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2013 – The year in mobile December 23, 2013Posted by chetan in : 4G,4th Wave,Applications,Chetan Sharma Consulting,Connected Devices,Devices,Disruption,Enterprise Mobility,European Wireless Market,Fourth Wave,Intellectual Property,IP Strategy,Mergers and Acquisitions,Mobile 2013,Mobile Applications,Mobile Future Forward,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 40 comments
Mobile Predictions 2014 Survey: We launched our annual mobile predictions survey for 2014 last week. For all of you have already contributed – many thanks! Rest – will appreciate you filling out the short survey and helping us in analyzing 2014. We even have prizes J. We will have the full analysis from the survey during first week of January.
2013 – The year in mobile
Just like there is no "year of electric cars†or "year of razor blades†or "year of the Greek yogurt,†there is no "year of mobile†or "year of this or that.†However, as we have seen over the 30+ years of mobile evolution, the next year is better than the previous one and so on and so forth. So, 2013 ends in the long tradition and continuum of human endeavor to make significant progress in multiple mobile dimensions and make an impact on individuals and societies alike. 2013 proved that connectivity has become the core of our fabric and we are entering the "connected intelligence era†that will enable the Golden Age of Mobile.
In no particular order, here were some highlights of mobile 2013:
Number of mobile subscriptions ~ humans: the total number of mobile subscriptions got tantalizing close to the number of humans on the planet. Next year, we will go past the milestone but it shows the pervasiveness and strength of the mobile technology that it has become the basic part of our Maslow's hierarchy.
More data please: As smartphones approach the 2B mark, the data appetite of consumers showed no signs of abating. In Sweden, the mobile broadband subs are consuming over 7GB/mo. In the US, some Android devices are consuming over 4 GB/mo on average. Operators will need to continue to refine their pricing and margin models as the demand for more spectrum will continue.
The dominance of Samsung and Apple: The tussles in the device segment has all the intrigue and juxtaposition of a Shakespearean drama and the ups and downs of a Pavarotti's masterpiece. Through sheer muscle tenacity and the execution speed of Usain Bolt, Samsung was able to firmly dominate 2013 despite Apple's grip on the high-end smartphone market. These two account for almost 50% of the smartphone shipments and almost all of the profits in the space. Apple continued to set the tone for the market with the launches of new iPhones and iPads. Though iOS trails Android in raw deployment, it trounces it in consumer usage. It is also remarkable how quickly consumers upgrade to the latest iOS in stark contrast with the Android fragmentation. Apple finally got access to the big Chinese market.
The disappearance of the legacy device brands: Nokia, Motorola, and RIM were dominant players a few years ago but Apple ensured the smartphone script is rewritten. They all made serious strategic errors one after another and while Nokia and Motorola have found new families to host their aspirations, their story should be a reminder of the turbulent cycles of the device business and that the complacency virus spares no one. The rise of the local OEMs should keep everyone on their toes in 2014.
Android juggernaut: In 2013, Android continued to create distance with Apple in terms of downloads, easily going past the mind boggling 1 billion milestone. Android has changed the industry for the better. While there is trouble in the house, Android will continue to play a major role in the device and app ecosystem in 2014.
The growth of OTT Services: As we discussed in our 4th wave paper earlier this year, OTT Services will be the biggest growth segment for the next decade. In 2013, the segment grew 50% ahead of any other telecom segment. Young IP messaging stalwarts fundamentally altered the messaging landscape with Whatsapp performing exceptionally. SMS usage and revenue numbers were impacted worldwide.
The digital revenue streams are very distributed with diverse players such as Facebook, Twitter, Starbucks, Expedia, Uber, Pandora, Amazon, AT&T, Telefonica, Verizon, DoCoMo, Netflix, China Mobile, Rovio, Square, Softbank, Ebay, Hertz, Apple, Google, and Microsoft. In our work with players around the world this year, it is clear that there is significant energy and application in mining the opportunities on the 4th wave. With nascent efforts in Bhutan, Vietnam, Malaysia to moonshots in the US and Europe, mobile is rewriting the rules in virtually every industry. Fasten your seat belts for another fast paced year in 2014.
Post-PC beat PC+: Apple expertly wrote the post-PC narrative and while the PC+ crowd has a legit argument, perception is often reality and there in no doubt that from here on out, the industry will be talking about the post-PC world in one voice. Even Microsoft will grudgingly admit to the transition and likely shift its strategy accordingly. As we wrote long time ago, Tablets have fundamentally altered the computing paradigm. In our SMB research released earlier this year, it was clear that smartphones and tablets are the tools of choice for the enterprise and that is not only altering the device business but also the software landscape. Mobile broadband, the cloud, and the applications are altering the enterprises – big and small. Microsoft should take solace from a tough year of progress. Blackberry is practically done and Microsoft has established itself as the distant but a viable third mobile ecosystem. Had it not been for a series of strategic mistakes, Microsoft might have made better inroads in 2013.
LTE launches: LTE is the fastest growing generation of cellular technology in the history. With over 250 networks launched, the desire to launch IP networks quickly is on top of the agenda. US leads with all major operators having substantial LTE deployments but other nations are fast catching up. While there has been quite a bit of focus on LTE, WiFi has been emerging as the white knight and its importance only grew in 2013 with 60-70% of the mobile data traffic being carried by WiFi networks in most of the countries. It might lead to some interesting business models in the coming years. 5G entered the industry lexicon.
M&As: It is natural for fast growing and competitive industries to consolidate. 2013 wasn't any different. There were some blockbuster and expected M&As: Microsoft acquired Nokia, Softbank surprised with Sprint/Clearwire acquisition, Verizon finally got hold of its destiny from Vodafone. As we have eluded to several times in our past research notes, we expect the global M&A to continue with several block buster deals slated for 2014. Stay tuned.
Patent wars: In maturing markets, patent wars are the unfortunate part of the ongoing battle for dominance. Mobile saw its share of patent wars. With roughly quarter of the USPTO grants becoming mobile related, it shouldn't come as a surprise though.
Regulatory tussles: Regulators are generally always behind in understanding a fast growing industry. It was clear in 2013, that the convergence of the computing and communications world has left the regulatory world woefully short of expertise and imagination. Governments around the world will do better by hiring folks from the industry to get a grip of the fast-paced every-changing dynamics of the mobile world as the very competitiveness of a nation depends on it. From spectrum to privacy, from competition to commerce, regulators need to get up to speed on unexpected trajectories of the new world.
Security and Privacy: From Snowden revelations to industrial espionage, from credit card data loss to enterprise security, the security and privacy of mobile data, applications, networks, and devices became front and center of the security and privacy debate.
Operator disruption plays: In the telecom space, the #4 player generally doesn't have a big impact on the overall mechanics of the industry. However, when it has nothing to lose, it can provide a potent dose of disruption to the market. Free in France and T-Mobile in the US were examples of that this year. In France, by offering cheap mobile data services at low margins, the newcomer altered the economics of the segment tumbling the incumbent revenues by 10%. In the US, through a series of financial and marketing maneuvers, T-Mobile was able to alter its net-add trajectory and had meaningful sub gains for the first time in three years. Also, for the first time, T-Mobile forced the top three to react to its moves and not the other way around. It also inspired other smaller players in other countries to rethink their strategies.
Connected devices: The promise of M2M and connected devices has been there for some time. Internet of Things has morphed into the gimmicky Internet of Everything. While the hockey stick curve hasn't arrived yet, there was plenty to celebrate with the introductions of Google Glasses, wearables, smart watches, connected autos, glamorous thermostats, winking light bulbs, home security and energy management solutions and much more. GE is spending billions for its "industrial Internet†initiative. A nice platform has been set for continued feverish growth and product introductions in 2014.
Mobile's impact on commerce: Mobile is changing every industry but its impact on commerce is particularly notable. In the 2013 holiday season (according to IBM), mobile made 17% of the online sales increasing over 55% from 2012. Tablet users spent $126/order.
Meteoric rise of mobile apps: In 2010, we evaluated the impact mobile apps will have on the industry. Much of the growth has been expected, however the players who lead in revenue and downloads have fluctuated across the various platforms. In 2013, Google started to match Apple in downloads though Apple easily wins in the revenues category and thus still remains more attractive to the developers though the gap is closing.
There was much more – Twitter IPO, Surface, Moto X, spectrum scandals, Facebook's love for mobile, Google mobile advertising dominance, the rise of the Chinese OEMs, decline of HTC, and several other events captivated our attention.
I am positive that 2014 is going to be another terrific year for mobile. The progress and surprises will come from all quarters. New players will emerge, new business models will take hold, and we will make significant progress. I am also sure that you all will do your part in shaping the mobile cosmos.
Would love to hear from you. How was your 2013? And what are you looking to do in 2014 that will change the mobile world? Please be sure to fill out our annual predictions survey for 2014.
With best wishes for an outstanding 2014.
Yours truly
Chetan Sharma
US Mobile Data Market Update Q3 2012 November 12, 2012Posted by chetan in : 3G,4G,AORTA,Applications,ARPU,Infrastructure,LTE,M&A,Mergers and Acquisitions,Messaging,Mobile Advertising,Mobile Applications,Mobile Cloud Computing,Mobile Commerce,Mobile Ecosystem,Mobile Future Forward,Mobile OEMs,Mobile Operators,Mobile Payments,Mobile Traffic,Privacy,Security,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
US Mobile Data Market Update Q3 2012
The US mobile data market grew 3% Q/Q and 17% Y/Y to reach $19.9B in Q3 2012. Data is now almost 43% of the US mobile industry service revenues. For the year 2012, the market is on track for mobile data revenues in the US market to reach our initial estimate of $80 billion.
Largely due to the strong postpaid performance by Verizon, the US operators added a net of 2.4M new subscribers. Sprint and T-Mobile saw further postpaid declines. For T-Mobile, Q3 marked the nine straight quarters of postpaid losses.
The quarter also saw a couple of block-buster operator M&As that took many in the industry by surprise. T-Mobile found a soul mate in MetroPCS while Softbank showed up at the altar for Sprint. Once the mergers are executed, Sprint is likely to emerge as the stronger of the two.
The two horse OS race got a new participant entry last month – Windows 8. Microsoft and its partners launched a worldwide campaign for a chance to compete. Microsoft also made a splash with the first computing device in its history – Surface. Both got a mixed reception from the market. We will find out how consumers will react in the Q4 numbers. Of all the OEMs, Q4 will be the most critical for Nokia who is running out of runway in its turnaround effort.
Despite setbacks in the IP battles, Samsung continued its march of being the undisputed unit leader in mobile device space. After displacing Nokia in Q1 2012, it continued to dominate in units shipped in Q3 2012. However, Apple dominates both the smartphone revenues and more importantly just crushes the competition on device profits. It has only 6% of the global unit shipment share but over 70% profit share. In tablets, Apple completely dominates the landscape in both shipments and revenue. In fact, 95% of the profits in the tablet segment go to Apple with the remaining ecosystem fighting for the crumbs. Apple has the complete stronghold on the supply chain and has sucked out the oxygen from the OEM world.
Amazon hasn't been shy about its ambitions in the mobile space. While the world awaits an Amazon smartphone, the company launched a slew of tablets to compete primarily with Google though its eyes are on Apple. Apple also launched iPad mini a mid-tier tablet to ward of threats coming from the bottom tier of the market.
As we mentioned it in our last update, smartphones are now past the 50% mark in the US and continue to sell at a brisk pace accounting for over 75% of the devices sold in Q3 2012.
While the US penetration of smartphones is over 50% as we reported last quarter, the 50% of the sub base is concentrated in only 30% of the households thus leaving plenty of growth left in the marketplace.
In terms of Y/Y growth, Connected Devices segment grew 19%, Prepaid 10%, Wholesale 6%, and Postpaid was flat. The connected devices segment picked up some growth after two straight quarters of sub-5% performance growth (Q/Q).
Verizon and AT&T maintained their top positions in the global rankings by mobile data revenues. A survey of the entire ecosystem shows that the US companies dominate the top 5 rankings of profit share. China Mobile leads the industry with Apple, Verizon, AT&T, and NTT DoCoMo completing the rankings.
Postpaid Doldrums and evolution of metrics – ARPU to ARPA to AMPA
The US market has added roughly 400K postpaid subs in the last two quarters. Verizon has added 2.4M, AT&T 400K, and Sprint and T-Mobile have lost a million each. Clearly, Verizon's performance is far superior to its competitor and its relentless focus on postpaid has yielded significant benefits. Typically, the postpaid ARPU is roughly 2-3 times that of a prepaid subscriber. So, while other operators have been adding prepaid subs, the improvement to the bottom line has been tepid especially for Sprint and T-Mobile. Sprint's losses have been primarily due to the bleeding of the Nextel customers. The iDEN network should turn off sometime next year and the continuous loss of overall postpaid subs might stop. T-Mobile faces a deeper challenge. Its net-revenue has declined in every quarter since Q4 2008, which is 15 straight quarters of revenue decline. In fact, its current revenue levels is at the Q2 2006 levels – that was six years ago. Though the company has done a terrific job upgrading the network to HSPA+ and doing blocking and tackling until it upgrades to LTE to come at par with its peers, the continuous bleeding of the postpaid subs needs a new strategy. Metro PCS helps gain new subs and spectrum but doesn't help with postpaid. In fact, one can expect that the churn will rise as consumers migrate from Metro to T-Mobile. 2013 will be a critical transition year for the company as it tries to compete with its larger competitors. Just being a "value†provider is the race to the bottom.
We have been advocating shared data plans to create more consumer demand for over two years. When I talked to CNBC earlier this year (Jan), I said that in all likelihood the family data plans will be introduced in the US market in 2012. I discussed this more with Bloomberg and USA Today and suggested that most likely Verizon will launch them first. Verizon and AT&T launched the shared data plans this summer with AT&T getting the benefit of launching it second. New types of plans also evolved the decades-old operator metric of ARPU to ARPA (Average Revenue Per Account) given that we are seeing a strong influx of multiple devices per individual/household. Verizon was first to transition and we expect others might introduce new matrices to measure progress and performance. AMPA (Average Margin Per Account) will also become an important metric in the coming days, first internally, and then for the markets.
Messaging Decline
Most western markets have seen the net revenue in the messaging segment decline. The US market has resisted the decline thus far. In Q3 2012, for the first time, there was a decline in both the total number of messages as well as the total messaging revenue in the market. It might be early to say if the decline has begun or the market segment will sputter along before the decline takes place. As we had outlined in our fourth wave paper, once the market segment reaches the 70-90% penetration mark, the decline begins and we might be seeing the start of the decline in messaging revenue. The decline is primarily due to the rise in IP messaging and operators have been slow to evolve their strategies in the segment.
Operator's Dilemma (And Opportunity): The Fourth Wave
In our paper "Operator's Dilemma (and opportunity): The Fourth Wave†earlier this year, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skillset and strategic approach that the past three curves. We are starting to see operators becoming more focused and aggressive. It is being widely adopted in the operator community around the world and some operators have started to break out the 4th wave revenues in their financials. We will have more discussion about how things are shaping up in future research papers.
AT&T has been better prepared in the US market and has embraced the ride on the fourth curve. It is investing in the areas of Digital Life, Mobile Premise Solutions, Mobile Payments, and Connected Vehicles. We discussed the subject at length in our recently concluded annual thought-leadership summit – Mobile Future Forward.
Operator M&A – The Rule of Three Strikes Back
Just when you thought the prospects of any major operator M&A slowed down due to the impending US election, T-Mobile announced its acquisition of Metro PCS giving it more spectrum, access to public markets, a good chunk of subscriber base to become a more competitive number 4. Sprint and Softbank followed the announcement with an absolutely brilliant maneuver. Sun Tzu would have been proud. It provides Sprint access to capital, economies of scale, and becomes a much stronger number 3, and a global telecom player with scale and ambition. There have been some interesting twists and turns but as we have stated before, the US market competitive equilibrium will be complete when Sprint and T-Mobile get together at some point down the road.As outlined in our research paper on the subject, market forces find their way to get to 3 dominant operators that compete for attention and revenues, rest becomes noise. While the regulators might scoff at the idea, the inevitable market forces will find their way around.
Connected Devices
In Q3 2012, we released some research around connected devices. If we just look at the active connected devices which can connect to the Internet directly either by wireless or wired means, either using cellular or WLAN, the total number of connected devices in the globe just crossed the 10 billion mark which means that the connected device to human ratio is now 1.3.
- 70% of the connected devices use some form of wireless connection.
- In the US, roughly 80% of the devices use some form of wireless connection.
- For the US Household survey, we asked 1014 HHs about the number of connected devices in their households.
- The average number of devices/HH was 5.
- Over 6% of the HHs had 15 or more devices.
- Splitting the respondents by gender, the results were about the same.
- Splitting the respondents by age group, the 65+ age demographics had the highest number of devices/HH followed by the 18-24 age group.
- The Northeast region of the US had the highest number of devices/HH.
- Suburban HH had the highest number of devices/HH.
More details available here.
Device ecosystem
Windows 8 arrival – Sept was a big month in Microsoft's attempt to regain its lost mobile decade. It went from a dominant position to virtually zilch coinciding with the remarkable ascend of iOS and Android. To make any device sell – one needs good and competitive device, distribution channel and marketing muscle, and brand loyalty. I think Windows 8 is genuinely good, is different, and for the first time can stand with its peers (obviously it needs to build a robust apps portfolio and a stronger developer ecosystem).
In the past, while operators, OEMs, and Microsoft announced significant advertising spend, it had almost negligible impact on sales. The actual $ amount spend was tepid, operators didn't want to be guinea pigs just to prop up a third ecosystem. With Windows 8, things might get better. We can see many more awareness campaigns, more OEMs are launching some quality devices, and operators are warming up to the idea as well. The brand loyalty index for Microsoft Mobile is fairly low and it will take a heavy lift and a few billion dollars of advertising spend to move the needle. The good news is that the devices are shipping and it is not thanksgiving yet.
However, Nokia, once propped at every Windows Phone rally isn't getting any special love from Microsoft anymore (in public) and it has become one of the many OEMs on the conveyer belt. Its ability to differentiate itself enough in Q4 will decide its 2013.
Last week, Qualcomm eclipsed Intel in market cap marking another milestone in the progression of the mobile ecosystem.
Surface, mini, and the tablet market
Apple launched the iPad mini for some of the same principles that Microsoft launched Surface. It is better to be cannibalized by self than by the enemy. Microsoft saw the notebook market shrink and needed a product to stem the bleeding while Apple saw Amazon and Google attack the bottom tier with a different model that poses a credible threat. Tablet market is indeed fundamentally altering computing in many ways. The changing landscape of computing also has impact on the ecosystem and the application development environment. Developers flock to platform reach, ease of access to the marketplace, and the basic economics of a viable business model. Windows a percentage of computing platform is shrinking which threats not only the platform but also Microsoft's other software franchises. Surface is classic blocking and tackling to provide a jolt to the shifting ecosystem. With iPad mini, Apple is attempting to lock the mid-top tier of the tablet market and daring its competitors to just play in the bottom tier that leaves no profit on the hardware and revenue stream from services for a very select few.
Apple is getting a lot of grief for its maps app. While the strategic decision to take control of a key application was spot on, it faltered on communications. The half-baked endeavor was nowhere close to being the "best mapping app.â€
Infrastructure segment faces a tough road ahead
The infrastructure segment of the wireless industry is facing turbulent and interesting times. The business model for many vendors hasn't evolved much in the last few years and some of the disruptive forces are bound to have a deep impact on the segment. ALU is facing serious headwinds and will need to figure out its strategic options going forward. Ericsson's margins are under pressure but more interestingly its services and support revenue exceeded its hardware revenue for the first time. Huawei and ZTE reported decline in revenues but they are making gains in the infrastructure markets outside US and in handsets in the US market. Until Premier Xi Jinping and President Obama sort out their geopolitical differences, the Chinese vendors remain shutout of the US infrastructure market.
What to expect in the coming months?
All this has setup an absolutely fascinating 2013 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. Players who firmly attach themselves to the 4th wave will reap benefits while the ones who miss it will see their fortunes dwindle.
As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q3 2012 US wireless data market is:
Service Revenues
· The US Wireless data service revenues grew 3% Q/Q and 17% Y/Y to $19.9B in Q3 2012. For the year 2012, we are forecasting that mobile data revenues in the US market will reach $80 billion.
- Verizon and AT&T dominated the quarter accounting for 69% of the mobile data services revenue and had 66% of the subscription base.
- Verizon and AT&T maintained its #1 & #2 mobile data revenue ranking in Q3 2012. Sprint and T-Mobile maintained their #5 and #9 rank in the top 10 mobile data operators list for Q3 2012.
- The Overall ARPU declined by $0.15. Average voice ARPU declined by $0.58 while the average data ARPU grew by $0.43 or 2% Q/Q.
- The average industry percentage contribution of data to overall ARPU is now at the 43% mark in Q3 2012 and is likely to exceed the 50% mark early next year. All the top three US operators are around the 45% mark with Verizon leading the trio. (For reference, all three major Japanese operators are now over the 60% mark).
