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The History and the Future of Connected Intelligence September 2, 2015

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, Connected Devices, Connected Intelligence Era, Internet of Things, IoE, IoT, Mobile Future, Mobile Future Forward , add a comment

The History and the Future of Connected Intelligence

A Mobile Future Forward Research Paper

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

Last year we introduced the concept of “Connected Intelligence” and how it is going to shape the next era of computing, communications, and technology. While to some this might seem as something new, folks who have been tinkering on the edges know that this evolution has taken place over more than 200 years. The concept of connectivity and intelligence have been around for decades. Early form of communication between two end points has existed since early 1800s. In fact, intelligence organizations in military and espionage have been using the basic techniques for the last two centuries. Even the industrial folks recognized the need for end-point sensors to communicate data of “things” that are outside the constant purview of humans.

The oil and gas industry has been using basic telemetry for almost half a century. The history of connected intelligence is very long. The present day evolution is the culmination of the several trends of the last two centuries. From the early days of telemetry to significant developments in machine to machine to connecting objects to the internet via Internet of Things have played a critical role in this journey. Along the same lines, the telegraphy, the phone, and the cellular industry have over the same time period changed how bits are transferred from point A to point B. To appreciate where we are going, we need to marvel at the historical achievements of the pioneers of past. In this paper, we will take a look at how the notion of connected intelligence has evolved over the last two centuries and where do we go from here.

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Your feedback is always welcome.

Chetan Sharma

We will be taking a deep dive into the Connected Intelligence Ecosystem and Opportunities in our upcoming summit Mobile Future Forward on Sept 29th.

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 Nov 2015.

Mobile Future Forward: Reimagine Everything August 28, 2015

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

Mobile Future Forward means business. We got so many deals done that it is a no brainer to attend again this year – CEO and founder, Mobile Startup

Mobile Future Forward connects a lot of high-level people with very progressive thinking and it is at the cutting edge of how technology is absorbed – MD, Leading Private Equity Firm

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

Dear Friends,

Here is a pop quiz to end the week.

When was the first instance of what is today known as IoT recorded?

a) 1991

b) 1980

c) 1812

d) 1836

e) 1901

f) 1930

g) 1958

Each year represents a milestone in the history of Connected Intelligence. The advent of telegraph, radar, telephone, wireless paved the way for 200 years of innovation evolution. Inventors such as Schilling, Gauss, Weber, Morse, Bell, Bose, Marconi, Ericsson, Galvin, Cooper (as you know Marty is joining us at MFF this year), and scores of other extraordinary individuals saw what others couldn’t and changed the trajectory of human civilization. However, the first instance of connected things took place before any of these remarkable individuals came to the scene.

The correct answer is 1812.

If you picked the right answer, you just won an automatic entry into the CI Historian Hall of Fame.

The first use of data transmission was recorded by P.L. Shilling who reported that the Russians telemetered the successful firing of remotely activated mines to stem the French invaders during the war of 1812. After that the notion of connected devices was used quite extensively in wars, weather reports, space exploration, transportation, medicine, entertainment, and the like. The taxonomy changed as different breakthroughs were incorporated into connected devices. From Telemetering, we went to Telemetry to M2M to now IoT. This has set us up nicely for a an explosive “Connected Intelligence” age to reimagine everything, each minute task, every revenue flow, every industry. We will explore “The History and the Future of Connected Intelligence” in the Mobile Future Forward 2015 paper that comes out next week.

In the meantime, we are busy preparing for the summit in four weeks and we have some brilliant minds that will test your thinking and grow your appetite for more.

Registration (First Come, First Served)

Additionally, here are some of the highlights of what we will be discussing during our annual brainstorm:

Connected Intelligence and the evolution of media consumption

Media remains a core part of our society. The entertainment, education, sports, drama, movies, and news events keep us captivated but how does the media creation, delivery, and engagement evolve with the new set of tools.

· Robert Gelick, SVP and GM – Digital, CBSInteractive

· Sanjay Macwan, SVP and CTO of NBCUniversal Media Labs

Disruption is my middle name

Every company present at Mobile Future Forward is disrupting the markets in their own ways, some more fundamentally than others, some more dramatically than others. We will look at the disruption of traditional industries and creation of new ones.

· Sunil Daluvoy, Head of Business Development, Uber Everything

· Dr. João Barros, Founder & CEO, Veniam

· Ralph Derrickson, President and CEO, Carena

5G and the Future of the Network

The 5G discussion is gaining significant momentum at all levels. We will have folks who understand the technology, the standards, and the economics better than most.

· Hossein Moiin, EVP and CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

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

· Bob Azzi, Executive Managing Partner, Argylegriffin

Leading the Connected Intelligence Era

At AT&T, Glenn Lurie saw the emergence of the 4th wave before many of his peers (some still don’t see it). Under his stewardship, AT&T has become a trusted partner and leader in many of the emerging areas such as connected car, enterprise services, IoT, digital home, etc. We will explore the opportunities, the learnings and what does it take to prepare a big company for the Connected Intelligence Era.

Connected CIOs

CIOs play a critical role in keeping their company ahead of the curve in terms of tools and technology. We will have CIOs from different industries address the challenges and the solutions needed to prepare the enterprise for the connected age.

· Dr. Tony Yen, MD, CMIO, EvergreenHealth

· Julie Woods-Moss, CEO, Tata Communications NextGen Business

· Mark Showers, CIO and EVP, Reinsurance Group of America

· Mark Fernandes, Managing Director, Sierra Ventures

Incredible India

India’s tech sector is on fire. It is the fastest growing economy with many terrific unicorns driving excitement and real revenue. We will have the top two companies who will educate us on what’s working in mcommerce in India and why.

· Anand Chandrasekaran, Chief Product Officer, Snapdeal

· Vijay Shekhar Sharma, Founder and CEO, Paytm

Convergence of industries, platforms, and opportunities

The IT and Telecom industries have collided and no one understands this better than Oracle as they work with all of the top 100 IT and Telecom clients around the globe. Hear from the executive who runs the global communications business on what’s changing in the enterprise and the wireless world and why.

· Doug Suriano, SVP and GM, Oracle Communications

Funding the next unicorn in the Connected Intelligence Era

It requires a different kind of mindset to invest in the next unicorn that can reshape an industry or the ecosystem. Meet the VCs who have a keen eye on finding such companies

· Tim Chang, Managing Partner, Mayfield

· Lo Toney, Partner – Catalyst Fund, Comcast Ventures

· Bubba Murarka, Partner, DFJ

· Colin Greenspon, Managing Director, Mithril

We will have discussion around Man and Machine, Industrial IoT, Building blocks of Connected Intelligence, New Platforms and Tools, Security, Robotics, Vertical Industries, and a ton more. We will have startups that will blow your mind, projects from the giants that will surprise you, and technology break-throughs that will inspire you.

What will be the $ flows, where are the early opportunities and successes, what are the use cases? We will tackle them all at Mobile Future Forward on Sept 29th. We welcome you to join us in the discussions and contribute to the collective knowledge of our industry. Give us your one day, and we will give you the next 5 years in mobile.

A number of key industry partnerships and relationships are formed at Mobile Future Forward. Make sure you are not left behind.

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

· Glenn Lurie, President & CEO, AT&T Mobility

· Dr. Eric Topol, Chief Academic Officer, Scripps Health

· Rima Qureshi, Chief Strategy Officer, Ericsson

· Hank Skorny, SVP – IoT, Neustar

· Raja Rajamannar, CMO, Mastercard

· Sanjiv Ahuja, Chairman, Tillman Global Holdings

· Hossein Moiin, CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

· Josh Will, SVP – Mobile, Best Buy

· Tim Chang, Managing Partner, Mayfield

· Prof. Shyam Gollakota, University of Washington

· Mark Fernandes, Managing Director, Sierra Ventures

· Mark Showers, CIO and EVP, Reinsurance Group of America

· Doug Suriano, SVP and GM, Oracle Communications

· Vishal Gupta, Chief Products and IoT Officer, Silent Circle

· Marty Cooper, Chairman, Dyna

· Vijay Shekhar Sharma, Founder and CEO, Paytm

· Julie Woods-Moss, CMO, CEO – Nextgen Business, Tata Communications

· Andrew Hopkins, Managing Director – IoT, Accenture

· Lo Toney, Partner – Catalyst Fund, Comcast Ventures

· Robert Gelick, SVP and GM – Digital, CBSInteractive

· Bob Azzi, Executive Managing Partner, Argylegriffin

· Anand Chandrasekaran, Chief Product Officer, Snapdeal

· Dr. Tony Yen, MD, CMIO, EvergreenHealth

· Sunil Daluvoy, Head of Business Development, Uber Everything

· Dr. João Barros, Founder & CEO, Veniam

· Sanjay Macwan, SVP and CTO of NBCUniversal Media Labs

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

· Bubba Murarka, Partner, DFJ

· Colin Greenspon, Managing Director, Mithril

· Kelly Fitzsimmons, CEO and Founder, Harqen

· Sam Shawki, CEO and Founder, MagicCube

· Ralph Derrickson, President and CEO, Carena

.. more to come

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

Thanks.

Chetan Sharma

Mobile Future Forward: Uber, CBS, NBC, Veniam join the program August 14, 2015

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, Connected Intelligence Era, Mobile Future Forward , add a comment

Mobile Future Forward means business. We got so many deals done that it is a no brainer to attend again this year – CEO and founder, Mobile Startup

Mobile Future Forward connects a lot of high-level people with very progressive thinking and it is at the cutting edge of how technology is absorbed – MD, Leading Private Equity Firm

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

Dear Friends,

One of the trends I have talked about is the impact of connected intelligence ecosystem on other industries. As we mentioned in our research earlier this year, US became the first country in 2014 when the 4th wave revenues eclipsed the access revenues. The universe on top of the IP layer is expanding faster than ever. We will go deeper into this facet of global growth using specific industry examples. Transportation is one of the categories that has captured the imagination of the ecosystem worldwide. Uber has become synonymous with disruption. The promise of connected cars, autonomous vehicles, and the media consumption when we will have all this time is not science fiction anymore but a tantalizing reality of the near future.

The Media landscape is changing right before our eyes. Consumption is up, distribution is changing, consumer expectations have diversified. Billions of dollars are at stake.

We have some exceptional speakers to help us think through the changes that are upon us:

Robert Gelick, SVP and GM of Digital Platforms at CBS Interactive is tasked with building CBS Interactive Entertainment experiences across multiple platforms.

Sanjay Macwan, SVP and CTO of NBCUniversal Media Labs is looking at advanced technologies that will shape our media experiences.

Sunil Daluvoy, Head of Business Development for Uber Everything is a Google veteran who has worked on new products such as Google Fiber, Wallet, and Adsense.

Dr. João Barros, Founder & CEO, Veniam is a professor in Portugal and a global entrepreneur who is building the networking fabric for the Internet of Moving Things. Extremely fascinating results. This company is going places.

Registration (4th Wave Saver expires next week)

Additionally, here are some of the highlights of what we will be discussing during our annual brainstorm:

5G and the Future of the Network

The 5G discussion is gaining significant momentum at all levels. We will have folks who understand the technology, the standards, and the economics better than most.

· Hossein Moiin, EVP and CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

· Bob Azzi, Executive Managing Partner, Argylegriffin

Leading the Connected Intelligence Era

At AT&T, Glenn Lurie saw the emergence of the 4th wave before many of his peers (some still don’t see it). Under his stewardship, AT&T has become a trusted partner and leader in many of the emerging areas such as connected car, enterprise services, IoT, digital home, etc. We will explore the opportunities, the learnings and what does it take to prepare a big company for the Connected Intelligence Era.

Connected CIOs

CIOs play a critical role in keeping their company ahead of the curve in terms of tools and technology. We will have CIOs from different industries address the challenges and the solutions needed to prepare the enterprise for the connected age.

· Dr. Tony Yen, MD, CMIO, EvergreenHealth

· Erez Yarkoni, CIO and EVP, Telstra

· Mark Showers, CIO and EVP, Reinsurance Group of America

· Mark Fernandes, Managing Director, Sierra Ventures

Incredible India

India’s tech sector is on fire. It is the fastest growing economy with many terrific unicorns driving excitement and real revenue. We will have the top two companies who will educate us on what’s working in mcommerce in India and why.

· Anand Chandrasekaran, Chief Product Officer, Snapdeal

· Vijay Shekhar Sharma, Founder and CEO, Paytm

Convergence of industries, platforms, and opportunities

The IT and Telecom industries have collided and no one understands this better than Oracle as they work with all of the top 100 IT and Telecom clients around the globe. Hear from the executive who runs the global communications business on what’s changing in the enterprise and the wireless world and why.

