Five trends in mobile devices from Gartner
Five Trends in Mobile Devices
Gartner has identified five key trends it says will affect the mobile device market through 2009:
- Established Vendors Consolidate and New Players Join the Fray: New device vendors, such as Apple and Garmin, want to differentiate themselves, while big-name vendors, such as Motorola, face pressure as market shares decline and design innovation becomes increasingly challenging.
- Device Vendors Build Out Ecosystems: Pressure from operators to lower the price of devices will drive some established players to seek out new sources of revenue from content and services sold to end users. This trend is epitomised by Nokia with Ovi, Sony Ericsson with PlayNow and Apple with its iTunes store. This new market will bring changes in relationships between vendors, operators and content providers.
- Device Makers Remove Complexity for Users: Increasing device functionality and a need for differentiation will drive demand to simplify the user interface (UI) and service experience. As a consequence, mobile device vendors will need to build up their UI competencies while retaining familiarity and considering how users can move horizontally across their devices’ applications, rather than just vertically within them.
- Mobile Devices Become Lifestyle Statements: Style will play more of a role across the range of devices, driven not only by fashion trends but also by consumers’ desires to reinforce lifestyle choices. Vendors need to have established platforms on which small changes to casings and colors can be made without affecting costs. They will also need to consider partnering with non-mobile companies and brands – such as consumer electronics, fashion or sports companies – to increase the lifestyle appeal and consumer reach of their products.
- High-End Device Platforms Become “Field-Refreshable:” As cellular technologies become part of increasingly expensive consumer devices, vendors must manage ongoing support, upgrades and enhancement of drives. Because many users will hold onto high-end devices longer, these platforms will need more life cycle management in the form of upgrades and enhancements. Some vendors are implementing these “field refreshes” that can be made to support new digital rights management (DRM) requirements, download bug fixes, or download new applications, wallpapers or skins to keep devices up-to-date.
3G Social Networking Goldmine
3G Social Networking Goldmine – communities-dominate.blogs.com – Tomi T. Ahonen
Technologies of Cooperation
When I first looked at Tomi Ahonen’s blog – Communities Dominate Brands – and immediately began ordering a copy of his latest book I had the familiar feeling of reading someone’s writings who “gets it” and “sees the imminent future“.
People know me in the Web Metrics Community as somewhat of an authority on Web Metrics, perhaps a “visionary” who sees where things are going, much as Howard Rheingold does in books like SmartMobs. It’s the artist in me that gave me the vision ot see Visual Sciences as the best Web Analytics Platform, bar none, leading many to take a closer look at that high end platform. It’s the same vision that tells me HitWise needs to be merged with Web Analytics vendors, that RSS subscribers are the main measure of loyalty, care of Seth Godin. And now I’m seeing the future in Tomi Ahonen’s ideas about 3G Mobile Networking – the goldmine is there – and he “sees” that goldmine – he knows it.
I think Howard believes in 3G Social Networking ….he wrote THE BOOK on it! Now Tomi Ahonen has taken that idea and ran with it …. looking at next wave ….. the 3G Mobile Social Neworking goldmine.
What’s the future? 3G Social Networking applications are worth more, today, than MySpace, YouTube, Flickr, Bebo, Second Life, Worlds of Warcraft, Skype etc!
“……..more revenues generated by similar social networking activity… on mobile phones of course. Led by such services as Cyworld from South Korea (in 6 countries), Mixi in Japan, Habbo Hotel from Finland (in over a dozen countries) and SeeMeTV in the UK, Italy and other 3/Hutchison markets – social networking on mobile is THE first elusive killer app for 3G !”
Today, many of those applications lie outside the mobile phone / device – perhaps a service one subscribes to – it’s not built into the software provided by the mobile network vendor (IE: TMobile, Verizon Wireless, etc). As far as what Tomi Ahonen is saying ….. I totally believe it and here’s why – illustrated by a story. I ran into two friends recently at an art opening in Brooklyn, Matthew and Nichelle, who are part of an art social network in New York that keep in constant communication with each other – they have Google Calanders sync’d in so they can see where each other is and meet up if they want. Matt and Nichelle do what I write about in WebMetricsGuru.com - they practice Social Networking – it’s in their bones ….. in fact they use DodgeBall and Plaxo to see all of their contacts in real time ….. hundreds of messages a day – hundreds of events a week in NYC – 4 people in this network (two I haven’t met yet).
That’s the power on real time 3G Mobile Social Networking……and the whole story of 3G Social Networking is being told for the first time by Tomi Ahonen in his blog and book Communities Dominate Brands.
How big is the pot of gold at the end of the 3G Social Network market THIS YEAR?
Informa tells us it is worth 3.45 billion dollars in 2006. Yes, mobile digital communities are worth more than online adult entertainment, or mobile gambling or multiplayer gaming or iTunes. Like we say in our book, Communities Dominate!
When I’m at Ad-Tech NY next month I’ll be sure to both attend the 3G Social Networking Sessions and put the speakers on the spot (as I’ll be interviewing many of speakers and companies for Know More Media’s www.WebMetricsGuru.com, my Web Metrics Blog that many influentials read (I found that out, to my surprise, at the EMetrics Summit in DC this month….me…they read my blog….yes they do), especially for Web Metrics – I’ll be covering Ad-Tech as a reporter / press). As Tomi says in a recent blog post titled: Why is mobile social networking worth $3.45b?
…..The story, is about people – and what we are – A “we species” – human beings are highly social and are built to be so. But industrialisation, mass-consumption, mass-media – although providing us with greater prosperity – denied us some of our fundamental rights as people.
And now we’re taking our Social Networking rights – enabled by technology.
