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2014 Year-End Review and Industry Predictions for 2015: Insights on the Telecoms, Media, and Technology Sector

By Cartesian

As the year draws to a close, there is an opportunity to reflect on the year behind us and to consider what is in store for the year ahead. Every year, we at Cartesian like to share our reflections, offer a few predictions and evaluate the success of our predictions from the previous year.

At Cartesian, 2014 marked a year of exciting transitions. Our rebrand and reorganization led to increased opportunities and collaboration across our strategy and execution practice areas. We also expanded our managed solutions offer leveraging our proprietary Ascertain® platform to develop new analytically driven optimization solutions and further enhanced our offers through key partnerships in technology solutions. As we plan for 2015, we will draw on lessons from the trends described below to advance our own thinking around how we can assist our clients with shaping the future of technology, media and communications.

2014: The Year That Was

Competition Intensifies among Telecom Networks

As mobile adoption continued to grow across the globe, wireless operators further invested in network upgrades. LTE rollout expanded in developed and emerging markets and LTE-A deployments occurred in South Korea and the UK. Providers in the fixed telco market also worked to increase capacity, as Fiber network deployments occurred across the US, UK and the Middle East and DOCSIS 3.1 deployment grew nearer. In the US, the threat of mass deployment by Google Fiber led some incumbents to increase investments and drove increased prevalence of ‘Fiber to the Press Release.’ As competition intensified in many markets globally, service providers focused on optimizing their internal processes, leveraging analytical tools to improve customer lifecycle management and incorporating technology-based solutions to reduce facilities and energy costs.

Over-the-Top Shakes Up Media, Again

Cord-cutting continued to accelerate, but cable companies showed new strength in negotiations with broadcasters and distribution partners. Major merger announcements (e.g., Comcast / Time Warner Cable, AT&T / DirecTV and Sky UK / Italia / Deutschland) left many predicting that consolidation would both continue and lead to further increases in operator buying power, but also heated up debate around Net Neutrality. Meanwhile, growth in the over-the-top market accelerated as Amazon pushed its Prime membership to steer customers toward its media ecosystem, while HBO announced plans to launch a standalone service and Google introduced a low-priced media streaming device.

The ICT Revolution Continues among Enterprises

Information and communications technology continued its tear of revolutionizing industries as IT spending climbed higher in the healthcare, banking, and security sectors. Meanwhile, enterprises continued to incorporate bring-your-own-device and virtual work practices, although the extent of this transition varied by industry and country. Enterprises also continued to transition their big data analytics needs to public and private clouds, as competition among enterprise cloud market leaders Amazon, Microsoft and Google led to strengthened cloud ecosystems and lower prices.

Social Stays on Top and Devices Evolve Again

In the application space, social proved to be as strong as ever, as Facebook acquired WhatsApp, Freemium games (e.g., Candy Crush, Clash of Clans) made billions and growth of social media platforms continued to soar (e.g., Tumblr, Pinterest, Instagram, LinkedIn). On the hardware side, Apple’s decision to follow in Android’s footsteps by transitioning to larger phones along with its simultaneous announcement of the Apple Watch epitomized the evolving role of the mobile device. Amazon introduced its own smartphone, but its failure to gain traction, due to incorrect pricing, left many wondering whether the retail behemoth was headed down the wrong path.

The Physical World Continues to Get Connected

The Internet of Things continued to progress as new entrants and incumbents alike raced to develop meaningful connected devices for the enterprise, consumer and government use, while vehicle-to-vehicle communication and connected home continued to take shape. Meanwhile, mobile payments received a boost as Apple incorporated near-field communication into its latest iPhone and assembled bank and retailer partnerships in preparation for its launch of Apple Pay. The public and private sectors continued to explore how to monetize the smart cities opportunity, to tackle rising challenges in urban populations.

 

Not Forgetting…

There were a number of other noteworthy trends:

Momentum for small cell deployment accelerates.

Carriers turned to small cells to densify their networks and to reduce traffic load on macro cells. In the US, the FCC eased restrictions related to wireless infrastructure deployment. Meanwhile, a partnership between Alcatel-Lucent and JC Decaux focused on approaches to integrating small cells into street furniture.