- The US operators added 400K postpaid subs and over 2.4M total. It was the lowest net-adds quarter in the US mobile history (barring the early days of tepid growth)
- T-Mobile's postpaid woes continued for the ninth straight quarter.
- Verizon led the market with 1.7M net-adds followed by AT&T at 678K, and T-Mobile at 160K. Sprint returned to the negative net-add territory after nine straight quarters of positive growth.
- For the twelfth straight quarter, AT&T reported more net-adds from connected devices than postpaid subs.
Applications and Services
- Q3 2012 data suggests that the messaging revenues in the US market might have peaked. For the first time both the overall messaging volume and the revenues declined Q/Q. The task to prolong the access revenue curve and investment in the fourth curve has become all the more urgent.
- The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
- Q3 2012 again saw tremendous activity in the mobile commerce and payments space with a lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months. On the retail side, Starbucks is a player to watch as it tries to become a more active participant in the digital ecosystem.
- Smartphones continued to be sold at a brisk pace accounting to almost 80% of the devices sold in Q3 2012 with Android dominating though iPhone leads in revenue and mindshare.
- Samsung now leads in every major unit sale category both on the world stage as well as in the US. However, profits are a different equation where Apple overshadows its rivals like Gulliver on the Lilliput land.
- While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off. It renewed its entry into the battlefield with Windows 8 last quarter.
- Apple's iPhone sales improved marginally in Q3 but the OEM was more plagued by the supply-chain constraints than demand.
- US continues to sell over 40% of the world's smartphone every quarter thus making it the most attractive market for OEMs.
- AT&T continues to dominate the connected devices segment with over 46% market share.
- Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 15M making it the leading LTE operator in the world. AT&T's and Sprint's LTE rollouts are gathering steam. T-Mobile announced that it is putting the cash and spectrum it got from AT&T to good use and deploying LTE by 2013. Expect the "fastest network†marketing to continue for at least another seven quarters. Verizon reported that 35% of its total data traffic is on the LTE network now.
- There is always a beauty contest amongst operators as to who sold more iPhones. AT&T again bested its rivals by selling roughly 48% of the iPhones in the US.
Mobile Data Growth
- The overall data consumption in the US market in 2012 is expected to exceed 2000 Petabytes or 2 Exabytes. The smartphone data consumption at some operators is averaging close to 900 MB/mo. Some devices are averaging close to 2 GB/mo. As we move into 1GB range along with the family data plans kicking in, you can expect the data tiers to get bigger both in GBs and dollar amount.
- The Signaling traffic has increased 3x.
- Mobile data traffic growth is likely to slow down to roughly 80% after doubling for the last five years. Voice traffic will dip below 10% of the overall traffic in 2012.
- While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.
Your feedback is always welcome.
Chetan Sharma
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2013. The next Global Wireless Data Market update will be issued in Mar 2013.
Disclaimer: Some of the companies mentioned in this research note are our clients.
2012 Mobile Industry Predictions Survey January 3, 2012Posted by chetan in : 3G,4G,AORTA,Applications,ARPU,BRIC,Carnival of Mobilists,Carriers,Connected Devices,CTIA,Disruption,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Infrastructure,Intellectual Property,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Breakfast Series,Mobile Cloud Computing,Mobile Commerce,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Payments,Mobile Search,Mobile Traffic,Networks,Patent Strategies,Privacy,Smart Phones,Speaking Engagements,Speech Recognition,US Wireless Market,Wi-Fi,Wireless Value Chain,Worldwide Wireless Market , 12 comments
2012 Mobile Industry Predictions Survey
First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2012. My thanks to all who participated in our 2012 Mobile Predictions Annual Survey. It gives our community an insider's view of trends.
2011 was a terrific year for the mobile industry. With all its ups and down, consumers embraced devices, applications, services, and technology with more gusto than ever before. In the waning hours of 2011, we crossed the 6 billion subscriptions milestone. While the first billion took 19 years, this last billion only took 15 months.
Smartphones are selling like hot cakes. We estimate that by the end of Q4 2011, over 60% of the devices sold in the US were smartphones and over 30% of the global sales were for the evolved brethren of the primordial featurephones. Sparked by insatiable consumer demand for mobile data, LTE and HSPA+ networks are sprouting all over the planet with US leading the charge for broadband deployment.
Our annual survey is a way for us to engage our community on the trends for the next year. We put some of the pressing questions to our colleagues and industry leaders. We are able to glean some valuable insights from their choices and comments, some tangible shifts, and get a sense of what's to come. Executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain and around the world participated to help see what 2012 might bring to keep us on our toes. What makes this survey unique is that it draws upon the collective wisdom of folks who are at the center of the mobile evolution.
Fifteen names were randomly drawn for the limited edition of the Mobile Future Forward 2011 book. The winners are:
Tor Bjorn Minde, Head of Ericsson Labs, Ericsson
Sunder Somasundaram, Industry Solutions Practice Director, AT&T
C. Enrique Ortiz, Mobile Technologist, About Mobility
Russell Buckley, CMO, Eagle Eye
Marianne Marck, VP – Engineering, Starbucks
John Foster, President, ZED USA
Angel Luis Saez, Sr. Director, Orange Spain
Dilip Mistry, Senior Director, Microsoft Asia
Phyllis Reuther, Advanced Analytics Lab, Sprint
Gene Keenan, VP of Mobile, Isobar
Elizabeth Day, Director of Finance, Trilogy International
Alan Cole, Research Staff Member, IBM T.J. Watson Research Center
X J Wang, VP – GM China, Vesta Corp
Michelle Lee, Director, SK Telecom
Hemant Chandak, Sr. Analyst, Cisco Systems
Thanks again to everyone who contributed. We will be calling on you again next year. It has been a terrific year for us at Chetan Sharma Consulting and we are looking forward to an engaging and productive 2012.
Be well, do good work, and stay in touch.
Thanks and with warm wishes,
Your feedback is always welcome.
Chetan Sharma
Now onto the 2012 Mobile Industry Predictions Survey Results.
1. What was most newsworthy in Mobile 2011?
Android had a spectacular rise in 2011 around the globe. Android OEMs collectively shipped the most number of devices and while margins shrank, they were able to put a united front to iOS. 2011 will always be remembered for the passing away of the industry transformer Steve Jobs. His work directly or indirectly touched billions of souls around the planet, many times over – something rarest of human beings are able to achieve in their life time. Regulatory tussles and significant increase in IP disputes also occupied the headlines. Amazon announced its intention for the mobile space with the launch of Kindle Fire.
2. What will be the biggest mobile stories of 2012?
As we look towards 2012, our panel voted for the continued growth of mobile data as the biggest story followed by Amazon's entry into the mobile space. Some key questions for the year are: Will Microsoft/Nokia devices will make any meaningful progress? Will RIM survive the year? How does Google manage the fragmentation, decline in margins (for the OEMs), and the IP issues? Will any high-profile security and privacy mishaps lead to more regulatory entanglements? Facebook IPO and its mobile ambitions? How do operators manage the data demand? Which M&As will capture industry's attention? Will Apple continue to dominate on both smartphone and tablet front? What does Apple do with mobile payments? and much more. Clearly, it is going to be a terrific year.
3. Who will be the most open player in the mobile ecosystem in 2012?
File this in the "perception is reality†folder. Despite all the criticism, Google has maintained its strong position as the most open player in the mobile industry.
4. What applications will define 4G?
Still looking for a killer-4G app? Video, cloud computing, and access will continue to drive 4G demand and growth.
5. What will be the breakthrough category in mobile in 2012?
For a second year in a row, the panel voted for mobile payments and mobile commerce as the top two category that will find their voice. Mobile advertising has become mainstream so it lost its ranking in the top 3.
6. What will be the most popular consumer mobile applications in 2012?
Apps preferences vary by regions depending on a whole range of factors. Messaging and Commerce are the top two categories for the developing world while consumers in the developed nations are likely to gravitate towards commerce and location based services.
7. Which will be the most dominant (unit sales) tablet platform in 2 years?
iOS and Android will dominate the tablet landscape for the next 24 months. A late entry by Windows 8 tablets could make a dent but don't count on it.
8. Who will make the biggest mobile acquisition in 2012?
2011 had its fair share of block-buster acquisitions, some successful while others were not. Our panel expects Microsoft and Google to continue making the biggest acquisitions.
9. How will the "Apps vs. Mobile Web" debate shape up in 2012?
It seems like the pendulum is swinging towards the mobile web though hybrid solutions are likely to stay with us for a long time.
10. Who will define the mobile payment/commerce space?
The financial companies safely locked in the mobile payments space and while the value chain is fairly complicated and definition confusion abounds, the likes of Visa, Operators and Google will continue to drive the payments/commerce space.
11. Which solutions will gain the most traction for managing mobile data broadband consumption?
Managing data growth and margins drives all strategies at mobile operators these days which in turns drives the value chain. 4G, tiered pricing, and mobile offload continue to be the top solutions if one has the spectrum that is.
12. Which category will generate the most mobile data revenue in 2012?
Messaging, access, apps, and advertising are the four broad categories that drive mobile data revenues around the world. The developing markets rely on messaging while the developed markets are increasingly looking to access as their dominant form of revenue generation.
13. What will help mobile cloud computing gain traction in 2012?
Mobile cloud computing will continue to be defined by enterprise, storage, and media needs.
14. Which enterprise segment will mobile impact the most?
Best buy is becoming the next Circuit City. Other retailers will follow unless they can successful reinvent themselves. Health is more regulatory driven so the progress will be slow though it is ripe for a complete overhaul and developing nations are moving much faster in this space.
15. What will be the dominant revenue model for apps in 2012?
In-app revenue model made good strides in 2011 but the combination of the various available revenue models will be the norm for most application developers.
16. What mode of mobile payments will get traction in North America and Western Europe in 2012?
2011 was the year to set the ground work for growth in the mobile payments space. Given the investment and focus, we are likely to see more movement and consumer involvement in 2012 with proximity based solutions and commerce of physical goods on mobile.
17. What will be the most successful non-mobile-phone category in 2012?
Tablets dominate. Period.
18. Which of the following are likely to happen in the near future?
The is a significant shift in computing taking place right in front of our eyes wherein tablets are replacing laptops and even desktops in the enterprise. European operators have been experiencing tough times while some of the Asian operators are flush with cash, they might make their move in 2012 though regulatory hurdles might prove to be an issue. 33% of the nations will have elections in 2012, maybe which will move mobile voting to the forefront in some nations. Our panel thought there is a better chance of humans discovering water on another planet than rise of another significant mobile OS.
19. Which areas will feel the most impact from Regulators in 2012?
Net-neutrality and market competitiveness will keep the regulators busy in 2012.
20. Who was the mobile person of the year?
Clearly, Steve Jobs was an easy choice but who will replace him 2012? Jeff Bezos has an early lead followed by Andy Rubin and Mark Zuckerberg. Angry Birds representing the developer community will be in for another terrific year. Other honorable mentions were Tim Cook, Paul Jacobs, Sanjiv Ahuja, Dan Hesse, and Glenn Lurie.
A lot to look forward to in the New Year. My thanks to all who participated and we hope you found it useful as you embark on your journey for a successful 2012.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this survey are our clients.
US Wireless Market Update Q2 2011 August 18, 2011Posted by chetan in : 3G,4G,AORTA,Applications,Connected Devices,Enterprise Mobility,Intellectual Property,IP,IP Strategy,Mergers and Acquisitions,Mobile Applications,Mobile Cloud Computing,Mobile Commerce,Mobile Content,Mobile Ecosystem,Mobile Future Forward,Mobile Payments,Patent Strategy,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
US Mobile Data Market Update Q1 2011
If Confucius was alive, he would have said, "We live in interesting times.†2011 is proving to be the blockbuster deal year. After Microsoft/Nokia, AT&T/T-Mobile, Microsoft/Skype, Google made the $4*π billion play for Motorola and raised the stakes in the mobile ecosystem warfare. The ecosystem has entered into a phase that Sun Tzu and Chanakya would have loved to operate in.
In other news, the US wireless data market grew 5% Q/Q and 22% Y/Y to reach $16.2B in mobile data service revenues in Q2 2011 and is on course to increase Y/Y by 22% to $67B in 2011.
US unseated Philippines as the king of TXT messaging with almost 664 messages/sub/month. Philippines is seeing a sharp decline in per user messaging thanks to Facebook and app messaging.
Apple overtook Nokia as the dominant smartphone OEM though Samsung is right behind and is likely to overtake Apple later this year. However, Apple will continue to dominate profit share for the foreseeable future.
Smartphones continued to be sold at a brisk pace accounting for 55% of the devices sold in Q2 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The featurephone as a device species is on the verge of extinction. By Christmas, 90% of the US postpaid device sales could be smartphones.
Platform Moves
I am a Platform, therefore I am. Everything and everyone wants to be a platform that developers can build upon. The big 4 – Apple, Google, Facebook, and Amazon are having good success with frequent upgrades and rollouts. Consumers gravitate towards ecOSystems and the richness of the product offerings not specific OSes. OS is just a means to an end. However, the more developers you get excited about the platform, the more the ecosystem thrives and it becomes a virtuous circle. Companies left without the dancing partners need to ensure that they are not the one left standing when the music stops.
While a lot of attention has been focused on Apple and Google skirmishes, Amazon has been quietly tinkering with some interesting products – advertising enabled Kindle, the upcoming tablets and handsets, Android based appstores, mobile payments, distribution giant, cloud, and so on and so forth. Facebook with its nearly 800M friends can unleash several "billion dollar†features that can shake up different mobile microcosms.
In the meantime, Microsoft is trying to find a way to get back into the mobile market. Microsoft's Xbox franchise gives it something unique and compelling. Their success might depend on how well they are able to integrate and tell a compelling story to the consumers. The upcoming Christmas quarter will be a critical test. RIM and HP don't have much of an ecosystem to matter in the larger scheme of things. They can be successful in their own ways but attaining a leadership position remains significantly challenging.
AT&T/T-Mobile merger
AT&T's proposed merger of T-Mobile continued to keep the regulators busy for the quarter. Earlier this year, we published a first of its kind in-depth study on competition in mobile markets –"Competition and the Evolution of Mobile Markets – A Study of Competition in Global Mobile Marketsâ€. The paper presents analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets. Our research shows that an effective equilibrium point for the top three market share in a given country to be around 46%:29%:18% respectively. We expect that once all is said and done, we will end up in the vicinity of this equation.
Patent Warfare
On the eve of Android launch, I mentioned to one of the journalist to watch for some IP fireworks in about 3 years. For those of us who have been deeply involved in the mobile IP space, the IP events of 2011 have been largely predictable though the valuations have gone through the roof.
Over the last 15 years, I have seen patents and IP in the mobile space from all angles from authoring patents to testifying in ITC cases and pretty much everything in between. In the last six months, patents have become an essential tool for competitive strategy in the mobile device space. See our analysis on the major players with the number of granted patents in Europe and US (slide 13).
To paraphrase the oracle of Omaha, "Only when the litigation tide comes in do you discover who's been swimming without protection.â€
Mobile is changing the way we spend
It is very clear that mobile will be at the center of human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day.
Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend. We discussed this and more in the paper "How Mobile Will Change The Way We Spend†that was released earlier this month.
What to expect in the coming months?
All this has setup an absolutely fascinating rest of the year in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are likely to see a few more blockbuster marriage proposals before the year is out.
We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 12th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what's next.
Hope you can join us.
As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q2 2011 US wireless data market is:
Service Revenues
- The US Wireless data service revenues grew 5% Q/Q and 22% Y/Y to $16.2B in Q2 2011. The mobile data services revenues for the US market are on track to reach $67B in 2011.
- Verizon and AT&T had a good mobile data quarter accounting for 77% of the increase in data revenues in Q2 2011.
- For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 62% of the subscription base.
- Verizon maintained its #1 ranking just edging past NTT DoCoMo who came in at number two with $5.77B in data revenues for the quarter. AT&T maintained its #3 position with $5.4B in data revenues. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q2 2011. The proposed merger of AT&T and T-Mobile will make AT&T #1 by a distance and place 20% of the global mobile data revenues in the hands of the top two US operators. AT&T and Verizon will become the #1 and #2 players respectively.
- The Overall ARPU increased by $0.41. Average voice ARPU declined by $0.48 while the average data ARPU grew by $0.89 or 5% Q/Q.
- The average industry percentage contribution of data to overall ARPU was 36.3% in Q2 2011 and is likely to touch 40% by year's end. Verizon is likely to be the first to eclipse the 40% mark with AT&T a close second. (NTT DoCoMo became the second major operator to go past the 50% mark this quarter (if we don't include Philippines) and Japan as a market follows Philippines in going past the 50% mark).
- Verizon and Sprint were neck-and-neck in data ARPU followed by AT&T. In terms of % contribution, all the top three operators exceeded the 35% mark. T-Mobile ended the quarter with almost 30% of its revenue coming from the data services.
- We expect data revenues to exceed voice revenues in the US market in early 2013.
- Helped by the growth in connected devices, the overall net-adds increased by 4.4M with Verizon accounting for almost 50% of the growth.
- For the seventh straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. AT&T now accounts for 43% of connected devices in the US (w/ cellular subscription of some sort).
- Overall, AT&T has 43% of the connected device share of the market. The connected device segment growth slowed down to 3% Q/Q but is still up 37% Y/Y.
- Sprint continued on its comeback trail by adding more than a million subscriptions for the third straight quarter, first time it has done it since Q2 2005.
- T-Mobile however continues to be sandwiched between the top three and the next three and hasn't been able to add postpaid subs for five straight quarters. The net-adds declined for third straight quarter.
Applications and Services
US unseated Philippines as the king of TXT messaging with almost 664 messages/sub/month compared to Philippines which is seeing a sharp decline in per user messaging due to IP messaging. Some of the European operators are also experiencing the pain of declining SMS usage.
While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $5B in revenues.
- The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
- Q2 2011 also saw tremendous activity in the mobile commerce and payments space with lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months.
- Smartphones continued to be sold at a brisk pace accounting for 55% of the devices sold in Q2 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare.
- For a first time in recent memory, Nokia sold less than 100M devices in a quarter and its marketshare shrank to 22% from a once dominant position of almost 40%.
- Apple unseated Nokia as the king of the smartphone hill but Samsung is right behind and is likely to overtake Apple later this year.
- 35% of all smartphones being sold globally are being sold in the US.
- Last quarter, smartphones sales exceeded the 50% mark. The % share jumped to 55% in Q2 2011. Smartphones now account for 80% revenue of all phones sold in the US.
- In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
- 85% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category.
- While the definition of 4G stays muddled, Sprint added 1.7M WiMax subs and Verizon incremented their LTE count by 1.2M.
Mobile Data Growth
The mobile data consumption continues unabated. We expect per MB usage in the US to reach 675 MB by the end of 2011 just behind Sweden which is likely to end up at 760 MB.
While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.
We will have the 3rd edition of our "Managing Growth and Profits in the Yottabyte Eraâ€research out later this year. We will also be discussing this subject in great detail at our Mobile Future Forward summit with some of the most influential voices in the space.
Global Update
Race to a billion – India went past 850M in Q2 2011 subs and China went past 900M. By mid 2012 both India and China will have more than a billion subscriptions.
China Mobile crossed the 600M subscription mark however its 3G introduction has had a tepid response thus and its 4G strategy remains in flux.
For more details, please see our Global Mobile Wireless Market Update released in July 2011.
Mobile Future Forward
We will be discussing the global mobile ecosystem – the challenges and the opportunities at our annual mobile thought-leadership summit – Mobile Future Forward – brought to you in partnership with our terrific partners – Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12th.
Some of the distinguished guests include:
Abhi Ingle, VP, AT&T; Biju Nair, Chief Strategy Officer, Synchronoss Technologies; Bob Borchers, Partner, Opus Capital; Bobby Morrison, President – PNW, Verizon Wireless; Braxton Woodham, Head of Product Development, AVOS; Danny Bowman, President, Sprint; David Messenger, EVP, Head of Online/Mobile, American Express; Gibu Thomas, SVP – Mobile Walmart; Erik Moremo, SVP, FOX; Glenn Lurie, President, Emerging Devices, Resale & Partnerships, AT&T Mobility; Hank Skorny, CSO, Real Networks; Jana Messerschmidt, Sr. Director, Twitter; Jay Emmet, GM, OpenMarket; Jason MacKenzie, President, Global Sales and Marketing, HTC; Jerry Batt, CIO, PulteGroup; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel-Lucent Wireless; Kris Rinne, SVP – Networks/Architecture, AT&T; Mark Rolston, Chief Creative Officer, Frog Design; Manoj Leelanivas, EVP & GM, Juniper Networks; Michael Wolf, VP, GigaOM; Mikael Back, VP – Products, Ericsson; Naoki Aoyagi, CEO, GREE USA; Paul Palmieri, CEO, Millennial Media; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP/Group President, Qualcomm; Suja Chandrasekaran, CIO, Timberland; Will Hsu, CPO, AT&T Interactive.
More information at http://www.mobilefutureforward.com
Your feedback is always welcome.
