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Mobile Predictions 2017 January 2, 2017

Posted by chetan in : 4th Wave,5G,Chetan Sharma Consulting,Connected Devices,Connected Intelligence Era,Fourth Wave,Internet of Things,IoT,M&A,Mergers and Acquisitions,Mobile Applications,Mobile Future Forward,The Golden Age of Mobile,Wireless Value Chain,Worldwide Wireless Market , add a comment

Mobile Predictions 2017

http://www.chetansharma.com/MobilePredictions2017.htm

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A very happy, healthy, and prosperous 2017 to you and your family. Hope you had a good holiday and are ready to take on the new year with vigor and purpose. My thanks to all who participated in our 10th annual Mobile Predictions Survey. It is a unique polling of the insiders to get a glimpse into what the ecosystem is thinking about the future.

As I have mentioned before, we are entering the Connected Intelligence Era and the mobile industry is growing beyond its traditional borders to transform every vertical industry and by extension – the global GDP. Proof is in the numbers. 7 Zettabytes of digital information created. 1.3 billion smartphones sold. Over 60 Exabytes of mobile data traffic (which btw will grow 15x+ in the next 5 years). Almost 100 million wearables sold.  More than 16 billion connected devices. Almost half trillion dollars in data revenues. Over 400 billion dollars in OTT revenues. At least 77 companies generating a billion or more from 4th wave. At least 8 companies generating a billion or more from IoT.

The improved economy empowered consumers to spend more. Europe despite its political troubles did well economically. China slowed down but India picked up the slack. Affordability remains a key issue to address to bring in the next billions into the fold.

IoT emerged as a big category last year and we are just starting. While the potential is unlimited, industry needs to come together on a number of issues around fragmentation, security, policy, and privacy. The fact that we are selling more non-phone devices than phone devices on cellular networks in the US should be a hint of things to come. 2015-16 saw a wave of consolidation and we will continue to see stronger player get more aggressive this year across domains which is very exciting. The next five years are going to be full of action, surprises, and transformation. Stay with us and we will keep you posted.

We do our annual survey to engage our knowledgeable community on trends and events to keep us informed. The composite view gives a glimpse into the future scenarios. Executives, developers, and insiders from leading mobile companies and startups from across the value chain and from around the globe participated to educate us on what to expect of 2017. The survey draws upon the unique collective wisdom of the folks who are making it happen. Thanks for being part of the annual ritual.

5 names were randomly drawn for the limited edition of the Mobile Future Forward 2016 book and they have been notified. Congrats.

Welcome 2017!

Kind regards,

Chetan

What was most newsworthy in Mobile 2016?

In 2016, there was no one blockbuster event that stood out. Samsung’s Note debacle was perhaps the one that captured the most headlines and consumer’s imagination as they were inundated with recall messages and airline announcements. But, perhaps, the most meaningful undercurrent of the industry was the continued success of T-Mobile USA that shaped the US and global markets. There were no blockbuster devices that excited consumers at scale. There were some big M&A announcements most notably – AT&T-Time Warner, Qualcomm-NXP, Softbank-ARM. We expect the M&A activity to pick up significantly in the coming months and could see a big announcement within weeks. IoT made steady progress though slower than initially expected. AI/ML is on the top of the hype cycle curve. AR/VR grew but also disappointed. Regulatory tussles continued and are likely to intensify in 2017. Voice UI made a comeback lead by “I will tell you a joke” Alexa. Microsoft surged while Apple faltered. Facebook and Google dominated the mobile ad landscape. Chinese players are making impact globally.

What will be the biggest mobile stories of 2017?

There is a lot of hope for IoT to grow from experiments to seep into the fabric of society and enterprise (but it will take time). Folks are expecting new experiences aided by AR/VR, ML/AI, displays, networks to shine in 2017. 5G got its voice in 2016 and we can expect a tremendous amount of activity and noise on this front around the globe. After the US election, major tech companies started to lay the ground work for potential M&A activity in 2017. We expect some big announcements depending on how the policy framework for the new administration looks like.

Who are the top 4 important players in the mobile ecosystem?

Since the iPhone came out (did you notice, 2017 is the 10-year anniv. for the legendary device – Apple kept some of the killer features for this year’s release), Apple have dominated our “most important players” rankings. This year, Google edged out Apple. Operators made a comeback and were ranked third. Facebook, Samsung, Amazon, Qualcomm rounded out the top 7. Our more scientific analysis puts Amazon at the top followed by Apple, Google, Facebook, and Microsoft.

What will be the breakthrough categories in mobile in 2017?

We had a continuous stream of AI/ML news and breakthroughs throughout 2016 and we expect that to continue in 2017. You can tell the importance of the category by looking at the fight for talent. Right now, the AI/ML recruits are most in demand. Google dominates and the education engine is struggling to feed the pipeline. IoT activity was most successful in the enterprise and we expect the likes of GE and Siemens to continue to invest in IoT making it a big category for the year. Fueled by demonetization in India and the rise of viable mobile payment solutions worldwide, we expect mobile payments to enter the consumer consciousness in a big way in 2017. Another category that is seeing tremendous activity and excitement is that of autonomous vehicles. Google did well to kickstart the market but other tech players and OEMs are not sitting idle. This will be a fascinating tech and policy space to watch for 2017 with significant implications for the society. Given the cyberwars and hacking that has become second nature, we expect a lot of commercial activity in the space. This is one problem that is hard to get a handle on and it will only get worse. Flexible displays haven’t made their mark so far, perhaps, they will in 2017.

What will be the most popular consumer mobile applications in 2017?

Our participants thought mobile payments and commerce will be the most popular consumer app in 2017 in the developing world while IoT and Connected Cars will dominate the developed markets. Social and messaging will continue to make inroads in the emerging markets while AR/VR, health and wellness will be popular in developed markets.

Who will dominate the mobile payment/commerce space?

Financial institutions have cornered the payments/commerce market for a long time but Apple, Amazon, and startups are making inroads. The Financial networks haven’t been disrupted in decades and the time seems ripe though the level of difficulty is the highest. Facebook has so far sat on the sidelines with only minor half-hearted initiatives. Perhaps, it along with some of the other tech players can reinvent the sector. It needs a breath of fresh air.

Who will make the biggest mobile acquisition in 2017?

After the US election, the probability of AT&T-Time Warner merger going through flipped from 30% to 70%. It is likely to become the biggest merger of the year though don’t underestimate Masa who is readying his own set of M&A announcements. Depending on what happens on the tax repatriation front, we could see the tech companies to flex their muscles and purses as well.

Who is doing the most interesting work in the IoT space?

Startups continue to do some of the most interesting work in IoT space. We have documented the evolving landscape in our Connected Intelligence series of papers. Amongst the big companies, AT&T, GE, Verizon are probably at the forefront. Google had a chance to define the space that needs leadership but many missteps has left the room for someone else to take that mantle. Still a lot of fragmentation and issues around security, privacy, cost, implementation, etc. will continue to plague the segment in 2017 thought long-term, we stay quite bullish on the prospect of IoT shaping the tech ecosystem.

Who will dominate in the autonomous vehicles race?

Tesla is the iPhone of the autonomous vehicles car race. No other company is further ahead than Tesla. The primary reason is that it already has millions of miles of autonomous driving under its belts and is significantly ahead of the competitive landscape. We expect the self-driving, ride-sharing, logistics management, and car manufacturing to all converge making it one of the most interesting tech segment for the next decade.

What impact will the new US administration policies have?

If there is one word that can describe what to expect after the last US elections, it is “uncertainty.” We just don’t know how things will play out on a quarter-to-quarter basis. However, there are a lot of assumptions and hopes going forward. Folks are quite divided based on geography, their own beliefs about where the economy is headed, and how the policy framework is likely to break out. In some areas there was quite a bit of consensus. For example, respondents expect the new administration policies to have a positive impact on operators and service providers (net-neutrality seems history, M&As are going to be allowed, and they will gain on the OTTs). The impact on Internet players, startups, overall tech and mobile industry, and the US economy seems to be positive but more uncertain. Trade and the global economy might be up for a beating in the coming years. We are in unchartered territory so it is all speculation at this point.

Which category will generate the most mobile data revenue in 2017?

Mobile data has driven growth in the mobile industry for many years in the western world and we expect that to continue. In North America, Japan, Korea, and Western Europe, Access, Apps, Advertising, and OTT services are expected to dominate 90%+ revenue base in 2017. In emerged markets like China and India, messaging is still important but its contribution is shrinking as expected. In emerging markets like Africa and South America, are a bit behind but on the same 4th wave trajectory.

Which region will end up leading the world in 5G by 2020?

With its Winter Olympics firmly in sight, Korea is expected to lead the industry in setting 5G standards and commercial deployments but it is getting a close fight from its US counterparts as the 5G activity is expected to pick up in 2017 with Verizon and AT&T eyeing commercial deployments of some shape and form this year. There is still a lot of hype and definition meddling but expect the noise to get louder in the coming months.

What protocol will dominate IoT communications?

When it comes to protocols for IoT, the industry is all over the place. All of this is not surprising though. Market is expected to stay fragmented with NB-LTE making inroads along with Cat-M. Lora, Sigfox, and other standards and proprietary protocols are unlikely to make any discernable impact over the long run. A piece of advice – stay away from non-standard approaches on projects that expect a 10-year lifecycle.

The company bringing the most successful mobile gadget of the year – 2016 and 2017?

While Apple didn’t have a blockbuster feature set in 2016, it’s ecosystem is so strong that even a weaker launch was enough to make it the most desirable device in 2016. We expect 2017 to be a much more successful launch – akin to the iPhone 6+. Google made inroads with Pixel but its supply-chain and global support is not at par with Apple and Samsung (and perhaps the desire is lacking as well) so the results were good but not spectacular. Samsung was ideally placed to exploit a weak Apple launch but stumbled with an exploding device that put it on back foot for much of the last quarter. Microsoft messed the handset market but made inroads with Surface where it outshone Apple for the first time in its history. Will that inspire a reentry into the handset space? We will have to just wait and see. Chinese darling Xiaomi struggled. As expected, besides Huawei and ZTE, other Chinese OEMs also had a hard time gaining traction outside of China.

Mobile company of the year – 2016 and 2017?

For the first time, a mobile operator was named at the top. T-Mobile was voted company of the year. It easily beat Apple, Google and Facebook. With its uncarrier series of announcements, T-Mobile has changed the market not only in the US but also globally. For 2017, participants expect Apple and Google to shine more than others. We expect Amazon and Facebook to make more inroads and see further expansion of their revenue base. Amongst other operators, AT&T is best poised to gain in areas such as IoT and Media services.

Automation and Digitization of industries will lead to?

We have been researching this question for a long time. The respondents who expect net losses of jobs to increase continues to rise each year and might go past 50% in 2017. Most people expect to benefit from automation (reminder, the respondents don’t represent the larger consumer base) but the percentage of folks who expect automation to negatively impact them has started to creep up. There is a lot of misconception that it is robots that impact the job. Automation more than anything is the key element for research as automation of tasks is what eliminates the need for those tasks to be carried out by humans. How the governments and societies deal with the opportunity (and the threat) of automation is perhaps one of the most important question facing our generation. The best solution is of course the revamping of the education system and the training program but this won’t be able to catch all those who are getting impacted or will be affected so there need to be policies to deal with edge cases that will generate the most political noise.

Which of the following are likely to happen in 2017?

The big 5 tech companies lead the stock exchanges. Apple, Google, Amazon, Facebook, and Microsoft are racing towards the $1 Trillion mark. Will we see it in 2017? Unlikely but it is fun to speculate. Repeal of net-neutrality in the US almost a given. So, is Twitter acquisition, Sprint and/or T-Mobile M&A, 5G commercial announcements, and data only smartphone plans. Soft-SIM smartphones might make an entry which could upend the market in unexpected ways. Samsung is likely to bounce back from the Note fiasco. Microsoft might introduce a smartphone. Google glasses anyone? More progress on the autonomous car front. It is going to be an exciting year in the industry.

What category will be impacted the most by mobile in the next 5 years?

I am fond of saying that mobile is perhaps the most impactful industry because it has transformed every other industry. We expect the impact to be felt in health, IoT, Home automation, entertainment, automobile, transportation, AI/ML, Commerce, and much more.

Which segments are likely to get disintermediated the most by algorithms in the next 5 years?

With automation comes shift in labor requirements and needs. The first ones to get displaced are the skill-less jobs but also jobs that serve as middlemen for transactions. Some of the areas that will face pressure in the coming years are: Car drivers, transportation personal, real estate agents, retail staff, advertising agencies, even journalism. Impact on healthcare and doctors is not imminent but it is coming. On the flip side, it is up to these professions as how they evolve taking advantage of technology in doing things better but that does require an upgrade of skills. However, the gap between skill-less and skilled jobs would be the story of the next decade.

Who was and will be the mobile person of the year?

Not surprisingly, for the second straight year, John Legere, CEO of T-Mobile was voted person of the year for his impact on the industry followed by Sundar Pichai (Google), Jeff Bezos (Amazon), and Mark Zuckerberg (Facebook). Mukesh Ambani (Reliance) with his Jio announcement transformed the most competitive market on the planet. Masa never sits idle and is expected to play a major role in defining 2017 for the industry. For 2017, all eyes are on Jeff Bezos as the person of the year followed by Mark Zuckerberg, Tim Cook, John Legere, and Sundar Pichari. Other notable mentions – Jack Ma, Satya Nadella, Evan Spiegel, Randall Stephenson, Jony Ive, Neville Ray, Tom Wheeler, and Glenn Lurie.

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, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in Feb 2017.

Disclaimer: Some of the companies mentioned in this update are our clients.

New Paper: Redefining Privacy Using AI December 15, 2016

Posted by chetan in : US Wireless Market , add a comment

Our Annual 2017 Mobile Industry Predictions Survey is Open. You might win our latest Connected Intelligence book below. Please consider participating at https://www.surveymonkey.com/r/SLQ2JQW

Redefining Privacy Using AI

– Sarla Sharma

A Mobile Future Forward Paper

http://www.chetansharma.com/redefiningprivacyusingai.htm

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Artificial Intelligence (AI) is all the rage these days. As the capabilities of computing, networks and devices have improved and the amount of data available to train algorithms has increased exponentially, the notion of helping software learn the ways of our minds has taken hold. From personal assistants which can book meetings, order pizza, and order a car to park itself to more sophisticated tasks of booking an appointment with the doctor on noticing the impending heart attack, the power of data analysis with smart algorithms will have a profound impact on every facet of the technology industry. While the industry is busy refining the products and services and enabling new innovations that are transformative in nature, perhaps, we must pause and see how these new capabilities can be applied a sacrosanct feature called privacy. As volume of data explodes from a few megabyte/person/day to many petabytes/person/hour, we need to think through the privacy implications and enlist the power of technology to be on side of consumer protection and privacy. This paper will look at the recent advances in AI, the threat to privacy by unmitigated checks and balances, and how should we go about redefining privacy using AI.

Request Research (pdf)

Your feedback is always welcome.

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles. The next US Wireless Data Market update will be released in Feb 2017.

Disclaimer: Some of the companies mentioned in this update are our clients.

Request for input – Mobile Predictions Survey 2017 December 6, 2016

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Dear friends,

Trust that the end of a fabulous mobile year is treating you well. Wish you and yours a very happy holiday season and best wishes for a terrific 2017.

As is the tradition, we are doing our 10th Annual Mobile Predictions Survey for 2017. I would like to request your input in the process. We rely on our community and colleagues to help us understand the trends for the upcoming year.

The survey is available at https://www.surveymonkey.com/r/SLQ2JQW

The questions are:

1. What was most newsworthy in Mobile 2016?

2. What will be the biggest mobile stories of 2017?

3. Who are the top 4 important players in the mobile ecosystem?

4. What will be the breakthrough categories in mobile in 2017?

5. What will be the most popular consumer mobile applications in 2017?

6. Who will dominate the mobile payment/commerce space?

7. Who will make the biggest mobile acquisition in 2017?

8. Who is doing the most interesting work in the IoT space?

9. Who will dominate the Autonomous Vehicles race?

10. What impact will the new US administration policies have?

11. Which category will generate the most mobile data revenue in 2017?

12. Which region will end up leading the world in 5G by 2020?

13. Which protocol will dominate IoT Communications?

14. The company bringing the most successful mobile gadget of the year – 2016 and 2017?

15. Mobile company of the year – 2016 and 2017?

16. Automation and Digitization of industries will lead to?

17. Which of the following are likely to happen in 2017?

18. What category will be impacted the most by mobile in the next 5 years?

19. Which segments are likely to get disintermediated the most by algorithms in the next 5 years?

20. Who was and will be the mobile person of the year?

As an incentive, we will be giving away 5 copies of our exclusive edition Mobile Future Forward 2016 book (Connected Intelligence: Brain of the Global Economy) that is a collection of essays and interviews from some of the most influential mobile executives on the future of mobile.