· Doug Suriano, SVP and GM, Oracle Communications

We will have discussion around Man and Machine, Industrial IoT, Building blocks of Connected Intelligence, New Platforms and Tools, Security, Robotics, Vertical Industries, and a ton more. We will have startups that will blow your mind, projects from the giants that will surprise you, and technology break-throughs that will inspire you.

What will be the $ flows, where are the early opportunities and successes, what are the use cases? We will tackle them all at Mobile Future Forward on Sept 29th. We welcome you to join us in the discussions and contribute to the collective knowledge of our industry. Give us your one day, and we will give you the next 5 years in mobile.

A number of key industry partnerships and relationships are formed at Mobile Future Forward. Make sure you are not left behind.

We are excited to partner with the industry leaders and thank them for their ongoing support: EricssonNeustar, Oracle Communications, and Tata Communications.

· Glenn Lurie, President & CEO, AT&T Mobility

· Dr. Eric Topol, Chief Academic Officer, Scripps Health

· Rima Qureshi, Chief Strategy Officer, Ericsson

· Hank Skorny, SVP – IoT, Neustar

· Raja Rajamannar, CMO, Mastercard

· Sanjiv Ahuja, Chairman, Tillman Global Holdings

· Hossein Moiin, CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

· Josh Will, SVP – Mobile, Best Buy

· Tim Chang, Managing Partner, Mayfield

· Prof. Shyam Gollakota, University of Washington

· Mark Fernandes, Managing Director, Sierra Ventures

· Erez Yarkoni, CIO and EVP, Telstra

· Mark Showers, CIO and EVP, Reinsurance Group of America

· Doug Suriano, SVP and GM, Oracle Communications

· Vishal Gupta, Chief Products and IoT Officer, Silent Circle

· Marty Cooper, Chairman, Dyna

· Vijay Shekhar Sharma, Founder and CEO, Paytm

· Julie Woods-Moss, CMO, CEO – Nextgen Business, Tata Communications

· Andrew Hopkins, Managing Director – IoT, Accenture

· Lo Toney, Partner – Catalyst Fund, Comcast Ventures

· Robert Gelick, SVP and GM – Digital, CBSInteractive

· Bob Azzi, Executive Managing Partner, Argylegriffin

· Anand Chandrasekaran, Chief Product Officer, Snapdeal

· Dr. Tony Yen, MD, CMIO, EvergreenHealth

· Sunil Daluvoy, Head of Business Development, Uber Everything

· Dr. João Barros, Founder & CEO, Veniam

· Sanjay Macwan, SVP and CTO of NBCUniversal Media Labs

.. more to come

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

Thanks.

Chetan Sharma

US Mobile Market Update - Q2 2015 August 12, 2015

Posted by chetan in : 4G, 4th Wave, 5G, AORTA, Connected Intelligence Era, Emerging Markets, Fourth Wave, The Golden Age of Mobile , add a comment

US Mobile Market Update - Q2 2015

http://www.chetansharma.com/usmarketupdateq22015.htm

Summary

The US mobile data market grew by 3% QoQ and 14% YoY. The overall services revenue declined again by 1%. The device revenue increased by 21% which helped the overall revenue to grow by 3%.

The biggest news of the quarter was as we had suggested last year - T-Mobile finally going past Sprint to become #3 for the first time. TMO continues to add the bulk of postpaid phone subs and it helped the company reverse the declining postpaid ARPU trend that had been so prevalent for the last three years. AT&T’s postpaid ARPU also stabilized

All four operators delivered historic low churn rates and are running much tighter operations. Net income improved 11% YoY.

After seeing steep declines in 2014, the mobile data pricing has started to inch up in 1H 2015. The emphasis of unlimited is paving way for shared data plans and the data buckets per account keep on inching up. In fact, many low-to-mid tiers have seen a price increase. Some of the upper enterprise tiers have seen the prices double. This bodes well for the margins and revenue in 2H 2015.

Smartphone penetration increased to 78% and roughly 95% of the devices sold now are smartphones. The smartphone penetration amongst postpaid users is now 84%.

The iPhone again dominated with 75% of the smartphone profits. While the Android profits improved 41% QoQ, the smartphone business remains a challenge for a number of Android OEMs.

As we have suggested for the last couple of years, Microsoft finally got rid of Nokia and is focusing its energy on software and services.

4th wave services continue to grow at a very past face around the globe. IoT as a category is also making steady progress with a number of players reporting multi-million dollar revenue quarters most notably Intel with over a billion dollars in revenue in the first six months. Fitbit reported $736M in 1H with a whopping 49% margin.

T-Mobile Ascension to #3 – a historical perspective

One year ago, we suggested that T-Mobile is likely to become the #3 operator in early 2015. Given the current trends, the T-Mobile’s ascension to the #3 spot was rather anticlimactic.

In the service provider land, switching rank based on organic growth is rare. Most of the times, the rank switches because of M&A. This has been true for most part for US mobile operators over the last 30+ years. The top two positions in the last 20 years have been held by AT&T and Verizon who have taken turns to hold the #1 spot. The #3 and #4 rankings haven’t changed since 2004. In fact, when Sprint acquired Nextel, T-Mobile had less than half the customers of Sprint Nextel. However, aided by the Metro PCS acquisition, while Sprint added only 13M subs in 11 years, T-Mobile added more than 3x – 37M. Nextel proved to be a really bad operator acquisition – the company is still reeling from that decision.

At the time of the Nextel acquisition, T-Mobile’s share of the market was roughly 10%. By the end of 2015, T-Mobile’s share will increase to almost 17%. During the same 10 year period, Sprint’s share has declined from 23% to 16%. Verizon and AT&T controlled 51% of the market in 2005. Now that share stands at 68%. Rest of the market has virtually dissipated in light of the fierce competition.

US mobile operator consolidation – what’s next?

Like any other market and like what you would expect in a maturing industry, the US mobile operator segment has consolidated in predictable ways. 20 years ago, AT&T fresh from its McCaw Cellular acquisition led the market with 3.95M subs at 14.5% share. Today, it still leads the market with 124M subs at 34% share. In the last 20 years, the market has whittled down to four national players. As we discussed back in our 2011 paper, in every market, the competitive and regulatory forces narrows down the field to 3 players. The top 3 players controlled 40% of the market in 1995. With T-Mobile ascending to #3, by the end of 2015, the top 3 will have almost 90% of the market. This is no different than other major mobile markets. Barring India (which will follow this trend soon as well), each market either by design or by market forces has consolidated to three major players.

The US regulators have resisted the trend and it has worked out better for the consumers as competition has led to better deals and non-stop new offers. However, as we suggested in our paper, market forces are often more powerful than the regulatory ideology. In the last two years, since the Softbank acquisition, T-Mobile’s marketcap has doubled while Sprint’s has been cut down into half. T-Mobile is only slighty ahead in the subscriber count but in terms of marketcap, it is 2.5x more valuable than Sprint. Instead of being the hunted, it has become the hunter. On the other hand, without a substantial infusion of external investment, it will be a challenging few quarters for Sprint.

Given that there are only a few legit big suitors left for T-Mobile or Sprint, the market is waiting for a major acquisition to happen in the next 12-18 months.

US Service Revenues: Turnaround?

In 2014, data pricing came down by 77% to historic lows. However, in the first half of 2015, price/GB hasn’t really come down any further than the lowest levels seen in 2014. In fact, some categories even saw a jump as some of the promotions went away. It is also notable that both T-Mobile and Sprint are de-emphasizing (though the plans are still available) unlimited data plans and instead they are promoting their shared bucket data plans. This is good for profitability.

Though Sprint saw its position slip, the churn number looked much better than past quarters. AT&T and Verizon have managed their respective companies to historic low churn numbers. T-Mobile has literally cut down its churn rate by 50% over the last three years.

The fierce competition has put pressure on the service revenues which declined (YoY) for the first time in the history of the industry in Q1 2015 by 2%. In Q2 2015, the service revenues still declined by 1% but there are some early signs of stabilization.

T-Mobile’s postpaid ARPU which has been in decline for three years increased QoQ (YoY it still declined). For AT&T, the postpaid ARPU stayed flat. For Verizon and Sprint, the postpaid ARPU declined but by less amount than it did in Q1.

The industry also delivered better EBITDA and Net Income numbers which shows the operators are running a tighter operation compared to last year.

One data point doesn’t make a trend and we need to study the numbers of the next two quarters, if the industry has stemmed the decline or it was just a blip.

Microsoft’s turbulent history with mobile

In 2001, of all the major computing brands, Microsoft probably had the clearest view of the things to come in mobile. It was working with several leading players in Japan where imode was taking the country (and the world) by storm. It did make incremental progress with Windows CE but never really embraced mobile as a strategic pillar of growth until Satya became the CEO. However, his first task was to undo the mistakes of the previous administration and he had no choice but to untangle Microsoft from the Nokia deal. It has just taken this amount of time to write-off one of the biggest corporate mistakes in the industry.

As we have been saying for the last couple of years, Microsoft should abandon the strategy to fight Apple on Apple’s turf and instead focus on services and the cloud where it has historically been more agile. However, ceding the platform has its repercussions and it is not clear how far the current strategy will take the company. Microsoft is focusing early on IoT so as to not miss the next big wave but it seems like the strategic architecture to attack the market remains old school.

Nokia – final nail in the coffin and quickest destruction of a loved consumer brand

Nokia’s decision to pursue Windows OS will go down in the industry history as the biggest blunder of all times. By putting all eggs in one broken immature basket, Nokia’s fate was sealed from day one. Barring any strategic brilliant maneuvers from Microsoft, the seeds of demise of a fabled brand were sown, the writing was on the wall. The company’s board had made poor decision to let things go out of control. In its heydays, Nokia’s marketcap was almost $250 billion - many times that of Apple. With the launch of the history-shattering device in 2007, Apple laid the foundations of irrational behavior amongst its competitors. Nokia’s board did an extremely poor job of navigating the company out of turbulent waters. There was no strategy, no plan, just a misguided Hail Mary pass. More than the burning platform, the decision to switch to windows set forth in motion an inextricable trajectory into an inferno. Will the phoenix rise from the ashes in 2016 remains to be seen.

The verdict on Apple Watch

Quarterly sales of 2.5M units with almost a billion dollars on debut would have been hailed by the press and critics alike. But given that it was Apple’s name behind the watch, expectations were lofty and it led many to prejudge the platform and its future. People often forget what the first version of iPhone or even iPad felt like. While there are a number of issues with the Apple watch, it is just too soon to have a final say on the platform. While the potential marketsize is every wrist on the planet, the overall size just by definition will be smaller than the smartphone base. As developers learn to understand how to use the dual screens of watch and phone, as they master the different language of vibrations, taps, heartbeats, and notifications, as they connect the signals of health to the dots of care, we will see if the platform can deliver on its promise.

Android vs. iOS: The fight for profit continues

HTC’s losses from Android operation were really bad. LG barely eked out a profit from its quarter. Apple accounted for 75% of the industry profits in Q2 2015 down from Q1 but up 13% YoY. Samsung better than last quarter but is nowhere near the peak it hit two years ago. Overall, the revenue for the Android ecosystem declined 5% QoQ while the profits increased 41%.

4th Wave/IoT Revenues

Qualcomm reported $1B in IoT revenues (chips used in city infrastructure projects, home appliances, cars, and wearables) in 2014. Intel is on track to exceed $2B in IoT revenue this year. Fitbit is likely to eclipse $1.5B in revenue with an astonishing 48-50% margin. AT&T’s IoT business is over a billion dollars. Verizon’s annual run rate is over $650M now. Google is approaching half a billion in IoT revenues. There are numerous other players who are doing sizable IoT revenues. We haven’t even gotten to the Industrial part yet where the savings and earnings are into billions (we will cover them in a future paper).

In other 4th wave segments, 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 76% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 88% in mobile (of the total advertising revenue) up from 60% in 2013.

Alphabetizing Corporations

In the late breaking news, Google restructured the businesses under Alphabet. I have been thinking about this from the 4th wave point of view. Various business are quasi-conglomerates of many multi-million and even multi-billion dollar businesses. In fact, we wrote about it in May – Unicorns at incumbents. Mobile operators should think their various businesses as building blocks that can be under a holding company. For example, at some point access can be a separate company just focused on operating the pipes while the content company is focused on creating the best content for various distribution channels. Connected car is easily a separate business, so is Industrial IoT which can be further broken by verticals etc. This might give a better yield and return to the shareholder rather than holding them under the core entity.

Connected Consumer

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

· Roughly 80% or $3000 of the US household spend will go 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 will go 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 will go 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, smartphones is by far the biggest spend category. Consumers spend almost 3x on smartphones than they spend on personal computers. Smartphones will account 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 will spend 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.

· The number of connected devices per US household is now 5.3 with over 37% of the households in the 4-8 range.

· Almost 6% of the households have 15 or more connected devices.

