Technology, Media & Telecommunications

UK Predictions 2017

The predictions

Welcome to the 16th edition of Deloitte's Technology, Media & Telecommunications (TMT) Predictions. Knowing what will come next in tech, media and telco trends has become a key competitive differentiator and can give your business a leading edge. Our endeavour is to provide a considered point of view on key industry trends. Join the conversation using #tmtpredictions and #DeloittePredicts.

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Big steps towards the launch of 5G will take place in 2017. By the end of the year, Deloitte predicts that over 200 carriers will be offering enhanced 4G networks that incorporate many of the core 5G network components. A few dozen of the 800 operators around the world are likely to be actively involved in trials, and in some cases the commercial deployment of services marketed as 5G.

5G’s enhanced performance will be pre-released in stages via two iterations of the 4G network, namely LTE-Advanced and LTE-Advanced Pro. Both standards contain components of 5G networks and as such should provide an indication of what 5G may offer, for users, carriers and enterprises: significantly higher speeds, lower latency and support for low-power low-bitrate Internet of Things (IoT) devices and sensors.

By end-2017, we would expect tens of millions of users to be able to access maximum speeds in the hundreds of megabits per second. In the fullness of time, 5G should offer multi-gigabit speeds.

Much work will be required to map evolving network capabilities (in terms of performance, reach and price) with useful applications. Cross-functional teams, comprising engineering, customer experience, marketing and others should be closely aligned, and should also work closely with a wide range of hardware, software and other vendors whose offerings would be enhanced by 5G.

Deploying faster networks is costly – estimated at around £50 billion ($63.1 billion) for 5G roll-out in the EU alone. But enhanced connectivity is likely to nurture and disrupt a significant part of global economic output for decades to come. The availability of higher speeds will likely reveal uses we cannot currently imagine with multiple ‘killer apps’. In the US, 4G is estimated to have accounted for some £120 billion ($150 billion) in economic growth and over 750,000 jobs.

The fifth generation of cellular networks will be the most sophisticated ever. It is founded on multiple technological breakthroughs that are likely impress. The public has already been fascinated by innovations such as virtual reality, smart watches and 3D printers – arguably, the personal, enterprise and societal benefits from faster connectivity will be even more significant.

There will soon be over one billion devices equipped with fingerprint readers in use worldwide. And with each sensor being used around 30 times a day, that means over 10 trillion aggregate presses globally in 2017 – great news for everyone who struggles to remember their passwords.

Some 90 percent of devices with fingerprint readers will be smartphones and tablets; by the end of the decade, fingerprint scanning sensors will be as ubiquitous as front-facing smartphone cameras.

The success of fingerprint reading is paving the way for multiple types of biometric inputs, including face recognition, voice pattern and iris scan, but in 2017, the humble finger will be responsible for 40% of identification and authentication events.

The smartphone fingerprint reader’s popularity is down to its ability to provide a rapid, discreet and secure way of unlocking phones and authenticating transactions – phones being the device that most people have with them throughout the day.

Deloitte predicts that the mainstream adoption of smartphone biometrics will act as a catalyst for the deployment of biometric sensors in other environments. For example, finger vein and palm vein scanners can be integrated into ATMs, or incorporated into the authorisation process for high-value online money transfers. Schools could use a vein scanner as a means of authenticating access to the building, and for registering when a pupil has left. The list goes on.

A growing number of countries may also consider using biometrics in national identity schemes. India’s scheme, which collects facial, fingerprint and iris data, surpassed one billion registrants in 2016.

The use of biometrics is nothing new, but its large-scale adoption in modern technology has just started to take off. The applications throughout society are almost limitless, and are likely to become increasingly sophisticated in 2017 and beyond. Now’s the time for companies to exploit this growing base of fingerprint readers; the challenge is to determine which additional applications might benefit from using them.

The number of people who will die in motor vehicle collisions in 2017 is forecast at over 1.25 million, making it the ninth leading cause of death worldwide. It is the leading killer for 15-29-year-olds.

A head-on collision between two cars travelling at 70mph has nearly the same explosive force as a hand grenade, and the consequences for the passengers can be severe. The 1950s saw the introduction of crumple zones and seat belts, and in the 70s came airbags and anti-lock braking systems. The newest technology to emerge is automatic emergency braking, or AEB, and it is likely to be a large contributor to road safety.

The average driver takes a couple of seconds to see an obstruction, recognise it as a problem, and react to it by hitting the brakes. If travelling at 70mph, this would mean the vehicle could travel a further 200 feet before the brakes are applied. A vehicle fitted with AEB technology can react to an obstruction in a millisecond or two. The time saved could allow the vehicle to decelerate to 30mph – and the force of a head-on collision with both vehicles travelling at 30mph is 80 percent lower than one at 70mph. As long as one-car in a two-vehicle collision is slowing, the reduction in impact helps the passengers in both vehicles. As AEB technology becomes more widely adopted, there could be a significant increase in lives saved for both road users and pedestrians alike.

