US Mobile Market Update Q1 2016 May 30, 2016Posted by chetan in : 4G,4th Wave,5G,Chetan Sharma Consulting,Connected Intelligence Era,European Wireless Market,Internet of Things,Mobile Future Forward,Technology Cycles,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment
Highlights of the US Mobile Market Q1 2016
· Mobile data revenues increased by 17% YoY and now contribute 73% of the overall service revenues.
· QoQ, the service revenues declined again for the third straight quarter.
· The overall ARPU dropped below $40 for the first time.
· The Capex is likely to contract for a third year in a row given that most of the LTE networks are built out and there is pressure to preserve the margins.
· Device revenues declined sharply as consumers are upgrading at a slower pace than before and new device launches haven’t really motivated consumers to upgrade.
· EBITDA and Net Income saw double digit gains indicating operators are running a much tighter ship than before.
· Churn is at historic lows. Despite all the commotion in the market, fewer customers are churning each quarter.
· US will cross 400M in subscriptions in 2016.
· The data prices remained pretty stable throughout Q1.
· Mobile data traffic grew again with per sub smartphone consumption going past 4.0 GB/user/mo however, overall data traffic is expected to slow down in 2016.
· In the first 4-5 months of Binge-on, T-Mobile users chomped away over enough PBs of data for free to account for almost entire data traffic for the operator in 2013. T-Mobile experienced a net traffic reduction of 10-15% but given that consumers are consuming 3x than before, overall traffic is likely to rise again.
· AT&T continues to add more connected cars than rest of the operators combined. The operator is optimizing its business around profits. One side-effect of this has been a decline in postpaid phone net-adds for the sixth straight quarter.
· Verizon’s IoT/Telematics accounted for $195M in Q1 and is likely to cross the $1B mark in 2016 making US the hotbed for Connected Intelligence activities, growth, and continued experimentation.
· Apple again dominated the device market with over 39% revenue share, 74% profits share however it saw its quarterly YoY growth saw a decline for the first time in 13 years. The law of large numbers is starting to catch-up. Apple needs a new market narrative and/or another blockbuster. Given the pickup in R&D spend, speculators are hoping for the iCar to surface but it could be something as pedestrian as a new iPhone.
· Apple’s services business was greater than Facebook’s Q1 revenue but in context of its $50B quarter, Wall Street doesn’t appreciate the 20% increase in services revenue. Street’s eyes are squarely positioned on the iPhone numbers.
· Intel abandoned its existing wireless efforts leaving its future strategy and its role in the ecosystem a big question mark.
· Android ecosystem revenues and profits improved slightly primarily on the back of Samsung’s quarterly results. Sony, HTC, LG and some other Android players suffered deep losses in Q1.
· Operator tablet net-adds growth declined sharply.
· AT&T and Verizon on average made $17 per sub/mo, T-Mobile stayed into positive territory with $2 profit/sub/mo while Sprint eked out a 20c profit.
We will be doing an in-depth analysis of the future of the mobile industry at our 7th annual mobile executive summit Mobile Future Forward in Sept 2016. Hope you can join us.
Service Revenue Decline, what does 2016 hold in store?
The overall service revenue, postpaid revenue, overall and postpaid ARPU all declined again. After seeing the net-revenue decline for the first time in the history last year, there is a big question if 2016 will repeat itself or not. Q1 pointed downwards albeit only marginally. In general, the net-service revenue decline is not a good sign if it is market induced. In Europe, we saw net-revenue declines but the impact of the economic crisis was a big factor in determining the trajectory. After the economy has improved, we have seen the net revenue in effected countries rise again. In the US, the net-revenue decline is more market induced. The calculation of service revenue is a bit more complicated because device revenues are no longer part of the mix and as customers are weaning off the contracts, we have to adjust the service revenue for this accounting change. Regardless of the accounting distortions, there is continuous pressure on the postpaid revenues which is what is impacting the overall numbers.
Given the competitive state of the market, we might see further service revenue declines in 2016. The reversal might come down to consolidation in the industry in 2017 and beyond. The pressure on the revenues has had a positive impact though – operators are running far tighter ships than before. The net income surged in Q1 2016. Churn is at historical lows.
FCC’s incentive auction will begin at the end of the month. It will be fascinating to see who beyond the usual suspects have aspirations in the mobile auction game.
Microsoft’s Tryst with Mobile
When Microsoft bought Nokia for a tidy sum, a reporter called me and asked, “What do you think?” I responded, “They will have to sell it once they are done realizing it was a mistake.” I have written extensively about the missteps in strategy and tactics that were so apparent from the start. Microsoft backed itself into a corner and had no choice but to buy Nokia and eventually destroy it. One of the highest market cap company disappeared right before our eyes. With market share falling below 1%, Microsoft has pretty much gotten rid of the last remnants of the business. This doesn’t mean Microsoft is out of mobile devices. If you carefully read between the words, Microsoft hasn’t given up and will be back. Its Surface strategy is finally taking shape and yielding better results and the pivot to services was the right call to get Microsoft enmeshed in the complex Connected Intelligence ecosystem. Old habits die hard. Microsoft might be making the same mistake with IoT.
Mobile Data Traffic Growth
In the last quarterly update, we mentioned that the Cisco’s data traffic numbers looked unreasonable for the US market. CTIA’s annual survey results proved the point earlier this week. Cisco will probably adjust its model and correct the numbers in its next update. We expect the US mobile data traffic to grow by 65% in 2016.
Messaging – the Next Big Platform Shift?
The last big platform shift in the computing space was the migration of attention, talent, and dollars from Windows to Android and iOS. The rise of the smartphones mirrored the rapid decline in Microsoft’s hold on the computing platforms. While Android and iOS have served us well, they haven’t evolved much. Despite having sensors and signals, some of the basic things like inter-linking of apps, contextual surfacing of app features and functions, and search remain complex and/or non-existent. The vacuum is being filled by the emergence of messaging as a platform. Messaging is primal. Consumers knew messaging before they knew smartphones. Given the availability of the processing power as well as the smarter software, some of the tasks can be moved to the messaging window is only natural. Asia has been the guiding light in this regard. How messaging emerges and how various players react to this phenomenon will be fascinating to watch in the coming days and months.
What’s next for Apple?
I have been saying for some time that Google has the best AI engine. Try driving in a remote part of the world and use Google Maps and you will see what I mean. The primary reason for this is that Google has been at it the longest with primary dataset on the most number of individuals. Facebook is starting to get there but the AI needs much more work. It will eventually get there. Another player that is sitting on a gold mine is Amazon and that’s why I say that they are most interesting tech company in the industry today.
Every company has at least one Achilles heel. Apple’s is software and services. Apple’s DNA is hardware and services come second. As I have said before, Apple’s problem with the market is more around controlling the narrative. Media and critics have been pretty hot and heavy about the future prospects of Apple. No doubt Apple has a weakness in software as has been apparent for many years but it has a very strong hold on brand loyalty of customers and a rock solid ecosystem of a billion+ consumers around the globe. Guess what, they also have an excellent stream of data on how consumers use devices, what apps they buy, what they surf and where do they go to but the way use it is quite different. I won’t count Apple out by any stretch. In fact, if one studies the acquisitions they have made over the last couple of years and connect the dots, some cool innovations could be released with the iPhone once the company figures out how to do it at scale.
However, as we have said in our Connected Intelligence thesis as well as Fourth Wave series of papers, services is where the action is going to be over the next decade or two. Apple, Facebook, Google, and Amazon are all well positioned to take advantage. How they execute against their strategy will determine who comes out ahead on the other side.
AI is as good as the datasets it has to train on. Neural networks of yesterday have become the AI algorithms of today just like M2M transformed into IoT. New buzzwords are like a necessary evil to keep the tech industry going. Apple has plenty of data, it just hasn’t started using it in a tangible way. You know who else has enormous amount of useful data? Mobile Operators – well, that’s a story for another day.
IoT Revenue Streams and what it means for the ecosystem
Service provider IoT revenue passed the important $1B mark back in 2013. So far it is tracking the growth of the early days of mobile data. However, they are different curves influenced by different factors. Mobile data was relatively an easier curve to climb as the revenues went up as more data handsets came online. The sales, business case, and ROI was straight forward. IoT is a bit more complicated as it across multiple vertical areas and it is not just about the data network, it is about the complete solution. The sales cycle and execution strategy is different and requires patience and resilience.
We will be doing an in-depth analysis of opportunities at the intersection of 5G and IoT at our upcoming Mobile Breakfast Series on June 7th.
Android vs. iOS: The fight for profit continues
Amongst the prominent Android OEMs, HTC, Sony, and LG, all lost money in their device business in Q1 2016. This again highlights the difficulty in differentiating on an open platform. Some of these players might give up on their handset business in 2016. Apple again dominated with 74% of the profit share and 39% of the revenue share with only 15% of the market share. Samsung’s revenues and profitability improved but it continues to face challenges both on the top and bottom end of the spectrum.
4th Wave Revenues
5 years ago, we put forth the theory of 4th wave to explain the upcoming changes in the mobile ecosystem. For the most part, the industry changes and tribulations have tracked the 4th wave curves. Last year, voice revenues fell down by 23%, messaging revenues declined by 18%, while data revenues grew by 23%. 4th wave revenues which now dominate the ecosystem now grew by a 60% YoY. We will have more analysis of the state of the 4th wave ecosystem later in the year.
Regulations for the new age
Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 54%+ of its voice calls are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.
AT&T is integrating its DirectTV acquisition. Verizon acquired AOL, launched Go90 and is looking to acquire Yahoo (who isn’t?). Similar moves are afoot in Europe and other regions. Regular readers won’t be surprised. Video is a key offering for many service providers and by bundling quad plays, operators can further lower the churn. Content will continue to play a big role in how various offerings get bundled. The traditional cable bundle is being pulled apart in favor of more al carte OTT offerings. Media companies will have to figure out how they play in the new converged world. The ones that have been sitting on the sidelines will have to make some moves in the wireless ecosystem to stay relevant in the long-term.
The licensed vs. unlicensed: frenemies
Comcast is expected to launch its WiFi first MVNO with Verizon later this year. Google Fi hasn’t been a roaring success, perhaps it was never designed to be. Given that WiFi is carrying 75-80% of the traffic, it is easy to make the business case for a national WiFi operator. Companies like Republic Wireless have shown that this can be done.
Seeing the success of WiFi, FCC has rightly made more unlicensed spectrum available and it will be interesting to see how the ecosystem around 3.5GHz and other bands develop. This in light of what’s happening in the higher bands of cm and mmwave for 5G deployments. Technologies and business models that take into account benefits and drawbacks of both types of spectrum bands across a different uses cases will win out in the end. Despite advances, WiFi calling still has quality issues so the need for traditional networks is not going away anytime soon.
5G is gaining steam. All the major players have outline their preliminary plans to do trials on 5G (code word for we don’t want to be perceived as being behind). However, there is some real progress being made in short-range ecosystem of 5G. I have been working with many companies and talking to many researchers on this subject. I think what’s lacking from the discussion is the role of economics in 5G – what will be the cost structures, ROI, and the TCOs that will make it worthwhile for the operators to deploy 5G profitably. US is likely to be the key driving force in setting the standards and pushing the trials to deployments even though there is no Olympics as a motivator. But competition sure is.
We expect to explore this issue in more detail in the coming months. Our Mobile Future Forward Summit in Sept will tackle the questions in-depth with some seasoned experts.
What to expect in the coming months?
2016 has started with a bang. The ecosystem is getting very complex and we need better tools to understand the relative strength of players and strategies. As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q1 2016 and 2016 US wireless market is:
· The US mobile data services revenues in Q4 2015 increased 2% QoQ and 17% YoY.
· Verizon and AT&T dominated the quarter accounting for 69% of the mobile data services revenue and had 67% of the subscription base.
· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q1 2016. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.
· The Overall ARPU fell by 1.9%.
· Data contribution to the overall revenues is now at 73%.
· All operators saw their ARPU decline by with Sprint and Verizon experiencing the sharpest declines.
· The US market increased its net-adds to 5.6M. T-Mobile gained the most and Sprint added the least.
· Tablet netadds declined sharply leading to a decline in big decline in postpaid netadds.
· There were more Car net-adds than there were phone net-adds
· AT&T has approximately 8M connected cars on their network – probably the highest of any mobile operator in the world.
4th Wave Progress
· The number of players making $250M/quarter on mobile continues to increase rapidly and these aren’t your traditional wireless players. For example, Mobile is now contributing 80% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: “Mobile 4th Wave: Evolution of the Next Trillion Dollars”)
· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.
· Verizon reported $195 million revenue from IoT and Telematics. At the current run-rate, this will likely be a billion-dollar business by 2016.
· Overall, the IoT business is tracking the early days of the mobile data growth.
· Connected devices (non-phones) accounted for almost 69% of the net-adds in Q1 2016. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.
· Smartphones continued to be sold at a brisk pace accounting almost 97% of the devices sold in Q1 2016. The feature phone category is practically becoming extinct in the US market.
· The smartphone penetration in the US is now at 84%.
· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 87M making it the #2 LTE operator behind China Mobile which has more than three times the LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 92% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and at our annual thought-leadership summit – Mobile Future Forward in Sept 2016. The next US Wireless Data Market update will be released in Aug 2016.
Disclaimer: Some of the companies mentioned in this update are our clients.
Mobile Future Forward Update July 20, 2015Posted by chetan in : 4th Wave,Connected Intelligence Era,European Wireless Market,Internet of Things,IoE,IoT,Mobile Future Forward,Wireless Value Chain,Worldwide Wireless Market , add a comment
Over the past couple of years, I have talked a lot about the â€œConnected Intelligenceâ€ Era which is a superset of the Industrial Internet and IoT. We already have plenty of data points to indicate the rise of the next technology era enabled by sensors and software. While consumer gizmos get the headlines, the real money is in the enterprise segment though in some verticals, the two start to merge e.g. health, retail, energy, etc. To give you a sense of the disparity in terms of dollars, consider the following:
This year the US wearables segment will do over $4B in sales. A leading industrial giant founded more than 90 years ago is looking to capture 2-4x revenue of the entire wearables industry in one year with the help of IoT as it empowers them to create new service and revenue models.
Leading facilities management companies are looking to automate the entire building management process and reduce the maintenance costs by over 50% in a matter of months. The â€œindustrialâ€ side of IoT is likely to capture 90% of the new multi-trillion-dollar revenue that will be injected into the global economy. Obviously, benefits will flow into the consumer economy as well.
The Connected Intelligence stack is very complicated right now but thatâ€™s true with any new technology wave. 10-20 years ago, most markets had dozens of mobile operators. Today they are generally limited to 3-4. We will see the layers collapse and new players emerge.
“The caliber of participants is extraordinary. Mobile Future Forward is a data driven event, the team has put together so much hard to find factual data that is unrivaled anywhere in the industry in terms of building the foundation of facts for analysis. I normally donâ€™t learn new things at events but at Mobile Future Forward, I did.” â€“ North American Leader â€“ IoT and Mobile, IBM
At Mobile Future Forward, we will explore where is the money in IoT, discuss several use cases that are being implemented around the world, the required building blocks, the areas of collaboration and competition, and how our community can help the industry reach its full potential quicker. Mobile Future Forward is a summit that makes you think. We will have folks from startups who challenge our thinking and industrial giants who are moving at a fast pace to deliver outcomes.
We welcome you to join us in the discussions and contribute to the collective knowledge of our industry. Give us your one day, and we will give you the next 5 years in mobile.
We are excited to partner with the industry leaders and thank them for their ongoing support: Ericsson, Neustar, Oracle Communications, and Tata Communications.
Registration (Summer Saver expires next week)
Some of the confirmed leaders are:
â€¢Â Glenn Lurie, President & CEO, AT&T Mobility
â€¢Â Dr. Eric Topol, Chief Academic Officer, Scripps Health
â€¢Â Faisal Masud, Chief Digital Officer, Staples
â€¢Â Rima Qureshi, Chief Strategy Officer, Ericsson
â€¢Â Hank Skorny, SVP â€“ IoT, Neustar
â€¢Â Raja Rajamannar, CMO, Mastercard
â€¢Â Sanjiv Ahuja, Former CEO, Orange
â€¢Â Hossein Moiin, CTO, Nokia Networks
â€¢Â Craig Moffett, Partner, MoffettNathanson
â€¢Â Josh Will, SVP â€“ Mobile, Best Buy
â€¢Â Tim Chang, Managing Partner, Mayfield
â€¢Â Prof. Shyam Gollakota, University of Washington
â€¢Â Mark Fernandes, Managing Director, Sierra Ventures
â€¢Â Erez Yarkoni, CIO and EVP, Telstra
â€¢Â Mark Showers, CIO and EVP, Reinsurance Group of America
â€¢Â Doug Suriano, SVP and GM, Oracle Communications
â€¢Â Vishal Gupta, CTO â€“ IoT, Silent Circle
â€¢Â Marty Cooper, Chairman, Dyna
â€¢Â Vijay Shekhar, Founder and CEO, Paytm
â€¢Â Â Julie Woods-Moss, CMO, CEO â€“ Nextgen Business, Tata Communications
â€¢Â Â Andrew Hopkins, Managing Director â€“ IoT, Accenture
â€¢Â Â Lo Toney, Partner â€“ Catalyst Fund, Comcast Ventures
.. more to come
We will be announcing new speakers and partners through the course of the summer and look forward to seeing you in September. If you are interested in partnering, please reach out at email@example.com.
CEO, Chetan Sharma Consulting
http://www.chetansharma.com4G,4th Wave,5G,Chetan Sharma Consulting,Connected Intelligence Era,European Wireless Market,Mobile 2015,Mobile Ecosystem,Mobile Future Forward,Mobile Payments,The Golden Age of Mobile,Wireless Value Chain,Worldwide Wireless Market , add a comment
5G – The past, present, and future of the mobile industry evolution
The deployment of LTE otherwise known as 4G is in full swing. Operators in US, Japan, Korea, Finland, Australia, and others started deploying the new technology some years ago and are nearing completion of their network build out. Others in Europe and Asia are on an aggressive schedule to catch-up. We can expect that a majority of the operators will have LTE up and running in the next couple of years. Operators have sunsetted 2G. In some instances they even stopped investing in 3G and are putting all of their investments in the 4G bucket. As mobile networks transition to all IP, operators will be able to re-farm their spectrum assets for 4G deployments. Beyond LTE, operators are looking at LTE-A to provide more efficiency and network bandwidth to consumers.
In mature LTE markets like the US, Korea, and Japan, the talk has shifted to the next generation technology evolution â€“ 5G. Even Europe, which still has a long way to go before their 4G is built out have set their sights on 5G to recapture the mantle and the pride of the GSM days. Korea and Japan led the world in 3G but lost the lead of 4G to the US. They both are eager to be considered leaders in 5G. Japanese government has set the ambitious goal of having 5G by the Tokyo Olympics in 2020. US regulators have started to talk about 5G and the future spectrum needs as well.
Since the launch of 1G networks in late seventies and the eighties, we are now onto the 5th iteration of the network technology evolution. We have gone through a lot of technology skirmishes but with 4G and likely with 5G, we are narrowing the differences between technology options giving significant technology scale advantages to the ecosystem.
As network technologies have evolved, the application landscape has changed as well. 1G or AMPS was all about basic voice services. GSM and CDMA (2G) digitized mobile and we saw basic messaging and data services introduced into the market. 3G (WCDMA, EVDO) introduced the potential of data services to the ecosystem and the consumers. The launch of iMode in Japan became the poster child of data services for much of the 3G evolution around the globe. Midway in the 3G growth, new players like Apple and Google entered the ecosystem and laid the foundation of unprecedented data and application growth. Business models and control points in the ecosystem changed overnight. The insatiable data demand led to the acceleration of the 4G services in many leading markets. For the first time, the network technology was data-led. We are clearly moving towards an IP infrastructure where voice is just another app running on the data network.
