2014 to be an Annus Horribilis for the Telecom Industry Part 2

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What will 2014 hold for the telecoms industry

What will 2014 hold for the telecoms industry

Predictions for 2014 in the Telecoms Industry.

2013 was a great year for Strand Consult and its team of experts. We have never published so many new reports or have been involved in so many interesting projects around the world as we have during last year. Globalization is exciting, and it forces reluctant national regulators to think in new ways. One of our key accomplishments was to help operators optimize their business case to build and run mobile infrastructure. As a result of our work, Denmark is one of the few countries in the world where operators experience vastly improved conditions to deploy mobile infrastructure. This is part of a multi-stakeholder process with regulators, municipalities, and operators to improve mobile coverage. Read more here and here.



Predictions for 2014
Here are Strand Consult’s predictions for 2014. Feel free to share them to create debate. The exchange of ideas is an important element for the evolution of our world.

Infrastructure providers will have difficulty to see who their friends are
We would like 2014 to be a good year for equipment providers Ericsson, NSN , ALU, Huawei and ZTE, but it won’t happen. It will be another tough year for the infrastructure providers, and the political and regulatory uncertainty in the EU and other regions means that operators will postpone their CAPEX again.

Road Without EndOn the other hand, as infrastructure providers get squeezed, they will likely take a more vocal role in the infrastructure debate. While they many have many dialogues with regulators, they can likely benefit by making their discussions public. Infrastructure providers can achieve a lot good will with their customers by being one of the more visible stakeholders the movement to improve mobile coverage.

2014 represents the last window of opportunity for equipment manufacturers. If they want to market their services, they have to be able to make a real difference for their customers. The next wave of revenue for operators has not been found, so equipment providers need to demonstrate how they can help operators cut costs. The disconnect is evident when looking at small cells. There are many challenges associated with creating networks of small cells. This report gives an idea.

Mobile phone manufacturers need to realize that the subsidies will be reduced significantly
For the last 20 years mobile phone manufacturers enjoyed subsidies form operators. It was through subsidies that mobile operators boosted penetration and helped to grow the mobile market. The model has come to the end of its useful life. Markets are saturated with phones. Profits for operators are squeezed because of competition; operators spend some 15% of sales on infrastructure and nearly twice that on buying and retaining customers. Competition will continue to drive prices down, so operators need to reduce subsidies to manage this further financial pressure. This has already happened in Denmark.

Reducing subsidies will have a big ripple effect on the marketplace. Without subsidies to drive customer acquisition, the mobile market will be driven more by attracting and retaining customers. The U.S. will experience one of the greatest upheavals as device sales move away from operators’ stores and to regulator retailers. There will be a larger selection of phones which can be used across operators. Unlocked phones will be big in the U.S. in 2014.

Connected devices will garner even more attention than phones. 4G/LTE will be the continued buzzword even though most people can’t tell the difference between 3G and 4G. The lazy journalist can find old stories about what you thought 3G should be and then reprint them as 4G stories. With so many years in the mobile industry, we recognize things from the past and experience a kind of mobile déjà vu.

Fortunately 2014 will be the year when there is more focus on quality of phones, especially the antennas and the role they have in relation to coverage experience. Strand Consult described it in this research note. The phone manufacturers that have not mastered the quality of their phones can run into a media firestorm. It will be interesting to see how Apple customers react when they learn that much of the bad coverage they experience is due to their phone. The phone has a more complex relationship to coverage than most realize. The cuts on subsidies and the increased scrutiny from consumers will be a double whammy for phone manufacturers.

Broadband – the hottest topic
Broadband will continue to be a big deal in 2014 as it was in 2013. In many countries, there will be people who will argue that broadband, especially fiber to the home (FTTH), is the panacea to all the world’s problems. The same people will argue that the government should get involved in broadband investment and deployment, especially when consumers aren’t doing enough on their own to demand the technology. The debate will be derailed by technologically religious people with limited insight, and this makes it difficult for the telecom industry and other serious actors to have a forthright debate.

2014 will be the year when rogue politicians outbid each other in how high they can promise taxpayer money for broadband, and lobbyists will beg for subsidies. They will pay little heed to the facts or the reality of the telecommunications market and the state of competition. In 2013 Strand Consult published a report to address the myths in the broadband debate. With hope, consumers will learn of the catastrophic national fiber projects in Australia and New Zealand and that government sponsorship of broadband is not the way to go.

While the debate plays out, consumers will continue to buy 4G/LTE, many as their primary broadband connection (already 7% of all Danes), and as seen in Japan, cancel their fiber subscription in lieu of mobile only broadband. More people will buy and use 4G/LTE than the biggest optimists would dream of. The challenge for operators is that consumers don’t pay a premium for that 4G/LTE, so there is little upside to ARPU. As such, the need for consolidation will grow more obvious though the year.

Rest assured that Strand Consult will remain active on this important issue in 2014 and issue a series of reports and research notes.

Mobile services become even more mobile

American broadband

American broadband

Mobile drives the development of the internet, and players such as Facebook, Google, WhatsApp and Yahoo! have increasingly mobile first strategies. The way we use mobile is changing the internet fundamentally. In 2014 there will be a focus on the composition of internet traffic and which devices are in play. It will increasingly recognized that high speed broadband connectivity is enabled through mobile devices, not computers or laptops. Consider what an innovator thinks about today. Does he develop for the mobile device of the 15 inch screen?

The classic consumer internet services consumed on a computer are old school. New services are conceived entirely from the perspective of a mobile phone. In 2014 there will be a year with a lot of focus on OTT services and how they challenge the telecom industry. Operators will also realize that most did not succeed with their own OTT services, and they will accept that the market will be dominated by Internet-based companies, the largely American.

2014 will find continued discussion of mobile internet services, their business models, and the reality that advertising as a business model works only for a few big players, not the whole ecosystem.

Consumers get value for money. Keep your eyes on USA, Mexico, and Africa
In a large part of the countries around the world, consumers get value for money with mobile services. A month of mobile services costs as much as a family size pizza and a large Coke. Mobile is a mecca for competition between operators, devices, and services. The U.S. will likely see even more competition in the form of MVNOs. In Mexico operators and regulators will look at the carrier’s carrier model to solve some old challenges.

Africa’s is the world’s final frontier for the internet. The internet penetration rate is so low that it has nowhere to go but up. When it comes to broadband, it’s a fait accompli that broadband will be mobile. Looking at how Africa has innovated with mobile provides a valuable lesson for many in the developed world who think that FTTH is the only worthwhile religion. There is no doubt a need for consolidation, and it is likely to occur through classic M&A and network sharing.

Strand Consult hopes that these predictions for 2014 give you some inspiration. It is our 13th year in making these predictions, and they consistently prove our audience’s most favorite content. Please be sure to see our predictions from the last 12 years and evaluate for yourselves whether we were right or not.

Source: Strand Consult

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