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Global Telecoms Analyses and Forecasts

Paul Budde’s analyses of the telecommunications industry and market are cited in the leading business press around the world. His comments and views are sought by government authorities, large corporate organisations and telecoms users, as well as by telcos, ISPs, vendors and their financial and management advisors.

The analyses and business forecasts cover:

  • Telecoms developments - Strategic Overview
  • Predictions 2005-2015
  • Forecasting (qualitative) 2006
  • The Future Of Voice (Fixed, Mobile, VOIP)
  • NGN
  • The FttH market in 2006
  • Mobile Content - Industry and Market Analyses
  • WiMAX
  • Broadcasting - Interactive TV - Overview and Analysis
  • Transitions to a Digital Industry
  • Digital Media - Analyses, Issues, Developments

The year 2007 will see a further increase in the convergence of telecoms, media and IT, which started to become more visible in 2006. With the telecoms industry rapidly changing from being telephone-focused to application-focused, the convergence that Paul Budde has been talking about for more than a decade is slowly becoming a reality. The first results have been witnessed with the arrival of Digital Media, led by the Internet.

People are quickly adopting Digital Media because it offers new multimedia formats that enhance the Internet users’ experience. Everybody is talking about Google, Yahoo, YouTube, eBay, Amazon and so on. Google Earth, MySpace, Flickr and many more services in which millions of people have become involved with were unheard of as little as five years ago. This renewed interest in the Internet is stimulating other industry sectors to change their business models in order to align themselves with the developing Internet economy.

Digital Media also brings with it a second trend that lies in the advancement of digitalised television/entertainment. This at first will lead to an increase in the number of channels and new interactive formats and from 2007 onwards traditional broadcasting will increasingly become a subset of broadband.

Digital Media however can only be fully developed once there are wide spread high-speed broadband networks available. This demand for broadband will lead to the further development of fibre networks, as the current copper-based networks simply cannot handle the increased capacities required.

Over the next 12 to 18 months, we will see a continuation of large scale fibre announcements from the various incumbent telcos around the globe. Key leaders include the telcos in Japan, Korea, USA, Netherlands, Germany, Switzerland, Belgium, France and the Scandinavian countries.

Fixed-line voice will probably be with us forever, but it will also become a subset of broadband, instead of the other way around. Despite retaining its role as cash cows for incumbent operators; fixed and mobile voice services are progressively being overtaken by broadband. In the western world, wireless broadband offers new opportunities as a competitor for DSL in some niche markets.

2007 will see a further increase in the emergence of triple play business models and while VoIP will be a key element in triple play packages - it is broadband video (IPTV) that will make the products viable.

VoIP is already becoming more prominent in corporate and government markets, because of the Next Generation/broadband corporate networks. In the residential market it is still largely a ‘hobby’ product linked to the Internet, and the quality remains questionable. Large scale implementation will occur however, once wide spread broadband networks are in place, and it is incorporated into the triple play business models. Wireless VoIP could also challenge 3G towards the end of the decade. The development of VoIP will further reduce the telcos’ revenues and add additional pressure on them to adopt more of a wholesaling rather than a retailing business model.

The operational separation of BT is reverberating throughout the global industry, with several European telcos already ‘voluntarily’ moving in the direction of transparent and equivalent wholesale services. The convergence of telecoms and broadcasting infrastructures will produce some major battles in the telco/media space in the years to come.

This report provides a high-level analysis and overview of the various developments occuring in the telecoms industry around the world. Topics covered include convergence and digital media, VoIP, 3G and mobile data, fixed wireless and WiMAX, interactive TV and broadband. The report includes Paul Budde’s forecasts for the industry in five and ten year’s time. Also described is Paul’s approach to forecasting; where the uncertainties of short-term forecasting due to fluctuations in markets and economies are met by the use of scenarios, or ‘what-ifs’. Included is analysis of revenue trends by market segment, the factors that will influence them, and the extent of that influence.

Key Highlights
Revenue from broadband, both fixed and wireless, will steadily increase as the market moves towards 2015, whilst revenues from mobile voice and revenue from narrowband Internet will decline. Key developments for 2007 and beyond lie with social networking and broadband e-health, namely in home care services for our aging populations. For various reasons, fixed-line operators have not introduced enough significant new products, services or cost-saving technologies in the same way that mobile operators have, and it is now that they need to take a holistic view of the market. In most countries, the number of mobile subscriptions has now well and truly overtaken the number of fixed lines. However, in some countries, traffic over the mobile networks has remained relative low due to the high call charges. Slowly but steadily the mobile network is taking traffic away from the fixed network. By now it has become clear that 3G is simply going to cannibalise 2G. The mobile trend in this market is very much about substitution, and that is where the new battleground is.

