Rapid growth in data volume, technological change

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The massive growth in demand for information and entertainment has dominated the development of the telecommunications sector for a number of years. The ability to offer data access at more or less all times and all locations is becoming a major competitive advantage. Connectivity is increasingly becoming an integrated element of everyday business and private life. Smartphones have long been established as the standard device for information, communication and work, while equipment, machinery and vehicles are increasingly being connected to the internet, particularly in the areas of healthcare, transportation and public utilities.

Industry experts are anticipating average annual growth of 40% in global mobile data traffic and 25% in fixed-line data traffic between 2014 and 2020. Between the third quarter of 2013 and the third quarter of 2014 alone, global mobile data traffic increased by 60%. Smartphone-based data traffic is expected to increase eightfold by 2020, while the same is true for mobile data traffic generally.4) 5)

Mobile data traffic development
at Telekom Austria Group

Mobile data traffic development at Telekom Austria Group (line chart)

Expectations in terms of data upload and download speeds are also steadily rising. Mobile and fixed-line services are increasingly dominated by ‘All IP’, i. e. the expectation that all services can be accessed by all users at any time and in any place. Cloud services, which are increasingly used to access content by various devices, are also becoming more and more important.

The rapid development of information and communications technology requires a high level of ongoing investment in network quality, which in turn represents a substantial cost factor. This includes the expansion of fibre networks and the LTE infrastructure. Austrian providers, for example, spent more than EUR 2 bn on mobile spectrum in the frequency auction in September/October 2013 alone. In Europe these licences are generally sold by auction and granted for a period of 15 to 20 years.

The challenge for telecommunications providers is to not only expand their infrastructure to cope with growth in data traffic, but also to ‘monetise’ this growth, i. e. to convert it into revenues and earnings. The fact that customers in many markets are used to unlimited data tariffs at fixed prices makes this a complex matter for the companies involved. In this market environment higher network quality is one way for providers to differentiate themselves from their competitors.

4) ERICSSON Mobility Report November 2014
5) Telekom Austria Group mobile data traffic approximately 6,000 terabyte at the end of 2014

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