Tuesday, 30 August 2011

Mobile network operators focus on the HetNet to deal with ten-fold mobile data traffic growth

Over the last three or four years industry commentators have been predicting that mobile networks would imminently be swamped by the growth in data traffic. Hyperbole-strewn language spoke of “the mobile data tsunami”, spurred by widespread adoption of mobile broadband dongles and increasingly powerful smartphones. It is easy to see how such a fever was whipped up. Many mobile network operators (MNOs) were reporting huge increases in data traffic. In August 2011 even the UK regulator Ofcom got in on the act reporting that mobile data traffic had increased 40-fold in the last three years. However, according to forthcoming research from Machina Research the picture is much less worrying than most MNOs imagine.

Take the example of Austria, which is a great test case for mobile broadband as it was, until recently, the leading market in the world. At the end of 2010 there were 1.6 million laptop mobile broadband connections for a population of just 8.4 million. Austria was replaced as number one world mobile broadband market by Finland in 2009 but prior to that it was the preeminent example of how successful mobile broadband could be. Mobile network operators in many other markets have looked to Austria as an indication of how their market may develop. Initially they did so with some excitement as penetration grew, but at the same time the amount of traffic on the network also surged with implications for network demand. For one major Austrian MNO mobile data traffic more or less trebled each year from 2006 to 2008, resulting in a 34-fold increase in traffic over those three years. Subscriber numbers increased only six-fold. At this point most MNOs would be fearful of a continuing growth swamping the network. However, over the next two years subscriber numbers and total traffic increased by only a further 50% each and the total amount of traffic seems to be plateauing rather than continuing to grow at an exponential rate. The evidence from Austria indicates that traffic growth is very rapid during the early adoption phase of mobile broadband but it slows as the market matures, rather than continuing to accelerate away.

By the end of 2011 Machina Research anticipates that globally there will be 2 billion 3G/LTE phones and almost 300 million datacards and tablets active. Between them these devices will generate 4 exabytes of data. By 2020 there will be 7.3 billion 3G+ handsets and 1.6 billion datacards and tablets, altogether accounting for 40 exabytes of data: a ten-fold increase in traffic over the next ten years. Of course that belies some significant variation between countries. Across developed markets the average growth is 8-fold over the ten years. Naturally, those markets that have very high mobile broadband penetration today will see the lowest growth. Austria, Australia and Finland will all see growth of less than 500% over the period. In contrast, growth will be much more rapid in emerging markets in Latin America, Africa and Asia. On average Machina Research expects countries in these regions will see a 14-fold increase in mobile data traffic over the period. The biggest growth will come in China, India, Pakistan and Peru which will all see data traffic increase by more than twenty times, albeit from a relatively low base today.

Of course MNOs must act to cope with the traffic growth. Even a 500% increase in traffic is substantial. However, the key figure for mobile networks is not the total amount of traffic but the peak traffic which the network must be provisioned to support in a particular location. Typically the busiest 10% of cells carry 50% of traffic. Traffic growth in traditionally quieter periods or less active cells will have little implication for capacity planning. The key for MNOs is to focus on shifting user behaviour to reduce the peak in the mobile broadband busy hour from 10-11pm and to deal with high localised traffic demand. With this in mind, MNOs should be focusing their attention on delivering localised capacity rather than simply pouring more money into the macro network. The implication is that the focus of MNOs should not be on acquiring additional spectrum or the widespread deployment of the latest technology. It should focus on using a variety of different technologies and access methods to provide the best coverage areas of high demand. Ultimately MNOs will be forced to adopt a varied approach including public WiFi, femtocells, small cells for localised capacity and the macro network for coverage. The main role of the MNO for the next five years will be stitching together all these varied technologies into what is becoming known as the HetNet or heterogeneous network.

Thursday, 18 August 2011

Another Machina Research blogger

My colleague Jim Morrish has also started blogging and I recommend you take a look. He'll be covering the same sorts of stuff as me, with a particular focus on M2M. Cheekily he's called the blog "Not Quite 50bn" in reference to Ericsson's oft-quoted figure for number of connections by the end of 2020. We're currently putting together our own estimate of the total number of connections. Rest assured we'll be telling everyone about it once we've finished it.

Wednesday, 17 August 2011

I always knew my market forecasts were a work of art: telecoms-themed modern art at Estonia's KUMU gallery

I've been away in the Baltic states for a couple of weeks (hence no blog posts). When I was in Tallinn I visited KUMU, the Estonian Art Museum. A phenomenal building.

