V2MTM. Global Mobile Data Trends: The Service Provider Implications. Putting Key Points from the Cisco Visual Networking Index in Context

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1 COMMUNICATIONS V2MTM S P E C I A L R E P O R T February 2012 Global Mobile Data Trends: The Service Provider Implications Putting Key Points from the Cisco Visual Networking Index in Context Mobile broadband is the most dynamic area of the communications landscape and will continue to be for the foreseeable future. Ever-increasing speeds and a rapid evolution in devices, applications, content availability and competitive threats have forced operators hands when it comes to preparing for the next generation of services through strategic infrastructure and technology planning. The trick of course is to make savvy business architecture decisions that pay off now, without sacrificing the long-term vision of flexibility and ongoing innovation. V2M has taken the data that Cisco has uncovered from its research methodology, to put the top trends shaping the mobile broadband world into context. By Tara Seals

2 S P E C I A L R E P O R T V2MTM Global Mobile Data Trends: The Service Provider Implications Putting Key Points from the Cisco Visual Networking Index in Context Mobile broadband is the most dynamic area of the communications landscape and will continue to be for the foreseeable future. Ever-increasing speeds and a rapid evolution in devices, applications, content availability and competitive threats have forced operators hands when it comes to preparing for the next generation of services through strategic infrastructure and technology planning. The trick of course is to make savvy business architecture decisions that pay off now, without sacrificing the long-term vision of flexibility and ongoing innovation. V2M has taken the data that Cisco has uncovered from its research methodology, to put the top trends shaping the mobile broadband world into context. Table of Contents SECTION I Executive Summary... Page 3 SECTION II Device Diversification... Page 5 SECTION III Mobile Video... Page 8 SECTION IV Mobile Cloud Adoption...Page 10 SECTION V Mobile Traffic Offload...Page 12 SECTION VI The 4G Impact: 9X Increase in Connection Speeds...Page 15 SECTION VII Tiered Pricing Models...Page 17 SECTION VIII IPv6-Capable Devices...Page 21 SECTION IX Key Data Points...Page 22 Copyright 2012 VIRGO Publishing, LLC. All rights reserved. The publisher reserves the right to accept or reject any advertising or editorial material. Advertisers, and/or their agents, assume the responsibility for all content of published advertisements and assume responsibility for any claims against the publisher based on the advertisement. Editorial contributors assume responsibility for their published works and assume responsibility for any claims against the publisher based on the published work. Editorial content may not necessarily reflect the views of the publisher. Materials contained on this site may not be reproduced, modified, distributed, republished or hosted (either directly or by linking) without our prior written permission. You may not alter or remove any trademark, copyright or other notice from copies of content. You may, however, download material from the site (one machine readable copy and one print copy per page) for your personal, noncommercial use only. We reserve all rights in and title to all material downloaded. All items submitted to V2M become the sole property of VIRGO Publishing, LLC. V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

3 SECTION I EXECUTIVE SUMMARY Mobile broadband is the most dynamic area of the communications landscape and will continue to be for the foreseeable future. Ever-increasing speeds and a rapid evolution in devices, applications, content availability and competitive threats have forced operators hands when it comes to preparing for the next generation of services through strategic infrastructure and technology planning. The trick of course is to make savvy business architecture decisions that pay off now, without sacrificing the long-term vision of flexibility and ongoing innovation. The unbiased research encapsulated in the Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update provides many clues as to the future state of our communications availability and consumption trends, and by extension, our society. How we spend our media time both as consumers and as businesses (paging M2M) will have a dramatic effect on operators as they seek to solve the challenge of effectively monetizing an explosion in traffic while investing and increasing infrastructure capital expenditures. V2M has taken the data that Cisco has uncovered from its research methodology, chockablock as it is with valuable points, to put the top trends shaping the mobile broadband world into context. As Cisco points out in the report, these top trends are requiring operators to become more agile and able to quickly change course and provide innovative services to engage the Web 3.0 consumer. As the Net neutrality regulatory process and business models of the operators evolve, there is an unmet demand from consumers for the highest quality and speeds. As wireless technologies aim to provide experiences formerly only available through wired networks, the next few years will be critical for operators and service providers to plan future network deployments that will create a adaptable platform upon which will deploy the multitude of mobile enabled devices and applications of the future. Deploying next-generation mobile networks also requires greater service portability and interoperability. With the proliferation of mobile and portable devices, there is an imminent need for networks to allow all these devices to be connected transparently, with the network providing high performance computing and delivering enhanced real time video and multimedia. This openness will broaden the range of applications and services that can be shared, creating a highly enhanced mobile broadband experience. The expansion of wireless presence will increase the number of consumers who access and rely on mobile networks, creating a need for greater economies of scale and lower cost per bit. As many business models emerge with new forms of advertising, media and content partnerships, mobile The unbiased research encapsulated in the Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update provides many clues as to the future state of our communications availability and consumption trends, and by extension, our society. V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