But don’t believe my word….read Tomi’s blog which has – a lot of material in it – but he makes a case for Mobile 3G Social Networking being the real goldmine that should be looked at much more closely – given much more press than it has.
Links: Communities Dominate Brands – I’ll leave the rest of the links out…they’re all over the post.
An overview of all cool wireless companies
SMS & MMS
Abbreviated as SMS, the transmission of short text messages to and from a mobile phone, fax machine and/or IP address. Messages must be no longer than 160 alpha-numeric characters and contain no images or graphics.
Once a message is sent, it is received by a Short Message Service Center (SMSC), which must then get it to the appropriate mobile device.
Multimedia Messaging Service (MMS) (a newer standard)
Mobile365 http://www.mobile365.com/case_studies/sony.php
NeoMedia Mobile companies
12snap is an award-winning specialist for creative work and development in the fields of mobile marketing, mobile (CRM) and mobile applications. The company is based in Munich, Germany and has offices in Dusseldorf, London, New York, Milan, Stockholm and Vienna and an affiliated partner in Moscow. 12snap provides services to companies including McDonald’s, MTV®, Coca-Cola, Ferrero, Wella, adidas, Unilever and Gillette®. Press Release – February 14, 2006
Gavitec AG – mobile digit is a specialist in designing and manufacturing flexible and easy-to-use code readers for mobile marketing, mobile ticketing and mobile couponing. We are the pioneer and leading innovator in creating scanning systems able to read linear barcodes and two-dimensional symbols from mobile phone displays, and in developing code-reading solutions using the built-in camera included in mobile imaging phones. Press Release – February 21, 2006
Mobot is a leader in visual search and recognition technology designed to make marketing effective and innovative using mobile devices. Mobot connects consumers using any camera phone on any wireless carrier to brands, mobile content and commerce. Mobot gives marketers, content providers and carriers the tools to make it easy for any consumer with a camera phone to interact with their offerings. Press Release – February 9, 2006
qode’s ground-breaking technology turns brand-names and barcodes into hyperlinks to the mobile Internet. Web-enabled handsets with the patented Qode® software are able to take consumers – or enterprise users – direct to desired pages on the mobile Web, simply by clicking on a code with the handset’s camera, or by entering keywords or product codes in a search-style window. The handset is now your mouse and the brand name or barcode is now your hyperlink.
Sponge is one of Europe’s leading independent developers of mobile applications and content. The Company continues to experience rapid growth and profitable operations, as a premier provider of mobile services. Today, Sponge counts more than 40 agencies, including WPP, Aegis and BBH, as clients, and supplies services for over 100 world-class brands, including Coca Cola®, Heineken® and Diageo. Press Release – February 22, 2006
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P2P multi-level marketing
http://www.coremedia.com/en/88908/superdistribution/
OMA DRM Companies
—The ability to sell premium digital content for the mobile phone market represents a significant opportunity for nobile operators and content providers. Rampant piracy, however, requires that operators who hope to profit from this expected revenue growth have a viable Digital Rights Management (DRM) content protection system. NDS mVideoGuard, an Open Mobile Alliance (OMA) standards compliant end-to-end content protection system—server and client—provides enhanced security and flexibility of business models based on superior implementation and extension of the OMA standard.
See also
See also
US wireless market
August 13, 2006
US Wireless Data Market: Mid Year Update statistics
US Wireless Data Market: Mid Year Update
By Chetan Sharma
• US wireless data market is growing at an impressive rate. Top 4 US carriers (Cingular, Verizon, Sprint Nextel, and T-Mobile) accounted for over $6.3B in wireless data revenues for the first half of 2006. Overall, wireless data service revenues exceeded $7B and the figures are likely to exceed $15B for the year 2006. This is almost a 75% jump from end-of-2005 number of $8.6B. The growth rate slowed down only slightly from 2004-2005 growth rate of 87%. SMS and data transport still drives bulk of data revenues but their percentage share is declining.
• Among the top 4 US carriers, Verizon has made the most impressive strides in the last 4 quarters, increasing their wireless data revenues by a whopping 114%. Next Sprint with 71%, T-Mobile with 65%, and Cingular with 54% also netted impressive gains.
• Verizon became the first US carrier to net over $1B in wireless data revenues in a quarter. Cingular was close second with $979M and Sprint with $935M are likely to cross the $1B mark next quarter.
• Sprint retains its leadership position of highest wireless data ARPU in terms of absolute dollar amount at $7.25 but lost its number one spot in the % data ARPU to Verizon which now leads the US carriers at almost 13%. Average data ARPU is now $6.3 or 12%.
• Overall ARPU (voice + data) increased slightly from Q106 but declined $0.27 from Q405. The general trend is towards slow decline. Data revenue is barely keeping up with the decline in voice ARPU. On an average voice ARPU has declined 8% from a year ago and data ARPU has increased 48%. Average Overall ARPU was $53.04. Sprint led with $62 followed by T-Mobile at $51, Verizon at $49.7, and Cingular with $48.4.
• If the current trends hold, Verizon Wireless is likely to surpass Cingular Wireless as number 1 US carrier by Q307.
• US had about 7M 3G subscribers by Q206, primarily from Verizon and Sprint Nextel. With Cingular joining the fray, the 3G growth is expected to accelerate with 2007 being the inflection year.
• US wireless subscriber penetration stands at approximately 74% and is likely to exceed 78% by the end of the year.
• Top 4 carriers added 12.7M subscribers from Jan-Jun 2006.
• The top 4 US carrier account for 79% of the subscribers, 86% of the service revenues, and approximately 95% of the wireless data revenues.
• US Off-net revenues for the year are likely to exceed $750M.
