What Will Add at Least $45 Billion a Year in New Mobile Revenues?

Multi-product business models work best a constant stream of big new revenue-creating products are created to replace mature products. For the mobile industry, which drives the whole telecom industry, the biggest question therefore is "what big new product drives the next wave of growth?"

It's an open question, despite the optimism about internet of things. After every human being who wants to use mobile phones has got one; after every human buys mobile internet access; what comes next?

Whatever it is, it has to be big, as the global telecom industry already is about a $1.5 trillion annual revenues industry. To move the needle, any new sources have to be large, simply to replace lost revenues from legacy sources. Roughly speaking, to sustain three percent annual revenue growth, and assuming zero losses in all legacy sources, some $45 billion has to be added every year.

Do platform-based product substitutes lead to declining total industry revenues, an increase or are they basically neutral? The answer might well be “yes.”

When usage, the number of subscribers and users is growing fast, even legacy product abandonment does not necessarily slow revenue growth.

That might be true even when competition and technology are lowering prices per unit sold.

If there is a clear pattern at all, it seems to be that revenues grow about as you would expect from a standard product life cycle analysis: some growth early on, fast growth as mass market adoption happens, then slowing growth as markets saturate.

But that describes total industry fortunes only in a single-product scenario, and telecom long ago became a multi-product industry.

The result is slow growth in mature markets, faster growth in developing markets, with product changes happening in all markets, nearly all the time.

In the case of fixed voice lines, product substitution increased overall revenues, since sales were to “people,” not “places,” and there are more people than places where a voice line makes sense to buy.

In the case of text messaging, over the top alternatives shrank the total market, even as volume ballooned, since usage grew dramatically.

By 2021, fixed voice will represent only about 7.7 percent of total global telecom revenues, compared to mobile at 59 percent of total, according to researchers at Ovum.

Fixed network broadband will represent 18 percent of total revenues, while subscription TV represents about 15 percent of total revenues.

The global telecoms & media market will generate $1.58 trillion in revenues in 2021 from 11.96 billion connections, according to Ovum, which counts fixed network, mobile network and video services in its tally.

The mobile segment will dominate, with revenues of $933 billion and nine billion connections in 2021, Ovum predicts. However, fixed broadband will be the fastest-growing market, with revenues growing at a compound annual growth rate of 3.02 percent from 2016 to 2021, ahead of subscription TV at 2.51 percent and mobile at 1.91 percent.

Global broadband will generate $288 billion in revenues in 2021, ahead of subscription  TV with $239 billion and fixed voice at $122 billion.

Not all estimates include video. But even some of those forecasts are in line with Ovum projections.

The relative importance of mobile, fixed broadband, and subscription TV markets varies by country and region.

In 2021, the mobile market will generate 87 percent of total telecom and media revenues in Africa and 70 percent in the Middle East, compared to 50 percent in North America and 49 percent in Western Europe, Ovum predicts.

source: Analysys Mason

U.S. Mobile Industry Will Look Quite Different in a Couple Years

It is a safe bet that the U.S. communications business will look significantly different in a few years, as a potential wave of big mergers--most likely of a vertical sort--reshuffle assets in a way that positions access providers higher in the protocol stack and elsewhere in the value chain.

The biggest moves will involve mobile assets, one way or the other, as virtually everyone believes T-Mobile US, Sprint and Dish Network are likely partners (more as sellers than buyers). Some potential buyers (AT&T and Verizon) might be inhibited by debt issues related to prior big acquisitions. That leaves, in the buyer category, well-capitalized app providers of several types.

Though some horizontal combinations could occur, those are likely to be almost incidental to acquisitions and mergers that have access assets combined with content, application, retail or transaction assets.

The potential combinations could have spectrum owners combining or partnering with other entities that bring network access assets. That could be as true for a Dish Network as for a Comcast.

On the other hand, access providers might also seek to add application, content or platform capabilities. Or, just as plausibly, app providers might seek deals to vertically integrate access platforms and capabilities.

And it has been a long time coming.

“We've been talking about wireless for 20 years,” Comcast CEO Brian Roberts recently said. Roberts also emphasized that the new mobile offering (sometimes cable executives talk about wireless as referring to the network of Wi-Fi homespots or even premises Wi-Fi) is aimed at current and prospective Comcast customers, in region, where Comcast has fixed network footprint.

