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Summary:

Cisco Systems’ oft-cited Visual Networking Index of the world’s projected mobile data consumption fell under some criticism this year as some operators’ rapid growth seemed to peter off, but Cisco isn’t changing its forecasts. Rather, it is revising them upward, predicting even greater traffic growth.

Cisco VNI 2012-feature

Cisco Systems’ oft-cited Visual Networking Index of the world’s projected mobile data consumption fell under some criticism this year as some operators’ rapid growth seemed to peter off, but Cisco isn’t changing its forecasts. Rather, it is revising them upward, predicting that global mobile Internet traffic will hit 130 exabytes in 2016, an exabyte being the equivalent of one quintillion bytes.

Don’t call off the data deluge yet

That represents a 78 percent compound annual growth rate in mobile data traffic over the next five years, which in 2011 topped out at 0.6 exabytes. According to Cisco, we ain’t seen nuthin’ yet. Just the incremental data traffic added to mobile networks in 2015 and 2016 will be three times larger than the entirety of the mobile Internet this year, Cisco predicts. The total number of global connections will top 10 billion, far exceeding the world’s projected population of 7.3 billion. Average connection speeds to mobile devices will increase by a factor of nine, from 1.3 Mbps sent down to a smartphone in 2011 to 5.2 Mbps in 2016. By that year, 71 percent of all traffic will be dominated by a single application: video.

Last year, Cisco predicted an annual growth rate of 92 percent between 2010 and 2015, and at first glance it might appear that Cisco is adjusting its numbers downward. But director of service provider marketing Douglas Webster said that is not the case. The phenomenal growth in 2010 is now factored in to this year’s projections, he explained: As global mobile data use swells, each year’s percentage growth will be smaller than the previous. In fact, Cisco has bumped up its projections for global consumption this year over last, revising the projected monthly run rate in 2015 from 6.3 exabytes to 6.9 exabytes.

“It’s very much a matter of large numbers,” Webster said. “If history is a guide then overall growth is likely to be greater than what we’re estimating.”

What’s AT&T got to do with it?

Cisco’s VNI numbers have become one of the industry’s standard measurements for projecting future mobile data demands, and they have been cited by carriers, infrastructure vendors and even the U.S. government as justification for clearing massive amounts of new spectrum for mobile broadband use.

But in the past month, AT&T revealed that its data growth rate is now running at about 40 percent, far smaller than you would expect in an exploding mobile broadband market. That has led several critics, including GigaOM contributor Tim Farrar, to question whether the spectrum crisis the industry supposedly faces is a myth.

AT&T’s current growth rate, however, isn’t the best snapshot of the industry as a whole. Cisco’s figures are a global average, not just for the U.S., which experienced the smartphone boom far before other regions. Meanwhile, AT&T, by virtue of its years of iPhone exclusivity, is well ahead of the U.S. curve, with an industry-leading 56.8 percent smartphone penetration. Unlike its competitors, AT&T can no longer double its smartphone base. Its future mobile data growth will increasingly depend more on its existing subscribers than on new ones.

The next big growth spurt is from the 99 percent

Cisco is projecting a 74 percent annual growth rate in the U.S., only slightly less than the overall global growth rate. But mobile data growth hardly slowed down in the U.S. last year. Using real network data to validate its numbers, Cisco found that traffic over cellular networks increased by 172 percent in 2011, compared with a 171 percent increase in 2010. AT&T may be slowing down, but the rest of the wireless industry is not.

The biggest check on U.S. growth that Cisco found was among the top 1 percent of users, which traditionally consume the lion’s share of mobile network capacity. In 2010, the top 1 percent of mobile data users were responsible for an astounding 51 percent of all traffic. This year that top 1 percent consumed only 24 percent of traffic, a likely result of tiered data plans and throttling by all the major operators save Sprint, Webster said. Still, that didn’t stop the remaining 99 percent from boosting their overall consumption:

  • The average mobile connection in the U.S. generated 319 MB of traffic per month in 2011, up 156 percent from 125 MB per month in 2010.
  • The average smartphone generated 201 MB of traffic, up 152 percent from 80 MB per month in 2010.
  • Laptops are still by far the biggest mobile broadband hogs, generating 2,507 MB of traffic per month in 2011, up 88 percent from 1,336 MB per month in 2010.
  • While still not the most prevalent devices connected to the cellular network, tablets generated an average of 382 MB of traffic per month in 2011, up from 198 MB per month in 2010.

Cellular-connected tablets already consume nearly twice what the typical smartphone does, and their average consumption is increasing at a faster pace. As the smartphone data boom starts to taper off, it is easy to envision how the tablet could kick off the next big data growth spurt in the U.S. — that is, when consumers finally start connecting them to mobile broadband networks.

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  1. Cisco is, if anything, underestimating the increase. Everybody has experienced lagging mobile broadband performance at least once per day – much like we all did as our fixed broadband connections were in the midst of their own tech upgrades a decade or so ago. The NPRG Data Deluge analysis – which focused exclusively on mobile networks from the cell site upwards, makes a strong case that in for as much as 25% of the high capacity cell sites (or more) the demand will exceed 500 Mbps by 2016.

  2. Also, keep in mind, some U.S. mobile service providers may intentionally be using a pricing strategy to send a message to the top 1% — they actually don’t want those customers.

    Therefore, if you push customers to competitors (by whatever means), then you will surely experience a decline in data usage growth. My point: don’t assume that a carrier’s lower data usage growth is always viewed as a “problem” that needs to be resolved.

  3. I think the VNI numbers look overstated. For instance, the detailed figures show forecast growth in both North America & Western Europe predicted at >100% for 2012 vs. 2010. Yet we have AT&T at 40%, Vodafone Europe at 20%, Telefonica O2 as quite low or even flat… so unless VZW, Orange, T-Mo & a couple of others are pushing 200%, there’s no way that particular number can add up. I’m also highly doubtful that the *average* smartphone user in 2016 will be doing 2.6GB/month – given that will probably include hundreds of millions in emerging markets with cheap $50 smartphones on “thin” networks and a $5 ARPU. There’s some good stuff in VNI but some of the numbers don’t, to me, pass the “smell test”.

    Dean Bubley
    Disruptive Analysis

  4. …edit to my comment. Should read >100% for 2012 vs. 2011

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