Intelligence Brief: Is AI on a slippery slope?

There is a strong case to be made that artificial intelligence (AI) is now the most central topic in technology. While the computer science that underpins AI has been in development since the 1950s, the rate of innovation has gone through multiple step changes in the last ten years.

The technological reasons for this are well understood: the advent of neural networks; an increase in semiconductor processing power; and a strategic shift away from AI systems that rely on parameter-driven algorithms towards self-reinforced and multiplicative learning, machines that get smarter the more data they are fed and scenarios they negotiate.

Development has been open and collaborative. The benefits of AI in process efficiency and, potentially, accuracy are clear. For this reason, R&D activity, pilots and commercial deployments stretch to virtually every sector of the economy from healthcare to automotive manufacturing to telecom networks. A recent Vodafone survey indicated a third of enterprises already use AI for business automation, with a further third planning to do so. Take-up on this scale, at this rate, could put AI on a level with prior epochal shifts of electricity, the combustion engine and personal computing.

Two sides to each coin
Whether that actually happens depends on how the technology is managed. I spend a lot of time talking with major telecom and technology companies. While it’s clear AI is a major point of interest to nearly everyone, the discussion is still pitched in generalities. Paraphrasing:

AI is the Fourth Industrial Revolution
We know AI is big and we want to do something with it, but we don’t know what
We’re moving to be an AI-first company
How can we win with AI?
We’re a far more efficient company because of AI
The ebullient tone is to be welcomed.

Far less talked about, however, are the ethical and legal implications that arise from trading off control for efficiency. It’s fairly clear that cognitive dissonance is at work – the benefits blind us to the risks.

How do you answer these?

A crucial faultline is the balance between programmed and interpretive bias. That is to say, how much are machines programmed to act based on the way humans want them to act (reflecting our value sets) versus their own learned ‘judgement’? This has a direct bearing on accountability.

To make this point, let’s pose a series of questions that draw on how AI is being used in different industries.

Autonomous vehicles
If a self-driving car faces the inevitability of a crash, how does it decide what or who to hit? If that same self-driving car is deemed to be at fault, who bears responsibility? The owner? The car manufacturer? A third-party AI developer (if the technology was outsourced)?

Criminal justice
If an algorithm is tasked with predicting the likelihood of reoffending among incarcerated individuals, what parameters should it use? If that same algorithm is found to have a predictive accuracy no better than a coin flip, who should bear responsibility for its use?

Social media
If Facebook develops an algorithm to screen fake news from its platform, what parameters should it use? If content subsequently served to people’s news feeds is deemed intentionally misleading or fabricated, does responsibility lie with the publisher or Facebook?

I chose these for a number of reasons. One, these are real examples rather than hypothetical musings. While they emanate from specific companies, the implications extend to any firm seeking to deploy AI. Second, they illustrate the difficulty in extracting sociological bias from algorithms designed to mimic human judgement. Third, they underline the fact that AI is advancing faster than regulations and laws can adapt, putting debate into the esoteric realms of moral philosophy. Modern legal systems are typically based on the accountability of specific individuals or entities (such as a company or government). But what happens when that individual is substituted for an inanimate machine?

No one really knows.

A question of trust
Putting aside the significant legal ramifications, there is an emerging story of the potential impact on trust. The rise of AI comes at a time when consumer trust in companies, democratic institutions and government is falling across the board. Combined with the ubiquity of social media and rising share of millennials in the overall population, the power of consumers has reached unprecedented levels.

There is an oft-made point that Google, Facebook and Amazon have an in-built advantage as AI takes hold because of the vast troves of consumer data they control. I would debunk this on two levels. First, AI is a horizontal science that can, and will, be used by everyone. The algorithm that benefits Facebook has no bearing on an algorithm that helps British Airways.

Second, the liability side of the data equation has crystallised in recent years with the Cambridge Analytica scandal and GDPR. This is reflected in what you might call the technology paradox: while people still trust the benevolence of the tech industry, far less faith is placed in its most famous children (see chart, below, click to enlarge).

[1]In an AI world, trust and the broader concept of social capital will move from CSR to boardroom priority, and potentially even a metric reported to investors.

This point is of heightened importance for telecom and tech companies given their central role in providing the infrastructure for a data-driven economy. Perhaps it is not surprising, then, that Google, Telefonica and Vodafone are among a vanguard seeking to proactively lay down a set of guiding principles for AI rooted in the values of transparency, fairness and human advancement. The open question, given the ethical questions posed above, is how actions will be tracked and, if necessary, corrected. Big questions, no easy answers.

– Tim Hatt – head of research, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.mobileworldlive.com/wp-content/uploads/2019/01/Jan-31-GSMA-AI-ethics-blog-Jan19-v2.docx-Chart.png

Intelligence Brief: Does African 4G history offer lessons for 5G?

When we think of 4G, we immediately think of an increase in mobile bandwidth, which increased mobile phone usage globally. Yet, 4G missed the commercial mark with consumers in Africa, and operators are still feeling the pinch. At GSMA’s Mobile360 Africa event [1], Safaricom’s Stephen Chege’s keynote speech addressed the limited usage of high-speed mobile broadband in Africa and the inevitable obstacle it has posed to the uptake of 4G services.

During the event it became clear that low adoption could be attributed to a lack of consumer awareness of the wider range of uses or benefits of 4G and smartphones, and with 5G on the horizon operators could no longer afford to allow the technology to continue to be underutilised. In Q3 2019, 4G adoption was ranked at just 9 per cent and there was a call upon mobile network operators (MNOs) to begin educating consumers from urban to rural areas on the real capabilities of 4G before they could usher in 5G.

The leapfrog to 3G
Prior to the 3G-era, the African broadband market was vastly underserved (due largely to the emergence of mobile voice that subsequently limited the deployment of fixed line networks during the late 1990s and early 2000s). Although fixed line networks were key in delivering the popular broadband access technologies including ADSL or cable lines, mobile networks were faster, easier and cheaper to deploy, which operators sought to capitalise upon. Due to a lack of broadband services, ownership of personal computers or laptops was limited by way of sparse access.

