Asia: Asia Communication Profile

The Asian market has been continuing its long run of overall strong growth and to support this there has obviously been a correspondingly strong development of infrastructure. 

Background notes to market forecasts

Asia’s fixed infrastructure underpins its booming mobile and broadband sectors

The governments of Asian nations have long recognised – some earlier than others – that there needed to be some encouragement of private sector investment to meet the demand for the all-important capital needed in the telecom sector. At the same time, it was also generally well recognised that this strategy could not rely on local investment alone, and would inevitably mean a substantial level of foreign investment. Of course, despite this recognition, there has inevitably been some resistance within governments to opening up the telecom sector to foreign investors and as a consequence the level of ‘encouragement’ has been variable.

The changing nature of the telecom market has also had a major impact on the approach to investment in infrastructure. With shifting revenue patterns across the market segments and falling ARPUs on many services, operators have been more selective about what they actually invest in. Telecom operators throughout Asia have been increasing investment levels on the back of carefully considered investment strategies. This has seen companies shifting business focus, looking for new ways to add value to existing revenue streams; it has also seen a strong desire to leverage new value from infrastructure that is already in place. This has especially been the case with mobile network moving increasingly to support mobile broadband services and newer generations of mobile technologies.

The initial round of substantial investment in telecom infrastructure in Asia was in fixed telephone networks. Over a number of decades the regional economies were progressively building their often quite substantial fixed-line national networks. These fixed networks were in time followed by the building of mobile networks. In many of the developing nations of the region, the building of fixed-line infrastructure was not far advanced before it was overwhelmed by the introduction of mobile infrastructure. This created the phenomenon of ‘substitution’ in many of the markets of Asia (where mobile services perform the function of the non-existent fixed services.) Nevertheless, despite the unevenness in disposition, fixed infrastructure remained an important component in the overall development of the region’s telecom sector. Coming into 2012 there were around 580 million fixed-line subscribers in Asia; this compared with close to 3 billion mobile subscribers. Most importantly, the fixed-line numbers have only been increasing marginally in recent years, with a significant number of countries in Asia starting to see a decline in fixed-line numbers.

The focus of infrastructure building has been shifting. There has been a major push to upgrade domestic telecoms networks to Next Generation Networks (NGNs). This process is seeing large scale investment by Asia’s leading telecoms markets in new-generation IP-based telecommunications networks. At the same time there has been a major surge in infrastructure building as mostly developed economies roll out National Broadband Networks (NBNs). These networks come in various ‘shapes and sizes’ as governments work with operators to tackle the strategic challenge of delivering high speed to the nation. Not surprisingly the NBNs rely heavily upon fibre; in some cases it is Fibre to the Premises (FttP), while in others it might be Fibre to the Node (FttN). And the cost varies accordingly. Those countries that have government backing for NBN roll-out are the ones that are setting the pace.

In addition to the national networks, international connectivity remains central to the overall effectiveness of the region’s telecommunications services. Submarine cable routes criss-cross the Asia Pacific area, providing both intra-regional and inter-regional networks. This sector of the market has been characterised by widely fluctuating supply and demand, which in turn has seen somewhat erratic investment strategies. . Submarine projects are subject to this boom and bust market phenomena, with planned projects commonly being delayed or abandoned, consortia being reshaped, etc. In fact, over-supply of capacity has been common in the Asian market. More recently investments have been less speculative and more focused on predicted growth. In the meantime, new submarine cable projects continue being proposed and the cables installed throughout the region. As Asia’s broadband usage surged, a major effort has gone into managing the shortfall in capacity between Asia and the US.

As the demand for wholesale services continues to rise in Asia, still driven in the short term by voice, but in the longer term by data, there has been a boom in IP-based services, with the volume of international Voice over Internet Protocol (VoIP) traffic into and out of Asia having increased at a rapid rate at the expense of the traditional International Direct Dial (IDD) traffic. The industry will watch closely to see how this settles into a pattern of more predictable growth in demand.

