15 November 2010 |
To help celebrate Capacity's 10th Anniversary, we asked you for your thoughts on the important highs and lows of the last decade and your plans for the years ahead
Middle East mobile market
I can report that the Middle East mobile market continues to boom, having some of the highest penetration rates in the world. 3G, HSPA and mobile TV services are growing. Digital media, on the other hand, is at a very early stage of development in the region, but at least has high potential due to the rise in broadband use.
The population of the Middle East is young and growing fast, many people now having good incomes. In the Gulf countries (UAE, Oman, Bahrain, Qatar, Kuwait and Saudi Arabia), 65% of the population is under 30. Young consumers tend to be enthusiastic consumers of all types of digital media, with users between the ages of 15 and 29 accounting for 70% of all internet traffic in the Gulf countries. Mobile data services are increasingly important in such markets as data revenues are increasing.
While some countries in the Middle East have high mobile penetration levels, some Arab countries are at the other end of the spectrum entirely. In between, penetration levels are mostly rising fast.
At least five countries in the region now have penetration levels well over 100%, with the mobile markets of Bahrain, Kuwait, Qatar and the UAE appearing to be saturated.
One of the main challenges for mobile operators in the region is intense and growing competition, and the existence of mobile virtual network operators which don’t need to own a network, but still can compete with you.
Senior sales manager for wholesale business
Future business models
The number of internet users around the world has grown 444.6% over the last decade, according to Internet World Stats. This exponential growth in internet use, alongside the migration of traditional business models online and the development of new, innovative online business models, has transformed the industry. This will only continue. The quantity of digital information created and replicated around the world grew by 62% in 2009 and is now estimated to be around 800,000 petabytes, up from 161,000 petabytes in 2007 – according to IDC.
For wholesale telecoms, the quantity of data being transferred has finally met the promise of the late 1990s. The growth curve of data however has not been met by a similar upturn in revenue for the wholesale carrier.
This business model means that in many cases, expected revenues no longer justify further capital investment. Something has to give, especially in terms of the relationship between online businesses and the underlying infrastructure providers. Net neutrality could be key here. The purist net neutrality model that is coming in will certainly be interesting to watch in the coming years. Regulators will need to bear this in mind if the promise of productivity and social benefit is to be realised.
What sort of companies will be setting the pace in the telecoms market of the next 10 years? How will traditional telcos fare against competition from new, disruptive market entrants?
In the next 10 years, companies that are able to implement truly innovative online business models will be successful. Additionally, we will see de-leveraging in western economies alongside suppressed growth, juxtaposed with leveraging in emerging economies with periods of sustained, substantial growth. The biggest growth should come from the companies that can seize on the huge opportunities in emerging markets such as China, India, Russia and Africa. Balanced against this is the execution and sovereign risk attached to these economies. As it stands, few companies are successfully managing consistently good execution.
Competition will remain fierce – the next decade will be no different from a competitive point of view. There will be new entrants, further migration to the cloud and the concepts of net neutrality and hub ownership will become more important. Traditional telcos will still be very relevant however – especially in enabling intelligent, secure infrastructure and new disruptive online business models.
Wholesale telecoms will always have an important role to play in the enablement of business, both regionally and globally. It will be crucial both in terms of the migration of old world business models online and development of new world online models.
The price charged for data to be transferred has fallen dramatically, but a point of inflection must be reached between capital employed and the economics required to support that investment. This will be an important development. Around this, we can expect to see more integration of wireless and fixed infrastructure.
Director of corporate development, strategy and global marketing, EMEA
Anthing, anytime, anywhere
Can I start by saying how useful media like Capacity magazine are in delivering knowledge, news, trends, and information about the telecoms industry to me and our colleagues.
There’s no doubt that the internet has pervaded our lives – offering anything, anytime, anywhere in our lives. Even the most traditional telcos have for years now been turning their infrastructure into IP-based networks. I’d argue that this process is even more important for localised service providers, ones which concentrate on specific regions, as a key to opening up those regions to connect them to the world via the internet.
The need to evolve
The most important trends in wholesale telecoms in the last 10 years? The move to VoIP, and the network flattening caused by it, the emergence of open source switches as a major enabler for business, the huge drop in termination rates worldwide...
Traditional telcos will have to evolve. They will split into wholesale units that will maintain “subscriber access and mobility”, and services units where there will be fierce competition.
Looking ahead, I suppose flat fees will rule, and low-cost long-term contracts will be traded rather than signed. A new “contract trading” business will emerge. Most business margins will come, as always, from arbitrage and from exploiting loopholes in such contracts.
Chairman and CTO
The next step in internet growth
There is a fundamental question I’d put to any Capacity magazine reader. Are you really ready for the next 10 years? The past is the past, and we all have stories to tell, about both success and failure. In the next 10 years, we are going to see a completely different telecoms industry – one where unit costs have dropped and where global connectivity, once thought unique to the telecoms-savvy, will be commonplace for everyone. It will also be a world where the install times on services will be measured in minutes and hours versus days and months. This is the focus I would want from Capacity magazine as we move into its next decade. The pace will pick up and the need to inform the masses that this is not your father’s telecoms world is squarely on your shoulders.
I work for a company that’s solidly focussed on the wholesale internet marketplace, and is the number one IPv6 backbone globally. We provide more connectivity than anyone else to IPv6 enabled customers, wholesale and large enterprise. It’s synergistic that Capacity magazine is 10 years old, as that’s also the age of the Internet Engineering Task Force’s RFCs defining the IPv6 protocol. Yet 10 years on, we still only see a limited uptake within the global internet community for this important next step in internet growth. If it takes another 10 years for some corners of the internet to become IPv6 enabled, then we will truly be in bad shape. This is a subject that your magazine has touched on before. However, we are reaching a point where the IPv4 world is clearly about to hit a brick wall. Someone has to explain this clearly. I challenge you to do exactly that.
Martin J Levy
Director of IPv6 strategy
A change in focus
Service providers’ business models are under pressure due to rapid traffic growth combined with slow revenue and IT budget increases, making them rethink the current value chain.
Applications such as video, social networking, teleconferencing and cloud computing are driving high-bandwidth growth and the need for next-generation networks to support them. Despite this hunger for more capacity, the end user’s perceived value has moved from the network to the application provider, making consumers and enterprises more focussed on service quality and less willing to simply pay for higher bandwidth usage.
Service providers options are either to significantly accelerate their pace of innovation and move up the value chain to focus on content and services, or to concentrate on network infrastructure and costs and effectively move down the value chain. We are likely to see multiple combinations of these models as well as a trend towards fixed mobile convergence as service providers offer bundled services while optimising on a single network infrastructure.
In this new market model vendors will also take a new role, not only helping carriers to control costs and simplify network architectures, but also taking on networks’ design, planning and operations – enabling operators to focus on innovation and take their desired place in the value chain.
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