3G’s contribution to the mobile industry will be to facilitate effective and efficient network management. This will allow prices to come down, and mobile data traffic might increase to approx 15% of all revenue. The role for WiMAX in the overall personal wireless broadband market will be limited; however WiMAX will find its niche in certain markets. There will be room for the technology to complement fixed broadband services, where the coverage is poor or non-existent.

The major missing element in our communication mix to date, has been video; and yet this is perhaps the most important form of communication. Broadband now enables us to add this element and it will become the number one killer application of the future.

It is estimated that, during this decade, demand for bandwidth will grow by 1,000% and more. Continued growth in this market, stimulated by triple play models, will see the development of Very High Data Rate Digital Subscriber Line (VDSL) and eventually Fibre-to-the-Home (FTTH) networks, a process that, in the western world, will be largely completed by 2015.

A range of new Internet devices that can be connected to the TV will be launched over the next few years.

There will be more than 135 million residential and virtual office VoIP subscribers worldwide by 2009.

1.1 A rapidly changing global telecoms market
1.1.1 Electronic consumption becomes an economic driver
1.1.2 Incumbents clash with their governments
1.1.3 Pro-active telcos can stay ahead of regulations
1.1.4 Governments will continue to lead telecoms policies
1.1.5 Lack of policies = lack of innovation
1.1.6 Facilities based competition is the way to go
1.1.7 Infrastructure duopolies look like the best option
1.1.8 Unbundling does lead to infrastructure roll out
1.1.9 Telcos that fail to change will go under
1.1.10 Developing world still a long way to go
1.1.11 Key trends and developments
1.2 Infrastructure developments
1.2.1 Fibre-to-the-home (FttH) infrastructure
1.2.2 IP-based developments
1.3 Rapidly changing voice market
1.3.1 Milking the voice market
1.3.2 Mobile merging with wireless
1.3.3 Fixed-Mobile Conversion (FMC)
1.3.4 Financial outlook for the telco industry
1.4 Broadband market
1.4.1 Broadband: a technology concept
1.4.2 Wireless broadband
1.4.3 Broadband over Powerlines (BPL)
1.4.4 Developments will be non-linear
1.5 Broadband-based video communications
1.5.1 Tele-presence
1.5.2 Tribes, clans and communities
1.5.3 Broadcasting over IP (BoIP)
1.5.4 IPTV
1.5.5 Hollywood coming to the party
1.5.6 The digital divide
1.6 Broadcasting-based developments
1.6.1 Traditional broadcasting
1.6.2 Digital TV
1.6.3 Home media centres
1.6.4 DOCSIS 3
1.7 Mobility markets
1.7.1 Mobile telecoms
1.7.2 Mobile Virtual Network Operators (MVNOs)
1.7.3 Wireless mobility
1.7.4 Companies rolling out 802.16e
1.7.5 HSDPA and IMS
1.7.6 Fixed-mobile convergence

2.1 Paul Budde’s approach to forecasting
2.1.1 The use of scenarios
2.2 Long-term Telecoms revenue trends - 2010 - 2015
2.2.1 By markets
2.2.2 By products
2.2.3 By industry
2.3 Mobile
2.4 Broadband
2.5 Wireless VS fixed broadband
2.6 Regulation - structural changes in the industry
2.7 So where to go from here?

3.1 The market in ten years time
3.2 High-level developments
3.3 Short-term developments
3.4 Medium-term developments
3.4.1 Key trends
3.5 Internet economy
3.5.1 One million companies already depend on the Internet economy Internet economy is looking for bypasses
3.6 Industry structures
3.6.1 Industry Restructuring
3.7 Three distinct segments
3.7.1 Infrastructure
3.7.2 Content
3.7.3 Appliances
3.7.4 Get a 360 degree vision
3.7.5 Separation and integration
3.7.6 The roles of the players
3.7.7 Internet companies might take over the telcos
3.7.8 Media restructuring
3.7.9 Next generation network
3.7.10 To VoIP or not to VoIP?
3.8 New business models
3.8.1 After broadband, triple play will be the next battleground
3.8.2 VoIP the key in triple play
3.8.3 Wholesale opportunities
3.8.4 Telcos learning at great cost
3.9 My prediction: a golden future ahead of us
3.10 China will dominate the industry within 5 years

