VC firm forecasts strong broadband demand in ’10

With just weeks left in 2009 (and not a moment too soon) predictions of what to expect in the new year are beginning to trickle out.
The telecommunications industry is sure to look back at 2009 with a wary eye as a brutal economic background caused the usually go-go sector to take a step back and readjust to consumer and market needs. What will 2010 bring? Will the promise of 4G re-ignite both the growth from within fueled by demand from the masses? Or will the slumbering of 2009 cast a continued shadow over the market leaving both consumers and the industry tightly gripping its pocketbook?
Boston-based venture capital firm M/C Venture Partners is betting that consumer demand for broadband access, and increasingly mobile broadband access, could provide the catalyst needed to get the telecom sector back on track.
“Consumers are sharing and demanding more rich media than ever before, and they are doing so in new ways, which places more stress on their data connections. They expect their Internet experience will meet their needs,” according to James Wade, managing general partner at M/C Venture Partners. “The workplace carries the same expectations, so enterprise networks are also being pushed for faster speeds. We’ll be seeing upgrades in all areas.”
(MC Venture Partners claims to have invested more than $1.8 billion into nearly 100 companies in the communications, media and information technology sectors. Those companies include Lightower, MetroPCS Communications Inc. and Revol Wireless.)
Trends on the M/C Venture Partners’ 2010 list include:
1. 10-plus gigabit per second broadband speed, a prevalent speed at the core of the cloud, is now being demanded closer to the cloud’s edge, to connect enterprises and other network nodes. Continued demand increases for Ethernet services and the shift away from copper-based TDM services by large enterprises and by wireless carriers to support more intensive network applications and more powerful smartphones underpin these changes.
2. DOCSIS 3.0 combined with dense metro network footprints among MSOs will change the nature of competition for enterprise broadband services. The most recent evolution in the CableLabs standards delivers a new level of high bandwidth asymmetrical broadband service to the enterprise and will put pressure on other carriers to innovate their business models.
3. Video consumption amongst consumers will continue to drive an unprecedented growth in bandwidth usage in the home. However, consumers pay much less per megabyte of video than any other content or service. This disparity in cost and value will cause revenue and pricing models to adjust to re-capture latent value, which in turn will trigger further investment in network services to consumers.
4. With the emergence of 4G LTE, historically disparate wireless network standards will begin merging into a globally scalable network platform. This will lead to accelerated innovation as economies of scale fully enable handset OEMs, application developers and carriers as never before. This trend will become more discernible in late 2010 and may lead to further commoditization of wireless network services, which carriers will carefully try to avoid.
5. The popularity of social networking is driving competitors in the wireless industry, including handset makers and applications developers, to consider a next generation of “unified messaging” on handsets. E-mail, SMS, IM and social networking will mesh into a consumer-driven experience of seamless messaging.
6. Disparate handset application universes create barriers and switching costs for users and consternation among carriers who are ceding market power to handset OEMs. Manufacturers such as Apple [Inc.], Nokia [Corp.], [Research In Motion Ltd.] and Palm [Inc.], adopting a handset-centric application experience have shifted the balance of power from the carriers and created barriers around their own handset domains. Carriers will respond to mitigate commoditization of their networks.
7. Smartphones will begin enabling voice applications in the enterprise. Voice services continue to become more application-oriented in the enterprise through VoIP-desktop interoperability. At the same time, voice enhancements such as visual voicemail and voicemail-to-text are creating improved user experiences for mobile customers. Smartphones’ inherent computing and messaging capabilities will combine these voice innovations, providing a building block for fixed-mobile convergence.
8. Recent consolidation of competitive local carriers points to more consolidation in the future. Transactions by Comcast [Corp.] and Windstream show that MSOs and RLECs have viable business cases for acquiring CLECs and they will stimulate more activity in 2010 as CLECs continue to develop their businesses and prospective buyers pursue new market opportunities.
9. Communications services companies will become more application-centric and focus on the consumer’s share of wallet, giving less consideration to network access methods. As cable companies become more competitive with improved data offerings and as wireless carriers deliver a stronger consumer value proposition with mobile data, seemingly disparate products will encroach on each other and communications services companies will focus on capturing a “wallet share.”
10. Unbridled power consumption in data centers will come under increased scrutiny. Virtualization and decommissioning of older infrastructure will unlock power cost savings, while cloud computing and high-density data center environments will place new power demands on operators. Energy management will become a key factor in improving data center profitability and data center power management innovations will appear on the horizon.