Mobile VoIP

2016 Adoption of Mobile VoIP

A leading indicator that signals the adoption of mobile VoIP is the adoption by mobile subscribers of social networking/instant messaging OTT services. The precursor to OTT service adoption is the strategic drive by mobile operators to increase smartphone penetration combined with an effective data pricing strategy. Mobile VoIP OTT usage leads to traditional mobile revenue disruption along with disruption of the national interconnect market. Mobile operators can choose to either defend against this trend, or embrace this trend and build products that incorporate mobile VoIP.

Introduction

Analysis of information published in Deloitte’s Global Mobile Consumer Survey 2016 provides insight into the adoption of various OTT services across different markets, and over different time periods. We have extracted information pertaining to the adoption of mobile VoIP, social network (SN) usage and instant messaging (IM) for 13 countries located in Europe (EU), Latin America (LATAM) and Sub-Sahara Africa (SSA).

From this data we created the following two charts that provide useful market observations.

Chart 1: Relationship between mobile VoIP and social networking / instant messaging services

The following country (and region grouping) chart provides some interesting insights into the adoption of mobile VoIP and the adoption of social networking / instant messaging. The chart shows the plot of mobile subscriber adoption of social networking / instant messaging plotted against the adoption of mobile VoIP.

From this chart, the following observations can be made:

  • In all countries, there is a higher adoption of social networking / instant messaging when compared to mobile VoIP; and
  • Based on the country groups, we see a different adoption across the regions. Surprisingly, the EU countries show a much lower mobile VoIP adoption.

2016 Mobile VoIP AdoptionThe difference in developed (EU) vs developing country (LATAM, SSA) adoption of mobile VoIP OTT service can be driven by the following factors:

  • From a disposable income level perspective, the lower price of VoIP (to circuit switched) may not be as attractive / make much difference in developed markets vs developing markets;
  • The price differential between mobile VoIP (using mobile data) and circuit switched calls may be much smaller in developed markets vs developing markets therefore there is less economic incentive to use mobile VoIP; and
  • There are other factors such as (1) the difference in age distribution between developed and developing countries, younger mobile users adopt new services at a faster rate, (2) the difference in prepaid vs postpaid mobile services in developed vs developing countries, postpaid will have less incentive to use mobile VoIP given the bundling of minutes in postpaid plans, that can play a role in the markets.

Chart 2: 2013 to 2016 Adoption trend of mobile VoIP service

The following country chart shows the mobile subscriber adoption of mobile VoIP plotted over the period 2013 to 2016 for four countries.

The following observations can be made:

  • There was significant growth in mobile VoIP adoption in Brazil and Mexico over a single year. Brazil grew by 343% from 2013 to 2014 while Mexico grew by 294% from 2014 to 2015; and
  • This large jump was not seen in the two EU countries: Sweden and the UK.

2016 Adoption Trend in Mobile VoIPIt is quite possible that Sweden and the UK have not reached a critical market tipping point with the social network / instant messaging adoption that, once passed, would drive rapid adoption of mobile VoIP.

Drawing out market observations

While the base is small, the data does suggest the following interesting market observations:

#1: The 2016 adoption of mobile VoIP varies significantly between the EU countries (low) and Latin America countries (high adoption), with Sub-Sahara Africa (SSA) countries found between the two regional groupings.

  • Therefore, developed country adoption of mobile VoIP cannot readily be used as a proxy for the adoption in developing countries.

#2: Social network / instant messaging adoption is a leading indicator and a proxy for mobile VoIP adoption.

  • Therefore, the higher the adoption of these services, the higher the adoption of mobile VoIP can be expected.

#3: Over a three year period, the rate of adoption of mobile VoIP in Latin America (Brazil and Mexico) is significantly higher than that seen in Sweden and the UK. Various reasons can exist that drive this adoption. For example, this is possibly driven by the perception of higher prices in developing markets, or that the adoption of social networking/instant messaging has reached a critical market tipping point that accelerates mobile VoIP adoption.

  • Therefore, based on the data mobile VoIP will see faster adoption in developing countries.

So what does this mean?

The market drive to lower mobile data pricing coupled with the aggressive growth in smartphone adoption will see wider uptake of OTT services. Within the OTT bouquet, the growing adoption of social networking/instant messaging services, as shown, will lead to higher mobile VoIP adoption.

We ascribe this linked adoption to social networking/instant messaging OTT services driving the following behaviour:

  1. Grow greater awareness of mobile VoIP availability among social networking/instant messaging users, thus educating users on the use of mobile VoIP; and
  2. Grow usage of mobile VoIP on the social networking/instant messaging platforms where such a service is offered.