Asia – key developments in infrastructure

• Asia’s networks and infrastructure supported a total of more than 3.5 billion telephone subscribers coming into 2012; of these, an estimated 580 million were fixed-line subscribers and 2.9 billion were mobile subscribers;
• Asia’s developed markets had built or were building their NGNs, with IP shaping as the primary delivery platform for telecom services across the region;
• After annual growth of 20%-30% in the region’s mobile market during the 2005/2010 period, 2011 saw growth fall to around 10%, with looking likely to continue for the next few years;
• Most tellingly, coming into 2012 Asia claimed 49% of the world’s total mobile subscriber base;
• In the meantime, the operators were expanding infrastructure to support their still growing subscriber bases and usage patterns, and especially the push into mobile broadband;
• By early 2012 Asia had a mobile broadband penetration of 11%; this represented 460 million mobile broadband subscribers in the region;
• Two of Asia’s markets – South Korea and Singapore – had more mobile broadband subscribers than population by end 2011; Japan was not far behind on 90% mobile broadband penetration at the time;
• While mobile broadband was expanding rapidly, fixed (wired) broadband remained a key component of the infrastructure in Asia; in 2011 30 million fixed (wired) broadband subscriptions were added in China alone, this being about half of total such subscribers added worldwide;
• Asia’s all-important submarine cable market continues to attract interest from investors anticipating an increased demand for bandwidth that will put pressure on capacity;
• With a series of system outages drawing attention to the highly vulnerable nature of these key systems, redundancy has become a critical issue for submarine cable systems in the region and provides further incentive for investment in this type of infrastructure;
• The region continues to see a steady run of new satellite launches with further such launches already scheduled for the coming year or two. 

Asia: - Key telecom indicators – 2011 – 2012 

(Source: BuddeComm)

Asia’s fixed infrastructure underpins its booming mobile and broadband sectors

The governments of Asian nations have long recognised – some earlier than others – that there needed to be some encouragement of private sector investment to meet the demand for the all-important capital needed in the telecom sector. At the same time, it was also generally well recognised that this strategy could not rely on local investment alone, and would inevitably mean a substantial level of foreign investment. Of course, despite this recognition, there has inevitably been some resistance within governments to opening up the telecom sector to foreign investors and as a consequence the level of ‘encouragement’ has been variable.

The changing nature of the telecom market has also had a major impact on the approach to investment in infrastructure. With shifting revenue patterns across the market segments and falling ARPUs on many services, operators have been more selective about what they actually invest in. Telecom operators throughout Asia have been increasing investment levels on the back of carefully considered investment strategies. This has seen companies shifting business focus, looking for new ways to add value to existing revenue streams; it has also seen a strong desire to leverage new value from infrastructure that is already in place. This has especially been the case with mobile network moving increasingly to support mobile broadband services and newer generations of mobile technologies.

The initial round of substantial investment in telecom infrastructure in Asia was in fixed telephone networks. Over a number of decades the regional economies were progressively building their often quite substantial fixed-line national networks. These fixed networks were in time followed by the building of mobile networks. In many of the developing nations of the region, the building of fixed-line infrastructure was not far advanced before it was overwhelmed by the introduction of mobile infrastructure. This created the phenomenon of ‘substitution’ in many of the markets of Asia (where mobile services perform the function of the non-existent fixed services.) Nevertheless, despite the unevenness in disposition, fixed infrastructure remained an important component in the overall development of the region’s telecom sector. Coming into 2012 there were around 580 million fixed-line subscribers in Asia; this compared with close to 3 billion mobile subscribers. Most importantly, the fixed-line numbers have only been increasing marginally in recent years, with a significant number of countries in Asia starting to see a decline in fixed-line numbers.

The focus of infrastructure building has been shifting. There has been a major push to upgrade domestic telecoms networks to Next Generation Networks (NGNs). This process is seeing large scale investment by Asia’s leading telecoms markets in new-generation IP-based telecommunications networks. At the same time there has been a major surge in infrastructure building as mostly developed economies roll out National Broadband Networks (NBNs). These networks come in various ‘shapes and sizes’ as governments work with operators to tackle the strategic challenge of delivering high speed to the nation. Not surprisingly the NBNs rely heavily upon fibre; in some cases it is Fibre to the Premises (FttP), while in others it might be Fibre to the Node (FttN). And the cost varies accordingly. Those countries that have government backing for NBN roll-out are the ones that are setting the pace.

