Telecom Industry Update

An Expert's View about Telecommunications in Taiwan

Posted on: 11 Jul 2012

During the past decade, Taiwan’s telecom industry grew at an average annual rate of 20%, dramatically outpacing Taiwan’s average annual GDP growth of 3-6%. Taiwan’s fast growing telecom industry has and continues to be driven by a number of factors, namely, the rapid advances in wireless communication technologies/services, growth of the Internet (Information Superhighway) and convergence of fixed and mobile platforms. Moreover, the global industry’s continued convergence between telecom and IT as well as between telecom and media not only created smart mobile devices, but also the demand for further technological innovations and platform convergence. It is estimated 2012 smart phones sales will grow by 35% reaching approximately 685 million units. Also, 2012 tablet computers sales are estimated to jump annually by 60% to reach 65 million units. As a result, the growth in demand created from these key drivers have already put a strain on the network capacity for both wireless and fixed service providers in Taiwan.

With already one of the most developed telecommunications infrastructure in Asia, Taiwan’s telecom industry is now poised to enter its next phase of growth. The Taiwan Authorities, for example, has already launched the “Digital Convergence Development Program” scheduled to be implemented from 2010 to 2015. After Taiwan’s digitalization is completed in 2015, Taiwan’s broadcasting market is expected to generate products and services valued at US$4 billion. Driven by a number of industry and similar government-type policy catalysts, the development of Taiwan’s telecom industry will increasingly be driven by sharp growth in data consumption from smart mobile devices accessing the information superhighway. Smart mobile device Internet traffic growth rates already outstrip those for fixed line. Both public and private enterprises will continue to augment fixed line broadband infrastructure (copper to fiber), however the next telecom capex boom will come from Taiwan’s telecom service operators upgrading their network to 4G (Fourth Generation) wireless platforms. Although there has been no formal announcement by the National Communication Commission (NCC), service operators generally expect the NCC to adopt LTE FDD as the 4G standard in Taiwan.

Market Demand
Simply put, the demand from the various ecosystems related to smart mobile phones and tablets, broadband capacity and wireless chips (Qualcomm’s Snapdragon currently dominates market share) will continue to drive massive growth in Taiwan’s telecommunications industry. Taiwan’s fixed line carriers, wireless operators, and, even broadcasters, (terrestrial TV, radio, and CATV networks) are all upgrading their network infrastructure to meet anticipated demand. Among Taiwan’s five wireless service operators, incumbent Chunghwa Telecom represents the only integrated i.e. fixed/wireless player in the market largely responsible for installing the island’s broadband fixed line (DSL, fiber) capacity. Moreover, telecom equipment maker HTC is one of the top three smart mobile device makers in terms of global market share. In 2011, Taiwan had one of the world’s highest mobile phone penetration rates (124.3%); and an overall Internet household penetration rate of 77% or roughly over six million households. For the island’s fixed line broadband network, (Chunghwa Telecom), the overall penetration is 56.9% and represents approximately 13.2 million users. Demand for bandwidth whether cable or fixed line is continuing to grow quickly. In April 2012, for example, Chunghwa’s fiber based Internet 100Mbps (fastest advertised download data speed) broadband service reported a penetration rate of 28%, and is estimated to further reach 70% by the end of 2012.

In the past ten years, Taiwan’s economic growth annually ranged from 3% to 6%, while the annual growth rate of the telecom industry averaged more than 20%. Among the telecom industry’s total output value, wireless represents 75.5%. Taiwan’s Ministry of Economic Affairs (MOEA) has emphasized that for the next decade, Internet broadband demand may grow by 100 to 1,000 fold than current levels, highlighting the key importance of maintaining a world-class broadband telecom infrastructure and eco-system.

Since it now appears the NCC may be moving towards LTE FDD as the 4G standard in Taiwan, some of the wireless service operators will need to make a transition from 3G and Worldwide Interoperability for Microwave Access (WiMAX) based platforms. This is because earlier, in an effort to be ahead of the curve, the Taiwan Authorities initially chose WiMAX over Long Term Evolution (LTE) as a fourth generation (4G) wireless technology platform. In 2008, the Taiwan Authorities collaborated with Intel Co. and invested US$1.3 billion to develop and promote WiMAX wireless services with the hope of also eventually establishing a Taiwan-based supplier ecosystem. Unfortunately, the rate of WiMAX market adoption and network deployment fell short of expectations. Intel closed its Taiwan WiMAX program office two years later in June 2010 resulting in a postponement of widespread WiMAX adoption. Though the Taiwan Authorities have not officially abandoned WiMAX, Taiwan’s key industry players along with the rest of the world have already embraced LTE as one of the potential de-factor 4G standards. LTE 4G technology, for example, is already being widely adopted by the world’s major telecom equipment makers (Qualcomm, Motorola, Nokia, Alcatel- Lucent, etc.) and service provides (AT&T, Verizon, etc.)