Intuitively mobile operators recognise the competitive threat posed by mobile VoIP to traditional mobile services. Through the analysis presented here, we are now beginning to understand the complexity of the OTT threat to traditional mobile services.

IoT Pic

South African IoT/M2M Market Opportunity for Network Operators

The global IoT/M2M installed base is expected to reach between 12.5 and 13.3 billion by 2020, and show a CAGR of over 20% over the period 2015 to 2020. In South Africa, we forecast that the IoT/M2M installed base will reach 35 million by 2020, showing a CAGR of 32% over the same period. While these numbers grab many headlines, network operators need to recognise that their revenue opportunity will come from managed connectivity, which accounts for roughly 20% of the IoT/M2M service revenue, and not the connectivity itself. Revenue earned from connectivity itself, only accounts for around 11% of the service revenue.

Global Outlook

Network operators (mobile, fixed and wholesale) have started to turn their attention to the rising Internet of Things (IoT) and machine-to-machine (M2M) opportunity. Global predictions vary, with some reports such as the IHS Markit showing that the number of IoT/M2M connections is expected to rise to 12 billion while IDC have reported that IoT/M2M connection will rise to 28 billion by 2020. This range illustrates the challenge in forecasting a rapidly growing market.

 

For example, the following chart shows a comparison of the various global forecasts of the installed base:

2017 Global IoT Installed Base Forecast

Forecasts made in 2016 and 2017 for the 2020 global installed IoT base, show that the installed base is expected to reach between 12.5 and 13.3 billion. Most forecasts show a CAGR of over 20% over the period 2015 to 2020.

The South African IoT Connectivity Development

In South Africa, as in the rest of the world we can expect to see the Low Power Wide Area Networks (LPWA) IoT battle lines drawn along technology. The LPWA platforms include Extended Coverage GSM for IoT (EC-GSM-IoT), Long Term Evolution Machine Type Communications Category M1 (LTE MTC Cat M1, also referred to as LTE-M) and Narrowband IoT (NB-IoT).  In the first camp the main protagonists will be the mobile network operators, such as MTN and Vodacom, both of which have announced IoT plans based on LTE narrow band technology, using licensed spectrum.  On the other side, will be the LPWA platforms such as Sigfox, backed by Dark Fibre Africa subsidiary SqwidNet, using unlicensed ISM bands.

The mobile network operators will position their services based on service quality as their ability to manage the spectrum will ensure a quality service for the enterprise. The mobility factor will see applications such as the “connected car” and vehicle tracking being among the major drivers of IoT/M2M uptake for the mobile operators. Providers using platforms such as Sigfox will opt to focus on volumes, low power and short transmission distances to offer services and solutions for more static applications such as smart metering and utility services.

Forecast of the South African IoT Installed Base

Africa Analysis forecast that the installed base of IoT/M2M connections will rise from 8.8 million in 2015 to 35 million by the end of 2020, showing a CAGR of 32%.

  • A large slice of the market will be found in the LPWA technology, rising from around 290 thousand in 2017 to over 19 million by the end of 2020.
  • Other technologies such as mobile cellular, Wi-Fi will retain a steady growth of 14% and 11% respectively over the forecast period. Mobile cellular will rise to 8.7 million connections and Wi-Fi will rise to 7.4 million.
  • Satellite services will retain some importance in the local IoT/M2M market but the applications will be restricted to a niche market such as aviation and rural areas.

Network Operators and the IoT Service Revenue Stack

The forecast of the large installed base of IoT/M2M connections sounds very attractive, and these big numbers grab a lot of attention. But the sad reality is that the connectivity revenue opportunity for just proving network connectivity is limited. In 2016, the connectivity portion of the IoT revenue stack accounted for around 11% of total revenues. The lower cost of connection and the associated downward pressure on data tariffs will continue to keep this contribution under pressure.

The attractive revenue for network operators is found in the stack of services associated with connectivity. For example, managed connectivity accounts for roughly 20% of the IoT/M2M revenue.

Given this, we expect that IoT deals will likely to be driven by volumes that will see network operators sacrificing some of their connectivity margin to secure contracts.  However, this basic element of the stack will see operators use connectivity as a foundation to offer managed connectivity services. This way, the MNOs will be able to take advantage of both the basic and the managed connectivity services, thus increasing the portion of total revenue they will be able to access in the IoT environment.

Those network operators with the necessary resources are able to push themselves further up the value chain and possibly offer more complex services such as integration, which accounts for around 47% of total revenues while application development will account for around 22% of total revenues.

Contact Richard Hurst, Africa Analysis, for more information on this topic.

Mobile Advertising

Mobile Ads …. do consumers like them or loathe them?

