Latest Analyses, blogs and news
Broadband in China 13 Oct 2015
After a relatively slow start, the application of FttX connections has been growing rapidly in China over the last 7 or 8 years. The tipping point for fibre occurred in 2008 after costs started coming down a year earlier. China was in a fortunate position of not needing to make use of a massive investment in copper infrastructure as was the case in other markets. The rapid growth noted has in fact been falling short of the government’s aggressive targets. In a particularly targeted investment in 2010/2011 the Chinese government committed over RMB150 billion (US$22 billion) to establish optical fibre networks around the country. Typical of the government’s aggressive targets, the aim was to increase the number of FttX subscribers to more than 80 million by the end of 2011, according to the Ministry of Industry and Information Technology (MIIT). Slower than expected progress saw the target achieved in mid-2013. Growth was continuing at close to 20% coming into 2015.
In China, the 3G mobile platform has really only gained traction in 2010/2011. Since then it has been expanding quickly. In the meantime, networks have been experiencing the impact of smartphone popularity. China Mobile reported that total data traffic had increased by a factor of 8 in the two years to end-2012. In a potential boost for mobile broadband China allocated 4G /TD-LTE licences to mobile operators in December 2013. China Mobile moved quickly into this segment of the market and had already claimed 14 million 4G subscribers by mid-2014.
As already noted, mobile broadband has expanded rapidly in China over the last two years. It reached 296 million subscribers by end-2013 and then in the first half of 2014 the subscriber base had surged to almost 500 million. It then went on to reach over 580 million by year-end. Forecasts suggest it will reach 750 million by end-2015.
The energy revolution 12 Oct 2015
There is no doubt that we can talk about an energy revolution. Not only is the nature of energy changing from fossil-generated energy to renewables. At the same time the total distribution structure is changing, with less focus on centralised distribution and a shift towards distributed energy. We can talk about a perfect storm as several developments are now coming together. These are all revolutions in themselves.
Revolution one – customers pushing the industry out of the driver’s seat:
With an increase in energy prices customers have become energy-aware and are now driving energy savings. They are becoming very inventive at this and energy savings have become the latest barbecue discussion topic, overtaking telco issues. Customers will look for applications (services) and devices (hardware) that will assist them in this.
It is interesting to see that customers have rather suddenly decided to invest in energy apps, devices, renewables, batteries. This is an interesting development as they have hardly ever invested in energy products before. As in telecoms, customers will play an increasingly decisive role, as co-investors, on where the market will be going. This will drive the development of new consumer products and services (similar to the impact of the smartphone on the telecoms industry).
Revolution two – smart micro-grid versus big iron grid:
With a focus on renewables, batteries, micro-grids and smart homes the focus of ‘smart grid’ investment is moving away from the ‘big grid’. These new developments are based on open standards, interoperability and sharing. This is the opposite to what is happening in the so-called ‘big iron’ smart grid developments, which are taking place within the industry and are still largely proprietary-driven, with little standardisation and based on closed rather than open systems.
Revolution three – sharing versus owning:
New technologies and organisations around them are developing totally new business models based on sharing and utilising the technology to build business models (Uber and Airbnb are the poster children here, but there are already thousands of sharing networks in place). It is only a matter of time before disruptive sharing developments will take place in the electricity industry. Could there be one big grid connection to a community, a street or a new housing development – just for emergency – and the rest based on sharing renewable energy?
Mobile broadband penetration in Asia 07 Oct 2015
The advent of mobile broadband triggered a huge change in broadband access across Asia. Following more than a decade of strong growth in almost all mobile markets in the region, an amazing transition to new generation mobile networks and services took place. By end 2014 there were a total of 1.2 billion mobile subscribers and with annual growth running at over 40% coming into 2015 the numbers were expected to hit 1.7 billion by end-2015. As already noted this represents around 50% of the total global mobile broadband subscriber base.
The key factor underpinning this huge array of networks and services across Asia is the increasing capability of networks and operators to efficiently manage data; this capacity is in turn matched by an enthusiasm in the various Asian telecom markets for the rapid uptake of all that is on offer. The adoption rate of mobile broadband has increased sharply in company with the various regional networks being progressively upgraded to next generation status. At the same time, operators are also busy providing more intense coverage and capacity. And we should not ignore the handset in all this. The greater availability of smartphones, tablets and other similar devices is helping drive the adoption rate of mobile broadband.
Mobile data usage
Since the introduction of 3G+ and 4G/LTE across the markets of Asia and the world, mobile data usage has started to skyrocket. In Hong Kong, for example, on average each 2.5G and 3G/4G subscriber was sending over 1,000Mbytes per month by January 2015. By end-2014, the total data usage in Hong Kong had increased almost ten times in just five years, driven by increased adoption and consumption of a wide range of mobile data services. As the market shifted dramatically, not surprisingly, leading mobile operators in Asia had stopped offering unlimited mobile data plans.