4 services including M2M, live gaming and looking into the future, augmented reality, a mutually beneficial situation needs to be developed for service providers and over-the-top providers. New partnerships, ecosystems, and strategic consolidations are expected as mobile operators, content providers, application developers- and others seek to monetize the video traffic that traverses mobile networks. For a visual executive summary, Table 1 breaks down the growth in mobile broadband traffic by service, device and region. Table 1. Global Mobile Data Traffic, By Application Category (TB per ) CAGR Data 174, , , ,122 1,349,825 2,165,174 65% File sharing 76, , , , , ,559 36% Video 307, ,792 1,545,713 2,917,659 4,882,198 7,615,443 90% VoIP 7,724 10,327 12,491 15,485 22,976 35,792 36% Gaming 6,957 13,831 24,388 40,644 77, ,330 76% M2M 23,009 47,144 92, , , ,022 86% By Device Type (TB per ) Nonsmartphones 22,686 55, , , , ,679 94% Smartphones 104, , ,373 1,915,173 3,257,030 5,221, % Laptops and netbooks 373, , ,486 1,340,062 1,963,950 2,617,770 48% Tablets 17,393 63, , , ,326 1,083, % Home gateways 55, , , , , ,777 56% M2M 23,009 47,144 92, , , ,022 86% Other portable devices By Region (TB per ) 525 1,460 5,429 22,966 84, , % North America 118, , , ,416 1,304,870 1,964,477 75% Western Europe 180, , ,843 1,160,571 1,704,596 2,437,922 68% Asia Pacific 205, , ,616 1,502,748 2,614,055 4,322,879 84% Latin America 40,171 77, , , , ,808 79% Central Eastern Europe 34,317 67, , , , ,469 83% Middle East and Africa Total (TB per ) Total Mobile Data Traffic Source: Cisco, ,147 44,868 90, , , , % 597,266 1,252,438 2,378,903 4,215,246 6,896,080 10,804,321 78% V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

5 SECTION II DEVICE DIVERSIFICATION We are in the midst of a device explosion, a veritable Big Bang of form factor innovation that takes on-device intelligence to the boundaries of the known communications universe. Smarter devices, better user experiences and better screens for performing high-bandwidth activities like streaming video on the go all add up to exponentially increasing mobile data traffic. It s also a function of quality; as operators continue to upgrade their networks and radio access technologies to provide better throughput and signaling capability, the Quality of Service for applications that were once best-efforts and assumed to be less-than-stellar in a mobile environment (again, video springs to mind) are suddenly optimized when viewed on certain devices. Tablets, for instance, provide a wonderful canvas for things like social TV applications, or news aggregation portals. Cisco has found that when it comes to the mobile Internet, laptops and netbooks will continue to generate a disproportionate amount of traffic, but newer device categories such as tablets and M2M will begin to account for a more significant portion of the traffic by 2016 (see Figure 1). That ease of use, in turn, encourages consumers and businesses to use more. And more and more. As shown in Figure 2, a single smartphone can generate as much traffic as 35 basic-feature phones; a tablet as much traffic as much as 121 basic-feature phones; and a single laptop can generate as much traffic as 498 basic-feature phones. Further, we are reaching an over-saturated state when it comes to devices per user, or even devices per household. Gone are the days when a person had a laptop for data, a phone for voice (no data) and perhaps a PDA for scheduling meetings. Now, that same user is likely to have a smartphone for work, a smartphone for home, a laptop, a netbook, a tablet, maybe an e-reader and that doesn t even begin to count the number of connected devices inside the home, which increasingly may be connected via, say, a femtocell to a mobile operator network, as fixed-mobile substitution within the home increases as a result of better capacity inside 4G networks. And all of those things are generating traffic, sometimes all at the same time. By 2016, one-quarter of mobile users will have more than one mobile-connected devices, and 9 percent will have three or more mobile-connected devices (Figure 3). This is going to engender business model innovation on the part of operators, because the current model of one subscription per device will become untenable. Buckets of data bytes that can be shared amongst devices, perhaps tied to specific applications or bundled with other carrier offerings like a Wi-Fi plan for offload, will begin to become differentiators in a hyper-connected market. V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

