x Abu Dhabi, UAETuesday 23 January 2018

Insatiable appetite for video and data replacing need to talk

The world is becoming a much smaller place – and increasingly the connections do not require wires.

Wireless data spending last year topped voice spending in the US for the first time, driven by features such as Apple's video calling. Bradley Bower / Bloomberg
Wireless data spending last year topped voice spending in the US for the first time, driven by features such as Apple's video calling. Bradley Bower / Bloomberg

New Jersey // Grant Seiffert, the president of the US Telecommunications Industry Association (TIA), believes he can accurately predict the future of the country's telecoms sector in four words: "Everything is going mobile".

Mr Seiffert says this new trend is being driven by the fact that people are relying on their smartphones to utilise data-driven applications, such as SMS, watching videos and online browsing and are spending less time actually talking on the devices.

"We continue to hear more about the smartphone wars and the trailing story about investing in infrastructure and the innovation of the network," Mr Seiffert says.

In fact, for the first time in the history of mobile telecoms, wireless data spending in the US has topped wireless voice spending. Last year, an estimated US$94.8 billion was spent on mobile data services, compared with $92.4bn spent on mobile voice services, according to the TIA.

"This trend will not only continue but will accelerate in the years ahead," says Mr Seiffert.

"Our insatiable appetite for video and data will continue to drive wireline and wireless infrastructure in the telecoms sector."

Mobile data spending is forecast to hit $118.6bn by the end of this year, compared with $86.4bn for voice, according to the TIA. By 2016, those figures present an even larger divide at $184bn for mobile data spending versus $70.1bn for voice.

Meanwhile, US wireless penetration jumped to more than 100 per cent last year.

US growth is being driven by accelerated demand for specialised services, including cloud computing, machine to machine (M2M) and cybersecurity. M2M is expected to lead the way, with a combined average growth rate of 57.2 per cent over the next four years, compared with cloud services (combined average growth rate of 16.3 per cent) and cybersecurity (combined average growth rate of 19.2 per cent), the TIA says.

Overall, industry growth in the United States will outpace international growth, Mr Seiffert says.

According to the TIA, the telecoms industry experienced 7 per cent worldwide growth last year, down three percentage points from 2011.

Growth accelerated in the US, from 5.9 per cent in 2011 to 6.2 per cent last year.

Meanwhile, international markets experienced slowing growth - 11.3 per cent in 2011 down to 7.2 per cent last year.

While this trend is expected to continue, with the overall telecoms industry growth rate in the US surpassing international growth next year, it is worth noting there has been significant activity in overseas markets so far this year. For instance, the Japanese company SoftBank won approval from the US federal communications commission (FCC) this month to acquire Sprint Nextel for $21.6bn.

The deal will position the new entity to compete with telecoms heavyweights such as AT&T and Verizon.

The decision allows Sprint to purchase the remaining $3.7bn in shares of Clearwire, which owns a large amount of wireless spectrum that the new Sprint will need to expand on and improve.

"After thorough review, the [FCC] has found that the proposed SoftBank-Sprint-Clearwire transactions would serve the public interest," said the acting FCC chairwoman Mignon Clyburn.

"The increased investment in Sprint's and Clearwire's networks is likely to accelerate deployment of mobile broadband services and enhance competition in the mobile marketplace, promoting customer choice, innovation and lower prices."

Elsewhere, reports have recently surfaced indicating the US telecoms giant Verizon may be gearing up to enter the Canadian market.

If such speculation is on target, one of the more significant developments caused by this move may be a shift towards a single North American communications market.

Today, the US and Canada share much of the same communications infrastructure, including the same calling codes, similar spectrum policies and easy access to broadband signals along the border.

However, regulation has divided the two markets for decades. This involves foreign ownership restrictions, Canadian content requirements and simultaneous substitution policies.

A move to unite the markets could potentially reduce wireless pricing and could eliminate roaming fees for US and Canadian customers.

Mr Seiffert believes recent activity could lead the way for more overseas developments in the telecoms sector.

Meanwhile, across the pond, British Telecom, known as the AT&T of the United Kingdom, announced in May that it had "chosen to make North America one of our focal points in our global strategy", says Bas Burger, the president of the US and Canada division of BT.

"From the US perspective, there is a lot of interest in international emerging markets like South America, Latin America, China, India and the Middle East," Mr Seiffert says.

"The world is becoming smaller and smaller every day and depending on some of these new trade agreements, rapid change is going to happen faster than ever experienced in the past.

"Those changes will reach all corners of the world," he adds.

"It is all coming down to this: everyone's identity is held in the palm of their hand through a smartphone."