In addition to the national networks, international connectivity remains central to the overall effectiveness of the region’s telecommunications services. Submarine cable routes criss-cross the Asia Pacific area, providing both intra-regional and inter-regional networks. This sector of the market has been characterised by widely fluctuating supply and demand, which in turn has seen somewhat erratic investment strategies. . Submarine projects are subject to this boom and bust market phenomena, with planned projects commonly being delayed or abandoned, consortia being reshaped, etc. In fact, over-supply of capacity has been common in the Asian market. More recently investments have been less speculative and more focused on predicted growth. In the meantime, new submarine cable projects continue being proposed and the cables installed throughout the region. As Asia’s broadband usage surged, a major effort has gone into managing the shortfall in capacity between Asia and the US.

As the demand for wholesale services continues to rise in Asia, still driven in the short term by voice, but in the longer term by data, there has been a boom in IP-based services, with the volume of international Voice over Internet Protocol (VoIP) traffic into and out of Asia having increased at a rapid rate at the expense of the traditional International Direct Dial (IDD) traffic. The industry will watch closely to see how this settles into a pattern of more predictable growth in demand.

Asia – key developments in infrastructure

• Asia’s networks and infrastructure supported a total of more than 3.5 billion telephone subscribers coming into 2012; of these, an estimated 580 million were fixed-line subscribers and 2.9 billion were mobile subscribers;
• Asia’s developed markets had built or were building their NGNs, with IP shaping as the primary delivery platform for telecom services across the region;
• After annual growth of 20%-30% in the region’s mobile market during the 2005/2010 period, 2011 saw growth fall to around 10%, with looking likely to continue for the next few years;
• Most tellingly, coming into 2012 Asia claimed 49% of the world’s total mobile subscriber base;
• In the meantime, the operators were expanding infrastructure to support their still growing subscriber bases and usage patterns, and especially the push into mobile broadband;
• By early 2012 Asia had a mobile broadband penetration of 11%; this represented 460 million mobile broadband subscribers in the region;
• Two of Asia’s markets – South Korea and Singapore – had more mobile broadband subscribers than population by end 2011; Japan was not far behind on 90% mobile broadband penetration at the time;
• While mobile broadband was expanding rapidly, fixed (wired) broadband remained a key component of the infrastructure in Asia; in 2011 30 million fixed (wired) broadband subscriptions were added in China alone, this being about half of total such subscribers added worldwide;
• Asia’s all-important submarine cable market continues to attract interest from investors anticipating an increased demand for bandwidth that will put pressure on capacity;
• With a series of system outages drawing attention to the highly vulnerable nature of these key systems, redundancy has become a critical issue for submarine cable systems in the region and provides further incentive for investment in this type of infrastructure;
• The region continues to see a steady run of new satellite launches with further such launches already scheduled for the coming year or two. 

Asia: - Key telecom indicators – 2011 – 2012 

(Source: BuddeComm)

Mobile data and wireless broadband services across Asia being driven by FttX, Wi-Fi offload, 3G, LTE and high smartphone adoption

With some three billion Asians using mobile phones - almost half of the number of mobile subscribers in the world – spread across a diverse range of markets, the region is already exploiting its huge potential for mobile data/wireless broadband services.

Growth in mobile wireless internet across Asia has been largely driven by highly competitive markets combined with the arrival of new generation mobile technologies. With 3G and 3G+ platforms spreading rapidly throughout the region, cheaper handset prices and lower airtime tariffs have combined to support the even wider adoption of mobile broadband services.

The developed markets in the region, such as Japan, South Korea, Hong Kong, Singapore and Taiwan, have positioned themselves well to exploit mobile data and broadband wireless opportunities and lead the rest of the region into the next generations of mobile applications. As 3G moves through 3.5G towards 4G/LTE and speeds increase, as service improves and as content providers offer more, we are seeing exponential growth in data usage occurring in the leading markets. Hong Kong is a good example of the explosion in mobile data.

Mobile data usage in Hong Kong – 2002 – 2012

(Source: BuddeComm based on OFCA data)

Note: Figures are for December usage each year unless indicated otherwise.

While 3G licensing and the ongoing launch of 3G services in Asia has certainly been providing the basis for growth in wireless data services, 3G has also been providing opportunities for both wireless access and content providers in domestic markets. In South Asia, in particular, more people own a mobile phone than a PC, giving the delivery of mobile data services huge potential there.

