The converging telecom and IT space is set to become a $5 trillion global business, fueled by relentless demand from individuals and businesses to be able to access information across any device at any time.
The wireless/telecom/media/IT sector is growing two to five times faster than the overall economy, as consumers and businesses demand high-speed data connections and real-time voice communications at home and in the office. The wireless sector alone is expected to grow more than 40% by 2016.
But the convergence of wireless, telecom, media and IT can be confusing. To help you better understand the various segments of the ecosystem, we’ve broken the industry into 10 broad sectors. Each month, we’ll drill down into one of the segments to explore trends in the segment and potential employment opportunities.
Segments
• Customers – Service Providers (data, telecom and wireless), volume enterprise customers by vertical market (i.e. government, energy, healthcare, real estate and financial services) and the various consumer markets (Gen Y, Echo Boomers, Baby Boomers, Gamers, Soccer Moms, etc.).
• Devices – computers, laptops, netbooks, smartphones, cell phones, set-top boxes and related accessories used to connect to the network. Companies include: Nokia, Samsung, LG, Motorola, HTC, Sony Ericsson, Apple and RIM, while traditional PC companies like NEC, Dell, HP, Acer and Toshiba are incorporating wireless technology into their devices.
• The Channel – On-line and physical distributors of devices, applications and content including on-line stores like Amazon.com, traditional retail stores like Best Buy and Wal-Mart, direct sales and channel sales including value added resellers and operating-centric application stores like Apple’s App Store. Other companies include: Brightpoint, BrightStar, RadioShack and the thousands of direct and indirect wireless retailers.
• Content & Mobile Marketing – Games, music, video, voice, e-mail, and the myriad of other content. Companies include: EA Mobile, Groove Mobile, PacketVideo, MediaFLO, MobiTV, Google, Yahoo, and Microsoft.
• Enabler Apps – Software applications, which make the network and devices useful to customers. Companies include: Microsoft, Verisign, Google, Apple, Salesforce.com and the thousands of developers empowered to create applications for smart phones.
• Carriers – Companies operating networks and providing services to businesses, government and consumers. Companies include: Verizon, AT&T, Sprint Nextel, T-Mobile, Vodafone, China Mobile, Telephonica, Comcast, Cox, Time Warner Cable and MediaFLO.
• Business & Operating Support Systems (BSS/OSS) – The software and applications required to monitor and manage the infrastructure and traffic running over the network. Companies include: Microsoft, Agilent, Ariston Global, Hewlett-Packard, Solarwinds, Cisco and Accenture.
• Infrastructure – The physical network required to store and transmit information from point A to point B. This includes the physical wireline and wireless networks and equipment as well as servers required for “cloud” computing and storage. Companies include: Ericsson, Oracle, Sun, Nokia Siemens, Alcatel-Lucent, Huawei, Bechtel and American Tower.
• Chips –Manufacturers and suppliers of semiconductor chips, which power the infrastructure and devices. Companies include: Advanced Micro Devices, Altera, Freescale Semiconductor, IBM, Infineon, Intel, LSICorp., Qualcomm, Samsung, Texas Instruments and STMicroelectronics.
• Facilitators – The capital providers, investment bankers, consultants, regulators, analysts, and associations supporting, fueling and defining the industry. Companies and associations include: Goldman Sachs, JP Morgan Chase, Accenture, Yankee Group, Gartner, Frost & Sullivan, FCC, NTIA, CTIA, PCIA , ITA, ITU, SCTE, IEEE, WICT, NCTA and RCA.
Customers
This segment can be divided into two large categories: enterprise volume buyers and the mass-market customer. The U.S. Telecommunications Association counted more than 158 million residential and business telephone lines in 2008; wireless penetration rates stand at 90% of the population. Compass Intelligence estimates U.S. business would spend $688 billion on information and communications technology (ICT) last year, with small businesses spending about $280 billion on ICT by 2012.
Government is also a big consumer of telecom devices and service. For instance, the Federal Emergency Management Administration is expected to pay more than $61 million to AT&T, Verizon and Stratus Technologies for communications services and equipment during the next five years – and that’s just one agency.