As well as all the treasures of Estonia's art history (mostly portraits of the duke of somewhere-or-other) there is also a rich vein of modern art in Estonia, including some fantastic surrealist, modernist and pop art in the 70s and 80s and some excellent current stuff. KUMU also featured a wonderful spotlight on the work of Jules de Bruycker which was outstanding.

For me though the highlight of the visit was an exhibition of internet and telecoms related art called Gateways. Given that it's vaguely related to telecoms I also feel justified in sticking it on this blog. Most relevant to my current work were a couple of pieces that made heavy use of RFID.

"Real Snail Mail" by Vicky Isley and Paul Smith of the boredomresearch collective is an installation piece involving real snails with RFID tags collected. Members of the public address and send an email using the associated PC and one of the snails will pick it up at an RFID tag marked "collect" and eventually deliver it a tag marked "forward" at which point it will be sent over the internet.

More explanation is provided in the picture below.

The average delivery time is about 5 days. I sent a message to myself on the 11th August and I'm still waiting.

Another piece, "Trapped", involved the artist, Anna Irapanciere, equipping 40 objects in her home with RFID tags to basically record everything she does. Apparently this lifeblog is accessible via the internet. I didn't try and, to be honest, probably won't bother as the minutiae were rather dull. In the exhibition itself the results were presented on a very 1980s green screen computer. More details in a rather blurry picture below.

Another fun piece was by Timo Toota. It was a giant computer console that basically took your name, date-of-birth etc from your passport and performed a web search on that name, telling you some stuff about yourself. Naturally it got me confused with my namesake the British boxer but it's nice to be told you're a maximum 20/20 on the fame scale. It also told me that I'd served in the armed forces and that I'd die at 69 (which was more than a little bit worrying). So all-in-all pretty inaccurate. The machine is, however, very impressive to look at and makes a suitably futuristic pulsing/clanking noise while performing its check on me.

A final one to excite (within reason) all mobile industry analysts was Ingo Gunther's "Worldprocessor". It featured a set of globes aimed at showing the world in different ways, including the relative sizes of country economies vs turnover of the biggest multinationals. One globe showed mobile penetration and CAGRs.

So apparently the plotting of mobile penetration and subscriber CAGRs is art. Who knew? Turns out I've been an artist all along. I have to confess to wondering slightly who they got their figures from. Anyone know?

Tuesday, 2 August 2011

Preview from Machina Research's forthcoming mobile broadband report: MBB traffic will grow 10x from 2011 to 2020

Mobile broadband has been one of my main coverage areas at other analyst firms and it's now something that I'm carrying over into Machina Research. As of later on this month we'll be publishing our report Mobile Broadband Global Forecast & Analysis 2010-20. The forecasts are pretty much finished bar a little bit of tinkering here and there so I thought I'd share a few of the topline figures.

We estimate that there are around 6 billion personal wireless wide area connected devices in the form of handsets, MBB-connected PCs/laptops and tablets in use today. By 2020 this will have increased to over 9 billion, including 1.4 billion connected PCs/laptops and well over 200 million wireless wide area connected tablets (i.e. excluding WiFi-only devices). Today about 1/4 of the world's 6 million connected devices are 3G+, a figure that is set to rise to 95% by 2020, as illustrated in the chart below.

Our forecast for traffic growth isn't as aggressive as many. Realistic I call it. We estimate that it will grow from about 4 Exabytes annually this year to about 40 in 2020. So a ten-fold increase on average globally. Obviously there will be massive geographical variation in there. Some markets in Europe are already seeing what looks like the start of a plateauing in total data usage. It's still growing pretty rapidly but it is not exponential. In other emerging MBB markets such as India the growth will be more rapid in percentage terms.

As you can see from the chart below, it's mostly PC/laptop connectivity generating the data traffic however the variation in the mix between handsets and PC traffic across different countries is quite dramatic. In the Netherlands for instance 2/3 is handset data, whereas for more mature mobile broadband markets such as Austria it's more like 15%.

These are just some of the topline figures. I'll be sharing a few other nuggets as the report nears completion.

