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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

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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.

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Your feedback is always welcome.

Chetan Sharma

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

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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.

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

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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.

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.

US Mobile Market Update – Q3 2014 November 10, 2014

Posted by chetan in : 4G, 4th Wave, 5G, AORTA, Chetan Sharma Consulting, Connected Intelligence Era, Mobile Cloud Computing, Mobile Ecosystem, Technology Cycles, The Golden Age of Mobile, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update – Q3 2014

http://www.chetansharma.com/usmarketupdateq32014.htm

Download

Summary

The US mobile data services revenue exceeded $25B for the first time and increased 23% YoY and 7% QoQ. The US market will easily exceed the $100B mark in data revenues in 2014 thus becoming the first nation to do so.

Verizon became the second operator after China Mobile to cross the milestone of 100 Million postpaid subs.

The average mobile data consumption (cellular) crossed 2GB/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 100 hours.

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.

Smartphone penetration increased to 72% and roughly 93% of the devices sold now are smartphones.

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.

After a relatively quiet year, Apple had a blockbuster quarter with new product introductions. The expected bigger screen device arrived and was an instant big hit. It is going to do really well in Q4. The 6+ was in severe short supply and in Q3, the ratio of 6:6+ was 10:1 in the US market.

Apple also introduced two new products – 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 more disruptive. Apple’s classic approach of embracing the ecosystem and thinking end-to-end might finally disrupt the otherwise staid financial sector.

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

T-Mobile recovered all of its postpaid losses since Q3 2009. At its peak, T-Mobile had cumulatively lost almost 5 million subscribers. However, in the last 4 quarters, the 4th place operator has added over 4.5M subs to recover in a dramatic fashion. Sprint on the other hand lost postpaid subs for the 11th straight quarter.

Due to its strong performance, T-Mobile has narrowed the gap with Sprint to roughly 1M subs. As expected, Sprint launched a series of price cuts to counter T-Mobile’s uncarrier moves to recapture the value share of the market. The Sept and Oct numbers show that Sprint has improved its performance but will it be enough to maintain its #3 spot that it has had forever?

The US market had the best net-add quarter in a decade and probably the 2nd best quarter in the history of the US wireless market.

The net-adds rebounded strongly in Q3 2014 on the back of strong performances by Verizon, AT&T, and T-Mobile. The ratio of non-phone to phone net-adds was 1.66. 62% of net-adds were connected devices.

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.

Samsung – Can It Rediscover Its Mojo?

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?

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 theConnected Intelligence Era trends here)

As expected Iliad gave up its dream of acquiring T-Mobile. The deal never made sense and had no market merit. This has left DT scratching for other options. The most likely scenario is that Sprint and T-Mobile try to get married in 2017 again or the FCC/DOJ have a change of heart due to declining financial performance of the two players. Another possibility is America Movil getting into the fray. And finally, some cable companies are likely to flex their muscles at an opportune time.

AT&T acquired Mexican operator Iusacell last week. If approved (and there is little reason why it won’t), it will make AT&T a clear leader in North America with almost 127 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. Perhaps, US Cellular should sharpen its pencil.

4th Wave Revenues

For the first time, US operators revealed some of their 4th wave (digital) services metrics publicly. Verizon reported $150M revenues from M2M and Telematics. At the current run-rate, this will be a billion dollar business by early 2016. AT&T reported 2M 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. Sprint is also quite active on the 4th wave front but hasn’t shared any details yet.

Globally, we expect 37 companies to be generating a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

Microsoft Freemium Moves

First it was the OS, Now it is the Office portfolio – Microsoft is leaving no sacred cow unturned in order to gain relevancy in mobile. However, it seems that for the Office apps, Microsoft is essentially doing what it did for Windows Mobile i.e. just pare down the desktop OS for mobile. It never worked. The Office apps on competitive platform is a good strategy but they are still the pared down versions of the desktop app. As such, while people are downloading these apps out of curiosity, they are really not using them. However, the recent moves do indicate a willingness to rethink the business models, the platforms, and the distribution models which is a good start.

Amazon’s Mobile Aspirations

While Amazon is the biggest mobile commerce player in the world by a distance, its hardware aspirations have failed to impress. As expected, the Fire Phone was a complete dud. As we explained previously, it never had a shot. It was Zuned out of the market in record time (Facebook Phone probably holds the world record but Fire Phone wasn’t too far behind). A product without any substantial differentiation doesn’t stand a chance in this crowded market. While Kindle tablets had a tempting price point that made them relatively successful, Fire Phone failed across all dimensions. Software mistakes can be iterated upon. Hardware mistakes show up on the balance sheet.

In the meantime, Amazon is poised to have a blockbuster mobile commerce quarter to make it one of the most dominant players on the 4th wave.

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.

Apple Watch

After visiting the show floor at CES in January, we noted that “The space is going to get commoditized very quickly and it is likely going to get stratified into two major buckets – really cheap $10-20 wearables. The other bucket will be high-end fashion driven wearables.”

Earlier in the year, Xiaomi released a $13 tracker and Apple announced its new product in almost 5 years – the Apple Watch. The mid-market will be under tremendous stress.

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 has been a tremendous year for the mobile as it becomes omnipresence in every industry. We have already seen some massive moves, astounding acquisitions, and interesting strategic endeavors.

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

Against this backdrop, the analysis of the Q3 2014 US wireless data market is:

Service Revenues

· The US mobile data services revenues in Q3 2014 increased 7% and crossed the $25B market for the first time.

· The mobile data services revenue is on track to exceed 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 Q3 2014. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU rebounded to increase by $0.08. 

· Data contribution to the overall revenues is now at 58%.

Subscribers

· The US market had the best net-add quarter in a decade and probably the 2nd best quarter in the history of the US wireless market.

· The US operators added 6.3M new customers with T-Mobile leading the pack.

· 62% of the net-adds in Q3 2014 were from the non-phone category. The net-effect has been that while overall subscriber count has increased, there has been a negative impact on the ARPU. 

· Verizon’s tablet net-adds soared accounting for almost 71% of the overall tablets that were added in Q3. Verizon has caught up with AT&T on the tablet front.

· T-Mobile’s postpaid continued to see the positive growth for the sixth straight quarter. It has almost recovered all its losses that began in Q3 2009.

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. 57% of postpaid accounts at Verizon are now on shared plans. For AT&T, the number is even higher at 62%.

· 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 66% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 85% 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.

Connected Devices

· Connected devices (non-phones) accounted for almost 62% of the net-adds in Q3 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.

· Tablets form 70% of the connected devices sold.

· QoQ, the non-phone segment grew 30%.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 93% of the devices sold in Q3 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 72%.

· Android again outperformed iOS by a good margin. iOS is likely to bounce back in Q4.

· While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off. It renewed its entry into the battlefield with Windows phone last year but sales have been poor. While Microsoft has made steady progress in other regions, in the US, it’s not gaining any traction and its share remains at a measly 1-3%. (Read our paper to get more insights into why Windows hasn’t been able to make a dent so far).

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 59M making it the leading LTE operator in the world (next 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 79% 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 Feb 2015.

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

Mobile Future Forward: Announcing the Preliminary Agenda August 29, 2014

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

Homework for the Summit

To get the most out of the summit, it is recommended that you familiarize yourself with the following research papers:

-          Connected Intelligence Era: The Golden Age of Mobile

-          Mobile 4th Wave: Evolution of the Next Trillion Dollars

-          Operator’s Dilemma (and Opportunity): The 4th Wave

-          Industrial Internet at Work

-          Industry Transformation In the Networked Society

Morning Sessions (8:00am – 12:00pm)

Welcome – The Connected Intelligence Era

The major technology changes come in 40-50 year cycles. The telecom and Internet cycle that started in the 70s has perfectly setup the advent of the Connected Intelligence Era that is going to have a profound impact on the vertical industries, the global economy, and competitiveness of nations. At Mobile Future Forward 2014, we will discuss the emergence of this technology wave and its implications.

Chetan Sharma, President, Chetan Sharma Consulting

Fireside - Powering the Connected Intelligence Era

Matt Grob, CTO and EVP, Qualcomm

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Fireside - Industrial Internet: Transforming the Economy

Bill Ruh, VP – Global Software, GE

Hank Skorny, VP and GM, Intel

Steve Elfman, Former President, Sprint (moderator)

Fireside - Connected Intelligence: Platforms, Ecosystems, and Global Markets

Erik Ekudden, SVP, Ericsson

Benedict Evans, Partner, Andreessen Horowitz

Tim Bajarin, CEO, Creative Strategies (moderator)

Fireside - The Opportunities in the Golden Age of Mobile

Glenn Lurie, President and CEO, AT&T Mobility

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Afternoon Sessions (1:30 – 6pm)

Connected Intelligence Era through the lens of CIOs

Philip Fasano, CIO, Kaiser Permanente

David Webb, CIO, Equifax

Tim Campos, CIO, Facebook

Steve Mills, CIO, Motorola

Paul Brody, VP – Mobile Practice, IBM

Mark Fernandes, Managing Director, Sierra Ventures (moderator)

Connected Living

Kevin Peterson, President – Digital Life, AT&T Mobility

Liz Dickinson, Founder and CEO, MIO Global

Chris Putnam, SVP, Synchronoss

Josh Will, Chief Category Officer, Best Buy

Tim Wagner, SVP, Samsung

Dawn Chmielewski, Senior Editor, Re/code (moderator)

Growing the 4th wave Pie

Julie Moss-Woods, CMO/CEO – NG Business, Tata Communications

Rob Chandhok, President, Qualcomm

David Sprosty, CEO, Sprosty Network

Ed Lewis, Chief Strategy Officer, Syniverse (moderator)

Designing 5G and the Network of Tomorrow

Dr. Ron Marquardt, VP – Advanced Technology, Sprint

Dr. Hassan Ahmed, Chairman and CEO, Affirmed Networks

Glenn Laxdal, VP – Advanced Technology, Ericsson

Erik Moreno, SVP, Fox Networks

Harvesting the Opportunities in Mobile Commerce

Sharath Dorbala, Head of Mobile Financial Services, Amdocs

Andy Chu, VP – Mobile Commerce, Sears Holdings

Rajeev Tankha, Sr. Director - Applications, Oracle Communications

Mark Donovan, SVP, Comscore (moderator)

The Future of Consumer Engagement and Mobile Advertising

Vik Kathuria, Global Chief Media Officer, Razorfish

Erin Kienast, SVP, Starcom

Chia Chen, SVP, Digitas

Eric Mugnier, SVP, M&C Saatchi Mobile

Ujjal Kohli, Founder, Rhythm New Media (moderator)

Opportunities in the Emerging Markets

Mathew Oommen, President, Reliance

Andreas Gal, CTO, Mozilla

Nathan Eagle, CEO, Jana

Michael Fisher, Head of Intl. Biz Dev, Twitter

Cocktail Reception (6-8pm)

Chill, Network, and form partnerships for Life

Mobile Future Forward: Network Evolution: Q&A with Dr. Hassan Ahmed, CEO, Affirmed Networks August 26, 2014

Posted by chetan in : 4G, 4th Wave, 5G, Fourth Wave, NFV, SDN, Worldwide Wireless Market , add a comment

Mobile Future Forward – Seattle – Sept 24th - Connected Intelligence Era

Registration (limited seats)

In partnership with Amdocs, Ericsson, Intel, Mio Global, MoBack, Oracle Communications, Qualcomm, Synchronoss, and Tata Communications.

We are looking forward to welcoming you to our Mobile Future Forward Summit next month. We are doing interviews with some of the thought-leaders leading up to the event to give you a glimpse of the upcoming brainstorms. LTE has been the quickest deployment in the mobile industry history. However, the pace of change is so dramatic that the industry needs to come up with solutions on-demand. NFV, SDN, Cloud, 5G are being discussed at all major service providers. Japan is already planning a 5G rollout prior to 2020 Tokyo Olympics. EU is investing heavily to reclaim lost momentum. Affirmed Networks is in the middle of this evolution. We caught up with Mobile Future Forward speaker and industry veteran - Dr. Hassan Ahmed, Chairman and CEO of Affirmed Networks to get a pulse on the network architecture evolution trends that will define the next 5-10 years.

MFF: NFV gets thrown around in a lot of network evolution discussions. Why NFV? What does it mean to the operators and the larger ecosystem? And why should we care about it?

Hassan: This is an excellent question because it helps us to look past the buzzword and ask where the fundamental demand for NFV really comes from.  Unfortunately it also requires a lengthy answer.  Some may view NFV as just a natural evolution of technology in the networking space but that really misses the point.  In fact, the transformation of networks away from a collection of isolated, custom built elements to a holistically orchestrated set of virtualized software functions is central to realizing the evolving business model of operators in the face of rising market demand for internet services.  The move to NFV also represents one of the largest transformations in networking since the shift from TDM to IP technology. To illustrate the point, let’s examine the impact of NFV on mobile networks, arguably one of the first places we see the technology being adopted.

Data on mobile networks is growing by leaps and bounds.  Application richness is growing rapidly as well with video leading the charge.  Scaling networks has historically been a hardware game, i.e. building more and more powerful network elements as chips get faster while keeping the network architecture and software intact.  Unfortunately this approach has run its course because mobile data today is growing faster than the rate at which hardware can be commoditized.  Effective network scaling is now a game of parallel software that can take advantage of the computing performance curve.  By reducing expensive custom elements to virtualized software functions that operate on data center servers, the cost of scaling is dramatically reduced.  This is the first answer to why NFV.  However, this isn’t the whole story.

Even after operators invest in scaling their mobile networks, IP service revenue flows over the top with the operator failing to participate in the service revenue equation (except for access, of course).  Today’s networks are very inflexible.  The entire service architecture of the network needs to become more intelligent so that service treatment can allow operators to enhance the revenue in their business models.  With service function chaining and orchestration, NFV brings the necessary flexibility to simultaneously simplify network operation (thereby reducing opex) and increase service velocity for new revenue.  So the market really demands cost effective scaling and enhanced service intelligence.  Together, they create a compelling case for network transformation and NFV answers the call.

As you can imagine the impact on operators and the ecosystem is far reaching.  NFV done well (since not all supposed NFV products are done well) dramatically shifts the operators network costs, simplifies network operation and allows the operator to derive new revenues from the internet economy.  The business model impact is significant.  Costs come down and revenue increases.  However operators need to be wary of approaches that preserve the inflexibility of the legacy network by simply virtualizing old products.  Fresh approaches are necessary to realize the business model benefits.

The ecosystem as a whole will be impacted as well.  Operators will have more choice to “mix and match” applications rather than being beholden to a small number of vendors.  In fact the fortunes of many of the legacy vendors will shift as IT companies and new software-centric vendors start to participate in the network infrastructure.  The landscape of providers in the “intelligence” of the networks will look quite different 5-10 years from now than it does today.

For all of these reasons, I believe NFV, which will play out over some time, is a transformative force akin to the impact IP had on TDM networks.  That’s why we should care.  A decade from now, networks will be built, managed and monetized differently.  Business models will be much richer and the landscape of vendors will shift significantly.  The full impact of NFV will restructure the industry.

MFF: As network consumption grows and as it moves more and more to video, how does NFV help? Can it enable new business models?

Hassan: As we’ve already discussed, NFV impacts both cost and revenue.  Video growth is challenging network capacity and NFV enables operators to cost effectively add capacity rather than succumb to profitless prosperity.  However, I think your question is more about revenue and new business models that NFV’s service flexibility can enable.

NFV done well gives the operator the ability to quickly spawn new services.  This allows for increased innovation and the emergence of new business models. Specifically in the case of video content, today the operator primarily focuses on content delivery.  However there are many opportunities to create user experiences around events that can create a business relationship between the operator and the content provider.  Consider an event like the Tour de France which appeals to a relatively small affinity group compared to say the Superbowl.  Offering premium access to races with differentiated billing to subscribers who purchase a “Tour de France” viewing package is unthinkable in today’s network because the lengthy service creation process is too expensive for serving a small audience.  However NFV can reduce the service creation to minutes and allow the operator to profitably capitalize on hundreds of “medium tail” sports and entertainment events through content partnerships.  This is just a small example of how new business models can be forged when the tools are made available to the operator.