6 Figure 1. Laptops and Smartphones Lead Traffic Growth Figure 2. High-End Devices Significantly Mutiply Traffic V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

7 Figure 3. More Than One-Quarter of Mobile Users Will Own Two or More Mobile-Connected Devices by 2016 V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

8 SECTION III MOBILE VIDEO Mobile video is of course the biggest story when it comes to soaking up bandwidth. It will grow at a CAGR of 90 percent between 2011 and 2016, the highest growth rate of any mobile application category that Cisco forecast. Almost 70 percent of all mobile data traffic will be attributable to mobile video by Of the 10.8 exabytes per month crossing the mobile network by 2016, 7.6 exabytes will be due to video (Figure 4). The question, of course, is twofold: how can mobile operators capitalize on the thirst for video (monetization), while intelligently handling that traffic within the network? To the first point, smart packages that appeal to consumer ease of use, perhaps in partnership with a content provider, and perhaps wrapped in with a device bundle, will mark business model innovation. Ongoing TV Everywhere initiatives on the part of media companies (think HBO GO) as well as pay-tv operators (Comcast would love to roll out video on the go, if it can secure the content rights) are an opportunity for mobile operators to leverage their network to provide value-adds for the service in return for a revenue share or other premium. A mobile carrier can implement policies and techniques to manage and deliver against QoS thresholds for the services that are being used, for one. Value-added services that leverage location, or presence and reachability, are another option. User-generated video is another growing category. Video chat services, video uploads to Facebook, video-enabled blogging and other self-publishing options are all part of the mix as well. Data plans that are service-aware and can offer special packaging around these types of activities is an opportunity for the future-thinking operator. But the services have to be delivered well with a flawless Quality of Experience for the end user if an operator hopes to charge for it. When it comes to grooming the network to handle the video onslaught, intelligence and policy are the key. Operator must become serviceaware, and need an end-to-end view of usage characteristics for video services, to ensure the traffic is delivered efficiently and effectively. On a more granular level, knowledge of access technology (2G, 3G, 4G or Wi-Fi), what kind of device is being used, the attributes of that device and session state awareness all can impact the delivery of service and should be brought to bear when handling video traffic. V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

9 Figure 4. Mobile Video Will Generate Nearly 70 Percent of Mobile Data Traffic by 2016 V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

10 SECTION IV MOBILE CLOUD ADOPTION Mobile video alone is not the only phenomenon that operators will need to prepare themselves to handle. The cornucopia of cloud services, which encompasses video-streaming services such as Netflix and YouTube, also counts a wealth of transactional and non-video streaming-type traffic generators as part of the fruit mix. Music services like Pandora and Spotify Mobile are but two popular examples; Facebook, Twitter and even something as staid as the Weather Channel smartphone app count too. There are also a wealth of enterprisefocused cloud options like Salesforce.com mobile and telemetry apps that go into the traffic escalation patterns as well. Globally, cloud applications will account for 71 percent (7.6 Exabytes per month) of total mobile data traffic in 2016, compared to 45 percent (269 Petabytes per month) at the end of Mobile cloud traffic will grow 28-fold from 2011 to 2016, a compound annual growth rate of 95 percent. Cisco rightly points out that the growth is intuitive. These applications and services are perfect for mobile use because those devices have memory and speed limitations that might prevent them from acting as media consumption devices otherwise. A user with an 8 GB smartphone who streams cloud video and music will consume more content over the course of two years than can be stored on the device itself. But it carries a heavy load for the network: A smartphone user adopting Netflix, Pandora, and Facebook will generate more than twice the volume of traffic generated by a smartphone user adopting only and basic Web applications (Figure 5). Also, users also have expectations. Because things are moving to the cloud, latency is going to be an issue from a user experience standpoint. If the network )and therefore the application) is not able to quickly respond to a user request, it becomes frustrating and eventually an issue for the operator in consumer satisfaction. To support cloud services, the coverage model must increase, as must capacity, speed, and signaling capability. In fact, the attributes that are requirements for a fixed network will become the same for the mobile side of the house as more and more cloud services become part of users daily lives and work. Smartphones and tablets in particular are widget-oriented and can ratchet up the signaling load on the network significantly if they are live-updated, like in the Windows Phone 7 OS, or if users simply forget to shut them down so that they run in the background, as is the danger with the Android OS. V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

