All around the world, the mobile landscape is changing. Mobile subscriptions are expected to reach nearly 7 billion by the end of 2015, while mobile broadband subscribers will reach 2.3 billon. As mobile penetration reaches saturation in many regions and grows exponentially in others, operators across the globe are recognizing the need to drastically change their business models. In 2014, in both developed and emerging markets, we’ve seen dramatic developments that look set to disrupt the market next year.
Unified communications
One key development that has gained rapid momentum in 2014, and looks set to continue in 2015, is the convergence of mobile and fixed services. In mature markets, where mobile penetration levels have reached near-saturation, operators are looking to reshape their business models to cope with stagnating voice revenues, retain customers and manage the increasing demand for data. To help generate new revenue opportunities, operators are increasingly starting to offer bundled or multiplay packages in which they provide fixed, mobile, Internet and sometimes television services under a single bill. This approach helps generate revenue by drastically reducing churn. Vodafone highlighted that in its annual statement, commenting that they believe mobile-only customer churn to be “three-times higher than that of customers taking combined fixed and mobile services.” With BT moving to add content and mobile to its fixed offering and Vodafone potentially looking to pursue Liberty Global in the U.K., it seems clear that the shift toward triple- and quad-play offerings in developed markets will continue into next year. As more and more operators look set to take that step, it appears highly likely that we’ll see many more mergers and acquisitions in the coming year.
Demand for connectivity to drive economic growth in emerging markets
The convergence of fixed and mobile networks is also evident in emerging markets. Here, the demand for enterprise access is challenging operators to upgrade capacity and roll out new connectivity to small and medium enterprises in previously underserved areas. In Africa, for example, the economy is predicted to accelerate from an average 4% growth rate in 2013, to between 5 and 6% in 2015, with much of that being driven by SMEs. As these findings highlight, SMEs will present a big opportunity for operators in 2015, and being able to cost-effectively expand connectivity in these growing areas represents a competitive edge. Thanks to the relative absence of major Internet service providers in emerging markets, mobile operators are extremely well placed to capitalize on the growing demand for connectivity and fill this void.
To meet the growing demand for connectivity, operators in emerging markets are looking more and more toward flexible and high-capacity backhaul solutions, such as point-to-multipoint microwave. Wireless technologies such as PMP enable operators to support both mobile backhaul and enterprise access over the same infrastructure, allowing them to quickly meet the market demands for a fraction of the cost of traditional fixed infrastructure. In 2015, it seems likely this will accelerate operators’ time to market for new services, create new revenue streams and help bridge the digital divide through providing connectivity to underserved areas.
The rise of SDN
The shift toward converged networks around the world has been enabled by the growth of software-defined networking. SDN gained steady momentum in 2014, and we witnessed a shift in its applications from the network core to wider applications like backhaul. After initial skepticism, operators now understand the benefits of SDN and how it can help them reshape their business models. Strategy Analytics, for example, recently documented that the use of SDN to boost the efficiency of data traffic on backhaul could save mobile operators $32 billion in annual capital expense investments by 2020.
SDN, particularly when combined with network function virtualization, grants operators far greater flexibility. This agility allows operators to customize virtual networks and roll out services that can quickly meet the changing demands from customers. For example, dedicated capacity can be allocated to backhaul at the same time as defining tiered connectivity offers for enterprise access. By efficiently managing resources in that way, operators can run mobile backhaul at a much lower cost and achieve a quicker return on investment. With such clear advantages, an increasing number of operators look set to adopt SDN in 2015. This is fully supported by a push from new entrants to the cellular market such as Cisco and Intel, who have the necessary technology and are keen to carve out their space.
High-capacity wireless emerges in North America
Big changes are also on the horizon for the North American market in 2015, as new, high-capacity wireless solutions such as PMP microwave look likely to become more prevalent.
Historically, the slow rate of fiber rollout or the reliance on low-capacity wireless solutions has resulted in poor broadband quality outside the densest urban areas. Consumer frustration has put pressure on operators to improve their quality of service and thus differentiate in the market. These dynamics have created an opportunity for service providers with innovative technology strategies to gain extremely rapid traction.
By looking to the latest highly efficient wireless solutions, service providers are now able to deliver higher capacity without the costs or slow time to market associated by fiber or older microwave solutions. This creates a win-win scenario for the provider and the customer. The providers are able to grow market share rapidly, using speed of provisioning and capacity as powerful differentiators. Customers experience high-quality broadband that is rapidly delivered without the “six o’clock slowdown” caused by over-subscribed cable and DSL networks.
Need to adapt
With a number of key developments such as SDN and converged networks really gaining momentum in 2014, it seems liable that 2015 will see further restructuring of operators’ business models around the world. Thanks to the growth in the number of mobile users, mobile broadband penetration and need for low-cost enterprise access to support economic progress, the landscape has undoubtedly changed for operators in recent years. With these recent developments, 2015 looks set to be the year that really tests operators’ ability to adapt to a changing market, while also seeing many new and innovative entrants.
Editor’s Note: With 2015 now upon us, RCR Wireless News has gathered predictions from leading industry analysts and executives on what they expect to see in the new year.
