Mobile Broadband, Devices Pushing Carriers Towards the Cloud

Wireless traffic and services demand is growing fast, yet service providers' margins are getting squeezed as falling real incomes, competition and slow reactions to the changing operating environment "are forcing operators to embrace new revenue services and business models - including the Cloud - to enhance profits," according to the IHS Suppli Mobile & Wireless Communications Services report.

The "explosive rise of broadband usage on smartphones and tablets" is driving the shift in business strategy and models and broadband wireless service providers have been slow to react, according to the special report.

Mobile communications service providers have lagged behind in the race to unlock the value in the mobile communications industry, which is estimated to grow to a trillion dollars during the next two years," commented Jagdish Rebello, Ph.D., senior director and principal analyst for communications and consumer electronics at IHS, in a "press release.

Margin Squeeze

The average operating profit for wireless service providers worldwide declined in 2010 as a result, he continued, though margins at semiconductor and device manufacturers increased.

Cloud-based services for tablets and other mobile devices that represent a new revenue stream for wireless carriers, and they need to take risks and drive innovation in order to capitalize on this opportunity, Rebello said.

"With the transformative impact of tablets and consumer-centric smartphones, the pace of change is accelerating in the wireless market. And to reclaim their share of profits, wireless carriers must be willing to take risks, move fast and be innovative in their offerings."

In the report, IHS forecasts that consumer and enterprise spending on public Cloud services will grow to $110 billion in 2015 from $23 billion in 2010. IHS analysts believe wireless carriers can capture about 7% of that total spending in 2015, up from less than 1% currently.

Global wireless data revenue is also growing, by almost 18.5% in 2010 to $218 billion. IHS forecasts that will grow to some $337 billion by 2015, yet the profit margin for wireless service providers declined to 19% in 2010, down a percentage point from 2009, the report notes.

"Booming" sales of media tablets are driving up wireless data traffic, IHS notes. Media tablet shipments will increase to 60 million units in 2011, up a whopping 245.9% from 17.4 million in 2010. They'll continue rising, to 275.3 million in 2015, according to IHS.

Missing Out on the Cloud Shift

Wireless carriers are missing out on much of the opportunity, however. Many tablets don't offer cellular connectivity, and in many cases are being sold without any service subsidies, IHS points out.

Moreover, in contrast to smartphones, tablets don't rely on marketing and advertising from wireless carriers. That means they miss out on fees associated with mobile broadband access for tablets' data plans.

Wireless carriers need to focus on other segments of the wireless data market, value-added services, including the Cloud in particular, IHS says.

At the same time, the shift to Cloud services poses major competitive challenges to wireless carriers, particularly from traditional IT providers, such as EMC, IBM, Microsoft and NetApp, as well as Apple, Google and online e-tail giant Amazon.

Written by Kevin Kutcher at 00:00

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