16
Feb
2018

A Communications Revolution

I am constantly amazed at how far telecoms has progressed in the last few years.  We are currently working on 5G strategy for a client and I was looking over some of our past projects to get some insights, and I think that it is fair to say there is a revolution underway in communications.  Network technology has seen a remarkable transformation with costs plummeting and usage growing at an unbelievable rate.  Not since Moore’s law was framed, with the cost of computer memory and computing power falling 50% every 18 months, have costs dropped so quickly.  The telecoms industry has seen world-beating increases in productivity with huge cost efficiencies.  In the UK this has delivered a 91% reduction in the cost of data transmission as detailed in a recent paper by the Office for National Statistics and the Economic Statistics Centre of Excellence [1] [2].

Fixed and mobile price per GB in the UK  [1]

 

A Price Fall of Historic Proportion

To me, a 91% fall over just five years seems like a big deal.  I think it is good to put this in context of other major supply shifts in history.  Rapid innovation over the last few centuries had had an impact on the cost of books, coal, oil, air transport, memory chips, lighting and computer chips amongst others.  The communications revolution has seen costs fall at a much faster rate than most of these advances.  This is both a huge achievement and a cause for celebration.   I believe that communications networks are a critical part of national and international infrastructure and are an important foundation for our future economy.  I doubt that companies like Apple, Google, Facebook, Amazon, Tencent and Alibaba could have achieved their multi-billion dollar valuations without access to cheap data.

Major price falls in the past

 

Incredible Value for Consumers

These cost efficiencies led to substantial increases in data allowances.  In mobile, this has provided subscribers an increase in the availability of voice, video and data.  The difference between a £25 mobile package in 2008 and 2018 is striking, even after allowing for increases in web-page size and video resolution.

How a typical £25 monthly package has changed in the UK

 

The value created for by these cost efficiencies has been incredible.  Practically all of this value has been captured by consumers and over-the-top players such as Google and Facebook.  That the massive increase in data volumes has not resulted in an increase in total telecoms revenue remains a question for pricing strategies.  In fact, revenue is declining in many markets.

Growth in UK mobile data traffic (petabytes) [1]

 

A Technological Leap

All this progress has been built on a foundation of huge investment in new technology.  New receiver architectures allow better noise discrimination for higher-order modulation, squeezing more bits from weaker signals.  4G cellular networks have seen LTE use new modulation schemes and increased bandwidth to grow base-station capacity by an order of magnitude.  New optical bands and better signal processing allow fibre throughput approaching 100 terabits per second.  Antenna advances have brought MIMO schemes to bear allowing multiple data streams to be combined.  The coming years will see even more innovation with 5G, network function virtualisation, software defined networks, beamforming and even schemes like Orthogonal Angular Modulation.

 

The Future of the Digital Society

Access to cheap data is beginning to have a profound effect on our society just like printing, silicon chips, electric light and oil production have in the past.  We have already seen the effect of social media on our political discourse.  Whole industries like music distribution, news reporting and photography have been transformed by digital alternatives.

Cheap data enables widespread use of data analytics with the potential to transform manufacturing, transportation, energy efficiency, environmental management and human health.  The Internet of Things is even predicted to increase human lifespan.  Think of advances like driverless cars reducing accidents, fitness trackers, remote medicine, health data analytics and human health monitoring.  Today’s children are growing up with almost the entire body of human knowledge in their pockets, at least the part of it that’s not behind paywalls.  There is no telling what effect this will have in future generations.  This is only the beginning, we are at the cusp of a major change in our society and I think it a very exciting time to be working with these new technologies.

– Seán.

 

1 £31.71 in 2018 prices per BoE inflation calculator

2 Video resolution increased from 240p to 480p for viewing on a 4G mobile

3 Note that average webpage size increased from 312KB to 2.3MB [10] [11]

4 Average email size increased from 50KB to 75KB

 

References

[1]D. C. R. H. a. W. S. Mo Abdirahman, “A Comparison of Approaches to Deflating Telecoms Services Output,” Economic Statistics Centre of Excellence, 2017.
[2]C. Giles, “ONS’s crossed telecom wires raise questions over inflation figures,” The Financial Times, 18 January 2018.
[3]K. Flamm, “Moore’s Law and the Economics of Semiconductor Price Trends,” in PRODUCTIVITY AND CYCLICALITY IN SEMICONDUCTORS, TRENDS, IMPLICATIONS, AND QUESTIONS, Washington D.C., 2004.
[4]D. Hummels, “Transportation Costs and International Trade Over Time,” Purdue University, 2007 January 14. [Online]. Available: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.395.5379&rep=rep1&type=pdf. [Accessed 13 February 2018].
[5]B. Koerner, “william nordhaus: the historic cost of light,” Lucept, 4 November 2014. [Online]. Available: https://lucept.com/2014/11/04/william-nordhaus-the-historic-cost-of-light/. [Accessed 13 February 2018].
[6]U. Bardi, “Prices and Production over a complete Hubbert Cycle: the Case of the American Whale Fisheries in 19th Century,” Resilience, 24 November 2004. [Online]. Available: http://www.resilience.org/stories/2004-11-24/prices-and-production-over-complete-hubbert-cycle-case-american-whale-fisheries-1/. [Accessed 13 February 2018].
[7]A. Doward, “Agricultural labour productivity, food prices and sustainable development impacts and indicators,” Food Policy, vol. 39, pp. 40-50, 2012.
[8]E. Buringh, Medieval Manuscript Production in the Latin West: Explorations with a Global Database, Leiden: Brill, 2011, p. 429.
[9]G. C. a. D. Jacks, “Coal and the Industrial Revolution, 1700–1869,” European Review of Economic History, vol. 11, no. 1, pp. 39-72, 2007.
[10]“Average Web Page Breaks 1600K,” July 2014. [Online]. Available: http://www.websiteoptimization.com/speed/tweak/average-web-page/.
[11]K. Finley, “The Average Webpage Is Now the Size of the Original Doom,” Wired, 23 4 2016. [Online]. Available: https://www.wired.com/2016/04/average-webpage-now-size-original-doom/. [Accessed 4 12 2017].