With a slowdown in telecom operators' revenues from 4G services, the establishment of 5G communications standards, and the commercialization of LPWAN (Low- Power Wide-Area Network), new applications and business models have emerged to accelerate the convergence of the telecom and ICT industries. "Looking ahead to 2017, we have put forward nine significant trends that are likely to shape the worldwide communications industry," said Welber Chang, the Director of Taipei-based MIC (Market Intelligence & Consulting Institute), at a session of the 2016 MIC Forum in Taiwan on December 6.
Trend #1: mmWave and Standard Setting to Accelerate 5G Development
The United States has approved the world's first rules for 5G operations in the millimeter wave (mmW) to make 14GHz of contiguous unlicensed spectrum available. The use of high-frequency spectrums for telecommunications is expected to have a ripple effect on telecom operators, equipment vendors, as well as Internet service providers and startups.
Meanwhile, 3GPP (The 3rd Generation Partnership Project) is set to complete Release 14, which will focus on LTE V2x, by the second quarter of 2017. This will encourage major vendors to speed up their deployment in related industries. Release 15 is expected to be unveiled in mid-2018 and will become 3GPP's first release of 5G standards. By 2025, the world is projected to have around 500 million 5G-ready users.
Trend #2: Business Models for Connected Cars are Emerging
Three business models are expected to create new values and propel the development of the global connected car industry.
The first is the usage-based business model, which is shifting consumers from "buying products" to "paying for services." Examples are found in the ride-sharing services launched by car makers, such as Tesla and Ford, Gogoro's electric scooter-sharing program, and connected car insurance services.
The second one is responsive or predictive services based on big data and computing algorithms, such as parking, responsive taxi rates, and real-time traffic control. As for predictive services, aside from vehicle maintenance and traffic flow predictions, cab-hailing, parking, repair, and traffic control services will likely to become smarter..
Last, the development of digital life will create more business opportunities by providing drivers and passengers with on-the-go connectivity. To further explore new business models, vendors need to collect more comprehensive consumer behavior data from emerging services include AT&T's in-car infotainment services and Amazon Echo Dot Car.
Trend #3: Telecom Operators' M&A Spree Continues as 4G User Growth Slowing Down
Though 4G users' global share is estimated to reach around 27% in 2017, the global 4G user base is going to grow slower over time. Compared to 2015, the global 4G penetration rate is estimated to increase by 7.6 percentage points in 2016, and by 4.6 percentage points in 2017.
While the 4G mobile market approaches saturation in most of developed countries, the developing countries, such as Brazil and Russia, are facing economic downturns. Around the world, telecom operators' ARPU (Average Revenue per User) has been stagnant or slipping in recent years. While the overall 4G user base manages to increase for a short period of time, the industry's revenues fail to grow further, due in large part to the lack of eye-catching applications and the stiffer price competition among operators.
Seeking to make a breakthrough, telecom operators have stretched out to make investments in various fields to deepen and broaden their operations, including in audiovisual content and mobile advertisements. They provide rich multimedia content across different devices to attract more users, with an aim to facilitate mobile data flows. After expanding the user base, they expect to conduct big data analysis on services like mobile ads so as to strengthen their competitiveness for the era beyond 4G.
Trend #4: Big Data Analytics Has Applied to OTT Services
Addressable ads, AI (Artificial Intelligence)-supported virtual assistance, data convergence and recommended platforms are three major business models that will spur the living room economy. Thanks to addressable ads derived from OTT (Over-the-Top) TV services, big data analytics targeting specific users for precision marketing are made possible, expected to create more value for TV commercials. Facebook has begun the very precise ad targeting with users across devices.
Meanwhile, voice-activated virtual assistants, which are enabled by AI technologies and leveraging the massive amount of data on users' searching behaviors and computing power, will create smarter services, such as speech-enabled search for video sources or online purchases. Examples include Apple TV with Siri, Amazon Fire TV with Alexa, and Xiaomi's application of Google Assistant.
Based on consumer data, major vendors such as Apple and Amazon have developed content aggregators and recommendation platforms, aiming to provide users with content from various sources in single application software. The app can make recommendations to consumers based on their preferences to improve search efficiency.
Trend #5: Commercialization of NB-IoT Technologies
In June 2016, 3GPP completed the standardization of NB-IoT (Narrow Band Internet of Things), implementing the features of wide-area coverage, low power consumption, large-scale connectivity, and low cost in Release 13 to propel the development of cellular IoT. To cope with a wide diversity of applications in the future, 3GPP plans to implement more technologies for NB-IoT in the upcoming Release 14 in 2017, adding new functions such as positioning, mobility, broadcasting, and advanced power saving.
