As Finland goes in mobile, the rest of the world follows

I have been lucky. Its not that I am clairvoyant, its simply because I've been exceptionally lucky to be in the right place at the right time. Literally, the absolute total best place in the right time. To understand mobile.

In 1995 I joined Elisa Corporation (who own Radiolinja the world's first GSM mobile operator, Helsinki Telephone the fixed line operator of Helsinki, plus internet, international etc telecoms services) and at Elisa, which was one of the world's first telecoms operators with fixed and mobile assets, I was assigned the project to develop our fixed-mobile convergence product in 1996. Finland was far ahead of the rest of the world in mobile phone adoption at the time when Finnish mobile phone penetration had reached 30% per capita. As I was the project manager for our fixed-mobile service - and no other countries even had meaningful enough mobile phone adoption to make such a service worth their while - I not only created the world's first fixed-mobile service eleven years ago; I was also exposed to all the internal data on mobile and fixed telecoms adoption back then, on the early trends of mobile call usage and the incredible trends in SMS text messaging etc.

I have been lucky to be in the right place, literally, in the world where this first happened. So then it was easy to see the trend in 1997, so that in 1998 when Finland became the first country where mobile phone density was higher per capita than fixed landline phone density, that was no surprise to me. I had seen the signs from observing the data. As Finnish mobile phone penetration numbers and mobile telecoms minute usage and SMS messages sent were then repeated across Scandinavia - often with only one year's lag - and then soon thereafter in Italy, Israel, Portugal, Hong Kong, Taiwan, Singapore, the UK etc - it has served me remarkably well as a crystal ball. As Finland goes, so soon goes the rest of the world.

So far every forecast that I've made in technology, on a trend observed in Finland and copied in at least one other advanced country in telecoms, has then happened just about everywhere in the industrialized world. And I've learned for example that one of the telecoms big industry analyst houses, Ovum, used the Scandinavian early SMS usage for their first SMS forecasts, which were remarkably accurate at the time for other European countries. This is a legitimate tool for forecasters, using a country or region or market as an early indicator of how a given technology will be adopted. Its easy to seem smart if you have access to all the facts first...

So its time to give you readers some more "first facts from Finland". The EU has released its E-Communications Household Survey report for 2006 by Eurobarometer. And again we find some very remarkable numbers around telecoms and Finland.

ABANDONING FIXED LANDLINES

We've reported on this trend in the book and at this blogsite. But Finland continues to lead the industrialized world in how households are now abandoning the fixed landline and using only mobile phones in the household. That is not news. But the extent of this truly is. Finland has just become the first country in the industrialized world where more households have only mobile phone connections than have fixed landline connections. During 2006 the proportion shifted so that today 46% of Finnish households have a fixed landline and 54% of Finnish households don't have a landline but do have a mobile phone. Note that of the 46% with a fixed landline, 40% have both a fixed landline and a mobile phone connection in the household and only 6% of Finnish households have a fixed landline but no mobile phone connection.

So more than half of all households (54%) have totally cut the cord. 40% have both a fixed and mobile phone (or phones) and only 6% of households have a fixed landline but no mobile phones.

Someone might say - but Tomi, you've reported earlier that Finland has over 100% mobile phone penetration, how is this possible that now suddenly 6% don't have a mobile phone. Yes, remember we normally talk of mobile phone subscriptions per capita. Measured against the population. By that measure the European average is 105% penetration, Finland is at 110% and the European leader Italy is at 125% (according to Informa). But also Informa tells us that 28% of the population has two or more phones. So in some Finnish households of four - father, mother and two teenage kids - there might be six mobile phones - both teenagers with one phone each and the parents both employed and thus mostly would both have two phones. But also in Finland there could be a retired couple of two 70 year olds, who both are still without mobile phones, and they do have one fixed landline in their home.

And to be clear - the EU report states clearly that of all EU countries, Finland leads in how many households have mobile phones. Only 6% have no mobile phone but have a landline. In the Netherlands and the Czech Republic that number is 7%, Italy is at 8% and Sweden at 9%. So even where there are 125 mobile phones to every 100 Italians alive today from babies to 101 year olds, still 8% of Italian households that do have a fixed landline phone do not have mobile phones.

Still, these numbers keep shrinking (as the elderly population is slowly converted to be mobile phone users and the rest of them slowly die away).

