Regulatory pressure could hurt African telecoms market
Political and regulatory pressure in Africa will likely adversely affect the telecoms market on the continent. This is according to the 2018 predictions for the telecom industry, released by Strand Consult.
However, Africa is not alone, as Strand Consult CEO John Strand believes that globally 2018 will be a year in which increasing regulation will threaten new technology.
"In 2017, we exposed how politicians and regulators make policy not on evidence, but ideology and idiosyncratic preference. We see counter-trends: some countries want to open the door for markets to drive a dynamic future while others want to double-down on failed policies of the past," says Strand.
He says knowledge of public affairs and regulation is becoming increasingly vital for telecoms CEOs.
"Some operators accept bad regulation as part of the new normal while others challenge it in court. Financial analysts incorporate regulatory burden as one of the parameters for assessment, and CEOs need to be ready for their questions about the impact of regulatory policies."
According to Strand, the regulatory world "was brutal" in 2017; and 2018 will likely be similar.
"Around the world, and especially in the EU, regulation is effectively a re-nationalisation of networks, but without financial compensation to the shareholders. Policymakers have made rules for mobile coverage, faster broadband, free roaming, data protection and intellectual property, many rules which negatively impact shareholder value.
"Moreover, regulators justify their actions by saying they are protecting the Internet and preserving democracy, but the real question is whether it's a cover for politicians to take control of communication and shut down their political enemies," he adds.
"Africa wants to get more investment in the networks that are the foundation of the modern society, and consolidation is needed among many players across a region with high penetration, high churn and low ARPU [average revenue per user]," he says.
In terms of other regions, Strand believes Asia will be the most exciting region in 2018 as China, South Korea and Japan will take another leap into the future.
"China is grooming Huawei to be a one-stop shop for telecommunications, enterprise solutions, smart cities and energy production. By 2018, Huawei will be not only the largest manufacturer for telecom equipment but solar panels as well. India, once a textbook success story for its mobile market liberalisation, is a basket case. Increasing broadband regulation imperils investment, and performance in infrastructure deployment and Internet adoption lags."
It will also be exciting to watch the US where "the combination of tax reform and regulatory right-sizing will boost American operators in 5G, IOT [the Internet of things] and wireless broadband technologies".
"In 2018, there will be courtroom drama: a showdown between the [US] justice department and AT&T over its attempt to acquire Time Warner; the Supreme Court's decision on whether to hear seven petitions against the FCC's Open Internet rules, and states suing the FCC for overturning them," he adds.
He also thinks the European Union (EU) will continue to fall behind the US and East Asia, especially in terms of 5G network implementation.
"European politicians will spend a lot of time boasting about their technological ambitions; the message will be 'Make Europe Great Again'. But for all the talk, the dream will not become a reality for Europeans," he predicts.
"In 2018, more Europeans will realise that politicians' promise of 5G is hot air. [With] the misguided net neutrality rules on the books and its heavy-handed privacy regulation coming online in May, the EU will likely be a dead zone for investment and innovation. The EU might be lucky to have some demo projects, but real services will be rolled out in the US and parts of Asia."
Strand also predicts many global operators will start decommissioning 2G/GSM and even 3G/UMTS networks and move toward 100% at 4G/LTE networks.
"The development will be driven by the positive experiences with 4G while the number of cheap phones that support different 4G frequency bands increases."
Strand says 2018 will likely see new technology with high user value for the mass market.
"This development will likely increase the demand for connectivity, subscriptions, bandwidth, software and hardware-based SIM cards. But the question remains on how to build the additional infrastructure (primarily 4G, 5G and Nb-LTE) to accommodate the increased traffic in a way that satisfies shareholders.
"Strand Consult is not confident that most operators will experience increased revenue and earnings because of increased traffic and new technology," he adds.
A bright spot will be the IOT market which is predicted to grow significantly this year, as new services are deployed on top of old technologies, making the transition for consumers easier and cheaper.
"One example is devices for cars' on-board diagnostics port which transforms old dumb cars into intelligent smart cars, a backward enablement for analogue vehicles. Consumers will use their smartphone to make their car smarter and the driving experience better."
Strand believes 2018 will prove to be a challenging year for creative people and innovative companies.
"There will be tons of new solutions that can add value to society, but there will continue to be a challenge that increasing regulation will limit the possibilities for business models. The price of technology has fallen so much, user interfaces are so user-friendly that what should now be focused on is how to create a number of sound business models that can stimulate adoption."
Other predictions from Strand include that distribution channels in the telecoms sector will evolve in an interesting way; platforms like Google and Facebook will face big challenges as governments continue to struggle to figure out how to handle these players; and net neutrality debates will continue.