The Telecom industry has been increasing its network capacity in order to keep up with the growing consumer demand for high-speed connectivity, a direct result of technological advancements in personal internet devices. Specifically, telecom equipment providers have focused on the “fiber everywhere” front. These infrastructure providers have been installing fiber infrastructure for years, much of which has been left dark and remained a large capital expense. However, Level 3 Communications’ CFO Sunit Patel is optimistic that content providers interested in network expansion will utilize this dark fiber to meet customer demand for high-speed connectivity as the use of high-definition video, 4G, video streaming and other broadband services increases. Major players such as AT&T are also rolling out Fiber to the Premise (FTTP) for consumers and businesses in major metro markets to offer industry-leading speeds of up to 1 Gbps. The focus on offering premium speeds at lower prices aligns with the effort to mitigate customer churn. Major players have also been looking toward acquisitions as the best means of attaining new customers and territories, specifically within wireless and subscription TV. American Tower (NYSE: AMT), for example, closed a deal to acquire over 11,000 wireless towers. Nelnet, Inc.’s (NYSE: NNI) move on Allo Communications also aligns with this trend. Nelnet believes that Allo’s pure fiber-optic service, which extends directly to the premise and provides top internet speeds, will increase Nelnet’s ability to meet consumer connectivity demands.
Less-traditional business models have also been gaining positive traction in the consumer markets. A good example is T-Mobile, which has been breaking from the norm and recognizing repeated growth with its unique “Un-carrier” branding. This business model challenges traditional carriers by eliminating annual contracts and allowing consumers to upgrade their smart phone devices more often and at a lower cost. Smart phone penetration in the U.S. and Europe reached nearly 80% in 2015. This saturation is expected to increase competition for new customers. The opportunity remains for carriers that are able to meet consumer demand, reach developing regions and implement new lines of service.
Moving into 2016, SDR is closely watching technological trends including mobile broadband, M2M, cloud computing, OTT services and big data management, which are all expected to propel the broader telecom industry ahead. In addition, further advancements in wireless technologies are expected, and attention will turn towards 5G infrastructure. Mobile broadband access using 3G and 4G/LTE networks is straining to keep pace, as users increase connection to cloud-based services. In fact, the increase in the availability of connected mobile devices and data usage is likely to double in the next few years. Due to the lack of fragmentation of the industry and high capital requirements to enter, top-coverage providers have controlled the wireless market and thus SDR expects that major providers will continue to make considerable investments in their tower infrastructure.
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