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Mobile industry driving growth in China

Recent figures from released by China's Ministry of Industry and Information Technology (MIIT) reported that mobile and data telecoms in China is still booming. The report said that revenues for the mobile sector were CNY 373 billion ($54.2 billion) in the first 10 months of 2008, up 15.7% on the same period in the previous year. Data revenues in the same period were CNY 66 billion ($9.6 billion), a year-on-year increase of 38%.

The total volume of telecoms business, including infrastructure investments, rose to  CNY1.85 trillion ($269 billion) in this period, a whopping 22.5% compared to 2007. Further infrastructure investments are expected next year as mobile operators roll out their nationwide 3G networks.

Overall telecoms service revenues in the period January-October 2008 were CNY 680 billion ($98.9 billion), a year-on-year increase of 8.1%. Pulling down the revenue figures are the results from the fixed-line and long-distance phone markets, which were actually down 7.9% and 6.1% respectively in the year. Together these two markets make up around 30% of the total telecoms market. Data communications is the fastest growing telecoms sector reflecting China's new leadership in the broadband market, but it currently only makes up 9.7% of total service revenues.

There is clear evidence of fixed mobile substitution in the MIIT report's details of new subscribers. While nearly 80 million new mobile lines were added in the first 10 months, over 14 million fixed lines were terminated. The process might even be accelerating, with 3.2 million new mobile users in October 2008 alone and a decline of 1.7 million fixed line users in the same month. Numbering 627 million, there are now almost double the number of mobile subscribers to the 351 million fixed line users in China.

Crisis, what crisis? Oh that crisis…

While most analysts have been bullish in predicting a healthy growth of the IT market next year, albeit slightly tempered by the recent financial tsunami, IDC is less optimistic. It believes that the Western European IT market, which grew at 4% during 2008, will slip to 1% next year, 3% less than it forecast pre-crisis. The US, similarly will see growth slip from 4% to 1%.

While Western Europe may prove bleak for hardware vendors, IDC reckons that growth in the emerging markets of Eastern Europe, Middle East and Africa will be a healthy 9%, down from a pre-crisis 14%.

One of the key areas affected by reduced IT budgets will be hardware. IDC expects "discretionary spending on IT hardware" to be delayed where possible. In other words, if isn’t broken, we’re not throwing it away. While there is merit to extending lifecycles of PCs and servers, companies must carefully evaluate the energy consumption of old equipment compared to energy-saving new kit. It might just prove a false economy in the long run.

Highlights next year include: IP phones and smartphones will continue double digit growth; open source sees a renewed interest as companies seek to reduce software license fees; outsourcing and Software as a Service will benefit from reduce capex budgets; and companies will be looking to green IT equipment (and virtualization) to deliver costs savings in corporate energy bills.

Could the Digital Dividend make mobile broadband more popular than DSL and bridge the digital divide to boot?

France is leading the way with the repurposing of analogue TV spectrum, ensuring that mobile broadband has room to grow and, potentially, become the dominant means of internet access for the majority of the world.

As part of the Numerique 2012 vision of a digital economy, 72 Mhz of the analogue switch off will be given to mobile broadband with the goal that it will lead to universal access. (Specifically it is the 790MHz to 862 MHz band.)

France’s decision is in keeping with the World Radiocommunication Conference (WRC-07) which agreed three bands worldwide for setting aside for mobile broadband. Basically, just about every country has agreed a time frame for turning off analogue TV and giving some of it to the mobile community. It’s known as the Digital Dividend and is good news for mobile operators and broadband users everywhere. This Digital Dividend spectrum is even better for delivering nationwide mobile broadband than the current 2100 MHz band used in Europe and Asia.

Mobile broadband to overtake DSL?

Five years ago, analysts predicted that mobile broadband would be a complement to fixed line broadband but it would never usurp it. Mobile broadband would bring roving users, whether travelling workers or students in coffee shops, internet at speeds almost as good as what they would find at home or in the office. The received wisdom was that as spectrum is a limited resource, mobile or wireless communications would lag fixed communications in speed and cost.

But that conservative view has been turned on its head. All over the world, mobile operators are offering 3G HSPA broadband at speeds and costs comparable to entry-level DSL. In the UK, for instance Orange offers mobile broadband at £15 per month (€18.50), for a 3.6 GB data allowance, and peak speeds of 1.8 Mbps. For many millions of users in developing countries, mobile broadband is the only way they can connect to the internet.

