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2018 Telecommunications

Industry Outlook
A new era of connectivity Technology, Media &
is on the horizon Telecommunications
2018 Telecommunications Industry Outlook | A new era of connectivity is on the horizon

A new era in mobile begins


As the telecommunications Internet of Things (IoT), autonomous While this will be a multiyear
sector continues to build on vehicles, and mobile media, just to journey for major telecom carriers,
the momentum of 2017, a new name a few. With the sheer number the foundations will begin to form
mobile era will emerge with the of applications that 5G will support, in 2018. Considering the carriers’
initial commercial rollout of fifth- we anticipate a tremendous impact varying approaches to 5G—with
generation wireless network on the entire mobile ecosystem, as some prioritizing fixed over mobile,
technology (5G). One of the most well as society and the economy and others vice versa—it will be an
anticipated mobile technology overall—even bigger than 4G, where exciting year to see which proves to
platforms, 5G will be the connective Deloitte estimated more than $150 be more valuable for consumers and
tissue that blends nascent uses billion in GDP growth and more than businesses.
of mobile technology, such as the 370,000 new jobs.
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2018 Telecommunications Industry Outlook | A new era of connectivity is on the horizon

Where do you see


opportunities for
growth in 2018?
Revenue growth for carriers is of critical importance in 2018. Revenue yield on data services (revenue
per bit consumed) continues to decline as consumers use more and more data, with static or declining
monthly bills. Hence it is critical to identify rapid investment opportunities across the telecom portfolio—
including 5G, IoT, and cross-industry partnerships (such as mHealth and mPayments), as well as a host of
other growth opportunities.

The telecom ecosystem expects IoT to Each of these will dramatically broaden a corresponding rise in the residual value
become a critical engine for future growth. the reach of wireless for consumers and of smartphones, as well as the desired
One of the most successful IoT applications business users. useful life of these devices. As a result,
thus far has been the connected car. The Looking beyond IoT, many telecom carriers fewer people are “throwing away” their old
largest US carriers have made significant are looking to potentially enter the media phones in hopes of finding a second useful
investments in the connected-car space space through M&A deals, partnerships, life for them. In fact, according to Deloitte’s
over the last several years, and we are alliances, and the like. Mobile content and Global Mobile Consumer Survey, US edition
already seeing strong growth in mobile video are some of most significant consumer (GMCS), the number of consumers throwing
subscriptions for connected vehicles. use cases for 5G, so expansion into the away old phones fell by more than half in
Connected cars, in addition to other content arena is only natural for carriers just one year—dropping from 12 percent
categories of IoT, will continue to be an seeking growth. We expect this to continue in 2016 to 5 percent in 2017. Hence, there’s
important growth area for carriers in 2018. in 2018 through ongoing M&A activity, an opportunity for carriers and other
(Autonomous vehicles, an evolving area of as well as key partnerships and alliances. businesses to capitalize on the growing
the connected-car industry, are explored in While there may be different approaches to value of secondhand smartphones, as well
the “What do you see emerging in the sector?” media (for example, by buying major media as the increasing volume that will enter this
section of this report.) houses, or by purchasing smaller-scale channel.
TV distribution technology with the intent
The potential for IoT extends far beyond to scale it), the objectives are the same: Finally, we would be remiss to not mention
connected cars. These opportunities the ability to deliver content to any screen augmented and virtual reality (AR1 and VR)
include the connected consumer and the through wireless distribution. M&A in other as avenues of potential growth. While both
broader universe of connected things with areas of telecom, such as fiber and towers, are still emerging, according to Deloitte’s
applications such as connected home is also likely to continue in 2018, building on GMCS, approximately 10 percent of
monitoring and control, entertainment, momentum begun in 2017. consumers own a VR headset, representing
wearables, and more. In addition, the a relatively quick adaption curve for such a
connected enterprise market features Secondhand smartphones also represent new product. It remains to be seen if this
applications such as connected vehicle an area of potential growth in the telecom is just another burden on mobile network
fleets, predictive maintenance, factory industry. With smartphones continuing to spectrum and capacity, or a significant
automation, workforce training and field increase in value—some having an initial revenue growth opportunity for carriers.
support, and countless other examples. price point of more than $1,000—there is
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2018 Telecommunications Industry Outlook | A new era of connectivity is on the horizon