• Data ARPU of CDMA/EV-DO carriers was 20% higher than GSM/WCDMA carriers.
• Several high-profile MVNOs were also launched in the last few months and the overall results have been disappointing primarily due to poor execution, instant crowding effect, and competition from big 4.
• US wireless carriers are steadily climbing in their wireless data performance as compared to their peers worldwide. Verizon, Cingular, and Sprint ranked number 4, 5, and 6 respectively, amongst the top 10 operators worldwide in terms of total wireless data revenue generated for first half of 2006.
• The #1 carrier worldwide in terms of total wireless data revenue for the first six months of 2006 is NTT DoCoMo which has maintained its position for a number of years. It is now generating almost $900M/month from wireless data revenues.
• The top 10 carriers in terms of total wireless data revenues for 1H06 in order of rank are NTT DoCoMo, China Mobile, KDDI, Verizon Wireless, Cingular Wireless, Sprint Nextel, O2 UK, Vodafone Japan, SK Telecom, and China Unicom. (6 Asian, 3 US, 1 Europe. Who says US is behind). Vodafone Germany, TMO Germany, and TMO US are also closing in.
• All the top 10 carriers in the list exceeded $1B in data revenues for the first six months of 2006. China Mobile and China Unicom benefited from their huge subscriber base of 274M and 135M respectively while DoCoMo and KDDI did well because they are generating over $17 (or 28%) in wireless data ARPU.
• The top 10 carriers accounted for almost $24B in wireless data revenues for the first six months of 2006. The top 10 carriers account for approximately 700M (or approx 28%) subscribers worldwide.
• In terms of wireless investments, over $2.8B was invested in wireless related companies/startups from Jan-Jun 2006 (this figure jumped to $4.1B in July). Source: Rutberg. Mobile TV/Video, Mobile Personalization, Mobile Search and Advertising, Semiconductor, Carrier infrastructure, Device design and development are hot areas. M&A activity also picked up quite significantly.
• WiMax industry got a big boost with almost $1B investment in Clearwire and due to Sprint Nextel’s announcement of WiMax deployment. Sigh of relief for Intel and Samsung. Puts pressure on Qualcomm. Maybe Intel will renegotiate with Clearwire.
• Worldwide Handset market share: Nokia and Motorola dominated with 35% and 23% market share respectively. Samsung with 12% stands third. Source: iSuppli. Though Apple’s iPhone rumors have been clouding the market, it is Motorola which continues to lead in launching must-have handsets. Windows mobile is starting to make serious inroads in the handset market but performance issues and high price points deter mass market adoption.
2005 Wireless Trend
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| The mobile market is maturing and struggling to find a growth area. Basic infrastructure has been deployed in most markets, with some high-speed data capabilities in major markets. Mobile operator consolidation will continue in most markets, and users must scrutinise operators and negotiate contracts with great care.META trend: Packet-switched mobile networks based on 2.5G (GPRS and CDMA 1xRTT) are available worldwide, and most industrialised countries will have 3G (W-CDMA and CDMA 1xEV-DO) built out by 2006/07. However, coverage, reliability and roaming remain challenges, with latency a problem for 2.5G networks, addressed somewhat in 3G services.In 2005, WiMAX (IEEE 802.16) wireless metropolitan-area networks will be adopted by service providers for backhaul and wireless broadband delivery, dramatically increasing local-loop competition and driving down access prices 10% to 20% per year (starting in 2006), while providing an alternative for enterprises interconnecting campus buildings. WiMAX will evolve to support mobility by 2008 and complement WiFi in multimode handsets, increasing available bandwidth to the megabit range; multi-megabit cellular service will emerge in 2008.Technology trends
Voice is the most compelling application for mobile carrier networks, and carriers are attempting to grow the market via data services. The trend to leverage mobile voice as the principal voice line is growing among knowledge-worker-intensive organisations. Enterprise adoption of 3G data services (ie, offering capacities of between 200Kbps and 2Mbps) will remain limited until at least 2007. Voice will remain the dominant application in mobile networks until 2010 by volume, and 2008 by revenue. This trend will not change when packetised voice (eg, VOIP) will be introduced in future versions of 3G/4G networks. Even though the business case is unclear, operators have continued their 3G roll-outs in most markets. Competition from other wireless data alternatives will limit the potential for 3G – especially WiFi (2005+) and WiMAX (2007+). 3G services are starting to receive some market acceptance beyond Japan and South Korea, and the vendor hype for a next set of services has begun. Market buzz has already started around High-Speed Downlink Packet Access (HSDPA), “Super 3G” and 4G. While the demand for additional capacity is unclear – users are not buying what is already offered – what is needed is better integration between wireless services. Fortunately, 4G is mostly a collection of services combining existing technologies (including 3G and WiFi) with other kinds of wireless technologies like WiMAX and future evolutions of 3G/UMTS. As a result, 4G will be less disruptive and more widely accepted if the promise is delivered upon. 3G’s remaining problems are more focused on the business case and less about technology. The previous technical issues that slowed 3G’s roll-out (eg, lack of appropriate handsets, poor battery life, problems with handoffs to/from legacy networks) have been addressed. The remaining challenges are mainly commercial (eg, the structure of compelling and profitable offerings such as regional or global pricing plans and flat-rate versus usage-based billing). Vendors are centring on fewer wireless standards. In the 2007/08 time frame, networks will be almost exclusively based on either the GSM evolution or the CDMA evolution (see below). As mobile-operator consolidation continues, remaining entities will have to standardise on one of the two established standards to stay competitive. For example, Sprint Nextel is left with two competing