IDC's 2006 Top 10 Telecommunications Predictions
According to IDC's latest research and insights on the top 10 trends in the Asia/Pacific Telecommunications Industry, 2006 will be a year where several game-changing technologies and services will enter the marketplace and redefine the rules of the game.
"Shifting business models and strategies are the key themes in the region for 2006. Changing regulatory environments, coupled with disruptive technologies in the guise of Skype, will cause many industry players to go back to the drawing board," says Sandra Ng, Vice President, Asia/Pacific Communications, Peripherals and Services Research.
The Asia/Pacific (excluding Japan) telecom services market was worth slightly over US$160 billion in 2005 and is projected to exceed US$170 billion in 2006, a growth rate of 7%. Growth will continue to come from VoIP, Broadband, IP Services and 3G Services. Another area of opportunity for Telco service providers will be Managed Services, which is estimated to grow from US$5.7 billion to US$6.5 billion. In addition, the equipment market, estimated to be US$36.5 billion, is expected to grow and will reach close to US$39 billion over the same period.
Drawing from latest research and the opinions of IDC telecommunications and network analysts in the region, the following represents IDC's high-level take on user trends, vendor and service provider strategies, as well as new technologies that will emerge to impact the industry and its players in 2006.
1. Carriers to Re-evaluate their Strategies in Consumer VoIP Market
Although VoIP has been around for some time now, some key developments will change the dynamics of the voice market and how VoIP is offered in 2006. Moves by non-traditional operators into the VoIP space, such as eBay's acquisition of Skype, Microsoft's purchase of Teleo, and the re-sale of Skype services by operators and service providers in the region, are forcing carriers to re-evaluate their consumer VoIP models, strategies and rollout plans.
2. Regulatory Issues Pose Key Challenge for Triple Play
As predicted last year, 2005 saw a significant number of operators looking at Pay TV over broadband, one of the key pillars of triple play (voice, data and video). As these offerings become more mainstream in 2006, operators will have to confront specific challenges before such services can be launched. These include re-evaluating current network architectures and making the necessary changes to provide both adequate bandwidth and high quality of service (QoS). Another key focus point in 2006 will be to resolve the regulatory issue as to whether the telecom agencies or the broadcast agencies should be overseeing the IPTV service.
3. VPLS as a Strong Alternative to Frame Relay and IP-VPN
Although Asia/Pacific saw little or no take-up of VPLS (Virtual Private LAN Services) services in 2005, IDC expects 2006 to be different - especially among mid-sized enterprises. VPLS is expected to be a strong alternative to both frame relay and IP-VPN services. The downside for operators is that VPLS offers customers the opportunity to easily setup and manage their WANs. Operators are seeking new revenue opportunities by managing more and more of the customers' LANs and WANs, and VPLS can be seen as a step back from this approach.
4. Common Licensing Frameworks Appear in More Mature Markets
Convergence is disrupting the marketplace. Fixed-mobile convergence (FMC) is making obsolete the differences between fixed and wireless/mobile regulatory approaches. Regulators will need to initiate changes to adjust to the realities of converged services. Failure to do so may mean that they could lose their grasp on services that they want to keep within regulatory control. This year, IDC expects some countries to propose frameworks to abolish the present fixed and mobile licenses in favor of class licenses that contain similar obligations and rights for both types of services. Specifically, regulators in more mature markets are likely to take the first steps to revise their interconnection regimes, their number pools and rules concerning number portability.
5. Multiplayer Mobile Online Gaming Taking Off in 2006
This market which has been dominated by either simple embedded or downloadable games for the past few years will continue to be so in 2006. In addition, both the developer community and the service providers will be eager to explore multiplayer mobile online gaming models in 2006. IDC believes that mobile gaming can be used as a conduit to attract serious PC-based online gamers who want continued online connectivity for the games they regularly play on their PCs. However, for this to flourish, a ubiquitous platform such as the PC is needed and finding such a platform will be the key challenge ahead.
6. Demand for Antivirus Technologies for Mobile Devices
Growth in the number of mobile viruses is an emerging area of concern driven by a growing install base of 3G-enabled smart phones. IDC estimates that this will contribute close to 7% of all mobile phone shipments by the end of 2006. With more smart phones being used and as organizations continue to deploy enterprise mobility solutions, antivirus clients will soon become a must-have for all smart phones and other converged mobile devices.
