How can we explain it?
Why have so few industry observers failed to recognize the pattern of exponential growth which typified the wireless industry in the 1990s? Why have so many -- especially in North American, viewing the rest of the world -- scratched their heads in disbelief as every quarter's figures yielded better results than anticipated? Perhaps they should have begun their studies with an examination of obscure Fibonacci, who "discovered" a sequence of numbers (1,1,2,3,5,8,13,21,34,55,89...) which proved to be a pattern found in many places in nature (as well as underlying much of the fixed income market). The pattern of world subscribers growth -- seen in Exhibit !! in the tens of millions -- has followed the Fibonacci sequence until 1998. Such figures are hard to believe when seen as a forecast, if not still hard to believe in retrospect.
EXBHIBIT 11
Some important lessons should be drawn from this Fibonacci sequence, and its reflection in the growth of world wireless subscribers and networks. It was one of the first cases in the 125-year history of the world telecommunications industry that supply push -- suppliers and monopolies jointly making long-term network deployment plans -- was overtaken by demand pull from the market. Customers came faster than roll-out could keep pace. Time to market in handsets and network infrastructure trumped technological perfectionism; in hindsight, several years of delay in the US, waiting for IS-95 CDMA, looks a mistake. Credit is due to market leaders for recognizing the pattern of exponential growth before the curve started sloping upwards in perpetuity, and building production systems to meet it. Today there are still only four suppliers of handsets which have successfully topped 20m units of annual production -- by putting the systems in place to handle those volumes several years ago -- and those four control 70% of the world market.
And What Comes Next?
As subscriber growth continues to outperform forecasts, operators are facing the challenge to expand capacity in their networks. Wireless services today are predominantly voice-based, but the overriding theme of Telecom 99 was wireless data. The massive customer base is attracting software developers eager to exploit the potential of wireless for e-commerce and mobile internet applications. Ericsson, Nokia and Motorola are jointly predicting that by the end of 2005, there should be more mobile devices connected to the internet than fixed terminals (PCs and laptops).
Even though we cannot expect Fibonnaci to continue as the leading analyst for predicting wireless growth -- adding the 200m at year end 1997 with the 305m at year end 1998, much less the 550m which the sequence suggests comes next --we are embarking on a another leg of Fibonacci defined growth, driven by data-centric wireless devices. This next phase of exponential growth may escape notice -- the volumes of new devices able to access networks wirelessly will be difficult to track. Yet we are confident that the wireless device market will show triple-digit growth rates for the next five years, coming from a low base of several million units in 1999 to several hundred million by 2004.
Pages 9-10
Wireless Wave II
Goldman Sachs
Message 12861405
More on Fibonacci
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