· More details are available at: http://chetansharma.com/connectedconsumer15.htm

Quad Moves

AT&T closed its DirectTV acquisition. Verizon acquired AOL. 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?

I started my career when 1G was all the rage. My first 4G project was back in 2002. By some measures, we are already behind on the 5G discussions. In general, it takes 7-10 years before the standards are finalized and then the network technology lasts for approximately 20 years before a market moves onto the next generation of technology. US led in the growth of 1G (AMPS, TACS) followed by Europe on 2G (GSM, CDMA). Japan took the leadership role with 3G (WCDMA, EVDO) and US wrestled it back on 4G (LTE). Japan and EU are determined to lead on 5G and have been making very public statements and R&D investments about their ambitions on 5G. Japan of course has a very clear goal of having 5G by Tokyo Olympics in 2020. Am sure some operator(s) somewhere will jump the gun and start calling LTE-A+ as 5G around 2017-18 or sooner. You can expect a lot of activities both in public and private on 5G as companies and governments try to figure out a way to claim the 5G leadership mantle.

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

What to expect in the coming months?

1H 2015 was a tremendous year for the mobile as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. 2H promises to be an exciting for the industry as well.

As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.

Against this backdrop, the analysis of the Q2 2015 US wireless market is:

Service Revenues

· The US mobile data services revenues in Q2 2015 increased 3% QoQ and 16% YoY.

· After crossing the $100B in data revenues last year, the US market is set for explosive growth and is likely to cross $130B in data revenues in 2015.

· Verizon and AT&T dominated the quarter accounting for 70% 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 Q2 2015. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 1%.

· Data contribution to the overall revenues is now at 65%.

· The postpaid ARPU increased for T-Mobile for the first time in 3 years. AT&T’s stemmed the decline of the last two quarters while others continued to see the pressure on postpaid ARPU.

Subscribers

· The US market increased its net-adds to 5.8M. AT&T and T-Mobile led with 2M+ net-adds.

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

· AT&T added 1M cars to its tally to reach 4.5M in connected cars on their network – probably the highest of any mobile operator in the world.

Shared Data Plans

· Shared data plans launched by Verizon and AT&T have been quite successful. The attachment rates have increased tremendously over the course of last two years with more consumers opting for cellular tablets and connected devices. 77% of postpaid accounts at AT&T are now on shared plans.

· Some more granular data plans for tablets have also spurred interest as the cellular broadband is becoming available on demand vs. expensive on premise Wi-Fi solutions.

· The number of accounts on 15 GB or more have quadrupled over the last year for AT&T.

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 76% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 88% in mobile (of the total advertising revenue) up from 60% in 2013. 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 $165 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 $650M.

· AT&T reported 1M net-adds on the connected car platform.

Connected Devices

· Connected devices (non-phones) accounted for almost 62% of the net-adds in Q2 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.

· For AT&T, Connected cars started to form a significant base of the connected devices segment with 47% of the new connections coming from cars.

Handsets

· Smartphones continued to be sold at a brisk pace accounting almost 95% of the devices sold in Q2 2015. The feature phone category is practically becoming extinct in the US market.

· The smartphone penetration in the US is now at 78%.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 76M making it the #2 LTE operator behind China Mobile which has more than twice LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 87% 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 Nov 2015.

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

We will be discussing a number of critical industry themes and future impacting topics at our annual summit Mobile Future Forward with some incredible thought-leaders from around the globe. Speakers, Sponsors, and the executives at Mobile Future Forward invite you to participate in the discussion on Sept 29th in Seattle. Join Glenn Lurie, President & CEO, AT&T Mobility, Dr. Eric Topol, Chief Academic Officer, Scripps Health, Rima Qureshi, Chief Strategy Officer, Ericsson, Hank Skorny, SVP – IoT, Neustar, Raja Rajamannar, CMO, Mastercard, Sanjiv Ahuja, Chairman, Tillman Global Holdings,Hossein Moiin, EVP and CTO, Nokia Networks, Craig Moffett, Partner, MoffettNathanson, Josh Will, SVP – Mobile, Best Buy, Tim Chang, Managing Partner, Mayfield, Prof. Shyam Gollakota, University of Washington, Mark Fernandes, Managing Director, Sierra Ventures, Erez Yarkoni, CIO and EVP, Telstra,Mark Showers, CIO and EVP, Reinsurance Group of America, Doug Suriano, SVP and GM, Oracle Communications, Vishal Gupta, Chief Products and IoT Officer, Silent Circle, Marty Cooper, Chairman, Dyna, Vijay Shekhar, Founder and CEO, Paytm, Julie Woods-Moss, CMO, CEO – Nextgen Business, Tata Communications, Andrew Hopkins, Managing Director – IoT, Accenture, Lo Toney, Partner – Catalyst Fund, Comcast Ventures, Robert Gelick, SVP and GM – Digital, CBSInteractive, Sujeet Chand, CTO and SVP, Rockwell Automation, Bob Azzi, Executive Managing Partner, Argylegriffin, Anand Chandrasekaran, Chief Product Officer, Snapdeal, Dr. Tony Yen, MD, CMIO, EvergreenHealth, and many more

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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 Aug 2015.

Connected Consumer 2015 August 5, 2015

Posted by chetan in : 4th Wave, Connected Devices, Connected Intelligence Era , add a comment

Global

· With each passing day, more consumers are connected and are using more connected devices. The connected intelligence era is starting to take shape.

· It is not just a western market phenomenon, the connected age is reaching the far corners of the planet.

· The total number of connected devices will reach 16 billion by the end of 2015.

· The biggest category of the devices will still be feature phones followed by smartphones and personal computers.

· By 2020, Industrial and Smartphones will become the top two connected devices categories.

US

· There are two broad connected categories of consumer spend: Access and Devices.

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

· Roughly 80% or $3000 of the US household spend will go 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 will go 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 will go 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, smartphones is by far the biggest spend category. Consumers spend almost 3x on smartphones than they spend on personal computers. Smartphones will account 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.

· For the first time, US consumers will spend more on wearables than feature phones in 2015.

· Chetan Sharma Consulting conducted its annual Connected Consumer survey of 1000 US households.

· The number of connected devices per US household is now 5.3 with over 37% of the households in the 4-8 range.

· Almost 6% of the households have 15 or more connected devices.

· In terms of geography, US Northeast households had the highest number of devices per households.

· In terms of urban density, urban, rural, and suburban neighborhoods exhibited similar propensity to acquire connected devices.

· In terms of household income, households with annual income of $150K or more had almost 10 connected devices. Next income bracket was $75-100K with 6.6 connected devices.

· US operators have been seeing a bulk of their net-adds come from connected devices (for more details, please refer US Wireless Market Updates).

· In the most recent quarter (Q2 2015), 62% of the net-adds were from non-phone devices such as tablets, cars, and m2m (more details to come in our Q2 2015 US Wireless Market Update next week).

We will be taking a deep dive into the Connected Intelligence Ecosystem and Opportunities in our upcoming summit Mobile Future Forward on Sept 29th.

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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 Aug 2015.

Mobile Future Forward Update July 20, 2015

Posted by chetan in : 4th Wave, Connected Intelligence Era, European Wireless Market, Internet of Things, IoE, IoT, Mobile Future Forward, Wireless Value Chain, Worldwide Wireless Market , add a comment

Dear friends,

Over the past couple of years, I have talked a lot about the “Connected Intelligence” Era which is a superset of the Industrial Internet and IoT. We already have plenty of data points to indicate the rise of the next technology era enabled by sensors and software. While consumer gizmos get the headlines, the real money is in the enterprise segment though in some verticals, the two start to merge e.g. health, retail, energy, etc. To give you a sense of the disparity in terms of dollars, consider the following:

This year the US wearables segment will do over $4B in sales. A leading industrial giant founded more than 90 years ago is looking to capture 2-4x revenue of the entire wearables industry in one year with the help of IoT as it empowers them to create new service and revenue models.

Leading facilities management companies are looking to automate the entire building management process and reduce the maintenance costs by over 50% in a matter of months. The “industrial” side of IoT is likely to capture 90% of the new multi-trillion-dollar revenue that will be injected into the global economy. Obviously, benefits will flow into the consumer economy as well.

The Connected Intelligence stack is very complicated right now but that’s true with any new technology wave. 10-20 years ago, most markets had dozens of mobile operators. Today they are generally limited to 3-4. We will see the layers collapse and new players emerge.

“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

At Mobile Future Forward, we will explore where is the money in IoT, discuss several use cases that are being implemented around the world, the required building blocks, the areas of collaboration and competition, and how our community can help the industry reach its full potential quicker. Mobile Future Forward is a summit that makes you think. We will have folks from startups who challenge our thinking and industrial giants who are moving at a fast pace to deliver outcomes.

We welcome you to join us in the discussions and contribute to the collective knowledge of our industry. Give us your one day, and we will give you the next 5 years in mobile.

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

Registration (Summer Saver expires next week)

Some of the confirmed leaders are:

•  Glenn Lurie, President & CEO, AT&T Mobility

•  Dr. Eric Topol, Chief Academic Officer, Scripps Health

•  Faisal Masud, Chief Digital Officer, Staples

•  Rima Qureshi, Chief Strategy Officer, Ericsson

•  Hank Skorny, SVP – IoT, Neustar

•  Raja Rajamannar, CMO, Mastercard

•  Sanjiv Ahuja, Former CEO, Orange

•  Hossein Moiin, CTO, Nokia Networks

•  Craig Moffett, Partner, MoffettNathanson

•  Josh Will, SVP – Mobile, Best Buy

•  Tim Chang, Managing Partner, Mayfield

•  Prof. Shyam Gollakota, University of Washington

•  Mark Fernandes, Managing Director, Sierra Ventures

•  Erez Yarkoni, CIO and EVP, Telstra

•  Mark Showers, CIO and EVP, Reinsurance Group of America

•  Doug Suriano, SVP and GM, Oracle Communications

•  Vishal Gupta, CTO – IoT, Silent Circle

•  Marty Cooper, Chairman, Dyna

•  Vijay Shekhar, Founder and CEO, Paytm

•   Julie Woods-Moss, CMO, CEO – Nextgen Business, Tata Communications

•   Andrew Hopkins, Managing Director – IoT, Accenture

•   Lo Toney, Partner – Catalyst Fund, Comcast Ventures

.. more to come

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

Thanks.

Chetan Sharma

CEO, Chetan Sharma Consulting

http://www.chetansharma.com

New Paper: Empowering the Digital Telco Transformation with Convergent Charging and Policy June 23, 2015

Posted by chetan in : 4G, 4th Wave, Connected Devices, Connected Intelligence Era, Convergent Charging, Mobile Cloud Computing, Oracle, Policy, The Golden Age of Mobile, Worldwide Wireless Market , add a comment

Empowering the Digital Telco Transformation with Convergent Charging and Policy

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

Commissioned by  Oracle Communications

convergentcharging_s

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Introduction

In 2014, the mobile industry passed an amazing milestone – the number of mobile subscriptions (SIM cards) surpassed the human population. While these connected devices represent a smaller subset of the global consumer base, mobile has had a significant positive impact on literally every aspect of our lives, the supply-chain of trillion-dollar industries and national GDPs. At the heart of this transformation is the digitization of information, processes and democratization of opportunity. The three dynamic forces of network evolution, smartphones and applications brought the fundamental change in the industry. Faster networks meant quick access to content and applications. Smaller yet powerful computers in smartphones translated into billions are coming into the digital fold. The new applications and services have empowered consumers to discover ways to enrich their lives and entrepreneurs to reimagine the world.

The changes have also meant that the traditional ways of doing business and thinking about revenue streams is largely over in most parts of the world. Many mobile operators who dominated the industry for the first 30 years recognize this and are transitioning to become a digital telco, but a vast majority are caught in the cycle of inaction.

For mobile operators to stay relevant and participate in the digital economy, they have to drastically change their processes and how they manage their services, launch new products, enable the ecosystem and think about digital services. At the heart of this transformation is the ability to launch and nurture new services whether it is one of their own or that from the larger ecosystem. The flexibility needed to launch at the speed of thought is essential to competing in the digital world.

Additionally, as the network becomes complex with millions of network nodes and billions of end points, we need a good framework for policy management to help manage the flow of data and thus manage the network.

Changing market dynamics due to economy and competition is also forcing service providers to consider a multi-play strategy, which helps protect the subscriber base whilst increasing revenue. As various services are integrated across different access means, one still has to maintain a single view of the customer to both lower the operational cost as well as better understand consumer’s interests and preferences. Without a tight integration on the back-end, this won’t be possible.

