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Global Wireless Data Market Update - 2008 April 28, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, European Wireless Market, India, Indian Wireless Market, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Strategy, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

Global Wireless Data Market Update - 2008

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http://www.chetansharma.com/globalmarketupdate2008.htm

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (together) are adding over 20M new subscriptions every month. India crossed the 400M subscription mark this month while China whizzed past 650M in Q109. Overall, the global subscriptions penetration edged past 60%. During 2008, revenues further tilted towards data services, increasing 17% from 2007 EOY. The overall global mobile revenues (including equipment) for the year reached the 1 Trillion dollar landmark in 2008, with over $830 billion attributed to services revenues. Data revenues now account for over 20% of the global service revenues.

For some leading operators, data is now contributing close to 40% of the overall revenues. However increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to the new services such as Mobile Advertising, Social Networking, Commerce, Mobile Wallet, and others, different services helped in adding billions to the revenues generated in 2008. The US market expanded its lead over Japan in mobile data service revenues for the year and is unlikely to cede ground in the months to come.

The success of Apple’s Appstore (1B downloads in 9M across 37M devices is not surprising but still impressive, look for another growth bump in July) led to appstore mania across the ecosystem with every major player in the ecosystem holding ambitions for Applesque success leading to healthy competition and hopefully more innovation. Google’s Android also kept the industry chatter on the high with a slew of new devices slated for 2009. The ease of use of applications developed for G1 on the new devices will define Android’s role in the ecosystem. If successful, it will decimate the weaker ones from the equation going forward.

WiMAX vs. LTE debate took over the EV-DO vs. WCDMA talk and while the majority of the industry is consolidating around LTE; open-platform advocates are watching the arrival of WiMAX with great interest. However, the down economy is delaying the establishment of Clearwire’s nationwide footprint.

Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India.

This note summarizes the findings from the research with added insights from our work in various global markets.

Service Revenues

US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $34B vs. $29B for Japan in 2008. China with $15.8B was ranked number 3. US registered the highest growth amongst the top 3 with over 40% increase from EOY 2007 levels followed by Japan at 25% and China at 21%.
The top 10 nations by service revenues are: US, China, Japan, UK, France, Italy, India, Germany, Spain, and Russia.
The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Spain, Australia, and Korea.
NTT DoCoMo continues to dominate the wireless data revenues rankings with over $4B in data services revenue in Q408 and almost $15B for the year. Almost 42% of its overall revenue now comes from data services. DoCoMo also crossed the 90% 3G mark last month.
NTT DoCoMo was followed by China Mobile, Verizon, AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top 10 operators by wireless data service revenues. It marked the first year for T-Mobile USA to be in the top 10 list as it went past SK Telecom. All the top 10 carriers exceeded $2B in data revenues for the year 2008.
The top 10 global operator groups now account for over 60% of the global mobile data revenues.
For the last couple of years, NTT DoCoMo has been the only carrier exceeding $10B in yearly mobile data revenues. In 2008, as expected it found company with China Mobile, Verizon Wireless, and ATT in the exclusive $10B club. KDDI missed out by a whisker.
Data revenues for the top 10 operators increased 27% from EOY 2007 and now account for almost 48% of the global mobile data revenues though their subscriber share is around 30%.
The biggest jump in data revenues was experienced by the US carriers – ATT and Verizon Wireless respectively. They were followed by China Mobile. (For a complete US Market Update, please see our Q208 research note).
NTT DoCoMo regained its position vis-à-vis KDDI w.r.t. mobile data revenues. Their data coordinates stand at ($27, 42%) and ($25, 38%) respectively.
Most of the operators in developed nations are contemplating future strategies to boost data revenues such that the decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPUs. Comparing the ARPU for last 2 years, amongst the top operators, only Singtel, Rogers, T-Mobile UK, O2 Germany, O2 UK, Verizon Wireless and ATT experienced increase in both overall and data ARPU.
China reported approximately $16B in data revenues for 2008 and the percentage contribution is around 27%, data ARPU is around $2. For India, data ARPU continues to stay around $0.50 as most of the new adds are voice only subscribers and there is continued price pressure in the market.
China Mobile remains the most valuable telecom operator with over $180B in market cap. It is followed by Vodafone at around $98B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. The current recession has slashed their market caps by 20-30%.
In 2008, SMS’s vice like grip on data revenues continued to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets and exploring new technologies and social experiments ahead of almost anybody else in the market. We looked at the data revenue growth at NTT DoCoMo since the introduction of i-Mode almost 10 years ago. During the last 9 years, overall ARPU has declined 33% though data ARPU increased over 1800% and now accounts for almost 40% of DoCoMo’s service revenues. The voice ARPU has declined almost 60%. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends and technologies in these markets to get a sense of what’s coming.

ARPU

Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like DoCoMo, and Softbank are over 42%. KDDI, 3 Australia, 3 Italy, 3 UK, O2 UK, Singtel, and 3 Sweden exceeded 30%.
ATT reported the highest increase in data ARPU from 2007 with 32% growth. Other notable percentage increases in ARPU were from KDDI, DoCoMo, Softbank Japan, 3 Australia, Vodafone Italy, Rogers, Verizon Wireless, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.50. In terms of absolute dollar amount, NTT DoCoMo leads the pack with $27 data ARPU.
The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with over 56% (or $3) contribution coming from the data services. Philippines is also one of the most active messaging nations where users average a message/hr round the clock.

