Does 5G "Leadership" Matter?

In some counties, and for some companies, "leadership" in 5G is believed to matter. That arguably is the case for companies and countries that believe 5G creates big markets (internal or export markets). Such leadership might also be believed to matter for firms in markets where 4G opportunities are now saturated, and therefore growth limited.

For yet other firms, marketing leadership is the goal, as claims to "lead in 4G" now are erased.

Whatever the objective merits of such claims, it frequently is claimed in telecommunications that one or another country or region is falling behind, or behind, on some measure of information technology or communications. Sometimes, both “lagging” and  not "falling behind" claims are heard about the very same markets.

Recall that observers in Europe have expressed fears of falling behind since at least 2007. In other words, we have heard expressions of concern for a decade, based largely on perceived performance on 4G adoption metrics.

In some part, such claims represent concerns about private interests, as it always is the case that for every valid public policy, there is a corresponding private interest (financial winners and losers). Lagging adoption means less revenue for hardware, software or service providers, whatever other broad social and economic  benefits are said to be lacking and lagging.

Still, it is fair to note that, having considered themselves generally global leaders in the 3G era, infrastructure, app and service providers in Europe virtually all agree that was not the case for the 4G era, and is shaping up not to be the case for 5G, either, where most observers likely agree that Asia and North America appear poised to “lead.”

Such anxieties, some would argue, must be taken in perspective. It nearly always is possible to hear one group or another point out that the United States is “behind” the best performing countries (often including Singapore, South Korea, Japan, Finland and some others on measures of internet access speed, for example.

Also, over time, such differences become far less pronounced. In other words, “quantity” virtually never, on a long enough period of time, remains highly disparate.

It is more germane to argue that many observers believe measures of “quantity,” while useful, are not the same as the harder to measure issue of “quality.” Consider a now-non-controversial example:  use of voice services.

In the past, the United States has been said to be “behind” in spectrum auctions, behind in use of mobility services overall,

In voice adoption, the best the United States ever ranked was about 15th, among nations of the world, for teledensity. Still, virtually nobody considered that a real big problem. It was a problem for rural users, yes, but a problem “at the margin.”

There are a few good reasons for such rankings It is harder to connect everyone in continent-sized areas, and harder to connect everyone in areas of low population density. For such reasons, the United States has not, and never will, rank at the very top of teledensity  measures for fixed network services.

The point is that “quantity” is not always the most-relevant measure of “qualitative” impact. It may not matter whether a particular country ranks first, 15th or even 50th on some quantitative measure. The issue is that relevant benefits are obtained.

We tend to believe (without clear knowledge of causation) that widespread, high quality internet access promotes economic development, for example. We all certainly behave as though that were true.

But it actually is not possible to “prove” this is the case. It likely is equally true that high economic growth and high national incomes “produce” high use of internet and internet access, as to prove the case that high internet access “produces” high income or economic output.

The upshot is that however real the concerns about progress towards 5G, much can, and will, change, going forward. Moving early is not a guarantee of “ultimate success,” nor is “lagging” always a problem.

In fact, should big new markets not develop, moving early on 5G might prove financially dangerous.

source: we are social

source: we are social

IoT Spending Growing Fast From Relatively Low Bases

Global spending on internet of things (IoT) is forecast by IDC to grow 16.7 percent year over year in 2017, reaching just over $800 billion in revenue. By 2021, global IoT spending is expected to total nearly $1.4 trillion in spending on hardware, software, services, and connectivity, IDC forecasts.

The IoT use cases that are expected to attract the largest investments in 2017 include manufacturing operations ($105 billion), freight monitoring ($50 billion), and production asset management ($45 billion), according to IDC researchers.

Smart grid technologies for electricity, gas and water and smart building technologies are also forecast to see significant investments this year ($56 billion and $40 billion, respectively).

Smart home technologies are forecast to see 19.8 percent compound annual growth rates  (CAGR) between 2017 and 2021.

The use cases that will see the fastest spending growth are airport facilities automation (33.4 percent CAGR), electric vehicle charging (21.1 percent CAGR), and in-store contextual marketing (20.2 percent CAGR).

The industries making the largest IoT investments in 2017 are manufacturing ($183 billion), transportation ($85 billion) and utilities ($66 billion).

Horizontal investments such as connected vehicles and smart buildings will generate $86 billion in 2017 spending and rank among the top segments throughout the five-year forecast.

Consumer IoT purchases will be the fourth largest market segment in 2017 at $62 billion, but will grow to become the third largest segment in 2021.

Industries that will see the fastest spending growth are Insurance (20.2 percent CAGR), Consumer (19.4 percent), and Cross-Industry (17.6 percent).

From a technology perspective, hardware will be the largest spending category until the last year of the forecast when it will be overtaken by the faster growing services category, IDC argues.

Hardware spending will be dominated by modules and sensors that connect end points to networks, while software spending will be dominated by applications software.

Services spending will be about evenly split between ongoing and content services and IT and installation services.

The fastest growing areas of technology spending are in the software category, where horizontal software and analytics software will have five-year CAGRs of 29.0 percent and 20.5 percent, respectively.

Security hardware and software will also see increased investment, growing at 15.1 percent and 16.6 percent CAGRs, respectively.

At this point, any forecasts of global “smart city” or “connected car” markets out some decades (annual revenue, for example) necessarily are speculative. We simply have no way of making accurate predictions that far out.

Estimates of smart cities spending (as opposed to citizen or societal benefits) likewise are difficult to quantify.

Frost and Sullivan

What is Better for Consumers: Fewer or More Suppliers?

