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Afghanistan operators rolling out 3G networks potentially delivering big boost for internet access 18 Apr 2014

In what has certainly been a challenging task, Afghanistan has built some positive momentum in its effort to put national telecom infrastructure in place and to offer effective telecom service throughout the country. The process involved in achieving this, however, has not been a smooth one. By end-2001, as a result of the US-led military action, the Taliban had been removed from power and a broad-based transitional government was established. The 2001 war in Afghanistan destroyed telecommunications infrastructure that had already been suffering serious disrepair due to neglect by the pre-war Taliban government. The nation’s network of telephone lines was left barely functioning. There were only 12,000 telephones in the capital city, Kabul, with its population of almost 2 million residents.

By 2003 recovery had commenced. In an important strategic move, the government announced in 2005 that licences were to be issued to allow the private sector to establish independent telephone companies. This initiative was called the Local Fixed Services Plan (LFSP). The main objectives of the LFSP licences were to facilitate faster rollout of services to small towns and rural areas and to provide an investment opportunity for small-medium local investors across the country.

The other major impact on telecommunications in Afghanistan came with the introduction and subsequent expansion of the mobile telephone service. In 2003, growing off a low subscriber base, the country’s mobile network operated exclusively at the time by the Afghan Wireless Communications Company (AWCC), started to attract customers at an extraordinary rate. The launch of a second mobile service, operated by Roshan, boosted the market even further and strong subscriber growth continued through 2004 and into 2005. Coming into 2014 there were four major mobile operators (and one minor one) competing in Afghanistan’s telecom sector; between them they were claiming a total of just over 20 million subscribers, representing an overall mobile penetration of 68%. All four of the major operators were carrying estimated market shares in excess of 20%.

In the meantime, internet penetration remained generally low throughout Afghanistan. With internet access relying heavily on dial-up services and only around 3,500 broadband subscribers in place, the online segment of the market was looking for a boost. The boost had come in the form of 3G mobile licences. The newly launched 3G services being offered by the various operators provided a special opportunity for delivering mobile broadband to Afghanistan’s population.

The political and civil stability of the country remains a big question; it is of course a constant threat to effectiveness of the telecommunications network and the viability of the telecommunications sector. The certainly does appear to be a will to secure the future of telecommunications in Afghanistan.

For detailed information, table of contents and pricing see:

Afghanistan - Telecoms, Mobile, Internet and Forecasts

Puerto Rican LTE thrives while the cable TV sector consolidates 17 Apr 2014

Puerto Rico has one of the highest mobile penetration rates in Latin America, though despite being a US territory it lags well behind the mainland US states in terms of fixed-line and broadband penetration. This is partly due to a continuing economic recession, high unemployment rates (and consequently low disposable income) and poor telecoms investment in a market largely dominated by the incumbent Puerto Rico Telephone Company.

The Puerto Rico Telephone Company’s fixed-line market dominance was augmented following its acquisition by the largest wireless company in Latin America, América Móvil. In contrast, with six network operators, the mobile (cellular/wireless) market has been experiencing more robust competition and growth. Although América Móvil’s Claro recently took the lead from AT&T Mobility in terms of subscriber numbers, AT&T regained the top position by late November following its acquisition of Centennial Communications.

With an emerging VoIP sector and steadily growing broadband market, as well as a healthy satellite TV sector which has caused a decline in the cable TV subscriber base in recent years, the growth and convergence of digital media looks promising for coming years. A new submarine cable, due to come online in 2014, will improve connectivity to the US and neighbouring Latin American and Caribbean countries, while investments by cellular operators in LTE infrastructure will help promote mobile data services, as also extend mobile broadband availability in rural areas.

For detailed information, table of contents and pricing see:

Puerto Rico - Telecoms, IP Networks, Digital Media and Forecasts

Digital Productivity Key to Transformation of Australian Economy 16 Apr 2014

The world in general – and its institutions and businesses in particular – is facing a significant number of challenges …...