4.1 Telephone companies - experts in negative marketing
4.1.1 Don’t use the phone
4.1.2 Don’t use the mobile phone
4.1.3 Don’t use the fixed phone
4.1.4 The IP solution
4.2 The future of voice
4.2.1 Market under pressure
4.2.2 Rearguard skirmishes in the voice market
4.2.3 A neglected market
4.2.4 Developments Ringless messages and voicecasts
4.2.5 Fixed-line SMS Testing underway Testing results Fixed-line SMS getting fixed ?! FSMS applications Overview of projects FMMS revenues
4.2.6 Click-to-Talk
4.3 The future of mobile
4.3.1 Voice still the killer app
4.3.2 But data is the future
4.3.3 Rebalancing of the industry
4.3.4 Devices-driven developments
4.3.5 Only option in developing countries
4.3.6 Multimodal services
4.4 VOIP
4.5 Analysis of vendor merge - the future is IT, not telco
4.6 Pricing strategies
4.6.1 Telecoms price developments
4.6.2 From bundling to triple play
4.6.3 New ways to measure ARPUs
4.7 Conclusion

5. NGN
5.1 Introduction
5.1.1 Developing from VPNs
5.1.2 Advantages and disadvantages
5.1.3 Simple Network Management Protocol (SNMP)
5.1.4 Advantages of NGNs over leased lines
5.1.5 Advantages of NGNs over traditional remote access
5.1.6 Types of NGN
5.1.7 NGN solutions
5.2 Telcos and the nextgen revolution - analysis
5.2.1 Changing telecoms into IT
5.2.2 Nextgen Telcos The new companies
5.2.3 Traditional telcos Sticking to outdated models
5.2.4 Ignoring next-gen structures
5.2.5 Choice: protecting the old or embracing the new
5.2.6 Battle between vested interests and nextgen developments
5.2.7 BT - an NGN leader
5.3 NGN in action
5.3.1 Drivers of NGNs
5.3.2 Key application is telepresence
5.3.3 The shaky position of 3G
5.3.4 New business models are emerging
5.3.5 Voice remains a killer ap
5.3.6 From vertical to horizontal industry structures
5.4 Internet economy requires NGNs - now
5.4.1 Lacklustre beginning by telcos
5.4.2 Businesses start looking at alternatives
5.4.3 NGN requirements
5.5 Nextgen investment strategies
5.5.1 Long term investment required
5.5.2 Competition - not NGNs - is driving prices down
5.5.3 Global telecommunications capital expenditure
5.5.4 Regional telecommunications capital expenditure
5.5.5 Are there any broadband write-offs?
5.5.6 Lose-lose-lose strategy
5.5.7 Who is paying for the decrease in values?
5.6 Broadband VOIP
5.7 Growth of IP-VPN (NGNs)

6.1 Statistics and forecasts
6.1.1 IP market statistics and forecasts IP forecasts for 2006 and beyond IP statistics for 2005
6.1.2 VoIP and the business sector VoIP deployment trends in business VoIP revenue forecasts for business
6.1.3 VoIP and consumer awareness
6.1.4 IP Centrex to be popular with SME’s
6.2 Analysis
6.2.1 The continuing importance of voice
6.2.2 Give VoIP a chance VoIP isn’t a stand-alone product IP is the key not VoIP Breaking the incumbents’ stranglehold Competition through ULL The need for facilities-based competition
6.2.3 VoIP service quality VoIP quality deteriorating, who cares? I do!
6.2.4 VoIP over hyped VoIP, VoIP and more VoIP No future for stand-alone VoIP Integrated applications Packaged services Reluctant SME market Internet-based VoIP VoIP takes on the mobile market IPdrum
6.2.5 Industry issues To VoIP or not to VoIP Wholesale VOIP and other New Media services
6.2.6 Tips for successful video over IP
6.2.7 Don’t over regulate
6.2.8 VOIP needs to be underpinned by NGNS
6.2.9 Corporate markets VOIP maturing in corporate markets Corporate market demands that incumbents deliver VoIP Corporate VPN
6.2.10 VoIP- a case of evolution, rather than revolution What are the real cost advantages? No leadership from telcos VoIP in triple play models Click to call Internet connection to talk to each other for free - Skype
6.2.11 Wireless VoIP Tromboning: bypassing expensive call charges WiMAX - the ultimate mobile bypass

7.1 FttH analysis - mid 2006
7.1.1 DSL is building the business case for FttH
7.1.2 Growth patterns and predictions
7.1.3 No business case for large-scale deployments
7.1.4 Business drivers
7.1.5 No e-government without fibre
7.1.6 Fibre-to-the-Node and VDSL
7.2 Where is the action in FttH?
7.2.1 Who are the leaders and why?
7.2.2 Initial drivers: utilities and local councils
7.2.3 Business market
7.2.4 Infrastructure upgrades
7.2.5 Corporate optical fibre
7.2.6 New housing developments
7.3 Different FttH business models
7.3.1 National economy drivers
7.3.2 Social drivers
7.3.3 Entertainment drivers
7.3.4 ‘Go with the flow’ strategies
7.3.5 New housing developments
7.4 Telcos still reluctant
7.4.1 Business opportunities for FttH niche telcos
7.4.2 Alternative infrastructure developments
7.5 Structural separation a must for FTTH
7.6 The costs of FttH
7.6.1 AT&T project estimates

