Tuesday, March 23, 2010

Ovum outlines Australia’s 3G mobile market future: 2010–15

Nathan Burley, Analyst, Ovum

AUSTRALIA: Competition intensifies while service quality becomes even more important. As the market continues to mature, end-user data service quality in terms of throughput, coverage, latency and overall experience will be in focus.

Telstra retains coverage and quality differentiation over its rivals but ‘national’ coverage becomes basic requirement of competing in this market, and the gap between Telstra and its competitors’ narrows. The government backed National Broadband Network (NBN) and the company set up to deliver its services (NBN Co.) potentially provides more backhaul options which further diminish Telstra’s advantages.

Capacity questions continue throughout 2010 as traffic growth continues rapidly. Managing capacity and efficient data delivery is focus of operators, outside of which operators struggle to differentiate. Volume-based pricing with ever increasing data caps will remain the norm. However, an operator may make a hard competitive decision on ‘unlimited data’ late in the period.

Mobile broadband provides growth but voice still crucial. Voice strategy will still have paramount importance given it accounted for 36 percent of revenue in 2009. It will not be until 2014 that voice revenue is overtaken by data. Mobile VoIP (both carrier but more disruptively non-carrier) will begin to have an impact in the forecast period. In terms of pricing, we will see more moves to unlimited based calling plans throughout the period.

Migration to 3G accelerates. 2G users upgrade to 3G as operators phase out 2G products for all but ultra low-end prepaid phones early in period, and completely by mid-period. Later in the period, as GSM reaches its sunset years, forced migration will begin, first by Telstra as it shuts down GSM completely. Ovum estimates that 68 percent of connections will be 3G by end 2010 and 94 percent of connections will be 3G/LTE by the end of 2014.

LTE impact only late in period. Continued evolution of HSPA networks, and LTE deployment will enhance but not revolutionise the user experience. Demand for wireless data will continue to grow and capacity, rather than speed, will be the major driver of further network investment.

Significant impact from LTE will not occur until 2014, as networks are deployed nationally in digital dividend spectrum. LTE will however be deployed earlier notably in the 2.5GHz band, yet as was the case with 3G, little will be gained by being first mover.

Smartphone adoption of multiple platforms continues. Data packs will increasingly be attached to handset accounts, and this will become standard practice by mid-period.

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