Deadline: Dec 27th. Results will be released in early January.

Thanks and see you in 2017.

Kind regards,

Chetan Sharma

US Mobile Market Update Q3 2016 November 3, 2016

Posted by chetan in : 4G,4th Wave,5G,Chetan Sharma Consulting,Connected Devices,Connected Intelligence Era,Internet of Things,IoE,IoT,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

US Mobile Market Update – Q3 2016

http://www.chetansharma.com/usmarketupdateq32016.htm

 

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Request Research (pdf)

Highlights of the US Mobile Market Q3 2016

EPIC week for the industry

There is never a dull moment in our industry but last week was EPIC. It will take many weeks to truly understand the long-term implications. Consider this:

· AT&T made its biggest blockbuster deal yet with the acquisition of Time Warner for $85B.

· Qualcomm made a bid for NXP for $39B.

· CenturyLink acquired Level3 for $25B.

· Google’s Fiber plans hit a snag.

· FCC passed tough privacy regulations limiting ISPs ability to monetize data.

· AT&T launched DirectTV Now.

· Verizon and one other major player might not be participating in the broadcast incentive auction.

· Microsoft upstaged Apple in the computing wars for the first time in a generation.

· T-Mobile continued its run in cleaning up the postpaid table.

· AT&T reached the 10M connected car milestone in Q3.

The rise of the Super Operators

To our regular readers, AT&T-Time Warner deal wasn’t a surprise. In fact, it was expected.

In our 2012 paper, “Operator’s Dilemma: The 4th Wave,” we argued that to stay relevant in the next phase of industry evolution, mobile operators need to focus on becoming digital lifestyle solution providers else their role will be relegated to access providers. While we are still early in the cycle, in the US, AT&T and Verizon are making investments to diversify their revenue streams. AT&T in particular has done a better job across multiple streams – content, home, IoT, health, transportation, retail, security, and other verticals. Some of the progress is visible in the financials and for others, one must dig deeper.

One of the hypothesis of the 4th wave thesis was that given the investments required to be a Digital Lifestyle Solution Provider (DLSPs), there will be a few operators morphing into Super Operators who get into multiple lines of businesses. Content and video play is close to the core operator strenghts and as such is a natural category for big acquisitions. The fusing of the access and content layer is not by accident. As such, in each major geography, we are likely to see the rise of Super Operators who manage access, platform, and applications across multiple dimensions.

Cable players have been reluctant participants in the mobile ecosystem but given the pressure on their core content business, wireless is their best bet to ensure the next decade of growth and sustainability. Comcast is expected to launch its MVNO next year. How far will it go remains to be seen? Over the long-haul, cable service providers will have to become solution providers too and have a more active play in the wireless world.

Implications of the AT&T-TW merger

Content has always been the salesperson to sell access. Binge-On, Go90 are all but a strategy to sell access. If it works, Advertising is just a side-benefit. As margins on the core telco business decline, operators must diversify to retain customers and improve life time value. Consumers still pay for content they like. Good content creates good revenue streams. Acquisition of content helps AT&T with diversification of its revenue streams, reduce churn, and extend its runway. Enough ink has been spilt on the probability of the deal going through. If the deal goes through, obviously, AT&T gains but if it doesn’t go through, it might still end up benefitting them. If regulators reject the vertical integration argument, then, in the future, they are likely to reject similar transactions e.g. Comcast/T-Mobile or Sprint.

4th Wave Index

5 years ago, we put forth the theory of 4th wave to explain the upcoming changes in the mobile ecosystem. For the most part, the industry changes and tribulations have tracked the 4th wave curves. Last year, voice revenues declined by 23%, messaging revenues by 18%, while data revenues grew by 23%. 4th wave revenues which now dominate the ecosystem now grew by a 60% YoY.

The 4th Wave thesis captures the underlying shifts in industry dynamics that the value is shifting dramatically from access to applications. The quality of networks, the power of devices, the sophistication of applications and services have upended the industry landscape. The competitive dynamics are changing right in front of our eyes, predictably, but dramatically. Consider the fact that Uber is valued more than T-Mobile and Sprint combined, Facebook is valued more than AT&T or Verizon, and Google is valued more than all the US wireless operators combined. The success of the 4th Wave economy is not limited to a handful of Internet players from the US but rather it is a global phenomenon and it is happening across all industry verticals.

So, how does one value an operator vs. an app, a leading device manufacturer vs. a new wearable entrant. If you had a dollar to invest, where would you invest? Infrastructure, devices, platforms, or in services? It was clear that the industry needs a better way to benchmark progress of various companies as well as understand the competitive dynamics. It is also useful to understand the positioning of these companies in a very complex ecosystem. We need to assess a corporation’s strengths across multiple key dimensions in various sub categories and understand how these companies are prepared to compete in the 4th Wave economy.

Our 4th Wave Index offered first view on how a complex ecosystem can be studied. We took a look 29 key variables across four key dimensions: Infrastructure, Devices, Platforms, and Services and calculates the 4th Wave index. It is a useful benchmarking exercise to see if companies are slipping competitively or are making progress. Additionally, the model provides a view into what it will take these players to move from aspirants to challengers to leaders. (I will be giving a keynote covering some of these topics at the Wireless Global Congress later this month).

Journey to 5GB/mo consumption

From the first inklings of data usage in the US market back in mid-nineties (remember CDPD, Mobitex, DataTac, etc.?), it took US consumers roughly 210 months to reach the threshold of 1GB/mo consumption. The last GB increase from 4GB/mo to 5GB/mo will take just 4 months.

Future of WiFi

It is well understood that WiFi plays a critical role in moving bits around. But it has been more due to the economics of the solution than the performance of WiFi as a technology. If one replaces WiFi with LTE at the same cost to the ecosystem, what would you choose? Well, the costs are coming down and LTE small cells and base stations could start to match WiFi access points in pricing at least in the enterprise. It could get real interesting real fast.

Microsoft getting its mojo back?

Microsoft’s cloud business is firing on all cylinders. However, the announcement that caught everyone’s attention was that of Surface Studio – a beautiful machine with a new design is an excellent attempt at reinventing a machine long thought to be past its prime. This was especially interesting as it contrasted with Apple’s long-awaited announcement of the MacBook line of computers. Consensus was that Microsoft stole the show. Perhaps, it will encourage them to release the secret Surface phone next year which will be less impactful due to the lack of a viable app ecosystem. Microsoft is also performing well on other fronts. It continues to be a formidable competitor to AWS and it is getting its stride back when it comes to experimenting and releasing new products, apps and services – both built on its existing platforms as well as new areas such as VR, MI, etc. Satya’s leadership has enabled Microsoft to discover its lost mojo.

OEM drama

We pointed last year that Chinese OEMs are dominating the device ecosystem in terms of unit shipments. The lack of a blockbuster new design from Apple and Samsung’s bungling of the Note recall widened the opportunity window for the Chinese OEMs. The fact that Samsung Note 7 is considered a hazard on flights similar to bombs has done tremendous brand damage and should be a case study for future products. Thankfully for consumers, there are viable Android substitutes available. Pixel from Google and Le S3 (better value) from the new entrant LeEco are both worthy replacements. LeEco’s content play is quite interesting but they will have to spend a lot on creating an acceptable brand in the US.

5G Economics

5G is gaining steam. All the major players have outline their preliminary plans to do trials on 5G with Verizon being the most aggressive in its intent. FCC become the first major regulator to set aside spectrum for 5G. There has been a lot of discussion on 5G from the technology point of view but not much from an economics point of view. We have taken a deeper look at the economics questions that the industry ought to be asking. The 5G Economics paper discusses the cost structures, ROI, and the TCOs that will make it worthwhile for the operators to deploy 5G profitably (I will be giving a talk on 5G Economics at the IEEE 5G Summit this weekend). 5G is going to be a different ecosystem than the first four generations and the current cost model of building out networks might not be sustainable given the demand.

US is likely to be the key driving force in setting the standards and pushing the trials to deployments even though there is no Olympics as a motivator. But competition sure is. We see US, Korea, and Japan shaping the global standards and deployment process with Europe playing a wait-and-see game.

IoT Revenue Streams and what it means for the ecosystem

Service provider IoT revenue passed the important $1B mark back in 2013. So far it is tracking the growth of the early days of mobile data. However, they are different curves influenced by different factors. Mobile data was relatively an easier curve to climb as the revenues went up with more data handsets coming online. The sales, business case, and ROI was straight forward. IoT is a bit more complicated as it is across multiple vertical areas and it is not just about the data network, it is about the complete solution. The sales cycle and execution strategy is different and requires patience and resilience.

Spectrum Auction

FCC’s incentive auction began earlier this year is showing signs of sputtering through the process. There isn’t that much reserve laying around to bid for the spectrum so we are likely to see more rounds of speculation and intrigue. No non-traditional player made it to the second round. Some major players are sitting out as well. This could be a long drawn out process with suboptimal outcome which is not surprising.

The shifts in Net-adds

In 2014, 61% of the accounts added were phones. Cars accounted for 12% and IoT 18%. Tablets were at 9%. In 2015, due to heavy promotions by the operators, tablets share rose to 35% while phones dropped to 33%. Cars and IoT combined to gain 32% of the net-add share. For the first 9 months of 2016, Cars and IoT combined for a 55% share of net-adds while phone share dropped to 29%. Absent promotions, tablets dropped to 16%. So, non-phone category went from 39% in 2014 to 71% in 2016 so far. Overall net-adds have stayed flat and just going through the normal gyrations. Overall, phones still dominate and that’s what generates the bulk of the industry revenue but IoT is starting to inch up in material impact.

Regulations for the new age

Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 60%+ of its voice calls are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle.

The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair. Maybe it is time to consider creating Federal Digital Commission (FDC) that has a broader perspective on competition and is prepared for the digital age.

More coverage of the quarter in the pdf.

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, articles. The next US Wireless Data Market update will be released in Feb 2017.

Disclaimer: Some of the companies mentioned in this update are our clients.

Mobile Future Forward: 50 reasons to join us September 21, 2016

Posted by chetan in : US Wireless Market , add a comment

Dear Friends,

We are less than a week away from what is turning out to be our best Mobile Future Forward yet. If you are not signed up yet, I will give you 50 reasons to make the case. Each of our speakers is a recognized expert in their domain, many of them manage billions of dollars in annual spend, and many yet are building companies that will shape the vertical industries around us.

Just take a look at the program we have planned for you:

· Machine Intelligence, AI, and VR with Blaise Agüera y Arcas, Principal Scientist, Google

· AI and Robotics with John Markoff, Senior Writer, NY Times

· Autonomous machines with Helen Greiner, CTO and Founder, CyPhy/iRobot

· Investing for the next billion with someone who has built many billion dollar businesses – Glenn Lurie, CEO & President, AT&T Mobility

· Network as a platform with Erik Ekudden, SVP and CTO, Ericsson

· Future of the 5G ecosystem with Neville Ray, CTO and EVP, T-Mobile

· Future of the enterprises in the NOW Economy with Doug Suriano, SVP, Oracle Communications

· Paul Brody, EY is leading the Cybersecurity panel with global experts in the field – Nathan Freitas, Guardian Project, Rodney Joffe, Neustar, Nancy Zayed, MagicCube, Scott Christensen, GE

· Ina Fried, Recode will help us scale the discussion on IoT with Hank Skorny, Neustar, Mike Kennewick, VoiceBox, Anthony Bartolo, Tata Communications, Peter Lewis, the guy who called it first, Sridhar Solur, Comcast

· Donna Fedor will hack healthcare with Vic Gundotra, AliveCor, Prof. Shyam Gollakota, UW, Dr. Renee Dua, Heal, Neurosurgeon Dr. Sam Browd

· Q Saeed, Vital Neuro will lead the discussion about Network economics and disruption with global experts Dr. Kim Larsen, Deutsche Telekom, Stephen Bye, Rivada Networks, Vern Fotheringham, ESI, Manish Jindal, Ericsson

· Industry veteran Steve Elfman will help moderate the session about 4th Wave Verticals with Jorge Espinal, Spotify (Media), Ruchit Garg, Harvesting (Agriculture), Krishna Vedati, Tynker (Education), Biju Nair, Hyla (Devices), Joe Megibow, Joyus (Retail)

· Investor legend in the making Bubba Murarka will quiz the VR CEOs – Todd Hooper, VReal, Maureen Fan, Baobab Studios, Forest Gibson, PlutoVR, Bob Berry, EnvelopVR

· US media talks about the Chinese tech ecosystem a lot but do we really understand it? Meet the entrepreneurs who are living it – you will be surprised by what you learn. William Bao Bean, Chinaccelerator will lead the discussion with Kate Whitcomb, HAX, Paul Wu, GMobi, Willie Chou, NeoNan, David Liu, Sirqul

· And finally, Golden Age of AI with Dina Bass, Bloomberg leading the discussion with Seth Neiman, Handbag, Dr. Babak Hodjat, Sentient, Ken Denman, Emotient (Apple), Prof. Emo Todorov, UW, Jeannette M. Wing, Microsoft Research

That’s just the speakers. Our audience is equally qualified and influential. You could be sitting next to these individuals and one conversation could change the trajectory of your life and company. Just ask folks who have become part of the Mobile Future Forward community over the last 7 years.

We are excited to partner with industry leaders to bring you a program that will make you think. Our thanks to: Ericsson, Hyla Mobile, Netcracker, Neustar, OpenMarket, Oracle Communications, SAP, Tata Communications, and VoiceBox

Hopefully, we have given you enough reasons to make the investment.

Registration (registration closes this week)

Hope to see you next week.

Thanks and best wishes.

Chetan Sharma

New Book: Connected Intelligence – Brain of the Global Economy September 16, 2016

Posted by chetan in : 4th Wave,5G,Chetan Sharma Consulting,Connected Intelligence Era,Mobile Future Forward,The Golden Age of Mobile,Wireless Value Chain,Worldwide Wireless Market , add a comment

We are pleased to announce that our Mobile Future Forward Book for 2016 will be published and become available exclusively to Mobile Future Forward participants on Sept 27th. As is the tradition, the book has some brilliant essays from our speakers – the thought leaders and mobile industry senior executives, on trends, opportunities, innovations, and user experiences. More importantly, these thought-pieces highlight how some of the leading companies are gearing themselves to execute in the Connected Intelligence Era. The book provides a perfect platform for our day long brainstorm about what the next 5 years in mobile will look like. We have extraordinary speakers and am really looking forward to the discussions throughout the day.

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1. 4th Wave Index: Benchmarking the Growth and Evolution of the Mobile Ecosystem – Chetan Sharma, CEO, Chetan Sharma Consulting

2. The NOW Economy Demands Communications-Enabled, Cloud-Optimized Solutions – Doug Suriano, SVP, Oracle Communications

3. One-on-one with Glenn Lurie, President & CEO, AT&T Mobility

4. 5G Economics: An Economics based Analysis of the Future of Wireless Networks – Chetan Sharma, CEO, Chetan Sharma Consulting

5. Why your gas turbine shouldn’t be allowed to check Facebook or how to secure your industrial IoT network – Paul Brody, Partner, EY

6. Voice Artificial Intelligence – The Next-Gen Interface for the IoT – Mike Kennewick, CEO and Philip Cohen, Chief Scientist, VoiceBox Technologies

7. Repurposing Mobile Phones is a Valuable Proposition for Everyone – Biju Nair, CEO, Hyla Mobile

8. Redefining Privacy using Artificial Intelligence, Sarla Sharma, COO, Chetan Sharma Consulting

9. AI in your pocket, Anthony Bartolo, President of Mobility and Collaboration Services, Tata Communications

10. VR Perspectives, Bubba Murarka, Partner, DFJ; Forest Gibson, CEO, PlutoVR; Todd Hooper, CEO, VReal

11. Mobile Patents Landscape: An In-depth Quantitative Analysis – Chetan Sharma, CEO, Chetan Sharma Consulting

The goal of the Mobile Future Forward Summit is to explore the future of the mobile industry, to create new connections, to openly discuss and debate new ideas. By bringing together a really diverse group of individual leaders – both speakers and audience, we are able to create an environment for constructive dialogue that will hopefully help in formulating your own strategies and product plans.

Thanks to all the authors and their respective organizations for making this year’s book possible.

Chetan Sharma

CEO, Chetan Sharma Consulting

http://www.chetansharma.com

New Paper: 5G Economics An Economics Based Analysis of the Future of Wireless Networks August 24, 2016

Posted by chetan in : 4th Wave,5G,Chetan Sharma Consulting,Mobile 2016,Mobile Future Forward,Technology Cycles,The Golden Age of Mobile,Wireless Value Chain,Worldwide Wireless Market , add a comment

5G Economics

An Economics Based Analysis of the Future of Wireless Networks

A Mobile Future Forward Paper

http://www.chetansharma.com/5GEconomics.htm

 

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After analog (1G) cell phones started to make inroads in the western markets, European wireless leaders got together to create GSM and dominated the 2G cycle. Japan got a head start with 3G and captured the imagination of the industry with what’s possible. NTT DoCoMo’s iMode lit the industry on fire and with many firsts in ecosystem design, business models, developer engagement, and new revenue streams. Meanwhile, in the US, after falling behind for a couple of cycles, WiMax forced Verizon to commit to LTE early on and the 4G timelines accelerated globally. 2007-9 was the time frame when iPhone took the world by storm as well. What AT&T learned about data traffic growth informed operators around the globe. At the same time, what will become the 4th wave ecosystem was starting to form in the US.