Quad play competition fuels UK competition.

As Virgin consolidated the packaging of its services and Vodafone announced interest in adding home broadband and Pay-TV, BT took steps towards acquiring EE, which had recently introduced its own EE TV to round out its quad-play offer. Many see this as a prelude to an increase in quad-play propositions in developed regions around the world.

Network Functions Virtualization adoption grows.

Increases in the efficiency and reliability of cloud computing incentivized network operators to continue their transition to cloud. This increased the plausibility of migration to network functions virtualization, as we saw growth in trials by network operators.

Traditional server and storage providers face a challenging decision.

As cloud commoditization continued, traditional server / storage providers were forced to transition to cloud services or divest legacy products. Rackspace, a managed hosting pioneer, shifted its focus to the public cloud, branding itself as “the open cloud company” and shifting to compete on superior service, rather than price.

Drone innovation sparks regulatory responses.

Innovation around drones occurred across a variety of industries including oil and gas, construction and insurance. As companies developed and tested drones for commercial use, regulatory bodies were forced to consider how to address the potential safety issues.

3D printing progresses as a tech giant announces plans to enter.

While still some time off from becoming mainstream, 3D printing made progress on both the consumer and commercial fronts. Tech giant HP announced plans to enter, further demonstrating the growing market opportunity, as 3D printing companies continued racing to develop technologies and identify uses across industries such as aerospace, automotive and consumer products.

Controversy brews over the definition, and potential, of Artificial Intelligence.

When a computer program called Eugene Goostman passed the Turing test this year, some touted this as a major accomplishment for AI, while others argued the program was not truly ‘intelligent.’ Meanwhile, Stephen Hawking and Elon Musk caught the public’s attention when they expressed their fear of the potential dangers of AI.

2014 Prediction Review

In December 2013, we made ten predictions for 2014 – here’s how we did:

Prediction for 2014

Did It Happen?

More consolidation
of
network operators

 

YES

M&A was certainly a theme of 2014, as monumental announcements were made and many deals were struck among operators, both in-country and cross-border. Examples include:

  • Comcast / Time Warner Cable merger announced (Feb)
  • AT&T / DIRECTV acquisition announced (May)
  • TDC Denmark reveals interest in Sweden Com Hem (Dec)
  • Telenor / TeliaSonera merge Denmark operations (Dec)
  • BT makes an offer to acquire EE (Dec)

European LTE
ramps up sharply

 

PROGRESS

There is still catching up to do, but market data shows welcome progress: in the UK connections ramped quickly, reaching 6 million in Q1 (according to Ofcom); Deutsche Telekom and KPN both report 4G now makes up over 10% of their domestic bases; and some countries now enjoy greater than 75% population coverage.

Traction for mobile
payments in US / Europe

 

THERE'S MOVEMENT

Though ApplePay’s entrance will spark progress, adoption is taking the form of an ongoing evolution, rather than an overnight transformation. For Android, BBVA announced launching of Visa-backed near-field communications payments service based on host card emulation, a technology that enables banks to bypass the operator and its control of the SIM.

Mobile roaming
becomes
more political

 

YES

Both the Gulf community and Southern African countries issued market consultations and held sessions to discuss the international mobile roaming agenda, demonstrating their commitment to strengthening ICT sector competition to improve end-user pricing.

M&A among content aggregators

 

YES

Amazon purchased Twitch, Apple acquired BookLamp and Google added Songza to its portfolio. These acquisitions, among others (Seatwave / Timbre, Google / spider.io) highlighted a strong year for M&A among content aggregators.

Operators seek big
value in Big Data

 

YES

Fighting fierce competition, operators focused substantial effort on leveraging analytics to improve their performance. Some examples are listed below:

  • Operators in the UK used Big data for churn prediction
  • Verizon leveraged data to improve its managed security services
  • C Spire leveraged analytics to improve customer service and to create its PERCS rewards program
  • A Swisscom / SAS collaboration used social media data to support customer communication and engagement
  • Telefónica and others with funding support from the European Commission planned to establish ODINE, an industry-focused open data start-up incubator

More large-scale online
security
incidents

 

YES

Despite an 8% increase in IT security spending, this year saw some of the largest security challenges to date, including the Heartbleed virus hitting websites worldwide in May 2014 and hacking of Sony Pictures in December.