Subscriptions

The global mobile markets continue to grow at an explosive pace touching 4B subscriptions by 2008 up 23% from EOY 2007 levels and will likely cross the 5B mark in 2010. Overall the global mobile subscriptions now represent over 60% of human population on Earth.
China and India continued their red-hot growth throughout 2008. Combined, they added 212.8M new subscriptions with India edging China by 15% for the first time in yearly net-adds.
Earlier this month, India also crossed the 400M subscriptions mark, only the second nation to do it after China. In total, China is still years ahead. In the meantime, US crossed the 90% subscriptions mark earlier this year.
In March, India edged past the US to become the number two wireless market (by subscriptions) in the world. In the last two years alone it has added almost 175M new subscriptions (in comparison China added 169M and the US market added 39M). For the past 7 months, India has been displaying Phelpsesque like flair in setting and beating its world record for 6 times, twice exceeding 15M/month net-add. For the last 7 months, the market has been exceeding 10M net-adds/month with Mar 09 being at a whopping 15.6M making it a record for monthly net-adds in a given country at anytime in the history of the industry or any industry for that matter (breaking its previous record set in Jan09).
In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by 2018.
The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan, Germany, Japan, and Pakistan.
China Mobile with 457M (as of Dec 08) remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone at 255M and Telefonica with 196M subscriptions. América Móvil, Telenor, China Unicom, T-Mobile, Orange, MTS, and Bharti Airtel are the next five largest telecom groups in the world.
As far as 3G is concerned, there were over 400M 3G users (72% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 90%+ penetration.

Others

Messaging still accounts for the lion-share of data service revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have gradually chipped away the share from messaging. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
Nokia eclipsed 100M/quarter unit sale in each of the four quarters. It has sold over 468M handsets in 2008 (up 7.2% from 2007), more than the next three handset manufacturers combined. Nokia’s global market share stayed in the 38-41% range. Samsung at 15%, Motorola with 9%, LG with 9.3% and Sony Ericsson with 8% rounded out the top five. Despite the slowdown, the industry eclipsed 1B in handset sales in 2008 and will do so again in 2009.
China and India represent the biggest opportunities for the Infrastructure providers. China launched 3G across the three operators earlier this year. India is also going through its 3G spectrum policy and is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts are coming from these two countries as they look to expand coverage into rural areas.
Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines. Many larger operators have laid out their plans for deploying LTE starting next year. Meanwhile, Clearwire has been rolling out its WiMAX network, one market at a time.
While the talk of “Open Access” and “Open Platform” consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon’s “Open Network” initiative elevated the consternation in the ecosystem. Apple launched its 3G iPhone and Android’s first device was introduced in the form of T-Mobile G1. Many more Android devices are slated to be released in 2009.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

Ps. We will have an update on the impact of recession on the mobile industry in our US Q109 update next month.

Advertising Age Article April 27, 2009

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Talked to Advertising Age about the mobile data segment in Q109

Who Needs the iPhone? Verizon Beats AT&T in New Customers

Telecom’s First-Quarter Sales Rise 3%; Wireless Revenue Up 29%

By Rita Chang
Published: April 27, 2009

SAN FRANCISCO (AdAge.com) — Amid all the talk about what the iPhone has done for AT&T, Verizon is also delivering — without a killer handset.

Verizon offers a wide choice of handsets, including a BlackBerry lineup.

Verizon narrowly beat AT&T in new customers in the most recent quarter, netting 1.3 million new subscribers vs. the 1.2 million added by AT&T, and it did so without the latter’s advantage of the exclusive, sought-after smartphone from Apple. Verizon now has 86.6 million customers to AT&T’s 78 million.

Verizon’s first-quarter sales rose about 3% to $26.6 billion, and its wireless-service revenue grew 29% from a year ago. The carrier’s net income was $3.2 billion, up from $3 billion a year ago.

The results emboldened Verizon President-Chief Operating Officer Denny Strigl to take a swipe at AT&T’s strategy of making the iPhone a centerpiece of its wireless business. Responding to a report during the company’s earnings call that Verizon was negotiating with Apple to sell the iPhone after AT&T’s exclusivity agreement ends next year, Mr. Strigl said Verizon has “not been dependent on any one device. … We have a strong handset lineup.”

Among U.S. carriers, Verizon has the widest array of handsets to choose from, including 3G handsets — a strategy that is paying off for the company. “The data consumption across their handsets is high,” said telecom analyst Chetan Sharma, adding that 55% of Verizon subscribers have 3G devices vs. a 42% national average.

“It doesn’t mean that if you don’t have the iPhone, you are doomed,” Mr. Sharma said.

James Brehm, an analyst at Frost & Sullivan, agreed that Verizon’s investments in the breadth of its handset offerings have paid off. “Its lineup of handsets is broader than any carrier out there, and they’re asking handset makers to do interesting things,” he said, citing the wide choices in Verizon’s BlackBerry lineup, multimedia phones from LG and Samsung, as well as “slider” phones for the texting generation, with keyboards that slide out from underneath the phone. “You’re looking at a broad portfolio that can touch about just every need.”

Squeezing more out of subscribers
But subscriber growth is getting harder to come by. AT&T and Verizon are partly stealing from each other (and most notably from Sprint, which last quarter shed 1.3 million subscribers), but they are also facing a U.S. wireless-handset base that is approaching 90% penetration. As the number of new customers shrinks, carriers are looking for ways to squeeze more dollars out of their subscribers by selling them wireless data plans as well as data-hungry smartphones.

With consumers looking to upgrade their handsets every 15 months on average, carriers have learned to use attractive handset promotions to get users to commit to two-year contracts and reap the revenue on the back end. During its most recent quarter, Verizon launched a promotion to give away a BlackBerry Storm for every one purchased, banking on the data plan required of users of the first touch-screen BlackBerry to produce revenue later.

Verizon and its competitors have also looked at bringing wireless connectivity to other devices to milk more revenue out of their 3G networks. Some of the 1.3 million new customers Verizon brought onboard signed up for wireless broadband services that plug into laptops and netbooks. That business was growing in the double digits until late last year, when the recession caused companies to pull the plug on wireless data plans for their mobile work forces.