technologies (ie, CDMA and iDen); we expect only CDMA to be supported beyond 2008. By YE05, enterprise-class handsets will generally be dual-mode 2G/3G, with specific variants by country and technology. For the GSM evolution (available in all countries in the world except eight; used by all operators in EMEA, some in the Americas and most in Asia Pacific, but not Japan and South Korea), handsets will support GSM, GPRS, EDGE and WCDMA, operating in five bands (850/900/1 800/1 900/2 100MHz). For the CDMA evolution (used by some operators in Japan, the Americas, China, India and Australia, as well as all operators in South Korea), handsets will support CDMA, CDMA 1xRTT and CDMA 1xEV-DO, operating in three bands (850/1 900/2 100MHz). In addition, META Group expects to see the introduction of multimode phones in various forms, with some versions combining GSM with CDMA, and some combining GSM with voice over WiFi. The GSM/CDMA combo will remain very niche and low volume, as it caters to a very small user population. Likewise, the GSM/WiFi combo will be niche until at least 2006 due to high price, technology challenges regarding roaming between the technologies, and the lack of a compelling revenue model for operators. Early integrated offerings (eg, NTT DoCoMo) are a difficult sell, due to both the upfront and the ongoing costs (ie, handsets not subsidised by the carrier, as well as high tariffs for off-net services). To combat the WiFi threat, carriers will adopt aggressive price plans with the goal of drastically reducing the potential savings with the dual-mode WiFi variant. Legacy data networks such as CDPD, Mobitex and paging are fading, and users need to plan for a migration to SMS, CDMA 1.x, or GPRS/EDGE by mid-2005 to avoid being trapped in an expensive solution with deteriorating service levels. Commercial and pricing trends META Group expects a continued 10% to 20% annual price decline throughout 2007 for voice calls, and 20% to 40% for data services. We expect mobile voice charges to be comparable to wireline voice by 2010. Coverage and technology are declining as differentiators, as there are only very small differences in coverage in the EMEA and Asia regions. Quality in the Americas and Australia will become less of a differentiator by 2006, as industry consolidation and network build-outs continue. Operators are changing their messaging to compete on service levels and price. The new 3G-only entrants are competing only on price initially, which drives down the price for services in 2/2.5G networks as well. Mobile data roaming (predominantly GPRS) has improved significantly during the past 12 months, but still has a way to go before becoming nearly as ubiquitous as voice roaming. Jump-starting wireless data is a paradox for the operators – pricing will remain expensive through 2006 (and beyond) due to low levels of enterprise adoption and low traffic volumes, even though data pricing is the principal barrier to increased traffic. International organisations are hurting from expensive roaming charges (2.5x-3x more expensive than in-country-of-subscription use) for both voice and data services. Multinational enterprises should exploit pan-regional pricing plans and aggregate their total buying power across the region (including wired voice and data networks) to get the best deals. META Group estimates that 80% of large international organisations will have centralised the procurement of mobile services and made the ITO (IT organisation) responsible for managing all aspects of mobility by 2006. Although the unit charges for mobile services will continue to decrease, the overall cost for mobile services will continue to increase, as consumption rises faster than the prices decline. Carrier offerings and new equipment make the move to wireless service as the only voice line for business users attractive. This is fuelled by vendors like Ericsson, Nokia, Alcatel and Siemens, concomitant with attractive rate plans being offered by mobile operators for companies that move a substantial portion of their voice minutes over to mobile voice. Most G2000 enterprises will continue to have focused efforts during 2005/06 to contain cost and refine usage patterns of mobile services. The primary vehicle is a well-balanced mobile policy, which is becoming mandatory during 2005. The mobile policy needs to be complemented with solid processes backed up with appropriate tools to monitor and enforce the policy. Bottom line: Competition for wireless customers will drive pricing down 10% to 20% per year through 2007. Users should centralise mobile-service procurement, understand usage patterns, control usage and aggressively negotiate mobile contracts. Business impact: Improved and less expensive mobile data networks enhance the return on investment of extending applications to an increasingly mobile workforce. |
Wireless Market Research
1) Introduction to the Wireless Industry.
Mobile communications and entertainment remains one of the hottest sectors in the InfoTech market. More 800 million cell phones will sell worldwide during 2006—making the cellular phone the fastest-selling single item of consumer electronics by far. Most new cell phones carry numerous advanced features. More MP3-capable cell phones are sold than stand-alone MP3 players. More digital camera-equipped cell phones are sold than stand-alone digital cameras. In addition, new cell phones are likely to be Internet-capable, and increasingly able to take advantage 3G (third generation) high speed access. In fact, by 2007, there will be nearly 1 billion consumers accessing the Internet via some type of wireless access worldwide.
The wireless world incorporates a great deal more than cell phones, ranging from satellite-based services and Wi-Fi hotspots to vast wireless networks on corporate and college campuses. The ubiquitous BlackBerry device, with its wireless email capabilities, has seen subscriptions pass the 5 million mark in 2006. Whether it’s through Bluetooth (with about 600 million Bluetooth-enabled devices sold worldwide in 2006), the much faster data transfer speeds of upstart ultrawideband (UWB), satellite, cell phone or Wi-Fi, consumers and business users alike are becoming more and more reliant on wireless-based services and devices in their daily tasks. There is no end in sight to the rapid acceleration of wireless.