In fact, data is the primary revenue engine for the services providers and rest of the ecosystem. In Japan, almost 80% of the revenue now comes from data services. In the US, we are approaching 60%. Other nations are not far behind. Even the emerging markets have caught up very fast and in some instances leap-frogging their western counterparts in certain application and services segments.
All through last four generations, the fundamental business model of â€œmeteringâ€ remained the same. Barring some exceptions, there has been a direct correlation of usage and revenues. Will 5G be any different?
Another significant standard that has evolved is Wi-Fi. The impact of Wi-Fi on the mobile ecosystem canâ€™t be overstated. It has become so pervasive that we have ask the question how long before nationwide Wi-Fi first networks start to make a run for the wallet share in major markets. How will Wi-Fi fit in with 5G, will the two standards merge?
Will 5G offer new business models or explore a different relationship between usage and cost? Will consumers warm up to the idea of value-based pricing? Or Will access just become a commodity layer like water and electricity and most of the value will reside in the platform and application layers? Though we have started to see the shifts (as discussed in detail in our 4th wave series of papers), how fast will future accelerate? Will the ecosystem landscape be markedly different than what we have in place today?
We wonâ€™t know the answer to some of these questions for a while but it is worth exploring the lessons from the past and potential disruptions that 5G could bring to the ecosystem that benefits the end customers. In the end, it might not be about the technology at all but about the business models that shape the technology landscape. This paper explores 5G through the lens of the past and explores the wireless world beyond 2020.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit â€“ Mobile Future Forward. The next US Wireless Data Market update will be released in May 2015. We will be discussing 5G and its impact on the ecosystem in more detail at Mobile Future Forward.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Mobile World Congress 2015 Recap March 9, 2015Posted by chetan in : 4th Wave,5G,Connected Intelligence Era,Emerging Markets,Enterprise Mobility,European Wireless Market,Mobile World Congress,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment
Mobile World Congress 2015 Recap
Barcelona hosted its 10th edition of MWC last week. The beautiful weather in a lovely city provided the perfect setup to pontificate about the future direction of the mobile industry. This note presents the summary of the discussions and the observations from the show.
- Facebook and internet.org
For a second year in a row, Mark Zuckerberg was the highlight of the show. The crowd and the buzz for his panel was probably more than for rest of the keynotes combined. Last year, Mark introduced the project, this year it was about the progress report. The operators look at Internet players with deep suspicion. The goal of getting more folks online is a shared objective in the industry but there is tension around the business model and the mechanics. Executives from Telenor, Bharti Airtel, and Millicom shared their experience (mostly positive) and the impact it has had on their data growth and revenues. All were cautiously optimistic.
One thing that will help the operators is to look at Internet players a bit differently and it requires a mental shift. Just like operators work with and compete against other service providers, they can find common grounds for collaboration in some areas and in other segments they will of course compete but having a one-track mind will detrimental to their progress. On the flip side, Internet players should appreciate the competitive dynamics in the market, the financial metrics that drives the business and the work to deliver a more customized partnership â€“ something the Internet players are not that accustomed to. The Internet segment does a better job of managing coopetition than the telecom sector.
- Google MVNO and broadband connectivity
Probably the second most watched keynote was from Sundar Pichai. Rumors of a Google MVNO have been around for many months. The plans to launch the â€œnexus of networksâ€ were discussed. Additionally, Sundar discussed how project Loon and project Titan could be used to provide the Internet backbone. The connectivity projects are nice science experiments at this stage but the MVNO project could have some implications depending on how far Google wants to take it. Will it be the Rokr project for Google or something more? Only time will tell.
- Apple – the invisible participant in the show
Just like it has been for many years, Apple was at the center of many discussions at the show. In carefully orchestrated leaks, there was a steady flow of the news on Apple Watch. It will set the competitive bar for the segment and help everyone figure out their place in the market. Folks were deeply divided on the likelihood of success. Battery life might end up being the key-determining factor. There was also a lot of discussion around the news reports on Apple Pay fraud issues.
For the first 3 generations, technical guys were in charge of the wireless technology Gs. With 4G, the marketing department took over and it looks like they are not ready to relinquish their position anytime soon. The hype around 5G was at its highest at the show. In the last 3 months, every major entity has had something to say about what 5G should be and what will it enable. There is also a tussle for who gets to lead the industry on 5G.
Europe is anxious to regain the mantle it lost after GSM. But there is a big problem. The 4G penetration in Europe wonâ€™t even get past 50% until 2020, the investment wouldnâ€™t have been recovered by then. Someone bring out the econ 101 book, please! It seems like 5G is going to revolve around mmWave spectrum and technologies (very few see a new interface coming) but this has massive capex and opex implications in addition to the practical implications of millions of nodes to deliver the desired throughput. That doesnâ€™t mean they shouldnâ€™t continue to work on pushing the boundaries and take leadership position in developing the standards and use cases. However, from a deployment point of view, we need a filter of reality.
Also, the industry is getting ahead of itself. Keep the marketing guys in the barn, settle on the definition, the how, the use cases, and then figure out the technical and marketing roadmap. (there was plenty of talk about pre-5G as well). Of course, one can achieve 10 Gbps today but mostly under impractical configurations. Whatâ€™s also troubling is that the Internet players are not part of the standards process. Matt Grob, CTO of Qualcomm responding to a question about the timeline for getting 5M 5G subs suggested we might get there by 2022. As a reference, 4G reached the 5M mark in 2010. KT CEO gave a delightful presentation of 5G optimism. A number of position papers were released â€“ fun reading for geeks if you are into these long reads. We will be releasing our own thoughts on 5G later this month expanding on piece we explored earlier this year.
- Net Neutrality
All eyes were on FCC Chairman Wheeler after the landmark ruling last month. There was no new news per say but the topic was hotly discussed and debated in public and private forums. While the journey is just starting, the world is looking to see how things will end-up. As I mentioned to the WSJ, no country wants to be viewed backwards and whatever happens in the US market will have implications worldwide over the next decade and beyond. I also get the sense that we donâ€™t quite understand the impact of unintended consequences. For e.g. there are several use cases like transportation, medical, financial, etc. where prioritization is required. Voice has been prioritized for ages and will be in the future. 5G will have different prioritization schemes depending on the radio, the applications, and the requirements. Ideally, you want the application to request a prioritization level. It is hard to justify that a moisture sensor in a sprinkler should get the same prioritization as the x-ray going over the wires. Prioritization exists in all forms of access and embedded in the way of life for good reasons. It is not quite clear what will be allowed and what will be dealt on a case-by-case basis. Maybe all this is taken care of in the ruling. Hopefully, the 300+ page tome will answer some of these questions.
- Samsung S6 launch
The best phone launch belonged to Samsung. Learning from past mistakes, it was a no-nonsense presentation. The S6 edge looks sleek and beautiful, the camera is remarkable. However, for the purists the lack of the SD card and the removable battery is troubling. The price point for the highest end might go past $1K. It is unlikely that S6 will steal share away from i6 but it will probably take it away from other Android OEMs and will see a nice revenue bump in the 2nd half of the year. It might help stabilize the severe decline in profits from 2014. Samsung Pay puts Android on the mobile payments map as well. There were device launches from Nokia, HTC, and others but nothing captured the attention of the show. Orange/Mozilla came out with a unique offering of a 35 Euro package that includes a decent smartphone, 6 month of 500MB/mo, unlimited voice and messaging. It will be launched in the African markets to get more people transition over to smartphones and data services.
- Industrial IoT
The current money in IoT is clearly in the industrial projects. IoT is a great enabler to re-architect business processes, revenue streams, business models, companies, and industries. While industrial IoT didnâ€™t make a splash, in conversations with folks, there are all sorts of projects being done around the globe and there is serious money being spent. One project can sometimes account for the entire consumer IoT revenue stream. Accenture/Intel had some cool demonstrations to tell the story. Lot of work is going into IoT driven factories, buildings, and the supply-chain.
- Lack of consumer IoT
Consumer IoT didnâ€™t make a big splash like it did at CES in January. There were no drones, robots, or humanoids running around. A number of OEMs came out with watches and sensor bands â€“ nothing that will take the industry by storm. Huawei probably gets the vote for the best watch launch at MWC. In general, for the current stream of connected watches, the technical specs have triumphed the fashion specs. Can Apple change the equation this year?
- Operator Landscape
In case, it wasnâ€™t clear to some â€“ AT&T is undergoing a significant transformation into becoming an international solutions provider â€“ it was apparent from the show. In the European show, AT&T had the best presence amongst its peers. European operator landscape is dominated by the quad-play moves and consolidation. As usual, the Koreans and the Japanese impress with their quirky art of storytelling. Using a robot to emphasize low 5G latency by SK Telecom was my favorite. AT&T has been signing up the most number of connected car contracts and the numbers are starting to impact the financials in a material way. A select group of the operators are showing meaningful revenues from the 4th wave.
- VR as a sales tool
VR helps tell a good story. Several companies used VR headsets (mostly Oculus and Samsung) to have attendees experience their product, services or vision. Ericsson had a cool setup to remotely controlled excavator thousands of miles away. Will VR enter the boardrooms? Quite likely.
After a slow start, LTE-U is gaining quite a bit of traction. Qualcommâ€™s efforts are bearing fruit and we should be seeing some deployments in 2016. The Wi-Fi ecosystem has expressed concerns but nothing that canâ€™t be overcome. Most of tier-1 operators in the western markets have some form of SDN/NFV initiatives in place. AT&Tâ€™s Donovan announced that they have already 5% coverage and are on track to reach 75% by 2020.
- Security and Privacy
Security and privacy continue to be hot topic in the post-snowden era especially in Europe. Regulations are also tightening up. EU wants much stronger privacy regulations. European operators want harmonization of privacy regulation between operators and the Internet players. IoT multiplies the attack nodes and it has serious implications for both enterprise and consumer domains.
- M&A news
Few M&A transactions during the week got the attention of the industry. The biggest one was from Freescale and NXP who announced a mammoth $40B merger. Then Mavenir got acquired by Mitel for $560M. HP acquired Aruba to boost the Wi-Fi business and paid a premium at $3B.
Other items of interest were 3D biometric fingerprints (Qualcomm), autonomous cars in 2016 (Nissan), zero rating (Wikipedia), B2B $1B revenues (Ooredoo), sub-$50 devices (Android, Mozilla), Windows 10 (Microsoft), 100M mobile money users (GSMA), 5G Holograms (KT), Smart Home Air Service (Conway), Lighting as a Service (Philips), Resiliency and Fault-Tolerant SDN/NFV layer (Stratus), 6G (DoCoMo), Runcible (Monohm), Selfieâ€™d Journalists (they were everywhere), Wireless charging furniture (Ikea), MoDe Electric Bike (Ford), Connected carry-on (Bluesmart), and more
Best launch â€“ Samsung S6. Well executed. Generated lot of interest from media and partners.
Best booth â€“ Ericsson. They have really mastered the art of storytelling through physical and digital assets.
Best parties â€“ Siris Capital and Qualcomm
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit â€“ Mobile Future Forward.
Disclaimer: Some of the companies mentioned in this update are our clients.
US Mobile Market Update Q4 2014 and 2014 February 23, 2015Posted by chetan in : 4G,4th Wave,5G,AORTA,ARPU,Chetan Sharma Consulting,Connected Devices,Connected Intelligence Era,Devices,European Wireless Market,Fourth Wave,Internet of Things,IoE,IoT,LTE,Mobile Applications,Mobile Cloud Computing,Mobile Devices,Mobile Future Forward,Technology Cycles,The Golden Age of Mobile,US Wireless Market,Wi-Fi,Wireless Value Chain,Worldwide Wireless Market , add a comment
US Mobile Market Update Q4 2014 and 2014
The US mobile market continues to be the biggest market by revenue and 2014 was a key transition year for the industry. The overall market grew 21% to almost $400B. Voice revenues declined by 15%, messaging by 16%, and tablets by 4%. The biggest winners were the 4th wave/OTT services which grew by 92%. Access revenues increased by 32%, handsets by 11%, and wearables by 150%. Verizon, AT&T, and Apple were the top 3 players by revenue (from the US market).
Last Jan, we had estimated $108 Billion in mobile data revenues for the market and the revenues ended spot on at $108B making US the first market to surpass the $100B mark. We are forecasting that the mobile data service revenues will increase by 22% to $132 Billion in 2015. Verizon will become the first operator to generate more than $50B from data services in 2015.
Verizon became the second operator after China Mobile to cross the milestone of 100 Million postpaid subs. After acquiring lusacell and Nextel Mexico (still pending), AT&T became the biggest North American operator with over 131 million subs. In 2014, US also crossed the 350 million subscription mark.
The average mobile data consumption (cellular) crossed 2GB/mo in 2014. In the US, it took roughly 20 years to reach the 1GB/user/mo mark. However, the second GB mark has been reached in less than 4 quarters. An entire yearâ€™s worth of mobile data traffic in 2007 is now reached in less than 100 hours.
From 2010 to 2013, the data pricing declined by only single digits YoY. However, in 2014, the data pricing has plummeted by 77%. It is having an impact on the industry financials which might help clear the way to further M&A in the US market.
The intense competition amongst the operators meant a whopping 20% rise in OPEX QoQ and a 1% decline in CAPEX YoY. The income stayed flat while EBITDA grew modestly at 3%.
In our 4th series of papers, we had postulated for years that the 4th wave revenues will become bigger than any of the previous curves. This finally happened in 2014 in the US market with the revenues from the 4th wave applications and services built on top of the IP access layer surpassed both voice and data revenues. The operator share of the US mobile industry revenues fell below 50% for the first time since the birth of the industry.
Smartphone penetration increased to 75% and roughly 95% of the devices sold now are smartphones.
The Android OEM ecosystem suffered its first major profit decline in 2014 – the profits dropped precipitously by 44%. iOS revenues increased by 31%. The difference in profits between the two major ecosystems is now $33 Billion â€“ the highest it has ever been.
Apple broke more records in a single quarter than most athletes break in their lifetime. The amount of revenues and profits generated by a rectangular screen sent everyone in a tizzy. To get a sense of the scale, consider this â€“ Appleâ€™s iPhone generated more revenue than revenues generated by entire portfolio of products from Microsoft, Google, Facebook, and Twitter combined. Add in Macs and Tablets and you can mix a dozen more companies in the mix. The laser focus on quality and the benefit of the brand loyalty and aspiration catapulted into the business stratosphere that few can even dream of reaching.
Apple also introduced two new products late last year â€“ Watch and Apple Pay. While it is too early to figure out the overall impact of Apple Watch (it clearly will put some Swiss Watchmakers out of business), Apple Pay appears to be more disruptive. Appleâ€™s classic approach of embracing the ecosystem and thinking end-to-end might finally disrupt the otherwise staid financial sector. Apple Pay is already seeing significant traction and the financial industry is nervously promoting the service. Rumors of Apple Car will keep media on its toes for the next few years.
4th wave services continue to grow at a very past face around the globe. At least 37 companies generated a billion dollar or more from 4th wave services in 2014 â€“ a 311% jump from 2012.
The difference between Sprint and T-Mobile number of subs is less than a million now â€“ the narrowest it has ever been. Like we suggested mid-last year, T-Mobile is likely to become the number three operator in a matter of weeks now. This is more or less just a symbolic event with the transfer of bragging rights.
T-Mobile accounted for over 40% of the overall net-adds for the year with Verizon coming in second at 30%. After having a lack-luster year in 2013, the operators doubled the net-adds in 2014 with connected devices driving most of the growth.
Race To The Bottom?
The mobile data traffic has been doubling YoY in the US. The consumption is clearly growing with the introduction of new devices, network upgrades, and application enhancements. Operators are seeing tremendous pressure on data pricing due to the competitive environment. EBITDA declined for the second straight quarter.
From 2010 to 2013, the data pricing declined by only single digits YoY. However, in the first 9 months of 2014, the data pricing has plummeted by 77%. It is having an impact on the industry financials which might help clear the way to further M&A in the US market.
Is Android in trouble?
Samsung suffered one of the biggest mobile revenue and profit declines in its history. As the dominant leader of the Android ecosystem, it is caught in the middle of two major trends that ironically enough Samsung had influenced. The bigger screen phone segment that Samsung seeded has become the fastest growing segment in smartphones. Apple following Samsung into the segment meant that it took away the single biggest differentiating factor and as such a serious impact on its high-end line. The lower end which yields higher volumes but much smaller ASP has attracted hordes of local developers in China, India, and Russia who have better logistics and operational advantage. Many of these players are becoming successful. To damage Samsung, they all donâ€™t need to be successful, just enough to be in the market to sway the market. As such, Samsung has seen its share dwindle in the two biggest emerging markets.
Much of the current situation has been predictable for some time. While Samsung has ridden the smartphone wave masterfully, it hasnâ€™t been able to build a platform moat, something that helps fundamentally differentiate its products in the sea of Android devices around the planet. They are not in a Blackberry or Nokia panic situation yet as some in the media have surmised. But, they need to figure a way out of the middle band. Unlike Nokia or Blackberry who were blinded by their success and ignorance, Samsung has shown it is a more nimble competitor. Samsungâ€™s R&D and marketing is also second to none. Its diversified portfolio also helps in cushioning the drop in the phone segment. Historically, OEMs with such sharp revenue declines havenâ€™t been able to arrest the decline. Can Samsung do it? Samsung is launching Galaxy 6 at MWC this weekend.
Given that Samsung controls most of Android ecosystem profits, the Android ecosystem suffered a 44% decline in profits. The woes of OEMs such as Sony, Motorola, and others also contributed to the decline. We can expect some of the Android OEMs leaving the device business altogether.
In his classic book, â€œCompetition in Telecommunications,â€ Nobel Laureate Jean Tirole wrote, â€œWith digital technology, telecommunications, cable TV, broadcasting, and computers have become a single industry, which will be a critical element of our economiesâ€™ backbone. With the impending opening of competition, industrial restructuring is progressing at a fast pace.â€ The book was written almost 15 years ago. As I have written before, the computing and communications industries are merging into one and that collision is generating ripple effects some of which we are starting to understand (more on the Connected Intelligence Era trends here)
One of the implications of the 4th wave evolution is that there will be fewer mobile operators in the world. As we have argued in the papers, many of the smaller players just wonâ€™t be able to keep up and compete. AT&T acquired Mexican operator Iusacell (it also made the bid for Nextel Mexico) which made AT&T a clear leader in North America with almost 131 Million subscriptions. As we mentioned in our 4th wave series of papers, the number of operators will continue to shrink with fewer global operators who will seek to combine wireless and wireline assets to strengthen their moat. It is quite likely that US Cellular will be acquired in 2015.
After a blockbuster spectrum auction, FCC is looking to put its stamp on the future of the Internet by proposing net-neutrality rules later this week. President Obama decisively tilted FCCâ€™s position on the subject. However, this is not a done deal yet. The legal and political apparatus is likely to react quite strongly to the ruling and we are in for a tough fight on this one. Other governments and regulators are also keenly watching the debate and the final ruling. Dish ended up acquiring a bulk of the spectrum wares. Is this a precursor of their wireless moves or was this just old-fashioned asset hoarding?
4th Wave Revenues
For the first time, US operators revealed some of their 4th wave (digital) services metrics publicly. Verizon reported $585 million in 2014 up 45% from a year ago. At the current run-rate, this will be a billion dollar business by 2016. AT&T reported 2.8M connected car connections and 140K home security connections. The connected car segment is clearly on its way to becoming a billion+ dollar business for AT&T. Connected cars accounted for 62% of the connected devices for AT&T.