MFF: How should an operator think about offering cloud services to the consumers or their enterprise customers? Do they have shot at the game against Microsoft and Amazon?

Hassan: I think the operators have an excellent shot at the game.  To be sure, some players like Amazon are leading the industry today.  The revenue derived from cloud services today is impressive however I believe that we are very early on in the game.  Much of the growth lies ahead of us.  As operators move to a software centric network architecture they bring some critical advantages around managing scale and delivering reliable networks – arguably traditional strengths of the operator.  When combined with service architectures that enable customers to control and customize the network capabilities they receive, a very compelling product is created. 

If you believe that most computing/applications will move to the cloud over time, then the operators have a significant opportunity to capitalize on as this market grows.  However success will require moving quickly.  The large internet companies have shown what’s possible and the operators need to create networks that allow them to move in “internet time.”

MFF: The legacy network architecture hindered in launching new services quickly. How do things change with NFV, SDN, Cloud? What kind of impact does it have on the capex and opex for the operators? Is there a net gain or are we just shifting costs?

Hassan: We have discussed already how NFV brings considerably more service intelligence to the network.  With service function chaining and orchestration, the speed at which new services can be created and deployed is greatly enhanced.  This definitely creates a net gain.  Opex is significantly reduced on a number of fronts from service creation and provisioning to space and energy cost.  The cost of creating or modifying services comes down dramatically as the time to do so reduces to minutes from months.  Significantly less labor goes into the NFV service model and that is a net gain.

Capex also declines significantly for a number of reasons.  The most often stated one is the much lower cost of data center servers compared to custom hardware platforms comprising today’s network elements.  In addition when servers are pooled in data centers, capacity is more efficiently managed requiring less hardware purchases.  More efficient hardware deployment also leads to reduced space and power needs.

NFV represents a meaningful reduction in the cost of owning and operating a network.

MFF: How does rest of the ecosystem benefit from these network changes? Does it lead to more competition or collaboration?

Hassan: As you might imagine, it leads to more of both.  Certainly, the NFV framework enables more innovation because it greatly simplifies the ability to add functions and capability to the network.  The ease of experimentation is also greatly enhanced so we will see an expanding ecosystem fostering greater collaboration to enable increased and faster service innovation by the operators.  Service transparency across operators should also result in cross-operator collaboration.

We will also see greater competition.  Competition will not just be among operators differentiating on service offerings but among vendors.  The move to NFV invites participation from IT companies that have historically had data center relationships with the operators but have not been suppliers in the network infrastructure.  NFV blurs the line between IT and network and market share will shift away from some legacy providers to traditional IT suppliers.

NFV enables major structural shifts in the industry and heralds an exciting time in telecom.

MFF: What’s your view of 5G? What features do you think should define the next generation?

Hassan: That is a tough question.  So much thought is going into 5G today trying to connect the art of the doable with perceived need.  If past is prolog, then we will see applications and usage emerge that we didn’t imagine.  However what we can imagine today is a rising importance of the network as applications and computing move to the cloud.  We can imagine ever more powerful entertainment services and we can imagine a two order of magnitude increase in the number of connected devices as the Internet of Things emerges.  Device to Device or vehicle to vehicle communication will enable lifestyle changes that we haven’t yet conceived of.  In order for such a vision to be successful, the network must change meaningfully.  Orders of magnitude more data capacity, data rates, connections combined with low latency to enable real time applications become fundamental requirements of a 5G network.  Accommodating disparate networks must be seamless.  In order to realize these capabilities, much of our attention focuses on the RAN and technologies that can create the data rates and capacities that we imagine.  However, the network service architecture has to become increasingly flexible as well to create and service these disparate applications and provide user control.  Today’s NFV evolution will create a foundation for 5G’s service architecture.

Thanks

Chetan Sharma

US Mobile Market Update – Q1 2014 June 2, 2014

Posted by chetan in : 4G, 4th Wave, AORTA, ARPU, Chetan Sharma Consulting, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update – Q1 2014

Summary

The US mobile data service revenues grew 4% Q/Q and 23% Y/Y to $25.9B in Q1 2014. In 2014, we expect US to become the first country to cross the $100B mark in mobile data services revenue. We have also started to see digital services appear in the revenue maps as more companies rely on mobile to generate their revenues.

With the acquisition of Leap, AT&T has virtually tied Verizon for market share at 34%.

T-Mobile continued to impress with 66% share of the net-adds. Even Verizon felt the heat in Q1 resulting in a subpar performance. Smartphone penetration increased to 68% and roughly 93% of the devices sold now are smartphones.

M&A Season

FCC must have cancelled all summer vacations for its staff as it is going to have a busy summer. As expected, Comcast made a bid for Time Warner and AT&T for DirectTV. Encouraged by the M&A season, Softbank is going to make a run for T-Mobile and pop the question to the FCC – so what do you think?

This in addition to the net-neutrality religious wars that have been triggered.

So, how will this all end-up?

It’s complicated.

The basic problem is that the communications and computing worlds have collided and nobody told the politicians. One can’t develop a policy framework in vacuum. It has to synchronize with the real world and with the facts on the ground. In my travels around the globe, I find that some of the most underdeveloped countries have better policy framework than some of the developed nations. Obviously, they don’t have the legacy to work with but they are more progressive in terms of national competitiveness and creation of jobs as the central underpinning of their framework.

As we noted in our 2011 research paper, “Competition and the Evolution of the mobile markets,” the mobile markets gravitate towards three player composition. Over time, every market approaches this equilibrium. We looked at the world’s top 36 markets and the average HHI (Herfindahl-Hirschman Index) for these markets is 0.344. If we just look at the developed markets, the HHI is 0.327. The US market HHI stands at a relatively lower number of 0.25 which is right at the cusp of what DOJ calls heavily concentrated and moderately concentrated markets. In fact, 30 of the 36 markets are over this line and that includes pretty much every developed market except UK.

If and when Softbank proposes the T-Mobile merger, the HHI will increase to 0.28 and will clearly cross the DOJ marker of heavily concentrated markets. For contrast, the cable industry is at 0.13 HHI. Clearly, just looking at HHI is inadequate and misleading as we showed in our paper back in 2011.

In heavy Capex industries, it is natural to have consolidation. It allows more efficient deployment of the capital or else everyone gets bloodied in the turf war as is evident in Indian mobile market which is on the verge of a major restructure.

In the last 20 years, the share of top 3 operators has grown from roughly 40% to 80%. The number of mobile subscriptions have grown 14x during the same time period.

So, will there be further consolidation in the mobile industry? Short answer is – Yes. The only thing up for debate is whether it happens in this administration or the next. As we said in the last note, T-Mobile has complicated things by being successful in the short-term. A third player with 30% market share will of course be better but T-Mobile has been able to change the market by being the fourth at 14%.

FCC’s dilemma is that it can’t evaluate these proposed mergers in isolation and Congress hasn’t done a good job of clearly defining FCC’s authority.

It is going to be an interesting summer for sure.

What’s next for Microsoft?

With a new CEO at the helm, Microsoft made some key (albeit late) changes to its strategy: Office for non-windows devices, zero-rating the OS licensing fees, doubling down on the enterprise class Surface. In light of the plummeting PC sales, Microsoft is trying to figure out its place in the post-PC world. Surface 3 is good device but there are also significant hurdles. Having failed to stem the tide of iPad and Android tablets, Microsoft seems to be focusing on the high-end by trying to change the discussion around the wisdom of carrying multiple devices.

One of the basic problem that the current strategy faces is that of articulating a valid value proposition. On the pricing axis, it doesn’t make a dent. MacBook Air is still the best notebook around and iPad is still the best tablet and you can get both of them for $1500 while a comparable Surface configuration will set you back $1200-1300, a drop of less than 20%. The reason Kindle and other sub $200 tablets got some traction was that the price difference was 60%. It forced Apple to reconsider and launch the mini to secure the mid-tier.

However, it is smart of Microsoft to fight the battle on the top end in the enterprise where their biggest strength lies rather than in the low-mid tier consumer segment which is nothing but a bloodbath for new OEMs.

The mobile ecosystem will clearly benefit from a stronger Microsoft but it has to address some key strategic questions for its partners and customers. It has started to shed some legacy constraints, is getting some product thinking behind its strategy, and is becoming more open which is a good start.

About that Google Car

The autonomous car that Google showcased earlier this week is probably the most interesting technology development in the last couple of years (in addition to whatever Elon Musk does). Given that going from point A and point B is so central to our civilization, a rethink of how it should be done is going to have profound effect on not only the existing value chains and industries but more fundamentally, how humans organize themselves as social beings. There are a number of exciting and terrifying (for some) questions in front of us – how quickly will autonomous cars become the norm in major markets – 5 years? 15 years? What does this do to the driver segment? Auto sales? Cost of transportation? Design and investment of infrastructure? Privacy and security of data? Mobile network infrastructure to support a radical societal architecture? Will tech companies become car OEMs? Should they? How quickly will the regulators catch-up? Months? Years? Decades?

I do think Google car is a perfect embodiment of the connected intelligence era and this is going to have such profound implications that we haven’t yet built a model to grasp its impact (more to come on this topic).

What to expect in the coming months?

2014 has had an excellent start and rest of the year is looking great with a slew of announcements and activities planned for the rest of the year. We have already seen some massive moves, astounding acquisitions, and interesting strategic moves.

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

Against this backdrop, the analysis of the Q1 2014 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

4th Wave Progress

Connected Devices

· Connected devices (non-phones) accounted for almost 50% of the net-adds in Q1 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.

· Tablets form 63% of the connected devices sold.

· YOY, the connected devices segment grew 23%.

We hosted our IoT Americas session last quarter with Verizon, Ericsson, Samsung, and adidas and are planning our IoT Europe panel with Telefonica, BMW, Intel, and Worldsensing in London on June 17th.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 93% of the devices sold in Q1 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 68%.

· Android had its best showing in the US market with 54% share of the quarter. Q2 is expected to strong as well.

· While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off. It renewed its entry into the battlefield with Windows phone last year but sales have been poor. While Microsoft has made steady progress in other regions, in the US, it’s not gaining any traction and its share remains at a measly 3%. (Read our paper to get more insights into why Windows hasn’t been able to make a dent so far).

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 48M making it the leading LTE operator in the world. Other three operators are also deep into their LTE deployments. Expect the “fastest network” marketing to continue for at least another seven quarters. Verizon reported that 73% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

· Mobile operators also announced their VoLTE launches.

· Verizon and AT&T sell more iPhones than Android while the reverse is true for T-Mobile (by a big margin) and Sprint. There is always a beauty contest amongst operators as to who sold more iPhones. AT&T again bested its rivals by selling roughly 36% of the iPhones in the US.

Mobile Patents/IP

· 24% of the patents granted by the USPTO were mobile related. Samsung, IBM, Microsoft, Sony, and Ericsson make the top 5 patent players in mobile. We will have more details in our coming paper on Mobile Patents Landscape next month.

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

· Samsung was again the leader in mobile patents granted in 2013 in the US and worldwide. Samsung was followed by IBM, Qualcomm, RIM, LG, Sony, Microsoft, Ericsson, Google, and AT&T for the top 10 companies by mobile patent grants in 2013.

· Google made an entry into the top 10 overall mobile patents list for the first time. AT&T did the same for the mobile patents granted in 2013.

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

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

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

· The top 5 categories for patents grants in the US for 2013 were Telecommunications, Digital Multiplexing, Digital Processing – Data Transfer, Digital Processing – Financial, and Computer Graphics.

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

· Facebook’s mobile patent filings increased by 177% YoY.

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 2014. The next Global Wireless Data Market update will be issued in July 2014.

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

We will be discussing many of the ecosystem and technology issues, opportunities and challenges for the coming years in our annual mobile executive summit Mobile Future Forward on Sept 24th in Seattle. Some of the confirmed speakers are Dan Hesse, CEO, Sprint; Tim Campos, CIO, Facebook; Ben Fried, CIO, Google; JD Howard, GM and VP, Lenovo; Erik Moreno, SVP, Fox Networks; Glenn Lurie, President, AT&T; Steve Mills, CIO, Motorola Mobility; Mark Fernandez, Partner, Sierra Ventures; Dave Webb, CIO, Equifax; John Saw, CNO, Sprint; Hank Skorny, VP/GM, Intel; Hassan Ahmed, CEO, Affirmed, and many more to come. We hope to see you there for the brainstorm.

Mobile Predictions 2014 January 2, 2014

Posted by chetan in : 4G, 4th Wave, ARPU, Bhutan, Chetan Sharma Consulting, Fourth Wave, Indian Wireless Market, Mobile 2014, Mobile Predictions, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

Mobile Predictions 2014

http://www.chetansharma.com/MobilePredictions2014.htm

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First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2014. My thanks to all who participated in our 2014 Mobile Predictions Annual Survey. It gives our community an insider’s view of the trends and predictions for the New Year.

2013 was a terrific year for the mobile industry. Mobile data continued to drive most of the mobile growth around the world. Whether it was LTE-minted markets like the US or the emerging economies like Indonesia, whether it was giants like China or the upcomers like Vietnam, mobile data growth was central to the economic activity in the ecosystem. Mobile is also transforming every major vertical industry around the globe. 2013 proved that connectivity has become the core of our fabric and we are entering the “connected intelligence era” that will enable the Golden Age of Mobile.

The competitive dynamics stayed quite vibrant in 2013. We saw epic battles in the field as well as in the courts. Many players struggled for relevance while some fresh blood was infused with startups around the world.

As we peer into 2014, we will see the total number of cellular subscriptions eclipsing humans on the planet for the first time. As the number of connected devices continue their march towards a multi-billion unit market, expectations of what’s possible are changing. Without a doubt, 2014 will be better than 2013 as new technologies, players, and business models shape the ever changing mobile landscape.

Our annual survey is a way for us to engage our community on the trends for the next year. We put some of the pressing questions to our colleagues and industry leaders. We are able to glean some valuable insights from their choices and comments, some tangible shifts, and get a sense of what’s to come. Executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain and from around the world participated to help see what 2014 might bring to keep us on our toes. What makes this survey unique is that it draws upon the collective wisdom of folks who are at the center of the mobile evolution around the world. The survey provides a view of how they collectively see the upcoming year for mobile.

1. What was most newsworthy in Mobile 2013?

Picture1

Smartphones and tablets established themselves as the most dominating computing platforms. If there was any doubts that the post-PC world is here, they were over as smartphones in most western countries are now over 90% of the devices sold every quarter. Once Nokia announced its shift to Windows, Microsoft’s acquisition was only a matter of time and with the acquisition (and a new CEO), Microsoft looks to a new beginning in 2014. Apple and Samsung continued to duel it out in the courts and the markets. The security breaches and the privacy revelations were a big deal in 2014. Facebook got its mobile mojo and many other consumer brands start to perform well on the mobile 4th wave.

2. What will be the biggest mobile stories of 2014?

Picture2

Mobile continues to transform industries and nations. The continued growth of mobile data around the globe was voted the top story third year in a row closely followed by the expectations of new experiences that go beyond the smartphones. The connected devices segment will keep wanting for more and the big M&As are not going anywhere. Given that cross-domain acquisitions have become the norm, expect some blockbuster deals in 2014. Privacy has also surged in priority for folks in the industry.

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

In mobile, Google, Apple, Samsung and the mobile Operators continued to be the most influential players in the ecosystem. Amazon, Qualcomm, Facebook, Microsoft, and Ericsson also hold significant sway as to which direction we will go in the New Year. The top 10 operators play a major role in terms of technology and business models evolution in the marketplace.

