It is likely that 2013 will be the year of the device. The number of smartphone shipments will reach almost two billion, and the smartphone-tablet hybrid will gain popularity in Australia, according to consulting firm, Deloitte.
It also claims that the PC is not dead, nor will it die in 2013 and connected and 4K TVs will gain momentum.
The implications? Over-the-top (OTT) will spur a broadcasting rethink, LTE adoption will be strong, a spectrum shortage will occur, and password security will grow in vulnerability.
That will be 2013 and its outcomes in a nutshell, as shown in the 12th edition of Deloitte’s Technology, Media and Telecommunications (TMT) report.
The TMT predictions are based on worldwide research supported by interviews and input from Deloitte member firm clients, Deloitte alumni, industry analysts, TMT executives, and thousands of Deloitte member firm TMT practitioners across its global network.
The report showed that while smartphone shipments will exceed one billion in 2013 and end close to two billion by the end of the year, while their usage will vary.
“Some 400 million will rarely or never connect their devices to data. This is an important consideration for those organisations developing a ‘mobile centric’ customer strategy,” Deloitte Australia lead telecommunications partner, Stuart Johnston, said.
He highlighted manufacturers’ delivering commercial smartphones instead of high-end phones, increasing number of hand-me-down smartphones as some lower-income people will be unable to afford data plans as the reasons behind the trend.
From the smartphone’s prominence will emerge traction for the smartphone-tablet combination in what has been (infamously) termed the ‘phablet’.
Deloitte predicts a possibility of the smartphone trend dying in 2014, giving way to phablets in the market.
“It’s the size of the screen that is driving the phablet appetite,” Deloitte Australia lead media partner, Clare Harding, said.
PC is not dead
2012 welcomed an influx of discussions regarding the death of the PC, although Johnston mentioned “it is screen size and keyboards that are driving the vast majority of connected traffic.”
According to Johnston, 30 million tablets have been purchased by companies globally, and this will grow to 300 million by the end of 2013.
Despite this, “it is paper they are replacing – not PCs. The PC is not dead as it is not about the units, but rather, the usage. In three to five years, it might be a different factor.”
Deloitte predicts that 80 per cent of Internet traffic measured in bits and 70 per cent of hours spent on computing devices will come from PCs.
In the share of connected device traffic, the report indicated PC usage to be 81.3 per cent – a large fraction as compared to mobile usage at 11.5 per cent, tablet at 6.5 per cent and other devices at 0.7 per cent.
“So even with very strong mobile growth predicted, the mobile device share of Internet traffic will be no more than 15 per cent worldwide by the end of 2013,” Johnston said.
He also mentioned businesses and consumers alike should be preparing for a PC-plus era instead of a post-PC era.
In addition, it expects about 1.6 billion PCs in use in 2013, up from 1.4 billion in 2010.
World of television
2012 saw a few 4K televisions trickle onto the market, and CES showcased an increased number of vendors entering the space.
Harding said Deloitte believes it will take another 18 to 36 months before the devices are commercially and broadcast-ready, but the first consumers are already taking delivery and making orders.
“Our Deloitte TMT partner at CES this year said a good number of orders were being taken for the new 4K sets, which were sold at $25,000 each in the first couple of days of the show.”
By the end of 2013, it is expected that at least half of 4K TVs will be available for less than $US10,000. Regardless, Deloitte said that the big uptake is likely to be for live sports in 2015 and 2016.
Furthermore, Harding predicts that although tens of millions of connected TVs will sell globally, it will be because of price, size, thickness, or bezel width, rather than for their integrated two-way connectivity.
“The bottom line is that unless ‘must-see’ content is made exclusive to connected TVs at a competitive price, the need for connectivity in televisions is likely to remain marginal,” she said.
“Broadcasters should keep track of the installed base of devices on which their content could be received and consumed when considering which services they should offer.”
Deloitte claimed that this trend will give rise to a wider option of content, standards and products – such as an increase in blockbuster movies and video games, a growing range of professional and semi-professional 4K cameras, multiple test broadcasts, as well as new supporting standards.
Deloitte predicts that two of the top three Over-the-top (OTT) TV program and movie services are likely to be provided by existing broadcasters and distributors in 2013.
Put simply, OTT services use the Internet to distribute content to homes.
Deloitte claimed combined OTT revenues for existing broadcasters and pure plays will be less than two per cent of earnings (from subscriptions and advertising), while free-to-air TV broadcasters are likely to include OTT access as part of subscription packages.
Harding said OTT is an interesting prediction for the Australian market as it is relatively undeveloped as compared to countries such as the US or the UK.
“OTT is important, but what we are seeing in other countries is that it is not core to the way people are consuming TV and video content,” Harding said. “If OTT services were suspended for a week, people would still watch television.
“What is core is content, and whichever entity has access to the most popular content is likely to have the most popular OTT site. We expect that legacy broadcasters will in fact get the most out of OTT as it is a natural and hopefully seamless extension of the already well-known brands of those broadcasters.”
2013 will be a year of momentum for 4G with more than 200 operators in 75 countries expected to have launched LTE by the end of 2014, Johnston said.
By the end of the year, it forsees LTE subscriptions to exceed 200 million – a 17 fold increase in two years.
However, Johnston mentioned that it will be a year of momentum for LTE, rather than completion.
By the end of 2013, the vast majority of 1.9 million smartphone customers will still be using 3G and 2.5G devices.
“We are likely to see lower prices initially to encourage use, but this won’t be sustainable. Despite LTE spectral efficiency, it will still cost carriers $US5 to $US10 to carry 1GB of data, sufficient for streaming one to two hours of HD video,” Johnston said.
He explained the step from 3G to 4G is not the same as experienced from 2G to 3G.
“4G is faster than 3G, but carriers will need to strike a balance between underwhelming and overselling when marketing to drive take-up. Device trends will drive the excess into 4G.”
As for spectrum, Australia is in a similar position to the rest of the world, Johnston mentioned.
Deloitte predicts although additional spectrum will continue to be made available in 2013 in many global markets, spectrum exhaustion will continue.
“We believe that the current spectrum shortage issues that are being experienced now will get worse before they get better. Australia’s investment in the NBN puts it ahead of most other nations in the developed world, but only in broadband,” Johnston said.
Deloitte suggests the supply of radio spectrum can be improved by two methods – allocating or reallocating of frequent bands to operators and make more efficient use of limited spectrum.
“LTE for example is 16x more efficient that 3G when it comes to moving data. But demand is outstripping technology innovation. In the seven years it took to develop and deploy LTE, wireless traffic has increased 30 times,” Johnston said.
The end of strong password-only security
Deloitte also predicts that more than 90 per cent of user-generated passwords will be vulnerable to hacking in a matter of seconds.
It said inadequate password protection may result in billions of dollars in losses, declining confidence in Internet transactions and significant damage to the reputations of the companies compromised by attacks.
“As smartphone adoption increases, and the value of data continues to grow, the incentive to hack has never been greater,” Johnston said.
Deloitte mentioned that for a long time, eight character passwords were thought to be highly secure – for example with the 94 characters available on a standard keyboard, there are 6.1 quadrillion possible combinations. With this number, it would take a powerful 2011 computer about a year to try every variation.
“However, a number of human factors combine to significantly reduce the number of combinations people actually use. A recent study of six million passwords found that the 10,000 most common would have accessed 98.1 per cent of accounts,” Johnston said.
Deloitte will release its global TMT Security Report survey results paper in February.