Globally, 37 companies generated a billion dollar or more from 4th wave services in 2014 â€“ a 311% jump from 2012.
The Upcoming 5G wars?
I started my career when 1G was all the rage. My first 4G project was back in 2002. By some measures, we are already behind on the 5G discussions. In general, it takes 7-10 years before the standards are finalized and then the network technology lasts for approximately 20 years before a market moves onto the next generation of technology. US led in the growth of 1G (AMPS, TACS) followed by Europe on 2G (GSM, CDMA). Japan took the leadership role with 3G (WCDMA, EVDO) and US wrestled it back on 4G (LTE). Japan and EU are determined to lead on 5G and have been making very public statements and R&D investments about their ambitions on 5G. Japan of course has a very clear goal of having 5G by Tokyo Olympics in 2020. Am sure some operator(s) somewhere will jump the gun and start calling LTE-A+ as 5G around 2017-18 or sooner. You can expect a lot of activities both in public and private on 5G as companies and governments try to figure out a way to claim the 5G leadership mantle.
We have a 5G paper coming out in March. You can read the summary here â€“ 5G: The history of the future.
Mobile Payments has long infatuated mankind. Many players with deep pockets have invested in the segment but in truth, the market was waiting for Apple to show up and show up it did with the launch of Apple Pay. In an ambitious orchestration of the financial supply chain, Apple introduced a simple payment proposition. The basic strategy is for commerce to flow through iOS. The institutions are even paying a share of the transaction to Apple which previous payment explorers are watching in utter disbelief. Ladies and Gentlemen, get ready for iTunes 2.0.
What to expect in the coming months?
2014 was a tremendous year for the mobile as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. 2015 promises to be an exciting year for the industry as well.
As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q4 2014 and 2014 US wireless data market is:
Overall Industry Revenues
Â· The overall market grew 21% to almost $400B.
Â· Voice revenues declined by 15%, messaging by 16%, and tablets by 4%.
Â· The biggest winners were the 4th wave/OTT services which grew by 92%.
Â· Access revenues increased by 32%, handsets by 11%, and wearables by 150%.
Â· The US mobile data services revenues in Q4 2014 increased 3% and crossed the $25B market for the first time.
Â· The mobile data services revenue crossed the $100B mark in mobile data services revenue to become the first country to generate $100B from mobile data services.
Â· Verizon and AT&T dominated the quarter accounting for 70% of the mobile data services revenue and had 68% of the subscription base.
Â· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q4 2014. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.
Â· The Overall ARPU fell by 2.57%.
Â· Data contribution to the overall revenues is now at 60%.
Â· The postpaid ARPU continues to decline for all operators with AT&T and T-Mobile experiencing double digit losses for the year.
Â· The US market had the best net-add year in the last 7 years.
Â· The US operators added 20M new subscriptions with T-Mobile leading the pack at 40%.
Â· Verizonâ€™s tablet net-adds accounted for almost 50% of the overall tablets that were added in Q4. Verizon has caught up with AT&T on the tablet front.
Â· T-Mobileâ€™s postpaid continued to see the positive growth for the seventh straight quarter. It has recovered all its losses that began in Q3 2009 and is now growing in the positive territory.
Shared Data Plans
Â· Shared data plans launched by Verizon and AT&T have been quite successful. The attachment rates have increased tremendously over the course of 2013-14 with more consumers opting for cellular tablets and connected devices. 61% of postpaid accounts at Verizon are now on shared plans. For AT&T, the number is even higher at 70%.
Â· Some more granular data plans for tablets have also spurred interest as the cellular broadband is becoming available on demand vs. expensive on premise Wi-Fi solutions.
Â· 52% of AT&Tâ€™s postpaid accounts are on 10GB+ plans.
4th Wave Progress
Â· The number of players making $250M/quarter on mobile continues to increase rapidly and these arenâ€™t your traditional wireless players. For example, Mobile is now contributing 69% (up from 30% in Q1 2013) to Facebookâ€™s quarterly revenues. Latest addition to the club is Twitter which is now doing 88% in mobile (of the total advertising revenue) up from 60% in 2013. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: â€œMobile 4th Wave: Evolution of the Next Trillion Dollarsâ€)
Â· In 2014, we are also seeing continued investments from the operators especially AT&T, Verizon, and Sprint in non-traditional segments like home security, healthcare, insurance, automotive, enterprise mobility, advertising, and security, and others. Collectively, this is already a multi-billion dollar business in the US.
Â· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.
Â· Verizon reported $585 million in 2014 up 45% from a year ago. At the current run-rate, this will be a billion dollar business by 2016.
Â· AT&T reported 2.8M connected car connections and 140K home security connections. The connected car segment is clearly on its way to becoming a billion+ dollar business for AT&T. Connected cars accounted for 62% of the connected devices for AT&T.
Â· Connected devices (non-phones) accounted for almost 52% of the net-adds in Q4 2014. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.
Â· For AT&T, Connected cars started to form a significant base of the connected devices segment with 62% of the new connections in the segment coming from cars.
Â· Smartphones continued to be sold at a brisk pace accounting almost 95% of the devices sold in Q4 2014. Within the next two years, the feature phone category will practically be extinct in the US market.
Â· The smartphone penetration in the US is now at 75%.
Â· After ceding the lead to Android for the last three straight quarters, iOS roared back to reclaim the lead with 54% share of the smartphones sold. For the year though, Android edged out iOS.
Â· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 67M making it the leading LTE operator in the world (this year China Mobile will overtake Verizon to become the number 1 LTE operator by subscriptions). Other three operators are also deep into their LTE deployments. Verizon reported that 84% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit â€“ Mobile Future Forward. The next US Wireless Data Market update will be released in May 2015.
Disclaimer: Some of the companies mentioned in this update are our clients.
2013 – The year in mobile December 23, 2013Posted by chetan in : 4G,4th Wave,Applications,Chetan Sharma Consulting,Connected Devices,Devices,Disruption,Enterprise Mobility,European Wireless Market,Fourth Wave,Intellectual Property,IP Strategy,Mergers and Acquisitions,Mobile 2013,Mobile Applications,Mobile Future Forward,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 40 comments
Mobile Predictions 2014 Survey: We launched our annual mobile predictions survey for 2014 last week. For all of you have already contributed â€“ many thanks! Rest â€“ will appreciate you filling out the short survey and helping us in analyzing 2014. We even have prizes J. We will have the full analysis from the survey during first week of January.
2013 â€“ The year in mobile
Just like there is no â€œyear of electric carsâ€ or â€œyear of razor bladesâ€ or â€œyear of the Greek yogurt,â€ there is no â€œyear of mobileâ€ or â€œyear of this or that.â€ However, as we have seen over the 30+ years of mobile evolution, the next year is better than the previous one and so on and so forth. So, 2013 ends in the long tradition and continuum of human endeavor to make significant progress in multiple mobile dimensions and make an impact on individuals and societies alike. 2013 proved that connectivity has become the core of our fabric and we are entering the â€œconnected intelligence eraâ€ that will enable the Golden Age of Mobile.
In no particular order, here were some highlights of mobile 2013:
Number of mobile subscriptions ~ humans: the total number of mobile subscriptions got tantalizing close to the number of humans on the planet. Next year, we will go past the milestone but it shows the pervasiveness and strength of the mobile technology that it has become the basic part of our Maslowâ€™s hierarchy.
More data please: As smartphones approach the 2B mark, the data appetite of consumers showed no signs of abating. In Sweden, the mobile broadband subs are consuming over 7GB/mo. In the US, some Android devices are consuming over 4 GB/mo on average. Operators will need to continue to refine their pricing and margin models as the demand for more spectrum will continue.
The dominance of Samsung and Apple: The tussles in the device segment has all the intrigue and juxtaposition of a Shakespearean drama and the ups and downs of a Pavarottiâ€™s masterpiece. Through sheer muscle tenacity and the execution speed of Usain Bolt, Samsung was able to firmly dominate 2013 despite Appleâ€™s grip on the high-end smartphone market. These two account for almost 50% of the smartphone shipments and almost all of the profits in the space. Apple continued to set the tone for the market with the launches of new iPhones and iPads. Though iOS trails Android in raw deployment, it trounces it in consumer usage. It is also remarkable how quickly consumers upgrade to the latest iOS in stark contrast with the Android fragmentation. Apple finally got access to the big Chinese market.
The disappearance of the legacy device brands: Nokia, Motorola, and RIM were dominant players a few years ago but Apple ensured the smartphone script is rewritten. They all made serious strategic errors one after another and while Nokia and Motorola have found new families to host their aspirations, their story should be a reminder of the turbulent cycles of the device business and that the complacency virus spares no one. The rise of the local OEMs should keep everyone on their toes in 2014.
Android juggernaut: In 2013, Android continued to create distance with Apple in terms of downloads, easily going past the mind boggling 1 billion milestone. Android has changed the industry for the better. While there is trouble in the house, Android will continue to play a major role in the device and app ecosystem in 2014.
The growth of OTT Services: As we discussed in our 4th wave paper earlier this year, OTT Services will be the biggest growth segment for the next decade. In 2013, the segment grew 50% ahead of any other telecom segment. Young IP messaging stalwarts fundamentally altered the messaging landscape with Whatsapp performing exceptionally. SMS usage and revenue numbers were impacted worldwide.
The digital revenue streams are very distributed with diverse players such as Facebook, Twitter, Starbucks, Expedia, Uber, Pandora, Amazon, AT&T, Telefonica, Verizon, DoCoMo, Netflix, China Mobile, Rovio, Square, Softbank, Ebay, Hertz, Apple, Google, and Microsoft. In our work with players around the world this year, it is clear that there is significant energy and application in mining the opportunities on the 4th wave. With nascent efforts in Bhutan, Vietnam, Malaysia to moonshots in the US and Europe, mobile is rewriting the rules in virtually every industry. Fasten your seat belts for another fast paced year in 2014.
Post-PC beat PC+: Apple expertly wrote the post-PC narrative and while the PC+ crowd has a legit argument, perception is often reality and there in no doubt that from here on out, the industry will be talking about the post-PC world in one voice. Even Microsoft will grudgingly admit to the transition and likely shift its strategy accordingly. As we wrote long time ago, Tablets have fundamentally altered the computing paradigm. In our SMB research released earlier this year, it was clear that smartphones and tablets are the tools of choice for the enterprise and that is not only altering the device business but also the software landscape. Mobile broadband, the cloud, and the applications are altering the enterprises â€“ big and small. Microsoft should take solace from a tough year of progress. Blackberry is practically done and Microsoft has established itself as the distant but a viable third mobile ecosystem. Had it not been for a series of strategic mistakes, Microsoft might have made better inroads in 2013.
LTE launches: LTE is the fastest growing generation of cellular technology in the history. With over 250 networks launched, the desire to launch IP networks quickly is on top of the agenda. US leads with all major operators having substantial LTE deployments but other nations are fast catching up. While there has been quite a bit of focus on LTE, WiFi has been emerging as the white knight and its importance only grew in 2013 with 60-70% of the mobile data traffic being carried by WiFi networks in most of the countries. It might lead to some interesting business models in the coming years. 5G entered the industry lexicon.
M&As: It is natural for fast growing and competitive industries to consolidate. 2013 wasnâ€™t any different. There were some blockbuster and expected M&As: Microsoft acquired Nokia, Softbank surprised with Sprint/Clearwire acquisition, Verizon finally got hold of its destiny from Vodafone. As we have eluded to several times in our past research notes, we expect the global M&A to continue with several block buster deals slated for 2014. Stay tuned.
Patent wars: In maturing markets, patent wars are the unfortunate part of the ongoing battle for dominance. Mobile saw its share of patent wars. With roughly quarter of the USPTO grants becoming mobile related, it shouldnâ€™t come as a surprise though.
Regulatory tussles: Regulators are generally always behind in understanding a fast growing industry. It was clear in 2013, that the convergence of the computing and communications world has left the regulatory world woefully short of expertise and imagination. Governments around the world will do better by hiring folks from the industry to get a grip of the fast-paced every-changing dynamics of the mobile world as the very competitiveness of a nation depends on it. From spectrum to privacy, from competition to commerce, regulators need to get up to speed on unexpected trajectories of the new world.
Security and Privacy: From Snowden revelations to industrial espionage, from credit card data loss to enterprise security, the security and privacy of mobile data, applications, networks, and devices became front and center of the security and privacy debate.
Operator disruption plays: In the telecom space, the #4 player generally doesnâ€™t have a big impact on the overall mechanics of the industry. However, when it has nothing to lose, it can provide a potent dose of disruption to the market. Free in France and T-Mobile in the US were examples of that this year. In France, by offering cheap mobile data services at low margins, the newcomer altered the economics of the segment tumbling the incumbent revenues by 10%. In the US, through a series of financial and marketing maneuvers, T-Mobile was able to alter its net-add trajectory and had meaningful sub gains for the first time in three years. Also, for the first time, T-Mobile forced the top three to react to its moves and not the other way around. It also inspired other smaller players in other countries to rethink their strategies.
Connected devices: The promise of M2M and connected devices has been there for some time. Internet of Things has morphed into the gimmicky Internet of Everything. While the hockey stick curve hasnâ€™t arrived yet, there was plenty to celebrate with the introductions of Google Glasses, wearables, smart watches, connected autos, glamorous thermostats, winking light bulbs, home security and energy management solutions and much more. GE is spending billions for its â€œindustrial Internetâ€ initiative. A nice platform has been set for continued feverish growth and product introductions in 2014.
Mobileâ€™s impact on commerce: Mobile is changing every industry but its impact on commerce is particularly notable. In the 2013 holiday season (according to IBM), mobile made 17% of the online sales increasing over 55% from 2012. Tablet users spent $126/order.
Meteoric rise of mobile apps: In 2010, we evaluated the impact mobile apps will have on the industry. Much of the growth has been expected, however the players who lead in revenue and downloads have fluctuated across the various platforms. In 2013, Google started to match Apple in downloads though Apple easily wins in the revenues category and thus still remains more attractive to the developers though the gap is closing.
There was much more â€“ Twitter IPO, Surface, Moto X, spectrum scandals, Facebookâ€™s love for mobile, Google mobile advertising dominance, the rise of the Chinese OEMs, decline of HTC, and several other events captivated our attention.
I am positive that 2014 is going to be another terrific year for mobile. The progress and surprises will come from all quarters. New players will emerge, new business models will take hold, and we will make significant progress. I am also sure that you all will do your part in shaping the mobile cosmos.
Would love to hear from you. How was your 2013? And what are you looking to do in 2014 that will change the mobile world? Please be sure to fill out our annual predictions survey for 2014.
With best wishes for an outstanding 2014.
US Mobile Market Update Q3 2013 November 14, 2013Posted by chetan in : 4G,4th Wave,Big Data,European Wireless Market,Fourth Wave,Mobile Applications,Mobile Cloud Computing,Mobile Commerce,Mobile Ecosystem,Mobile Future Forward,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment
The US mobile data market grew 5% Q/Q and 15% Y/Y to reach $22.8 billion in mobile data revenues. Data is now 48% of the US mobile industry service revenues and as we had forecasted a few years back, the cross-over point of 50% might occur next quarter. For the year 2013, we are expecting $90 Billion in mobile data service revenues for the US market making it the number one market in mobile data revenues ahead of Japan and China. Q4 2013 is looking to be another record breaking holiday quarter for the industry at many levels, which is setting up 2014 quite nicely.
For the quarter, the market added 2.2M new connections, a strong reversal from the paltry 139K last quarter. T-Mobile continued to impress after its strong reversal in industry metrics last quarter on the back of a series of marketing and pricing initiatives that seem to be gaining traction and having an impact on its image and fortune.
Given that Apple didnâ€™t launch the device until Sept and then had severe supply-chain constraints, Android had its best quarter against iOS with 54% share in the US market. However, iOS is likely to catch-up in Q4.
Smartphones are now past the 64% mark in the US and continue to sell at a brisk pace accounting for almost 90% of the devices sold in Q3 2013. Apple led the smartphone sales amongst the top 4 operators with 42% share for the quarter. While the US penetration of smartphones is 64%, the 64% of the sub base is concentrated in only 40% of the households thus leaving plenty of growth in the marketplace. Overall, connected devices remains the highest growth segment with 6% Q/Q growth.
Smartphone and Connected Device Growth
Though China has overtaken (primarily because of the sheer size of its population) US in terms of the overall smartphone penetration, US remains the market where OEMs have to be really successful in order to be consider a serious player on the larger canvas. Though the likes of Xiaomi and the Micromax have had good success in their local markets (and still have a great amount of growth left), the prized market to make a sizable dent in their overall revenue and margins is the US market. This is primarily due to handset subsidy that allows consumers to easily own premium brands at bargain-basement prices in addition to the higher disposable incomes. This has helped the ASPs to go up in this market unlike some of the other markets where they have been going down.
US also boasts four leading-edge LTE networks that allows the ecosystem to innovate at the edge, literally. Having access to fast mobile broadband impacts human behavior, application and service development and everything in between. As such, US has become the laboratory for many experiments that benefit the larger ecosystem. This absolutely doesnâ€™t mean that innovative things are not happening in other parts of the world. Far from it. But the â€œenabling layerâ€ of networks, devices, and platforms is in its most advanced stage in the US. This layer allows folks to build applications and services that will power the global economy.
So, in order to be considered credible in the smartphone space, one must have a decent scorecard in the US today. The pendulum could of course swing and China could take the lead. In fact, US and China are the G2 nations of the mobile world.
While there have been murmurs in the market about smartphone saturation, the upgrade cycles will keep up the demand for more devices in 2014.
Like any ecosystem or a market, there are winners and there are companies who couldnâ€™t perform to their potential. Enough ink has been spilt on Blackberry to reiterate what was quite predictable. The only interesting tidbit that emerged was that as we expected, Lenovo made a serious run for it and the Canadian government stopped it. It is ok for Canadians to use Lenovo laptops but not the smartphones? Of course, the reasons were complicated and different from what have been generally reported. Can Blackberry make a comeback under a savvy CEO? If they continue with the same OS, it is hard to see how?
Apple for the first time launched two models â€“ 5s and a slightly lower priced 5c. It seems like the strategy might have been two fold a) get the supply-chain ready for more than one new model at a time and b) given an additional option to the consumers (in the US) who used to go for a level down version. Since the supply chain was under pressure, it is hard to get a clear picture of what might be happening but the iPhone 5s/c launch allowed Apple to raise the percentage of new devices sold. In fact, based on the weekly sales data from ITG Research, they might have managed to flip the ratio. For e.g. in Sep and Oct 2012, the old models sold 3:1. During Sept-Oct 2013, the new models outsold the old models by 1.7:1. 5s outsold 5c 1.6:1.
The big block-buster deal of Q3 was Microsoftâ€™s acquisition of Nokia. It was clearly one of the outcomes Nokia was on the path of the day it chose Windows Phone OS. Microsoft got an effective OEM distribution and design system for really cheap but how long will it take to turn things around? Its mobile fate might largely depend on who the new CEO is.
Tablets are making a tremendous impact in the post-pc era. In the US market, we are already approaching 100M unit sales/year run rate. While Android tablets have taken market share from iPad, Apple remains the undisputed king of the category primarily because of superior hardware and a more robust ecosystem. Android tablets can be cheap but also unreliable, the life expectancy of such tablets can be 50% or so compared to the iPad. The usage is even less. Microsoft launched a credible challenger in Surface but there have been so many missteps that it is not (yet) in the picture of the post-pc transition.