Latin American market set for LTE investment into 2016 06 Oct 2015
In common with other regional areas globally, mobile network operators in Latin America are gearing up for further investment in network infrastructure into 2016 as customer demand for mobile data reaches new heights. Investment has been dominated by the major regional carriers, which include América Móvil, Telefónica, Millicom, and, in the Caribbean, Digicel.
Much of this demand has been spurred by consumer adoption of OTT video services across the region, and the growing preference for viewing content on smartphones equipped with larger screens. Data traffic initiated by SVoD services is placing considerable strain on network capacity, obliging MNOs to invest in network upgrades with new technologies including LTE-Advanced. The ability of MNOs to adopt carrier aggregation technologies has been made possible by the release of spectrum in a range of bands, which are generally technology neutral. Much spectrum has been made available in the 700MHz band, released following the switch from analogue to digital broadcasting which has progressed into 2015.
Operators are also encouraged to invest in expanding their networks to provide access to services to a greater proportion of the population. This entails reaching some of those rural areas which have hitherto been deemed uncommercial and so left underserved. Operators are supported by regulatory measures which have encouraged network sharing, and by government programs which have subsidised network build in some areas as part of national broadband strategies aimed at developing universal access to services.
For detailed information, table of contents and pricing see: Latin America - Mobile Infrastructure
The future of the electricity industry 05 Oct 2015
While new opportunities do exist the reality is that for most of the traditional electricity companies it is difficult to realise these. There are several reasons for that:
- In most countries, either directly through ownership or indirectly through regulations, governments have a dominant influence on the sector. A lack of political vision and leadership and an inability of regulators to step in are a serious hindrance to settling on the direction of the industry. Political indecisiveness and lack of bipartisanship is perhaps the worst thing that can happen in this situation as it paralyses the industry.
- But at the same time, based on the industry practices and very long-term investment cycles that have dominated the industry for decades, the industry of today is risk-averse and led by management that in most cases is unable to seize the new opportunities that are becoming available within an increasingly disruptive environment.
- Furthermore, the transition from the old silo-based energy economy to the new open-ended, interconnected one is very complex, and this transition will be messy. However the industry has no choice but to tackle this and increase its pace of change. This applies both to the industry and to its policy-makers.
Most governments and incumbent industry players around the world are grappling with these issues. Where we do see leadership and innovation is in places where cities are still operating their own electricity networks. There are many great examples in the USA, where over 60 cities are involved in using their electricity networks to build smart cities. This is strongly supported by the communications regulator in America, the FCC. There are also some good initiatives from the local DSO within the Amsterdam Smart City project.
As a consequence all of the above changes will happen. It is hard to predict exactly how it will work out, but there are several trends and developments already taking place which will have a profound impact on the shaping of the industry.
- Disruptive (often unexpected) developments from outside the industry, based on innovations coming from companies – and their customers – operating in the digital/sharing/networking economy can result in rather rapid and massive changes that cannot be controlled by the industry, and most of the time not by governments either.
- In cases of continual lack of national political leadership this will force the industry to step up its role in new developments. In some cases state and local governments are showing more and better leadership than their national counterparts.
- Smart energy developments will increasingly be community/city-driven, with developments such as micro-grids, community storage, solar and wind farms, (smart/wi-fi-driven), LED street lighting.
Disruption is happening and the challenge for the industry is to run with it. However in some cases it is hard for the industry to take a leadership role because of current government policies, regulations and its own outdated business models. So changes, innovation, new business models and new value-added business opportunities will arrive from outside the industry. Some of the electricity companies will be able to break through this and participate and thrive in the new digital sharing and networking economy.
That is not to say that there will be a total demise of the traditional electricity industry, but the value chains will be totally different.
It is interesting to draw a parallel with the telecoms industry here. Twenty years ago companies such as Telstra and AT&T (USA) warned their governments that allowing for the ISPs/internet market to develop would lead to a meltdown of the telecoms network. The telcos still exist, but in relation to market capitalisation companies such as Google, Apple, Microsoft, Amazon, Facebook, etc are many times larger, with most of the value-added revenue flowing to these companies, while the telcos simply operate the underlying networks.
So what could the consequences be for the industry?
There are several scenarios:
- If the industry takes leadership, changes business models and starts developing new products and services for consumers, communities and cities along the lines mentioned above they can drive innovation and chase the new opportunities.
- If they don’t take leadership the development of smart buildings, smart homes, smart communities and smart cities will happen anyway and the new opportunities will largely bypass the industry.
- It is highly unlikely that we will move to a totally decentralised energy environment – so there will remain a significant centralized infrastructure to the industry, in which case given the absence of innovative leadership, the industry will become low value wholesale providers to the new innovators and those developing new energy business models.
In reality the incumbent industry is in many cases facing an uphill battle. Large investments are needed in new business models based on new and innovative technological developments (renewables, batteries, micro-grids, smart cities, etc) while at the same time revenues are declining. The natural tendency is to then cave in, protect the incumbent business and try to stop changes which undermine their old business model. (Similar to developments that saw the demise of Kodak, Nokia, and many casualties in the music industry, publishers, telcos, book industry, etc).