4G Long Term Evolution (LTE)
Due to its high-data rate, low-latency and packed-optimized radio-access technology, LTE has become the mainstream mode of 4G telecommunication technology. Most global telecom carriers are now planning or preparing to optimize their networks with LTE. At present, there are two significant iterations of LTE: LTE FDD (Frequency Division Duplexing) and LTE TDD (Time Division Duplexing). LTE FDD is the successor to Wide Band Code Division Multiple Access (WCDMA), while LTE TDD is the successor to mainland China’s Time Division – Synchronous Code Division Multiple Access (TD-SCDMA). It should also be noted that there are recent demonstrations verifying LTE FDD/TDD convergence and roaming ability, a major milestone for telecom equipment makers.

According to the latest statistics released by the Global Mobile Suppliers Association (GSA), there are 301 global mobile carriers which plan to invest in and deploy LTE infrastructure. Moreover, by the end of first quarter of this year, there were already 63 manufacturers providing 347 units of LTE devices globally, most of which were smart phones and tablets.

In terms of Taiwan’s 4G timeline, the NCC plans to release 8 spectrum blocks from July 2013 to June 2014. Each spectrum block is sufficient for one license i.e. eight licenses, however the NCC is the ultimate decision maker on the final number of licenses.
• 700 MHz: 3 blocks
• 900 MHz: 2 blocks and
• 1800 MHz: 3 blocks

Once spectrum is allocated, each wireless service provider will commence planning, procurement, development and construction. Each operator, based on their own anticipated networks’ demand configuration, is free to allocate these spectrum blocks for existing 2G/3G or future LTE use. It is expected the licensing of the 700 MHz block will be released earlier (time not set yet) than the license of the 900/1800 MHz blocks, which are slated for release in 2017.

Beyond 4G (B4G)
Statistics indicate that Internet traffic doubles every eighteen months. Currently, the MOEA conservatively forecasts Internet traffic will grow by a hundred fold by 2020. Growth of this nature would quickly outstrip the currently planned 4G capabilities and capacities. There is even a concern that migration from 3G to 4G (and especially later to B4G) during 2014-16 could overload network infrastructure whereby spectrum demand exceeds spectrum efficiency.

In order to help avoid an uninterrupted migration beyond 2014-16, Taiwan’s MOEA has already set up the following six B4G technology development working category guidelines for Taiwan stakeholders:

1.B4G Radio Access Technology
- Interference coordination - Spectrum sensing - Cooperative Multi -Input Multi- Output (MIMO) - Spectrum Management

2. Small cell Radio Access Network (RAN) and Gateway (GW)
- Self-Organizing Network (SON) - C-RAN for increasing Network Density - Cognitive Radio - White Space for Increasing Spectrum - HetNet for Increasing Network Density

3. Inter-Radio Access Technology (RAT) Aggregation
- Heterogeneous GW to combine multi-RAT

4. Virtual cross-service platform in cloud
- Trigger IT & TELECOM convergence

5. Direct to Direct (D2D) Communications
-D2D communications for Offloading

6. Machine-Type Communication (MTC), Machine to Machine (M2M)
- Sensing Access for vertical application devices - Congestion control & Group management

Taiwan stakeholders in the telecom industry are actively preparing for these issues and will likely require international expertise to effectively implement a smooth migration path.

Electronic Commerce
Taiwan has one of the most sophisticated telecommunications infrastructures in Asia and one of the world’s highest penetration rates for mobile phones at 124.3%. Over 95% of Taiwan's companies have their own corporate network infrastructure, and 6.2 million (77%) households have access to the Internet. According to the Taiwan Institute for Information Industry, Taiwan’s e-commerce market value is expected to increase by
20% from $11.2 billion in 2011 to $13.5 billion in 2012.

In November 2001, the Electronic Signature Law was promulgated, which adopts the principles of the U.N. Commission on International Trade Law’s Model Law on Electronic Commerce and recognizes the legal validity of electronic contracts, records, and signatures. To further address the issue of identity theft, Taiwan passed the Computer-Processed Personal Data Protection Act in 2005.

Taiwan has now joined the United States’ efforts through APEC to advocate for a permanent moratorium on taxation of Internet transactions. The Ministry of Finance, however, still imposes business taxes on Internet vendors who sell products for profit and have monthly sales over NT$60,000 (approximately US$1,850).

Market Data
There are five major telecom carriers in Taiwan: Chunghwa Telecom, Taiwan Mobile, Far EasTone, Vibo and Asia Pacific Telecom. Among the mobile phone manufacturers, HTC plays a dominant role in the domestic market, similar to that of Apple in the U.S.
In December 2010, the Taiwan Authorities extended all 2G licenses, originally slated to expire in 2012, until 2017. The beneficiaries were those service providers who were earlier granted licenses in the mid-1990s, namely Chunghwa Telecom, Taiwan Mobile and Far EasTone.

Read the full market research report

Posted: 11 July 2012

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