Verizon’s wireless churn rate was about 1% in the first quarter of 2008, but this past quarter it rose to 1.14%. Verizon said that was partly due to the economy, and attributed it to service cancellations by small businesses.

Another bright spot in Verizon’s earnings was its FiOS network, which delivers high-speed internet and video service to homes in select U.S. markets. The company has been aggressively pitching the service as it continues to build out the network, taking aim at the cable companies. The promotions have paid off, as Verizon added a record 298,000 FiOS customers this past quarter vs. 288,000 in the fourth quarter. Close to 300,000 FiOS video customers joined the service vs. 303,000 in the fourth quarter.

Carnival #171 at Catalyst Code

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Hop over and read week’s best entries on mobile

NAB recap - Open, Personalization, Advertising April 26, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Devices, European Wireless Market, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Privacy, Speaking Engagements, Strategy, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

Last week, I was invited to present and moderate at the biggest Broadcaster’s show - the NABSHOW in Las Vegas. Compared to CTIA, the show was almost double with registered attendees exceeding 83K. For me, it was a day trip. I was involved with the Mobile Entertainment Summit being held on the 22nd.

The day started with the keynote from Matt Oomen, VP of Product and Technology development at Sprint Nextel. He laid the foundation for the day’s discussion with some overarching themes of Open Platforms, Open Devices, Social Networking, Personalization, and Broadband capabilities of the mobile industry. There were a number of great panels discussing the growth in the mobile video and applications space with panelists from all across the value chain. The bottom-line:

For mobile video to succeed, we need to reduce the number of global standards so that there is some standardization for OEMs and content providers instead of running around integrating new standards every year.
People didn’t think that was going to happen anytime soon
Apple’s Appstore has been a boon to some developers as they have refocused their monetizing strategies from advertising to subscription or charging for downloads which is good for the industry as it can diversify and experiment more. A company that has been successful at that is Glu Mobile
Zynga has an interesting model of social networking based games. The games are free but as you get more involved and want to raise the stakes, the price goes up, quite significantly with over $50 chips, etc. Idea is that a small population can fund a large base involvement for free
Texting has been quite successful with mobile marketing and advertising. Hipcricket and Singlepoint with support from Entravision and Fox argued (and rightly so) that to be successful, broadcasters should start developing their audiences and provider personalized services.

Next up were two of my panels. First one was on Mobile Trends being jointly presented with Brian Jurutka, VP Comscore. The session was moderated by Jay Frank, SVP, CMT. Brian presented some really interesting data on mobile video in the US market. A good number of video downloads are happening sideloaded and overall usage remains low.

Another interesting tidbit was for 3G vs. non-3G users

And while iPhone helped change the ecosystem, video usage looks quite similar to G1. Another interesting data point was that the video consumption tapers off with time for users meaning that content providers need to keep users engaged with different strategies.

I presented data on the overall US market and how that is evolving and ended up some observations and recommendations.

Next up was my panel discussion on how Mobile Innovations will impact Mobile Entertainment Experiences. I had the honor of moderating four very clued-in folks

Rebecca Hanson, VP, Strategic Initiatives, Sprint. She has been behind the WiMAX launch

Sajal Sahay, Director, Product Marketing, T-Mobile USA. He has been behind the Android G1 launch

Tim Chang, Principal, Norwest Venture Partners. He has been involved in the mobile industry for over 10 years as an investor and sits on several technology company boards and is very active in discussing emerging trends

and Raj Ray, Director, VAS, Qualcomm. He has been behind developing the VAS business for Qualcomm globally, esp. in the emerging economies

Salient points of our discussion:

Broadband provides great incentive for user to experiment with new apps and content
Appstore while increasing fragmentation will also increase competition and hence innovation
Openness drives innovation and carriers play an important role in driving that
For 3G, Usage growth is much higher than revenue growth so we need to figure out ways to bring them in alignment
Social networking needs to be embedded into everything
Role of alternate devices like kindle and cameo is increasing and we will see all sorts of vertically integrated devices. More and more consumer electronics devices will have cellular connection
Thanks to iPhone, interesting gaming models are emerging and gaming might provide guidance on how the ecosystem will develop
Data MVNOs anyone?
Emerging economies are bringing forth some interesting monetization and device technologies that will benefit everyone like high-end smartphones for less than $50
Advertising based monetization model is not everyone. One has to scale first
The biggest areas to invest: Personalization, Audience Measurement, QoS related, Payments, Android Games, Carrier agnostic user profile platforms, mobile cloud computing, augmented reality and much more

Overall a great show. I noticed that even Google had a booth (was absent at CTIA). Something to put on the calendar for next year. My thanks to Michael and Zahava for inviting me to participate.

My next events are at:

TiECON - May 16th - Mobile Monetization

Future in Review - May 20th - Future of Mobile Broadband

mHealth - May 22nd

Hope to see some of you there

Meeting with Dr. Abdul Kalam, former President of India

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Earlier today, I had a chance to meet with Dr. Abdul Kalam, India’s 11th President, my favorite of all Presidents in India’s history and one of the most brilliant heads of state. It was truly an honor to shake hands with him and a touching moment to meet with him in person. He was really nice and very humble. Author of several books, he has been a true visionary, a perfect engineer, and a great humanitarian. Wish him long life and good health.

Thanks to TiE Seattle for inviting me to the event and for doing a great job of organizing everything.

Behind the Millennial Advertising Numbers April 17, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, US Wireless Market, Worldwide Wireless Market , 5 comments

Earlier today Millennial Media released the numbers form their mobile advertising ad network for the first time and it quite interesting data for everyone to take a look at, esp. the advertisers.

