Cisco released their Annual Internet Report, and it’s the typical mixture of interesting stuff, insight, and blatant hype. With Cisco, though, even their hype is interesting, so I want to look at the report and sort out the angles, hopefully adding some analysis that will clarify just what pieces of the report fit in which of my categories.
At the high level, the report says that by 2023 there will be 5.6 billion Internet users worldwide, representing two-thirds of the world’s population. There will be 3.6 devices per every human on earth, and the average broadband speed will be 110 Mbps. The report is about the Internet, of course, but there’s a very strong mobile bias to it. That’s fair given that mobile devices, smartphones in particular, are the big instrument of change in the Internet overall. Consumers drive the Internet, and connected-home devices likely drive consumer device growth.
This raises an important point, which is that Cisco (as it has regularly) conflates “Internet” and “connected”. Their definition of something like IoT reflects any device that can be accessed using an Internet connection, even indirectly. They also use the term “connected car” to mean a car with some sort of Internet connection, not to mean autonomous operations.
The next point, which I think is one of the most important, is that Cisco makes the following comment about video: “An Internet-enabled HD television that draws couple – three hours of content per day from the Internet would generate as much Internet traffic as an entire household today, on an average. Video effect of the devices on traffic is more pronounced because of the introduction of Ultra-High-Definition (UHD), or 4K, video streaming.” There are (forgive the pedantic phrasing) profound implications in this quote…several, in fact.
The first one is that all Internet-enabled TVs don’t necessarily draw content from the Internet. Most have both linear and Internet connections, and so there is a combination of streaming and viewing off-Internet. However, the signs that even cable companies are abandoning linear TV for streaming are already highly visible. Revenue from linear TV is falling, in fact. The most significant transformation in Internet traffic is not the 4K or 8K video transformation of sets (what the set can do is independent of what the streaming video offers in terms of resolution), it’s the shift between linear TV and streaming TV. From zero traffic to potentially significant traffic, since linear TV doesn’t require an Internet connection at all.
The second point, related to the first, is that mobility is a big reason why the first implication matters. People have learned to stream because they’ve learned to consume content as needed. You don’t sit down in front of a TV to watch “what’s on” these days, you pick up whatever Internet device is convenient and pick what suits you. That mobile habit has crossed over into living rooms. We may, perhaps, see the growth in video devices that Cisco’s report predicts, but we almost certainly won’t see the bandwidth of all that stored content rise to fit the bigger screens. New programming may be available in 4K/8K form, but not much of the old, and so the impact of higher-definition TV is lower. In any case, mobile devices won’t benefit from 4K/8K.
Let’s move on now to what Cisco calls “M2M”, meaning machine-to-machine or IoT-like stuff. They say “Connected home applications, such as home automation, home security and video surveillance, connected white goods, and tracking applications, will represent 48 percent, or nearly half, of the total M2M connections by 2023, showing the pervasiveness of M2M in our lives.” Yes, it’s true that M2M connections (in the loose Cisco sense) will dominate the future. Home automation, surveillance…you get it. However, this misses two key points.
First point: most home automation devices don’t send anything or receive anything for long periods of time. If your home controller switches the lights on at nightfall and off when you go to bed, those events aren’t cropping up every couple seconds. Almost all smart-home applications do next to nothing most of the time. Thus, the fact that they’re connected isn’t highly relevant to the Internet.
Second point: message sizes on smart-home applications are typically small. Home security devices like video doorbells are an exception; they send compressed video files. But remember that everyone in your neighborhood isn’t likely standing on your doorstep every minute to activate your doorbell. The things that might happen more often involve very short messages.
But IoT (or M2M, as Cisco calls it) is still important, just not so much for traffic. The difference between “Internet” in a traditional emails-and-searching sense, and Internet as a means of controlling your home, is profound. You need a lot better availability and QoS for M2M because it matters more. You can’t drop events, you can’t overload and delay things significantly (before you drop them, in many cases!). Everyone hits send a couple times and things little of it. When the lights don’t come on or the heat won’t work, we react differently.
The next point is the explosion in mobile devices. By 2023, Cisco says there will be 8.7 billion, which is well beyond the number of people there are online at that point. Unless Cisco thinks people will be juggling a couple phones and tablets at the same time, the number of different devices is less important than the number of total devices in use at a given moment, which of course Cisco doesn’t estimate. Maybe yuppies juggle many smartphones with a video stream on each, but not regular people.
This isn’t to say that the number of devices isn’t important for reasons other than a yuppie arms race. Multiple Internet-ready devices says that we’re getting more and more dependent on the Internet, and our behavior is so altered by that dependency that we optimize our usage by customizing the devices we select at a given time. We don’t need 3.6 devices at once, but we need 3.6 (on the average, obviously) to choose from. And our devices have to be Internet devices; Cisco says non-smartphone market share will fall from 27% in 2018 to 11% in 2023, and I believe it.
Now for 5G, a topic so rife with exaggeration it’s hard to see how Cisco could even move the ball. Fortunately, they rise to the occasion, but with an unusually conservative start. They say that 4G will grow from 3.7 billion to 6 billion connections by 2023, which is likely true. By 2023, there will be 11% “devices and connections with 5G capability.” Which means what? Surely, new phones without 5G are going to be rare beyond 2020, and surely most operators in major markets will be deploying new mobile capacity in 5G form, but remember we have 6 billion mobile 4G connections in 2023, out of 6.7 billion by Cisco’s estimates. That means almost 90% of mobile connections are still 4G in 2023.
But never mind, it’s not the phones that matter. Cisco says “5G connectivity is emerging from nascency to a strong contender for mobile connectivity driven by mobile IoT growth.” I sure admire the use of “nascency”, a word even I never considered using, but what exactly is that mobile IoT growth? Here, Cisco merges the IoT and M2M terms and concepts. Many (perhaps most) of us have some M2M in our homes, but how many have 5G connections to it? WiFi absolutely dominates in-home Internet-type connectivity, and most sensors in the home are still wired or use specialty protocols rather than Internet. The good news is that even Cisco says that WiFi will “gain momentum”.
WiFi also helps buff up the broadband speed numbers, I think. Cisco’s forecast for a global 20% compound increase in broadband speed, which roughly doubles it by 2023, is pretty hard to reconcile with data on broadband speed from various governments, both in terms of current speed and in terms of rate of growth. I’ve blogged a lot about the fundamental techno-economics of broadband (demand density and access efficiency), and it’s darn difficult to see how those Cisco numbers could work…unless you made the assumption that the WiFi speed to devices was the thing being measured. The thing is, if you have 100 Mbps WiFi in the home, connected to 12 Mbps Internet, you don’t have 100 Mbps, obviously.
The biggest issue I have with the Cisco report is that it treats the Internet like some vast vacuum that sucks dollars from all those who have to contribute to its improvement, in order to meet the requirements of the applications Cisco says is driving it. Operators are clearly cutting back on infrastructure investment, as Cisco’s own earnings call showed. How do you fund the kind of radical increases in broadband performance that Cisco says will come along? To quote the book on the Mercury astronauts, “The Right Stuff”, “No bucks, no Buck Rodgers!” An exciting future has to be paid for.
But the thing I like most about the report is that it shows the bucks are on the table. There is no doubt that the applications and changes Cisco touts are possible. The challenge is making them practical, and in the end Cisco’s service to the industry in pointing out the table stakes is offset by its refusal to address the question of those bucks.
The Annual Internet Report is interesting, but it could have been so much more. I’d like to see Cisco take it to the next level with some economic realism.