Chetan Sharma
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Nov 2011. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
State of the Global Mobile Industry – Half Yearly Assessment 2011 July 7, 2011Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,Connected Devices,Devices,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Infrastructure,Intellectual Property,IP,IP Strategy,Japan Wireless Market,Location Based Services,Mergers and Acquisitions,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Cloud Computing,Mobile Commerce,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Payments,Mobile Search,Mobile Traffic,Mobile Usability,Mobile Users,Mobile Wallet,Networks,Partnership,Patent Strategies,Patent Strategy,Patents,Privacy,Smart Phones,Speaking Engagements,Speech Recognition,Student Paper Contest,US Wireless Market,Wi-Fi,Wireless Value Chain,Worldwide Wireless Market , 6 comments
The big picture
The global mobile industry is the most vibrant and fastest growing industry. We expect the total revenue in the industry to touch approximately $1.3 Trillion in 2011 with mobile data representing 24% of the mix. Global Mobile Data revenues are expected to eclipse $300 Billion for the first time in 2011. It is also the first year in which non-messaging data revenues will make up the majority of the overall global data revenues at 53%.
We expect the total number of subscriptions to exceed 6 billion by the end of 2011. The first 1 billion took over 20 years and this last one is going to take only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. Indian and China are also entangled in the race to the billion. At the end of Q2 2011, China was ahead by 50M but India is adding subscriptions at faster rate and is likely to eclipse China before Q2 2012. By then, both nations are expected to exceed 1 Billion in total subscriptions making up 31% of the global subscriptions.
In Q1 2011, US became the first major market to exceed the 50% mark in smartphone sales. The global figure stands at approximately 26%. Some operators expect 90% of their devices sales to be smartphones by the end of the year. In terms of the actual smartphone penetration, we expect the US market to eclipse the 50% mark in 2012.
China leads in the number of subs but US dominates in both total and data revenue. A number of emerging nations are now in top 10 – Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant – Korea, UK, Italy, Germany have dropped off or slipped in rankings.
The number of mobile operators with more than $1B in data revenues will increase to 47 in 2011. This number was only at 13 in 2005.
Japan continues to be the leader in mobile data with NTT DoCoMo, KDDI, and Softbank Japan ahead of the pack in terms of mobile data revenue and data as a % of total ARPU. In 2011, it became the first major market to have more than 50% of its mobile revenue from data services. Next, Australia and the US have made good inroads in the last two years. In fact, if we look at the overall data revenue, US is much further ahead than any nation due to the size of the market.
While India has the highest subscriber growth rate in the world right now, the revenue generating opportunity remain down right anemic compared to other major markets with average dropping down to $3.50 in overall ARPU. Even with significant subscriber base, there is going to be a general lack of opportunity in the market for the next couple of years relative to other markets.
Mobile Trends for 2011
1.Total Global Subscriptions to hit 6 Billion
–India and China racing to a billion a piece
2.Total Global Mobile Revenues to hit $1.3 Trillion, almost 2% of Global GDP
–Top 10 operators control 43% of the global mobile revenues
3.Total Global Mobile Data Revenues to eclipse $300 Billion
–Non-messaging data now owns 53% of the global mobile data revenues
4.Mobile Devices are now exceeding traditional computers in unit sales + revenue
–Majority of the device sales in the US are now smartphones. Device Replacement is shrinking
5.Mobile Broadband (4G) is being deployed at a faster rate than previous generations
–Over 1 Billion broadband connections by 2011
6.Global Mobile Apps revenue has shifted to off-deck
–The decline is directly proportional to the increase in smartphone penetration by region
7.All major markets are consolidating with the top 3 players at 85% of the market
–Regulators will have to be more prudent and proactive about managing competitiveness and growth
8.Mobile Data Traffic will be 95% of the global mobile traffic by 2015
–Many countries are facing spectrum exhaust in the next 5 years
9.Connected device segment is growing at the fastest pace
–Operators will have to quickly adapt their strategies to stay relevant in this segment
10.Several multi-billion dollar opportunity segments are emerging
–Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few
11.Mobile Ecosystem has become very dynamic and unpredictable
–Apple, Google, Amazon, and Facebook have become the most important revenue generating mobile platforms
12. There will be more changes in the next 10 years than in the previous 100
– The value chains will keep disrupting every 12-24 months by the new players and business models
13. Intellectual Property has become a key component of long-term product strategy
– Top 20 control 1/3rd of the overall mobile patent pool
Apple has had the tablet space to itself. Thus far the response from the competitors has been tepid esp. on the pricing dimension. Apple has had such a mastery over the supply-chain and months ahead of the competition that by the time they figure out details, Apple already locks up the pricing advantage for the cycle. OEMs try to catch-up on the features but can't do on the margins. OEMs can grow the pie by bringing products at a better price points that helps attract different demographics to the mix. Microsoft can make good inroads into the space with its Win8 tablet release in 2012 but it will be again in a catch-up mode as the iOS ecosystem will be even more robust by then. The cheaper Android tablets will do well in the market. As expected, tablets will pretty much eliminate the need for netbooks and are starting to eat into the desktop/laptop revenue.
Nokia and RIM are under severe market scrutiny as investors and developers leave in droves. Lack of product planning and execution has left their market share in disarray. Nokia's valuation has been cut into half while the newcomer HTC edged past the industry giant in a remarkable story of the year. Nokia's release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones. While the market hasn't shown much appetite for Windows phone thus far, a good family of devices might be able to slow the loss trajectory and position the combined team for the up-for-grabs 3rd spot in the ecosystem. HP's acquisition of Palm is finally bringing some new products to the market but the lack of an effective ecosystem means lack of traction in 2011. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.
Tablets are primarily being used in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher but will still be dominated by WiFi overall.
The number of connected devices per subscriber and per family will continue to increase over the course of this decade. As the cost structure and margin profile for these devices will be different, we are likely to measure performance of various operators using margin analysis for e.g. while the ARPU for connected devices is 5-10 times lower than the postpaid subscribers, the margins are typically higher due to lower costs of sales, marketing, support, and subsidy. As such the overall impact is dilutive ARPU but higher margins. So, instead of focusing on just the ARPU, the efficiency of operators will be measured in how well they maintain average margin per user (AMPU) and average margin per connection (AMPC).
Managing the data growth
As a result of the data tsunami, there are two types of opportunities that are being created, one that take advantage of the data being generated in a way that enhances the user experience and provides value and the other in technologies that help manage the traffic data that will continue to grow exponentially.
To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are already exploding. New technical and business solutions will be needed to manage the growth and profit from the services. Relying on only one solution won't be an effective strategy to manage rising data demand. A holistic approach to managing data traffic is needed and our analysis shows that the cost structure can be reduced by more than half if a suite of solutions are deployed vs. a single dimensional approach and thus bringing the hockey stick curves of data cost more in line with the revenues and thus preserving the margins.
The decision making process within the operator organizations will need to be streamlined as well. Operators should also consider creating a senior post which focuses on both the cost side and the solution side so they can devise and institute a sustainable long-term policy and keep the margins healthy.
Competitive landscape
The Rule of Three is evident in all major markets. While the percentage market share might vary, on an average, the top 3 control 93% of the market in an given nation. It doesn't matter if the market is defined by "controlled regulation†like in China, Korea, and Japan or if it is "open market†driven in markets such as the US, UK, and India. Eventually, only top 3 operators control the majority of the market. There are niches that others occupy but they are largely irrelevant to the overall structure and functioning of the mobile market.
Markets such as US and India experienced similar competitive environment in their hyper-growth phase. For the US, this phase was in the nineties-mid-2000s while India has been experiencing the similar environment in the last 3-4 years. In both cases, at the start there are 5-6 players with no more than 25% market share but higher than 10% of the mix but gradually the market forces enable consolidation. Over a period of 18 years, US is settling into a "top 3†operator market. India's brutal price wars are going to trigger the consolidation in the next 12-24 months and will eventually settle into a structure similar to other markets.
The competitive equilibrium point in the mobile industry seems to when the market shares of the top 3 are 46%:29%:18% respectively with the remaining 7% being allocated to the niche operators. To achieve some semblance of equilibrium in the market the top operator shouldn't have more than 50% of the market share and the number three player shouldn't have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer.
Mobile operators will face some hard choices in developing and protecting the role they want to play in a given region and the ecosystem at-large. The strategy they choose will have a direct impact on the expected EBITDA margins, investment required over the long-haul, how investors view them, and on the competitive landscape of the country. Given, the fast pace of globalization, new rules and trends might emerge over the course of this decade that further define "communications†and "computing†as we know it.
Apps and Services
As expected, mobile commerce and payment discussions are dominating the ecosystem. There is clearly a lot of investment and marketing dollars being spent. However, the traditional payments networks are largely intact. The new opportunities are being built on top of the existing payment platforms with convenience (Square) and offers and advertising (Google Wallet, ISIS, Groupon). Beyond payments, mobile is getting ingrained into every vertical and every facet of our lives – from healthcare to education, from energy to entertainment, from communication to socialization. And we are in the early innings of figuring out the business models, ecosystem leaders, user behavior, regulatory needs, and the overall impact on society.
Ecosystem Dynamics
It is very clear that the ecosystem dynamics can change very quickly, one just can't take the competitive and friendly forces for granted. In the past, the silos and segments were clearly defined with little overlap. However, over the course of last couple of years, players have been migrating and surfing in segments across the board – from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company wants to capture the mindshare and piece of the consumer's pocketbook. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&T's business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoft's enterprise business. One product launch, one acquisition, can change the game in an instant. And this is only the beginning.
Mobile is fundamentally reshaping how we as consumers spend from housing and healthcare to entertainment and travel, from food and drinks to communication and transportation. Mobile not only influences purchase behavior but also post purchase opinions. When the share button is literally a second away, consumers are willingly sharing more information than ever before. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. The long-term battle is however for owning the context of the users. Having the best knowledge about the user to help drive the transaction is the simply the most valuable currency of commerce.
Mobile Future Forward
We will be discussing the global mobile ecosystem – the challenges and the opportunities at our annual mobile thought-leadership summit – Mobile Future Forward – brought to you in partnership with our terrific partners – Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12th.
Some of the distinguished guests include:
Abhi Ingle, VP – Advanced Mobility, AT&T Wireless; Amit Gupta, SVP and CTO, INQMobile; Bob Gessel, VP/Head of Technology and Network Strategy, Ericsson; Braxton Woodham, Head of Engineering, AVOS; Carlos Domingo, CEO, Telefonica; Charlie Herrin, SVP – Products and Technology, Comcast; Dale Nitschke, former President, Target; Danny Bowman, President – Connected Devices, Sprint Nextel; David Messenger, EVP, Head – Online/Mobile, American Express; Erik Moreno, SVP, Fox; Gibu Thomas, SVP – Online/Mobile, Walmart; Glenn Lurie, President, AT&T Wireless; Hank Skorny, Chief Strategy Officer, Real Networks; Janet Schijns, VP, Verizon Wireless; Jason McKenzie, President, HTC-Americas; Jay Emmet, GM, OpenMarket; Jeremiah Zinn, EVP, MTV; Jerry Batt, CIO, PulteGroup; John SanGiovanni, Cofounder, Zumobi; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel Lucent Wireless; Kris Rinne, SVP – Networks, AT&T Wireless; Mark Rolston, Chief Creative Officer, Frog Design; Matt Oommen, President, Reliance Communications; Mikael Back, VP of Products and Portfolio Management, Ericsson; Mike Mulica, President, Synchronoss Technologies; Paul Palmieri, CEO, Millennial Media; Prof. Cliff Nass, Human Computer Interaction, Stanford University; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP and Group President, Qualcomm; Subba Rao, former CEO, Tata DoCoMo; Suja Chandrasekaran, CIO, Timberland; Will Hsu, Chief Product Officer, AT&T Interactive
More information at http://www.mobilefutureforward.com
Your feedback is always welcome.
Thanks and have a great 2H 2011.
Chetan Sharma
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Aug 2011. The next Global Wireless Market update will be issued in Jan 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
New Research: Competition and the Evolution of Mobile Markets April 28, 2011Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,Devices,Enterprise Mobility,European Wireless Market,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Networks,Patents,Privacy,Smart Phones,US Wireless Market,Wi-Fi,Wireless Value Chain,Worldwide Wireless Market , 2 comments
Competition and the Evolution of Mobile Markets
A Study of Competition in Global Mobile Markets
Over the course of the last decade, mobile communications has become an essential part of the global fabric of evolution. With almost 70% global subscription penetration as of 2010, mobility is being embedded into almost every facet of our lives. Mobility is also spreading across verticals whether it is m-pesa in Kenya or SMS based counterfeit medicine detection in Ghana or paying for your coffee using your NFC enabled mobile phone in a Tokyo café or watching the cricket world cup broadcast while hiking the Yangtze river near Tibet. Consumers expect access to information everywhere they are and the ecosystem is responding with continued innovation, which has become extremely critical in managing the competitiveness of nations.
It is also apparent that some of the innovation and market dynamics has been evidenced by the competitiveness of these markets at different levels – network, devices, and services. While the market entry conditions into the devices and software services markets have gone through significant overhaul this last decade, the competitiveness framework of the mobile networks has been more structured and controlled in many instances.
Given the importance of the mobile network infrastructure to every nation's competitiveness, security, and productivity, it is useful to understand how the "competitive mobile markets†are formed. In theory, the perfectly competitive markets are in the best interest of the consumers as they provide the best value given the competitive dynamics and the equilibrium provides good checks and balances for the ecosystem.
The global mobile networks have shown a remarkable adherence to the "Rule of Three†which states that in any mature industry, 3 top players dominate the market. Sometimes it has been dictated by the regulators and in other instances by the markets. Some markets like in Europe have settled into a state of equilibrium while other hyper growth markets like India are shuffling to find the right balance.
The elements of globalization are also shaping how mobile network operators grow. The regulators and the political class are increasingly looking at mobile networks as national assets and any foreign ownership generally goes through tremendous scrutiny.
Having worked in major mobile markets around the world, we have been intrigued by the framework for a competitive market and this is the theme we explore in this working paper. Having the front row seat in an industry that is growing stupendously has given us some unique perspective on the competitive forces at work in the mobile space. We studied the competitive landscape in 40 top mobile markets around the globe.
This paper presents the analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets.
Download Paper (45 pages, 2MB)
Disclaimer: Some of the companies mentioned in this paper are our clients.
US Mobile Data Market Update Q4 2010 and 2010 February 28, 2011Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile Usability,Networks,Smart Phones,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , add a comment
US Mobile Data Market Update Q4 2010 and 2010
The US wireless data market grew 5% Q/Q and 23% Y/Y to reach $14.8B in mobile data service revenues in Q4 2010. The final tally for the 2010 year was $55B and we expect this to increase by 22% to $67B in 2011.
The US mobile subscriptions officially crossed the 100% penetration mark in Q4 2010.
Of all the segments, the connected device category registered the highest growth at 55% while the postpaid subscriptions grew by only 3% for the calendar year. Connected devices (including tablets, M2M, telematics, eReaders, etc.) now account for 7% of the base.
A significant shift
2010 marked the milestone of the start of a new computing and communications era. For the first time in the US, the smartphones shipments exceeded the traditional computer segments (that consists of desktops, notebooks and netbooks). In 2011, the smartphone segment along with the connected devices (tablets and eReaders) will not only exceed the computer segment in unit shipment but more importantly in the overall revenues as well. Of course, these categories are merging and the lines are blurring but it is good to take stock of the transition which will create new ecosystems and decimate the old ones over the course of this decade.
The evolution of connected devices
The connected devices category is the fastest growing segment of the market and while the ARPUs are low, due to higher margins this segment will prove to be the most profitable in the coming years. By the end of 2011, connected devices will be commanding double digit market share. However, not all sub-segments are going to be successful in the operator channel until multi-device data pricing plans are introduced. Most of the tablets and eReaders can work well with only WiFi most of the times. Monthly data plans make sense for enterprise users but not for consumers who might use these devices occasionally. As such tablets will be more successful in direct and traditional retail channels.
Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category (We will be discussing the connected devices universe in our upcoming Mobile Breakfast Series event in April).
Similarly, OEMs who rely on the operators for sell-through of tablets/eReaders will see low volumes vs. players who have more diverse distribution channels (Apple and HP). We do expect multi-device or family data plans to start being introduced in the US market in 2011.
As we had mentioned in our last research note, iPad (and other tablets) are making Netbooks irrelevant. In fact, tablets are starting to eat into the laptop category as well. As expected, the device has been a hit with many enterprises with mobile workers. Many enterprises are giving out iPads to their workforce instead of laptops or Netbooks.
At CES 2011, hundreds of tablets were introduced. While the total number of releases was noteworthy, we expect iPad to dominate the space in 2011 as competitors will find it hard to compete across all dimensions – price, performance, ecosystem, distribution, and brand power.
Mobile Data Consumption
Mobile data consumption continued to grow across all networks increasing 2-5 times on major US networks. Many of the superphones introduced in 2H10 are clocking 1-1.5GB/mo average. The average data consumption in the US at the end of 2010 was 350 MB/mo. Thus, while the data revenues for the year increased 23%, the mobile data traffic grew 132%.
The significant rise in the smartphones sales and usage in the US market (over 50% devices sold in the US in 2010 were smartphones almost twice the global average) means that by the end of 2011, in the US, the smartphones will consume more data than the data cards for the first time. We also expect US to become the number 1 nation in mobile data consumption this year edging out Sweden. A detailed treatment of the subject can be found in our "Managing Growth and Profits in the Yottabyte Era" paper. Another research update on the topic will be released in 1H11.
The center of gravity has shifted back to the US
As I mentioned in my Time magazine interview earlier this month, there is no question that the center of gravity of the mobile market has shifted back to the US. The Nokia-Microsoft announcement was a wake-up call to many in the industry who were in denial. The innovation is happening all around the world and in many areas other countries are years ahead. The markets are growing faster in India, China, and elsewhere. However, the coordinates of what's next have clearly changed in the last three years. The software innovation and the next generation network launches in the US are laying the foundation of a solid mobile decade.
US is also the most dominant market in terms of revenue generation for the industry. While the US represents less than 6% of the subscription base, it accounts for over 21% of the data revenues with Verizon Wireless becoming the number one mobile data operator in 2010 edging past the decade long leader NTT DoCoMo. AT&T also went past China Mobile to gain its current number three ranking. By the end of 2013, the US market will account for 25% of the global mobile data services revenues (We will have a detailed analysis of the global markets in our upcoming research note in march).
Nokia-Microsoft partnership
Nokia's market problem can be summed up thusly – "While Nokia sold 10 times more devices than Apple in 2010, its market cap is 1/10th that of Apple.†It has been clear for some time that things had to change at Nokia.
Weeks leading up to the Mobile World Congress were rampant with curiosity of who will Nokia marry to continue its next phase of device journey. The multi-billion dollar offering from Microsoft proved too hard to resist for Nokia. This news completely dominated the MWC chatter and the topic comes up invariably in many conversations since then. One has to give points to Nokia for decisiveness and for moving quickly under the pressure.
It is also indisputable that the deal is a significant win for Microsoft who has been looking to come back into the game. However, impact on Nokia remains uncertain. While there were risks with Android, going with Win7 is not an assured path to resurrection either. It all comes down to execution. Can the troops be rallied to produce a slew of competitive devices quickly that consumers and operators will find attractive?
Microsoft understands developers better than most and the two companies can bring in tremendous scale and complementary toolsets to attack the market. Nokia has significant talent and it's a proud company but jumping into the shark-infested cold waters miles away from the shore will require all the stamina, good weather, and skill it can muster to make landfall before thanksgiving.
MeeGo is likely to go back into Intel's camp and might look interesting to the likes of LG, Samsung and even Motorola though creating a new ecosystem is a tall order. Never a dull moment in the industry, is there?
Impact of iPhone on AT&T
It finally happened. The Verizon iPhone has kept the media busy for the last 3.5 years. It was quite an anticlimactic moment when the device finally came to the 2nd operator in the US. It was inevitable that one of the longest exclusive relationship in the wireless world will come to an end. The iPhone singlehandedly turned around AT&T relative to Verizon in the net-adds race. For 10 quarters leading up to Q2 2007, AT&T was adding less net-adds compared to Verizon, in fact the cumulative net-add loss was 3.7 million subs on an average of 374,000 subs per quarter. As soon as the iPhone was launched in Q2 2007, AT&T started adding more net-adds compared to Verizon with the 14 quarter cumulative net-add difference close to 6 million subs on an average of 426,000 subs per quarter.
What to expect in the coming months?
Kids of the now generation are growing with connected electronics that is fundamentally altering the behaviors and expectations of interaction, communication, consumption, and monetization.
Android and iOS are completely dominating the developer and ecosystem mindshare and the race to become a viable 3rd option is on. Operators would love to see another competitive force emerge in the market.
All this has setup an absolutely fascinating 2011 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 15th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what's next. More details to come.
US is also leading the way in smartphone sales. In Q4 2010, 48% of the devices sold in the US were smartphones compared to 25% globally. The fast pace of device introduction has catapulted the agile players like Samsung and HTC to the forefront while others like LG and Sony Ericsson have lost ground. By singularly focusing on Android, Motorola did quite well in 2010 but 2011 is going to be challenging.