7. Telcos Dancing to the Beat of Managed Services
As telcos across the region are faced with the onslaught of disruptive technologies and declining revenue from traditional telecommunications services, the urgency for telcos to rethink their business models cannot be more pressing. For these reasons, telcos across the region need to move up the value chain, and they are doing so by offering managed services, building up alliances, rebranding themselves as ICT service companies, and providing more integrated solutions. Increasingly, some telcos are taking advantage of their status of being the sole provider of managed connectivity to bundle value-added managed services into connectivity contracts with their enterprise customers. Telcos will be the 'disruptive force' in the managed services market, a market long dominated by IT service providers.
8. IP Telephony Second Wave with Enhanced Mobility
In 2005, IDC predicted that IP Telephony would become more mainstream within the enterprise segment. This has become a reality and in 2006, IDC expects the market to evolve as more enterprises begin to understand the productivity gains and benefits that this technology brings and are more willing to explore the greater functionality it enables. 2006 will represent the start of the second wave: the emergence of converged, presence-based business communication applications that will further drive the growth of the enterprise telephony market. Vendors are expected to promote and educate users on enterprise fixed-mobile convergence (FMC) and mobility will become an additional application on top of an enterprise's IP telephony platform moving forward.
9. High Charges and Lack of Innovative Music Content Packages Inhibits Over-the-Air Music Downloads
In tandem with the theme of the mobile phone as a personal lifestyle and entertainment device, mobile music is seen as a potential big bang to both handset vendors and mobile operators. To date, portable music has taken off in a major way thriving on music devices such as MP3 players. As a further extension to such portable features, mobile operators are tapping music as content to be provided as part of their portfolio of mobile data services. With progressive upgrades of network speeds across advanced markets, 3G data speeds coupled with digital rights management technologies are enabling service providers to offer full-track music downloads. However, despite this and the improving selection of mobile-focused devices to be rolled out in 2006, IDC is conservative in expecting over-the-air music downloads to become a major distribution channel for mobile music. The main inhibitors are the high data usage charges and the lack of innovative music content packages such as subscription models.
10. mCommerce Re-start
The mobile wallet foreshadows a possible total change in consumer payment behavior. With various payment modes utilizing technologies such as infrared, SMS, interactive voice response, mobile scan and contact-less chips, the mobile phone is being transformed into a replacement for petty cash, debit and credit cards, with payments charged either through the mobile phone bill or even directly to the bank account. The notion of mCommerce took root several years ago but so far it has been an overly ambitious goal of the industry. However, with an expanding ecosystem, the increasing pool of applications developed and a rising acceptance of such mode of payment, IDC expects the market to begin to take root, beyond the leading adopters of Korea and Japan, at least in the micro-payment segment.
"Shifting business models and strategies are the key themes in the region for 2006. Changing regulatory environments, coupled with disruptive technologies in the guise of Skype, will cause many industry players to go back to the drawing board," says Sandra Ng, Vice President, Asia/Pacific Communications, Peripherals and Services Research.
The Asia/Pacific (excluding Japan) telecom services market was worth slightly over US$160 billion in 2005 and is projected to exceed US$170 billion in 2006, a growth rate of 7%. Growth will continue to come from VoIP, Broadband, IP Services and 3G Services. Another area of opportunity for Telco service providers will be Managed Services, which is estimated to grow from US$5.7 billion to US$6.5 billion. In addition, the equipment market, estimated to be US$36.5 billion, is expected to grow and will reach close to US$39 billion over the same period.
Drawing from latest research and the opinions of IDC telecommunications and network analysts in the region, the following represents IDC's high-level take on user trends, vendor and service provider strategies, as well as new technologies that will emerge to impact the industry and its players in 2006.
1. Carriers to Re-evaluate their Strategies in Consumer VoIP Market
Although VoIP has been around for some time now, some key developments will change the dynamics of the voice market and how VoIP is offered in 2006. Moves by non-traditional operators into the VoIP space, such as eBay's acquisition of Skype, Microsoft's purchase of Teleo, and the re-sale of Skype services by operators and service providers in the region, are forcing carriers to re-evaluate their consumer VoIP models, strategies and rollout plans.
2. Regulatory Issues Pose Key Challenge for Triple Play
As predicted last year, 2005 saw a significant number of operators looking at Pay TV over broadband, one of the key pillars of triple play (voice, data and video). As these offerings become more mainstream in 2006, operators will have to confront specific challenges before such services can be launched. These include re-evaluating current network architectures and making the necessary changes to provide both adequate bandwidth and high quality of service (QoS). Another key focus point in 2006 will be to resolve the regulatory issue as to whether the telecom agencies or the broadcast agencies should be overseeing the IPTV service.
