Telecom industry predictions for 2010 are popping up all over, but strategic business and telecom technology consulting firm inCode has let loose an astute annual take on its top 10 telecom industry predictions that identify emerging network, device, application and business trends that will affect carriers and their consumer and enterprise customers.
As we get closer to 2012, the word "predictions" produces search results about the end of the world, Nostradamus, tsunamis, earthquakes and World War III. Although inCode's predictions don't go quite that far, the looming death of the smartphone is on this year's prediction list. Then there are industry-rocking issues like the increasing difficulty of measuring average revenue per user (ARPU) in the traditional sense, what to do with all of that 4G data to backhaul, and how netbooks are driving carriers to embrace the IT side of the business with different support issue. These are all on an insider's tsunami list.
"This year's list looks quite a bit different due to cloud computing, video and wireless data pricing trends," said Jorge Fuenzalida, inCode's vice president and general manager. "But some are generational and crop up again and again." As for inCode's self-proclaimed accuracy rate, it's about 80%. Check out inCode's top 10 pain points and opportunities, and figure out which eight of 10 telecom industry predictions might become your reality.
- Wireless operators push netbooks -- a mixed bag
- Net neutrality: Unsatisfactory outcome for everyone
- Operators aggressive on 4G data, but backhaul issues loom
- When all devices are smart, what happens to the smartphone?
- Wireless data pricing: Operators turn to incremental charges
- M2M applications lead operators into new acquisition area
- Cloud computing for apps delivery: Clouds from both sides now
- A device OS bites the dust
- MVNOs get new lease on life in very different form
- Game console video kills the PC star, at least for Internet video
Debate on Net neutrality rules continues, and FCC efforts to reach a compromise bog down for many months. The potential imposition of net neutrality in wireless already has had a chilling effect on spectrum auctions and rural broadband stimulus participation. "The carriers have a very different perspective than the FCC because they have bid billions of dollars for spectrum, so carriers want to have some market power to offer different gradations," Fuenzalida said. Ultimately, the FCC will reach a compromise between network reliability and innovation that satisfies no one. Operators will need to find ways to gain traction in an environment encouraging more over-the-top (OTT) services.
Verizon has begun its aggressive deployment of LTE, and AT&T is continuing with HSPA. Other operators are following suit, finally giving wireless users the promise of wireline-type throughput as other challenging issues move to the forefront. Operators focus on new backhaul solutions that can cost-effectively handle increased traffic. In addition, device battery life rears its head again because high-speed data applications and always-on connections drain batteries quickly. Battery innovations have lagged behind RF technology advances, and the severity of the gap increases. Operator coverage -- especially in-building coverage -- is strained as customers use wireless as a replacement for wireline capabilities. Much time, effort and capital spending will be directed to finding solutions for these capacity issues.
Once upon a time, smartphones were high-end devices, but broad adoption has increased volume shipments, and airtime pricing has become more competitive. These factors are turning smartphone features into table stakes for mid-tier devices. Mobile phones above entry-level pricing tiers morph into computing platforms, so smartphones will cease to be a distinction between tiers by the end of 2010. Today's smartphone -- a device with an open OS, a big display, and full Internet browser -- won't be a standout because all devices will be smart. New levels of distinction emerge, with high-end units becoming powerful Internet devices, with voice calling as a secondary function.
Having provided customers with unlimited usage plans, operators find it difficult to increase pricing or start usage-based charging. Wireless operators increasingly turn to charging for incremental features and capabilities beyond basic transport. This is most evident in wireless data services and leads to quality-of-service pricing. Applications like VoIP or video streaming that require more guaranteed service are priced higher than just best-effort connectivity. Total cost of service for customers increases, but in many cases not from basic transport fee hikes.
The machine-to-machine (M2M) application space generated significant interest in 2009. AT&T and Jasper forged a strategic partnership, and Verizon and Qualcomm formed a joint venture called nPhase. Operators previously reticent to dive into M2M now recognize the profit-boosting characteristics of this business: low churn, low cost per gross add, and an increase in non-peak traffic. Many operators possess limited competency in the support and management requirements associated with M2M enterprise solutions. At least one operator will make a significant acquisition of a major M2M player to jump-start its capabilities in this market.
Operators embrace cloud computing for applications delivery because it places more value on the core network and increases customer "stickiness." Operators should be on the lookout for gray skies, however. Challenges of response time and coverage can affect utility of usage, and network security and vulnerability issues make customers hesitate. Other players won't sit still and watch operators occupy this space. Unwilling to assume "dumb terminal" status, device suppliers set up a classic technology battle between capabilities in the cloud and at the edge. Other cloud companies, such as Amazon and Google, provide these services across wireless and fixed in an "over the top" way, relegating operators to "transport pipe" status. During 2010, expect storm fronts to collide, but no clarity on winners.
A recession is still on, and there isn't enough device revenue to support seven different operating systems: BlackBerry, OS X, Windows Mobile, Web OS, Android, Symbian, and Linux Mobile. While the "open" oasis attracts much support for Google and Android, expect one OS to drop in the desert. Application storefronts and developer ecosystem traction are critical to device OS adoption by OEMs. Bigger device share attracts additional developers, resulting in more uptake by OEMs. Those OS platforms with extensive developer support, streamlined certification processes, and integration of Web 2.0 features establish early leads. Consolidation rather than continued fragmentation is the probable result since the industry typically drives toward standardization in the longer term.
Here comes the mobile virtual network operator (MVNO) 2.0 business model. In North America, MVNOs have struggled, and the few that found success were eventually acquired by network operators. Competing with operators that ultimately controlled supply just didn't work. The resurgence of MVNOs is based on a new business model emphasizing the delivery of total solutions with wireless as part of the package. An example is the free Amazon Whispernet content service accessed with a Kindle reading device. The risks are lower for mobile network operators (MNOs) since they're not enhancing a competitive brand and can penetrate markets previously not easy to access directly.
Internet video primarily has been consumed directly on the PC as streaming bite-sized clips. Only early adopters viewed streamed or stored Internet video on their TVs. The amount of Internet video viewed on TV doubles in 2010, and the gaming console serves as the primary gateway, accounting for almost half of usage. Developments supporting the console device, such as content availability, existing revenue model and higher-definition programming, are the enablers. While PCs and other devices -- such as Internet-connected TVs and over-the-top set-top boxes -- are expected to emerge after 2010, the gaming console will be the preferred device for now.
Bonus prediction: You can't track the players without a scorecard
Due to major industry changes, traditional wireless operational measurements are fast becoming obsolete. Here are a few examples:
- Penetration: This isn't a helpful figure when the numbers of devices and subscriptions reach 200%, 300% and more per customer.
- ARPU: Multiple devices and services per user, each with differing cost profiles, determine real customer revenue.
- Churn: An increase in the number of "disposable," "situational" and "substitution" devices challenges the traditional definition.
A new set of customer-focused metrics emerges and borrows criteria, such as share of wallet, from other industries.
"Carriers have a real tough time getting their arms around what it means because there's a lot of financial discipline in the telecom industry," Fuenzalida said. "Apple makes a lot of decisions around customer experience, which drives its revenue; but for carriers, it's tough because they're not sure how to measure it.