data networks

Mobile growth is about to be staggering

February 20, 2013: 8:40 AM ET

It's the biggest shift in technology since the advent of the Internet, and mobile is still only just beginning.

By Kevin Kelleher, contributor

121216081519-mobile-payments-gallery-horizontalFORTUNE -- "I remember traffic lights before smartphones," sighed a friend as we sat in traffic behind a car that remained still after the light had turned green. Sure enough, the driver's head was tilted downward as if lost in solemn prayer -- or, more likely, a texting/map/music app -- a small illustration of how mobile devices have changed everyday life.

What did we use to do to kill time in slow-moving checkout lines before we had Facebook (FB) or Twitter to distract us? How did we, before we had weather apps, check the forecast for breaks in the rain to walk the dog? How did we settle bar arguments on film and sports trivia without instant access to the web in our hands? How did all the urgent work tasks handled in text messages or networks like Yammer (MSFT) ever get accomplished?

Those days seem distant now, but for most it's only been a couple of years. And yet each quarter seems to bring a series of new, subtle changes to our lifestyles as mobile devices grow more powerful, LTE networks become speedier and apps themselves more creative in design. We socialize with phones or tablets as we watch TV programs. We watch our shelves of CDs gather dust as we tune into Spotify or Rdio. We discover how much work can, after all, be accomplished on a tablet instead of a laptop.

All of these changes are anecdotal, but the numbers on mobile-data growth back them up. A report from Swedish telecom giant Ericsson (ERIXF) this week showed that mobile traffic on data networks has been doubling for the past two years. In a more comprehensive report, Cisco (CSCO) said earlier this month that global traffic on data networks grew by 70% last year. Cisco offered a comparison that suggests how big mobile has become: The traffic on mobile data networks in 2012 -- 885 petabytes -- was nearly 12 times greater than total Internet traffic around the world in 2000, back when the web was taking off.

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And that's just the start. Wireless data traffic will continue to grow 66% a year for the next five years. That means, by 2017, monthly mobile data traffic will reach 11.2 exabytes per month, or 13 times what it is right now. Other data points in the report underscore how big the mobile world has become and how quickly it will grow to be much, much bigger. Last year, some 4.3 billion people around the world had mobile devices, a population that will grow by close to a billion in five years.

Annual growth in data traffic will be significantly higher on smartphones (81%) and even higher on tablets (113%). However, smartphones will continue to be the biggest eaters of mobile-network data: In 2012, they made up 16% of devices connected to wireless networks and 44% of total traffic. In 2017, they will be 27% of connected devices and consume 68% of data.

These numbers come with a few caveats. Cisco's annual report on mobile data may be widely referenced, but it is also the subject of some controversy (over whether it supports concerns of a looming spectrum crunch). And as hindsight regularly shows, growth projections in tech are at best an educated guess and are often foiled by unforeseen changes. What's more, Cisco and Ericsson's numbers only track traffic on wireless networks, whereas many people have learned to use their tablets and smartphones on WiFi networks whenever they can to stay within the lower tiers of costly wireless-data plans from AT&T (T) and Verizon (VZ).

Roughly half of mobile traffic in 2012 was offloaded onto fixed networks through WiFi and other connections, a percentage that is likely to increase as tiered data plans grow more expensive. Add in WiFi-only tablets and devices like Apple's (AAPL) iPod Touch, and the actual amount of data being pulled onto mobile devices is considerably higher than what these reports are indicating. Cisco estimates that mobile devices draw four times as much data from WiFi networks as they do from cellular networks.

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In terms of sheer mobile usage, however, the data underscores something we all know -- that the era of the mobile web is still in the early innings. What is much less certain is how that will continue to change our daily behaviors, although trends offer some hints.

Drawing on third-party research, Cisco estimated that the growth of 4G networks around the world will boost average connection speeds. The growth will be faster in Asia Pacific, where speed will increase by 57% a year to 3 Mbps in 2017. In North America, speeds will increase 41% a year but will on average be much faster, averaging 14 Mbps. That may pave the way for high-definition video to grow more commonplace on mobile networks. Cisco expects video, which accounted for half of mobile traffic last year, to make up two-thirds of it in five years. Video chats, GPS apps, handheld games, and other applications could add to the demand for mobile networks as well.

Of course, all of this depends on other factors too, such as the increased bandwidth of fixed networks, the expansion of broader and reliable WiFi networks and -- above all -- the tiered pricing of wireless-data plans. Costly wireless plans are already driving people to fixed WiFi networks. If that continues, the mobile web will continue to change our everyday lives, but leave the wireless carriers a peripheral part of the revolution.

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