The combination of LTE network deployment along with devices that were getting better with each release cycle which in turn fed the application ecosystem enabled US to take the lead and just completely dominate the narrative. Of course, South Korean 4G penetration grew faster than that of the US market, however, their influence on the global ecosystem was much smaller because of the relative scale. US operators really drove the standards, created economies of scale for the industry and 4G grew to become the fastest standard adopted in the history of the industry. The other two major markets – Western Europe and China started late and are still behind the US. Western Europe is at least 2 years behind the US as of 2016. China started late but went past Western Europe and is only one year behind the US.

It is clear from the activity in the ecosystem that 5G talk has the whole industry energized. Korea and Japan are driven by their respective Olympics deadlines. European Union has enunciated its deep desire to rediscover the glory days of GSM and has been making a number of investments and proclamations over the course of last couple of years. China, a new leader on the world stage wants to leave its own stamp on the 5G evolution. But gaining leadership in a technology cycle requires much more than mere declarations. It comes down to the fact if the governments and the players are putting their money where their mouth is. It also depends on which countries can drive the economies of scale for the ecosystem?

US generates the most amount of the revenue in the mobile ecosystem, more than the sum of revenues from the next two countries combined. Though it is premature to say which country or region will drive 5G, early indicators are that US is likely to be in the driver seat again. Consider the following key events. US became the first country to allocate high-band spectrum for 5G in both licensed and unlicensed bands. Additionally, mobile operators have been trialing their 5G systems and building the business case for an accelerated rollout.

Infrastructure vendors have also been actively participating in these trials to learn and strategize. Furthermore, National Science Foundation (NSF) has allocated substantial funds to research key problem areas that will eventually contribute to 5G technology deployments. Internet players such as Google and Facebook are also investing in researching new modes and models to provide connectivity. All this bodes well for the US market.

However, there is a fundamental question about the pace of deployment and how fast will the 5G technology cycles shape the US and the global markets. For 4G, we went from 0% to 25% penetration in 60 months, 25-50% in 21 months, 50-75% in 24 months and by the end of 2020, we will have 95%+ penetration. By 2020, US is likely to be 4 years ahead of Europe and 3 years ahead of China in LTE penetration. In fact, the industry vastly underestimated the growth of 4G in the US market. Will 5G growth curves be any different?

The paper is a first of its kind exploration of 5G from an economics angle rather than a technology one. 5G cycle is going to be different from the past ones for one most important reason – there is financial pressure on operator revenues like in no other cycle. The competition dynamics have drastically changed with the influence of the 4th wave players as documented in our 4th wave series of papers.

The 5G Economics paper will look at the lessons learned from past generations and build a model for 5G capex and opex to evaluate the economic factors that will determine the pace of investment in the 5G cycle. We will primarily focus on the US market for two simple reasons: US will play a very important role in determining what 5G eventually becomes and the US leads the 4th wave ecosystem by a distance. Understanding the dynamics in the most vibrant mobile market has significant lessons for the global markets. We will discuss the 5G economics model to help us think about cost structures. The paper will go into the details of the key determining factors for 5G evolution and growth curves.

It is more than likely that economics and not technology will define what 5G becomes over the course of next decade.

The purpose of the paper is to open an economics-led discussion in the industry. The 5G capex and opex models also indicate which areas will need the most innovation to accelerate 5G growth. The paper delves into mobile data economics and how at the end of the day this cost metric will perhaps be the most determining factor in the 5G evolution cycles worldwide.

Introduction

3

Why US?

5

Market Evolution 1G to 4G

8

What is 5G (or what will it become)?

10

Mobile Data Economics

12

5G Economics

15

        IoT Economics

16

5G Capex and Opex Dynamics

18

        5G performance criterion

22

Factors determining the 5G deployment curves and scenarios

24

        It’s the economics, stupid!

24

        Will mmWave deployments scale?

24

        Backhaul

26

        Competitive Dynamics

27

        Wireless Industry is not your father’s ecosystem anymore

28

         LTE-A to 5G: What’s the hurry?

31

         Fiber and WiFi

32

Conclusions

34

Acknowledgements

35

About Mobile Future Forward

35

Mobile Future Forward Publishing

36

About Chetan Sharma Consulting

37

About Author

37

5G Economics paper will be published as part of the upcoming Mobile Future Forward 2016 Book and will be available to summit attendees on Sept 27th. We will be discussing various aspects of the 5G technology, business models, and economics with senior industry leaders at the summit.

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, articles, and at our annual thought-leadership summit – Mobile Future Forward in Sept 2016.

Disclaimer: Some of the companies mentioned in this update are our clients.

US Mobile Market Update – Q2 2016 August 10, 2016

Posted by chetan in : 4th Wave,5G,Chetan Sharma Consulting,Connected Intelligence Era,Fourth Wave,Mobile Future Forward,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

US Mobile Market Update – Q2 2016

http://www.chetansharma.com/usmarketupdateq22016.htm

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Highlights of the US Mobile Market Q2 2016

· 12 years ago, US mobile data revenues were less than 5% of the overall revenues. In Q2 2016, mobile data revenues crossed the 75% threshold becoming the second country after Japan to do so.

· Service revenue declined again, down 2% YoY. Overall revenue was flat as device revenue made up for the decline.

· Mobile data revenues increased 8% YoY while Voice revenues declined 31%.

· The overall ARPU was below $40 again.

· Net income saw a nice bump, increasing by 10% YoY with AT&T leading the way with 14% increase.

· Sprint’s capex was lowest in recent memory dropping almost 80% YoY.

· Device revenues declined sharply as consumers are upgrading at a slower pace than before and new device launches haven’t really motivated consumers to upgrade.

· The postpaid upgrade cycle was the slowest in recorded history reaching over 4.4 years in Q2. The overall industry upgrade cycle is over 2.5 years now.

· For the first time, IoT (including connected cars) net adds exceeded phone and tablets combined.

· There were more connected cars net-adds than there were phone net-adds. For the 7th straight quarter, AT&T added more cars than phones and tablets combined.

· AT&T is dominating the IoT Revenues and with Verizon, the duo is pretty much cleaning up the IoT revenue stream in the operator segment.

· AT&T’s connected car onboarding pace is 2x that of its connected tablets pace. Operator is expected to reach 10M connected car subscriptions very soon in roughly 12 quarters compared to 25 quarters it took for the tablets.

· Verizon and T-Mobile have captured the bulk of the postpaid growth in the last three years.

· EBITDA and Net Income saw double digit gains indicating operators are running a much tighter ship than before.

· Churn is at historic lows. Despite all the commotion in the market, fewer customers are churning each quarter. Next churn opportunity is coming next month with the new iPhone release.

· US is well positioned to cross 400M in subscriptions in 2016. As of Q2 2016, the subscription tally stood at roughly 390M.

· The mobile data consumption continues to rise. US is third behind Finland and Korea in terms of GB consumed per sub/month and first amongst nations with more 60M population.

· Verizon’s IoT+Telematics rose 25% YoY to $205M inching towards a $1B/yr run rate.

· Apple’s service revenue is now consistently greater than iPad and Mac revenue streams making it the number two revenue stream behind the gargantuan iPhone bucket.

· AT&T and Verizon on average made $17 per sub/mo while T-Mobile and Sprint roughly $1.6/sub/mo.

· Android ecosystem revenues and profits improved slightly primarily on the back of Samsung’s quarterly results. As expected, iPhone units and revenues dipped again.

· FCC’s Incentive Auction created a massive $86B clearing hurdle which is likely to translate into some issues with the process. 

· Pokemon Go became the latest app sensation growing at almost 4x the rate of the last rocket ship – Angry Birds 2.

We will be doing an in-depth analysis of the future of the mobile industry at our 7th annual mobile executive summit Mobile Future Forward in Sept 2016. Hope you can join us.

Data is at 75%, now what?

We knew very early on that mobile data will transform the mobile industry. In fact, we wrote the book on it, back in 2000. The second book we wrote on the subject with Dr. Nakamura, CTO of NTT DoCoMo in 2002. At the height of the iMode phenomenon, when the world was barely learning to use messaging, the notion of controlling a remote task with the cell phone was very enticing for any engineer. I remember building a prototype of an application controlling some of the submarine repair tasks using voice (remember VoiceXML?). In the 2000s, much before the iPhone, we wrote a series of op-eds and cover story features to talk about mobile data and started to track the market granularly in 2003/4 timeframe. A lot has changed since then.

Pop Quiz: Which US mobile operator had the most data revenue in 2004?

If you answered Sprint, you deserve to be in the Wireless history hall of fame.

In the early days, Sprint was ahead of its compatriots. In fact, its data revenue was almost as big as Verizon and AT&T combined and almost 4x that of T-Mobile. Starting in 2005, both AT&T and Verizon picked up steam and by 2006 were ahead of Sprint but got the taste of mobile data growth earlier.

For T-Mobile, it was all SMS. In fact, 76% of the US mobile data revenues came from SMS. Ringtones were all the rage. Navigation apps ruled the day. Data contributed less than 5% to the overall revenue. That was the pre-iPhone epoch.

In Q2 2016, the US mobile data service revenue stream crossed an important milestone by going past 75%. To regular readers this won’t be a surprise, just a marker in the annals of industry history. Consumer’s life, the industry, and in fact the global GDP has been transformed as a result of mobile and its stupendous growth over the last dozen years. Fast networks, powerful devices, and addicting applications created a perfect tsunami of opportunities. Uber, Apple, Facebook, Amazon, Google, and many others are testament of the changing landscape which is well documented in our 4th wave series papers.

So, what’s next?

The logical conclusion is that mobile data growth will continue. The usage growth supports that view. In fact, we believe, that mobile data will subsume voice and messaging revenue streams and they will disappear from operator financials soon. It has already happened for some.

If you have been paying attention to our 4th wave analysis, you would have noticed that 4th wave already supplanted mobile data in terms of share. Mobile data revenue share peaked in 2012 and as expected, the industry is now completely dominated by the 4th wave. US became the first country to have 4th Wave revenue exceed access revenues in 2014 and in 2015, 4th wave revenues were greater than all the three major operator revenue streams – voice, messaging, and data.

Of course, operators like AT&T and Verizon haven’t been sitting idle. They have created new revenue streams, AT&T in particular has diversified its revenue stream to become a more complete “solution provider.” Verizon’s recent forays into digital with acquisitions of AOL and Yahoo are classic 4th wave execution plays. The intent shows a clear shift in management thinking on creating new revenue streams and look beyond their own subscriber base. IoT is also serving the top two operators well and the revenue curves in the early days mimic the early growth days of mobile data.

4th Wave Index

5 years ago, we put forth the theory of 4th wave to explain the upcoming changes in the mobile ecosystem. For the most part, the industry changes and tribulations have tracked the 4th wave curves. Last year, voice revenues declined by 23%, messaging revenues by 18%, while data revenues grew by 23%. 4th wave revenues which now dominate the ecosystem now grew by a 60% YoY.

The 4th Wave thesis captures the underlying shifts in industry dynamics that the value is shifting dramatically from access to applications. The quality of networks, the power of devices, the sophistication of applications and services have upended the industry landscape. The competitive dynamics are changing right in front of our eyes, predictably, but dramatically. Consider the fact that Uber is valued more than T-Mobile and Sprint combined, Facebook is valued more than AT&T or Verizon, and Google is valued more than all the US wireless operators combined. The success of the 4th Wave economy is not limited to a handful of Internet players from the US but rather it is a global phenomenon and it is happening across all industry verticals.

So, how does one value an operator vs. an app, a leading device manufacturer vs. a new wearable entrant. If you had a dollar to invest, where would you invest? Infrastructure, devices, platforms, or in services? It was clear that the industry needs a better way to benchmark progress of various companies as well as understand the competitive dynamics. It is also useful to understand the positioning of these companies in a very complex ecosystem. We need to assess a corporation’s strengths across multiple key dimensions in various sub categories and understand how these companies are prepared to compete in the 4th Wave economy.

Our 4th Wave Index offered first view on how a complex ecosystem can be studied. We took a look 29 key variables across four key dimensions: Infrastructure, Devices, Platforms, and Services and calculates the 4th Wave index. It is a useful benchmarking exercise to see if companies are slipping competitively or are making progress. Additionally, the model provides a view into what it will take these players to move from aspirants to challengers to leaders.

5G Economics

5G is gaining steam. All the major players have outline their preliminary plans to do trials on 5G with Verizon being the most aggressive in its intent. FCC become the first major regulator to set aside spectrum for 5G. There has been a lot of discussion on 5G from the technology point of view but not much from an economics point of view. We are taking a deeper look at the economics questions that the industry ought to be asking. Stay tuned for our research paper on the subject. We will discuss – what will be the cost structures, ROI, and the TCOs that will make it worthwhile for the operators to deploy 5G profitably. 5G is going to be a different ecosystem than the first four generations and the current cost model of building out networks might not be sustainable given the demand.

US is likely to be the key driving force in setting the standards and pushing the trials to deployments even though there is no Olympics as a motivator. But competition sure is.

Our Mobile Future Forward Summit in Sept will tackle the questions in-depth with some seasoned experts.

Our paper on 5G covers the past, present, and future of the network evolution.

Service Provider to Solution Provider

In our 2012 paper, “Operator’s Dilemma: The 4th Wave,” we argued that to stay relevant in the next phase of industry evolution, mobile operators need to focus on becoming digital lifestyle solution providers else their role will be relegated to access providers. While we are still early in the cycle, in the US, AT&T and Verizon are making investments to diversify their revenue streams. AT&T in particular has done a better job across multiple streams – content, home, IoT, health, transportation, retail, security, and other verticals. Some of the progress is visible in the financials and for others, one must dig deeper.

Verizon’s strategy has been two fold – IoT/Telematics and Media (advertising). It is clearly making excellent progress on the former while it is early to opine on the latter. Sprint has mostly retreated from its early 4th initiative to focus on nuts and bolts of the business. T-Mobile’s Binge-on strategy gives it a media play but something that prevents churn rather than generates “new” revenue.

Cable players have been reluctant participants in the mobile ecosystem but given the pressure on their core content business, wireless is their best bet to ensure the next decade of growth and sustainability. Comcast is expected to launch its MVNO later this year. How far will it go remains to be seen? Over the long-haul, cable service providers will have to become solution providers too.

IoT Revenue Streams and what it means for the ecosystem

Service provider IoT revenue passed the important $1B mark back in 2013. So far it is tracking the growth of the early days of mobile data. However, they are different curves influenced by different factors. Mobile data was relatively an easier curve to climb as the revenues went up with more data handsets coming online. The sales, business case, and ROI was straight forward. IoT is a bit more complicated as it across multiple vertical areas and it is not just about the data network, it is about the complete solution. The sales cycle and execution strategy is different and requires patience and resilience.

Spectrum Auction

FCC’s incentive auction began last quarter and ended with an $86 billion price tag. There isn’t that much reserve laying around to bid for the spectrum so we are likely to see more rounds of speculation and intrigue. No non-traditional player made it to the second round. The next round of action begins next week.

Regulations for the new age

Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 54%+ of its voice calls are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.

Request Research (pdf)

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, articles, and at our annual thought-leadership summit – Mobile Future Forward in Sept 2016. The next US Wireless Data Market update will be released in Nov 2016.

Disclaimer: Some of the companies mentioned in this update are our clients.

New Paper: 4th Wave Index: Benchmarking the Growth and Evolution of the Mobile Ecosystem July 14, 2016

Posted by chetan in : 4G,4th Wave,5G,Chetan Sharma Consulting,Connected Intelligence Era,Mobile Future Forward,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

4th Wave Index: Benchmarking the Growth and Evolution of the Mobile Ecosystem

A Mobile Future Forward Paper

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http://www.chetansharma.com/4thWaveIndex.htm

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In 2011, while studying the revenue curves of various operators around the world, it became apparent to us that there was a consistent pattern to the growth, plateauing, and the decline of revenue curves in the wireless industry. The underlying principle of mobile industry revenue curve is that at 70-90% penetration on a curve, the net revenue of the curve in a given country starts to flatten out and approach its peak. The curves are different for every country based on competitive, regulatory, and economic forces that dictate how consumers spend on communications or household IT resources. But, the consistency of the curves was unmistaken, country after country, showed the same pattern first starting with voice, and then with messaging. Access at the time was still a growth engine, it still is for the most part. That study led to the birth of 4th Wave thesis.

