Industy predictions are over-inflated, and LTE could create a surplus – analyst
Earlier today we carried a press release from AnalysysMason on mobile data traffic growth that created a small stir.
Just as a quick precis: AnalysysMason found that data traffic growth in Europe is nothing like ‘doubling every year’, a frequently reiterated claim usually based on Cisco’s Visual Network Index Global Mobile Data Traffic Forecast. Instead, AnalysysMason said that while European mobile data traffic grew by 110% in 2009, it will grow by only 35% in 2010, and there is no real prospect of a pick-up in growth rates in 2011.
If you are reading this you are probably used to seeing reports much to the contrary, such as this, and of course to seeing the aforementioned Cisco forecast that projects that globally, mobile data traffic will double every year through 2014, increasing 39 times between 2009 and 2014.
So how did Rupert Wood, Principal Analyst at Analysys Mason and author of the research, come to such radically different conclusions from many in the industry, and what does he think the implications are?
Keith Dyer:
Rupert, you are taking quite a different view here from much of what we hear across the industry.
Rupert Wood:
Yes, our view is that the market is significantly over-hyped. All the evidence we have from 2010 in terms of what’s actually happening is that growth in traffic is pretty weak. We have good data that all points to a growth of 30-35% in the year, and we see even less next year.
Keith Dyer:
Where did you get your data from?
Rupert Wood:
Operators and regulators, and it is hard numbers. It’s not complete data but it is good data, and it contains some startling figures that buck the “doubling every year” idea. For instance, data traffic in Norway in the first half of this year grew just 5% over the second half of last year – an annualised growth of 10%. That’s numbers from the Norwegian regulator. Of course, there will be markets and operators that have more than that but that’s the overall picture we are seeing.
People also misunderstand the types of data growth. The dongle market is slowing up very very sharply. Not in terms of subscribers, but each new subscriber is using less and less. Average usage per mobile broadband, by which I mean dongle, subscriber is in decline everywhere. The mobile broadband market is by far the largest part of the market, forming 95% of data traffic and it is slowing up rapidly. Smartphones will not create anything like the doubling of traffic that is projected year on year.
The second aspect that people misunderstand is the proportion of data that is simply being off-loaded to WiFi and fixed broadband. The analysis on our numbers is that the overwhelming bulk of data traffic is fixed line. Most of it is in-home and going over WiFi, HomeHub and Cable, etc
So our view is that there’s no capacity crunch on the way. There will be nodes and points where there are issues, but in general there is no capacity crunch on the way.
Keith Dyer:
Of course, a slow down in growth doesn’t necessarily mean there is then no capacity crunch. There could be a slowdown in data traffic growth and still operators could struggle for capacity.
Rupert Wood:
It depends where the operators are – and I agree this doesn’t mean there won’t be any capacity issues. I noted Elisa recently saying that they have more than enough capacity on HSPA+ to manage data at the moment quite easily. But there are issues such as backhaul and specific urban areas that need addressing, such as the issue of outdoor cellular smartphone traffic in certain locations.
Keith Dyer:
You say your research included numbers from operators and regulators. Ofcom is one regulator that has released stats that show the growth in data traffic over the last 2-3 years.
Rupert Wood:
Sure, in 2007 and 2008 and 2009 that happened. I absolutely agree with that. But we are saying look at what is actually happening this year, and what is likely to happen next year. These are also European numbers.
The danger is that if LTE investment are made too early we will see a capacity surplus. You create over-capacity in the network and then you sell it off cheap, and it’s not in the industry interest to create another decline.
This is not bad news for mobile operators – if they can get a better mix of data between small screen and large screen data and retain the price premium for small screen data, then the value of a bit transported goes up rather than down. It’s in their interests to do that , so it’s not bad news for the mobile operators.
Keith Dyer:
You realise that you are going to necessitate a change in every powerpoint presentation on this topic – the Cisco slide is going to have to go out the window,
Rupert Wood:
Well yes. It’s a myth – the doubling of mobie data traffic every year…
Keith Dyer:
And you’ve also put a hole in an awful lot of business cases which aim to take advantage of the capacity crunch – from equipment vendors to policy management, from data optimisation to billing providers…
Rupert Wood:
As I say, you can draw your own conclusions. It wouldn’t be the first time in the telecommunications industry that traffic forecasts have been wrong.