Introduction

In this paper TNC considers the following topics:

  • Smartphone Fatigue – a lack of innovation (other than screen technology) and high cost has created this phenomenon, but what impact will the increasing environmental debate have?
  • Dumbphone/Companion/Wise phones – are these the answer to smartphone fatigue?
  • Market Conditions – pre-5G UK land grab?
  • 5G – TNC re-examines 5G at a time when a number of countries have already seen some limited commercial launches, and we refresh our views on impact and use cases
  • Brexit
  • TNC’s previous predictions

Smartphone Fatigue

Both TNC and the national press have been reporting smartphone fatigue for a couple of years now, indeed parodies of Apple launches have mocked the incessant drive to keep a hardware refresh cycle operating despite little handset innovation. Ironically, organisations have been benefitting from significantly improving costs of operating their mobile devices but have found the actual costs of new devices offering limited improvements rising steeply, with new flagship handsets costing over £1,000. The days of a £150 BlackBerry device seem somewhat distant!

The reaction of many consumers and organisations has been to sweat their devices for longer but given the limitations, particularly of batteries and screens, this can be challenging.

TNC’s research suggests the options open to organisations include:

  • Delayed refresh – many organisations are now working to a 3-year refresh cycle rather than 2-year
  • Mend and make do – replacing batteries rather than replacing phones is the most common example of life extending possibilities
  • Leasing – increasingly popular as a low capex option
  • 'Wisephones’ – not smart, not dumb, but “wise” – typically these fall into two categories:

  1. New devices but older models – by not selecting the latest model significant discounts can be achieved and, given the lack of innovation, the end user is typically not overly concerned
  2. Non-premium brands – some of the Chinese manufacturers have remarkably good handsets whose features are not dissimilar to the flagship brands but at a fraction of the cost

Wisephones may not be ideal for every organisation particularly those concerned by security where the flagship brands have both an inherent brand reputation and familiarity as well as lengthy industry experience. For some organisations the implication of using a relatively unknown Chinese brand over the inherent or at least perceived security of say Apple is enough. Even the well-known Chinese brand Huawei has had significant negative attention with regard to its telecoms infrastructure that may seep into handset decision considerations. Further still, there are some organisations that suggest they trust IOS less than Android with regards to security which, given that Android is the software used by the majority of non-Apple devices may limit the adoption of these cheaper devices.

Likewise, older models may give concern to operational support longevity – how long will the manufacturer continue to support this model’s software and hardware? This appears to have become less of a concern in recent years with the likes of Apple still offering support for models several years old.

Handset innovation:
what might break or elongate the fatigue?

  1. The most likely driver for device replacement over the next few years is 5G – current devices do not support 5G so any organisation looking to utilise 5G will need new devices
  2. Recent product launches include folding screens which show great potential but as yet, the price and reliability are both questionable. Perhaps in time this will become the “must have” option and, as we have seen in TVs, the latest and greatest expensive screen technology of today will become next year’s standard offering combining better reliability and lower cost
  3. Battery innovation – battery life remains a bugbear for many and the more reliant users are on devices the more power is used, especially if tethering. It is not uncommon for users to carry spare power packs or to be seen searching for power outlets. With so much R&D into electric vehicles it is expected that innovation in battery technology will not be limited to cars but will be transferred into mobile devices too and so it’s not unreasonable to expect some real innovation in this area soon. Already both silicon anode and solid-state batteries are being speculated upon as offering near-term potential improvements. This may also be concurrent with widespread uptake of 5G which, contrary to common sense (due to increased speed and usage), may actually have lower battery consumption than current 3G/4G devices although it is often screen and processor usage that drains the battery rather than network connectivity. Certainly, if new devices came out with substantially improved battery life it would expect to be a key differentiator and justification to replace current devices
  4. Environmental concerns – over the last few years environmental concerns have seen significant media and consumer attention. So far, the demise of the plastic straw and the massive reduction of plastic bag use are two easily identified impacts of this surge in the consciousness of the environmental impact that humanity is having on the planet. Plastic consumption (especially single use) and recycling are at the forefront of these changes but increasingly consumers/media are identifying new focus points. The sometimes seemingly unnecessary mobile device replacement may also be targeted not only for the plastic in the device but also for the 16 or 17 rare earth metals required in each device. It is not hard to imagine that mobile devices will be targeted as an environmental concern and this may impact the refresh lifecycle and indeed the ability to repair/upgrade components within a device rather than replacement of the whole device every two years
  5. Dumbphone:

  • For some users the hyper connectivity of a smartphone has become a distraction and one answer is the use of a so-called dumbphone (typically defined as a text and talk only device) as an alternative allowing users to remain contactable but equally not distracted from their work or lives by constant interruption or temptation
  • Alternatively, other users may decide to carry two devices - a smartphone whose use they are more selective about, and a companion phone (dumbphone) which allows them to be contactable even if they have turned their smartphone off
  • For some organisations a review of eligibility policy (TNC can help with this) can identify users given smartphones who actually only need a dumbphone (often this is for historic reasons as giving them a BlackBerry for example was cheap and as devices matured these users remained as recipients of smartphones despite the increasing costs – a re-examination of their requirements might suggest that they no longer need such devices now that the cost associated with them is considerably greater)

UK Market Conditions

TNC continues to surprise and delight its customers in achieving significant reductions in mobile spend through renegotiations and procurement processes. Partly this has been driven by service provider behaviour driving ever more aggressive price points, and the overall competitive nature of the market.

For the most part, tariff structures are being simplified but TNC still sees some innovative answers to more complex organisations’ requirements, especially around non-EU roaming.

Given these competitive pressures, TNC has been achieving cost savings of 30%-50% on a number of recent deals, and even those that were not particularly old in terms of last procurement activity can still show significant improvement

TNC has seen a homogenisation of the market over the last couple of years. In the past we heard more about coverage issues with differing networks but through specific investment to improve poorly serviced areas, general 4G roll out and the sharing of masts between operators this noise has significantly decreased. TNC still hears differences in levels of service however, especially around the quality of account teams.

One may speculate that the only other way to differentiate themselves and thus win business (or retain it) is therefore through price, resulting in this competitive environment. Indeed there is evidence to suggest that the market is in a land grab before 5G roll out due to fears that an early leader in 5G rollout will have a significant differentiator. Furthermore vendors may also be gambling on the future increased revenues from 5G – selling their services cheaply now, capturing custom and then making money when those customers begin to pay more through line rental and usage for 5G. For this reason, ensuring contracts have options to increase data usage cost effectively is something TNC is very focussed upon.

Getting Ready For 5G

5G is not here yet but TNC is already seeing its impact on market conditions and a likely reason for some to upgrade devices. However, 5G is much, much more than just a mobile development. Whilst it is true that 5G, like 4G before it, will allow users to do more with their mobile devices and increase the throughput and speed of their interactions, in reality this technology goes far beyond mobile devices.

5G as a technology will span a far greater range of devices and services than simply the phone in your pocket. Smart cities, remote medical procedures/consultations, autonomous vehicles, AR/VR, IoT are all currently positioned as being beneficiaries of 5G coverage but there will certainly be others that are as yet unknown, or the pipe dream of entrepreneurs. Indeed, it is the very potential of ubiquitous, ultra-high speed and ultra-low latency wireless connectivity that could be the basis of a revolution not only just in comms but also in facilitating significant changes across our society. Looking today at the use of mobile networks and how they have changed life may give an indication of how important 5G is going to be over the next decade.

TNC has discussed the potential for 5G to replace fixed line WAN access and certainly the initial consumer launches of 5G in the US have effectively offered this as the first service, effectively replacing wired broadband access. 5G speeds on handsets will also offer a new dimension in speed but beyond these we wait to see what extraordinary use cases develop. Indeed one must also consider what the business case for organisations will be if you have to pay extra to access/use 5G. What can you do with a 5G enabled device that you cannot do today on 4G? Until those “extraordinary” uses exist this may limit who pays extra to have 5G.

5G is being launched imminently in the UK with EE on 30th May and Vodafone on 3rd July. No doubt other operators will not want to be too far behind, having previously had EE jump the gun on 4G. Whether this means summer or later in the year is unclear and the extent of these initial launches' coverage is likely to be limited to begin with.

TNC expects 5G to initially attract a premium rental cost – maybe an additional £5-£10 per month line rental charge. This is the most obvious commercial impact for organisations to consider but this is not the sole consideration. New mobile devices with 5G chipsets will also be required to access 5G signals. In addition, the ease at which users can consume data due to the high-speed capabilities of 5G is perhaps the more worrying aspect. This is not solely a user-influenced metric, such as a decision to download some HD video content, but there is also the behaviour of devices and their apps when presented with significant

bandwidth (e.g. will your devices' email app fully sync in the background and download every attachment whether wanted or not?). Users may therefore need to buy more data.

