In today’s connected world, people are never too far from the vast resources of the internet but the ways and means of individual connectivity are still vastly dominated by fixed wired connections. The use of mobile devices however (phones and tablets), are the fastest growing category and with hyper growth forecasts, it won’t be long until they are a more meaningful way of how people access the world-wide web.
Cisco Systems has data which breaks up internet connectivity into 3 mediums, fixed internet, managed internet protocol (IP), and mobile data. Each mode of connectivity is quite different, however the growth rates associated with each category will lead to drastic leadership change for how people get information.
Fixed internet refers to internet connections over wired lines which is still the most popular way to get on-line. According to Cisco Systems, fixed internet connectivity comprised 33,049 petabytes per month or 76% of the data transfer on the internet in 2012 (a petabyte for reference is a quadrillion bytes). Another internet category according to Cisco is managed IP, which refers to more sophisticated bundled voice, data, and video packaging. These networks are deployed at the enterprise or business level and are more robust than fixed line communications. According to Cisco, this medium accounted for over 9,000 petabytes per month in 2012, or 21% of data transfer on the internet. Last but not least and becoming increasingly more important is mobile internet access, which generated just over 1,250 petabytes of data transfer per month in 2012. This was a quite small contribution to the overall pie because people only use internet on their phone sporadically. Mobile data transfer thus comprised just 3% of internet traffic in 2012 according to Cisco.
Despite the predominance of fixed internet as a way to pull data from the internet and the also larger presence of managed IP networks, mobile data will quickly become a more relevant medium.
Forecasts for data transferred via mobile devices currently sit at a 71% compound annual growth rate going forward into 2016. This compares to 25% growth expected for fixed internet and just an 18% expected rate for managed IP. At a 71% compound annual growth rate, mobile data traffic effectively doubles every year1. This will force network providers including Verizon (VZ) and AT&T (T) to continue to develop the fastest and most robust mobile networks to keep up with traffic growth and also for handset makers Apple (AAPL) and Nokia (NOK) to build more advanced internet capabilities into their phones. In the long-term, a strong growth rate for mobile usage is likely to benefit large-cap mobile device companies and cellular carriers.
- Estimate based on the rule of 72, an economic principle which states that dividing your long-term growth rate by 72 shall establish roughly when the base number will double ↩