The introduction of 3G saw what we now know as the leapfrog the African market took in connecting consumers to the internet via mobile networks, thus shifting Africa into the next technological era and mobile phones became the primary point of access to the internet in the region.

Despite initially filling the much needed gap of availability of internet services in the region at a low cost, 3G mobile broadband is highly limiting in its capacity with speeds that are up to ten-times slower than 4G. So why did the digital revolution stop at 3G for Africa’s consumers?

The usage gap in 4G
The introduction of 4G in Africa initially saw slow rollout due to the high cost of deployment and, with no real coverage, consumers did not have access to a good 4G network that could service their capable devices. This curtailed consumer enthusiasm of the high-speed technology and, as a consequence when coverage increased (from 10 per cent in 2014 to 46 per cent in Q3 2019) usage and adoption has failed to evolve.

[2]

GSMA Intelligence’s 2018 consumer survey found that sub-Saharan Africa’s connected consumers spend most of their time on traditional communications (mobile voice calls and SMS) or digital communications (instant messaging and voice calls using OTT applications, and social media networking) services (see chart, above, click to enlarge).

The aforementioned use cases are all easily accessible on 3G networks and could run smoothly on feature-phones. So even if a consumer owns a smartphone and has access to a 4G connection, their uses don’t extend beyond that of a 3G-enabled device. Highlighting a key issue in the previously expected trade-off between 3G to 4G, because consumers were on a bumpy road towards 4G access, the usage of their devices has remained limited and consumers are yet to diversify their usage of the next generation access (NGA) technology.

Beyond access: educating and localising to increase usage
MNOs now have the burden of aiding consumers in diversifying their usage of NGA technologies by educating their consumers on the difference and the benefits: simply providing access has failed to increase adoption beyond 9 per cent. Some can argue the availability of entertainment (gaming and streaming) and lifestyle (education and health) applications in the region could have allowed for an increase in the uptake of services, however the lack of localised content has impeded uptake of popular global applications.

Of course, if applications are not tailored to the wants or needs of consumers in the region, they are bound to fail and Africa is not exempt from this. Here, MNOs could focus on, or invest in, applications tailored to the region and fund the localisation of digital content that will inevitably contribute to an increase in data consumption. There will also be the short-term burden of educating consumers on the real difference between technologies and how uses differ widely between devices that can better serve their specific needs. Despite MNOs in Africa not carrying the burden of device financing, the benefits of educating the consumer on the differences of devices available will always increase adoption in the long run.

We can remain sure that if 4G is not utilised to its full potential in Africa, 5G is bound to suffer a similar fate until the underlying issues are addressed. More importantly, we must stop misunderstanding the readiness of the average consumer as a barrier to investment in future NGA technologies and look at how best to educate consumers to ensure technologies are utilised.

– Julie Ssali – telecoms forecast analyst – GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.mobileworldlive.com/mobile-360-africa-2019/
[2] https://www.mobileworldlive.com/wp-content/uploads/2019/08/SubSaharanAfrica_SmartphoneUsage_ByActivity.png

Intelligence Brief: How can events boost fan appeal?

It’s been just over a year since I moved to London full time. In honour of the occasion, I decided to take what I felt was a thoroughly English summer holiday earlier this month. So, I loaded the Corgi in the car, drove over to the continent (taking a train through the Chunnel), bought some wine, and got a little sunburned. It’s pretty much exactly what my wife expected when we kicked off this adventure. And, somewhere in the middle of all that, the 2019 edition of summer vacation saw the Jarich household take in a stage of the Tour De France, the FIFA Women’s World Cup Final, and Switzerland’s Fete des Vignerons.

While it wasn’t part of the plan, I also spent some time thinking about the wireless industry and 5G a little during these spectacles. Each lent insight into why special events (including sporting events) are often cited as a key 5G use case.

FIFA Women’s World Cup. I can’t say that I wasn’t somewhat disappointed in the US versus Netherlands final. The gameplay was great and the Dutch fans were impressive in their coordination and congeniality. But from a fan experience standpoint, things were lacking…and that included constrained network capacity (particularly on the uplink). Network capacity might help to explain why we weren’t pushed to apps for real-time match or player stats. Regardless, it was a wasted opportunity. Where it’s increasingly easy to take in an event at a distance (in the rain, on a train, with a goat, on a boat…on a tablet, with a phablet), venue owners and event organisers need to give people a reason to come to the live event: the experience of “being there” only goes so far in justifying ticket costs. Seamless, in-venue connectivity (5G, 4G, Wi-Fi) is a start. Integration with venue operations and the event itself is a necessary follow-on. So is the will to tie this all together into something cohesive.

Tour de France. Network connectivity 3km out from the end of Le Tour’s Stage seven was about on par with the connectivity down at the Stade de Lyon. Not bad. Not great. The missed opportunity to engage with fans, however, was even greater. For those who’ve never been to see the race, let me paint the picture. Each day, riders tackle courses which can run more than 200km. An hour or so before they hit the road, the “caravan” (a promotional parade of vehicles handing out trinkets) travels the day’s route. More than 10 million fans line up all along the route to see the caravan and then the riders across the entire race. Do the math and you quickly realise this means a lot of people spending a lot of time standing around. I think the dictionary has a picture of them alongside the definition for “captive audience.” But, as much as it was great to see people enjoying the great outdoors, reading books and playing with their kids, I couldn’t help but wonder why there weren’t more who were glued to their phones watching a livestream or otherwise engaging with the race. Was it the connectivity issue? A lack of app promotion? Will 5G change that? Would it be different with something like an AR/VR caravan?

Fete des Vignerons. If you’re not familiar with the Fete des Vignerons, you shouldn’t feel too bad. It’s not an annual affair. It doesn’t even come around every decade, much less every four years like the Olympics or World Cup. Nope, it’s a once in every 20 years celebration of Swiss wine that takes place over several weeks on the banks of Lac Leman. Mobile apps weren’t quite a thing at the last one in 1999, but event organisers made sure to have one in place for this edition. And, thanks to solid connectivity in Switzerland (a small country where operators are already hashing out international 5G roaming agreements), using the official FeVi app shouldn’t have been a problem. But it was. Early on, just as everything was getting underway, error messages suggested that the servers were going down. When back up, the app wasn’t always serving up accurate info or anything super-compelling. It was a reminder that connectivity (3G, 4G, 5G, take your pick) is only one ingredient of engaging with people. Solid experiences delivered over that connectivity are more important.