With the completion of standards, global telecom operators are anticipated to launch commercial services in 2017. Public utilities, smart parking, and smart water meter will be the major applications in the initial stage. More applications, for businesses or consumers, are down the road after the completion of Release 14, including logistics, transportation, kid or pet tracking services, to bring tremendous business opportunities from IoT services for telecom operators..
Trend #6: LPWAN for IoT Services
According to GSMA's industry paper, the world is projected to have over two billion connected devices via LPWAN by 2019. At present, three business models of LPWAN services include: (1) the LPWAN operator deploys the network and acts as the network operator (e.g. Sigfox in France); (2) the LPWAN operator rents the network from a telecom operator (e.g. FHNet and Asia Pacific Telecom in Taiwan); (3) the telecom operator deploys the network and provides proprietary LPWAN services (e.g. SKT in Korea and Vodafone).
Aside from telecom operators, cable TV operators, satellite service operators and energy companies are also cutting into the realm of IoT services by connecting their existing network facilities with LPWAN. US cable TV operator Comcast announces to provide LoRa commercial services within one year; Altice, a France-based telecom and media group, will integrate Sigfox's proprietary IoT network within its operations; TEPCO (Tokyo Electric Power Company) combines Wi SUN with proprietary networks to provide smart meter services. They are expected to play a greater role in LPWAN IoT services.
Trend #7: AI Virtual Assistants as the New Portal of IoT Services
Over the years, Apple, Google, Microsoft, and Amazon have actively involved into the development of the voice-activated virtual assistants as they have become the next IoT service portal on the phone. The advancement in speech recognition technologies has improved machine's understanding of natural language, not only the words but also the intents in context to enable questions and answers.
For consumers, whether the services can understand their needs will be important selection criteria when choosing a service ecosystem. It is anticipated that major players in the industries will start to vertically integrate their own services, such as search engine, calendar, and email, to build personalized databases. The virtual assistant will know the consumers better than they do.
To expand their service scale, major vendors have opened API (Application Programming Interface) for third-party services and the support of multiple languages, regions, and different devices. How smart is your service will be an important differentiator and the analysis of the semantics and application scenarios, integration of multiple applications, and the provision of optimized services will be future development directions. In the future, third-party applications are likely to translate into third-party services, with a unified interface to call for services across different platforms.
Trend #8: Smart Wristbands to Develop towards More Sophisticated Designs
MIC expects that Apple, Fitbit, and Garmin will be the major vendors to uphold Taiwanese contract manufacturers' shipments of smart wearables in 2017. Smart watches, together with wristbands with a screen and sophisticated industrial design, are anticipated to be the mainstream products in the future. For instance, Apple Watch launched in the second half of 2016 has made from various materials, including stainless steel, aluminum alloy, and ceramic. Also, it has cooperated with Nike and Hermes to roll out sporty and fashionable watch bands, respectively. Meanwhile, aside from Blaze and Alta, Fitbit also launched the smart wristband, Charge 2, which is equipped with a larger screen compared to its predecessor. The contract manufacturing orders of smart watches and wristband screens from Xiaomi and Fossil also merit further observation.
Trend #9: Taiwanese Telecom Operators' Revenues from 4G Services to Slow Down
After the launch of 4G services in Taiwan, telecom operators had enjoyed higher ARPU for a while, thanks to a surge in mobile Internet data usage. As a result, telecom operators used to have higher revenues from 4G services rather than from 3G services.
However, with a wide availability of mobile Internet, free instant communications software like Line, has reduced the need for traditional voice calls. In addition, subscribers with dual SIM cards are decreasing which has led to a shrinking mobile phone user base in Taiwan. It is expected that the mobile phone penetration rate in Taiwan will slip from 128% in 2014 to 123% by the end of this year. Meanwhile, 4G ARPU has been on the decline for five consecutive quarters since the second quarter of 2015. In the fourth quarter of 2016, 4G ARPU is estimated to have fallen by 20% year on year. With a flat growth in overall mobile phone user base, the competition between telecom operators is anticipated to be intense in 2017, leading to a steeper decline in ARPU. For these reasons, Taiwanese telecom operators' revenue growth is seen slowing in 2016 and 2017.
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Market Intelligence & Consulting Institute (MIC), based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. http://mic.iii.org.tw/english