11 Figure 5. Cloud Media Apps Multiply Smartphone Traffic V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

12 SECTION V MOBILE TRAFFIC OFFLOAD As the traffic load increases on the 3G and 4G RAN for mobile operators, they are increasingly looking for ways to offload that traffic to Wi-Fi in the unlicensed arena or to small cells like femtocells or picocells in the licensed spectrum. Cisco has estimated that nearly one-third of handset and tablet traffic is offloaded now through dual-mode devices or femtocells (Figure 6). The offload factor is a combination of smartphone penetration, dual-mode share of handsets, percentage of home-based mobile Internet use and percentage of dual-mode smartphone owners with WiFi fixed Internet access at home. To be sure, the penetration of home Wi-Fi is the linchpin to these numbers. In Cisco s estimation, however, the percentage of traffic offloaded remains relatively flat over the forecast period. While in developed regions the offload factor steadily rises throughout the forecast period, this growth is offset by a decline in offload percentage in many developing countries and regions. The declining offload factor in developing markets is due to a decreasing number of mobile data users with Wi-Fi access at home. That said, in developing areas offload is very much at the top of mobile operator minds, and not just through the encouragement of users to wait until they get home to stream that video. Femtocell overlays that provide a metro drain to the backhaul network of local traffic to keep it from hitting the WAN is very much a part of 4G LTE architectures going forward. Also, service provider Wi-Fi is on the rise. The Hotspot 2.0 community is eyeing the future of wireless data, which builds on the already saturated state of Wi-Fi connectivity. The picture that emerges is one of a very Wi-Fi d society for which the concept of the hotspot is second-nature. The problem of course is the almost user-hostile requirements for use of those hotspots. Locating an open network (or even a subscribed network) and then logging on is a hassle, as is having to sign up for service via mobile device if one is in the mood to pay for it at an airport or other public location--subject then to time limits and re-upping with a new authentication if one needs more time. Then of course there is the enduring characteristic of the ad-hoc, will it work, will it won t crapshoot nature of using public hotspots. There are aggregation services that have aimed to make this process easier, but efforts have been rudimentary at best to provide unified billing, service bundling or broad-based authentication mechanisms. The Hotspot 2.0 standards (officially the u) aims to bring the operator ecosystem together for a seamless, secure, interoperable user experience that would bring a 3G-like end-user experience to Wi-Fi authentication and roaming. In other words, connection to Wi-Fi would be automatic, controlled by policy engines that are tied to subscriber billing profiles. Being operatormanaged, a user would simply automatically switch between 3G/4G and Wi-Fi as hotspots become available, and roam seamlessly, just as AT&T mobile customers roam to other carrier networks when AT&T coverage is not availabl e--no additional log-in required, and everything is taken care of behind the scenes. The technology integrates with an existing access network, be it mobile or fixed, and uses an automated network discovery and selection service to effect the aforementioned seamlessness. Hotspot 2.0 can also use carrier network intelligence to determine whether, say, the 3G network is congested, where the best signal may be, which hotspots have the lowest latency and so on to make the best connection decisions for the situation--all without the user needing to be involved. V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

13 Beyond basic economics, there are service innovation. Going forward, users would be able to set their Wi-Fi preferences--i.e., always use Wi-Fi at a certain time of day, location, or for a certain type of service like video streaming or Skype. That opens up the option for an operator to craft service-specific packages for incremental revenue, such as a bundle that includes broadband with nationwide Wi-Fi, oriented around a video streaming package. Managing the Wi-Fi link gives carriers control over the last mile--a perk that is nonexistent in today s enterprise and consumer electronic-based patchwork of access point connectivity. The opportunity is there: Informa Telecom & Media survey found that 47 percent of mobile operators believe Wi-Fi hotspots are now vital to meet customer expectations, as well as relieving data traffic on cellular networks and to diversify revenue streams. Figure Percent of Handset and Tablet Traffic will be Offloaded in 2016 V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

14 Figure 7. 5 Percent of Total Portable and Mobile Traffic is Due to Offload in 2016 V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

