Markets

01 January 2011 |


Bringing you the highlights of the last twelve months, Capacity covers key statistics and research from: backhaul; data; end user; infrastructure and networks; finance; services; voice and VoIP; and wireless and mobile.

Backhaul
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MOBILE BROADBAND SUBSCRIBERS DRIVE BACKHAUL EQUIPMENT MARKET 

The second edition of Infonetics Research’s 2009 Mobile Backhaul Equipment and Services report predicts that the mobile backhaul equipment market will grow by 60% in 2009 to $5.9 billion.

Both the overall number of mobile broadband subscribers and the amount of bandwidth consumed by each individual subscriber is increasing rapidly, according to the report. As a consequence, service providers across the globe are upgrading their networks to meet demand. Over 100 operators currently deploy HSPA, and upgrades to HSPA+, Wimax and LTE are expected in the near future.

In preparation for future upgrades, according to Infonetics, mobile operators are adopting Ethernet-only products, which has buoyed Ethernet microwave backhaul. Gigabit Ethernet “LTE-ready” microwave backhaul products were launched this year, and more Ethernet-only microwave products are expected to launch in 2010.

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SPECTRAL EFFICIENCY TO LOWER BACKHAUL COSTS 

Backhaul spectrum, like other highly valued finite resources, is being consumed at a rapid rate. With microwave spectrum congestion becoming a real issue in many regions, decreased availability and increased cost has meant fewer options for service providers looking to expand their spectrum footprint, according to Dragonwave, a provider of high-capacity packet microwave solutions. Furthermore, adding channels could have implications for the long-term viability of their business model.

For many service providers, spectrum licences already represent one of the largest recurring costs in their backhaul network, accounting for as much as 40% of a backhaul operator’s 10-year total cost of ownership, according to Dragonwave. Looking at future capacity requirements, where hundreds of megabits or more will be needed, careful spectrum utilisation planning will be essential in order to ensure the ongoing economic viability of these backhaul networks.

Despite the impact to the total cost of ownership, spectral efficiency is often a secondary consideration when evaluating microwave backhaul solutions, according to Dragonwave. These costs are varied according to ranges found in existing backhaul deployments, illustrating the potential impact that each can have (positive or negative) to the operator’s total cost of ownership.


Data
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US IP VPNs GROWING THROUGH 2014
 

Atlantic-ACM’s US Telecom Wired and Wireless Sizing and Sharing: 2009-2014 tracks trends in US business telecoms spending and expects IP VPN demand to grow at a CAGR (2007-2014) of 13.6%, representing the highest growing product among all business data products.

Respondents to the 2009 Business Connectivity Report Card indicated that they are increasingly migrating from legacy private line, ATM and Frame Relay products to Ethernet-based transport products, as well as IP MPLS-based VPN products.

Growth in demand will be driven by IP VPN’s cost-effectiveness as a data solution, according to Atlantic-ACM. Enterprise cloud computing build-outs will accelerate demand for secure and scalable connectivity between data centres and enterprises. At the same time, demand for cable modem, DSL and fibre-based broadband connectivity solutions among business customers should accelerate as use by small businesses as a T1 replacement continues to grow, driven by continued investment by cable/MSOs in the US small business telecoms space.

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CHALLENGES AHEAD IN THE LATAM DATA CENTRE MARKET
 

According to international consultancy Broadgroup’s Data Centres Latin America – Competition, Demand Drivers and Growth report, data centre space is set to grow 61% across seven Latin American markets (Argentina, Brazil, Chile, Colombia, Mexico, Panama and Peru) by 2014. Yet although the region boasts more than 200 data centres (excluding enterprise data centres) across these markets, this is still likely to leave a space shortage following enterprise outsourcing.

Latin America is at a crossroads of change for data centres, according to Broadgroup. As enterprises shift to outsourcing, which is a trend identified in the report research, the facilities available are upgrading but the business models often used are outmoded. “Latin America is at a crossroads of change for data centres,” said Pablo Diantina, research manager for Broadgroup Latin America. “As enterprises shift to outsourcing, the facilities available are upgrading but the business models often used are outmoded.” Data centre expertise is needed to manage this process, and although significant investment is occurring, Broadgroup believes that based on market growth and facility expansion, there will be a shortage of space in a few years time.