Nokia recently completed 2016 Nokia Acquisition and Retention study shows what ads consumers would like to receive from their mobile operators.

Mobile advertising

Mobile ads… do consumers like them or loathe them? As it turns out, not as many consumers mind receiving mobile advertising as you might think, particularly if targeted to their needs. And for even better traction? Offer consumers a reward in return for receiving mobile advertising.

  • 47 percent of global consumers currently receive mobile ads from their operator – of which, only 4 percent prefer not to receive them
  • Consumer frustration occurs when targeted ads are just not relevant
  • 38 percent of consumers globally would be willing to receive more advertising in exchange for rewards or benefits.

Overall, consumers are more interested in receiving advertising content around device upgrades than any other type of mobile ads:

Mobile Ads Pic

Source: 2016 Acquisition and Retention Study

Nokia 2016 Acquisition and Retention Study
The Nokia 2016 Acquisition and Retention Study has been designed to help mobile operators understand current trends in consumer behaviour, in order to make more informed decisions when developing acquisition and retention strategies. The focus of this extensive study is to uncover the core drivers of customer retention by providing detailed and granular insights around consumer perceptions, causes of dissatisfaction and the likelihood to churn across several scenarios.

IoT Trends

2016 Internet of Things (IoT) Outlook Report

The study reveals that roughly four in five respondents believe there is a lack of consensus over the best way to strategise, deploy and monetise IoT. This is one of the key findings reported by Telecoms.com Intelligence, who conducted the study.

2016 Market Survey
Of the roughly 1 000 respondents surveyed for this report, exactly 50% came from the service provider community – including MNOs, cable operators, ISPs, multiplay operators, broadcasters and cloud service providers. Service providers are frequently referred to as the great enablers of Internet of Things (IoT), and thus represents the primary market for this study. The second greatest group of respondents after service providers represent suppliers of IoT services, with 17% – this group includes hardware, software, services and application development vendors. Consultancy, analyst or research firms made up an additional 14%, while the remaining fifth of respondents originated from a range of sources including more niched telecoms services, government agencies, education institutions and industrial end-users of IoT technology.

Key Take-Outs

#1 Navigating the IoT landscape?

  • Roughly four in five respondents believe there is a lack of consensus over the best way to strategise, deploy and monetise IoT.
  • More than half the audience says IoT and M2M have now come to mean the same thing.
  • IoT services will be responsible for up to 50% of business revenue by 2020, according to half the audience.
  • In the next 12 months, just under half of our respondents expect to generate between zero and 10% of their revenues from IoT. Elsewhere, less than one fifth expects IoT to generate 10-30% of revenues, less than one tenth says up to 50%, and less than 5% expect to be able to attribute IoT with more than half of their total revenues in the next year.
  • By 2020, however, more than half of all respondents expect IoT to be responsible for somewhere between 10% and 50% of their total business, while 17% believe it will be 10% or less. A further 16% say more than half of their business will be directly concerned with IoT, and 15% opted against mustering a best-guess effort.

#2 Cloud platforms for IoT

  • 49% of respondents say data analytics is the most important feature of an IoT platform.
  • IoT services will mostly be built in-house instead of outsourced to third-party vendors, according to 70% of the audience.
  • Two thirds of respondents believe 5G will be the main connectivity platform for IoT, when it arrives.

#3 Optimising IoT connectivity

  • More than half the audience plans on using their existing radio network for both people and machine-based communications.
  • Nearly 90% of respondents see permanent roaming as a major challenge for businesses providing IoT services.
  • The radio network will carry up to 50% of IoT traffic in the future, according to nearly two thirds of the audience.

#4 Securing the IoT

  • Nearly two thirds of respondents believe IoT will present new and unique information security challenges.
  • An additional two thirds think IoT is more vulnerable to security leaks due to the volume of devices and traffic being generated.
  • One in three respondents think they don’t experience any DDoS attacks.

#5 Industrial IoT

  • Nearly half the audience says professional enterprise services and analytics software will be the biggest revenue generator for industrial IoT.
  • 81% believe telecoms operators will face threats from new market entrants as a result of IoT pervasion.
  • Just over a quarter of respondents feel conflicting standards will inhibit industrial IoT’s potential.

#6 Consumer IoT

  • Nearly two thirds of the audience believe consumer-related products will be a major element of their IoT strategy.
  • Just 7% of respondents think wearable tech will really take off.
  • A completely driverless experience will be the biggest benefit of connected cars, according to 27% of the audience.

Telecoms.com IoT Outlook Report 2016
Telecoms.com Intelligence, analyses and presents the findings of an in-depth questionnaire answered by 900 members of the telecoms industry involved with IoT today.