2016 is now behind us and despite the fact that it has been a controversial year with the Brexit and the election of Donald Trump as US president; it has also been a year of profound changes for the telecoms industry.
Indeed, 2016 saw mobile data traffic increase by 64% and fixed broadband traffic grew by 40% in the UK alone. It also saw a battle of regulations with the end of mobile roaming charges in the EU, M&A successes and failures but more importantly, Ofcom’s notification for legal separation of Openreach from BT.
With this in mind Shape Networks remains excited about the year ahead, which is why we have put together a list of key trends to follow in the Telecoms industry in 2017.
- A step closer to 5G and more fibre deployments:
Following the increase in both mobile and fixed data consumption in 2016, 5G and fibre deployments have taken centre stage on the telecoms scene. On one hand, 5G has been a big topic of discussion and whilst launch in the UK is estimated for 2020, experts are not predicting a mass development before 2022. We still believe 5G will remain a big topic in 2017 with heavy operator investments in 5G-ready spectrum. As Verizon is set to begin piloting 5G towards the end of 2017, we also expect new mobile data speed records to be broken with the advancement of 5G R&D.
On the other hand, the development of a reliable fibre network in the UK is of paramount importance if the country is to remain a world leader in the digital market. With high-speed broadband being increasingly perceived as a fundamental human right, the UK government is pledging another £1bn investment in its latest Autumn Statement to achieve its deployment target deadline, set for 2017.
- Cross-market Merger & Acquisitions (M&As):
The two 2016 M&A main events were the BT/EE successful merger and the failure of the Three UK/O2 UK merger. With market regulators making it clear they will not favour M&As over market competition, operators recently found the answer with cross-market M&As. The AT&T/Time Warner merger in the U.S. is the latest example. Likely to be approved by market regulators, this merger indicates cross-market M&As would be favourably treated.
Pressured to replace revenue streams lost from roaming charges, we expect telecom operators to develop new service lines and increasingly turn into multi-play operators through diversification. As a result, we expect big content and Internet players to have a crucial role to play in operators’ M&A activities in 2017, helping them diversify their offering.
- Regulatory reforms:
Ofcom, the UK telecoms watchdog has had a very busy year in 2016. Its 10-year review of the UK telecoms market along with regulations of market M&As kept its CEO, Sharon White busy. On the other hand, the EU still exercised its role of main market regulators as part of its Digital Single Market strategy. Overall, both regulators aim to rebalance the regulatory regime to encourage further investment in high-speed networks.
In line with this, in 2017 Ofcom will heavily focus on a possible legal separation of Openreach from BT whilst we expect the EU to take the lead on levelling competition between OTT players (WhatsApp, Skype and others) and telecoms operators within the EU.
- The Growth of IoT:
Whilst still being at a relatively early stage of product life, IoT is set for rapid growth thanks to its wide applications across a vast range of industries such as healthcare, energy and the automotive market. Smart home applications, smart city solutions and connected cars are the driving forces of the Internet of Things and with the latest research predicting the number of connected devices to reach 25 billion by 2020 (twice the amount of mobile devices), industry players can only be excited by the new revenue streams that IoT represents.
In such a competitive industry and with some operators already making up to 3% of their revenues from IoT, in 2017 we expect to see aggressive moves from telecom operators, seizing competitive advantage directly from their position in the IoT value chain to lead the industry in IoT offering.
Overall, 2017 looks very promising for the Telecoms industry with the creation of multi-play operators offering hardware, mobile and fixed connectivity, content provision (on demand and on the go), IoT, in-car infotainment, etc. The fast-paced evolution of technologies will further stimulate the telecoms industry with new product developments answering customers everyday requirements whilst regulators should further increase market competition, ensuring consumers remain protected.