The report illustrates the vast geography of the continent as well as its potential, and the way in which metro areas are progressively being connected using dark fibre and submarine cables. Power generation networks and grid connections remain an immense challenge, as does the development of clean and renewable energy. Argentina, for example, has large untapped hydroelectric potential, according to the consultancy.

Moves are afoot to build wind power plants and introduce green energy across the continent but the investment required to do so probably means this will only occur in the longer term. Nevertheless research did uncover evidence of plans for some of the new data centres under construction to be powered by renewable energy.


End user
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DTH PAY TV SUBSCRIPTION CONTINUES
TO GROW 

Satellite direct-to-home (DTH) subscription continues to grow steadily at rates of 13% to 15% per year and with the number of subscribers now standing at over 150 million globally, reports TeleGeography.

As telcos and cable companies battle for a market share in the pay TV and telecoms markets, DTH operators have continued to grow globally, with five times as many subscribers on the platform compared to IPTV subscribers. Its growth rates double those achieved by cable TV competitors.

ARPU for DTH is more than double that of cable companies and telcos globally, excluding North America where the gap is closer. The data is based on TeleGeography’s Globalcomms pay TV research service which tracks 530 pay TV operators and forecasts for over 170 countries quarterly.

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PURCHASING VIA MOBILE TO REACH $200 BILLION IN 2012
 

Juniper Research forecasts that the value of digital and physical goods that people buy with their mobiles will reach $200 billion globally by 2012, compared to less than $100 billion today. The study, Mobile Payments for Digital and Physical Goods, found that digital goods include entertainment and tickets, while physical goods include groceries, gifts and books. This global market sizing report focusses on two major sectors within the mobile payments industry: digital goods payments, like mobile entertainment such as a music track and SMS/barcode ticketing, and physical goods payments, like mobile purchase of almost any consumer product such as a book or DVD using mobile internet or an application.

Juniper Research noted that the purchase experience has been enhanced by improved mobile commerce transaction processes due to faster mobile networks, more powerful devices and much more user-friendly smartphone apps. Amazon Payments has introduced payment-processing tools for mobile devices, enabling smartphone users to buy with one click.

However, the Juniper report also underlined that retailers and merchants need to communicate the cost of transactions clearly so that people are not discouraged from buying by mobile. Not surprisingly, the frequency of physical goods purchased will be higher than average in developed regions such as North America and western Europe. Brands, retailers and merchants have an opportunity to increase their revenues through highly targeted marketing campaigns, using apps and mobile web payments as a convenience play for users.
 
Report author Howard Wilcox said: “Our research showed that the purchase experience has been enhanced by improved mobile commerce transaction processes due to faster mobile networks, more powerful devices and much more user friendly smartphone apps. Amazon Payments for example has recently introduced payment-processing tools for mobile devices, enabling smartphone users to buy with one click.”



Infrastructure and networks
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NETWORK CONGESTION AFFECTS PRODUCTIVITY IN THE UK
 

Research conducted on behalf of fibre network provider Geo suggests that public internet infrastructure congestion is affecting enterprises across the UK. IT and network professionals working for some of the country’s biggest banks, manufacturers, retailers, insurers and local authorities were surveyed about access to bandwidth, as well as network slowdowns and outages. The research showed that 30% of businesses have experienced slowdowns and faults, and 27% believe there is potential for them to lose a customer through these network issues.

A further 2% of those asked said that they had already lost a customer because of such problems. This trend, suggests Geo, could cost the UK’s economy millions of pounds in lost productivity each year, as 70% of respondents reported losing at least one hour of operational time per week as a result of poor network performance. In fact, 29% of these respondents lost a working day (7.5 hours) or more each week through network faults.