4. What will be the breakthrough categories in mobile in 2014?

It was no surprise that connected devices and wearable computing was voted as the breakthrough categories for 2014. We are in the early stages of understanding what’s possible and the entrepreneurs buoyed by the new business models are pushing the boundaries. Some of the early models lack the smarts but we will learn a lot this year about the new business models and technology boundaries to push with sensor-enabled societies.

5. What will be the most popular consumer mobile applications in 2014?

There is still quite a bit of disparity as to which apps dominate in the developed world vs. the emerging countries. The differences are due to the varying smartphone penetration, cost of data, regional requirements and interests. However, the gaps are closing every year.

6. Which will be the most dominant tablet platform in 2 years?

The industry expects iOS to continue to dominate the revenue pie and Android the unit share. While Windows made a bold entry with Surface, the lack of coherent strategy and execution has left the platform way behind in numbers and while we might see some incremental performance, iOS and Android will continue to dominate the tablet landscape for the next couple of years.

7. Who will make the biggest mobile acquisition in 2014?

Softbank made the biggest blockbuster deal in mobile last year with a $22B acquisition of Sprint/Clearwire. It is likely that Softbank will make a bid for T-Mobile in a deal of similar size in early 2014 and again lead the industry in M&As. A number of operators are also eyeing operators in Europe and so we might be in for a surprise. In a non-operator merger, our panel correctly predicted Microsoft to make the biggest acquisition (Nokia). This year, they pick Google ahead of Microsoft.

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

Due to fragmentation, no challenger has emerged who can put up a fight against the might of the financial companies like Visa and Mastercard. As such, the industry expects them to stay in the driver’s seat for some time.

9. Which solutions will gain the most traction for managing mobile data broadband consumption?

LTE has been the fastest cellular technology being deployed in the history of the industry. 4G continues to be the focus for the operators with other solutions chipping in to help manage the insatiable appetite of consumers for more data. There are hopes that some alternate business models to fund mobile data broadband will emerge in 2014.

10. Which category will generate the most mobile data revenue in 2014?

Access has become the most dominant category for generating mobile data revenues worldwide. There are some regional differences for e.g. in North America, messaging’s contribution is tiny while in Asia and Africa, it is a dominant category. OTT services are also starting to make a dent in the overall revenue mix.

11. Which European operator is likely to emerge stronger from the weak economic climate?

Vodafone sold of its previous Verizon possession. Will it help in making the company stronger? Our panel thinks so. Deutsche Telekom and Telefonica make up the top three.

12. When will mobile commerce be greater than ecommerce?

As the holiday commerce data showed, mobile was already 50% of the digital traffic in 2013. The panel expects that within 2-3 years, each region is likely to see the tipping point.

13. The company bringing the most successful mobile gadget of the year - 2013 and 2014?

Apple continues to set the pace of the industry, however, Samsung has gone toe-to-toe with its rival and won many battles. Samsung understood the potential of bigger screens better than most and capitalized on it with blockbuster sales around the globe. If you go to Asia, you will see ease with which consumers interact with larger screen devices. Now, this phenomenon is taking over the western markets as well. As is always the case, folks expect Apple to surprise us with iPhone 6. There are expectations that Google (Motorola) and Amazon might spring in a surprise or two.

14. Which platform has a credible shot at becoming a viable and durable 3rd ecosystem in mobile?

In 2013, Windows established itself as the only viable third mobile ecosystem. The gap is likely to increase in 2014 though HTML5 and forked Android based OS might pose a challenge.

15. Mobile company of the year - 2013 and 2014?

Samsung’s performance in 2013 was outstanding. With a massive global footprint, its ambition knew no bounds. It performed exceptionally well generating multi-billion quarters and just dominating the Android landscape. In 2012, Samsung displaced the 14 year reigning champion Nokia from the top spot. In 2013, the company solidified its position and was voted the Mobile Company of the year. However, in 2014, the panel expects Apple and Google to duke it out for the top spot.

16. Which of the following are likely to happen in 2014?

Amazon smartphone is like water on Mars. It is much talked about but hasn’t been spotted yet. Will 2014 be any different? For the first time, expectations improved to 50%+. Microsoft might launch Surface smartphone instead of pushing Windows smartphones. 40% of the panel thought that Softbank will acquire T-Mobile and it will go through. Will Samsung fork Android? The question has been of much speculation in 2013 and will continue to see interest in the New Year as well.

17. Which operator is best positioned for the digital world?

As we outlined in our 4th wave series of papers, mobile operators are at a critical juncture of their evolution. The ones that embrace the digital world will live to see another decade of growth and prosperity while others will perish or be relegated to lesser roles. As we have worked with leading operators around the globe on this transition, I have become more convinced that the digital transformation will redefine the segment. AT&T, Verizon, Softbank, DoCoMo, Telefonica continue to lead. There are many sceptics as well. 2014 will be a year of change and progress.

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

As I have said before, we are entering the golden age of mobile and every vertical, every industry is going to be transformed by mobile. Which categories are ripe for disruption? Our panel voted for health and monitoring, home automation, wellness/fitness, entertainment, and auto as the top categories. We already saw great progress in 2013 and will see many more companies enter these spaces in 2014. Exciting times ahead.

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

The inefficiencies of a middlemen can be overcome by algorithms. The concept is not new but society expects more each year to narrow the gap between the thought and task execution. Advertising agencies, retail, real estate, transportation, and education seem to be on top of everyone’s mind as the areas that need some algorithmic infusion.

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

Samsung’s JK Shin was number two behind Tim Cook in last year’s vote. His ascendency to the number one spot for 2013 reflects the success Samsung has had this last year. He was closely followed by Masayoshi Son whose global ambitions put the mobile world on notice in 2013 and John Legere who brought back T-Mobile as a strong contender in the US market. Last year, the expectations were high for Jeff Bezos and they are high again for 2014. Will it be drones or space exploration or just a simple much awaited smartphone? There is a lot to look forward to in the New Year. There were several other leaders who are working on transforming the mobile industry like Sundar Pichai, Jack Dorsey, Tim Cook, Jony Ive, Mark Zuckerberg, Dick Costolo, Neelie Kroes, Lowell McAdam, Ralph de la Vega, Hans Vestberg, John Chambers, Dan Hesse, Tom Wheeler, Matthew Key, Glenn Lurie, Brian Krzanich, and many more.

Thanks again to everyone who contributed. Warm wishes for a terrific 2014.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in March 2014. The next Global Wireless Data Market update will be issued in February 2014.

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

2013 – The year in mobile December 23, 2013

Posted by chetan in : 4G, 4th Wave, Applications, Chetan Sharma Consulting, Connected Devices, Devices, Disruption, Enterprise Mobility, European Wireless Market, Fourth Wave, IP Strategy, Intellectual Property, Mergers and Acquisitions, Mobile 2013, Mobile Applications, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 41 comments

Mobile Predictions 2014 Survey: We launched our annual mobile predictions survey for 2014 last week. For all of you have already contributed – many thanks! Rest – will appreciate you filling out the short survey and helping us in analyzing 2014. We even have prizes J. We will have the full analysis from the survey during first week of January.

2013 – The year in mobile

Just like there is no “year of electric cars” or “year of razor blades” or “year of the Greek yogurt,” there is no “year of mobile” or “year of this or that.” However, as we have seen over the 30+ years of mobile evolution, the next year is better than the previous one and so on and so forth. So, 2013 ends in the long tradition and continuum of human endeavor to make significant progress in multiple mobile dimensions and make an impact on individuals and societies alike. 2013 proved that connectivity has become the core of our fabric and we are entering the “connected intelligence era” that will enable the Golden Age of Mobile.

In no particular order, here were some highlights of mobile 2013:

Number of mobile subscriptions ~ humans: the total number of mobile subscriptions got tantalizing close to the number of humans on the planet. Next year, we will go past the milestone but it shows the pervasiveness and strength of the mobile technology that it has become the basic part of our Maslow’s hierarchy.

More data please: As smartphones approach the 2B mark, the data appetite of consumers showed no signs of abating. In Sweden, the mobile broadband subs are consuming over 7GB/mo. In the US, some Android devices are consuming over 4 GB/mo on average. Operators will need to continue to refine their pricing and margin models as the demand for more spectrum will continue.

The dominance of Samsung and Apple: The tussles in the device segment has all the intrigue and juxtaposition of a Shakespearean drama and the ups and downs of a Pavarotti’s masterpiece. Through sheer muscle tenacity and the execution speed of Usain Bolt, Samsung was able to firmly dominate 2013 despite Apple’s grip on the high-end smartphone market. These two account for almost 50% of the smartphone shipments and almost all of the profits in the space. Apple continued to set the tone for the market with the launches of new iPhones and iPads. Though iOS trails Android in raw deployment, it trounces it in consumer usage. It is also remarkable how quickly consumers upgrade to the latest iOS in stark contrast with the Android fragmentation. Apple finally got access to the big Chinese market.

The disappearance of the legacy device brands: Nokia, Motorola, and RIM were dominant players a few years ago but Apple ensured the smartphone script is rewritten. They all made serious strategic errors one after another and while Nokia and Motorola have found new families to host their aspirations, their story should be a reminder of the turbulent cycles of the device business and that the complacency virus spares no one. The rise of the local OEMs should keep everyone on their toes in 2014.

Android juggernaut: In 2013, Android continued to create distance with Apple in terms of downloads, easily going past the mind boggling 1 billion milestone. Android has changed the industry for the better. While there is trouble in the house, Android will continue to play a major role in the device and app ecosystem in 2014.

The growth of OTT Services: As we discussed in our 4th wave paper earlier this year, OTT Services will be the biggest growth segment for the next decade. In 2013, the segment grew 50% ahead of any other telecom segment. Young IP messaging stalwarts fundamentally altered the messaging landscape with Whatsapp performing exceptionally. SMS usage and revenue numbers were impacted worldwide.

The digital revenue streams are very distributed with diverse players such as Facebook, Twitter, Starbucks, Expedia, Uber, Pandora, Amazon, AT&T, Telefonica, Verizon, DoCoMo, Netflix, China Mobile, Rovio, Square, Softbank, Ebay, Hertz, Apple, Google, and Microsoft. In our work with players around the world this year, it is clear that there is significant energy and application in mining the opportunities on the 4th wave. With nascent efforts in Bhutan, Vietnam, Malaysia to moonshots in the US and Europe, mobile is rewriting the rules in virtually every industry. Fasten your seat belts for another fast paced year in 2014.

Post-PC beat PC+: Apple expertly wrote the post-PC narrative and while the PC+ crowd has a legit argument, perception is often reality and there in no doubt that from here on out, the industry will be talking about the post-PC world in one voice. Even Microsoft will grudgingly admit to the transition and likely shift its strategy accordingly. As we wrote long time ago, Tablets have fundamentally altered the computing paradigm. In our SMB research released earlier this year, it was clear that smartphones and tablets are the tools of choice for the enterprise and that is not only altering the device business but also the software landscape. Mobile broadband, the cloud, and the applications are altering the enterprises – big and small. Microsoft should take solace from a tough year of progress. Blackberry is practically done and Microsoft has established itself as the distant but a viable third mobile ecosystem. Had it not been for a series of strategic mistakes, Microsoft might have made better inroads in 2013.

LTE launches: LTE is the fastest growing generation of cellular technology in the history. With over 250 networks launched, the desire to launch IP networks quickly is on top of the agenda. US leads with all major operators having substantial LTE deployments but other nations are fast catching up. While there has been quite a bit of focus on LTE, WiFi has been emerging as the white knight and its importance only grew in 2013 with 60-70% of the mobile data traffic being carried by WiFi networks in most of the countries. It might lead to some interesting business models in the coming years. 5G entered the industry lexicon.

M&As: It is natural for fast growing and competitive industries to consolidate. 2013 wasn’t any different. There were some blockbuster and expected M&As: Microsoft acquired Nokia, Softbank surprised with Sprint/Clearwire acquisition, Verizon finally got hold of its destiny from Vodafone. As we have eluded to several times in our past research notes, we expect the global M&A to continue with several block buster deals slated for 2014. Stay tuned.

Patent wars: In maturing markets, patent wars are the unfortunate part of the ongoing battle for dominance. Mobile saw its share of patent wars. With roughly quarter of the USPTO grants becoming mobile related, it shouldn’t come as a surprise though.

Regulatory tussles: Regulators are generally always behind in understanding a fast growing industry. It was clear in 2013, that the convergence of the computing and communications world has left the regulatory world woefully short of expertise and imagination. Governments around the world will do better by hiring folks from the industry to get a grip of the fast-paced every-changing dynamics of the mobile world as the very competitiveness of a nation depends on it. From spectrum to privacy, from competition to commerce, regulators need to get up to speed on unexpected trajectories of the new world.

Security and Privacy: From Snowden revelations to industrial espionage, from credit card data loss to enterprise security, the security and privacy of mobile data, applications, networks, and devices became front and center of the security and privacy debate.

Operator disruption plays: In the telecom space, the #4 player generally doesn’t have a big impact on the overall mechanics of the industry. However, when it has nothing to lose, it can provide a potent dose of disruption to the market. Free in France and T-Mobile in the US were examples of that this year. In France, by offering cheap mobile data services at low margins, the newcomer altered the economics of the segment tumbling the incumbent revenues by 10%. In the US, through a series of financial and marketing maneuvers, T-Mobile was able to alter its net-add trajectory and had meaningful sub gains for the first time in three years. Also, for the first time, T-Mobile forced the top three to react to its moves and not the other way around. It also inspired other smaller players in other countries to rethink their strategies.

Connected devices: The promise of M2M and connected devices has been there for some time. Internet of Things has morphed into the gimmicky Internet of Everything. While the hockey stick curve hasn’t arrived yet, there was plenty to celebrate with the introductions of Google Glasses, wearables, smart watches, connected autos, glamorous thermostats, winking light bulbs, home security and energy management solutions and much more. GE is spending billions for its “industrial Internet” initiative. A nice platform has been set for continued feverish growth and product introductions in 2014.

Mobile’s impact on commerce: Mobile is changing every industry but its impact on commerce is particularly notable. In the 2013 holiday season (according to IBM), mobile made 17% of the online sales increasing over 55% from 2012. Tablet users spent $126/order.

Meteoric rise of mobile apps: In 2010, we evaluated the impact mobile apps will have on the industry. Much of the growth has been expected, however the players who lead in revenue and downloads have fluctuated across the various platforms. In 2013, Google started to match Apple in downloads though Apple easily wins in the revenues category and thus still remains more attractive to the developers though the gap is closing.

There was much more – Twitter IPO, Surface, Moto X, spectrum scandals, Facebook’s love for mobile, Google mobile advertising dominance, the rise of the Chinese OEMs, decline of HTC, and several other events captivated our attention.

I am positive that 2014 is going to be another terrific year for mobile. The progress and surprises will come from all quarters. New players will emerge, new business models will take hold, and we will make significant progress. I am also sure that you all will do your part in shaping the mobile cosmos.

Would love to hear from you. How was your 2013? And what are you looking to do in 2014 that will change the mobile world? Please be sure to fill out our annual predictions survey for 2014.

With best wishes for an outstanding 2014.

Yours truly

Chetan Sharma

US Mobile Market Update Q3 2013 November 14, 2013

Posted by chetan in : 4G, 4th Wave, Big Data, European Wireless Market, Fourth Wave, Mobile Applications, Mobile Cloud Computing, Mobile Commerce, Mobile Ecosystem, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update Q3 2013

http://www.chetansharma.com/usmarketupdateq32013.htm

Download PDF (2MB)

Summary

The US mobile data market grew 5% Q/Q and 15% Y/Y to reach $22.8 billion in mobile data revenues. Data is now 48% of the US mobile industry service revenues and as we had forecasted a few years back, the cross-over point of 50% might occur next quarter. For the year 2013, we are expecting $90 Billion in mobile data service revenues for the US market making it the number one market in mobile data revenues ahead of Japan and China. Q4 2013 is looking to be another record breaking holiday quarter for the industry at many levels, which is setting up 2014 quite nicely.

