Five Telecom Predictions for 2012

[#1]

Last week, I recapped the five biggest trends in North American telecom from 2011.  As we look ahead to 2012, it’s clear that the aftermath of some of these trends will continue and remain top-of-mind among service providers throughout the year.  That said, 2012 looks to have some new surprises in store that will grab headlines and drive network transformation projects around the world. Let’s review some of our predictions for North America in 2012:

1. Fiber Shortages Will End
   In March of 2011, Japan was hit with a devastating earthquake and tsunami, which caused shortages and delays in many tech products.  The telecom industry was greatly impacted with a shortage of fiber, causing delays in fiber-to-the-premises (FTTP) projects around the world.  Barring any further catastrophes, 2012 will see the fiber industry return to pre-tsunami conditions and economic recovery around the globe will continue to drive the deployment of fiber-based networks.
   
   
2. Competitive Forces Will Drive Further Deployment of Fiber and VDSL2 Vectoring
   As we noted before, 2011 was the year that VDSL2 vectoring chipsets came to market, helping service providers protect their investment in copper infrastructure, but more importantly, helping them to expediently meet the growing bandwidth requirements of their subscribers.  Fiber projects also kept their momentum going in 2011 with Broadband Stimulus awards, new applications, and heightened competition fueling investment.  In 2012, competition from DOCSIS 3.0 and LTE networks will be even fiercer, pushing wireline service providers to keep rolling out fiber and VDSL2 vectoring to maintain their competitive advantage in the markets they serve.
   
   
3. The 2012 Summer Olympics Will Push Service Providers to Think About How They Will Handle the Next Generation of Bandwidth-Intensive Content
   In November of 2011, broadcasting company NHK in Japan announced it would hold public screenings of the 2012 Summer Olympic Games on three continents in Ultra High Definition (UHD), which is 16 times the resolution of full HD.  While these broadcasts, which include screenings in the U.S., will paint a picture of the emerging bandwidth-intensive applications of the future, traffic volumes driven by unicast streaming of HD video from NBC, along with YouTube clips from spectators and others, will set new traffic peaks across the world during the 16 days of the Summer Games.  In short – if you were a skeptic about the reality or impacts to your network of an All-Video World – we think that this summer’s Olympics will make a believer out of you.
   
   
4. New U.S. Regulatory Policies Will Drive Service Provider Consolidation and the Pursuit of New Business Models
   Despite the fact that many of the details of the Connect America Fund (CAF) are still being appealed, debated, and interpreted, it is clear that both price-cap and rate of return companies will be impacted by these regulatory changes.  For the rate of return companies, 2012 will be a year of understanding how this emerging regulatory climate will impact their current and long term business models. With the scaling down of ICC and the shift in support from voice subsidies to broadband capital incentives, these IOCs will need to realign their business models to reflect a broadband world, and many will see consolidation as a requirement – or an opportunity.  For price-cap companies, the impact of CAF will be much more immediate, with deadlines for decisions on investment in rural access lines coming as early as March. The price-cap companies will face some interesting options themselves as the year progresses – and the service provider landscape in many states may be dramatically altered by their decisions to accept CAF support or to open their lines up for auction. By the end of 2012, we may already be seeing a telecom landscape in the U.S. that looks dramatically different from today’s view.
   
   
5. Usage-Based Billing Will Gain Momentum in Wireline Networks
   Usage-based billing among mobile operators gained momentum in 2011, and 2012 will see this model carry-over into the wireline world.  Early usage-based billing experiments in North America started last year with Bell Canada’s broadband service packages, as the service provider adapted their business model to match mobile packages.  We believe that these new billing models will pick up steam in 2012 as consumers accept the practice as reasonable for their wired service and service providers continue to adjust their business models to better manage and monetize skyrocketing network traffic and utilization.

We’re all in for quite a ride in 2012 as change driven by politics, new models, new technologies, stiffer competition, and emerging subscriber preferences will reshape the rules of the game and the strategies we employ to win. No matter what drives this change, both networks and business models will be transformed to conform to this new telecom climate. As you enter 2012, what other trends do you think will emerge?  What are your subscribers asking for?  What is driving your network transformation?  Let us know your thoughts.

[#2]

I am curious about your 5^thpredicition. Do you think usage-based billing will hurt or kill the OTT video service providers like Netflix/Vudu and the hardware vendors like Roku or Boxee? 

[#3]

Mike,

I think that the telcos will begin to target broadband packages on a subscriber by subscriber basis that reflect their propensity to use OTT video. A service provider might identify you as an OTT user and offer a special package designed for your lifestyle, which could include higher downstream bandwidth and lower latency but lower upstream speeds. I don’t think it’ll affect consumption and will benefit the Telcos with revenues to offset their increased traffic costs.