Internet of Things
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Earnings for roughly 80% of the globe's OTT/cloud-centric internet content providers (ICPs) are in, and overall growth is on track with Ovum's late-2016 forecast. Looking to 2017, we expect ICP capex growth of over 10%, while telco capex will fall about 6%. However, the macro climate faced by the biggest ICPs is volatile, due to a new US president and other factors. Their overall investment decisions, and relative geographic focus, need to be watched carefully in 2017.
Ovum has tracked the ICP segment for several years. This collection of cloud-centric providers has grown from 9% of communications sector capex in 2011, to nearly 20% today. They continue to grow, while telco investments are weakening.
For the ICPs reporting 4Q16 to date, their CY16 capex amounts to $54bn, up 18% YoY. That's slightly ahead of our CY16 target of 16% growth. Microsoft, Facebook, and Amazon reported the biggest capex jumps in 2016; new data center construction drove their growth. Revenues for the ICPs are also strong, up 10% in 4Q16 versus 4Q15; annual revenues versus 2015 are up a more modest 6%, as forecast.
ICPs' growing capex is focused on data center infrastructure, data center interconnection (subsea and terrestrial fiber routes), broadband access, media technology (including CDNs), and support for the Internet of Things (IoT) – also a growing area for telcos. The range of services they provide is far different from telcos, but ICPs and telcos are competing more directly in a number of areas – video, cloud services, messaging, rural broadband access, etc. To do this, they are both developing their own technology and working with domain-specific partners; they tend to stay away from generic RFPs aimed at ordering off-the-shelf equipment. Vendors who want a piece of the ICP capex pie need a customized sales and development approach, especially for the top five.
Currently, the market's biggest ICPs concentrate their brainpower and spending in the US, beyond what the US market contributes to revenues. There's a strong chance they'll start to hedge their bets in 2017, shifting resources to Canada, Europe, and even Asia.
Since the last US presidential election results were announced, the stock markets have gone on a tear. Some of this happens naturally after a highly contested election; more of it, though, is from expectations of future tax cuts and weaker (or, "less burdensome") regulations. For the ICPs in particular, they also hope to repatriate some of their overseas cash, and take a lower tax hit.
However, the ICPs – like the rest of corporate America – are balancing this new macro climate with other factors. Immigration is one issue. Here, the new administration will make it tougher for ICPs (and the rest of tech) to hire whom they want inside the US. There are a wide range of other issues concerning ICP execs about the Trump administration, relative to Obama. The net effect of these concerns will be to favor international investments over the US, especially in the R&D area. This would be a loss for the US. Given how large ICPs are, and how important they are to the US economy, this issue should get more attention in the coming months.
ICP Network Strategies and Their Impact on the Market, TE0006-001321 (January 2017)
Global Data Center Interconnect & Purpose-Built DCI Forecast: 2016–21, TE0006-001332 (January 2017)
Communications Provider Revenues & Capex Forecast: 2016–21, TE0006-001300 (November 2016)
"$2.1 trillion in communications capex up for grabs in next five years," TE0006-001304 (November 2016)
Equinix's Compelling Blue Water Data Center Interconnect Strategy, TE0006-001263 (August 2016)
Optical Networks Update: Data Centers are Reshaping the Market, TE0006-001262 (July 2016)
Microsoft and Facebook to build the Marea subsea cable, TE0017-000068 (July 2016)
Global Data Center Analyzer: 2Q16, TE0017-000067 (May 2016)
Matt Walker, Practice Leader, Companies & Markets
Consumer & Entertainment Services
By Adam Thomas 28 Mar 2018
With US pay TV having endured the worst year in its history, thoughts have inevitably turned to the future. The likelihood remains that the immediate future will remain highly uncomfortable for everyone except the scaled multinational digital platforms.
Internet of Things , Consumer & Entertainment Services, Serv...
15 May 2017
<p>A collection of thought leading articles on opportunities across the emerging Internet of Things market.</p> <p> </p>
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