Ok, so we are talking about households. But yes, Finland leads in this number as well - the first country where more households are 100% mobile phone connected, than have a fixed landline at all. And is this a trend? For sure. Last time we reported it, out of the industrialized world Portugal was second to Finland, and Portugal back then had 30% of its households already abandoning fixed landlines. Today Portugal is already up to 36%. Austria and Italy have jumped ahead of Portugal, with 39% and 38% respectively. Belgium is already at 32% and the EU average is already 22% of households who have totally cut the cord. Yes, Finland is leading and the rest of the world is following. Our regular readers will remember that even in the USA over 10% of households have gone totally without landlines relying only on cellphone communications.

Also while I'm at it, let me mention Eastern Europe. There the fixed landline penetration was never at or near 100% so with poor landline penetration, the mobile connectedness of households was very quickly more than landline penetration. Czech Republic, Estonia and Lithuania are also in that group of European countries where more households have mobile only connections than landlines.

No payphones...

Some funny impacts come out of these kinds of trends. The first is that old staple of the telecoms industry, the trusty payphone. A decade ago the payphone was a regular component in the love-lifes of teenagers about the town. But today, if "everybody" has personal mobile phones, who needs payphones. Again Finland leads. The European average is 12% of households have at least one member who uses public payphones. Leading countries where payphone use is vanishing? Estonia and Netherlands 4%. Sweden, Denmark, Slovenia and Cyprus are down to 3%. But the clear leader, Finland 1%. No wonder they are shutting down the payphone networks. Nobody uses them anymore.

More broadband than fixed landlines

But probably the most astonishing statistic is this one. Many telecoms experts suggest that broadband will be the innovation that "saves" the traditional fixed landline telecoms industry. Maybe so. But remember where Finland leads, the rest of the world follows in telecoms. Today Finland has become the first industrialized country which has more broadband connections than fixed landline telecoms connections. Yes, 46% of Finnish households have a fixed landline telecoms connection, but 49% have a broadband connection. How is this possible? There are more ways to connect to broadband than telecoms xDSL connections, such as cable modems, 3G/3.5G cellular and WiFi/WiMax etc. Yes, we were expecting this statistic for about the end of 2006, and it did happen. Today more Finnish households have a broadband connection for intenet than have a fixed landline telecoms connection.

Can broadband save the fixed landline telco operators/carriers? It looks pretty bleak actually. And for those who say "but but but, PC penetration, internet usage" etc - yes, same study reports Finland has third highest PC penetration in Europe with 81% of households with at least one personal computer and fourth highest internet penetration per household. And also while we are on the sad state of health of the legacy fixed landline telecoms operators, lets look at internet telephony, so-called VoIP Voice Over Internet Protocol, services such as Skype and Vonage etc. Finland is tied with France for second among Western Europeans with 24% of households using VoIP (Denmark leads with 25%).

So what do we learn from this? Yes, very soon the majority of households in all of the industrialized world will abandon the fixed landline altogether. Those who do have a landine it will mostly be used for broadband, but also broadband penetration will soon exceed fixed landline penetration. And if your job is repairing payphones, I'd urge you to quickly seek re-education.

PS - I've also written another of my Thought Pieces. This one is about the size of the worldwide mobile industry (an update of the blog about 2.7 Billion mobile phone users around the world) with stats and sources etc about mobile content, SMS text messaging, phone replacement cycles, second subscriptions etc. If you want a free copy of that Thought Piece, please send me an e-mail to  tomi at tomiahonen dot com.

Comments

[Sami]

Interesting statistics. Just want to mention a few things:

- Having more broadband connections than fixed phone lines is an interesting measure, but it may not tell much about anything else than regulation. In Finland, broadband has been uncoupled for a long time - in many places it still isn't, but that alone doesn't mean people would USE their fixed phones significantly more.

- Also, I think absolute broadband penetration gives a more accurate picture on the Internet usage and all that; here, Korea has been leading for a long time. Finland is barely in the top 10 depending on the measure used (population vs households).

- As for "saving" the fixed-line telcos, being a bitpipe can be profitable business. If you're talking about "saving" them in the sense that they could sustain their clearly too heavy corporate structures and in essence waste stockholders' money then no, they can't be "saved" by broadband. But that doesn't mean there's no money to be made in providing broadband access.

- Finally, what do you consider as "very soon" in terms of abandoning the fixed landline altogether? Remember Amara's law, let's not be impatient :)

[Dean Bubley]

"Yes, 46% of Finnish households have a fixed landline telecoms connection, but 49% have a broadband connection. How is this possible?"