The new spectrum freed up with the analogue switchover is not just more room to cope with the current growth of mobile broadband, but the ability to deal with massive broadband fixed-to-mobile substitution. A recent report by analysts Analysys Mason predicted that by 2013, 47% of European broadband subscriptions will be mobile, and nearly a quarter of broadband offices and broadband homes will be mobile broadband only. Get that? A quarter of internet users will have discarded DSL and fibre and cable in favour of mobile broadband.

Why would they do this? Well flexibility is obvious one reason. And maybe they are not interested in IPTV or have a household broadband connection but need their own personal one.

Already many mobile operators are offering peak HSPA downloads of 7.2 Mbps, some even at 14.4 Mbps. Within touching distance is 28 Mbps, shortly followed by the introduction of HSPA Evolved next year which will give peaks of 42 Mbps. But what is tantalising is LTE, or Long Term Evolution, which is expected to be first deployed in Japan and South Korea in early 2010.

In lab trials, the GSM Association reckons that LTE is delivering 172 Mbps downstream and 50 Mbps upstream.  Undoubtedly these speeds will never be achieved on congested mobile networks in poor weather while sitting inside a concrete building miles from a cell site. But lower the frequencies, and consistent multimegabit speeds are achievable in buildings and throughout a cell. Could we see a day where IPTV is delivered to plasma screens via a mobile broadband connection? Maybe, maybe not. But certainly mobile broadband is becoming a viable technology for remote offices and branches.

Is there enough capacity for everyone?

The question is can mobile networks deliver sufficient capacity to cope with this much demand. If mobile operators can access this new spectrum band and also be allowed to “re-farm” GSM 900 MHz spectrum for 3G services too, they may be able give us all the mobile broadband we could possibly want.

Current mobile broadband operates at a higher frequency – around 2100 MHz in Europe, Asia and Africa, 1900 MHz in North America. Higher frequencies mean higher throughput, but shorter range so you need many more cell sites than you do for GSM which operates at a lower frequency (900 and 1800 MHz).  More sites mean more expensive networks, and higher prices for users.

Lower frequencies mean less power and longer range, and consequently lower costs. If 3G mobile broadband could be deployed at 790-862 MHz, it would penetrate walls better, and operators would need less cells for the coverage, which means mobile broadband can more readily move into rural areas. This is the reason why many developing countries have been advocating the use of this lower spectrum of mobile broadband. Read page 4 of this paper Booz Allen Hamilton to understand the economics of mobile broadband at lower frequencies.

So without wanting to sound like an PR for the GSM Association, mobile broadband in the lower frequency bands freed up by analogue switch off would be great for mobile operators, businesses that want a better service quality for users outside of the office, for people who don’t want to sign up to 12 month DSL contracts (students for instance) and the large swathes of the developing world where copper local loops don’t extend far. It’s a complicated story, and there is a lot of politiking involved, but interesting nonetheless.

Oh, and before you ask, WiMax has a massive role to play too, but that’s another story…..

China overtakes the US to become the world's largest broadband market

It was only a matter of time before China became the world's largest broadband market, and analysts Point Topic have confirmed this milestone in a recent worldwide study. "This is a major milestone for China," says Oliver Johnson, Chief Executive of Point Topic. "Launching people into space is spectacular, but having the biggest broadband market down here on earth means a lot more for building a modern, hi-tech economy."

Market watchers have been predicting for some time that China would become the world's leading broadband nation, as Enterprise Briefing reported in 2006, but in the end it had to wait until 2008. Point Topic said that both China and the US had 78 million broadband lines at the end of August 2008, but that China was growing twice as fast. In fact, the US's broadband growth has been slowing since the end of 2007, with the nation only installing an additional 1.1 million broadband lines in Q2 2008, compared to 3.4 million in the last quarter of 2007. Growth in China on the other hand has been accelerating with new additions rising to 5 million from 3 million in the same period. The Chinese government sees broadband as an essential part of its infrastructure and has been instrumental in driving growth.

