2011 Asia - Mobile, Broadband and Digital Economy Overview

The road to closing the digital gap and embracing FttX

Mobile markets in Asia continued experiencing strong growth during 2010. A total of more than 2.6 billion mobile subscribers in early 2011 and an average annual growth of over 25% (excluding the most highly penetrated markets) have combined to see the Asia region have the fastest growing telecommunications markets in the world. With difficult economic conditions and some markets saturating it is not surprising that the growth rate has slowed somewhat over the last year or so. This is after a period where annual mobile subscriber growth rates in Asia had been well in excess of 50%.

Overall regional penetration had reached an estimated 65% going into 2011, suggesting that there was still more room for subscriber growth across the region. More than 12 countries in Asia had mobile penetration levels in excess of 100% going into 2011. Not surprisingly, the global financial crisis had caused some caution in mobile markets across the region for a while, mainly during 2009; after a pause the momentum has quickly begun to pick up again.

Particularly relevant in the context of rapidly growing markets that still have some further room for expansion are India and China where monthly net additions have regularly been close to 10 million subscribers. These two countries combined account for around 60% of overall market share in the Asia-Pacific region.

There is still room for substantial growth throughout the region and we can expect markets with large populations and relatively low penetration rates such as India, China, Philippines, Pakistan and Indonesia will continue to grow at a healthy pace. Growth is being driven by various factors, including government investment to drive the economy; infrastructure building or fixing the after-effects of war as well as major foreign investment projects.

In terms of growth rates, not surprisingly it is the smaller and generally less-developed markets that have been expanding rapidly. More recently, the rate of growth has clearly been much cooler than back in 2007, however; in that year there were seven countries in Asia with annual growth rates in excess of 90%. By 2010 there were no markets with growth rates in excess of 100% (North Korea came in at around 96%).

In the developing economies, quick and easy mobile uptake has for a long time been the preferred, and often the only, option for subscribers, given the low levels of fixed-line deployments. In order to prevent ARPU slide in these markets, operators are offering value added mobile services such as mobile banking, remittance payments and mobile health services that take advantage of lack of access by the poor to social infrastructure such as banks and hospitals.

The developed markets in the region, such as Japan, South Korea, Hong Kong, Singapore and Taiwan, have positioned themselves well to exploit mobile data and broadband wireless opportunities and lead the rest of the region into the next generations of mobile applications. In fact, through the leadership of these markets Asia makes a strong claim to be setting the global benchmark when it comes to the development of broadband internet.

Market competition has driven handset prices and airtime tariffs downward, thus opening up mobile services to wider adoption. The rate of adoption of wireless internet has started to rise with the overall increase in mobile penetration together with networks being progressively upgraded to next generation platforms. While 3G licensing and the ongoing launch of 3G services in Asia has certainly been promoting the growth of wireless data services, 3G has also been providing opportunities for both wireless access and content providers in domestic markets. In South Asia, in particular, more people own a mobile phone than a PC, giving the delivery of mobile data services huge potential there.

The growth of mobile internet across Asia is being largely driven by competition in the market place and has been boosted by the advent of 3G+ services. Market competition has been driving handset prices and airtime tariffs downward, thus opening up mobile services to wider adoption. The rate of adoption of wireless internet was expected to rise with the overall increase in mobile penetration and as networks are upgraded. LTE is also rolling out in the more mature markets such as Japan which already has close to 100% 3G penetration.

The 3G licensing process and the progressive launch of 3G services in Asia is already well advanced, with a few countries presenting themselves as anomalies in an otherwise progressive market. India and Thailand have both been slow to open up their respective 3G markets. By 2010 India was finally taking some real and significant steps on the road to 3G, but Thailand continues to struggle on this front and early resolution of the regulatory problems causing these delays in Thailand was not likely. In fact, the general consensus is that Thailand will not see progress on 3G until 2012.

Asia makes a strong claim to be leading the world when it comes to the development of broadband internet. In fact, after the mobile market, broadband has been the fastest growing telecom market segment in Asia. The energetic expansion of broadband has been more of a phenomenon in the developed economies, with narrowband access continuing to be the norm in most of the poorer developing countries of the region. This is changing, however.

With DSL dominating the world market, Asia has become the leading region with about 35% of the global DSL subscribers. More recently, we have seen FttX as an alternative platform for broadband access in Asia. In the leading technology markets of Japan and South Korea and Taiwan in 2011, FttX has been displacing other forms of high speed internet access. Asia accounts for around 85% of global FttX subscriptions and China dominates the lead with over 30 million subscribers.

While there has been some activity in the providing of WiMAX networks, the real test will be the advent of mobile WiMAX. The initial roll-out of mobile WiMAX in Asia has begun but it has been a cautious start. The technology continues to be strongly supported at this stage of its development. The big question is whether it will become a mass market platform or simply satisfy a niche market need. This remained an open question coming into 2011. In any event, in their various forms wireless broadband systems are becoming a key feature of the broadband access landscape across Asia.

Over a number of decades the economies of Asia have progressively built substantial fixed-line national networks followed by national mobile networks. More recently the focus of infrastructure building has shifted to the upgrading of domestic telecom networks to Next Generation Networks (NGNs). This process is seeing large scale investment by Asia’s leading telecoms markets in new-generation IP-based telecommunications networks. Those countries that have government backing for NGN roll-out are the ones that are setting the pace. Even some of the lesser-developed markets are pushing hard on this front.

NGNs are critical for the development of the digital economy. The development across Asia is being strongly promoted. The growth, however, is mostly focused on the developed markets and has been heavily dependent on the local support being provided by the governments in those markets, with Japan, South Korea, Singapore, Hong Kong, Malaysia and Taiwan leading the way.

Data in this report is the latest available at the time of preparation and may not be for the current year.