15 SECTION VI THE 4G IMPACT: 9X INCREASE IN CONNECTION SPEEDS We are a world hooked on speed, and operators and devices are happy to be our dealers, it would seem. Cisco has found that globally, the average mobile network connection speed in 2011 was 315kbps. That average speed will grow at a CAGR of 56 percent, and will exceed 2.9Mbps in Smartphone speeds, generally 3G and higher, are currently over four times higher than the overall average. And they will quadruple by 2016, reaching 5.2Mbps. Meanwhile, 4G connections represent only 0.2 percent of mobile connections today, but already account for six percent of mobile data traffic. In 2016, 4G will be account for percent of connections, but 36 percent of total traffic. Going forward, a key factor driving the increase in mobile speeds over the forecast period is the increasing proportion of 4G mobile connections. Currently, a 4G connection generates 28 times more traffic than a non-4g connection. Cisco has determined that there are two reasons for this. The first is that many of the 4G connections today are for residential broadband routers and laptops, which have a higher average usage. The second is that higher speeds encourage the adoption and usage of highbandwidth applications, such that a smartphone on a 4G network is likely to generate 50 percent more traffic than the same model smartphone on a 3G or 3.5G network. While the gap between 3G and 4G will continue to shrink thanks to better 3G technology, spectrum resources being freed up and so on. However, in 2016 a 4G connection will still generate nine times more traffic than a non-4g connection. The issue is how to make money off of that. When we think about making sense of usage data associated with 4G networks, you have to consider that operators are spending $20 billion a pop on an average LTE deployment, said Carl Howe, an analyst with Yankee Group. So they really do have to decide where they are going to get the most bang for their dollar in terms of service innovation, and how they can prove to the people that sign the checks that they are going to make a return on that investment. In terms of measuring the success of a deployment, operators should recognize that you re not going to get it right the first time, said Howe. You can t base your plans on what people say they want to be doing. You have to base it on what, over time, people actually do. Intelligent networks can be intelligent when it comes to giving straightforward statistics knowing how many Android devices are attached to the network, let s say. However, operators need to be able to see not just on how much traffic is on the network, where it s coming from and at what time of day, but they also need insight into the why of consumer behavior. For instance, say Carrier X goes live with an initial 4G deployment in New York, San Francisco, Dallas and Atlanta. Based on population, it would be rational to assume that each city s network would be equally loaded. But with the right measuring equipment and dashboards, operators can discover out how right or wrong that assumption is. Carrier X might find out that Dallas is so spread out that the freeway culture spurs more usage, because people are spending a goodly amount of time stuck in traffic in their cars. That opens up the door to craft relevant service packages tailored for commuters. The big issue is that operators are awash in data, but they still don t have a lot of information, said Howe. If there s a traffic spike, operators want to know why that happened V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

16 and what they should do about it. It requires a correlation between events and news, and action on the network. It s also useful to gain a view of demographics and cultural realities, to be able to correlate those to services. For instance, the conventional wisdom on bandwidth usage is that young people consume plenty of it, while older people don t use the network as much. Our research found that this trend is absolutely true for men, not so much for women, said Howe. Older women are increasingly using mobile data, because they are the social gatekeepers of families, and they post a lot more pictures to Facebook and Flickr. They use their phones more than their younger counterparts. Yet carriers have never marketed to that demo. Take Droid, for instance Verizon ran a very male-oriented advertising campaign for that device, Howe said, Even though women are big buyers of Droid. In the technology world, women tend to be a blind spot. Taking these realities together, it becomes apparent that turning raw usage data into actionable information is becoming a must-have for service differentiation and customer satisfaction down the line. Table 21. Projected Average Mobile Network Connection Speeds (in kbps) by Region and Country CAGR Global Global speed: All handsets ,236 1,908 2,873 Global speed: Smartphones 968 1,344 1,829 2,425 3,166 4,102 5,244 56% 31% By Region Asia Pacific ,101 1,697 2,608 51% Latin America ,082 1,627 67% North America 596 1,138 1,712 2,485 3,531 4,923 6,785 43% Western Europe ,196 1,967 2,960 4,163 5,549 53% Central and Eastern Europe ,555 2,618 76% Middle East and Africa ,101 1,697 2,608 97% Source: Cisco VNI Mobile, 2012 Current and historical speeds are based on data from Cisco s GiST (Global Internet Speed Test) application and Ookla s Speedtest. Forward projections for mobile data speeds are based on third-party forecasts for the relative proportions of 2G, 3G, 3.5G, and 4G among mobile connections through For more information about Cisco GIST, please visit V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