There has also been quite a bit of excitement about smart watches, smart glasses, smart cars, smart homes, and on and on. However, we must remember that just because device is growing in the era of the smartphones, it doesnâ€™t makes them smart. In fact, most of these devices are where smartphones were in the late nineties â€“ basic, functional, and full of possibilities. The evolution, however, will be much quicker. Google is one company that is pushing the boundaries of across multiple dimensions. Regulators and policy makers better come up to speed on the emerging landscape quickly.
A good test of a platformâ€™s importance is to find out what happens if the platform shuts down for 5 minutes â€“ how much panic and revenue drop does that create in various parts of the world? Another measure of the platform is the value it creates by launching new companies and ideas. For mobile, the answer is fairly obvious.
The Fourth Wave and the shift towards services
It is evident that there is a subtle shift from devices/access to services/solutions. In our paper on the topic â€œOperatorâ€™s Dilemma (and opportunity): The Fourth Waveâ€, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skill set and strategic approach than the past three curves. As predicted, we are starting to see the impact of the 4th wave on a global scale and some operators have started to break out the 4th wave revenues in their financials. Operators with better balance sheets will also look for global expansion especially in Europe where economic impact on the telecom operators has been severe, however the M&A efforts will be complicated by respective governments desire to keep control of the national infrastructure provider.
We had a very successful Mobile Future Forward Summit last quarter. It was dedicated to exploring the 4th wave in more detail across multiple dimensions and verticals. The dialogue was incredible and validates the march towards the 4th wave that is redefining industries across the spectrum including the wireless industry itself, at its core. Some of these tectonic shifts arenâ€™t very apparent and visible but as I have spent time working with some of the leaders in New York, Silicon Valley, London, Abu Dhabi, Barcelona, Hanoi, Singapore, Dallas, New Delhi, and Seattle this year, it has become abundantly that mobile industry is at a key inflexion point that is changing industries and the power structures, creating new opportunities and new revenue streams. In my interview at Mobile Future Forward, Ralph de la Vega, CEO of AT&T Mobility indicated that the ARPU from Digital Life customers is higher and the churn is lower. So, the fourth wave services have a direct impact on existing revenue streams as well. Conversely, absence of such services doesnâ€™t yield a pretty picture.
FCC chairman and regulations
Amidst all the cacophony of device launches, acquisitions, and investments, FCC finally got its new chairman. Tom Wheeler is one of the savviest operative in the space with better grasp of the ecosystem, policy, law, and politics than most of his predecessors, so it will be interesting to see what the next FCC era brings over the next 3 years. Clearly, Incentive Auctions will be one of the most critical items on the agenda but some other issues like the potential T-Mobile acquisition and net-neutrality issues are likely to become important as well. Regardless, we are in for an interesting ride.
What to expect in the coming months?
2013 has been quite a year for the mobile industry and as we head into the holiday season, itâ€™s a consumerâ€™s market with plenty of choice and competition.
As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q3 2013 US wireless data market is:
- The US mobile data service revenues grew 5% Q/Q and 15% Y/Y to $22.8B in Q3 2013.For the year 2013, US mobile data market is on track to reach our original forecast of $90 billion in 2013.
- Verizon and AT&T dominated the quarter accounting for 71% of the mobile data services revenue and had 68% of the subscription base.
- As expected, China Mobile went passed both Verizon and AT&T to claim the #1 operator in mobile data service revenues. Verizon and AT&T slipped to #2 & #3 mobile data revenue ranking respectively in Q3 2013. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile operators.
- The Overall ARPU increased by $0.82. Average voice ARPU declined by $0.38 while the average data ARPU grew by $1.19 or 5% Q/Q.
- The average industry percentage contribution of data to overall ARPU is now at the 48% mark in Q3 2013 and is likely to exceed the 50% next quarter. The top three operators are hovering over the 50% mark and T-Mobile is slowly catching up.
- The US operators added 2.4M net-adds a sharp reversal from the lowest net-add in history last quarter. Verizon and T-Mobile led with over 1M subs, closely followed by AT&T while Sprint slowly emerges from the Nextel shutdown.
- T-Mobileâ€™s postpaid continued to see the positive growth for the second straight quarter, though Verizon was a clear leader of the quarter with 927K net-adds.
- Sprint continued its losses in the postpaid segment. In the last couple of quarters, T-Mobile has started to break-away from Sprint in cumulative postpaid net-adds with positive growth.
- AT&T continued to lead the connected device segment with 48% market share.
Shared Data Plans
- Shared data plans launched by Verizon and AT&T have been quite successful. The attachment rates have increased tremendously over the course of 2013 with more consumers opting for cellular tablets and connected devices. In fact, at AT&T, tablets are performing 2-3 times better than smartphones in postpaid net-adds.
- Some more granular data plans for tablets have also spurred interest as the cellular broadband is becoming available on demand vs. expensive premise WiFi solutions.
4th Wave Progress
- The number of players making $100M/quarter on mobile continues to increase rapidly and these arenâ€™t your traditional wireless players. Facebook is now doing 50% and touching a billion dollars in quarterly revenue from mobile. Latest addition to the club is Twitter which is now doing $117M/quarter or 60% in mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: â€œMobile 4th Wave: Evolution of the Next Trillion Dollarsâ€)
- We are also seeing continued investments from the operators especially AT&T and Verizon in non-traditional segments like home security, healthcare, insurance, automotive, enterprise mobility and security, and others. Collectively, this is already a multi-billion dollar business in the US.
- The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.
- Smartphones continued to be sold at a brisk pace accounting almost 90% of the devices sold in Q3 2013.
- The smartphone penetration in the US is now 64%.
- Android easily went past iOS in smartphone sales in Q3 13 by a 54% – 42% margin. However, iOS is expected to bounce back in Q4 after the release of new devices in late Q3.
- At the end of Q3 2013, Samsung continued its lead in unit sale category both on the world stage as well as in the US. However, profits are a different equation where Apple overshadows its rivals like Gulliver on the Lilliput land.
- While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off. It renewed its entry into the battlefield with Windows phone last year but sales have been poor. Q3 was better than Q2 but insignificant in the larger scheme of things. So, while the sales surged over 400% from Q3 2012, the market share barely budged at 3%. (Read our paper to get more insights into why Windows hasnâ€™t been able to make a dent so far).
- Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 38M making it the leading LTE operator in the world. AT&Tâ€™s and Sprintâ€™s LTE rollouts are gathering steam. T-Mobile is also ramping up its LTE deployment. Expect the â€œfastest networkâ€ marketing to continue for at least another seven quarters. Verizon reported that 64% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.
- There is always a beauty contest amongst operators as to who sold more iPhones. AT&T again bested its rivals by selling roughly 42% of the iPhones in the US.
- In terms of Q/Q growth, Connected Devices segment grew 6%, Wholesale -1%, Postpaid 1%, and Prepaid 2%.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit â€“ Mobile Future Forward. The next US Wireless Data Market update will be released in March 2014. The next Global Wireless Data Market update will be issued in February 2014.
Disclaimer: Some of the companies mentioned in this research are our clients.3G,4G,4th Wave,AORTA,Applications,Chetan Sharma Consulting,Connected Devices,Enterprise Mobility,European Wireless Market,Mobile Cloud Computing,Mobile Ecosystem,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment
The ABCs of SMB Transformation: Apps, Broadband, and the Cloud
– A collaboration between Chetan Sharma Consulting and AT&T
In 2013, the US mobile data revenues will exceed $90 billion accounting for over 165% growth in the last 5 years. This makes US the biggest market for mobile data solutions and services. The smartphone penetration in the US went past 50% by mid-2012. The number of applications available to consumer has quadrupled in just the last two years. While the growth in the smartphone segment has been quite impressive, the tablet adoption rate has been the highest in the consumer electronics history. The advent of mobile broadband, powerful computing devices, reliable cloud services and applications have changed the computing landscape forever.
At the same time, the Consumerization of IT is changing the face of the enterprise architecture as well. This is felt more acutely in the small-and-medium business (SMB) segment. US is also the biggest enterprise market in the world and the SMB segment represents the more agile and technology-savvy of the ecosystem. In fact, we think it is a leading indicator of how technologies are going to be adopted in the enterprise ecosystem, what trends will prove to be disruptive, which vertical segments will embrace efficiency, and most importantly, how should we think about the ever-changing landscape as we look towards rest of the decade.
Small businesses are at the heart of the US economic engine. They represent roughly 45% of the non-farm GDP. Every administration, every president focuses on small business growth and job creation. Given the importance of small businesses to the economy, it is worthwhile to look at how their technology needs are changing. Additionally, it is important to understand how they are adopting technology and the impact it is having on their productivity, competitiveness, and efficiency. The technology adoption is also putting some of the traditional industry segments at risk while creating several new growth areas.
To understand the impact of mobile broadband, devices, and cloud applications, we conducted a survey of eighty SMB companies of different shapes and sizes across the US serving different verticals constituting over ten thousand employees. We also looked at the data from over twelve thousand companies in the SMB segment and over twenty thousand larger enterprises. Additionally, we conducted a series of interviews to better understand the motivations, requirements, and feedback of these companies. These companies have been in business for twenty years on average with over two years of experience with mobile data solutions. By understanding how they use and benefit from mobile data solutions, we can better identify the course of enterprise mobility in the US and around the world.
Some interesting findings:
Â· Small and medium businesses are leading indicators of technology adoption. As referenced in this paper, SMB smartphone and tablet penetration is more than 90 and 65 percent respectively; whereas national smartphone and tablet penetration is roughly 55 and 22 percent.
Â· Mobile First to Mobile Only. Last year, we proposed that we will start moving from mobile first to mobile only economy. We said that we are approaching a pivot point wherein the mobile first doctrine is going to move to mobile only. We are starting to see strong evidence of that shift. In our survey, roughly 30% of the SMBs are transitioning from desktops/notebooks to smartphones/tablets. Business software and solutions are being transformed by the use of smartphones and tablets. With this shift, weâ€™ve seen the emergence of a generation of app developers focusing primarily on the mobile app platform.
Â· Mobile broadband, cloud, and apps are providing real and tangible ROI. The SMBs in the survey saw an average savings of 40 minutes per worker per day, which translates into significant impact on profits over the course of the year.
Your feedback is always welcome.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Mobile World Congress 2013 Recap March 6, 2013Posted by chetan in : 4G,AORTA,Chetan Sharma Consulting,European Wireless Market,LTE,Mobile World Congress,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 6 comments
â€œWelcome to Spain, Thank you for your business,â€ remarked the immigration officer and thus started my yearly pilgrimage to the grand slam of mobile â€“ The Mobile World Congress 2013. It is truly a global event with participants from virtually all countries looking to do business, learn a thing or two, and ponder over what the year will bring forth. The show moved to a new venue which made the logistics work much better for attendees and exhibitors but the venue lost its charm and character. We used this opportunity to feel the pulse of the industry and understand where things are headed. This note summarizes our observations from the show.
While there was no blockbuster announcements or products that will knock your socks off, several interesting trends emerged that will keep the industry exciting to watch in 2013.
The perennial search for the #3 ecosystem continues: Windows sales have disappointed thus far, Blackberry has launched new devices but hasnâ€™t quite hit the mark. So, while consumers seem perfectly happy with iOS and Android, industryâ€™s desire to have a third robust ecosystem is palpable. The biggest announcement in that regard was from Firefox OS and in a matter of 12 months, it has not only forged a strong alliance with operators, it is actually getting ready to ship phones. It is going to be targeting the low-end of the market which is a smart strategy but a lot depends on the range of price points of the devices and how quickly it can attract the developer ecosystem. Given that Android device price points are hovering around $50 and it is a mature ecosystem with great developer reach and support, it will be challenging to convince consumers to go the Firefox route. However, if the price points are attractive enough, with the distribution power of some key operators, we could see some early traction. Ubuntu, Jolla, and Tizen were also vying for attention.
LTE everywhere: LTE deployment is growing at a very fast pace. The US market is ahead of the curve with almost national footprint from Verizon followed by substantial coverage from the remaining three operators. Elsewhere, operators are gearing for deployment once some of the spectrum issues/auctions are sorted out.
The 4th Wave has arrived: Last year, we put forth a framework for future mobile industry revenues in our 4th wave paper. Since then, the framework has been embraced by many leading operators around the globe. It was good to hear operators talking more about services rather than data plans. Several areas were discussed by the leading tier 1 operators such as health, retail, education, cloud, M2M, automobile, enterprise, security, connected living, home security, commerce, identity and privacy, big data and analytics. Operators who are able to steer their giant organizations to focus on services will be able to survive the commoditization of access. We will have more say on the subject later this year.
Yo OTT, luego existo: which is Spanish for â€œI OTT, therefore I amâ€ To be a player in the digital world, one has to be an OTT provider for communications and beyond. The interesting dichotomy of the communications OTT business is that very few will survive. The end state of a majority of them (if not all) is either an M&A with a telco or an Internet player or they run out of cash. The new breed of OTTs has forced the lumbering giants to think different about their customers and their markets.
Mobile Broadband, Cloud, and Apps: The troika of broadband network access, the cloud infrastructure and the applications are creating a sea change in the enterprise, especially the SMB segment. It is also changing how developers see the enterprise segment as the opportunity migrates from windows to iOS and Android. We conducted some in-depth research in the space and will have more to share later this year. Our Mobile Breakfast Series later this month will be dealing with the topic of Cloud and SDN in more detail.
Redefining Monopoly: The mobile and internet worlds have collided but the regulatory regimes havenâ€™t changed. European operators seemed to indicate that it is time to reassess what a monopoly really means and the rules should apply to all layers of the ecosystem stack and that means devices and OSs as well.
Device Launches: All major OEMs are following the Apple playbook as far as the device announcements are concerned. To garner media attention, it is best to announce the â€œheroâ€ devices away from major shows. Just like CES earlier this year, MWC lacked any big device announcements. Nokia announced mid-low tier devices to expand its portfolio that will help it in unit sales. ZTE, Huawei, LG, Asus, NEC, Sony, HTC, HP, Asus, Acer, Lenovo all had new devices to display but mediaâ€™s eyes are set on Samsungâ€™s Galaxy release later this month.
Local OEMs: Traditional OEMs are facing some healthy competition from new entrants in local markets. Players like Fly and Yotaphone in Russia are giving the veterans a run for their money. By both innovating with new features but also by customizing the devices for the local market (e.g. bigger battery that last 3 days), they are creating their own niche. After gaining good market share in Russia, Fly is expanding into other markets.
Connected Cars: When the biggest operator by revenue announces a deal with the biggest car manufacturer, people take notice. GM and AT&T announced LTE cars by 2015 which will pretty much force the entire auto industry to provide broadband connectivity in a hurry. However, the auto industry has misplaced expectations on apps and any incremental revenue they might be able to harness from them.
Samsung Knox, Blackberry â€“ can you hear me now: Android is probably the most insecure mobile platform out there. Blackberry has long been the gold standard, iOS has improved, Windows has security features built in but security has always been a step-child of Android. Samsungâ€™s Knox announcement elevates Samsungâ€™s role in the mobile enterprise and to some extent takes over some of the development capability of Android that are squarely aimed at Blackberry. The container security feature set with MDM integration is well thought out and opens up the mobile enterprise market for Samsung especially in North America and Western Europe.
Spectrum and Regulations: While spectrum was a universal issue with the operators, more is better, European operators were particularly vocal about the state of the regulatory affairs on the continent. Regulators, they complained, are killing the industry by cutting of revenue opportunities, are fostering too much competition, too much taxation, and too involved in the operations of the operators. This is leading to declining revenues and turmoil at the operators. There might be some unintended consequences of weakening operators and regulators will have to grapple with some interesting questions that a free market economy will pose in the coming days.
TU Go â€“ Take your phone number everywhere: In our opinion, Telefonica has done the best job of dealing with the digital world in putting forth an org structure that can crank out applications and services at Internet speed. TU Go is a new service (launched in UK) that allows users to take their phone number to any supported device and use it for calling and texting â€“ number in the cloud at its best.
NFC is dead, Long Live NFC: Vodafone CEOâ€™s frank admission that he doesnâ€™t expect to make much money from NFC gave the audience a bit of a pause. Several NFC initiatives have floundered without clear goals or vision. Instead of working together, the industry has remained fragmented and thus the lack of scale has hampered progress. For too long, the industry has focused on payments but the opportunity lies in the engagement with the customer. For better or for worse, the financial industry has sequestered its commission for the foreseeable future. We saw some clever NFC implementations to drive consumer engagement and commerce in retail environments, primarily in Europe.
Consolidation looms: The question that is on everyoneâ€™s mind but was hardly discussed at the show was the coming onslaught of consolidation at virtually all layers of the ecosystem.
Developing Markets: Connecting the next billion was a recurring theme. The smartphone penetration in the developing world is in the single digits. More than that, introducing consumers to a computing platform for the first time is an exciting opportunity. Creating services that are tailored to the local environment remains an opportunity that can have a profound impact on society. Our own work with the UN/ITU has shown the transformative role of mobile in almost every walk of life. The device unit growth is coming from the developing markets and as they get connected, the world becomes flatter, and the competitive dynamics in a globalizing world will create for some interesting policy and political battles.
M2M and Internet of Things: As we wrote in our book â€œWireless Data Servicesâ€ back in 2004, the connectivity is becoming pervasive. The module costs are coming down fast and the desire to measure and track every number that is important in our lives is creating a massive opportunity. However, privacy, battery life, environment, security remain key issues that need to be tackled.
Identity as a business opportunity: In a digital world where access to information and resources depend on verification of your identity, the guards and keepers of the identity information have a big role to play. As such, â€œidentityâ€ management is emerging as an opportunity that can be monetized. In the online world, Facebook has become the dominant way to integrate apps and services. In the mobile world, operators can play a significant role in authentication and verification. Will the two worlds collide? Fasten your seat belts.
The Post PC world: As an experiment, for the MWC trip, I carried just the Nexus 7 tablet and an iPhone. I felt liberated. In the past, for day trips, I have relied just on iPad/iPhone for taking care of my computing needs. For this trip, I wanted something that I can carry in jacket pocket. Nexus was good enough for taking simple notes, email, browser and even some phone calls. I could easily switch back-and-forth between the tablet and the phone, and the combined battery life lasted the whole day.
Â· Googleâ€™s absence from the show puzzled many
Â· The enthusiasm for RCS/Joyn seems to have subsided as reality sets in
Â· Nokia is broadening the reach of its HERE platform to other operating systems
Â· AT&T/Ericsson showed WebRTC demo
Â· Facebook announced messaging partnerships with operators in developing countries
Â· Small cells remained a hot topic though seen more of a compliment for the macro network
Â· Signaling traffic continues to grow at a faster pace than the data traffic as more LTE devices come on the network
Â· Qualcomm launched RF360 solution to deal with frequency band fragmentation which is serious problem for LTE roaming
Â· Yotaphone with its dual screen (front and back) and NEC Medias with its stacked up screens had something fresh to offer in the devices space when 99% of the devices look the same
Â· Virtualization is the new black in mobile networks
Best booth: Ericssonâ€™s networked world theme was well thought-out and provided a unique exploratory view of the opportunities and technology evolution. A close second â€“ Connected City.
Best party: There wonâ€™t be an MWC without the bevy of parties every night. Qualcomm again stole the show with the jam-packed confluence of the mobile elite.
2013 Mobile Industry Predictions Survey January 2, 2013Posted by chetan in : Chetan Sharma Consulting,Connected Devices,European Wireless Market,IP Strategy,Mobile Commerce,Mobile Ecosystem,Mobile Predictions,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 2 comments
First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2013. My thanks to all who participated in our 2013 Mobile Predictions Annual Survey. It gives our community an insiderâ€™s view of the trends and predictions for the New Year.