Finance
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ASIAN CIRCUIT PRICES SLIDE, TRANSATLANTIC PRICES STABILISE 

According to TeleGeography’s Wholesale Bandwidth Pricing Database, capacity costs five times more on trans-Pacific and intra-Asian routes than across the Atlantic.

Lease prices for a 10Gbps wavelength ranged from $9,000 to $20,000 per month between New York and London; the same product cost between $65,000 and $80,000 per month between Tokyo and Los Angeles, according to TeleGeography. However, a recent wave of network construction and upgrades in Asia and the Pacific has brought renewed pricing pressure to those markets.

10Gbps wavelength prices between Los Angeles and Tokyo have fallen at a compound annual rate of 21% over the past two years, and prices from Singapore to Tokyo have plummeted by nearly 50% in the past year.

Conversely, prices for 10Gbps wavelengths between New York and London have fallen at a compound annual rate of only 3% – unusually stable, by the standards of the bandwidth market, according to TeleGeography.


Three-year disinvestment cycle to bottom out in 2010 

Global capex is forecast to decrease by a maximum of 6% in 2009, with a possible end-of-year bump up potentially lowering the decrease to below 6%, according to Infonetics Research’s 2009 Service Provider Capex, Opex, ARPU and Subscribers report. The 2009 decrease has been driven by factors such as a weakening US dollar and predicted declines in the value of the Brazilian real and Mexican peso.

A capex plateau was reached in 2008, says the report, ending a five-year investment cycle and signalling the start of a three-year disinvestment cycle that will be less severe than the one that followed the 2000 crash. After disinvestment bottoms out in 2010, a new capex investment cycle will begin in 2011 which will be driven by 3G roll-outs in India, central and Latin America and Africa. It will also be aided by LTE deployments in Australia, Brazil, western Europe, Japan and North America.


Services
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Rich communications growing in east Asia and western Europe 

As commercial launches of rich communication suite (RCS) services begin in 2010, positive progress is being made in achieving interoperability among operators, a critical first step, according to Infonetics Research which publishes the Rich Communications Suite Services, Devices and Subscribers report. RCS aims to unify the communications experience by tying together presence, voice, chat and multimedia services over IP multimedia subsystem (IMS) networks, first for mobile networks and later extending to fixed-line capabilities.

Western Europe leads the way, with the first commercial deployments of RCS occurring in 2010 in France, led by Bouygues Telecom, Orange and SFR. Asia-Pacific also will see pockets of RCS commercial trials and deployments in 2010, starting in Japan and South Korea. The lack of RCS-compliant handsets has been a critical barrier and there is work to be done toward operators launching additional enhanced applications and services over RCS, according to Infonetics.

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Increasing demand for visual collaboration managed services 

Research from Frost & Sullivan suggests that what is referred to as a “perfect storm effect” has eradicated previous concerns about the viability of video conferencing as a business tool. In 2008, the emerging global market for visual collaboration managed services was worth $82.7 million. According to Frost & Sullivan, it will reach $938.3 million by 2014.

The group suggests that visual collaboration is on its way towards becoming established as a practical communications technology for businesses of all sizes, and that many companies investing in this area want a service provider to manage the infrastructure equipment for them. Consequently, the research suggests, the concept of “public immersive visual collaboration rooms” is gaining in popularity as a cost-effective substitute for in-house deployments.


Voice and VoIP

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Mobile VoIP users to increase in
mature markets 

The number of mobile VoIP users will exceed 100 million in developed markets by 2012, with over half the users residing in Europe and North America, according to a new study by Juniper Research.

Juniper Research’s study, Mobile Voice Strategies: mVoIP Opportunities and Business Models, 2010-2015, identifies a direct correlation between the roll-out of 3G services and increased adoption of VoIP in developed countries.

A high percentage of mobile VoIP applications are carried via WiFi and bypass the provider’s network. This traffic will result in lost revenues, amounting to about $5 billion by 2015, says Juniper. The researcher notes there is the potential for alliances between mobile VoIP players and traditional operators which may provide the best option for incumbents that are planning to address and provide mobile VoIP services.