8. 3G
8.1 Sorting out the Telstra NEX G confusion
8.2 The future of 3G
8.3 The time for 3G has arrived, but no cheering from the operators
8.3.1 Where is the business case?
8.3.2 Network costs will be driving 3G?
8.3.3 New business scenarios
8.3.4 Competition from disruptive technologies
8.4 The hard realities of the mobile market
8.4.1 The networks simply would not be able to cope
8.4.2 As usual, over-promising and under-delivering
8.5 Slow start so far
8.6 Will 3G survive as a separate business model?
8.6.1 3G cannibalising 2G
8.6.2 2G is fighting back
8.6.3 Data moving to wireless broadband
8.6.4 3G for voice and enhanced voice applications
8.6.5 Mobile operators absorbed by voice competition
8.6.6 Mobile, wireless convergence
8.6.7 Fixed operators have the upper hand
8.7 From 3G to 4G mobile
8.7.1 Service evolution
8.7.2 How to move forward?
8.7.3 What went wrong with mobile data?
8.7.4 Demand is there, supply is failing
8.7.5 Super 3G versus WiMAX
8.7.6 3G Long-Term Evolution (LTE)
8.8 4G will be the end result

9.1 A market still kept hostage - analysis 2006
9.1.1 Not much progress in almost a decade
9.1.2 Still no open networks
9.1.3 Untapped potential
9.1.4 We are a telecoms industry
9.1.5 3G is still a voice-driven development
9.1.6 What do you mean - customer service?
9.1.7 All we need is competition
9.2 New marketing and distribution models
9.2.1 Content providers giving up hope
9.2.2 Manufacturers supporting bypass solutions
9.2.3 The race for content
9.2.4 Branding with partners
9.2.5 The future: value-chain-based scenarios
9.2.6 IPX takes on the walled mobile gardens
9.3 Digital Rights Management (DRM)
9.3.1 The Open Mobile Alliance (OMA)

10.1 Fixed wireless analyses - 2006
10.1.1 The promises of fixed wireless Bypassing the fixed local loop Clear benefits
10.1.2 The problems of fixed wireless Dozens of competing technologies Questionable qualities The economics of wireless
10.1.3 Opportunities of fixed wireless Slow moving incumbents Room for a 20% market share
10.1.4 Fixed wireless broadband developments - Mid 2006
10.1.5 Repositioning The wireless battle with DSL has been lost Limited roll-outs WiMAX - Losing the battle in mobile industry
10.1.6 Spectrum developments New technologies will lead a push for spectrum to be opened up
10.1.7 WiMAX and BPL - commercial viability? The wireless and BPL alternative? Delaying WiMAX standards does not not help DSL always depended on incumbents WiFi jungle Public hotspots for consumers a waste of money
10.2 Mobility analyses - Moving into 2007
10.2.1 Personal wireless broadband Business models more important than technologies
10.2.2 WiMAX is losing the battle
10.2.3 The new and the old WiMAX
10.2.4 From 3G to 4G mobile Service evolution How to move forward? What went wrong with mobile data? Demand is there, supply is failing
10.2.5 Super 3G versus WiMAX Wireless broadband next year or perhaps the year after, or…
10.2.6 Long-term evolution path to 4G

11.1 Introduction
11.1.1 Definitions
11.1.2 Interactive TV to generate billions
11.1.3 First interactions with TV
11.1.4 Personal TV (choose and control)
11.1.5 Broadband or IPTV
11.2 Market analysis 2006
11.2.1 iTV - 35 years on
11.2.2 Snail pace progress
11.2.3 Digital TV (DTV) 2nd Internet platform
11.2.4 Shock to the ‘couch potato’ syndrome
11.2.5 Innovation required
11.3 i-Advertising - analysis
11.3.1 Individually addressed advertisements
11.3.2 And again…permission-based models
11.3.3 Revenue opportunities
11.4 Statistics and forecasts
11.4.1 Forecasts beyond 2006
11.4.2 Reports for USA from 2005
11.5 Business modelling
11.5.1 Real-time or non-real-time
11.5.2 Permission-based through SMS
11.5.3 Subscription or itinerary?
11.5.4 Technology issues