AEB is a critical first step towards the fully autonomous vehicle, and the technology sector stands to benefit as it is more widely deployed. The automotive section of the semiconductor market is already estimated to be worth £23 billion ($29 billion), and is forecast to grow significantly faster than the overall chip market for the next few years.

The death of US network TV has been predicted since the 1970s, but the data just doesn’t support this view. Although traditional TV advertising is not growing as rapidly as it used to, it remains an important medium. American adults watch some 1,800 hours of TV a year.

Deloitte predicts US TV advertising revenue in 2017 will be in line with 2016. While that doesn’t sound particularly exciting, for an industry widely thought to be in sharp decline, it’ll do nicely.

US TV ad revenues were around £58 billion ($72 billion) last year – up 3.5 percent on 2015, buoyed by the Olympic Games, the US presidential election and a strong ‘scatter’ market; a scatter market being when advertising is sold close to the broadcast date, rather than at the ‘upfront’ meetings that preview planned programming.

To some degree, TV advertising is holding up well in the US because it’s being marketed more aggressively, but it’s also recapturing some of the dollars that have been moving to digital in recent years. So although digital advertising revenues in 2017 will probably be slightly larger than those for TV, TV ad spending is still growing in real terms.

Traditional TV has a broad audience compared to digital. Advertisers do not, therefore, need to spend too much time pondering the demise of their TV budgets. Instead, they should consider which products are best advertised on TV and which on digital. In this omnichannel world, they need to make all their different ad channels work together, rather than trying to pick a single, winner-take-all medium.

Deloitte predicts that more than a fifth of smartphones sold in 2017 (that’s over 300 million units) will have on-board neural network machine-learning capability. This essentially means that our phones will be designed to mimic aspects of the human brain’s structure and function. This functionality will enhance applications including indoor navigation, image classification, augmented reality, speech recognition and language translation – even where there is little or no cellular or wi-fi connectivity.

Recognising, for example, that an object is a face – and whose face it is – in a world of varying light sources, hats and glasses, is remarkably challenging for programmers. It’s a challenge that’s better dealt with by machine learning – the process by which computers get better at performing tasks through exposure to data, rather than through explicit programming.

Although some smartphones in 2016 were capable of extremely limited machine-learning tasks such as recognising a fingerprint, more powerful cognitive tasks only worked when connected to large data centres far away. Software and hardware developments mean that neural networks can now be provided at prices, sizes and power consumption that are compatible with smartphones.

In the near term, most of the on-board machine-learning capacity will be on consumer devices such as mobile phones and tablets. But over time, the applications for Internet of Things devices may be more transformative. Autonomous vehicles will need to have machine-learning capacity; drones with on-board machine learning are on the market today; and it is imaginable that every device from smart tractors and jet engines to horizontal oil drills will be able to benefit from on-board processing.

As the number of vulnerable Internet of Things (IoT) devices grows, the availability of ever higher bandwidth speeds increases, and the presence of malware methodologies online becomes more prevalent, so too does the threat of Distributed Denial-of-Service (DDoS) attacks. A DDoS attack uses malware to bombard web servers or connected devices with traffic until they collapse under the strain. That means an e-commerce site may not be able to sell, a government site may not be able to process tax returns, or a news site may not be able to show news stories.

Deloitte predicts there will be some 10 million attacks this year, with an average size of between 1.25 and 1.5 gigabits per second. Left unchecked, that’s enough to take most organisations offline. More worryingly, we also anticipate at least one terabit attack per month on average.

DDoS attacks are not new, but over the past few years their scale has become steadily larger. Due to the abundance of insecure IoT devices (devices connected to the internet – such as digital video recorders, cameras and routers) and the fact that attacks have become simpler to execute, the threat has never been more acute.

In 2017, any organisation that depends on the web will need to develop safeguards to mitigate against such attacks. So that means retailers with a high share of online revenues; online video games companies; streaming video services; online business and service delivery companies; social media sites; governments... pretty much everyone.

By 2022, Deloitte predicts that at least a quarter of all uses of precision digital navigation will include an indoor element or be for an entirely indoor journey. This compares to less than five percent of all uses in 2017. Demand will be stimulated by sustained improvements in the accuracy of indoor navigation over the medium term, permitted by an array of positioning data, analytical tools and high-quality indoor maps.

Satellite-based digital navigation, accompanied by the digitization of street maps, has revolutionized how people and objects are located and guided. The fundamental blind spot of satellite-based digital navigation is that its signals, sent from 24,000 kilometres up, are often too weak to penetrate solid roofs by the time they reach the ground. Yet people spend over 90 percent of their time indoors; billions of objects, from vehicles to tools to components, all of which may need to be located, are housed somewhere under a roof.

