TIA, Cisco both looking to what the Mobile future holds
While industry associations and equipment vendors will often put forward figures on one aspect of telecommunications, such as service revenues, handset or equipment sales, it is less usual to get a picture of the whole industry puzzle fits together. Two recent studies, by the US Telecommunications Industry Association (TIA) and equipment vendor Cisco respectively, go some way to doing just that, though TIA figures are only for the US of course.
Despite pressure on services pricing, particularly for voice services, the US mobile market achieved revenues of $215 billion in 2009, representing a 3.3% annual increase in the year, says the US Telecommunications Industry Association (TIA). The TIA also expects the sector to grow at "mid-to-high single-digit rates," in the next five years, says a market review by the organisation.
This means, says TIA, that revenues derived from telecom services in the US will reach $278 billion in 2013. TIA includes in this figure revenue generated by voice, data services, wireless infrastructure terminals and services. Particularly, transport services revenues, which demonstrated an increase of 8.8%, have offset lower spending on wireless devices (-8.9%), equipment (-13.5%) and infrastructure support services (-8%).
And the reasons behind this demonstrate that there is some elasticity of demand in the sector as penetration rates reach saturation in the US- the TIA says that an increase in the number of wireless subscribers (a 5.1% increase over 2008) is largely due to lower service costs.
Cisco, meanwhile, paints a picture of vast increases in global demand for mobile data, driven by the continual rise of the smartphone and video applications: "Globally, mobile data traffic will double every year through 2014, increasing 39 times between 2009 and 2014," says Cisco, noting that nearly two thirds of mobile data traffic will be video by 2014.
Interestingly, volumes will increase across all geographical regions- indeed, according to Cisco, the Middle East and Africa region will have the strongest growth of all with a CAGR of 133%, followed by Asia Pacific at 119% and North America (117%).
So what does this all mean? To hazard a guess: Competition will continue to lead to lower pricing for all services, increasing demand, but reducing the premium that has existed to date for mobility.
Traditional operators will have to embrace IP based voice or lose out to third party operators. This will spur them to invest, as many are doing already, in LTE, which has a lower cost structure than traditional circuit switched technologies.
The challenge for traditional operators will be to manage the transition to all IP networks without losing out on revenues. New flat rate models for voice and product bundles are likely be key to this.