It’s no great insight to note that event organisers need to ensure engagement with fans and attendees. It’s equally obvious that mobile devices are a prime (if not the primary) tool for driving that engagement.

But, given the plethora of potential 5G use cases and applications, it’s easy to ignore some of them or underestimate their value without direct experience: promises of opportunity around every corner are likely to seem more like 5G hype (hope?) than viable businesses. For me, getting out to a few first-class events this summer helped underscore the value of leveraging 5G and improved connectivity (teamed with the right content) to drive fan engagement along with the increasing importance of engagement. Beyond the special event use case, however, this also points to the need to educate stakeholders across all vertical industries around new wireless capabilities while developing a fuller understanding of their needs and operations.

Planning for summer 2020 maybe that means I should start looking at remote, robotic surgery options?

– Peter Jarich – head of GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

Intelligence Brief: How much will 5G cost?

The year is 2019 and 5G is finally here. Or is it?

At MWC19 Barcelona, there were so many 5G announcements that it seemed the technology’s arrival was clearly upon us, or at least imminent. And, in fact, we now have two countries with commercial consumer 5G launches: the US [1] and South Korea [2]. Of course, in both cases the launches are limited in terms of coverage as well as the number of supported devices. And with services aimed at mass market consumers, the enterprise opportunity has yet to prove itself.

As we move further into 2019 (and then 2020), we’ll get more 5G devices and more operators ramping their 5G plans.

China Mobile is set to launch 5G in the second half of 2019, with China Telecom and China Unicom to follow in 2020. Japanese operators are also set to launch 5G in 2020, including the new operator Rakuten, which will undoubtedly disrupt the market and try to use the technology to grow its market share.

Combined, these early launches will generate significant knowledge and give more courage to other operators to follow the 5G pioneers. At the same time, new devices and spectrum should boost adoption of the technology and accelerate deployments…and therefore 5G spend.

That’s right, 5G will require more than just spectrum and devices. It will take capex spend.

So how much are we talking about?
In our newly expanded 2025 capex forecasts (to be released this week), we predict operators will spend over $1.3 trillion over the next seven years on networks. The bulk of that (75 per cent, or a little less than $1 trillion), will be allocated to 5G. The rest will primarily go into upgrading and expanding 4G networks, which will continue to coexist alongside 5G past the end of our forecast period. With 4G, the monetisation strategy was more or less clear: charging more for data, either per MB, or by increasing the size of data bundle. In reality, this strategy didn’t pan out and generate an ARPU uplift in all markets. By contrast, 5G, offers a more complex system, where the combination of multiple technologies serves a set of diverse, varied, complex monetisation scenarios: that fact will weigh on capex.

What’s the catch?
To its credit, the industry has concluded there will be no single killer app for 5G and operators will have to find an individual approach to revenue generation. This means 5G networks will have to be built in a modular way, to offer customised services, along with scalability. At the same time, operators will have to maintain a capex-to-revenue ratio low enough to keep investors happy. With all this factored in, it would be fair to say the global 5G investment cycle will be more gradual than the 4G one: capex will be spread out, with the global capex-to-revenue ratio not exceeding 18.5 per cent.

So what should the money be spent on?
One thing is for sure: 5G will require more network densification, which means a lot of investment will go into RAN. In fact, we forecast the share of RAN in total capex will grow from 62 per cent in 2018 to 86 per cent in 2025 (see chart, below, click to enlarge). In part, this is a function of densification. In part, it’s because many operators in the early 5G launch markets already have fibre in place to support the upgraded RAN, and many of the rest should also have sufficient backhaul already given that global 5G adoption will still only be around 16 per cent in 2025.

That said, it is important to mention that the distribution of core and RAN investments will vary regionally, depending on the core network development level in each country and individual operator. While we do not expect the share of sites connected via fibre backhaul to grow significantly before 2025, once 5G networks are up and running operators will have to think about investing into their transport networks to be able to increase their capacity.

[3]Are there any ways to spend less?
NFV, SDN and Cloud RAN offer a way to roll out and upgrade equipment faster, with fewer people needed to maintain it and less physical space to deploy it. They promise easier and cheaper ways of switching between vendors, without the need to replace hardware supplied by one vendor to install the other. Meanwhile, network sharing can be a solution to costly RAN densification, especially in rural areas, where RoI is usually lower.

Some countries are even discussing the option of having one neutral host deploy 5G and wholesale it to other mobile operators. A neutral host could be a particularly viable option for countries with low ARPU and where operators already have a high net debt-to-EBITDA ratio.

Weighing on all 5G capex considerations is the fact that the overall business case for 5G is still unclear. And while multiple use cases present opportunities for operator revenue growth, the risks of failing to realise that growth remain significant. Ultimately operators will need to build their 5G networks according to the specific opportunities and constraints in the markets where they operate.

To that end, the number of different models for deploying and therefore financing 5G could run as high as that of the services it will eventually support.

– Alla Shabelnikova – senior analyst, Financial Data, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.mobileworldlive.com/featured-content/home-banner/verizon-stakes-5g-claim-with-mobile-launch/
[2] https://www.mobileworldlive.com/featured-content/home-banner/korea-operators-set-consumer-5g-tariffs/
[3] https://www.mobileworldlive.com/wp-content/uploads/2019/04/GSMAi_RAN_Core_Capex_Breakdown.png

Intelligence Brief: What next for pay-TV?

Pay-TV has been the most popular medium to deliver entertainment to households for decades. But when was the last time you sat down with the family to watch good old-fashioned programming on your pay-TV subscription? OTT apps just fit perfectly with the way we live and consume media today, don’t they?