For the quarter, the market added 2.2M new connections, a strong reversal from the paltry 139K last quarter. T-Mobile continued to impress after its strong reversal in industry metrics last quarter on the back of a series of marketing and pricing initiatives that seem to be gaining traction and having an impact on its image and fortune.

Given that Apple didn’t launch the device until Sept and then had severe supply-chain constraints, Android had its best quarter against iOS with 54% share in the US market.  However, iOS is likely to catch-up in Q4.

Smartphones are now past the 64% mark in the US and continue to sell at a brisk pace accounting for almost 90% of the devices sold in Q3 2013. Apple led the smartphone sales amongst the top 4 operators with 42% share for the quarter. While the US penetration of smartphones is 64%, the 64% of the sub base is concentrated in only 40% of the households thus leaving plenty of growth in the marketplace. Overall, connected devices remains the highest growth segment with 6% Q/Q growth.

Smartphone and Connected Device Growth

Though China has overtaken (primarily because of the sheer size of its population) US in terms of the overall smartphone penetration, US remains the market where OEMs have to be really successful in order to be consider a serious player on the larger canvas. Though the likes of Xiaomi and the Micromax have had good success in their local markets (and still have a great amount of growth left), the prized market to make a sizable dent in their overall revenue and margins is the US market. This is primarily due to handset subsidy that allows consumers to easily own premium brands at bargain-basement prices in addition to the higher disposable incomes. This has helped the ASPs to go up in this market unlike some of the other markets where they have been going down.

US also boasts four leading-edge LTE networks that allows the ecosystem to innovate at the edge, literally. Having access to fast mobile broadband impacts human behavior, application and service development and everything in between. As such, US has become the laboratory for many experiments that benefit the larger ecosystem. This absolutely doesn’t mean that innovative things are not happening in other parts of the world. Far from it. But the “enabling layer” of networks, devices, and platforms is in its most advanced stage in the US. This layer allows folks to build applications and services that will power the global economy.

So, in order to be considered credible in the smartphone space, one must have a decent scorecard in the US today. The pendulum could of course swing and China could take the lead. In fact, US and China are the G2 nations of the mobile world.

While there have been murmurs in the market about smartphone saturation, the upgrade cycles will keep up the demand for more devices in 2014.

Like any ecosystem or a market, there are winners and there are companies who couldn’t perform to their potential. Enough ink has been spilt on Blackberry to reiterate what was quite predictable. The only interesting tidbit that emerged was that as we expected, Lenovo made a serious run for it and the Canadian government stopped it. It is ok for Canadians to use Lenovo laptops but not the smartphones? Of course, the reasons were complicated and different from what have been generally reported. Can Blackberry make a comeback under a savvy CEO? If they continue with the same OS, it is hard to see how?

Apple for the first time launched two models – 5s and a slightly lower priced 5c. It seems like the strategy might have been two fold a) get the supply-chain ready for more than one new model at a time and b) given an additional option to the consumers (in the US) who used to go for a level down version. Since the supply chain was under pressure, it is hard to get a clear picture of what might be happening but the iPhone 5s/c launch allowed Apple to raise the percentage of new devices sold. In fact, based on the weekly sales data from ITG Research, they might have managed to flip the ratio. For e.g. in Sep and Oct 2012, the old models sold 3:1. During Sept-Oct 2013, the new models outsold the old models by 1.7:1. 5s outsold 5c 1.6:1.

The big block-buster deal of Q3 was Microsoft’s acquisition of Nokia. It was clearly one of the outcomes Nokia was on the path of the day it chose Windows Phone OS. Microsoft got an effective OEM distribution and design system for really cheap but how long will it take to turn things around? Its mobile fate might largely depend on who the new CEO is.

Tablets are making a tremendous impact in the post-pc era. In the US market, we are already approaching 100M unit sales/year run rate. While Android tablets have taken market share from iPad, Apple remains the undisputed king of the category primarily because of superior hardware and a more robust ecosystem. Android tablets can be cheap but also unreliable, the life expectancy of such tablets can be 50% or so compared to the iPad. The usage is even less. Microsoft launched a credible challenger in Surface but there have been so many missteps that it is not (yet) in the picture of the post-pc transition. 

There has also been quite a bit of excitement about smart watches, smart glasses, smart cars, smart homes, and on and on. However, we must remember that just because device is growing in the era of the smartphones, it doesn’t makes them smart. In fact, most of these devices are where smartphones were in the late nineties – basic, functional, and full of possibilities. The evolution, however, will be much quicker. Google is one company that is pushing the boundaries of across multiple dimensions. Regulators and policy makers better come up to speed on the emerging landscape quickly.

A good test of a platform’s importance is to find out what happens if the platform shuts down for 5 minutes – how much panic and revenue drop does that create in various parts of the world? Another measure of the platform is the value it creates by launching new companies and ideas. For mobile, the answer is fairly obvious.

The Fourth Wave and the shift towards services

It is evident that there is a subtle shift from devices/access to services/solutions. In our paper on the topic Operator’s Dilemma (and opportunity): The Fourth Wave, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skill set and strategic approach than the past three curves. As predicted, we are starting to see the impact of the 4th wave on a global scale and some operators have started to break out the 4th wave revenues in their financials. Operators with better balance sheets will also look for global expansion especially in Europe where economic impact on the telecom operators has been severe, however the M&A efforts will be complicated by respective governments desire to keep control of the national infrastructure provider.

We had a very successful Mobile Future Forward Summit last quarter. It was dedicated to exploring the 4th wave in more detail across multiple dimensions and verticals. The dialogue was incredible and validates the march towards the 4th wave that is redefining industries across the spectrum including the wireless industry itself, at its core. Some of these tectonic shifts aren’t very apparent and visible but as I have spent time working with some of the leaders in New York, Silicon Valley, London, Abu Dhabi, Barcelona, Hanoi, Singapore, Dallas, New Delhi, and Seattle this year, it has become abundantly that mobile industry is at a key inflexion point that is changing industries and the power structures, creating new opportunities and new revenue streams. In my interview at Mobile Future Forward, Ralph de la Vega, CEO of AT&T Mobility indicated that the ARPU from Digital Life customers is higher and the churn is lower. So, the fourth wave services have a direct impact on existing revenue streams as well. Conversely, absence of such services doesn’t yield a pretty picture.

FCC chairman and regulations

Amidst all the cacophony of device launches, acquisitions, and investments, FCC finally got its new chairman. Tom Wheeler is one of the savviest operative in the space with better grasp of the ecosystem, policy, law, and politics than most of his predecessors, so it will be interesting to see what the next FCC era brings over the next 3 years. Clearly, Incentive Auctions will be one of the most critical items on the agenda but some other issues like the potential T-Mobile acquisition and net-neutrality issues are likely to become important as well. Regardless, we are in for an interesting ride.

What to expect in the coming months?

2013 has been quite a year for the mobile industry and as we head into the holiday season, it’s a consumer’s market with plenty of choice and competition.

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

Against this backdrop, the analysis of the Q3 2013 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

4th Wave Progress

Handsets

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in March 2014. The next Global Wireless Data Market update will be issued in February 2014.

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

US Wireless Market Update Q1 2013 June 20, 2013

Posted by chetan in : 3G, 4G, 4th Wave, AORTA, Chetan Sharma Consulting, Connected Devices, Infrastructure Providers, Mobile Future Forward, Mobile Patents, OTT, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

 US Wireless Market Update Q1 2013

http://chetansharma.com/usmarketupdateq12013.htm 

Summary

The US mobile data market grew 2% Q/Q and 14% Y/Y to reach $21 billion in mobile data revenues. Data is now almost 45% of the US mobile industry service revenues and as we had forecasted a few years back, the cross-over point of 50% might occur later this year. For the year 2013, we are expecting $90 Billion in mobile data service revenues for the US market.

For the quarter, the market added a paltry 1.1 million new connections, a decline of 60% from Q1 2012. It was the lowest net-adds Q4 quarter in the US mobile history (barring the early days of tepid growth). The postpaid category added only 200K subs largely on the back of Verizon’s 677K net-adds.

AT&T sold more iPhones but Verizon sold more smartphones. With T-Mobile joining the iPhone bandwagon, iOS lead in the US market is likely to continue.

T-Mobile continued to lose their postpaid subs for the 11th straight quarter. Sprint also lost over half a million postpaid subs primarily due to the Nextel business. Once Nextel is sunsetted mid-2013 for good, we can expect a pick-up of net-postpaid subs at Sprint.

The see-saw battle between Softbank and Dish for Sprint/Clearwire continued as expected but as expected Softbank is likely to prevail when it is all said and done. After completing the Metro acquisition, T-Mobile started to integrate the 8M+ base into the company. We can expect that the next round of M&A will continue once we are done with the Sprint decision.

As we mentioned in our previous updates, smartphones are now past the 50% mark in the US and continue to sell at a brisk pace accounting for almost 85% of the devices sold in Q1 2013. Apple led the smartphone sales amongst the top 4 operators with 50% share for the quarter. While the US penetration of smartphones is over 50%, the 50% of the sub base is concentrated in only 30% of the households thus leaving plenty of growth in the marketplace.

In terms of Q/Q growth, Connected Devices segment grew 17%, Wholesale 5%, Prepaid 4%, and Postpaid was flat.

Verizon and AT&T maintained their top positions in the global rankings by mobile data revenues. A survey of the entire ecosystem shows that the US companies dominate the top 5 rankings of profit share. China Mobile leads the industry with Apple, Verizon, AT&T, and NTT DoCoMo completing the rankings.

What really drives mobile device performance?

Will a 3rd mobile ecosystem emerge this year? Is it necessary? Specifically, what problem does it solve? What factors influence the purchase behavior of the consumer? And can OEMs change their strategy to impact sales? Why have Microsoft and Nokia not been able to make a dent in the trajectory despite having a compelling OS, range of devices, consumer-friendly price-points, better distribution, and increased level of advertising dollars? Will Blackberry be able to recover? Why hasn’t HTC One been able sell in similar numbers as the Galaxy S4 despite being better by most accounts? What will it take for LG to increase share? Can Motorola stay relevant? Can new entrants disrupt the waters? Can ZTE and Huawei come from the bottom and disrupt the top players? Will Apple and Samsung be able to protect their position on the top?

These questions have been a matter of intense debate in the media and in the ecosystem. We try to address these questions in some detail in our recent paper “What Really Drives Mobile Device Performance?” As I mentioned to the New York Times, it is no longer good enough to have a great product, an OEM needs to perform well across multiple variables.

The Fourth Wave and the shift towards services

It is evident that there is a subtle shift from devices/access to services/solutions. In our paper on the topic Operator’s Dilemma (and opportunity): The Fourth Wave, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skill set and strategic approach than the past three curves. It is being widely adopted in the operator community around the world and some operators have started to break out the 4th wave revenues in their financials.

We will be discussing fourth wave in much more detail at our annual thought-leadership summit – Mobile Future Forward with the incredible leaders who are making billion dollar decisions every day.

OTT impact on legacy businesses and models

In the last 12 months, Whatsapp moved around more messages than all the mobile operators combined in any country and that includes US and China. US and China collectively have approximately 1.5 billion subscriptions. Whatsapp with its 200M base has moved more messages in the last 12 months than all the operators in both US and China combined. Ok, let that sink in for a few minutes. For a significantly small fraction of the cost, Whatsapp moves around more messages than every single telecom operator on the planet. Of course, Whatsapp makes a tiny fraction of the revenue compared to the operators. What Whatsapp and similar players lack in ubiquity and interoperability, they make it up by being the commodity utility provider at a low cost to the consumer. The notion of designing by a standards committee above the IP layer is just no longer needed in majority of the cases. Once you have the IP connection, consumers will gravitate towards innovative solutions and be willing to fragment their communication behavior across multiple apps. SMS will stay relevant for the foreseeable future but the growth is in IP communication. We will also see more cooperation between the IP app players and the operators as they find common strategic grounds.

We will see the same impact of IP and mobility on the various verticals like Retail, Energy, Education, Entertainment, Travel, etc. Some operators have been preparing for this shift and going outside their traditional products and services to launch services like AT&T’s Digital Life to address opportunities in the home, Verizon’s efforts in health and public safety and Sprint’s steps in mobile advertising and analytics.

Operator M&A – The Rule of Three Strikes Back

The M&A game continued with intense frenzy in the ecosystem. T-Mobile completed the Metro acquisition which gives it more heft and scale to compete as a value-player. However, the real drama has been going on with the Softbank and Sprint merger with Dish playing the role of the spoiler. Our original thesis has been that Softbank is a better fit than Dish and Dish’s strategic intention might actually be T-Mobile not Sprint. It was a masterful decoy to raise the cost and pain for Softbank and Sprint. It is likely to be all sorted out in the next few weeks.

There have been some interesting twists and turns but as we have stated before, the US market competitive equilibrium will be complete when Sprint and T-Mobile get together at some point down the road. As outlined in our research paper on the subject, market forces find their way to get to 3 dominant operators that compete for attention and revenues, rest becomes noise. While the regulators might scoff at the idea, the inevitable market forces will find their way around.

Operators with better balance sheets will also look for global expansion especially in Europe where economic impact on the telcom operators has been severe, however the M&A efforts will be complicated by respective governments desire to keep control of the national infrastructure provider.

The Patent Battles

In 2012, Samsung had a strong showing not only in the market place but also in the patents area. It edged past Nokia to become the overall mobile patents leader in the industry. IBM and Microsoft also improved their rankings. Nokia, Ericsson, and Alcatel-Lucent slid in rankings. Motorola dropped out of top 10. Not surprisingly, companies who have been around for a while especially in the infrastructure and the platform space lead the overall mobile patents. Samsung has been fiercely building its patent portfolio in both Europe and the US and the efforts have paid off as it has built a significant portfolio and a formidable lead that is likely to serve it well in the coming years.

A more startling observation is the mobile patent grants as a percentage of the total patent grants in a given year have risen significantly for the US market indicating the importance innovators attach to mobile in their business. In the US, one out of every five patent granted in 2012 was related to mobile. Less than a decade ago, this number was less than 10%. The European market has seen lower growth relative to the US market. Roughly one out of every ten patents granted in Europe are mobile related.

Samsung was the leader in the mobile patents granted in 2012 in the US and that propelled the company to the top ranking in overall patents (1996-2013). Samsung was followed by IBM, Sony, Microsoft, RIM, LG, Qualcomm, Ericsson, Panasonic, Alcatel-Lucent, and Nokia for the top 10 companies by mobile patent grants in 2012. The top 5 categories for patents grants in the US for 2012 were Telecommunications, Digital Multiplexing, Digital Processing – Data Transfer, Digital Processing – Financial, and Digital Processing – Databases. The top 5 filers of mobile patents in the US were IBM, Microsoft, Samsung, Qualcomm, and Sony. Apple made it to top 10 for the first time on the strength of its patents filed in the computer graphics processing category.

For more detailed analysis, please refer our research paper on the subject – Mobile Patents Landscape – An In-Depth Quantitative Analysis.

SMB leading indicator of mobile adoption

Small businesses are at the heart of the US economic engine. They represent roughly 45% of the non-farm GDP. Every administration, every president focuses on small business growth and job creation. In our paper “The ABCs of SMB Transformation: Apps, Broadband, and the Cloud,” we explored how mobile is transforming the SMBs. The main conclusions were: a) SMB segment is a leading indicator of technology adoption and we can learn a great deal about the broader trends by understanding how SMBs adopt technology b) there are tangible gains in productivity – on average SMB workers save 40 minutes per worker per day which translates into significant impact on profits and c) there is a tangible impact on computing, enterprise software and services as the business processes are shifting towards iOS and Android.

What to expect in the coming months?

