The vast majority of telcos believe their role in the new data world is to partner with the content players. At the same time, more three-quarters of respondents see the OTT players as a significant or moderate threat to operators, according to a joint Telecom Asia-Ovum survey.
The results of this year's Asia-Pacific mobile broadband survey also found that price continues to be much less off a service differentiator, with just 14% indicating it as the most important factor, compared to 29% just two years ago.
For the first time, respondents this year were asked to rank the threat of over-the-top (OTT) players on operators. Not surprisingly, a quarter of those surveyed believe that OTT players will have a "very significant" impact on mobile operators, with a further 56% warning of a "moderate" threat. But still close to 20% are holding out and don't see them as a threat.Nicole McCormick, a senior analyst with Ovum, said the OTT players are no doubt here to stay and will continue to encroach on mobile operator's traditional turf. "It's time for some operators to revaluate their position, especially in the content space," she said.
An operators' role in this new data world is the industry's 25 million dollar question. Having said that, she noted there is a degree of realism in the industry, with 69% of respondents believing that an operator's best-suited role in this difficult new data world is to partner with content players.
"Ovum urges operators to partner throughout the entire mobile ecosystem if their goal is to avoid becoming just a dumb-pipe provider. Such operators need to concede that they can no longer do everything themselves."
Yet, almost a fifth of respondents continue to see their role in terms of only investing in network infrastructure. Only 4% see investing heavily in content as the way forward while 7.7% want to become an access only provider.
Social networking on top
The explosive growth of mobile social network services in markets such as India, Japan and the Philippines meant it was critical to add that component to this year's list of the applications driving traffic growth. As expected, social networks were tipped as the catalyst for growth going forward, ahead of browsing services which last year topped the list.
These services, with 31% putting it on top, even narrowly pipped video services (30%) as the next anticipated traffic generating application (see chart 1). The issue for mobile operators is how to monetize mobile social network services while not cannibalizing key SMS revenues in the process, McCormick said.
Browsing took a huge hit, falling almost 20 percentage points (from 36% last year to just 17%) after a 6-percentage point decline the previous year. Those reckoning P2P would drive traffic also fell sharply, dropping to 6% from 15% in 2010. Video remained at about the same level as last year.
LBS again has proven to be a major disappointment as an application to boost traffic ?after a significant fall last year (from 16% to 12%), it plunged again to just 7%.
Looking at the devices fueling growth, the survey confirmed what the industry already knew ?the netbook market for mobile broadband access is in trouble. Only 7% of respondents agreed that netbooks would drive traffic (see chart 2).
Rather, handsets topped the list as the proliferation of cheaper smartphones continues to gather steam in Asia Pacific. Just about half of respondents thought mobile phones would be the main device driving traffic (up from 41% last year). Grouped together just 21% of those surveyed saw laptops/netbooks leading growth (down from 48% a year ago).
However, tablets are expected emerge as an important access device, with about quarter of respondents deeming tablets as key to driving traffic growth. McCormick said this will be welcome news to device makers that are pouring millions of dollars into producing tablets as the "next big thing."
Similar to last year, no clear key differentiator emerged for taking mobile broadband to the consumer market. Price made the most noticeable change from the 2010 survey. Just 14% of those surveyed put price as most important, compared to 20% just a year ago and 29% in 2009 (see chart 3). This points to a leveling of offerings brought on by increased competition in almost all markets.
Coverage once again ranked top (28% ?down 3 percentage points from a year ago). As operators in the region have upgraded their networks, coverage is clearly becoming less of an issue. Quality of service was unchanged from a year ago, with almost a quarter of respondents saying it continues to be a major differentiator.
Speed, which dropped sharply in importance last year (from 26% to 19%) rebounded slightly, with 22% of respondents this year ranking it as the most significant differentiator for mobile broadband services, as operators throughout Asia Pacific increasingly promote peak data rates as they move from HSPA networks to HSPA+.
Apps and content also gained ground, with 11% indicating it was a key differentiator, compared to just under 4% in 2010 (but down from 16% in 2009). Seems users are seeing more value in operators' value-added services.
Asked what impact mobile broadband will have on fixed broadband, almost three-quarters felt it would have a some or significant impact with substitution (see chart 4).
Some 40% of respondents believe that mobile broadband will have a significant impact. Just 14% thought there would be no impact and that mobile broadband would only complement fixed broadband. Another 6% said mobile would have a large impact in all but small segments.
Those results are not unexpected. "Ovum believes that increasingly some customer segments will cut the cord with their fixed-service provider as mobile broadband services become even more competitively priced. This segment, for instance, will likely include low-income households, such as renters and students," McCormick said.
However, she noted that with the increase in popularity of both IPTV services and mobile operators looking to offload traffic through WLAN or femtocell solutions, fiber and mobile broadband will predominately be complementary.
"The bigger threat to pure fixed network providers is not customers cutting the cord, but high-value services moving to mobile, leaving the low-value high-bandwidth services for fixed networks."
Again, consistent with last year's results 84% of telco executives think non-operator content will drive traffic growth (83% last year, 76% in 2009).
When asked about the future of LTE, it was not forecast to be a top priority by the majority of respondents in the next year. Just a quarter of those surveyed said LTE was a very high priority in 2011.
This makes sense as Asia Pacific is still in the nascent stages of LTE rollouts. Early FD-LTE rollouts will be dominated by developed markets, such as Hong Kong, Japan and South Korea, where operators are looking to not only reduce their per bit costs but maintain their competitive edge.
As such, it is understandable that 48% of respondents see LTE as being only a medium-term priority over the course of the next year. More than a quarter see it as a low priority or not priority. LTE deployments are tipped to start to pick up steam, however, in 2012, including in China.
Backhaul constraint
A challenge for some mobile operators, and particularly those that are not part of an integrated fixed and mobile operator, is providing sufficient backhaul capacity to sustain the base-station upgrades and increasing traffic volumes.
This year's survey found that 43% expect backhaul to be a restraint on mobile services in the next 12 months compared to 34% in the last survey. Another 31% believe that backhaul is currently a constraint on mobile services vs 32.5% last year. Just 15% don't think it will be a problem for the foreseeable future.
McCormick pointed out that mobile operators that have not already done so will be looking at the opportunity to move their backhaul to packet technologies (typically Ethernet) in conjunction with capacity upgrades.
Radio access network capacity is currently a constraint on operators, according to 39% of respondents ?up from 36% last year. Another 36% say it will be problem for mobile operators in the next 12 months. Some 17% indicate it won't be a restraint going forward.
Ongoing investment in RAN capacity is ultimately required if operators are to meet growing traffic demands. "Operators can try to deflect continued base station investment, but investing in additional capacity will have to eventually catch up with some operators, especially if they want to remain competitive," McCormick said.
WLAN/Wimax offloading is still thought to be the most effective means to handle increased data traffic, apart from adding extra sites. To keep up with traffic growth, 45% say Wi-Fi/Wimax offloading of the macro-network would be the most effective option while 14% point to femtocells (see chart 5).
Other traffic management techniques receiving significant support were new pricing schemes (18%) and policy control and throttling (16%).
The adoption of femtocells has also increased marginally in this regard, but she said femtocells seem unlikely to be more than a niche solution for offloading traffic from the network. "Ovum continues to believe there is no one silver bullet to deal with traffic growth."
Respondent profile
The Telecom Asia-Ovum online survey was conducted in December and January and had responses from 276 telecom executives in more than 20 countries across Asia Pacific. A quarter were mobile operators while another 25% were integrated players. Management accounted for 26% of respondents, engineering/operations 25% and sales/marketing 30%. This is the third year the survey was conducted with support from Ovum.