So it does not immediately appear that Comcast is interested in making a bigger play in nationwide mobility at the moment. It is not so clear that all other big cable companies have the same strategy, so a big combination of a cable TV and a mobile provider is not impossible.

Huge Amount of New Millimeter Spectrum is Coming

Different business models are likely to emerge early in the 5G rollout. In some markets, millimeter wave spectrum will not be a factor, so use cases based on use of small cells might not emerge, either.

In a few markets, 5G in fixed mode might be quite significant; in other markets it will not be a factor.

Internet of things opportunities likewise will vary between regions; large companies versus small companies; urban areas versus rural areas; mobile and fixed use cases and between connectivity supported by 5G or specialized networks.

That noted, longer term, the International Telecommunications Union has identified some frequency bands that can be globally harmonized, in the millimeter wave regions.

■ 24.25–27.5 GHz

■ 31.8–33.4 GHz

■ 37–40.5 GHz

■ 40.5–42.5 GHz

■ 45.5–50.2 GHz

■ 50.4–52.6 GHz

■ 66–76 GHz

■ 81–86 GHz

The U.S Federal Communications Commission already is moving to commercialize 28 GHz, 37 GHz, 39 GHz, and 64 GHz to 71 GHz bands for 5G and other uses. Of particular note, spectrum in the 64 GHz to 71 GHz band will be available on a license-exempt basis.

That seven gigaHertz of new unlicensed spectrum will create potential for possible new business models. What is important is the 11 GHz of new spectrum (including seven gigaHertz of unlicensed spectrum), plus another potential 18 gigaHertz of additional spectrum that might be made available in the U.S. market, dwarfing all existing spectrum previously allocated for public communications purposes.

source: National Instruments

All other things being equal, a service provider likely would prefer to use frequencies at 40 GHz or lower, as signal propagation is better within those regions, compared to all other millimeter wave frequencies. The next “window” of interest, in terms of coverage apps and use cases, is around 80 GHz. The 60-GHz band, by way of contrast, will have much worse propagation characteristics and therefore will make more sense for point-to-point apps where the signal can be highly focused, or for indoor and other settings where capacity--not coverage--is the biggest objective.

source: National Instruments

Spectrum Sharing Will Happen First in U.S. Market

At this point, spectrum sharing is slated for study by the World Radio Conference for all communications spectrum above 24.25 GHz, up to 86 GHz.

Spectrum sharing is authorized in the 3.5-GHz band in the United States and in the 3.2-GHz range in Europe.

Since 2014, the FCC has been looking at:

• 24.25-24.45 GHz
• 25.05-25.25 GHz
• 27.5-28.35 GHz
• 29.1-29.25 GHz
• 31-31.3 GHz
• 38.6-40 GHz
• 37.0-38.6 GHz
• 42.0-42.5 GHz
• 60 GHz bands (57-64 GHz and 64-71 GHz)
• 70/80 GHz bands (71-76 GHz, 81-86 GHz)
• 92-95 GHz

The FCC followed in 2015 with a formal proposed rulemaking for

• 27.5-28.35 GHz

• 38.6-40 GHz
• 37-38.6 GHz
• 64-71 GHz

The FCC proposed licensed access for:

• 27.5-28.35 GHz
• 38.6-40 GHz

In the 37-38.6 GHz band a hybrid access system is proposed, with outdoor access licensed and indoor access unlicensed for property owners.

Unlicensed access is proposed for  64 GHz to 71 GHz.

In Asia, China, Korea and Japan are looking at millimeter wave spectrum between 3 GHz and 5 GHz. In the high range, Korea and Japan have expressed intent to use all or parts of the 26.5 GHz to 29.5 GHz range for delivery of enhanced mobile broadband applications.

The Asia-Pacific Tele-Community is looking at spectrum in the 3 GHz and 5 GHz regions to support 5G. Spectrum sharing in the bands starting at 24 GHz is being studied as well.

More Revenue Per Bit Pressure in U.S. Mobile

Unlimited usage plans and video services in the mobile business now place a new value on spectrum holdings, for obvious reasons: demand is going to grow substantially.

“What the return of unlimited really highlights, and that is the industry's position in terms of network capacity, because if the industry is going to stay with unlimited, we're prepared and can probably sustain it better than anyone else because of our spectrum position,” said AT&T CEO Randall Stephenson.