All this has setup an absolutely fascinating 2013 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. Players who firmly attach themselves to the 4th wave will reap benefits while the ones who miss it will see their fortunes dwindle. We are gearing up for our annual Mobile Brainstorm Summit – Mobile Future Forward on Sept 10th, hope you can join us.

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

Against this backdrop, the analysis of the Q1 2013 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

Applications and Services

OTT and the impact on legacy services

Handsets

Mobile Data Growth

Your feedback is always welcome.

Chetan Sharma

We will be discussing a number of issues raised in this research update at our annual mobile executive thought-leadership summit – Mobile Future Forward on Sept 10th in Seattle. Thought-leaders include: Biju Nair, EVP and CSO, Synchronoss; Curtis Kopf, VP – Customer Innovation, Alaska Airlines; Danny Bowman, Chief Sales and Operating Officer, Samsung; David Small, Chief Platform Officer, Verizon Enterprise Solutions; Erik Moreno, EVP, Fox Networks; Fay Arjomandi, CEO - Vodafone Xone, President/Chairman – Vodafone Americas Foundation; Geeta Nayyar, Chief Medical Information Officer, AT&T; Glenn Lurie, President, AT&T Wireless; Hank Skorny, VP and GM – Software Services, Intel; Henning Schulzrinne, CTO, FCC; Jef Holove, CEO, Basis; Jude Buckley, President – Mobility, Best Buy Co; Kevin Packingham, Chief Product Officer, Samsung; Manish Jha, GM – Mobile, NFL; Marianne Marck, SVP – Consumer Products, Starbucks; Marios Zenios, VP – Uconnect, Chrysler Group; Matt Carter, President – Emerging Solutions, Sprint; Raj Toleti, CTO, Patient Point; Ralph de la Vega, CEO, AT&T Wireless; Rowland Shaw, VP - Strategy, Ericsson; Stephen David, former CIO, P&G; Steve Elfman, President, Sprint; Terry Myerson, Corporate Vice President – Mobile, Microsoft; Tracy Isacke, Head, Telefonica Digital Americas

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 August 2013. The next Global Wireless Data Market update will be issued in July 2013.

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

New Research Paper: The ABCs of SMB Transformation: Apps, Broadband, and the Cloud May 6, 2013

Posted by chetan in : 3G, 4G, 4th Wave, AORTA, Applications, Chetan Sharma Consulting, Connected Devices, Enterprise Mobility, European Wireless Market, Mobile Cloud Computing, Mobile Ecosystem, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

The ABCs of SMB Transformation: Apps, Broadband, and the Cloud

- A collaboration between Chetan Sharma Consulting and AT&T

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

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Download pdf (1.5 MB)

Introduction

In 2013, the US mobile data revenues will exceed $90 billion accounting for over 165% growth in the last 5 years. This makes US the biggest market for mobile data solutions and services. The smartphone penetration in the US went past 50% by mid-2012. The number of applications available to consumer has quadrupled in just the last two years. While the growth in the smartphone segment has been quite impressive, the tablet adoption rate has been the highest in the consumer electronics history. The advent of mobile broadband, powerful computing devices, reliable cloud services and applications have changed the computing landscape forever.

At the same time, the Consumerization of IT is changing the face of the enterprise architecture as well. This is felt more acutely in the small-and-medium business (SMB) segment. US is also the biggest enterprise market in the world and the SMB segment represents the more agile and technology-savvy of the ecosystem. In fact, we think it is a leading indicator of how technologies are going to be adopted in the enterprise ecosystem, what trends will prove to be disruptive, which vertical segments will embrace efficiency, and most importantly, how should we think about the ever-changing landscape as we look towards rest of the decade.

Small businesses are at the heart of the US economic engine. They represent roughly 45% of the non-farm GDP. Every administration, every president focuses on small business growth and job creation. Given the importance of small businesses to the economy, it is worthwhile to look at how their technology needs are changing. Additionally, it is important to understand how they are adopting technology and the impact it is having on their productivity, competitiveness, and efficiency. The technology adoption is also putting some of the traditional industry segments at risk while creating several new growth areas.

To understand the impact of mobile broadband, devices, and cloud applications, we conducted a survey of eighty SMB companies of different shapes and sizes across the US serving different verticals constituting over ten thousand employees. We also looked at the data from over twelve thousand companies in the SMB segment and over twenty thousand larger enterprises. Additionally, we conducted a series of interviews to better understand the motivations, requirements, and feedback of these companies. These companies have been in business for twenty years on average with over two years of experience with mobile data solutions. By understanding how they use and benefit from mobile data solutions, we can better identify the course of enterprise mobility in the US and around the world.

Some interesting findings:

· Small and medium businesses are leading indicators of technology adoption. As referenced in this paper, SMB smartphone and tablet penetration is more than 90 and 65 percent respectively; whereas national smartphone and tablet penetration is roughly 55 and 22 percent. 

· Mobile First to Mobile Only. Last year, we proposed that we will start moving from mobile first to mobile only economy. We said that we are approaching a pivot point wherein the mobile first doctrine is going to move to mobile only. We are starting to see strong evidence of that shift. In our survey, roughly 30% of the SMBs are transitioning from desktops/notebooks to smartphones/tablets. Business software and solutions are being transformed by the use of smartphones and tablets. With this shift, we’ve seen the emergence of a generation of app developers focusing primarily on the mobile app platform.

· Mobile broadband, cloud, and apps are providing real and tangible ROI. The SMBs in the survey saw an average savings of 40 minutes per worker per day, which translates into significant impact on profits over the course of the year.

Your feedback is always welcome.

Chetan Sharma

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

Abhi Ingle – The Mobile Cloud Connected Enterprise

Posted by chetan in : 4G, 4th Wave, Applications, Enterprise Mobility, Mobile Cloud Computing, Mobile Ecosystem, Mobile Future Forward, Worldwide Wireless Market , add a comment

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The following piece is excerpted from the 2011 Mobile Future Forward BookConnected Universe. Unlimited Opportunities. It was written by Abhi Ingle, then VP, Advanced Mobility Solutions at AT&T and now VP of Innovation and Head of Foundry  at AT&T

Technology and Structural Change

An observation of the technology industry reveals three broad trends having a visible impact on business today. First, mobile computing devices continue to add computing capacity and new capabilities at an exponential rate of growth (Figure 1a and 1b). (Moore’s Law is still very much in effect and shows no signs of slowing). Second, wireline and wireless connectivity is being migrated to a flat, high-speed internet protocol architecture providing the ability for the stack of services to be disaggregated. This allows applications to run seamlessly across multiple devices simultaneously in stationary, nomadic and mobile scenarios. Third, the explosion of cloud computing in terms of infrastructures, platforms and applications continues to develop and is now gaining acceptance in mainstream scenarios, both consumer and business (Figure 2).

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Figure 1a and 1b: New Uses for Computing (Source: IDC) and New Model of Computing Innovation (Source: 2011. Intel Investor Meeting).

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Figure 2: AT&T Mobile Data Volumes Up 8,000% Over Four Years (Source: 2011. AT&T).

Amplifying the impact of these technological changes is a sea-change in technology purchasing, evaluation and consumption in the marketplace. Technology purchasing–previously a top-down IT-driven process–has now morphed in to a bottom-up consumer-driven phenomenon. Alternately referred to as the “consumerization of IT” or the “Bring Your Own Device” (BYOD) movement, it is having a tremendous influence on business IT, effectively redefining where and how technology decisions are made. (Ted Schadler (Forrester Research) and Josh Bernoff (Forrester Research) have written Empowered, an entire book dedicated to this trend alone).

Any of these advances taken individually is an exciting evolution, but the opportunity presented by the combination of these technologies and trends taken together is revolutionary. This troika of technological advancements and industry trends can be viewed through two lenses, either as an incredible opportunity or an insurmountable challenge.

This dichotomous view is understandable. There are formidable obstacles as companies realize that they may have to reengineer twenty years of PC-centric architecture to contend with multiple connected devices, multiple computing platforms and multiple applications (which may or may not run on all of the same platforms). It can be an overwhelming task even for the most forward-thinking organizations. We choose to view this as a rare opportunity for businesses agile enough to harness these trends to make dramatic business improvements by transforming classic enterprise IT architectures to real-time, business process driven, cloud-based mobile architectures. A systemic phased approach with the right partners can make this a manageable and self-funding transformation.

We find the three technology changes referenced earlier to be mutually reinforcing. For example, the advent of powerful smartphones, tablets and connected devices changes the computing paradigm to be one in which there are many devices per person. Having several devices inherently leads to the necessity to have data and applications accessible by multiple devices simultaneously.

What is the phenomenon ideally suited for housing applications allowing access from multiple end points? The cloud! And, of course, all of this would not work if all of these devices were not always on and connected through incredibly fast flat IP networks (wireless and wireline). The business network is, in fact, the most mature virtualized element, secure MPLS-based connectivity which increasingly forms the core of enterprise connectivity today was the original “cloud or virtualized” service. The virtualization of data centers, servers, storage, processing power and the XaaS phenomenon is taking the other elements towards the same evolution as the network, in effect creating a virtualized or cloud fabric in which network, processing, storage and software can flex to the needs of the enterprise on a dynamic basis (Figure 3).

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Figure 3: Cascading Waves of Innovation (Source: 2011. AT&T).

Much has been written about the technologies involved in this change, but surprisingly little about a business framework that can fully take advantage of these changes. Capitalizing on this opportunity will require a holistic framework encompassing people, processes, assets (Figure 4) and linkages between the three in an architecture that provides the enterprise with the ability to sense, analyze and respond in real-time (Figure 5).

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Figure 4: Framework for a Real-Time Event Driven Enterprise. (Source: 2011. AT&T).

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Figure 5: Sense, Analyze, Respond Relationship. (Source: 2011. AT&T).

Consider two companies we have worked with recently on extreme ends of the spectrum. The first, a large beverage distribution company, with a history of successfully implementing progressive mobility solutions, wanted to retain its competitive advantage.

The second, a 20-person company providing specialized healthcare supplies, with no automation, sought to capitalize on creating a real-time enterprise which they could never have afforded prior to these technological changes. Both of these companies have dramatically transformed their business processes around the concept of the real-time enterprise in which people, process and assets are always connected and can be optimized on the go.

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Figure 6: Beverage distribution company scenario illustrates real-time demand and supply adaptation (Source: 2011 AT&T).

To understand how the beverage distribution company is thinking about the future and how they can capitalize on the technology changes, visualize this scenario:

A large group of bicycle riders are out on a long ride on their bicycles on a hot day and require a sports drink to rehydrate (Figure 6, Illustration A). Those of you familiar with road biking will recall that the form fitting lycra outfits that most road bikers wear typically limit what one can carry. Imagine that on the bicycle’s handlebar (where in the past a GPS device would have resided) is instead a sled for the rider’s mobile smartphone, GPS and near field communications, where he or she can use an application to locate the nearest drink machine (Figure 6, Illustration B) and get directions to it (Figure 6, Illustration C).

Once there, the rider can use his or her mobile device to pay for and receive a drink using Near Field Communication (NFC) technology. The process is repeated for the entire group of bikers, depleting the machine of all the sport drinks (Figure 6, Illustration D). In a non-real time world, the company would fail its’ consumer at the moment of truth – it would direct thirsty riders to an empty machine. But in our real-time connected world, the connected vending machine has already signaled its status to the cloud, has been taken off the database before the next set of riders would see, and they are automatically directed to the next closest machine.

Simultaneously, cloud based analytics ensure that “restock work orders” are routed to all supply trucks in the area (Figure 6, Illustration E). (All trucks are equipped with automated vehicle location technologies that are continuously connected). Each supply truck driver has a handheld device to receive the alert and the ability to accept a restocking order and go refill the depleted machine. As soon as this is done the vending machine resignals its status and is immediately shown on the next dynamic search a consumer makes. Imagine the efficiencies and revenue maximization as a result of these real-time interactions!

One could even imagine correlating this cycle to the weather/temperature or time of day to drive even further efficiencies. Clearly, not everything outlined in this scenario has been implemented to date, but by preparing for the future, this company is systemically transforming its business processes and moving to a real-time mobile IT architecture.

Now let’s take a look at the small twenty person specialized health supplies company harnessing these technology trends to completely revise the operations of their company around a mobile, real- time cloud delivered core.

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Figure 7: Rehabilitation Company Specializing in Wheelchairs (Source: 2011 AT&T).
(ProntoForms is a trademark of TrueContext Corporation.)

The Scenario Prior to Transformation: The company– a privately owned corporation–supplies custom wheelchairs to customers. The company operated primarily via paper forms requiring extensive calling back and forth using basic phones and a classic company reception system despite the fact that the company could not afford to keep the company phone line staffed around the clock. The company also owned two delivery vans to pick up and deliver wheelchairs the company was either servicing or supplying. Since the company could not afford any more vans, multiple calls to these vans to ensure on time delivery and pickup was critical.

The AT&T Mobility Applications Consultant who called upon this company soon realized the company was too small to either host, manage or support any onsite software or even deploy and maintain PCs. The answer was delivering four applications through the cloud direct to smartphones (in this case iPhones) and to specialized tracking devices. What follows is a summary of the 4 different solutions and the problems they addressed. (Refer to Figure 7 for the following).

Solution #1: The company’s wheelchair technicians used paper forms for everything they did; surveying customers about their needs, taking down specs or noting repairs delivered. This equated to three different forms over four pages in length. Each day field technicians filled out the forms and turned them in. Then they were formally entered/rekeyed at the end of every day. This was a time consuming effort with frequent errors and inaccuracies that had to be found, corrected, and re-entered.

The company was transitioned to a cloud delivered, mobile forms solution. The Pronto Forms Solution delivered by AT&T converted a paper intensive environment into a highly efficient method of capturing data. The forms were automated on iPhones for the field technicians and eliminated all the paperwork and rekeying steps, cutting the previous process time by approximately 75% per form. The information is also available online as soon as the technician fills out the form.

Solution #2: As previously mentioned, this company has two vans on the road constantly making deliveries. But the owner has no visibility as to current vehicle location, if they are on schedule, and if the miles driven are valid.

The TeleNav Vehicle Tracker from AT&T, a vehicle tracking solution involving a box that can be attached to the van and a cloud delivered portal provides visibility of corporate vehicles at all times. This ensures the vehicles whereabouts, if the driver is on schedule, and how far the vehicles have been driven. All this leads to better customer service, better image, and increased safety, security, and business stability.

Solution #3: The owner often needed to send out communication blasts to employees to see if someone could fulfill a particular task when they were short staffed in one department, but the owner and employees were only able to receive messages from customers on a 1:1 basis, slowing communication down. The implementation of AT&T Enterprise Paging allowed the owner to send one message to all employees via a simple text messaging portal and confirm receipt/delivery of messages.

Solution #4: After-hours management of the business was practically non-existent since the company was so small, yet their customers were dependent on their wheelchairs and needed the ability to reach someone in the company immediately.

AT&T Office@Hand, a cloud delivered PBX to the smartphone with a very simple web GUI, provided the customer with the ability to better manage and control after-hours service. It unifies employees in a business-on-one-phone system and includes auto-receptionist, multiple extensions, voicemail, call handling, faxing, and other features. The owner can assign a receptionist, a “sales, technician or repair” department on the fly depending on which employees are available.

The bottom line: The company was able to accomplish with $99 smartphones and asset tracking devices and a monthly software subscription fee of <$500, what would have previously involved buying $800-$1000 PCs , tens of thousands of dollars of enterprise software, a PBX system and an IT person to deploy and manage the software and communications. The difference is startling! Contrast capital and OPEX running into $200,000 vs. a CAPEX of <$1500 and monthly subscription fees of <$500 for the software. Even better, all of this is delivered by one company (AT&T) with a simple monthly bill that includes: Voice charges, data charges and applications charges all as one consolidated bill with one point of contact. This scenario even 3-4 years ago was unimaginable prior to the convergence of the three technology trends. It is the ultimate democratization of technology.