There are certain things you can count on when considering the wireless market over the mid-term:
a) Cell phones will continue to morph into ever more complex, multi-purpose personal communication devices (including the growing use of the cell phone as a financial transaction device). Cell phone circuitry will become much more powerful, piggybacking off of the revolution in screaming-fast, multi-processor power in handheld game machines. Additionally, tiny high-density hard drives are now being manufactured specifically for use in cell phones. Batteries for wireless devices will become much longer lasting.
b) Although cell phone markets are relatively established in the U.S. and in major developed nations everywhere, the number of subscribers continues to grow in these countries nonetheless. In the U.S., new subscribers tend to be those on lower-cost plans and accounts set up by parents for their children. Already, more than 40% of 12- to 14-year-old Americans carry cell phones. The rest of them will soon follow.
c) Meanwhile, hundreds of millions of cell phone subscribers will be added in short order within less developed nations worldwide. More than 5 million new cell phone subscriptions are opened in India every month.
d) There is no end to the ways you can make money out of wireless trends. For example, look at the multi-billion yearly global market in downloadable cell phone ring tones.
e) Ever better, higher-speed, longer-distance standards will continue to emerge and be fully developed for Wi-Fi and other wireless network access systems.
f) Security issues such as eavesdropping on Bluetooth conversations, hacking into Wi-Fi networks and viruses spread among cell phones will require more attention and investment from the technology and telecommunications sectors. (Analysts at IDC estimate that the global market for mobile phone security software will reach $1 billion by 2008.)g) RFID (radio frequency ID tags used to track inventory) will continue rapid adoption by manufacturers, logistics centers, shippers and retailers, thanks largely to an early initiative by Wal-Mart to require its largest suppliers to use RFID to wirelessly transmit data from cases of merchandise. Second-generation RFID will eliminate most of the disappointments of earlier RFID implementations.
h) By 2007, about 8% of U.S. homes will have cancelled landline service entirely, relying on their cell phones instead.
Over the mid-term, emerging markets in lesser-developed nations will add about 1 billion new subscribers to today’s global base of more than 2 billion. While cell phone market penetration is at 100% in some nations, including Sweden, the U.K. and the Netherlands, it is only about 70% in America. Sales and subscriber growth will continue to boom in nations with rapidly-growing economies like China and India.
Accessing and transferring data and entertainment via cell phone is growing at a rapid clip. Worldwide, more than $2 billion is spent on accessing games via wireless handsets. In the U.S., there are more than 210 million cell phone subscribers (as of 2006), taking advantage of more than 180,000 cell phone towers that seamlessly pass along calls as users move from one place to another. Built-in cameras are extremely popular with Verizon’s customers. In total, they use data services to e-mail about 300 million digital photos yearly.
Meanwhile, the rapid development of Wi-Fi, the potential spread of longer-range WiMAX and the eager adoption of VoIP all threaten to turn the cell phone and landline industries upside down. Already, the leading cell phone provider in Japan, NTT DoCoMo, is marketing a cell phone manufactured by NEC that works on standard cell phone circuits and, when it senses the presence of Wi-Fi, can switch over to VoIP, wirelessly making calls over the Internet via the Wi-Fi connection. Motorola has developed a comparable phone, and BT recently launched similar features in the U.K. market.
Consider this: Wi-Fi is only good for a range of a few feet. WiMAX, on the other hand, may be good for up to 30 miles. When WiMAX gets rolling, the eventual effects on cell phone service and markets could be profound. What firms will be leaders in providing Wi-Fi and WiMAX access? What revenue streams will be generated? How will cell phone subscription use and revenue be affected? The answers are not yet clear. AT&T and other leading telecommunications sector companies are testing, or plan to test, Wi-Fi offerings. As a result, the competition for wireless customers will become much more intense. Hold onto your hats—it’s going to be wild, wireless ride!
A 2006 survey of cell phone users in America conducted by the Pew Internet & American Life Project found that there is still plenty of room in the U.S. market for the sale of advanced cell phone services. Their survey showed that only 4% of cell phone users had employed their phones to access mobile maps, while 47% said they would like to do so. Likewise, only 8% said they had used cell phones to send and receive email (24% would like to do so), and only 14% had used them to access the Internet (16% would like to do so.)
2005 Wireless Trend
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| The mobile market is maturing and struggling to find a growth area. Basic infrastructure has been deployed in most markets, with some high-speed data capabilities in major markets. Mobile operator consolidation will continue in most markets, and users must scrutinise operators and negotiate contracts with great care.META trend: Packet-switched mobile networks based on 2.5G (GPRS and CDMA 1xRTT) are available worldwide, and most industrialised countries will have 3G (W-CDMA and CDMA 1xEV-DO) built out by 2006/07. However, coverage, reliability and roaming remain challenges, with latency a problem for 2.5G networks, addressed somewhat in 3G services.