Tomi - I don't have the EU source document, but I strongly suspect that "fixed landline connection" = subscribes to PSTN service (ie a conventional primary-line telephony service, based on whatever the local Finnish regulatory definition is)

What this excludes is Local Loop Unbundling, where there is no "PSTN voice service", but instead there is a copper line used solely for a competitor's broadband connection - and probably one or more VoIP servces, maybe a fixed-mobile converged service too. Finland has >270k LLU lines which won't be counted in the PSTN statistics. That is >10% of households on its own. This is a very useful source of information:
http://www.ectaportal.com/en/upload/File/Broadband%20Scorecards/Q306/FINALBBScQ306.pdf

Also, Finland has 2.4m dwellings, of which around one-sixth (400k) are second homes. These will often not have a fixed connection as they are only used infrequently - however, the family that owns them probably will have them.

Cheers

Dean

[Tomi T Ahonen]

Hi Sami and Dean

Nice to see both of you here.

Sami - good points as usual, thanks. About the posting, I was not intending an absolute position of "the world has changed" but rather a trend, this is clearly a direction and very many traditional analysts in the telecoms industry have been suggesting that as homes get broadband, they will find good use for their landlines. While its true that homes get broadband, obviously the error in logic, is to assume that this will "always" or mostly be from the fixed landline option. Now we have an "absolute" verification of this phenomenon, exactly like in 1998 when Finland became the first country with more mobile phones than total fixed landlines, and then the telecoms experts HAD to accept that yes, it actually is possible to have more mobile phone connections than the total, and fully saturated 100 year old fixed landline telecoms density.

That is what I am driving at with this blog. A trend, and crossing of a mile stone. And I also show that half a dozen European countries are shortly on Finland's heels, to achieve this level in two or three years..

But you are correct about broadband usage leadership (which was not my point, my point was mobile penetration and its related fixed-mobile substitution which is the area where Finland still leads the world). You've seen us Sami many times say that for broadband or convergence, South Korea is the world's leading country, so we are in total agreement with this. Finland is, like you say, "barely" in the Top 10 - not a bad place, but yes, significantly behind world leaders.

About "very soon" - I hope I wasn't too unclear about what I meant would happen rather soon. Not that total households would abandon fixed; rather that the cross-over point, with more broadband than fixed - this would be happening soon and by that I'd say 2-4 years we'll have maybe half of Western Europe in that range. In my book that is rather soon ha-ha.. But not by this October ha-ha, not THAT soon...

Dean - first on the 46% vs 49%: I did clearly explain how it is possible, obviously in Finland as in most countries, there are multiple options to get broadband and for example cable modems are a meaningful minority of total broadband lines. Also remember the stat is per household. So we exclude business PSTN lines out of the math.

As Finland started with one of the world's highest fixed landline teledensities in 1995/1996 when Finland was the world's first country with 100% digital trunk network and the fifth country in the world with fully liberalized telecoms competition (three years before EU mandated it for its members), there was a time when almost every home had a fixed landline. Also obviously all businesses had landlines. Now as the homes have been abandoning those landlines, the businesses tend to hold onto them, so the fixed-to-mobile substitution has been very rapid in the homes, but only marginal in businesses. Therefore today's total PSTN lines in use in Finland are severely skewed on behalf of business lines.

Also you mentioned summer homes/vacation homes. Yes, very true. But also there, to a very large degree these too had fixed landlines drawn to them through the early 1990s, I'd say definitely over half of them used to have a phone, just recollecting from my various visits to friends' summer homes etc. But then in about 1994 or so, the competition in mobile phones and the prices coming down etc, suddenly people started to "install" only a mobile phone for the new vacation home - this was a good excuse to sell the first mobile phone to a home - and when GSM had still very poor geographic coverage, Sonera the incumbent who didn't have GSM but had NMT and very solid coverage on that technology - would promote the fact to get a mobile phone for your summer home out in the wilderness.

So since then the fixed-mobile substitution probably started FIRST with vacation homes, and then to the young adults in their first homes, etc. Good point Dean, but it does support this statistic.

Thanks for stopping by and leaving the comments

Tomi Ahonen :-)

[robert]

What about design trends in mobiles? How often do Finns replace their mobile phones?

[Tomi T Ahonen]

Hi Robert

I'm sorry I don't have the exact replacement cycle data for Finland. The global average came down from 21 months to 18 months from 2004 to 2005 according to the Semiconductor Industry Association and all signs suggest the replacement cycle is shrinking.

I would guess Finland is near the average, perhaps a bit faster, but not at the extremely rapid replacement cycles such as those in South Korea, Japan and Hong Kong.

But sorry, I don't have the actual number for you.

Thanks for writing

Tomi Ahonen :-)