2012 was a terrific year for the mobile industry. Mobile data continued to drive most of the mobile growth around the world. Mobile also started impacting every major vertical industry around the globe. In fact, mobile has become so ingrained in the fabric of business productivity and social interaction that it is not longer the new growth engine, it has become the engine.
The competitive dynamics stayed quite vibrant in 2012. We saw epic battles in the markets as well as in the courts. 2012 also saw the PC value chain struggling for relevance while the smartphones and tablets unit sales captured all the attention and headlines.
As we peer into 2013, we will see the total number of cellular subscriptions eclipsing humans on the planet. The connected device made steady progress. Anything that should be connected is being connected – creating a web of new opportunities and challenges.
LTE has become the fastest deployed cellular technology in the approximately 35 year history of the industry. Broadband combined with connected devices and applications are changing the way we live, we interact with others, do business, and consume information.
The European economic crisis impacted many players especially the large telcos, making the transition to digital ever more urgent. As voice and messaging revenue curves decline and access revenue approaches its high mark in the next few years, investment in the fourth curve becomes critical for all players.
Our annual survey is a way for us to engage our community on the trends for the next year. We put some of the pressing questions to our colleagues and industry leaders. We are able to glean some valuable insights from their choices and comments, some tangible shifts, and get a sense of whatâ€™s to come. Executives, developers, and insiders (n=200) from leading mobile companies and startups from across the value chain and from around the world participated to help see what 2013 might bring to keep us on our toes. What makes this survey unique is that it draws upon the collective wisdom of folks who are at the center of the mobile evolution. The survey provides a view of how they see the upcoming year for mobile.
30 names were randomly drawn for the limited edition of the Mobile Future Forward 2012 book. The winners are:
- Ryan Carney, UX, Gfk
- Wes Biggs, CTO, Adfonic
- Volker Hirsch, Head of BD, RIM
- Bobby Morrison, President, Verizon Wireless
- Chris Walls, Strategy, Huawei
- Von Cameron, EVP, Smith Micro
- Sami Makelainen, Manager, Telstra
- Martin Fichter, VP, HTC
- Jeff Hasen, CMO, Hipcricket
- Paul Brody, VP, IBM
- Michael Mullany, CEO, Sencha
- Mick Welch, Manager, Nokia
- Jana Messerschmidt, VP, Twitter
- Akio Orii, SVP, Toyota
- Gina Bovara, Software Services, Intel
- Mark Brill, Lead Partner, Brand Emotivity
- Stuart Saunders, CEO, Mobile Defense
- Tony Greco, Director, ZTE
- Venu Vasudevan, Sr. Director, Motorola
- Elliott Hamilton, Sr. Director, TeleCommunication Systems
- Biljana Jovicic, VAS, Digitel
- Robin Jewsbury, Cofounder, Promoht
- Julie Dey, VP, Rootmetrics
- Pat Nunally, VP, Upaid
- Paul Upham, Director, Welldoc
- Sagar Tamang, Director, Nielsen
- Andrew Meadors, Engineer, Cisco
- Nikao Yang, SVP, Adcolony
- Pelle Larsen, Director, SingTel
- Kelly Amsbry, Sr. Planner, Microsoft
- Elisabeth Rainge, Head â€“ Strategy, NSN
Thanks again to everyone who contributed. We will be calling on you again next year.
Be well, do good work, stay in touch, and stay away from Triskaidekaphobiacs.
Thanks and with warm wishes,
What was most newsworthy in Mobile 2012?
2012 was a spectacular year for smartphones. Smartphones in most western nations are now over 80% of the devices sold every quarter. China will soon become the biggest market by unit volume and the rest of the world is catching up fast as we see sub-$50 Android devices flood the market. Apple vs. Samsung has become akin to Lakers vs. Celtics of the eighties or the India vs. Pakistan rivalry in cricket. The passion and intense competition between the two super powers was clearly the headline of the year. That pushed the Android vs. iOS tussles as the subheading for 2012. As we enter into 2013, the legacy computing aka PC players will need to reinvent themselves or expect substantial decline in their fortunes.
The role of mobile data in industryâ€™s growth has been cemented by the insatiable appetite for higher speeds, more apps, and social interaction and is expected to continue at a feverish pace as LTE roles out around the world and the developing world catches up. We are likely to see the Apple and Google rivalry intensify. One is a master of hardware and the other of software. Both have their Achilles heel and much is at stake in the coming year. Many expect Microsoftâ€™s Windows to make progress to lay claim to become a viable 3rd ecosystem. 2013 will try to answer that question.
Who will be the most open player in the mobile ecosystem in 2013?
Who are the top 4 important players in the mobile ecosystem?
Many in the industry talk about Apple, Google, Facebook, and Amazon as the most important platform players in the business today. However, when it comes to mobile, in addition to the defacto top-two, our survey picks Samsung as number three by a good margin. Samsung has become a strong player in the digital ecosystem that commands attention and respect. The top 10-15 global operators play a strong role in the mobile ecosystem and collectively edged out Amazon and others for the number four spot. Facebook and Microsoft while strong in the desktop world have a lot to prove to be considered a top tier player in mobile.
What will be the breakthrough categories in mobile in 2013?
Our industry seems fascinated with the potential of mobile payments and voted it to be the top mobile applications and services category for 2013. Given the importance of Cloud in all apps/services, it is no surprise that it is part of the top 2. Mobile Commerce, Big data, and connected devices rounded up the top 5.
What will be the most popular consumer mobile applications in 2013?
There are regional variations when it comes to the popularity and revenue potential of mobile applications. Messaging, mobile commerce, and social dominate the developing world while location based services replaces messaging in the developed world as the key mobile application. Mobile health and gaming made a strong show in both regions.
Which will be the most dominant tablet platform in 2 years?
So far, iOS has dominated the tablet landscape. With iPad, Apple has effectively carved out the mid-high tier of the tablet space. Android players are losing or barely making any revenue from this device category. Windows tablets are priced so high that it is trying to compete with laptops rather than the tablets. Our panel expects Android to catch-up in unit sales and iOS to dominate the revenues by good margins. Windows is likely to stay a marginal player.
Who will make the biggest mobile acquisition in 2013?
Microsoft and Google both have big cash balanced to make some sizable acquisitions in 2013. Microsoft lacks traction and attention and will try to make a move but which player can give them an edge? Apple also needs to beef up its software operations significantly but doesnâ€™t have the history of big acquisitions. Operators are also looking to become OTT players themselves and might make moves to shore up their strategic interests. Many participants think that Nokia and RIM have seen their final year as an independent entity.
How will the "Apps vs. Mobile Web" debate shape up in 2013?
In 2012, many expected the resurgence of â€œmobile webâ€ but it hasnâ€™t panned out that way. Google has doubled up on apps, Facebook realized HTML5 isnâ€™t going to cut it, and the expectations pendulum swung back to the apps and might stay there for 2013.
Who will dominate the mobile payment/commerce space?
Three years ago, mobile payments/commerce seemed to be the â€œblue oceanâ€ opportunity but financial guys have firmly protected their turf, at least for now. Hopes were high for operator led initiatives but the enthusiasm has tapered off. Startups like Square are doing more to disrupt the payments space than some of the established players. The only exception is PayPal, which has so far been able to create good distance with the competitors. Microsoft has surprisingly been absent in a critical space.
Which solutions will gain the most traction for managing mobile data broadband consumption?
4G, mobile offload, and tiered pricing have been most effective in managing the costs of mobile data consumption though spectrum has garnered more of the noise share.
Which category will generate the most mobile data revenue in 2013?
Access dominates the developed world while messaging has the lion share in the developing world. We will see access becoming the dominant category in the emerging markets fairly soon.
Which European operator is likely to emerge stronger from the current economic climate?
European operators have been battered by struggling economy and regulatory changes. Many are rethinking their strategy, shedding off assets, and just trying to keep their head above water. The leaner operations and refocused strategic direction might help them recover better when the economy improves. While our global panel picked Vodafone to have the strongest recovery, our European panel picked Telefonica to emerge stronger.
When will mobile commerce be greater than ecommerce?
A majority of the panel thinks that mobile commerce will eclipse ecommerce in revenues generated by 2015 in North America and Asia and by 2020 for the rest of the world. There are already strong signs that commerce is shifting from online to mobile.
The company bringing the most successful mobile gadget of the year – 2012 and 2013?
Apple continues to produce the most desirable devices. iPhone and iPad dwarf everything else and easily was the company with the most successful gadget in 2012. However, the panel expects Samsung to best its rival in 2013. Google and Amazon might mount a credible challenge but their chances of producing something truly dominating remain low.
Which platform has a credible shot at becoming a viable and durable 3rd ecosystem in mobile?
Windows 8 phones finally launched in 2012. The design is solid, the OEM support is growing, the number of apps are rising and while it is still a long ways to becoming a credible 3rd ecosystem, it has the best shot at becoming one. The only rival seems the HTML5-based OS initiatives. The application developer community actually voted for HTML5 over Windows as the 3rd ecosystem that has some chance of competing with iOS and Android which completely dominate in revenues and unit sales respectively.
Mobile company of the year – 2012 and 2013?
Samsung eclipsed Nokia and Apple to become the most dominating device player in unit volume in almost all major markets. The speed with which it is churning out devices has pretty much crushed the rest of the Android ecosystem and is going head-to-head with Apple. For this performance, the panel voted Samsung to be the mobile company of the year for both 2012 and 2013 with Apple and Google close behind.
Which of the following are likely to happen in 2013?
The rumor chamber is ablaze with the possibilities of Apple TV, smartphones from Amazon and Microsoft, and data-only plans to make their appearance in 2013. Square and Twitter could be the hot acquisitions of the year though Twitter is likely to chose IPO glory. Will Samsung fork Android? Will Sprint and T-Mobile merge? Will European operators get acquired? These are some of the questions that are likely to keep the media on their toes this year.
Which operator is best positioned for the digital world?
As we outlined in our research paper â€œOperatorâ€™s Dilemma: The Fourth Wave,â€ the business of being a mobile operator is at a critical juncture and operators are investing heavily into creating the digital business. AT&T, Verizon, NTT DoCoMo, Softbank, and Telefonica are already generating billions of dollars from these initiatives and lead the operator contingent in the digital world.
Who was and will be the mobile person of the year?
In the past, Steve Jobs was consistently the person of the year in mobile. In 2012, Tim Cook effectively managed to produce record profits for the investors and navigated Apple to keep its â€œmost valuable enterpriseâ€ title intact for the year. Apple is still the company on top of the hill. JK Shin of Samsung was voted number two for 2012. For 2013, the landscape changed. Our panel overwhelmingly voted Jeff Bezos to impress us the most in 2013. Amazon has done a good job disrupting the device model and with its strong commerce expertise, it is looking to take on both Google and Apple at the same time. Andy Rubin of Google with the 1 billion Android units milestone coming up this year will be a good contender for the title as well.
There were several other leaders who impressed in 2012 e.g. Paul Jacobs (eclipsing Intel in market cap), Jack Dorsey (disrupting the mobile payments market with Square), Masayoshi Son (for Sprint acquisition and global ambitions), Dan Hesse (for navigating Sprint through rough waters), Glenn Lurie and Matthew Key (for leading the digital transformation of the two giants â€“ AT&T and Telefonica respectively), Rhen Zhengfei (for making Huawei into a dominating infrastructure provider), Lowell McAdam (for making Verizon the number 1 mobile data operator in the world) and Ralph de la Vega (for making AT&T the number 2 ahead of NTT DoCoMo).
All in all, a great collection of thoughts and comments. Thanks again to everyone who participated. Have a great 2013.AORTA,Applications,European Wireless Market,Mobile Cloud Computing,Mobile Commerce,Mobile Future Forward,Mobile OEMs,Mobile Operators,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment
Hope allâ€™s well. Just a quick update on how the program is shaping up.
We have been working steadily on our fall mobile executive summit â€“ Mobile Future Forward (Sept 10th in Seattle) and I am very pleased to announce the preliminary program. We will provide an update as we continue to refine the program and announce more speakers. As you know, our programs are deep in content and high on participant caliber. Each year we strive to bring together some of the leading thinkers and doers from around the world to brainstorm the future of mobile. As we like to call it â€“ it is a mobile boot camp with the brightest brains in mobile.
I am delighted to be partnering with some of the leading players in the mobile ecosystem: Intel, Ericsson, Synchronoss, and Tekelec.
Steve Elfman, President, Sprint will give us an update on the state of the wireless industry â€“ the opportunities and the investment areas. Glenn Lurie, President, Emerging Enterprises and Partnerships at AT&T Mobility will provide us with a glimpse into the world of emerging devices and opportunities. Both Steve and Glenn are mobile industry veterans with decades of experience and their perspective will be invaluable for our Mobile Future Forward community.
Mobile commerce has been a hot topic lately. We have two terrific speakers â€“ Mung Ki Woo, Head of Mobile at Mastercard Worldwide and Antonio Benjamin, Global CTO at Citi to lay the roadmap of the mobile commerce ecosystem evolution.
When it comes to retail, brands, and technology, there are not many people with deeper insights than Stephen David, former CIO of Procter & Gamble. He is a highly sought-after advisor to global brands around the world. I have had the good fortune to work with him in the past and his grasp on how wireless is going to disrupt retail is just brilliant. We are delighted to have him back to have a conversation about mobile, brands, retail, and IT.
As you can see below, we have an outstanding group of executives who are responsible for changing the industry every day. Their viewpoints and commentary will be invaluable. The Mobile Future Forward team, our esteemed partners, our fantastic speakers and our engaged community are really looking forward to Sept 10th.
Â· Steve Elfman, President, Sprint
Â· Glenn Lurie, President, AT&T
Â· Renee James, SVP, Software and Services Group, Intel
Â· Wim Sweldens, President, Alcatel-Lucent Wireless
Â· Michael Bayle, SVP and GM, ESPN Mobile
Â· Martin Fichter, President, HTC
Â· Stephen Bye, CTO, Sprint
Â· Bobby Morrison, President, Verizon Wireless
Â· Erik Moreno, EVP, Fox
Â· Stephen David, former CIO, Procter & Gamble
Â· Ed Cantwell, SVP, West Wireless Health Institute
Â· Jana Messerschmidt, VP, Twitter
.. More to come
Â· Mung Ki Woo, Head of Mobile, Mastercard Worldwide
Â· Antonio Benjamin, Global CTO, Citi
Â· Biju Nair, EVP and Chief Strategy Officer, Synchronoss
Â· Hank Skorny, VP/GM, Intel
Â· Jack Kennedy, EVP, News Corp Digital Media
Â· Marianne Marck, VP â€“ Engineering, Starbucks
Â· Tim Chang, Partner, Mayfield
Â· Vish Nandlall, CTO and EVP, Ericsson
Â· Carlos Domingo, President and CEO, Telefonica R&D
Â· Kevin Packingham, SVP â€“ Product Innovation, Samsung
Â· Frank Meehan, Executive, Horizons Ventures
Â· Oke Okaro, Global Head of Mobile, Bloomberg
Â· Looking back from Mobile 2020 â€“ the last 10 years
Â· The fight for developers â€“ Apps, APIs, and Dollars
Â· Will Privacy get in the way of mobile growth?
Â· PostPC era and the tablets â€“ commerce, engagement, and consumption
Â· Quantified Self. Quantified Enterprise â€“ how to benefit from big data?
Â· Gamification of Everything â€“ How to reinvent business models and revenue streams
Â· When will Mobile Commerce eclipse Ecommerce? And How?
Â· Mobile Broadband â€“ LTE is here and now. Whatâ€™s Next?
Â· Mobile Competitive Policy â€“ Balancing competitiveness, consumer interests, policy, and innovation
Â· nScreen Connected Consumer â€“ Expectations, Solution roadmap, and Revenue flows
Â· Operators vs. OTT â€“ Competition, Co-opetition, and the new landscape. Measuring the seismic shifts.
Â· Big (Mobile) Data â€“ Collection, Management and Use of Data
Â· Mobile Cloud Computing â€“ Innovation, Competition, and Business Models
Â· Mobile CIO Prism â€“ Disruption in the enterprise. Opportunities for growth and cost reductions
Â· Managing networking growth in the Yottabyte Era â€“ strategies to tame signaling and data tsunamis
Â· Mobile Platforms and Ecosystems â€“ The Cycles and the Eternal Debate
Â· Mobile Security â€“ BYOD, Hacking, Protecting, and Monetization
Â· Emerging Markets, Emerging Opportunities
Â· Battle for the Home â€“ Devices, Apps, Networks
Â· Retail channel transformation â€“ how are we going to shop and who makes money?
I hope you will join us in what is shaping up to be an exceptional gathering of the mobile minds. Registration is open now. Early bird will expire July 10th. The last two events were sold out so be sure to grab your seat to one of the most anticipated mobile gathering of the year.
Chetan Sharma3G,4G,AORTA,Applications,ARPU,Connected Devices,European Wireless Market,Mobile Advertising,Mobile Applications,Mobile Breakfast Series,Mobile Cloud Computing,Mobile Commerce,Mobile Content,Mobile Devices,Mobile Ecosystem,Mobile Future Forward,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 2 comments
We started doing Mobile Breakfast Series in Seattle back in 2009 and after hosting10 straight events, it was time to expand the wings and explore other cities. The first stop in this journey was Atlanta and we worked closely with our partners at â€œWireless Technology Forumâ€ to make it a successful event last friday. I also had the good fortune of participating in WTFâ€™s event the night before. Both events focused on Connected Devices and their impact on the consumer, the ecosystem and the value-chains thus making it a â€œconnected weekâ€ in Atlanta.
As I mentioned, the night before the event, I had the opportunity to present and moderate a panel on Connected Devices with Glenn Lurie, President of Emerging Enterprises at AT&T and Jeff Smith, CTO at Numerex. Both are movers and shakers in the space and it was such a pleasure meeting with many WTF members and interacting with the top-notch panelists. The event was recorded and is available on WTFâ€™s Youtube Channel.
We hosted the Atlanta Mobile Breakfast Series Event in Atlanta at the Commerce Club of Atlanta which has beautiful views of the Atlanta area.
There is an old Chinese saying, â€œWhen the wind of change blows, some build walls others build windmills.â€ Our industry is going through tremendous change; it wonâ€™t be an exaggeration if I say that the tectonic plates are moving and moving fast. The motion is being forced both by the economic conditions but also the technology and business progress. I have been around the industry long enough but it still amazes me â€“ the stuff thatâ€™s in the pipeline and how quickly consumers absorb it.
The topic of our discussion was Connected Devices, the Cloud, and the Consumer. With connected devices, I am referring to the broad availability of devices that are connected to data networks â€“ so they include smartphones, tablets, connected auto but also wellness devices like fitbit, energy meters, dog collars, medical devices, etc. as of last year, the subscription penetration was at 6B, next year, we will have more connections than people on this planet. In another 5-7 years, we might touch 20 Billion sensors on the planet. So you can see the growth is going to be astronomical.
Another phenomenon is that of cloud. If a startup mentions Cloud in their presentation to a VC, the valuation doubles, you say mobile, and it quadruples. I donâ€™t know how many of you are a fan of Mark Weisier, the Xerox Parc researcher who pioneered what became â€œalways on, always connectedâ€ tagline of pervasive computing. It was more than 20 years ago, we finally are seeing that with the help of broadband networks, amazing devices, and open business models, information is truly available at the fingertips.
The third leg of our discussion was the consumer â€“ their appetite for new and the latest is creating this tremendous opportunity that is shaping their behavior and expectations.