Finally, the communications and the IT industries are merging. Digital is changing the expectations of both the consumers as well as the enterprises. The digital economy is providing an opportunity to service providers to transform the business processes and become a digital platform where new applications and services can blossom. The massive growth in connected devices and applications means we need a more robust framework for policy and charging. One of the core strengths that service providers have is their billing relationship with the customer. The architecture required to support evolving use cases needs a rethink.

In this paper, we will explore the emerging trends that necessitate the urgency for a more agile infrastructure. We will discuss how new revenue opportunities in communication, commerce, health and retail need a more robust framework to manage growth and keep service providers relevant in the value chain.

Download paper

Your feedback is always welcome.

Chetan Sharma

Mobile Breakfast Series–5G–July 16th June 5, 2015

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

Dear friends,

Hope you are enjoying the advent of summer.

For our next mobile breakfast series event, we will tackle one of the hottest topic in the industry – 5G.

LTE is here and now. What’s next?  The networking wizards of the industry will put their heads together to help define 5G. What features are essential? How will our understanding of the data consumption on the 4G networks help define 5G? How should we tackle video and signaling? How do we tackle IoT? What applications will motivate 5G? What does the timeline look like for 5G? Will 5G enable new business models? How are we going to have a sustainable spectrum strategy? Will 5G empower operators to justify the investments? This panel will take a look at the fundamental elements of 5G that will be a key layer for the Connected Intelligence Era.

Our guest speakers are:

Dr. Ron Marquardt, VP – Technology Innovation & Architecture, Sprint

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

Two of the best network engineers anywhere so am really glad to have them. 5G will impact everyone and every industry. Get an early glimpse into what’s coming.

Background Reading

Registration is open now

Portion of the proceeds will be donated to the Nepal Earthquake Relief Efforts.

Thanks and see you in July.

Regards,

Chetan

Ps. Don’t forget to save your seat for the fall Mobile Future Forward Summit. Early bird expires next week.

Mobile Future Forward 2015 Update June 4, 2015

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

Greetings,

Trust your summer is going well. The connected intelligence ecosystem continues to expand with each passing day. From startups like Prosyst, Axeda, 2lemetry getting acquired to mobile operators and chip manufacturers building billion dollar IoT businesses to Google proposing Brillo and Weave, there is tremendous activity all around. On the consumer front, wearable revenue is expected to cross $5B for the first time. In the industrial sector, investments and cost-savings are even bigger.

Partners and speakers at Mobile Future Forward are key companies and executives who are shaping the connected intelligence journey. We are delighted to add more speakers to the roster (see below). At the summit, each topic gets a thorough deep-dive to explore the intricacies of opportunities and challenges. Participants leave with a clearer picture of where the technology world is headed and more importantly what should they do about it, who to partner with, and what to ignore as noise.

At Mobile Future Forward (now in its 6th year), we delve into the nuances of innovation that trigger seismic activity which shapes the future generation of experiences, applications and services. This unique executive summit is a true meeting of the great minds who go beyond the headlines and hype to examine the growth trajectory of the future. It is a daylong data-driven brainstorm designed to make you think. The experts and visionaries from around the globe will gather in Seattle on Sept 29th to explore the world of possibilities, envision the opportunities, and inspire the entrepreneurship spirit within us to achieve more, faster.

We welcome you to join us in the discussions and contribute to the collective knowledge of our industry.

Registration is open now (Early bird expires next week)

We are excited to partner with the industry leaders and thank them for their ongoing support: Ericsson and Neustar.

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

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

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

Some of the confirmed industry leaders are:

· Glenn Lurie, President & CEO, AT&T Mobility

· Dr. Eric Topol, Chief Academic Officer, Scripps Health

· Faisal Masud, Chief Digital Officer, Staples

· Rima Qureshi, Chief Strategy Officer, Ericsson

· Hank Skorny, SVP – IoT, Neustar

· Raja Rajamannar, CMO, Mastercard

· Sanjiv Ahuja, Former CEO, Orange

· Hossein Moiin, CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

· Prof. Shyam Gollakota, University of Washington

· Tim Chang, Managing Partner, Mayfield

· Josh Will, SVP – Mobile, Best Buy

.. more to come

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

Chetan Sharma

CEO, Chetan Sharma Consulting

http://www.chetansharma.com

US Mobile Market Update - Q1 2015 May 18, 2015

Posted by chetan in : 4G, 4th Wave, 5G, AORTA, ARPU, Chetan Sharma Consulting, Connected Devices, Connected Intelligence Era, IoE, IoT, LTE, Mobile 2015, Mobile Future Forward, Tablets, The Golden Age of Mobile, US Wireless Market, Wearables, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update - Q1 2015

http://www.chetansharma.com/usmarketupdateq12015.htm

image

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Summary

The US mobile data services revenue grew 4% Q/Q and 15% Y/Y. The overall services revenue declined 1%. The device revenue for the operators grew by 41% allowed the overall service revenues to grow 5% Y/Y.

We are forecasting that the mobile data service revenues will increase by 22% to $132 Billion in 2015. Verizon will become the first operator to generate more than $50B from data services in 2015.

After acquiring lusacell and Nextel Mexico AT&T became the biggest North American operator with over 136 million subs.

The average mobile data consumption (cellular) is approximately 2.5GB/mo. In the US, it took roughly 20 years to reach the 1GB/user/mo mark. However, the second GB mark has been reached in less than 4 quarters. An entire year’s worth of mobile data traffic in 2007 is now reached in less than 75 hours.

From 2010 to 2013, the data pricing declined by only single digits YoY. However, in 2014, the data pricing has plummeted by 77%. In Q1 2015, the data pricing stayed pretty steady.

The intense competition amongst the operators meant a 6% rise in OPEX QoQ and a 12% decline in CAPEX YoY. The income declined 4% while EBITDA grew modestly at 2%.

Smartphone penetration increased to 76% and roughly 95% of the devices sold now are smartphones.

4th wave services continue to grow at a very past face around the globe. At least 37 companies generated a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

The difference between Sprint and T-Mobile number of subs is just 300K subs now – the narrowest it has ever been. Like we suggested mid-last year, T-Mobile is likely to become the number three operator. This is more or less just a symbolic event with the transfer of bragging rights. Overall, churn was low for all operators in Q1 2015.

T-Mobile accounted for over 40% of the overall net-adds for the year with AT&T and Sprint coming in second at 26%. Verizon slipped to a distant fourth with only 8%.

Operator’s non-phone net-adds were 4 times that of the phone net-adds, highest it has ever been in the history of the industry.

M2M+Connected car is a billion dollar revenue stream for AT&T. M2M+Telematics will become a billion dollar stream for Verizon by 2016.

In our 4th wave series of papers, we had postulated for years that the 4th wave revenues will become bigger than any of the previous curves. This finally happened in 2014 in the US market with the revenues from the 4th wave applications and services built on top of the IP access layer surpassed both voice and data revenues.

Apple Watch – New Interaction Models

Apple is never the first one to introduce a new consumer gadget but it is generally the first to make it work for the market so allies and enemies are all eager for Apple to come in and create awareness. For me, the exciting part wasn’t the watch itself though it clearly the best smartwatch available in the market but the new interaction models it introduced. The reincarnation of Morse code in the language of vibrations and heartbeats. The splitting of screen on two different computers on the body is quite fascinating and has design implications for the developers. It will take time for us (as consumers and developers) to understand and absorb the advantages of such a model. The transmission of signals from the body is enormously powerful in creating the preventive care culture around the globe. The story on wearables is just starting out.

Q1 2015 – 4th wave in action

For a casual observer of the industry, Verizon’s acquisition might have come as a surprise but for the students of the 4th wave, it was normal course of action.  In my talks, I often say that for service providers to compete with the OTTs, they have to become OTTs themselves. One could argue if AOL was the right company for this strategy but large operators are opening up their checkbooks to do cross-domain acquisitions. AOL brings a new billion dollar revenue stream however it doesn’t solve the basic fragmentation problem that operators have. They can’t effectively compete with Google and/or Facebook without covering the entire market. Without domination (in market share) or collaboration, the opportunity will remain small and might even vanish in due time.

As we mentioned earlier this year, globally, 37 companies generated (not valuation) a billion dollar or more in revenue from 4th wave services in 2014 – a 311% jump from 2012.

Unicorns at incumbents

Tech press and the startup world is infatuated with unicorns. The billion dollar is a magical marker that inspires the ecosystem to be in the elite club but what about when a new unicorn stream is created at an incumbent? It rarely makes waves. At a 100+ year old incumbent, even less so. AT&T has been lighting up connected cars faster than any other mobile operator in the world right now. While 3.5M connected cars might not instill excitement, one must consider the replacement cycles of automobiles which is several times that of a smartphone.

Our estimates suggest that the connected car segment will become a billion dollar business for AT&T by 2016. The M2M+Connected Car revenue stream is already a billion dollar business for AT&T. Verizon is also slowly getting there. Their M2M+Telematics revenue stream should reach an annualized revenue stream of over a billion dollars by 2016. Some operators in Europe are also making inroads into the new connected devices revenue streams. Similarly, the likes of Microsoft and Google have created new billion dollar revenue streams in mobile. As a separate entity, these will be decacorns but don’t get appreciated when residing with the parent company.

Google Fi – Google Fiber for Wireless

When Google-Fi was announced, there was plenty of media frenzy around Google going after the operators. Folks who wrote such articles don’t understand the business of either Google or the operators. Google is a brilliant strategist which does some projects to push its strategy in the ecosystem. The goal is generally not a new revenue stream but twisting the value-chain enough to serve its purpose long-term.

However, there are couple of direct and subtle signals that Google did send to the markets. First, there are some technical tricks that Google was able to pull off to make WiFi/Cellular handoffs to work. Second, and perhaps more important is that the control point moved from the network to the device which at scale can be the biggest disruption the mobile industry has ever seen. It is not easy to pull off given the interdependency of OEMs to the operators. But sometime in the future, it is not hard to envision that for every session, the device (and associated cloud infrastructure) initiates the auction amongst the available networks and picks one based on performance, pricing, revenue share, and other parameters. That day is not here yet but service providers should start planning for this scenario.

WiFi-first network has good potential and we will see many of them pop up around the globe but getting scale is the biggest question mark in such endeavors (beyond some technical issues of seamless interop).

One should also remember that while WiFi usage in the US is 3x that of cellular usage, the use of WiFi hasn’t really slowed down the cellular data growth one bit. They both are growing at approximately 100% Y/Y.

Post-PC – Apple has no peer

There are has been a lot of debate around the PC and Post-PC worlds. Apple has benefited from the transition to the Post-PC universe like no other company. Its Post-PC revenue in Q1 was four times the Post-PC revenue of Google, Microsoft, Facebook, and Amazon combined. Largely due to the iPhone, Apple has been able to carve out a dominant space on the current wave of computing.

Service provider M&A

When Comcast initially announced the merger with Time Warner, it looked like a slam dunk but it was swiftly rebuffed by the regulators. This sets up an interesting 18 months for the US market. Unless there is a change in power (democrats to republicans), the big mergers in the same domain are off the table. So, how do existing behemoths grow? They start to look overseas (e.g. AT&T acquiring Mexican operators), look sideways (e.g. AT&T acquiring DirectTV) or look upwards (e.g. Verizon acquiring AOL). There are still a number of questions posed to the likes Comcast, Time Warner, Dish, T-Mobile and Sprint. Will this finally force Comcast to be a more active mobile player by acquiring one of the two smaller operators? Will the regulators allow such a move? Is Sprint back in the equation? How anxious is Deutsche Telecom to offload its US assets? How will Dish use its spectrum assets? We might see all these questions answered in the next 18 months or not.

Net-Neutrality and Zero-Rating Debates

In the tech world few things ignite the discussion with religious fervor as the net-neutrality debates. From Washington DC to New Delhi, from Brussels to Santiago, net-neutrality and zero-rating have inflamed passions. Most of the times those fighting on either sides have no clue about the issues at hand and what are they fighting for. Ask a protester on the street about the intricacies of net-neutrality and you will get blank looks or confused answers. Both issues boil down to “transparency” and “control” – who gets to decide what and what are they going to disclose. The answer to many of these debates is fairly simple – ensure there is enough competition and put the (granular) “control” and the “responsibility” in the hands of the customer for e.g. they should decide which apps should make it into the “Zero Rating” club for them. The problem goes away at least in principle.

The Upcoming 5G wars?

I started my career when 1G was all the rage. My first 4G project was back in 2002. By some measures, we are already behind on the 5G discussions. In general, it takes 7-10 years before the standards are finalized and then the network technology lasts for approximately 20 years before a market moves onto the next generation of technology. US led in the growth of 1G (AMPS, TACS) followed by Europe on 2G (GSM, CDMA). Japan took the leadership role with 3G (WCDMA, EVDO) and US wrestled it back on 4G (LTE). Japan and EU are determined to lead on 5G and have been making very public statements and R&D investments about their ambitions on 5G. Japan of course has a very clear goal of having 5G by Tokyo Olympics in 2020. Am sure some operator(s) somewhere will jump the gun and start calling LTE-A+ as 5G around 2017-18 or sooner. You can expect a lot of activities both in public and private on 5G as companies and governments try to figure out a way to claim the 5G leadership mantle.

