Author(s): Geoff Blaber
Data traffic continues to grow at a relentless pace, driven by the growing app and service economy. Ericsson cited a rise in traffic of 60 percent between 1Q15 and 1Q16 alone and Cisco estimated an increase of 74 percent in 2015. Ericsson forecasts smartphone traffic to grow by 12 times between 2015 and 2021, with about 90 percent of cellular mobile data traffic coming from smartphones by the end of that period.
This growth will be fuelled by a rising number of smartphone subscriptions and increasing consumption of apps and video content per subscriber. We believe that augmented reality, virtual reality and 360-degree streaming content will also contribute heavily, already evident in the popularity of Pokemon Go and in Facebook's statement that over 250,000 360-degree videos were uploaded on the platform from September 2015 to August 2016. Such shifts will require low latency and high bandwidth for an adequate user experience, and this is likely to put huge demand on Wi-Fi and cellular networks.
CCS Insight forecasts that over 68 million mobile virtual reality devices will ship by 2020, adding significantly to mobile data traffic. This is set to be compounded by an abundance of new connections to the network as part of the Internet of things (IoT), with Ericsson forecasting 15.7 billion IoT devices by 2021. An estimated 1.5 billion of these will be connected by cellular networks, requiring comparatively low data rates but in high volume. However, tasks like autonomous driving and remote manufacturing will crucially require low latencies at or below 1 millisecond.
Addressing the Data Challenge
Networks and devices need to evolve through increased efficiency, the addition of new spectrum and the introduction of new technologies to intelligently manage and distribute traffic.
An important part of the process is using unlicensed as well as licensed spectrum. The topography of the network also needs to adapt, with density becoming as important as coverage as 5G connectivity looks set to utilize new higher-frequency millimetre wave bands.
It's critical that operators maximize what are often highly fragmented spectrum assets and make use of unlicensed spectrum. Operators can combine disparate spectrum blocks (including unlicensed airwaves) through carrier aggregation to increase speed and capacity. In addition, the use of more antennas to create more data streams and advanced modulation techniques can boost throughput and capacity.
Many of these techniques are a key part of LTE-Advanced and LTE-Advanced Pro standards, and these represent the near-term priorities as operators address the data challenge. We believe that the requirement to maximize capital investment in LTE, address data demand and the need for a smooth path to 5G will see an accelerated commitment to LTE-Advanced.
Importance of the Modem
CCS Insight predicts that the modem will become important and complex in a highly segmented IoT landscape. Systems must be highly optimized and extremely efficient to enable low-power wide-area devices to sit in the field for years, and bandwidth and latency will be crucial for the likes of drones, autonomous driving and healthcare applications.
Network infrastructure and operator deployments have historically run ahead of handset technology: features have been launched commercially only to be met with a delay as chipset suppliers sought to integrate the necessary features into devices. This situation has now been reversed, with modem technology from a select few suppliers operating at a cadence ahead of commercial network implementations. The development time to the availability of supporting devices has also been significantly reduced, and this accelerated pace is helping network evolution to provide greater efficiency, throughput and lower latencies.
We believe this is strengthening focus on modem capability in the handset. It's a leap to suggest that consumers will concentrate on modem attributes in the same way as CPU cores and clock speeds, but the feature is undoubtedly affecting purchase decisions by handset makers and chipset players seeking differentiation and by operators motivated by network capacity, performance and return on investment. Smartphones will remain responsible for most data traffic, and devices stand to become a bottleneck if they don't support key optimization features.
With modem technology varying significantly in feature set from one supplier to another — owing largely to growing complexity — CCS Insight believes the competitive landscape stands to intensify (see The Importance of Connectivity). Players that can swiftly integrate key features and deliver them at mass-market prices stand to establish a significant long-term competitive advantage that's likely to be strengthened by the added complexity of 5G connectivity.