[2010 trends] Telecommunications tsunami for 2010

If 2009 were a year of earthquakes in the telecommunications sector, 2010 will bring the tsunami.

The past year has been breathtaking in the scope and scale of events in the industry. The divorce between Telkom and Vodacom and the listing of the latter on the JSE, the collapse of the Bharti MTN merger, the landing of the SEACOM undersea cable, the first cut ever in the interconnect fee for calls between cellular operators, and the beginning of the roll-out of new fibre optic backbones across South Africa, mean that nothing will ever be the same again.

The coming year will see the implications of all these events not only becoming clear, but also transforming the market.

1. Operators begin to leverage the new fibre-optic networks to supply corporate clients and resellers with bigger, faster and more flexible capacity. Resellers, in the form of Internet service providers (ISPs ) and communications service providers, begin to make more noise about the more cost-effective packages they are able to offer as the result of this.

2. The rate of Internet growth in South Africa continues to accelerate. According to the preliminary findings of the Internet Access in South Africa 2010 study, the number of Internet users in South Africa last year not only grew by more than 10% for a second year in a row, but in fact outpaced the 13% growth seen the year before, reaching 15%. This increased growth rate is expected to be repeated in 2010.

3. The number of cellular subscriptions declines for the first time, as new connections fail to keep up with churn. The drop in the interconnect rate will, however, result in more calls being made by customers, which will arrest the decline in the key industry metric of average revenue per user (ARPU).

4. The first 4G or fourth generation mobile broadband technology will begin to come to market. Formally called Long Term Evolution (LTE), 4G will mean mobile broadband speeds starting at the current speed limit of 7.2Mbps, and increasing over the next decade to 100Mbps, the current speed being offered via fibre optic networks.

   Meanwhile, mobile broadband will make a significant enough contribution to cellular networks' revenue to spur them into better provisioning, ie ensuring better 3G throughput across their networks instead of only in key hubs. However, performance will still lag far behind fixed line broadband (ie ADSL).

5. Fibre to the Home (FTTH) will increasingly come into focus as it becomes viable for affluent communities and new gated communities. Word of mouth will spread on the performance of FTTH, which emulates the experience of cable broadband subscribers in the US and Europe, and more and more people will say "I want a bit of that". This will create a demand that may not yet be met, but that will fuel the growth of an industry still in search of a customer base.

6. Web 2.0 will lose favour as a defining term for interactive online architectures, services and sites, when it becomes clear that it is merely a streamlining of so-called Web 1.0. Web 3.0 is already over-abused by all the digital marketers wanting to be seen as being ahead of the curve. Web 4.0 is the answer, as it will align with the arrival of 4G-based services. It won't arrive fully formed in 2010, but as 4G begins to deploy, the possibilities of mobile services will begin to arrive in public and business consciousness.

7. Cloud computing becomes more than a buzzword, and case studies begin to show that it is a key strategy for the future, but it will still be resisted by smaller companies as merely a buzzword. It will be pushed hard by global IT companies such as Microsoft, IBM, Intel, Cisco, EMC and VMware (the latter three have created the VCE coalition to deliver an integrated, open standard architecture for cloud computing), but large corporate clients with skilled CIOs will lead the way in implementing it in ways that the vendors might not have anticipated.

   In South Africa, the arrival of cloud computing in a big way will be almost synchronised with the arrival of massive new bandwidth that makes the concept viable. The concept of the Private Cloud, where an enterprise has its own dedicated patch of the cloud, will be more compelling than the public cloud from which any customer will pick and choose applications.

8. Mobile commerce finally becomes a distinct industry segment, both driven by cellphone banking and by the myriad mobile payment solutions coming to market.

9. With better, more and cheaper broadband, we will see more Internet-oriented start-ups emerge in South Africa. Because there are likely to be so many more start-ups than in recent years, there is a higher probability that we will see start-ups with a sustainable revenue model rather than merely a venture capital-oriented revenue model, as has been the case with the best-known examples from the past few years. Some of the most successful of these businesses will capture a slice of the emerging mobile applications and mobile commerce markets.

10. Following on from the above, established South African brands with an international presence AND a sustainable revenue model emerge more strongly above the radar. Clickatell, Acceleration, and Fundamo, are among the brands to watch.