At the end of last year, we made 10 predictions for 2017 for the telecoms, technology, and digital media sector. In this article, we assess our predictions against industry news from the last six months and give each a mid-year grade. Read on to find out which predictions are on track and which ones might be missing the mark.
Grading Our 2017 Predictions
By Micah Sachs
1. 5G will come early—in the form of ultra-fast fixed wireless.
WHAT WE SAID: The future of 5G will become a little bit clearer, as a major communications service provider will announce an urban build-out of a 5G network with commercial availability in 2018. But with a twist: it will be using high spectrum bands for fixed wireless, so as to provide 100 Mbps+ broadband speeds to homes at a fraction of the capital cost of fiber-to-the-home.
WHAT HAPPENED: Commercial availability of 5G fixed wireless in 2018 looks on track—we just don’t know what exact markets. Verizon has provided the most specifics, with its confirmation of 2018 commercial availability and its announcement of the 11 cities going through service trials in 2017. In Europe, Three announced it would cover 40% of the population of the United Kingdom with 5G fixed wireless within three years. Meanwhile, operators continued to stockpile assets for 5G roll-outs: AT&T bought FiberTower for its 24 and 39 GHz spectrum, Verizon beat out AT&T in a bidding war for Straightpath Communications and their 28 and 39 GHz spectrum, and T-Mobile gobbled up 40 MHz of 600 MHz spectrum in the incentive auction.
MID-YEAR GRADE: B+
2. Partnerships and white-labeled platforms will be the path forward for most Pay TV providers.
WHAT WE SAID: Providers facing major investment decisions for their Pay TV platforms will increasingly look to third parties to provide an end-to-end TV offering, whether via white-labeled IPTV platforms like Comcast’s X1 or partnerships with over-the-top multichannel offerings like DirecTV Now. Only providers with massive national or international scale will continue to invest heavily in their own platforms, while subscale providers will seek to minimize their exposure to Pay TV’s deteriorating economics.
WHAT HAPPENED: Not much. No new deals for Comcast’s X1 platform. No significant player getting out of video and partnering with DirecTV Now. Evolution Digital continued to sign up more small providers for its TiVo-enabled hybrid QAM/IPTV set-top box, but small providers have been migrating to TiVo for years. If anything, it’s been a half-year of in-house innovation, as new entrants joined the over-the-top multichannel fray (Google, Hulu, soon Verizon) and existing providers expanded their channel line-ups and improved their functionality and usability. Altice, meanwhile, announced the launch of its internally developed “The Box” in its US properties, demonstrating the benefits of international scale. An interesting development is the emergence of Amazon Prime as a primary channel for standalone OTT services like HBO Now and Showtime OTT.
MID-YEAR GRADE: D
3. Major sports will go over-the-top.
WHAT WE SAID: The unbundling and OTT migration of traditional Pay TV content will reach the next milestone in its evolution in 2017 when one or more major US or international sports leagues (e.g., NFL, NBA, Premier League) will announce the launch of a subscription-based OTT channel with premium content, likely in partnership with one of their rights partners—as both parties try to maintain ad rates in the face of ratings slides that started with the 2016 Summer Olympics.
WHAT HAPPENED: Over-the-top providers and sports leagues continued their dalliance, but no game-changer yet. The NFL sold non-exclusive rights to Thursday night games to Amazon, and Facebook started streaming one Major League Baseball game a week. Until these rights become more expansive and exclusive—or a league launches its own in-house streaming service with exclusive premium content, à la the WWE Network—sports will remain traditional TV’s “killer app.”
MID-YEAR GRADE: C
4. Operators with a traditionally conservative view towards fiber build-out will get more aggressive.
WHAT WE SAID: A few incumbent telcos and cable providers in the US, Europe and Asia will announce new large scale fiber build-outs, as they take a page from alt-nets like Zayo and euNetworks and embrace probability-based (vs. success-based) demand models and also better integrate fiber planning between their residential, enterprise and wholesale business units.
WHAT HAPPENED: Aggressiveness is in the eye of the beholder. Verizon announced an unprecedented fiber purchasing agreement with Corning worth $1.1 billion, although it’s not clear whether that is due to greatly increased demand or concern over industry-wide supply constraints and a desire to lock in favorable pricing. Altice announced an IPO to help raise funds for its large-scale FTTH build-out (announced in 2016), while Bell Canada, who had already been upgrading major portions of its network to FTTH, announced a CAD$854M project to expand fiber to 1 million-plus homes and businesses in greater Montreal. SNL Kagan sees US cable plant spending reaching an all-time peak of $3.7 billion in 2017—more than double the average from 2010 to 2013—in part due to Comcast overbuilding business areas with high-capacity fiber.
MID-YEAR GRADE: B-
5. Expect super-sized consolidation in the network equipment market.
WHAT WE SAID: Two of the big non-Chinese network vendors (Ericsson? Nokia? Cisco?) will pursue a mega-merger to increase bargaining power and fight competition from the duo of Huawei and ZTE. Regulatory approval will prove a slog.