Mobile data is not a new phenomenon in Asia. An example of the early widespread adoption of a particular mobile data service in the region has been the Short Message Service (SMS). SMS became very popular throughout Asia ahead of the wider market, with remarkable growth being experienced in particular in the Philippines and Malaysia, as well as in China.

The business plans of the majority of mobile operators have been built on the assumption that the key to further revenue growth lies not just in building customer bases but in the ability to offer more Value-Added Services (VAS) and, most importantly, efficient and effective access to the internet.

An early push in this direction saw Japan’s NTT DoCoMo launched its i-Mode service and its two rivals –SoftBank and KDDI - launched their own versions of i-Mode with dramatic success, with over 80% of mobile subscribers in Japan logging on from a mobile using one of these platforms.

More recent mobile data development in Asia has essentially been built on the 3G and 3G+ technology platforms. As a consequence, right across Asia with the transition to a range of new generation mobile platforms, there has been a major shift from mobile voice to mobile data.

An example of the way in which 3G has been progressively reshaping the mobile markets across the region can be found in Singapore. By July 2012 the number of mobile subscribers had reached 7.9 million for a penetration of 152%; of these subscribers a huge majority, 6.2 million, were signed up to 3G services. That means that just the 3G subscribers alone represented a penetration in excess of 100%. Or, in other words, Singapore had more mobile broadband subscribers than population. We note another big change when we compare 3G with 2G; there has been a major shift from the high level of prepaid 2G subscribers to the postpaid subscriptions for 3G. Even though operators in Singapore are offering prepaid 3G services, a solid 65% of 3G subscribers in that market are in fact postpaid.

Regionally, mobile broadband penetration was around 11% by early 2012. This represented a total of 460 million mobile broadband subscribers across the region; of the markets in Asia, as well as Singapore, South Korea had more mobile broadband subscribers than population; and coming into 2012 Japan was not far behind on 90% mobile broadband penetration.

Almost all markets in Asia had effectively witnessed the licensing and launch of 3G networks by 2012. (Thailand, the last of the significant markets in region to introduce 3G, was continuing to have regulatory and licensing problems.)

In the context of mobile broadband services, mention must be made of the WiMAX platform. Whilst there has been some activity in the providing of fixed WiMAX networks, the real test has been the advent of mobile WiMAX. The roll-out of WiMAX-based mobile services in Asia has begun; however, it has been a cautious start and significant rollouts have been limited to just a few markets. The technology still continues to be strongly supported at this stage of its development. The big question is whether it will become a mass market platform or simply satisfy a niche market need. Pakistan, Bangladesh and Malaysia are WiMAX markets to watch.

Key operators in the region have been investing heavily in WiFi and the deployment of femtocells for mobile network offload. South Korea for example, has seen an 11-fold jump in mobile data traffic over a one year period and WiFi traffic accounting for a third of all mobile traffic. Leaders in mobile data usage, there is a new drive for NFC chips in smartphones which will further drive data usage.

Coming into 2012 Singapore was following on the path of South Korea (and Hong Kong) in adopting initiatives to enable 3G traffic to be more easily offloaded to WiFi. A major capacity upgrade to the Singapore’s free public WiFi network, Wireless@SG, was set to commence together with a plan to enable mobile devices to switch seamlessly between the mobile and Wireless@SG networks.

Moving quickly past 3 billion mobile subscribers, Asia sees voice services remaining dominant for the time being

Mobile markets in Asia continued to experience strong growth during 2012 and into 2013, despite many countries in the region having subscriber penetrations of over 150%. Asia is home to some of the fastest growing telecommunications markets in the world. Growth across the region in mobile subscribers was in excess of 15% overall in 2011 and was estimated to have been about 8% in 2012 to reach a regional total of 3.3 billion mobile subscribers by year-end. The substantial growth levels have been particularly obvious in China and India, with their huge populations. These two countries alone account for over 32% and 28% overall market share in the Asia region respectively; or a massive 60% combined. It is not just the regional presence either; with China and India’s mobile subscriber numbers they also dominate the global mobile landscape, with seven operators in the top 10 ranking of subscribers worldwide.

