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VNI Shift Driven by Smartphone Adoption and Offloading to Wi-Fi

For the fifth year, Cisco has released its updated Mobile Visual Networking Index Forecast.  This year, we’ve seen dramatic changes in consumer behavior as well as continued explosive growth in mobile data.

Global mobile traffic grew 70% in 2012 and traffic is forecast to rise 13 times between 2012 and 2017, a CAGR of 66%.  And in 2012, for the first time, video exceeded 50% of global mobile data.

The key take away from this year’s report, however, is the dramatic shift of mobile traffic offloaded to small cells, primarily Wi-Fi. The chart below (Figure 8 from the mobile VNI report) illustrates how mobile offload increases from 33 percent of total mobile traffic (cellular plus small cell/ Wi-Fi) in 2012, to 46 percent in 2017. This is significantly larger than we forecasted just a year ago when we estimated mobile offload would comprise 11% of total traffic in 2011, growing to 22% in 2016.

Fig8 - Mobile VNI 2013

Offloading is even more pronounced in the US where it will account for 66% of total mobile traffic in 2017.

While the underlying aggregate global mobile data traffic, cellular plus Wi-Fi, has been revised slightly from last year (2012 total traffic revised to 1.3 exabytes from 1.5 exabytes/month; 2016 traffic revised to 13.8 exabytes from 13.9 exabytes), the shift from cellular to Wi-Fi is occurring faster than we had anticipated. The table below compares the 2012 and 2013 forecasts.

VNI Forecast Comparison 7

So what’s happening in the mobile landscape that is driving these changes?

First, the mobile VNI report highlights an acceleration of smartphone uptake, and even faster adoption relative to the use of mobile connected laptops. While mobile connected laptops, mostly using dongles, helped drive early consumption of mobile data traffic, consumers are adopting smart phones and tablets faster than earlier forecasted. The shift from mobile connected laptops to smart phones and tablets lowers data consumption as the latter use less data per application (because of smaller screens size and lower processing speeds). Forecasting to 2017, smart phones and tablets are expected to overwhelm laptops and account for about 80% of connected devices in 2017 vs. only 14% for laptops (see graph below).

Fig3 - Mobile VNI 2013

The second trend is a dramatic uptake of offloading data traffic to small cells, primarily Wi-Fi. Offload is being driven by service providers (both mobile as well as fixed, such as cable) deploying and using Wi-Fi hot spots, as well as a by consumers using WiFi for bandwidth hungry applications such as high-resolution video.  Operators are offloading data connections to cope with limited and increasingly congested spectrum for macro cell networks while, at the same time, consumers are using WiFi offload for better indoor performance and to avoid exceeding their mobile data plans.

Working together, these two trends are driving dramatic change in the composition of total wireless data traffic (cellular plus Wi-Fi).

The full Mobile VNI 2013 report highlights this shift as well as other key trends driving growth in mobile IP traffic.

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Global Mobile VNI Reveals Shift in Consumers Usage of Mobile Devices

Cisco’s 2013 Global Mobile Visual Networking Index (VNI) once again shows that mobile networking traffic continues to rise.  Big picture:   by 2017, global mobile data traffic will reach unprecedented levels of 11.1 exabytes per month.  That’s the highest projection we’ve ever made in the Global Mobile VNI.  It’s the same story in the United States.  By 2017, mobile data traffic will reach new highs of 1.96 exabytes per month.  To put this in context, that’s the equivalent of 491 million DVDs each month or 5,410 million text messages each second.

As we dig deeper inside the numbers, we’re also seeing a couple of key trends that are a result of changes in how consumers are using their mobile devices.

First, the 2013 Global Mobile VNI has called out a significant shift globally away from consumers using laptops to access mobile networks. This shift is particularly important because data traffic from mobile-enabled laptops generates much more data traffic than smartphones or tablets.  While this shift is most pronounced in Western Europe, we’re seeing the same trends globally, including here in the United States.

Second, our 2013 study dramatically illustrates a more rapidly evolving shift toward accessing the Internet through Wi-Fi/Fixed networks, commonly known as “Wi-Fi offloading.”   By 2017, the study projects 46% of global mobile data traffic will be offloaded to Wi-Fi.  Compare that to last year, when we projected that by 2016, 22% of traffic would be offloaded.  The U.S. is well ahead of the global curve on this issue – by 2017, we project 66% of mobile data traffic will be offloaded to Wi-Fi.

Together, these two seemingly disconnected shifts in consumer behavior produce an interesting effect on mobile data growth rates. Globally, growth will be about 30% less than what we projected last year and about 25% less in North America. That’s the combined effect of consumers using fewer mobile-enabled laptops that generate 368X data relative to a basic cell phone, while increasingly taking advantage of Wi-Fi networks at home, in the office or on the go.  That’s an amazing shift in consumer behavior.

We learn something new with every new edition of the Global Mobile VNI, and this year, we learned how shifts in consumer behavior can have an impact on forecasted growth projections.  But the basic narrative, which the Global Mobile VNI has been telling us for these many years, remains unchanged.  Mobile data traffic keeps growing and growing and growing – and policymakers will have to take this into account as they consider ways to meet the ever-increasing demands on networks.

Shifting Focus in Trade Agreements: Boosting Supply Chain Efficiency to Grow Global GDP

Last week, the World Economic Forum (WEF), in collaboration with the World Bank and Bain & Company, issued the report, “Enabling Trade: Valuing Growth Opportunities.”  The report concluded that reducing supply chain barriers in two key areas – border administration and transportation and telecommunications infrastructure – could increase global GDP up to six times more than total tariff elimination.   The WEF paper calls on governments and the private sector to tackle these barriers through coordinated action, something which we here at Cisco strongly support.

