Data substitution, not price competition, now the primary driver in telco competition
Spectrum fragmentation still main obstacle preventing LTE subscribership in Asia Pacific
MOBILE operators across the board are facing declining voice revenues. Voice revenues will fall drastically even in absolute terms in most markets in Asia Pacific. Data substitution, as opposed to price competition, is now the primary driver, says analyst firm Frost & Sullivan.
Consumer behavior is also putting additional pressure on operators. Consumers can choose how they want to communicate and it may not be via a telco service. OTT (Over The Top) platforms will hit telco core services such as SMS revenues, the firm said in its annual review of key ICT trends in the region.
According to Pranabesh Nath, industry manager of Frost & Sullivan Asia Pacific’s ICT Practice, telcos are facing the significant challenge of getting disintermediated – that is, the emergence of platform providers such as Google, Apple, Microsoft are taking away their traditional opportunities such as communications, entertainment, e-commerce, social networking and enterprise services.
“We are looking at tougher competition between all kinds of ICT players as technologies and platforms converge, which is great for the consumer. We expect higher focus in emerging areas such as television platforms that integrate the TV, Internet and apps,” he said.
“Here we expect to see Microsoft enter with its Windows 8 mobile platform, as well as Android and Apple in the near future. Currently smart TV platforms are usually made by the TV manufacturers themselves, such as Samsung. The benefit for the consumer is to have one platform/ OS across his desktop, laptop, mobile, tablet and television,” he added.
There are almost three billion mobile subscribers today, with the majority on 2/2.5G in Asia Pacific, says Frost & Sullivan. Smartphone and tablet shipments have shown rapid growth in 2011, with approximately 150 million smartphones and five million tablets shipped.
LTE (Long-Term Evolution) deployments are catching up around the globe, but LTE deployment is not yet a revenue-generating proposition. By the end of 2012, global LTE subscriptions are expected to exceed 40 million. This will be a fourfold increase over the nine million global LTE subscriptions in 2011, Frost & Sullivan said.
LTE subscriptions in the Asia Pacific region are expected to overtake North America by 2014, primarily driven by adoption in China, India, Japan, and South Korea. Presently, the North American region accounts for 60% of total LTE subscriptions, followed by the Asia Pacific region at 37%.
However, spectrum fragmentation still remains the main obstacle preventing LTE subscribership in the Asia Pacific region from going full throttle. With LTE deployed in more than five spectrum bands, it creates additional costs for handset OEMs to develop an LTE smartphone for every band.
One of the most critical elements in driving LTE penetration is the availability and affordability of devices, and for this very reason several operators, such as China Mobile HK, Korea Telecom and PCCW, have delayed their launches until a handful of LTE-enabled smartphones, rather than just data cards, became available.
Cloud, data centers
The Asia Pacific cloud computing market is expected to be worth US$2.22 billion in 2012, rising to US$5.81 billion in 2015.
This market includes SaaS, IaaS, PaaS. While all three segments are expected to demonstrate strong growth, IaaS and PaaS (Infrastructure- and Platform-as-a-Service) will grow at a faster pace to account for a greater share of the market. Australia leads in cloud computing adoption, with 43% of respondents saying they have implemented some form of cloud services. Malaysia and Singapore are fast growth markets for cloud services.
Based on a Frost & Sullivan survey, most enterprises believe that cloud computing will shrink IT teams and make some jobs redundant. However, there is still some hesitance in adopting cloud applications due to perceived risks such as data security and privacy.
The Content/ Media vertical accounts for 20% of the data center market currently. This is expected to rise to 24-25% over the next three years as data center players have expand their offerings to meet this.
Furthermore, the captive data centers of large media companies, such as Google and Facebook, are also expanding greatly in the region to host the content locally.
More than US$14 billion was spent on Unified Communications (UC) solutions in the last three years in Asia Pacific. Applications that are growing rapidly are business video, enterprise mobility, conferencing services, and UC-related cloud and managed services.
There is a shift from hardware and software applications for enterprise communications to cloud based apps. Both telcos and vendors with their platforms are competing in this hotly contested market.
The market for unified communications on-premise applications in Asia Pacific is expected to be worth US$5.5 billion in 2012, which will rise to US$9.3 billion in 2018. This market includes enterprise telephony, enterprise video, email, mobility, contact centres, instant messaging, presence and social media for business.
The market unified communications services (hosted/ managed/ cloud), also known as ‘UCaaS’, is expected to be worth US$3.2 billion in 2012, which will rise to US$7.53 billion by 2018.
On-premise video is a booming market, worth US$800 million in Asia Pacific, growing at 20% year-on-year in the last 3-4 years. The rise in types of devices (desktop/ mobile/ meeting rooms), and availability of new technology is expected to keep this growth steady in the next three years.
However, the global economic environment is declining and this may have a negative impact on enterprise and consumer spending in Asia Pacific in the next two years. On-premise solutions are expected to fare worse compared to cloud services in such a scenario as capital expenditure may come down and it may be easier for enterprises to adopt cloud solutions where they can pay-per-month.