The state of telecommunication networks: from voice to data, 5G and beyond

Along with the development and maturation of the telecommunications network, we're seeing telcos embrace new technologies and business models to attract and retain customers. Telecommunication companies are increasingly turning into digital service providers. We'll consider the recent changes observed both on the network and the devices used to access it to envision the upcoming trends reshaping the world of telco.

The shift to data

The telecommunication industry is evolving very rapidly. Telephony seems easy, obvious and evident. However, can you imagine that switching board operators were still needed the 70s? The shift to the automated switching boards (PBX) was barely starting fifty years ago. Touch-tone dialing brought opened the door for new technologies such as voicemails, or IVR.

With the emergence and development of computers and smartphones, the telecommunication network had to evolve and adapt rapidly. Nowadays, mobile devices are forcing a significant change of infrastructure. once again.

1. Mobile is first

Mobile data usage is now outstripping landline usage. According to Cisco Systems Inc., mobile data traffic has grown 4,000-fold in the last ten years. The trend shows no sign of reversal.

2. Wifi as support

Mobile is now the new consumer connection of choice, but the wired network is still relevant. Its role is evolving. Mobile devices are using the wired network to offload traffic, thanks to WiFi and femtocell technologies.

3. From voice to data

The telco industry used to be all about voice traffic, but the reality has changed. Data is now the main usage: videos, SMS, chat, browsing the web… The network had to evolve to reflect this shift, as the trend keeps gaining traction. Currently, we already see interactive data usage outstripping voice traffic. Soon, the development of IoT (Internet of Things) will lead non-interactive data to surpass that.

Therefore, the network must be optimized for data which became its primary function. It implies a shift in the nature of voice traffic: voice is becoming data to coexist on a data-optimized network (VoIP).

4. Network Virtualization

The backbone of the telecommunication infrastructure is increasingly becoming virtual. Software-defined networking enables cost-reductions and greater adaptability of the network.

Network virtualization is more than a mere performance boost or cost reduction measure. It improves the maintainability of the network and enables programmatically efficient network configuration to facilitate monitoring.

The new frontier of the telecommunication industry: 5G and beyond

The telecommunications hardware and infrastructure is always evolving. Now that 4G is widespread in developed countries, 5G is the new frontier. The emergence of the 3G and 4G network was all about users: it allowed them to consume data-intensive resource in a fast and cost-effective manner. It made it possible to stream audio and video and rely on the cloud to store and access our files.

However, 5G, along with other innovations addresses a much different need: machine to machine interactions. Autonomous vehicles are a great example of this. It's been estimated that one car could produce between 380 TB to 5 100 TB of data in just one year (17 600 minutes of driving).

With such high data usage, the current paradigm — cloud networking — using low embarked computing capacity and relying on data centers for processing cannot suffice. Instead of the fat cloud-thin client logic we have today (a smartphone can't do much in airplane mode), we'll need to switch to a thin cloud - fat client logic. It's necessary for autonomous cars, as they cannot afford to drop service. Therefore, autonomous vehicles have to process the large amount of data they generate locally.

Besides, our current and future infrastructure will not be able to handle the processing of data streams coming from millions of different vehicles. The data can then be supplemented by data coming from external sensors monitoring traffic or weather in real-time. Instead of relying on a central server to pilot all the cars, we will see something that looks more like distributed networks: cars exchanging with one another as well as other sensors or data sources.

The innovations in the network infrastructure explain only part of the shift of usage we observe. To get the full picture, we need to get a look at the devices used to access it. Let's have a look at the current trends.

Smartphone industry overview

Regarding consumers hardware — smartphones, we also see an exciting transition. Legacy actors sales numbers, such as Apple or Samsung are flattening while new actors are quickly gaining significant traction. Overall, the growth of the sales of smartphones has slowed down over the past years. It flattened: between 2016 and 2017, the total amount of smartphones sold grew by roughly 1.7%, from 1,480.90 million units to 1,505.5.

A plateauing market

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Quarterly smartphone sales, worldwide[/caption]

The market is now mature in most developed countries: according to the Pew Research Center 75% of US adults own a smartphone. Most of the new sales are upgrades and the pace of these upgrades is also slowing down. People are holding to their current phones longer: in the UK, while the average shopper was upgrading his phone every 20 months in 2013. Five years later, he now waits for 29 months.