There is still room for further significant growth right across the various markets of the region, with growth of 10% overall anticipated in 2013. In those countries with large populations and relatively low penetration rates (at least by the standards of developed markets), such as India, China, the Philippines, Pakistan, Vietnam and Indonesia, we can expect further expansion and at a reasonably rapid rate. In the more mature markets such as Japan, Taiwan and South Korea, mobile numbers will continue to ease upwards at a small percentage rate. Growth across the region is being driven by a variety of factors, including government investment to drive the economy; infrastructure building after years of neglect or to fix the after-effects in war torn countries, and also major foreign investment.

Voice services remain dominant in the Asian mobile market. This is despite the fact that right across Asia we have seen a transition to new generation mobile platforms. With the roll out of 3G and 3G+ networks, there has certainly been a shift from mobile voice to mobile data. But by 2012 Asia had an estimated mobile broadband penetration of less than 15%.

In the developing economies of the region quick and easy mobile uptake has been and still is the preferred, and often only, option for subscribers, exacerbated by low fixed-line deployments. These countries also offer investors the promise of continued growth of the mobile infrastructure and subscriber numbers. While subscriber growth and market share is important in the developing economies, there comes a point where the venture must result in profits. Operators still face the huge challenge of trying to prevent ARPU slide as mobile services spread to poorer parts of the population and voice services remain the major share of revenue. To an extent, a large customer base will help to offset low spend by subscribers on voice services. But it is inevitable that operators will be looking to new non-voice services to help boost revenue.

Within the markets themselves, as already noted China and India have been the standout performers. China had close to one billion mobile subscribers entering 2012; by year-end the number was estimated to have increased to more than 1.1 billion. In other words, an annual growth rate of 13% meant large numbers of additional subscribers; in this country of 1.4 billion people, penetration in China reached around 82% by end-2012. This growth is likely to continue for at least a few more years with both China Mobile and China Unicom expecting to see incremental growth from the less well-penetrated rural areas.

In the meantime, India, having been somewhat in the shadow of China, was finding itself close on China’s heels coming into 2012. There is still a significant potential for expanding the population coverage in India with over 15% of the population residing in areas with no mobile coverage. It had come as no surprise when India’s mobile numbers grew by 17% in 2011 to reach 894 million; the national subscriber base had grown to 934 million by June 2012. However, India saw its total mobile subscriber base go into decline in the second half of 2012, falling dramatically to 865 million by year-end. A major reason for the decline was the move by operators to delete inactive mobile subscribers from their databases. One operator, Reliance, for example, deactivated those subscribers that have not used their phones in two months, shedding 20 million subscribers in July alone.

Top 10 mobile markets in Asia – ranked by subscribers – 2009 - 2012

(Source: BuddeComm)

Note: Figures in italics are estimates

As the Asian mobile market continues to grow at a healthy rate overall, it remains a market based largely on voice services for the time being. As already noted some markets in Asia have moved rapidly to mobile broadband and advanced data services but the predominant service in the majority of the region’s markets is mobile voice for the moment.

Asia’s huge mobile/broadband capacity is a solid foundation for growing the digital economy

Asia presents a massive presence in the global mobile and broadband markets. The region owns 49% of the world’s mobile subscribers. And when it comes to the development of broadband internet Asia makes a strong claim to be leading the world. On the back of the mobile and broadband market segments and their respective capabilities, Asian nations have been busy building a formidable alliance with the digital economy.

Following more than a decade of strong growth, mobile markets across Asia continued to expand during 2011 and into 2012. By end 2011 there were a total of 2.9 billion mobile subscribers in the region and with annual growth running at 10% the numbers were expected to hit 3.2 billion by end 2012. With some markets saturating and the impact of the shaky global economy still being felt, it is not surprising that the growth rate has slowed somewhat over the last year or so. This is after a period where annual mobile subscriber growth rates in Asia had been well in excess of 50%.

Overall regional penetration had reached an estimated 76% by mid 2012; although this figure is impressive in a region where the population was around 4.2 billion, it nevertheless suggests that there is still more room for subscriber growth across Asia. More than 18 countries in Asia had mobile penetration levels in excess of 100% going into 2012 and two (Macau and Hong Kong) had mobile penetrations in excess of 200%. Not surprisingly, the Global Financial Crisis caused some caution in mobile markets across the region for a year or two, but after a pause the momentum has quickly picked up again. The business emphasis has shifted from general subscriber growth to value added and mobile broadband.