First, let’s quickly talk about the numbers. From the Q109 numbers, for the US market, it seems like Millennial outpaced other ad-networks including perhaps Admob (only Jan and Feb numbers are available as of this writing) as Millennial surpassed 10 Billion impressions for the quarter.

Thus, officially, we have a horse race.

But more importantly, Millennial’s numbers reveal something rather interesting, the stuff we have been talking about for sometime. In fact, we had a whole chapter in our book discussing the 5 Point Framework for Mobile Advertising: Reach, Engagement, Targeting, Viral, and Transactions. Here are some of the case studies we discussed in the book

So far, industry has been enamored with “Impressions” only. We had argued that the quality of advertising increases as you start including other factors in the technology and design of campaigns.

The graph that really caught my eye is below: (all graphs below this point are copyright Millennial Media)

The Audience refers to the user population that is built based on behavior and related attributes. The value is high and the performance is three times the average. Compare this to Channel (news, sports, etc.) targeting or more generic run of the network categories and you see a significant performance lift for the advertiser and a revenue boost for the value chain. And it looks like because of the performance, the Audience category dominates in Millennial’s network.

Another interesting data is what happens post-click. Impression alone means little though only mobile it is till many times better than online but we need to figure out how users interact (or get them to interact) once impression is landed and the figure below shows the distribution. Once you start comparing various campaigns and variables, a really interesting pattern will emerge which essentially will be the best practices for the industry.

I think the best part is the measurement of user session or time which is key to the engagement metrics. Millennial reported 4:48 minutes of average user session time (90th percentile). Also, 58% requests used some level of geo info for targeting which is quite good. The handset mix was more distributed compared to the Admob network and the carrier share provided some interesting glimpse into the ecosystem as well (Sprint leads the pack). Device input mix shows the how touch devices are starting to make an impact on the device ecosystem.

Overall great educational material for all in the mobile advertising ecosystem to see what is happening at a granular level. I hope other networks will also publish their traffic details and we will also start to get more metrics around Targeting, Virality, and Transactions, so we can learn what works under what circumstances. This will give all the ammunition the advertisers and agencies need to wake up their analog counterparts.

Next Step - Standardization and Auditing.

Business Week Article: Wireless Carriers: Your New PC Retailer? April 13, 2009

Posted by chetan in : US Wireless Market , 1 comment so far

Had a chance to talk to BusinessWeek about the growing trend of Netbooks, esp. through the carrier channel.

COMPUTERS April 13, 2009, 12:01AM EST

Wireless Carriers: Your New PC Retailer?

Move over Best Buy; AT&T, Verizon Wireless, and other mobile-phone providers are moving swiftly into the business of selling computers

By Olga Kharif

Consumers on the prowl for new PCs may soon find themselves heading for the local wireless carrier instead of a big-box retailer. In a move that could dramatically change the way people shop and pay for computers, AT&T (T) and other mobile-phone service providers are swooping in on the PC retailing business.

One of the earliest signs of this shift came Apr. 1, when AT&T began selling small laptop computers in Atlanta and Philadelphia for as little as $50 to people who also signed up to get at-home and mobile broadband services for two years. It was no April Fool’s joke. AT&T, the biggest U.S. phone company, is “very pleased with the early results” and is considering introducing the offer nationwide, says David Haight, vice-president of business development for emerging device organization at AT&T. He wouldn’t provide details on the results so far. Rival Verizon Wireless plans to offer small, inexpensive laptops called netbooks to customers this quarter. Other carriers are expected to follow suit.

With the market for cell-phone service saturated, the PC market represents a way for mobile-phone carriers to get more people to buy monthly wireless Internet-access service plans. Consumers who buy wireless Web access can save money on the up-front purchase price of a computer and, in some cases, the price of monthly access to high-speed Internet services. But the shift in who sells PCs could also mean lower revenue for computer makers if it lures buyers toward lower-priced netbooks and away from big-ticket machines. It could also crimp demand for smartphones.

BUNDLING NETBOOKS WITH SERVICE PLANS

Wireless service providers are already emerging as big PC vendors in Western Europe, where companies like Vodafone (VOD) and Deutsche Telekom’s (DT) T-Mobile International began selling netbooks last fall. Carriers already account for 20% to 25% of all small laptops sold there, estimates Richard Shim, a research manager at consultant IDC (IDC). The U.S. may not be far behind. PC maker Dell (DELL) and retailer RadioShack (RSH) began selling netbooks for use with AT&T’s wireless network several months ago.

Carriers are willing to absorb $200 or more of a netbook’s cost to get more people to sign up for related wireless data-service plans as well as other offerings. AT&T, for instance, offers discounted netbooks to people who also sign up for a $60-a-month bundle of its at-home Digital Subscriber Line Internet access and its on-the-go broadband service. In one of several deals, AT&T sells the Acer Aspire One netbook, which normally retails for $300, for $100 up front.

The emergence of carriers as computer distributors could spell changes, good and bad, for PC suppliers. On one hand, consumers who may not have bought a $500 PC may be tempted by a $50 one. “It’s about getting the next billion people online,” says Anil Nanduri, director of netbook marketing at chipmaker Intel (INTC). “We see this as a definite opportunity for additional volumes,” especially in emerging markets, he says. Researcher IDC expects netbook sales to rise from 19 million units this year to 32.6 million units in 2012.

Mobile-phone service providers and their marketing muscle could also help their computer making partners grab market share quickly. T-Mobile, for instance, has sold 60,000 netbooks since making them available in September. “You could get quick market share, provided you work well with a telco provider,” says Shim. Such companies as Acer, Dell, Samsung, Hewlett-Packard (HPQ), and LG—which have announced wins with AT&T, T-Mobile, and Vodafone—could end up climbing the market-share charts.