The pace of product introduction is accelerating with each quarter. Devices of all shapes and sizes are coming into the market literally every week. Players are having to re-evaluate their businesses and long-term strategies. There are several players whose future is at stake. The competition has grown fierce and companies are finding it hard to take ideas from R&D to products in market in a short amount of time.
While 2010 started quite active on the regulatory front as the national broadband plan was unveiled in March little substantive progress has been made w.r.t. the spectrum, net-neutrality, and other broadband related issues. The matter has swiftly moved to courts where it will take months before anything useful comes out.
Operators are starting to diversify more aggressively than in the past. AT&T's mobile enterprise business is a leading indicator of this trend. Their focus by verticals has yielded new revenue streams and positioning them to become a one-stop shop for devices, access, and services in the enterprise market.
As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q4 2010 and 2010 US wireless data market is:
Service Revenues
- The US Wireless data service revenues grew 5% Q/Q and 23% Y/Y to $14.8B in Q410. The mobile data revenues for the US market reached $55B in 2010.
- Verizon, AT&T, Sprint had a good mobile data quarter accounting for 86% of the increase in data revenues in Q4 2010.
- T-Mobile's 3G/4G drive is starting to pay off. While the postpaid net-adds were still in the red, its data growth is starting to match with its peers. The 24% smartphone base definitely helps.
- For the calendar year 2010, AT&T and Verizon accounted for 69% of the market data services revenues and 64% of the subscription base.
- Verizon Wireless edged past NTT DoCoMo and AT&T went past China Mobile to become #1 and #3 respectively in operators by mobile data revenues in 2010. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for 2010.
- The Overall ARPU decreased by $0.58. Average voice ARPU declined by $0.90 while the average data ARPU grew by $0.32 or 2% Q/Q.
- The average industry percentage contribution of data to overall ARPU was 34% in Q410.
- Verizon led in data ARPU with $18.79 followed by AT&T and Sprint. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with approximately 28% of its revenue coming from data services.
- We expect data revenues to exceed voice revenues in the US market by Q2 2013.
- US crossed the 100% penetration mark in terms of total subscriptions.
- Helped by the growth in connected devices, the overall net-adds increased by 4.9M.
- For the fifth straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. Connected devices are now almost 10% of AT&T's subscription base.
- Overall, AT&T edged past Verizon in total number of connected devices. The connected device segment grew 9% Q/Q and 55% Y/Y.
- Sprint made a nice comeback in 2010 reversing the 11 quarter negative net-adds trend by adding three straight positive net-add quarters. Sprint extended its streak of positive net-adds to three quarters by adding over a million subs for the first time since Q1 2006.
- T-Mobile however continues to be sandwiched between the top three and the next three and is having a hard time adding postpaid subscribers. For the year, the operator ended the year 390K subscribers (postpaid) below the 2009 levels. It's churn rate is almost 60% higher than the average of its top competitors and the cost of postpaid churn was over half a billion dollars in 2010. However, the increased smartphone penetration, quick HSPA+ deployment, backhaul upgrades, and a clever marketing campaign is helping on the mobile data front.
Applications and Services
- While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $17B in messaging revenues.
- In 2010, there was a significant shift that took place in terms of app revenues. There was more revenues generated (globally) from off-deck than on-deck for the first time and while the on-deck revenues are in billions, the decline trend looks irreversible. In the US, this shift will occur in 2011.
- The usage and data consumption trends are enabling carriers to accelerate their 3.5G/4G plans and develop long-term business and technical strategies.
- The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education. Much more to come in 2011.
- Nokia sold 123.7M units in Q4 2010 accounting for 31% of the market share. Samsung continues to be one of the most agile players in the device business shipping a whopping 80.7M for a 20% share of the market. Apple again edged past RIM to be in the top 5 along with the new entrant ZTE which broke into the top 5 for the first time.
Data Traffic
- As we noted in our previous updates, the data traffic is now significantly more than the voice traffic. By end of 2010, the average US consumer was consuming approximately 350 MB/mo up 132% in 12 months. The good news is that there are several solutions available and are being invented that will help manage the data growth starting with the tiered pricing plans.
- Q4 10 also saw significant activity in the 4G space with Verizon launching its LTE network and after the ITU flip-flop, the HSPA+ deployments of T-Mobile and AT&T Wireless along with Sprint's WiMAX made US the epicenter of 4G growth for the next few years.
Your feedback is always welcome.
Chetan Sharma
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2011. The next Global Wireless Data Market update will be issued in Mar 2011.
Disclaimer: Some of the companies mentioned in this paper are our clients.
2011 Mobile Predictions Survey Results January 3, 2011Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,CTIA,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Traffic,Networks,Patent Strategy,Patents,Privacy,US Wireless Market,WiMax,Wireless Value Chain,Worldwide Wireless Market , add a comment
2011 Mobile Predictions Survey
First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy,
healthy, and prosperous 2011. Thanks to all who participated in our 2011 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way.
We put some of the questions to our colleagues and industry leaders in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=225) from leading mobile companies across the value chain and around the world opined to help us see what 2011 might bring.
Ten names were randomly drawn the limited edition Mobile Future Forward book. The winners are:
1. Jared Cornfeld, Industry analyst, FCC
2. Abhi Rele, Marketing, Microsoft
3. Christopher Billich ,Head of Mobile Advertising, Deutsche Telekom AG
4. Gary Cohen, VP/GM North America, Flirtomatic
5. Peter Jarich, Service Director, Current Analysis
6. Darren Austin, Director of Mobile, Expedia
7. Craig Fisher, Software Client Leader, IBM
8. Steve Wood, CEO, Perlego Systems, Inc.
9. Elliott Hamilton, Sr. Director of Strategic Planning, TeleCommunication Systems
10. Vishal Gupta, Vice President North America, Qualcomm Inc
Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly
living in "interesting times" with never a dull moment in our dynamic industry. It has been a terrific
year for us here at Chetan Sharma Consulting and we are looking forward to 2011 and seeing many of
you along the way. We hope you enjoyed gaining from the collective wisdom.
Be well, Do Cool Work, Stay in touch.
Thanks. With warm wishes,
Your feedback is always welcome.
Chetan Sharma
Now onto the 2011 Mobile Industry Predictions Survey Results
The panel comprised of movers and shakers of the mobile industry from around the world.
What will be the biggest stories of 2011?
In last year's survey, Google/Android narrowly missed out to be the biggest story of the year but this year, the verdict was clear that Google will continue to dominate the headlines with Android devices and new updates and apps. Given that we are in the midst of 4G deployments and ITU's flipflop on the definition, we could be in for an interesting year.
When will Verizon iPhone launch?
Inordinate amount of ink has been spilt over Verizon's iPhone speculation. However, given the chatter, our panel voted for a Q1 launch.
Who will be the most open player in the mobile ecosystem in 2011?
In all our surveys Google has consistently cemented its perception of being the most open in the ecosystem.
Will Android tablet sales exceed iOS tablet sales in 2011?
Last year, Android OS edged past iOS, however, given the lead iOS has had in tablets, it might be hard to overcome the number of shipments in 2011.
Who will make the biggest mobile acquisition in 2011?
Got Cash? Big players are likely to go shopping but who will score the blockbuster deal of the year. Google and Microsoft will duke it out with Google taking the spoils.
How will the "Apps vs. Mobile Web" debate shape up in 2011?
Apps vs Mobile Web has been as hotly debated in the industry as the CDMA vs. GSM battles of the past. Our panel thought Apps will continue to grow though mobile web starts to show its muscle.
By how much will the mobile advertising ad-spend increase in 2011?
Our panel was more bullish on mobile advertising than last year with a good 50% of respondents aiming for 200% growth and higher.
Which market will be the biggest infrastructure in 2011 for sales opportunities?
India and China are laying out 3G and North America is expanding on 4G. Infrastructure contracts abound.
Who will be the mobile come back story of 2011?
Many long-time players are under the gun this year. Will Windows 7 help Microsoft or will Meego make Nokia competitive. Story will unfold this year.
Who will end up having the strongest position in the mobile payment/commerce space?
While Japan/Korea markets have developed mature mobile payments solutions, the battle royale of mobile payments in North America will play out between the financial guys and Operators with Internet players making a strong run at it as well. 2011 might help decide the long-term winners in the space. Our panel thinks, the likes of Mastercard and Visa will edge out others in the tussle.
Which areas will feel the most impact from Regulators in 2011?
Regulators can have a huge impact on the course of the industry and nation's competitiveness. With the laws all but laid out, the real rulings might come from the courts.
Which solutions will gain the most traction for managing mobile data broadband consumption?
2010 saw the emergence of tiered data pricing in North America and operators all over the world are bracing for a long-term challenge of managing mobile data growth. We have written extensively on this subject in our Yottabyte series. Our panel voted for Tiered pricing and 4G as the top two solutions.
Which category will generate the most data revenues in 2011?
Global markets are quite different and while data service revenues have been growing in all regions, our panel breaks down by categories in terms of expected contribution from various segments.
What will help mobile cloud computing gain traction in 2011?
Mobile Cloud Computing is expected to take several strides in 2011 with Media and Enterprise demand at the forefront.
What will be the most successful non-mobile phone category in 2011?
As we have highlighted in our previous research, Connected devices have shown tremendous growth in 2010. Tablet seems to be clear category winner.
What will be the breakthrough category in mobile in 2011?
Mobile payments and commerce are starting to take off and are expected to show the most growth in 2011.
By the end of 2011, how will we end up defining 4G?
ITU's flipflop means, anything above HSPA+ will be deemed a 4G technology.
Which enterprise segment will mobile impact the most?
Mobile as a platform is booming with Retail finally getting into the swing of things and will show the most activity in 2011.
What will be the dominant revenue model for apps in 2011?
While paid apps dominated the revenue stream in the early days, advertising and in-app payments are taking off on iOS and Android. Developers will play with a combination of models depending on what works on a given platform.
What mode of mobile payments will get traction in NA and WE in 2011?
Operators experimented with mobile payments over the last few years, now is the time to put the solutions to the test.
Who was the mobile person of the year?
Who can compete with King Jobs. Launching iconic devices year after another, Steve Jobs has set the direction of the industry since 2007 and was a clear favorite for the mobile person of the year. The tremendous success of the apps personified by blockbuster hit of "Angry Birds" took away the second spot with Andy Rubin's Android effort won him the third spot.
Well, there you have it. The top trends and stories we will be talking about in 2011. Thanks again for all who participated and we hope that you found this useful as you embark on your journey for the year.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Mar 2011. The next Global Wireless Data Market update will be issued in Mar 2011.
Disclaimer: Some of the companies mentioned in this paper are our clients.
US Mobile Data Market Update Q2 2010 August 10, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,CTIA,Enterprise Mobility,European Wireless Market,Indian Wireless Market,IP Strategy,Location Based Services,M&A,Mergers and Acquisitions,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Search,Mobile Wallet,Music Player,Networks,Speaking Engagements,Speech Recognition,Unified Messaging,US Wireless Market,Usability,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 2 comments
US Mobile Data Market Update Q2 2010
Executive Summary
The US wireless data market grew 6% Q/Q and 22% Y/Y to exceed $13.2B in mobile data service revenues in Q2 2010 – on track so far to meet our initial estimate of $54B for the year.
Having narrowly edged NTT DoCoMo last quarter for the first time, Verizon Wireless maintained its number one ranking for the 1H 2010 in terms of the operator with the most mobile data revenues (though the difference was thinner than the amoeba membrane). The total wireless connections for Verizon were almost 100M with 92.1M being the traditional subscriber base. Rest of the 3 top US operators also maintained leading positions amongst the top 10 global mobile data operators.
Sprint had the first positive netadd quarter in 3 years and has been slowly and steadily turning the ship around. T-Mobile did better on the postpaid netadds but overall additions declined again. The larger question for the market is if 4 large players can stay competitive. Generally, the answer is no. But these are different times and there are a number of permutations and combinations that are possible.
The US subscription penetration crossed 95% at the end of Q2 2010. If we take out the demographics of 5 yrs and younger, the mobile penetration is now past 100%. While the traditional net-adds have been slowing, the "connected device†segment is picking up so much that both AT&T and Verizon added more connected devices than postpaid subs in Q2 2010. Given the slow postpaid growth, operators are fiercely competing in prepaid, enterprise, connected devices, and M2M segments.
Data traffic continued to increase across all networks. By 1H 2010, the average US consumer was consuming approximately 230 MB/mo up 50% in 6 months. US has become ground zero for mobile broadband consumption and data traffic management evolution. While it lags Japan and Korea in 3G penetration by a distance, due to higher penetration of smartphones and datacards, the consumption is much higher than its Asian counterparts. Given that it is also becoming the largest deployment base for HSPA+ and LTE, most of the cutting edge research in areas of data management and experimentation with policy, regulations, strategy, and business models is taking place in the networks of the US operators and keenly watched by players across the global ecosystem.
As we had forecasted, the tiered pricing structure for mobile broadband touched the US shores with AT&T becoming the first major operator to change its pricing plan based on consumer consumption. We will see the pricing evolve over the next 2-4 quarters as the US mobile ecosystem adjusts to the new realities and strategies for mobile data consumption.
In the connected device category, iPad like its flashy cousin dominated the headlines, the sales numbers, and the industry profits. The device sent every slate maker back to the drawing board, many projects were cancelled and strategies are still being formulated to capture a new burgeoning space and Apple again has a massive lead of mindshare and pocketbook.
Kids of the now generation are growing with connected electronics that is fundamentally altering the behaviors and expectations of interaction, communication, consumption, and monetization.
All this has setup an absolutely fascinating period in the communication/computing industry. Convergence is everywhere and is leading to fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 8th event – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what's next. Hope you can join the discussion.
What to expect in the coming months?
31% of the US subscription base is now smartphones.
The pace of product introduction is accelerating with each quarter. Devices of all shapes and sizes are coming into the market literally every week. Players are having to re-evaluate their businesses and long-term strategies. Several new impressive devices got introduced during the course of 1H of 2010 including the iPad and EVO.
There are several players whose future is at stake (to put it mildly). The competition has grown fierce and companies are finding it hard to take ideas from R&D to products in market in a short amount of time.
Microsoft announced its comeback with the W7 commercial launch imminent. The change in UI was refreshing and the expectations are quite high. W7 v2 is likely around the corner to update on the flaws of v1. HP acquired Palm in an attempt to become relevant again in the mobile device space. It has been an action packed 1H 2010 and we can expect more of the same for the remainder of the year.
2010 has also been active on the regulatory front as the national broadband plan was unveiled in March and the subsequent debate over the course of nations broadband future kept the spectrum, net-neutrality, and exclusivity issues at the forefront.
To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come. (We will be going in-depth into this subject at our Sept event with some very senior and experienced executives)
2010 is also the year of network rollouts. T-Mobile has been rolling out HSPA+ at an impressive rate, Clearwire announced its intention to move to LTE, Verizon is betting big on LTE and looking for competitive marketing advantage over the course of the next 12 months. AT&T has been adding backhaul, upgrading to HSPA+ and planning for LTE all at once. Even the smaller carriers like MetroPCS are looking for competitive advantage with quicker LTE launch and beat others by carrying the first LTE smartphone. (We will be releasing the next edition of our "State of the "Mobile†Broadband Nation†paper later this year)
As we had mentioned last year, the mobile data traffic kept on growing disproportional to the revenues. A series of solutions have come into the market from players big and small. We released the second edition of our in-depth research paper on data growth – "Managing Growth and Profits in the Yottabyte Era" last quarter.
We will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q2 2010 US wireless data market is:
Service Revenues (Slides 7, 16)
- The US Wireless data service revenues grew 6% Q/Q to $13.2B in Q210. Compared to Q209, the mobile data service revenues grew 22%.
- Verizon and AT&T accounted for 75% of the increase in data revenues in Q2 2010.
- T-Mobile's 3G drive is starting to pay off. While the net-adds were still in the red, its data growth is starting to match with its peers. The 20% 3G smartphone base definitely helps.
- Verizon Wireless again nudged past NTT DoCoMo in overall mobile data revenues by a whisker. By the end of the year, China Mobile and AT&T are also likely to cross their Japanese counterpart in quarterly mobile data service revenues.
- AT&T and Verizon now account for 70% of the market data services revenues and 62% of the subscription base.
ARPU (Slides 8-11)
- The Overall ARPU increased by $0.46 reversing the declining trend of the past three quarters. Average voice ARPU declined by $0.13 while the average data ARPU grew by $0.58 or 4% Q/Q.
- The average industry percentage contribution of data to overall ARPU is now 31% in Q210.
- Verizon led in data ARPU with $17.37 followed by AT&T and Sprint. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with approximately 25% of its revenue coming from data services.
Subscribers (Slides 12-14)
- Overall netadds stayed stable at just over 3M with AT&T gaining the lion-share (though their count now includes the connected devices while other operators don't specifically include that in the calculations).
- The texting see-saw between US and Philippines continued in Q210. US averaged around 639 messages/user/mo marginally behind Philippines.
- For the third straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. Connected devices are now 7% of AT&T's subscription base.
- Sprint got back into the positive net-adds territory again after 3 years. T-Mobile's net-adds continued to decline. T-Mobile's 20% and Sprint's 23% subscriber base is now prepaid. The national prepaid penetration is touching 20%.
Applications and Services
- Non-messaging services continues to grab 60-65% of the data revenues for the US carriers.
- There is a significant shift taking place in terms of app revenues. In 2010, there will be more revenues generated (globally) from off-deck than on-deck for the first time and while the on-deck revenues are in billions, the decline trend looks irreversible. In the US, this shift will occur next year. (We released our mobile apps economy research paper earlier this year)
- The usage and data consumption trends are enabling carriers to accelerate their 3.5G/4G plans and develop long-term business and technical strategies.
- Nokia sold 111M units in Q2 2010 amounting for 36% of the market share. Samsung again had a solid quarter with 64M devices sold with the share at 21%. LG Electronics at 10%, Sony Ericsson and RIM at 3.6% rounded up the top 5.
- Apple shipped 8.4M iPhones in Q2 but the criticism over the antenna design took some shine out from yet another home run.
- Smartphone penetration increased to 31% in the US market
Data Traffic (Slide 15)
· As we noted in our last update, the data traffic is now significantly more than the voice traffic. By 1H 2010, the average US consumer was consuming approximately 230 MB/mo up 50% in 6 months. The good news is that there are several solutions available and are being invented that will help manage the data growth starting with the tiered pricing plans.
To discuss all these trends and more, we are putting together a unique Mobile Future Forward Executive Summit and are fortunate to have the company of some of the sharpest minds in the industry, folks who both have the vision to shape the evolution and the authority to invest billions of dollars this decade to make things happen. Hope to see you in Seattle on Sept 8th.
Abhi Ingle, VP, AT&T; Amir Mashkoori, CEO, Kovio; Anand Chandrasekhar, SVP & GM, Intel; Bob Azzi, SVP – Network, Sprint Nextel; Christopher Dean, Chief Strategy Officer, Skype; Danny Bowman, President, Sprint Nextel; David Weiden, General Partner, Khosla Ventures; Dr. Boris Nikolic, Sr. Program Officer, Global Health & Discovery, Bill & Melinda Gates Foundation; Dr. Genevieve Bell, Intel Fellow & Director, User Experience, Intel; Dr. Greg Brandenberg, CEO, Columbia Basin Health Association; Dr. Sailesh Chutani, CEO, Mobisante; Dr. Suzanne Clough, Chief Medical Officer, WellDoc; Erick Tseng, Head of Mobile, Facebook; Glenn Lurie, President, AT&T; Hank Skorny, SVP, Media Mobile Cloud Computing, Real Networks; Jack Kennedy, EVP, News Corp; Joe Sims, Lead Partner – Digital Convergence , Booz & Company; Jon Stross, VP & GM – Babycenter, Johnson & Johnson; Ken Denman, CEO, Openwave; Krishna Vedati, SVP & GM – Mobile, AT&T Interactive; Lirong Shi, President, ZTE; Louis Gump, VP Mobile, CNN; Mario Queiroz, VP – Product Management – Android, Google; Mark Selby, VP, Nokia; Matt Bross, CTO and Vice Chairman, Huawei; Michael Sievert, Chief Commercial Officer, Clearwire; Neville Ray, Chief Network Officer, T-Mobile ; Omar Javaid, CEO, BBDO; Paul Palmieri, Founder and CEO, Millennial Media; Rob Glaser, Chairman, Real Networks and Partner, Accel; Sean Cai, VP – Advanced Technology, ZTE; Stephen David, Former CIO, Proctor & Gamble; Subba Rao, CEO, TataDoCoMo; Takayuki Hoshuyama, CEO D2 Communications; Tim Chang, Partner, NVP;Tony Lewis, VP, Verizon; Wim Sweldens, President, Alcatel-Lucent
Each panel discussion will involve luminaries/experts on specific topics, for e.g.
