Organisations in the wireless industry must prepare for radically different futures

Analysys Research:

• Three scenarios for the evolution of the European wireless industry show very different outcomes for mobile operators, equipment vendors and regulators

• Up to a 30% difference in ARPU forecast by 2012,depending on scenarios: range from EUR27.10 to EUR35.20

• In the Substitution scenario, mobile operators successfully displace fixed network voice and data services, increasing wireless ARPU and network investment

• In the Convergence scenario, the success of fixed broadband and converged services keeps wireless services outdoors and significant mobile operator consolidation occurs

• In the Fragmentation scenario, a patchwork of different wireless technologies and services are deployed across Europe

The wireless industry could evolve in very different ways over the next five to ten years, demanding robust planning by network operators, technology vendors, service providers and regulators.

Major uncertainties, including fixed–mobile substitution, convergence, service demand, disruptive technologies and changing business models could have a massive impact on the wireless industry. We have developed three plausible scenarios for the evolution of the wireless industry, to help network operators, equipment vendors and other interested parties to develop and test their plans. The scenarios demonstrate that some very different outcomes are possible over the next five to ten years.

In the Substitution scenario, mobile operators build on the success of early home-zone services to drive fixed–mobile substitution. They successfully displace fixed network services in the home and workplace, with a ‘double play’ of voice and broadband Internet access, enabled by substantial improvements in performance and cost per Megabyte from 3G Long Term Evolution (3G LTE, also referred to as Super 3G). The strategy displaces a significant proportion of fixed network usage, as well as many fixed network lines, to increase wireless ARPU. The dominance of wireless services delivered over 3G (and 3G LTE) strengthens the role of mobile operators, while equipment vendors benefit from the substantial investment in cellular infrastructure and terminals.

In the Convergence scenario, fixed operators strengthen their role in the home and workplace with broadband services, such as IPTV, that far outreach the capabilities of wireless networks. The success of converged voice services, enabled first by Unlicensed Mobile Access (UMA), and then by Internet Multimedia Subsystem (IMS) and Session Initiation Protocol (SIP), ensures that the vast majority of voice calls made in the home are carried on fixed networks, halting the migration of voice traffic to mobile networks. Wireless ARPU declines and there is little need for investment in 3G capacity or coverage. Significant consolidation occurs, with the remaining mobile operators competing to form alliances with the leading fixed operators.

In the Fragmentation scenario, no single dominant approach emerges. A patchwork of different services and wireless technologies (including WiMAX and DVB-H) are deployed across Europe, as operators attempt to seize a competitive advantage in their respective markets. Voice and messaging decline to a much smaller proportion of total ARPU, as operators focus predominantly on data applications, such as mobile TV and Internet access, and there is increasing adoption of wireless VoIP services. In effect, wireless networks become bit pipes.

Report co-author, Mark Heath, observes, “Business plans are often based on unwritten assumptions concerning the evolution of the wireless industry. It is important that organisations evaluate the robustness of their plans in the light of different possible evolution paths. Organisations should identify a preferred scenario and attempt to make it happen, rather than simply predicting and reacting to future events. They also need contingency plans to cope with alternative outcomes. The report highlights substantial differences between scenarios in terms of mobile service ARPU and network usage. By

2012, monthly spend on mobile varies (according to scenarios) between EUR27.10 and EUR35.20,¹ with monthly usage per customer varying between 53MB and 550MB.

Scenarios for the Evolution of the Wireless Industry in Europe to

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