There will soon be 9 billion people in the world, and increasingly more of them will participate in the global economy, most likely at less cost. Furthermore, the environment is having difficulty coping with us – whole business sectors are facing digital disruption; healthcare in western economies has an efficiency factor of minus 40% (which, if it goes unchecked, could consume 40% of Australia’s GDP by 2040); people are more empowered – they are moving away from traditional behaviour patterns; and new jobs are in the new economy, not the old one.

Governments and traditionally organised businesses and organisations have great problems with these developments. They are unprepared to embark on the essential economic and social transformations that are needed to face up to the challenges.

In essence, in order to transform they will need to operate much more horizontally and be far more truly customer/people-focussed. And ICT can greatly assist in this. To be able to compete with those organisations that have been successful in creating digital productivity it is often necessary to look at ways to remove 50%, or even more, from current business costs. Cannibalisation of traditional services and revenues is also required, with no certainty of new income from new services to compensate for this.

As a result many businesses are fighting rearguard battles rather than leading the charge, and whole sectors are resisting the transformation process (retail, healthcare, education, energy, government).

Has the internet reached the ‘too big to fail’ stage?

Would an internet failure result in what economists call a ‘too big to fail’ disaster? In other words, will such a collapse be catastrophic for our society and the economy? If the internet fails we cannot go back to the systems that helped us run our lives in the 1950s, when we had only one-third of the population we currently have. We need the right systems to manage our new rapidly changing society and economy.

Very few people fully realise the impact of this population growth in such an incredibly short period. And it is here that the internet plays its most important role – yet technically it was never designed to take on such enormous responsibilities. Resolving the issues surrounding control and governance of the internet is also of fundamental importance to its success in the future. Issues surrounding security and governance are already of concern for emerging sectors like e-health; e-commerce; e-education and e-government.

Among the hottest topics are the issues in relation to the security of the various aspects of the digital economy. Analysts predict that spending on e-security and mobile security will rise sharply and continue to be a key priority.

E-banking and M-banking

E-commerce has become a very important area of focus for internet media players, financial institutions and payment-processing firms alike. Given the speed that new services, features and companies appear (and disappear) the e-commerce and m-commerce sectors must be among the most innovative and rapidly evolving sectors worldwide – quite a spectacle to observe.

Person-to-Person email payment has become a hot topic with Google and Square launching services. Banks are also realising the world is changing and social banking is becoming a key trend; and the internet media companies continue to battle for supremacy in this vibrant market.

Mobile commerce is one of the hottest sectors right now and it is gaining importance for a wide range of industries, including telecommunications, IT, finance, retail and the media, as well as for end-users. It works best in those areas where it can emphasise the core virtue of mobile networks – convenience. The enormous success of smart phones is linked to the apps that are available, and increasingly commercial models will be linked to these apps – which will result in further spectacular growth in m-commerce. BuddeComm sees the development of m-wallets as a major breakthrough for the m-payment sector and beyond – that could indeed be a game changer.

Australians are among the world’s biggest users of online banking. EFT (electronic funds transfer) is very popular in Australia and the BPAY consortium owned by Australia’s Big Four banks is widely used to pay bills. However the more consumer-driven developments, such as m-banking, took longer to emerge. After decades of procrastination, and ultimately pushed by developments from companies such as Apple and Google, the era of m-payments has now taken off in a major way, with all four banks now facing breakneck growth in m-payments. By 2015 it is expected that m-banking will overtake online banking in the number of transactions carried out electronically.

Advertising and Marketing in the Digital Age

Spending on advertising using digital media channels is continuing to grow in market share, despite economic conditions slowing down the growth of overall advertising spending. In 2014 the advertising sector is focused on the future opportunities offered by multi-screen developments. In other words, a cross-marketing approach involving multiple devices including TV, touchscreen tablets, computers, laptops, mobile phones etc. In addition, advertisers and content developers/providers are eyeing off the potential opportunities offered by the Over-the-Top (OTT) content distributed by smart TVs. Digital marketing as a whole remains a growth area, as marketers shift towards these types of advertising methods at the expense of traditional formats.

The increase in online advertising comes as Australian businesses expand their presence online and aim to see local sales win over from sales made offshore.

The increased use of video advertising and video viewing is – at an increasingly more rapid pace - also continuing in 2014, and will grow consistently for the next five years or so, according to industry trends.