In 2005, WiMAX (IEEE 802.16) wireless metropolitan-area networks will be adopted by service providers for backhaul and wireless broadband delivery, dramatically increasing local-loop competition and driving down access prices 10% to 20% per year (starting in 2006), while providing an alternative for enterprises interconnecting campus buildings. WiMAX will evolve to support mobility by 2008 and complement WiFi in multimode handsets, increasing available bandwidth to the megabit range; multi-megabit cellular service will emerge in 2008. Technology trends Voice is the most compelling application for mobile carrier networks, and carriers are attempting to grow the market via data services. The trend to leverage mobile voice as the principal voice line is growing among knowledge-worker-intensive organisations. Enterprise adoption of 3G data services (ie, offering capacities of between 200Kbps and 2Mbps) will remain limited until at least 2007. Voice will remain the dominant application in mobile networks until 2010 by volume, and 2008 by revenue. This trend will not change when packetised voice (eg, VOIP) will be introduced in future versions of 3G/4G networks. Even though the business case is unclear, operators have continued their 3G roll-outs in most markets. Competition from other wireless data alternatives will limit the potential for 3G – especially WiFi (2005+) and WiMAX (2007+). 3G services are starting to receive some market acceptance beyond Japan and South Korea, and the vendor hype for a next set of services has begun. Market buzz has already started around High-Speed Downlink Packet Access (HSDPA), “Super 3G” and 4G. While the demand for additional capacity is unclear – users are not buying what is already offered – what is needed is better integration between wireless services. Fortunately, 4G is mostly a collection of services combining existing technologies (including 3G and WiFi) with other kinds of wireless technologies like WiMAX and future evolutions of 3G/UMTS. As a result, 4G will be less disruptive and more widely accepted if the promise is delivered upon. 3G’s remaining problems are more focused on the business case and less about technology. The previous technical issues that slowed 3G’s roll-out (eg, lack of appropriate handsets, poor battery life, problems with handoffs to/from legacy networks) have been addressed. The remaining challenges are mainly commercial (eg, the structure of compelling and profitable offerings such as regional or global pricing plans and flat-rate versus usage-based billing). Vendors are centring on fewer wireless standards. In the 2007/08 time frame, networks will be almost exclusively based on either the GSM evolution or the CDMA evolution (see below). As mobile-operator consolidation continues, remaining entities will have to standardise on one of the two established standards to stay competitive. For example, Sprint Nextel is left with two competing technologies (ie, CDMA and iDen); we expect only CDMA to be supported beyond 2008. By YE05, enterprise-class handsets will generally be dual-mode 2G/3G, with specific variants by country and technology. For the GSM evolution (available in all countries in the world except eight; used by all operators in EMEA, some in the Americas and most in Asia Pacific, but not Japan and South Korea), handsets will support GSM, GPRS, EDGE and WCDMA, operating in five bands (850/900/1 800/1 900/2 100MHz). For the CDMA evolution (used by some operators in Japan, the Americas, China, India and Australia, as well as all operators in South Korea), handsets will support CDMA, CDMA 1xRTT and CDMA 1xEV-DO, operating in three bands (850/1 900/2 100MHz). In addition, META Group expects to see the introduction of multimode phones in various forms, with some versions combining GSM with CDMA, and some combining GSM with voice over WiFi. The GSM/CDMA combo will remain very niche and low volume, as it caters to a very small user population. Likewise, the GSM/WiFi combo will be niche until at least 2006 due to high price, technology challenges regarding roaming between the technologies, and the lack of a compelling revenue model for operators. Early integrated offerings (eg, NTT DoCoMo) are a difficult sell, due to both the upfront and the ongoing costs (ie, handsets not subsidised by the carrier, as well as high tariffs for off-net services). To combat the WiFi threat, carriers will adopt aggressive price plans with the goal of drastically reducing the potential savings with the dual-mode WiFi variant. Legacy data networks such as CDPD, Mobitex and paging are fading, and users need to plan for a migration to SMS, CDMA 1.x, or GPRS/EDGE by mid-2005 to avoid being trapped in an expensive solution with deteriorating service levels. Commercial and pricing trends META Group expects a continued 10% to 20% annual price decline throughout 2007 for voice calls, and 20% to 40% for data services. We expect mobile voice charges to be comparable to wireline voice by 2010. Coverage and technology are declining as differentiators, as there are only very small differences in coverage in the EMEA and Asia regions. Quality in the Americas and Australia will become less of a differentiator by 2006, as industry consolidation and network build-outs continue. Operators are changing their messaging to compete on service levels and price. The new 3G-only entrants are competing only on price initially, which drives down the price for services in 2/2.5G networks as well. Mobile data roaming (predominantly GPRS) has improved significantly during the past 12 months, but still has a way to go before becoming nearly as ubiquitous as voice roaming. Jump-starting wireless data is a paradox for the operators – pricing will remain expensive through 2006 (and beyond) due to low levels of enterprise adoption and low traffic volumes, even though data pricing is the principal barrier to increased traffic. International organisations are hurting from expensive roaming charges (2.5x-3x more expensive than in-country-of-subscription use) for both voice and data services. Multinational enterprises should exploit pan-regional pricing plans and aggregate their total buying power across the region (including wired voice and data networks) to get the best deals. META Group estimates that 80% of large international organisations will have centralised the procurement of mobile services and made the ITO (IT organisation) responsible for managing all aspects of mobility by 2006. Although the unit charges for mobile services will continue to decrease, the overall cost for mobile services will continue to increase, as consumption rises faster than the prices decline. Carrier offerings and new equipment make the move to wireless service as the only voice line for business users attractive. This is fuelled by vendors like Ericsson, Nokia, Alcatel and Siemens, concomitant with attractive rate plans being offered by mobile operators for companies that move a substantial portion of their voice minutes over to mobile voice. Most G2000 enterprises will continue to have focused efforts during 2005/06 to contain cost and refine usage patterns of mobile services. The primary vehicle is a well-balanced mobile policy, which is becoming mandatory during 2005. The mobile policy needs to be complemented with solid processes backed up with appropriate tools to monitor and enforce the policy. Bottom line: Competition for wireless customers will drive pricing down 10% to 20% per year through 2007. Users should centralise mobile-service procurement, understand usage patterns, control usage and aggressively negotiate mobile contracts. Business impact: Improved and less expensive mobile data networks enhance the return on investment of extending applications to an increasingly mobile workforce. |
3G for US market
2005 will be remembered for some major achievements in the wireless industry such as reaching the milestone of two billion subscribers worldwide and Nokia selling its one-billionth handset in Nigeria. There were some modest successes worth noting as well like total number of 3G subscribers reaching the 50 million milestone. Following Japan and Korea, 3G networks are being deployed worldwide and the subscriber base will be reaching the 10% critical mass in the next 18-24 months. In this article, we will focus our attention on 3G’s diffusion to mass-market in key geographies, look into key drivers for 3G growth, and discuss the short-term (12-18 months) and long-term (1-5 years) trends.After a hesitant start, 3G networks have finally started to proliferate. As of Dec 2005, over 90 operators have launched EV-DO (20) and WCDMA (70) networks worldwide and there are over 200 3G devices available (Source: 3GToday.com). For the purposes of this article, we will only consider broadband technologies such as CDMA EV-DO and UMTS and their subsequent enhancements as 3G. EV-DO Rev 0 and UMTS on an average provide 400-700kbps and 220-320kbps respectively; peak rates are a bit higher. EV-DO Rev A and HSDPA (High Speed Downlink Packet Access) will provide on average 500kbps-1Mbps. These upgrades will enable simultaneous (otherwise known as combinational services) rich multimedia content applications such as: full album MP3 downloads, video conferencing, movie downloads, high-res pictures, real-time VoIP, multiplayer, and interactive gaming.