Would mobile operator consolidation produce more--or less--competition, in U.S. and other markets, and is less competition better for consumers? Such questions will, and perhaps must be asked, as market consolidation happens in at least some markets. India’s market already has begun the process, and the U.S. market is on the cusp of possible change of that sort as well.

The empirical record cannot be understood in advance of any changes, but arguments will be made--for and against--regarding consolidation of the number of market suppliers. In other words, some will argue, with some justification, that consolidation will lead to stronger and more robust competition.

The issue is that only a few providers actually can sustain themselves, long term, in mobile or fixed networks facilities business.

source: McKinsey

So the trick is creating a policy environment where enough competition exists to drive lower prices and consumer benefits, but also innovation and investment. You need both competition and investment.

What is Better for Consumers: Fewer or More Suppliers?

Would mobile operator consolidation produce more--or less--competition, in U.S. and other markets, and is less competition better for consumers? Such questions will, and perhaps must be asked, as market consolidation happens in at least some markets. India’s market already has begun the process, and the U.S. market is on the cusp of possible change of that sort as well.

The empirical record cannot be understood in advance of any changes, but arguments will be made--for and against--regarding consolidation of the number of market suppliers. In other words, some will argue, with some justification, that consolidation will lead to stronger and more robust competition.

The issue is that only a few providers actually can sustain themselves, long term, in mobile or fixed networks facilities business.

source: McKinsey

So the trick is creating a policy environment where enough competition exists to drive lower prices and consumer benefits, but also innovation and investment. You need both competition and investment.

5G Will be Driven by Enterprise, Pervasive Computing

You would expect an organization such as GSMA to argue that “5G is more than just a generational step; it represents a fundamental transformation of the role that mobile technology plays in society.”

But it is not in any way incorrect for GSMA to argue that 5G “is an opportunity for operators to move beyond connectivity.” In other words, one big attraction of 5G is that presents a new way for mobile operators to “move up the stack” in terms of role within the ecosystem.

Specifically, 5G--built to support pervasive computing--”will mark an inflection point in the future of communications, bringing instantaneous high-powered connectivity to billions of devices” and “enable machines to communicate without human intervention,” says GSMA.

That is important. To the extent 5G actually enables service providers to move up the stack and occupy new and additional roles within the ecosystem, it will be by enabling new use cases, business models and revenue streams principally driven by enterprise customers not consumers.

That is among the big potential changes 5G will bring. To be sure, 5G is expected to enable new uses for the mobile network in supporting consumer internet access, including substitution for fixed network connections.

But the dramatic change is expected to come from revenues generated by enterprises, which will deploy most of the new pervasive computing services, apps and business models.

If 5G develops as most expect (we cannot be sure of that), there will be some historic differences: new revenue sources will be driven by enterprise customers and applications involving machines (pervasive computing).

source: GSMA

Will Internet Access Produce More Revenue Than Content, to 2021?

With the caveat that individual markets can vary dramatically, at least some observers believe that internet access services (on a global basis) will produce more revenue growth by 2020 than will content.

That might initially strike you as somewhat odd, but it is not as odd as you might think. In the past, telecom revenues were a bigger revenue category than “content” services such as linear video or subscription  music services, for example. That is especially true when considering both business and consumer revenues, as business customers contribute very little in terms of linear video revenue, for example.  

Also, in part, that might be the case even if the telecom revenue base is more challenged than content, advertising or transaction revenues.

source: Deloitte

Internet access will grow at about a 6.3 percent compound annual growth rate to 2021, while ad revenue grows at 4.7 percent and paid content services at about 2.6 percent CAGR.

As with all such forecasts, keep in mind that segment growth prospects can be quite different. The “paid content” segment includes radio, magazine publishing, newspaper publishing, prerecorded music and book publishing, in addition to linear video subscriptions and over the top video subscriptions.

The same caveat holds for internet access revenues, which clearly are set to grow in developing regions, with flat or declining revenue in developed markets.

source: PwC

It is not yet completely clear whether mobile internet access revenue growth will happen in all, most or only some markets.

Even in some markets that are saturated, or approaching saturation, in terms of take rates, the possibility remains that average revenue per user could grow, as users upgrade to faster services.

Some observers believe internet access revenues will grow faster than content revenues, on a global  basis, through 2021. That is easy enough to foresee in many developing markets, where both subscriptions and mobile internet subscriptions will grow significantly, or very significantly.

What is less clear are potential revenue trends in developed markets, where subscription growth is limited, and revenue growth mostly must come from higher ARPU. Some, including PwC analysts,  forecast modest growth in the fixed segment, but relatively  robust growth near nine percent on a compound basis for mobile internet access.

The caveat is that it also is not clear how much of that growth will come from new internet of things applications, and what percentage of growth could come from human users.

source: Activate

source: Activate

Activate Tech and Media Outlook 2017 de Activate

source: Activate

Video Drives 67% of Global Internet Traffic

The evolution of capacity demand in the telecom business is very easy to describe: voice, tlso hen data, now video.

Video will represent 80 percent of all Internet traffic by 2021, up from 67 percent in 2016, says Cisco.

Globally, there will be nearly 1.9 billion Internet video users (excluding mobile-only) by 2021, up from 1.4 billion in 2016. The world also will reach three trillion Internet video minutes per month by 2021, which is five million years of video per month, or about one million video minutes every second.

Emerging mediums such as live Internet video will increase 15-fold and reach 13 percent of Internet video traffic by 2021 -- meaning more streaming of TV apps and personal live streaming on social networks. While live streaming video is reshaping today's online entertainment patterns, virtual reality (VR) and augmented reality (AR) are also gaining traction. By 2021, VR/AR traffic will increase 20-fold and represent one percent of global entertainment traffic.

source: Cisco