Feature Article

October 03, 2012

Mobile Sector May Undergo Contraction Despite Mobile Data Growth in the West: Study

There could be “severe” contraction in the mobile sector – given slow data growth and low network costs, according to Analysys Mason.

That means mobile operators don’t need to focus on the impact of a mobile data explosion, but be concerned that the explosion will ever take place, according to Analysys Mason.

The firm’s new report shows the compound annual growth rate (CAGR) of the volume of mobile data traffic will be below 50 percent between 2011 and 2016, and 40.8 percent between 2012 and 2017.

The report, “Wireless network traffic worldwide: forecasts and analysis 2012 - 2017,” says growth in mobile data traffic will be insufficient to stop a contraction within the mobile industry in western economies.

The predicted contraction could be severe given that data revenue growth is already offset by tariff rebalancing, the study said. There is also a loss of core voice and messaging revenue to over-the-top players, and erosion of operators’ position in device distribution.

Also, the study said that Western Europe is predicted to have the lowest growth rate in mobile data out of eight regions of the world. Mobile data traffic in Western Europe will increase at a CAGR of 29 percent from 2012 to 2017. The low growth rate was blamed on device saturation, delays in availability of 4G, and consumers opting to use Wi-Fi.

Also, network costs will likely drop quickly, the study said.

"In an uncompetitive market, falling costs would lead to rising margins, but in a mature, competitive market such as Western Europe they result in a contracting business," Rupert Wood, a Analysys Mason analyst and author of the report, said in a statement from the firm. "In other words, it’s not getting dangerously expensive to cater for demand; it is getting worryingly cheap to transport what little demand there is."

"Forecasting mobile data traffic has been bedeviled by analyst excitability, vendor and operator interests, spectrum lobbyists, and wildly mobile-centric views of device ecosystems," Wood added. "Open-loop forecasts with headline-grabbing growth rates simply don’t tally with long-term trends in transport costs or any plausible increase in operator revenue."

The study also projects variations in mobile network traffic growth between 2012 and 2017. Traffic in emerging Asia, Pacific and Latin America regions will increase by a multiple of 9.1 and 6.8, respectively, but Western Europe will see a growth rate of 3.6, and a growth rate of 4.5 will be seen in North America.

Also, the handset share of total traffic will increase from 45 percent in 2012 to 52 percent in 2017 – showing relatively slow growth.

The report recommends that mobile operators offer bigger handset and multi-device bundles, and target the light-user end of the fixed broadband user base with fixed-to-mobile substitution offers.

Users could pay for data that they often get for no additional cost, and the handset subsidy model was also recommended, the study said.

"Ultimately, mobile operators in developed economies are going to have to get used to being the victims, not the perpetrators, of disruptive substitution," Wood said. "Fixed and Wi-Fi can do most of what mobile does (except the wide-area/mobility bit) at a fraction of the price to the end user, but mobile can do only a fraction of what fixed and Wi-Fi can because of its inherently limited capacity."

In related news, a U.S. business contraction was recently announced, and it is the first one in three years, according to MobilityTechzone, citing data from the Institute for Supply Management-Chicago Inc.

In addition, Western Europe continues to have a slow economy,  MobilityTechzone said. But software growth in Northern Europe has been “robust, and mobile device shipments (smartphones and tablets) have remained on course,” the piece added, citing September data from IDC.

Want to learn more about today’s powerful mobile ecosystem? Don't miss the Mobility Tech Conference & Expo, collocated with ITEXPO Austin 2012 happening now in Austin, TX. Stay in touch with everything happening at Mobility Tech Conference & Expo. Follow us on Twitter.




Edited by Braden Becker


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