Special Report: The Telecom Consumer in 2020

Rapid progress in the affordability and accessibility of technology will reshape the telecom consumer by 2020. Greater broadband Internet penetration in emerging markets such as India will unlock huge demand for online retail and entertainment platforms, while households in developed economies will focus on merging their devices with their environment. A major obstacle to consumer telecom uptake will likely be increasing state interference on the web and globally rising income inequality.

Key Points

• Rising adult literacy rates, which remain low especially among females in the Middle East and Africa region, will begin to allow improved access to telecom goods and services, such as the Internet and smartphones, for a sizeable cross-section of the global populace, providing a wave of new consumers. Adult literacy in Sub-Saharan Africa is set to reach 61.8% in 2013, an increase from 58.7% in 2007;
• Homes in advanced economies will begin to more actively integrate their lifestyle with technology, driven by greater affordability of information and communications technology (ICT) goods and rising awareness. This will be reflected through "smart homes", households that are integrated with ICT, becoming relatively common by 2020, while handheld devices will incorporate more tools, such as bank cards and car/house keys;
• Although consumers will increasingly grow accustomed to free online content, a trend that has been growing alongside the popularity of the Internet, this will come at the price of greater exposure to digital marketing as user-generated platforms look to boost revenues via such streams. Online advertising is thus expected to maintain its dynamic growth, with global online adspend rising by 7.0% in real annual terms in 2013;
• The greater presence and importance of ICT in the lives of consumers, improved telecom coverage and a more competitive global technology environment will drive telecom spending levels upwards. Over 2013-2020, household expenditure on telecom services will rise by 20.7% in real terms, while household spending on telecom equipment increases by 32.3% in real terms;
• However, by 2020 the majority of the global population (55.9%) will continue to remain offline, unassisted by a rapidly growing income inequality globally that is creating a wide digital divide across the socioeconomic spectrum, excluding low-income homes from opportunities in the uptake of telecom goods and services. Increasing interference and policing of the web by government structures can also restrict the free market growth of online segments.

Global Possession of Broadband PC and Household Expenditure on Telecom Services: 2013-2020

Source: Euromonitor International from national statistics/Eurostat/UN/OECD

Note: US$ in constant terms; all figures forecast

Emerging market consumers will leapfrog to wireless technologies

The lack of fixed telecom infrastructure in major emerging markets such as China and Brazil will lead to a leapfrogging effect, where local states implement new wireless technologies faster than their developed counterparts by 2020. Rapidly growing income inequality presents obstacles to optimum uptake, however:

• The utilisation of wireless technologies is already prioritised to a greater extent by consumers in emerging countries due to their greater accessibility and affordability. For example, African consumers are some of the most active users globally of mobile telephones in carrying out non-voice tasks. This trend will only strengthen as consumers without fixed line access rely more on their handheld web-enabled devices for banking and other services;
• China is already betting on a wireless future, focusing on developing the world's largest and most expensive high-speed mobile broadband 4G network from 2013 onwards through its three state operators. By 2020, more than 500 million Chinese rural consumers could have wireless access to online services, unlocking vast opportunities for businesses to tailor m-commerce tools, such as mobile TV, e-wallets and mobile marketplaces, for this emerging market;
• Female telecom consumers in emerging markets will have an increasingly more influential role to play in shaping brand identities and digital marketing campaigns, as female incomes and IT literacy rates see a strong increase. Female disposable income per capita in Latin America, for example, is expected to rise by 27.7% in real terms over 2013-2020;
• However, despite the rising attractiveness of emerging consumers, the developing world is also seeing some of the largest increases in income inequality, as the gap between the wealthy and the rest expands. While this is creating a niche luxury market for upmarket telecom goods, a large mainstream section of the populace is excluded from digital participation, weakening prospects for telecom providers. India’s Gini Index, for example, is set to rise from 40.6% in 2013 to 42.4% by 2020, marking a strong rise in inequality.

A “smart” consumer lifestyle to enter the mainstream in advanced economies

In 2020, the telecom consumer in a developed market will aim for complete convergence across a number of digital platforms, with many having “smart homes”, households that are equipped with technology to control domestic electronic devices. The primary challenge will be to ensure a rapidly ageing society continues to keep with ICT trends:

• The IT-savvy, developed country consumer of 2020 will desire a digital household that is responsive to the demands of intensive ICT usage. Increases in affordability, competitiveness and awareness will ensure that linking up domestic electronics to a motherboard becomes the norm, allowing consumers to control TVs, PCs, lights, security and suchlike via their handheld web-enabled devices;
• Future developed market consumers will also become more accustomed to receiving a range of services online, especially in segments such as health and education, with this trend driven largely by state inability to provide such services on-premises to an increasingly ageing and healthcare-hungry population. By 2020, the median population age in developed countries will reach 42.3, significantly older than the 30.4 in emerging economies;
• However, the ageing issue will also provide challenges to telecom businesses, as more elderly consumers in developed countries struggle to follow the latest ICT trends, which could be a major issue considering the enlarging size of this demographic. The population aged 65+ in developed nations is set to expand by 17.8% over 2013-2020.

Implications for businesses and governments

As telecom consumer profiles shift by 2020, businesses will face growing opportunities as well as challenges, while economies will have to adapt to the conditions of a more digital environment:

• China and India will be the world’s online superpowers, with the two countries making up over 1.0 billion Internet users by 2020, or around a third of the world’s total users. Opportunities for online businesses will be expansive, especially in Internet retailing and m-commerce services targeted at the countries’ huge rural populations;

Five Largest Internet User Markets: 2012 and 2020

Source: Euromonitor International from International Telecommunications Union/OECD/national statistics

Note:  2020 figures are forecast

• However, while large emerging markets will be extremely attractive, intrusive governments may increasingly limit access to domestic consumer markets. For example, China has increasingly protected local firms by blocking access to external firms in social and digital media such as YouTube and Facebook, while several Middle Eastern markets have blocked VoIP and IP messaging services such as WhatsApp and Skype to protect local mobile operators;
• Greater consumer digitalisation levels globally by 2020 will mean that more businesses and governments will store data on cloud computing systems, which will present considerable risks for leaks and intrusions, while at the same time opening opportunities for IT security solutions firms. The Internet will become a necessity for firms in some regions, with 95.8% of businesses using the web by 2020 in Western Europe;
• A growing proportion of global consumers online by 2020 will allow states to interact with their citizens to a much larger degree, with rising IT literacy levels also allowing more users to intelligently utilise online state services, which would enhance the global e-government sector;
• Growing disposable incomes, the rise of the middle classes in emerging markets, and improved bundle offers by broadband providers will see more consumers uptake pay-TV services, boosting opportunities for businesses in the segment. Global household possession of cable TV will reach 41.9% by 2020, while satellite TV will rise to 27.3%, both seeing sizeable increases on 2012.

Prospects

• Consumers have already demonstrated that they consider telecom products as relatively recession-proof, with few markets seeing consumers downgrading on basic ICT products during the global economic downturn of 2008-2009 or the eurozone sovereign debt crisis. The status of mobile phones and Internet subscriptions as necessities will ensure the health of the segment through to 2020;
• However, as only 47.0% of the world’s households will possess a broadband enabled PC by 2020, many consumers will only have access to relatively slow Internet speeds, restricting their ability to use increasingly speed-focused and bandwidth-heavy online programmes. Governments and operators will be key in expanding wireless access in order to make up for a fixed shortfall in markets where infrastructure is lacking.