WHAT HAPPENED: Nothing yet. March saw rumors of a merger between Ericsson and Cisco, but executives from both companies damped those down. All of the big network vendors continue to struggle with losses and moribund share prices.
MID-YEAR GRADE: C+
6. Augmented reality, not virtual reality, takes off.
WHAT WE SAID: One or more “killer apps” that have clear value (entertainment or otherwise) for consumers will take off like Pokémon Go did in 2016—but with more staying power. Meanwhile, another year will pass without widespread VR adoption, as device manufacturers continue to work out the kinks and game and movie studios hesitate to invest heavily in what will remain a small install base.
WHAT HAPPENED: No break-throughs so far, but not for lack of trying. Apple (ARKit), Facebook (Camera Effects) and Snap (3D Lenses) made significant platform announcements, but we are still waiting for the Google Maps of augmented reality. VR continues looking for its “killer app” as well, as headset manufacturers Oculus, HTC and Sony dialed back their VR marketing at E3, the world’s biggest video game expo.
MID-YEAR GRADE: C
7. Wholesale data centers will consolidate in response to the growing buyer power of hypercloud providers.
WHAT WE SAID: Two unrelated trends will lead to consolidation in the wholesale data center market: a shrinking number of massive buyers (Amazon, Microsoft, Google, Facebook) will motivate data center operators to increase their supplier power; and the share prices of red-hot dividend-generating data center REITs will cool in the face of rising interest rates, making acquisition targets more affordable.
WHAT HAPPENED: Consolidation happened, although not for all the reasons we said. Data center REIT stocks hit all-time highs on the back of record demand from the Internet giants, but that didn’t stop Digital Realty, the biggest public wholesale data center operator, from buying Dupont Fabros to get better access to the hyperscale cloud market. Meanwhile, Peak10 contributed to the consolidation of telco data center assets, buying ViaWest from Canada’s Shaw Communications, and positioning itself as one of the largest data center providers in Tier 2 markets. Digital Bridge continued its quiet empire-building, buying major data centers in Silicon Valley (Vantage Data Centers), Dallas (Stream), Salt Lake City (C7), Cleveland and Pittsburgh (both from 365 Data Centers).
MID-YEAR GRADE: A-
8. IoT-based cyber-attacks will lead to calls to regulate.
WHAT WE SAID: More wide-scale cyber-attacks using botnets of poorly secured IoT devices (WiFi routers, smart thermostats, cameras, toys) will lead to calls to regulate—and scrambling by consumer device manufacturers and software vendors to demonstrate to consumers their devices are secure.
WHAT HAPPENED: With no major IoT attack as of mid-year, public calls for regulation were muted: a Democratic congressman symbolically introduced a bill called the Securing IoT Act, and the Federal Trade Commission offered non-binding suggestions to IoT manufacturers on best practices for notifying customers about security issues. But vendors on both sides of the Atlantic looked to get ahead of the game by calling for more-or-less voluntary industry-wide IoT security standards, including Microsoft, a group of European semiconductor manufacturers (Infineon, NXP and STMicroelectronics) and the newly formed IoT Cybersecurity Alliance (AT&T, IBM, Nokia, Palo Alto Networks, Symantec and Trustonic).
MID-YEAR GRADE: B-
9. Home WiFi mesh will be commercialized.
WHAT WE SAID: While fixed-line operators in the US are just beginning to control the home Wi-Fi experience, European operators will start pushing WiFi mesh solutions to provide high bandwidth Wi-Fi coverage throughout the home to enable high quality video streaming.
WHAT HAPPENED: Following the launch of Google WiFi in late 2016, BT launched BT Whole Home, the first WiFi mesh product from a British service provider. In the US, Comcast continued to expand its product line for controlling home WiFi, launching the xFi app for managing WiFi networks and unveiling new WiFi “pods” that can combine into a mesh.
MID-YEAR GRADE: A
10. Software-Defined Network (SDN) and Network Function Virtualization (NFV) will grow… slowly.
WHAT WE SAID: Business services providers will continue to make announcements about new customer-facing services leveraging SDN and NFV, but the vast majority will be trial/proof-of-concept stage. Widespread commercial availability with robust SLAs will be a year or two away.
WHAT HAPPENED: It remains hard to separate the substance from the hype in a market where everyone wants to lead—but nobody wants to cannibalize their existing revenues. The boldest announcement came from NTT that it has launched an SD-WAN product available in more than 190 countries – which will surely lead to a slew of similar announcements from global telcos in the coming months. Network providers with limited footprints like Windstream, Sprint and Masergy launched or expanded SD-WAN products, while SDN pioneer AT&T signaled a “wait-and-see” approach on SD-WAN. Comcast, meanwhile, was the first of the U.S. cable operators to trial SD-WAN. Both Verizon and Orange have started virtual CPE (vCPE) trials, while BT announced plans to build on its iWAN service with an SD-WAN product in early 2017.
MID-YEAR GRADE: B