Table of Contents
This report provides the reader with a forecast for North American Network Traffic for the next several years, but perhaps more importantly, it will also explore the industry and consumer patterns that are driving that traffic. The lessons of the very recent history of telecommunications suggest that it is very important to understand network traffic patterns and the resulting, reasonable forecasts for growth. Dramatic “busts” disastrously impacting entire industry segments have resulted from a misunderstanding of traffic patterns and the resulting misleading forecasts. This report is directed at trying to provide understanding of these parameters and providing a basis for sound business judgments. This report will provide hard data traffic forecasts by all sources of traffic on the network and will use those source forecasts to build composite forecasts, but, as noted, it will also do more than just provide raw numbers, by giving the reader a perspective of the drivers and patterns behind those numbers. The report will use the “Demand” (traffic) and “Supply” (network resources) paradigm of the economist to help understand the interactions of the traffic “market place”.
Traffic Demand Today
Traffic demand on the network is largely driven, today, by the various sources comprising the Internet and particularly by mobile data traffic. The data streams resulting from end users accessing the Internet or the cellular telephone network are the major sources of traffic growth. These data streams comprise three of the four “Major Sources of Traffic,” as identified in this report and they are the largest and the fastest growing. Two companies, more than any others, are responsible for this growth - Apple and Microsoft. Of course, there are many other companies (e.g., Samsung - the largest cell phone maker, Google - the developer of Chrome, etc.) that are a part of either or both of these markets, but these two are almost entirely responsible for inventing the markets of the Smartphone as we know it today and the Internet.
Problems in the Industry
There are dramatic changes facing Apple and Microsoft, who are the largest companies in the US telecommunications business and who are among the largest companies in the World. Both Apple and Microsoft are having financial troubles. Regardless of their cash on hand (a measure of past successes, not a promise of future success) these two companies are reporting slowing sales of their major products - hardware in Apple's case and software in Microsoft's case - and resulting lower net earnings. As this is being written, Microsoft has bought the Nokia cell phone assets in a bid to get a foothold in the cell business, and Apple has announced a new release of its operating system and new iPhone models. Their troubles are symptomatic of the industry and must be discussed in the context of traffic demand - the subject of this report.
On the supply side of the equation, a similarly caused situation is occurring with the largest telecom companies (primarily AT&T and Verizon) in that they are having to build network infrastructure to carry traffic for which they can't charge adequately thus reducing their return on investment, while their base services (landline telephones) are disappearing.
All of these problems in our industry are related to traffic: its growth, its source and its nature. This report addresses a forecast for US traffic in total and by source, and provides an analysis of the traffic growth patterns from each of the various sources. The sources have been structured in a way that they are physically separate, and thus can be dealt with on an investment basis.
Organization of the Report
This Report will investigate the parameters of this situation - supply and demand, wire-line income, optical network innovation, and telecoms' investment. The report is over 130 pages long and contains over 85 figures and charts.
The Report will begin with a discussion of market drivers (the drivers of the market are what drives traffic) and will then look at the demand and supply situation of the network much as an economist would. The reader should remember that either an over-supply (wasted capacity) or unfilled demand (poor service, slow response times, etc.) can affect the traffic that the network experiences. In the “demand” section, we will introduce our first set of forecasts providing hard forecasts for the major sources of Internet traffic. As a part of the demand/supply review, we will investigate related issues such as the impact of changes at some of the major companies (Apple and Microsoft) and the impact of the conversion of the network from wire line to wireless.
The next major section will provide the hard data forecasts for traffic from each of the major sources of traffic. The report uses this breakdown (by sources) rather than just by Internet, etc., to make the data more useful to the reader.
The Appendixes provide several items (traffic definitions, terms, Histories of the companies mentioned, etc.) that are thought to be needed by many readers.
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