We saw a similar impact to data consumption with the introduction of 4G and features such as Wi-Fi assist. With some contracts the overage costs can be onerous and a substantial increase in data consumption could leads to hundreds of pounds of additional cost per errant user per month if data bundles/overage cost is not addressed prior to use of 5G.

As such, organisations considering 5G should consider the full cost of ownership:

  • Cost of hardware
  • Cost of 5G access
  • Cost of additional data consumption
  • Policing and managing usage

Brexit


Who knows? Obviously TNC’s advice is to remain vigilant and in particular to lock down pricing where ever possible especially around EU pricing. Currently this is legislated to be priced the same as domestic usage but with Brexit this enforcement may well fall away. For the most part, TNC expects that the tariffing structure will remain (maybe with some specific country exceptions) due to the wholesale pricing that has been established and the mutual usage/benefits. Of course, this may be impacted by taxes or tariffs that cannot be avoided but TNC recommends as a prudent measure the inclusion of clauses that ensure the pricing and thus EU roaming benefits are fixed for the life of the contract.

TNC's Previous Predictions:
What did we predict in 2016 for 2017? What happened in 2017? What happened in 2018?
Increased data usage - in part due to increased 4G coverage and a move away from legacy BlackBerry estates. Both were seen to be common trends across our customer base – there are now very few BlackBerrys but a small number still persist. 4G coverage is much more consistent but there is still work to be done by the Network Operators to keep up with the competition and/or to meet contractual or regulatory commitments. No surprises - data consumption continued to increase
Wi-Fi calling Whilst we saw O2 launch its native Wi-Fi calling product in mid-2017 it was Vodafone’s mid-November announcement that meant our predictions were met by the skin of our teeth. Will this now see the erosion of traditional fixed lines as the reliability of mobiles inside “Faraday Cage” workplaces is further improved? Standard offering, no additional cost and whilst not always perfect it offers significant relief from poor coverage especially inside workspaces
5G and Embedded SIMs (eSIMs) to impact market in the next few years More of a slow burn for both of these but there continues to be more discussion around eSIM standards and future use, particularly in M2M and vehicles. Early 5G testing is showing that significant increases in bandwidth may be possible. In 2016 the consensus was that 5G would reach at least 1Gb speeds but now trials are indicating several Gb may be possible. 5G testing continued in preparation for 2019 launches. eSIMs were seen in some devices (notably Apple XS) but with limited impact so far
Global deals* not working for most companies (only the largest of corporations seem able to get a sufficient attention and discount to make these deals feasible) and we did not expect that to change in 2017. As expected, no change – for most companies procuring separate deals in-country will lead to better outcomes and costs than trying to put together a global deal with a single provider. Not much change
Increased uptake in wearables in the work place Fortuitously we gave ourselves the benefit of a few years on this prediction and indeed, while the consumer market has increased, TNC has yet to see many organisations deploying wearables. TNC is still waiting so glad of those few years
Continued fierce competition TNC is still regularly seeing ‘like for like’ improvements of 30% over previous deals. This remains much the same
*(i.e. not roaming but the provision of services to multinational companies who are looking to tie in the procurement of services in several countries)
What else did TNC predict in 2018? What happened in 2018?
Dongle decline Almost unheard of now as nearly all users prefer or are encouraged to tether
5G progress An easy prediction with launches announced for mid-2019 still on target
Will O2 IPO? Brexit and market conditions eventually bought this to a halt in Oct 2018
Increased EMM uptake Continues to be a focus especially following GDPR with most organisations now adopting EMM
Smartphone Fatigue A continued trend both in 2018 and 2019
Fixed line substitution Organisations continue to look for efficiencies and cost savings and whilst some have looked to mobile TNC has seen far more fixed line substitution with UC especially Skype
Disclaimer

Other than matters relating to The Network Collective, this research is based on current public information that we consider reliable. Opinions expressed may change without notice and may differ from views set out in other documents created by The Network Collective. The above information is provided for informational purposes only and without any obligation, whether contractual or otherwise. No warranty or representation is made as to the correctness, completeness and accuracy of the information given or the assessments made.

This research does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Network Collective Limited © 2019

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