3. VPLS as a Strong Alternative to Frame Relay and IP-VPN
Although Asia/Pacific saw little or no take-up of VPLS (Virtual Private LAN Services) services in 2005, IDC expects 2006 to be different - especially among mid-sized enterprises. VPLS is expected to be a strong alternative to both frame relay and IP-VPN services. The downside for operators is that VPLS offers customers the opportunity to easily setup and manage their WANs. Operators are seeking new revenue opportunities by managing more and more of the customers' LANs and WANs, and VPLS can be seen as a step back from this approach.
4. Common Licensing Frameworks Appear in More Mature Markets
Convergence is disrupting the marketplace. Fixed-mobile convergence (FMC) is making obsolete the differences between fixed and wireless/mobile regulatory approaches. Regulators will need to initiate changes to adjust to the realities of converged services. Failure to do so may mean that they could lose their grasp on services that they want to keep within regulatory control. This year, IDC expects some countries to propose frameworks to abolish the present fixed and mobile licenses in favor of class licenses that contain similar obligations and rights for both types of services. Specifically, regulators in more mature markets are likely to take the first steps to revise their interconnection regimes, their number pools and rules concerning number portability.
5. Multiplayer Mobile Online Gaming Taking Off in 2006
This market which has been dominated by either simple embedded or downloadable games for the past few years will continue to be so in 2006. In addition, both the developer community and the service providers will be eager to explore multiplayer mobile online gaming models in 2006. IDC believes that mobile gaming can be used as a conduit to attract serious PC-based online gamers who want continued online connectivity for the games they regularly play on their PCs. However, for this to flourish, a ubiquitous platform such as the PC is needed and finding such a platform will be the key challenge ahead.
6. Demand for Antivirus Technologies for Mobile Devices
Growth in the number of mobile viruses is an emerging area of concern driven by a growing install base of 3G-enabled smart phones. IDC estimates that this will contribute close to 7% of all mobile phone shipments by the end of 2006. With more smart phones being used and as organizations continue to deploy enterprise mobility solutions, antivirus clients will soon become a must-have for all smart phones and other converged mobile devices.
7. Telcos Dancing to the Beat of Managed Services
As telcos across the region are faced with the onslaught of disruptive technologies and declining revenue from traditional telecommunications services, the urgency for telcos to rethink their business models cannot be more pressing. For these reasons, telcos across the region need to move up the value chain, and they are doing so by offering managed services, building up alliances, rebranding themselves as ICT service companies, and providing more integrated solutions. Increasingly, some telcos are taking advantage of their status of being the sole provider of managed connectivity to bundle value-added managed services into connectivity contracts with their enterprise customers. Telcos will be the 'disruptive force' in the managed services market, a market long dominated by IT service providers.
8. IP Telephony Second Wave with Enhanced Mobility
In 2005, IDC predicted that IP Telephony would become more mainstream within the enterprise segment. This has become a reality and in 2006, IDC expects the market to evolve as more enterprises begin to understand the productivity gains and benefits that this technology brings and are more willing to explore the greater functionality it enables. 2006 will represent the start of the second wave: the emergence of converged, presence-based business communication applications that will further drive the growth of the enterprise telephony market. Vendors are expected to promote and educate users on enterprise fixed-mobile convergence (FMC) and mobility will become an additional application on top of an enterprise's IP telephony platform moving forward.
9. High Charges and Lack of Innovative Music Content Packages Inhibits Over-the-Air Music Downloads
In tandem with the theme of the mobile phone as a personal lifestyle and entertainment device, mobile music is seen as a potential big bang to both handset vendors and mobile operators. To date, portable music has taken off in a major way thriving on music devices such as MP3 players. As a further extension to such portable features, mobile operators are tapping music as content to be provided as part of their portfolio of mobile data services. With progressive upgrades of network speeds across advanced markets, 3G data speeds coupled with digital rights management technologies are enabling service providers to offer full-track music downloads. However, despite this and the improving selection of mobile-focused devices to be rolled out in 2006, IDC is conservative in expecting over-the-air music downloads to become a major distribution channel for mobile music. The main inhibitors are the high data usage charges and the lack of innovative music content packages such as subscription models.
10. mCommerce Re-start
The mobile wallet foreshadows a possible total change in consumer payment behavior. With various payment modes utilizing technologies such as infrared, SMS, interactive voice response, mobile scan and contact-less chips, the mobile phone is being transformed into a replacement for petty cash, debit and credit cards, with payments charged either through the mobile phone bill or even directly to the bank account. The notion of mCommerce took root several years ago but so far it has been an overly ambitious goal of the industry. However, with an expanding ecosystem, the increasing pool of applications developed and a rising acceptance of such mode of payment, IDC expects the market to begin to take root, beyond the leading adopters of Korea and Japan, at least in the micro-payment segment.
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