“We now have more than 60 megahertz of fallow spectrum that we're ready to light up, and we'll be deploying all the bands simultaneously starting this fall,” said Stephenson. “Our goal is to put one gig speeds in our customers' hands no matter where they are on our network.”

AT&T executives now speak of a “new world, where capacity, networks, and entertainment intersect.”

“A year from now, we may look back on the return to unlimited plans as the moment when the battle for network reach and capacity began,” said AT&T CFO John Stephens.

Google Fiber, meanwhile, seems to be preparing for a big new test of its fixed wireless strategy.

If fixed wireless assaults mount, and as fiber-based gigabit offerings expand, the pace of investment pace of investment is going to remain high, for competitive reasons.

Mobile bandwidth also has grown substantially, with T-Mobile US and Dish Network gains in the 600-MHz auction, new activity to add millimeter wave spectrum on the part of AT&T and Verizon, and more coming as shared spectrum in the 3.5-GHz band becomes available, and the Federal Communications Commission moving to release huge amounts of new millimeter wave spectrum as well.

source: McKinsey

Mobile Data Revenue Grows at 10% CAGR, Traffic at 77% CAGR

Between 2008 and 2020, mobile data revenues will climb from about $177.7 billion to about $578.3 billion, about a 10 percent compound annual growth rate. Good, yes? The problem is that traffic will grow from 37 petabytes a month to about 35,054 petabytes a month, a CAGR of about 77 percent.

That means mobile data networks will have to become much more efficient, as revenue per bit does not look to end its trend of decreasing with time and volume.

source: McKinsey

Cost, Revenue, Spectrum Worry Potential 5G Adopters

A recent poll of industry executives suggests uncertainty about 5G business models, though a significant concern is not the biggest concern. That issue is deployment cost, cited by 38 percent of respondents to a GSMA survey.

For many mobile operators, that concern is caused by the concern that a recent big wave investment in 4G might not have time to provide a payback before the follow-on investments in 5G are necessary.

The next most identified barrier to 5G deployments--selected by 22 percent of respondents--was  lack of clarity surrounding 5G use cases. There’s a likely feeling among respondents that too much vagueness exists around what 5G networks will be used for, GSMA says.

Simply saying more speed and throughput will be available just isn’t enough. Mobile operators want to know what new services and revenues they can generate as a consequence of having 5G networks before they sign off on the investment.

A third issue was spectrum availability. Some 19 percent of  respondents saw this as the greatest barrier to 5G deployment. That might be seen as a bigger issue in some markets where regulator willingness to release huge amounts of new millimeter spectrum is limited.

In some markets, raw spectrum is likely to be the least of obstacles, as an order of magnitude or two orders of magnitude worth of new spectrum is going to be released for use.

To be sure, respondents tend to believe there is too much vagueness around what 5G networks will be used for. That concern is not new. It was true of 3G and 4G as well. The implication should be that, in the era where internet accessed apps and services lead markets, it is not always possible for access providers to predict what people and entities will want to do, and what apps and revenue streams will emerge.

IoT Use Cases for 5G Networks

Moderator Dan Meyer, Editor-in-Chief at RCR Wireless News is joined by Peter de Nagy, President, Acommence Advisors and Tri-Chair, Tech Titans IoT Forum (Tech Assoc of North Texas); Jake MacLeod, President and CEO, GreyBeards Consulting, Caroline Chan, VP, GM 5G infrastructure Division; Nadine Manjaro, Lead IoT Consultant, InterDigital and Neville Meijers, Vice President, Business Development, Qualcomm Technologies Inc to discuss applications and use cases of 5G technologies for IoT. 

Mobile Growth Slowing, Shifting to Asia

By the end of 2016, two thirds of the world’s population had a mobile subscription, a total of 4.8 billion unique subscribers, according to the GSMA. By 2020, almost three quarters of the world’s population--or 5.7 billion people--will subscribe to mobile services.

Mobile broadband connections (3G and 4G technologies) accounted for 55 percent of total connections in 2016, a figure that will be close to three quarters of the connections base by 2020, GSMA says.  The proportion of 4G connections alone is forecast to almost double from 23 percent to 41 percent by the end of the decade.

But business challenges already are obvious. Total mobile revenues reached $1.05 trillion in 2016, up 2.2 percent on 2015.

