By Rupert Wood
Instead of worrying about the impact of a mobile data explosion, mobile operators in the West should worry about ensuring that it happens in the first place, according to a new report from Analysys Mason (www.analysysmason.com), which forecasts worldwide mobile data traffic. The report indicates that the compound annual growth rate (CAGR) of volume of mobile data traffic will be below 50% for the period 2011–2016, and just 40.8% for 2012–2017.
The report, Wireless network traffic worldwide: forecasts and analysis 2012–2017, argues that growth in mobile data traffic will not be enough to stop a contraction within the mobile industry in western economies. Data revenue growth is already offset by tariff rebalancing, and together with the loss of core voice and messaging revenue to over-the-top players, and some erosion of operators’ position in device distribution, this contraction could be severe.
Western Europe is forecast to have the lowest growth rate in mobile data out of eight regions of the world. Tiered pricing has already had a significant effect on growth rates, and the report forecasts that mobile data traffic in Western Europe will grow at a CAGR of just 29% from 2012 to 2017, equivalent to a growth multiple of 3.6. Device saturation, delays in availability of 4G, but above all the greater propensity of consumers to use Wi-Fi are the main barriers to growth in the region.
On top of this trend, network costs are predicted to fall fast. According to the report, unit transport costs are declining at about 30% per annum, so network costs would be balanced if data traffic grew annually at 42%. However, because data traffic is predicted to grow by only 29% in Western Europe, overall costs will fall.
In an uncompetitive market, falling costs would lead to rising margins, but in a mature, competitive market such as Western Europe they result in a contracting business. In other words, it’s not getting dangerously expensive to cater for demand; it is getting worryingly cheap to transport what little demand there is.
Forecasting mobile data traffic has been bedevilled by analyst excitability, vendor and operator interests, spectrum lobbyists, and wildly mobile-centric views of device ecosystems. Open-loop forecasts with headline-grabbing growth rates simply don’t tally with long-term trends in transport costs or any plausible increase in operator revenue.
On a regional basis, the report predicts large variations in mobile network traffic growth between 2012 and 2017. Traffic in emerging Asia–Pacific and Latin America will grow by a multiple of 9.1 and 6.8 respectively, but along with Western Europe’s low growth rate of 3.6, it will only grow by a factor of 4.5 in North America. The report also takes issue with the view that handset share of total traffic will grow fast at a global level, and forecasts that it will increase slowly from 45% in 2012 to 52% by 2017.
The report also offers a range of tactics for mobile operators to help ward off the spectre of ‘managed decline’, either by boosting traffic growth or by increasing the unit value of what growth there is. Strategies include offering bigger handset and multi-device bundles, and targeting the light-user end of the fixed broadband user base with some serious fixed-to-mobile substitution offers. These involve getting users to pay for data that most of the time they could get for no additional cost, and they will also place even more stress on the handset subsidy model.
Ultimately, mobile operators in developed economies are going to have to get used to being the victims, not the perpetrators, of disruptive substitution. Fixed and Wi-Fi can do most of what mobile does (except the wide-area/mobility bit) at a fraction of the price to the end user, but mobile can do only a fraction of what fixed and Wi-Fi can because of its inherently limited capacity.
About the author and Analysys Mason
Rupert Wood is Principal Analyst and author of the report. Analysys Mason delivers strategy advice, operations support and market intelligence worldwide to leading commercial and public-sector organisations in telecoms, IT and media. Analysys Mason consistently delivers significant and sustainable business benefits. We are respected worldwide for the exceptional quality of our work, our independence and the flexibility of our teams in responding to client needs. The company has over 250 staff worldwide, with headquarters in London and offices in Cambridge, Dubai, Dublin, Edinburgh, Madrid, Manchester, Milan, New Delhi, Paris, Singapore and Washington DC.