2015 Australia - Mobile Broadband Market - Services and Apps

1800MHz spectrum auction set to improve LTE in regional Australia

SMS still in contention though threatened by OTT services

SMS remains a cash cow for mobile network operators, but with diminishing returns. The high charge made to consumers compared to the cost to transmit the data across the network prompted the ACCC in May 2015 to propose a significant reduction in SMS termination charges, to come into effect from January 2016. While MNOs protest that most SMS traffic is bundled within packages and that such a measure is unnecessary, they are also smarting from the prevalence of OTT messaging services offered by the likes of WhatsApp, Viber, Skype and social media messaging services. These alternative services will further erode SMS traffic and revenue for MNOs into 2016.

LTE approaching near comprehensive coverage, while 5G is closer on the horizon

The three LTE networks operated by Optus, Telstra and Vodafone have developed rapidly during the past two years as these players strive to provide an infrastructure capable of meetings customer demand for mobile broadband services. As well as aiming to attract new customers, these players are also trying to reduce churn – the experiences of Vodafone in recent years has shown how damaging it can be for an operator when their networks do not provide reliability and, increasingly in an era leaning further to mobile data than voice, sufficient performance.

Technological developments have also progressed, with operators using aggregated channels to improve data throughput. Since the beginning of 2015 Optus and Telstra have been able to utilise their 700MHz spectrum assets, with which they aim to provide about 98% population coverage by the end of 2016. Vodafone is relying on upgrades to its existing concessions, and by mid-2015 it provided about 95% coverage in metro areas.

These upgraded networks face daunting data demands from customers, many of whom make use of data-intensive graphics, videos and files shared across the networks. In addition, popular OTT services such as Netflix, a company which alone had attracted about one million customers since launching in Australia in March 2015, provide streaming of content over mobile devices. While networks can at times be strained, the MNOs are continually adding capabilities and applications in an effort to reduce their overall costings. Customer preference for WiFi from homes and workplaces has meant that mobile broadband traffic is largely offloaded to fixed-line infrastructure.

Smartphones becoming a standard medium for internet access

Smartphone use in Australia continues to grow, and with tablets and phablets they are becoming a dominant internet access channel for many people among the younger demographic. As a result, these devices account for a growing proportion of mobile data accessed. Smartphone penetration is rising rapidly, and by mid-2015 the majority of new device sales were geared for LTE. The preponderance of LTE-capable devices will gain steadily into 2016 as a greater number of competitively priced units hit the market, and as the reach of LTE networks widen.

Mobile video streaming emphasising need for solid network capabilities

Mobile video streaming, also known as mobile TV, has been promoted by mobile network operators as one of the prime benefits of more capable infrastructure resulting from networks being upgraded with HSPA and LTE technologies. These upgrades enable subscribers to view streaming content on the go, with content less subject to outages and failed connections. However, until recently the platform had not caught the public’s attention, despite the introduction of unmetered access and generous data caps.

MNOs initially failed to develop the right business models to deliver the type of content suitable for mobile streaming. It was also uncertain whether customers would want to pay for content at all, given the small size of screens when mobile streaming was initially promoted. However, in recent months the popularity of phablets and of larger screened smartphones has helped address these limitations. In addition, the development of new technologies such as out LTE-Broadcast (from Telstra) will make the delivery of mobile streaming more efficient on a technical level, while the ability of people to view content from Netflix and other OTT services via mobile devices has made the format more attractive. Indeed, by early 2015 up to a third of all viewing was done via tablets and phablets.

Key developments:

• Telstra launches Air WiFi network;
• Telstra planning wholesale LTE for MVNOs by mid-2016, contracts Ericsson to develop road-map to 5G;
• Google’s Project Loon teams up with Telstra to trial LTE;
• Telstra trials LTE-A carrier aggregation technology providing data at up to 450Mb/s;
• Vodafone re-allocates 850MHz spectrum for LTE, trials VoLTE and VoWiFi;
• Vodafone LTE reaches 95% metro population coverage;
• Rapid growth in phablet sales impacts tablet market;
• ACCC proposes reduction in SMS termination charges;
• Telcos’ operating data to Q1 2015;
• ACMA market report 2014;
• ABS data to December 2014;
• Recent market developments.

Companies mentioned in this report:

Optus, Telstra, Fon, NBN, iiNet, Huawei, Vividwireless, Ericsson, EnergyAustralia, SingTel, Unwired, BigPond Music, Vodafone Hutchison Australia (Vodafone and 3), Enero, Mnemon, M.Net, Jumbuck, MobileActive, MOKO.mobi, Photon Group, Oxygen8, Mobile Embrace, IDS, BlinkMobile, Red