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CTIA 2009 Roundup April 6, 2009

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

CTIA 2009 Roundup

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

CTIA 2009 in Pictures

ctia09

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

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

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

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

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

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

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

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

Broadband

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

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

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

Mobile Health

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

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

Applications and Services

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

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

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

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

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

Green

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

Miscellaneous

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

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

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

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

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

Your feedback is always welcome.

Thanks

Chetan

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

Understanding the wireless opportunities in the world’s top two markets - China and India March 23, 2009

Posted by chetan in : BRIC, CTIA, Carriers, IP, IP Strategy, Indian Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 3 comments

The first time I spoke on the topic of Opportunities in the BRIC Mobile Markets in a conference setting was back in the summer of 2006 in Moscow at the inaugural Interop conference. At the time, BRIC mobile markets were just emerging to be a big force. Net adds in the four countries amounted to 159M in 2005, in 2008, just India and China exceeded 212M. In the first two months of this year, India alone has added over 28M subscriptions. We were amongst the first ones to forecast this tremendous growth that was going to shake up the global mobile markets.

We summarized our observations in the special report for the Wireless World magazine.

bric-conf

Fast forward 3 years. I am putting together another presentation on the subject focused on India and China and the mobile opportunities in these markets. Interesting enough, some of the basics remain the same, and they have more to do with Business 101 than anything else.

The lure of a billion subscribers is quite tempting but these markets are not for the faint-hearted. If you go in without understanding the markets and how business is done, you will be spit out of the market in no time. The fate is similar for big and powerful players like Vodafone to small startups you may have never heard from. Companies like Real Networks who have had success worldwide learned the hard way that these markets are no walk in the park.

Here are some of the factors, IMHO, that any company needs to keep in mind before spending too much energy in these markets. They are:

Understand the market by spending time on the ground: Many a times, companies think they can enter the market from a distance, parachute some executives, and things will fall in place. Rarely are things that simple. One must spend time in the markets with potential customers, suppliers, partners, analysts, and others to get a “real” grip of the market.

Perseverance: The customers in India and China can wear you down and if you have the enough strength to last long, you are likely to be rewarded. That’s one of the reasons, even some of the stronger players didn’t succeed but smaller players like Venturi Wireless (Disclosure: VW is a client of ours) have done well with carriers in these markets.

Build Relationships: Relationships and trust matters more in Asia than in the western markets. If you have spent enough time building relationships with key companies, suppliers, individuals, it might take a long time, but in the end, that’s are what is likely to pay off.

IP Protection: IP has a different meaning in these markets. It is not enough to just file patents, technology must also be protected or else the probability of it being copied are high.

Hire local: To be successful, it is rare that you can manage and operate from afar. It is not only inefficient, it is also a risky proposition. You have to be close to the customer. Hiring local talent who understands how business is done and when “yes” actually means “yes” is critically important.

I will be discussing these and other areas in my talk at the BRIC Mobile Markets conference at CTIA on 31st March.

US Wireless Data Market Update Q408 and 2008 March 2, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, Middleware, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Speaking Engagements, US Wireless Market, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

US Wireless Data Market Update Q408 and 2008

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http://www.chetansharma.com/usmarketupdate2008.htm

Executive Summary

The US wireless data market continued to ignore the recession doldrums in Q4 2008 and grew 7.3% Q/Q and 38.7% from Q407 to reach $9.4B in mobile data services revenues. In 2008, the mobile data services revenues reached our original estimate of $34B. Even as the global industry crossed 4B in subscriptions and $1T in total revenues, the nervousness due to the current recession has been palpable. While the flailing economy has started to hit hard on the wireless data ecosystem esp. the infrastructure and handsets segments, consumers haven’t really pulled back on mobile data spending overall, just yet. There are sub-segments within mobile data revenue stream that are starting to feel the pinch like data card subscriptions and downloadables. Also, in an event of a longer recession, the fate of the US mobile industry will be more closely tied to the overall economy this time compared to the previous recessions.

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US Wireless Industry in Recession - A collision of two perfect storms

Back in 2005, we published a paper titled “3G - Hitting the Mass Market” in which we presented the case for an explosive market growth in the US market riding on the back of 3G and posited that by 2009, US will become the leading nation in terms of the number of 3G subscribers. As of 2008, US crossed 100M 3G subscribers catapulting ahead of all industrialized nations in terms of total subscribers (% penetration was around 40%). The paper was based on our work in various markets and study of diffusion trends in the global markets. That study became the subject of several articles and cover stories and was one of the central documents (including our testimony in the case and a report to the President) referred to in one of the most prominent wireless industry cases in front of the US International Trade Commission. Our basic thesis was simple - once you have the favorable ecosystem factors in place, the market is ripe for explosive growth.

2008 was a key year for growth in the mobile data services adoption in the US market. The confluence of 3G, better devices and the smartphones, and the applications ecosystem set the stage for tremendous growth. We already saw signs of significant user adoption and the market grew 7-9% QoQ each quarter in 2008. From almost being in the bottom-most square in 2005 (in our 9-box ARPU charts), US market gained strength to find itself amongst the leaders by the end of 2008 (more on this in our Global Wireless Data Market update for 2008 coming out later this month). At mid-2008 point, 2009 looked to be another year of growth and adoption.

However, the current recession is not your parent’s recession. The problems with the economy are so deep and its impact on the consumer spending and sentiment is so massive that most economists are scrambling to make sense of it. Nobody really has a firm grip on how to fix the current mess because a recession of this magnitude complicated by a globalized economy hasn’t occurred before, so there is no playbook to lean on. We might get lucky and things could turn around in a couple of quarters but things could also take a turn for the worst that might take many more quarters to recover. Markets are incredibly volatile and so are the consumers. All consumer confidence indices are down to their worst ratings ever (The Conference Board Consumer Confidence Index was down to 25 (on a relative scale of 100) to reach yet another all-time low in February (index began in 1967)).

So, we stand at the junction of two perfect storms - one that has the promise of an incredible surf to take the mobile industry to new heights while the other is hell bent on destroying everything in its path. Will the growth surf be strong enough to absorb the economic tidal wave? or will it set us back in time? or will we end up somewhere in between?

The answer lies in how quickly the consumer sentiment and market psychology improves and stays consistently positive over a period of 3-6 months. If the situation improves in the next 1-2 quarters, the recession will be all but a blip in the overall US mobile data market historic charts. If however, this downward spiral continues and the confidence in the markets is not restored, consumers will start cutting some of the discretionary mobile data spending, even cutting down some family lines, and downgrading of mobile plans (including data) at an accelerated rate. If it is the latter, we are in for a fundamental reset of the economy as Steve Ballmer eloquently outlined in his talk to the Democratic Caucus in Feb.

Impact on the US Wireless Industry during Recessions (Slides 11 and 12)

The current recession is not the first one that the US wireless industry has faced but it is quite different this time around. The first one came in 1990 and lasted for one year and the second came amidst the dot-com bubble and terrorist attacks in 2001 and lasted for two years. Historically and logically, GDP and consumer spend is closely correlated. When the economy contracts, so does the consumer spending. A look into the income elasticity of demand indicates a change in consumer mobile services demand as a result of drop or change in consumer income. Different patterns of consumer demand emerge in different countries depending on the state of the industry during the specific downturn.

To put things in perspective, US represents 21% of the global economy and the US services revenue represents 1.1% of the US economy as of 2008. In access of 70% of the US economy is linked to consumer consumption so you can see the tight linkage between the GDP and the consumer spending (the US consumer spending alone is more than the economies of China and India combined).

If we compare the US GDP data to the mobile services revenues and subscriber data, there is some correlation during recessions i.e. service revenues contract but the state of the industry was quite different around on previous occasions. The % change in mobile services revenues and subscriptions went down with the drop in GDP in both instances and recovered as the GDP pulled back after the recession. During the first recession, mobile was a niche service. By 2001, mobile had passed the inflection point on to become a mass-market phenomenon but data services market was largely non-existent. By 2008, the US mobile market had matured with high-degree of subscriber penetration and mobile data had become a healthy and vibrant industry.

Let’s look at how the mobile industry behaved in the various recessionary periods over the past two decades.

1990-1991 The % GDP change (GDP compared to previous year) dropped from 5.8% in 1990 to 3.3% in 1991. The mobile services revenues % change dropped from 36% to 26% over the same time period, the subscriber % growth dropped from 51% to 43%. Subscriber penetration at the end of 1990 was around 3%. Given the smaller base, the drop in mobile numbers can be partially attributed to the fact that as the % subscriber penetration grows the % change numbers come down anyway. In 1992, when % GDP jumped to 5.7%, the % change in mobile services revenues and total subscribers jumped to 46% and 37% respectively, thus quickly reversing the downward trend.

2001-2003 The % GDP change dropped from 5.9% in 2000 to 3.2% in 2001. Over the same period, % change in mobile services revenues dropped from 31% to 24% and % change in total subscribers dropped from 27% to 17%. However, as you would see in slide 11, these numbers have been slowly dropping regardless of the recession as the subscriber and revenue base grew. The subscriber penetration in 2000 was 39%.

2007- The % GDP change dropped from 4.8% in 2007 to 2.3% in 2008. Q4 2008 reported a drop by 6.2% QoQ in one of the sharpest declines in the last quarter century. The nature of this recession is quite different as well. While the previous recessions were limited to certain segments of the overall economy, the current recession has touched almost all sectors with a vengeance. The subscriber penetration at the end of 2008 was 89%. The overall ARPU stayed pretty steady around $50 between 2001 and 2008, while data ARPU became a growing component of the overall mobile services revenue.

What to expect in the coming months?

As we noted in our Q3 2008 note, in some sense, the Christmas quarter might have masked some of the microtrends within the mobile data segment of the industry though Europe started to feel the pinch in Q4. If one looks deeper into the sub segments, as we contemplated in our Q3 research note, it is clear that the layoffs are having an impact on the data card revenues (which account for approx. 10-12% of the overall mobile data revenues in the US) as the enterprises are dropping access cards with employees. Downloadables revenues were down from some segments of the user base as discretionary spending tightens.

Also, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid constituted 57% of the net-adds in Q408 sharply up from 23% in Q407 (though Suncom subscriber base probably has something to do with it). Rising unemployment has accelerated another trend - landline replacement by Mobile which reached almost 20% by Q408 (of course this benefits the mobile industry). This trend is irreversible unless new experiences can be introduced.