The healthcare and utilities industries are expected to drive growth. And consumers are expected to spend $94 billion on home network-enabled devices next year, according to ABI Research.
Devices and Accessories
Consumer electronics device sales are big business; the telecom category encompasses everything from computing devices to cell phones and accessories to home-networking routers and set-top boxes that enable the “connected home” to machine-to-machine (M2M) communicators.
• About 1.2 billion handsets should be shipped globally this year, according to a February report from research firm IDC. Handsets sales are expected to decline in today’s challenging economy, but wireless remains the major driver for the global telecom industry. Along with cell phones and smartphones, wireless technologies increasingly are embedded in laptops and smaller, lighter “netbooks” for always-on connectivity. Handset manufacturers include Nokia, Samsung, LG, Motorola, HTC, Sony Ericsson, Apple and RIM, while traditional PC companies like NEC, Dell and Toshiba are incorporating wireless technology into their devices.
• And while research firm Gartner forecasts a nearly 12% drop in global PC sales this year – the worst drop ever – mobile PC sales should be up 9%. Sales of netbooks, a subsegment of laptop PCs, should top 21 million, up nearly 80% from 2008. Meanwhile, desktop PC shipments are expected to decline nearly 32% from 2008. The researcher expects total PC shipments of 257 million. Dell, Lenovo, NEC and Hewlett-Packard are just some of the companies in this space.
• In-Stat, another research firm, is declaring a new segment called Digital Media Adapters, over-the-top devices that access third-party home entertainment services delivered via a broadband connection without an affiliation to a specific operator. Apple TV, the Netflix player by Roki and the Blockbuster/2Wire Streaming MediaPoint box are included in this category.
• Dell’Oro Group estimated 23 million IPTV subscribers by the end of 2008, all of which use devices to connect to TV services. Motorola and Cisco are the top vendors in this space. Screen Digest expects 127 million set-top boxes to ship in 2012.
• The cell-phone accessories business – chargers, Bluetooth headsets, carrying cases and the like – stands at $80 billion worldwide, according to ABI Research. Companies that touch the accessory space are diverse, from manufacturers such as Blue Ant, Parrot and Jabra, to distributors Brightpoint and BrightStar.
• Harbor Research estimates M2M device shipments could reach 430 million units by 2013, driven primarily by wireless personal area networks and wireless sensor networks technologies.
The Channel
All these products and services have to be sold somewhere. The consumer electronics devices segment is forecast to be a $171 billion industry. Consumer-facing telecom devices
are sold in retail channels as diverse as Best Buy and Wal-Mart to the 7-Eleven convenience store chain, as well as c
arrier-owned Web sites and stores. Online channels, such as Amazon.com and eBay, also sell every conceivable telecom device out there. Operators also outsource some products logistics to third-party providers. Large players in this space include Brightpoint and BrightStar.
Content & Mobile Marketing
Music, video, voice, games, photos, location-based services, advertising, books, social networking: they’re all going digital. Americans are consuming a media-rich diet. From the Amazon Kindle, which lets people read books transmitted via a Sprint Nextel wireless connection, to Wi-Fi integrated into the Nintendo Wii, more and more content is being consumed wirelessly. Whether it’s Twitter, Google Maps or the Wall Street Journal, content publishers are exploring ways to enable connectivity in a variety of ways. In addition, handset manufacturers like RIM and Apple, carriers and applications developers are introducing ”store fronts” where people can go to buy a wireless application. Expect a lot of attention in this area as companies compete for the best and brightest employees to help this transition.
Revenue numbers for this space are all over the place, depending on the segment, but no matter whose numbers you believe, one thing is sure: the space is growing.
• The worldwide video games and interactive entertainment could reach $57 billion this year, according to DFC Intelligence.
• The digital music business grew about 25% in 2008, according to IFPI Communications, which represents the recording music industry. Digital platforms account for 20% of recorded music sales.
• One estimate says mobile TV will bring in $10 billion in revenues globally by 2013.