17 SECTION VII TIERED PRICING MODELS To solve the profitability gap, service providers around the world are turning to tiered pricing models that impose bandwidth usage caps depending on the amount of the monthly subscription. The cost of delivering mobile broadband effectively (taking into account capex as well as ongoing opex) is forecast to far outweight the money made in subscriptions should unlimited plans remain the norm. AT&T, Verizon Wireless and others made the painful move into tiered pricing over the course of 2010 and 2011, and while unlimited still outstripped tiered in terms of pricing, analysts estimate that this type of service packaging will be the go-to model going forward as mobile broadband traffic continues to grow into the colossus that we expect it to be in the industry. But is it effective? Are there other, better ways to monetize mobile broadband traffic? If the idea is to dissuade bandwidth hogs, the jury is out on the effectiveness of tiered pricing on traffic growth. Cisco recently completed a case study based on the data of two Global Top 50 service providers, analyzing usage associated with over 22,000 devices and spanning 22 months beginning with the introduction of tiered pricing. Over the period of the nearly two year study, the percentage of the number of tiered plans compared to all data plans increased from four percent to 29 percent compared to the number of unlimited plans, while the latter saw a drop from 81 percent to 63 percent. This has however not hindered the usage patterns of the tiered pricing plans. In a year s span, average usage on a tiered plan per device grew from MB per month to 388 MB per month, at a rate of 169 percent, while that of unlimited plans grew at a slower rate of 83 percent from a higher base of 391 MB per month to 715 MB per month. Table 31. MB/month usage per mobile operating system in unlimited plans Operating System Android Apple Windows Blackberry Proprietary Symbian Source: Cisco, Table 42. MB/month usage per mobile operating system in tiered pricing plans Operating System Android Apple Windows Blackberry Symbian Proprietary Source: Cisco, V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

18 Even so, average usage of a connection on a tiered pricing plan is half that of unlimited plans, which would indicate that users consume their allotment and then pull back when they reach it. Also, tiered pricing will be increasingly important: It seems as though heavy users-- bandwidth hogs--are no longer confined to the top 1 percent of subscribers. About 52 percent of bandwidth two years ago was consumed by the top 1 percent. But with tiered pricing and alerts for when a person is reaching their limit, only 24 percent is consumed by 1 percent. Similarly, the top 10 percent of the mobile data users generated 83 percent of the monthly traffic at the beginning of the study, now down to 54 percent. The reality nowadays is that the top 20 percent of subscribers are accounting for the majority of usage, largely due to the uptake of mobile cloud services like Facebook and Pandora. As smartphone and tablet penetration increases, it s no longer the early adopters that are making the most use of mobile broadband. And to that point, at the beginning of the study, Apple OS data consumption was equal to if not higher than other smartphone platform. Android based devices have now caught up and usage is 29 percent higher than that of Apple in terms of megabytes per month per connection usage. Operators do have other ways to monetize mobile broadband traffic than the basic tiered approach. Revenue shares with over-the-top (OTT) content providers in return for QoS guarantees, advertising and new bundles that are service-specific or multi-device are all options. It is likely that as these intersecting trends in mobile broadband continue to shape usage patterns, innovation on that front will become a requirement, for differentiation as well as economic viability. Figure 8. Top 1 Percent Generates 24 Percent of ly Data Traffic in 21 Compared to 52 Percent in 1 V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

19 Figure 9. Top 20 Percent Growing at a Faster Rate of 102 Percent Y/Y Figure Percent of Users Are Consuming 5 GB per and 3 Percent Are Consuming Over 2 GB per V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

