GENEVA-Just five years from now, cellular will overtake fixed-line access to become not only the dominant form of telephony, but the world’s primary access to the online world as well. That bold prediction doesn’t come from a controversial industry guru or brash market analyst, but from the International Telecommunication Union (ITU), a conservative organization that hardly has a reputation for going out on a limb with inflated market forecasts.
Nevertheless, the figures and trends outlined in the ITU’s “World Telecommunication Development Report 1999,” released during Telecom ’99 in October in Geneva, point convincingly to a future that’s wireless, Wireless Application Protocol-based and Web friendly.
The report reveals that while there were as many as 50 fixed-line subscribers for every cellular subscriber just 10 years ago, by the turn of the millennium, that figure will have plummeted to less than two fixed-line users for every mobile connection. What’s more, the report says, that ratio will continue to fall steadily as more and more mobile devices, from cellular phones and pagers to personal digital assistants (PDAs) and third-generation (3G) personal communicators, are connected to networks around the world.
“If it weren’t for revenues from mobile, we’d see the telecommunications sector shrinking rather than growing,” said Michael Minges, head of the Information Systems Unit with the ITU’s Telecommunication Development Bureau, and one of the authors of the report. “On current trends, we’ll have more mobile subscribers than fixed-line users sometime around the middle of the next decade. But that crossover point could come much sooner if mobile tariffs, which are still considerably above costs, continue to come down.”
According to the report, the number of new mobile subscribers has been outpacing new fixed-line customers since 1996, with almost twice as many new mobile subscribers added last year as fixed-line customers. At the same time, as revenues from fixed-line service have declined steadily, the world’s cellular operators generated service revenues of US$155 billion in 1998, a figure the ITU predicts will grow to reach US$315 billion by 2002.
Nevertheless, pricing remains an important barrier to growth in many countries. While figures reveal a steady decline in the average price of mobile service in Organization for Economic Co-operation and Development countries-from US 56 cents per minute in 1989 to US 40 cents per minute today-charges for mobile service remain on average around four times higher than the cost of fixed-line service in the same countries.
“There’s a definite correlation between high prices and low rates of penetration relative to national wealth,” said Minges. “In Western Europe, for example, economies with high tariffs tend to have a lower mobile density than you’d expect. Conversely, countries with cheaper prices like Norway or Finland enjoy the world’s highest levels of mobile penetration.”
At the same time, the report says, the rapid evolution of mobile markets is turning mobile service provision into a complex juggling act for the growing number of mobile operators. While average revenue per user (ARPU) continues to decline as markets mature, new economies of scale made possible by a fast-growing user base are bringing down the cost of service provision.
Similarly, while liberalized markets mean operators are having to spend more on marketing and advertising to win and retain customers, the hefty costs many pay for interconnection to the fixed network will begin to decline in importance as more and more calls are retained on mobile-only networks.
