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Straight Talk Telecoms

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At this time of year we look back on the predictions that we made 12 months ago and reflect more broadly on industry trends that we are likely to see in the year ahead.

Over the next few weeks Ovum analysts will be sharing their projections with you. But as a curtain-raiser I think it’s appropriate to muse over the very nature of the prediction business in the TMT sector. So here are five trends about trends for 2016. You may note a slightly frivolous tone in some cases, but please don’t confuse tone with substance.

1. Wait long enough and your trend or prediction will invariably come right, or come around again. We are all familiar with the concept of the hype curve, but some trends in telecoms stretch the hype curve out over a much longer period than you might expect. Think quad-play: it was first discussed in the mid-1990s but has only become a mass-market phenomenon in the past two years. Its success has got less to do with the maturing of technology and is more a function of lighter regulation and the state of the telecoms operator business. Other trends that were first flagged more than 10 years ago and remain tomorrow’s business include smart home and M2M. Mobile video was, undeniably, a big trend in 2015, but it uses very different technologies and business models from when mobile TV was first touted as the next big thing at the start of this century.

2. We tend to overestimate short-term change and underestimate longer-term trends. We’ve been working on a series of reports here at Ovum about the digital economy in 2025 – from the perspective of operators, network and IT vendors, device OEMs, and content providers. Taking a 10-year perspective is extremely challenging. The natural inclination is simply to extend the trends that we see now over a longer period. In practice, changes to some parts of the TMT sector will be more profound than we can foresee – largely due to the emergence of new (or newly affordable) technologies, products, and services that are not available today.

3. Vendors feel the pain first, and more acutely. When the telecoms industry suffered its first sustained downturn during the early years of the 21st century, it was the infrastructure vendors that felt the pain before – and more acutely than – the operators. In the past year we have seen Nokia acquire Alcatel-Lucent, and this week Ericsson and Cisco agreed to partner to build new services and capabilities. Should we interpret these moves as early warning signs that telecoms operators are about to cut their spending on network gear? Certainly the indications are not good, with the number of announced network contracts declining and many operators talking about lower capex in 2016.

4. Building out next-generation networks is part of the telecoms operator DNA and avoids having to focus on strategy. Even with no business model today for 5G, the telecoms industry is dedicating a growing proportion of time and resource to researching and refining potential 5G technologies. At a time when there are serious questions about telecoms operators’ ability to develop new services, the idea of having a new network technology to plan for and invest in is as welcome as a warm coat on a chilly November afternoon.

5. While the digital landscape, and the services that we use, are constantly changing and improving, the telecoms operator business evolves slowly. The digital economy moves quickly and dynamically, and from one year to the next our digital preferences and habits change and deepen. In the telecoms industry we like to think of ourselves as part of the digital economy. In practice, however, we are more enablers of the digital economy than providers of the services themselves. It has taken a long time for the telecoms sector to accept this role and stop taking a scattershot approach to service development. Being enablers may not place telecoms operators in the fast lane, but it is a more comfortable, slower-paced role that is in keeping with the size and maturity of the telecoms sector.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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