What should businesses


be mindful of as they
plan for growth?
smartphones too much, and this number
rises to more than 70 percent for 18- to
34-year-olds. As a result, 47 percent of
consumers are taking active measures to
limit their mobile phone use: keeping the
device out of sight, turning off notifications,
or periodically turning off the device
altogether. Given that US consumers look
at their phones an average of 47 times a
day (translating to about 12 billion looks per
day in the aggregate in the US alone), the
industry will no doubt continue to thrive.
However, mobile telecom providers have an
opportunity to develop additional services
As mentioned above, for any major alone to adequately support broadband
and apps that will help consumers use their
mobile telecom provider, the demand for competition, rural coverage, and wireless
devices even more responsibly.
investment dollars is vast. 5G will require densification.
major investment over the next several
Of course, security and privacy are key
years, in addition to other areas such as IoT Additionally, carriers have the ever-
considerations for anyone in the telecom
and cross-industry partnerships. The good present obligation to continue to update
ecosystem. Because security is part
news about 5G investments (along with legacy IT systems, particularly as they
and parcel to what telecom companies
SDN/NFV and other network upgrades) is expand into new areas. These legacy IT
address on a daily basis, our focus here
they will help minimize service delivery costs systems are key but costly assets for any
is on the opportunities potentially left
and improve time-to-market. telecommunications provider and are the
behind due to customer concerns related
focus of far-reaching digital transformation
to security. Ultimately, it often comes
Additionally, carriers have a heavy efforts designed to improve customer
down to perception as opposed to reality.
investment demand related to the core fiber service, streamline processes, consolidate
According to Deloitte’s GMCS, fewer than
network. While most attention on 5G relates ERP/financial systems, and so on. Newer,
one in five consumers believe they are
to wireless coverage and the potential use more transformative technologies on the
“very well informed” about security risks
cases that 5G will bring, the success of horizon for telecoms also include robotics,
for their connected home devices, and
next-generation mobile networks will rely automation, and blockchain.
nearly 40 percent say they are not properly
on substantial investment in the core fiber
informed at all. In addition, for the third
backhaul network to support anticipated Also of note for 2018 is the important shift
consecutive year, the No. 1 reason for not
growth in data services. In fact, according to in consumers’ usage of mobile services.
using mPayments is the fear that it is not
a Deloitte-published 2017 report titled “The Insights from Deloitte’s latest GMCS
secure enough, despite mobile payments
need for deep fiber," there will be a fourfold were considered the first to highlight the
being more secure than many forms of
increase in mobile data traffic in the United increasingly balanced approach consumers
traditional payments. Hence, Deloitte sees
States between 2016 and 2021. This analysis are taking to their mobile phone behavior—
opportunity for telecom ecosystem players
suggests that an investment of $130 billion actively curbing their mobile usage habits.
to help educate consumers on the benefits
to $150 billion could be required over the According to the survey, almost half of
of secure network solutions.
next five to seven years in the United States all US consumers believe they use their
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2018 Telecommunications Industry Outlook | A new era of connectivity is on the horizon

What do you see


emerging in the sector?
Telecom providers need to be aware of several years, they are gaining popularity. sensors; and infrared cameras are other
several important emerging developments. According to Deloitte’s GMCS, the number developments to watch in 2018. With these
of consumers interested in renting or advances, we expect overall US smartphone
First, as previously mentioned, we will see hiring an autonomous vehicle increased penetration to approach 90 percent,
the first commercial market deployments of by nearly 15 percent in just the last year with much of the growth driven by older
5G in 2018. Associated with this rollout will alone. Ubiquitous next-generation wireless generations (ages 45–74). In fact, according
be the emergence of small-cell densification. networks (for example, 5G) will be critical to Deloitte’s GMCS, over the last three
For years, carriers have utilized “small to eventual mass-market adoption of years, the compound annual growth rate
cells” to help fill coverage gaps between autonomous vehicles. for smartphones among those age 45 and
large macro-site cellular towers that serve older was more than five times that of 18- to
sizable geographic areas. As their name Yet another hot topic for tech-hungry 24-year-olds (7.8 percent vs. 1.4 percent)—a
implies, these small cells have traditionally consumers is what the smartphone’s future trend we expect to continue in 2018.
been scaled-down versions of large towers’ will hold now that the external form factor
capabilities, augmenting coverage where of most devices has stabilized. According Finally, from a regulatory standpoint, 2018
towers couldn’t reach. With 5G, small cells to Deloitte Predictions, 2018 will be a year is going to be an important year for the
become a more standard element of the of “invisible innovation.” This means that topic of net neutrality. In late 2017, the
radio access network. They no longer just progress will be made to functions within Federal Communications Commission
fill gaps—they are essential to enabling 5G, the software and/or internal hardware, (FCC) reversed a previous net neutrality
particularly in densely populated areas. including AR/VR and artificial intelligence/ order. State and local governments likely
machine learning—delivering, for example, will continue to challenge the FCC’s position
A key element for the evolution to 5G will better route recommendations, more on net neutrality for some time. While the
be adequate spectrum, and while small realistic augmented reality, and so on. ultimate outcome is unknown, this issue
cells can yield better spectral efficiency, will be a key focus for the entire telecom
strong spectrum strategy and positioning is Better and faster chips; increases in the industry throughout 2018.
critical for a robust deployment, especially number, capability, and sensitivity of
as carriers commingle traditional mobile
spectrum with a shift to more mmWave
deployments. With the dramatically higher
frequencies that many 5G operators plan to
utilize, and the limited distance that these
frequencies can travel, 5G operators will
need to construct the network with a mesh
of small cells that interoperate with the large
cells and/or directly with the backbone fiber
network.

Autonomous vehicles are another emerging


category with ties to the telecom sector.
While autonomous cars have been in
the testing and development stages for

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2018 Telecommunications Industry Outlook | A new era of connectivity is on the horizon

Contacts
Craig Wigginton
Vice Chairman
US Telecommunications Leader
Deloitte & Touche LLP
+1 212 436 3222
cwigginton@deloitte.com

Endnotes
1. Deloitte predicts that in 2018, more than a billion smartphone users will
create AR content at least once, with at least 300 million being regular users.

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