The 4th Wave thesis surmised that if the industry is going to run out of steam on the first three curves, we better start investing in the 4th curve. But, what would that curve look like? It was also clear at the time that the digital services will start to dominate the mobile industry landscape which led to some predictions that the 4th Wave revenues will be bigger than the first three wave combined. As we approach the five-year anniversary of the 4th Wave thesis, 4th Wave is already dominating the US mobile market and other markets are on the cusp. In 2014, the 4th Wave revenues exceeded the access revenues and a year later, in 2015, the 4th Wave revenues exceeded the revenue from all the three curves combined.

The 4th Wave thesis captures the underlying shifts in industry dynamics that the value is shifting dramatically from access to applications. The quality of networks, the power of devices, the sophistication of applications and services have upended the industry landscape. The competitive dynamics are changing right in front of our eyes, predictably, but dramatically. Consider the fact that Uber is valued more than T-Mobile and Sprint combined, Facebook is valued more than AT&T or Verizon, and Google is valued more than all the US wireless operators combined. The success of the 4th Wave economy is not limited to a handful of Internet players from the US but rather it is a global phenomenon and it is happening across all industry verticals.

So, how does one value an operator vs. an app, a leading device manufacturer vs. a new wearable entrant. If you had a dollar to invest, where would you invest? Infrastructure, devices, platforms, or in services? It was clear that the industry needs a better way to benchmark progress of various companies as well as understand the competitive dynamics. It is also useful to understand the positioning of these companies in a very complex ecosystem. We need to assess a corporation’s strengths across multiple key dimensions in various sub categories and understand how these companies are prepared to compete in the 4th Wave economy.

This paper introduces the notion of a 4th Wave Index that looks at 29 key variables across four key dimensions: Infrastructure, Devices, Platforms, and Services and calculates the 4th Wave index. It is a useful benchmarking exercise to see if companies are slipping competitively or are making progress. Additionally, the model provides a view into what it will take these players to move from aspirants to challengers to leaders. The paper also recaps the progress on the 4th Wave and how various companies have performed in the last five years. It is our belief that through dialog and discussions, we can further refine the 4th Wave index and get a better view of competitiveness, valuation, and the future viability of leading players as well as emerging new entrants across industry verticals and geographical boundaries.

Request Paper

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, articles, and at our annual thought-leadership summit – Mobile Future Forward in Sept 2016. We will be discussing various aspects of the 4th Wave Index at the summit.

Disclaimer: Some of the companies mentioned in this paper are our clients.

Opportunities at the intersection of 5G and IoT June 12, 2016

Posted by chetan in : 4th Wave,5G,Fourth Wave,IoT,Mobile Future Forward,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

There are two important discussion points in the mobile industry today are 5G and IoT. So, we decided to cover both of them under the same umbrella at last week’s Mobile Breakfast Series. The audience was glued, the speakers were brilliant, the weather was vintage Seattle, and I had a great time moderating the session. My thanks to our sponsor Netcracker for supporting the event.

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We had some excellent speakers who not only have the command over the subject but have a vision for the future. The audience was treated to a fantastic intellectual discussion on the topic.

Mark McDiarmid, VP – Radio Network Engineering, T-Mobile

Mark McDiarmid has 24 years of experience in the wireless industry in both domestic and international operations. Currently, Mark serves as VP, Radio Network Engineering and Development for T-Mobile US, where he leads several teams of industry-leading engineers focused on creating robust, operationally-efficient, and economic radio network designs. Recently, Mark was responsible for defining the evolution and system design of T-Mobile US’s HSPA+ and LTE mobile broadband network including the design and operationalization of new radio network transport solutions based on IP and Ethernet.

Hank Skorny, SVP – IoT, Neustar

Hank Skorny is Senior Vice President of Internet of Things at NeuStar, Inc. Mr. Skorny has extensive experience in the mobile software and services industry as well as in PC software for 25 years. Prior to joining Neustar, Mr. Skorny served as the Vice President of Software & Services Group and General Manager of the Intel Services Division at Intel Corporation, where he was responsible for the strategy and delivery of unified software services across device and operating systems including enterprise, cloud, IoT and developers.  Prior to that he was Chief Strategy Officer and SVP of RealNetworks, Inc., and President and Chief Executive Officer of mobile messaging startup, Thumbspeed, Inc. until its successful acquisition. Earlier in his career, Mr. Skorny directed product management, marketing and development teams at AOL, Adobe Systems, Microsoft and Apple Computer.

Paul Brody, Strategy Leader, Technology Sectory, EY

Paul Brody is Americas Strategy Leader, Technology Sector at EY. He is proficient in mobile finance strategy planning, technology of mobility and internet of things, with 20 years of consulting and strategy experience in mobile and electronics. Prior to joining EY, he served as Vice President and Global Industry Leader of Electronics at IBM. At IBM, he is responsible for building IBM’s services business in the mobile space, including the partnership with Apple, and developing solutions for connected devices.  Prior to IBM, Paul worked at McKinsey & Co. Paul has a degree in Economics and a Certificate in African Studies from Princeton University.

Dr. Rasmus Hellberg, Senior Director, Qualcomm

Rasmus Hellberg joined Qualcomm in 2006 and leads Qualcomm’s corporate technical marketing team that drives Qualcomm’s visions for future technologies, such as the wireless evolution, the path to 5G and the evolution of mobile computing. Rasmus has spent 20 years in the wireless industry and started his career in product management, working on the Japanese PDC system, the first commercial WCDMA products, and later on CDMA2000 1X and EV-DO focusing on radio access network products. Rasmus holds a Ph.D. in electromagnetic wave propagation and a master’s degree in electrical engineering from the Royal Institute of Technology in Stockholm, Sweden. He also holds a bachelor’s degree in business administration and finance from the University of Stockholm, Sweden.

Some of the highlights of our discussion:

It was a great discussion on some key 5G and IoT issues in the industry. We look forward to carrying on the conversation at Mobile Future Forward. Hope you can join us on Sept 27th. Until next time, have a great summer.

AT&T, Uber, T-Mobile, Spotify, Alaska Airlines join the Mobile Future Forward lineup June 2, 2016

Posted by chetan in : Mobile Future Forward,The Golden Age of Mobile , add a comment

Dear friends,

Mobile Future Forward prides itself in inviting doers of the Connected Intelligence Era, leaders who are making things happen on the ground so you can learn firsthand months and years before you will read it in the mainstream press. 2016 will be no different.

We are excited to partner with industry leaders and thank them for their ongoing support: Hyla, Neustar, Oracle, and VoiceBox.

Glenn Lurie has been shaking things up since the iconic iPhone deal that set the mobile world on fire. If there was an Oscar for Mobile Network Deployment, Neville Ray will surely win by a landslide. Peter Lewis who had the foresight to understand the power of IoT 30 years ago will share where he thinks the connected world is headed. How do you transform the health care industry with IoT? Tracy Rausch is doing it in different parts of the world. Curious about VR? Bubba Murarka will lead a panel of VR rockstars to explore the meaning and the opportunities on the new platform. Voice is all the rage these days. Meet Mike Kennewick who pioneered voice commerce before it was being talked about at parties and conferences. Implications of 5G? We got it covered. Messaging as a platform? Check that. Autonomous Intelligence (AI)? We will go deep and wide. Industrial? We will be all over it.

You get the drift.

Mobile Future Forward is the most intellectual conference – CEO and founder, Connected Watch Company

It is a terrific event. Mobile Future Forward is causing everyone to think about what’s the next big thing –  CEO, Global Mobile Operator

 

The caliber of participants is extraordinary. Mobile Future Forward is a data driven event, the team has put together so much hard to find factual data that is unrivaled anywhere in the industry in terms of building the foundation of facts for analysis. I normally don’t learn new things at events but at Mobile Future Forward, I did. North American Leader – IoT and Mobile, IBM

The distinguished guests of the forum will discuss wide-ranging topics of 5G, network economics, messaging platform, VR, autonomous intelligence, blockchain, vertical industries, IoT, commerce, security, intelligent data, new business models, policy and economies, and much more. We welcome you to join us in the journey and contribute to the discussions that will help shape the industries and economies worldwide.

Registration (Early bird expires soon).

Some of the confirmed industry leaders are:

· Glenn Lurie, CEO, AT&T Mobility

· Veresh Sita, CIO, Alaska Airlines

· Neville Ray, CTO, T-Mobile

· Jorge Espinal, SVP, Spotify

· Peter Lewis, Father of IoT

· Michael Bayle, SVP – Mobile, Amadeus

· Sunil Daluvoy, Head, Uber Everything

· Donna Fedor, MD, Mavericks Capital

· Mike Kennewick, CEO and Founder, Voicebox

· Bubba Murarka, Partner, DFJ

· Todd Hooper, CEO, VREAL

· Mohamed Kande, Managing Partner, PwC

· Kim Larsen, SVP, Deutsche Telekom

· Hank Skorny, SVP – IoT, Neustar

· Doug Suriano, SVP – Communications, Oracle

· Sridhar Solur, SVP – Xfinity Home and IoT, Comcast

· Maureen Fan, CEO and founder, Baobab Studios

· Tracy Rausch, CEO and Founder, DocBox

· Biju Nair, CEO, Hyla Mobile

We will be announcing the addition of new speakers and partners throughout summer and look forward to seeing you in September. If you are interested in partnering, please feel free to reach out at info@mobilefutureforward.com.

Thanks and best wishes.

Chetan Sharma

CEO, Chetan Sharma Consulting

http://www.chetansharma.com

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US Mobile Market Update Q1 2016 May 30, 2016

Posted by chetan in : 4G,4th Wave,5G,Chetan Sharma Consulting,Connected Intelligence Era,European Wireless Market,Internet of Things,Mobile Future Forward,Technology Cycles,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

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http://chetansharma.com/usmarketupdateq12016.htm

Highlights of the US Mobile Market Q1 2016

· Mobile data revenues increased by 17% YoY and now contribute 73% of the overall service revenues.

· QoQ, the service revenues declined again for the third straight quarter.

· The overall ARPU dropped below $40 for the first time.

· The Capex is likely to contract for a third year in a row given that most of the LTE networks are built out and there is pressure to preserve the margins.

· Device revenues declined sharply as consumers are upgrading at a slower pace than before and new device launches haven’t really motivated consumers to upgrade.

· EBITDA and Net Income saw double digit gains indicating operators are running a much tighter ship than before.

· Churn is at historic lows. Despite all the commotion in the market, fewer customers are churning each quarter.

· US will cross 400M in subscriptions in 2016.

· The data prices remained pretty stable throughout Q1.

· Mobile data traffic grew again with per sub smartphone consumption going past 4.0 GB/user/mo however, overall data traffic is expected to slow down in 2016.

· In the first 4-5 months of Binge-on, T-Mobile users chomped away over enough PBs of data for free to account for almost entire data traffic for the operator in 2013. T-Mobile experienced a net traffic reduction of 10-15% but given that consumers are consuming 3x than before, overall traffic is likely to rise again.

· AT&T continues to add more connected cars than rest of the operators combined. The operator is optimizing its business around profits. One side-effect of this has been a decline in postpaid phone net-adds for the sixth straight quarter.

· Verizon’s IoT/Telematics accounted for $195M in Q1 and is likely to cross the $1B mark in 2016 making US the hotbed for Connected Intelligence activities, growth, and continued experimentation.

· Apple again dominated the device market with over 39% revenue share, 74% profits share however it saw its quarterly YoY growth saw a decline for the first time in 13 years. The law of large numbers is starting to catch-up. Apple needs a new market narrative and/or another blockbuster. Given the pickup in R&D spend, speculators are hoping for the iCar to surface but it could be something as pedestrian as a new iPhone.

· Apple’s services business was greater than Facebook’s Q1 revenue but in context of its $50B quarter, Wall Street doesn’t appreciate the 20% increase in services revenue. Street’s eyes are squarely positioned on the iPhone numbers.

· Intel abandoned its existing wireless efforts leaving its future strategy and its role in the ecosystem a big question mark.

· Android ecosystem revenues and profits improved slightly primarily on the back of Samsung’s quarterly results. Sony, HTC, LG and some other Android players suffered deep losses in Q1.

· Operator tablet net-adds growth declined sharply.

· AT&T and Verizon on average made $17 per sub/mo, T-Mobile stayed into positive territory with $2 profit/sub/mo while Sprint eked out a 20c profit.

We will be doing an in-depth analysis of the future of the mobile industry at our 7th annual mobile executive summit Mobile Future Forward in Sept 2016. Hope you can join us.

Service Revenue Decline, what does 2016 hold in store?

The overall service revenue, postpaid revenue, overall and postpaid ARPU all declined again. After seeing the net-revenue decline for the first time in the history last year, there is a big question if 2016 will repeat itself or not. Q1 pointed downwards albeit only marginally. In general, the net-service revenue decline is not a good sign if it is market induced. In Europe, we saw net-revenue declines but the impact of the economic crisis was a big factor in determining the trajectory. After the economy has improved, we have seen the net revenue in effected countries rise again. In the US, the net-revenue decline is more market induced. The calculation of service revenue is a bit more complicated because device revenues are no longer part of the mix and as customers are weaning off the contracts, we have to adjust the service revenue for this accounting change. Regardless of the accounting distortions, there is continuous pressure on the postpaid revenues which is what is impacting the overall numbers.

Given the competitive state of the market, we might see further service revenue declines in 2016. The reversal might come down to consolidation in the industry in 2017 and beyond. The pressure on the revenues has had a positive impact though – operators are running far tighter ships than before. The net income surged in Q1 2016. Churn is at historical lows.

Spectrum Auction

FCC’s incentive auction will begin at the end of the month. It will be fascinating to see who beyond the usual suspects have aspirations in the mobile auction game.

Microsoft’s Tryst with Mobile

When Microsoft bought Nokia for a tidy sum, a reporter called me and asked, “What do you think?” I responded, “They will have to sell it once they are done realizing it was a mistake.” I have written extensively about the missteps in strategy and tactics that were so apparent from the start. Microsoft backed itself into a corner and had no choice but to buy Nokia and eventually destroy it. One of the highest market cap company disappeared right before our eyes. With market share falling below 1%, Microsoft has pretty much gotten rid of the last remnants of the business. This doesn’t mean Microsoft is out of mobile devices. If you carefully read between the words, Microsoft hasn’t given up and will be back. Its Surface strategy is finally taking shape and yielding better results and the pivot to services was the right call to get Microsoft enmeshed in the complex Connected Intelligence ecosystem. Old habits die hard. Microsoft might be making the same mistake with IoT.

Mobile Data Traffic Growth

In the last quarterly update, we mentioned that the Cisco’s data traffic numbers looked unreasonable for the US market. CTIA’s annual survey results proved the point earlier this week. Cisco will probably adjust its model and correct the numbers in its next update. We expect the US mobile data traffic to grow by 65% in 2016.

Messaging – the Next Big Platform Shift?

The last big platform shift in the computing space was the migration of attention, talent, and dollars from Windows to Android and iOS. The rise of the smartphones mirrored the rapid decline in Microsoft’s hold on the computing platforms. While Android and iOS have served us well, they haven’t evolved much. Despite having sensors and signals, some of the basic things like inter-linking of apps, contextual surfacing of app features and functions, and search remain complex and/or non-existent. The vacuum is being filled by the emergence of messaging as a platform. Messaging is primal. Consumers knew messaging before they knew smartphones. Given the availability of the processing power as well as the smarter software, some of the tasks can be moved to the messaging window is only natural. Asia has been the guiding light in this regard. How messaging emerges and how various players react to this phenomenon will be fascinating to watch in the coming days and months.

What’s next for Apple?

I have been saying for some time that Google has the best AI engine. Try driving in a remote part of the world and use Google Maps and you will see what I mean. The primary reason for this is that Google has been at it the longest with primary dataset on the most number of individuals. Facebook is starting to get there but the AI needs much more work. It will eventually get there. Another player that is sitting on a gold mine is Amazon and that’s why I say that they are most interesting tech company in the industry today.

Every company has at least one Achilles heel. Apple’s is software and services. Apple’s DNA is hardware and services come second. As I have said before, Apple’s problem with the market is more around controlling the narrative. Media and critics have been pretty hot and heavy about the future prospects of Apple. No doubt Apple has a weakness in software as has been apparent for many years but it has a very strong hold on brand loyalty of customers and a rock solid ecosystem of a billion+ consumers around the globe. Guess what, they also have an excellent stream of data on how consumers use devices, what apps they buy, what they surf and where do they go to but the way use it is quite different. I won’t count Apple out by any stretch. In fact, if one studies the acquisitions they have made over the last couple of years and connect the dots, some cool innovations could be released with the iPhone once the company figures out how to do it at scale.

However, as we have said in our Connected Intelligence thesis as well as Fourth Wave series of papers, services is where the action is going to be over the next decade or two. Apple, Facebook, Google, and Amazon are all well positioned to take advantage. How they execute against their strategy will determine who comes out ahead on the other side.

