Deployment of Next-Gen Wireless Networks to Impact Communications Services in 2011
Deployments of HSPA+ and LTE networks will have a huge impact on all sectors of the communications industry next year, according to M/C Venture Partners, which today is releasing its annual list of the top 10 communications, technology and digital media industry trends to watch in 2011. Mobile services will enhance the experience of digital media channels, fuel a renewed demand for fiber networks in the coming months, and hasten the erosion of DSL services, according to the venture capital firm's list.
M/C Venture Partners compiled the list as part of its ongoing research to understand industry trends and identify investment opportunities in the communications, media, and information technology sectors.
According to M/C Venture Partners, the leading trend in the new year will be the profound impact higher speed mobile services will have on many sectors of the communications services industry and related areas. All of the major and emerging carriers in the United States have significant network upgrades planned using either High Speed Packet Access + (HSPA+) or Long Term Evolution (LTE). By putting mobile broadband on a level of service comparable -- and in some cases exceeding -- cable modems, these services will drive many consumers and small enterprise users away from DSL, accelerating its decline.
"2011 will be the year of mobile broadband -- as carriers improve their network performance and expand to more cities. Some may take this for granted, but these improvements will have many repercussions in the market," said James Wade, Managing General Partner, M/C Venture Partners. "The consumer experience will be significantly enhanced by improved video applications. Mobile advertising also will grow. Carriers will use more fiber networks to build infrastructure to meet the bandwidth demands of their upgraded networks. Smartphone capabilities, which are currently under-utilized on average, will begin pushing new usage paradigms as advanced networks unleash new service levels. And DSL will become less and less compelling for many consumer and small business customers."
Trends on the M/C Venture Partners' list include:
1. Distributed local fiber networks will emerge as key enablers of broadband wireless. With fiber networks supporting their infrastructure, carriers deploying HSPA+ and LTE will push the RF limitations of wireless to deliver the most competitive bandwidth offerings they can. This will further fuel the fiber renaissance as wireless carriers generate significant additional demand for local fiber networks.
2. The erosion of DSL-type services will accelerate. Telcos stand to lose much of their market share over the next five years if they depend on DSL technologies as their primary broadband offering. Many DSL customers will move to broadband wireless offerings because of competitive costs and the convenience of mobility. Further in the future, as competitive intensity heats up, consumers may benefit from multi-device mobile broadband packages on a single bill.
3. Smartphones will benefit from broadband network improvements. Smartphones currently utilize less than 60% of their true performance capabilities, on average, driven by network performance limitations of 3G and emerging familiarity with mobile applications. This gap will close rapidly with the roll-out of HSPA+ and LTE as well as a renewed proliferation of public Wi-Fi networks that provide smartphone users with a higher grade of performance. This will put increased pressure on carriers to improve their infrastructure to meet these demands.
4. Digital media channels (from out-of-home to mobile to Internet) will strive for more efficient operating models, leading to changes and opportunities for technology and software to enable advertisers and enterprises to improve advertising execution across channels, particularly in mobile. Traditional ad networks will be squeezed as technology enables more efficient market-making, distribution and measurement of digital advertising.
5. Multiple bandwidth alternatives for small business (cable, fixed wireless, fiber and traditional T1) will allow carriers to sell and small businesses to enjoy redundant services, which were historically available mainly to large enterprises. New niche services and devices will evolve to address this market.
6. Co-location facilities will enjoy stronger demand in a lagging economy, attracting capital from real estate, tech and telecom investors that will lead to more supply and softening prices in some markets.
7. Premium online video services such as Netflix and Hulu will continue to adversely affect cable companies by reducing video-on-demand sales and increasing bandwidth requirements, placing a double strain on their business model. This will push them closer to becoming transport-pipe companies -- what they have long tried to avoid. Cable companies will respond with deeper product offerings and selective deployment of capital to counter this threat.
8. Consumer awareness of mobile applications will drive enterprise application demand, a reversal from the days when Blackberries acted as a driver of consumer smartphone adoption. This will help grow a previously over-hyped and under-performing market but also bring to the surface security, usage and application performance issues in the enterprise. As a result, enterprises will have to react to new application demands from mobile workers as well as IT infrastructure enhancements to adequately support their changing mobile environment.
9. The continued ascension of the Android platform. In what has become a replay of the Windows-Apple battle from the PC market, Android is now the smartphone OS leader ahead of Apple with a broad range of supporting OEMs; but, unlike Microsoft, Google will remain true to its open and do-no-evil roots and support a rich environment of applications from all developers, at least for the foreseeable future.
10. Home networking and entertainment devices will begin a new era of complexity, introducing new service models and customer service requirements for telecom and cable companies. Consumer expectations of support for devices will evolve and new business opportunities will develop. Competitors with clear vision of the future will capture this value creation opportunity and strengthen their offerings.