We had an awesome panel to discuss things in detail. First I discussed the topic with David Christopher, Chief Marketing Officer at AT&T Mobility. As most of you might be aware, AT&T is leading not only the US but the globe in their efforts to bring connected solutions to the market. I work around the world with top operators, and I can tell you there is no exciting place in mobile right now than right here in the US of A. US is leading in innovation, technology, and business model. We had lost touch after 1G and US truly teaching rest of the world how to do 4G right. David has a terrific background â€“ a product and operationally driven CMO at one of the worldâ€™s biggest mobile operator and it was a delight to have him on the panel.
I have known both Biju Nair and Louis Gump for sometime â€“ several decades of mobile expertise. Louis is with CNN, has been running their mobile efforts which are top-notch. He is a recognized leader in the mobile advertising space and given that CNNâ€™s properties span across multiple screens, he has really great insights as to how consumers behave across n-screens.
Biju is a hard core technologist, has been working at solutions that make Louisâ€™ stuff work across networks and devices. Many of you might not know but Synchronoss where Biju is the Chief Strategy Officer and Products EVP, powers online activation at AT&T. If you bought the iPhone over the last few years at AT&T, there is a good chance your order was processed by Synchronoss.
Highlights from the discussion below:
- Many in the industry expected AT&T to take a hit after the iPhone exclusivity ended but AT&T continued to perform better than Verizon and others with devices. David has been the person leading the charge to ensure AT&T maintains its competitiveness. AT&T did that by a) conveying the overall value proposition of an iPhone on the AT&T network b) build out the Android portfolio and c) conveying crisply the benefits of being an iPhone on the AT&T network (talk and text at the same time, etc.)
- Consumers understand that 4G is faster than 3G but necessarily understand (beyond the techie crowd) the benefits of LTE.
- AT&T is a big supporter of Windows ecosystem. It is good to have more choice for the consumers. While the initial version of Surface is WiFi only, the hope are high for Windows 8. Having a viable third ecosystem for mobile is important for the mobile industry.
- Microsoft has done a good job with the design of the OS but have been poor on the opening up of the API front. Developers find the closed ecosystem to be stifling. Unless Microsoft remedies that, interest in the platform might be limited.
- It is RIMâ€™s battle to lose. They have good software, loyal users, security framework, email is the best but have been asleep on the wheel for a while. They can turn things around though the probability of that happening are fairly low at this point.
- AT&T is studying data share plans and how consumers might react to them. It is a new paradigm in the evolution of mobile data plans and services.
- CNN has been doing mobile for a long time but was surprised by the pick up of the tablets. The reach is highest on the browser for them but the engagement is much higher on apps.
- Cloud is essentially Client-Server from the years past but applied to new use cases that brings together user experience new and different ways. The trifecta of devices, broadband networks, and content is enabling new services.
- Privacy and Security of cloud services is of paramount importance. There is a view that the industry needs to self-regulate and come up with some better solutions quickly.
- HTML5 is an important step for the industry but it is clearly not a panacea. It will have a role in the ecosystem but wonâ€™t obliterate the need for apps. The holy wars to continue.
- There is some conflict between the cloud data usage and data tier plans but WiFi (US consumers have access to WiFi 80% of the time) and smarter configuration to manage data have helped.
- Mobile advertising only 1% of the overall mix but mobile has 10% usage so a tremendous growth opportunity (yep, we said that back in 2007).
- APIs are open but monetization is still challenging. The first task is to get developers understand the benefits and find ways to enhance the user experience.
- Toll free data plans is not a new concept. Remember Sugar Mama from Virgin Mobile from years ago? Still experimental. Content providers like CNN are willing to engage if there is some value exchange that yields to revenue which can be shared. Some interesting opportunities with prepaid.
- To some extent there is more ARPU innovation in the developing countries like India which are borne out of necessity â€“ like the Kissan program in India.
- In terms of whatâ€™s next, virtually every industry is going to be disrupted. Tremendous change on the horizon however a lot will depend on the battery innovation in the coming days and months.
The team at Chetan Sharma Consulting really enjoyed taking the Breakfast Series to Atlanta. My thanks to the terrific team at WTF for their support and to the Atlanta Mobile Community for making the event so successful. Finally, the event wouldnâ€™t have been possible without the support of our series partner â€“ Synchronoss.
As you might be aware, our fall mobile executive summit â€“ Mobile Future Forward is going to be on Sept 10th. Registration is open. We are likely to sell out so grab your tickets early.
Next Stop â€“ London for our first venture across the pond. On June 29th, we host the discussion on Operator/OTT â€“ The way forward with Telefonica, Orange, Rebtel, and Horizons Ventures. Read Frank Meehanâ€™s pre-event interview about the topic here.
Operators and OTT – The Way Forward – London
Operator traditional revenue streams are under threat esp. voice and messaging. Access margins will continue to stay under pressure. OTT players are coming in fast and furious and it is not just the big ones like Google but also players like Whatsapp, Voxer, Viber and others. How do operators play in the new landscape â€“ lessen the decline of their traditional revenues while investing in new areas that improve their overall margins and revenues. Do they play the role of an enabler, a utility player, or become the OTT player themselves? In a software-driven world, how do they stay nimble? On the flip side, what are some things that operators can provide to the OTT players that make them successful, take them to the market quickly and maintain a long-term healthy and mutually-beneficial partnership? Operators still generate 70% of the global mobile industry revenues, so they are an important part of the chain but how do they ensure they have an equally relevant share in the profits. The panel will discuss how operators and OTT players think about the challenges and the opportunities, the competition and the coopetition.
CTIA Wireless 2012 Recap May 14, 2012Posted by chetan in : 3G,4G,AORTA,Carriers,CTIA,European Wireless Market,Infrastructure Providers,Mobile Breakfast Series,Mobile Future Forward,Mobile Operators,Worldwide Wireless Market , add a comment
CTIA Wireless 2012 Recap
CTIA returned to New Orleans after many years and it was great to see the city revitalized and ready to host the wireless show. Overall there were no big announcements, no blockbuster deals, no zingers from speakers that made the headlines. However, it was good to take the pulse of the industry. We met with several prominent industry executives, long-time colleagues, and new entrepreneurs. This note presents the summary of my observations from the show.
Mobile Web and Apps â€“ I had the opportunity to chair the Mobile Web and Apps event and kick off the proceedings with an opening keynote on the State of the Mobile Industry. It was based on our recent global market update that we released last week. In fact, many CEOs and speakers including FCC Chairman Genachowski frequently referenced from the research throughout the show. Wireless Week did a nice cover story based on the talk. There was good discussion and debate about whatâ€™s working and whatâ€™s not, how developers try to create demand and monetize eyeballs, the issues of security and privacy. Mastercard announced its payment developer APIs program. In fact, the show had the presence of all the major credit card companies. Payments, wallet, and commerce were the big talking point.
Operators vs. OTT â€“ The theme of Mobile World Congress continued at CTIA with the topic dominating in both open forums as well as behind closed doors. While most of the ink has been focused on how OTT players are killing operator revenue streams, there is the untold story of operator collaboration with the OTTs. I wrote a piece on the topic for Synergy magazine â€œMobile Operators and OTTs: Building a win-win.â€ The manner in which operators respond to the OTT opportunity/threat will end up defining their future in the years to come. Some operators like TeliaSonera have reacted by throwing their hands and just charging extra for OTT services while others like Telefonica are launching innovative services. We have looked at this topic in-depth for many years and have some more new research coming out in the next few weeks. Stay tuned.
The challenge for some of the operators is in stark display. While T-Mobileâ€™s Bobsled app garnered (95% users non-TMO customers) 1 million users, Viber announced the 70 million milestone. To be a relevant app, one needs scale. Operators have the advantage of providing better call quality. The call quality on many mobile VoIP services is subpar and enterprise customers (and consumers) will pay a premium for better call quality.
Digital Life and New Revenue Streams â€“ In the US, AT&T dominates the connected devices spaces. Indeed in terms of rolling out new services, it is a step ahead of the competition. AT&T has been showing the Digital Life concepts at Mobile World Congress and at CTIA they announced the trial and actual product availability in 2013. This clearly bodes well for the industry for there are many adjacent industries where operators can play an important role. Other operators should pay close attention. We will be discussing the Connected Devices opportunities in detail at our Atlanta Mobile Breakfast Series Event on June 22nd with AT&T, Synchronoss, and CNN.
Traffic Growth and Signaling storm â€“ As we have mentioned in our various research papers and research updates, mobile traffic is roughly doubling YOY in most major markets including the US. While data traffic hogs the headlines, signaling is becoming a menace to network management esp. Android which tends to be more inefficient in handling network resources. We will have a more in-depth discussion of these topics in our upcoming Yottabyte research paper.
TMO Acquisition â€“ Last year, AT&Tâ€™s proposed acquisition of T-Mobile rocked the industry and kept the regulators busy for better part of 2011. While there were no blockbuster announcements, T-Mobileâ€™s acquisition of MetroPCS along with Nokia and RIMâ€™s long-term prospects remained popular water cooler topics.
Nokiaâ€™s revival â€“ Nokia has a lot to prove. Its future is riding on the success of the Lumia series of devices in 2012. Though it hasnâ€™t exactly set things on fire, the sales are actually doing fine. It is amongst the top selling devices at AT&T and is showing stickiness. However, Nokia is getting crushed in other markets, so the net impact on overall cash position can be significant if it is not able to arrest the downfall in the next 3-4 quarters.
Small Cells â€“ A couple of years ago, small cells and HetNets were just talking point. Now, operators are weaving them into their execution plans as they lay out their 4G networks. Given that mobile data growth is going to stay front and center for the foreseeable future, expect to hear about small cells and HetNets for some time to come.
TMO $4B network deal â€“ Generally, the network deals of this size takes many quarters to iron out. T-Mobile moved fairly quickly to iron out its LTE rollout plans and its vendors. Not surprisingly, the spoils of the deal went to Ericsson and NSN. In light of the collapse of LightSquared, this deal might provide NSN a lifeline to continue operations for a few more years.
Mobile Wallets and Mobile Payments â€“ While 2012 will not be the year of mobile payments; it certainly is the year of mobile wallets launches and lots of them. Every financial institution worthy of its salt has launched a wallet. We are just going through the early turbulence cycle of this new segment. However, the opening up of the payment APIs from the financial industry is leading to some compelling experiences and use cases.
NFC was absent â€“ The talk of NFC as a payment solution was noticeably muted. We have always said that NFC will have more impact from other solutions than payment.
Verizon â€“ LTE â€“ Competing on LTE, the fight to build the fastest and biggest LTE network is on. Verizon has an early formidable lead but in 2013 rivals will start to catch-up.
Messaging innovation â€“ As I mentioned to the NY Times and discussed it in our annual global mobile update, messaging revenue has started to decline in some countries. Some operators in Europe are in a state of panic. Chaos creates new opportunities. While operators have just given up on fighting the OTT war, others are gearing with new apps and services of their own (TU Me from Telefonica, Bobsled from T-Mobile, On from Orange). Several startups are also helping the operators innovate on the messaging front. SMS was invented in the early nineties but operators didnâ€™t really take messaging to the next level for the last two decades. I met with a number of companies which are doing some interesting work on the messaging side â€“ like ZipWhip, Maxx Wireless, OpenMarket, and others. Some of these companies are still in the stealth mode and expect to make some waves in the coming months. We will be taking this topic head-on in our Mobile Breakfast Series in Seattle (w/ AT&T, Groupon) and London (w/ Telefonica, Orange, Horizons Venture, Rebtel)
Sprint Guardian, and other apps â€“ in line with generating more revenue form other apps, Sprint guardian was launched with Safely and the service is seeing pretty good traction in the early days and might be able to increase the lifetime value of the customer. Other US operators have similar services available on their network as well. Operators will have to invest heavily in VAS ecosystem and services to arrest the declining revenue in other segments.
FCC, Spectrum and Regulations â€“ FCC continued to make its case for more spectrum via incentive auction. With a change of guard expected next year, it will be interesting to see how some of these efforts pan out. FCC should create parallel incentive programs like a $1B prize for tangibly solving the spectrum crisis w/o the need of new spectrum.
Absence of large players â€“ The lack of any major announcements was only rivaled by the absence of the former CTIA heavyweights like Samsung, Alcatel-Lucent, Nokia, Motorola, and Microsoft. Others had fairly low-key presence.
Regulations â€“ Regulations lag the technology industry progress and it is getting to the point that they might end up hindering growth esp. related to communication, privacy and monetization of network assets. It is time to consider bringing all communication, and data privacy rules under the same umbrella so both the telecom and Internet players are guided by the same set of principles.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2012. The next Global Wireless Data Market update will be issued in Nov 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Global Mobile Market Update 2012 (Annual Edition) April 30, 2012Posted by chetan in : 3G,4G,AORTA,BRIC,European Wireless Market,Indian Wireless Market,Japan Wireless Market,Mobile Breakfast Series,Mobile Future Forward,Mobile Operators,Mobile Patents,Mobile Payments,Patent Strategy,US Wireless Market,VoIP,Wireless Value Chain,Worldwide Wireless Market , 7 comments
Global Mobile Market Update
State of the Global Mobile Union – 2012
- Total Global Mobile Revenues to hit $1.5 Trillion in 2012, over 2% of Global GDP
â€“ Top 10 operators control 42% of the global data mobile revenues
- Mobile Services Revenue exceeded $1 Trillion for the first time in 2011
â€“ The number of mobile operators with > $1 Billion in yearly data revenues will touch 50 in 2012
- Total Global Mobile Data Revenues went past $300 Billion in 2011
â€“ Non-messaging data now owns 53% of the global mobile data revenues
- Mobile Operator Profits have more than doubled over the last 10 years.
â€“ However, the wealth is not divided evenly. Asiaâ€™s share has tripled at the expense of Europe whose profit share has declined by 50%
- Total Global Subscriptions to exceed 7 Billion in early 2013
â€“ China exceeds 1 Billion, India 950 Million. Subscriber growth is in Asia, Revenue growth is in Asia+North America
- China and India represent 27% of subscriptions but only 12% of the global service revenues
â€“ US represents only 6% of the subscriptions but 21% of the global service revenues, 26% of the data revenues, and 27% of the global CAPEX
- Mobile Devices are now exceeding traditional computers in unit sales + revenue
â€“ 70% of the device sales in the US are now smartphones. Device Replacement cycle is shrinking
- Samsung and Apple now account for 50% of the smartphone unit share and 90% of the profit share
â€“ Difficult environment for other OEMs esp. when ZTE and Huawei are coming strong from the bottom. It will be difficult for pure play device OEMs to survive long-term
- Tablets (iPads) has created a new computing paradigm that is having a significant impact on commerce, content consumption, and developer investments
â€“ Apple will continue to dominate the segment and iOS will be the leading OS for the segment. Amazon, ZTE, Huawei, to chip away at the sub-$200 tier.
- Mobile Broadband (4G) is being deployed at a faster rate than previous generations, first time data is leading the charge
â€“ Over 1.5 Billion broadband connections by 2012
- Global Mobile Apps revenue has completely (and irreversibly) tilted to off-deck
â€“ The decline is directly proportional to the increase in smartphone penetration by region
- All major markets are consolidating with the top 3 players at 85% of the market
â€“ Regulators will have to be more prudent and proactive about managing competitiveness and growth
- Mobile data traffic 2x YOY in most markets. Mobile Data will be 95% of the global mobile traffic by 2015
â€“ Many countries are facing spectrum exhaust in the next 2-3 years (in certain markets)
- Mobile Signaling takes up 2x the resources as Mobile Data Traffic
â€“ Signaling traffic is growing faster than the data traffic on broadband networks
- Connected device segment is growing at the fastest pace in the western markets
â€“ Operators will have to quickly adapt their strategies to stay relevant in this segment
- Several multi-billion dollar opportunity segments are emerging
â€“ Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few
- Mobile Ecosystem has become very dynamic and unpredictable
â€“ The 5 Platform Amigos â€“ Apple, Google, Amazon, Microsoft, and Facebook dominate though the first two have the real power
- Mobile Operator Revenue is under pressure from OTT Players
â€“ OTT Share of the Global Mobile Revenues increased to 4%
- OTT players forcing operators to up their game
â€“ Operators are partnering, launching their own OTT apps, increasing tariffs to manage the margins
- Intellectual Property has become a key component of long-term product strategy
â€“ 21% of all patents granted in US are mobile related. Top 20 control 1/3rd of the overall mobile patent pool
- Mobile Patent Rankings: US â€“ IBM, Microsoft, Nokia. Europe â€“ Alcatel-Lucent, Nokia, Samsung. Overall â€“ Nokia, Samsung, Alcatel-Lucent
â€“ OEMs â€“ Nokia, Samsung, Sony. Service Providers â€“ AT&T, NTT DoCoMo, Sprint
- In 3-5 years, with few exceptions, if a company is not doing majority of its digital business on mobile, it is going to be irrelevant
â€“ Majority (by a good margin) of the consumer interactions with brands will be on mobile
- Mobile has become the single most important digital channel for engaging consumers and it shows
â€“ In the US, mobile revenues were > all Ecommerce And > Music, ISP, Hollywood, and Cable revenues combined
- We have entered the mobile 3.0 era where â€œdataâ€ is all that matters and it disrupts the value chains
â€“ Data will drive majority of the network growth, Contextual data will drive majority of the VAS growth
- There will be more changes in the next 10 years than in the previous 100
â€“ The value chains will keep disrupting every 12-18 months by the new players and business models. Several verticals are already getting redefined e.g. retail, health, education, etc.
The Big Picture
The global mobile industry is the most vibrant and fastest growing industry. We expect the total revenue in the industry to touch approximately $1.5 Trillion in 2012 with mobile data representing 28% of the mix. Mobile data services revenue stood at 33%. Global Mobile Data revenues eclipsed $300 Billion for the first time in 2011. It is also the first year in which non-messaging data revenues will make up the majority of the overall global data revenues at 53%.
By the end of 2011, the global subscriptions exceeded 6 Billion. The first 1 billion took over 20 years and this last one took only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. China became the first country to eclipse the 1 billion mark in March 2012. India is likely to arrive at the milestone by early 2013.
Smartphones are driving tremendous growth around the globe. Amongst the major markets, US leads with 69% sales. The global figure stands at approximately 32%. Some operators expect 90-95% of their device sales to be smartphones in 2012. In terms of the actual smartphone penetration, we expect the US market to eclipse the 50% mark in 2012.
China leads in the number of subs but US dominates in both total and data revenue. A number of emerging nations are now in top 10 â€“ Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant â€“ Korea, UK, Italy, Germany have dropped off or slipped in rankings.
Global Mobile Data Growth
Japan continues to be the leader in mobile data with NTT DoCoMo, KDDI, and Softbank Japan ahead of the pack in terms of mobile data revenue and data as a % of total ARPU. Country average is now at 60%.
Next, Australia and the US have made good inroads in the last two years. In fact, if we look at the overall data revenue, US is much further ahead than any other nation due to the size of the market.
While India has the highest subscriber growth rate in the world right now, the revenue generating opportunity remain down right anemic compared to other major markets with average dropping down to $2.50 in overall ARPU. Even with significant subscriber base, there is going to be a general lack of opportunity in the market for the next couple of years relative to other markets.
Devices â€“ Changing Landscape
Apple has had the tablet space to itself. Thus far the response from the competitors has been tepid esp. on the pricing dimension. Apple has had such a mastery over the supply-chain and months ahead of the competition that by the time they figure out details, Apple already locks up the pricing advantage for the cycle. OEMs try to catch-up on the features but canâ€™t do on the margins. OEMs can grow the pie by bringing products at a better price points that helps attract different demographics to the mix. Microsoft can make good inroads into the space with its Win8 tablet release in 2012 but it will be again in a catch-up mode as the iOS ecosystem will be even more robust by then. The cheaper Android tablets will do well in the market. As expected, tablets will pretty much eliminate the need for netbooks and are starting to eat into the desktop/laptop revenue.