And why not? They give us flexibility, mobility, AI-based recommendations, original as well as aggregated content and, maybe more importantly, a wire-free, (sometimes) hardware-free, and hassle-free experience at a very reasonable cost per month.

All of this combines to have some pundits predicting the end of pay-TV.

[1]In some markets, this might be premature: think APAC, where the Informitv Multiscreen Index showed considerable net new connections were added during Q3 2018 (see chart, right, click to enlarge). But, regions like North America and Europe have seen the trend kick in with 877,000 net cord-cutters for the top ten players alone in the US during the quarter. As per some market watchers, globally there will be more than 400 million OTT video subscriptions by 2022. And what might be driving this growth beyond the dynamics (ease and cost) highlighted above? In a word: value.

1: The successful OTT players are competing on service innovation backed by improved infrastructure and changed viewership dynamics;
2: Pay-TV players kept on adding channels and increasing carriage fees which made money for the networks and cable companies, but eventually resulted in a costly bill for consumers, inviting OTT disruption.

What has been the operator strategy so far?
For operators, the response so far has been straightforward. Consolidate the customer base and converge TV, broadband, voice and wireless services to manage churn through compelling bundled offers with OTT subscriptions.

It is simple economics: operators with the bigger share of pie gain negotiating power against the content providers and can pass that benefit on to the end customer. That’s what operators have done alongside exploring possibilities like acquisition/partnership with content producers, developing their own OTT app, or playing role of an aggregator for other OTT services in order to retain their subscriber base and revitalise their growth.

Let us look at few of our favourite examples from the industry where the operators applied some of the above strategies:

Partnership with OTT players
By partnering with OTT services and bundling their subscription fee with post-paid and prepaid plans, the operators can provide additional convenience which will help in reducing customer churn. In Germany, Deutsche Telekom has started giving its customers direct access to Netflix. In 2018, the operator added 200,000 new TV customers thanks to the pseudo-convergent offering including attractive TV content across all screens and on any device. In South Korea, SK Telecom and LG U+ are soon to provide exclusive Netflix services on IPTV. This strategy will help the operators to expand their client base through a diversified content offering.

Acquisition to reduce time to market
Acquiring budding or established players in the market can be a good strategy to derive direct and indirect benefits for scaling the services while still reduce time to market. For example, Reliance Jio’s acquisitions of Den and Hathway are good examples of how it gained a massive share of the Cable-TV pie in India to use it for content distribution and price negotiations. Icing on the cake, it helps them with quick proliferation of its cable network, leveraging it for broadband service provision as well. India’s Airtel TV is also in talks with Dish-TV to explore a potential merger, in order to acquire a collective market share of more than 60 per cent in the DTH space and then provide its enhanced content offerings to a wider audience.

Partnership with local content producers
This allows telecom operators to tap into the deepest layers of demography by offering local or regional content. For example, in the US, Televisa’s audio-visual content is distributed through subsidiary Univision, the leading media company serving the Hispanic market. Televisa’s content and convergence strategy has helped the operator to generate value for its shareholders: its content revenue contributed approximately 37 per cent and 35.1 per cent of total revenue for 2018 and 2017, respectively.

Own OTT App and content
For operators with deeper pockets, this move can help to command a strong control over the long-term content monetisation strategy. Jio Prime membership from Reliance Jio in India is a great example through which it is providing a host of OTT apps offering extensive content services to the customers. While initially they were provided for free to incubate a sense of loyalty and penetrate the market, Jio is now charging INR99 per year ($1.42) for these services, adding an additional source of income. Telefonica’s content strategy in Spain and LatAm specifically stands out in this regards: it started producing its own content and launched 12 original series in more than 13 countries during 2018. To add to the convenience, it bundled this product and other premium content services (Netflix, Fox premium et cetera) along with its core mobile and fixed line offering into a single bill. Due to this strategy, there was a noticeable impact on customer retention with 1.5 million registered users of the service as of August 2018, 78 per cent of which were active users.

Playing a role of content aggregator
Operators are well-placed to aggregate content/services by providing one-stop access and bundled billing. A great example of this is EE in UK offering its mobile customers access to Amazon prime video, MTV play, BT sport and Apple music in a single bill. Telefonica in Spain and LatAm (illustrated above) also sets a good example as a content aggregator providing a unified service offering with single billing.

In a changed media and entertainment landscape, end customers yearn for on-demand content, customised to their taste with enhanced convenience. While the big media houses and operators are cognisant of this and willing to come together to provide seamless distribution of content, the models of collaboration vary across markets. It is about tapping the right arrangement to penetrate the opportunity.

– Aryan Jain – research manager; Ashish Singhla – senior research analyst; and Deepti Agrawal – research analyst, Strategy, GSMA Intelligence

The editorial views expressed in this article are solely those of the authors and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.mobileworldlive.com/wp-content/uploads/2019/04/InformativMultiscreenIndex_PayTVChurn_Q3-1.png

Intelligence Brief: Will sub-Saharan Africa get 5G?

Sub-Saharan Africa has been conspicuously missing from the global 5G story so far, and for good reason. 2G is still the dominant technology in the region, at least until the end of this year, while 4G, which accounts for just 8 per cent of total connections compared to the global average of 46 per cent, is far from mass adoption. There is also the issue of device affordability, which has stymied 4G adoption. With the first wave of 5G devices likely to target the top end of the market, it is not hard to imagine the impact device costs could have on 5G adoption in the region.

Against this backdrop, it is easy to see why the notion of 5G in sub-Saharan Africa may come across as an oxymoron to some people. But is it? 5G attracted a lot of attention at this years’ Mobile360 Africa [1] conference, with numerous mentions on the conference stage and side chats during coffee breaks, even though the subject was not officially on the agenda. I quickly noticed that more people talked about the prospects for 5G in the region at this year’s event, compared to 2018, where 5G and Africa were hardly used in the same sentence.

So, what has changed? Nothing much in terms of Africa’s readiness for 5G or actual 5G-related activities. However, there was a realisation that 5G, as a natural progression from previous generations, will one day become a reality in the region. This in itself raised several pertinent questions among participants, for example when will the 5G era will arrive in the region; which markets will lead the transition to 5G; how should stakeholders, including policymakers, operators and vendors, prepare for the 5G era; and what would the 5G the business case for the region look like, given the network deployment requirements and consumer peculiarities?