12.1 Introduction
12.2 The most important telecoms transition issues appearing from our models and scenarios
12.2.1 Horizontal value chains
12.2.2 The value chains are no longer in one direction: from supplier to consumer
12.2.3 Bandwidth demand will continue to go up
12.2.4 ‘Services’ are not a separate layer but are part of every layer
12.2.5 Because of more intelligence in devices the ‘place’ of services is shifting
12.2.6 Another big sudden jump-transition, in fact two at the same time is to G4 mobile &FttH
12.3 New kinds of innovations
12.4 What may be next after WMesh+fiberMAN
12.5 Postsciptum
12.6 References

13.1 The rise and rise of the Internet economy
13.2 The future is digital people, not digital media
13.3 The Internet
13.3.1 The killer app
13.3.2 High-speed, always-on Internet
13.4 It’s worthwhile fighting for open networks
13.4.1 Structural changes to the industry are overdue
13.4.2 The farce of infrastructure-based competition
13.4.3 We should stand firm on open networks
13.4.4 The telcos failed for 30 years - Internet succeeded in 10
13.4.5 Open networks engine for innovation and growth
13.4.6 Large economic benefits
13.4.7 BT leading the way
13.4.8 Safe harbours undermine the Internet economy
13.4.9 Bill of Internet Rights
13.4.10 Telcos hampering growth of Internet economy
13.4.11 IP is upsetting the telcos
13.4.12 Dutch cable operators obliged to open networks
13.4.13 Global cities declare open networks
13.4.14 INEC Declaration on Open Networks
13.5 Digital content
13.5.1 Introduction
13.5.2 Watch out for the Internet media companies
13.5.3 Internet media companies -vs- telcos
13.6 Other interesting developments
13.6.1 Skype SMS
13.6.2 Videoconferencing in telepresence
13.6.3 Bittorrent in digital media devices
13.7 The disruptive effects of digital media


Table 1 - Predicted global m-commerce revenues - 2003 - 2005; 2009 - 2010
Table 2 - Telecommunications services revenue share by market - 2005; 2010; 2015
Table 3 - Telecommunications services revenue share by product - 2005; 2010; 2015
Table 4 - Telecommunications services revenue share by industry group - 2005; 2010; 2015
Table 5 - Mobile data revenue as % of total mobile revenue forecast - 2005 - 2015
Table 6 - Mobile penetration in developed and developing markets - 2005 - 2015
Table 7 - Forecasting costs broadband over a 10-year period
Table 8 - Residential Broadband (BB) - growth predictions - next ten years
Table 9 - Wireless as % of fixed broadband forecast - 2005; 2010; 2015
Table 10 - Global telecoms investments - 2005; 2010; 2015
Table 11 - Capital expenditure by region - 2005, 2006
Table 12 - Regional residential and SOHO VoIP subscribers - 2006; 2009
Table 13 - Estimated growth of inbound VoIP traffic - Africa, Latin America, Asia-Pacific, Middle
East, Eastern Europe - 2005
Table 14 - VoIP subscribers - Skype, Vonage, France Telecom, Time Warner
Table 15 - VoIP access lines in US - 1999 - 2007
Table 1 - Global wireless broadband market subscribers - 2003 - 2008
Table 2 - Wireless broadband market share by region - 2005
Table 18 - Global wireless broadband subscribers by technology - 2011
Table 19 - DSL, 1Gb/s, DWDM transmission speeds - what does it mean?

Exhibit 1 - Key revenue trends - period to 2015
Exhibit 2 - A changing industry structure − 2005 - 2010
Exhibit 3 - Massive restructuring is now overdue
Exhibit 4 - New public network concept
Exhibit 5 - Triple play pricing examples
Exhibit 6 - Triple play pricing examples
Exhibit 7 - Nextgen telecoms
Exhibit 8 - Verizon vs Skype
Exhibit 9 - The role of voice
Exhibit 10 - Global outsource market services
Exhibit 11 - BuddeComm VoIP quality survey
Exhibit 12 - Teen pop singer launches own VoIP service
Exhibit 13 - Residential Broadband (BB) - growth predictions - next ten years
Exhibit 14 - FttH costings per home connected
Exhibit 15 - Mobile facts and figures
Exhibit 16 - What users want
Exhibit 17 - Tillevision Model for ICT infrastructure
Exhibit 18 - Tillevision Model
Exhibit 19 - Conjecture Subsidiarty
Exhibit 20 - Fractal repetition of the Internet paradigm
Exhibit 21 - Rural Tellet mobile voice-mail devices
Exhibit 22 - Some application bit rates
Exhibit 23 - Drivers of high-speed Internet

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