Business Market – Trends and Statistics

The digital economy affects everybody, including existing players such as telcos, banks, media wholesalers, services and retail. All businesses will eventually need to adapt to the new environment as new players enter these markets from different angles.

This report highlights information from surveys that indicate how well businesses are prepared for the digital economy; where they participate; their strengths and weaknesses; and the first interesting commercial starting points. It provides statistics in text, tabular and easy-to-read chart formats. It also contains detailed statistics from e-business activity usage surveys taken over the last few years.

This indicates a strong acknowledgement of business benefit, including productivity gains and positive growth. It highlights a near unanimous view that active digital economy participation is important to future business success, in spite of a diversity in adoption, planning and sophistication across the business community.

Online Retailing

Across Australia more and more users are now shopping online – they are shopping from the comfort of home, while at work and even using mobile devices to impulse-buy. In fact many online retailers are finding mobile is their fastest-growing sales channel, including eBay and Gumtree.

While online sales have been growing at around 20%-30% annually the overall market share is still below 10% of the overall market in 2014. But spending will only increase further in the online markets over the years to 2020 as users take advantage of the higher speeds that the NBN will provide as it is rolled out.

There are many choices from offshore e-tailers offering low-cost deliveries, with onshore businesses that operate a retail web presence providing service and communication at a local level. Low start-up costs and minimal barriers to entry have seen many enterprises, both bricks and mortar stores and online-only stores, operating successfully in the direct sales to consumers market.

In 2013 there were a number of acquisitions – AussieCommerce’s purchase of group buying Cudo, and Graysonline’s purchase of online department store are two examples – and consolidation in the Australian online retail sector will continue in 2014.

For detailed information, table of contents and pricing see:

Australia - E-Commerce, Marketing and Advertising

A look at newspaper paywalls 16 Apr 2014

With online news now capturing a significant market share of consumers – publishers continue to face the continuing problem of how to generate revenue. Online news gained its popularity by being free and changing this status quo is quite an uphill battle. Some industry players have turned to paywalls in recent years – however there are really not many online news publishers that successfully charge consumers – The Wall Street Journal is one of the few, and it has over one million subscribers.

New Corp’s Rupert Murdoch has been one of the leaders in developing new models that require payment for news. It started with paywalls on both The Times and The Sunday Times websites in Britain which require users to pay up to couple of dollars for monthly access. News Corp claimed over 153,000 online subscribers in 2014 – compared to 207,000 print subscribers. In 2014 it began offering its online subscribers a year free access to digital music service Spotify Premium; in order to encourage more uptake.

News Corp also set up a paywall for its popular Sun newspaper, known as Sun+. In late 2013 it claimed it had 117,000 online subscribers to its service which costs around £2 a week. It too is offering “sweeteners” to encourage subscribers including meal deals and discounted cinema tickets.

By early 2013 around 650,000 digital only subscribers were reading The New York Times, after it implemented a paywall in 2011.However, this newspaper is unique because it is tapping into a global readership market, most newspaper have a much smaller that they can tap into, with often only a 10-20% penetration level of paid subscribers.

Fairfax Media company, which publishes the Sydney Morning Herald and Melbourne's Age newspapers, introduce its paywall in mid 2013. It already charged for access to most of the Australian Financial Review.

Whether or not the paywall business model is going to be a success is being closely watched by the global industry. The reason for establishing paywalls is to add extra revenue to the publishing business, however the question is if that extra revenue will have any significant effect on the business. BuddeComm believe that it is highly unlikely that it will stop the demise of the traditional business models of the newspaper publishers.

Kylie Wansink, Senior Analyst – Global and Middle East Markets

For related information, see separate report: BuddeComm Intelligence Report - Impact of the Digital Economy and the Media Industry.

Japan’s telecom operators face a major challenge with the more nimble OTT competitors 16 Apr 2014

Japan is preparing to face a myriad of challenges in the coming decade with looming social and economic changes ahead. Accelerated globalisation sees the increasing influence of emerging countries in the international community and the global economy. This, coupled with the global shift to a more sustainable society, is forcing governments and industry to engage with environmental issues and ensure efficient use of energy and resources.