We have summarized our thoughts on 5G in this paper – 5G: The past, present, and future of the mobile industry evolution. I have been giving a number of talks on 5G in North America and Europe and many of these will be made public in due course.

What to expect in the coming months?

2014 was a tremendous year for the mobile as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. 2015 promises to be an exciting year for the industry as well.

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.

The next 10 years will generate almost 1000 Trillion dollars in global GDP, which is 60% more than the last 10 years. What will be significant is how the “Connected Intelligence” built using networks, sensors, and software is going to transform every industry, every nation. We will covering the future of the mobile industry in-depth at our Mobile Future Forward summit this fall on Sept 29th.

Against this backdrop, the analysis of the Q1 2015 US wireless data market is:

Service Revenues

· The US mobile data services revenues in Q1 2015 increased 3% and reached $30B.

· After crossing the $100B in data revenues last year, the US market is set for explosive growth and is likely to cross $130B in data revenues in 2015.

· Verizon and AT&T dominated the quarter accounting for 70% of the mobile data services revenue and had 68% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q1 2015. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 2.71%. 

· Data contribution to the overall revenues is now at 62%.

· The postpaid ARPU continues to decline for all operators with all but Verizon suffering double digit YoY losses.

Subscribers

· The US market had 4.6M net-adds. Probably for the first time, Verizon finished last in terms of net-adds for the quarter. T-Mobile led with 1.8M net-adds mostly postpaid.

· T-Mobile added almost as many postpaid subs as rest of the three operators combined.

· Connected devices (excluding tablets) had the best net-add performance followed by tablets.

· T-Mobile led in the phone category while remaining three operators added more than 1M non-phone customers.

Shared Data Plans

· Shared data plans launched by Verizon and AT&T have been quite successful. The attachment rates have increased tremendously over the course of 2013-14 with more consumers opting for cellular tablets and connected devices. 70% of postpaid accounts at AT&T are now on shared plans.

· Some more granular data plans for tablets have also spurred interest as the cellular broadband is becoming available on demand vs. expensive on premise Wi-Fi solutions.

· 50% of AT&T’s postpaid accounts are on 10GB+ plans.

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 70% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 89% in mobile (of the total advertising revenue) up from 60% in 2013. 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 $150 million revenue from M2M and Telematics. At the current run-rate, this will be a billion dollar business by 2016.

· AT&T reported 684K net-adds on the connected car platform. We estimate that connected car will become a billion dollar revenue stream for AT&T in 2015. Connected cars accounted for 62% of the connected devices for AT&T.

Connected Devices

· Connected devices (non-phones) accounted for almost 52% of the net-adds in Q4 2014. 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.

· For AT&T, Connected cars started to form a significant base of the connected devices segment with 68% of the new connections in the segment coming from cars.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 95% of the devices sold in Q1 2015. The feature phone category is practically becoming extinct in the US market.

· The smartphone penetration in the US is now at 76%.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 71M making it the #2 LTE operator behind China Mobile which has more than twice LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 86% 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 Aug 2015.

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

Announcing Mobile Future Forward 2015 May 13, 2015

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

Dear friends,

The next 10 years will generate almost 1000 Trillion dollars in global GDP, which is 60% more than the last 10 years. What will be significant is how the “Connected Intelligence” built using networks, sensors, and software is going to transform every industry, every nation. At Mobile Future Forward (now in its 6th year), we delve into the nuances of innovation that trigger seismic activity which shapes the future generation of experiences, applications and services. The unique executive summit is a true meeting of the great minds who go beyond the headlines and hype to examine the growth trajectory of the future. It is a daylong data-driven brainstorm designed to make you think. The experts and visionaries from around the globe will gather in Seattle on Sept 29th to explore the world of possibilities, envision the opportunities, and inspire the entrepreneurship spirit within us to achieve more, faster.

We welcome you to join us in the discussions and contribute to the collective knowledge of our industry.

Registration is open now.

We are excited to partner with the industry leaders and thank them for their ongoing support: Ericsson and Neustar.

 

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

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

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

Some of the confirmed industry leaders are:

· Glenn Lurie, President & CEO, AT&T Mobility

· Dr. Eric Topol, Chief Academic Officer, Scripps Health

· Faisal Masud, Chief Digital Officer, Staples

· Rima Qureshi, Chief Strategy Officer, Ericsson

· Hank Skorny, SVP – IoT, Neustar

· Raja Rajamannar, CMO, Mastercard

· Sanjiv Ahuja, Former CEO, Orange

· Hossein Moiin, CTO, Nokia Networks

.. more to come

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

Thanks and have a great spring.

Chetan Sharma

Webinar: Empowering the Digital Telco Transformation May 12, 2015

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

Oracle and Chetan Sharma Consulting will be hosting a webinar on how Convergent Charging and Policy can enable a telecom service provider to become a more digital player in the ecosystem. It will coincide with the release of a paper I have been working on.

Convergent Charging and Policy – Empowering the Digital Telco Transformation

The mobile industry is transforming the global markets in fundamental ways. The communications and the IT industries are merging. Digital is changing the expectations of both the consumers as well as the enterprises. The digital economy is providing an opportunity to service providers to transform the business processes and become a digital platform where new applications and services can blossom. The massive growth in connected devices and applications means we need a more robust framework for policy and charging.
This webinar will discuss the changing service provider landscape and the tools required to manage this transition.

Chetan Sharma, CEO, Chetan Sharma Consulting

Richard Hallett, Senior Director, Product Marketing, Oracle Communications

When: May 27 2015 7:30 – 8:30am PDT

Registration

Vancouver Mobile Breakfast Series Recap: Mobile Commerce and Payments April 16, 2015

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, Mobile 2015, Mobile Breakfast Series, Mobile Commerce, Mobile Future Forward, The Golden Age of Mobile, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

We hosted our second event of the year in Vancouver (our first in Canada) earlier this week and had a great time. I have been going to Vancouver for 20+ years and have been thinking about doing something north of the border. It is also one of my favorite cities in the world. By strange coincidence, all 3 of our MBS cities outside Seattle have been Olympic cities – Atlanta, London, and now Vancouver. I guess we will have to go to Beijing or Seoul next.

With the help of my good friend Pankaj Agarwal and his team at Optimus Information and Wavefront, we were able to plan out a sold-out event. We continued the theme of Mobile Commerce and Payments given that it is such a hot topic right now and brought together three startup CEOs who are right in the middle of the action.

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The mobile ecosystem is evolving exactly we envisioned it in our 4th wave paper in 2012. The 4th wave is becoming the most dominant portion of the revenue stream as was witnessed from the revenue results in 2014 in the US.

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As I have said before in various public forums, one of the metrics I use to track progress in any segment is the number of $1B businesses being created each year. In 2012, there were only 9 companies mostly large enterprises like AT&T, Apple, Google, and Amazon that had > $1B digital businesses. However, in 2014, this number jumped to 37 with several new entrants – from known brands like Twitter, Walmart, and Xiaomi but several companies unknown to the western world like WeChat, FlipKart, Otto Group, GungHo, Suning Appliance, and others. While most of the concentration of digital wealth in the US, China is emerging very strongly as a player to reckon with. In fact, how China and US companies interact and play will perhaps define the next 10 years. While other economies like India, EU will play a role, I find China and US to be the most fascinating.

The speakers were:

Sam Gadodia, CEO & Co-Founder, Lotusflare

Sam co-founded LotusFlare with couple of his colleagues from Facebook with the objective to make mobile internet more accessible across the globe. Prior to LotusFlare, Sam worked at facebook and worked with Mobile Operators’ on SMS, Zero rating and other initiatives to drive growth on FB mobile app. Before this, Sam built and scaled TeleSign, one of the leaders in mobile authentication and verification space. Sam also co-founded and successfully built Global eProcure, a leading SaaS based SCM analytics Company with operation spanning from North America to Asia. While at Global eProcure, he received the Stevie award and was named by American Business Awards as Best Operation Executive.

Michael Gokturk, CEO & Founder, Payfirma

Michael Gokturk is the kind of entrepreneur who takes a company public in 3 years then launches a new business 3 days later. In 2011, Michael founded Payfirma with the goal of disrupting the highly competitive payments market by creating a solution to merge online, in-store and mobile payments. He has since grown Payfirma from the first company to introduce mobile payments in Canada into one of the top multichannel payment platforms. Before Payfirma, Michael founded and was the CEO of Versapay. A payments company specializing in point of sale systems and electronic bill presentment and payment (EBPP).

Ajay Hans, CEO and Co-Founder, Mobetize

Ajay Hans, Founder of Alligato Inc. and Co-Founder of Mobetize Corp brings over 15 years of diverse experience in the development, marketing and implementation of complex billing and payment related software technologies dedicated for MNO’s and MVNO’s. Ajay has overseen Mobetizes’ strategic vision and tactical execution since inception. He has held senior executive positions with leading telecom software technology companies where he successfully implemented solutions for brands including SaskTel, Sprint and AT&T.

Chetan Sharma, CEO and Founder, Chetan Sharma Consulting (moderator)

The three panelists are involved in advertising, payments, and commerce working with all parts of the value chain – banks, operators, startups, credit card companies, retailers, etc. We had a very interesting discussion that covered a breadth of topics.

The salient points of the session were:

In summary, mobile commerce remains a hot area and we are approaching a tipping point wherein mobile commerce dominates ecommerce in all parts of the world. I really enjoyed the moderation and questions from the audience. My thanks to Optimus Information and Wavefront for being our partners for the event. and thanks to the Vancouver mobile community for embracing us with open arms.

Our next event is going to be in our annual mobile summit – Mobile Future Forward on Sept 29th in Seattle. Stay tuned for announcements and details.

Mobile Patents Landscape - An In-Depth Quantitative Analysis - 4th Ed - 2015 April 1, 2015

Posted by chetan in : 4G, 5G, Intellectual Property, Mobile Patents, The Golden Age of Mobile, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

Mobile Patents Landscape 2015

- Fourth Edition

http://www.chetansharma.com/MobilePatentsLandscape_2015.htm

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Highlights

· The study looked at over 7 million patents granted in the US and Europe. The analysis focused on the patents granted to 65 technology companies in the mobile space.

· The gap between the number of mobile patents granted in the US vs. Europe widened again. US now accounts for roughly 79% of the mobile patents granted in the two jurisdictions.

· US companies comprise of 48% of the top 50 list followed by Japan, China, and South Korea.

· By the end of 2014, over 26% of all granted patents in the US were mobile related. In 2001, the percentage was 5%. In Europe, roughly 10% of the patents granted were mobile related.

· IBM recaptured its top spot from Samsung to become the leader in mobile patents granted in 2014 in the US while Samsung dominated Europe. Samsung still dominates the overall rankings. Samsung was followed by IBM, Microsoft, Sony, Ericsson, Qualcomm, Nokia, Google, Alcatel-Lucent, and Blackbery for the top 10 companies by mobile patent grants in 2014.

· Google was number 5 in mobile patent grants in 2014. Apple was behind at number 8.

· Despite dwindling market fortunes, Blackberry continues a healthy patents grant rate and appears in several top 10 categories.

· US Mobile Operators dominate the top 10 operator rankings: Patent top 10 Rankings: AT&T, NTT DoCoMo, Verizon, Sprint, British Telecom, Telecom Italia, T-Mobile, Swisscom, Orange, and SK Telecom.

· Mobile Infrastructure Patent top 10 Rankings: Samsung, Ericsson, Qualcomm, Alcatel-Lucent, LG, Intel, NEC, Siemens, Broadcom, and HP.

· Mobile OEM Patent top 10 Rankings: Samsung, Microsoft, Sony, Google, Blackberry, LG, Fujitsu, Panasonic, NEC, and Siemens.

· The top 5 categories for patents grants in the US for 2014 were Digital Multiplexing, Telecommunications, Digital Processing – Data Transfer, Digital Processing – Financial, and Computer Graphics.

· The top 10 filers of mobile patents in the US were Samsung, IBM, Qualcomm, Microsoft, Intel, Google, Apple, LG, Sony, and Ericsson. It was the second time that Samsung, Microsoft, Google and Apple showed up in the top 10 patent filers list together.

· Some of the Chinese companies started to increase their filings substantially. Notable amongst them are: Alibaba, Xiaomi, Mediatek, and Huawei.

· Huawei appeared in the top 10 rankings in Europe for the first time.

· Information security category saw the highest jump in patent filings in 2014.