An earlier blog [2] captures the contrasting views of operators and vendors to some of these questions at the event.

GSMA Intelligence’s new report 5G in Sub-Saharan Africa: laying the foundations [3] directly addresses these other issues more deeply. The report reflects the perspectives of policymakers, operators, and vendors, and lays out key expectations and considerations for the 5G era, some of which are highlighted below:

5G mass deployment and adoption is not likely until the second half of the next decade – Most people agree that 5G in Africa is a question of when rather than if. However, it will not be until mid to late 2020s before 5G network deployment and adoption becomes more widespread across the region. Only a handful of countries, including South Africa, Kenya and Nigeria, are expected to have commercial 5G services before 2025 (see chart, below, click to enlarge).

[4]

Enterprises will lead 5G adoption in Africa – 5G will play a key role in addressing the connectivity needs of enterprises, given the challenges around access, cost and reliability of existing solutions, such as fixed broadband and satellite. However, deployments will need to be localised and targeted, as opposed to ubiquitous and mass market, considering the cost implications for the requisite cell densification. Beyond connectivity, 5G can enable new business processes to drive productivity and efficiency in closed ecosystem environments, particularly in large, consolidated sectors such as mining and manufacturing. However, our research shows a lack of awareness and understanding of the potential of the technology among enterprises. For operators and their vendor partners, the challenge will be to increase awareness and develop relevant use cases.
The consumer segment will be a long-term play – Affordability will be a crucial factor for 5G adoption in the consumer segment. At around $1,000 on average, the cost of 5G handsets today is way beyond the reach of most consumers in the region. While this is expected to fall over time, it is not certain when the market will see sub-$100 devices, the price point at which mass adoption can begin to take place, given the experience of 4G. Meanwhile, immersive use cases such as AR and VR, for which 5G’s low latency capability is well suited, are still underdeveloped in the region. This means that 3G and 4G will remain the primary consumer mobile broadband access technologies for the foreseeable future.
Ecosystem collaboration will be essential to ease the transition to 5G – Given the cost burden of network deployment and the need to address consumer barriers to broadband adoption, our research identified four areas where ecosystem collaboration could facilitate the transition to 5G. These are: content creation to stimulate demand for connectivity; solutions for cost effective network deployment; initiatives to bring affordable devices to market; and development of 5G use cases for local enterprises. Take network deployment, for example, operators could collaborate on active network sharing, which has been shown to deliver much higher levels of both capex and opex savings compared to passive. Vendors can also explore new ways of financing network investment, such as the lease-to-own-model, to reduce the upfront capital outlay for operators.

As governments and enterprises across Africa increasingly use technology to tackle the biggest challenges faced by society, and digital trends point to growing demand for enhanced connectivity, 5G will no doubt play a key role in the future connectivity landscape. The technology will support the implementation of transformative technologies, such as AI and IoT, that can improve industrial processes and generate significant social and economic benefits for individuals and communities.

While this scenario is still several years away for most countries in the region, now is the time for ecosystem players including policymakers, operators and vendors, to begin to put in place the necessary building blocks on spectrum, network modernisation, consumer and enterprise use cases, and other relevant areas to maximise value in the 5G era.

– Kenechi Okeleke – senior manager – GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.mobileworldlive.com/mobile-360-africa-2019/
[2] https://www.mobileworldlive.com/blog/blog-can-vendors-sell-5g-dream-to-developing-markets/
[3] https://www.gsmaintelligence.com/research/?file=7d4569ab4c1f69b82e9ad8f179ba92ef&download
[4] https://www.mobileworldlive.com/wp-content/uploads/2019/08/GSMAi_SubSaharanAfrica_5GRollout_predictions.png

Intelligence Brief: Why small will be big in IoT

The enterprise segment will be the principal driver of future IoT deployments. By 2025, we predict that out of a total of 25 billion IoT connection more than half will come from the enterprise/industrial sector.

This is what we have been forecasting. And this is what increasingly comes up during conversations with players in the IoT ecosystem. More important than our forecasts, though, is the fact that recent evidence suggests this is correct.

To be fair, a focus on the enterprise might run contrary to other views in the market. Yet as companies continue their quest to digitalise their operations, it’s only natural that the IoT market will scale…and our Enterprise IoT survey has confirmed just that. The enterprise appetite for IoT is immense: 65 per cent of enterprises have already deployed IoT solutions. And while the large ones may get the attention, some of these are very small companies. Given the fact that most companies are small, SMEs (small to medium enterprises, which include those with fewer than 250 employees, account for the vast majority of businesses, almost 95 per cent according to the OECD), we looked at enterprises with upwards of 20 employees in our survey. And, sure enough, the demand for IoT was near universal.

So let’s dig a bit more into the survey.

We wanted to understand the what’s, whys and how’s that are driving IoT adoption across enterprises. To that end, we asked IoT decision makers across eight verticals and 14 countries about all things IoT: their IoT deployment plans and timeframes; the scale of their IoT projects; their technology and vendor choices; the reasons behind their investment in IoT; key challenges, benefits and how they measure IoT success. Add to that questions around data analytics, security, and other IoT components and the result is a lot of data. Data which I am very excited about interpreting. But where to start?

That’s a good question. The easy answer is to look at our first cut of survey insights published recently, (IoT in business? The enterprise voice on the adoption choice [1]), digging into the drivers, challenges and measures of IoT success.

The better answer, however, involves the takeaways and longer-term implications for this rapidly developing market? Such as:

Small is big. The majority of IoT deployments are currently small. Even though IoT is moving beyond trials and proof-of-concept (PoC), the current size of deployments makes it feel like we’re still in a trial phase. One of the reasons for the smaller scale, is simply that smaller enterprises tend to deploy fewer devices.

