@ Mobile Broadband China: Analysts frame the global outlook

SHANGHAI, CHINA — A group of analysts shared the main stage here at Mobile Broadband China last week to add some academic flair to Light Reading’s first conference in China.
It’s not as if any explanation is needed to highlight the reasoning for the event’s locale, but whereas their western counterparts used to be in the driver’s seat, operators in emerging markets are now taking the lead in the industry on a variety of fronts. China is very often at the lead of that pack.
“Increasingly it’s the operators in emerging markets that are having an increasing impact on the driving of standards in the market,” said Patrick Donegan, senior analyst at Heavy Reading.
“Five or 6 years ago it was North American and European vendors that were driving innovation in the industry,” he said.
This shift is occurring as the industry moves from one that is voice centric to a field defined by mobile broadband.
“From a global perspective, if you add up all the wireless networks in the world, data surpassed voice in Q4 of last year,” Donegan said, referring to data he’d received from L.M. Ericsson (ERIC).
There are only 20 million mobile broadband 3G subscribers in China today, Donegan said, but that figure isn’t expected to hold long and it’s a far cry from the current global picture. At the end of 2009, there were roughly 500 million fixed broadband lines in service and 765 million mobile subscriptions supporting 3G, said Gabriela Baez, managing director of global research and consulting at Pyramid Research.
“Mobile broadband will become a very important technology to expand the coverage of broadband in emerging markets,” she said.
As more operators envision mobile broadband as a core area for growth, mobile penetration rates are expected to triple in about 10 years when all connected devices are taken into account, Baez added.
“We take the view that demand for mobile data is going to be unstoppable,” Donegan said. “If the economy is bad in the next three or four years that may affect the rate at which data traffic increases … but we have no doubt that irrespective of what the economy does data will certainly increase on the network.”
In terms of the source of that increased load on networks, http streaming is growing the fastest at 29% year-over-year and http downloads are close behind at 27%.
Another sad truth is that the efficiency (or lack thereof) of signaling on smartphones is causing incredible problems for operators just the same as increases usage.
If smartphones are not optimized for the operator’s network, they will send too much contextual-based information to the network, thereby “creating a very significant amount of signaling traffic in the network, which is wasted traffic,” Donegan said.
Further tightening the strain on carriers is that revenues are flattening a bit while traffic goes through the roof, he continued.
During his presentation, Donegan pulled up a slide that depicted the stock performance of 10 of the world’s leading carriers for the last 12 months. “Pretty much all the carriers over the last 12 months … have all underperformed the Dow Jones industrial average over the last 12 months,” he said.
“This chart does tell you one thing — investors are not excited about LTE,” he said. “Investors are not excited about LTE, they are concerned. They’ve seen this expectation rise before and they are cautious. I think it’s important to consider this investment issue.”
Stock performances are also mirroring the capital expenditure outlook for the same 10 carriers for the coming years. As such, one could argue that aggressive LTE rollouts will be fewer and farther between.
“Because of the financial market, carriers are determined to keep a very tight control of capital expenditure,” Donegan said.
He presented two scenarios, which are mostly dependent on how quickly carriers move to LTE+, an upgrade he posited as the “true 4G technology.”
The inflection point of LTE will see annual LTE infrastructure spending reach anywhere from $10 billion to $20 billion by 2017, Donegan concluded.
Even at the top end of that range, his colleague at Heavy Reading, senior analyst Gabriel Brown, said LTE will not reach the scale of GSM anytime soon, if ever.
“LTE is barely a spec on the horizon, and it’s going to remain that way for a long time period,” he added.
Cellular technologies have historically enjoyed a 15 to 30 year lifetime, Brown said. GSM technology first commercially launched in the early ’90s and peak demand didn’t hit until 2009, whereas he continued, UMTS networks got off the ground in early 2000 and peak demand for that technology isn’t expected until 2015.
“Subscriber growth should really be put into a time perspective,” Brown added. “It’s only been launched early this year. Potentially we might not see peak demand for this technology … until 2025 or something of that nature.”