Changing Roles for Everyone In the Value Chain

The trends that we outlined above have profound implications for everyone involved in the technology delivery, evaluation, implementation and support chain. Consider the two examples outlined above. Each of these involved solutions comprised of innovative applications that live in the cloud and are delivered to smartphones or “always on connected devices” and paid for via subscription models.

Consider my own company, AT&T. Many of you are likely surprised that the role AT&T is playing in a rapidly evolving market such as this, and many of you might be skeptical of the need/value /competency of AT&T to play such a role, and rightfully so.

To illustrate my position, I would ask anyone who is curious to conduct a simple experiment. While inside of Apple’s App Store or the Android Market, type in “business application” and stand back as you compile thousands of results. How does a small company determine which application is right for them? How does a small company perform the due diligence to determine which platforms each application will run on, and on which models provided by which service providers? How does a business support, manage and develop to these platforms? Finally, try to find application providers able to provide enterprise billing as opposed to a consumer centric credit card only option.

We came to the conclusion that AT&T needed to adapt to the times by morphing our role to provide solutions to help businesses harness the mobile cloud phenomenon. As a supplier of mobile hardware, virtual private networks and data centers which can serve up mobile applications, we are uniquely qualified to deliver integrated solutions to customers.

But the change from delivering monolithic communication products to a collaborative enterprise partnering with dozens of hardware and software providers is not easy. It requires a significant transformation. First, in our people; hiring and training Mobile Application Consultants, ecosystem managers and vertical specialists. Second, in our process; moving from a product sale architected, managed and supported by AT&T, to a complex solution assembled across many different participants and supported through partnerships. And third, in our assets; from managing a network to a fixed set of devices, to managing a network that connects virtual private mobile application clouds to millions of smartphones, tablets and connected end points.

We felt we had no choice but to make this journey to stay relevant in the brave new world of mobile IT, cloud platforms and connected devices. The AT&T objective is, in effect, to help businesses master the melding of communications and computing together by knitting a series of ecosystem partnerships and providing a platform for other companies to innovate on via hardware and software and services. We believe we can simplify the process of harnessing technology for many business segments and serve as a broad distribution channel for small innovative companies (such as the types of companies showcased in the examples provided earlier) that struggle with brand, distribution and enterprise billing.

Given the far reaching impact of these changes, we believe it is important for all participants in the value chain to rethink their role, assets, people and partnerships for the years to come. Provided below is a quick synopsis of practical implications and considerations for different participants.

Changing Role of the CIO and the Enterprise IT Department

As outlined, in the Advisory Board Article (The Space Race – The Competitive Implications of Next-Generation IT Architecture, Research Summary, The Research Board. June 2010) on the changing role of the CIO, dramatic changes are occurring in the IT department as well. In effect, many companies have gone from having IT departments that DO things (own and drive projects) to an IT department that MANAGES things (potentially working with outside service providers).

This change has an influence on the balance of power between IT departments and Line-of-Business (LOB) departments. In some cases LOB departments find themselves in the unique situation of no longer requiring the assistance of IT and go directly to an external service provider (supplanting the internal IT department). In these cases, the IT department finds itself in the unique situation of having to compete against other service providers as an alternate provider. Enterprise IT should ask themselves if their highest value is in buying piece parts and spend time integrating these solutions or developing them in-house? Or does it make more sense to turn your department into high value business process analysis groups supplemented by strong architects who can put the various solution providers together?

The answer for each company will vary, but there is little doubt that a journey towards the latter is necessary. This may warrant changing hiring profiles to shift from maintenance and integration talent to personnel with strong architecture, business analysis and skills in user interfaces and experiences.

1) Software Providers: Consider how software is going to be delivered in the future. Do you stick with shrink wrapped software or begin delivering software over the cloud? Should you do that yourself or partner with others to do that? Who should the partners be? Should the cloud be private or public? Once again, there is no one-size-fits-all answer, for the larger companies such as SAP, it may make sense to build out their own cloud as well as partner with service providers like AT&T. For the smaller companies, they need to also consider the value of distribution, brand, billing and support services in addition to just the cost/capital to build out the cloud.

2) Hardware Suppliers: The success of the iPhone and iPad, tightly integrated mobile platforms and hardware, has every hardware manufacturer wondering if they need to also provide an end-to-end controlled experience. HP has clearly chosen to go down that path with the purchase of Palm/WebOS. Dell on the other hand has bet on a loose coupling with Android and Windows Phone 7. Nokia on the other hand has tightly coupled itself to Windows Phone 7 while Samsung and HTC continue to play across both. How far do hardware manufacturers go down the route of content/application services? How far into systems integration and services do they extend without alienating their downstream channels? How does the entire PC ecosystem transition the set of support, management and application services from the WINTEL era to the post PC, multi-OS environment? These are important issues that the established hardware ecosystem is dealing with even now.

3) Systems Integrators: As hardware and software players forward integrate, is it enough to ally with purely software providers to build “practices” or does it make more sense to ally with new emerging or established service providers? Is there a way for Systems Integrators to move upstream and focus on complex custom application development and service/change management (which most service providers will have little appetite for) and leave the simpler pre-packaged and configured applications to be delivered directly by software providers and/or service providers?

4) Service Providers: Does one move up the value chain and become an integrated supplier of cloud, application and mobile computing service or do you strip away complexity and focus purely on providing bandwidth? What is the set of systems integration and software relationship needed to accomplish this? What is the set of cloud/network APIs that will need to be opened up to truly build a platform on which an ecosystem can build and thrive on and act as a pull through for the infrastructure services? Again, as with all other players in the value chain, the answer will be different depending on the scale, scope and ambitions of the service provider.

Whichever path the companies in the value chain pick, they must all remember the familiar dictum of “adapt or die”. The list of companies throughout many different industries that were unable to adapt to changes in innovation is long. Consider some companies that were considered “unsinkable”: One invented the instant film camera (among many other camera-based devices) that was on the market from 1948 through 2008, or the computer company that employed over 33,000 and had revenues of over $3B in the 1980s, or the airline that was a cultural icon of the 20th century and shaped the international airline industry… All utterly dominated their respective markets for extended periods of time, then failed to either recognize change, or adjust to it, and ended up perishing.

The current force of technology change is powerful enough that if Mary Meeker from Morgan Stanley is to be believed, we are in the middle of a significant evolution in computing. She calls it the “5th wave” (Figure 8).

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Figure 8: The 5th Wave of Computing (Source: Morgan Stanley).

One can debate whether it is the 3rd, 4th or 5th wave, but the historical shift in market position and innovation that have accompanied every such wave, one thing we can all agree upon is that the only constant will be change itself. I hope that companies will seize upon this opportunity to unleash an era that we will look back on as the ultimate democratization of computing and connectivity.

At this time of uncertainty, it is edifying to remember a quote from the 35th President of the United States:

Change is the law of life. And those who look only to the past or present are certain to miss the future.
- John F. Kennedy

Mobile Breakfast Series – Dallas – LTE & Beyond: The future of mobile networks April 3, 2013

Posted by chetan in : 4G, 4th Wave, LTE, Mobile Breakfast Series, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

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We are pleased to announce Mobile Breakfast Series is coming to Dallas for the first time. Below are some details about the program:

Mobile Breakfast Series - Excellent Speakers. Invaluable Insights. Peerless Networking.

Mobile Breakfast Series is a quarterly event that brings together thought leaders and visionaries from the global mobile industry to interact and share ideas, insights, and best practices with the entrepreneurs, enthusiasts, and everyone who is passionate about mobile. We dive into the most important issues and opportunities in front of our industry with the executives who are making things happen.

Date: June 25th, 2013

Time: 7:30-11am. 7:30am – Registration, 8:30am – Discussion Begins, 10:00am - Networking

Venue: Tower Club, 1601 Elm Street, Thanksgiving Tower, 48th Floor, Dallas, TX 75201

Registration is open now.

Topic: LTE and Beyond – The future of mobile networks

US is leading the globe in LTE deployment. In fact, most of the cutting-edge engineering with mobile networks is happening here with all major operators deploying LTE. What’s next for mobile networks? How will they evolve over the course of the next decade? Will we be able to keep ahead of the insatiable consumer demand for more? We will have an in-depth discussion with our distinguished speakers.

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Fireside Chat:

Kris Rinne, Senior Vice President – Network Technologies, AT&T Labs

Vish Nandlall, Chief Technology Officer & Head of Strategy, Ericsson

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Kris Rinne, SVP – Network Technologies, AT&T Labs

Kris Rinne is responsible for network architecture, service platforms, radio access roadmap and initial implementation, wireless device requirements and certification, network platforms, network performance analysis, and industry standards development at AT&T. Previously, Rinne served as Cingular’s chief technology officer with similar responsibilities. She earlier served as vice president—Technology and Product Realization, responsible for new product development from a technology standpoint, handset certification, and infrastructure vendor coordination. Prior to joining Cingular, she was vice president—Technology Strategy for SBC Wireless, responsible for new product development and network operations support. She has worked for Southwestern Bell Mobile Systems as managing director—Operations. In 2011, Kris was named as “The Most Influential Woman in Wireless” by Fierce Wireless and was a member of the Global Telecom Business Power 100 list of the most powerful telecom executives.

Vish Nandlall, CTO and Head of Strategy, Ericsson

Vish Nandlall is Head of Strategy, Marketing and Chief Technology Officer for Ericsson’s North American region. He is responsible for identifying Ericsson’s long-term vision, defining the overall company strategy, and driving business value creation for Ericsson’s customers in North America. Nandlall joined Ericsson in 2010, most recently serving as Chief Technical Officer for the company’s AT&T Customer Unit. He previously served as CTO of Extreme Networks and CTO and distinguished member of technical staff for Nortel Carrier Networks. Nandlall has led architecture and standards direction for product portfolios ranging from GSM, CDMA, WiMAX, LTE, metro DWDM, carrier routing and switching, and carrier VoIP portfolios. His recent areas of research include M2M, augmented reality, and mobile virtualization.

US Mobile Market Update Q4 2012 and full year 2012 March 13, 2013

Posted by chetan in : 3G, 4G, 4th Wave, AORTA, Chetan Sharma Consulting, Intellectual Property, Mobile Cloud Computing, Mobile Commerce, Mobile Future Forward, Patent Strategy, Smart Phones, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

http://www.chetansharma.com/usmarketupdateq42012.htm

Summary

The US mobile data market grew 3% Q/Q and 15% Y/Y to cross $20B for the first time in Q412. Data is now almost 44% of the US mobile industry service revenues and as we had forecasted a few years back, the cross-over point of 50% might occur later this year. For the year 2012, the market ended up with $79 Billion in data revenues much higher than any other market. The overall mobile services revenue were $182 Billion. For the year 2013, we are expecting $90 Billion in mobile data service revenues for the US market.

For the year, the market added 9 million new connections, a decline of 56% from 2012. The postpaid category suffered a 97% decline despite Verizon and AT&T collectively adding 6.3M postpaid subs. Sprint and T-Mobile collectively lost over 3.3M postpaid subs in 2012.

The last year T-Mobile had Y/Y positive postpaid net-adds growth, George Bush was still the president, Facebook was in diapers, and Pinterest wasn’t even born yet. T-Mobile suffered its tenth straight quarter of postpaid declines. Cumulatively, in the last fifteen quarters, while Verizon and AT&T have added 15M and 8M postpaid subs respectively, Sprint and T-Mobile have lost approximately 4.7M each. Once Nextel is sunsetted for good (it is down to 2.1M subs), we can expect a pick-up of net-postpaid subs at Sprint.

2012 saw a couple of block-buster operator M&As that took many in the industry by surprise. T-Mobile found a soul mate in MetroPCS while Softbank showed up at the altar for Sprint. T-Mobile is adopting the challenger role while Sprint that of a disruptor.

As we mentioned in our previous update, smartphones are now past the 50% mark in the US and continue to sell at a brisk pace accounting for over 90% of the devices sold in Q4 2012. Apple led the smartphone sales amongst the top 4 operators with 51% share for the year. While the US penetration of smartphones is over 50% as we reported last year, the 50% of the sub base is concentrated in only 30% of the households thus leaving plenty of growth left in the marketplace.

In terms of Y/Y growth, Connected Devices segment grew 12%, Wholesale 9%, Prepaid 6%, and Postpaid was flat. The connected devices segment only grew 1% in Q4 2012 Q/Q.

Verizon and AT&T maintained their top positions in the global rankings by mobile data revenues. A survey of the entire ecosystem shows that the US companies dominate the top 5 rankings of profit share. China Mobile leads the industry with Apple, Verizon, AT&T, and NTT DoCoMo completing the rankings.

Race for the 3rd ecosystem

2013 might help define the 3rd ecosystem or at least separate wannabes from the true contenders. While iOS and Android duel out on the top (with iOS ahead in the US market), there is fight for the distant #3. Windows made a grand entry in Q4 but the sales have disappointed. Blackberry is hoping its Q/Z10s will do the trick and help revive its fortune or at least boost the asking price.

Last quarter, Microsoft and its partners launched a worldwide campaign for a chance to compete. It went from a dominant position to virtually zilch coinciding with the remarkable ascend of iOS and Android. To make any device sell – one needs good and competitive device, distribution channel and marketing muscle, and brand loyalty. I think Windows 8 is genuinely good, is different, and for the first time can stand with its peers (obviously it needs to build a robust apps portfolio and a stronger developer ecosystem).

In the past, while operators, OEMs, and Microsoft announced significant advertising spend, it had almost negligible impact on sales. The actual $ amount spend was tepid, operators didn’t want to be guinea pigs just to prop up a third ecosystem. With Windows 8, things might get better. We can see many more awareness campaigns, more OEMs are launching some quality devices, and operators are warming up to the idea as well. The brand loyalty index for Microsoft Mobile is fairly low and it will take a heavy lift and a few billion dollars of advertising spend to move the needle. The good news is that the devices are shipping at all price points.

Microsoft also made a splash with the first computing device in its history – Surface. Both got a mixed reception from the market. In the US, Nokia is selling 80% of the windows volume making the future of the two companies inextricably tied together. Can the windows ecosystem thrive without Samsung’s support?

Additionally, there has been movement with other OSs like Firefox, Tizen, Jolla, and Ubuntu.

Apple’s dominated 2012 – what’s next?

For 2012, Apple dominated the device sales accounting for 51% of the smartphone sales amongst the top four mobile operators. In Q4, its share rose to 59% of the sales on the back of a successful iPhone 5 launch. AT&T sold a record 8.6M units followed by Verizon’s 6.2M. For the year, AT&T sold a record 21.3M iPhones. So, while globally, Android dominates iOS more than 2:1, the US subsidy model has helped Apple keep its lead from Android. But, will it last? Enough ink has been spilt to answer that question. Undoubtedly, Samsung and others have caught up Apple on device specs and ease of use, even created new categories that Apple didn’t foresee, but, Apple is still the player to beat in 2013. Apple has clearly exposed its Achilles heel – software and services. It will take some heavy lifting to gain back confidence and momentum.

Samsung’s rise

The rise of Samsung and its domination of the Android ecosystem was clearly one of the most captivating stories of 2012. Samsung is making more revenue from Android than rest of the ecosystem put together. Samsung is firing on all cylinders, works better with its distribution partners, and has the bank balance to fight toe-to-toe for its share of the market. It is also in the unique position of having good perch in all the three major screens – mobile, laptops, and TV. But, software and services is also a weak spot for the company. How quickly it beefs up its offerings and how ambitious it is in providing end-to-end solutions will determine its competitiveness in the next 24 months.