DOWNWARD SPIRAL OF PRICES AND MARGINS

The deals with carriers could also make it easier later for PC makers to market other electronics, such as smartphones and mobile Internet devices (MIDs, which are slightly smaller than netbooks) through the carriers. Already, Acer and several other PC makers have announced smartphone models, and Dell is rumored to have developed one. “They’ll establish some brand presence and then slowly introduce a smartphone [in the following 12 to 18 months],” says wireless consultant Chetan Sharma. “This gives them expertise in the ecosystem.”

By the same token, faster sales of netbooks could mean diminished demand for more expensive computers. “The [PC] industry overall gets pulled into this downward spiral of [lower average selling prices] and margins,” says Roger Kay, founder of consultant Endpoint Technologies Associates.

And as netbooks take off, what happens to demand for smartphones made by such vendors as Nokia (NOK) and Research In Motion (RIMM)? Some consumers may opt for a netbook—or its smaller cousin, the MID—instead of high-end smartphones that cost about as much. A netbook offers greater battery time of 10 to 16 hours, while a phone typically conks out after five. MID screens are larger and more conducive to watching video. The category could receive a boost if, as expected, iPhone maker Apple (AAPL) releases a MID-like device with video capabilities.

WHY NOT MULTIPLE MOBILE DEVICES?

Carriers also may wish to steer consumers away from smartphones and toward netbooks or MIDs. Today a smartphone brings more profit to carriers because it uses data as well as voice services; a netbook merely gobbles data. But this might change: Users of netbooks or MIDs may be willing to pay more for access to additional bandwidth so they can surf the Web and watch movies online. T-Mobile believes consumers may also pay for such extra services as a subscription to Microsoft (MSFT) Office and Norton AntiVirus software or to virtual storage services. Some users may buy display insurance and additional tech support from carriers.

Handset vendors such as HTC don’t foresee danger. “We see netbooks as being a new and emerging segment that’s expanding the pie,” says Steven Seto, executive director of marketing for HTC North America. After all, people buy multiple TVs for their homes. So they may buy multiple mobile devices. “It’s the inspiration for what one day might happen in our industry,” he says.

Carrier-sold netbooks are bad news for traditional electronics retailers such as Best Buy (BBY) and Wal-Mart (WMT). “They are undercutting Best Buy by several hundred dollars [in up-front costs],” says John Spooner, an analyst with Technology Business Research. “Companies like Best Buy and Wal-Mart are under some pressure because now they have a competitor.” Best Buy did not respond to a request for comment.

Cable companies such as Comcast (CMCSA), which did not return a request for comment, could suffer as well. Instead of hooking up to fixed broadband from a cable company, some consumers may opt for wireless or bundled wireless-home offerings from a telecom provider instead. What’s more, some 5 million to 10 million Americans already connect wireless notebooks to the TV and stream movies from Hulu.com and video from Google’s (GOOG) YouTube, says Phil Leigh, president of consultant Inside Digital Media. “The cable TV operators will discover their audience is using mobile video and will, over time, begin to cancel their cable subscriptions,” he says. “Beyond a shadow of a doubt, it’s going to have big impact.”

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

MIT Technology Review Article: Gmail Sidesteps the App Store

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Last week I talked to MIT Technology Review regarding the web-based mobile apps. Article below

Monday, April 13, 2009

Gmail Sidesteps the App Store

The technology behind the new Gmail could challenge Apple’s control over third-party applications.

By Kate Greene

Last week, Google announced an upgrade to its Web-based Gmail service for users of the iPhone and Android-powered devices. The new service has an easier-to-use interface, loads and searches e-mails faster, and has the ability to check e-mails even without access to a wireless signal.

More significant than the interface, however, is the underlying technology that enables it. Google took advantage of features of the browsers running on both platforms to create a Web application that looks and feels like one that has been downloaded onto the device. Representatives from Google claim that this is just the beginning. The company hopes that the new mobile Gmail will kick-start a trend in mobile Web apps with developers using the Internet to build and deploy more powerful applications.

According to some analysts, this approach to mobile development could have large implications for the way that developers distribute their software and the way that people buy it. It’s even possible that more-powerful mobile Web apps could undercut some of the business of Apple’s App Store, says Chetan Sharma, an analyst who runs his own consulting firm in Issaquah, WA.

“From the user’s point of view, one of the problems with the App Store is discovery of content and apps,” says Sharma. “It could be easier to discover mobile software living outside the App Store using a browser.” The user won’t care whether the app is running out of a browser or is running directly on the phone, Sharma says, “as long as you get the same sort of experience.” A developer also has much more control over the distribution of the software, and she can keep the revenue it generates instead of splitting it with a third-party distributor like Apple.

More powerful mobile Web apps won’t become widespread overnight, though. Google is leveraging Web browser capabilities that exist on a relatively small number of devices: the iPhone, the iPod Touch, and the current (and forthcoming) Android phones. These devices run browsers based on the open-source Webkit code base, which has already implemented features required under the forthcoming Web programming standard HTML 5.

These features include a graphics tool called Canvas, “persistent storage,” and an “application cache,” explains Shyam Sheth, product manager on Google’s mobile team. Canvas is something of an alternative to the popular Adobe Flash software that’s commonly used to create graphics and animation on the Web. Persistent storage provides a way for data, originally on a remote server (such as Google’s e-mail servers), to be stored locally, on the device. The HTML 5 application cache keeps important information about an application on the device that allows it to open quickly, as if it were running directly on the hardware instead of remotely. The iPhone version of Gmail uses only HTML 5, whereas Android uses a combination of HTML 5 and Gears (a Google software add-on that enables its Web apps to run offline).