Opportunities in Mobile
Mike Sievert, CCO, Clearwire
Dr. Genevieve Bell, Fellow, Intel
Shi Lirong, President, ZTE
Subba Rao, CEO, Tata DoCoMo
Evolution of Communication/ Engagement
Christopher Dean, Chief Strategy Officer, Skype
Erick Tseng, Head of Mobile, Facebook
Mario Queiroz, VP, Google
David Weiden, General Partner, Khosla Ventures
The size of the panel will be small and the time duration long so we can delve deep into the issues and questions. For more panel, speaker, sponsor, and program details, please visithttp://www.mobilefutureforward.com
Your feedback is always welcome.
Chetan Sharma
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Nov 2010. The next Global Wireless Data Market update will be issued in Sept 2010.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Mobile Industry 1H 2010 Assessment July 8, 2010Posted by chetan in : 3G,4G,AORTA,BRIC,Carnival of Mobilists,Carriers,CTIA,Enterprise Mobility,European Wireless Market,Gaming,Indian Wireless Market,Japan Wireless Market,M&A,Mergers and Acquisitions,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,MVNO,Partnership,Smart Phones,Speaking Engagements,Strategy,US Wireless Market,Usability,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 2 comments
Mobile Industry 1H 2010 Assessment
As the mobile world approaches the 5 billion subscription landmark, it is time to do a half yearly assessment of 2010. We will have our official Q2 2010 analysis for the US market in Aug and the global analysis for 1H 2010 in Sept after all the numbers are in. In the meantime, it might be worthwhile to take a stock of the first 6 months, the ensuing trends and what they mean for the long-term.
Mobile Ecosystem has become much more complex
In case you didn't notice, the competitive landscape has changed significantly over the last 6-12 months. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&T's business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoft's enterprise business, Kodak is competing with Yahoo, so on and so forth. One product launch, one acquisition, can change the game in an instant. And this is only the beginning.
Network evolution: more capacity, more bandwidth, tremendous usage
We have covered this topic in detail in our paper – Managing growth and profits in the Yottabyte era. As we had predicted, the tiering of pricing plan has started in the US which is actually a good thing. It will force some discipline and technology innovation to solve the longer-term problem of network congestion. While AT&T got things in motion, market forces will take care of the right pricing and GB levels in the coming months. Data consumption on TeliaSonera and Clearwire's network is a good indicator of what's to come with 3-4x the usage compared to its counterparts.
New sources of revenue: mobile advertising, commerce, and more
Regular readers know that we have been bullish on the mobile advertising space for a long time. Over the last 6 months or so, some of the pieces are coming together though significant amount of work remains. Sergio Zyman, former CMO of Coca Cola once said "There is only one rule: advertising must sell.†And nothing will sell better than mobile. Period. While North America and Western Europe have been slow to wake up to the mobile commerce opportunities, in Japan, it is already a multi-billion dollar industry. Several trials are underway that are going to help open up the western market in the next 12 months for significant opportunities. In fact, the pie for the mobile services will keep on growing bigger but so will the number of players who want a piece of it. This will set up an interesting tug-of-war for the next couple of years
It's the iPhone, dude!
Just when the competitors think they are all caught up with Apple, Steve Jobs and co. releases a new product that raises the bar further. Google, Samsung, HTC, LG, Motorola have done well in emulating Apple while Microsoft and Nokia have fallen behind. The embarrassing launch and demise of KIN is a example of how confused things are for some of the players. While both Microsoft and Nokia are capable for mounting good comebacks, it will take more than an org change and a sprinkle of holy water. Android will easily outsell iPhone just by the law of arithmetic but Apple's secret weapon is iTunes. With over 150M billing relationships, it has fostered a great apps ecosystem that others will find hard to replicate entirely. While some point to Apple's tiny marketshare, wall street looks at the fat margins – rewarding Apple by making it the most valuable technology company surpassing Microsoft in a major tech tremor. Google has run the mobile chess game with great acumen so far. Despite the Nexus experiment, the explosion of the superphone category has gone according to the plan. Overall, most of the western operators are selling smartphones at 50%+ levels each quarter.
Always On Real-Time Access
The always-connected vision of the late Mark Weiser is finally approaching some realization. Mobile is so perfectly suited for cloud computing. The younger generation is growing with the expectation that they can get access to any content from any device anywhere. The constraints and friction that doesn't allow them to do that is just not acceptable. As such, the mobile industry is scrambling to provide tools and technologies that help the digerati access content at will. All this has to be designed and developed against the current network, content, and device constraints and evolution paths. Whether it is access to music or movies for a 15 year old or availability of the entire corporate knowledgebase, information will need to be available at a touch of a button. Companies big and small are investing in the infrastructure and software tools to make this happen. We are likely to see some interesting launches in the next 12 months.
Battle for the analytical mind – data, context and intelligence drives everything
Many people don't realize that the battle for the consumer of 2015-2020 has already begun. The company that has the best understanding about the most consumers will have a pole position in the mobile ecosystem. Players like Google, Apple, Amazon, Mastercard, Microsoft, Facebook, Twitter, China Mobile, Disney, AT&T, Vodafone, Motorola, and others are amassing a lot of information on individuals. Besides Google and Apple, Facebook has quietly become one of the most important players in the mobile ecosystem with its phenomenal reach across many countries, tremendous stickiness of the app, and innovative onboarding process of the carriers. Of course, data is a double edged sword – it can provide enormous benefits to consumers in terms of intelligence, experience, and engagement and can also prove to be problematic when privacy and data breaches happen. In fact, that will be one of the tightest ropes many including the regulators will have to walk this decade – figuring out what they call in Swedish – logam – the right balance.
Apps vs. the Web
Recently, the ecosystem has been more enamored with the apps vs. the web debate than the early departure of Brazil and Argentina from the world cup. It is rather a silly debate. As we mentioned in our apps economy paper, both worlds will coexist for a long time. What matters for the developers is the "reach†of a certain platform or technology and the "cost†and "potential†of that reach. For the user, the only thing that matters is what's available on "their†device. Obviously, the capabilities of the mobile browser will grow over time and it will make more sense to build certain category of applications for the web vs. on the native platforms but developers live and die in the present.
Internet of Things
Nokia took the leadership stance of announcing that all of their smartphones by the next year will have NFC. You can expect pretty much all major OEMs following the same trend which means that hundreds of millions of devices will be equipped with a chipset that will enable new experiences, applications and services. Though we still need to do a lot of work to complete the end-to-end ecosystem, we are getting close. Further, all major carriers have created separate units to address the M2M and emerging devices opportunity. iPad showed what's possible – it fundamentally created a new leisure computing category. Also, iPad (and similar form factor devices) will find good usage in the enterprise as well. Pretty soon, it will be hard to imagine a computing device without the communication capability. Operators will have to release pricing plans to accommodate such an evolution.
Nurturing ecosystems – fight for the developer mindshare
It is good to be a developer in 2010. The success of many players goes through developersville. The love fest won't last forever though, it will depend on how vibrant the various ecosystems become and how profitable individual developer shops are over the course of time. One thing Microsoft did very well with the windows empire was to create a web of partners and developers who were incented to use the tools and develop for the platform. In a more fragmented world of mobile, things are a bit complicated. Developers don't have time or the energy to go after the newest, shiniest toy, what matters in the end is the "cost†to develop, "reach/distribution†of the platform, and "potential†of the reach. Players who don't consciously make an effort to make developers thrive in their ecosystem will see their developer efforts collapse like house of cards. While the media attention is squarely on iOS and Android, we are not heading down the duopoly path as the dynamics of the mobile ecosystem are significantly different from that of the PC. RIM, Nokia, Samsung and others will do well, the fight is over the relative rankings in the pecking order.
Shifts in the revenue sand dunes
By the end of 2010, the global ondeck revenues will be overtaken by the offdeck revenues. As the smartphone penetration grows, it is less likely that the user will purchase VAS from the operator. While the carrier gets a healthy access revenue of $15-40 or more/month, the VAS business is shrinking for many. Some operators are trying to extract some value but are likely to follow T-Mobile's path and give up on the smartphone appstore eventually. On the featurephones and probably low-tier smartphones, operator do have a role to play but perhaps some of it can be outsourced to other appstore providers so that they can focus on higher-margin services. We are going to see a readjusting of the appstores again in the next 12-24 months with the weaker ones whittling away from the landscape.
New experiences – display, interaction and commerce
The man-machine interaction took a significant leap with the introduction of the iPhone. Now the touch-interface is embedded in our evolutionary genes. There is significant work going into accomplishing more with less friction with the help of new interfaces and experiences that can like trying out a new outfit in front of a mirror – at home or in the store and with a flick of finger – choose the color, purchase it, and get it shipped. The amount of time it takes to "accomplish any given task†is going to reduce dramatically. With the help of contextual sensors, extreme personalization, and brainiac software, we will take automation to a new level. This will lead to new experiences that will enable more commerce, social interaction and participation, and general awareness and intelligence about every day things. Examples like Kinect, Augmented Reality, Projection displays are just the start of the decade when the display and interaction paradigms will be fundamentally redefined.
Reallocation of revenues – winners and losers are decided in reallocation
If we take a look at the spending habits of the US consumers on "access and communication services†which includes the spending on Telephone, Cable, Internet, and Cell phones, the total "access†spending over the course of last decade has been consistently around 4% of the total personal income per capita. However, the share of each of the services has been changing steadily. Telephone used to have 65% share of the spending but is going to be below 30% by end of 2010. Others have been climbing at the expense of telephone revenues, especially the cellphones which since 2007 command the highest share. So, the overall spending has stayed constant while there has been significant reallocation of spending. Similarly, within cell phone services, data has gone from being less than 1% of the overall revenues to over 35% in 2010 and is going to be more than 50% of the overall revenue mix by early 2013. Mobile operators will need to figure out how to manage these reallocation undercurrents and maintain the overall life time value of the customer. It will come from re-architecting of the business and technology practices as well through the introduction of new services.
Mobile takes off in Verticals
Mobile has become a full-fledged computing platform and other industries are taking notice. There is significant work going on in the mHealth, mRetail, mCommerce, mEducation, mEnergy, and others to keep things busy for the next few years. There are some really innovative startups focused on making use of the computing power that the device affords and turn them into full-fledged medical instruments. Add the communication bit and you can see the revolution happening in front of your eyes. The impact on saving lives and quality of health care will be tremendous – worldwide. The regulators and the legacy players will need to keep up. As we mentioned before, the NFC wave is coming and if all goes well, it will change the retail experience. Stay tuned.
(Mobile) World is flat
There is a significant readjusting of players going on right now with some of the Asian players flexing their muscles for dominant share of the market. Competition is driving more M&A, the gravity of the mobile data world is slowly shifting from Japan and Korea to the US with Verizon overtaking the long time leader NTT DoCoMo in terms of quarterly mobile data revenues. India's Bharti became the number 5 operator after completing the acquisition of Zain. On the device front, Samsung and LG have been ferocious in their pursuit of marketshare and have been rewarded well by their performance esp. in the North American market. HTC has undergone metamorphosis and has become a serious competitor. Many non-traditional brands like Dell, Garmin, HP, Cisco are also flexing their muscles in the space that has become the computing battleground. On the infrastructure front, ZTE and Huawei are going to make life difficult for some of the players. We can expect the big "M&As†to continue as the industry consolidates around the top 3 players in different markets and sectors. The local skirmishes will spill into the global arena. North American operators have been curiously silent on the global front. Being the most lucrative mobile market probably has something to do with it but we can expect some of the bigger players to go shopping in the coming days.
Regulatory Excursions
The much-awaited national broadband plan was finally unveiled earlier this year. The current FCC has done a good job of engaging the industry and informing the citizens, better than its predecessors. It is also taking a deeper interest in setting up guidelines for the industry. The Comcast ruling was a setback but FCC is moving ahead with its plans. It will be interesting to see the execution details and how things pan out over the course of this decade. Similarly, regulatory agencies in other nations are acutely aware of the role broadband plays in nations economy and competitiveness and what they need to do keep their country on track. The mad scramble for more spectrum is underway. FTC is also keeping a close eye on the mobile industry for privacy related violations. If someone has any doubts of how much regulators are likely to get involved in this matter should read through the settlement between the FTC and Twitter.
Scenario Analysis – more changes in the next 10 years than in the previous 100
Despite all the commotion, the excitement, and the turbulence in the ecosystem, the trajectory of the winners and losers is not set. Like the Chaos theory, a lot depends on how the dynamic elements of the mobile universe effect and react to changes. Players will do well to have strategies in place per scenario so they can adapt quickly and keep the mother ship in the right direction. We can expect more changes in the next 10 years than in the previous 100. The triggers for various scenarios will vary – regulatory, competitive, technology, business model, consumer adoption, economic – each of these can have an impact on how a trend becomes the fact of life.
To discuss all these trends and more, we are putting together a unique Mobile Future Forward Executive Summit and are fortunate to have the company of some of the sharpest minds in the industry, folks who both have the vision to shape the evolution and the authority to invest billions of dollars this decade to make things happen. Hope to see you in Seattle on Sept 8th.
First 25 readers to use the discount code FUTBOL get $200 off the regular price.
Abhi Ingle, VP, AT&T; Amir Mashkoori, CEO, Kovio; Anand Chandrasekhar, SVP & GM, Intel; Bob Azzi, SVP – Network, Sprint Nextel; Chamath Palihapitiya, VP – Growth, Mobile, Intl, Facebook; Christopher Dean, Chief Strategy Officer, Skype; Danny Bowman,President, Sprint Nextel; David Weiden, General Partner, Khosla Ventures; Dr. Boris Nikolic, Sr. Program Officer, Global Health & Discovery, Bill & Melinda Gates Foundation; Dr. Genevieve Bell, Intel Fellow & Director, User Experience, Intel; Dr. Greg Brandenberg,CEO, Columbia Basin Health Association; Dr. Sailesh Chutani, CEO, Mobisante; Dr. Suzanne Clough, Chief Medical Officer, WellDoc; Glenn Lurie, President, AT&T; Hank Skorny, SVP, Media Mobile Cloud Computing, Real Networks; Jack Kennedy, EVP, News Corp; Joe Sims, Lead Partner – Digital Convergence , Booz & Company; Jon Stross, VP & GM – Babycenter, Johnson & Johnson; Ken Denman, CEO, Openwave; Krishna Vedati, SVP & GM – Mobile, AT&T Interactive; Lirong Shi, President, ZTE; Louis Gump, VP Mobile, CNN; Mario Queiroz, VP – Product Management – Android, Google; Mark Selby, VP, Nokia; Matt Bross,CTO and Vice Chairman, Huawei; Michael Sievert, Chief Commercial Officer, Clearwire;Neville Ray, Chief Network Officer, T-Mobile ; Omar Javaid, CEO, BBDO; Paul Palmieri, Founder and CEO, Millennial Media; Rob Glaser, Chairman, Real Networks and Partner, Accel;Sean Cai, VP – Advanced Technology, ZTE; Stephen David, Former CIO, Proctor & Gamble;Subba Rao, CEO, TataDoCoMo; Takayuki Hoshuyama, CEO D2 Communications; Tony Lewis, VP, Verizon; Wim Sweldens, President, Alcatel-Lucent
Each panel discussion will involve luminaries/experts on specific topics, for e.g.
M2M/Internet of Things
Danny Bowman, President, Sprint
Amir Mashkoori, CEO, Kovio
Tony Lewis, VP, Verizon Wireless
Mark Selby, VP, Nokia
Evolution of Communication/ Engagement
Christopher Dean, Chief Strategy Officer, Skype
Chamath Palihapitiya, VP – Mobile, Facebook
Mario Queiroz, VP – Android, Google
David Weiden, General Partner, Khosla Ventures
The size of the panel will be small and the time duration long so we can delve deep into the issues and questions. For more details, please visit http://www.mobilefutureforward.com
Your feedback is always welcome.
Chetan Sharma
Disclaimer: Some of the companies mentioned in this paper are our clients.
Announcing Mobile Future Forward Executive Summit June 14, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Federal,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Users,Mobile Wallet,Music Player,MVNO,Networks,Partnership,Patent Strategies,Patent Strategy,Patents,Privacy,Speaking Engagements,Speech Recognition,Strategy,US Wireless Market,Usability,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
You have seen some hints of the project that we have been working on for sometime. We are proud to announce "Mobile Future Forward†Executive summit to be held in Seattle on Sept 8th, 2010.
Registration is Open Now. Early Bird expires June 30th 2010.
MFF is a gathering of some of the most brilliant minds in the mobile industry. The goal is to look at how mobile is likely to evolve over the course of this decade. We couldn't have done this without the tremendous support of our excellent sponsors who are paving the way in their respective segments.
The speaker list includes the who's who of the mobile industry:
Glenn Lurie, President, AT&T
Subba Rao, CEO, TataDoCoMo,
Mike Sievert, Chief Commercial Officer, Clearwire
Louis Gump, VP Mobile, CNN,
Paul Palmieri, Founder and CEO, Millennial Media
Dr. Sailesh Chutani, CEO, Mobisante
Abhi Ingle, VP, AT&T Wireless
Ken Denman, CEO, Openwave
Amir Mashkoori, CEO, Kovio
Stephen David, Former CIO, Proctor & Gamble
Dr. Genevieve Bell, Intel Fellow, User Experience, Intel
Hank Skorny, SVP, Real Networks
Jon Stross, VP & GM – Babycenter, Johnson & Johnson
Dr. Suzanne Sysko, Chief Medical Officer, WellDoc
Dr. Boris Nikolic, Sr. Program Officer, Bill & Melinda Gates Foundation
Krishna Vedati, SVP & GM – Mobile, AT&T Interactive
Christopher Dean, Chief Strategy Officer, Skype
Russ McGuire, VP, Sprint Nextel
Jack Kennedy, EVP, News Corp
David Weiden, General Partner, Khosla Ventures
Anand Chandrasekhar, SVP and GM, Intel
Chamath Palihapitiya, VP Growth/Mobile, Facebook
Rob Glaser, Chairman, Real Networks
Wim Sweldens, President – Wireless Division, Alcatel Lucent
Takayuki Hoshuyama, CEO, D2 Communications
Neville Ray, SVP, T-Mobile
Bob Azzi, SVP—Networks, Sprint Nextel
Mario Queiroz, VP—Android, Google
Matt Bross, Global CTO, Huawei
We will be covering the following topics in detail:
Emerging Devices
Internet of Things
Network Evolution
Content, Media, and Entertainment
New sources of Revenue and Business Models
Evolution of Communication and Interaction
Mobile Cloud Computing
Globalization and Competition
Mobile Anthropology
Mobile as a platform
The economics and politics of consumer data and privacy
Nurturing Developer Ecosystems
Shifts in the Ecosystem
Mobile Health and Implications
Mobile Retail
Japanese Mobile Industry
Innovations at each level of the value chain
Mobile Social and Commerce
Managing network growth
You can read more about what you can expect at the executive summit in the following whitepaper.
I hope to see you there.
Chetan Sharma
Chief Curator
Mobile Future Forward
Global Mobile Data Market Update 2009 March 31, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Federal,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Users,Mobile Wallet,Music Player,MVNO,Networks,Partnership,Patent Strategies,Patent Strategy,Patents,Privacy,Smart Phones,Speaking Engagements,Speech Recognition,Storage,Strategy,Unified Messaging,US Wireless Market,Usability,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 4 comments
Executive Summary
The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (combined) are adding almost 30M new subscriptions every month. Amongst the two, India is outpacing China 2:1. China touched 750M subscriptions while India crossed 525M by the end of 2009. With 4.6B subscriptions, the global subscriptions penetration was above 68%.
The global mobile data revenues reached $220B and mobile data now contributes 26% of the overall global mobile service revenues.
As expected, the overall global mobile revenues stayed pretty flat for the year at around $1.1 trillion as many regions were hit by the recession and the competition pushed the ARPU lower for many operators. While the countries like US, Japan, China, and India showed very little signs of pullback, most of Europe and the developing world experienced a decline in overall service revenues in 2009. All the major markets have their data contribution percentages above 10% now.
For some of the leading operators, data is now contributing almost 50% of the overall revenues. However, the increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. NTT DoCoMo continues to dominate the carrier ranking in terms of the mobile data service revenues, Verizon Wireless which became #2 replacing China Mobile and is slowly edging towards the #1 spot and is likely to overtake DoCoMo within the next few quarters.
Though 4G as a standard hasn't been defined yet, the discussions around LTE and WiMAX deployments grew intense. Telia Sonera became the first operator to commercially launch LTE. At CTIA, Sprint/HTC became the first players to launch a WiMAX smartphone and MetroPCS/Samsung took the honors for the LTE smartphone.
2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic. In the US, the yearly mobile data traffic exceeded the voice traffic for the first time.
We are also entering the phase of global mega-mergers in telecom. Bharti Airtel of India just acquired Kuwait-based Zain Group to become the 5th largest telecom group in the world (at the end of 2009, it was #9). There are now 14 telecom groups with 100M or more subscriptions. While China Mobile's ARPU is 1/5th of its western counterparts, it operates its business at higher margin, around 51%. There are a number of global players mainly in Europe and Asia who have mastered the art of running lean operations and if they have good bank balance they are going to go shopping in the days ahead.
From the revenue perspective, the $50 billion revenue club is more exclusive with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.