Messaging continues to grow. The messaging volume jumped 15% and messaging revenue was up 5.5% QoQ. The data access (excluding data card) including flat rate data plan subscriptions have also showed significant strength offlate. In addition to smartphones, we are also seeing increased mobile data activity amongst feature phone users.

The key question is - will the increase in the mobile data subscriber base nullify the loss in data subscriptions? and the answer seems to be - likely yes. But, if the job losses continue at the current rate, we will start to see flattening of data revenues in Q109 for some operators and a gradual decline over the course of the year. We have already started to see infrastructure (operators are slowing down 3G/4G investment) and device segments (replacement cycles are getting longer) getting hit pretty hard. Smartphones remain a bright spot, which in turn has a direct positive impact on the data revenues. Even with the decline in handset sales, smartphone segment will continue to increase in 2009 accounting for almost 30% of the overall device shipments.

As we eluded to earlier, another factor at play is the growth in 3G and smartphone penetration in the US market, both of which have been responsible for increasing the usage and hence the data revenues. At the end of Q408, 3G penetration was approximately 40% and the data penetration had reached 60%. Smartphone penetration has been inching up as well. In fact, all the service providers and OEMs have been targeting sub-$200 price point, which seems to be a good sweet spot for consumer adoption. The above two factors have also been helping negate any cancellations or downgrading of data plans.

We are likely to see continued price and margin pressure on subscription plans and as a result, voice ARPU will continue its downward trend and data ARPU will become a more prominent factor of the overall ARPU mix by the end of 2009. The longer the recession lasts, the more permanent the shift in voice ARPU becomes. Customer retention will edge customer acquisition. Same would be true with the consumer behavior and expectations. This will lead to new business and pricing models for e.g. some will find the low flat rate pricing untenable in the long-run without a fundamental rethink of the network and business architecture.

The percentage contribution to the overall ARPU from data reached almost 25% in 2008 and is likely to exceed 30% by the end of 2009. For the first time since 1998, the voice ARPU dip below $40 in the US.

During the last downturn, the likes of Google emerged. These players didn’t have much to do with the mobile market at the time but have gradually put their indelible stamp on the future of the industry. It is almost certain that new media and telecom models will emerge as a result of the current crises with new players shaping the next decade of the mobile industry.

Whether this recession invites regulatory intervention remains to be seen. Government can encourage mobile adoption by reducing taxes and fees on mobile services, avoiding unnecessary regulations, making more spectrum readily available, increasing competition, investing and incentivizing in mobile broadband.

Also, will the industry price or innovate its way out of this recession? The short-term knee-jerk reaction is to generally lean on price-differentiation but innovative services and business models can lay the ground work for a more sustainable differentiation and long-term benefits from new services adoption.

Coming back to the 2008 forecasts, our estimate of the mobile data revenues was spot on. The annual mobile data services revenue stood at $34B. 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. Q109 numbers will give us a better insight into the impact of the current recession on the US mobile industry and the global markets at large.

The bottom line is that in an event of a long and deep recession (i.e. beyond 2009), which I am afraid seems to be the case, the fate of the US mobile industry will be more closely tied to the overall economy this time compared to the previous recessions. If the consumer and market sentiment improves within the next 3-6 months, the mobile data industry will continue its rapid growth. Despite a difficult environment, we expect the mobile data services revenues to grow by at least 15% YOY in 2009.

Against this backdrop, the analysis of the Q408 and 2008 US wireless data market is:

Service Revenues (Slides 14 , 21, 22)

ARPU (Slides15-18)

Subscribers (Slides 19-20)

Applications and Services

Handsets

Misc. (Slide 23)

Preliminary Global Update (Slides 21-22)

We will be keeping a close eye on the trends in the wireless data sector in our blog, future research reports, and articles. The next Global Wireless Data Market update will be issued in March 2009 and the next US Wireless Data Market update will be issued in May 2009.

To the 1% of you who have made it this far, thanks very much for your time and attention.

Your feedback is always welcome.

Should you need assistance in navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

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

US Wireless Industry in Recessions February 28, 2009

Posted by chetan in : 3G, AORTA, Carriers, Mobile Applications, Mobile Ecosystem, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 2 comments

We have been analyzing the data from the previous recessions to see how much correlation exists with the mobile industry data. Below is the high-level analysis. This will be part of our US Wireless Data Industry Update 4Q08 and 2008 coming out next week.

The current recession is not the first one that the US wireless industry has faced but it is quite different. The first one came in 1990 and lasted for 1 year and the second came amidst the dot-com bubble and terrorist attacks in 2001 and lasted for 2 years. Historically and logically, GDP and consumer spend is closely correlated. When the economy contracts, so does the consumer spending. A look into the income elasticity of demand indicates a change in consumer mobile services demand as a result of drop or change in consumer income. Different patterns of consumer demand emerge in different countries depending on the state of the industry during the specific downturn.

image

If we compared the US GDP data to the revenues and subscriber data, there is some correlation but state of the industry was quite different around that time. The % change in mobile services revenues and subscriptions went down with the drop in GDP in both instances and recovered as the GDP pulled back after the recession. During the first recession, mobile was a niche service. By 2001, mobile has become a mass-market phenomenon but data services market was largely non-existent. By 2008, the US mobile market had matured with high-degree of subscriber penetration and mobile data had become a healthy and vibrant industry.

1990-1991 The % GDP change (GDP compared to previous year) dropped from 5.8% in 1990 to 3.3% in 1991. The mobile service revenues % change dropped from 36% to 26% over the same time period, the subscriber % growth dropped from 51% to 43%. Subscriber penetration at the end of 1990 was around 3%. Given the smaller base, the drop in mobile numbers can be partially attributed to the fact that as the % penetration grows the % change numbers come down anyway. However, in 1992, when % GDP jumped to 5.7%, the % change in mobile services revenues and total subscribers jumped to 46% and 37% respectively, thus quickly reversing the downward trend.

image

2001-2003 The % GDP change dropped from 5.9% in 2000 to 3.2%. Over the same period, % change in mobile services revenues dropped from 31% to 24% and % change in total subscribers dropped from 27% to 17%. However, as you would see in slide X, these numbers have been slowly dropping regardless of the recession as the subscriber and revenue base grew. The subscriber penetration in 2000 was 39%.

2008- The % GDP change dropped from 4.8% in 2007 to 2.3% in 2008 with 4Q 2008 reported a drop by 6.2% QoQ in one of the sharpest declines in last quarter century. The nature of this recession is quite different as well. While the previous recessions were limited to certain segments of the overall economy, the current recession has touched every single sector with a vengeance. The subscriber penetration at the end of 2008 was 89%.

So, what can we expect in the next few months. Tune in to our quarterly report next week to read some our 2c.

Interview w/ BusinessWeek on the state of the wireless industry February 20, 2009

Posted by chetan in : 3G, 4G, AORTA, Carriers, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

Olga Kharif from BW talked to me about the state of the US wireless market. Article below. I will have more commentary on the same in our yearly update report in a few days.

 

Sprint Nextel: The Canary in Wireless’s Coal Mine?

The wireless carrier’s fourth-quarter challenges may be shared by the rest of the industry in the coming months

By Olga Kharif

“Economic uncertainty” was the phrase of the day for Sprint Nextel (S). During a Feb. 19 conference call, executives of the No. 3 U.S. wireless service provider used the two words liberally to describe the company’s fourth-quarter results. In the three months ended in December, sales fell, losses ballooned, and customers jumped ship. There was so little visibility into the future that the company declined to make a forecast for the current quarter.

Usually when Sprint reports a bad quarter, it’s easy to blame challenges specific to the company, including subpar customer service and network performance. But this time around, Sprint’s woes augur a rough year for the entire industry.

Sprint Nextel’s results are an early indication that the tough economic times engulfing construction, banking, and other industries are catching up with wireless carriers. Already, the downturn has pushed equipment maker Nortel (NT) into bankruptcy and ravaged sales of phone manufacturers like Motorola (MOT). Now it’s the service providers’ turn. “I don’t think there’s any sector that’s been untouched,” says Brent Iadarola, a global research director for consultant Frost & Sullivan. “The wireless sector is not immune.”

BUSINESS CUSTOMER EXODUS

Sprint Nextel may be feeling the pinch from businesses earliest because, among the top wireless carriers, it has the largest proportion of corporate customers. Sprint reported a “sizable” increase in turnover among corporate customers, which account for more than 25% of its user base. Companies are eliminating employees and canceling contracts for Research In Motion (RIMM) BlackBerrys and other business-friendly devices that run on the Sprint Nextel network. “We can watch unemployment [rise] and see a direct impact on our enterprise business,” Sprint Nextel CEO Dan Hesse says in an interview with BusinessWeek.

Though Sprint is the largest national provider of wireless service to businesses, the enterprise exodus may also affect the top two mobile-phone service providers: AT&T (T) and Verizon Wireless, which is owned by Verizon Communications (VZ) and Vodafone Group (VOD). Businesses are cutting back on air cards that connect laptops to the Web via wireless networks, as well as related data plans, says consultant Chetan Sharma. One maker of air cards, Sierra Wireless (SW), on Jan. 29 announced it would lay off 10% of its workforce amid a drop in fourth-quarter revenue. About 12% of carriers’ data revenues come from data cards, Sharma estimates. While Hesse says Sprint isn’t feeling an impact yet, its rivals are. In a recent note, UBS (UBS) estimated that AT&T’s net air card additions fell 121,000 in the fourth quarter, from 186,000 in the third quarter and 166,000 in the second.

Consumers are starting to curtail wireless service purchases, too. Of 2,151 U.S. online cell-phone users surveyed by JupiterResearch in November, one-third were considering cutting back on wireless spending and the number of minutes and texts they use per month. In the fourth quarter, sales of downloadable content like ringtones and games declined 4% to 5%, Sharma estimates. “People are just buying less than they used to,” Sharma says. “That’s discretionary spending, and it’s going away.” Only last July, researcher Gartner (IT) said it expected mobile gaming, one of the most popular forms of downloadable content, to surge 40% to $6.3 billion in 2011, from $4.5 billion in 2008.

At Handango, an online provider of mobile applications, sales have declined in the past year, and the average order value fell 10%, says CEO Alex Bloom. High-priced productivity and utility applications have been hit the hardest, as consumers cut back and developers began offering similar apps for less or free through rival stores, like the Apple (AAPL) App Store and Android Market. Some mobile games outfits are struggling as well: On Feb. 4, THQ (THQI) laid off 100 staffers from its mobile gaming division, citing “continued economic weakness and uncertainty in the market.” For now, the pain is not universal: Mobile content providers MobiTV and PopCap Games say they are doing well.

