Broken Communication

Alexander Graham Bell was a great inventor.

In 1876, he got the first patent for the telephone. By 1885, he had gone on to create the American Telephone and Telegraph Company or AT&T.

Only decades later, the telephone had become a common household fixture. It was a great success.

It has come an even longer way today.

Telephones have moved on from the clunky rotary phones — remember those? Having to pick up the receiver, looking for the person’s number, listening for the tone and dialling numbers one by one clockwise. Then waiting for the dial to go all the way around before getting to the next number…it was excruciating.

Anyway, who has landlines anymore?

Calling someone is much easier today. No need to memorise telephone numbers or bother dialling, just press someone’s name and the phone does all the work.

But I digress. What I mean is phones have become even more popular in recent years. They have gone from one per household to one in everyone’s back pocket.

And it has been a great success.

The network is getting congested

The problem is, more phones mean more people using the network…at a time when we are using more data than ever.

The network is getting congested.

And, you may be starting to notice.

It’s probably happened to you, as it has surely happened to me. You go online to quickly check something, only for that ‘quickly’ to end up taking five or 10 minutes.

The spinning loading wheel keeps spinning…but the website isn’t loading.

We’ve all experienced it, and it can be a problem.

The thing is, it is not only more phones on the network and more data usage. We are also increasing the number of things hooked up to the internet.

I’m talking about the Internet of Things (IoT), that is, things that connect to the internet. Like medical devices, vending machines, transport…you name it.

And, that number is only set to increase.

GSMA Intelligence estimates that the number of global IoT connections is set to triple to 25 billion by 2025.

That is, we will be seeing more objects around us connected to the internet.

To understand the impact of this, you only need to look at your home. How many devices and objects do you have connected to the internet?

I bet that when you start looking around, the number is much larger than what you think. It is not only computers and phones…it is printers, tablets, e-readers, smart TVs, smart home devices (think Alexa and Google Home), toasters, Playstations…you name it.

It is quite incredible when you think about it.

Your home network probably has a lot of devices on it, transmitting large amounts of data, and it is probably congesting your connection. In the same way, we are overloading our networks.

What’s the solution?

Want faster mobile connection speeds?

Well, you may need to start thinking about using your phone off peak hours.

According to a recent report from Opensignal, the time of the day you connect will make a huge difference on your speed, as you can see below. You can see some of the faster speeds at 4am, when most people are sleeping.


Source: Opensignal

As they noted:

Across 77 countries studied, 4G Download Speeds are between 31.2 Mbps and 5.8 Mbps faster at the best hour of day compared with the slowest hour of the dayCongestion on current 4G networks is holding back speeds highlighting the need for new 5G capacity to relieve pressure. Opensignal’s analysis uncovers that during the optimal time of day —usually when most users are asleep —networks are capable of enabling a significantly faster download experience than during awake hours.’

We are consuming more data than ever before, and we have many more devices connected to the internet.

Operators are already updating the network, but all that work won’t be enough. We will need to upgrade our infrastructure.

As shown by Mckinsey, countries are going to be running out of capacity in the near future and will need to build infrastructure between 2020 and 2025.

When network upgrades are no longer sufficient to support the increased traffic, operators will need to build new macro sites or small cells. That point in time will vary by location, but simulations show that most operators will need to embark on significant new build-out between 2020 and 2025 (Exhibit 2). That shift will be the primary driver behind network cost increases.

As you can see below, some countries will see in the near future a decrease in capacity:


Source: McKinsey

Investing in infrastructure to meet demand will be key.

Best,

Selva Freigedo,
Editor, Markets & Money


Selva Freigedo is an analyst with a background in financial economics. Born and raised in Argentina, she has also lived in Brazil, the US and Spain. She has seen economic troubles firsthand, from economic booms to collapses and the effects of hyperinflation, high unemployment, deposit freezes and debt default. Selva now writes from her vantage point here in Australia. She is lead Editor at the daily e-letter Markets & Money. And every week, she goes through each report and research note produced by our global network of trusted advisors to find, in her opinion, the best investment opportunities for you in Australia and overseas. She packages these opportunities for you in Global Investor.


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