Money Expands into Retail Payments, Branded Prepaid Cards in Africa

Orange is launching mobile payment services in partnership with Visa that will extend the range of operations for Orange Money beyond “mobile payments.” Though it is premature to speculate on just how far Orange will move into the banking business, Orange Money now will be issuing its own branded prepaid cards.

Whether most mobile service providers eventually will become “banks,” at least to some degree, is one question the initiatives raise.

Rogers in Canada already is certified as a bank by Canadian regulators, though it still appears Rogers is most interested in offering branded credit card services, not undertaking broader banking operations.

That is a traditional banking function, as is the processing of money exchanges between people and institutions.

Botswana is slated to be the first country to get the new point-of-sale, online and ATM transaction options, in addition to the existing ability to use mobile phones to send and receive money and pay bills.

Starting in August 2013, though, Orange Money subscribers in Botswana will be able to use their Orange Money account to make Visa enabled payments and pay invoices at stores, international online merchants and at over 300 Visa ATMs across the country.

That moves Orange Money into the retail payments business in a new way.

Is "mobile banking" a key revenue opportunity for mobile service providers, or not? The answer is that "it depends" on what you mean by "mobile banking,” where those operations are conducted and how the business evolves.

According to a  survey by ACI Worldwide, 76 percent of Indian mobile respondents used their mobiles for mobile banking in last six months (in 2012).

Comparatively, only 38 percent of  respondents from the United States, and 31 percent from the United Kingdom said they had used mobile banking in last six months.

Obviously, money transfers are a bigger opportunity in regions where retail banking services are relatively rare, and less an opportunity where banking infrastructure is highly developed.

China, came in after India with 70 percent of users using mobile banking followed by South Africa (61 percent). The global average for Mobile Banking adoption rate stands at 35 percent of mobile users.

Where both online banking using PCs, and branch bank infrastructure are highly developed, people tend to use mobile banking to check balances or move money between accounts.

In regions where the banking infrastructure is undeveloped, and availability of PCs and Internet access is limited, people more often use mobile banking as a way to move money from one person to another, or from person to organization (to pay a utility or school bill, for example).

As you would guess, the revenue opportunity for a "mobile banking" services supplier is greater, and more direct, in scenarios where peer to peer payments are involved. As people pay fees to Western Union to move money, so mobile banking in a P2P context represents per-transaction fees that are easy to measure.

That is not the case for "softer" mobile banking transactions conducted in regions where the banking infrastructure is highly developed. In Western Europe or North America, for example, mobile banking more often is used in place of an online session to check balances, rather than as a way to move money from person to person, or person to organization.

Subscribers will need to have an Orange Money prepaid Visa card that is linked to their existing Orange Money account. The card will enable use of those funds to make point-of-sale payments at retailers and withdraw cash at ATMs, as well as make web purchases.

Other countries in Africa and the Middle East, where Orange Money is already available, will eventually offer the Orange Money prepaid Visa card as well.

Safaricom’s M-Pesa already offers the same service through Safari Pre-Pay card offered in conjunction with I&M Bank.

The moves illustrate one of the potential ways mobile service providers or telcos might diversify their core operations to replace declining voice and messaging revenues.

Mobile payments, something AT&T, Verizon Wireless and T-Mobile US now are preparing to introduce as a nationwide commercial service, is another example.

Isis, the mobile wallet service owned by the three carriers, plans its national U.S. launch before the end of 2013.

It is some measure of the new services revenue challenge now facing communications service providers in the developed regions that mobile payment and mobile banking are serious initiatives.

But it is hard to see right now just how far matters could eventually progress. What is clear is that Orange considers mobile money and possibly other mobile banking opportunities serious indeed.

CenturyLink Touts 1 Gbps

To be sure, only some users in some parts of Omaha, where Qwest Communicatons had installed fiber to the home, originally to test IPTV services, will be able to buy this 1-Gbps service. But the offer itself shows the impact Google Fiber has had in the U.S. ISP market. 

Over the long term, it won't matter so much that such "hero" services are not widely available from most ISPs. The point is that Google Fiber now is resetting consumer expectations about what a reasonable high speed Internet access offer includes. 

Google Adds Global Spell Check, Formatting Features

If you use Google Drive frequently, as some of us do, you will likely appreciate two new features:  updated spell check and more customized lists. 

The updated spell check lets you check the spelling of your entire document or presentation at once, instead of having to resolve misspellings individually. 

Google Drive also has added new presets for numbered and bulleted lists with options to change colors, sizees, and styles of individual bullets, or create customized formatting. Watch the example here. 

LTE Customers Buy Bigger Data Plans, Study Finds

Long Term Evolution (LTE) changes end user behavior, as you might have guessed. In the United States, Canada, Germany, Korea, Japan, and the United Kingdom, LTE customers buy larger data plans, though continuing to rely heavily on Wi-Fi access, but use their mobile data plans more than 3G customers.

Both those trends arguably are helpful to LTE service providers, to the extent that larger data plans generate more revenue than smaller data plans.

In Canada, more than 21 percent of LTE subscribers are on 5-Gb to 10-GB plans, compared to 14 percent of 3G subscribers. There almost certainly is an early-adopter aspect to those purchasing decisions, so the trend might be less pronounced as mainstream users start to shift to 4G services.

Still, virtually all studies show that data consumption increases when users have access to faster Internet access services. On the other hand, Mobidia Technology studies also suggest there are some natural limits to the amount of data most mobile users will consume, even on a faster 4G network.

When looking at total data consumption on a mobile, combining mobile network plus Wi-Fi consumption, users tended to top out at about 4.5 GB per month in Japan and South Korea, and 3.2 GB per month in the U.S. market.

That tends to suggest users will not exponentially and indefinitely increase the amount of data they consume, even on a faster LTE network. The amount of data consumption will tend to flatten out because there is only so much time a consumer will want to interact with mobile data sources.

Time of engagement, in other words, acts as a natural brake on consumption. That also seems to be true, at least in South Korea, for use of Wi-Fi consumption. Apparently, you can use only so much data on a handheld device because there is only so much time to do so.

South Korean LTE subscribers used less Wi-Fi than 3G subscribers, for example. In part, that might be because the faster LTE network provides a more-satisfying experience, reducing the amount of Wi-Fi consumption driven directly by the desire for a faster connection.

In Japan the share of Wi-Fi traffic, compared to mobile network access for LTE users fell from 60 percent to 51 percent, and in the United States, Wi-Fi share dropped from 62 percent to 59 percent.

LTE subscribers are using less Wi-Fi than 3G subscribers. In April 2013, Wi-Fi

represented 67 percent of all data usage of LTE subscribers versus 72 percent of the

3G subscribers.

Wi-Fi offload remains an important form of access for mobile data users, especially

for video consumption.

Apps that subscribers value while mobile, such as Google Maps, or that subscribers

want all the time and everywhere, such as Facebook, were used more by 4G

subscribers, compared to 3G users.

However, data-hungry apps, such as music services, actually saw a drop of usage over the mobile networks and an increased use of  Wi-Fi networks. That might simply reflect growing sophistication by users.

People have figured out that they can stretch their data usage allowances by shifting video and streaming music consumption to Wi-Fi.