Particularly relevant in the context of rapidly growing markets that still have some further room for expansion are India and China where monthly net additions have regularly been close to 10 million subscribers. These two countries combined account for around 60% of overall market share in the Asia-Pacific region. Led by China and India the region will continue to grow its mobile subscriber numbers on the back of other markets with large populations and relatively low penetration rates such as the Philippines, Pakistan and Indonesia.

In the developing economies, quick and easy mobile uptake has for a long time been the preferred, and often the only, option for subscribers, given the low levels of fixed-line deployments. In order to prevent ARPU slide in these markets, operators are offering value added mobile services such as mobile banking, remittance payments and mobile health services that take advantage of lack of access by the poor to social infrastructure such as banks and hospitals. As a consequence of these mobile-based services, the digital economy is alive and well in many of the emerging markets across Asia.

In the meantime, the developed markets in the region, such as Japan, South Korea, Hong Kong, Singapore and Taiwan, have positioned themselves well to exploit mobile data and broadband wireless opportunities and lead the rest of the region into the next generations of mobile applications. In fact, through the leadership of these markets Asia makes a strong claim to be setting the global benchmark when it comes to the development of mobile broadband internet access.

The rate of adoption of mobile broadband started increasing rapidly across Asia with the overall increase in mobile penetration combined with networks being progressively upgraded to next generation platforms. The initial wave of 3G services took a while before it saw any substantial growth in wireless data services across the wider regional markets; however, as 3G moves towards 4G and as speeds increase, as service improves and as content providers offer more. In South Asia, in particular, more people own a mobile phone than a PC, giving the delivery of mobile data services huge potential there.

By early 2012 Asia had a mobile broadband penetration of 11%; this represented 460 million mobile broadband subscribers in the region; two of Asia’s markets – South Korea and Singapore – had more mobile broadband subscribers than population by end 2011; Japan was not far behind on 90% mobile broadband penetration at the time.

The 3G licensing process and the progressive launch of 3G services in Asia is already well advanced. However, a few countries had been particularly slow in opening up their 3G markets. But by 2012 the last significant player to embrace 3G, the recalcitrant Thailand, was finally making substantial progress along this path.

For broadband internet generally – the combination of fixed and mobile - Asia makes a strong claim to be leading the world when it comes to its development. Broadband in its various forms has indeed been a fast growing segment in the Asian market. The energetic expansion of broadband has certainly been more of a phenomenon in the developed economies of the region, but most of the relatively poorer developing countries of the region are increasingly adopting broadband at a rapid rate. Te choice of technology platform varies across the region.

With DSL continuing to dominate the world’s fixed broadband market, Asia maintains its ranking as the leading DSL region with around 43% of the global DSL subscribers. In fact by end-2010 China claimed around an estimated 110 million of Asia’s 146 million DSL subscribers. In recent times, we have seen FttX as a growing alternative platform for broadband access in Asia. In the leading technology markets of Japan, South Korea and Taiwan, FttX has been displacing other forms of high speed internet access. DSL has dropped to just 20% of the broadband market in Japan. Asia, with 68 million fibre-based broadband connections by end 2011, accounted for around 80% of global subscriptions.

While there has been some activity in the providing of WiMAX networks, the real value of this platform is in its mobile form. Initial provisioning of mobile WiMAX in Asia has certainly commenced, but with a few exceptions the technology has not yet impacted on the mass market. In any event, in their various forms mobile wireless broadband systems are becoming a key feature of the broadband access landscape across Asia.

Over a number of decades the economies of Asia have progressively built substantial fixed-line national networks followed by national mobile networks. More recently the focus of infrastructure building has shifted to the upgrading of domestic telecom networks to Next Generation Networks (NGNs). This process has seen large scale investment by Asia’s leading telecoms markets in new-generation Internet Protocol (IP)-based telecommunications networks. The developed economies have each taken this a step further, rolling out a new fibre-based National Broadband Network (NBN) or its equivalent. Inevitably, those countries that have their government promoting the implementation of broadband strategies and backing new fibre-based roll-outs are the ones that are setting the pace. Even some of the lesser-developed markets are pushing hard on this front. Singapore and Malaysia provide two interesting case studies. In any event, those countries placing the emphasis on ensuring that the population has access to high speed broadband internet will be well prepared for the wider implementation of the digital economy.