AI is as good as the datasets it has to train on. Neural networks of yesterday have become the AI algorithms of today just like M2M transformed into IoT. New buzzwords are like a necessary evil to keep the tech industry going. Apple has plenty of data, it just hasn’t started using it in a tangible way. You know who else has enormous amount of useful data? Mobile Operators – well, that’s a story for another day.

IoT Revenue Streams and what it means for the ecosystem

Service provider IoT revenue passed the important $1B mark back in 2013. So far it is tracking the growth of the early days of mobile data. However, they are different curves influenced by different factors. Mobile data was relatively an easier curve to climb as the revenues went up as more data handsets came online. The sales, business case, and ROI was straight forward. IoT is a bit more complicated as it across multiple vertical areas and it is not just about the data network, it is about the complete solution. The sales cycle and execution strategy is different and requires patience and resilience.

We will be doing an in-depth analysis of opportunities at the intersection of 5G and IoT at our upcoming Mobile Breakfast Series on June 7th.

Android vs. iOS: The fight for profit continues

Amongst the prominent Android OEMs, HTC, Sony, and LG, all lost money in their device business in Q1 2016. This again highlights the difficulty in differentiating on an open platform. Some of these players might give up on their handset business in 2016. Apple again dominated with 74% of the profit share and 39% of the revenue share with only 15% of the market share. Samsung’s revenues and profitability improved but it continues to face challenges both on the top and bottom end of the spectrum.

4th Wave Revenues

5 years ago, we put forth the theory of 4th wave to explain the upcoming changes in the mobile ecosystem. For the most part, the industry changes and tribulations have tracked the 4th wave curves. Last year, voice revenues fell down by 23%, messaging revenues declined by 18%, while data revenues grew by 23%. 4th wave revenues which now dominate the ecosystem now grew by a 60% YoY. We will have more analysis of the state of the 4th wave ecosystem later in the year.

Regulations for the new age

Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 54%+ of its voice calls are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.

Quad Moves

AT&T is integrating its DirectTV acquisition. Verizon acquired AOL, launched Go90 and is looking to acquire Yahoo (who isn’t?). Similar moves are afoot in Europe and other regions. Regular readers won’t be surprised. Video is a key offering for many service providers and by bundling quad plays, operators can further lower the churn. Content will continue to play a big role in how various offerings get bundled. The traditional cable bundle is being pulled apart in favor of more al carte OTT offerings. Media companies will have to figure out how they play in the new converged world. The ones that have been sitting on the sidelines will have to make some moves in the wireless ecosystem to stay relevant in the long-term.

The licensed vs. unlicensed: frenemies

Comcast is expected to launch its WiFi first MVNO with Verizon later this year. Google Fi hasn’t been a roaring success, perhaps it was never designed to be. Given that WiFi is carrying 75-80% of the traffic, it is easy to make the business case for a national WiFi operator. Companies like Republic Wireless have shown that this can be done.

Seeing the success of WiFi, FCC has rightly made more unlicensed spectrum available and it will be interesting to see how the ecosystem around 3.5GHz and other bands develop. This in light of what’s happening in the higher bands of cm and mmwave for 5G deployments. Technologies and business models that take into account benefits and drawbacks of both types of spectrum bands across a different uses cases will win out in the end. Despite advances, WiFi calling still has quality issues so the need for traditional networks is not going away anytime soon.

5G Economics

5G is gaining steam. All the major players have outline their preliminary plans to do trials on 5G (code word for we don’t want to be perceived as being behind). However, there is some real progress being made in short-range ecosystem of 5G. I have been working with many companies and talking to many researchers on this subject. I think what’s lacking from the discussion is the role of economics in 5G – what will be the cost structures, ROI, and the TCOs that will make it worthwhile for the operators to deploy 5G profitably. US is likely to be the key driving force in setting the standards and pushing the trials to deployments even though there is no Olympics as a motivator. But competition sure is.

We expect to explore this issue in more detail in the coming months. Our Mobile Future Forward Summit in Sept will tackle the questions in-depth with some seasoned experts.

Our paper on 5G covers the past, present, and future of the network evolution.

What to expect in the coming months?

2016 has started with a bang. The ecosystem is getting very complex and we need better tools to understand the relative strength of players and strategies. 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 Q1 2016 and 2016 US wireless market is:

Service Revenues

· The US mobile data services revenues in Q4 2015 increased 2% QoQ and 17% YoY.

· Verizon and AT&T dominated the quarter accounting for 69% of the mobile data services revenue and had 67% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q1 2016. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 1.9%.  

· Data contribution to the overall revenues is now at 73%.

· All operators saw their ARPU decline by with Sprint and Verizon experiencing the sharpest declines.

Subscribers

· The US market increased its net-adds to 5.6M. T-Mobile gained the most and Sprint added the least.

· Tablet netadds declined sharply leading to a decline in big decline in postpaid netadds.

· There were more Car net-adds than there were phone net-adds

· AT&T has approximately 8M connected cars on their network – probably the highest of any mobile operator in the world.

4th Wave Progress

· The number of players making $250M/quarter on mobile continues to increase rapidly and these aren’t your traditional wireless players. For example, Mobile is now contributing 80% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: “Mobile 4th Wave: Evolution of the Next Trillion Dollars”)

· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.

· Verizon reported $195 million revenue from IoT and Telematics. At the current run-rate, this will likely be a billion-dollar business by 2016.

· Overall, the IoT business is tracking the early days of the mobile data growth.

Connected Devices

· Connected devices (non-phones) accounted for almost 69% of the net-adds in Q1 2016. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 97% of the devices sold in Q1 2016. The feature phone category is practically becoming extinct in the US market.

· The smartphone penetration in the US is now at 84%.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 87M making it the #2 LTE operator behind China Mobile which has more than three times the LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 92% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

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, articles, and at our annual thought-leadership summit – Mobile Future Forward in Sept 2016. The next US Wireless Data Market update will be released in Aug 2016.

Disclaimer: Some of the companies mentioned in this update are our clients.

Announcing Mobile Future Forward 2016 May 20, 2016

Posted by chetan in : 4th Wave,5G,Connected Intelligence Era,Mobile Future Forward,The Golden Age of Mobile,Wireless Value Chain,Worldwide Wireless Market , add a comment

In 2015 something dramatic happened in the mobile industry. In the US, the revenue on the 4th wave exceeded revenue from all the first three waves combined, just like the 4th wave theory had predicted in the 2012 paper. Globally, 62 companies made $1 billion or more on the 4th wave, a 1140% jump from 2010. The world of Connected Intelligence is unraveling in front of us at a fierce pace across multiple dimensions. At Mobile Future Forward (now in its 7th year), we will delve into exponential growth impacting linear industries, new innovations changing the trajectory of competition, sensors and software enabling a programmable world of immense potential, and new experiences changing consumer’s perception of technology, data, and privacy. The day long executive summit brings together global experts and visionaries to help probe the deeper mysteries of the evolving landscape. Am thrilled to announce that Mobile Future Forward 2016 will be held on 27th September in Seattle

We are excited to partner with industry leaders and thank them for their ongoing support: Neustar, Oracle, and VoiceBox.

The distinguished guests of the forum will discuss wide-ranging topics of 5G, network economics, messaging platform, VR, autonomous intelligence, blockchain, vertical industries, IoT, commerce, security, intelligent data, new business models, policy and economies, and much more. We welcome you to join us in the journey and contribute to the discussions that will help shape the industries and economies worldwide.

Registration is open now.

Some of the confirmed industry leaders are:

· Glenn Lurie, CEO, AT&T Mobility

· Veresh Sita, CIO, Alaska Airlines

· Jorge Espinal, SVP, Spotify

· Peter Lewis, Father of IoT

· Michael Bayle, SVP – Mobile, Amadeus

· Sunil Dulovoy, Head, Uber Everything

· Donna Fedor, MD, Mavericks Capital

· Bubba Murarka, Partner, DFJ

· Todd Hooper, CEO, VREAL

· Sridhar Solur, SVP – Xfinity Home and IoT

We will be announcing the addition of new speakers and partners throughout summer and look forward to seeing you in September. If you are interested in partnering, please feel free to reach out at info@mobilefutureforward.com.

Thanks and have a wonderful spring.

Chetan Sharma

CEO, Chetan Sharma Consulting

http://www.chetansharma.com

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IoT–Exploring the next big thing in mobile May 1, 2016

Posted by chetan in : 4th Wave,5G,Chetan Sharma Consulting,Mobile Breakfast Series,The Golden Age of Mobile,Wireless Value Chain,Worldwide Wireless Market , add a comment

Internet of Things (IoT) has been hailed as the next big thing in the mobile industry. As connections from objects and things interconnect with existing and new end points, the networked effect can provide tremendous opportunities, reshape existing processes, user experiences, and expectations. But, really, how real is IoT and what will it take to reach the billions of dollars promised. Will it fundamentally alter how we do things? We are starting to see signs of tremendous progress. GE is investing $4B+ into its version of IoT – the industrial Internet and it is making the difference in operations and machine learning. Connected consumer gadgets are enabling us to lead healthier lives, work more efficiently, and manage our time more effectively.

Chetan Sharma Consulting hosted the first Mobile Breakfast Series event of the year in Vancouver and we delved deeply into the subject of IoT and what it means. We talked about the opportunities it represents, the challenges it faces, and the timeline for success. The panel took a look at the fundamental elements of IoT that will be a key layer for the Connected Intelligence Era.

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Shahid Ahmed is a Partner at PwC where he leads the Emerging Technology and IoT Practice. Previously, Shahid was the Managing Director with Accenture, where he had P&L responsibility for North America’s Communications business.  In this role, Shahid helped telecommunications clients build new capabilities, operate more efficiently and drive new growth.  He was also responsible for the Network practice in North America.  During his twenty-year tenure at Accenture, Shahid was involved in creating many practices including the formation of the Wireless Practice and helping to start the Accenture Cisco Business Group. Prior to joining Accenture, Shahid held several management positions at Sprint where he rolled out and expanded Sprint’s cellular services in North America.   Shahid was also responsible for rolling out the first cellular digital packet data (CDPD) capability in the US. Shahid is an active member of several wireless industry groups. He currently serves on multiple Advisory Boards such as the Smart Network Council, Cellular Telecommunication and Internet Association (CTIA), Northwestern University Masters in Engineering Management (MEM) Program and The Coral Group. In February 2011, Shahid was appointed as an Advisor to the Federal Communications Commission (FCC) Technical Advisory Council advising on technology issues facing the United States.  Shahid was chair of the M2M/IoT working group and currently chairs the cyber-security working group.

Rob Tiffany is the Global Technology Lead for the Internet of Things at Microsoft where he’s shipped smartphones and architected + developed many of the world’s largest enterprise mobile, IoT and wireless solutions. Prior to Microsoft, he spent his career as an entrepreneur, executive, strategist and writer of bestselling books on mobile and wireless technologies. A pioneer of the mobile revolution, he drove the development of the mobile app ecosystem and co-founded the world’s first cloud-based, mobile device management company. He started his career in the M2M business in the early days of wireless, bringing unintelligent vending machines to life.

Gonzalo Tudela is CEO and Co-founder of Vandrico Solutions, an enterprise wearables software company based in Vancouver Canada. With a background in Finance and Mining Operations, Gonzalo is an early champion of the positive impact wearable technology will have on large commercial operations. His insights have been featured in publications such as The Globe and Mail, Entrepreneur Magazine and TechCrunch. Gonzalo is a TEDx speaker who regularly presents to business leaders across the world. His expertise has been televised internationally to millions of viewers on the Globo TV network and on CBC. Gonzalo currently leads Vandrico in helping large global organizations use wearable technology as a way to overcome safety and operational challenges.

Rob Chandhok currently serves as President and COO of Helium, which provides a complete Internet of Things platform that makes sense of your things. Prior to Helium, Chandhok served as president of Qualcomm Interactive Platforms and senior vice president of Qualcomm Technologies Inc., where he was responsible for Qualcomm products and strategies that enabled people to benefit from the Internet of Everything, including wearable computing, vision-based computing via the Vuforia augmented reality platform, and the AllJoyn software development framework, an open source project of the AllSeen Alliance. Chandhok has years of practical and product-oriented experience in wireless communications and the Internet. He takes a systems-level approach to innovative communication oriented products, from chips up to applications and user interface. Chandhok holds 36 patents and has 23 published articles.

The highlights of the discussion were:

· Shahid was just back from the big Hannover fair in Germany. He gave a good overview of the emerging movement towards of what is being called Industrial 4.0 essentially a derivative of Connected Intelligence. Industrial nations like Germany and Japan are very worried about staying relevant in the new economy. It’s worth reading the official summary here. US was the showcase country this year so there were plenty of representation from US tech giants like GE, Intel, Microsoft, AT&T, and many others. Even President Obama took time to represent the US interests at the show. The bottom line of the show was that everything is getting connected, really fast, and the change is coming faster than we can think. There were several case studies that highlight this as we will discuss below.

· Rob Chandhok has cut his teeth in the mobile ecosystem with years of experience building technology and ecosystems at Qualcomm and is now shepherding Helium to become a contender in the IoT space. Fresh from raising a $20M round with GV and the likes, Helium is making good progress in that dimension. As he stated on the panel, Helium wants to become Android of the IoT world.

· Rob Tiffany started his career in the M2M space building vending machines that could communicate and help with the operations but as he leaned all too painfully, it is not about the technology but also about the human element that we need to be always cognizant of it.

· Gonzalo’s background is in mining and he is connecting the mining world to IoT and vice-versa and is in the process building out a platform that can be applied to many other use cases but the focus is on how to make things better, safer, workers more productive, operators cheaper and effective, and the ROI a no-brainer.

· While the news headlines are captured by the likes of consumer gadgets and gizmos, almost all of the revenue and profits is in Industrial or Enterprise IoT and that’s where we focused all of our attention.

· At the highest level, the main goals of IoT are one or more of the following: to reduce cost and expense, reduce risk, increase productivity, enhance consumer engagement which results into higher revenue and better profitability, and obviously at the end of the day – increase revenues with new revenue streams or new business models applied to the old businesses or just doing a better job with the existing streams.

· Product companies are turning into services companies. IoT is also enabling new business models. The prominent examples are: Rolls Royce and GE are leasing their jet-engines by the hour rather than selling them so that they can very accurately predict the maintenance windows and maximize usage by reducing downtime costs. It has led to increase in revenue and best margins for the business.

· Many folks in the industry view IoT as dumb endpoints to collect data but clearly there much more to it. Even sending control commands to manipulate the outcomes are a big step forward. However, the clear benefits come when the end-points are smart and are capable of making decisions. In the case of Helium sensors, software can be updated over time. In fact, if the sensor is not software upgradable, you shouldn’t even consider buying the sensor. As such, some of the new low-power networks like Sigfox and Lora are a non-starter in the long-run because they just don’t have the bandwidth to send updates to the end-points efficiently. I think the role of these two networks is similar to that of WiMax. It helped accelerate the LTE evolution. Similarly, SIgfox and Lora spurred the growth of NB-IoT and the ecosystem around it is being built quickly.

· Another great example is from RioTinto – they have dozens of mining operations around the world and operate heavy equipment. With the help of sensors, they are able to operate autonomous vehicles. In fact, RioTinto is the world’s largest owner and operator of autonomous haulage system trucks. By operating autonomously, more material can be moved safely and better yield is delivered.

· In the underground mining operations, Vandrico equips miners with off-the-shelf wearables and the data from the sensors is used to provide specific instructions based on the type of work, location within the mine, and other contextual factors that need to be considered in real-time operators.

· This leads to how the business model should be designed. More and more folks are thinking about value-based pricing. The communication piece in IoT is practically a commodity and so the value is in the outcomes. Gonzalo brainstormed some interesting value propositions that he is thinking about for e.g. pricing based on lives saved or extra production of the mineral (in case gold, copper and other valuable minerals, one can hit the jackpot).

· Microsoft has a number of good framework elements that can be used for IoT like Azure cloud, Analytics, BI, real-time event processing of high volume, etc. With Amazon, Microsoft are the two giants in the IoT cloud space.

· The IoT stack is very fragmented and it will continue to be such for a time before some consolidation takes place.

· Opex of IoT devices/network is generally bigger than the capex.

· Security is of course a big deal in IoT. Some think about it all the time but in general there is a big gap in the industry. Regulators are slow to move as well. Perhaps a big public fiasco will force the industry and the regulators to come up with guidelines and rules that can be enforced. Just because you can encrypt data doesn’t mean you are securing the data from the sensor. The fact that it is emitting data (garage opener) can be captured by nefarious elements. Encrypted data is of no use in such scenarios. So, as an industry, we need to take a much deeper look into how we deal with security and privacy of IoT data and end-points.

· BP provided fitbits to their employees and saw a 44% reduction in sick-days. That’s enormous amount of hours that can change how the business is run. It will also have a ripple effect on the fabric of society – insurance, health care facilities, education, social security, etc. will all be impacted.