As of now, indoor location works in two ways: via Wi-Fi routers and cellular base stations. Over the medium term, beacons, LED lighting, ultra-wide broadband and magnetic fields are all potential additional sources of positioning data to add to the mix.

An improvement in indoor positioning accuracy requires a commensurate increase in indoor mapping for its benefits to be exploited fully. There are likely to be multiple players that see significant benefit in generating indoor maps. Site owners are likely to regard indoor maps as a differentiator. A shopping mall could use indoor maps to enable people to find stores, departments and even aisles faster.

Indoor navigation’s potential is significant, and could be transformative. Private and government organisations should therefore be alert to the potential benefits from the availability of precise location data. And mobile operating system vendors should consider that consumers may choose their next smartphone partly based on the quality of indoor navigation available, and the apps available in each ecosystem that can exploit positional data.

By the end of 2018, Deloitte predicts that spending on IT-as-a-Service for data centers, software and services is likely to top £440 billion ($547 billion) worldwide. This would represent a rise of over half from a forecast 2016 level of £290 billion ($361 billion). IT-as-a-Service is a subset of flexible consumption models which are provision and payment schemes in which the customer pays according to the resources used.

The growth in IT-as-a-Service spending is coming across the board, and it’s coming fast. It’s an appealing model for several reasons – companies avoid significant capital expenditures and have a predictable expense based on actual use that’s easily scaled up or down.

Both the traditional ownership IT model and the flexible consumption model will coexist for years, but there’s an ongoing shift towards the latter. At current rates of growth, IT-as-a-Service will likely represent more than half of IT spending by 2021 or 2022.

Buyers should contemplate the available options for this new way of procuring data centres, software and services, and compare flexible in relation to traditional purchase programmes to determine if the new way works out better for them.

Vendors should focus continually on crafting solutions for enterprises in different industries and sectors. To accelerate the adoption rate in larger enterprises, vendors should invest in deeper understanding of unique enterprise requirements and continuing service needs.

Resellers, distributors and integrators could upgrade their capabilities to price, quote, entitle, fulfil and report usage accurately through the channel. And they will likely need to develop new services to drive customer engagement, adoption and usage in order to retain the customer in a recurring revenue model.

The finance function will need to evolve too. As IT-as-a-Service accounts for more than a third of IT spending by 2018, companies will have to create new approaches to predicting and recording expenditures on IT.

In 2017, Deloitte predicts fewer than 165 million tablet computers will be sold worldwide – down by 10 percent on 2016. That’s not a steep decline, but it does suggest that we have passed the peak demand for tablets, which were first recorded as a category as recently as 2010.

There are numerous reasons why sales of these devices are weak. Since the arrival of tablets, smartphones have become bigger and laptops lighter, making them both viable alternatives. Although, in the UK, tablets are popular with children under 10, they are less so when they become teenagers. But the biggest challenge of all is that there is no compelling use case for these devices – across a range of online activities, tablets have their fans, but there is no single activity where they are the preferred device.

This does not mean that no one likes using tablets, but there are three consumer devices that are head and shoulders above them: TVs, computers and smartphones.

In the UK, around 95 percent of homes have a TV set, and it’s watched for about 3 hours a day on average. Another 95 percent of people have access to a desktop or laptop, and daily usage is over 2 hours. Just over 80 percent have access to a smartphone, and non-voice usage is an hour and three-quarters a day. In contrast, tablet access is only 63 percent, and daily use is 49 minutes.

The data in other developed countries shows similar levels of penetration and usage for tablets compared to the other ‘big three’ consumer devices. Tablets are simply not at the same level as the big three, and the trends suggest they will not be joining them.

Deloitte predicts that vinyl will continue its remarkable resurgence in 2017, with sales of discs, turntables and accessories approaching $1 billion (£800 million) globally for the first time since the turn of the century.

But, while vinyl’s renaissance may appear miraculous for a format that seemed consigned to oblivion just a decade ago, the reality is that vinyl buyers are likely to remain niche. In 2017, an estimated 20 million individuals globally may purchase a small number of records at a high unit price relative to most other music formats. Implicitly, billions of music fans will not purchase vinyl this year, instead consuming music predominantly via a blend of radio, TV, CD, digital streaming and downloads.

The motivation for purchasing vinyl contrasts with the situation in the late 1970s and early 1980s when the record was the predominant way of listening to pre-recorded music. Buyers are now likely to have a range of reasons for choosing vinyl, of which listening to music might only be a minor factor. For many buyers, the record has become a collectible, a memento, a proudly physical format and an expression of individuality in an increasingly digital world.

That said, vinyl is unlikely ever to be a major growth or profit engine for the music industry. Music’s future is all about digital, and this is where the brunt of the focus should be. The vinyl format will remain important, and as with bands that first started touring in the 70s and 80s, their outputs will continue to be enjoyed for years to come, albeit by an ever-diminishing minority of fans.


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