PREPAID MOBILE SERVICES BENEFIT

Analysts are also concerned as consumers migrate away from traditional service plans—where users sign up for one- or multiyear contracts—and opt for lower-priced, more flexible prepaid services such as Leap (LEAP), MetroPCS (PCS), and Sprint’s own Boost Mobile. On Jan. 22, Boost introduced Boost Unlimited, offering unlimited anytime calling, text messaging, wireless Web, and walkie-talkie services for $50 a month, drawing a slew of postpaid users from carriers like T-Mobile USA. “The macroeconomic conditions are certainly having an impact on people’s pocketbook,” says Matt Carter, president of Boost Mobile. “They want things that are affordable, and people are looking for more predictability.”

John Hodulik, an analyst at UBS, expects the unlimited prepaid segment to garner 36% of the wireless industry’s total new subscribers in 2009, from 18% in 2008. That means “postpaid subscriber growth will likely slow more than the overall market,” Hodulik wrote in a recent note. That blow to postpaid subscriber growth comes at a bad time. The industry’s overall growth has already slowed to a crawl, and carriers are expected to add only about 10 million new subscribers to their current stable of 272 million users this year.

Price competition is yet another concern. There are rumors that T-Mobile USA is about to start offering low-cost voice plans to existing customers who’ve used the service for more than 22 months. The plans are likely designed to slow customer exodus to prepaid offerings from rivals. “T-Mobile won’t comment on test market activities,” the company said in a statement. But if made nationwide, the offering could potentially push down other carriers’ prices.

There may be a thin silver lining for wireless carriers in the current dismal climate. As consumers try to cut costs, many are dropping their landlines and office lines and going completely wireless. Gartner recently forecast that cell phones will replace many office phones in North America by 2011. “Even though we are feeling some impact, we are still a necessity,” Sprint Nextel’s Hesse says.

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

Event Recap: PNWS (Vancouver) and Location Based Advertising (PARC) January 30, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, IP Strategy, Indian Wireless Market, Location Based Services, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Patent Strategy, Speaking Engagements, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , 2 comments

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My event calendar this year started like last year - with a trip to Vancouver to attend Pacific Northwest Wireless Summit (PNWS) - the best wireless conference in Canada (18 and 19 Jan) . The weather was clear and sunny for a change, the drive beautiful, and the views from the conference rooms just drop-dead-gorgeous. The first day was Leadership summit where over 50+ C-level executives participated in discussing the state of affairs in the wireless industry and how to respond to the slumping economy.

Canada seems to be hit much harder than US by the slumping economy especially eastern Canada with the likes of Nortel struggling to survive.There were several interesting presentations and discussions. Some of the comments that stood out -

Steve Morley (former VP Qualcomm) - Qualcomm didn’t have any patents, any strategy, any product plan, any VC money but had a good group of people who figured things out. So, entrepreneurs shouldn’t feel disheartened and go with their dreams. The things that will get traction are - productivity tools, things that provide comfort, social connection tools, and simplifiers.

Wang Jing (Chair TD-SCDMA Forum, China) The ultimate battleground is LTE, TD-SCDMA is just a stepping stone to 4G. The mobile data market won’t pick up for the next 2 years

Laurence Dunbar (Partner, Fasken Martineau) Regulations can create new opportunities for new players and incumbents alike but it is important to understand the implications

Howard Donaldson (VP Disney) - It is very important to capture IP to maximize returns

I also moderated a panel on Global Opportunity - where are the opportunities and how to capture them. It is clear that certain segments are getting hit hard like Infrastructure and handsets, operators are also cutting back. Consumer data spending is still strong in the North American market as was evident form the strong AT&T and Verizon Q4 numbers. China and India are finally going 3G and some of the biggest contracts will be doled out.

China is pursuing a three technology strategy with China Mobile with TD-SCDMA, China Telecom with CDMA2000, and China Unicom with WCDMA. On the TD-SCDMA, China is trying to attract traditional OEMs to supplement Chinese OEMs but will the big boys invest in a technology that might not too long? To avail international opportunities, one has to understand the local market perfectly before jumping in. Despite the nuclear winter, there are new opportunities surfacing in various parts of the globe.

Next day, the full conference was in full flow with 6 interesting and diverse keynote addresses and panel discussion. Soundbites (courtesy PNWS)

During the session on Mobile Advertising, I presented my thoughts on the state of affairs of the mobile advertising ecosystem

I also wrote a small piece for the PNWS newsletter (below) based on our annual mobile predictions survey.

The best guesses for 2009
It’s that time of year again; time for predictions and forecasts for the year ahead. Chetan Sharma gives you some ideas based on the annual mobile survey conducted by Chetan Sharma Consulting with industry execs. Don’t miss Chetan live at PNWS where he will give you the inside track on mobile advertising and give you some insight on what consumers are thinking.

Thanks to Michael Bidu for inviting me to participate.

Earlier this week, I headed down to Palo Alto to moderate a panel on Location Based Advertising being hosted by the Wireless Communication Alliance LBS SIG at Palo Alto Research Center (PARC)

089 096

Being involved in the wireless industry for almost 15 years, I used to follow the works of the legendary Mark Weiser, founder of the Ubiquitous Computing (UC) group at PARC and father of Ubiquitous Computing in general. His works and words have inspired many in the industry including me.

In fact, in 1999, when I was picking a name for our wireless practice at Luminant, Ubiquitous Computing was on the top of my list but I found myself explaining it the industry. We gradually changed to Pervasive Computing (which was also chosen by IBM around that time). People still found it hard to grasp the meaning, so I reluctantly changed (IBM also started de-emphasizing PvC) it to “wireless practice.”

Anyway, it was an absolute thrill and an honor to interact with the folks at UC at PARC and moderate a panel at PARC. There is so much computing history at PARC that even the walls seem to whisper UC.

The panelists were

– Brian Levin, Useful Networks
– Ujjal Kolhi, RhythmNewMedia
– Ilan Zorman, AdYouNet
– Blair Swedeen, Placecast
– David Turner, NAVTEQ

presenting different points of view regarding LBA. These guys have been around the block with location and advertising so it was a good spirited discussion. I have great respect for Ujjal (before Rhythm, he used to be CMO of Airtouch responsible for $250M/yr advertising budget), he has good insights into how advertising is bought and sold. Unlike the other panelists, Ujjal wasn’t particularly bullish on the LBA opportunity in terms of size and scale and thought it will be at best a niche play.

David talked about some interesting campaigns they have been launching on portable navigation devices from Garmin. Blair and Ilan talked about the differences with online targeting and how location targeting can improve performance. Brian from Useful Networks (I like the tag line - we take the BS out of LBS, neat!) gave some information about their European trials. Their role as location aggregator is being received well and they will have some numbers to announce next month in Barcelona.

Privacy was a common theme for the panelists, something that has to be done right or else the industry risks the regulatory hammer. We covered quite a bit in a short amount of time, yet there was still so much to discuss.

Thanks to Kurt Partridge for inviting me to help out with the event.

The need for the broadband stimulus package January 20, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, Carriers, Japan Wireless Market, Mobile Applications, Mobile Ecosystem, US Wireless Market, Unified Messaging, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

As we get ready to witness history today with Obama’s inauguration, Vern and I wrote a piece on the need for renewed emphasis on broadband to revitalize the economy. Our 2c to forward the discussion.

 

The need for the broadband stimulus package

- Vern Fotheringham and Chetan Sharma

Broadband Communications IF Properly Conceived, Incentivized and Deployed Can Lead to the Revitalization of the American Economy and Our Global Competitiveness

There is an urgent need to upgrade the telecommunications infrastructure in the United States, if the new administration intends to restart the engine of commerce that has empowered our nation to prosper for so long. Over the past few decades, we have slipped onto a slippery slope of public policies that have confused the pseudo value of trading financial instruments with the actual creation of new wealth that refreshes and expands the foundation of our economy. Our attention shifted from incentivizing those who actually create wealth, to rewarding those who simply trade existing assets.

Regardless of how many times asset backed securities, or for that matter obsolete telecom infrastructure, can be repackaged, and creatively revalued into an ever-increasing spiral of pseudo financial gains, the value of the underlying assets are finite, and often eroding in value. It is essential to the restoration of the American dream, that the new administration immediately address ways to restore the core drivers of the US economy, which have been eroded to a point of imminent disaster. Our leaders have failed to protect our nation’s engine of innovation through a cascade of policies that have literally strangled the “goose that lays the golden eggs.”

Key initiatives such as Education, Healthcare, and Emergency Response all require affordable broadband availability to modernize archaic systems and processes. Our kids shouldn’t be penalized in comparison to children in other countries who are benefiting from real-time access to education and information 24×7. With global access to the best minds and teachers becoming available via the Internet, the expense and inefficiencies of traditional educational institutions are soon in for a major challenge from the virtual realms of the broadband Internet versus the physical benefits available to students’ physical attendance in a campus setting.

As far as healthcare is concerned, broadband availability becomes ever more important in the global society in which the end-points of any solution can be anywhere. In an interconnected world, for example, healthcare delivery will be much more decentralized and distributed. Our senior citizens should not have to haul themselves up to the hospital every time they have a question or concern.

The ability for emergency service providers of all types will benefit from the seamless interconnection of their wireless broadband networks. Our first responders should have as much information about the crisis they are expected to tackle in real-time. All this requires a high-speed flow of information, access, and intelligence that most of our existing infrastructure is simply incapable of supporting.

Broadband policies and the extension of U.S. international competitiveness is a topic that affects all political camps equally. We challenge our politicians, regulators, financiers, carriers, vendors, and the consuming public to pay very close attention to how we balance the public policy issues and the sometimes-painful business impacts that are expected. Too heavy a hand in any one dimension of the debates will surely have negative impacts on overall progress. How the pains and the gains are shared and distributed across all boundaries of the industry and its publics will determine our ultimate success, or alternatively, just subject us to a muddled mess that ultimately penalizes everyone, as we lose our competitive advantages as a global leader and innovator.

Will the United States regain its position as a world leader in advanced telecommunications, or will it slowly but surely slip into the role of a tired old economy, past its prime and slipping into its declining years? The potential to do damage is real, and the potential for the United States to lose its position as a world leader is also real and imminent.