· Gaming might provide some interesting business model lessons for IoT.

· In the end, Industrial IoT is about managing business outcomes to impact the basic operating metrics of the company and the ecosystem.

· The threat of cybersecurity looms large and we just don’t have the integration, collective framework to even start tackling the problem. Lots of challenges and opportunities to tackle this.

· There are big differences in expectations of IoT solutions in the developed vs. emerging worlds. Pricing is the biggest variable. As such companies operating in the space had to adjust their pricing models to suit the market and make it more palatable to the markets such as India and China.

· It was kind of reflective of the state of the industry that we didn’t talk much about the mobile operators who dominated the industry until 2010-11 and are slowly becoming less relevant in the 4th wave era (more to come on this). Of course, there are a few operators like AT&T, Verizon, Vodafone, Telefonica, and DT who are quite active in the space not only at the connectivity layer but actually on all layers of the stack. However, their best opportunity might be managing the OSS stack for the Industrial world.

Overall, it was an excellent panel with diverse viewpoints covering a technology evolution that is just getting started. It is exciting to be part of this shift and help shape the conversation which is bound to have a fundamental impact on the global economy. My thanks to our sponsor Optimus Information for their support, all the speakers who traveled great distances to be with us, and to the attendees who took out their morning to be with us. Everyone was glued to the discussion and the time flew by very fast. And we barely were able to scratch the surface. We will continue the dialog in the coming days, months, and years.

Our next opportunity is our Mobile Breakfast Series in Seattle on June 7th where we will add 5G to the mix and explore where are the opportunities at the intersection of 5G and IoT. We will look into what the new world of 5G will look like and how it will impact IoT.

As always, we welcome your input which helps in planning future forums and brainstorm sessions.

Thanks

Chetan Sharma

Mobile Breakfast Series: Vancouver & Seattle April 17, 2016

Posted by chetan in : US Wireless Market , add a comment

We have two terrific events coming up in the Pacific Northwest, first in Vancouver on 28th April and then on June 7th in Seattle. They will feature some of the smartest execs on the most pressing topics of the day – 5G and IoT. Hope you can join us.

www.mobilebreakfastseries.com

Internet of Things – Exploring the next big thing in mobile

When: April 28th 7:30-8:30am Registration, Breakfast and Networking, 8:30-10:00am Panel Discussion, 10:00-11:00am Networking.

Where: Hyatt Regency, 655 Burrard St, Vancouver, BC V6C 2R7, Canada

Speakers

Shahid Ahmed, Managing Partner – Emerging Technology and IoT, PwC

Rob Tiffany, Global Technology Lead – IoT, Microsoft

Gonzalo Tudela, CEO and CoFounder, Vandrico Solutions

Rob Chandhok, COO and President, Helium

Chetan Sharma, CEO, Chetan Sharma Consulting (moderator)

Event Sponsor: Optimus Information

Shahid Ahmed is a Partner at PwC where he leads the Emerging Technology and IoT Practice. Previously, Shahid was the Managing Director with Accenture, where he had P&L responsibility for North America’s Communications business.  In this role, Shahid helped telecommunications clients build new capabilities, operate more efficiently and drive new growth.  He was also responsible for the Network practice in North America.  During his twenty-year tenure at Accenture, Shahid was involved in creating many practices including the formation of the Wireless Practice and helping to start the Accenture Cisco Business Group. Prior to joining Accenture, Shahid held several management positions at Sprint where he rolled out and expanded Sprint’s cellular services in North America.   Shahid was also responsible for rolling out the first cellular digital packet data (CDPD) capability in the US. Shahid is an active member of several wireless industry groups. He currently serves on multiple Advisory Boards such as the Smart Network Council, Cellular Telecommunication and Internet Association (CTIA), Northwestern University Masters in Engineering Management (MEM) Program and The Coral Group. In February 2011, Shahid was appointed as an Advisor to the Federal Communications Commission (FCC) Technical Advisory Council advising on technology issues facing the United States.  Shahid was chair of the M2M/IoT working group and currently chairs the cyber-security working group.

Rob Tiffany is the Global Technology Lead for the Internet of Things at Microsoft where he’s shipped smartphones and architected + developed many of the world’s largest enterprise mobile, IoT and wireless solutions. Prior to Microsoft, he spent his career as an entrepreneur, executive, strategist and writer of bestselling books on mobile and wireless technologies. A pioneer of the mobile revolution, he drove the development of the mobile app ecosystem and co-founded the world’s first cloud-based, mobile device management company. He started his career in the M2M business in the early days of wireless, bringing unintelligent vending machines to life.

Gonzalo Tudela is CEO and Co-founder of Vandrico Solutions, an enterprise wearables software company based in Vancouver Canada. With a background in Finance and Mining Operations, Gonzalo is an early champion of the positive impact wearable technology will have on large commercial operations. His insights have been featured in publications such as The Globe and Mail, Entrepreneur Magazine and TechCrunch. Gonzalo is a TEDx speaker who regularly presents to business leaders across the world. His expertise has been televised internationally to millions of viewers on the Globo TV network and on CBC. Gonzalo currently leads Vandrico in helping large global organizations use wearable technology as a way to overcome safety and operational challenges.

Rob Chandhok currently serves as President and COO of Helium, which provides a complete Internet of Things platform that makes sense of your things. Prior to Helium, Chandhok served as president of Qualcomm Interactive Platforms and senior vice president of Qualcomm Technologies Inc., where he was responsible for Qualcomm products and strategies that enabled people to benefit from the Internet of Everything, including wearable computing, vision-based computing via the Vuforia augmented reality platform, and the AllJoyn software development framework, an open source project of the AllSeen Alliance. Chandhok has years of practical and product-oriented experience in wireless communications and the Internet. He takes a systems-level approach to innovative communication oriented products, from chips up to applications and user interface. Chandhok holds 36 patents and has 23 published articles.

 

Connected Intelligence: At the Intersection of 5G and IoT

When: June 7th 7:30-8:30am Registration, Breakfast and Networking, 8:30-10:00am Panel Discussion, 10:00-11:00am Networking.

Where: Columbia Tower Club, 701 5th Ave #7600, Seattle, WA 98029

Registration

Mark McDiarmid, VP – Radio Network Engineering, T-Mobile has 24 years of experience in the wireless industry in both domestic and international operations. Currently, Mark serves as VP, Radio Network Engineering and Development for T-Mobile US, where he leads several teams of industry-leading engineers focused on creating robust, operationally-efficient, and economic radio network designs. Recently, Mark was responsible for defining the evolution and system design of T-Mobile US’s HSPA+ and LTE mobile broadband network including the design and operationalization of new radio network transport solutions based on IP and Ethernet.

Paul Brody is Americas Strategy Leader, Technology Sector at EY. He is proficient in mobile finance strategy planning, technology of mobility and internet of things, with 20 years of consulting and strategy experience in mobile and electronics. Prior to joining EY, he served as Vice President and Global Industry Leader of Electronics at IBM. At IBM, he is responsible for building IBM’s services business in the mobile space, including the partnership with Apple, and developing solutions for connected devices.  Prior to IBM, Paul worked at McKinsey & Co. Paul has a degree in Economics and a Certificate in African Studies from Princeton University.

Mobile Patents Landscape 2016 April 13, 2016

Posted by chetan in : 4th Wave,5G,Connected Devices,Connected Intelligence Era,Intellectual Property,Patent Strategy,Wireless Value Chain,Worldwide Wireless Market , add a comment

Mobile Patents Landscape 2016

http://www.chetansharma.com/MobilePatentsLandscape_2016.htm

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In 2016, Mobile industry will approach 2.7 trillion dollars in revenue. It has become the most broadly available and used technology on the planet. Its impact is being felt beyond the traditional boundaries of communications. Mobile app Uber has completed upended the logistics equation; Amazon and Alibaba are generating billions of dollars in mobile commerce; FlipKart and Snapdeal are changing how Indians buy, sell, and trade; and so on and so forth. By the end of 2015, there were at least 62 companies generating over a billion dollars from digital mobile services.

We are seeing a fundamental shift in the mobile industry as discussed in detail in our 4th wave series papers and an emergence of the Connected Intelligence Era as outlined in our recent series of papers. These two broad trends are changing the landscape and impacting how and where value gets created and where it gets captured. In the transition years, the value of IP becomes quite important as companies jumping from one stack layer to another one require the IP portfolio to protect its investment in the space. The cross domain activity will only intensify in the coming years and we are already seeing this in the patent data to date.

According to World Intellectual Property Organization (WIPO), the top fields of technology for published patent applications were: Computer technology (8.2%), Digital Communications (8%), Electrical machinery (7.3%), Medical Technology (6.3%), and Transport (4.3%). While US remains the leader in terms of overall quality and quantity. China and its companies are starting to flex some muscles on the big stage. In terms of regions, Asia continues to outpace North America and Europe. US and Japan were followed by China, Germany, Korea, France, and UK. The top 10 PCT applications were Huawei Technologies, Qualcomm, ZTE, Samsung, Mitsubishi, Ericsson, LG, Sony, Philips, and HP.

According to the US Patent Office (USPTO), in 2015, the number of patents granted grew over 8% YoY. The numbers of foreign filings are now in the majority for both the applications filed as well as the patents granted.

As we look into the mobile related patents, the growth is much more striking. The number of mobile related patents that were granted by the USPTO and the EPO increased significantly over the course of last decade. The US market saw a 447% increase while the European market saw a 75% increase in mobile related patent grants.

By the end of 2015, approximately 27% of patent granted in the US were mobile related. This grew from around 2% in 1991 and 5% in 2001. In Europe, roughly 8% of the patents granted are now related to mobile. Europe saw a decline of 4% in mobile patents in contrast of 16% growth in the US market.

It is also interesting to note that a number of new Asian companies like Mediatek, Alibaba, and Xiaomi have stepped up their IP efforts and substantially increased the filings in the US. We are also observing strong activity in the new areas such as 5G, VR, mobile security, and IoT.

Chetan Sharma Consulting analyzed over 7 million patents granted by the USPTO and EPO over the last two decades to understand how mobile has become a key enabler for all technology companies. Furthermore, we looked at patent granted to the top 65 technology companies who are active in the mobile space to understand their relative strengths and weaknesses in the mobile patents landscape. This study is fifth in the series that does an in-depth quantitative analysis of the mobile patents landscape.

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, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in April 2016.

Disclaimer: Some of the companies mentioned in this update are our clients.

Correcting the IoT History March 14, 2016

Posted by chetan in : 4th Wave,Internet of Things,IoE,IoT,The Golden Age of Mobile,Wireless Value Chain,Worldwide Wireless Market , add a comment

In the last 5 years, IoT has entered the industry consciousness. There are varying forecasts calling for tremendous growth and revenue generation opportunities. We have argued IoT as part of the Connected Intelligence Evolution and have published a couple of papers on this topic of ongoing research. Last year, we delved into the history of IoT. Before it was fashionable to say IoT, it was M2M, and before that Telemetry and Telemetric systems.

During our research last year, we came across something that our industry and the media got wrong – the origination of the term “Internet of Things” or “IoT.” The current thinking is that the term first originated at the Auto-ID center at MIT around 1999.

IoT didn’t really enter the conversation until ITU’s IoT report in 2005. It took another 5-6 year before the 50B forecasts started appearing for connected devices and of course the lion-share of the growth was attributed to IoT. Regardless of the forecasts, IoT is a thriving ecosystem and the future of opportunities and its relevance in transforming industries has never been more important.

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Peter Lewis with Harry Brock, President, Metrocall in 1982 (Black Enterprise, June 1983) (top). Peter Lewis in 2015 (bottom)

That’s why it is important to get the historical context right. To the extent we could find, the term “Internet of Things” was first conceptualized, coined, and published in Sept 1985 by Peter T. Lewis in a speech to the Congressional Black Caucus Foundation 15th Annual Legislative Weekend in Washington, D.C. There was no widespread availability of Internet in those days so the Internet didn’t archive it some place and Peter Lewis was busy with his new startup endeavors and we lost track of an important speech that brought together the vision of IoT together. Only a few close friends and colleagues knew about the speech.

The full speech is published with permission in this note and as you will see, his vision was spot on – 30 years ago. Peter was uniquely positioned to understand the confluence of machines, wireless, Internet, applications because he had been exposed to them from different angles by then.

By connecting devices such as traffic signal control boxes, underground gas station tanks and home refrigerators to supervisory control systems, modems, auto-dialers and cellular phones, we can transmit status of these devices to cell sites, then pipe that data through the Internet and address it to people near and far that need that information. I predict that not only humans, but machines and other things will interactively communicate via the Internet. The Internet of Things, or IoT, is the integration of people, processes and technology with connectable devices and sensors to enable remote monitoring, status, manipulation and evaluation of trends of such devices. When all these technologies and voluminous amounts of Things are interfaced together — namely, devices/machines, supervisory controllers, cellular and the Internet, there is nothing we cannot connect to and communicate with. What I am calling the Internet of Things will be far reaching.

Peter started his career as a young commander and nuclear officer-in-charge in the US Army and served in the US and abroad in charge of critical communications and as a nuclear officer, in charge of running NATO’s first strike force during the cold war. In fact, here is a fascinating trivia for the history buffs – Peter was called by the Secret Service to retrofit President Reagan’s Limo (it was a 1972 Lincoln Presidential parade car) with phone service in the Motorola shop in Prince Georges County in 1984.

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Dawn Magazine, The Afro American, Nov 9, 1985 covering the CBC Foundation panel in Sept 1985

From the very early days of his career, Peter understood the importance of cellular communications before many of his peers at the time and was determined and focused to play a role in the birth and subsequent growth of the industry. At the start of 1980, he cofounded Metropolitan Radio Telephone System, Inc. or MRTS which merged with other partners to make the first cellular company in the US – Cellular One. The grand opening of Cellular One took place at the Vista International Hotel (now the Westin Washington) in Washington DC on 16 Dec, 1983. Later on, the company was folded into Cingular and then into the current AT&T Wireless.

He also played an influential role in the cellular settlements amongst mutually exclusive applications in over half of the top-90 US markets and in his interactions with the FCC. It was during this time in 1985, he was invited by Ms. Zora Kramer at the FCC to present his thoughts on the burgeoning Cellular industry and participate with other executives on the panel moderated by Ms. Doris McMillon who was the news anchor for WJLA TV-9 in DC. She now runs her own Media and Communications firm.

I had a chance to talk to Ms. McMillon to see what she remembered about that session from 30 years ago. “Peter wowed the audience, some of the stuff he was saying seemed science fiction at the time,” she said.

Peter was very familiar with the work on ARPAnet at DARPA and from the beginning saw the cellular system not just for voice but also for data services; not just for connecting phones but all sorts of machines. Remember, in those early days, cellular phones were installed in the car and amounted to thousands of dollars in equipment and monthly costs.

In all of our filings with the FCC, we made mention of our intent to offer not just voice, but also data services over the cellular networks. Particularly, was is easy to see that tons of machines and devices, many of which are situated in remote or hard-to-access areas, are in dire need of monitoring and manipulation so that managers of such machines and devices can check status, turn these devices on and off and modify settings and thresholds. The narrow bandwidth of cellular ideally lends itself to carrying small amounts of data to and from machines and devices. Some of you in the audience are familiar with the simultaneous and rapid development of the Internet — whose progenitor was called the “ARPAnet” — overseen by the U.S. Department of Defense Advanced Research Programs Agency better known as “DARPA.” When the Russians launched the Sputnik communications satellite in 1958, this gave the U.S. government the urgent motivation to create DARPA so we would never again fall behind in critical technology behind a rival superpower.

You can read the full speech to judge for yourself.

In the meantime, an entrepreneur like Peter can hardly sit idle. He has played an important role in the connected cars that are so prevalent today (see patent USPTO 5587715). He regularly advises the various government agencies like US Army, Pentagon, FAA, etc. and other corporations on future growth of technology and its impact on our world. He is currently engaged in Unmanned Aerial Systems (a.k.a drones) industry, which is an emerging segment of the IoT industry.

So, the next time someone asks you about the origination of IoT at a cocktail party, you will have the data and the historical context of how Peter’s speech in Sept of 1985 came about.

Chetan

US Mobile Market Update – 2015 March 9, 2016

Posted by chetan in : 4G,4th Wave,5G,AORTA,Applications,ARPU,Chetan Sharma Consulting,Connected Intelligence Era,IoE,IoT,Mobile 2016,Mobile Breakfast Series,Mobile Ecosystem,Mobile Future Forward,Smart Cities,Smart Phones,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

US Mobile Market Update – 2015

http://www.chetansharma.com/usmarketupdate2015.htm

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Highlights of the US Mobile Market 2015

· The overall mobile market expanded by 18% increase in revenues.

· Mobile data revenues increased by 17% YoY and now contribute 72% of the overall service revenues. In terms of data contribution, US is catching up with Japan which has been a leader in data % since the iMode days.

· For the first time in its history of the US market, the service revenues declined.

