This report provides statistics and analyses on several aspects of Australia's mobile broadband market. It includes recent developments affecting the provision of mobile broadband in metro and regional Australia resulting from the extension of LTE networks. It also anticipates changes to the market for regional Australia after new licences for spectrum in the 1800MHz are auctioned at the end of 2015. The report assesses the status of the SMS market in the wake of competition from OTT messaging services, as also the likely effect on MNOs' revenue resulting from the ACCC's decision in May 2015 to reduce SMS termination rates. In addition, the report analyses the burgeoning mobile video streaming sector. After several years in which MNOs had failed to develop a compelling business case for mobile streaming, the combination of larger screened smartphones and phablets with services offered by Netflix and similar content providers has made mobile streaming a fast developing market. This has placed a greater burden on network capacity, and has in turn placed greater emphasis on the provision of additional and reallocated spectrum for operators.
SMS remains a cash cow for mobile network operators, but with diminishing returns. The high charge made to consumers compared to the cost to transmit the data across the network prompted the ACCC in May 2015 to propose a significant reduction in SMS termination charges, to come into effect from January 2016. While MNOs protest that most SMS traffic is bundled within packages and that such a measure is unnecessary, they are also smarting from the prevalence of OTT messaging services offered by the likes of WhatsApp, Viber, Skype and social media messaging services. These alternative services will further erode SMS traffic and revenue for MNOs into 2016.
The three LTE networks operated by Optus, Telstra and Vodafone have developed rapidly during the past two years as these players strive to provide an infrastructure capable of meetings customer demand for mobile broadband services. As well as aiming to attract new customers, these players are also trying to reduce churn - the experiences of Vodafone in recent years has shown how damaging it can be for an operator when their networks do not provide reliability and, increasingly in an era leaning further to mobile data than voice, sufficient performance.
Technological developments have also progressed, with operators using aggregated channels to improve data throughput. Since the beginning of 2015 Optus and Telstra have been able to utilise their 700MHz spectrum assets, with which they aim to provide about 98% population coverage by the end of 2016. Vodafone is relying on upgrades to its existing concessions, and by mid-2015 it provided about 95% coverage in metro areas.
These upgraded networks face daunting data demands from customers, many of whom make use of data-intensive graphics, videos and files shared across the networks. In addition, popular OTT services such as Netflix, a company which alone had attracted about one million customers since launching in Australia in March 2015, provide streaming of content over mobile devices. While networks can at times be strained, the MNOs are continually adding capabilities and applications in an effort to reduce their overall costings. Customer preference for WiFi from homes and workplaces has meant that mobile broadband traffic is largely offloaded to fixed-line infrastructure.
Smartphone use in Australia continues to grow, and with tablets and phablets they are becoming a dominant internet access channel for many people among the younger demographic. As a result, these devices account for a growing proportion of mobile data accessed. Smartphone penetration is rising rapidly, and by mid-2015 the majority of new device sales were geared for LTE. The preponderance of LTE-capable devices will gain steadily into 2016 as a greater number of competitively priced units hit the market, and as the reach of LTE networks widen.
Mobile video streaming, also known as mobile TV, has been promoted by mobile network operators as one of the prime benefits of more capable infrastructure resulting from networks being upgraded with HSPA and LTE technologies. These upgrades enable subscribers to view streaming content on the go, with content less subject to outages and failed connections. However, until recently the platform had not caught the public's attention, despite the introduction of unmetered access and generous data caps.
MNOs initially failed to develop the right business models to deliver the type of content suitable for mobile streaming. It was also uncertain whether customers would want to pay for content at all, given the small size of screens when mobile streaming was initially promoted. However, in recent months the popularity of phablets and of larger screened smartphones has helped address these limitations. In addition, the development of new technologies such as out LTE-Broadcast (from Telstra) will make the delivery of mobile streaming more efficient on a technical level, while the ability of people to view content from Netflix and other OTT services via mobile devices has made the format more attractive. Indeed, by early 2015 up to a third of all viewing was done via tablets and phablets.
Optus, Telstra, Fon, NBN, iiNet, Huawei, Vividwireless, Ericsson, EnergyAustralia, SingTel, Unwired, BigPond Music, Vodafone Hutchison Australia (Vodafone and 3), Enero, Mnemon, M.Net, Jumbuck, MobileActive, MOKO.mobi, Photon Group, Oxygen8, Mobile Embrace, IDS, BlinkMobile, Red.