Apple and Samsung are strong on the top. Huawei and ZTE are coming up strong from the bottom. The middle tier players will have a tough time going forward.
It will be difficult for pureplay device OEMs to survive long-term.
Nokia and RIM are under severe market scrutiny as investors and developers leave in droves. Lack of product planning and execution has left their market share in disarray. Nokiaâ€™s valuation has been cut into half. Nokiaâ€™s release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones (Lumia). While the market hasnâ€™t shown much appetite for Windows phone thus far, a good family of devices might be able to slow the loss trajectory and position the combined team for the up-for-grabs 3rd spot in the ecosystem. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.
Majority of the tablet use is in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. However, of the users who use cellular, the churn is low. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher (e.g. Rogers, Vodafone Spain) but will still be dominated by WiFi overall.
Mobile VAS and OTT â€“ The Big Picture
â€¢ The traditional operator revenue streams of
â€“ Voice â€“ declining and under threat from VoIP
â€“ Messaging â€“ flattening/declining and under threat from IP messaging
â€“ Access â€“ rising but margins are shrinking fast
â€“ VAS â€“ declining in proportion to the growth of smartphones
â€¢ Operators are fighting back with
â€“ Voice â€“ launching their own VoIP apps e.g. Bobsled from T-Mobile, partnering with VoIP players e.g. Skype integration, charging for VoIP apps e.g. TeliaSonera â‚¬6/month
â€“ Messaging â€“ launching their own IP messaging apps e.g. Huddle from AT&T, partnering with IP messaging players e.g. Whatsapp partnership
â€“ Access â€“ Tiering
â€“ VAS â€“ launch their own VAS apps and industry vertical apps and services
Managing Mobile Data Traffic and Profits
As a result of the data tsunami, there are two types of opportunities that are being created, one that take advantage of the data being generated in a way that enhances the user experience and provides value and the other in technologies that help manage the traffic data that will continue to grow exponentially.
To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are already exploding. New technical and business solutions will be needed to manage the growth and profit from the services. Relying on only one solution wonâ€™t be an effective strategy to manage rising data demand. A holistic approach to managing data traffic is needed and our analysis shows that the cost structure can be reduced by more than half if a suite of solutions are deployed vs. a single dimensional approach and thus bringing the hockey stick curves of data cost more in line with the revenues and thus preserving the margins.
The decision making process within the operator organizations will need to be streamlined as well. Operators should also consider creating a senior post which focuses on both the cost side and the solution side so they can devise and institute a sustainable long-term policy and keep the margins healthy.
Mobile Intellectual Property
â€¢ The IP tussles are playing out as expected
â€¢ Players with strong IP portfolios will be able to command better negotiating positions, new revenue streams, competitive positioning over the long-term
â€¢ On average mobile companies file patents 1.7 times more in the US vs. Europe
â€¢ Mobile Patent Leaders in US: IBM, Microsoft, Nokia
â€¢ Mobile Patent Leaders in Europe: Alcatel-Lucent, Nokia, Samsung
â€¢ Mobile Patent Leaders in Infrastructure: Samsung, Alcatel-Lucent, Ericsson
â€¢ Mobile Patent Leaders in Devices: Nokia, Samsung, Sony
â€¢ Mobile Patent Leaders in Service Providers: AT&T, NTT DoCoMo, Sprint
â€¢ Top 20 control 1/3rd of the total mobile communications patent pool
Mobile Competitive Dynamics
The Rule of Three is evident in all major markets. While the percentage market share might vary, on an average, the top 3 control 93% of the market in an given nation. It doesnâ€™t matter if the market is defined by â€œcontrolled regulationâ€ like in China, Korea, and Japan or if it is â€œopen marketâ€ driven in markets such as the US, UK, and India. Eventually, only top 3 operators control the majority of the market. There are niches that others occupy but they are largely irrelevant to the overall structure and functioning of the mobile market.
Markets such as US and India experienced similar competitive environment in their hyper-growth phase. For the US, this phase was in the nineties-mid-2000s while India has been experiencing the similar environment in the last 3-4 years. In both cases, at the start there are 5-6 players with no more than 25% market share but higher than 10% of the mix but gradually the market forces enable consolidation. Over a period of 18 years, US is settling into a â€œtop 3â€ operator market. Indiaâ€™s brutal price wars are going to trigger the consolidation in the next 12-24 months and will eventually settle into a structure similar to other markets.
The competitive equilibrium point in the mobile industry seems to when the market shares of the top 3 are 46%:29%:18% respectively with the remaining 7% being allocated to the niche operators. To achieve some semblance of equilibrium in the market the top operator shouldnâ€™t have more than 50% of the market share and the number three player shouldnâ€™t have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer.
Mobile operators will face some hard choices in developing and protecting the role they want to play in a given region and the ecosystem at-large. The strategy they choose will have a direct impact on the expected EBITDA margins, investment required over the long-haul, how investors view them, and on the competitive landscape of the country. Given, the fast pace of globalization, new rules and trends might emerge over the course of this decade that further define â€œcommunicationsâ€ and â€œcomputingâ€ as we know.
Key Industry Micro-Milestones
- Apple captures 70% of mobile device profits â€“ defies gravity, obliterates competition
- Apple mobile appstore downloads exceed 25 Billion, 100 Million on Mac â€“ can you spell domination
- Samsung ends Nokiaâ€™s 14 year reign as the device king â€“ brutal execution
- Android 300M activations â€“ Juggernaut
- Paypal does $7B in mobile transaction volume
- Square does $5B in commerce transaction volume
- Google > $5B in mobile revenues
- Microsoft revenues from Android > Windows Mobile
- Pandoraâ€™s 70% usage is on mobile, Twitterâ€™s 60% of the usage is on mobile â€“ heading towards a mobile-dominant world
- Facebook Instagram Acquisition $1B â€“ Mobile only acquisition to beef up mobile strategy
- Angry Birds approaches a billion downloads
- ESPN does 3.1 billion minutes on mobile in 3/12 â€“ Mobile is where the action is
- Skype traffic over 150 billion minutes â€“ OTT pressure
- KPN messaging volumes decline 15% YOY â€“ OTT pressure
- Mobile Security threats grow 7x in last two years, Android threats up 3000% â€“ Mobile IS IT
- Cisco BYOD ratio â€“ 70% (up 52% in 2011) – BYOD is creating new opportunities for vendors
- US data traffic over 130 quadrillion bytes/month in 2011 â€“ Data traffic 2X YOY, welcome to the yottabyte era
- Fandango sells quarter of its ticket on mobile â€“ commerce is happening
- Expedia does > $1B in mobile commerce â€“ see above
- Microsoft Nokia Multi-Billion partnership â€“ It takes two to tango
- Lightsquared fails â€“ Keep your friends close, enemies closer
- Google Motorola $12.5B â€“ IP becomes key to strategy
- Nortel Patent acquisition $4.5B â€“ IP becomes key to strategy
- AT&T/T-Mobile Failure â€“ DOJ/FCC put down the gavel
- 40% of Kenyaâ€™s GDP comes from mobile money â€“ impact of mobile is pervasive
- Millennial Media IPO at $2B â€“ first public market validation of the mobile advertising space
- HP gives up on Palm â€“ Competition forces Corporate Schizophrenia
What to expect in 2H 2012
â€¢ More Tiering, faster pace of change of plans. More options, family data plans
â€¢ Cost reduction is as important as revenue generation. More players will align their value-chains and cost structures
â€¢ Facebook IPO is probably going to be the single biggest event in the technology industry in the next few months.
â€¢ Radios will start connecting the digital world with the physical world with significant disruption opportunity
â€¢ Mobile Payment Networks will remain intact for the near future as the ecosystem largely focuses on building value on top of the existing exchange platforms
â€¢ The intersection of Social, Location, Identity, and Gaming is creating new opportunities
â€¢ With connectivity becoming pervasive, mobile will fundamentally start to alter the legacy infrastructure â€“ retail, health, education, energy, computing, travel, entertainment
â€¢ Significant tablet adoption in the enterprise directly impacting the traditional computer manufacturers
â€¢ Both HTML5 and Apps will continue to grow, the relevancy to any given application will depend on the reach and economics requirements. HTML5 is not going to replace Apps.
â€¢ Mobile data growth will double again in 2012. Significant opportunities in managed and understanding of mobile data growth
â€¢ Regulators will need to evolve to keep up with the trend to keep their nation globally competitive
â€¢ More IP scuffles before licensing settlements
â€¢ Consolidation of weaker players, more global M&A
â€¢ Significant progress in emerging areas like mHealth, mPayments will come from the developing world while the western countries get mired in regulatory and legacy mess
â€¢ Several players face challenging times ahead and 2012 will be critical in their turn around sojourn.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Mobile Patents Landscape – An In-depth Quantitative Analysis April 17, 2012Posted by chetan in : 3G,4G,AORTA,European Wireless Market,Infrastructure Providers,Intellectual Property,Mobile Advertising,Mobile Applications,Mobile OEMs,Mobile Operators,Mobile Patents,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment
In April 2012, in its report on Intellectual Property, the US Patent Office (USPTO) concluded that the entire US economy relies on some form of IP, because virtually every industry either produces or uses it. The foreword of the report said,
â€œInnovation protected by IP rights is key to creating new jobs and growing exports. Innovation has a positive pervasive effect on the entire economy, and its benefits flow both upstream and downstream to every sector of the U.S. economy. Intellectual property is not just the final product of workers and companiesâ€”every job in some way, produces, supplies, consumes or relies on innovation, creativity, and commercial distinctiveness. Protecting our ideas and IP promotes innovative, open, and competitive markets, and helps ensure that the U.S. private sector remains Americaâ€™s innovation engine.â€
Intellectual property has been an integral part of the economic engine of the western world for many decades if not centuries. Over the past two decades, nations and corporations have competed on the creation, funding, execution, and protection of the new ideas. Increasingly, the role of mobile devices, networks, and applications has become an important component of the growth story worldwide.
To say that the mobile devices have become the remote control of our lives would be an understatement. Mobile phones stay attached to us almost 24 hours a day. From waking us up in the morning to keeping us connected and entertained, from speeding up a commerce transaction to being a trusted advisor; mobile is fundamentally changed how we as consumers behave and how societies and cultures evolve over time. As a result, there has been a big influx of investment and innovation over the last decade. This surge of activity has also translated into increased number of patent filings in the two major jurisdictions of US and Europe. Even the developing countries like China and India have seen a significant increase in patent activity in the country. In fact, in terms of filings, Chinaâ€™s share of the global patent grants has increased from 0.8% in 1996 to 15% in 2010 placing it third behind Japan and the US and well ahead of Korea and Europe.
According to the US Patent Office (USPTO), in 2011, the number of applications reached over 535,000 growing by almost 54% from a decade ago. Similarly, the number of patents granted grew 35% to 224,505 by the end of 2011. The numbers of foreign filings are now in the majority for both the applications filed as well as the patents granted. In Europe, similar trends were observed where the EPO (European Patent Office) patent grants increased by 46%.
The number of mobile related patents that were granted by the USPTO and the EPO increased significantly over the course of last decade. The US market saw a 390% increase while the European market saw a 173% increase in mobile related patent grants.
Another interesting fact is that as of Q1 2012, over 21% of the patents granted by the USPTO now are mobile related. This grew from around 2% in 1991 and 5% in 2011. In Europe, roughly 9% of the patents granted are related to mobile.
Chetan Sharma Consulting analyzed almost 7 million patents granted by the USPTO and EPO over the last two decades to understand how mobile has become a key enabler for all technology companies. Furthermore, we looked at patent granted to the top 65 technology companies who are active in the mobile space to understand their relative strengths and weaknesses in the mobile patent landscape. In a first of its kind study, the paper presents and discusses these findings in more detail.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Mobile Internet 3.0: How Operators Can Become Service Innovators and Drive Profitability February 23, 2012Posted by chetan in : 3G,4G,ARPU,BRIC,Carriers,China,Connected Devices,Devices,Enterprise Mobility,European Wireless Market,Mobile Cloud Computing,Mobile Health,Security,Smart Phones,US Wireless Market,Wi-Fi,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
Mobile Internet 3.0
How Operators Can Become Service Innovators and Drive Profitability
Sponsored by Juniper Networks
The mobile ecosystem is going through significant shifts in consumer behavior, the value-chain alignment, and the strategies required in managing the profitability of the service business. Operators around the world are experiencing tremendous mobile data growth. While the mobile data revenues are increasing, the margins are decreasing for many operators. As the percentage of the smartphones on the network increases, the data business is primarily becoming an access business which is difficult to sustain over the long-haul.
Additionally, it is becoming clear that the long-term value will be in the portfolio of value-added services (VAS). As we slowly migrate into the Mobile Internet 3.0 world where mobile data becomes the primary source of service revenues, operators have a fundamental choice to make â€“ either learn to live with the utility business that pushes the margins downwards by 30-50% or selectively compete and/or collaborate with the OTT (over the top) players where they can offer compelling solutions and packages to their customer base and beyond.
Operators who are fully able to grasp the changes occurring in the ecosystem and are willing to refocus will position themselves for higher profitability in the coming years.
A fundamental rethink of the network and the business models is required. Rather than leaving all the VAS business to others, operators should look at ways to launch new services, to micro-segmented consumer base, to enable APIs and services that the developer ecosystem can build on, and to look at the core network to enable incremental revenue streams.
The pace at which the new services are launched needs to accelerate and the marginal cost of the introduction needs to go down significantly. By architecting the â€œnetwork as a platform,â€ operators will have more flexibility in deploying an open and programmable network that not only provides operational efficiencies and insights but also paves the way for new generation of services such as mobile cloud, mobile security, health care, and identity management.
The paper looks at the global trends in mobile data and the need for new approaches to operator services that can help increase the mobile data margins and help operators play a more decisive and enabling role in the mobile ecosystem. The paper provides an operator blueprint for succeeding in the Mobile Internet 3.0 era by discussing the operating principles and the long tail of VAS. Several strategies and application areas are analyzed that can help operators in building a viable VAS strategy and sustainable profit streams.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Mar 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
2012 Mobile Industry Predictions Survey January 3, 2012Posted by chetan in : 3G,4G,AORTA,Applications,ARPU,BRIC,Carnival of Mobilists,Carriers,Connected Devices,CTIA,Disruption,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Infrastructure,Intellectual Property,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Breakfast Series,Mobile Cloud Computing,Mobile Commerce,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Payments,Mobile Search,Mobile Traffic,Networks,Patent Strategies,Privacy,Smart Phones,Speaking Engagements,Speech Recognition,US Wireless Market,Wi-Fi,Wireless Value Chain,Worldwide Wireless Market , 12 comments
2012 Mobile Industry Predictions Survey
First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2012. My thanks to all who participated in our 2012 Mobile Predictions Annual Survey. It gives our community an insiderâ€™s view of trends.
2011 was a terrific year for the mobile industry. With all its ups and down, consumers embraced devices, applications, services, and technology with more gusto than ever before. In the waning hours of 2011, we crossed the 6 billion subscriptions milestone. While the first billion took 19 years, this last billion only took 15 months.
Smartphones are selling like hot cakes. We estimate that by the end of Q4 2011, over 60% of the devices sold in the US were smartphones and over 30% of the global sales were for the evolved brethren of the primordial featurephones. Sparked by insatiable consumer demand for mobile data, LTE and HSPA+ networks are sprouting all over the planet with US leading the charge for broadband deployment.
Our annual survey is a way for us to engage our community on the trends for the next year. We put some of the pressing questions to our colleagues and industry leaders. We are able to glean some valuable insights from their choices and comments, some tangible shifts, and get a sense of whatâ€™s to come. Executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain and around the world participated to help see what 2012 might bring to keep us on our toes. What makes this survey unique is that it draws upon the collective wisdom of folks who are at the center of the mobile evolution.
Fifteen names were randomly drawn for the limited edition of the Mobile Future Forward 2011 book. The winners are:
Tor Bjorn Minde, Head of Ericsson Labs, Ericsson
Sunder Somasundaram, Industry Solutions Practice Director, AT&T
C. Enrique Ortiz, Mobile Technologist, About Mobility
Russell Buckley, CMO, Eagle Eye
Marianne Marck, VP â€“ Engineering, Starbucks
John Foster, President, ZED USA
Angel Luis Saez, Sr. Director, Orange Spain
Dilip Mistry, Senior Director, Microsoft Asia
Phyllis Reuther, Advanced Analytics Lab, Sprint
Gene Keenan, VP of Mobile, Isobar
Elizabeth Day, Director of Finance, Trilogy International
Alan Cole, Research Staff Member, IBM T.J. Watson Research Center
X J Wang, VP â€“ GM China, Vesta Corp
Michelle Lee, Director, SK Telecom
Hemant Chandak, Sr. Analyst, Cisco Systems
Thanks again to everyone who contributed. We will be calling on you again next year. It has been a terrific year for us at Chetan Sharma Consulting and we are looking forward to an engaging and productive 2012.
Be well, do good work, and stay in touch.
Thanks and with warm wishes,
Your feedback is always welcome.
Now onto the 2012 Mobile Industry Predictions Survey Results.
1. What was most newsworthy in Mobile 2011?
Android had a spectacular rise in 2011 around the globe. Android OEMs collectively shipped the most number of devices and while margins shrank, they were able to put a united front to iOS. 2011 will always be remembered for the passing away of the industry transformer Steve Jobs. His work directly or indirectly touched billions of souls around the planet, many times over â€“ something rarest of human beings are able to achieve in their life time. Regulatory tussles and significant increase in IP disputes also occupied the headlines. Amazon announced its intention for the mobile space with the launch of Kindle Fire.
2. What will be the biggest mobile stories of 2012?
As we look towards 2012, our panel voted for the continued growth of mobile data as the biggest story followed by Amazonâ€™s entry into the mobile space. Some key questions for the year are: Will Microsoft/Nokia devices will make any meaningful progress? Will RIM survive the year? How does Google manage the fragmentation, decline in margins (for the OEMs), and the IP issues? Will any high-profile security and privacy mishaps lead to more regulatory entanglements? Facebook IPO and its mobile ambitions? How do operators manage the data demand? Which M&As will capture industryâ€™s attention? Will Apple continue to dominate on both smartphone and tablet front? What does Apple do with mobile payments? and much more. Clearly, it is going to be a terrific year.
3. Who will be the most open player in the mobile ecosystem in 2012?
File this in the â€œperception is realityâ€ folder. Despite all the criticism, Google has maintained its strong position as the most open player in the mobile industry.
4. What applications will define 4G?
Still looking for a killer-4G app? Video, cloud computing, and access will continue to drive 4G demand and growth.
5. What will be the breakthrough category in mobile in 2012?
For a second year in a row, the panel voted for mobile payments and mobile commerce as the top two category that will find their voice. Mobile advertising has become mainstream so it lost its ranking in the top 3.
6. What will be the most popular consumer mobile applications in 2012?
Apps preferences vary by regions depending on a whole range of factors. Messaging and Commerce are the top two categories for the developing world while consumers in the developed nations are likely to gravitate towards commerce and location based services.
7. Which will be the most dominant (unit sales) tablet platform in 2 years?
iOS and Android will dominate the tablet landscape for the next 24 months. A late entry by Windows 8 tablets could make a dent but donâ€™t count on it.
8. Who will make the biggest mobile acquisition in 2012?
2011 had its fair share of block-buster acquisitions, some successful while others were not. Our panel expects Microsoft and Google to continue making the biggest acquisitions.
9. How will the "Apps vs. Mobile Web" debate shape up in 2012?
It seems like the pendulum is swinging towards the mobile web though hybrid solutions are likely to stay with us for a long time.