We will all enjoy the benefits of the broadband future, yet there is much work to be done, with many regulatory and technical battles still to be fought over exactly how to bring these services into being. We will get the future we deserve, on the basis of our courage and wisdom in how we balance massive, highly disruptive change, without destroying much of the value created in the narrowband and wideband eras, which have enormously benefited our society at large, and each of us personally, as we move forward into the broadband era. However, it will only be from the hindsight of the future that our generation of pioneers will be judged for our wisdom, competence, and creativity in solving the numerous financial, regulatory, and technical challenges facing the creation of the universal information society on a truly national scale.

Vern Fotheringham and Chetan Sharma are co-authors of “Wireless Broadband: Conflict and Convergence” (IEEE Press/John Wiley, Nov 2008)

Pacific Northwest Wireless Summit Next week January 12, 2009

Posted by chetan in : 3G, 4G, AORTA, BRIC, Carriers, European Wireless Market, Mobile Advertising, Mobile Applications, Speaking Engagements, Wireless Value Chain, Worldwide Wireless Market , add a comment

The PNWS is shaping up to be a great event.

In case, you haven’t registered yet (and are in the pacific northwest area), it will be a good idea. The event starts with a Leadership Summit on Sunday which is an invite only forum for 50 CEOs, presidents, CFOs, CTOs and visionaries from small and large successful wireless companies as well as decision makers from government and academia from Canada, US, UK, China, and other parts of the world. I will be moderating a panel on “Global Opportunities” with

Dr. Wang Jing (Secretary General, TD-SCDMA Forum, China)

Tony Fish (Co-founder, AMF Ventures, UK) 

Laurence Dunbar (Partner, Fasken Martineau DuMoulin LLP, Canada)

There will be a report published on the days proceedings, so will have more to share later on.

Next day, I will participate on the panel on Mobile Advertising and Consumer Insights, presenting mobile advertising trends in 2009 and then going in the roundtable moderated by our friend Michael Bidu, Executive Director of WINBC, the man behind this event. Other panelists will be:

Olivier Vincent, CEO, Canpages (http://www.canpages.ca)

Simon Backer, CEO, Wireless Image (http://www.wireless-image.com)  

Gowri Shankar, SVP Sales and Business Development, SinglePoint (http://www.gosinglepoint.com )

Looking forward to an engaging couple of days.

Mobile Industry Predictions 2009 January 1, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, European Wireless Market, Gaming, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Privacy, Speaking Engagements, Strategy, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

Mobile Industry Predictions 2009

2009 Mobile Industry Predictions Survey
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First things first. From all of us at Chetan Sharma Consulting, wish you and yours a very happy and prosperous 2009.

Before we get into what’s to come, let’s do a quick wrap-up of the year that was.

While 2007 was remembered as “the year of the iPhone,” in 2008, though iPhone and Appstore again dominated the headlines as “Touch” became the new black, iPhone shared the spotlight with Android and the resurgent RIM. The deafening roar of “Openness” that started to bubble up during Q407 permeated the ecosystem in 2008. Responding to the iPhone, OEMs raced to introduce Touch phones - Instinct, Armani, Storm, N2, Glimmer, Vu, G1, Diamond, Dare, N97, 5800, and others.

Apple reached its 10M goal a full quarter early and Gphone’s 1M number was impressive. The Clearwire deal was consummated though it meanders through the clouds of uncertainty. Blyk continued to defy expectations. We made significant headway in energizing the mobile advertising sub segment but the tough problems of privacy, education, control, fragmentation, and user experience remain. LBS picked up steam and mobility started to get into the alternate consumer device universe which with the help of Amazon kindle and PNDs have started a new chain of AORTA devices.

In terms of actual numbers, the mobile industry exceeded 1 Trillion USD in revenues for the first time with services revenue making up 80% of the mix and 20% being contributed by infrastructure, handsets, and misc. Several operators are now exceeding $2B/quarter in data revenues.

Several subscription milestones throughout the year: 50% penetration, almost 4B worldwide, 600M China, 300M India. India and China both added more than 100M subs in 2008. As expected, 3G crossed the inflection point in the western markets (30%+ penetration) while in Korea and Japan, it was getting hard to find people without 3G (85%+ penetration). Mobile web penetration is above 25% and is becoming quite significant.

Thanks to the iPhone, we seem to have settled on sub-$200 smartphones with race to $150 and $100 on the cards. Flat-rate data subscriptions went above 10% in the western markets. Over 20% of the global service revenues are not dependent on data while non-SMS revenues surged past 40%. With the advent of Femto and UMA, we might see a new front in the battle for the digital home, esp. as bundling and quad-play offers become common place and convergence starts to take different shapes, forms, and business models. Carriers are starting to worry about mobile data usage and looking for alternate strategies and business models. Chinese OEMs started to become more dominant and started to win some major accounts. Don’t be surprised by a major acquisition by them in 09.

Among other events of significance: Mobile TV continued to suffer from highpricendititis, Helio shut down, China and India delayed 3G, WM got updated as MS got behind, Yahoo cemented some impressive operator deals as GYM got more active in mobile, Microsoft entangled Yahoo in a mating dance, Mobile Open got into the industry physce, 700 MHz auction drama ensued, Beijing Olympics rocked, SMS handed the presidency to Obama, Whitespaces and FCC tangled, LTE dominated, UMB died, Admob exponentiated, M&A slowed, IP scuffles continued, over 1.2B new devices shipped, Nokia sold more than 100M devices in each quarter, Samsung surged, Motorola pondered, AT&T iJoyed, Vodafone said Namaste India, US edged past Japan in mobile data revenues, DoCoMo continued to dominate the mobile data revenues rankings, India edged past US in total mobile subscribers, Mobile Facebook spread, Twitter tweeped, Symbian went open source, Sequoia panicked, INQ launched, Economy tanked, WalMart started selling iPhone, Palm got a lifeline, Change was in the air.

We covered these is much detail in our regular industry research notes, books, whitepapers, blog posts, speeches, panels, and more. Look forward to continuing the conversation this year.

2009 will also be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?

We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that industry movers and shakers participate. Executives and insiders (n=200) from leading mobile companies across the value chain and around the world opined to help us see what 2009 might bring.

Six names were randomly drawn for one of our three books released in 2008 (Mobile Advertising, Enterprise Mobility and Wireless Broadband)

The winners are:

  1. Akio Orii, CFO and VP, Toyota

  2. Declan Carew, New Product Strategy Manager, Vodafone

  3. Helen Keegan, Consultant, Beep Marketing

  4. Rich Begert, CEO, Singlepoint, and

  5. Russ McGuire, VP, Sprint Nextel

  6. Jonathan Ebinger, General Partner, Blue Run Ventures

Congrats and Thank You.

Now onto the survey results.  The makeup of the respondents below:

survey1

survey2

Will we see a pull-back in mobile data spending globally/in the US?

survey3

The wireless data industry has been somewhat unharmed so far (though OEMs and Infrastructure providers are bearing the brunt of the economic storm). Flat rate pricing, smartphones, 3G networks, better UX are all helping in the continued surge of mobile data consumption and hence revenues. Most expect that though we might see some scaling back in mobile data spending, overall, the growth will continue. The global markets will be slightly better off than the US.

Will Android handset sales exceed iPhone’s in 2009?

survey4

The overwhelming majority thought that iPhone will continue to dominate Android in 2009 though 2010 could be a different story. Android has had a good start and if the number of handsets keep on increasing with more carriers carrying it in more countries, Android might not exceed but can come awfully close.

Mirror, Mirror on the wall, who will be the most open of them all?

survey6

“OPEN” was the biggest buzzword of 2008 though it means different things to different people. Almost everyone thinks, Google is likely to set the agenda on “open” for others to follow.

Will Apple launch new iPhone models in 2009?

survey5

The answer is yes but will they be just minor upgrades or shake-the-market new models. With Android, Nokia, and RIM breathing down its neck, Apple will need more than just upgrades to maintain the limelight.

Will Mobile Advertising see a rise in ad-spend in 2009?

survey7

There might be some slow down but mobile advertising ad-spend will keep on increasing. Targeting capability is increasing and CPMs are coming down making for a more efficient mobile channel for advertising. In our own work, we have seen brands fall into two camps: one who are scaling down on inefficient channels like print and radio and moving money into digital including mobile and the others who don’t have quite the appetite for mobile and want to keep investing in channels that they are most familiar with.

Will India and China launch nationwide 3G in 2009?

survey8

After many years of delay, the two powerhouses set to launch 3G in 2009. China with TD-SCDMA/WCDMA and India with WCDMA are set to doll out some of the largest contracts seen in the industry.

Will Mobile Payments get any traction in North America and Western Europe?

survey9

The plans for mobile payments launch will get pulled back a bit due to the economic crisis. Limited rollouts and trials to continue. Some progress will be made in international mobile remittances.

Will Microsoft launch its own mobile phone?

survey10

Will they, Won’t they? How can they not? The probability increased from last year for an Mphone coming to a store near you. But, with the boeingification of Microsoft, it is hard to get any decisions to the market quickly.

Will Clearwire meet the 1.3 million subscriber target in 2009?

survey13

The economic climate might force slow-down of expansion and thus the optimistic subscriber forecasts could be impacted.

Will Mobile Open Source mitigate fragmentation?

survey14

Not a clear cut answer. Depends on how other versions of Android phones do in the market and if the application development remains a challenge across the Android and Symbian family of devices.

Will cable companies make a major play in wireless in 2009?

survey15

Quad-Play is the name of the game. Cable companies have invested half-heartedly thus far. 2009 might be the year they move in aggressively.

Will Microsoft buy RIM?

survey11

RIM has become too big and powerful to be consumed by Microsoft easily but desperate times call for desperate measures.

Will Obama’s administration have a major impact on network neutrality and open networks debate?

survey16

Not a priority for now. No high expectations, just regular bureaucratic grind.

Will carriers start launching Apple/Android style appstores?

survey17

Opinions remain divided. I think most are tempted to build but will outsource the development.

Will Microsoft make windows mobile free to OEMs?

survey12

Android (and to some extent Symbian) has pushed Microsoft in a corner. Will it preempt the demise of its pricing strategy? Reduction in price might be the safest bet at this time.

Will the smartphone penetration hit the inflection point in the western markets?

survey18

We are getting to that inflection point. 2009 seems to be the year with major implications for the ecosystem.

Will UMA/Femtocells cement their place in the mobile ecosystem?

survey20

As 3G networks get burdened by data usage, carriers will look to making UMA and Femtocells as a critical piece of their network strategy

Will consumer privacy and data security rise to be one of the important issues of 2009?

survey19

Privacy? What Privacy? Another celebrity mishap might pull this issue to the front burner.