Content driven operators
must
hike prices

 

ALMOST

As service providers recognized the need to provide premium content-based services in order to remain competitive, they were forced to raise prices. Pricing increases included Netflix raising its pricing as it introduced exclusive content and Amazon doubling the price of its disks by post in the UK.

Ultra HD TV
makes slow progress

 

TAKING OFF

While 4K TV uptake was slow for most of 2014, sales finally took-off in Q3, with a 500% increase YoY. Total sales for the year were estimated at 6.4m units, driven largely by purchases in China (60% of total sales), as well as a boost from Black Friday deals offered across the US and UK.

Cloud giants increase their share, as the NSA revelations do not have a lasting impact

 

ALMOST

As AWS continued to dominate the fast growing enterprise cloud market, Google and Microsoft steadily grew their footprints, establishing themselves alongside Amazon as the three clear leaders in the market. Constant price cuts and commoditization of the market continued. The NSA revelations appear to have had a lasting impact, as cloud providers have increased their focus on addressing enterprise and consumer security concerns.

 

Predictions for 2015

Looking forward to the year ahead, here are our predictions for 2015:

1. High altitude network deployment trials show which approaches are viable.

Initial commercial trials of non-traditional high altitude networks, focused on addressing the digital divide, occur. Which approaches are viable becomes apparent (e.g., Google Loon, Facebook Low Orbit satellite and high altitude planes).

2. LTE feeds small cell backhaul revenue growth, while 5G fails to take shape.

As demand for video consumption over LTE and LTE-Advanced networks drives cell densification, LTE small cell backhaul grows at twice the rate of 3G backhaul. Meanwhile, carriers continue to demand a definition for 5G, but the industry fails to make substantial strides.

3. Soft SIM arrives to Android.

Soft SIM becomes a feature on Android tablets as Google tries to overcome the barrier of data roaming prices to the use of its services when abroad.

4. New and refarmed spectrum enables innovation.

Spectrum repurposed for LTE from older air interfaces and increased deployment of higher-frequency spectrum increases capacity – supporting innovation to address urban needs (e.g., public safety, transportation).

5. Over-the-Top leads to changes in the cable industry dynamic.

OTT hits a milestone. Though HBO’s standalone service turns out to be niche in focus, other content providers follow with mainstream OTT offers, driving a rapid increase in cord shaving / cord cutting. Sony and Dish introduce linear OTT network packages and, following its acquisition of TWC, Comcast announces plans to do the same, forever changing the cable industry dynamic.

6. Pressure to implement 4K creates hardship for IPTV providers.

The push to 4K OTT accelerates the pay-TV providers’ timelines for their move into 4K, pressuring the capital spending plans of IPTV providers that have limited available bandwidth.

7. Cloud differentiation continues.

Cloud service providers continue to differentiate their enterprise offers by orchestrating hybrid cloud services, providing service-level agreements across cloud and connectivity, and partnering to serve customers’ cross-border requirements. Competing cloud-enabled marketplaces intensify their efforts to attract and on-board partners.

8. Wearables market makes progress but remains fragmented.

The Apple Watch increases interest in wearables and drives a luxury brand to introduce its own high-end wearable product. The increasing capability and accuracy of wearable sensors opens the door to significant new healthcare applications.

9. Disruption from the sharing economy continues.

The sharing economy goes public as IPOs are announced for Uber and AirBNB. A new sharing app disrupts a traditional consumer market and the volume of business-to-business sharing significantly increases.

10. Apple does not emerge as the mobile payment leader, yet.

Fragmentation of ecosystem participants, the strength of other competitors, the lack of NFC on legacy iPhones and pushback from merchants associated with CurrentC are too difficult for ApplePay to overcome in 2015.