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Jan 1

Will Data Demand Keep Growing at 60% a Year?

Forecasting the future is a tough business, at least in part because people respond to changes in incentives, which in turn reshapes their behavior in non-linear ways. Many of you who follow trends in bandwidth are familiar with a basic rule suggesting that bandwidth consumption grows about 60 percent a year, globally or in most market segments. It therefore is logical to assume continued growth at about that magnitude. But that might not be a safe assumption.

One might assume that later users are less heavy consumers of data than the early adopters. Retail pricing is shifting in ways that provide clear incentives for users to make choices about which networks they use when connecting to the Internet. And service providers also have new incentives to encourage offloading of data demand. Wi-Fi is more prevalent, all the time, and service providers have a vested interest in convincing their own customers to use Wi-Fi when possible, in part to relieve strain on mobile networks, and in part to provide a better end user experience. To be sure, the percentage of data-using devices also is growing steadily, adding more users. So any attempt to predict future usage has multiple moving inputs. So it is reasonable to ask whether smart phone consumers are making significant changes in behavior that could slow the rate of mobile broadband data consumption.

Given trends that show substantial  use of Wi-Fi connections in place of mobile network access, that is a possibility. A recent study by NPD Connected Intelligence, for example, tracking usage on 1,200 smart phones, shows a mixed pattern. Android users on the Verizon, AT&T and Sprint networks seem to have decreased their use of mobile data networks between April 2012 and October 2012, while T-Mobile USA Android users seem to have increased usage. Apple iPhone users on all of the networks except AT&T seem to have increased usage. Fierce Wireless notes that the iPhone sample is small, so the results might be an anomaly.

But at least a couple explanations could explain the data. It is conceivable that users are learning to economize by shifting to Wi-Fi access whenever possible. And even where mobile network usage is growing, it is possible the greater consumption is less than it would have been had users not begun shifting access to Wi-Fi. It is conceivable that new Android users are more budget conscious. And it remains possible that the demographics of Android and iPhone users are different in some material way. A number of surveys have shown that Apple iPhone users are, in fact, wealthier than Android users. Other studies suggesting iPhone spend more than Android users likewise might be related to differences in disposable income. That pattern was upheld, some studies suggest, on Black Friday of 2012 and also Cyber Monday of 2012. The NPD data is a snapshot in time, and one ought to be circumspect about what it really means. Nor are consumer preferences, demographics, disposable income or device type the only key variables.

Some of the service providers might be deliberately creating greater incentives for users to switch to Wi-Fi, in some cases allowing users to default to Wi-Fi automatically, which would increase use of the Wi-Fi access method. With mobile service providers having clear financial incentives to shift users to Wi-Fi, and with a greater move to use of small cell access (especially when those small cells also feature Wi-Fi access), it seems reasonable to assume at least a possibility that smart phone mobile network bandwidth consumption might not grow as fast as some have predicted. That will have key implications for any number of other elements of business strategy, such as new spectrum policies, the value of new spectrum, the amount of undersea cables that must be built, and the lit capacity on those cables.  How fast to deploy Long Term Evolution will be an issue in many markets, especially where 3G might meet demand in the near term. And service providers might have to rethink the pace of infrastructure upgrades, at least in terms of network elements that can handle higher speeds and more capacity. It bears watching.

Source: IP Carrier