 |
 Back to 2005 Press Releases
|
Gartner Predicts Changing User Habits Will Cause Fundamental Shift in the Economics and Value of Voice Connection By 2009 |
 |
Asia Pacific region to overtake Western Europe as second largest market in 2006
Consumer segment will see surge in VoIP, with fourfold revenue growth between 2004 and 2009 |
Egham, UK, 3 November, 2005 - Gartner today forecast that the global telecommunications market will remain the single largest segment by revenues of the global information technology (IT) market, growing by a healthy compounded annualised rate of 5 percent between 2004 and 2009. Mobile and broadband services, conversion to Internet Protocol (IP) infrastructures and mobile handset sales, and rising rates of demand in emerging economies, particularly within Asia, will be major contributors to further growth. However, despite this overall strength, Gartner warns that by 2009, changing user habits will fundamentally shift the economics and value of voice connection. For example, one third of consumers are expected to disconnect their public switched telephone network (PSTN) lines by then in favour of voice over Internet protocol (VoIP) and wireless.
In 2005, the telecom market will represent 3.5 percent of the global gross domestic product (GDP), with the overall IT market representing six percent of global GDP.
Gartner unveiled its views on the future of the telecommunications industry ahead of its Symposium/ITxpo conference in Cannes, France, taking place November 7-11, 2005. Several thousand senior IT strategists and practitioners from across Europe are expected to join more than 100 Gartner analysts at the conference to gain insight into how their organisations can use technology to address business challenges and improve operational efficiency.
Gartner predicts that the majority of the coming growth in the telecommunications industry will be in the services and mobile sectors. Gartner anticipates that mobile services will grow 8.5 percent compound annual growth rate (CAGR) by 2009, with an estimated three billion global subscribers by 2010. Broadband services will lead in the fixed-line consumer segment. Digital subscriber line (DSL) will remain the preferred medium, but Gartner predicts Ethernet will grow most rapidly, achieving 40 percent CAGR between 2004 and 2009. Revenues in the global telecommunications equipment sector are projected to rise by 41 percent in the same period, to $384 billion in 2009 from $272 billion in 2004.
"The sector that will experience the most dramatic growth will be the mobile handset market, with devices such as smart phones and wireless personal digital assistants (PDAs)," said Mike Harris, group vice president at Gartner. According to Gartner forecasts, there will be three billion mobile subscribers in the world by 2010, a doubling of current subscriber levels. This doubling will occur for two reasons. One, the increased proliferation of basic, low-priced handsets, which will cost as little as $25 or less in 2010, and, two, increased network coverage, with penetration expanding to lower-income but densely populated regions of countries such as China and India.
Gartner predicts that the Asia/Pacific region will rival North America as the world's leading telecom market in 2009, and overtake Western Europe as the second largest market in 2006. Asia/Pacific's continued expansion will reflect the strength of emerging markets in China, India, Thailand, Indonesia and the Philippines. "Growth in these markets will lead to new players, new products, new markets and therefore new challenges for all involved," said David Neil, research vice president at Gartner. "Winners will be players that tap into the wireless and/or IP revolution by providing applications and services that use these technologies. Some losers will be traditional providers that do not change or do not change quickly enough. Other losers will be those that do not have a clear wireless strategy."
Mr Neil continued, "The wave of consolidation in recent years is a telling sign as to how the hierarchy of telecom operators has changed. It's astonishing to think that only six years ago, AT&T was ranked second in the top 13 telecommunications carriers. By 2004, AT&T had dropped to number nine due to divestments to reduce the debt accumulated in the early 2000s. The market as we knew it has been flipped on its head. The trend continues for mobile operators such as Vodafone to overtake traditional fixed line operators such as AT&T and BT to become the world's dominant players."
"Carriers in Asia/Pacific fair better than others," Mr. Neil said. "They generally have better operating margins because they conduct their business in markets with significant growth, less price pressure or less competition. The North American market is in the middle of a deep restructuring that will lead to the creation of few large dominant players. They will offer a range of services and cost structures that will mirror those of European counterparts who currently enjoy better operating margins. In the short term, operating margins may improve as cost structures change. However, in the long term, telecommunications companies will need to find new sources of revenues or continue restructuring to cut costs."
Gartner recommends that telecommunication companies use consumer-focused industry innovations to their advantage. Serving consumer needs will be a critical element of any operator's strategy and success in the business market. An example of this is the rise of VoIP and how changing user habits are altering the economics and value of voice transmission.