10. Who will define the mobile payment/commerce space?
The financial companies safely locked in the mobile payments space and while the value chain is fairly complicated and definition confusion abounds, the likes of Visa, Operators and Google will continue to drive the payments/commerce space.
11. Which solutions will gain the most traction for managing mobile data broadband consumption?
Managing data growth and margins drives all strategies at mobile operators these days which in turns drives the value chain. 4G, tiered pricing, and mobile offload continue to be the top solutions if one has the spectrum that is.
12. Which category will generate the most mobile data revenue in 2012?
Messaging, access, apps, and advertising are the four broad categories that drive mobile data revenues around the world. The developing markets rely on messaging while the developed markets are increasingly looking to access as their dominant form of revenue generation.
13. What will help mobile cloud computing gain traction in 2012?
Mobile cloud computing will continue to be defined by enterprise, storage, and media needs.
14. Which enterprise segment will mobile impact the most?
Best buy is becoming the next Circuit City. Other retailers will follow unless they can successful reinvent themselves. Health is more regulatory driven so the progress will be slow though it is ripe for a complete overhaul and developing nations are moving much faster in this space.
15. What will be the dominant revenue model for apps in 2012?
In-app revenue model made good strides in 2011 but the combination of the various available revenue models will be the norm for most application developers.
16. What mode of mobile payments will get traction in North America and Western Europe in 2012?
2011 was the year to set the ground work for growth in the mobile payments space. Given the investment and focus, we are likely to see more movement and consumer involvement in 2012 with proximity based solutions and commerce of physical goods on mobile.
17. What will be the most successful non-mobile-phone category in 2012?
Tablets dominate. Period.
18. Which of the following are likely to happen in the near future?
The is a significant shift in computing taking place right in front of our eyes wherein tablets are replacing laptops and even desktops in the enterprise. European operators have been experiencing tough times while some of the Asian operators are flush with cash, they might make their move in 2012 though regulatory hurdles might prove to be an issue. 33% of the nations will have elections in 2012, maybe which will move mobile voting to the forefront in some nations. Our panel thought there is a better chance of humans discovering water on another planet than rise of another significant mobile OS.
19. Which areas will feel the most impact from Regulators in 2012?
Net-neutrality and market competitiveness will keep the regulators busy in 2012.
20. Who was the mobile person of the year?
Clearly, Steve Jobs was an easy choice but who will replace him 2012? Jeff Bezos has an early lead followed by Andy Rubin and Mark Zuckerberg. Angry Birds representing the developer community will be in for another terrific year. Other honorable mentions were Tim Cook, Paul Jacobs, Sanjiv Ahuja, Dan Hesse, and Glenn Lurie.
A lot to look forward to in the New Year. My thanks to all who participated and we hope you found it useful as you embark on your journey for a successful 2012.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this survey are our clients.
Mobile Breakfast Series – Mobile 2012: Trends and Opportunities December 15, 2011Posted by chetan in : 3G,4G,AORTA,ARPU,Connected Devices,Enterprise Mobility,European Wireless Market,Patent Strategies,Patent Strategy,Privacy,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
We held our 8th Mobile Breakfast Series event earlier today. As is the tradition, we delved into discussing the trends and opportunities for the coming year. As usual it was a sold out crowd with terrific panelists representing different parts of the value chain.
2011 has been a fascinating year â€“ with all the mergers, sky rocketing data growth especially in the US market. 2011 will also be remembered for the passing away of Steve Jobs, the man who helped change the global mobile industry over the course of the last four years. Locally, lots happening â€“ Microsoft/Nokia alliance is launching new devices, Amazon has entered the mobile space with both feet, mobile gaming remains hot, and on a broader scale, we are going through the process of mobilification of everything.
Mark Anderson, CEO of Strategic News Service. I have known Mark for over 15 years now as one of the early subscribers to his wonderful newsletter. My good friend and coauthor Joe Herzog introduce me to Mark and since then I have been influenced by his writing. If you follow my blog, the name AORTA or Always On Real Time Access was coined by Mark in the late nineties and he generously allowed me to use it. Mark has also been writing about the carry-along-PC aka tablets for sometime and won the bet with bet with Michael Dell on the growth of this sector. He just finished off his annual predictions for 2012, so we had a lot to talk about.
Laura Marriott is CEO of Neomedia which is doing some pioneering work in the mobile barcode/mobile marketing space. But she is more famous for her work at the Mobile Marketing Association where she helped grow the industry and the association to make it a thriving enterprise.
Satya Mallya is Director at Orange. For those of you donâ€™t know Orange is one of the top European Operators but he is based in the silicon valley working on some cool projects. He has been in the telecom space for almost 20 years working at Bell Labs, Octel and two startups
Brian Fling is CEO of pinchZoom a mobile agency that helps big brands like BBC, Paypal, Delta and others understand mobile design and development. He is passionate about mobile user experience, has spoken and written extensively about the subject.
Jay Emmet is GM OpenMarket, SVP, Amdocs and knows the messaging, commerce space on the back of his hand. Very successful stints at mblox, ATG and others. Knows the operator world really well and has been straddling both the on-deck/off-deck world for a long time.
We touched on a range of subjects from IP to platforms, from privacy/security to mobile commerce and payments, from Microsoft to Amazon .. and so on and so forth. Below is the summary of the discussion:
- While the economy in various regions has been shambles, the tech industry has been largely protected, especially, the mobile industry. We are lucky to be working in space. Amen! 🙂
- As far as the mobile platforms are concerned, there are only two that matter â€“ iOS and Android with iOS still having a strong upper hand. Android is plagued with IP issues and OEMs are starting to have second thoughts about the cost and risks of supporting Android in the long-term. All this is of course very fluid and will depend on the outcome of a number of IP cases in courts.
- Microsoft has made some progress with Nokia but as recent shuffling indicates, all is not good and there is going to be considerable work needed in the coming days to get alliance working in sync and work a thriving ecosystem long-term.
- Siri has just changed the game at some many levels. Consumers now expect more from their devices and players are scrambling to deliver.
- This year began with the debate of apps vs. mobile web. Mobile Apps have fundamentally changed the mobile UI and design paradigm. Consumers donâ€™t want to just browse a page on their devices, they want great user experiences all of which canâ€™t be delivered on mobile web. Apps stay quite a bit ahead of the game.
- There is systematic IP theft and cyberattacks going on and western nations and companies are finally waking up to do something substantial. However, it is going to be a long journey to get it right.
- Many small companies have built good, attractive IP portfolios in mobile and given the investment and invention, they should be allowed to maximize the value of their IP.
- Amazonâ€™s entry has changed the game. It has already become the number two in tablets and more to come. It will impact retail, advertising, and many other segments of the consumer economy.
- Over the last 20 years, capacity has been an issue every year but this time around, the capacity constraints are significant. While the services and consumption have gotten much better in orders of magnitude, the prices have largely stayed the same. To build capital-intensive networks, operators will have to find ways to increase data revenues.
- Operator channel is still a viable channel for the developers especially the ones who are looking for broader international reach.
- Mobile Security on smartphones remains a worrying concern and is an opportunity area for entrepreneurs.
- Mobile Privacy is a complicated issue. Many businesses are actually based on exploiting the privacy not protecting it so the business models are at odds with the privacy mantra and regulations. Something has to give. More regulations to come.
- QR codes and NFC will live in harmony for sometime.
- There are currently no clear winners in the mobile payments space. It is likely to stay very fragmented and is likely to become even more so over the coming days before any leaders emerge. Payments remains the most complicated ecosystem with many players involved and success stories will depend on the use-case scenarios.
- Cloud offers a differentiating opportunity for the operators and compete effectively with some of the OTT players.
- Many industry verticals are getting transformed by mobile. Big brands are aggressively pursuing mobile as a key strategic project. Health, Retail â€“ opportunities abound.
- While traditional messaging is getting impacted by IP messaging, the decline is not universal and operators are reacting with new business models and technology initiatives.
- 2012 will be another great year for mobile. Fasten your seat belts.
It was a joy to moderate this terrific panel that kept audience glued to their seats till the very end. Thanks all for coming. We have some terrific events planned for 2012, Stay Tuned.
Until then, Wish you and yours a very happy and stress-free holiday season and enormously successful and prosperous 2012.
And donâ€™t forget to fill out our Annual Mobile Predictions Survey for 2012. There are prizes for 10 lucky winners.
ps. As I mentioned in the opening, WA state dept has a wonderful program to help startup with their travel to Mobile World Congress in Barcelona next year. Details here. Startups should check it out.
US Wireless Data Market Update Q3 2011 December 12, 2011Posted by chetan in : 3G,4G,AORTA,Applications,Carnival of Mobilists,Carriers,CTIA,European Wireless Market,Indian Wireless Market,Japan Wireless Market,Location Based Services,Mobile Breakfast Series,Mobile Cloud Computing,Mobile Commerce,Mobile Content,Mobile Ecosystem,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Payments,Mobile Search,Mobile Traffic,Unified Messaging,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 5 comments
The US mobile market continued its blistering pace of growth and ecosystem restructuring. While China and India lay claim to the fastest growing markets on the planet, the many of the meaningful and impactful trends are originating out of the US market with software at the epicenter of creation, growth, change, evolution, and destruction.
The US wireless data market grew 5% Q/Q and 21% Y/Y to reach $17B in mobile data service revenues in Q3 2011 and is on course to increase Y/Y by 22% to $67B in 2011.
As predicted, Samsung overtook Apple as the leading smartphone OEM. However, Apple will continue to dominate profit share for the foreseeable future.
Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The featurephone as a device species is on the verge of extinction.
Mobile Ecosystem Complexity
As expected, Amazon entered the mobile tablet space with a killer value proposition – $200 for a tablet, something the market sorely needed. While other OEMs tried to compete with Apple on performance (and have been retreating from the market one by one), Amazon is entering the battle on its own turf â€“ a hardware platform built on Android with a slew of services to underwrite the device discount. Incumbent OEMs just canâ€™t compete with that strategy without a complete rethink of their product strategy. What happens when Amazonâ€™s strategy migrates to handsets? While Kindle Fire is not a serious threat to Apple iPad, and the current version has a lot of deficiencies, Amazon has carved out a nice market for itself that will continue to grow in the coming days. In some sense, with its tight integration of commerce, cloud, and advertising, it has out-maneuvered even Google.
Amazonâ€™s impact will be felt by many others in 2012 as its strategy becomes more apparent. Retailers will be facing the brunt of the wave that Amazon represents i.e. etailers supplanting physical retailers. Donâ€™t be surprised if Amazon purses Apple like stores to showcase its merchandize and puts a dagger at the heart of retail.
Google has done a masterful job of shepherding Android through the turbulent platform waters and make it the dominant mobile platform in terms of shipments.
Microsoft and Nokia finally introduced the Windows devices and it has at least given them a fighting chance in 2012, though a far more competitive offering would be needed to make any significant market share or revenue share inroads. Microsoftâ€™s Xbox/Kinect integration remains its best card for 2012.
In a severe case of corporate schizophrenia, HP first launched webOS devices, then backed away, then thought of re-launching only to give it away to open source. Similarly, RIM faces critical test in 2012 and all its hopes are pinned on the new OS that is expected to come to the market sometime next year.
Mobile is changing the way we spend
It is very clear that mobile will be at the center of the human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day.
Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming â€“ spend. We discussed this and more in the paper â€œHow Mobile Will Change The Way We Spendâ€ that was released last quarter.
What to expect in the coming months?
All this has setup an absolutely fascinating 2012 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems.
As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q3 2011 US wireless data market is:
- The US Wireless data service revenues grew 5% Q/Q and 21% Y/Y to $17B in Q3 2011. The mobile data services revenues for the US market are on track to reach $67B in 2011.
- Verizon and AT&T had a good mobile data quarter accounting for 62% of the increase in data revenues in Q3 2011.
- For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 62% of the subscription base.
- Verizon maintained its #1 ranking again just edging past NTT DoCoMo who came in at number two with $5.95B in data revenues for the quarter. AT&T maintained its #3 position with $5.6B in data revenues. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q3 2011.
- The Overall ARPU increased by $0.31. Average voice ARPU declined by $0.49 while the average data ARPU grew by $0.80 or 4% Q/Q.
- The average industry percentage contribution of data to overall ARPU was 37.6% in Q3 2011 and is likely to exceed 40% by Q1 2012. As expected, Verizon became the first US operator to eclipse the 40% mark with AT&T and Sprint close behind. (for reference, all three major Japanese operators are now above the 50% mark).
- The top three operators were neck-and-neck in data ARPU each recording a 39%+ performance. T-Mobile ended the quarter exceeding the 30% mark for the first time.
- We expect data revenues to exceed voice revenues in the US market in early 2013.
- Helped by the growth in connected devices, the overall net-adds increased by 4.9M with Verizon accounting for almost 50% of the growth.
- For the eight straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. AT&T now accounts for 43% of connected devices in the US (w/ cellular subscription of some sort).
- Overall, AT&T has 43% of the connected device share of the market. The connected device segment growth slowed down to 8% Q/Q and is still up 32% Y/Y.
- Sprint added more than a million subscriptions while T-Mobile added 126k.
Applications and Services
- After unseating Philippines as the king of TXT messaging last quarter, US TXT messaging continues to grow albeit at a slower pace. Philippines is seeing a sharp decline in per user messaging due to IP messaging. Some of the European operators are also experiencing the pain of declining SMS usage. As expected, this transition will continue around the world at different rates. In the US, while the change is underway, we donâ€™t expect any dramatic declines like the Philippines market in the near-term.
- The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
- Q3 2011 again saw tremendous activity in the mobile commerce and payments space with lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months.
- Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in revenue and mindshare.
- Nokiaâ€™s position in the market improved slightly with the launch of WP7 devices. While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off.
- As predicted in the last update, Samsung overtook Apple in smartphone sales and is unlikely to relinquish the title despite a blockbuster iPhone 4S launch in Q4.
- 37% of all smartphones sold globally in Q3 were sold in the US making it the most attractive market for the OEMs.
- Smartphones now account for over 80% revenue of all phones sold in the US.
- In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
- 87% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. As expected, Verizon announced family data plans for 2012. Other operators will quickly follow or may even preempt Verizon.
- Verizon added another 1.4M LTE subscribers making it the leading LTE operator in the world. AT&Tâ€™s LTE plans are gathering steam and Sprint plans to offer LTE in 2012.
- iPhone finally arrived at Sprint. Sales of iPhone 4S have been brisk which is likely to make it the top selling device for the most important quarter of the year.
Mobile Data Growth
- While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.
- We will have the 3rd edition of our â€œManaging Growth and Profits in the Yottabyte Eraâ€research out early next year.
- Race to a billion â€“ Indiaâ€™s net-addition rate declined significantly in Q3 2011 while China kept its current pace. We expect that China will be the first country to exceed 1 Billion subscriptions by mid-2012. For India, the event will now occur in 2013.
- For more details, please see our Global Mobile Wireless Market Update released in July 2011.
Mobile Future Forward
Our annual mobile thought-leadership summit – Mobile Future Forward was a grand success. Our thanks to all those who attended as well as to the speakers, sponsors, and well-wishers for making it happen. Planning for 2012 summit are underway and we will keep you posted as plans develop.
More information at http://www.mobilefutureforward.com
Mobile Predictions Survey 2012
As is the tradition, we are running our annual Mobile Predictions Survey for 2012. Will appreciate your input in understanding the trends and news stories that will make 2012 another big year in mobile. Winners of the survey get our fabulous limited edition Mobile Future Forward 2011 book that contains 19 essays from the global leaders in the mobile industry. (Mobile Predictions Survey Results for 2011 here)
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.3G,4G,AORTA,Connected Devices,CTIA,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Mobile Advertising,Mobile Applications,Mobile Breakfast Series,Mobile Cloud Computing,Mobile Commerce,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Future Forward,Mobile Payments,Mobile Search,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
How Mobile Will Change The Way We Spend
A Mobile Future Forward Paper
The Mobile Future Forward 2011 Book will contain 18 essays from thought-leaders around the globe and is going to be distributed exclusively to the Mobile Future Forward attendees on Sept 12th. The book is published by FutureText, UK.
The essays from the Mobile Future Forward speakers and industry luminaries are:
1. How Mobile Will Change The Way We Spend â€“ Chetan Sharma, President, Chetan Sharma Consulting
2. The Mobile Cloud Connected Enterprise â€“ Abhi Ingle, VP, Advanced Mobility Solutions, AT&T
3. Mobile and Health Possibilities â€“ Subba Rao, CEO, Razi Health
4. Buying a Mobile Device in 2014 â€“ Frank Meehan, CEO, INQMobile
5. Surviving and Thriving in the Age of Mobile Internet â€“ An MNO Game Plan â€“ Manoj Leelanivas, SVP and GM, Juniper Networks
6. Mobile Future Forward Interview with Steve Elfman â€“ President, Sprint Nextel
7. Is Mobile Local Advertising Finally Poised to Take Off? â€“ William Hsu, SVP and CPO, AT&T Interactive
8. Implications of a Connected Society â€“ Danny Bowman, President, Sprint Nextel
9. Big Data and Mobile â€“ Braxton Woodham, Head of Engineering, AVOS
10. Broadband for All â€“ Sanjiv Ahuja, CEO, LightSquared
11. Wireless Competition and Innovation â€“ Stephen Bye, CTO, Sprint Nextel
12. The Future of the Personal Information Economy: Enabling Success Across the Mobile Ecosystem â€“ Ken Denman, CEO, Openwave
13. T-Commerce â€“ Carving Out and Extending E-Commerce â€“ Ramneek Bhasin, SVP and GM, TheFind
14. The Case for Building a Mobile Broadcast Content Delivery Network â€“ The Critical Piece to Fulfilling Mobile Data Demands of the Future â€“ Erik Moreno, SVP, FOX Network
15. Connected Devices â€“ Redefining the Channel â€“ Biju Nair, Chief Strategy Officer, Synchronoss Technologies
16. How Mobile Can Turn Retailers Into Media Companies â€“ Dale Nitschke, CEO, Ovative Group
17. The Future of (Mobile) Communications â€“ Carlos Domingo, CEO, Telefonica R&D
18. Competition and the Evolution of Mobile Markets â€“ Chetan Sharma, President, Chetan Sharma Consulting
In his 1943 paper titled â€œA Theory of Human Motivationâ€, the famed philosopher Abraham Maslow theorized his observations of human needs and curiosities. His pyramid came to depict the human hierarchy of needs. If we map the physiological, safety, love, esteem, and self-actualization needs onto how much we spend as a community, it correlates rather well. As you would expect, human spending behavior is tightly tied to the basic needs. The amount of money we spend on these basic needs might vary by demographics or region but in aggregate, we tend to spend the most for the things that are the bottom of the pyramid â€“ shelter, food, and water.
Over time, entrepreneurs have used technology to drive fundamental changes in consumer behavior for e.g. Microsoft with personal computers, Google with search, Apple with devices, Facebook with social connections. Of course, the web of interconnection, the various vertical industries that map against the human needs is very complex and as new technology cycles come into play, inventors get busy with enhancing performance sometimes by manifold to keep up with the insatiable demand and appetite to do more.
It is very clear that mobile will be at the center of human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day. As we alluded to earlier, it is not just the traditional phones that have cellular connection these days; we are slowly but surely moving into an era where a majority of electronic devices from small tags to giant billboards will have a communication channel that both machines and humans can interact with.
Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming â€“ spend.
In this paper, we will take a look at how the connected universe of devices and sensors are going to impact the way we spend and how all this creates new opportunities to meet the basic human needs.
Your feedback is always welcome.