Despite conventional wisdom, what will not happen in 2009?

There were many. Sampling - Microsoft will not buy Yahoo. US Cellular will not be sold. Global economy will not recover in 2009. LTE won’t be commercially deployed. India and China will struggle to get substantial progress with 3G. Motorola will not breakup. Nortel will not disappear. 2009 won’t be the year of mobile advertising.

It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem - monetization of social networks, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, OpenSocial, GF/FB Connect, Comes with Music, Mobile Widgets, Mobile 3.0, LTE, MIDs, Off-portal, Embedded Mobile, M2M, and others.

However, be rest assured, we will be tracking these and much more throughout the year and sharing them through various channels.

Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly living in “interesting times” with never a dull moment in our dynamic industry. It has been a terrific year for us here at Chetan Sharma Consulting and we are looking forward to 2009 and seeing many of you along the way.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

2009 Events December 28, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

Here are some of the events I will be participating in starting Jan 09.

On the 18th (Jan), I am heading to beautiful Vancouver BC to participate in the Leadership Summit at the Annual Pacific Northwest Wireless Summit that brings some of the noted executives in the mobile industry for an afternoon of pondering and contemplation. On 19th, I will participate in the day long conference on mobile. I participated in last year’s event and enjoyed it. In fact, launched our Mobile Advertising book at this event, so fond memories.

On 27th Jan, will be going south to Palo Alto to first mingle with the staff at PARC (XEROX) and then moderate a panel on “Location Based Advertising” for the Wireless Communications Alliance (WCA) SIG for LBS. We will be finalizing the program early Jan so stay tuned, should be a great discussion.

Then at CTIA in early April, will be joining my friend and colleague from across the pond - Ajit Jaokar to participate in the discussion on the BRIC markets. Conference agenda is shaping up well. More details to come.

Later in April, Ajit is also putting together “Mobile Web Mega Trends” Conference series with the first one being in Singapore. More details as they become available. Be sure to check them out.

2008 - year in review December 26, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, European Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

2008 has been a great year for the mobile industry with several key milestones. We will be detailing them in an another post. For this one, just wanted to look back and see how we did in our last year’s predictions survey where we invited the industry insiders to predict the events that will shape the industry this year. The full discussion is here.

We will be presenting our 2009 findings next week. For now, let’s briefly look at the year that was:

1. Will Google introduce a Google Branded Phone in 2008?

Will it? Won’t it? 44.5% gave it a 75% or higher chance of happening while 40% thought it ain’t happening. GPhone is a temptation Google will find hard to resist though a lot will depend on how various initiatives and partnerships shape-up on the ground. In any case, expect another major announcement in the next 2-3 months.

Google did announce the G1 and it launched in Sept. Even though it was launched by T-Mobile USA, in the industry it was known as the Google Phone with Google logo prominently embedded on the phone. Look for several Android launches in 2009.

2. Will Google play to win in the 700MHz Spectrum Auction?

Google has played the spectrum chess game effectively. Almost 50% respondents gave it a 75% or higher chance of Google winning the bid. Though expectations are high, Google is unlikely to play to win. Services business is not their cup of tea, they could still fund the Clearwire-Sprint deal but that investment can be spent differently to get better end-results, i.e. mobile ad revenue.

Google has been pretty savvy with its mobile strategy pushing the ecosystem to its tune. We didn’t think that Google was in it for the win, it just wanted to muddy the waters a bit to makes things interesting. As predicted, it also invested in the Clearwire deal.

3. Will Microsoft launch its own mobile phone?

Unless Google comes out with GPhone, Microsoft will stay content with its operator distribution strategy. 63% of respondents gave it less than a 25% chance of Microsoft releasing their own phone. If GPhone comes out and gets some traction, expect Microsoft to get its “fast follower” strategy into high gear.

Our panel didn’t give Mphone much of a chance. Will it happen 2009? well, probability just got higher.

4. Will Mobile Payments get traction in North America and Western Europe?

Only 9% thought it is a sure bet for 2008. True mobile commerce hasn’t really started in the western world. While there are significant movements, 2008 will just be a “lay the groundwork” year for mobile payments.

We didn’t think so. Groundwork was laid but not much real traction.

5. Will WiMAX regroup from its setbacks?

Only 35% gave it a 75% or higher chance (of WiMAX resurrecting itself esp. in the US in 2008). A lot depends on how Mr. Hesse deals with Sprint’s WiMAX business. Indications are there will be a deal with Clearwire to off-load the risks via some external investment (Google?).

The Clearwire deal did happen and as predicted Sprint decided to offload the business with the help of external investments. The success of the venture is still an open question.

6. Will Helio survive 2008?

Almost 70% respondents thought Helio won’t make it. Given the flameout of some of the prominent new-generation MVNOs, it is hard to see how Helio will see 2009. It will all come down to how persistent is SK Telecom. Earthlink doesn’t have the bank balance to keep funding this initiative.

Writing was on the wall and our panelists called it out explicitly.

7. Will Verizon truly open-up its garden for third-party visitations?

Only 5% thought it is a sure bet for 2008. Verizon’s open posturing was more to ward off any regulators and to improve its image. There is unlikely to be any meaningful progress on this front this year.

“Open” was one of the biggest buzzwords of the year. For Verizon, it was more of a posturing game.

8. Will 2008 be the inflection year for Mobile Advertising?

42% gave Mobile Advertising a 75% or higher chance for rapid growth. Market will mature, more consolidation, some privacy gaffes but overall things are looking up for mobile advertising.

While the market matured a lot, consolidation didn’t really take place this year, perhaps in 2009.

9. Will Femto-Cells gain any significant momentum in 2008?

It will be an introduction and experimentation year, so no significant traction is expected. Over 52% thought Femto-Cells will be just a buzz word in 2008.

It was primarily a buzz word with Sprint launching Femto Cells and T-Mobile pushing hard on the @Home strategy. Given the pressure on the 3G networks, Femtocells will become an integral part of the carrier strategies in 2009.

10. Will Nokia be able to extract iPhone-style rev-share from carriers in 2008?

Less than 20% thought Nokia will be able to do an Apple when it comes to rev-share arrangements. For OEMs, going direct to the consumers was considered treachery to the sacrosanct relationship with the operators. Until Apple showed up with iPhone. Now, Nokia is putting its services strategy in motion and is building a direct relationship with the consumers worldwide and it has a good shot at pulling it off though it will be a long haul.

Well, Nokia didn’t and Apple backed off their rev-share scheme coming back to the tried and tested model of the subsidy model.

11. Will Palm survive 2008?

Only 8% gave it a 100% chance of surviving 08 as an independent entity. It will be difficult for Palm to stay in a status-quo mode. They desperately need a hit device that can give them some breathing room.  Given all the operational and strategic problems the company is having, a sale is likely.

This is probably the only prediction that we got wrong though we came pretty close. Palm is still struggling and in spite of the $100M investment late in the year and the announcement of Nova coming up at CES, the company is still struggling. It has got some breathing room but desperately needs a hit, a big hit.

12. Will iPhone truly open up?

Over 45% thought iPhone won’t open-up in any meaningful way. Apple has built-up one of the most profitable closed empires in the digital world. Are they about open things up? While the iPhone SDK is scheduled for early 08, don’t hold your breath on accessing the critical native APIs.

Well, “Openness” is in the eyes of the beholder. The Appstore has been a super hit and has become a standard for the industry such that everyone is rushing to copy the model. Apple opened up but lot of work still needs to be done.

13. Will there be more unsubsidized devices introduced in the US market in 2008?

Almost 49% thought we are likely to see another unsubsidized device in the US market this year. Nokia is looking to go direct and some GSM handset manufacturers are likely to entertain the idea of testing the market with unsubsidized devices.

The Apple model changed and that was pretty much the death knell to the unsubsidized device model in the US.

14. Will Mobile TV move the needle in 2008?

Almost 70% thought mobile TV won’t make much of a difference in 08.Though AT&T is slated to introduce MediaFLO to join Verizon in the Mobile TV services market, lack of devices and better pricing models will hinder wide adoption in 2008. However, downloadable video and VOD content will experience significant growth.

Mobile TV suffers from highpricenditis and users stayed away as expected.

15. Will Android make a dent in handset shipments in 2008?

Only 15% gave it a more than 75% chance this year. It is going to take some time for Android plans to mature and materialize. Don’t see any material impact in 08.

1M+. Enough for the buzz but not making any material dent into the market share. 2009 could be different.

Request for Participation: 2009 Mobile Industry Predictions December 9, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, Indian Wireless Market, International Trade, Japan Wireless Market, Location Based Services, Wireless Value Chain, Worldwide Wireless Market , add a comment

Greetings.

2009 is upon us. We are doing our annual Mobile Industry Predictions survey (20 questions) to gather insights from the collective brain trust – our readers, friends and colleagues around the globe. I am hoping you will help us out by giving us your thoughts and insights. You can answer any or all questions. All answers are kept confidential. Last year’s survey results here.

If you leave your email address, we will enter you in the drawing for winning a signed copy of one of our three books released in 2008.

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- Mobile Advertising by Chetan Sharma, Joe Herzog, and Victor Melfi, John Wiley & Sons

- Wireless Broadband by Vern Fotheringham and Chetan Sharma, IEEE Press and John Wiley & Sons

- Enterprise Mobility: Applications, Technologies, and Strategies, IOS Press

We will share the results during the first week of 2009.

Please click here to start responding. If the link doesn’t work for you, please let us know.

Survey ends Dec 28th.

The questions are:

1. Will we see a pull-back in mobile data spending globally?

2. Will we see a pull-back in mobile data spending in the US?

3. Will Android handset sales exceed iPhone’s in 2009?

4. Mirror, Mirror on the wall, who will be the most open of them all?

5. Will Apple launch new iPhone models in 2009?

6. Will Mobile Advertising see a rise in ad-spend in 2009?

7. Will India and China launch nationwide 3G in 2009?

8. Will Mobile Payments get any traction in North America and Western Europe?

9. Will Microsoft launch its own mobile phone?

10. Will Clearwire meet the 1.3 million subscriber target in 2009?

11. Will Mobile Open Source mitigate fragmentation?

12. Will cable companies make a major play in wireless in 2009?

13. Will Microsoft buy RIM?

14. Will Obama’s administration have a major impact on network neutrality and open networks debate?

15. Will carriers start launching Apple/Android style appstores?

16. Will Microsoft make windows mobile free to OEMs?

17. Will the smartphone penetration hit the inflection point in the western markets?

18. Will UMA/Femtocells cement their place in the mobile ecosystem?

19. Will consumer privacy and data security rise to be one of the important issues of 2009?

20. Despite conventional wisdom, what will not happen in 2009?

Please feel free to pass this on to anyone who might be interested or has something to say.