We see this scaling up as the overall market matures and new capabilities emerge. Think small retail organisation currently connecting their point-of-sale (PoS) machines, adding a few security cameras, fleet management for the vans, smoke detectors et cetera…looking into the future these devices could be supplemented by automated check-outs, beacons, inventory management, and even robots. As more data is generated, collected and analysed, the application of AI/ML, in turn, will lead to new use cases and further benefits. And of course more connected devices.

Productivity tops all. Less than one in four (22 per cent) of enterprises pointed to unclear RoI as a challenge to IoT solution deployment. And this is the same for both SMEs and larger enterprises. At first glance this is surprising given this is an emerging area and a lot of people still heavily focus on RoI. Our survey results point to IoT deployments focus on low hanging fruit and targeted use cases.

For example, Ericsson’s Panda Nanjing factory (its largest industrial factory involved in the manufacture of its radio products) deployed IoT to automate production, resulting in savings from increased efficiency, a reduction in maintenance costs and increased flexibility in product line design. The first year provided a 50 per cent return on investment, while breakeven is projected in less than two years. This is reflected in our survey results: increased productivity is one of the key drivers of IoT adoption and success is measured through cost saving/process efficiency. Beyond that IoT creates additional opportunities for companies: tailored products and or services; better insights; and improved business processes to name but a few.

Last week, I moderated a panel session at Smart IoT London, on the topic of RoI on IoT. There’s a wider set of implications to consider when thinking about the future direction of enterprises. Whether we call it digital transformation or the Fourth Industrial Revolution, it’s clear that the very nature and DNA of enterprises is undergoing a major transformational shift (for example: moving from product- to service-based), which in turn requires both cultural and organisation change. Smaller enterprises might take longer to embark on this journey. Yet, there was a clear consensus on the panel that RoI for more transformational IoT projects will be harder to measure but the overall impact will be greater.

Challenges remain around integration, security and cost.

[2]These are felt by all enterprises, no matter the size. A lack of internal skills can then often exacerbate typical challenges around integration, maintenance and security, while the enterprise also suffers from a custom-build price premium.

So what can be done to avoid this? We saw this year at MWC19 Barcelona the theme of “making deployments simpler”, where partnerships are emerging between different industry players [3] aimed at addressing enterprise pain points around integration and security.

Being able to address the small enterprise segment is one of the key challenges for any vendor, including mobile operators. It requires a different skillset, building blocks and relationships. Unfortunately, there isn’t a one-size-fits-all recipe for success. It requires skilfully crafted partnerships across a fast emerging and developing ecosystem to deliver on small enterprise needs.

– Sylwia Kechiche – Principal Analyst, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.gsmaintelligence.com/research/2019/03/iot-in-business-the-enterprise-voice-on-the-adoption-choice/738/
[2] https://www.mobileworldlive.com/wp-content/uploads/2019/03/ji.jpg
[3] https://www.gsmaintelligence.com/research/2019/03/mwc19-barcelona-beyond-the-headlines/736/

Intelligence Brief: Urban mobility super-app remains a distant dream

The opening weeks of 2019 have already delivered big announcements from the likes of Daimler, BMW, Seat and Uber. All of them seem to be betting big on smart urban mobility [1] and all aim to create the ‘platform of platforms’ in the city transport space through newly announced ventures.

A decade after Uber brought taxi booking to our mobiles, fresh traction in the space suggests a new wave of innovation might be round the corner for smart urban mobility. Just look at a handful of the announcements made in the last two months:

Daimler and BMW
The automotive behemoths, after concentrating on an ecosystem of services adjacent to mobility (parking; car rental; electric vehicle charging, taxi booking), announced at MWC19 Barcelona that they are going after the integration of all into one mobile app.
This is expected to merge 14 different services into one later in 2019.

SEAT and IBM
Unveiled the Mobility Adviser app at MWC19, which will use IBM Watson AI to help commuters make decisions about their daily transportation options, from scooters and bikes (the so-called micro mobility) to cars and public transport. The initiative is currently at a proof-of-concept stage.

Uber integrates public transit into its app in Denver
It’s no secret that Uber has been trying to integrate public transport routes and ticket purchases as well as the option to rent electric scooters into its app, while also trying to find its way more into our lives through food delivery with Uber Eats.

Here Technologies’ SoMO app
Announced in January, SoMo is an app connecting various on-demand mobility services, offering the option of sharing taxis with selected people, all on top of Here’s core mapping service. It plans to integrate more mobility service providers with SoMo and expand to new cities in the near future.

The common denominator of all these ventures? The creation of a ‘platform of platforms’ for urban mobility that allows commuters to plan their journey end-to-end and through one single app.

Can these companies really live up to their promises? Probably not. Consider the following:
Taxi sharing companies won’t make friends with cities any time soon
The Ubers of the world have been finding it really hard to operate even basic services in many cities due to protests from established competitors and conflict with local regulation over licensing of drivers. One can imagine the challenges of integrating local public transport data, especially when few cities’ transport authorities offer open APIs.
Uber’s Denver deal, to name one example, happened after seven years of Uber’s operation across cities of the world and is still at early stages. There is really no particular reason to be optimistic about the prospects of other players attempting to do the same thing across cities.
Micro mobility vendors’ future in question
Early endeavours in the micro mobility space are disheartening. Emblematic companies Bird and Lime both found it difficult to protect their assets from vandalism, so wide availability of scooters and dockless bikes in cities remain an open issue. In addition, the viability of the business model has been questioned due to small margins, hence talk about Uber buying one or the other. Therefore, even in the buyout scenario, an Uber, Lyft or Grab would have to subsidise their micro mobility business unit due to different margins.
Adjacent tasks provided over third-party apps add complexity
Bringing all urban mobility service providers under one application is not enough. The commuter is still required to perform a number of related tasks separately (mapping; navigating; planning; paying for ticket fares) which are tricky to integrate altogether in one app.
The reasons for this are that few cities offer mobile ticketing services for public transport: mobility apps are not necessarily good at mapping and rely on other apps, such as Google Maps; and payments over existing mobility apps often redirect users to PayPal or mobile banking apps.
All of these add complexity in the end-user experience and there is no development in sight that suggests their seamless integration will be achieved at scale.