The innovations are not enough to drive users to upgrade their device before the old one break downs or start malfunctioning. Thus, the sales curve flattened since 2014.

The rise of new giants?

Despite the market flat sales curve, the dynamic of each manufacturer greatly varies. The balance of power between the industry actors is changing rapidly. New manufacturers, such as BBK, Huawei or Xiaomi emerged and developed their market share quickly despite the market slowing down.

On the other hand, existing actors saw their market share plateauing or even shrinking, such as Apple which went down from representing 16.10% of the market two years ago to 14.40% now.

Repartition of smartphone sales between the top 5 manufacturers, 2017 (source)[/caption]

The different brands of smartphones can be confusing as the merges and acquisitions are numerous. Google bought Motorola and then Lenovo. Most of us don't know about BBK, as there are no smartphones sold under that brand. Instead, BBK uses three brands to develop different product offerings.

Vivo and Oppo are trendy brands in Asia (both of them make it to the top 10 alone), while OnePlus is more well known in Europe and the US for its premium phones.

Besides, the western market is unfamiliar with the new Chinese brands such as Xiaomi. Indeed, their devices were only available on online import websites in Europe until recently.

While the number of smartphones sold is interesting by itself, the yearly growth rates give us more insight into what the market might look like five years from now. The stats evolution of the sales between 2016 and 2017 is a good tell of the overall trend: new brands are rapidly emerging, and current main actors are stalling. Apple sales are flat, and Samsung's grew by 3 % between 2016 and 2017. Meanwhile, their competitors landed a 10% (Huawei), 29% (BBK) or even 70% (Xiaomi) yearly increase in their sales.

Top 5 smartphone manufacturers sales - 2015, 2016 and 2017 (source)[/caption]

The diversification of the smartphone offering

Indeed, thanks to their competitive positioning, BBK, and Xiaomi devices are hot-selling all around the globe. Their low prices make them very attractive to consumers. Xiaomi's products offering starts below $100 (Redmi 6) and is capped around $500 for the latest and most advanced models offering performance similar to the Galaxy S or the iPhone.

Besides, there are also others less known manufacturers who develop more specific product to address the needs of certain niches, such as:

• Battery (an iPhone XS has a 2 658 mAh): brands like Gionee or Oukitel are proposing smartphones with battery ranging from 5000 to 10 000 mAh (Oukitel K10000), offering up to a week of operating time.
• Resilience: brands such as Caterpillar or AGM are offering ultra-resistant smartphones packing innovative features, like indoor air quality sensor or a laser-assisted distance measurement tool.

Android has won the OS war

The smartphones sale have a direct impact on mobile operating system distribution. Thus, iOS usage follow Apple's shrinking market share on a downtrend, while Android is dominating the market.

iOS is now on a path to become a niche. Moreover, the market for mobile devices diversified over the last few years. While Apple initially dominated smartphones and tablets sales, newer markets where dominated by Android devices since the start: Smart TV, watches, wearables…

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Mobile Operating System Distribution, 2017 (source)[/caption]

The new manufacturers and products dynamics lead to 85.4% of mobile devices using Android and 14.3% using Apple, leaving little to nothing to other alternatives. The current mobile OS distribution reminds its desktop counterpart. Yet even Windows is not as prevalent on desktop as Android is on mobile. (75% Windows, 12% MacOS, ~5 % Linux)

To dig deeper into the smartphone sales stats, check out Tomi Anohen's blog. He provides free of usage and reproduction data covering the key metrics of the industry.

What's next for the telecommunication industry?

The very nature of telecommunications services providers is changing. We're seeing the emergence of new models and services. Networks are increasingly becoming available on demand, just like the Platform as a Service (PaaS) model took over the world of software.

Virtualization technologies (such as VPN) are driving the growth of the Network as a Service (NaaS) model. Some projects are trying to achieve this vision, while also open-sourcing and decentralizing the infrastructure using a blockchain.

The frontiers between hardware and software providers are blurring considering both are attacking new verticals and continuously offering more products and services. With the explosion of mobile data consumption, a mere increase in the capacity of the network won't be sufficient.

New approaches must be explored to reduce the amount of data transiting on the networks and favor local peer-to-peer data exchanges whenever possible. This shift comes with a promising upside: it does more than just facilitating scalability. It will increase the overall resilience and availability of the telecommunication networks.