Introduction

The idea of Intellectual Property (IP) is as old as the debates Aristotle used to have about philosophy and society. All mature civilizations and societies come to appreciate the value in preserving the IP created by its citizen and give the rights to the benefits that such IP creates. IP is enshrined in laws and principles of doing trade and business. It is also how nations outmuscle each other over long periods of time to become dominant economies.

In a knowledge economy, the very competitiveness and durability of the nation’s prosperity depends on how well the framework of IP and patents works in the country and the steps it takes to avoid theft and misuse of the laws while enforcing the rules and regulations on the books. IP has been an integral part of the economic engine of the western world for many decades if not centuries. Over the past two decades, nations and corporations have competed on the creation, funding, execution, and protection of the new ideas.

Mobile is first computing based technology that will encompass the entire human race and then some. In 2014, the number of cellular connections went past the human population. Additionally, the rise of IoT and Wi-Fi-led usage has meant that the use-cases for mobile and the impact it can have across verticals have exploded. Mobile has outgrown its own universe and now expanded to segments such as health, industrial, retail, education, agriculture, and more. As such, the intellectual property being generated has become very mobile centric. In 2014, the US crossed a major milestone, more than a quarter of the overall patents that were granted had something to do with mobile.

Mobile expertise and by extension the IP is being developed by more companies around the globe beyond the traditional ecosystem players such as Samsung, IBM, Microsoft, Qualcomm, and Ericsson. Billion dollar mobile companies are emerging from India, China, and Europe. Africa and Latin America are not far behind. As expected, mobile has removed the artificial boundaries of time and distance and empowered developers across regions. Mobile is also leveling the playing field, increasing the opportunities for entrepreneurs far and wide. A dreamer in Nairobi has as good a shot at success as anyone else in the west.

All the innovation and economic activity has also increased the patent activity around the world. 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 2014, China went past the European leaders Germany, France to become the 3rdplayer behind US and Japan to file the number of patent applications. While US, Europe, and Japan remain the overall leaders in patents both in quantity and quality; China’s is at the top in terms of growth rate. Amongst the top 3 filers, Huawei and ZTE are from China (Qualcomm was the third player on the list).

According to the US Patent Office (USPTO), in 2014, the number of patents granted grew over 8% by the end of 2014 for the same time period. 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 440% increase while the European market saw a 71% increase in mobile related patent grants.

Another interesting fact is that in 2014, for the first time, over a quarter of all patents granted in the US were mobile related. This grew from around 2% in 1991 and 5% in 2001. In Europe, roughly 9% 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.

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 fourth in the series that does an in-depth quantitative analysis of the mobile patents landscape.

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 May 2015.

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

New Paper: 5G - The past, present, and future of the mobile industry evolution March 16, 2015

Posted by chetan in : 4G, 4th Wave, 5G, Chetan Sharma Consulting, Connected Intelligence Era, European Wireless Market, Mobile 2015, Mobile Ecosystem, Mobile Future Forward, Mobile Payments, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

5G - The past, present, and future of the mobile industry evolution

- A Mobile Future Forward Research Paper

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

NA_Wireless_Market

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Introduction

The deployment of LTE otherwise known as 4G is in full swing. Operators in US, Japan, Korea, Finland, Australia, and others started deploying the new technology some years ago and are nearing completion of their network build out. Others in Europe and Asia are on an aggressive schedule to catch-up. We can expect that a majority of the operators will have LTE up and running in the next couple of years. Operators have sunsetted 2G. In some instances they even stopped investing in 3G and are putting all of their investments in the 4G bucket. As mobile networks transition to all IP, operators will be able to re-farm their spectrum assets for 4G deployments. Beyond LTE, operators are looking at LTE-A to provide more efficiency and network bandwidth to consumers.

In mature LTE markets like the US, Korea, and Japan, the talk has shifted to the next generation technology evolution – 5G. Even Europe, which still has a long way to go before their 4G is built out have set their sights on 5G to recapture the mantle and the pride of the GSM days. Korea and Japan led the world in 3G but lost the lead of 4G to the US. They both are eager to be considered leaders in 5G. Japanese government has set the ambitious goal of having 5G by the Tokyo Olympics in 2020. US regulators have started to talk about 5G and the future spectrum needs as well.

Since the launch of 1G networks in late seventies and the eighties, we are now onto the 5th iteration of the network technology evolution. We have gone through a lot of technology skirmishes but with 4G and likely with 5G, we are narrowing the differences between technology options giving significant technology scale advantages to the ecosystem.

As network technologies have evolved, the application landscape has changed as well. 1G or AMPS was all about basic voice services. GSM and CDMA (2G) digitized mobile and we saw basic messaging and data services introduced into the market. 3G (WCDMA, EVDO) introduced the potential of data services to the ecosystem and the consumers. The launch of iMode in Japan became the poster child of data services for much of the 3G evolution around the globe. Midway in the 3G growth, new players like Apple and Google entered the ecosystem and laid the foundation of unprecedented data and application growth. Business models and control points in the ecosystem changed overnight. The insatiable data demand led to the acceleration of the 4G services in many leading markets. For the first time, the network technology was data-led. We are clearly moving towards an IP infrastructure where voice is just another app running on the data network.

In fact, data is the primary revenue engine for the services providers and rest of the ecosystem. In Japan, almost 80% of the revenue now comes from data services. In the US, we are approaching 60%. Other nations are not far behind. Even the emerging markets have caught up very fast and in some instances leap-frogging their western counterparts in certain application and services segments.

All through last four generations, the fundamental business model of “metering” remained the same. Barring some exceptions, there has been a direct correlation of usage and revenues. Will 5G be any different?

Another significant standard that has evolved is Wi-Fi. The impact of Wi-Fi on the mobile ecosystem can’t be overstated. It has become so pervasive that we have ask the question how long before nationwide Wi-Fi first networks start to make a run for the wallet share in major markets. How will Wi-Fi fit in with 5G, will the two standards merge?

Will 5G offer new business models or explore a different relationship between usage and cost? Will consumers warm up to the idea of value-based pricing? Or Will access just become a commodity layer like water and electricity and most of the value will reside in the platform and application layers? Though we have started to see the shifts (as discussed in detail in our 4th wave series of papers), how fast will future accelerate? Will the ecosystem landscape be markedly different than what we have in place today?

We won’t know the answer to some of these questions for a while but it is worth exploring the lessons from the past and potential disruptions that 5G could bring to the ecosystem that benefits the end customers. In the end, it might not be about the technology at all but about the business models that shape the technology landscape. This paper explores 5G through the lens of the past and explores the wireless world beyond 2020.

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 May 2015. We will be discussing 5G and its impact on the ecosystem in more detail at Mobile Future Forward.

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

Mobile World Congress 2015 Recap March 9, 2015

Posted by chetan in : 4th Wave, 5G, Connected Intelligence Era, Emerging Markets, Enterprise Mobility, European Wireless Market, Mobile World Congress, The Golden Age of Mobile, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

Mobile World Congress 2015 Recap

Barcelona hosted its 10th edition of MWC last week. The beautiful weather in a lovely city provided the perfect setup to pontificate about the future direction of the mobile industry. This note presents the summary of the discussions and the observations from the show.

For a second year in a row, Mark Zuckerberg was the highlight of the show. The crowd and the buzz for his panel was probably more than for rest of the keynotes combined. Last year, Mark introduced the project, this year it was about the progress report. The operators look at Internet players with deep suspicion. The goal of getting more folks online is a shared objective in the industry but there is tension around the business model and the mechanics. Executives from Telenor, Bharti Airtel, and Millicom shared their experience (mostly positive) and the impact it has had on their data growth and revenues. All were cautiously optimistic.

One thing that will help the operators is to look at Internet players a bit differently and it requires a mental shift. Just like operators work with and compete against other service providers, they can find common grounds for collaboration in some areas and in other segments they will of course compete but having a one-track mind will detrimental to their progress. On the flip side, Internet players should appreciate the competitive dynamics in the market, the financial metrics that drives the business and the work to deliver a more customized partnership – something the Internet players are not that accustomed to. The Internet segment does a better job of managing coopetition than the telecom sector.

Probably the second most watched keynote was from Sundar Pichai. Rumors of a Google MVNO have been around for many months. The plans to launch the “nexus of networks” were discussed. Additionally, Sundar discussed how project Loon and project Titan could be used to provide the Internet backbone. The connectivity projects are nice science experiments at this stage but the MVNO project could have some implications depending on how far Google wants to take it. Will it be the Rokr project for Google or something more? Only time will tell.

Just like it has been for many years, Apple was at the center of many discussions at the show. In carefully orchestrated leaks, there was a steady flow of the news on Apple Watch. It will set the competitive bar for the segment and help everyone figure out their place in the market. Folks were deeply divided on the likelihood of success. Battery life might end up being the key-determining factor. There was also a lot of discussion around the news reports on Apple Pay fraud issues.

For the first 3 generations, technical guys were in charge of the wireless technology Gs. With 4G, the marketing department took over and it looks like they are not ready to relinquish their position anytime soon. The hype around 5G was at its highest at the show. In the last 3 months, every major entity has had something to say about what 5G should be and what will it enable. There is also a tussle for who gets to lead the industry on 5G.

Europe is anxious to regain the mantle it lost after GSM. But there is a big problem. The 4G penetration in Europe won’t even get past 50% until 2020, the investment wouldn’t have been recovered by then. Someone bring out the econ 101 book, please! It seems like 5G is going to revolve around mmWave spectrum and technologies (very few see a new interface coming) but this has massive capex and opex implications in addition to the practical implications of millions of nodes to deliver the desired throughput. That doesn’t mean they shouldn’t continue to work on pushing the boundaries and take leadership position in developing the standards and use cases. However, from a deployment point of view, we need a filter of reality.

Also, the industry is getting ahead of itself. Keep the marketing guys in the barn, settle on the definition, the how, the use cases, and then figure out the technical and marketing roadmap. (there was plenty of talk about pre-5G as well). Of course, one can achieve 10 Gbps today but mostly under impractical configurations. What’s also troubling is that the Internet players are not part of the standards process. Matt Grob, CTO of Qualcomm responding to a question about the timeline for getting 5M 5G subs suggested we might get there by 2022. As a reference, 4G reached the 5M mark in 2010. KT CEO gave a delightful presentation of 5G optimism. A number of position papers were released – fun reading for geeks if you are into these long reads. We will be releasing our own thoughts on 5G later this month expanding on piece we explored earlier this year.

All eyes were on FCC Chairman Wheeler after the landmark ruling last month. There was no new news per say but the topic was hotly discussed and debated in public and private forums. While the journey is just starting, the world is looking to see how things will end-up. As I mentioned to the WSJ, no country wants to be viewed backwards and whatever happens in the US market will have implications worldwide over the next decade and beyond. I also get the sense that we don’t quite understand the impact of unintended consequences. For e.g. there are several use cases like transportation, medical, financial, etc. where prioritization is required. Voice has been prioritized for ages and will be in the future. 5G will have different prioritization schemes depending on the radio, the applications, and the requirements. Ideally, you want the application to request a prioritization level. It is hard to justify that a moisture sensor in a sprinkler should get the same prioritization as the x-ray going over the wires. Prioritization exists in all forms of access and embedded in the way of life for good reasons. It is not quite clear what will be allowed and what will be dealt on a case-by-case basis. Maybe all this is taken care of in the ruling. Hopefully, the 300+ page tome will answer some of these questions.

The best phone launch belonged to Samsung. Learning from past mistakes, it was a no-nonsense presentation. The S6 edge looks sleek and beautiful, the camera is remarkable. However, for the purists the lack of the SD card and the removable battery is troubling. The price point for the highest end might go past $1K. It is unlikely that S6 will steal share away from i6 but it will probably take it away from other Android OEMs and will see a nice revenue bump in the 2nd half of the year. It might help stabilize the severe decline in profits from 2014. Samsung Pay puts Android on the mobile payments map as well. There were device launches from Nokia, HTC, and others but nothing captured the attention of the show. Orange/Mozilla came out with a unique offering of a 35 Euro package that includes a decent smartphone, 6 month of 500MB/mo, unlimited voice and messaging. It will be launched in the African markets to get more people transition over to smartphones and data services.

The current money in IoT is clearly in the industrial projects. IoT is a great enabler to re-architect business processes, revenue streams, business models, companies, and industries. While industrial IoT didn’t make a splash, in conversations with folks, there are all sorts of projects being done around the globe and there is serious money being spent. One project can sometimes account for the entire consumer IoT revenue stream. Accenture/Intel had some cool demonstrations to tell the story. Lot of work is going into IoT driven factories, buildings, and the supply-chain.