· For 2015, the voice revenues declined by 24%, messaging revenues declined by 18%, tablets saw the dip by 18%, handsets saw an increase of 5%, access revenues by 23% and 4th wave services dominated with an increase of 60%.

· The Capex contracted for a second year in a row.

· Device revenues are now 21% of the overall.

· EBITDA and Net Income saw double digit gains indicating operators are running a much tighter ship than before.

· Churn is at historic lows. Despite all the commotion in the market, 7% fewer customers churned in 2015.

· After falling sharply in 2014, the data prices remained pretty stable throughout the year.

· Mobile data traffic grew again with per sub smartphone consumption at 3.9 GB/user/mo (see note below on data traffic)

· In the first 10 weeks of Binge-on, T-Mobile users chomped away 34 PB of data for free or what was the entire year’s worth of data traffic on T-Mobile’s network in 2010. T-Mobile experienced a net traffic reduction of 10-15% but given that consumers are consuming 3x than before, overall traffic will rise again.

· AT&T added 4 million cars to their network. While postpaid business has its challenges, the connected devices business showed significant strength in 2015.

· Verizon’s IoT/Telematics accounted for $690M in 2015 and is likely to cross the $1B mark in 2016 making US the hotbed for Connected Intelligence activities, growth, and continued experimentation.

· Apple again dominated the device market with over 45% revenue share, 81% profits share with only 16%-unit share.

· Android ecosystem revenues grew by 5% but the profits declined by 2%

· There were more tablets added to the network than phones in 2015. Cars outperformed M2M by a good margin.

· T-Mobile edged past Verizon in postpaid netadds, AT&T was ahead in Prepaid, Verizon in Connected devices, Sprint in wholesale, and Verizon overall had the most netadds in 2015.

· AT&T and Verizon on average made $16 per sub/mo, T-Mobile turned into positive territory with $1 profit/sub/mo while Sprint stayed in negative territory with a loss of $0.55 per sub/mo.

· The valuation of Uber surpassed the combined market cap of T-Mobile and Sprint.

What to expect in 2016? Questions for 2016.

· We expect the overall US mobile market to pass the half a trillion-dollar mark in 2016.

· US will cross 400M in subscriptions in 2016.

· After the pause of dropping data prices in 2015, we could see intense price wars in 2016.

· The upcoming auction could be the big story of the year.

· What new 5G test results will be announced and will industry converge on some 5G standards ahead of the 2019 deadline?

· Will Comcast MVNO follow Google-Fi as a niche endeavor or does it have elements to fundamentally impact the market. 2016 will hopefully answer the question about the future of WiFi-first network strategy.

· Will the upcoming eSim integration in devices go far enough to disrupt the market?

· Will IoT gain sufficient steam to justify the forecasts?

· Can Android OEMs turn around the decline in profits in 2016?

· Can iPhone7 boost Apple’s growth numbers in 2016?

· Will the service revenue decline in the US reverse itself or are we seeing the start of the decline in revenues in the industry?

· Autonomous driving was a big story last year; what progress are we going to make in 2016? How will Uber shape the autonomous driving business models?

· AT&T and Verizon have bet big on video. How will the respective strategies pan out in 2016?

· The Apple-FBI is going to be one of the most watched cases in the world. Whichever way the final ruling lands has huge implications for the tech industry and consumers.

We will be doing an in-depth analysis of the future of the mobile industry at our 7th annual mobile executive summit Mobile Future Forward in Sept 2016. Hope you can join us.

Service Revenue Decline, what does 2016 hold in store?

The overall service revenue, postpaid revenue, overall and postpaid ARPU all declined. In general, the net-service revenue decline is not a good sign if it is market induced. In Europe, we saw net-revenue declines but the impact of the economic crisis was a big factor in determining the trajectory. After the economy has improved, we have seen the net revenue in effected countries rise again. In the US, the net-revenue decline is more market induced. The calculation of service revenue is a bit more complicated because device revenues are no longer part of the mix and as customers are weaning off the contracts, we have to adjust the service revenue for this accounting change. If we take the accounting distortion into account, service revenue is still in the positive growth territory but in terms of how operators report service revenues, this was the first year the category saw a decline. Regardless of the accounting distortions, there is continuous pressure on the postpaid revenues which is what is impacting the overall numbers.

Given the competitive state of the market, we might see further service revenue declines in 2016. The reversal might come down to consolidation in the industry in 2017 and beyond. The pressure on the revenues has had a positive impact though – operators are running far tighter ships than before. The net income surged in 2016.

The licensed vs. unlicensed: frenemies

Comcast is expected to launch its WiFi first MVNO with Verizon fairly this year. Google Fi hasn’t been a roaring success, perhaps it was never designed to be. Given that WiFi is carrying 75-80% of the traffic, it is easy to make the business case for a national WiFi operator. Companies like Republic Wireless have shown that this can be done. Keeping aside some of the technical challenges with WiFi, there are two major business challenges with the WiFi strategy. First, even with the rise of WiFi usage, the cellular usage hasn’t slowed down. Cellular data usage is still growing 60-70% YoY. As such, consumers will have to rely on cellular when they are out and about which means the economics comes down to the wholesale rate the MVNO has for cellular. The second big problem is the lack of handset choices. For consumers, handset choice is paramount. They want both iOS and Android devices to go with their data plans. WiFi operators generally have limited handsets. Over time this will change but to have a WiFi network of scale, economics, choice, and pricing are critical. By contract, cellular operators will always have a leg-up on the MVNOs unless access regulations are in place which of course are nowhere in sight.

Seeing the success of WiFi, FCC has rightly made more unlicensed spectrum available and it will be interesting to see how the ecosystem around 3.5GHz and other bands develop. This in light of what’s happening in the higher bands of cm and mmwave for 5G deployments. Technologies and business models that take into account benefits and drawbacks of both types of spectrum bands across a different uses cases will win out in the end. Despite advances, WiFi calling still has quality issues so the need for traditional networks is not going away anytime soon.

M&A 2016

As we mentioned last year, the service provider M&A window for 2016 pretty much closed late 2015 given the upcoming auctions and the presidential cycle.  There might still be some cross border opportunities but for any major transactions, it is better to wait it out to have a reasonable chance of success.

IoT Revenue Streams and what it means for the ecosystem

Service provider IoT revenue passed the important $1B mark back in 2013. So far it is tracking the growth of the early days of mobile data. However, they are different curves influenced by different factors. Mobile data was relatively an easier curve to climb as the revenues went up as more data handsets came online. The sales, business case, and ROI was straight forward. IoT is a bit more complicated as it across multiple vertical areas and it is not just about the data network, it is about the complete solution. The sales cycle and execution strategy is different and requires patience and resilience.

AT&T already had an active IoT developer program. Verizon introduced its ThingSpace platform to the developers last year. It is already selling complete IoT solutions in energy, transportation, security, and several other industry segments. As we mentioned before, Verizon is on track to crack the billion-dollar mark in IoT this year. For trivia buffs, Verizon passed the billion-dollar mark in mobile data revenues back in 2004 which at the time made only 5%of the overall wireless revenues for the operator.

We will be doing an in-depth analysis of the IoT Opportunity at our upcoming Mobile Breakfast Series in April and May.

Mobile data growth – Correcting the Cisco Numbers

Mobile data consumption (cellular) continues to grow as devices and networks continue to improve. There are 13 countries now with at least 1GB/mo/sub consumption. US is amongst the top three. At the end of 2015, the average consumption per sub in the US was at 3.9 GB/mo/sub.

Earlier this quarter, Cisco released its annual VNI report that forecasts data consumption and growth around the world. However, they did something very unusual this time, they pulled back their “factual numbers” by 36% for the US market. Based on our research which is corroborated by the data from the sources, Cisco’s numbers are low. Given that a lot of policy papers use these numbers as an input, we thought it will be worthwhile providing the reasonable estimates for data growth in the US market. These estimates match well with the data growth numbers in the Ericsson report.

Our estimates are that the US data consumption last year was close to 10.9 Exabytes. Ericsson reported approximately 10.5 Exabytes. Cisco adjusted its numbers from 9.2 Exabytes to 6 Exabytes.

Android vs. iOS: The fight for profit continues

Amongst the prominent Android OEMs, HTC, Sony, LG, and Lenovo all lost money in their device business in 2015. This again highlights the difficulty in differentiating on an open platform. Some of these players might give up on their handset business in 2016. Apple again dominated with 81% of the profit share, 45% of the revenue share, with only 16% of the unit share. Samsung’s profitability improved a bit but it continues to face challenges both on the top and bottom end of the spectrum.

4th Wave Revenues

5 years ago, we put forth the theory of 4th wave to explain the upcoming changes in the mobile ecosystem. For the most part, the industry changes and tribulations have tracked the 4th wave curves. Last year, voice revenues fell down by 23%, messaging revenues declined by 18%, while data revenues grew by 23%. 4th wave revenues which now dominate the ecosystem now grew by a 60% YoY. We will have more analysis of the state of the 4th wave ecosystem later in the year.

In its Q4 15 earnings call, Verizon laid out its 3-Tier strategy which is similar to the 4th wave digital strategy we have been working on with many operators around the globe since 2011 (see paper and slides for details). Without moving up the stack, eventually, operators will run out of the data steam that is powering their revenues today.

Regulations for the new age

Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 50% of its voice calls are are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.

Connected Devices – Resetting the target

The 50B number by 2020 has gotten into the industry lexicon since 2010 when Ericsson first suggested that we are likely to reach this target by the end of the decade. Others picked up the number and either copied it or even went further by suggesting even 75B+ numbers. By the middle of this decade, it looks unlikely, we will hit 50B. Our research shows that we were at approximately 16B last year. It is tall order to make up 34B in 5 years. Given the new evidence and assumptions, Ericsson also revised its estimates down to 28B by 2021 (the 2020 number is just over 25B). 25B+ is still an excellent target and something the industry can be proud of. The 50B number still gets thrown around a lot by vendors and media. We will be better off as an industry if we adjust the forecasts based on ground realities and not unnecessarily hype things.

Apple – what’s next? Mastering the narrative

Apple’s profit in Q4 were the highest recorded in the history of mankind. Let that sink in for a minute. Its $18B in profit on $76B revenue was truly astonishing. Yet, the markets were disappointed. What gives? First, the markets care about growth more than they care about the size of the profits or revenue. If the growth number matches or exceeds the expectations, the stock price responds positively otherwise it moves in the other direction. Second, for the first time since 2003, Apple issued a negative guidance on sales.

The unwritten narrative for Apple’s success has been around the iPhone juggernaut. Now that the high-end market for smartphones is starting to saturate, Apple needs a new narrative that can tie to growth. Apple took a shot at it by releasing some new details around services revenue. In any other company, this would have been received very well. With Apple, expectations of the market are supersized so it is not clear if the pivot towards services will help reshape the basic narrative around Apple’s growth.

Connected Consumer

· On average, each US household spent approximately $3800 on access and devices in 2015.

· Roughly 80% or $3000 of the US household spend went to access of services such as cellular voice, mobile data, cable, landline voice, and broadband internet.

· Roughly 20% or $800 of the US household spend went to devices such as computers, smartphones, feature phones, wearables, tablets, e-readers, connected cars, drones, robots, connected home, and other connected devices.

· 41% of the household access spend went to cellular phones (for voice and data services).

· As a standalone category, mobile data is the biggest category approaching $1000 in yearly household spend.

· In the last 5 years, mobile data spend has risen the most and landline voice has declined the most. Cellular voice spend has also gone down while cable and broadband spend have seen relatively modest uptick.

· In devices, smartphone is by far the biggest spend category. Consumers spend almost 3x on smartphones than they spend on personal computers. Smartphones accounted for more than 50% of the US household connected spend in 2015.

· New categories such as wearables, connected cars, drones/robotics, and connected homes have started to make a tangible impact on consumer spend.

· US consumers spent more on wearables than feature phones in 2015.

· Chetan Sharma Consulting conducted its annual Connected Consumer survey of 1000 US households. The results confirmed the ongoing increase in the number of connected devices/household.

Quad Moves

AT&T is integrating its DirectTV acquisition. Verizon acquired AOL and launched Go90. Similar moves are afoot in Europe and other regions. Regular readers won’t be surprised. Video is a key offering for many service providers and by bundling quad plays, operators can further lower the churn. Content will continue to play a big role in how various offerings get bundled. The traditional cable bundle is being pulled apart in favor of more al carte OTT offerings. Media companies will have to figure out how they play in the new converged world. The ones that have been sitting on the sidelines will have to make some moves in the wireless ecosystem to stay relevant in the long-term.

The Upcoming 5G wars?

5G is gaining steam. All the major players have outline their preliminary plans to do trials on 5G (code word for we don’t want to be perceived as being behind). However, there is some real progress being made in short-range ecosystem of 5G. As I noted, in my MWC note, some of the demos coming out of the labs are exciting. In the US, Verizon’s announcement last year took folks by surprise. By Q1 16, both AT&T and T-Mobile announcement their version of 5G trials. Verizon was out with the first batch of results from its experiments indicating 10Gbps throughput at short-distances. Given the momentum behind cm/mm wave, it is possible that some consensus is built around the spectrum bands by country (and not wait till WRC 19) to get the device ecosystem going.

A lot is still unknown about 5G, specifically, what will be the economics of 5G and the business case for new capex and ROI. We hope to explore this topic in more detail in the coming months.

Our paper on 5G covers the past, present, and future of the network evolution.

What to expect in the coming months?

2015 was a tremendous year for mobile industry thus far as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. The final quarter which is typically the biggest in terms of revenue will lay the foundation for an exciting 2016.

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 2015 and 2015 US wireless market is:

Service Revenues

· The US mobile data services revenues in Q4 2015 increased 3% QoQ and 16% YoY.

· After crossing the $100B in data revenues for two straight years, the US market is set for another excellent mobile data services year though some slowdown has started to occur as predicted by our 4th wave thesis.

· Verizon and AT&T dominated the quarter accounting for 69% of the mobile data services revenue and had 67% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q4 2015. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 2.2%. 

· Data contribution to the overall revenues is now at 72%.

· After a minor blip of positive growth in postpaid ARPU by T-Mobile and AT&T earlier this year, all operators saw declines in postpaid ARPU in Q4 with Sprint showing the sharpest decline with 18% change YoY.

Subscribers

· The US market increased its net-adds to 6.7M. AT&T, Verizon, and T-Mobile all added approx. 2M or more subs. Sprint also showed positive net-adds though at a fraction of the top 3.

· Verizon again led in postpaid net-adds though a bulk of the net-adds are coming from tablets.

· AT&T has approximately 7M connected cars on their network – probably the highest of any mobile operator in the world.

4th Wave Progress

· The number of players making $250M/quarter on mobile continues to increase rapidly and these aren’t your traditional wireless players. For example, Mobile is now contributing 80% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: “Mobile 4th Wave: Evolution of the Next Trillion Dollars”)

· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.

· Verizon reported $200 million revenue from M2M and Telematics. At the current run-rate, this will be a billion dollar business by 2016. The current annualized run rate is $800M.

Connected Devices

· Connected devices (non-phones) accounted for almost 66% of the net-adds in Q4 2015. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 97% of the devices sold in Q4 2015. The feature phone category is practically becoming extinct in the US market.

· The smartphone penetration in the US is now at 83%.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 84M making it the #2 LTE operator behind China Mobile which has more than three times the LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 90% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

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, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in April 2016.

Disclaimer: Some of the companies mentioned in this update are our clients.

Mobile World Congress 2016 Observations February 29, 2016

Posted by chetan in : 4th Wave,5G,ARPU,Chetan Sharma Consulting,Connected Devices,Connected Intelligence Era,Disruption,Enterprise Mobility,LTE,Mobile 2016,Mobile Breakfast Series,Mobile Future Forward,Mobile World Congress,MWC,NFV,SDN,Technology Cycles,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

Mobile World Congress 2016 Observations

The second of grand slams of mobile events – Mobile World Congress has become the marquee events that helps get the pulse of the industry as to where things are headed for the year. With the attendance topping 100K for the first time, it is a massive undertaking and brings all major players in the ecosystem from all corners of the world. Vegas could learn a thing or two from Barcelona on how to host big events. Some of the major themes were predictable like 5G, IoT, and VR. Others were important but not widely talked about in public settings. This note presents the summary of our observations from the show.

5G – 5G entered industry’s consciousness last year and the activity around the globe has just caught fire since then. Each week there is a new trial announced. Last year, there were more questions about 5G than answers. Some of the questions are starting to get answered now and we are getting clarity on others. However, the specification timeline still stays around 2019 with full standard deployments not before 2020. Given the trial activity and the progress in the labs, there is a good possibility, that there might be some consensus on higher frequency use specifications especially around indoor and dense outdoor networks.

I had a chance to visit with a number of CTOs of major players and these guys are not the ones who give into hyperbole. As an engineer, I left the show quite optimistic about the solutions and technologies that will become part of the 5G portfolio.

