Just over a year ago, Analysys Mason analyst Rupert Wood decided he would swim against the tide and produce a series of reports with titles such as The mobile data explosion is a myth and The mobile data explosion: myths and reality.
Wood’s claim was that industry growth forecasts were wildly overblown, and in particular he cast aspersions on the notion that mobile data volumes would double every year. In particular his comments clashed with the predictions of Cisco’s VNI, upon which so many presentations and models were built. We were taken by his boldness, and conducted this interview with him at the time. We came to this conclusion:
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 mobile 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.
And now, a year later, Wood is back and he’s feeling vindicated. A note from Analysys Mason, referring to last year’s reports, states:
“These papers had a mixed reception. Some vendors in particular were outraged, and others’ reaction was incredulity at prognoses so out of kilter with received industry opinion, and in particular with that of the de facto gold standard in this area, Cisco VNI. Privately, though, some European mobile operators told us we were more or less right
So it is reassuring – for us at least – to hear those two key points recently confirmed by Vodafone (presentation by Richard Feasey to IIC regulatory conference, Washington, December 2011).
Vodafone stated that its annualised European revenue growth in data was 21% over the period July-September 2011, whereas volume growth was just 19% over the same period. This means the value of a GByte is actually increasing.
Back in November 2010 we estimated European mobile data traffic was growing at an annualised rate of 35%. We subsequently revised this upwards, in part because we thought we had underestimated the effects of seasonality on data consumption.
At the same time in 2010 Analysys Mason also wrote:
Myth: The value of transporting a byte is collapsing?
Reality: This was emphatically true up until the end of 2009, but the rate of decline has slowed recently. If operators manage to preserve the premium for small-screen data, the value of transporting a byte of data could actually rise as the mix of large-screen and small-screen becomes more beneficial to the operator.
In fact we thought – perhaps a little cynically – that mobile network operators’ sudden enthusiasm for tiered handset data pricing in late 2010 had more to do with the desire to hang on to the handset data premium than with networks falling over under the weight of data.
Vodafone of course is just one case, and despite its size, is not generally the largest data carrier in its 13 European markets. But it is not alone. The steady trickle of information that comes back to us from the players that really matter in the industry, those at the RAN-face, has mostly – though not universally – tended to confirm what we originally thought.”
So what are the main conclusions Wood and Analysys Mason now draw from this? Here’s how the statement concludes.
- The idea that mobile operators are the passive victims of some demand force of nature is just muddle-headed. Open-ended demand forecasts that do not take into account operators’ ability to finance data networks are meaningless. And so are forecasts that simply assume operators will have to bow to consumer pressure for flat-rate pricing. Pricing is actually a very effective lever.
- Fixed broadband soaks up a huge share of small- and mid-screen wireless device data. Our own primary-research consumer surveys bear this out. In markets where there is widespread fixed broadband, the reality is that smartphones and tablets are essentially fixed broadband devices with additional mobile functionality.
- Long-term demand for bandwidth-intensive data in locations where the fixed/Wi-Fi default is not available is not great.
- Most mobile operators should be reasonably happy that fixed operators are bearing this excess traffic for the time being. There is really no compelling reason for these operators to attempt to service this traffic unless they can come up with a genuinely compelling 4G FMS product priced at a similar but competitive level to basic fixed broadband double-plays. And it is this that is at the core of Vodafone’s LTE strategy: not a response to a capacity crunch that may not even exist, but as a platform for next-generation broadband services.
In fact, although Wood’s support for his view is still mainly hidden – outside of those Vodafone numbers – we are also now seeing an increasing number of voices pipe up that mobile data demand is not on the predicted x2 every year curve. Indeed, even the assumption that data revenues, and especially profits, cannot keep up with the cost of transport, will come under increasing challenge – especially following those Vodafone results, in which the operator stated that data revenues were now aligned with costs. So is Vodafone an outlier amongst the Tier One operators, or will we see similar results from other operators come through in 2012? Wherever the truth lies, it is good to have analysts that question the orthodoxy, especially if they can back their questions up with actual data.
So, this is the final newsletter of the year from Mobile Europe. I’d like to thank you all for all the feedback, emails and messages over the past months. We’ve had a great year here at Mobile Europe, and look forward to the next one.
Keith Dyer
Editor
Mobile Europe
European Communications launches customer experience survey
As network operators continue their evolution to being fully customer facing organisations, there is still debate around what customer experience actually means from a telco perspective, what it should entail, how it should be implemented and who should lead it. To shed some light on this, Mobile Europe’s stable mate European Communications is undertaking a customer experience survey to assess the views of senior telco managers around the world. Click here to take the survey.
The results will be revealed at “Understanding Customer Experience”, a special seminar sponsored by Oracle, Amdocs and Alcatel-Lucent. Please do consider both completing the survey and attending the seminar.
Two webinars are now available to view. Both were successfully held this week, with hundreds of attendees joing from across the globe. They are:
Designing high capacity networks in stadiums: challenges & best practices
Making Wi-Fi “Carrier Grade” to Support Cellular Offload