In its home market, Japan has an aging and decreasing population base that demands the creation of appropriate social systems and supports services. The market has also seen a change in values and the behaviour with people wanting quality instead of mass consumption. At the same time there has been a shift from personal ownership to efficient use and sharing of resources. As it happens, Japan’s sophisticated IT infrastructure and high broadband penetration sets the scene for improved productivity, convergence of industries and a more flexible industrial structure.

Clearly Japan has been a dynamic leader in many aspects of global and regional telecommunications. The government has been particularly active in regulating its telecommunication industry in such a way as to introduce more effective competition. This competitive market has been challenged to develop the most effective business structures to achieve commercial success.

A key 2010 government-led initiative is the ‘New ICT Strategy’ which aims to realise a “knowledge/information society” by switching from a society led by government and providers to a society led by citizens (taxpayers and consumers). It focuses on key strategies in the lead up to 2020 to support the sustained growth of Japan. The strategic goals include:

  • improved e-government;
  • high-quality medical services using ICT;
  • a nationwide environment for school education and lifelong learning using ICT;
  • creation of new markets worth approximately ¥70 trillion;
  • universal deployment of the smart grid;
  • using ICT to halve traffic congestion on key roads nationwide;
  • advancing intensive R&D in strategic fields (eg next-generation optic networks, next-generation wireless, cloud computing, smart grid, robotics, 3D video).

These initiatives support and drive technological development and advanced infrastructure.

Through this sustained oversight, the government has already ensured that Japan can claim one of the world’s leading mobile telephone markets, not only in terms of size but also in terms of innovation and, in particular, its ability to be early with the introduction of advanced technologies. With 3G subscriber numbers having peaked at around 97% of all mobile subscribers coming into 2013, Japan has shifted its focus to 4G/LTE becoming the fourth country in the world to introduce this next generation platform. Competition has been intensifying in areas such as low pricing, a wide variety of handsets, music, video, e-books, and other content services. Not surprisingly the volume of smart phones and telecommunications modules entering the market has been rapidly increasing.

Japan can also claim to have developed one of the most advanced broadband environments in the world. It is the third largest broadband market in the world after the US and China. Especially noteworthy has been the continued strong uptake of FttH services (with a corresponding move away from DSL). In the fixed-line market the expansion of broadband services centred on FttX is accompanied by an ongoing convergence between fixed-line and mobile communications broadcasting. As a result, competition between services has entered a new phase. With content and services driving revenue and profitability, the telecom operators now, more than ever, need to focus on leveraging their full-service network capabilities and take advantage of the new opportunities presented by a digital age.

For detailed information, table of contents and pricing see:

Japan – Telecoms, Mobile, Broadband and Forecasts

Statistical overview of the Australian Broadband and Digital Industry 15 Apr 2014

BuddeComm estimates that the overall telecoms services revenue was about $42.5 billion in 2013, slightly down on revenue in 2012, as a result of poorer results from Vodafone and Optus.

Growth has in fact been subdued since 2011, largely due to competitive pressure on pricing among operators, as well as the continuing economic uncertainty among some sectors of society which has reduced discretionary spend. This is expected to continue in 2014 and 2015, with revenue growth limited to about 1%-1.5% annually. Most fixed-line and mobile voice services are now at levels where consumers would not tolerate price increases, so opportunities to drive increases in consumer and business expenditure in the short term are limited to mobile broadband services based on 4G/long-term evolution (LTE) technologies, fibre, and cloud data-housing.

Telstra successfully rolled out 4G services in 2011, establishing a significant market advantage since it had no competition in this sector from either Optus or Vodafone until 2013. Nevertheless, the company’s overall market share continues to decrease slowly, staying steady at 60% in 2014.

Optus has seen its market share stabilise at about 21% to 22% during the last few years. The company is attempting to grow its share through company stores expansion, increased digital media presence and its LTE rollout.

The merged Vodafone and Hutchison operator, as VHA, has seen a drop in revenue in recent quarters, as well as a declining employee count and dramatic losses in its subscriber base. The company may emerge a changed operation by 2014/15, but this depends on the strategy that is adopted. The company anticipates seeing a turnaround in late 2014 or 2015.

