Editor's note: The industry analysts at ACG Research have looked into the future and conjured 14 key 2010 telecom industry trends and technology predictions designed to help service providers capitalize on the trends rather than just acknowledge their existence. Their shout-outs range from the pace of technology innovation to chip integration and from optical networking to networking architectures, with many stops in between.
One thing is certain in the telecom industry: As business and demands for products and services increase and technology continues to evolve rapidly, change is inevitable, and winners are those that can best and most quickly adapt to these changes. The savvy provider knows it is not enough simply to recognize trends and changes; it must also position business models to capitalize on them when they open up. To give you a head-start and help you survive and thrive in this competitive landscape, ACG has identified emerging and changing telecom industry trends likely to affect service providers in 2010, including business, network, devices and applications.
- Startups will lead innovation and technology development. Over the past five years, we've seen many service providers consolidating, with networking vendors following suit. This consolidation has led to increases in internal bureaucracy, slower technology releases, numerous layoffs and, ultimately, employee disillusionment, which has affected innovation. Even though companies have decreased their number of product and service innovations, the cutting-edge ideas keep coming. In 2010 and beyond, we will see skilled employees leaving large companies to join or launch startups to foster their progressive ideas, which will lead to new technologies coming to market.
- The level of chip integration will continue to increase, adding more functionality. Vendors will have to deal with multiple challenges associated with this integration, such as integrating the new technology quickly or dealing with the increase in complexity for software development. Mature vendors like Intel are being challenged by such competitors as ARM, a microprocessor design company that has introduced the Cortex A5 MPCore CPU, a low-power chip designed to make the Internet available on a wide selection of devices.
- The Chinese approach to business is a model for changing how U.S. businesses operate. According to a Newsweek survey, 81% of Chinese think the
We suggest that technology vendors heed the Chinese lesson and work faster to integrate features within silicon.
- The optical market will continue to consolidate, with mid-tier vendors joining forces. We anticipate that Tellabs, ECI, Ciena, ADVA, Infinera and Fujitsu will be players in this consolidation. We are also past the point where an optical system is just the sum of technically independent components. Nortel's electronic dispersion technique has clearly identified a trend toward silicon and electronic integration. The sooner optical vendors realize this, the more competitive they will be in 2010 and beyond.
- Wireless data will grow exponentially, putting more pressure on mobile backhaul infrastructure and challenging flat-rate data models, specifically in North America. As new phones similar to the iPhone are adopted, networks other than AT&T will begin to see dramatic increases in data traffic, boosting bandwidth requirements for wireless networks that, in turn, will affect the need to grow the wireline networks as well. And while iPhone bandwidth growth has been primarily in North America, these phones will proliferate worldwide as prices fall, putting pressure on the networks to grow at a faster rate. Backhaul will be put to the test as 4G subscribers and more high-end PDAs and netbooks go online. India will continue to be a key emerging market for broadband. The convergence to IP from TDM is still going strong, forcing service providers to deal with price pressures and dwindling budgets.
- New devices will grow IP connections worldwide. Netbooks are growing in popularity with both consumers and business executives, prompting them to leave the laptop at home and carry the netbook and the smartphone. Additional "objects" will also be connected, using the cloud; and every transaction will be tracked and have monetary value.
- IP video in the enterprise will grow dramatically and have a significant impact on networks. This will be especially true in real estate or similar types of markets where flip video can be used to instantly sell a consumer on a house or any business transaction. If latency and quality of service issues are not addressed soon, however, providers will be overwhelmed with video traffic that is HD in quality and being sent 24/7. It is unlikely to be locally cached, owing to the specific nature of the transmission.
- Simplicity + streamlining analytical data = competitive advantage. As the need for simplicity grows and the amount of data on any given subject expands, the demand for streamlining the complicated into a visual pretext will be paramount to users. Those who can innovate in this area will be ahead of the game and gain advantage.
- Targeted advertising paired with location-based services will give providers new tools to grow revenues. As advertising becomes increasingly sophisticated and delivers in-depth information, it also becomes more valuable. The new marketing strategy will be based on a single person (market to one) and personalized based on the customer's profile. Personal data will be a valuable resource for the customer, producer and/or carrier.
- The pressure to go "green" will intensify as the percentage of CO2 emissions generated by the ICT industry continues to grow (according to the Telecommunications Industry Association they are growing at a 9.4% annual compound growth rate). Consumers will demand lower energy use from their ICT infrastructure. Industry leaders will need to focus on "in use" consumption and lifecycle waste to drive costs out of the infrastructure, improve customer loyalty, find entry into new markets, and ensure environmental compliance.
- Managed services will continue to be one of the few growth areas for wireline telecom service providers. In 2009, the majority of telecom companies reported growth in managed services while other lines of business decreased. For example, Verizon's managed service revenues grew 1% year over year in Q309, while its global enterprise revenue fell 5%; AT&T's numbers were 17% growth in managed services versus an 8% decline in enterprise revenue. The drivers behind this growth -- pressure on IT budgets and increasing demand for new services -- will continue throughout 2010.
- 4G competition heats up, especially in the U.S. Companies such as Clearwire will continue to aggressively roll out WiMAX to gain a first-to-market advantage. Verizon will continue to push its coverage area as a key advantage to its service.
- Telecom pricing practices are shaking up the market. Competitive pricing and discounting will continue to be destructive and to erode margins in 2010. Vendors will have to position themselves against Chinese vendors that bring a wide range of products to market in a multitude of sizes. Great technology and high performance will not be enough to combat the wave of pricing pressures. New and innovative feature sets will be required to assist customers in their businesses.
- Service providers' business models will become more aggressive as they map technology to service innovation and focus on delivering stronger customer value. Look for service providers to map applications such as IPTV, mobile offering to services, technology, operations and financial domains to increase their profitability and longevity of service.
About the author: Eve Griliches is managing partner at ACG Research where she uses her comprehensive understanding of IP technology to focus on data center and cloud computing. Griliches spent five years at IDC as program director for the Telecommunications Equipment group, where she provided in-depth insight and analysis on many of the key technologies in the telecom market. She has more than 10 years of product management experience with a number of equipment vendors.