20 Figure 11. Megabytes per by Operating System V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

21 SECTION VIII IPV6-CAPABLE DEVICES The telecommunications industry is becoming increasingly aware of the pending depletion of IPv4 address space. Indeed, we are fast approaching the global exhaustion of IPv4 addresses, as signified by the Internet Assigned Numbers Authority (IANA) allocating its last central pool of available IPv4 on February 1, In some regions, the situation is immediate: Asia Pacific exhausted its IPv4 registry in April 2011, and the European registry is expected to be depleted in early Providers will need to address the heterogeneous nature of the IPv6-IPv4 mixed addressing scheme at the core of the network with network address translation. Cisco also has identified a notable potential for IPv6-capable mobile devices connecting to IPv6 networks, provided all the requirements are in place to enable this emerging connection type. In 2011, it estimated that 10 percent of mobile devices are potentially IPv6-capable based on network connection speed and OS capability. By 2016, Cisco projects that 39 percent of all global mobile devices could potentially be capable of connecting to an IPv6 mobile network. However, the other elements must be present to achieve even a modest percentage of this potential: radio enablement on the device, IPv6 enabled mobile network and content provider enablement of IPv6. There are five requirements necessary for IPv6-capable mobile device connectivity to an IPv6 capable mobile network. Connecting a mobile device via IPv6 requires the cellular radio on the device to be enabled either by the service provider or user. Also, the network must be IPv6 enabled, and the content provider must have IPv6 continuously enabled. Independent industry estimates suggest that less than one percent of mobile connections currently meet these multiple requirements. In terms of regions with the greatest potential for IPv6-capable mobile device connectivity, Asia-Pacific leads in total number of potential IPv6-capable mobile devices. When combined with the Asia-Pacific region IPv4 registry depletion, this indicates a particular confluence of supply and demand trends that may have a unique impact on IPv6 adoption in this region. Figure 12 39% of Global Mobile Devices Potentially Capable of Connecting to an IPv6 Mobile Network by 2016 V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

22 SECTION IX TOP DATA POINTS The Cisco Visual Networking Index (VNI) Global Mobile Data Traffic Forecast Update is part of the comprehensive Cisco VNI Forecast, an ongoing initiative to track and forecast the impact of visual networking applications on global networks. The following top-line data points represent Cisco s major global mobile data traffic projections and growth trends Year in Review and Outlook for 2012 Mobile Data Traffic More Than Doubled in 2011 Global mobile data traffic more than doubled (2.3-fold growth or 133 percent) in 2011, for the fourth year in a row. It is a testament to the momentum of the mobile industry that this growth persisted despite the continued economic downturn, the introduction of tiered mobile data packages, and an increase in the amount of mobile traffic offloaded to the fixed network. Mobile Data Traffic Will Double Again in 2012 Cisco estimates that traffic in 2012 will grow 2.1-fold 110 percent, reflecting a continuation in the tapering of growth rates. The evolving device mix and the migration of traffic from the fixed network to the mobile network have the potential to bring the growth rate higher, while tiered pricing and traffic offload may reduce this effect. The current growth rates of mobile data traffic resemble those of the fixed network from 1997 through 2001, when the average yearly growth was 150 percent. In the case of the fixed network, the growth rate remained in the range of 150 percent for five years. The Mobile Network in 2011 and 2012 Global mobile data traffic grew 2.3-fold in 2011, more than doubling for the fourth year in a row. The 2010 mobile data traffic growth rate was higher than anticipated. Last year s forecast projected that the growth rate would be 149 percent. This year s estimate is that global mobile data traffic grew 159 percent in Last year s mobile data traffic was eight times the size of the entire global Internet in Global mobile data traffic in 2011 was more than eight times greater than the total global Internet traffic in Mobile video traffic exceed ed 50 percent for the first time in Mobile video traffic was 52 percent of traffic by the end of Mobile network connection speeds grew 66 percent in Globally, the average mobile network downstream speed in 2011 was 315kbps, up from 189kbps in The average mobile network connection speed for smartphones in 2011 was 1,344kbps, up from 968kbps in In 2011, a 4G connection generated 28 times more traffic on average than a non-4g connection. 4G connections represent only 0.2 percent of mobile connections today, but already account for 6 percent of mobile data traffic. V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