The second-tier telcos’ share of revenue continues to expand for several smaller broadband providers – most notably iiNet and TPG – but revenue fell overall in 2013, with Telstra picking up the majority of subscribers and revenue.

This report includes detailed revenue and forecasting statistics and analyses for the mobile broadband and fixed broadband markets, separately, with estimates for the future. In the long term fixed broadband on the copper network will also decline gradually as fibre and fixed-wireless broadband services become more widely available – although the Coalition’s NBN plan, with its emphasis on VDSL with fibre-to-the node (FttN), will make greater use of copper than did Labor’s plan for a national fibre-to-the-home (FttH) network.

At the same time as fixed-line telephony is declining, the mobile broadband market is growing steadily and is set to become a major income revenue stream for providers. As well as this, in time much of the voice traffic will be data via technologies such as voice-over-long-term-evolution (VoLTE). Data traffic caused network constraints on 3G networks over the past couple of years, since the infrastructure was not designed for the rapid increase of traffic and consequently MNOs have had to invest in network upgrades to ensure that customers receive a reliable service.

For detailed information, table of contents and pricing see:

Australia - Broadband, Digital Media and Digital Economy Statistics (tables only)

To intervene or not to intervene: that is the mobile question 15 Apr 2014

This is the difficult question in relation to the current debate on mobile services in Australia. On the one hand Vodafone and Optus argue that, at least in rural areas where the government invests in network extensions, the network should be shared. On the other hand, Telstra argues that the mobile industry in Australia has been so successful because there has been very little regulatory intervention.

So, a very difficult decision for the government to make, especially for a more conservative one.

Telstra’s strong view on this is understandable, and it certainly does have validity. Nevertheless, duplicating infrastructure in areas that have proved not to be economically viable doesn’t make sense; and a further argument here is that all those who are willing to invest (in accordance with the condition attached to the $100 million investment from the government) should reap the benefits of that investment. However, without any real economic validation to extend the infrastructure Telstra would become stronger and the others weaker.

Perhaps a solution could be a combined investment from all three operators to extend the rural coverage even further, with them all having access rights to that extended network. But such an industry-led activity might be far too radical for the mobile operators.

I also want to flag another point here.

First, let me say that I am very impressed by Telstra’s mobile strategy – it is a world leader and is admired for its success by operators around the world. It certainly should be congratulated for its vision, strategy and ongoing commitment to its mobile network.

However, with success also come some disadvantages. Could Telstra’s success turn out to be the downfall of mobile competition in Australia? This has happened in many industries, with case studies going back a hundred years or more – in telecoms, media, transport, electricity. After very innovative starts involving many players in time a utilities-based environment will lead to market failures, mergers, acquisitions, followed by market concentration and, eventually, monopolies.

The mobile industry is following this path. Within five years the US market went from 5 to 2 players, and in many countries the 3rd and 4th operators are struggling, as can also be seen with Vodafone in Australia and 2Degrees in New Zealand. It is too early to tell if this will lead to an eventual monopoly, but many signs are pointing in that direction.

While not popular in such a successful market, and perhaps hard to justify at this stage, early regulatory intervention could avoid the emergence of undesirable developments that – when such a monopoly surfaces – will be much harder to address and will require a much deeper intervention. It is not a forgone conclusion that this will happen, but in a dynamic and fast-moving industry such as mobile, the structure can fairly quickly shift to an anti-competitive one.

So the current discussion on mobile network sharing will need to be looked at in this much broader context. A serious investigation might be warranted at some stage to look at the overall structure and performance of this market; and this will need to be based on real data, facts and figures. If that shows that competition is healthy, and is likely to stay that way for coming years, then obviously no intervention is needed. But if investigation points in the direction of deteriorating competition, then earlier and smaller interventions might just be enough to keep the competition healthy.

In the past regulatory investigations have focused more on access to the basic (fixed) infrastructure, but we now see far more concentration at the edge of the network, with a small number of last-mile providers being able to increase their powers, reshape the market and extract what potentially could start looking like anti-competitive terms and conditions and higher prices.

The mobile infrastructure starts to look more and more like a fixed network with mobile access at the edge.

Paul Budde See also:

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