Unlike the US, where cable still rules the roost, broadband in China is dominated by xDSL technology, according to Point Topic. China has some 60 million installed xDSL lines, with the remaining broadband lines being largely made up of fibre-to-the-home and its variants (FTTx). DSL is also still the main broadband access technology in the major European markets of Germany, UK, France, Italy and Spain, while Japan and Korea are the only other countries with any notable FTTx deployment.

Germany is Europe's largest broadband market with 21.8 million installed lines, followed by the UK and France (both 16.7 million). Japan (29.4 million) and South Korea (15.3 million) follow China in Asia and the Pacific. In the Americas Canada (9 million) and Brazil (8.5 million) are second and third after the US. In terms of household penetration, the tiny principality of Monaco leads, with 100%, followed by South Korea (97.2%) and Singapore (89.6 %).

burgeoning kenyan mobile market gets fourth operator

Orange is extending its footprint in Africa, one of the world’s fastest growing telecoms markets. France Telecom has announced that it will be launching a nationwide GSM network in Kenya, following the acquisition of a majority shareholding in incumbent operator Telecom Kenya. This is the fourth nationwide GSM network in Kenya, and both mobile and fixed networks will be branded Orange. The launch of cellular services means Orange becomes Kenya’s first fully integrated fixed line, mobile and Internet provider.

Kenya, located in East Africa and home to 37 million people is an important regional hub for trade and finance. The government has been targeting inward investment, particular in the form of offshore outsourcing. To support the move into the hi-tech service economy, communications with the rest of the world are receiving a boost. For instance, sub-sea cables are being laid to the United Arab Emirates and the East Africa Submarine Cable System will link East and Southern Africa to the rest of the world.

Like many African countries, mobile communications dominate fixed line. There are around 12 million mobile subscribers in Kenya, about a one-third market penetration, so while growing rapidly, there is plenty of room for further growth. Fixed wireless services are also doing well; Orange Kenya has around 200,000 subscribers to its limited mobility CDMA service. This brings mobile networks to rural villages but does not supporting roaming between cells so it’s a bit like supercharged DECT. Enterprises will be interested to know that there is also significant investment in nationwide backbones and WiMAX access networks. So with lots of competition between operators, investment in new networks, there’s ample evidence that Kenya has become of the continents most dynamic telecom markets.

Orange’s $390m purchase of a controlling interest in Telecom Kenya, Kenya’s largest operator, last year, is proof that Africa remains high on FT’s overall strategy. FT Group has a major commitment to developing fixed and mobile services, particularly helping incumbent operators make the transition to full market liberalization. FT also operates networks in Botswana, Cameroon, Central African Republic, Egypt, Equatorial Guinea, Republic of Guinea, Guinea Bissau, Ivory Coast, Madagascar, Mali, Niger and Senegal. In each case, Orange is helping to modernize existing networks, and build out mobile and wireless networks in underserved locations. In Ivory Coast, for instance, Orange Business Services has built a Metro Ethernet network to support Cote D’Ivoire Telecom’s enterprise customers. This could well be the first all-optical backbone of its kind in Africa.

Solar offers answer for Africa's telecoms electricity shortages

Africa has seen a mobile telecoms boom with subscribers numbers ballooning as users access communications services that were denied them by the limited fixed infrastructure. Users in cities have been the main beneficiaries up to now, but African operators hope that base stations powered by renewable energy will help them overcome the lack of electricity supply in the countryside.

Electricity supply in Africa is patchy at the best of times and in many rural areas there is no access to the power grid. Operators deploying a rural mobile network need to rely on diesel generators to power the base stations. Not only is this an inefficient and dirty way of generating electricity, it also gives operators the headache of managing and supplying diesel fuel across the country. To compound their difficulties, the price of diesel fuel is going through the roof, making it expensive for them to service low-return customers.

Renewable energy may just provide them with the answer. Indian company VNL has just launched a low-cost solar-powered base station that would be ideal for African operators. The base station is powered by 2-8 m2 solar panel and has a backup battery that is also charged by the sun. All the equipment, including the mobile switching center (MSC) and base station controller (BSC) packs into two trucks and doesn't need to be installed by a specialist engineer.

VNL aren't the only company with renewables-powered mobile infrastructure, Swedish company Flexenclosure provides a solar and wind powered base station, and even mainstream equipment suppliers such as Ericsson and Nokia are in on the act. Getting communications services to the countryside is more than just sustaining the growth rates of African mobile operators, it vital to bridge the digital divide.