In October 2001, NTT DoCoMo succeeded in launching FOMA — the world’s first fully commercialized third generation mobile service. Based upon WCDMA, FOMA supported high-volume, high-speed transmission to enable a new range of services such as videophone and videomail. Since the launch of the service, coverage has been extended to almost 100% of the Japanese population, and the release of new terminals with higher-level functionality continues to attract ever more subscribers who want to upgrade to FOMA. SK Telecom and KTF launched their EV-DO initiatives in 2002 and their subscriber base has been growing steadily. 3G has impact on both voice and data traffic and on types of applications one can introduce. One of the primary reasons for DoCoMo to move to 3G was to get more voice capacity. However, it is the data applications and traffic that industry is banking on and for good reason. There is clear evidence from launched networks that broadband wireless attracts higher ARPU. SK Telecom and KTF in Korea, DoCoMo and KDDI in Japan, Vodafone in Europe have all experienced higher ARPU from their 3G customers. Operators in other countries have also experienced over 50% gains in ARPU from 3G subscribers.
We are reaching a critical 12-18 month period in 3G’s evolution cycle. Before we delve into the trends and forecast of subscriber growth, we will first discuss what the key drivers of 3G growth are and then enumerate the important factors to enable quicker diffusion of a new technology. Both i-mode and FOMA provide good case studies of understanding the basics of successful launches.
Network Coverage
i-mode in Japan has been the most successful data service ever launched because of all the key growth factors were in place such as nationwide network coverage, choice of cheap handsets, and a healthy ecosystem of vendors, content, and applications. While i-mode did everything right, FOMA clearly lacked many of these elements on launch and as such floundered for a number of months before there were a number of good handsets with battery life equivalent to existing handsets. Once the network coverage reached over 90% POPs (Figure 1) and handset prices dropped, the consumers embraced the new services. FOMA penetration will reach over 50% during first half of 2006. It should also be noted that i-mode hasn’t really done well outside Japan primarily because of lack of clear strategy, relevant content, devices and a fractured eco-system – the very elements that made it successful in Japan.
Handset price and choice
As mentioned above, choice of affordable handsets is key to adoption. 2006 should see handset ASPs drop below $200 – an important benchmark. This should accelerate the introduction of both EV-DO and WCDMA handsets worldwide especially in Europe and North America. In price-sensitive emerging economies in South-East Asia and Latin America, 3G won’t take off until handset prices (without subsidies) drop in the range of $50.
Healthy application and services ecosystem
Another important lesson from i-mode was DoCoMo’s effort to build a healthy developer and content ecosystem before and after the launch. In her book “i-mode, the Birth of i-mode” Mari Matsunaga — who led the content development team — recounts the pains her team took to attract and retain major content players prior to the launch. This was in stark contrast to AT&T Wireless’s launch of its obligatory UMTS network in four US cities with 1980isque handsets, no differentiated content offerings, providing no compelling reason for users to upgrade. i-mode’s business model was also very attractive to content providers. Aside from any co-marketing dollars agreed to by DoCoMo and the content provider, the rev-share to i-mode was a nominal 9% of the retail rate, leaving the content provider with 91% of the revenue for itself and its partners.
External driving factors
There are some key sports events over the next three years that will accelerate the deployment and adoption of 3G services. Soccer world cup in 2006 (Germany), winter Olympics in 2006 (Italy), Cricket world cup in 2007 (West Indies), and summer Olympics in 2008 (China) will all prove to be catalyst in 3G growth worldwide. In addition to major global sporting events, the convenience of accessing important new bulletins in real-time will become a common consumer experience. With billions of fans willing to pay to track performance of their favorite teams and players, network operators worldwide wouldn’t want to miss out on this significant consumer demand. Action-packed events will also promote video and streaming services.
3G Forecasts 2006-2010
The 10% adoption represents a milestone in any consumer technology proliferation. The critical mass point in the diffusion process is generally expected to occur approximately between 10 and 20% adoption. Figure 2 shows the forecast for 3G growth worldwide and for key economies such as Japan, South Korea, UK, Western Europe and the US. As we move into 2006, Japan and Korea already have over 40% of the nation’s wireless subscribers experiencing 3G technology. The growth will continue in the two nations until 2008 when penetration will start hitting the saturation level between 80% and 90%. For US and western Europe, next 18 months will be particularly interesting as the penetration hits between 10-20%. US is just starting with its 3G growth. Verizon is leading the charge with approximately 2M EV-DO subs by end of 2005 (As of Dec 2005, Verizon’s BroadbandAccess is available to more than 140 million Americans in 171 major metropolitan areas and 68 primary airports).