Verizon was the first one to announce results from some early tests in the field – 10 Gbps for potential fixed wireless deployments. Nokia and DT both showed sub millisecond radio delay which is quite an achievement. Ericsson showed the power of beamforming to gain really high capacity at short distances. 25-30 Gbps was common in most of the lab setups. SDN/NFV will provide the key underpinning to the 5G architecture but it didn’t surface much in the discussions.

Fundamentally, 5G will be driven by economics not just technology. Europe’s quixotic approach to spectrum auction in 2000s led to a decade long stagnation that left Europe behind. To attain leadership in 5G and on the next wave of technology evolution of Connected Intelligence, policy, technology, and strategy have to work hand-in-hand in a country to gain an upper hand. Some of my thoughts mentioned in the Economist and WSJ.

We will be covering 5G and its implications in future papers and at Mobile Future Forward in Sept.

Gigabit Society – While 5G is still a ways off, work goes on the LTE front. Industry hit a major milestone of a 1B LTE subs. Lot of the 5G enhancements will also be available in 4G being termed as 4.5G, Xtreme LTE, pre5G, 5G ready, and really-really advanced LTE. Infact, many of the features talked about in 5G are going to be available in the 4G evolution path. Qualcomm showcased their X16 chipset capable of reaching 1Gbps by combining 10 100Mbps streams.

4th Wave – In 2011, we put forth the 4th wave theory and 5 years later, we are seeing the 4th wave in full effect. As I mentioned to the Economist and the WSJ, the value is moving to the applications and services layer. Operators who will invest to become “solutions providers” will be better positioned for the future vs. the ones who are purely “access providers.” We are seeing the theory play out in front of our eyes. In 2014, US became the first country where the 4th wave revenues were greater than the access revenues. We expect this to occur in every major market over the course of next few years. Operators such as AT&T, Verizon, Telefonica, DoCoMo, KDDI, and Orange are benefiting from becoming solution providers. The new found revenue speaks for itself (more on this next week in our US Market Update for 2015).

Ericsson – Amazon Cloud Deal – Ericsson and Amazon struck a clever cloud deal that helps mobile operators use the AWS framework while creating a framework to be in compliance with the safe harbor provisions of sovereign nations. Win-Win-Win for sure.

The Ad wars – Instead of innovating, the ad industry as a whole took shortcuts and the end result was the bombardment of useless ads with no frequency control. Consumers are responding by embracing ad-blockers. Operators view this trend as an opportunity to stall the OTTs. Some of it is genuine concern for the consumers who get slapped with ads which consume good portion of their data bucket and deteriorate the experience sometimes to a point of making the browsing completely unusable especially when network conditions are less than favorable. Operator 3 in Europe working with startup Shine is taking the stance to block out the ads inviting the scorn of the ad industry and a peek of curiosity from the regulators. It is unlikely to be an effective strategy. However, it clearly is an opportunity for the ad industry to step up and design new frameworks that are consumer friendly. When we wrote the first mobile advertising book at the dawn of the birth of the modern mobile advertising industry, we had proposed several ideas that use the data to enhance the consumer experience and ecosystem strength but we clearly have a lot of work to do.

Verizon XO investment – Verizon’s XO deal of $1.8B didn’t get much attention but it was a brilliant deal appreciated by the folks who really understand what is going on. Verizon gets a fiber network and more important wireless spectrum (28 and 39 GHz) suited for 5G.

Resurrection of RCS – RCS has been a poster child of inability of operators to work together on a global scale w.r.t applications. The growth of IP messaging is well documented. Not only did operators miss out but Google did as well. Now that messaging is emerging as a new potential commerce and engagement platform, this is an attempt by Google to take a shot at the messaging opportunity. A number of things have to go right for this program to work so the probability is stacked against it.

Facebook TIP – Having shaped the IT infrastructure, Facebook is focusing on influencing the telecom infrastructure stack. The focus is going to commoditize the stack and open source it. Some big names are joining the effort like Nokia, Intel, and DT.

Connecting the next billion takes a back seat – Last year, one of the big theme emerging out of MWC was the focus on connecting the next billion. The talk of 5G drowned out any discussion of connecting the unconnected. The show did discuss using balloons, drones, satellites unlicensed spectrum to lower the cost of access. The unintended consequence of FreeBasics ruling might be a dampening effect on experimenting with alternative business models to support low cost access in emerging markets in the short-term.

Net Neutrality – NN has become an emotionally charged debate. Regulators around the world are grappling with how to understand and regulate through the complex prism of the future. Regulators are rushing to issue their rulings based on the world they saw in the past not the society and how it is going to react to applications and services in the future. Participants are getting bolder in their approach and interpretation of Net Neutrality. T-Mobile’s Binge-On is being watched by operators worldwide and the regulators are trying to understand what it means in their local market.

Regulations for the new age – Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 50% of its voice calls are are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.

IoT – IoT use cases are becoming more crisp and clear. There is steady growth in how IoT is getting integrated into both industrial and consumer worlds. As expected there are efforts underway to streamline and unfragment the stack. Intel and Qualcomm got together for the larger good of the industry under the Open Connectivity Foundation. We will be taking a deep dive into the IoT world at our upcoming Mobile Breakfast Series event in Vancouver.

eSIM – eSIM is potentially one of the biggest disruptive force our industry has seen in some time. If you connect the dots into the future, it is becoming clear that there is significant tension along the fault lines. Regulators better get ahead of this wave in time.

VRthe next communication platform – The emerging world of VR/AR is quite exciting. The technology is getting there. One of the key 5G use cases is going to be VR as it will require high capacity delivery of bits to the headset. However, VR sales are not going to go through the roof anytime soon. Some of the same things that plagued Google glasses – price, performance, and dorkiness are going to impact the early days of VR (Google’s VR approach is actually more market friendly at this time) but it is exciting to see tech companies tackle a complex computing problem. I am looking forward to new experiences across different domains.

Security, Privacy, and the clash of the titans – Apple vs. FBI case was on the top of the mind of executives. It wasn’t being discussed openly for obvious reasons but it came up in discussions almost every day. It is a complex issue that has to be looked from the perspective of enforcement in international jurisdictions. Operators have been forced to comply with similar requests for years. It will be an interesting battle, something that every tech company, every govt. around the world is paying close attention to.

Handset launches – Samsung launched S7, LG showed G5, Xiaomi announced Mi5, Huawei had its MateBook which probably was the sleekest device at MWC this year. Overall, only incremental improvements while the industry awaits new ideas to surface.

Disruption from 3.5 GHz – When I talked to the White House last year about 5G, I focused on stressing that Bits/s/Hz/Km2/joule/$ will be a key 5G performance consideration. FCC has done well by making the 3.5 Ghz available to the industry. Given that 70-80% of data consumption is indoors, unlicensed WiFi+LTE can be used to provide a much better economics esp. for enterprise customers. Players of various stripes are taking a serious look at it – Ericsson, Lemko, Google, Nokia, and others. Expect more news to come during the first half of the year.

Sigfox/Lora vs. NB-LTE – Sigfox/Lora remind me of WiMax. WiMax is remembered for its role in accelerating LTE deployments. While Sigfox/Lora started the process of creating a network and business model suited for IoT, it forced the 3GPP members to come up with NB-LTE (in a hurry) and with the growing support of the ecosystem behind it, it is hard to see how in the long-run a non-standard approach can win out.

Wearables – It seemed like the hype around consumer wearables has died down at MWC this year. No new concepts. Industry has to get the basics right first. However, there is good progress on the enterprise front where the use cases and requirements are clear. There are a number of companies who are working to make wearables/VR/AR a reality in the enterprise space.

Misc – Selfie security (Mastercard), Gesture user interfaces, Stripe’s Atlas platform, Mobile Connect (2B enabled consumers), AT&T $10B investment to expand globally, Paypal loves NFC after all, Smart Cities, Mobile Commerce initiatives, Media and Telco convergence, Operator data monetization, Alternate connectivity solutions (drones, balloons, lasers, etc.), Digital divide, 1B LTE subs.

Booth of the year: Ericsson by a distance

Party of the year: Siris Capital, Qualcomm

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, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in March 2016.

Disclaimer: Some of the companies mentioned in this update are our clients.

CES 2016 roundup January 11, 2016

Posted by chetan in : 4th Wave,5G,CES,Chetan Sharma Consulting,Connected Intelligence Era,Internet of Things,IoE,IoT,Mobile 2016,The Golden Age of Mobile,Worldwide Wireless Market , add a comment

CES 2016 roundup

As has been the tradition for the last few years, Cool Toys Association kicked started the year with its annual gadget fest. Ever since the iPhone launch, the industry keeps waiting for a company riding on a unicorn coming from the heavens to surprise us with a technology that we haven’t considered before. However, the romantic notion of someone taking our breath away invariably leaves many disappointed as we get relegated to the incremental improvements of the future. However, CES remains the premier show to lay the foundations of the discussions and debates for the year. Most of the products launched and showcased at the event don’t make it past the show floor but an incredible diversity of devices, applications, services, players, and ideas is on display. Additionally, the deals that are struck away from the limelight makes it one of the most important shows in the tech space.

As usual, I kick-started my CES with the AT&T Dev Summit which provides a good barometer of the initiatives for the year in the operator ecosystem. I also had an opportunity to participate on the WSJ’s panel on innovation to talk about broad industry trends that last beyond 2016. This note provides a summary of our observations from the show.

The Numbers: CTA forecasts the US spending on gadgets to increase 1.6% to $224 Billion in 2016 with smartphones accounting for quarter of that spending. Wearables, drones, robots, and some of the non-traditional devices are starting to appear on the spreadsheet now. As we mentioned in our Connected Consumer Research last year, the spending habits of US consumers are changing. Bulk of spending is still on services like data, internet, and cable with mobile data capturing the most share of the household IT budget.

The march towards Autonomous Intelligence: Each year, we are making incremental progress towards to what seems today a utopian autonomous intelligence state where computers observe anomalies and problems and just fix and address them without human intervention. We have written about this at length in our Connected Intelligence series of papers and will continue to explore the subject in more papers this year. The inevitable emergence of trusted data brokers that help us tie disparate data sources, products, services will be a key development in the coming years.

The current incumbents have a big leg up. In my mind, Google has by far the best machine learning engine. You get a sense of the power of Google’s AI when you travel in remote parts of the world and get a highly accurate representation of human movement – in real-time. It is stunning. Google has better understanding of what’s happening on the ground than any other entity or government in the world.

Facebook has the best repository of emotion movement though the AI engine needs work. Similarly, Amazon knows more about commerce movement than any other player. A number of their products are launched because of this key insight. Apple obviously has good understanding of what their iOS base is doing and while it is smaller than any of the three players mentioned above in their respective areas, in aggregate, it has a potent repository of human behavior and movement. Some mobile operators have technology that can give them insights into some of these trends but their subscriber base is limited and unless they expand beyond their traditional base, they will always be at a disadvantage vis-à-vis the Internet giants.

Intel again gave an excellent keynote of the computing capabilities that are going to enable new interfaces, experiences, devices, and applications. When will computing sense what I am thinking?

Self-driving cars – The biggest headlines at CES this year was for self-driving cars. CES looked like an auto-show. Tesla and Google have forced auto OEMs to dust off their self-driving plans and accelerate their public unveiling because that’s what the cool kids are doing. The notion of self-driving cars has gone from a geek fantasy just a few years ago to the reality on the ground at breathtaking speed. Competition does wonders to the innovation process. The tech to safely deliver a self-driving car is already here. Social-acceptance and regulatory issues will likely to delay the full-blown introduction for sometime.

However, a more interesting development is the marrying of a self-driving fleet with the Uber service model. That’s where a lot of disruption is going to take place. GM’s monstrous $500M investment in Lyft is a defensive bet in that future. Don’t be surprised by some interesting M&A activity in the sector. As, hardware gives way to software domination, new models and players will shift the industry marketecture.

Lot of media companies are busy figuring out how to entertain the consumer with all the new time that will become available in the self-driving cars.

IoT – IoT was a big headline last year, 2016 was just the continuation of what we saw in 2015. Pretty much anything imaginable was connected. Chipset guys are going to stay employed for sometime. The challenge for many new players is still going to be the distribution. Most of the money today is flowing to the system integrators and they can play the role of the segment godfathers of IoT if they play their cards right. Platforms are yet to consolidate around a few accepted technologies and players so we will continue to see the fragmentation and jostling for advantage this year.

Robots – Softbank’s Pepper again stole the show by displaying its humane side. Robots for elderly, kids, and the lonely will become mainstream.

Drones – The drone ecosystem seems to be growing as fast as the self-driving cars (obviously massively different price points). Regulators are more active in understanding what’s going on and how to provide a shape passage to innovation in the space. There are some really interesting use cases both in the consumer and the enterprise space.

Netflix moves – You know what is better than US media domination? Global media domination. Netflix launched its services to pretty much the entire world minus China which remains a closed market for most western services.

3D printing – 3D Printing. Yup, Check!

Connected Home – Connected home has disappointed so far. The pricing is still too high for mainstream adoption and products lack imagination. However, some startups are coming up with both new products that are built from the ground up as well as service models that will get traction. 2016 will continue to be the year of experimentation in the space.

Connected Devices. Unconnected Data – Current set of connected devices are primarily focused on sucking up the data but there hasn’t been much work on connecting the data across devices. If you own an Apple Watch and an iPhone and were having a stroke, Apple watch will duly note that your vitals are deteriorating fast but it will just sit on that data and pray that someone finds you to help out. It has access to a communication tool that could be used to seek immediate help via a call or text but it doesn’t. Data stays unconnected and as such useless in real-life situations. We need more work on the intelligence layer that connects the data and makes it useful. This can be applied to connected devices at home, car, office, city, and pretty much any set of devices and sensors around us.

Smart City – Smart City initiatives are starting to take hold. From governments to industrial players to mobile operator ecosystem, everyone wants a piece of it. Probably, the biggest announcement in the space was from AT&T which is putting together a coalition of the willing to explore the scalable framework for a smart city. Atlanta, Chicago, and Dallas get the first nod. The biggest problem with Smart City is not the tech which is available for most part but the funding and execution. With a majority of the cities in the US in the bankruptcy zone, money is hard to come by. Even if did, cities are notorious for lousy execution and waste of resources. Hopefully, being led by some of the industry players will provide the necessary guidance and new business models to bring many of the big cities into the 21st century. Dubai, Helsinki, Seoul, and Oslo might provide a better inspiration of how to go about making your cities smart. Who wants to live in a dumb city anyway?

Virtual Reality – VR is going mainstream. Will it become the OS for new experiences? By when? What will be the applications and services? Vertical segments? Lot of open questions but we are slowly starting to answer them. Facebook launched its much awaited Oculus, HTC had its Vive and a score of new players emerged on the VR landscape.

IP dilemmas – The federal agents swooped into the CES show floor and took evidence from the booth of Hangzhou First International Trade (maker of the wheeled skateboard) – something that doesn’t happen that often. The pace of introduction of digital products is accelerating at such a pace that it is extremely difficult to protect your IP specially for smaller innovative players. The copycat ecosystem comes so fast that before you know it, you are history. IP tussles used to be the domain of the industry giants but smaller innovators are now getting impacted. The sheer volume of products that use your IP will overwhelm you. But, CES gives a good window into the haves and the have-nots. The federal agencies have their work cut for now.

Samsung – Samsung has studied the history of the mobile industry well. That’s why it is nervous. The fact that they are struggling to maintain their top spot is not surprising, it was expected. in fact, the entire trajectory was very easy to predict. What’s astonishing is that, even after being at the center of the digital explosion with hands into virtually every segment, it hasn’t been able to launch an integrated product strategy. It should have been a leader in IoT but is not. It should have used TV as the home hub to connect everything digital in the house but it hasn’t. it should have led the industry in standards and best practices but it seems confused of its role in the larger ecosystem. In the meantime, Google, Apple, and others are doing circles around them. With a new management team in place, a renewed focus on software, will 2016 be different?

Security & Privacy – Almost every major discussion thread had an underlying question around security and privacy and what can and is being done about it.

Auction – FCC is pretty jazzed about the upcoming spectrum auction. It will be fascinating indeed.

The foldable screen – we have waited for a computing screen that can fold like a newspaper for over 15 years. I first wrote about it in my Wireless Internet book in 2000. We might be still a few years away from full commercialization. Sometimes, these things just take time. A flexible screen could lead to breaking of the rectangular screen mold that is starting to get boring. Full marks to LG for bringing the screen to the market.

Vaporware – There was plenty of hand waving. Some managed to fool the press into feeding into the frenzy like Faraday Future (apparent competitor to Tesla), Ehang flying cars.

Uber in Vegas – Every year, CES attendees to the torture of the Vegas taxis and the highly inefficient system of transportation. For the first time, Uber and Lyft were in action and it definitely help at times. The taxi cabal hates the entry of the new brethren in the market but will learn to live with it.

Next stop, DLD Munich.

Have a great 2016.

Best wishes