I attended the Consumer Electronics Show (CES) in Las Vegas last week with the purpose of analyzing consumer technology trends and how those trends may or may not impact service providers. The underlying themes at CES this year were immersive video experiences with 4k, 8k, and virtual reality tech, as well as connected home and automation, connected cars, and the Internet of Things (IoT). Many of these technologies were visible at last year’s CES, though my conclusion is that they have since matured and service providers should be addressing the impacts they have on business. Based on this information, I have compiled what I feel are the five most important consumer trends and discuss specifically how those trends are impacting the service provider industry.
1. Broadband Demand
I always refer to Nielsen’s Law of Internet Bandwidth when discussing bandwidth consumption growth by subscribers. It states that a high-end user’s connection speed grows by 50% per year. This has held true since 1983 (Figure 1).
|Figure 1: Bandwidth consumption growth since 1983|
The cloud is transforming consumption models and is driving end consumer bandwidth needs. Music and video quality is increasing with 4K/Ultra HD. Services like Apple Music and Google Play are now built into Apple TV and Roku devices so that this enhanced media can be consumed by end users. Google and Apple are utilizing cloud storage for photos, videos, and device backups. Combine these cloud services with an increased number of devices in the home and you have the potential for a bandwidth explosion.
This increased bandwidth consumption puts pressure on service providers to make network and outside plant upgrades. However, the market won’t necessarily allow price increases on these services as competitive pressures mount. This is a major challenge for providers today.
While their current revenue streams are suffering, customers aren’t spending any less. Operators have a wide-open opportunity to adapt their service strategy and replace legacy revenue streams with a whole host of new potential streams from managed Wi-Fi, Security, Storage, Connected home, Home network management, amongst many other possibilities.
2. Content Consumption Models
The upcoming generation of subscribers consumes content very differently than those of older demographics. The traditional method of watching TV at pre-determined times with a standard guide is dying. On demand, streaming content that can be viewed in any location on any connected device is the new normal. Conversely to traditional video which is receding, the streaming market is exploding with growth and opportunity.
This brings into question how relevant traditional service providers can be in response to this paradigm shift. Service providers could become the “dumb” pipe for consumers to access content, leaving them out of the equation, if providers don’t constantly analyze their consumer’s behavior and trends and adapt their strategies appropriately. Instead of purchasing content from the service provider, consumers are instead opting for streaming devices such as the Roku and Apple TVs, and content streaming services like Hulu, Sling TV, Netflix, and HBO Now, to name a few.
Despite this shift, there is still hope. TiVo and Pace/Arris have come together to create a set-top box, the MG1, that supports both traditional video content through broadcast QAM and over-the-top (OTT) application integration such as Netflix, Hulu with integrated search across the different sources. The roadmap for the MG1 includes the ability to ingest broadcast TV through the QAM interface or via multicast IP on the Ethernet interface. This allows a service provider to offer the best of both worlds and create a transition plan to get to an all-IP network, which is exactly what the NCTC has enabled for its members.
In the end, subscribers will be given the flexibility and freedom they demand by being able to purchase their own streaming devices, and installing both OTT apps and an app provided by their service provider that supports broadcast content and local content.
3. Mobile Connectivity
At CES this year, Qualcomm had a major presence around 5G technologies and how it will enable multi-gigabit speeds with a combination of licensed and unlicensed spectrum solutions. AT&T has also released its broadband and 5G plan. These solutions have a focus on enabling IoT expansion, wireless broadband access, and advanced mechanisms for delivering quality content across the spectrum. 5G is positioned to disrupt fixed broadband access, with multi-gigabit speeds, and augment Internet delivery to the subscriber in more flexible ways.
Figure 2: Qualcomm's 5G Roadmap
Adapting a strategy for delivering a combination of fixed broadband and wireless access—and in some cases, a mix delivered to the same location will be required. This will enable IoT device connectivity, UltraHD video delivery, mobile device access, connected vehicles, and other devices to communicate back to cloud-based management and analytic systems.
Service providers must partner with their predominant farming, automotive, municipal, emergency response, and other mobile industry customers to create wireless coverage and fixed broadband initiatives and strategies. These partnerships should include revenue sharing and business partnership models that are win-win for the customer and provider.
A legitimate concern for those providers with no spectrum, no Wi-Fi solution, or no partnerships for spectrum, is that due to these advances in wireless communication, they will be unable to deliver the truly mobile solution that consumers demand.
4. Internet of Things (IoT)
Although not clearly defined by all, and perhaps combining trends 1 and 3, the IoT is adding a multitude of devices onto networks at a rapid pace. Cisco defines the IoT as the mechanism that “links objects to the Internet, enabling data and insights never available before.” Industries are being transformed, from connected cars with thousands of sensors communicating issues back to service centers, to farmers with sensors sending data back to the cloud to analyze soil composition and weather patterns to optimize yields. The IoT is changing how we live and conduct business. The advances in Wi-Fi, 4G/LTE, and 5G technology is continuing to enable more and more IoT devices, all communicating back to management and analytics systems to create optimizations and applications that have never existed before. Cisco has published specific case studies that demonstrate the value that can be created.
This growth in IoT is putting demand on service providers to have more encompassing and reliable mobile solutions through Wi-Fi, near field communication, and LTE today and 5G in the future. Business and residential subscribers are demanding more intelligent, flexible, and reliable connectivity methods to enable these applications. Much like the mobility strategy, providers must partner with their most strategic customers and understand their IoT and mobility needs to co-create solutions that create positive impacts for both the subscriber and the provider.
5. Home Automation
The last technology on my list is home automation. Although this technology has been around for a while, this year’s CES showed me that the technology and more specifically the management applications for mobile devices has matured. Technologies such as Zwave create a standard for other vendors to base their technology on—allowing consumers to mix and match Zwave compatible devices in their home. Zwave has created a solution guide based on common use cases in the home. By following these use cases consumers can create their customized home automation install.
These technologies in the home will require additional bandwidth, especially streaming video camera feeds, and secure home networks to isolate and protect their connected devices. Setup, installation, and support for Zwave solutions and other home automation solutions are probably out of the reach of non-technical folks. This creates some opportunity for service providers to create and perform setup, installation, and ongoing support of home automation bundles and solutions based around some of these standard technologies.
Key strategies for service providers going forward will be to partner with customers to understand their mobility and IoT needs; co-develop solutions for mutual success; and should include a mobility strategy that utilizes Wi-Fi, 4G/LTE, and fixed broadband to enable IoT and home automation solutions.
Despite the challenges facing service providers in delivering high bandwidth-consuming content—especially video, they should not give up. Service providers can protect their brands and even make up any margin loss resulting from broadband growth-driven network upgrades by creating new revenue streams made possible by these changes. These additional revenue streams will include managed WiFi and IT services, cloud applications, home automation, IoT backhaul, and most importantly security services for business and residential subscribers. The importance of adapting strategy to meet changing consumer, technology, and bandwidth-related demands cannot be stressed enough. It is a truly exciting time in the market where innovative and creative service providers will come out ahead.
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