Consumer IoT didn’t make a big splash like it did at CES in January. There were no drones, robots, or humanoids running around. A number of OEMs came out with watches and sensor bands – nothing that will take the industry by storm. Huawei probably gets the vote for the best watch launch at MWC. In general, for the current stream of connected watches, the technical specs have triumphed the fashion specs. Can Apple change the equation this year?

In case, it wasn’t clear to some – AT&T is undergoing a significant transformation into becoming an international solutions provider – it was apparent from the show. In the European show, AT&T had the best presence amongst its peers. European operator landscape is dominated by the quad-play moves and consolidation. As usual, the Koreans and the Japanese impress with their quirky art of storytelling. Using a robot to emphasize low 5G latency by SK Telecom was my favorite. AT&T has been signing up the most number of connected car contracts and the numbers are starting to impact the financials in a material way. A select group of the operators are showing meaningful revenues from the 4th wave.

VR helps tell a good story. Several companies used VR headsets (mostly Oculus and Samsung) to have attendees experience their product, services or vision. Ericsson had a cool setup to remotely controlled excavator thousands of miles away. Will VR enter the boardrooms? Quite likely.

After a slow start, LTE-U is gaining quite a bit of traction. Qualcomm’s efforts are bearing fruit and we should be seeing some deployments in 2016. The Wi-Fi ecosystem has expressed concerns but nothing that can’t be overcome. Most of tier-1 operators in the western markets have some form of SDN/NFV initiatives in place. AT&T’s Donovan announced that they have already 5% coverage and are on track to reach 75% by 2020.

Security and privacy continue to be hot topic in the post-snowden era especially in Europe. Regulations are also tightening up. EU wants much stronger privacy regulations. European operators want harmonization of privacy regulation between operators and the Internet players. IoT multiplies the attack nodes and it has serious implications for both enterprise and consumer domains.

Few M&A transactions during the week got the attention of the industry. The biggest one was from Freescale and NXP who announced a mammoth $40B merger. Then Mavenir got acquired by Mitel for $560M. HP acquired Aruba to boost the Wi-Fi business and paid a premium at $3B.

Other items of interest were 3D biometric fingerprints (Qualcomm), autonomous cars in 2016 (Nissan), zero rating (Wikipedia), B2B $1B revenues (Ooredoo), sub-$50 devices (Android, Mozilla), Windows 10 (Microsoft), 100M mobile money users (GSMA), 5G Holograms (KT), Smart Home Air Service (Conway), Lighting as a Service (Philips), Resiliency and Fault-Tolerant SDN/NFV layer (Stratus), 6G (DoCoMo), Runcible (Monohm), Selfie’d Journalists (they were everywhere), Wireless charging furniture (Ikea), MoDe Electric Bike (Ford), Connected carry-on (Bluesmart), and more

Best launch – Samsung S6. Well executed. Generated lot of interest from media and partners.

Best booth – Ericsson. They have really mastered the art of storytelling through physical and digital assets.

Best parties – Siris Capital and 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.

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

US Mobile Market Update Q4 2014 and 2014 February 23, 2015

Posted by chetan in : 4G, 4th Wave, 5G, AORTA, ARPU, Chetan Sharma Consulting, Connected Devices, Connected Intelligence Era, Devices, European Wireless Market, Fourth Wave, Internet of Things, IoE, IoT, LTE, Mobile Applications, Mobile Cloud Computing, Mobile Devices, Mobile Future Forward, Technology Cycles, The Golden Age of Mobile, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update Q4 2014 and 2014

 

Summary

The US mobile market continues to be the biggest market by revenue and 2014 was a key transition year for the industry. The overall market grew 21% to almost $400B. Voice revenues declined by 15%, messaging by 16%, and tablets by 4%. The biggest winners were the 4th wave/OTT services which grew by 92%. Access revenues increased by 32%, handsets by 11%, and wearables by 150%. Verizon, AT&T, and Apple were the top 3 players by revenue (from the US market).

Last Jan, we had estimated $108 Billion in mobile data revenues for the market and the revenues ended spot on at $108B making US the first market to surpass the $100B mark. We are forecasting that the mobile data service revenues will increase by 22% to $132 Billion in 2015. Verizon will become the first operator to generate more than $50B from data services in 2015.

Verizon became the second operator after China Mobile to cross the milestone of 100 Million postpaid subs. After acquiring lusacell and Nextel Mexico (still pending), AT&T became the biggest North American operator with over 131 million subs. In 2014, US also crossed the 350 million subscription mark.

The average mobile data consumption (cellular) crossed 2GB/mo in 2014. In the US, it took roughly 20 years to reach the 1GB/user/mo mark. However, the second GB mark has been reached in less than 4 quarters. An entire year’s worth of mobile data traffic in 2007 is now reached in less than 100 hours.

From 2010 to 2013, the data pricing declined by only single digits YoY. However, in 2014, the data pricing has plummeted by 77%. It is having an impact on the industry financials which might help clear the way to further M&A in the US market.

The intense competition amongst the operators meant a whopping 20% rise in OPEX QoQ and a 1% decline in CAPEX YoY. The income stayed flat while EBITDA grew modestly at 3%.

In our 4th series of papers, we had postulated for years that the 4th wave revenues will become bigger than any of the previous curves. This finally happened in 2014 in the US market with the revenues from the 4th wave applications and services built on top of the IP access layer surpassed both voice and data revenues. The operator share of the US mobile industry revenues fell below 50% for the first time since the birth of the industry.

Smartphone penetration increased to 75% and roughly 95% of the devices sold now are smartphones.

The Android OEM ecosystem suffered its first major profit decline in 2014 - the profits dropped precipitously by 44%. iOS revenues increased by 31%. The difference in profits between the two major ecosystems is now $33 Billion – the highest it has ever been.

Apple broke more records in a single quarter than most athletes break in their lifetime. The amount of revenues and profits generated by a rectangular screen sent everyone in a tizzy. To get a sense of the scale, consider this – Apple’s iPhone generated more revenue than revenues generated by entire portfolio of products from Microsoft, Google, Facebook, and Twitter combined. Add in Macs and Tablets and you can mix a dozen more companies in the mix. The laser focus on quality and the benefit of the brand loyalty and aspiration catapulted into the business stratosphere that few can even dream of reaching.

Apple also introduced two new products late last year – Watch and Apple Pay. While it is too early to figure out the overall impact of Apple Watch (it clearly will put some Swiss Watchmakers out of business), Apple Pay appears to be more disruptive. Apple’s classic approach of embracing the ecosystem and thinking end-to-end might finally disrupt the otherwise staid financial sector. Apple Pay is already seeing significant traction and the financial industry is nervously promoting the service. Rumors of Apple Car will keep media on its toes for the next few years.

4th wave services continue to grow at a very past face around the globe. At least 37 companies generated a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

The difference between Sprint and T-Mobile number of subs is less than a million now – the narrowest it has ever been. Like we suggested mid-last year, T-Mobile is likely to become the number three operator in a matter of weeks now. This is more or less just a symbolic event with the transfer of bragging rights.

T-Mobile accounted for over 40% of the overall net-adds for the year with Verizon coming in second at 30%. After having a lack-luster year in 2013, the operators doubled the net-adds in 2014 with connected devices driving most of the growth.

Race To The Bottom?

The mobile data traffic has been doubling YoY in the US. The consumption is clearly growing with the introduction of new devices, network upgrades, and application enhancements. Operators are seeing tremendous pressure on data pricing due to the competitive environment. EBITDA declined for the second straight quarter.

From 2010 to 2013, the data pricing declined by only single digits YoY. However, in the first 9 months of 2014, the data pricing has plummeted by 77%. It is having an impact on the industry financials which might help clear the way to further M&A in the US market.

Is Android in trouble?

Samsung suffered one of the biggest mobile revenue and profit declines in its history. As the dominant leader of the Android ecosystem, it is caught in the middle of two major trends that ironically enough Samsung had influenced. The bigger screen phone segment that Samsung seeded has become the fastest growing segment in smartphones. Apple following Samsung into the segment meant that it took away the single biggest differentiating factor and as such a serious impact on its high-end line. The lower end which yields higher volumes but much smaller ASP has attracted hordes of local developers in China, India, and Russia who have better logistics and operational advantage. Many of these players are becoming successful. To damage Samsung, they all don’t need to be successful, just enough to be in the market to sway the market. As such, Samsung has seen its share dwindle in the two biggest emerging markets.

Much of the current situation has been predictable for some time. While Samsung has ridden the smartphone wave masterfully, it hasn’t been able to build a platform moat, something that helps fundamentally differentiate its products in the sea of Android devices around the planet. They are not in a Blackberry or Nokia panic situation yet as some in the media have surmised. But, they need to figure a way out of the middle band. Unlike Nokia or Blackberry who were blinded by their success and ignorance, Samsung has shown it is a more nimble competitor. Samsung’s R&D and marketing is also second to none. Its diversified portfolio also helps in cushioning the drop in the phone segment. Historically, OEMs with such sharp revenue declines haven’t been able to arrest the decline. Can Samsung do it? Samsung is launching Galaxy 6 at MWC this weekend.

Given that Samsung controls most of Android ecosystem profits, the Android ecosystem suffered a 44% decline in profits. The woes of OEMs such as Sony, Motorola, and others also contributed to the decline. We can expect some of the Android OEMs leaving the device business altogether.

Operator M&A

In his classic book, “Competition in Telecommunications,” Nobel Laureate Jean Tirole wrote, “With digital technology, telecommunications, cable TV, broadcasting, and computers have become a single industry, which will be a critical element of our economies’ backbone. With the impending opening of competition, industrial restructuring is progressing at a fast pace.” The book was written almost 15 years ago. As I have written before, the computing and communications industries are merging into one and that collision is generating ripple effects some of which we are starting to understand (more on the Connected Intelligence Era trends here)

One of the implications of the 4th wave evolution is that there will be fewer mobile operators in the world. As we have argued in the papers, many of the smaller players just won’t be able to keep up and compete. AT&T acquired Mexican operator Iusacell (it also made the bid for Nextel Mexico) which made AT&T a clear leader in North America with almost 131 Million subscriptions. As we mentioned in our 4th wave series of papers, the number of operators will continue to shrink with fewer global operators who will seek to combine wireless and wireline assets to strengthen their moat. It is quite likely that US Cellular will be acquired in 2015.

Net-Neutrality Debates

After a blockbuster spectrum auction, FCC is looking to put its stamp on the future of the Internet by proposing net-neutrality rules later this week. President Obama decisively tilted FCC’s position on the subject. However, this is not a done deal yet. The legal and political apparatus is likely to react quite strongly to the ruling and we are in for a tough fight on this one. Other governments and regulators are also keenly watching the debate and the final ruling. Dish ended up acquiring a bulk of the spectrum wares. Is this a precursor of their wireless moves or was this just old-fashioned asset hoarding?

4th Wave Revenues

For the first time, US operators revealed some of their 4th wave (digital) services metrics publicly. Verizon reported $585 million in 2014 up 45% from a year ago. At the current run-rate, this will be a billion dollar business by 2016. AT&T reported 2.8M connected car connections and 140K home security connections. The connected car segment is clearly on its way to becoming a billion+ dollar business for AT&T. Connected cars accounted for 62% of the connected devices for AT&T.

Globally, 37 companies generated a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

The Upcoming 5G wars?

I started my career when 1G was all the rage. My first 4G project was back in 2002. By some measures, we are already behind on the 5G discussions. In general, it takes 7-10 years before the standards are finalized and then the network technology lasts for approximately 20 years before a market moves onto the next generation of technology. US led in the growth of 1G (AMPS, TACS) followed by Europe on 2G (GSM, CDMA). Japan took the leadership role with 3G (WCDMA, EVDO) and US wrestled it back on 4G (LTE). Japan and EU are determined to lead on 5G and have been making very public statements and R&D investments about their ambitions on 5G. Japan of course has a very clear goal of having 5G by Tokyo Olympics in 2020. Am sure some operator(s) somewhere will jump the gun and start calling LTE-A+ as 5G around 2017-18 or sooner. You can expect a lot of activities both in public and private on 5G as companies and governments try to figure out a way to claim the 5G leadership mantle.

We have a 5G paper coming out in March. You can read the summary here – 5G: The history of the future.

Apple Pay

Mobile Payments has long infatuated mankind. Many players with deep pockets have invested in the segment but in truth, the market was waiting for Apple to show up and show up it did with the launch of Apple Pay. In an ambitious orchestration of the financial supply chain, Apple introduced a simple payment proposition. The basic strategy is for commerce to flow through iOS. The institutions are even paying a share of the transaction to Apple which previous payment explorers are watching in utter disbelief. Ladies and Gentlemen, get ready for iTunes 2.0.

What to expect in the coming months?

2014 was a tremendous year for the mobile as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. 2015 promises to be an exciting year for the industry as well.

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 2014 and 2014 US wireless data market is:

Overall Industry Revenues

· The overall market grew 21% to almost $400B.