“However, the future outlook remains mixed, with increasing competition, regulatory intervention and slowing subscriber growth weighing on revenue growth,” says GSMA. That alone shows why the interest in new internet of things apps and services is so high. As the market for services used by humans peaks, new markets are expected to come from services used by sensors and machines.

source: GSMA

The Asia Pacific set to account for two thirds of the 860 million new subscribers expected globally by the end of the decade. India, already the world’s second largest mobile market, will be the primary driver of this growth, with 310 million new unique subscribers. Regional penetration rates are forecast to range from 50 percent in Sub-Saharan Africa to 87 percent in Europe.

Despite Some Changes, Additional Spectrum Will Still be the Way Most Capacity is Added to Mobile Networks

Historically, additional spectrum, smaller cells and more efficient radios or modulation techniques have been the principal ways mobile operators have gained more capacity. With some exceptions, that is likely to continue to be the case in the U.S market, even if new reliance on small cell architectures develops.

The reason is simply the huge absolute increases in spectrum that will come in the 5G era. Where total spectrum allocated for mobile service, for example, amounts to about 600 MHz, the Federal Communications Commission plans to release scores of gigaHertz--11 GHZ first, then possibly 18 GHz more new spectrum in the millimeter wave region, including seven GigaHertz of unlicensed spectrum.

In other words, two orders of magnitude more spectrum is coming. That is likely going to overwhelm gains from use of small cells (more intensive spectrum re-use) and better radios and modulation techniques.

There is something quite new, though. Millimeter wave spectrum will have propagation issues compared to the low band (600 MHz to 800 MHz) spectrum or mid-band (2 GHz) spectrum. By some estimates, “raw” spectrum will increase up to 400 percent between 2010 and perhaps 2022, at minimum, an older forecast had suggested.

That already is out of date as we consider millimeter wave allocations that will increase raw spectrum by an order of magnitude to two orders of magnitude.

Contributions of raw spectrum to U.S. mobile capacity growth
Year	Currently allocated spectrum (built-out MHz)	Baseline Spectrum Index	Additional built-out allocations (MHz)	Augmented spectrum quantity (MHz)	Upper bound Spectrum Index
2010	294.5	1.90
2011	334.5	2.16
2012	374.5	2.41
2013	426.6	2.75			2.75
2014	478.8	3.08	30	508.8	3.28
2015	513.4	3.31	30	573.4	3.69
2016	548.0	3.53	30	638.0	4.11
2017	548.0	3.53	30	668.0	4.30
2018	548.0	3.53	40	708.0	4.56
2019	548.0	3.53	40	748.0	4.82
2020	548.0	3.53	40	788.0	5.08
2021	548.0	3.53	30	818.0	5.27
2022	548.0	3.53	30	848.0	5.46

source: Science Direct

Spectrum reuse, which is the way small cells increase capacity, will grow at lower rates, perhaps 270 percent in an older forecast.

Contributions of additional spectrum reuse to mobile capacity
	Basic Reuse		Reuse with 4G+ Het-net lift
Year	Cell sites	Cell site Reuse Index	With currently allocated spectrum			With upper bound spectrum
			Reuse lift from 4G+ Het-nets	Number of effective sites	Baseline Reuse Index with Het-net lift	Reuse lift from 4G+ Het-nets	Number of effective sites	Upper Reuse Index with Het-net lift
2010	253,086	1.00		253,086	1.00
2011	283,385	1.12		283,385	1.12
2012	301,779	1.19		301,779	1.19
2013	325,921	1.29		325,921	1.29
2014	351,995	1.39		351,995	1.39		351,995	1.39
2015	380,155	1.50	1.0891	383,361	1.51	1.0882	383,025	1.51
2016	410,567	1.62	1.0967	420,424	1.66	1.0981	420,595	1.66
2017	443,412	1.75	1.0997	462,360	1.83	1.1034	464,079	1.83
2018	478,885	1.89	1.1055	511,154	2.02	1.1111	515,621	2.04
2019	517,196	2.04	1.1114	568,083	2.24	1.1174	576,166	2.28
2020	558,572	2.2 1	1.1194	635,913	2.51	1.1252	648,283	2.56
2021	603,258	2.38	1.1289	717,876	2.84	1.1323	734,060	2.90
2022	651,518	2.57	1.1383	817,173	3.23	1.1413	837,763	3.31
Basic site CAGR:  8.0%
4G+ Het-net effective site CAGR:  16.0%

source: Science Direct