Telecommunications demand forecasting - a review

The last decade has seen rapid advances in telecommunications technology in an increasingly deregulated and competitive market place. Companies operating in these various markets have relied on demand forecasts to justify the considerable investment needed to ensure capacity availability at the right time. These new markets are typically composed of new consumers taking up a product or service for the first time, established users changing their usage patterns, users of competing services shifting to the alternative service and those exiting from this segment of the market altogether. This paper describes various models that have been used to understand market dynamics. Markets discussed include both established and new: mobile, the internet, and PSTN (public switched telephony network). Cross-sectional choice models of the mode of accessing the service are discussed along with models for usage in established markets. These models typically include price (and perceived price) differentials and use standard econometric methods, focusing on price elasticity estimation. Forecasting accuracy has been neglected. New product models may include additional 'drivers' such as aspects of service quality and the attributes of the products themselves. Both choice models of adoption of new products and Bass-type diffusion models have been used in forecasting. Because of the complexity of the 'drivers' of the adoption process, the successful modelling of these new markets has been limited, not least by inadequate data. Simulation models have been proposed to structure the problem more completely and overcome these inadequacies. Both these classes of model have not been effectively validated, researchers having been content just to propose a new approach without thoroughly testing it against alternatives. The only class of telecommunications forecasting problem that has been more thoroughly analysed are those needed to support operations such as call centres. This review paper describes the research that has been carried out on the three problem areas of established products, new products and operations, highlighting areas where further research is needed. The paper also serves as an introduction to the Special Issue on Telecoms Forecasting by describing how the papers contribute to the developing research agenda. (C) 2002 International Institute of Forecasters. Published by Elsevier Science B.V. All rights reserved.