Mobility through a single pane of glass is still a far away dream
Of course, integrating multiple means of transport (private, shared and public) and related services into one vendor’s app is a step in the right direction. However, the real value for commuters lies in offering this capability while integrating with all other mobility apps, even competing ones, through a single pane of glass type of platform that can operate independently of the geographic location.

If an app works in London but not in Paris or even in Bristol, is it really valuable and can it scale?

In reality, integrating all these services in one single pane of glass type of application is a far away dream due to inherent limitations in the respective companies’ partnership strategies and business models. For example, a typical European city has around five taxi booking apps and another five bike sharing services, which might not actually operate in the adjacent city or country. In other words, this is a highly fragmented market and further integration is needed.

But without any significant breakthrough, further market concentration such as the move by Daimler and BMW, can only lead to merging just parts of the mobility experience, without any visible way out of the location and multi-apps constraints.

Such a compromise which delivers an inferior user experience should not be accepted.

There is a market gap to fill: what would a breakthrough look like?
Clearly, there is a market need that aspiring entrants are so-far failing to address. Potential propositions might include a “connector” app which will interface with all competing mobility services providers and the adjacent ones, such as payments and mapping.

Of course, this “connector” app would have to be offered for free in order to incentivise companies to on-board. So the question is how to make money from that.

Interesting elements in that direction arise from Iomob, a Spanish start-up; Citymapper; and the Here Technologies’ Open Mobility Marketplace. However, more time is needed to assess their real potential in the market.

Another type of breakthrough would possibly be a solution that enables secure personal data and personal mobility preferences portability across applications. Blockchain presents some interesting attributes on digital identity, but nothing has emerged so far that would be applicable in the short-term.

Until there is a substantial shift in the market, some incremental improvement in our mobility experience is not bad at all, but it’s far from ideal.

– Christina Patsioura – senior analyst, Emerging Technologies, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.gsmaintelligence.com/research/?file=d2e2f4b417a6a0f60d32b3dec01e7274&download

Intelligence Brief: Why does Huawei matter?

In just about a week, I’ll be headed to China. It will be my second trip to the country this year, with one more planned in June. You might ask why I’m headed there so much? It’s a fair question, one I’ve asked myself on more than one occasion even though the answer is fairly straightforward.

Let’s start with the specific events I’m headed to. June brings MWC19 Shanghai and last month was a quick trip to Beijing to talk up what happened at MWC19 Barcelona along with launching our latest research on the Chinese market.

I talked a bit about the trip in one of our Data Point videos [1] last month and you can find the Mobile Economy China report here [2].

Both of these point to a very simple reason for all the 12-hour flights: China is an important mobile market. This is so patently obvious that it feels silly writing it out. But, whether we’re talking about 5G launches, IoT scale or the innovation that comes from a society with 1.1 billion smartphone subscribers, the importance of China as key to understanding the direction of mobility is clear.

And the trip that’s coming up? That’s my annual visit to Huawei’s analyst conference. I’ve been to every one of these for more than a decade. Skipping out on the chance to catch up with the vendor (or any of its major competitors) never feels like a wise decision. But, if “China is important” explains the other trips, a visit to Shenzhen raises an obvious question. Why is Huawei important?

This, too, might seem blatantly obvious. Given the amount of news circulating around the vendor lately and a plea for “fact-based” judgements on it, it’s still worth highlighting some basics.

Operator market share
We don’t model network infrastructure market share at GSMA Intelligence. That’s okay, there are plenty of other people who do. My friends at Dell’Oro Group have Huawei capturing 29 per cent of the telecom equipment market in 2018, the top position, with Nokia and Ericsson taking a distant second and third, respectively. In other words, you can’t talk about the state of telecom networks in 2019 without talking about Huawei.

Mobile market presence
Of course, telecom networks market share and mobile infrastructure market share aren’t the same thing. So, let’s look at this a different way. How many mobile networks is Huawei present in?

The company claims to have supported 5G tests with 182 carriers. Does that seem high? It shouldn’t. Our own analysis of network launch announcements has Huawei touching more than one-third of operator 4G launches, over-indexing in some markets like Europe. That means you or someone you know is likely touching a Huawei-powered wireless network on a regular basis (US readers excepted).

Operator revenues
Over the past five years, Huawei’s carrier business revenues have grown by almost 80 per cent. The figures for key competitors? Let’s just say they’re not quite that solid.

I’m not sold on the idea that revenue success points to product superiority. However, it does support R&D scale and the financial stability operators like to see when making an investment that needs to live for ten or more years.

End-to-end capabilities
Another idea I’m not sold on? That end-to-end capabilities always help to win deals. Maybe for smaller operators which need a one-stop shop or a bundle of base stations and mobile devices. But Ericsson does pretty well for itself without smartphones to sell and Cisco manages to sell into mobile operators without a base station portfolio.

So why does end-to-end (in this case network infrastructure, consumer devices, and enterprise gear) matter? In part, because diversification helps with financial stability. In part, because these disparate spaces are converging as operators look to build networks on IT technologies and build services that more directly touch the consumer (think smart home, gaming or AR/VR). Know-how that touches all three spaces is an inherent advantage.

So, is there anything else I’m forgetting?

Oh yeah, that security thing and Huawei’s recently released 2018 annual report.

As we said in our MWC19 Barcelona wrap-up [3], “5G is increasingly positioned as ‘critical infrastructure’ given its potential for societal digital transformation. The critical nature means that 5G security is paramount”.

In other words, while mobile network security has always been top of mind, nobody should have been surprised by the elevated focus on 5G network security. And, as we talked up the possibilities the technology brings, and the scale benefits of a single ecosystem, we should have all been able to predict the stakes at hand and the potential impact of banning any major network vendor from 5G deployments: delayed service rollouts; the cost of replacing existing network assets; potential global R&D contraction due to constrained competition; and potential global technology scale impacts.

It’s a doom and gloom scenario, for sure. But Huawei’s latest annual report provides some important context. Among all the data in it, a few points stand out.