As we sit at the cusp of the iPad era, there is a bigger transformation taking place and that is of the connected consumer electronic devices (CEDs). Few years from now, most popular CEDs will have connectivity. We are also approaching the start of phase where pricing of access will start to morph – we will see the introduction of family data plans (something we have been advocating for some time), ability to connect multiple devices to the same GB plan, more granular use plans (per session/day/week/mo/yr etc, roll-over GBs anyone?). As the number of connected devices/consumer increases, we will start worrying about Average Margin Per User (AMPU) or Average Margin Per Connection (AMPC) because ARPU won't quite capture the dynamics of the industry.
Exciting times indeed.
Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries – from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India.
This note summarizes the findings from the research with added insights from our work in various global markets.
Impact of Global Recession
Telecom in general fared better than other industries. In some regions, it hardly caused a tremor. However, in most nations, the impact was felt by the operators. Amongst the 40 major operators we studied, SK Telecom, 3 Australia, KTF, T-Mobile Netherlands, Rogers, Softbank Japan, Singtel, Vodafone Italy, T-Mobile Germany, 3 Sweden, Telstra, China Unicom, and Vodafone Germany experienced increase in both the data ARPU and the overall ARPU during 2009. Some of increase was due to the fluctuation in international currencies e.g. Korea.
Looking at the data at a country level, most nations noted a decline in overall ARPU. Only Venezuela, Pakistan, Argentina, Bangladesh, Australia, and Poland showed positive increase in ARPU since 2008.
Rule of Three is kicking in most markets with smaller players having to consider the M&A option to remain viable. T-Mobile/Orange, Bharti/Zain tie-ups are just the start of that process. We are likely to see many international mergers in 2010 and beyond as power in the mobile ecosystem self-adjusts.
5 new players joined the 100M subscriptions club. The new members are: Bharti Airtel (India), MTN Group (South Africa), Orascom (Egypt), Etisalat (UAE), and MTS (Russia). The top 9 telecom groups in the world are: China Mobile, Vodafone, Telefonica, America Movil, Telenor, T-Mobile, China Unicom, TeliaSonera, and Orange.
Service Revenues
- US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $44.56B vs. $32.5B for Japan in 2009. China with $20.3B was ranked number 3. US registered the highest growth amongst the top 3 with over 40% increase from EOY 2008 levels followed by Japan and China.
- The top 10 nations by service revenues are: US, China, Japan, France, Italy, UK, Germany, Brazil, Spain, and India.
- The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Australia, Spain, and Korea.
- NTT DoCoMo continues to dominate the wireless data revenues rankings with over $16B in data services revenue in 2009. Almost 46% of its overall revenue now comes from data services. DoCoMo also crossed the 95% 3G mark.
- NTT DoCoMo was followed by Verizon Wireless, China Mobile, AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top 10 operators by wireless data service revenues.
- Each of the top 5 carriers exceeded $10B in yearly mobile data service revenues in 2009
- Data revenues for the top 10 operators now account for almost 43% of the global mobile data revenues.
- The biggest jump in data revenues was experienced by Verizon, Softbank, and AT&T. DoCoMo saw an 11% increase for the year.
- Most of the operators in the developed nations are contemplating future strategies to boost data revenues such that the decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPU.
- China reported approximately $20.3B in data revenues for 2009 and the percentage contribution from data services is around 32%, data ARPU is around $3.2. For India, data ARPU continues to stay below $0.50 as most of the new adds are voice only subscribers and there is continued price pressure in the market.
- China Mobile remains the most valuable telecom operator with over $195B in market cap. It is followed by Vodafone at around $122B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans.
- In 2009, SMS's vice like grip on data revenues continues to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets. They are exploring new technologies and social experiments ahead of almost anybody else in the market. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends, technologies, and ecosystem dynamics in these markets to get a sense of what's coming.
· From the revenue perspective, the $50 billion revenue club has limited membership with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.
- Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like DoCoMo, and Softbank are over 46%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK, Telstra, and 3 Sweden exceeded 35% and many others are on the verge of crossing the 30% mark.
- NTT DoCoMo reported the highest data ARPU for the year while Rogers took away the honors for the highest overall ARPU. Other notable percentage increases in ARPU were from 3 Italy, SK Telecom, KTF, T-Mobile Germany, 3 Sweden, and T-Mobile Austria. The Japanese operators saw a decline in ARPU by 3%.
- The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with over 53% (or $2) contribution coming from the data services.
- Softbank of Japan looks set to be the first major operator (outside of Philippines) with more revenues coming from data services than voice.
Mobile Data Traffic
- We have been calling attention to the tremendous increase in mobile data traffic for some time. The discussion has hit mainstream and many operators are scrambling to nail-down their short-term and long-term strategies to manage the data traffic growth in their networks. See our paper on the subject "Managing growth and profits in the Yottabyte era." The recommendations discussed in the paper are slowly being adopted by various vendors and operators worldwide.
- The global mobile data traffic exceeded an Exabyte for the first time in 2009. In fact, the data usage is growing so fast that this year, the two territories experiencing the most growth – North America and Western Europe are both going to exceed an Exabyte in mobile data traffic.
- 2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic.
- For many of the superphone heavy operators, devices like iPhone and Android account for more than 50% of their total data traffic.
- 2010 will mark the first year when the total number of mobile broadband connections will exceed the total number of fixed broadband connections.
For more mobile data traffic analysis, please stay tuned for the second edition of our Yottabyte research
- India continues to be the hottest market on the planet in terms of net-adds with (again) a world record-setting month in Jan 2010 with 19.9 million net adds. To give you a perspective, this is almost 1.5 times the number of subscribers US added in the whole year. It is like adding a Canadian wireless market every month. For the year 2009, India added 177 million subs vs. 106 million for China. Combined, one year of growth in these two market is equivalent to the size of the third largest market – the US, to date. Making money on the net-adds is a different proposition all together (more discussion on the international market in our global market update later this month)
- Thanks to the explosive growth in the emerging markets, the global mobile market went past 4.6B in 2009 and is likely to cross the 5B mark in 2010. The global mobile subscriptions now represent over 68% of human population on planet earth.
- China crossed the 700M subscription mark in July while India's total went past 500 in Nov. In the meantime, US crossed the 90% subscriptions mark in 2009.
- In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by 2018.
- The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan, Germany, Pakistan and Italy.
- China Mobile became the first operator (and likely to be the only one for a very long time) to cross the 500M mark. It remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone. Telefonica, América Móvil, Telenor, T-Mobile, China Unicom, TeliaSonera, Orange, and Bharti Airtel round up the top 10 largest telecom groups in the world.
Mobile Apps
· The total number of app downloads in 2009 reached 7 billion resulting in approximately $4.1B in revenues 12% of which was from mobile advertising.
· The number of non-carrier appstores jumped to 38 from 8 in the previous year.
· While Asia had the highest percentage of the download share, North America had the highest share of the apps revenue accounting for over 50% of the total revenue.
· The paid ASP in 2009 was approximately $1.9 and the advertising revenue generated from the free applications was approximately $0.09/user/app/year
For a more detailed analysis of the mobile apps market, please see our paper "Sizing the Global Mobile Apps Marketâ€
- Messaging still accounts for the lion-share of data service revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have gradually chipped away the share from messaging. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
- Nokia dominated the year as usual but the revenue share is shrinking and so is the lucrative smartphone share. Apple, RIM, and Google are relentlessly attacking the top tier while Samsung, LG, and others giving a tough fight for the bottom tier. We see a new middle tier emerging that has the form factor of a featurephone and functionality of a smartphone. The smartphone category is getting further split into regular qwerty smartphones like Blackberry and the touch and full browser based superphones like the iPhone and Droid.
- The year was dominated by several blockbuster device launches like the iPhone 3GS.
- Next few years will be big for infrastructure providers as many countries both developed and developing get into upgrading their infrastructure.
- Willcom, the small Japanese carrier that started the flat-rate unlimited phenomenon filed for bankruptcy last month.
- In the US, the increase in messaging volume catapulted US as the number one texting nation by messages/user/month going past the long-time leader Philippines.
- Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines, even though 4G hasn't been fully defined yet and the current candidates for 4G are nowhere near the performance goals of 4G (150Mbps/50+Mbps). Many larger operators have laid out their plans for deploying LTE starting this year.
We are also seeing regulators playing an active role in making the markets competitive and attractive in the long-term.
· The velocity with which the smartphones are being introduced into the market esp. the western markets, one wonders if in five years, we will be using the moniker to describe devices and if the "dumbness" in the device market will be practically eliminated. Led by Apple's Appstore success, significant investments are pouring into the appstore world. In parallel, the debate over apps vs. mobile web is intensifying. The implications of the transition will be significant on the ecosystem on many levels.
2010 will be a critical year on many fronts. As usual, we will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2010. The next Global Wireless Data Market update will be released in Sept 2010.
Your feedback is always welcome.
Chetan Sharma
Disclaimer: Some of the companies mentioned in this note are our clients.
New Research: Sizing up the Global Mobile Apps Market March 17, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,CTIA,European Wireless Market,Gaming,Indian Wireless Market,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile Usability,Partnership,Smart Phones,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 7 comments
Sizing up the Global Mobile Apps Market
Industry Study Commissioned by Getjar
Executive Summary
Mobile applications (apps) have been around since the late nineties and the apps stores have been available for a quite some time as well. Operators have been offering content and applications on their appstores for most of the last decade. But it wasn't until the launch of Apple Appstore that the appsworld started to blossom in earnest. First, it fundamentally changed the revenue model in favor of the developers which has become the current defacto standard (70/30) in the mobile apps business. Second, it brought more developers into the ecosystem as it fostered the notion of focusing on just 1-2 platforms rather than the entire device ecosystem to be relevant. Third, the time-to-market equation changed for developers so that they can get the application from conception to market in a fraction of a time of what was possible in the past. Finally, the importance of a seamless end-to-end user experience to increase usage and monetization became a core principle in the mobile apps space.
While Apple has played a significant role in reenergizing the mobile apps space by bringing more consumers and developers into the ecosystem, there is significant activity outside the iPhone or smartphones space that is often not discussed. The purpose of this research study is to take a holistic look at the mobile apps space across all platforms and on a global basis to get a sense of the size of the mobile apps market and the direction it is headed.
The overall mobile apps downloads are expected to increase from over 7 billion in 2009 to almost 50 billion by 2012 growing at the rate of 92% CAGR. The revenue from mobile apps which includes both paid downloads and revenue from advertising and virtual goods is expected to increase from $4.1 billion in 2009 to $17.5 billion by 2012 at the rate of 62% CAGR. Though ondeck (operator managed) mobile apps sales exceeded those from offdeck in 2009, by 2012, offdeck is expected to hold the lion share of the mobile apps revenue.
The dynamics of the app market are quite different in emerging nations where to effectively monetize the significant app momentum (app downloads/active user and growth rates in some of these countries exceed those from the western markets, irrespective of the device type), creative strategies are needed to attract new consumers and different business models will be required to make the regional ecosystems viable.
Overall, by enhancing discovery, improving user experience, dropping price barriers, and increasing developer revenue share, the apps ecosystem can continue to prosper. The paper presents the results of the study in more detail as well discusses the future of mobile apps and how the app economy is likely to evolve.
My thanks to Getjar for supporting the research.
Chetan Sharma
Disclaimer: Some of the companies mentioned in this note are our clients.
New Whitepaper: Mobile VoIP – Approaching the Tipping Point February 17, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,Devices,Enterprise Mobility,European Wireless Market,India,Intellectual Property,Japan Wireless Market,M&A,Mergers and Acquisitions,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Users,Mobile Wallet,MVNO,Patent Strategy,Privacy,Smart Phones,Speech Recognition,Unified Messaging,US Wireless Market,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 3 comments
Mobile VoIP – Approaching the Tipping Point
Sponsored by Skype
This paper is a collaboration with Ajit Jaokar (FutureText) in London
Over the course of the last decade, mobile devices have become the most ubiquitous consumer electronic devices ever invented. Even in the poorest of the nations, mobile phones have evolved from being a luxury to an indispensible necessity. The paradigm of communication itself has undergone a significant transformation from just voice to multimode interaction. The trend is also discernable in the revenue numbers from the advanced mobile markets where voice revenue per user have been declining over the course of the last decade while most of the growth is coming from mobile data services. Mobile data services have evolved significantly from simple text messaging to multimode communication involving text, VoIP (voice over IP), video, and other forms of messaging and social networking interactions.
As we head into the next decade, the competitive landscape is going to change from year to year and sometimes even quarter to quarter. For major service providers, competition is no longer just from an operator who provides voice and data services but any company that captures the communication value chain. It is no longer sufficient to rely on voice revenues but providers need to think communications in a much more holistic form. Once the transport layer becomes all-IP in a given network, voice is nothing but another application that will work and interact with other applications in tandem often in real-time. The fear of cannibalization are unwarranted as our research shows that by offering consumers comprehensive services, the lifetime value of customers can be increased, churn can be reduced, and the overall value proposition of the operator increases tremendously.
The forces of technology, business models, consumer expectations, regulatory regimes, competition, and collaboration will help define the communication landscape of the next ten years. This paper will take a look at the evolution of the Internet, mobile broadband, and mobile communication and how consumer behavior and expectations have changed. Next, the emergence and the role of VoIP is discussed in further detail before we delve into the intricacies of communication economics to dispel some myths and layout the framework for how operators should approach the new communications world.
Given the embrace by major tier-one operators, we believe that mobile VoIP is on the verge of becoming an integral part of the communications framework. This acceptance represents a tipping point in the evolution of mobile VoIP. The ecosystem participants who embrace and collaborate to provide a holistic and comprehensive communication solutions stand to benefit the most.
2010 Mobile Industry Predictions Survey January 3, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Federal,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Users,Mobile Wallet,Music Player,MVNO,Networks,Partnership,Patent Strategies,Patent Strategy,Patents,Privacy,Smart Phones,Speaking Engagements,Speech Recognition,Storage,Strategy,Uncategorized,Unified Messaging,US Wireless Market,Usability,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 6 comments
2010 Mobile Industry Predictions Survey
Mobile Predictions Survey (pdf)
Mobile Predictions Survey (ppt)
First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2010. Thanks to all who participated in our 2010 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way.
Before we dive into the survey results, let's do a quick wrap-up of the year that was. Well, since we just completed one heck of a mobile decade, let's do a quick jog down the memory lane.
The Last Decade: 2000-2009
Each new decade brings its own consumer and technology trends. During the 2000s mobile cemented its place in the global society fabric, the use of mobility became addictive and pervasive, to be without mobile seemed a curse and innovation blossomed and took user expectations to new heights.
From a pure statistical point of view, the global mobile subscription penetration grew from 12% in 2000 to approximately 68% in 2009 – phenomenal by any measure. The overall revenues grew over 400%, the data revenue grew 32,600% and the total subscriptions grew 563%. NTT DoCoMo paved the way with the i-mode launch in 1999 and they were the operator to emulate throughout the last decade, leading every single year in data revenues, in new application and service revenue sources, and in innovation and risk taking. They tried to export the success to other regions with little reward but DoCoMo clearly led the industry in taking mobile devices where they have never gone before.
China and India were late to the party but during the second half of the decade caught up with the western world and eventually surpassed all nations becoming number one and two nations by subscriptions respectively. In 2006, China Mobile became the most valuable operator passing Vodafone.
Mobile devices went significant transformation as well. From the early Bluetooth, camera, and music phones to the iPhones, the Storms, and the Androids, the industry was transformed by the introduction of Apple's iPhone in 2007. While Bluetooth, sleek designs, camera phone defined the first half of the decade, the second half was all about the applications and the mobile web. While Nokia dominated the entire decade in terms of the sales and profits, having missed the touch revolution, it leaves the decade a bit battered and a bit behind playing catch-up to the newcomers who profoundly disturbed the status quo.
Razr carried Motorola through 2006 when its global share peaked but was left to reinvent itself during the second half. It seems to have redeemed itself with the successful launch of Droid and upcoming Android devices. While many in the industry predicted RIM's demise, the company has only gotten stronger and is looking good for the 2010s. The emergence of Samsung and LG as strong players in the mobile ecosystem was also a big story of the decade with Samsung increasing its share by 380% and LG by 575% becoming the number 2 and 3 players respectively.
While Microsoft's Windows Mobile had an early start and the enterprise market share, it lost its way through several missteps and is on dialysis as we enter the new decade. One shouldn't count WM out though but there is a lot of work to be done before it can capture the imagination of the ecosystem which has been sequestered away by iPhone and Android.
While many new application areas were introduced during 2000s, none was able to displace SMS as the leading app category by usage and revenues. However, it's relative share has started to come down especially in North America and Western Europe.
As data usage grew, so did the data traffic bringing many data networks to their knees. We expect the data traffic consumption to only accelerate. Many people are underestimating the growth rates (as they did previously) and the strain the increase in consumption will put on the unprepared networks. Projector phones will take media consumption to a new level. Data management is going to be big business in the 2010s.
Overall, the mobile industry became a trillion dollar industry in 2008 and the data revenues are increasing in almost all regions. Voice is being commoditized at fast pace and that has put the traditional economics and ecosystem wealth distribution in topsy-turvy.
The US market also experienced tremendous growth with mobile data service revenues climbing 21,327% and becoming a mainstay in the mobile economy. In 2008 it crossed Japan as the most valuable mobile data market. US was late in adopting SMS but caught fire once American Idol started using it and even played a good role in the 2008 Presidential election in showcasing the power of mobile. Verizon started the decade being the number one operator and after trading places with Cingular and ATT grabbed the title back in 2009 (after the Alltel acquisition) to become the most dominant carrier in North America. Many smaller players competed by being innovative with Cincinnati Bell launching the fist UMA device, Sprint the first mobile eReader, and TMO launched the hotspot business which has now become an essential component of an operator strategy going forward.
Mobile is also replacing landline at a much faster pace than expected and within the first half of the new decade, we will have majority of the users using mobile vs. landline. Just like the last decade, this one starts with a new standard deployment of LTE that will keep operators and vendors busy throughout the decade. However, a lot of the developing markets will still be deploying 3G during the first half of the decade.
Infrastructure providers suffered the most in the decade bookended by the two recessions. Consolidation of giants (Alcatel Lucent, Nokia Siemens), bankruptcies of the famous (Nortel), and uprising of the upstarts (Huawei) pretty much defined the decade for the segment. Ericsson and Huawei enter the new decade from a strong position and looking to dominate the global markets.
The last decade was also marked by some prominent IP battles such as RIM vs. NTP, Qualcomm vs. Broadcom, Sony Ericsson vs. Samsung, Upaid vs. Satyam etc. (disclaimer: we worked on some of these cases and testified as an expert)
Here is our "subjective†list of movers and shakers of the last decade
Operator of the Decade
NTT DoCoMo
DCM led the way in almost all new category of apps and services. Its data service revenue was highest in each of the last 10 years
DCM will continue to lead along with KDDI and SKT. However, it might be the carriers with tremendous scale who will have the calling cards in the new decade. Watch for China Mobile, Vodafone/Verizon, Telefonica, Orange, Bharti, Unicom, Singtel
OEM of the Decade
Nokia dominated in sales and revenues in each of the 10 years and while the last couple of years took some shine off its glorious past, the company nevertheless came out ahead
RIM, Apple, Nokia, Samsung
Smartphone OEM of the Decade
Smartphones as we know them were introduced by RIM but Apple defined the category and the subsequent ecosystem
This space will be very competitive with Apple still the gold standard to beat
Infrastructure Provider of the Decade
Its prime rivals struggled to stay afloat while Ericsson grabbed most of the revenues from infrastructure contracts and is very well positioned for the next decade
Ericsson is joined by Huawei as the two top infrastructure provider with Huawei giving tough competition for LTE contracts. ZTE and other Chinese infrastructure providers will also replace some of the incumbents
Nation that led in mobile data
This is a no brainer. Japan led with Korea a close second. Finland, UK also impressed
US, China, and India are well positioned to make an impression but most likely during the second half. Japan will still be a major player
Device of the decade
iPhone followed by Razr
iPhone impressed with form and function while Razr with its global sales making it a top selling device of all times
The field might get more crowded as all OEMs focusing on the smartphone category. However, OEMs who also focus on the 90% of the market w/o smartphones might win the top prize
The year 2009
Apple continued to dominate the headlines for the third straight year – whether it was the launch of 3GS or the upcoming introduction of the fabled tablet. Google too kept the ecosystem active. It has executed on its mobile strategy with brilliant acumen though causing significant consternation amongst its partners who it needs to be successful. It has been often misunderstood by competitors, regulators, and partners. Often, they have focused on Google's tactics vs. its strategy. Look for these two players to be very aggressive as they try to fight for the mantle and the mindshare.
While Nokia leads the OEM space by a good distance, its momentum in the smartphone space left a lot of question marks. Motorola made a credible comeback with Cliq and Droid. Samsung and LG continued to innovate and expanded on their share of shipments and revenues.
India outpaced China in net-adds and crossed 500M though it is still quite behind China's 750M. The M&A and the consolidation process became active in Asia with several of the big regional operators looking to flex muscles in the international markets. After several delays, China started deploying 3G while India again fumbled and postponed its 3G auction.
