Could wireless displace
fixed-line telecoms?

8 Feb 2006

The telecoms sector could evolve in very different ways over the next five to 10 years with the potential for wireless to completely displace fixed-line telecoms to create a dominant ‘fixed wireless’ as one of the suggested future routes, a telecoms analysis firm has suggested.

In a report entitled Scenarios for the Evolution of the Wireless Industry in Europe to 2010 and Beyond, Analysys Research forecasts a 30pc increase in average revenue per user (ARPU) by 2012 from €27.10 to €30.20.

Major uncertainties in the report include fixed to mobile substitution, convergence, service demand, disruptive technologies and changing business models. These could have a massive impact on the wireless industry going forward.

Report co-author Alastair Brydon said: “We have developed three plausible scenarios — substitution, convergence and fragmentation — for the evolution of the wireless industry, to help network operators, equipment vendors and other interested parties develop and test their plans. The scenarios demonstrate that some very different outcomes are possible over the next five to 10 years.”

In the substitution scenario, mobile operators build on the success of early home-zone services to drive fixed-mobile substitution. They successfully displace fixed network services in the home and workplace with a ‘double play’ of voice and broadband internet access, enabled by substantial improvements in performance and cost per megabyte from 3G Long Term Evolution (3G LTE, also referred to as Super 3G). The strategy displaces a significant proportion of fixed-network usage, as well as many fixed-network lines, to increase wireless ARPU. The dominance of wireless services delivered over 3G (and 3G LTE) strengthens the role of mobile operators, while equipment vendors benefit from the substantial investment in cellular infrastructure and terminals.

In the convergence scenario, fixed operators strengthen their role in the home and workplace with broadband services, such as IPTV, that far outreach the capabilities of wireless networks. The success of converged voice services, enabled first by Unlicensed Mobile Access (UMA), and then by Internet Multimedia Subsystem (IMS) and Session Initiation Protocol (SIP), ensures that the vast majority of voice calls made in the home are carried on fixed networks, halting the migration of voice traffic to mobile networks. Wireless ARPU declines and there is little need for investment in 3G capacity or coverage. Significant consolidation occurs, with the remaining mobile operators competing to form alliances with the leading fixed operators.

In the fragmentation scenario, no single dominant approach emerges. A patchwork of different services and wireless technologies (including WiMAX and DVB-H) are deployed across Europe as operators attempt to seize a competitive advantage in their respective markets. Voice and messaging decline to a much smaller proportion of total ARPU as operators focus predominantly on data applications, such as mobile TV and internet access, and there is increasing adoption of wireless voice over IP services. In effect, wireless networks become bit pipes.

Report co-author Mark Heath observes: “Business plans are often based on unwritten assumptions concerning the evolution of the wireless industry. It is important that organisations evaluate the robustness of their plans in the light of different possible evolution paths. Organisations should identify a preferred scenario and attempt to make it happen, rather than simply predicting and reacting to future events. They also need contingency plans to cope with alternative outcomes.”

By John Kennedy