Another area of expected revenue growth is through mobile advertising. A recent report from Frost & Sullivan predicts nearly $2 billion in mobile advertising revenue to be generated by 2012. Frost & Sullivan industry inalyst Vikrant Gandhi notes, “Adoption of mobile advertising by the nation’s largest mobile operators and innovative mobile virtual network operators (MVNOs) is a testament to the perceived potential of the market. Mobile advertising efficiently serves the expectations of advertisers, mobile operators, and even subscribers when offered in a highly targeted, non-intrusive manner.” Mobile advertisements are mainly in the form of messaging, wireless application protocol (WAP), mobile video, in-application, and performance-based advertising within search, WAP and other environments.
Mobile advertising is also expected to see strong adoption through the user-generated content space. Juniper Research notes that by 2013 ad-funded social networks will provide the bulk of UGC revenues. By the end of the forecast period, advertising is expected to account for nearly one-third of total revenues in the UGC market and more than half of mobile social networking revenues. Dr. Windsor Holden of Juniper Research states, “Whereas initially there was a perception that users would pay a small mobility premium to access social networks on their handsets, it rapidly became clear that to achieve truly mass adoption, it would be necessary to offer free membership and then to augment that with advertising and the sale of premium content.”
Enabler Apps
Applications drive the telecom and IT industry, both for business users and mass-market customers.
Vertical market enterprise software applications are often sold to businesses as a service, enabling employees to use the application whether they are on a laptop, network or smartphone. Enterprise software sales worldwide are expected to be flat this year at $222 billion, Gartner predicts. Microsoft, Salesforce.com, SAP BusinessByDesign and Google Enterprise provide business apps online via a Web browser. Fleet monitoring and smart meter-reading are going mobile, further driving wireless data growth.
In the consumer space, Apple recently announced that 1 billion applications had been downloaded from its iTunes store front for the iPhone and iPod touch, despite the fact that Apple’s operating system is proprietary. The Google Android OS is based on the Linux open standard, which means any developer who writes an application to the Android OS can be assured that app will run on any device that uses the OS.
In addition to applications developers, some companies write software to do things to the handset that aren’t necessarily consumer-facing. These companies, like RedBend Software, develop software that can fix a device glitch over the air so the customer doesn’t have to take the cell phone into a physical store for it to be fixed.
Carriers
Increasingly, the world is using cellular technology to access content – and Americans lead this trend. Four U.S. carriers are in the top 10 worldwide in wireless data use, according to Chetan Sharma Consulting. Since Ma Bell was broken up in 1984, U.S. carriers have morphed a number of times. The nation’s two largest telecom carriers are AT&T and Verizon. AT&T and Verizon also are the nation’s two largest wireless operators and are building extensive broadband networks. Cable TV companies like Comcast and Cox Communications are beginning to offer fiber-based phone service—and all of these carriers are interested in offering their customers a quadruple play: that is bundled landline phone service, wireless connectivity, broadband Internet and television/video. Beyond that, there are many smaller carriers that only offer one or two pieces of the quadruple play. These carriers include companies like Qwest Communications, which sells its own telephone and broadband connections, but has partnered with Direct TV and Verizon Wireless to resell their services.
The wireless industry alone employed more than 268,000 people at the end of 2008, producing service revenues of about $148 billion, according to trade association CTIA. An estimated 51% of adults have broadband access in their homes today, and 21% without broadband in the home still use the high speed connection regularly, trade association TIA noted. As people continue to demand high-speed connectivity to access data-rich applications like streaming video and multimedia messaging, carriers must continue to invest billions of dollars in their networks to make them faster and fatter.
Specialized operators, like mobile satellite service (MSS) operators, paging carriers, MediaFLO, which offers mobile TV, and companies that connect machines to machines (M2M) are also included in this category.
Meanwhile, less-developed markets are opening up new telecom-related opportunities. China is expected to experience significant growth as that nation opens up its telecom ecosystem. India, Brazil and Russia also should be growth regions. Vodafone, one of the world’s largest mobile operators, is moving into integrated mobile and PC communications services.