US mobile data market continued its pace in 2009 with each of the four quarters exceeding $10B in data service revenues. The gap between the top two operators and the rest grew to be the biggest in the decade and the industry weathered the recession with ease. There was a clear shift towards prepaid especially for Sprint, T-Mobile, and the tier 2/3 operators.
2009 was also defined by significant activity on the application front. With Facebook eclipsing 100M subscribers and Appstore exceeding 2.5B downloads, sky is the limit.
The year also saw an unprecedented growth in mobile data consumption. As we had predicted, for some of the networks, the growth proved to be a double-edged sword. Many in the industry are banking on LTE to help relieve the pain but will be surprised that depending solely on the upgrade strategy will not be enough. Declaring spectrum as a looming crisis, FCC also started tinkering with the mobile industry and the broadband plan.
Japan exceeded 90% in 3G penetration while US subscriptions ventured into the 90% territory. Most of western Europe is way past 130%.
All in all, a terrific year considering that we went through one of the worst recessions in a generation. As we bid goodbye to the last decade, Nexus One and iTablet only serve to whet our appetite of what's to come.
On a personal note, we started our consulting practice this last decade as we were coming out of the bubble recession and have been fortunate to work with some of the brightest brains and companies in the global ecosystem. We also had a chance to work on some key initiatives that impacted the ecosystem in profound ways. Many thanks to our clients, colleagues, friends, and readers. We will be involved with many new initiatives over the next decade and are looking forward to the conversations through the research notes, books, speeches, panels, whitepapers, blog posts, facebook and twitter feeds, and more.
Thanks and Happy New Year. May the upcoming decade leave you happier, healthier, and more successful than the previous one.
As we eluded to earlier, 2010 will be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?
We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=150) from leading mobile companies across the value chain and around the world opined to help us see what 2010 might bring.
11 names were randomly drawn for 3 special prizes. The winners are:
Claire Boonstra, Cofounder, Layar- INQMobile 3G Chat device
Michael Libes, CTO, GroundTruth – Open Mobile Book
Henri Moissinac, Head of Mobile, Facebook – Open Mobile Book
Subba Rao, CEO, TataDoCoMo – Open Mobile Book
Saumil Gandhi, Product Manager, Microsoft – Open Mobile Book
Sarah Reedy, Senior Editor, Connected Planet – Open Mobile Book
Mike Vanderwoude, VP & GM, Cincinnati Bell Wireless – 2010 Mobile Almanac
Pinney Colton, VP, GfK – 2010 Mobile Almanac
Tim Chang, Principal, Norwest Ventures – 2010 Mobile Almanac
Laura Marriott, President – 2010 Mobile Almanac
Asha Vellaikal, Director, Orange – 2010 Mobile Almanac
Thanks to INQMobile and my friend Ajit Jaokar for contributing the prize gifts.
Despite conventional wisdom, what will not happen in 2010?
There were many. Sampling – Verizon iPhone, Microsoft Phone, Sprint will not be bought, Femtocells won't gain traction, RCS will not happen, Google will not enter handset market directly, iPhone won't lose steam, Android won't bring coherence, NFC won't take off, WiMAX won't disappear, Nokia won't bounce back, Palm won't die, "Year of Mobile†noise won't subside, carriers won't be delegated as dumb-pipes.
It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem – monetization of social networks, augmented reality, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, Mobile 3.0, LTE, single purpose devices, 3G in India, Bada, app vs web, developer turmoil, featurephones, smart grids, M2M, Chrome, etc.
However, be rest assured, we will be tracking these and much more throughout the year and sharing them through various channels.
Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly living in "interesting times" with never a dull moment in our dynamic industry. It has been a terrific year for us here at Chetan Sharma Consulting and we are looking forward to the next decade and seeing many of you along the way.
We hope you enjoyed gaining from the collective wisdom. Your feedback is always welcome.
Be well, Do Cool Work, Stay in touch.
With warm wishes,
Chetan Sharma
Disclaimer: Some of the companies mentioned in this note are our clients.
Now onto the 2010 Mobile Industry Predictions Survey Results
The panel comprised of movers and shakers from around the world
What will be the biggest stories of 2010?
Jan seems to be the Google Phone vs. Apple Tablet matchup. Our panel though voted for the continued growth in mobile data as the top story.
Have we recovered from the recession? (Please select one)
Majority thought we are out of it though some might still feel the pinch
Who will be the most open player in the mobile ecosystem in 2010? (Please select one)
Google has done a great job at maintaining its image as THE open leader
Will Android handset sales exceed iPhone's in 2010? (Please select one)
Despite Androids coming in droves, iPhone will still be the king of the hill
When will we see tiered pricing plans for smartphones in the US from tier 1 operators? (Please select one)
There are indications that this might happen sooner rather than later
What will happen to the mobile prepaid subscriber base in the US? (Please select one)
Prepaid made a strong comeback in 2009 and a good majority thought that the trend is likely to continue
By how much will the mobile advertising ad-spend increase in 2010? (Please select one)
Mobile Advertising was the only advertising segment with positive growth last year so it is no surprise that folks expect it to more than double this year
What will be the impact of the FCC's national broadband plan on the mobile industry in 2010? (Please select one)
Not much is expected from the various rulings that might come this year with most expecting the courts to have the final word.
Who will be the mobile comeback story of 2010?
Having bet its future on Android, Motorola was voted as the comeback kid of 2010
What will be the impact of Google Phone?
It's pretty clear, Google and Apple are duking it out for the developer mindshare. Google wins in either case.
Which areas will feel the most impact from FCC?
Net neutrality is the area where they will have the most impact
Which solutions will gain the most traction for managing mobile data broadband consumption?
While only a holistic approach can provide complete relief, tiered mobile data pricing might have the most impact
When will the carrier-branded appstores lose steam? (Please select one)
Most expect carrier-branded appstores to be a thing of the past in 2010
What will help mobile cloud computing gain traction in 2010?
Mobile cloud computing is gaining steam and the reason is storage and media
What will be the most successful non-mobile-phone category in 2010? (Please select one)
Netbooks seem to be the strongest category followed by eReaders, Tablet, and M2M
What will be the breakthrough category in mobile in 2010? (Please select one)
Mobile Advertising and Mobile Payments share the top honors
By the end of 2010, which will have more subscribers? (Please select one)
LTE might have the momentum but WiMAX has the subscribers
How will Netbooks do through the operator channel? (Please select one)
No major impact from the operator channel
Which standards will gain traction?
No major impact from the standards
What mode of mobile payments will get any traction in North America and Western Europe in 2010?
The category will expand in different ways with more items being charged on the operator bill
Roundup of second Mobile Breakfast Series event – Mobile Broadband December 6, 2009Posted by chetan in : 3G,AORTA,ARPU,Carriers,CTIA,Indian Wireless Market,Infrastructure,Location Based Services,Mergers and Acquisitions,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Search,Mobile TV,Mobile Users,Mobile Wallet,Networks,Speaking Engagements,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 3 comments
The second Mobile Breakfast Series Event was held at the picturesque Harbor Club in downtown Seattle on Dec 4th. The topic was "The Impact and Evolution of Mobile Broadband.†The lineup of speakers was awesome with who's who of the mobile broadband world opining about the state of the industry, the opportunities, and challenges posed by the growth in mobile broadband:
Neville Ray, Senior Vice President of Engineering, T-Mobile USA
Hank Skorny, Senior Vice President, Media Cloud Computing and Services, Real Networks
Ken Denman, CEO, Openwave
Dow Draper, Vice President, Technology Partnerships, Clearwire
Charlie Martin, Wireless CTO, Huawei Technologies
Stacey Higginbotham, Senior Writer, GigaOM (moderator)
First of all, a big thanks to our generous sponsors: Motricity, Openwave, and Clearwire of supporting the event series. I am happy to report that Motricity has signed up to be the sponsor for the entire 2010 season. So, thanks Jennifer Moranz and Brendan Benzing. Thanks also to Ken Denman and Lupe Downing at Openwave, and Jeff Giard and Scott Richardson at Clearwire for their support. Thanks also to our esteemed panelists who have taken the time out of their busy schedules to be here with us this morning, esp. Ken, Charlie, and Stacey who had to hop on a plane to be at the event. Also, thanks to GigaOM and Moconews for being such terrific media sponsors.
As our operators continue to enhance the infrastructure both in the US as well as abroad, it is creating new opportunities and challenges for the industry. As you know, our friends at the FCC are also very consumed by the task of creating a National Broadband Policy and mobile is a key component of that proposal.
It was one of the best discussions on mobile broadband I have heard all year long. Panelists were really frank and insightful.
The salient points of the 90 minute discussions were:
- The disparity between the available bandwidth and the bandwidth demand is becoming apparent and the industry is scrambling to find solutions to stay ahead of the curve.
- Even at these high usage rates, mobile data is quite profitable for the operators. Vendors typically don't a full grasp of the carrier economics and end up making some product choices that are not that directly relevant or useful for the carriers.
- Consumers are willing to pay more for better access, higher speeds, and good content and significant opportunities await us in the coming years.
- There is no such thing as "free lunch†and someone has to pay for the bandwidth. Sometimes it feels that the pie is not big enough to feed all the hands that are the in the revenue share pot.
- Spectrum and capacity is king and whoever has a good spectrum tends to benefit competitively.
- Out of necessity, companies come up with innovative solutions e.g. T-Mobile focusing on WiFi in the early days when AT&T didn't want to touch it and Verizon mocked it. Now WiFi is central to their mobile data strategy.
- Traffic from non-phones will exceed that from the typical feature and smartphones.
- Business and revenue models that will help sustain the industry are going to come from outside the industry.
- With so much at stake, carriers will figure out ways to participate the appstore value chain.
- Browsers have shattered the control of the ecosystem and we are just at the tip of the iceberg.
- We will soon see the return of the tier-ing price plans. QoS will enter the picture soon. Likely to have platinum vs. gold service concept emerge
- Solutions – mobile analytics, video optimization, traffic shaping – it comes down the "art of delivering a packetâ€
- Apps are not a zero-sum game.
- There will be a metamorphosis of physics and economics of mobile data, new group of players will emerge.
- Carriers have historically not done a good job of picking winning applications but they will figure ways to participate in the new ecosystem.
- Compared to the online Internet market, mobile Internet market is quite nascent and we are expected to see significant opportunities emerge in the next couple of years.
- While iPhone has been a great device, it is the Google applications that make it so popular.
- Presence, social networking, and connectedness will all help in creating a brave new world of mobile data services.
- More Carrier branded solutions to come.
- If carriers are cut of the revenue stream, they might have less incentive to upgrade their networks.
- Technographics, Psychographics, and Demographics data very useful for application developers and we can expect operators to open up consumer information gradually for the ecosystem.
- Some see Android getting more closed with each release, OEMs need to open up the device for app developers to take full advantage of capabilities.
- T-Mobile has been rapidly expanding their 3G footprint with expected coverage increase to 200M by end of the year.
- The levers operators can use to control data usage – pricing, QoS
- FCC's action is having a positive impact on the industry though we need a lot of work (and a lot of spectrum)
Also, Tricia Duryee does a good summary of the discussion at Moconews
Our next event is looking to be another sellout affair with tech titan Rob Glaser, Founder, Chairman, and CEO of Real Networks headlining the event. Be sure to register early to avoid any sellout blues. Date: March 10, 2010.
Until then, a very happy new year to you and yours and have a terrific holiday season that helps you prepare for a successful 2010.
US Mobile Data Market Update Q3 2009 November 9, 2009Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,European Wireless Market,Indian Wireless Market,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile TV,Mobile Usability,MVNO,Networks,Partnership,Speaking Engagements,Unified Messaging,US Wireless Market,Usability,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 5 comments
Executive Summary
The US wireless data market grew 5% Q/Q and 27% Y/Y to exceed $11.3B in mobile data service revenues and thus exceeded $10B for the third straight quarter. As we mentioned in our Q1 2009 research note, given the strong growth in data revenues and overall service revenues, the worst is over for the US mobile industry. The US market touched 25% penetration of smartphones in Q3 2009, a new milestone.
While the flailing economy hit certain segments of the wireless ecosystem hard esp. the infrastructure and handset segments, consumers haven't really pulled back on the mobile data overall spending. Additionally, the CAPEX spending has stayed strong in 2009 given the activity around 3G/4G deployments and trials. As expected, there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers. The US subscription penetration was approximately 91.3% at the end of Q3 2009.
As we mentioned in our last three research notes that this time around, the fate of the US mobile industry is more closely tied to the overall economy compared to the previous recessions. As the consumer sentiment improved over the last two quarters along with better than expected Q1-3 2009 earnings from corporations, the mobile industry is back on track. While the structural flaws in various industry segments remain, the outlook for the Q4 2009 and 2010 remains bright and we are expecting the overall data revenues to now increase by over 30% compared to 2008 with a record-setting Q4.
Q3 2009 reported a 3.5% increase in GDP compared to the 1% decline in Q2 and 6.4% decline in Q1, thus marking the official (technical) end of the recession. The GDP is expected to change by 3.2% for 2009 and the service revenues are expected to account for 1.13% of the US economy by year-end. Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.
So, what does this mean? Well, the markets can still be volatile, but overall the market seems to be feeling better about the economy than it was in February. The Conference Board Consumer Confidence Index though retreated from June is at a healthy 47.7.
What to expect in the coming months?
The high unemployment has slowed the growth in the data card segment but the smartphone consumers have more than picked up the slack. Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid accounts for almost 20% of their customer base compared to 17% from an year ago. The fight for the low-end customer is also having an impact on the traditional prepaid players and the price pressure is reducing their margins. It is quite likely that 50-60% of such consumers don't go back to postpaid thus permanently lowering the ARPU base for such customers and carriers who have experienced more postpaid to prepaid shift will have to make up for the lost revenues elsewhere.
In fact, the churning in the last few quarters has distanced the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) by the biggest gap in the history of the industry. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.
The trend of the landline replacement by Mobile continued in Q3 2009, now reaching almost 25%. In the third quarter, messaging growth slowed down. The messaging volume was up only 4% and messaging revenues were up 3% QoQ. With its expanding 3G network, T-Mobile like its peers has started to benefit from smartphone penetration reaching to 6% of its subscriber base. Overall, The increased use of smartphones and datacards is putting a pressure on carrier networks and accelerating their strategies to deploy LTE/WiMAX. We estimate that by end of 2009, the US mobile data traffic is likely to exceed 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, operators will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discuss mobile data traffic in much more detail in our paper "Managing Growth and Profits in the Yottabyte Era." We will have more on this subject in the coming days (You can also read our RCR Wireless columns on the subject – Defining Mobile Broadband and Solutions for the Broadband World).
We will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q3 2009 US wireless data market is:
Service Revenues (Slides 11-12, 17, 19)
- The US Wireless data service revenues grew 5% Q/Q to $11.3B in Q209. Compared to Q308, the data service revenues grew 27%.
- Verizon and AT&T accounted for 80% of the increase in data revenues in Q3 2009.
- The US mobile data service revenues crossed $10B for the third straight quarter and stays ahead of Japan and China by a distance.
- AT&T experienced the most growth with over 6% increase Q/Q followed by Verizon and Sprint at 5%.
- Verizon's data revenues exceeded $4B/quarter only inches behind the global leader of over 10 years NTT DoCoMo.
- AT&T and Verizon now account for 68% of the market data services revenues and 61.5% of the subscriber base.
- The average industry percentage contribution of data to overall ARPU is now 28%. US market is likely to touch the 30% mark in 2009 though it might not quite eclipse it.
- The top four US carriers are now a permanent fixture in the top 10 global operators by mobile data service revenues occupying #3, #4, #6, and #8 spot respectively. Apart from NTT DoCoMo and China Mobile, Verizon Wireless and AT&T are the only two other operators generating more than $3B in quarterly mobile data service revenues.
ARPU (Slides 13-15)
- Overall ARPU decreased by $0.14. Average voice ARPU declined by $0.57 while the average data ARPU grew by $0.43 or 3%.
- Verizon led in (blended) data ARPU with $15.59 followed by AT&T and Sprint. In terms of % contribution, Verizon exceeded 30% to become the first US operator to do so. It was followed closely by AT&T and Sprint respectively. T-Mobile also exceeded $10 in data ARPU for the first time.
- AT&T experienced something unique – an increase in voice ARPU (for the first time in 10 quarters). The voice ARPU increased $.03 in Q3 2009.
Subscribers (Slides 16-18)
- In Q309, the US market added approximately 2.7M new subscriptions down 1% from Q109.
- The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q309, 67% of US subscribers were using some form of data services.
- The messaging volumes in the US market now average almost 568 messages/subscriber/month or at the frequency of almost a message/hour/sub thus reaching close to the messaging leader Philippines.
- In terms of net-adds, thanks to the boost from the iPhone, ATT again led in Q309 with 2M net-adds, edging its friendly rival Verizon which added 1.2M net subscriptions. Sprint lost 565K.
- T-Mobile lost customers for the first time in its history. It lost 77K customers in the quarter.
- The 3G penetration in the US stays at a healthy 43% in Q309. Verizon led the pack while T-Mobile is slowly expanding its 3G coverage. The growth in 3G and smartphones is helping offset some of the downward pressure on the data revenues and overall ARPU.
- The gap between the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) is at its maximum. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.
Applications and Services
- Non-messaging services continue to grab 50-65% of the data revenues for the US carriers.
- The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe became more prevalent in the US market with industry wide flat-rate pricing plans that included data. All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 20% of the consumers have flat-rate data plans.
- There are probably 18-20 sub-segments within mobile data services and consolidation looms. While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene is starting to heat up.
- The usage and data consumption trends are enabling carriers to accelerate their 4G plans and develop long-term business and technical strategies.
- Nokia sold 100M+ units in Q3 2009. Samsung again had a solid quarter with over 60M devices sold inching its market share to almost 21%. LG Electronics at 11%, Sony Ericsson at 4.9%, and Motorola at 4.7% rounded up the top 5.
- The third quarter was again dominated by blockbuster launches of smartphones. Androids have been invading the industry en-masse and 2010 looks to be a terrific year for consumers and competition.
- The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband – usage billing, UMA, Femtocells, Hotspots, WiMAX, LTE, and others.
Policy and Regulations
· Q3 also marked the start of an intense FCC scrutiny of the wireless industry. In outlining the four key principles of a) looming crisis of spectrum shortage b) removal of red tape c) enforce net-neutrality and d) open Internet, things have already started to change in the US Wireless Industry. Google has played the game of Armadaian tactics with Kasparovian acumen. The impact of the codified principles (and the subsequent court battles) can have a significant impact on not only the US wireless industry but the global ecosystem as well.
- The appstores battle is intensifying with OEMs and carriers are announcing their plans and some of them are opening their wares to woo the developer community. In the midst of the appstores hoopla, Apple announced the passing of the 2 Billion download mark with increasing number of developers participating the ecosystem. The new functionality being released with 3.0 is taking the battle up a notch. The clear-cut business model of 30/70+ split is attractive to the long-tail of developers. While there is no dearth of applications, findability remains a challenge. Also, appstores are changing the monetization strategies for content and application developers.
- The App vs. Mobile Web debate is getting intense. The evolution is pretty clear – for the applications that don't require significant UI resources, it will be better to develop in for the browser, for intensive games, the native platform will be ahead of the browser advances. The location API access on the iPhone browser is breakthrough to have developers start thinking about the webapps. But, what does it do to the control points and the revenue models?
· While there has been much consternation around the word "Open," one is hard pressed to find a consistent definition what it might actually mean. One could provide access to one API and declare themselves an open heretic while others could end up opening up their business more than needed and yet be accused of being closed. Clearly, the degree to openness is in the eye of the recipient. There is no black and white, just shades of grey and that's where the battles will be won and lost. In the end, it is all about "access" to the market and the "freedom" to earn profits. Rest is noise.
· It is worth debating as to what can be mandated to be open, do the rules apply just to the operators and OEMs, or we should extend the courtesy to software platforms, search indices, aggregated user profiles, billing engines, etc.
· It is also becoming obvious that we need to redefine the device categories. Featurephones are no longer dumb terminals, many empower the users with smartphone functionality. Devices like iPhone, Droid, Pre no longer fit the smartphone stereotype, they need a separate category for themselves – appphones, ddhmvcs (data devices that happen to make voice calls), platformdevices, mobilecomputers, geniusdevices, agilechips, astuteconceirge, you get the point.
- Not surprisingly, Venture capital market experienced a continued decline in 2009, with companies announcing $1.5B in financings vs. $3B for the same time period. (Source: Rutberg)
- In a sign of convergence battles to come, T-Mobile's @Home and various Femto cell initiatives are taking hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service.
- China crossed the 700M subscription mark in Q3. India crossed the 500M mark for telephone penetration (wireline + wireless) of which 472 are mobile subscriptions. In terms of net-adds, India has outpaced China for the last 16 months. The Indian market added almost 155M vs. 101M in China during the last four quarters. (more discussion on the international market in our global market update next year)
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2009. The next Global Wireless Data Market update will be issued in Mar 2010.
Watch out for our end of the year survey and commentary on global wireless markets and trends for 2010.
Your feedback is always welcome.
Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.