After years of double-digit growth, Huawei’s carrier business had a tepid 2017 (growing 2.5 per cent) and a worse 2018 (shrinking 1.3 per cent). As a result, the company’s consumer business suddenly became its biggest money maker [4], accounting for 48 per cent of revenues.

Meanwhile, the Chinese market has steadily grown in importance for Huawei: where it was 35 per cent of revenue in 2013, it’s now almost 52 per cent. Combined with EMEA, the markets generate 80 per cent of Huawei’s sales.

What’s the story here? That the ascending importance of consumer and Chinese markets will impact how Huawei looks at its business strategy and how best to deal with security concerns? Retrenching on the easier wins?

To date, there’s been no indication of a pullback. And, here, another highlight of its 2018 annual report is worth noting

In 2016 and 2017, Huawei kicked off its report by answering three questions: who is Huawei; what do we offer the world; and what do we stand for? In the latest document, it added a few new questions: who owns Huawei; who controls and manages Huawei; and who does Huawei work with?

The additions send a clear message: Huawei wants to signal that it operates around the world, as a private company with “no government agency or outside organisation” holding shares. A pullback wouldn’t benefit anyone. Not Huawei. Not its carrier customers with “1,500 networks in more than 170 countries”. Not the global standards organisations it supports.

Of course, this is a message it’s been sending for some time now. How that message evolves in the face of commercial and political progress on 5G is the key question. And it’s why I’ll be in Shenzhen later this month.

– Peter Jarich – head of GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://twitter.com/GSMAi/status/1106534553286569984/video/1
[2] https://www.gsmaintelligence.com/research/2019/03/the-mobile-economy-china-2019/743/
[3] https://www.gsmaintelligence.com/research/2019/03/mwc19-barcelona-beyond-the-headlines/736/
[4] https://www.mobileworldlive.com/featured-content/home-banner/huawei-profit-jumps-despite-dip-in-carrier-business/

Intelligence Brief: Is it time to change mobile tax track?

April heralds the start of the new fiscal year in many countries around the world, when various new tax rules come into place.

One example of a country that has been grappling with new taxes is Romania, where the so-called greed tax ordinance was implemented earlier in the year: it targets bank assets, energy companies and mobile operators. Romanian mobile subscribers will see bills go up as a result of the 3 per cent tax on all telecom operators’ turnover.

This is just the latest in a longer-term trend on mobile sector taxation.

The mobile sector continues to see further taxes added on by governments in an effort to maximise fiscal revenues. Governments across the world have introduced or increased 120 taxes specific to the sector since 2011. As of 2017, 1.5 billion mobile subscribers in 60 countries were subject to some form of additional taxation on top of general VAT or sales tax: that’s almost 30 per cent of mobile subscribers worldwide.

While this might seem like abstract data, there are real consequences. Here are some of the more worrying developments in mobile taxation (you can find more in our recent Rethinking Mobile Taxation to Improve Connectivity report [1]).

Uganda: social media tax
In 2018, the government introduced a tax of UGX200 ($0.05) to use many online platforms including WhatsApp and Facebook. The Ugandan regulator recently reported that, as a result, internet subscriptions fell by 2.5 million in the three months after the tax was introduced.
Sri Lanka: tower tax
Original plans for a tower tax in late 2017 included an LKR200,000 ($1,144) tax per tower every month. These plans were watered down by the time the tax was implemented in January 2019: the monthly rate became the yearly rate. Nevertheless, taxing towers will no doubt reduce incentives to roll out networks.
Turkey: activation taxes
Getting access to a new phone connection has been difficult for a while now: consumers in Turkey pay three different charges before the first MB of data is downloaded. But these charges, the special communication tax, wireless licence fee and wireless usage fee, are inflation-linked and now add up to TRY98 ($17.22) just to get started for the year. It’s no wonder consumer taxes account for more than 60 per cent of the cost of owning a mobile in Turkey (and on top of that there’s a number of operator taxes there including a 15 per cent revenue share).

These additional (and complicated) taxes aren’t good for developing a mobile market. Need proof?

Since taxes increase the price of owning and using a mobile phone, fewer people are able to afford and use mobile internet services. Charting out the results, we see that consumers in high-tax countries (with red dots in the chart, below, click to enlarge) are charged more than 3.5 per cent of their income in taxes on mobile. In these same countries, mobile internet penetration never exceeds 30 per cent.

[2]Of course, there is a reason many developing countries impose high tax burdens on the mobile sector.

Where debt levels are higher, governments reach for additional tax payments on the mobile sector to try and fill the fiscal gap. Where that debt is due to be paid back soon, governments’ requirements are even more pressing. And mobile transactions of all types are tempting to tax: the International Labour Organisation estimates 2 billion of the world’s employed population are in the informal economy, with 93 per cent of these workers in emerging and developing countries. Collecting taxes from a significant informal economy is difficult. On the other hand, mobile transactions such as buying SIM cards, handsets, and prepaid top-ups can be identified fairly easily, and therefore are easier to tax.

But, as much as this strategy might be popular or easy, it’s a mistake for two key reasons.

Taxable base decreases
Higher taxes means lower take-up and therefore a decrease in the taxable base, the number of people you are able to tax. So gains by governments in terms of increasing tax rates can be eroded by the lower number of people using mobile.
Mobile services can help in formalising the overall economy
Person-to-government (P2G) payments using mobile money can be used to collect general taxes from citizens; school fees; health payments; and other official payments, and therefore increase the taxable base. P2G payments are now available in over 30 markets.

Inevitably, the debate on mobile taxation will continue with the short-term fiscal requirements of governments being pitted against longer-term sector and economic development.

At the same time, governments are developing ambitious digital economy plans. Mobile operators are being asked to simultaneously take on the burden of generating significant tax revenues and invest heavily in infrastructure. Maintaining both roles might turn out to be unsustainable.

– Mayuran Sivakumaran – senior economist, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

[1] https://www.gsmaintelligence.com/research/2019/02/rethinking-mobile-taxation-to-improve-connectivity/730/
[2] https://www.mobileworldlive.com/wp-content/uploads/2019/04/GSMAi_MobileOwnershipCosts.png