Nº 1 2013 > Market forecasts
Predictions for 2013
What does the year hold for the telecoms industry?
ITU News always looks ahead when updating you on the telecommunication and information and communication technology (ICT) environment, but this is the first time that we are publishing specific predictions from three well-known analysts: Analysys Mason, Deloitte, and Informa Telecoms & Media.
In a fast-moving industry, players need to know what will happen next. Yet predictions — even those based on expert knowledge and careful analysis, like those presented here — are simply best guesses and can be evaluated at the end of the year to see how accurate they were.
As Deloitte comments at the beginning of its “Technology, Media & Telecommunications Predictions 2013”, the aim with its forecasts is to catalyze discussions around significant developments that may require companies or governments to respond. “We provide a view on what we think will happen, what will occur as a consequence, and what the implications are for various types of companies. We do not however presume that ours is the last word on any given topic: our intent is to stoke the debate.”
Deloitte anticipates that a record one billion smartphones will be shipped in 2013, that mobile advertising will get split into two categories — tablets and smartphones — and that more than 90 per cent of user-generated passwords will be vulnerable to hacking in a matter of seconds. Deloitte also forecasts the start of preparations for the next generation of high-definition television, known as 4K.
Among its top predictions for 2013, Analysys Mason anticipates that the roll-out of long-term evolution (LTE) services will have limited immediate economic impact and that social media giants look set to stir up Internet Protocol (IP)-based messaging services. It is also expected that smartphone penetration growth rates will slow down considerably.
Informa Telecoms & Media predicts that 2013 will be another tough year for telecommunication operators and that over-the-top (OTT) players will not have it all their own way either. The company sees risks for those operators that do not invest properly in building wide-area networks that can deliver high-quality data services. When it comes to new services, there will be continued usage migration to smartphones and tablets. But both established and new players are trying to figure out how best to monetize mobile usage.
Among its top predictions, Analysys Mason foresees the following in 2013:
LTE arrives, but with limited impact before 2014: In 2013 LTE will become a commercial reality in many more countries, but will have limited economic impact in the next 12 months. Some European countries and emerging markets in Latin America are set to launch LTE, as well as countries in South-East Asia via the Asia–Pacific band plan. Some developed markets such as the United States will also start to test LTE-Advanced and take advantage of features such as carrier aggregation to craft larger channels for higher-speed services.
However, the immediate economic impact of LTE will be limited in countries where it has been priced as a premium product and the economy remains sluggish (for example, Italy and Spain). The industry will also realize that consumers are unwilling to pay a premium for LTE mobile broadband, and that this service will not compete with next-generation fixed access. It will provide a complement to fixed access, both in urban areas as part of bundled service solutions, and in rural areas where fixed access is not available.
Social media giants to further shake up IP-based messaging: In 2012, operators responded to short message service (SMS) cannibalization by launching rich communication suite-enhanced (RCS-e) services, followed by a number of over-the-top (OTT) services. In the next 12 months, competition will intensify as social media giants such as Facebook enter the market. Analysys Mason forecasts that European operator revenue from messaging will decline by 34 per cent in the next four years, from EUR 28 billion in 2011 to EUR 18.6 billion in 2017.
The voice-over-LTE investment case to come into the spotlight: The first voice-over-LTE (VoLTE) services came to the market in 2012. Though widespread commercial deployments are still some way off, operators will need to make some tough decisions about the future of their voice services. Potential cost savings are currently driving the Internet Protocol multimedia subsystem (IMS) investment case, but revenue implications are uncertain, and a clear vision for how voice services should evolve in an LTE world has yet to be articulated. HTML5/WebRTC will further stimulate the debate about whether “voice is just an application”.
Smartphone penetration growth rate to slow markedly: The smartphone market will continue to grow, but the rate at which it grows will be markedly slower than in previous years. The number of smartphone shipments worldwide will grow from 691 million in 2012 to 869 million in 2013. However, the rate of growth in the number of new smartphone connections will significantly decline. Having decreased from 39 per cent in 2011 to 29 per cent in 2012, this growth rate will decline further to 20 per cent in 2013.
There will be continued, incremental development in the market share of the smartphone operating system (OS). In the next 12 months, both Android and iOS are predicted to marginally grow their share of smartphone sales worldwide (from 56.4 per cent to 58.1 per cent, and from 21.5 per cent to 22 per cent, respectively). However, Symbian’s market share for sales is projected to fall from 5.9 per cent to 2.7 per cent.
Traditional television will be under more pressure: OTT/connected television and non-linear television will continue to force broadcasters and pay-TV and telecommunication operators to rethink their strategies. The take-up of paid-for OTT video services in the United States and Canada will more than double to 53.1 million households between 2012 and 2017, representing 37.4 per cent of households.
In Europe, the take-up of paid-for OTT video services reached an estimated 2.3 million households in 2012, representing a mere 0.7 per cent of households and is expected to increase to 32.2 million, or 10 per cent of households, in 2017. Compared with the United States and Canada, growth in Europe will continue to be constrained by a lower propensity to pay for video services, because of the widespread availability of high-quality free content from public broadcasters.
Wi-Fi to the rescue: Small-cell/service-provider Wi-Fi solutions will address mobile operators’ needs for dense urban wireless coverage and capacity, but limited backhaul availability, standards maturity and solution costs will blunt major deployments until late 2013 or early 2014. LTE 2600 will emerge as a key option for small-cell spectrum, and will gain network and device support to address the capacity needs of developed-market operators, complemented by growth in 5 GHz Wi-Fi deployments, which will provide improved Wi-Fi performance.