Sheth says that there are a number of advantages for developers who build mobile applications via the Web. While there are only three major operating systems for desktops that developers need to learn, there are tens of mobile-device platforms with various different requirements. Applications can be built on the Web and need to be modified only slightly for different mobile devices. “Given the number of platforms we have in the mobile space,” says Sheth, “we really need a unifying platform . . . That’s why Google is so heavily investing in the Web becoming the common platform.”

Sheth notes that many developers are already familiar with writing software for the Web. Another advantage of mobile Web apps, he says, is the ability to roll out an update without needing to deploy new code to individual devices. This means that updates can happen more frequently and without the need for users to take action.

Nonetheless, mobile Web apps may have limited capabilities in the near future. “Apps that will work in this environment will be more text heavy or static,” says Sharma. They won’t be the type of apps that need to be constantly updated from a server. “But when you get into games or applications that require [device] support, it becomes tougher to develop applications that are browser only,” he says.

In the long term, there may be little difference between mobile Web apps and the platform-specific ones that run on today’s devices, says Matt Womer, who is the World Wide Web Consortium’s Mobile Web Initiative lead for North America. He notes that users of the iPhone and Android can create widgets that represent the Gmail Web app and place them in the phone’s application palette. “The gap between an app and a Web app is narrowing,” Womer says. “The future will be more Web apps than platform-specific applications that require some sort of specialized knowledge to program. It’ll be interesting to see how this shakes out with the app stores when everyone starts launching Web apps,” he adds.

Womer says that forthcoming features of HTML 5 will be available in the coming months, although it could take years for the entire standard to be approved. He notes that geolocation is already available, enabling programs in a phone’s browser to tap into the location of a user. And some future features could allow Web software to access data from accelerometers, light sensors, and the microphone.

“I’ve been doing mobile stuff for years,” Womer says, “and this is the fastest rate that I’ve seen things go in the mobile world.”

Carnival of Mobilists #169 April 12, 2009

Posted by chetan in : 3G, 4G, CTIA, European Wireless Market, Mobile Advertising, Mobile Applications, Mobile Ecosystem, Mobile Entertainment, Speaking Engagements, Wireless Value Chain, Worldwide Wireless Market , 7 comments

Last week at CTIA in Las Vegas I had the opportunity to meet many of my friends and colleagues, old and new. Such events remind us that it is the people you associate with that makes our industry vibrant and exciting. This week, it is my pleasure to showcase and celebrate the thinking and work of my friends, many of whom I have known for many years. Most have written important books for our industry and others have at least a tome in them.

Picture Tomi T Ahonen 3G Strategy Consultant, his book Services for UMTS out in March 2002 My Photo

Mobile as 7th of the Mass Media: Cellphone, cameraphone, iPhone, smartphone Product Details Cover image for product 0470239530

In no particular order, they are:

First up is Ajit Jaokar, co-author of recent book “Social Media Marketing,” discussing an important issue of opening up the carrier network. He writes an in-depth post on how telecom companies should be thinking about open as we get into the 4G era. Very Interesting commentary.

Tomi Ahonen is one of the most prolific writers I have come across in the wireless industry. He has written more words than many read in a lifetime. Off late, our industry has been wondering if they will ever be able to monetize mobile social networking. Tomi in his usual flair points through case studies and examples, a way forward. Also, checkout his indispensable Pearls series.

At CTIA (BRIC event), I was impressed with the discussion of Zeebo by Mike Yuen at Qualcomm. Martin Sauter, author of Beyond 3G, an important book of the evolving ecosystem, writes about Zeebo: Gaming for the next billion.

Russ Buckley, a tireless advocate of Mobile Advertising and all things mobile pens a very interesting piece by tweaking George Orwell’s classic “1984.” Pour your tea and dive into the post.

Judy Breck, author of several books including the latest - Intertwingle, is the energy behind the Carnival who keeps all of us straight. She is also a big proponent of learning and education. A big cheer for her. She talks about Russ Buckley’s post on the new Sprint’s commercial.

Lately, our industry has been consumed by 4G. Volker Hirsch takes a look at how 4G might influence the mobile gaming environment.

Ernest Doku of Omio.com also writes about the theme that Ajit picked up - Should networks fear Skype?

James Cooper at mjelly summarizes the key iPhone app stats.

Andrew Grill, a great evangelist for the mobile advertising industry discusses the recent survey by KPMG which has some key insights into the mobile ad market.

Barbara Ballard, author of Designing the Mobile User Experience and an important voice of reason in the mobile industry writes about her latest initiative on mobile SEO. Check it out and contribute.

Tam Hanna looks at the Symbian ecosystem from a developer’s point of view.

James Pearce of dotMobi raises some interesting thoughts regarding mobile maps.

My own 2c to the conversation is in the form of my CTIA 2009 Roundup.

You can catch many of the the colleagues listed above at the upcoming Future Technologies Conference on April 24th.

Finally, a shout-out to our friends at MOMO Amsterdam. They host some of the best MOMO events anywhere in the world and have a great line-up coming up on June 1.

I will encourage you to add these blogs to your RSS feed, follow these guys on twitter, chase them at conferences, and call upon them when in doubt.

Next carnival is going to be hosted at TamsBlackberry. Be sure to create and submit your best posts.

Until next time, best wishes.

The impact of economy on mobile April 9, 2009

Posted by chetan in : US Wireless Market , 1 comment so far

In our Q3 2008 report we noted that there could be a slow down occurring in the data card space due to increasing number of layoffs. Comscore is out with some data that shows the pull back in PC data card growth. Also fascinating is the shift in our spent to mobile.

PC Data Card Growth Pulls Back in Q4 2008

PC data card adoption grew 163 percent overall in 2008, slightly ahead of the 157 percent growth rate in 2007, a confirmation of the market’s strong growth trajectory. However, despite this rapid adoption curve, Q4 2008 showed the first signs of softness in the market, as sequential quarterly subscriber growth fell to just 5 percent, following sequential growth of 22 percent in Q3 2008 and several preceding quarters of double-digit growth.