23 The top one percent of mobile data subscribers generate 24 percent of mobile data traffic, down from 35 percent one year ago. According to a mobile data usage study conducted by Cisco, mobile data traffic has evened out over the last year and now approaches the 1:20 ratio that has been true of fixed networks for several years. Average smartphone usage doubled in The average amount of traffic per smartphone in 2011 was 150MB per month, up from 55MB per month in Smartphones represent only 12 percent of total global handsets in use today, but they represent over 82 percent of total global handset traffic. In 2011, the typical smartphone generated 35 times more mobile data traffic (150MB per month) than the typical basic-feature cell phone (which generated only 4.3MB per month of mobile data traffic). Globally, 33 percent of handset and tablet traffic was offloaded onto the fixed network through dual-mode or femtocell in In 2011, 72 petabytes of smartphone and tablet traffic were offloaded onto the fixed network each month. Without offload, traffic originating from phones and tablets would have been 217 petabytes per month rather than 147 petabytes per month in Android has caught up with iphone levels of data use. At the beginning of the 2010, iphone consumption was at least 4 times higher than that of any other smartphone platform. Toward the end of 2011, Android consumption was equal to iphone consumption in the United States and Western Europe. In 2011, 10 percent of mobile devices were potentially IPv6-capable based on network connection speed and OS capability. In 2011, the number of mobile-connected tablets tripled to 34 million, and each tablet generated 3.4 times more traffic than the average smartphone. In 2011, mobile data traffic per tablet was 517 MB per month, compared to 150 MB per month per smartphone. There were 175 million laptops on the mobile network in 2011, and each laptop generated 22 times more traffic than the average smartphone. Mobile data traffic per laptop was 2.1 GB per month, up 46 percent from 1.5 GB per month in Non-smartphone usage increased 2.3-fold to 4.3 MB per month in 2011, compared to 1.9 MB per month in Basic handsets still make up the vast majority of devices on the network (88 percent). The Mobile Network through 2016 Mobile data traffic will reach the following milestones within the next five years: ly global mobile data traffic will surpass 10 exabytes in 2016 Over 100 million smartphone users will belong to the gigabyte club (more than 1GB per month) by 2012 The number of mobile-connected devices will exceed the world s population in 2012 The average mobile connection speed will surpass 1 Mbps in 2014 Due to increased usage on smartphones, handsets will exceed 50 percent of mobile data traffic in 2014 ly global mobile data traffic will surpass 10 exabytes in 2016 ly mobile tablet traffic will surpass one exabyte per month in 2016 Tablets will exceed 10 percent of global mobile data traffic in 2016 China will exceed 10 percent of global mobile data traffic in 2016 V2M GLOBAL MOBILE DATA TRENDS FEBRUARY

24 Global mobile data traffic will increase 18-fold between 2011 and Mobile data traffic will grow at a CAGR of 78 percent from 2011 to 2016, reaching 10.8 exabytes per month by By the end of 2012, the number of mobile-connected devices will exceed the number of people on earth, and by 2016 there will be 1.4 mobile devices per capita. There will be over 10 billion mobile-connected devices in 2016, including machine-to-machine (M2M) modules exceeding the world s population at that time (7.2 billion). Mobile network connection speeds will increase nine-fold by The average mobile network connection speed (189 kbps in 2011) will exceed 2.9 megabits per second (Mbps) in In 2016, 4G will be six percent of connections, but 36 percent of total traffic. In 2016, a 4G connection will generate nine times more traffic on average than a non-4g connection. By 2016, 39 percent of all global mobile devices could potentially be capable of connecting to an IPv6 mobile network. Over 4 billion devices will be IPv6-capable in Two-thirds of the world s mobile data traffic will be video by Mobile video will increase 25-fold between 2011 and 2016, accounting for over 70 percent of total mobile data traffic by the end of the forecast period. Mobile-connected tablets will generate almost as much traffic in 2016 as the entire global mobile network in The amount of mobile data traffic generated by tablets in 2016 (1.1 exabytes per month) will be approximately equal to the total amount of global mobile data traffic in 2012 (1.3 exabytes per month). The average smartphone will generate 2.6GB of traffic per month in 2016, a 17-fold increase over the 2011 average of 150MB per month. Aggregate smartphone traffic in 2016 will be 50 times greater than it is today, with a CAGR of 119 percent. By 2016, more than 3.1 exabytes of mobile data traffic will be offloaded to the fixed network by means of dual-mode devices and femtocells each month. Without dual-mode and femtocell offload of handset and tablet traffic, total mobile data traffic would grow at a CAGR of 84 percent between 2011 and 2016 (21-fold growth), instead of the projected CAGR of 78 percent (18-fold growth). The Middle East and Africa will have the strongest mobile data traffic growth of any region at 104 percent CAGR, followed by Asia-Pacific at 84 percent and Central and Eastern Europe at 83 percent. China will account for more than 10 percent of global mobile data traffic in 2016, up from less than five percent in V2M GLOBAL MOBILE DATA TRENDS FEBRUARY