BSS/OSS
Just as important to the network is the software powering it. This multibillion-dollar industry segment is vast and diverse; an estimated 1.4 million people in the U.S. are employed in computer system design. Software technology manages everything from completing a call or data connection to managing network power, operational and business support systems (OSS/BSS) that administer and maintain the network as well as manage products and services, billing and customer relationship management.
The OSS/BSS segment is also becoming more important as wireless carriers begin implementing 4G technologies that will need to interface with their legacy 2G and 3G networks. Customers don’t want to be bogged down with issues surrounding whether they are using a carrier’s different network technologies or for that matter if they roam onto a compatible Wi-Fi network. This need for integration at the
network level is leading carriers and infrastructure providers to further invest in technol
ogies and services that provide a seamless experience for the consumer as well as for their back-office billing systems.
Key computing companies are active in this segment. According to IDC, Microsoft is the largest supplier of enterprise software, followed by IBM and Oracle. Other companies offering product in the $15 billion sector include Microsoft, Agilent, Ariston Global, Hewlett-Packard, Cisco and Accenture. Further, companies like SolarWinds and BMC offer mission-critical network management software.
Infrastructure
While consumers are familiar with sexy devices, the network is the powerhouse behind the device. Networks can be divided into a few broad categories: wireline telephone networks, wireless, cable and DSL, Internet and satellite.
About 128,000 people are employed in the communications equipment segment. In the telecom space, Ericsson is one of the largest infrastructure providers in the world. Alcatel Lucent and Nokia Siemens Networks also compete to build out carriers’ next-generation networks. Chinese companies Huawei and ZTE have made significant inroads into the networks business. Some companies concentrate on the core area of the network, others focus on the radio access portion of the network.
Servers, data centers and cloud-computing technologies are an integral part of the telecom network. The data processing, hosting and related services sector employs around 255,000 people. Cisco, IBM, Oracle and Juniper Networks are just some of the companies that play in the multibillion-dollar space. Cloud-computing companies include some of the biggest computing names, like Microsoft, Apple and Google, but a number of startups and nontraditional players like Amazon, are in the sector as well.
But the network is also cellular towers and base stations, fiber running underground and microwave backhaul. As carriers build out next-generation networks capable of handling high-speed data, they are going to have to upgrade their existing networks and build new infrastructure to handle the volume. People are needed to design, engineer, furnish, install and maintain these networks. Companies in this part of the ecosystem include Bechtel, Black & Veatch, Goodman Networks, General Dynamics, Computer Science Corp., HP and staffing companies like KForce, KBR/All States Staffing and Teksystems.
Chips
Semiconductors sit at the heart of all electronic devices, and thus are the foundation not only for telecom and IT devices, but the networks they run on. Worldwide semiconductor sales are beginning to stabilize after experiencing declines in 2008; smartphones and netbook PCs are bright spots in the industry, according to the Semiconductor Industry Association.
The semiconductor industry employs a domestic workforce of 216,400 employees, according to the U.S. Bureau of Labor statistics, part of a global industry with 2008 sales of $249 billion. Companies that are active in the space include Advanced Micro Devices, Altera, Freescale Semiconductor, IBM, Infineon, Intel, LSI Corp., Qualcomm, Samsung, Texas Instruments and STMicroelectronics.
Facilitators: The Professionals and Regulators associated with the field
Many of the world’s largest companies are focused on telecom so they need accountants, office managers, billing and payroll employees, HR departments and the like to operate their business. Further, the ICT industry attracts venture capitalists, analysts and consultants in a wide variety of ways. Private-equity groups and investment bankers play an integral part of the industry. Goldman Sachs, for example, purchased Alltel and then later sold the assets to Verizon. One government estimate has more than $1 of every $5 in private capital invested in the economy in 2008 going into communications and IT.
The telecom industry is also closely regulated at federal, state and local levels, often across a number of sub-sectors. For example, a local planning commission has to approve a cell site and the Federal Aviation Administration has jurisdiction over lighting on that tower. Wireline telecom operators are especially heavily regulated at the state level.
Each sector has trade associations and professional organizations to help steer the industry as a whole.
Questions or comments? Email the Editors at:
Tracy Ford – tford@ardenmediaco.com
Dan Meyer – dmeyer@ardenmedico.com