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US, Japan and France lead VoIP subscribers
 

Point Topic reveals that by the end of September 2009 VoIP subscriptions had grown by 15% in the first three quarters of the year to pass the 100 million milestone. The number is close to 110 million today, according to the research firm.

The US keeps the top spot with over 22 million subscribers paying for VoIP services, many over cable, at the end of Q3 2009, just ahead of Japan. In terms of penetration, however, it is France that is way ahead of the pack, with over 38% of all its fixed-line calls delivered over VoIP, according to Point Topic. In contrast, South Korea, ranked sixth in subscriber terms, had about 18% of its fixed-line calls on IP by September 2009. A spokesman from Point Topic explained that the French market’s acceptance of the technology was largely fuelled by the country’s unbundling strategy, while Japan “led in VoIP principally because of a deal Yahoo Japan/Softbank rolled out two years ago which provides VoIP in such a way that the customer doesn’t notice they are using an alternative technology.”

Soft client VoIP services like Skype add another dimension to the VoIP market. For Q3 2009, Skype reported 27.7 billion PC-to-PC minutes, in addition to 3.1 billion Skype Out minutes, which are calls terminating on normal phone lines or mobiles. Skype had an income for the 12 months to Q3 2009 totalling $653 million. Although that is only equivalent to the revenue of a small telco, it should be remembered that almost 90% of the traffic that Skype carries generates no revenue at all, noted Point Topic.

VoIP has taken longer to take hold than many had first expected. There have been technical issues, by no means resolved even today, regulatory barriers and customer inertia. Many operators have reduced their standard tariffs to cope with the threat of VoIP, which reduces the incentive to switch. Conditions that should allow for faster growth in the next couple of years are starting to become common, especially when VoIP is provided for a low price in a bundle with broadband and TV, according to Point Topic.



Wireless and mobile

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Mobile broadband subscribers surpass
DSL subscribers in 2009 

The number of mobile broadband subscribers surpassed DSL subscribers for the first time in 2009, and is forecast by Infonetics Research to grow to 1.5 billion worldwide in 2014. While the mobile broadband card market (including standard and embedded cards) was soft overall in Q4 2009, sales are up 55% in 2009 compared to 2008, at $6.4 billion worldwide, driven in large part by increasing adoption of high-speed packet access (HSPA).

According to Infonetics, the effects of the recession continue to linger, with fewer than usual USB dongles and netbooks delivered at the end of 2009, making the normally seasonally-strong fourth quarter softer than expected for the mobile broadband device market. However, fundamental drivers remain strong and the market will continue to gather momentum, driven by HSPA, and Infonetics expects to see fewer growth blips in the future.

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Asia-Pacific leads the way for 4G wireless subscription 

The Asia-Pacific region has overtaken North America as the home to the largest number of 4G broadband wireless subscribers, according to figures from TeleGeography’s 4G research service.

Subscription in the Asia-Pacific region has increased by 7% in the past year to 1.7 million, or 29% of the total 5.7 million 4G subscribers globally. North America was second, down one place from last year on figures based on the year ending March 2010 with 1.4 million subscribers, predominantly in the US and Canada.

Teleeography says Wimax is attractive to operators in Asia as it is cheap and can bypass the last mile in fixed-access networks, which are still dominated by the incumbent operators.

The third largest market for 4G is eastern Europe with approximately 1.1 million subscribers. This growth is driven by Russian operators like Yota in Russia, which is committed to converting its network from Wimax to LTE cellular technology.

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Large increase in mobile money transfers predicted
 

Juniper Research predicts that by 2014, half a billion people worldwide will use mobile money transfer services. Its report, Mobile Money Transfer & Remittances: Markets, Forecasts & Strategies 2009-2014, claims that this growth will come primarily from mobile users in developing countries.

Juniper Research’s report states that in developing economies around the globe, including parts of Africa and South America, conventional banking is often highly underpenetrated.

In many of these economies only an extremely small percentage of the population has access to a bank account or owns a credit card. In these “under-banked” countries, according to the report, a significantly higher percentage of people will have used or have access to a mobile phone than an ATM or bank branch.