Service-provider Wi-Fi solutions based on HotSpot 2.0 and devices supporting Passpoint 2.0 will come to market in late 2013, helping to bridge the gap between cellular networks and the emerging “carrier grade” Wi-Fi service. Operators will also start to look at providing various grades of service (cellular, service provider Wi-Fi and “best effort” Wi-Fi) to help differentiate their service and brand, as well as support monetization of the wireless experience.
Deloitte’s ten predictions cover three converging industries — technology, media and telecommunications — and focus on how they will affect the market. Here we highlight the following:
There will be an upsurge in momentum behind LTE: 2013 will be the first year in which LTE thrives across multiple markets. The subscriber base will triple to 200 million by year end, and those on LTE tariffs will represent about 10 per cent of all service revenues. Usage of LTE will be evolutionary rather than revolutionary; the major benefits of subscribing to LTE from 3G are likely to be better performance from existing applications — from e‑mail to updating social networks.
“Mobile advertising” will thrive, led by tablets, but smartphones will lag behind: “Mobile advertising” — a category including tablets, smartphones and feature phones — should grow by 50 per cent to reach USD 9 billion globally. The smartphone sector may generate USD 4.9 billion in revenues in 2013, while advertising on tablets may generate USD 3.4 billion. Revenue per unit, however, will reveal a different dynamic: smartphone display advertisement revenues are forecast at USD 7 per tablet and USD 0.60 per smartphone.
A billion smartphones should ship for the first time ever. Smartphone usage, however, will become increasingly varied, with a growing number of smartphone owners (about 400 million out of an installed base of 1.9 billion by the end of the year) rarely or never connecting their devices to data.
The personal computer (PC) is not dead, but its success will be measured in usage not units: Of total sales of personal computers, tablets and smartphones in 2013, PCs will make up about one fifth. However, more than 80 per cent of Internet traffic measured in bits will continue to be generated on traditional PCs (desktops and laptops). And of the total time spent at home and at work on PCs, tablets and smartphones combined, more than 70 per cent will be on a PC.
The television industry will start preparing in earnest for 4K: This next iteration of high definition (HD) offers four times the resolution of the current highest standard HD television, but the full roll-out of 4K will take years. In 2013, 4K will be in very few living rooms and there will be no 4K broadcasts. There is little content so far. About 20 types of television sets will be available to those wishing to spend USD 15 000 — USD 25 000 on a set.
Companies may experiment with enterprise social networks and staff bringing their own computers: More than 90 per cent of Fortune 500 companies will have selectively or fully implemented an enterprise social network by the end of 2013; a 70 per cent increase over 2011. Of those who register, only a third will read content once a week or more, and just 40 per cent will make an enterprise social network post in the average month.
Very few additional companies will adopt a bring-your-own-computer policy where the employer pays for the PC. At the same time, 50 per cent of Fortune 500 companies will allow employees to bring their own personally-owned and paid for computers.
The looming spectrum shortage will get worse before it gets better: The demand for wireless bandwidth continues to grow, causing increased spectrum exhaustion — leading mainly to slower speeds, but sometimes an inability to access networks or dropped calls or data sessions.
Informa Telecoms & Media
Among the predictions made by Informa Telecoms & Media, we highlight the following:
Wi-Fi will become a victim of its own success: There will be a shift in operator sentiment away from public Wi-Fi as it becomes evident that the growing availability of free-to-end-user Wi-Fi devalues the mobile-broadband business model. Mobile operators will respond by articulating the value of their cellular networks better, but others not affected by this trend will double down on their public Wi-Fi investments to continue to propel the deployment and monetization of Wi-Fi.
Digital services will need to show investors that they can make money: Investors will demand a clear path to revenue from investments into digital services before operators begin to feel any share-price benefit from initiatives. It will become apparent to many operators that material revenue streams that can increase group-level revenues will be very hard to come by.
Content providers will continue to spend on infrastructure: Google, Netflix and others will continue to invest heavily in extending their infrastructure by bringing it closer to users in 2013. Operators should consider these proposals carefully and recognize where they are likely to gain more from reduced costs and increased network efficiency than lose out in terms of uncertain revenues from so-called two-sided business models.
Subsidies will come under the microscope, but not necessarily for the right reason: Handset-financing models were established in Europe in 2012 and will continue to spread globally in 2013. But a reduction in subsidies and changes to traditional ways of retailing devices will come at a cost to operators. Physical and online retailers, such as Amazon, as well as device-platform owners, such as Apple or Google, will accelerate their own initiatives to disrupt traditional device distribution models. Every slip in the share of devices sold through operator channels will serve to further erode the balance of power between operators and Internet and platform owners at the negotiating table.
Shared network might mean shared pain: The logic of network-sharing will increasingly be questioned by the industry given the core strategic importance of a differentiated network platform. In Europe, especially, we expect more operators to forsake dividends and free cash-flow in order to ramp up investments into network infrastructure in the hope of establishing a competitive advantage built upon network quality of experience. However, despite this reversal of attitude by some, network-sharing and operator consolidation will sweep through emerging markets, especially in Africa.
Voice over LTE: Boosted by a lack of any negative customer feedback about interim voice for LTE solutions (such as falling back to circuit-switched 2G and 3G networks), more operators will join Verizon Wireless and EE in pushing out their timelines for the commercial deployment of VoLTE. A business case that looks to be based solely on spectrum efficiency will struggle to gain enough executive support to justify a rushed investment plan.