· Voice revenues declined by 15%, messaging by 16%, and tablets by 4%.

· The biggest winners were the 4th wave/OTT services which grew by 92%.

· Access revenues increased by 32%, handsets by 11%, and wearables by 150%.

Service Revenues

· The US mobile data services revenues in Q4 2014 increased 3% and crossed the $25B market for the first time.

· The mobile data services revenue crossed the $100B mark in mobile data services revenue to become the first country to generate $100B from mobile data services.

· Verizon and AT&T dominated the quarter accounting for 70% of the mobile data services revenue and had 68% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q4 2014. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 2.57%. 

· Data contribution to the overall revenues is now at 60%.

· The postpaid ARPU continues to decline for all operators with AT&T and T-Mobile experiencing double digit losses for the year.

Subscribers

· The US market had the best net-add year in the last 7 years.

· The US operators added 20M new subscriptions with T-Mobile leading the pack at 40%.

· Verizon’s tablet net-adds accounted for almost 50% of the overall tablets that were added in Q4. Verizon has caught up with AT&T on the tablet front.

· T-Mobile’s postpaid continued to see the positive growth for the seventh straight quarter. It has recovered all its losses that began in Q3 2009 and is now growing in the positive territory.

Shared Data Plans

· Shared data plans launched by Verizon and AT&T have been quite successful. The attachment rates have increased tremendously over the course of 2013-14 with more consumers opting for cellular tablets and connected devices. 61% of postpaid accounts at Verizon are now on shared plans. For AT&T, the number is even higher at 70%.

· Some more granular data plans for tablets have also spurred interest as the cellular broadband is becoming available on demand vs. expensive on premise Wi-Fi solutions.

· 52% of AT&T’s postpaid accounts are on 10GB+ plans.

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 69% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 88% in mobile (of the total advertising revenue) up from 60% in 2013. 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”)

· In 2014, we are also seeing continued investments from the operators especially AT&T, Verizon, and Sprint in non-traditional segments like home security, healthcare, insurance, automotive, enterprise mobility, advertising, and security, and others. Collectively, this is already a multi-billion dollar business in the US.

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

· Verizon reported $585 million in 2014 up 45% from a year ago. At the current run-rate, this will be a billion dollar business by 2016.

· AT&T reported 2.8M connected car connections and 140K home security connections. The connected car segment is clearly on its way to becoming a billion+ dollar business for AT&T. Connected cars accounted for 62% of the connected devices for AT&T.

Connected Devices

· Connected devices (non-phones) accounted for almost 52% of the net-adds in Q4 2014. 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.

· For AT&T, Connected cars started to form a significant base of the connected devices segment with 62% of the new connections in the segment coming from cars.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 95% of the devices sold in Q4 2014. Within the next two years, the feature phone category will practically be extinct in the US market.

· The smartphone penetration in the US is now at 75%.

· After ceding the lead to Android for the last three straight quarters, iOS roared back to reclaim the lead with 54% share of the smartphones sold. For the year though, Android edged out iOS.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 67M making it the leading LTE operator in the world (this year China Mobile will overtake Verizon to become the number 1 LTE operator by subscriptions). Other three operators are also deep into their LTE deployments. Verizon reported that 84% 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 May 2015.

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

5G: The history of the future February 18, 2015

Posted by chetan in : 4th Wave, 5G, Connected Intelligence Era, Fourth Wave, Internet of Things, IoE, IoT, Mobile Applications, Mobile Future Forward, Technology Cycles, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

5G: The history of the future

- Chetan Sharma

Note: This piece is based on an upcoming research paper on 5G

Over 50% of the world’s LTE subscribers are in the US right now. With aggressive 4G deployments aided by the thriving application ecosystem, US wrestled back the leadership mantle of the mobile world. While consumers are enjoying their mobile broadband devices and services, chatter around 5G has begun. Some new to the industry might be perplexed by all the talk of a technology cycle that is years away. However, if we study the 35 year old history of the mobile industry, things are going according to the plan.

All the major mobile markets have started to focus on defining 5G and the subsequent launch dates. Even Europe, which still has a long way to go before their 4G networks are built out have set their sights on 5G to recapture the mantle and the pride of the GSM days. Korea and Japan led the world in 3G but lost the lead of 4G to the US. They both are eager to be considered leaders in 5G. Japanese government has set the ambitious goal of having 5G by the Tokyo Olympics in 2020 (Russia wants to do it by 2018 for the FIFA World cup). US regulators have also started to talk about 5G and the future spectrum needs as well.

Students of the industry will observe that these network technologies evolve over a 20 year cycle. In general, the time to peak (the point where the net revenues for the technology peak and start dropping) is generally slower than the time from peak to sunset. This is primarily because as the last generation is peaking, investments and roll-outs of the new generation of technology starts thus taking away the share at a faster pace. On an average, the time-to-peak has been 12 years while the time from peak-to-sunset has been 7 years. Obviously, there are shifts in different countries depending on spectrum auctions; competitive dynamics, investment availability but they largely follow the 20 year cycle. For each of these 20 year cycles, the R&D and standardization time period of 7-8 years typically precedes the first major deployments of the network technology. So overall, these are big cycles of 25-30 years from initial concepts to the last subscription getting off the network technology. The research work for 5G got started in 2012 and we might have our first networks by 2018-2020.

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While there is no consensus yet on what 5G will feel and look like, there is some agreement on the types of performance criterion that are worth considering. Some of the performance goals for 5G under discussion are:

· Average - 300-500 Mbps and > 10 Gbps

· < 1 ms latency

· (Almost) 100% network coverage

· 1000 times reduction in power consumption

· Very high reliability in all circumstances especially indoors (99.999%)

· Deep indoor coverage (+20dB)

· 30x higher device density

· 10-100x connected devices

· Significantly higher security requirements

The first four generations have largely followed the same business model that of “metering.” The operator typically invested in assets such as spectrum, network build out, operational capacity, etc. and then built the business based on the usage. In the early days, it was more of a linear model with tight correlation between the usage and the cost of the usage but as the markets matured, the past revenue curves melded into the new ones. That’s the reason voice and messaging are offered as unlimited packages designed around the data services.

Will 5G offer new business models or explore a different relationship between usage and cost? Will consumers warm up to the idea of value-based pricing? Or Will access just become a commodity layer like water and electricity and most of the value will reside in the platform and application layers? Though we have started to see the shifts, how fast will future accelerate? Will the ecosystem landscape be markedly different than what we have in place today? We will answer these questions in due course.

Another important question for the industry will be around the control points. From 1G to 3G, the industry clearly revolved around the operators. Almost all of the revenue in the industry flowed through the operators and they controlled in excess of 75% of the industry revenue. However, primarily because of the broadband capability of the networks, the emergence of the powerful computing platforms in iOS and Android, and very powerful computing devices, the picture in the 4G era is changing. We estimate that the overall control of the industry revenues by the operators will shrink to 50% or lower within the next 5 years. This doesn’t mean that the operator revenues will decline in aggregate, they will continue to increase 1-3% globally but the ecosystem is growing much faster and as such the operator share will decline.

With 5G, it is very likely, that a highly distributed application and services ecosystem will become the dominant industry source of revenue around which rest of the mobile solar system will evolve. The tectonic shifts are likely to result in fewer mobile operators in the 5G technology era. Most of the countries will have 2 or 3 major operators. Given that so much mobile traffic is indoor, we will see the wireline and wireless operate merge at a frantic pace in the next 5 years. Many will also become content owners, banks, and might even operate car companies. On the flip side, we might see the rise of non-traditional MVNOs wherein vertical industry players will bundle in IP access with their services.

The noise around 5G will only grow louder in 2015 but it is normal. All mobile network technology evolutions have gone through the same cycle in the last 35 years and 5G will be no different. However, the ecosystem and the control points in 2025 are likely to look markedly different from the first three cycles. Tighten your seat belts and enjoy the ride.

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.

Chetan Sharma is the President and CEO of Chetan Sharma Consulting – a global management consulting firm focused on the mobile space. Chetan has been in the industry since the 1G days and is often found working with clients around the globe on strategies applicable to 4G, 5G and beyond. He is an author of over a dozen books and over 150 papers/articles on wireless. @chetansharma

Mobile Breakfast Series Recap: Mobile Commerce and Payments

Posted by chetan in : Mobile Breakfast Series, Mobile Commerce, Mobile Payments, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

We hosted our first event of the year yesterday and were blessed with some terrific weather and views of the picturesque Puget Sound. This year we want to tackle the topic of mobile commerce and payments. In our annual predictions survey for 2015, Mobile Payments emerged as the breakthrough category for the year. Additionally, mobile commerce is just booming in all parts of the world with some very interesting implications for the ecosystem.

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One of the metrics I use to track progress in any segment is the number of $1B businesses being created each year. In 2012, there were only 9 companies mostly large enterprises like AT&T, Apple, Google, and Amazon that had > $1B digital businesses. However, in 2014, this number jumped to 37 with several new entrants – from known brands like Twitter, Walmart, and Xiaomi but several companies unknown to the western world like WeChat, FlipKart, Otto Group, GungHo, Suning Appliance, and others. While most of the concentration of digital wealth in the US, China is emerging very strongly as a player to reckon with. In fact, how China and US companies interact and play will perhaps define the next 10 years. While other economies like India, EU will play a role, I find China and US to be the most fascinating.

We had a terrific group to discuss the mobile commerce and payments trends, folks who are in the trenches making things happen on a daily basis and come to the problem from different angles.

Sebastien Taveau, VP and Chief Developer Evangelist, MasterCard

Sebastien serves as Chief Developer Evangelist for the Open API team at MasterCard where he leads the outreach to the global developer community. Puzzle solver, strategic thinker, beyond-the-horizon watcher and hands-on doer, Sebastien has technical and professional experience spans more than 20 years in various industries. He was previously with Validity as CTO and Paypal leading the technology integration efforts.

Prat Vemana, VP – Mobile and Commerce, Staples

Prat leads Staples’ eCommerce product teams responsible for the online customer experience (CX) on desktop, mobile and retail-store digital interactions. He also manages global shared services teams for onsite search, user experience research, architecture, A/B testing and analytics. Prior to his current role, Prat lead Staples’ Velocity Lab in Cambridge and drove the company’s global mobile strategy. Prat’s product and CX teams operate out of the company’s corporate headquarters in Framingham, Massachusetts and Staples Labs across the country, including Cambridge, Seattle and San Mateo.

Sam Liang, CEO and Co-Founder, Alohar Mobile

Sam Liang is CEO and Co-Founder of Alohar Mobile. Previously, Sam was the platform architect and lead of Google Location Server and API, which powers thousands of mobile applications on Android and iOS. Sam held a number of patents in wireless and mobile technologies. Sam has a Ph.D. in EE from Stanford University. Alohar was acquired by Alibaba, now the 4th largest tech firm on the planet.

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(Source: Alohar Mobile)

The salient points of discussions were:

We covered a range of topics. Mobile Commerce is driving the 4th wave for sure with so many interesting ideas and companies popping up every month. As usual, I had a lot of fun moderating the panel and engaging the audience. Thanks to all who joined and we will be in touch regarding future events. For now, we are expanding the breakfast series to Vancouver where we will host an event on April 14th and our Mobile Future Forward annual summit will take place on Sept 29th. Stay tuned for more announcements.

Thanks and see you around.

Mobile Breakfast Series–The Future of Mobile Commerce/Payments January 30, 2015

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

Greetings,

In 2014, Mobile Commerce is going to generate over $100 billion+ in revenue. Mobile Commerce already accounts for over 12% of the digital commerce in the US. This is the revenue that didn’t exist a few years ago. We will talk to executives who are driving mobile commerce and who are powering the technology behind these billion dollar initiatives. Digital only retailers are likely to take 75% of the mobile commerce revenue share. How are the traditional players reacting to the threat and the opportunities? How does the difference in behavior on smartphones and tablets impact commerce? As we move into the Connected Intelligence Era, how will commerce change in both the physical and the digital worlds? How will Apple Pay transform the financial industry? We will tackle some of the thorniest questions in front of our industry.

Sam Liang, CEO and founder of Alohar Mobile (Alibaba)

Prat Vemana, VP – Mobile and Commerce, Staples

Sebastien Taveau, VP and Chief Developer Evangelist, MasterCard

Chetan Sharma, CEO, Chetan Sharma Consulting (moderator)

We will explore the mobile commerce opportunities and shifts in the ecosystem in detail across the globe. You don’t want to miss this one.

Registration: http://www.mobilebreakfastseries.com/register.html

Venue: Columbia Tower Club, 701 5th Ave #7500, Seattle, WA 98104

Date: Feb 17th 7:30 – 10:30am

Look forward to seeing you soon.

Regards,

Chetan