Chetan Sharma
Disclaimer: Some of the companies mentioned in this note are our clients.
New WhitePaper: Managing Growth and Profits in the Yottabyte Era July 14, 2009Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Japan Wireless Market,Location Based Services,Mergers and Acquisitions,Mobile Advertising,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Search,Mobile TV,Mobile Usability,Mobile Users,MVNO,Networks,Smart Phones,Speaking Engagements,Strategy,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 2 comments
Managing Growth and Profits in the Yottabyte Era
In Q1 2009, the US market exceeded $10B in quarterly mobile data service revenues for the first time. The subscription penetration in the US is well past 90% and the mobile data usage is on the rise. While the rate of new subscriptions has slowed, the pace of innovation is going very strong. It is quite apparent that the mobile industry is going through a significant transition from voice to data, from making calls to getting lost in applications and from voice communications to multimedia communications. Helped by the ever expanding wireless broadband networks, and release of hit devices every quarter, and consumer's insatiable appetite for information and content has brought us to the surge of a data tsunami that will shake the industry to its core.
As everything moves to digital, information repositories across the web are almost doubling every day moving rapidly to the yottabyte (YB) era. The information and the desire and the capability to consume oodles of data is increasing exponentially. As a result the traffic – both Wireline and wireless is also increasing at a predictably fast rate.
In 2009, the global yearly mobile data traffic will reach a new milestone – 1 Exabyte(EB) or 1 Million Terabytes (TB).By 2016-17, the global yearly mobile data traffic is likely to exceed 1 Zettabyte (ZB) or 1000 Exabytes. By 2014, in the US alone, the total yearly mobile data traffic is likely to exceed 40 EB. How do you go about managing such growth in a profitable manner when the cost of supporting such traffic will increase exponentially despite the move to 4G? Will the move to LTE offer some respite?
This paper discusses the analysis done by Chetan Sharma Consulting on the growth of mobile data traffic in the US market and how the ecosystem can apply some strategies to manage growth and profits. We built detailed models to estimate the rise of mobile data network traffic and discuss some solutions to handle such growth in this paper.
Your feedback is always welcome.
Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.
Chetan Sharma
Disclaimer: Some of the companies mentioned in this paper are our clients.
Future in Review (FiRe) 2009 roundup May 31, 2009Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,European Wireless Market,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP Strategy,Japan Wireless Market,Location Based Services,Mergers and Acquisitions,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Speaking Engagements,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment
Over the course of last year, I did 25 different events, all of them focused on mobile. However, there was one event that truly stretched my thinking and worldview and that was the "Future in Review" conference (see last year's review here) hosted by Mark Anderson, CEO of Strategic News Service (SNS). It exposes one to multidisciplinary subjects from global warming to nuclear weapons, from oceanography to medicine, from mobile to cloud, from economics to space rockets, it's all here, nicely packed in a 3 day conference.
FiRe 2009 started with a brilliant keynote address from Prof. Veerabhadran Ram Ramanathan, Distinguished Prof of Climate Sciences and Director who is quite possibly the most authoritative person on the subject of climate change. He started his work way back in the 70s, decades before Al Gore made it glamorous. He is the one who has been measuring the impact on our planet one measurement at a time. He took us through the journey of his career culminating with a stark warning and a message of hope.
Things have deteriorated to such an extent that if we don't check the downward spiral, many of the significant sources of water such as the Gangotri Glacier in India will disappear in 10-15 years. If you stop and think about it – that's just stunning and has calamity written all over it. If the source of Ganges disappears, the life that has built around the river for thousands of miles before it goes into the Bay of Bengal will be unsustainable. I grew up in Roorkee, a town on the banks of the Ganges, so the point hit home very strongly. I have been thinking about this issue since the PBS documentary "On Thin Ice" by David Brancaccio and Conrad Anker – one of world's leading high altitude climbers. 75% of the world's fresh water is stored in glaciers and at the current pace of destruction, within 15-20 years most will be severely depleted. And there are still people in high places who don't get it.
It was not all doom and gloom but a ray of hope in his experiments that left us less depressed by the end of the keynote. He is working on a number of experiments to identify and cure the main sources of pollution and carbon in the atmosphere like the Project Surya to reduce air pollution and global warming by cooking with renewable sources. Or the unmanned drones (pictures above) to measure brown cloud particulate composition to get a handle on how pollution travels (did you know that it only takes 2-3 days for pollution in China to come over the US and then another 2-3 days to reach Europe and the cycle continues – pollution is flat and globalized – thinking that it is only a developed world problem or developing world problem is foolish, also foolish is waiting on the other party to move first).
Best wishes to Ram and his team to educate, illuminate, and find solutions to the toxic problem of our times.
Next day we moved into the full-fledged conference mode with 30 min rapid fire sessions from 8-5. The morning started with Mark talking to Stephen Evans of BBC World Service (he is a great interviewer btw) about how we recover from the current crisis and if technology will lead the rebound? Answer is Yes! and we are already seeing signs of it and others in the industry like Bill Gates and John Chambers have been echoing the same thing as well. Later Mark interviewed Mark Hurd, CEO of HP who had a hard time sitting on his feet so the discussion was done standing up.
He emphasized that the future is in the packaging of software, services, hardware, and network rather than siloed solutions. Haven't we heard that before. Hurd is a numbers guy and can recite P&L spreadsheet from memory. He suggested that we will see more of the same for the reminder of the year and that the services business is yielding good profits for HP now. There was also quite a bit of discussion on the latest buzz word "Cloud Computing," what it means and how does everyone profit from it.
Several industry heavyweights like Werner at Amazon, Amitabh at Microsoft, Russ Daniels at HP were at hand to discuss what CC means to them. While there is a lack of industry consensus on the meaning, it more and more looks like the reallocation and redistribution of resources – physical and electronic in a manner that drives efficiency and cost reductions for startups to behemoths. From a consumer point of view, it will always be a blend of solutions that take into account the privacy and security of data. My recent hard drive failures has forced me rethink my backup strategy.
(My panel on the future of Wireless Broadband – Fred, Chris, David, Hugh, and Rama)
Photo copyright © 2009 by Sandy Huffaker Jr
Later in the day, I had the privilege to host the only mobile session of the conference "The Future of Wireless Broadband" with five amazing panelists, Dr Fred Kitson, Corporate VP, Motorola, Chris Pearson, President, 3G Americas, Dr. Hugh Bradlow, CTO of Telstra, Dr. Rama Shukla, VP, Intel, and David Achim, President, SkyFiber. I have written about the subject in great detail over the last couple of years so it was great to bounce some questions to the best minds in the space. Highlights of the discussion:
- Hugh, ever a purist, defined 4G as 100Mbps.
- Not a surprise, but the latest surge of smartphones is causing the networks to panic and follow the upgrade path esp. for HSPA+, LTE, and WiMAX
- Rama said that 4G is more about the business model than about the technology. A business model that enables and opens up the ecosystem at a low price thus fostering innovation and services in an accelerated way
- Hugh added that it is also about the spectrum as what's available and how it can be utilized for new services, new technologies, and new business models
- Being a provider of the backhaul technology (a choke point in the network evolution), David discussed how the backhaul technology will need to be upgraded at an accelerated pace if we are to deliver 10Mbps+ speeds.
- Fred brought in the perspective from the device and infrastructure provider and they are doing well with both WiMAX and LTE and that newer devices with much enhanced capabilities will drive more demand for bandwidth as well as the need to optimize applications to conserve batteries (which is another areas that needs innovation and breakthrough)
- Chris gave a summary of the LTE efforts of operators around the world with folks like Verizon accelerating their rush to 4G due to end of lifecycle of EV-DO while others like ATT are pursuing a slightly slower approach trying to maximize the output from HSPA+.
- Hugh has been playing with newer set of "alternate devices" like sensor networks, telemetry, projection glasses and so on and so forth and sees their importance in the growing ecosystem.
- Australia is dedicating $43B to broadband expansion to 90% of the consumers in the country. An equivalent US investment will be close to $350B and we are investing $7B (stimulus package). As I have said before, the stimulus package was a huge missed opportunity and the govt. could have done much better.
- The flat rate economy is not sustainable and something has to give in the future
- The availability of broadband impacts consumer behavior and we are likely to see very diverse models and services emerge in the coming days
There were other host of areas I wanted to get into but you can only do so much in 30 minutes especially if you have great panelists. Wish I could have a day long session 🙂 to discuss the nitty-gritty in much more detail. In any case, great panel and insights. Joe Sterling was at hand as well to do an artist rendition of our panel, art below.
As I mentioned before, the conference was filled with very interesting discussions like Ambassador Dennis Hays from Thorium Power discussing a world where the capacity of making nuclear weapons can be taken out of the nuclear materials to only focus on nuclear energy for energy purposes. Boy! won't that change the geo-political dynamics. John Hagel talked about shaping strategy based on this recent HBR paper and his upcoming book on the subject.
Another highlight of the show is to gather the bright CTOs of leading corporations and give them a practical problem to solve like how to provide adequate safe water for future decades. Hosted by David Brin (cohost of TV ArchiTechs series), the panel delved into understanding the problem and delivering a framework for solutions. Not a typical session you see at a conference. Hey CTIA! how about putting together a problem solving panel for your next show?
I also was touched by the screening of the movie "The Cove" – winner of the 2009 Sundance Film Festival Audience Award. More details here. Synopsis:
In the 1960's, Richard O'Barry was the world's leading authority on dolphin training, working on the set of the popular television program Flipper. Day in and day out, O'Barry kept the dolphins working and television audiences smiling. But one day, that all came to a tragic end.
The Cove, directed by Louie Psihoyos, tells the amazing true story of how Psihoyos, O'Barry and an elite team of activists, filmmakers and free divers embarked on a covert mission to penetrate a hidden cove in Japan, shining light on a dark and deadly secret. The mysteries they uncovered were only the tip of the iceberg.
It will change your perspective of how you view dolphins for ever and those trips to seaworld will be ever so more poignant filled with self-introspection. More power to the activists like Richard O'Barry and directors like Louie Psihoyos for opening our eyes and making a remarkable piece despite the challenge.
Another highlight of the conference is the interviews of top technologists and emerging startups by BBC's Stephen Evans. Each gets a sound byte to wow the world (the session is streamed to 150M people). Highlights – Xerox – how can we solve legal cases with technology? Radar Networks – NOW is the unit of change. Vlingo – Speech is changing. IMANI-Ghana – SMS to prevent drug counterfeits, Cisco – virtual reality, voice, and data are the three different waves of innovation, the opportunity for collaboration is immense, Liberty – 5 yr projection 1Gbps wired, 100Mbps wireless peak throughputs, avg – 200Mbps for wired and 10Mbps for wireless, Microsoft – it will be the Chinese century, companies shouldn't worry about protecting their marketshare in China but worry about protecting their share from Chinese players overseas, Smaato – Mobile Advertising is going to be the most prevalent business model in mobile, and SIMtone – make terminals dumb again and have the network cloud take care of everything.
The current financial crisis was also discussed at length. Many thought Europe is in denial and lack fundamental understanding of the crisis, that China and US are intertwined more than ever before and will have to work together to lead the world out of the crisis, India is largely untouched and better days are ahead thanks to the recent electoral results.
(Larry with Kamran, Mark with Elon)
Larry Brilliant suggested that the vaccines are the best investment in human history. Can't argue with that one. He also suggested that the world should be thankful to Mexico for releasing the data early and often enough for other countries to take precautionary measures (sometimes to the extreme, I might add). They have suffered significantly and have been ridiculed but hopefully they serve as a lesson for the world in future pandemics.
If FiRe represents the best in multidisciplinary thinking, Elon Musk represents the rare breed of multidisciplinary entrepreneurs. The guy can shift from intricacies of electric cars to the design of rocket ships to solar energy with ease.
(with Hugh at Calit2) Copyright© 2009 Calit2
My best session was at Calit2. I think Larry Smarr has the best office with many 10Gbps links and coolest toys to play with, especially the 125Mpixel Hyperwall. It was also nice to interact with Michael Sims, Manager and Planner for the Mars Rover at NASA and his team using the network and the wall. You can see some cool images below. The second set of pictures are an image of human brain where you can pick out the single neurons with ease.
Also, interacted with the next generation surface and touch technology that uses pressure as an input as well. Below is me doing a destructive face surgery on a poor soul.
Finally, I would be remiss if I didn't mention the 0-60 mps in 3.9s experience in Tesla Roadster. That car is a rocket.
Overall it was a great conference. I left more curious about more things. The conference also has an intimate feel to it where you can discuss burning issues with top experts and award winners over coffee, stroll, and meals. Registration for 2010 is open now.
CTIA 2009 Roundup April 6, 2009Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,CTIA,Devices,European Wireless Market,Indian Wireless Market,International Trade,IP,Japan Wireless Market,Location Based Services,Mergers and Acquisitions,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile TV,Mobile Usability,Speaking Engagements,Strategy,Unified Messaging,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
CTIA 2009 Roundup
CTIA provided a boost to the Las Vegas economy by hosting the 2009 International CTIA in the sin city. Prior to the show, we knew that the attendance will be down due to the economy and it was clear from day 1 that it will be a less busy event. Attendance was probably down 30-40%, Exhibitors seemed down by a good percentage as well with many opting for meeting rooms instead or skipping the show altogether. The big double story compounds were downgraded to smaller fields. Samsung and LG didn't plaster the town with massive banners, taxis weren't covered in advertisements. It was not all bad though, the probability of being trampled by humans reduced, taxi lines were shorter (though no less annoying) and the quality of the show was still pretty good. We had a jam packed schedule. This note summarizes the observations from the show.
Numbers CTIA released its semi-annual numbers. For 2008: 270M subscribers, $148 billion in service revenues, $32 billion in data revenues (just for reference, this is more than the total global Hollywood box-office revenue which came in at $28B), 2.2 trillion in MOU, 1 trillion TXT messages. You can checkout our annual US data market analysis which was released last month here.
Etech Contest – Prior to the event, CTIA invited us to judge the Emerging Technology Contest. It was fun reviewing the various entries. The award winners are announced here. Congrats to all.
My CTIA started early with a couple of sessions at the pre-conference event – BRIC Mobile Market Summit. The quality of the discussion was pretty good. I gave a talk on the Opportunities in the Indian and Chinese mobile markets and discussed where the opportunities in these two fastest growing markets as well as dispel some myths that engulf most companies.
After that, I joined the panel with other experts in the industry to have a lengthy discussion of the trends and opportunities in these markets including Latin America.
Unfortunately, our workshop on "Monetizing Mobile User Generated Content†got canceled due to low attendance or maybe folks are just not interested in monetizing these days. I will be discussing some of the similar themes in my talk at the NAB Show (MES) in Vegas on 22nd April. I will also be moderating a panel on Innovations in Mobile Experiences.
If interested, clients of Chetan Sharma Consulting can request the slides from any of the talks.
Themes: The main themes of the conference were: Broadband (primarily around 4G and LTE with sprinkles of WiMAX) and data usage, Green, Mobile Health, Appstores, Rich Communication and Social Networking.
4G – My first 4G project was back in 2003 for NTT DoCoMo when 4G didn't even enter industry's vernacular. Most operators were figuring out their 3G strategies. Six years hence, we have come a long way. Broadband, 4G, and LTE were the core themes of the conference and there was visible progress from the last CTIA with more test results, actual devices, and real demos. While the current reports suggest that some form of deployment will take place in 2010, we don't expect the "real†commercial deployments before 2011, LTE voice will even take longer. So, where does this leave WiMAX. With each passing day, the role of WiMAX as a niche technology is affirmed. The backhaul bottleneck problem is also becoming prominent and the enhancement of backhaul is behind the RF infrastructure to provide any substantive improvements in data throughputs at least in the near future.
I will be moderating a panel on 4G at Future in Review (FiRE) conference considered by Economist the best Tech conference on the planet (panelists include executives from Telstra, Qualcomm, Clearwire, and others) to get delve deeper into the evolution of 4G.
The Broadband Stimulus – Many companies are eying the $8B broadband stimulus package. The process of how they are going to be granted seems chaotic with unintended consequences. My feeling is that it is a lost opportunity. Instead of just looking at incremental enhancements, US could have been bold and improved existing and new broadband deployments by over 50-60 times. (More discussion here)
Mobile Health
Keynotes – I thought Dr. Eric Topol, Director, Scripps gave perhaps the most effective keynote addresses in recent memory. Keynotes are generally a drab affair. Instead of inspiring through vision many put the audience to sleep with their product announcements. Dr. Topol's speech was so rich in content, his words were filled with such passion, and his articulation was so inspiring that most entrepreneurs in the room were energized to make a difference. I commend CTIA for inviting him. He is joining Qualcomm's Don Jones (a fierce proponent of mHealth) and others to form the first ever Wireless Health Institute in San Diego. Expect some really cool stuff to come out of them. However, to be most effective, health institutions need to get on board with the program starting with the simplest of things like "txt messages.†Come on folks, move into the 21st century!
Health – For the first time, there was significant discussion on mobile's impact on the health care industry. My masters is in Biomedical Engineering so it is great to see the marriage between the two industries. I strongly believe if we can get past some of the bureaucratic nonsense, mobile can have a significant lasting impact on the quality of life and healthcare in both the developing and developed nations. Some of the stuff is really amazing (iBrain, iPill, iShoe, you get the picture). I will have more discussion on the subject in the coming days.
Applications and Services
You say appstore, I say appworld, you say market, I say marketplace – I have been working on appstores for so long that I can't help but be amused by the recent frenzy of appstores sprouting like mushrooms. I think overall it is good for the industry as each of the providers will push each other in areas of innovation and pricing models thus opening up the industry for developers and consumers. However, the fragmentation also increases as a result and something has to give because developer's attention and resources are finite. There aren't many companies who can pull-off a successful developer program (this is one area where Microsoft has some advantage because of significant experience in cultivating developers). Apple's model has already forced carriers to accelerate their short-term and long-term strategies. T-Mobile USA saw the writing on the wall earlier than most and is further along in its plans. Current implementations are still quite primitive with much potential for improvement.
Rich Communication – Talked to some companies (Aylus, Ericsson, Alcatel-Lucent, etc.) about rich communication services that integrate various experiences on the mobile device including chat, voice, data, social networking, video, etc., onto a single screen. The user experience is enhanced leading to newer sources of revenues for operators.
Netbooks also seem to be on operator roadmaps with 33% of these devices expected to be sold through the carrier channels in 3 years. Will Nokia and Motorola get active in this space? Or will the new entrants use netbooks to enter the phone market? Inspired by Kindle, many players are getting bolder and investing in application specific devices (a trend we wrote about in our mobile advertising book last year). Examples: a cool new wireless video game console – Zeebo being launched in Brazil and nuvifone being launched by Garmin and Asus.
Mobile Social Networking – Some interesting social networking features and functions are coming down the line. I am convinced that carriers need to treat social networking as a core service rather than a bolt on application. I almost wrote a book "The Facebook Effect†but 3 books in a year were too many so taking a break for now. (Maybe the next one will be "The Twitter Effectâ€).
Mobile Advertising – Though we have been involved with several mobile advertising projects, at the show, it felt the segment excitement was quite flat and many companies are struggling to stay in business. The consolidation hasn't come yet but things are likely to start changing in the next few months. I also think that industry needs to start thinking about much more compelling and engaging closed-loop creative experiences rather than just impressions. Also, third party verification is needed (who is going to step up?). Finally, the role of the mediation layer is becoming important. The real substantive announcement came before CTIA with four major US operators agreeing to collaborate on best practices. Kudos to MMA for orchestrating the agreement.
Green is the new black – With so much focus on cleantech and global warming, vendors are stepping up and making a dent in the carbon put out by the industry. There were some really cool solar chargeable devices as well as applications that keep the users green-aware. Being green is a competitive advantage.
Devices – The quality of devices that coming out keeps getting better. Stuff coming out from Samsung, LG, and INQ is pretty darn cool (Motorola, Nokia, Palm have some good stuff coming out as well). There were some neat concept phones on display as well (I know, I know, we are ways out but I think we will see some of these come to light sooner than we think). I thought one of the coolest new device was from LG – GD900 with transparent keypad. Samsung's DLNA and AMOLED based devices were also quite good. They were also showing the WiMAX Smartphone Mondi. ZTE is also planning to enter the US market in a big way. While new Androids were hard to spot, several of them are scheduled to be released in the next few months.
NTT DoCoMo – Each CTIA, I love spending time in DoCoMo's booth as they are always at the cutting edge of what's to come. Downloading your digital key to your handset to open your hotel room by waving your phone, controlling every piece of equipment in your home via your cell phone, i-concier: your friendly on-screen butler, separable phones were some of the highlights.
Best booth: Most Creative – SpinVox, Most Hip – LG
Interesting companies – While it is difficult to meet each of the upcoming startups, couple of companies caught our attention: Waze out of Israel with its crowd-sourcing based approach to real-time traffic information and Kovio with its ability to lower the cost of printed silicon.
3G connection – My 3G connection was so good throughout the show that I didn't need to lug my laptop around and did 100% of my communications for 3 days from my phone.
Your feedback is always welcome.
Disclaimer: Some of the companies mentioned in this note are our clients.