Despite setbacks in the IP battles, Samsung continued its march of being the undisputed unit leader in mobile device space. After displacing Nokia in Q1 2012, it continued to dominate in units shipped in 2012. However, Apple dominates both the smartphone revenues and more importantly just crushes the competition on device profits. It has only 6% of the global unit shipment share but over 70% profit share. In tablets, Apple completely dominates the landscape in both shipments and revenue. In fact, 95% of the profits in the tablet segment go to Apple with the remaining ecosystem fighting for the crumbs.

The Fourth Wave has arrived – the shift towards services

If you attended the AT&T developer summit and Verizon keynote at CES this January, you might have noticed the subtle shift from devices/access to services/solutions. In our paper on the topic “Operator’s Dilemma (and opportunity): The Fourth Wave”, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skill set and strategic approach than the past three curves. It is being widely adopted in the operator community around the world and some operators have started to break out the 4th wave revenues in their financials. We will have more discussion about how things are shaping on the fourth wave in future research papers.

The Patent Battles

In 2012, Samsung had a strong showing not only in the market place but also in the patents area. It edged past Nokia to become the overall mobile patents leader in the industry. IBM and Microsoft also improved their rankings. Nokia, Ericsson, and Alcatel-Lucent slid in rankings. Motorola dropped out of top 10. Not surprisingly, companies who have been around for a while especially in the infrastructure and the platform space lead the overall mobile patents. Samsung has been fiercely building its patent portfolio in both Europe and the US and the efforts have paid off as it has built a significant portfolio and a formidable lead that is likely to serve it well in the coming years.

A more startling observation is the mobile patent grants as a percentage of the total patent grants in a given year have risen significantly for the US market indicating the importance innovators attach to mobile in their business. In the US, one out of every five patent granted in 2012 was related to mobile. Less than a decade ago, this number was less than 10%. The European market has seen lower growth relative to the US market. Roughly one out of every ten patents granted in Europe are mobile related.

We will have a more detailed analysis of the patent landscape of the mobile industry later this month.

The vanishing Tier-2s

The so called Tier-2s in the US market are practically done. For the year 2012, the top 4 Tier-2 operators suffered a drastic 77% decline in net-adds. Combined they added a measly 366K subscriptions. One of the reasons is that the tier-1s are now squarely focused on the prepaid market as a growth engine. Sprint has had a long history in the segment with brands like Boost and Virgin. T-Mobile’s has retooled itself to go after the prepaid and wholesale opportunities. Additionally, the top 2 have also been launching attractive plans for the prepaid segment. That’s why the top 4 added ten times the prepaid subs compared to the next 4 operators. With Metro gone and Clearwire on the blocks, we expect the Tier-2s to lose their relevancy in the market.

Operator M&A – The Rule of Three Strikes Back

Just when you thought the prospects of any major operator M&A slowed down due to the impending US election, T-Mobile announced its acquisition of Metro PCS giving it more spectrum, access to public markets, a good chunk of subscriber base to become a more competitive number 4. Sprint and Softbank followed the announcement with an absolutely brilliant maneuver. It provides Sprint access to capital, economies of scale, and becomes a much stronger number 3, and a global telecom player with scale and ambition. The T-Mobile-Metro merger has been approved by the FCC and we expect Sprint merger to go through as well.

There have been some interesting twists and turns but as we have stated before, the US market competitive equilibrium will be complete when Sprint and T-Mobile get together at some point down the road. As outlined in our research paper on the subject, market forces find their way to get to 3 dominant operators that compete for attention and revenues, rest becomes noise. While the regulators might scoff at the idea, the inevitable market forces will find their way around.

Surface, mini, and the tablet market

Apple launched the iPad mini in 2012 for some of the same principles that Microsoft launched Surface. It is better to be cannibalized by self than by the enemy. Microsoft saw the notebook market shrink and needed a product to stem the bleeding while Apple saw Amazon and Google attack the bottom tier with a different model that poses a credible threat. Tablet market is indeed fundamentally altering computing in many ways. The changing landscape of computing also has impact on the ecosystem and the application development environment. Developers flock to platform reach, ease of access to the marketplace, and the basic economics of a viable business model. Windows as a percentage of computing platforms is shrinking drastically which threats not only the platform but also Microsoft’s other software franchises. Surface is classic blocking and tackling to provide a jolt to the shifting ecosystem. Surface RT was an expected disaster but Surface Pro will see takers in the corporate world. With iPad mini, Apple is attempting to lock the mid-top tier of the tablet market and daring its competitors to just play in the bottom tier that leaves no profit on the hardware and revenue stream from services for a very select few.

2012 – US Highlights and Milestones

2012 provided enough drama and suspense for the year, good enough for a hit Spielberg flick. Here were some of the highlights from the US market:

· Samsung went past Nokia to become the world’s biggest OEM by unit volume

· Qualcomm eclipsed Intel in market cap marking another milestone in the progression of the mobile ecosystem.

· Verizon sold 29M smartphones (with half of them being LTE) and AT&T sold 10.2M in Q4 – all US records.

· Shared data plans were introduced by Verizon and AT&T which have been viewed by the consumers favorably.

· The focus of operator metrics is changing from ARPU to ARPA to AMPA.

· After dealing with the AT&T-T-Mobile merger in 2011, the regulators were back to work with the T-Mobile-MetroPCS and Softbank-Sprint mergers.

· Verizon and AT&T Wireless became the top two mobile operators globally by mobile data revenues.

· US market saw its first decline in both messaging revenues and volumes.

· Smartphones penetration eclipsed the 50% mark.

· Over 42M tablets were sold in the US with more than half being iPads. Globally, Apple went past 100M iPads in cumulative sales making it the fastest computing platform.

· mCommerce started to eclipse eCommerce for some companies.

· Amazon made a splash with its Kindle line of tablets, the sales have been steady. Google’s Nexus devices also got good traction.

· The average number of connected devices per household was over five.

What to expect in the coming months?

All this has setup an absolutely fascinating 2013 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. Players who firmly attach themselves to the 4th wave will reap benefits while the ones who miss it will see their fortunes dwindle. We are gearing up for our annual Mobile Brainstorm Summit – Mobile Future Forward on Sept 10th, hope you can join us. Details to come.

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 2012 and full year 2012 US wireless data market is:

Service Revenues

ARPU

Subscribers

Applications and Services

Handsets

Mobile Data Growth

Intellectual Property/Patents

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2013. The next Global Wireless Data Market update will be issued in Apr 2013.

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

Mobile World Congress 2013 Recap March 6, 2013

Posted by chetan in : 4G, AORTA, Chetan Sharma Consulting, European Wireless Market, LTE, Mobile World Congress, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 6 comments

“Welcome to Spain, Thank you for your business,” remarked the immigration officer and thus started my yearly pilgrimage to the grand slam of mobile – The Mobile World Congress 2013. It is truly a global event with participants from virtually all countries looking to do business, learn a thing or two, and ponder over what the year will bring forth. The show moved to a new venue which made the logistics work much better for attendees and exhibitors but the venue lost its charm and character. We used this opportunity to feel the pulse of the industry and understand where things are headed. This note summarizes our observations from the show.

While there was no blockbuster announcements or products that will knock your socks off, several interesting trends emerged that will keep the industry exciting to watch in 2013.

The perennial search for the #3 ecosystem continues: Windows sales have disappointed thus far, Blackberry has launched new devices but hasn’t quite hit the mark. So, while consumers seem perfectly happy with iOS and Android, industry’s desire to have a third robust ecosystem is palpable. The biggest announcement in that regard was from Firefox OS and in a matter of 12 months, it has not only forged a strong alliance with operators, it is actually getting ready to ship phones. It is going to be targeting the low-end of the market which is a smart strategy but a lot depends on the range of price points of the devices and how quickly it can attract the developer ecosystem. Given that Android device price points are hovering around $50 and it is a mature ecosystem with great developer reach and support, it will be challenging to convince consumers to go the Firefox route. However, if the price points are attractive enough, with the distribution power of some key operators, we could see some early traction. Ubuntu, Jolla, and Tizen were also vying for attention.

LTE everywhere: LTE deployment is growing at a very fast pace. The US market is ahead of the curve with almost national footprint from Verizon followed by substantial coverage from the remaining three operators. Elsewhere, operators are gearing for deployment once some of the spectrum issues/auctions are sorted out.

The 4th Wave has arrived: Last year, we put forth a framework for future mobile industry revenues in our 4th wave paper. Since then, the framework has been embraced by many leading operators around the globe. It was good to hear operators talking more about services rather than data plans. Several areas were discussed by the leading tier 1 operators such as health, retail, education, cloud, M2M, automobile, enterprise, security, connected living, home security, commerce, identity and privacy, big data and analytics. Operators who are able to steer their giant organizations to focus on services will be able to survive the commoditization of access. We will have more say on the subject later this year.

Yo OTT, luego existo: which is Spanish for “I OTT, therefore I am” To be a player in the digital world, one has to be an OTT provider for communications and beyond. The interesting dichotomy of the communications OTT business is that very few will survive. The end state of a majority of them (if not all) is either an M&A with a telco or an Internet player or they run out of cash. The new breed of OTTs has forced the lumbering giants to think different about their customers and their markets.

Mobile Broadband, Cloud, and Apps: The troika of broadband network access, the cloud infrastructure and the applications are creating a sea change in the enterprise, especially the SMB segment. It is also changing how developers see the enterprise segment as the opportunity migrates from windows to iOS and Android. We conducted some in-depth research in the space and will have more to share later this year. Our Mobile Breakfast Series later this month will be dealing with the topic of Cloud and SDN in more detail.

Redefining Monopoly: The mobile and internet worlds have collided but the regulatory regimes haven’t changed. European operators seemed to indicate that it is time to reassess what a monopoly really means and the rules should apply to all layers of the ecosystem stack and that means devices and OSs as well.

Device Launches: All major OEMs are following the Apple playbook as far as the device announcements are concerned. To garner media attention, it is best to announce the “hero” devices away from major shows. Just like CES earlier this year, MWC lacked any big device announcements. Nokia announced mid-low tier devices to expand its portfolio that will help it in unit sales. ZTE, Huawei, LG, Asus, NEC, Sony, HTC, HP, Asus, Acer, Lenovo all had new devices to display but media’s eyes are set on Samsung’s Galaxy release later this month.

Local OEMs: Traditional OEMs are facing some healthy competition from new entrants in local markets. Players like Fly and Yotaphone in Russia are giving the veterans a run for their money. By both innovating with new features but also by customizing the devices for the local market (e.g. bigger battery that last 3 days), they are creating their own niche. After gaining good market share in Russia, Fly is expanding into other markets.

Connected Cars: When the biggest operator by revenue announces a deal with the biggest car manufacturer, people take notice. GM and AT&T announced LTE cars by 2015 which will pretty much force the entire auto industry to provide broadband connectivity in a hurry. However, the auto industry has misplaced expectations on apps and any incremental revenue they might be able to harness from them.

Samsung Knox, Blackberry – can you hear me now: Android is probably the most insecure mobile platform out there. Blackberry has long been the gold standard, iOS has improved, Windows has security features built in but security has always been a step-child of Android. Samsung’s Knox announcement elevates Samsung’s role in the mobile enterprise and to some extent takes over some of the development capability of Android that are squarely aimed at Blackberry. The container security feature set with MDM integration is well thought out and opens up the mobile enterprise market for Samsung especially in North America and Western Europe.

Spectrum and Regulations: While spectrum was a universal issue with the operators, more is better, European operators were particularly vocal about the state of the regulatory affairs on the continent. Regulators, they complained, are killing the industry by cutting of revenue opportunities, are fostering too much competition, too much taxation, and too involved in the operations of the operators. This is leading to declining revenues and turmoil at the operators. There might be some unintended consequences of weakening operators and regulators will have to grapple with some interesting questions that a free market economy will pose in the coming days.

TU Go – Take your phone number everywhere: In our opinion, Telefonica has done the best job of dealing with the digital world in putting forth an org structure that can crank out applications and services at Internet speed. TU Go is a new service (launched in UK) that allows users to take their phone number to any supported device and use it for calling and texting – number in the cloud at its best.

NFC is dead, Long Live NFC: Vodafone CEO’s frank admission that he doesn’t expect to make much money from NFC gave the audience a bit of a pause. Several NFC initiatives have floundered without clear goals or vision. Instead of working together, the industry has remained fragmented and thus the lack of scale has hampered progress. For too long, the industry has focused on payments but the opportunity lies in the engagement with the customer. For better or for worse, the financial industry has sequestered its commission for the foreseeable future. We saw some clever NFC implementations to drive consumer engagement and commerce in retail environments, primarily in Europe.

Consolidation looms: The question that is on everyone’s mind but was hardly discussed at the show was the coming onslaught of consolidation at virtually all layers of the ecosystem.

Developing Markets: Connecting the next billion was a recurring theme. The smartphone penetration in the developing world is in the single digits. More than that, introducing consumers to a computing platform for the first time is an exciting opportunity. Creating services that are tailored to the local environment remains an opportunity that can have a profound impact on society. Our own work with the UN/ITU has shown the transformative role of mobile in almost every walk of life. The device unit growth is coming from the developing markets and as they get connected, the world becomes flatter, and the competitive dynamics in a globalizing world will create for some interesting policy and political battles.

M2M and Internet of Things: As we wrote in our book “Wireless Data Services” back in 2004, the connectivity is becoming pervasive. The module costs are coming down fast and the desire to measure and track every number that is important in our lives is creating a massive opportunity. However, privacy, battery life, environment, security remain key issues that need to be tackled.

Identity as a business opportunity: In a digital world where access to information and resources depend on verification of your identity, the guards and keepers of the identity information have a big role to play. As such, “identity” management is emerging as an opportunity that can be monetized. In the online world, Facebook has become the dominant way to integrate apps and services. In the mobile world, operators can play a significant role in authentication and verification. Will the two worlds collide? Fasten your seat belts.

The Post PC world: As an experiment, for the MWC trip, I carried just the Nexus 7 tablet and an iPhone. I felt liberated. In the past, for day trips, I have relied just on iPad/iPhone for taking care of my computing needs. For this trip, I wanted something that I can carry in jacket pocket. Nexus was good enough for taking simple notes, email, browser and even some phone calls. I could easily switch back-and-forth between the tablet and the phone, and the combined battery life lasted the whole day.

The Miscellaneous:

· Google’s absence from the show puzzled many

· The enthusiasm for RCS/Joyn seems to have subsided as reality sets in

· Nokia is broadening the reach of its HERE platform to other operating systems

· AT&T/Ericsson showed WebRTC demo

· Facebook announced messaging partnerships with operators in developing countries

· Small cells remained a hot topic though seen more of a compliment for the macro network

· Signaling traffic continues to grow at a faster pace than the data traffic as more LTE devices come on the network

· Qualcomm launched RF360 solution to deal with frequency band fragmentation which is serious problem for LTE roaming

· Yotaphone with its dual screen (front and back) and NEC Medias with its stacked up screens had something fresh to offer in the devices space when 99% of the devices look the same

· Virtualization is the new black in mobile networks

Best booth: Ericsson’s networked world theme was well thought-out and provided a unique exploratory view of the opportunities and technology evolution. A close second – Connected City.

Best party: There won’t be an MWC without the bevy of parties every night. Qualcomm again stole the show with the jam-packed confluence of the mobile elite.

US Mobile Data Market Update Q3 2012 November 12, 2012

Posted by chetan in : 3G, 4G, AORTA, ARPU, Applications, Infrastructure, LTE, M&A, Mergers and Acquisitions, Messaging, Mobile Advertising, Mobile Applications, Mobile Cloud Computing, Mobile Commerce, Mobile Ecosystem, Mobile Future Forward, Mobile OEMs, Mobile Operators, Mobile Payments, Mobile Traffic, Privacy, Security, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

US Mobile Data Market Update Q3 2012

http://www.chetansharma.com/usmarketupdateq32012.htm

 

 

Summary

The US mobile data market grew 3% Q/Q and 17% Y/Y to reach $19.9B in Q3 2012. Data is now almost 43% of the US mobile industry service revenues. For the year 2012, the market is on track for mobile data revenues in the US market to reach our initial estimate of $80 billion.