Mobile Broadband Subscriber Growth by Quarter

Q2 2007 – Q4 2008

Total U.S. – Home/Work/University Locations

Source: comScore, Inc.

Quarter

Growth vs. Prior Quarter

Q2 2007 11%

Q3 2007 27%

Q4 2007 28%

Q1 2008 12%

Q2 2008 14%

Q3 2008 22%

Q4 2008 5%

“The PC data card market is clearly in the early stages of its adoption curve, with the overall number of subscribers multiplying in the past few years,” said Serge Matta, comScore senior vice president. “That said, we’ve observed a significant deceleration in subscriber growth during Q4 2008 coinciding with the economic downturn, an indication that mobile broadband service may still be seen by many as a luxury rather than a necessity. Now is the time for mobile broadband providers to solidify their market position, because as the economy begins to recover and discretionary spending resume the market will likely accelerate once again. Verizon appears well-positioned for this eventual resurgence, having gained 2 market share points in the past year.”

PC Data Card Access Does Not Represent Incremental Internet Usage Overall

The study also compared the Internet usage patterns of mobile broadband PC data card users with the general U.S. Internet population to determine how the availability of mobile broadband affects online time. It is important to understand whether online access via mobile broadband represents incremental Internet usage or merely a shift in usage time between different access points.

When looking at the population in aggregate, the results indicated that PC data card usage actually represents a time-shift in Internet consumption, as PC data card users spent nearly the same amount of time online (89 hours) as typical U.S. Internet users (90 hours) during Q4 2008. Of PC data card users with both a PC data card and a wireline ISP, approximately 25 percent of their total online time (22 hours) was spent using a PC data card.

Time Spent Online Among PC Data Card Users

Q4 2008

Total U.S. – Home/Work/University Locations

Source: comScore PC Data Card Report

Connection type

Hours Spent Online in Q4 2008

Total U.S. Internet Audience 90

PC Data Card User – Total Time Spent Online 89

PC Data Card User – Time Spent on Data Card 22

PC Data Card User – Time Spent on Wireline ISP 67

“That aggregate Internet usage via PC data card is not incremental to standard wireline Internet usage suggests that it’s a valuable convenience feature for many Internet users,” added Matta. “That said, there are also certain segments with PC data cards that do spend additional time online, likely indicating that these segments see PC data card as more of a necessity. Carriers seeking to generate strong PC data card subscriber growth during the current downturn will need to focus their marketing efforts on the differing needs of the various segments and consider offering financial incentives in this tough economic environment if they hope to continue attracting new users.”

CTIA 2009 Roundup April 6, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, European Wireless Market, IP, Indian Wireless Market, International Trade, Japan Wireless Market, Location Based Services, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Speaking Engagements, Strategy, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

CTIA 2009 Roundup

http://www.chetansharma.com/ctia2009.htm

CTIA 2009 in Pictures

CTIA provided a boost to the Las Vegas economy by hosting the 2009 International CTIA in the sin city. Prior to the show, we knew that the attendance will be down due to the economy and it was clear from day 1 that it will be a less busy event. Attendance was probably down 30-40%, Exhibitors seemed down by a good percentage as well with many opting for meeting rooms instead or skipping the show altogether. The big double story compounds were downgraded to smaller fields. Samsung and LG didn’t plaster the town with massive banners, taxis weren’t covered in advertisements. It was not all bad though, the probability of being trampled by humans reduced, taxi lines were shorter (though no less annoying) and the quality of the show was still pretty good. We had a jam packed schedule. This note summarizes the observations from the show.

Numbers CTIA released its semi-annual numbers. For 2008: 270M subscribers, $148 billion in service revenues, $32 billion in data revenues (just for reference, this is more than the total global Hollywood box-office revenue which came in at $28B), 2.2 trillion in MOU, 1 trillion TXT messages. You can checkout our annual US data market analysis which was released last month here.

Etech Contest – Prior to the event, CTIA invited us to judge the Emerging Technology Contest. It was fun reviewing the various entries. The award winners are announced here. Congrats to all.

My CTIA started early with a couple of sessions at the pre-conference event - BRIC Mobile Market Summit. The quality of the discussion was pretty good. I gave a talk on the Opportunities in the Indian and Chinese mobile markets and discussed where the opportunities in these two fastest growing markets as well as dispel some myths that engulf most companies.

After that, I joined the panel with other experts in the industry to have a lengthy discussion of the trends and opportunities in these markets including Latin America.

Unfortunately, our workshop on “Monetizing Mobile User Generated Content” got canceled due to low attendance or maybe folks are just not interested in monetizing these days. I will be discussing some of the similar themes in my talk at the NAB Show (MES) in Vegas on 22^nd April. I will also be moderating a panel on Innovations in Mobile Experiences.

If interested, clients of Chetan Sharma Consulting can request the slides from any of the talks.

Themes: The main themes of the conference were: Broadband (primarily around 4G and LTE with sprinkles of WiMAX) and data usage, Green, Mobile Health, Appstores, Rich Communication and Social Networking.

Broadband

4G – My first 4G project was back in 2003 for NTT DoCoMo when 4G didn’t even enter industry’s vernacular. Most operators were figuring out their 3G strategies. Six years hence, we have come a long way. Broadband, 4G, and LTE were the core themes of the conference and there was visible progress from the last CTIA with more test results, actual devices, and real demos. While the current reports suggest that some form of deployment will take place in 2010, we don’t expect the “real” commercial deployments before 2011, LTE voice will even take longer. So, where does this leave WiMAX. With each passing day, the role of WiMAX as a niche technology is affirmed. The backhaul bottleneck problem is also becoming prominent and the enhancement of backhaul is behind the RF infrastructure to provide any substantive improvements in data throughputs at least in the near future.

