I'm currently up to my ears in a model for mobile broadband computing adoption and shipments - netbooks, MIDs, 3G-embedded laptops and the services that go with them.
The number of input factors was already astonishingly high - device purchase preferences, operator business models, realistic activation rates, fit with the existing 3G dongle market, national/regional variations and so forth.
But added to this, I now need to superimpose the threat of economic recession on end users - and also try to have a view on the issues around the reaction of mobile operators & vendors to financial imperatives like unavailability of credit, and plummetting stock values. Then there's things like currency movements, the need for adequate compliance and corporate governance, managing short-term cashflows......
It's tempting to say "all market forecasts are useless, you might as well rip up the spreadsheet and plan based on gut feel & positive thinking". And for some technology companies, that may be exactly the approach taken. But for others, they will still want external views on both timing and growth of market segments - especially if it has to fit in with other activities like buying spectrum, upgrading network capacity and so forth.
I'm not an economist, but I did spend a couple of years as an equity analyst covering telecoms & technology at an investment bank around the time of the last crash in 2000-2001. I also know various people in the financial sector like James Enck, and another friend who was former head of investment strategy for a European bank. I don't want to have to put a 10-page chapter on economic assumptions and predictions in my reports, but I do at least need to have a baseline view on what the most probable scenarios are.
(There's no point having an "Armageddon" scenario though - if everything really does fall off a cliff, we'll all have better things to worry about then how many netbooks will ship in 2013).
My general feeling is that a lot of the market forecasts that have been issued in the last 18 months need serious revision - especially those for completely new segments which may end up being pushed back years, or even miss their market opportunity entirely. I'm not going to give everything away, but some of the factors to bear in mind are:
- What consumer electronics purchases will survive as confidence falls, and discretionary spending is watched more carefully?
- What are the substitutive effects of people looking for the cheaper options?
- Will mobile operators delay upgrades to network capacity, either in terms of radio or backhaul networks?
- Will enterprises lengthen replacement cycles for existing hardware?
- What happens to spectrum auctions during a recession? Who will still be a bidder?
- Will any service providers go bust? And what new business models might emerge if others acquire their assets or networks cheaply afterwards?
- If device subsidy is tantamount to consumer credit... what's the effective interest rate? And who is doing the risk management?
- Will we see a further move to prepaid mobile services and away from monthly contracts?
- Is mobile broadband and mobile Internet access a "nice-to-have"? Especially if networks get congested, and user experience suffers, as capacity upgrades are deferred?
- Will we see telecom operators moving in new directions that redefine the value chain and business models? If you're brave, is it now cheaper to buy a bank than an LTE network?
- Even if you think demand will remain robust, will CFOs look to delay spending on capex, to conserve cash and impress investors?
- Could we see government intervention (or even renationalisation) of publicly-held telecom companies if failure looks possible?
- Will deployment scenarios be refocused more on cost-savings, rather than new opportunities for revenue-generation and "cool new stuff"?
Obviously, I don't have the answer to all of these - they're unknowable and ultimately based on factors like whether confidence is restored by the actions of Messrs. Paulson, Sarkozy, Brown & co. But any business planning dependent on market forecasts needs to think about these and similar factors, and at least have an idea of the senstitivities possible outcomes.
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