Largely due to the strong postpaid performance by Verizon, the US operators added a net of 2.4M new subscribers. Sprint and T-Mobile saw further postpaid declines. For T-Mobile, Q3 marked the nine straight quarters of postpaid losses.

The quarter also saw a couple of block-buster operator M&As that took many in the industry by surprise. T-Mobile found a soul mate in MetroPCS while Softbank showed up at the altar for Sprint. Once the mergers are executed, Sprint is likely to emerge as the stronger of the two.

The two horse OS race got a new participant entry last month – Windows 8. Microsoft and its partners launched a worldwide campaign for a chance to compete. Microsoft also made a splash with the first computing device in its history – Surface. Both got a mixed reception from the market. We will find out how consumers will react in the Q4 numbers. Of all the OEMs, Q4 will be the most critical for Nokia who is running out of runway in its turnaround effort.

Despite setbacks in the IP battles, Samsung continued its march of being the undisputed unit leader in mobile device space. After displacing Nokia in Q1 2012, it continued to dominate in units shipped in Q3 2012. However, Apple dominates both the smartphone revenues and more importantly just crushes the competition on device profits. It has only 6% of the global unit shipment share but over 70% profit share. In tablets, Apple completely dominates the landscape in both shipments and revenue. In fact, 95% of the profits in the tablet segment go to Apple with the remaining ecosystem fighting for the crumbs. Apple has the complete stronghold on the supply chain and has sucked out the oxygen from the OEM world.

Amazon hasn’t been shy about its ambitions in the mobile space. While the world awaits an Amazon smartphone, the company launched a slew of tablets to compete primarily with Google though its eyes are on Apple. Apple also launched iPad mini a mid-tier tablet to ward of threats coming from the bottom tier of the market.

As we mentioned it in our last update, smartphones are now past the 50% mark in the US and continue to sell at a brisk pace accounting for over 75% of the devices sold in Q3 2012.

While the US penetration of smartphones is over 50% as we reported last quarter, the 50% of the sub base is concentrated in only 30% of the households thus leaving plenty of growth left in the marketplace.

In terms of Y/Y growth, Connected Devices segment grew 19%, Prepaid 10%, Wholesale 6%, and Postpaid was flat. The connected devices segment picked up some growth after two straight quarters of sub-5% performance growth (Q/Q).

Verizon and AT&T maintained their top positions in the global rankings by mobile data revenues. A survey of the entire ecosystem shows that the US companies dominate the top 5 rankings of profit share. China Mobile leads the industry with Apple, Verizon, AT&T, and NTT DoCoMo completing the rankings.

Postpaid Doldrums and evolution of metrics – ARPU to ARPA to AMPA

The US market has added roughly 400K postpaid subs in the last two quarters. Verizon has added 2.4M, AT&T 400K, and Sprint and T-Mobile have lost a million each. Clearly, Verizon’s performance is far superior to its competitor and its relentless focus on postpaid has yielded significant benefits. Typically, the postpaid ARPU is roughly 2-3 times that of a prepaid subscriber. So, while other operators have been adding prepaid subs, the improvement to the bottom line has been tepid especially for Sprint and T-Mobile. Sprint’s losses have been primarily due to the bleeding of the Nextel customers. The iDEN network should turn off sometime next year and the continuous loss of overall postpaid subs might stop. T-Mobile faces a deeper challenge. Its net-revenue has declined in every quarter since Q4 2008, which is 15 straight quarters of revenue decline. In fact, its current revenue levels is at the Q2 2006 levels – that was six years ago. Though the company has done a terrific job upgrading the network to HSPA+ and doing blocking and tackling until it upgrades to LTE to come at par with its peers, the continuous bleeding of the postpaid subs needs a new strategy. Metro PCS helps gain new subs and spectrum but doesn’t help with postpaid. In fact, one can expect that the churn will rise as consumers migrate from Metro to T-Mobile. 2013 will be a critical transition year for the company as it tries to compete with its larger competitors. Just being a “value” provider is the race to the bottom.

We have been advocating shared data plans to create more consumer demand for over two years. When I talked to CNBC earlier this year (Jan), I said that in all likelihood the family data plans will be introduced in the US market in 2012. I discussed this more with Bloomberg and USA Today and suggested that most likely Verizon will launch them first. Verizon and AT&T launched the shared data plans this summer with AT&T getting the benefit of launching it second. New types of plans also evolved the decades-old operator metric of ARPU to ARPA (Average Revenue Per Account) given that we are seeing a strong influx of multiple devices per individual/household. Verizon was first to transition and we expect others might introduce new matrices to measure progress and performance. AMPA (Average Margin Per Account) will also become an important metric in the coming days, first internally, and then for the markets.

Messaging Decline

Most western markets have seen the net revenue in the messaging segment decline. The US market has resisted the decline thus far. In Q3 2012, for the first time, there was a decline in both the total number of messages as well as the total messaging revenue in the market. It might be early to say if the decline has begun or the market segment will sputter along before the decline takes place. As we had outlined in our fourth wave paper, once the market segment reaches the 70-90% penetration mark, the decline begins and we might be seeing the start of the decline in messaging revenue. The decline is primarily due to the rise in IP messaging and operators have been slow to evolve their strategies in the segment.

Operator’s Dilemma (And Opportunity): The Fourth Wave

In our paper “Operator’s Dilemma (and opportunity): The Fourth Wave” earlier this year, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skillset and strategic approach that the past three curves. We are starting to see operators becoming more focused and aggressive. It is being widely adopted in the operator community around the world and some operators have started to break out the 4th wave revenues in their financials. We will have more discussion about how things are shaping up in future research papers.

AT&T has been better prepared in the US market and has embraced the ride on the fourth curve. It is investing in the areas of Digital Life, Mobile Premise Solutions, Mobile Payments, and Connected Vehicles. We discussed the subject at length in our recently concluded annual thought-leadership summit – Mobile Future Forward.

Operator M&A – The Rule of Three Strikes Back

Just when you thought the prospects of any major operator M&A slowed down due to the impending US election, T-Mobile announced its acquisition of Metro PCS giving it more spectrum, access to public markets, a good chunk of subscriber base to become a more competitive number 4. Sprint and Softbank followed the announcement with an absolutely brilliant maneuver. Sun Tzu would have been proud. It provides Sprint access to capital, economies of scale, and becomes a much stronger number 3, and a global telecom player with scale and ambition. There have been some interesting twists and turns but as we have stated before, the US market competitive equilibrium will be complete when Sprint and T-Mobile get together at some point down the road.As outlined in our research paper on the subject, market forces find their way to get to 3 dominant operators that compete for attention and revenues, rest becomes noise. While the regulators might scoff at the idea, the inevitable market forces will find their way around.

Connected Devices

In Q3 2012, we released some research around connected devices. If we just look at the active connected devices which can connect to the Internet directly either by wireless or wired means, either using cellular or WLAN, the total number of connected devices in the globe just crossed the 10 billion mark which means that the connected device to human ratio is now 1.3.

More details available here.

Device ecosystem

Windows 8 arrival – Sept was a big month in Microsoft’s attempt to regain its lost mobile decade. It went from a dominant position to virtually zilch coinciding with the remarkable ascend of iOS and Android. To make any device sell – one needs good and competitive device, distribution channel and marketing muscle, and brand loyalty. I think Windows 8 is genuinely good, is different, and for the first time can stand with its peers (obviously it needs to build a robust apps portfolio and a stronger developer ecosystem).

In the past, while operators, OEMs, and Microsoft announced significant advertising spend, it had almost negligible impact on sales. The actual $ amount spend was tepid, operators didn’t want to be guinea pigs just to prop up a third ecosystem. With Windows 8, things might get better. We can see many more awareness campaigns, more OEMs are launching some quality devices, and operators are warming up to the idea as well. The brand loyalty index for Microsoft Mobile is fairly low and it will take a heavy lift and a few billion dollars of advertising spend to move the needle. The good news is that the devices are shipping and it is not thanksgiving yet.

However, Nokia, once propped at every Windows Phone rally isn’t getting any special love from Microsoft anymore (in public) and it has become one of the many OEMs on the conveyer belt. Its ability to differentiate itself enough in Q4 will decide its 2013.

Last week, Qualcomm eclipsed Intel in market cap marking another milestone in the progression of the mobile ecosystem.

Surface, mini, and the tablet market

Apple launched the iPad mini for some of the same principles that Microsoft launched Surface. It is better to be cannibalized by self than by the enemy. Microsoft saw the notebook market shrink and needed a product to stem the bleeding while Apple saw Amazon and Google attack the bottom tier with a different model that poses a credible threat. Tablet market is indeed fundamentally altering computing in many ways. The changing landscape of computing also has impact on the ecosystem and the application development environment. Developers flock to platform reach, ease of access to the marketplace, and the basic economics of a viable business model. Windows a percentage of computing platform is shrinking which threats not only the platform but also Microsoft’s other software franchises. Surface is classic blocking and tackling to provide a jolt to the shifting ecosystem. With iPad mini, Apple is attempting to lock the mid-top tier of the tablet market and daring its competitors to just play in the bottom tier that leaves no profit on the hardware and revenue stream from services for a very select few.

Apple is getting a lot of grief for its maps app. While the strategic decision to take control of a key application was spot on, it faltered on communications. The half-baked endeavor was nowhere close to being the “best mapping app.”

Infrastructure segment faces a tough road ahead

The infrastructure segment of the wireless industry is facing turbulent and interesting times. The business model for many vendors hasn’t evolved much in the last few years and some of the disruptive forces are bound to have a deep impact on the segment. ALU is facing serious headwinds and will need to figure out its strategic options going forward. Ericsson’s margins are under pressure but more interestingly its services and support revenue exceeded its hardware revenue for the first time. Huawei and ZTE reported decline in revenues but they are making gains in the infrastructure markets outside US and in handsets in the US market. Until Premier Xi Jinping and President Obama sort out their geopolitical differences, the Chinese vendors remain shutout of the US infrastructure market.

What to expect in the coming months?

All this has setup an absolutely fascinating 2013 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. Players who firmly attach themselves to the 4th wave will reap benefits while the ones who miss it will see their fortunes dwindle.

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

Against this backdrop, the analysis of the Q3 2012 US wireless data market is:

Service Revenues

· The US Wireless data service revenues grew 3% Q/Q and 17% Y/Y to $19.9B in Q3 2012. For the year 2012, we are forecasting that mobile data revenues in the US market will reach $80 billion.

ARPU

Subscribers

Applications and Services

Handsets

Mobile Data Growth

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2013. The next Global Wireless Data Market update will be issued in Mar 2013.

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

Mobile Breakfast Series Recap – Atlanta – Connected Devices, Cloud, and Consumer June 24, 2012

Posted by chetan in : 3G, 4G, AORTA, ARPU, Applications, Connected Devices, European Wireless Market, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Devices, Mobile Ecosystem, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 2 comments

We started doing Mobile Breakfast Series in Seattle back in 2009 and after hosting10 straight events, it was time to expand the wings and explore other cities. The first stop in this journey was Atlanta and we worked closely with our partners at “Wireless Technology Forum” to make it a successful event last friday. I also had the good fortune of participating in WTF’s event the night before. Both events focused on Connected Devices and their impact on the consumer, the ecosystem and the value-chains thus making it a “connected week” in Atlanta.

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As I mentioned, the night before the event, I had the opportunity to present and moderate a panel on Connected Devices with Glenn Lurie, President of Emerging Enterprises at AT&T and Jeff Smith, CTO at Numerex. Both are movers and shakers in the space and it was such a pleasure meeting with many WTF members and interacting with the top-notch panelists. The event was recorded and is available on WTF’s Youtube Channel.

We hosted the Atlanta Mobile Breakfast Series Event in Atlanta at the Commerce Club of Atlanta which has beautiful views of the Atlanta area.

There is an old Chinese saying, “When the wind of change blows, some build walls others build windmills.” Our industry is going through tremendous change; it won’t be an exaggeration if I say that the tectonic plates are moving and moving fast. The motion is being forced both by the economic conditions but also the technology and business progress. I have been around the industry long enough but it still amazes me – the stuff that’s in the pipeline and how quickly consumers absorb it.

The topic of our discussion was Connected Devices, the Cloud, and the Consumer. With connected devices, I am referring to the broad availability of devices that are connected to data networks – so they include smartphones, tablets, connected auto but also wellness devices like fitbit, energy meters, dog collars, medical devices, etc. as of last year, the subscription penetration was at 6B, next year, we will have more connections than people on this planet. In another 5-7 years, we might touch 20 Billion sensors on the planet. So you can see the growth is going to be astronomical.

Another phenomenon is that of cloud. If a startup mentions Cloud in their presentation to a VC, the valuation doubles, you say mobile, and it quadruples. I don’t know how many of you are a fan of Mark Weisier, the Xerox Parc researcher who pioneered what became “always on, always connected” tagline of pervasive computing. It was more than 20 years ago, we finally are seeing that with the help of broadband networks, amazing devices, and open business models, information is truly available at the fingertips.

The third leg of our discussion was the consumer – their appetite for new and the latest is creating this tremendous opportunity that is shaping their behavior and expectations.

We had an awesome panel to discuss things in detail. First I discussed the topic with David Christopher, Chief Marketing Officer at AT&T Mobility. As most of you might be aware, AT&T is leading not only the US but the globe in their efforts to bring connected solutions to the market. I work around the world with top operators, and I can tell you there is no exciting place in mobile right now than right here in the US of A. US is leading in innovation, technology, and business model. We had lost touch after 1G and US truly teaching rest of the world how to do 4G right. David has a terrific background – a product and operationally driven CMO at one of the world’s biggest mobile operator and it was a delight to have him on the panel.

I have known both Biju Nair and Louis Gump for sometime – several decades of mobile expertise. Louis is with CNN, has been running their mobile efforts which are top-notch. He is a recognized leader in the mobile advertising space and given that CNN’s properties span across multiple screens, he has really great insights as to how consumers behave across n-screens.

Biju is a hard core technologist, has been working at solutions that make Louis’ stuff work across networks and devices. Many of you might not know but Synchronoss where Biju is the Chief Strategy Officer and Products EVP, powers online activation at AT&T. If you bought the iPhone over the last few years at AT&T, there is a good chance your order was processed by Synchronoss.

Highlights from the discussion below:

The team at Chetan Sharma Consulting really enjoyed taking the Breakfast Series to Atlanta. My thanks to the terrific team at WTF for their support and to the Atlanta Mobile Community for making the event so successful. Finally, the event wouldn’t have been possible without the support of our series partner – Synchronoss.

As you might be aware, our fall mobile executive summit – Mobile Future Forward is going to be on Sept 10th. Registration is open. We are likely to sell out so grab your tickets early.

Next Stop – London for our first venture across the pond. On June 29th, we host the discussion on Operator/OTT – The way forward with Telefonica, Orange, Rebtel, and Horizons Ventures. Read Frank Meehan’s pre-event interview about the topic here.

Operators and OTT - The Way Forward - London

Operator traditional revenue streams are under threat esp. voice and messaging. Access margins will continue to stay under pressure. OTT players are coming in fast and furious and it is not just the big ones like Google but also players like Whatsapp, Voxer, Viber and others. How do operators play in the new landscape – lessen the decline of their traditional revenues while investing in new areas that improve their overall margins and revenues. Do they play the role of an enabler, a utility player, or become the OTT player themselves? In a software-driven world, how do they stay nimble? On the flip side, what are some things that operators can provide to the OTT players that make them successful, take them to the market quickly and maintain a long-term healthy and mutually-beneficial partnership? Operators still generate 70% of the global mobile industry revenues, so they are an important part of the chain but how do they ensure they have an equally relevant share in the profits. The panel will discuss how operators and OTT players think about the challenges and the opportunities, the competition and the coopetition.