Thanks and Have a safe and wonderful holiday.

For a prosperous and strong 2009.

Kind regards,

Chetan Sharma

Now it’s Nokia’s turn December 2, 2008

Posted by chetan in : 3G, 4G, AORTA, Carriers, Devices, Worldwide Wireless Market , add a comment

to challenge its friendly rival - the iPhone with N97. The device looks pretty sharp and easy to use. it is sleek and appealing. The problem might be the price of the device - currently at almost $700 w/o subsidies. We know that $200 is the bar set by iPhone and other smartphones have been in the same range ever since. Even with subsidies, N97 will probably be in the $300-$400 range, not a mass-market price. Will it meet the fate of the Nokia Communicator or will Nokia throw in some subsidy dollars to bring the device down to the competing levels.

Also, Nokia as usual will be targeting Europe first and US probably won’t see the device until 12-18 months later, clearly a missed opportunity. They need to learn from Apple how to launch devices and capture the buzz and momentum. N97 looks like a serious challenge thus far to iPhone but other factors might thwart its success.

More on the launch here

Recap of "Tomorrow’s Wireless Future" November 20, 2008

Posted by chetan in : 3G, 4G, AORTA, Carriers, Enterprise Mobility, European Wireless Market, Indian Wireless Market, International Trade, Japan Wireless Market, Location Based Services, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Smart Phones, Speaking Engagements, US Wireless Market, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

Tomorrow’s Wireless Future

One of the reasons I love what I do is that I get a chance to work with really smart people around the world on some cutting-edge projects. Additionally, I get the opportunity to interview some of the brightest minds in the industry. This year has been particularly rewarding. I probably did close to 25 events which were a mix of keynote addresses, panel moderation, panel participation, university lectures, and other speeches. Add in the 20+ client project visits and it all translates into more than a trip every other week to the SeaTac airport. My suitcase has been permanently positioned at the doorstep in my house.

Earlier this week, I had the distinct honor of moderating a panel of some of the most eminent senior wireless research scientists and CEOs of wireless companies from Finland where we explored the future of the wireless landscape from user interface to reduction in carbon footprint to privacy and security issues and much more.

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Also, had the privilege to do a Q&A session with Dr. Craig Barrett, Chairman of Intel Corporation after his keynote address. This note summarizes the topics discussed during the “Tomorrow’s Wireless World” event.

Many people might not be aware but the City of Oulu in the central part of Finland is a leading epicenter of wireless activities with many major industry players setting up shops for doing R&D work. In fact, it is quite likely that one of the companies out of Oulu has had an impact in some way on the mobile phone you have in your pocket (and we are not including Nokia).

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The topic of our panel was “Your Wireless Future” – a broad topic that is always difficult to cover in 60 minutes or less. My illustrious panel included (from R to L):

· Prof. Juha Röning, Head of the Dept. Electrical and Information Engineering, Oulu University. A leading edge research center, many companies in Oulu have been spun out of this department

· Markus Asplund, VP, Sesca Technologies. A major services firm in the mobile industry

· Ari Pouttu, Director of Center of Wireless Communications, University of Oulu. A leading research center in doing work in access technologies.

· David Chartier, CEO, Codenomicon. A major player in the network security space. Their tools are used for hardening their products by companies such as Cisco, Apple, IBM, Nokia, and others.

· Craig O’Connell, Sr. Manager, Elektrobit. Working with pretty much all OEMs around the world

· Dr. Jussi Paakkari, VP, R&D ICT, VTT. Doing some cutting edge research in the area of network protocols, security, access, machine vision systems, and much more

· Purnima Kochikar, Director, Software and Services. Nokia. Well, you know Nokia

I started by asking the panelists about what in their view have been some of the defining trends over the last 12 months. Summary of answers – iPhone; android; move towards full mobile browser; browser will reduce fragmentation and more innovation will happen on this front; with the rise of smartphones, security and privacy have become an issue,

Some other salient points (read issues and opportunities) from the discussion:

· It is forecasted (by WWWRF) that in another 10 years, we will have 1000 radios per every subscriber. That would translate into few trillion nodes around us. The level of complexity and carbon footprint will be enormous. One has to figure out a way to address both.

· City of Oulu has first of a kind experiment with NFC where the technology has been embedded in day-to-day life from home, school, train station, restaurant, probably every object in the city. Pretty interesting experiment that will lead to interesting use cases and technology implementations.

· There are so many protocols being integrated into the device that hackers are targeting not only the data but the protocol weaknesses to gain access. IT finally starting to address smartphone issue in their networks.

· The role of Cognitive radio and SDRs will gain prominence as more access technologies get introduced.

· In a ubiquitous environment with finite spectrum, “sensing” technologies will have a great role in optimization. Sense and do the best for the consumer, the device, and the network. Hyper connectivity will become the norm.

· In addition to touch, gesture and face recognition will add to a better multimodal experience.

· Mobile payments is coming and going to make a big impact. We have to of course sort out the business models.

· 3Cs of mobile – convergence, context, and community (Nokia’s Mantra).

· The very business of R&D has changed significantly with corporations choosing to outsource R&D and the cycle of concept to market launch has shrunk from 6 years or more to 12-18 months.

· More innovation will come from integration of existing technologies rather than some big breakthrough.

· Demand for bandwidth will keep growing.

· Significant opportunities in medicine, enterprise, and other industry verticals.

· In developing countries, while consumers are willing to pay for expensive devices, they don’t have any appetite for expensive service plans.

Some discussion points from Craig’s speech and our Q&A session:

· World will go to free MIPS and free baud (computing and communications). What happens then?

· Moore’s law is good for another 15 years based on 5 generation of future chipsets that they have in the labs. And it will probably keep going after that.

· Awareness of context really important.

· Many types of devices will proliferate including MIDs, education devices, some designed specifically for special purpose (medical monitors) and geographies (emerging markets).

· Global challenges are education, health, computing, and communication.

· In the developed world, wireless technology can help reduce the cost which is increasing at the rate of $200B/year and in the developing world, technology can help provide access to health care.

· Convenience and access trumps security concerns.

· Areas of opportunities – Telemedicine, education, economic development, governance, energy and environment.

· This is Craig’s 11th recession. Principle to tackle has been the same every time. You cannot save your way out of recession. You can only innovate out of a recession. Intel R&D budgets will remain the same.

· Innovation is key to surviving and competing in the global economy, now more so than ever.

· The fact that so much can be done in these tiny piece of electronics is just amazing and the drive to do better and more using technology keeps him going, keeps him inspired.

Craig is passionate about education and innovation and he serves on more global committees than he would care to admit. His work outside of Intel has been equally impactful.

It should be noted that the Matti Pennanen, Mayor of Oulu who also graced the event with his presence is a technologist at heart and understands the role of innovation in the growth and strengthening of their economy. How many tech-savvy Mayors do we have in other countries? I thought so. I have noticed similar trends in Korea, Ireland, and Israel. They all have something in common – great early education system and maniacal focus on innovation and desire to succeed. It was great chatting with Mayor Matti about technology trends and opportunities. In this global economy, politicians better become tech-savvy really fast or they won’t be serving their constituents well. Cities, states, and countries need to start thinking like startups and compete for every dollar.

My thanks to my friends Victor Vurpillat and Brenda Fox at Global Connexus and Pauliina Pikkujämsä at Oulu Innovation for inviting me to participate in the discussion.

Image Courtesy: Global Connexus

US Wireless Data Market Update - Q3 2008 November 16, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Japan Wireless Market, Location Based Services, Microsoft Mobile, Mobile Advertising, Mobile Ecosystem, Mobile Usability, Speaking Engagements, US Wireless Market, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

 

US Wireless Market Q3 2008 Update Nov 2008 Chetan Sharma Consulting
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http://www.chetansharma.com/usmarketupdateq308.htm

Recession: Nice to meet you.

US_Wireless_Data_Market: I don’t know who you are but I won’t mind a bailout package.

The US wireless data market shrugged off the economic doldrums in Q3 2008 and grew 7.3% Q/Q and 37.5% from Q307 to reach $8.8B in data services revenues. The total for the year (for first 9 months) stands at $24.5B which is equal to the revenues generated in 2007 (full year). While the flailing economy has started to hit hard on the wireless data ecosystem esp. the infrastructure and handsets segments, consumers haven’t really pulled back on mobile data spending, just yet.

But will they? That is a $700B question. It is likely that more people will be willing to downgrade their Internet services, wireline usage, cable premium channels, restaurant eating frequency, energy consumption, vacation trips, and the gas mileage every week than reduce their wireless usage. But what about data services - broadly, they are divided into messaging, web and information access (includes data cards and subscriptions) and downloadables (games, ringtones, etc.). It is highly unlikely that people will change their messaging (which now accounts for approximately 40% of the revenues) habits overnight though we might see more subs going for package deals and family plans to save. We might also see growth in prepaid subscriptions in the US market. In fact, Q3 saw a jump in messaging volumes in the US by 38% and messaging revenues grew 6%.

Wireless WAN data card access is very useful for road warriors though some corporations might start limiting the number of employees using such services, we don’t think it will make substantial impact in most cases except for the fact that the layoffs in various sectors will start to ripple into the mobile sector and will start cutting into some of the enterprise mobile data revenues. The downloadables have already been in the declining mode for the last 9 quarters and we might see acceleration of that trend.

Next question is - will the increase in the subscriber base nullify the loss in data subscriptions and the answer seems to be - likely yes. But, if the job loss rate increases substantially, more than it has been in Q3 and into Q4, we might, just might, start to see flattening of data revenues in Q109 and gradual decline over the course of the year. Despite the unprecedented bailout from the US Treasury to abort a long recession, we are likely to be in for a longer winter than most anticipate because current efforts don’t even start to address the fundamentals of the financial crisis. The basic industry structure is still flawed. Unless the new administration strikes at the root cause of this mess, wireless data segment won’t be completely immune to the wider economic crisis. We have already started to see infrastructure (operators are slowing down 3G/4G investment) and device segments (replacement cycles are getting longer) getting hit pretty hard.