There is no doubt that in general the industry will survive; however the question is what their role will be, and what value will they be offering to their customers and their shareholders (whether private or public).
Smart cities need to invest in the ICT platform 01 Oct 2015
While a holistic approach towards the development of smart cities is still often missing; in 2015 there are some good examples both nationally and internationally of councils that are moving in the right direction. We are migrating from Smart Cities being a concept for the future and are now seeing cities make tangible plans and infrastructure decisions to support such a transformation.
This also means we can begin to see more clearly the obstacles and challenges involved. The most difficult issue to resolve in building smart cities is the funding. And this is not unique, all sectors and industries that are facing transformation are dealing with the same problem. The transformation process will not be possible unless investments are made in the ICT platform.
The most important element of a smart city is direct engagement with citizens, businesses and others. Not only is their support essential, through their enthusiasm and demand for services (and their votes) they can assist in building business models that can lead to investment.
Councils will have to take a leadership role in developing smart cities in order to keep pace with the technological developments that their citizens are embracing and the expectations they have in relation to the economic, social and lifestyle aspects of their city. Increasingly less leadership can be expected from other levels of government, yet at the same time it is the councils that are suffering from the burden of issues such as economic transformation, the need for job growth, sustainability and liveability, city infrastructure and the lifestyle of their citizens.
Overall the process towards smart communities already underway through global interconnection - facilitated by technologies such as the internet, broadband, smartphones and mobility. The latest developments are in M2M (machine-to-machine) and IoT (Internet of Things) sphere where we link machines and different data sets together and use so-called ‘big data’ technologies and analysis to better manage the various aspects of our society. This will lead to interaction and even integration between these two developments – merging humans and machines, something that is becoming increasingly possible and leading to the broader concept of artificial intelligence (AI).
For detailed information, table of contents and pricing see: Global Smart Infrastructure – The Direction is Smart Cities and AI
Asia quietly expands broadband as fibre replaces copper infrastructure. 30 Sep 2015
Providing a solid foundation for the roll-out of broadband access across Asia, fixed broadband services continue to grow at a steady, not spectacular, rate. In the process, fixed broadband provides online access for hundreds of millions of households and businesses throughout the region. The big change in this segment of the market has been the transition to new and expanding fibre networks. Whilst National Broadband Networks (NBNs) have come in a variety of shapes and sizes they are very much a characteristic of the more developed markets. The construction of new NBNs is also boosting the presence of fibre across those markets that have adopted for a national approach. In the meantime, Asia could claim to be the global leader in the rollout of FttP. Coming into 2015, it had 140 million fibre subscribers, representing around 75% of the total world fibre segment.
Whilst it is always tricky to choose a market that is ‘typical’ of the region, one market that has long been a measure of where Asia is heading is Singapore. Singapore’s fixed broadband market has a dominant presence in this island state where an improbable household penetration of 107% was being claimed in May 2015. (For more information on Singapore, see chapter 5.) Other strong markets in terms of household penetration include South Korea (96%) and Hong Kong (92%). A middle-ranked country, Malaysia has also made rapid progress in recent years and reported 70% household penetration for broadband access as at March 2015.
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Latin American MNOs expecting further competition into 2016 02 Oct 2015
Latin America’s mobile market is dominated by four multinational operators, which together account for about 75% of the region’s subscribers. This proportion has been stable for a number of years but is being slowly eroded as regulatory measures facilitate the entry of MVNOs. In part this has been made possible by regulators setting aside auctioned spectrum for new market entrants, and by auction rules which oblige licensees of some spectrum bands to host MVNOs.
Mexico’s América Móvil is the largest player in the region, operating in a large number of countries. The company also has a significant presence in the US via its MVNO Tracfone, and has made greater inroads into Europe where it has a presence in Austria and the Netherlands via its interest in the respective incumbent operators. These investments were intended as a launching pad for ventures elsewhere in the region, with varying success. América Móvil during 2015 expressed further interest in expanding into Eastern European markets, which are considered ripe for further development and more likely to return dividends on investments made.
The second largest operator in Latin America remains Telefónica, operating under the Movistar brand in all markets except Brazil, where it operates under the Vivo brand. Brazil is Telefónica’s key market in the region, where it has over 81 million mobile subscribers and generated revenue of some €7.6 billion in 2014.
In Mexico, a new regulatory regime was recently introduced aimed at curbing the dominance of América Móvil, which controls 70% of the wireless market and 80% of landlines. The operator is obliged to reduce its market share to below 50%, and to this end it has made moves to sell its local assets regionally. The process has made room for other operators both locally and from AT&T, which acquired Nextel Mexico in April 2015. During 2015 there were moves to facilitate access to services between the Mexico and the US, with Telcel having launched its Sin Fronteras Plan (No Borders Plan) under which customers can make calls from Mexico to the US charged as a local call. In the US, customers can use the minutes, SMS and data on their plans as if they were in Mexico, with no roaming charges.
For detailed information, table of contents and pricing see: Latin America - Mobile Network Operators and MVNOs
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