I will be moderating a panel on 4G at Future in Review (FiRE) conference considered by Economist the best Tech conference on the planet (panelists include executives from Telstra, Qualcomm, Clearwire, and others) to get delve deeper into the evolution of 4G.

The Broadband Stimulus – Many companies are eying the $8B broadband stimulus package. The process of how they are going to be granted seems chaotic with unintended consequences. My feeling is that it is a lost opportunity. Instead of just looking at incremental enhancements, US could have been bold and improved existing and new broadband deployments by over 50-60 times. (More discussion here)

Mobile Health

Keynotes – I thought Dr. Eric Topol, Director, Scripps gave perhaps the most effective keynote addresses in recent memory. Keynotes are generally a drab affair. Instead of inspiring through vision many put the audience to sleep with their product announcements. Dr. Topol’s speech was so rich in content, his words were filled with such passion, and his articulation was so inspiring that most entrepreneurs in the room were energized to make a difference. I commend CTIA for inviting him. He is joining Qualcomm’s Don Jones (a fierce proponent of mHealth) and others to form the first ever Wireless Health Institute in San Diego. Expect some really cool stuff to come out of them. However, to be most effective, health institutions need to get on board with the program starting with the simplest of things like “txt messages.” Come on folks, move into the 21^st century!

Health – For the first time, there was significant discussion on mobile’s impact on the health care industry. My masters is in Biomedical Engineering so it is great to see the marriage between the two industries. I strongly believe if we can get past some of the bureaucratic nonsense, mobile can have a significant lasting impact on the quality of life and healthcare in both the developing and developed nations. Some of the stuff is really amazing (iBrain, iPill, iShoe, you get the picture). I will have more discussion on the subject in the coming days.

Applications and Services

You say appstore, I say appworld, you say market, I say marketplace – I have been working on appstores for so long that I can’t help but be amused by the recent frenzy of appstores sprouting like mushrooms. I think overall it is good for the industry as each of the providers will push each other in areas of innovation and pricing models thus opening up the industry for developers and consumers. However, the fragmentation also increases as a result and something has to give because developer’s attention and resources are finite. There aren’t many companies who can pull-off a successful developer program (this is one area where Microsoft has some advantage because of significant experience in cultivating developers). Apple’s model has already forced carriers to accelerate their short-term and long-term strategies. T-Mobile USA saw the writing on the wall earlier than most and is further along in its plans. Current implementations are still quite primitive with much potential for improvement.

Rich Communication – Talked to some companies (Aylus, Ericsson, Alcatel-Lucent, etc.) about rich communication services that integrate various experiences on the mobile device including chat, voice, data, social networking, video, etc., onto a single screen. The user experience is enhanced leading to newer sources of revenues for operators.

Netbooks also seem to be on operator roadmaps with 33% of these devices expected to be sold through the carrier channels in 3 years. Will Nokia and Motorola get active in this space? Or will the new entrants use netbooks to enter the phone market? Inspired by Kindle, many players are getting bolder and investing in application specific devices (a trend we wrote about in our mobile advertising book last year). Examples: a cool new wireless video game console – Zeebo being launched in Brazil and nuvifone being launched by Garmin and Asus.

Mobile Social Networking – Some interesting social networking features and functions are coming down the line. I am convinced that carriers need to treat social networking as a core service rather than a bolt on application. I almost wrote a book “The Facebook Effect” but 3 books in a year were too many so taking a break for now. (Maybe the next one will be “The Twitter Effect”).

Mobile Advertising – Though we have been involved with several mobile advertising projects, at the show, it felt the segment excitement was quite flat and many companies are struggling to stay in business. The consolidation hasn’t come yet but things are likely to start changing in the next few months. I also think that industry needs to start thinking about much more compelling and engaging closed-loop creative experiences rather than just impressions. Also, third party verification is needed (who is going to step up?). Finally, the role of the mediation layer is becoming important. The real substantive announcement came before CTIA with four major US operators agreeing to collaborate on best practices. Kudos to MMA for orchestrating the agreement.

Green

Green is the new black – With so much focus on cleantech and global warming, vendors are stepping up and making a dent in the carbon put out by the industry. There were some really cool solar chargeable devices as well as applications that keep the users green-aware. Being green is a competitive advantage.

Miscellaneous

Devices – The quality of devices that coming out keeps getting better. Stuff coming out from Samsung, LG, and INQ is pretty darn cool (Motorola, Nokia, Palm have some good stuff coming out as well). There were some neat concept phones on display as well (I know, I know, we are ways out but I think we will see some of these come to light sooner than we think). I thought one of the coolest new device was from LG – GD900 with transparent keypad. Samsung’s DLNA and AMOLED based devices were also quite good. They were also showing the WiMAX Smartphone Mondi. ZTE is also planning to enter the US market in a big way. While new Androids were hard to spot, several of them are scheduled to be released in the next few months.

NTT DoCoMo – Each CTIA, I love spending time in DoCoMo’s booth as they are always at the cutting edge of what’s to come. Downloading your digital key to your handset to open your hotel room by waving your phone, controlling every piece of equipment in your home via your cell phone, i-concier: your friendly on-screen butler, separable phones were some of the highlights.

Best booth: Most Creative – SpinVox, Most Hip – LG

Interesting companies – While it is difficult to meet each of the upcoming startups, couple of companies caught our attention: Waze out of Israel with its crowd-sourcing based approach to real-time traffic information and Kovio with its ability to lower the cost of printed silicon.

3G connection – My 3G connection was so good throughout the show that I didn’t need to lug my laptop around and did 100% of my communications for 3 days from my phone.

Your feedback is always welcome.

Thanks

Chetan

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