Gartner predicts that by 2009, 99 percent of new voice connections will be wireless and 70 percent of total voice connections will be wireless. Furthermore, one third of consumers in Northern America and Western Europe will disconnect their PSTN lines in favour of VoIP and wireless. In the consumer segment, while the anticipated acceleration of VoIP demand - fourfold revenue growth between 2004 and 2009 - offers some glimmer of hope for fixed line operators. Low prices will limit revenue gains that otherwise would offset some of the revenue decline in circuit-switched voice. In the corporate segment, Gartner predicts spending on VoIP will grow at a compounded annualized rate of 23.7 percent from 2004 to 2009. Yet aggregate VoIP revenues will amount to only 10 percent of total switched voice revenue in 2009.
In order to address the threat of VoIP and the subsequent erosion of their market, fixed line operators are integrating wireless and fixed offerings. Their selling point will be the package of one device, one number, one bill and one messaging platform. However if mobile voice pricing continues to fall, consumers may migrate even more rapidly to mobile-only rather than to converged fixed/mobile.
Gartner predicts that by 2010, the Internet will be able to support 70 percent of business needs and deliver acceptable consumer quality. This means that users can expect an equivalent level of quality that they currently receive on their mobile phones. Gartner also predicts that by 2010, the majority of small and medium sized businesses will rely on Internet Protocol virtual private networks (IP VPNs) over the public Internet for their wide area network (WAN) needs.
Gartner recommendations
Gartner offers the following recommendations to vendors operating in the telecommunications market:
- In order to survive, telecommunications companies have to recognise that we are living in a world of IP. To be successful they must develop and leverage new applications to take advantage of this.
- Service providers and others must take steps to improve the overall performance of the Internet, particularly quality, security and consistency, if the Internet is to be used as the 'corporate communications backbone'.
- Telecommunication companies, equipment vendors and service providers should use consumer-focused industry innovations to their advantage, as serving consumer needs will be a critical element of any operator's strategy and success in the business market.
- Focus on fixed-mobile substitution first for the enterprise market, as complete substitution for mobile is less likely than in the consumer market.
- Network service providers must rapidly deploy their own VoIP offerings - or else risk their PSTN customers being lost entirely.
And the following advice to end-users:
- Network managers must engage business users in evaluating ways in which businesses can change to take advantage of real-time and mobile communications technologies.
- Identify business applications and process improvements enabled by IP-based infrastructure, i.e. if voice is embedded into a sales force automation application, how does that change an organisations' booking process?
- Ensure that service providers have clear wireless, mobility, IP and managed services strategies and near term implementation timeframes, as end users will likely be using all of these for mission critical business applications in the near future.
- The financial strength of many providers will change in the next five years. As a result, vendor consolidation will continue. End-users are urged not to sign long term deals. They should monitor the financial health of their provider continually and ensure contractual clauses are put in place to allow contract termination if desired.
- Learn from Asian providers and users. Asian vendors should be on the end-user shortlist for mobile handsets and networking products; user service adoption is well ahead of North America.
Press Contact:
For further information about the research or to speak to the analysts, please contact Bite Communications on Tel: +44 (0)20 8834 3508 or email: gartner@bitepr.com.
About Gartner Symposium/ITxpo:
Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more than 10,000 IT professionals from the world's leading enterprises, Gartner's annual Symposium/ITxpo events are key components of their annual planning efforts. Attendees rely on Gartner Symposium/ITxpo to gain insight into how their organizations can use technology to address business challenges and improve operational efficiency.
In Cannes an integral part of the Gartner Symposium is the ITxpo show floor, where more than 80 technology companies will give attendees and press an opportunity to see and experience the latest technology solutions.
|
About Gartner:
Gartner, Inc. (NYSE: IT) is the leading provider of research and analysis on the global information technology industry. Gartner serves more than 9,000 clients, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company focuses on delivering objective, in-depth analysis and actionable advice to enable clients to make more informed business and technology decisions. The Company's businesses consist of Research and Events for IT professionals; Gartner Executive Programs, membership programs and peer networking services; and Gartner Consulting, customized engagements with a specific emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has more than 3,900 associates, including more than 1,200 research analysts and consultants, in more than 75 countries worldwide. For more information,
visit www.gartner.com.
|
|
|
|
|