Sprint and Cingular are also aggressively building out their nationwide EV-DO and UMTS/HSDPA networks respectively and signing-up customers. Sprint’s EV-DO network has been expanded to cover more than 141 markets and 250 airports nationwide since its launch in July 2005, bringing it closer to its target of being accessible to over 150 million people in 220 major markets by early 2006. Cingular is turning up approximately 16 new UMTS markets by end of 2005; they would all have the HSDPA upgrade installed. While volume HSDPA chipsets are not yet shipping, Cingular will have HSDPA-ready PC cards from Novatel and Sierra Wireless. The first handsets will be UMTS only, and Cingular is currently evaluating phones from Samsung, Nokia and LG Electronics for commercial launch. In 2006, Cingular will start selling its first HSDPA handsets, which will contain an early release of the HSDPA chipsets, supporting network data speeds of 1.8 Mb/s. The HSDPA standard has 12 separate categories, the 10th iteration of which supports HSDPA’s full theoretical capacity of 14.4 Mb/s.
Several factors will accelerate the growth of 3G adoption in US in 2006-2007.
First and foremost, network coverage for both EV-DO and UMTS will reach over 80% POPs by end of 2006. As indicated earlier, the cost of phones are dropping and economies of scale is kicking in to help alleviate the significant price-factor for mass market adoption. Finally, a number of MVNOs are launching in 2006. ESPN, Disney, Helio, Amp’d are all focused on multimedia content and applications on broadband networks. This will raise consumer awareness, put pressure on prices, and increase competition thus accelerating adoption of 3G services. However, while MVNOs will act as a catalyst, not all MVNOs will be successful as it is going to be very difficult to go after the same young demographics. MVNOs will have to continuously innovate and roll out new services in order to gain new customers and prevent them from churning.
By mid 2007, we should be hitting the 10% critical mass subscriber base for 3G services in the US. Western Europe should follow the same pattern and by end of 2007, we will be reaching 10% critical mass worldwide. By 2009, US will become the leading nation in terms of number of 3G subscribers, a status it will briefly enjoy before being eclipsed by China during early part of next decade.
As you might have noticed, China is not on the 3G map yet. There is a significant debate in the industry as to when will the 3G licenses in China be issued. It is clear that China’s government wants to have a 3G network operating in time for the Beijing Olympics in 2008, which means they need to issue the licenses within the next six months. It is also quite likely that government might only be focusing on providing the infrastructure in the cities that are hosting Olympics in which case time pressure is not that great and we could be looking at 2007 before any of the 3G network becomes operational China’s government is waiting for certain developments before issuing the licenses. Some of the Indian carriers are planning 3G trials and India might end up launching their 3G networks prior to China though it will be sometime before they can reach critical mass. The issue of China’s timing is important because it could prove to be an important swing factor for CAPEX spending in 2006. Should Chinese carriers (or the Indian carriers) get the go ahead early enough, their spending could take global growth up to or above this year’s rate of increase. That amount of increase captures a lot of attention from infrastructure vendors as it can make or break their balance sheets.
We’ve got 3G, now what?
3G in-of-itself means nothing to the end-user unless it is followed-up by some compelling services and applications that enrich consumer’s life without breaking the bank. Higher bandwidth does foster rich media applications that enhance the user experience as well as empower user to have information and content at their fingertips. With the introduction of location-based services, presence based infrastructure, more personalized concierge services, broadcast technologies such as MediaFlo and DVB-H, better battery life, multimedia content (music, video), mobile advertising, P2P and M2M applications, and mobile search, things do look bright for the industry. However, one must be cautious and not over-promise and under-deliver but rather systematically educate users on the benefits (and shortcomings) of the new services (not technology). In addition, pricing must be attractive for mass-market to be interested in such services.
There are some trends that will influence the carrier business like the move towards all-you-can-chew-n-spew pricing (irrespective of data applications). Currently, each new service (music, video, etc.) is classified as a premium service with an additional price tag. However, mass-markets have a price ceiling and over time, we will move from al-carte model to fixed fee. Additionally, as smart phones become a larger percentage of the phone population, application model on the device will look more and more like the desktop model where users will start deploying apps independent of carrier offerings.
3G will also have a significant impact on the enterprise and government sectors. Instead of being tethered to a hotspot, 3G cards will provide true mobility. Enterprises have been restlessly waiting for reliable high bandwidths with nationwide coverage. EV-DO and WCDMA both provide that capability and enterprises will be pretty aggressive in launching some vertical applications such as CRM, SFA, FFA, and SCM. Clearly, both mobile consumer and enterprise sectors are primed for growth in the coming years. Companies who are prepared to deal with the shift in communications paradigm are going profit from it.
Conclusion
It is evident that we are entering a new era of always-on mobile communications. The three billion subscriber milestone will be reached within the next three years and by then majority of the subscribers will be using 3G+ services. Within 18 months or so, we should be hitting the 10% critical mass subscriber base for 3G services in the US and Western Europe. This milestone will represent a shift towards accelerated adoption. By 2009, US will become the leading nation in terms of number of 3G subscribers. Around that time, China and India will also be in significant 3G growth mode. By focusing on the key growth drivers such as network coverage, handset prices and choices, healthy applications and services ecosystem, industry will gain quicker diffusion of 3G services. The most important people in the industry would be the ones who are challenging the existing mindset and business models. By the year 2010, the global communications marketplace – and mobile communications within that – may well be unrecognizable when compared with today. By reference, we need only to look back 15 years to observe that most of the dynamics that dominate communications today did not yet exist and were not commonly foreseen. The new mode of communication will help shape economies and communities and accelerate the progress towards always-on pervasive computing.