Another factor at play is the growth in 3G and smartphone penetration in the US market, both of which have been responsible for increasing the usage and hence the revenues. At the end of Q308, 3G penetration was approximately 37% and the data penetration had reached 56%. Smartphone penetration has been inching up as well. In fact, all the service providers and OEMs have been targeting sub-$200 price point, which seems to be a good sweet spot for consumer adoption. The above two factors will also help negate any cancellations or downgrading of data plans.

However, we are likely to see price pressure on subscription plans and as a result, voice ARPU will continue its downward trend and data ARPU will become a more dominant factor of the overall ARPU mix by the end of 2009. The percentage contribution from data is likely to exceed 25% by the end of 2008 and 30% by the end of 2009.

Operators in Europe have already started to feel the pinch starting with Vodafone and Telefonica who experienced decline in revenues (due to the decline in MOU and price pressure) some of which is a function of the heavy prepaid penetration. But, it should be noted that for Vodafone, though overall service revenues declined 1.7%, data revenues grew 30%. As we have been saying for years, data-mindset is needed for strategy, infrastructure design and investment to stay competitive in the changing landscape. Better offer packaging and lower price plans will also help in reducing service churn. Operators will also look to reduce their opex to boost profits.

Coming back to the 2008 forecasts, we still think that the US wireless data market is likely to come close to hitting our original estimate of $34B for the year given the seasonality of Q4 which is likely to negate any decline experienced by the industry. So, it might not be until Q109 before we know where the various data sub-segment are trending. If consumer confidence starts to reverse its trend in early 2009, we are likely to see slower growth but the data revenues will continue to grow from the current levels. However, the lack of policies or correction will further downgrade consumer sentiment, then, we might start to see decline in the US wireless data market for the first time probably starting around late Q209.

Against this backdrop, the analysis of the Q308 US wireless data market is:

Global update

We will be keeping a close eye on the trends in the wireless data sector in our blog and future research reports. The next US Wireless Data Market update and the Global Wireless Data Market update will be issued in March 2009. We will be doing an end of the year piece with forecasts and predictions for the coming year in Dec 2008.

Your feedback is always welcome.

Happy Thanksgiving and Happy Holidays.

Thanks.

Chetan Sharma

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

Recap of the Vienna Summit November 11, 2008

Posted by chetan in : 3G, AORTA, ARPU, Carriers, European Wireless Market, Indian Wireless Market, Location Based Services, Mobile Advertising, Mobile Applications, Speaking Engagements, US Wireless Market, Worldwide Wireless Market , add a comment

For the past 2 months, I have been on the road every week, from a day trip to San Francisco to distant but beautiful Vienna (and an extra day in Paris courtesy of Air France mess). Finally getting some break from the hectic travel schedule .

I was invited to give a keynote address in Vienna on Mobile Advertising - the current state of affairs and where it is heading. Over the course of this year, I must have given 20+ talks on the subject and every couple of months I find myself updating stats and case studies as things are changing so fast. Also, have been working several players in the ecosystem to help them with the strategy and positioning in the mobile advertising ecosystem. Working with agencies, brands, carriers, startups, platform providers, OEMs, and VCs gives me a complete 360 view of this evolving space.

My talk looked at the trends in Western Europe, Japan, and North America, compared what’s working and what’s not. Then I got into the key elements that make MA tick - Reach, Engagement, Targeting, Viral, and Transactions; discussed a bunch of case studies; and finally, put forth the expected trajectory for the next 3-4 years.

The event also had presentations (many of them operators) from all over  - UK, Turkey, Albania, Ukraine, Belarus, Israel, Germany, and Indonesia. For me the most interesting one was by Evrim Dirik of Turkcell, Turkey. He discussed the ringback tone mobile advertising platform - Tonla Kazan. It is an ingenious use of a simple functionality of ringback to great effect. The effective CPM (or cost per listen - CPL as he put it) is $100. That should raise some eyebrows. Users get tremendous value, advertisers get stickiness, carrier gets revenue ($10K minimum per campaign), and everyone is happy. Turkcell has also done some innovative work in direct marketing and advertising and their revenues from this segment are reaching $38M. Not many operators around the world can claim that.

  Anish and Europe 117

 

It was great to meet new colleagues and share ideas and war stories. Didn’t get much time to see around (and it was getting dark around 4:30pm) except a quick run to the Schonbrunn Palace (famous as Mozart’s training ground). A missed connection courtesy of Austrian Airlines and Air France provided the opportunity to spend an evening in Paris. If you are going to get stuck somewhere in Europe, Paris is a good choice. Hey! I even found free WiFi at the hotel (IBIS at the airport, elsewhere, it was a rip-off with $20+/day rates).

Back to the missed connection story - sometimes I feel that airlines compete for hiring the dumbest people around, these guys are so incompetent that it should be criminal. Charles De Gaulle - the Parisian airport is going through some construction, as such getting from one terminal to another - specially on across the pond flights can become a task. People flying on Air France to North America were missing connections left and right and these guys have to provide hotel and food. And then the industry complains about falling profits.

Anyway, barring the airline doldrums, quite a productive trip, learned some new things, got some new ideas, and made new friends.

Next week, I have a short one coming up - a 2 hr hop to San Jose to moderate a great panel of executives from the Finnish wireless industry on the topic of “Future of Wireless.” Really looking forward to it. Hope to see some of you down there.

Tomorrow’s Wireless World featuring Craig Barrett October 10, 2008

Posted by chetan in : 3G, 4G, AORTA, Carriers, Speaking Engagements, Worldwide Wireless Market , 1 comment so far

I am delighted to announce my participation in an upcoming event being organized in San Jose on 18th Nov. A high-level Finnish delegation of executives from the wireless industry is coming to US and I will be moderating a panel discussion on “Tomorrow’s Wireless World.” We will be going beyond the current deployments and trends and into something much beyond. The highlight of the event is of course to share the stage with the eminent Dr. Craig Barrett, Intel Chairman of the Board. Am deeply honored.

I gave a keynote address to the Finnish delegation 3-4 years ago and it was great fun, so, am really looking forward to this one.

There is limited seating and they are filling out fast, so, if you are interested, please register.

Details below:

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Featuring Craig Barrett, Intel Chairman of the Board
Mayor Chuck Reed of San Jose & Mayor Matti Pennanen of Oulu, Finland
invite you to:
“Tomorrow’s Wireless World ”
November 18th 2008 at the San Jose Hilton Hotel

Share ideas, debate issues and check the pulse of the market with leading wireless R&D experts that have resources to deliver the most advanced wireless technologies in the world.

 

Keynote
Craig Barrett
Intel Chairman of the Board
Craig R. Barrett became Chairman of the Board of Intel Corporation on May 18, 2005. He became Intel’s fourth President in May of 1997 and Chief Executive Officer in 1998. He was elected to Intel’s Board of Directors in 1992 and served as Chief Operating Officer from 1993 to 1997. Barrett began his tenure at Intel as a Technology Development manager in 1974. Prior to joining Intel, Dr. Barrett was an Associate Professor at Stanford University in the Department of Materials Science and Engineering.

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Panel Moderator
Chetan Sharma
Chetan is a recognized industry expert in strategy and implementation of wireless data and pervasive computing solutions. Executives from leading wireless companies around the world seek his accurate predictions, independent insights, and actionable recommendations. He has served as an advisor to senior executive management of several Fortune 100 companies in the wireless space. Some of his clients include NTT DoCoMo, China Mobile, Disney, KTF, Sony, Samsung, Virgin Mobile, Sprint Nextel, AT&T Wireless, Alcatel-Lucent, KDDI, Cincinnati Bell, Reuters, Qualcomm, Reliance Infocomm, SAP, Merrill Lynch, American Express, Infospace, BEA, and HP. Chetan is also author of 5 books on wireless.

Panel
Centre for Wireless Communications is a world-class telecommunications research institute focusing on three application areas: Broadband Wireless Access, Short-Range Communications, and Security and Defense.

Codenomicon enables wireless software developers to preemptively mitigate unknown and published threats in products and services prior to release or deployment - before systems are exposed, outages occur and zero-day attacks strike.

Elektrobit (EB) develops products, telecommunications solutions, testing solutions, and automated systems for the wireless industry.

Nokia is the world leader in mobility, driving the transformation and growth of the converging Internet and communications industries. Nokia makes a wide range of mobile devices with services and software that enable people toexperience music, navigation, video, television, imaging, games, business mobility and more.

Oulu University is home to an international scientific community known for delivering high-quality research and education in disciplines that include both national and international wireless technologies.

Sesca Group’s Mobile Software business area offers smartphone software development services for Symbian, Java, Microsoft and Linux platforms.

VTT is Europe‘s leading applied research center creating new technology and science-based innovations with a strong emphasis on wireless technologies.

 

Agenda

9:30    Registration

10:00  Welcome: Mayor Matti Pennanen, of Oulu Finland, and Mayor Chuck Reed of San Jose

10:15  Panel: “Your Wireless Future”,Moderated by Chetan Sharma

11:15  Q and A

11:45  Buffet Lunch

12:15  Discover Oulu

1:00   Keynote: Craig Barrett – Intel Chairmanof the Board

2:00   Networking

 

Reserve the date now!

Reserve the date now! As a qualified recipient, you are eligible to receive a complimentary ticket that includes a buffet luncheon, please register at the following link https://www.acteva.com/go/suomi Enter promo code “FINN” for complementary ticket.

Wireless Broadband Book - More Details October 7, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Search, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

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The Wireless Broadband Book is launching next week on 17th Oct. It will be in Wiley stores in a week and then early Nov, available at retailers around the world including amazon.com.

If you are interested, the best discount is available at Wiley.com. We are making it available to all our readers and colleagues. The code is WBR98 and it get you the book 20% cheaper (Amazon is 9% right now).

We also launched the book web site  - WirelessBroadbandBook.com. It has lot of details about the book including:

Introduction

The telecommunications industry has evolved to a point in time when the wireless elements of the global network have eclipsed the legacy wired networks in terms of reach and adoption by the world’s population. There is now a growing tension between the original vision of the cellular network as simply a mobile extension of the traditional wired telephone network that is operated as a closed system under the unilateral control of the service provider and its role as a leading access platform for the global Internet. The powerfully established business and regulatory model of the legacy telephone network operators is now bumping up against the dramatic expansion of the global Internet into a broadband data system that can provide alternatives for virtually every legacy communications service. A historic conflict is evolving over how these two mammoth environments will converge and overlap. Will the well-established institutions that hold sway over the legacy telecommunications networks and service providers capture control of the Internet by leveraging their existing gatekeeper position for access and termination? Alternatively, will these well-established habits of operation yield to creative new forces and competitors who will grow and thrive by implementing new business models that make obsolete the business practices of the incumbents? This conflict is well under way, and its outcome will have tremendous influence on the future of the global economy, the evolution of human rights and freedom, and the daily lives of virtually all the world’s citizens.