Meanwhile, two other studies advocate similar approaches.

First, the World Trade Organization (WTO) and the Organization on Economic Cooperation and Development (OECD) have measured trade flow in relation to value added by a country in the production of a good or service that is exported.  This approach provides insight into the importance of services, the role of imports in production processes, the reality of economic interdependencies, and the role of emerging economies.

Second, a recent paper by Bernard Hoekman and Selina Jackson at the World Bank suggests that trade policy negotiations should be structured in ways that reflect the independencies of global supply chains. This approach would improve the commercial relevance and utility of trade liberalization agreements and is being explored in the Transpacific Partnership (TPP) negotiations. This is a groundbreaking approach to trade negotiations that better-reflects the imperatives of global supply chains.

Bottom line:  With these new analyses in hand, governments have an opportunity to adjust their thinking and realign their policy and funding priorities to capture the benefits of supply chain efficiency.  In doing so, they can accelerate global GDP growth around the world.

Breaking the Broadband Bottleneck: NTIA Spectrum Sharing Report

Last week, the National Telecommunications and Information Administration (NTIA) released a report to Congress concerning proposals to expand commercial spectrum sharing opportunities with government and other systems operating at 5 GHz.  This is a direct result of landmark Congressional action last year, when it directed the NTIA and the Federal Communications Commission (FCC) to examine whether government might be able to open nearly 200 MHz of additional spectrum to sharing by unlicensed devices.

The proposed spectrum footprint for unlicensed devices would permit operation over a contiguous block of spectrum, from 5150 MHz to 5925 MHz, providing significant new spectrum for Gigabit Wi-Fi, the next gen Wi-Fi technology capable of multi-gigabit throughput speeds.  Among its many benefits, Gigabit Wi-Fi would be a major leap forward, opening the door to real time HD video in hundreds of applications.

The NTIA report represents a tremendous step toward understanding the radio environment presented by government and other systems in the expansion bands, and is a positive contribution to the technical examination that needs to happen before devices can be allowed to operate in the expansion bands. We are looking forward to working with the NTIA and  participating in the upcoming FCC rulemaking next month to address the technical issues about how unlicensed equipment can share spectrum with incumbent users successfully.

We are very pleased that NTIA has reached this important milestone in the examination of whether additional spectrum can be made available for unlicensed devices at 5 GHz.  The new Gigabit Wi-Fi technologies that we are deploying at 5 GHz represent tremendous advancements in radio technology, and will accelerate the use of high definition video in a range of new applications. In hospitals, manufacturing, education and throughout the economy, Gigabit Wi-Fi promises to break new ground in delivering high quality video imaging. And it is just as important that Wi-Fi is becoming the off-load technology of choice – carrying an estimated 60% of all Internet traffic at the edge by 2016.

Wi-Fi is becoming the default way in which devices connect to the Internet and is now incorporated into everything from smart phones and tablets to cars and smart grid technologies.  Adding wireless capacity is a years-long effort.  If policymakers don’t act now, America faces a serious supply-demand imbalance in the near term. More spectrum must be made available for connectivity and innovation to continue supporting America’s job growth.

Incentive auctions: Preparing for the Avalanche of Data

It’s begun!  The US Federal Communications Commission (FCC) today launched an important new proceeding that, together with a lot of hard work and some policy leadership, will allocate much-needed radio spectrum for broadband.  Called “incentive auctions,” the concept is relatively simple – ask the broadcasters how much they want for their licenses, decide which broadcaster “bids” to accept, repackage that spectrum and auction it off to mobile carriers.

We at Cisco know first-hand the pressures our carrier customers face, as consumers continue to adopt more and more powerful mobile computing devices – phones, tablets, laptops and more.  Cisco’s Visual Networking Index has illuminated for policymakers the dimensions of the transition by consumers to data and video.  In the US, Cisco projects mobile data will increase 16 times from 2011 through 2016, to 1.7 exabytes per month, up from an estimated 0.2 exabytes per month in 2012.

All those packets use radio spectrum, and as we’ve seen this year from the acceleration of deal-making among holders of spectrum, there is a scramble on to find enough spectrum to ensure that consumer demand can be met.  Even with these deals, carriers must have more spectrum, and the next place where it will be found is the UHF television bands.

Incentive auctions represent the first time a regulator will create a market mechanism to allow broadcasters to exit their spectrum in exchange for compensation, permitting the FCC to repurpose that spectrum for mobile broadband.

Among the key issues to watch:

  • Will the FCC be able to keep this proceeding on track to culminate in auctions in 2014?  By then, spectrum needs will be critical.
  • How quickly will the FCC articulate clear and comprehensive rules that will allow broadcasters to make an informed judgment about whether to participate?
  • Has the FCC correctly implemented Congressional direction to permit unlicensed use in guardbands to the extent technically reasonable to present interference to adjacent bands? Have they proposed too much unlicensed? Not enough?
  • And one issue Congress will be watching closely. Does Congress think that the sum total of the FCC’s proposed rules mean that the FCC will realize enough money to fund the new public safety broadband network at $7 billion, in addition to deficit reduction?

The undertaking begun today is huge. The FCC, which invented spectrum auctions back in the 1990s, will now call “incentive auctions” to life.  They are the world’s experts on these topics and there will be a lot of detailed conversation in the next months. Cisco, carriers and consumers will be watching.