The wireless communications market, including emerging 4G technologies, may be positioned for some dramatic changes in structure and business models over the next few years, brought about by a variety of disruptive forces that will undermine the current status quo.
These disruptive forces range from new mobile service providers and an increase in data traffic growth to the proliferation of tablets and other low-margin mass market devices that are changing the face of content development and access, according to a study released last month by CSMG, a division of the TMNG professional services group that focuses on the telecom, media and entertainment industries.
In fact, the significant rise in mobile data traffic over the past several years, brought about by advances in smartphones and increase in the number of Internet-enabled mobile devices, may be the top concern among wireless service providers worried about capacity constraints and possible spectrum shortages. As tablet costs continue to drop, CSMG analysts forecast a steady and rapid increase in the number of devices in the hands of both consumer and business users, boosting the current 20% adoption rate to 50% or more in a relatively short time.
“Touchscreens, instant-on capability and lightweight design offer convenience unmatched by traditional PCs,” the report notes. “Continued hardware and software improvements will only make tablets more versatile.”
The CSMG report, “Signal Strength: Assessing Value Shifts in the Mobile Telecommunications Industry”, is based on information collected as part of the company’s advisory services activities across a range of industry segments, including telecom service providers, enterprise users and device makers. The study pinpoints top trends and analyzes the potential impact they may have on various business models and technology paths.
While the report notes that continued price erosion and competition from Apple will make it difficult for tablet manufacturers to develop more powerful products, capture market share and maintain profitability, the expanding universe of cloud-based applications and cloud-based storage alternatives will allow tablet users to do more with less computing power. Increasing Bring Your Own Device (BYOD) trends in the enterprise and the adoption of cloud strategies by businesses will also increase demand for less expensive non-Apple devices, the report points out.
“As the ecosystems around the Android and Windows tablet operating systems develop, device makers will have greater ability to offer tablets that match, or surpass, the iPad’s capabilities,” CSMG researchers say.
The increased demand and use of tablets, as well as the addition of cellular connectivity as a standard option, will place a significant burden on the wireless communications infrastructure. This will challenge service providers’ network capacities and create roadblocks for profitability as users demand more cost-effective and less expensive data plans. While companies like Cisco have painted a dire picture of mobile data usage trends over the next several years, reaching a critical stage by as early 2016, these forecasts may be too extreme, CSMG contends.
The expansion of spectrum-efficient technologies like 4G LTE is expected to support up to three times more traffic on the same bandwidth, while the Federal Communications Commission (FCC) is moving to make more spectrum available as part of its national Broadband Plan, the report notes. This will more than offset any increase in mobile demand that is expected to come as more tablets come into play and smartphones are used as the preferred device for Internet access.
The CSMG report pinpoints a number of areas that might very well be ‘disruptive’ to the wireless space. These include:
- The proliferation of mobile voice and messaging applications, especially those that are integrated with the low cost of free mobile apps for both tablets and smartphones. This has created concerns among carriers that users will opt to replace paid text plans with these applications and eat away at revenues that are used to support and build out bandwidth;
- An increase in the number of ‘late adopters’ of smartphones and eventually tablet devices, who are less enticed by faster processors, more memory and higher resolutions screens and are more likely to settle for services that do not carry premium price levels and programs;
- The continued expansion of third-party applications and ‘application stores’ that flood the market with a wide variety of low-cost mobile applications and further distance wireless service providers from the potentially lucrative software and services space.
“Seeing their content revenue dry up, mobile operators are concerned they are being relegated to the role of a ‘dumb pipe’,” the report points out. This limits each carrier’s ability to differentiate beyond pricing and results in higher churn rates among wireless subscribers.
More information on CSMG’s “Signal Strength: Assessing Value Shifts in the Mobile Telecommunications Industry” is available from the parent company’s TMNG Global Web site.