The core theme of this book is an examination of contesting factors that have influenced and will continue to influence the deployment and adoption of the broadband Internet Protocol (IP) wireless infrastructure, its devices and its services, which will mark the next major steps in the evolution of wireless worldwide. The implementation of the ubiquitous wireless broadband Internet will reach into every corner of global society. Every segment of the wireless industry will ultimately have to view and plan for its future prospects from the perspective of how it will fit within the emerging IP ecosystem growing out of this major change of state for the entire telecommunications industry. We will consider the impact of new entrants and operators, versus new innovators and the current market leaders in each sector of the industry. We will also examine how the future technology road maps of the 3GPP (Third Generation Partnership Project) and WiMAX (Worldwide Interoperability for Microwave Access) standards promoters will conflict, compete, and ultimately converge. Our efforts will also seek to penetrate the noise and hype, both positive and negative, that presently cloud the perceptions of both industry insiders and the larger publics who will be impacted by this insidious and inevitable broadband evolution.

New broadband wireless deployments will find market share both among and beyond the current base of 3 billion subscribers, most of whom are on secondgeneration (2G) versions of the global system for mobile communications (GSM) systems. The installed base of GSM infrastructure is presently undergoing a slower than anticipated, but inevitable transition to third-generation (3G) platforms. This step along the trajectory to true broadband IP–centric fourth generation (4G) networks can be viewed as the transition from the narrowband 2G environment to the wideband 3G era, which will evolve into the true broadband future matching the vision of the 3GPP technology Long Term Evolution (LTE) for GSM systems, and the emergent Mobile WiMAX standards based on OFDMA (orthogonal frequency division multiple access) technology. The emergence of OFDMA as the technology of choice for the next-generation mobile platforms is a by-product of the dramatic increases in microprocessor power over the past decade that finally enabled OFDMA technology to become practical for application in wireless platforms. These systems will come into existence under the sponsorship of existing cellular operators, and through major telecommunications and computing industry organizations that have to date been essentially left out of direct participation in the wireless industry. Included among these new contributors to the wireless broadband future are the cable television operators, Internet portal and search companies, computer and digital appliance manufacturers, software concerns, and content developers.

Much of the momentum driving mobile wireless broadband services is being created by the widespread adoption of wired broadband Internet services by a large portion of the population. The experience and convenience of broadband access have extended from their original presence in the workplace into approximately 60%of all U.S. households, primarily though digital subscriber line (DSL) and cable modem services.* We are now at the tilting point when it is both practical and logical to seek access to our broadband services and applications wherever we may be, regardless of whether we are at the office, at home, traveling to a remote destination, or mobile betwixt and between these locations. We will address the nature of network and service convergence and the interrelationships that exist between and among each of the broadband network service domains, including all types of wired and wireless networks.

There is a pending collision between the traditional telecommunications industry closed system approach to the market and the open platform environment of the Internet. As broadband wireless service delivery networks proliferate, the migration to expanded openness will accelerate. The traditional ‘‘walled garden’’ environments of the legacy wireless service providers are already breaking down, with pledges to remove existing carrier-defined constraints that only allow network access to user devices obtained from the underlying carrier coming from both Verizon and Mobile WiMAX proponents. How these deeply established traditions of the telecommunications industry are relaxed and eliminated in whole or in part and at what pace over time will mark the next era of the wireless industry.

Numerous contributing factors will impact the pace of the ubiquitous availability of wireless broadband services. These include: (1) the need to resolve a wide range of regulatory constraints and protectionist policies on literally a global basis; (2) the existence of enabling technology development for pending broadband wireless expansion in an increasingly complex intellectual property environment that requires equipment manufacturers to be sensitive to potential business risks, which are very difficult to quantify in advance of drawn-out contentious legal processes; (3) the need for substantial increases in the amount of radio spectrum allocated to existing and new service providers with sufficient contiguous bandwidth to support truly broadband services; and (4) the need for non-discriminatory standardization of networks and user equipment across commercial and political boundaries, which will likely take many years to resolve.

We will attempt to handicap the field contending to be the future winners and losers among the numerous competing factions participating in the broadband convergence movement. Included among the participants for next-generation network services leadership are the reconsolidated and expanded (wireless, Internet, video and long-distance-enabled) legacy telephone companies, called the incumbent local exchange carriers (ILECs), non-ILEC cellular network operators (Cellcos), the multisystem operators (MSOs) in the cable industry, wireless internet service providers (WISPs) led by the new Mobile WiMAX system operators, the direct broadcast satellite (DBS) service providers, and the competitive local exchange carriers (CLEC).

Our direct experience over the past 20 years of the evolutionary march of progress towards a wireless broadband future has revealed many of the obstacles and obstructions that have emerged either as defensive acts of commission by established operators, or acts of omission on behalf of regulators and vendors, which have resulted in a seemingly never-ending series of chicken-or-egg phenomena. Inefficiencies impacting progress abound, including how wireless spectrum is allocated and licensed, how capital formation is organized and aligned with new network requirements, and how the numerous ‘‘standard’’ obstacles that mark the implementation of wireless infrastructure are overcome, such as site acquisition in a crowded market, local zoning obstacles including NIMBY (not in my back yard) issues, and the growing challenge of provisioning broadband backhaul and interconnection for cell sites with vastly increased capacity requirements compared with legacy voice cellular systems.

We are attempting to cover a very wide swath of the issues facing decision makers within the impacted sectors of the economy, with the intention of broadening their awareness of emerging competitive factors and potential opportunities that will decide their future success or failure. In addition, we hope to add worthy contributions to the policy making process to add additional insight and information to the impacted publics on every side of these often polarized issues.

We all share responsibility for the future we create as members of our respective professions and societies as well as members of the global community of nations. Our world is shrinking rapidly, and few technologies are contributing to this evolution of global interaction and interdependency as completely and cogently as broadband communications in all of its multivariate forms.

Chapter 1

Foreword by Mark Anderson, Founder and CEO of Strategic News Service, one of the biggest proponents of Wireless Broadband and the one coined the term AORTA from which this blog gets its name.

Testimonials

and much more.

We look forward to your feedback and carrying the conversation forward.

Thanks for your continued support.

Global Wireless Data Market Update - 1H 2008 September 28, 2008

Posted by chetan in : 3G, 4G, AORTA, BRIC, Carriers, Enterprise Mobility, European Wireless Market, Gaming, IP Strategy, Indian Wireless Market, Japan Wireless Market, Location Based Services, MVNO, Messaging, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Smart Phones, Speaking Engagements, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

 

Global Wireless Data Market 1h 2008 Update Sept 2008 Chetan Sharma Consulting
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Global Wireless Markets continued to grow rapidly especially in India and China where the carriers are adding over 9M new subscriptions every month. India crossed the 300M subscription mark in Aug while China whizzed past 600M in September. Overall, the global subscriptions penetration edged past 50%. During the 1H 2008, revenues further tilted towards data services. The overall global mobile revenues (including equipment) for the year are likely to reach the 1 Trillion dollar landmark later this year (enough to bailout an economy or two), with approximately $800 billion attributed to service revenues. Data revenues now account for almost 20% of the global service revenues.

For some leading operators, data is now contributing close to 40% of the revenues however increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to the new services such as Mobile Advertising, Social Networking, Commerce, Mobile Wallet, and others, different services helped in adding billions to the revenues generated for 1H 2008. Japan remains the envy of the global markets and the nation to study and learn from w.r.t. new services and applications. The US market expanded its lead over Japan in mobile data service revenues for the year and is unlikely to cede ground in the months to come.

Buoyed by the global launch of iPhone, Apple is likely to eclipse the 10M goal in Q308. Its App-Store launch along with Android’s imminent arrival dominated the news. Other manufacturers also introduced challengers to iPhone, most notably, Instinct by Samsung on the Sprint network which has also been quite successful in getting users to engage in data services.

WiMAX vs. LTE debate took over the EV-DO vs. WCDMA chatter and while majority of the industry is consolidating around LTE; open-platform advocates are watching the arrival of WiMAX in the US with great interest. Google, Sprint, Motorola, TWC, Comcast and others put new life into the experiment called Clearwire.

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

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

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

Carnival of the Mobilists #141 September 15, 2008

Posted by chetan in : AORTA, CTIA, Carriers, European Wireless Market, Location Based Services, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, US Wireless Market, Worldwide Wireless Market , 2 comments

Welcome back to Always On Real-Time Access or AORTA. Last week, folks in the industry were busy with several events including CTIA, TC50, DEMO, Mobile Web Strategies, and many others. Here are the gems from the week.

Anthony Hand at Hand Interactive educates us about the screen capture techniques on various phones. Quite Handy.

James Cooper at MJelly opines on “Why South Africa is leading the mobile Internet revolution” Good insights, data, and case studies.

Tsahi Levent-Levi at VoIP Survivor posts an interview with a TD-SCDMA chipset vendor and their launch in the Chinese market during the Olympic games.

Martin Sauter at Mobile Society and author of Communications Systems for Mobile questions the use of Narrow band codecs for SIP to SIP calls.

John Boxall at Handi Mobility writes about Python S60 Bluetooth Console on Mac OSX using pictures.

Igor Faletski at Mobscure discusses some guidelines for supplying context indicators in mobile applications.

Ram Krishnan at Mobile Broadband Blog discusses mobile broadband pricing.

Carlos Enrique Ortiz points that “one click” interactions are necessary for barcodes and NFC to take off. He also has pictures from MobileWidget Camp in Austin.

Andrew Grill of London Calling talks about the Blogloc service that enables users to post their location.

My contribution to the carnival - CTIA IT and Entertainment 2008 roundup.

Finally, my vote for the best post of the week goes to Ajit Jaokar at Open Gardens who discusses cloud computing in “Cloud or Fog? The battle for supremacy in the cloud is not a dogfight but will be fought in the trenches.“

Next week, hop over to Next Generation Mobile Content hosted by Ofir Leitner for #142 COM. Until then, happy reading.