The global telecommunications market is on a high-growth path. This trend is only likely to continue as data services, which are the key growth drivers in the sector, are expected to see increased demand in the coming years. According to the Ericsson Mobility Report, June 2016, monthly data traffic per smartphone increased from 1 GB per month in 2014 to 1.4 GB per month in 2015. This is likely to go up to 8.9 GB per month by 2021. To cater to the rise in demand for connectivity and data services, operators are increasingly deploying efficient technologies. As a result, the sector is witnessing the evolution of telecommunication networks from first generation to long term evolution Advanced (LTE-A).
With each new technology deployed by the telecom industry, testing and measurement (T&M) players innovate their offerings to meet the changing needs of customers. Each new development in technology poses new measurement challenges including the need to develop a new kind of test instrument. T&M techniques are the cornerstones of all technologies including communications. Investment in T&M is a critical component of all strategies adopted by players in the telecommunication industry including communication service providers, network operators, mobile device manufacturers, equipment manufacturers, system integrators and enterprises. T&M equipment enables network operators to test and deploy new services, bring down operating costs and deliver high quality service at all stages of the network life cycle.
Global growth story
The communication T&M equipment market has evolved parallely with the telecom industry. Wireless being the dominant technology, the wireless tester segment is currently the largest revenue generating segment for all T&M players. Demand for faster and reliable communication networks coupled with increasing smartphone proliferation has revolutionised the wireless communication sector. Further, traffic carried by wireless networks has rapidly changed from voice to integrated voice, video and data, thus increasing the need for solutions that can test the performance and capacity of new-age networks. Further, the demand for communication T&M solutions is on the rise on account of growing bandwidth demand and introduction of next-generation cellular and wireless technologies. The T&M market has also gained momentum due to increased research and development investment in the telecom sector coupled with growth in the mobile phone market.
According to Markets and Markets, a Hyderabad-based research firm, the global T&M market is expected to grow at a compound annual growth rate (CAGR) of 9.3 per cent from $4.28 billion in 2015 to $6.69 billion in 2020. The North America region, which is one of the most mature telecom markets in terms of technology, is expected to account for the largest share in the global communication T&M market. Meanwhile, T&M markets in the Asia-Pacific (APAC) region, Europe, the Middle East, Africa and Latin America, which are currently in the growth stage, hold immense potential for future expansion. Another research firm, Technavio, predicts that the global T&M market is expected to grow at a CAGR of 5 per cent during 2016-20, mainly contributed by the APAC region. Ericsson’s figures show that the APAC region (including China and India) has 1.42 billion mobile subscriptions as of March 2016, the highest globally. Moreover, the region is likely to retain its leadership position in the smartphone market for the next few years. The rapid roll-out of 4G networks in India, the fastest growing smartphone market in the world, is likely to further increase the growth potential of the T&M market in the APAC region.
Emerging growth drivers
The T&M market will continue to create ample opportunities for all market players as the need for augmenting network performance arises. The telecom industry is constantly testing new and more efficient network technologies to cater to the traffic being generated by various types of applications including voice, video and data.
A key emerging area for T&M growth is 5G network testing by various operators worldwide. While the world is yet to see a commercial 5G launch, a number of operators in countries such as Japan, South Korea and the US have already started field-testing the technology. Ericsson says that the number of 5G subscriptions globally is expected to reach 150 million by 2021. According to the Global Mobile Suppliers Association, there will be more than 270 5G networks by 2025. While the standards that will define 5G are yet to be established, 5G network testing is expected to open up immense opportunities for T&M equipment vendors. Currently, many researchers are focused on developing new antenna technologies for massive multiple-input multiple-output systems for advancing 5G technology. Therefore, high performance and flexible T&M solutions will be required before the technology is rolled out commercially.
Various other technologies are also being developed to deliver speeds of over 100G. Wireless technologies such as LTE-A and wired communication technologies such as Ethernet and fibre optics, providing up to 100 Gbps speed, are likely to drive growth in the T&M market going forward.
Meanwhile, the internet of things (IoT) will contribute significantly towards the T&M market. According to IT research firm IDC, the IoT market size will grow from $655 billion in 2014 to $1.7 trillion by 2020, with consumer IoT devices exceeding the total number of smartphones and tablets. T&M equipment vendors will have to innovate and upgrade their offerings in order to cater to this emerging demand segment. Industry experts are of the view that vendors will have to shift to software-upgradeable instruments to meet the changing customer requirements. Moreover, they will have to offer predictive analytics, big data analytics and virtualised testing, and adopt new business models such as offering software-as-a service to stay relevant in the market.
Challenges and future outlook
As operators deploy LTE and LTE-A networks worldwide, a key challenge that T&M equipment vendors are facing is the lack of spectrum harmonisation for 4G services and the absence of standards for 5G networks. Globally, operators are using different spectrum bands for these networks. For instance, companies in the US use spectrum in the 70 MHz and 1800 MHz bands to provide 4G services while those in Europe utilise the 2.6 GHz band for the same. Meanwhile, operators in India use the 2.3 GHz band and those in Japan use the 2.1 GHz band. These bands conform to and operate on different standards and configurations. This requires equipment vendors to manufacture a wide range of testing instruments, each specific to different standards.
These challenges notwithstanding, the global T&M equipment industry is expected to expand on the back of increased roll-out of faster and reliable communication technologies and devices.