About the report

Mobile Broadband Global Forecast & Analysis 2010-20 provides invaluable qualitative and quantitative analysis of the evolving opportunity for mobile broadband. The report reviews the major drivers and barriers for growth of MBB and analyses the key market dynamics, including how MNOs should approach customer acquisition, retention and management. It also examines the implications of the growth in mobile data traffic and the strategies that MNOs should pursue to cope with that growth including pricing and bundling. The three major device types (smartphones, datacards/USB sticks and tablets) are examined individually with case studies and forecast analysis.

The forecast excel data sheet includes very granular 10 year market forecasts for 54 countries and 6 regions. The forecast covers numbers of connections, traffic and revenue for each of the device types with splits by technology (2G, 3G and 4G).

To order your copy, find out more about the report or to discuss annual subscriptions please contact us.

Monday, 1 August 2011

Machina Research Press Release: Automotive M2M forecast to hit 1.4 billion connections generating revenue of EUR157 billion by 2020

The automotive sector promises a plethora of connected applications from in-vehicle entertainment to pay-as-you-drive car insurance making it one of the biggest and most dynamic M2M opportunities

[London, UK 1st August 2011]

Automotive will be one of the most vibrant sectors for machine-to-machine (M2M) communications over the next ten years according to a new report from M2M analysts Machina Research. From less than 90 million connections globally in 2010 the market will grow to almost 1.4 billion connections by the end of 2020. Of these, over one billion will be application-specific ‘aftermarket’ devices, and over 300 million will be vehicle platforms, such as GM’s OnStar, supporting multiple applications.

Commenting on the findings, the report’s author Matt Hatton said: “With 1.4 billion connected devices in 2020, automotive will be one of the biggest M2M segments. Today it is dominated by security and tracking applications, courtesy of high adoption of stolen vehicle recovery (SVR) services in markets such as Brazil and South Africa where concern over car theft is rife. By 2020 the domination of security applications will have given way to a more diverse landscape, with major applications including emergency assistance (on the back of regulatory mandates such as eCall in Europe), multi-application vehicle platforms and pay-as-you-drive insurance.”

Revenue will rise from EUR10 billion in 2010 to EUR157 billion in 2020. In the early years, aftermarket hardware sales will account for a large proportion of the revenue: 40% in 2011. Over the forecast period, as the market starts to saturate and applications gradually migrate to the vehicle platform, the importance of the devices market diminishes. By 2020 it accounts for only 20% of revenue. The provision of services over the hardware comes to dominate. However, for mobile network operators there is not guarantee of riches in store. The proportion of overall revenue generated by mobile network traffic is small, reaching only 3.2% (EUR5 billion) in 2020. Commenting on these numbers Hatton said: “As with most other M2M sectors mobile network operators are not going to make their fortunes from the mobile network traffic generated by the automotive sector. They need to be more involved with the service wrap. Worldwide only EUR5 billion is guaranteed to them for carrying mobile traffic but there is a further EUR120 billion in service revenue of which they should aim to take a portion”.

It would be a mistake, cautions Hatton, to consider the automotive M2M opportunity as a homogenous mass: “Automotive M2M is a diverse market and MNOs, module vendors, automotive OEMs and all other service providers must be aware of the dynamics of each of the sub-segments. It involves a combination of B2B, B2C and B2B2C sales either provided via aftermarket devices or through the vehicle platform. Services range for very low bandwidth, high integration and rarely-used applications such as security and tracking through to high bandwidth in-vehicle infotainment which is more reminiscent of consumer mobile broadband.”

About the report

Machine-to-machine (M2M) Communication in the Automotive Sector 2010-20 provides invaluable qualitative and quantitative analysis of the emerging opportunity for machine-to-machine communications in cars, motorcycles and other road vehicles. The report reviews the major drivers and barriers for growth of M2M in the sector and analyses the key market dynamics, including how MNOs, fixed operators, service providers and vendors might go about identifying and realising addressable opportunities. Each application is examined individually with case studies and forecast analysis.

The forecast excel data sheet includes very granular 10 year market forecasts for 54 countries and 6 regions. The forecast covers numbers of connections, traffic and revenue for each of the identified automotive application groups (including Vehicle Platforms, Security & Tracking, Emergency Assistance, Vehicle Recovery/Roadside Assistance, Entertainment & Internet Access, Navigation, Voice, Insurance and Manufacturer) with splits by technology (2G, 3G and 4G) and a break-out of mobile traffic revenue.

For a copy of the executive summary, table of contents and a blank sample data sheet, or to order your copy, find out more about the report or discuss annual subscriptions please contact sales@machinaresearch.com.