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Future in Review (FiRe) 2009 roundup May 31, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, European Wireless Market, IP Strategy, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, Mergers and Acquisitions, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

Over the course of last year, I did 25 different events, all of them focused on mobile. However, there was one event that truly stretched my thinking and worldview and that was the “Future in Review” conference (see last year’s review here) hosted by Mark Anderson, CEO of Strategic News Service (SNS). It exposes one to multidisciplinary subjects from global warming to nuclear weapons, from oceanography to medicine, from mobile to cloud, from economics to space rockets, it’s all here, nicely packed in a 3 day conference.

FiRe 2009 started with a brilliant keynote address from Prof. Veerabhadran Ram Ramanathan, Distinguished Prof of Climate Sciences and Director who is quite possibly the most authoritative person on the subject of climate change. He started his work way back in the 70s, decades before Al Gore made it glamorous. He is the one who has been measuring the impact on our planet one measurement at a time. He took us through the journey of his career culminating with a stark warning and a message of hope.

ram

Things have deteriorated to such an extent that if we don’t check the downward spiral, many of the significant sources of water such as the Gangotri Glacier in India will disappear in 10-15 years. If you stop and think about it - that’s just stunning and has calamity written all over it. If the source of Ganges disappears, the life that has built around the river for thousands of miles before it goes into the Bay of Bengal will be unsustainable. I grew up in Roorkee, a town on the banks of the Ganges, so the point hit home very strongly. I have been thinking about this issue since the PBS documentary “On Thin Ice” by David Brancaccio and Conrad Anker - one of world’s leading high altitude climbers. 75% of the world’s fresh water is stored in glaciers and at the current pace of destruction, within 15-20 years most will be severely depleted. And there are still people in high places who don’t get it.

It was not all doom and gloom but a ray of hope in his experiments that left us less depressed by the end of the keynote. He is working on a number of experiments to identify and cure the main sources of pollution and carbon in the atmosphere like the Project Surya to reduce air pollution and global warming by cooking with renewable sources. Or the unmanned drones (pictures above) to measure brown cloud particulate composition to get a handle on how pollution travels (did you know that it only takes 2-3 days for pollution in China to come over the US and then another 2-3 days to reach Europe and the cycle continues - pollution is flat and globalized - thinking that it is only a developed world problem or developing world problem is foolish, also foolish is waiting on the other party to move first).

Best wishes to Ram and his team to educate, illuminate, and find solutions to the toxic problem of our times.

(with Mark Anderson)

Next day we moved into the full-fledged conference mode with 30 min rapid fire sessions from 8-5. The morning started with Mark talking to Stephen Evans of BBC World Service (he is a great interviewer btw) about how we recover from the current crisis and if technology will lead the rebound? Answer is Yes! and we are already seeing signs of it and others in the industry like Bill Gates and John Chambers have been echoing the same thing as well. Later Mark interviewed Mark Hurd, CEO of HP who had a hard time sitting on his feet so the discussion was done standing up.

(Mark and Mark)

He emphasized that the future is in the packaging of software, services, hardware, and network rather than siloed solutions. Haven’t we heard that before. Hurd is a numbers guy and can recite P&L spreadsheet from memory. He suggested that we will see more of the same for the reminder of the year and that the services business is yielding good profits for HP now. There was also quite a bit of discussion on the latest buzz word “Cloud Computing,” what it means and how does everyone profit from it.

Several industry heavyweights like Werner at Amazon, Amitabh at Microsoft, Russ Daniels at HP were at hand to discuss what CC means to them. While there is a lack of industry consensus on the meaning, it more and more looks like the reallocation and redistribution of resources - physical and electronic in a manner that drives efficiency and cost reductions for startups to behemoths. From a consumer point of view, it will always be a blend of solutions that take into account the privacy and security of data. My recent hard drive failures has forced me rethink my backup strategy.

(My panel on the future of Wireless Broadband - Fred, Chris, David, Hugh, and Rama)

Later in the day, I had the privilege to host the only mobile session of the conference “The Future of Wireless Broadband” with five amazing panelists, Dr Fred Kitson, Corporate VP, Motorola, Chris Pearson, President, 3G Americas, Dr. Hugh Bradlow, CTO of Telstra, Dr. Rama Shukla, VP, Intel, and David Achim, President, SkyFiber. I have written about the subject in great detail over the last couple of years so it was great to bounce some questions to the best minds in the space. Highlights of the discussion:

Hugh, ever a purist, defined 4G as 100Mbps.
Not a surprise, but the latest surge of smartphones is causing the networks to panic and follow the upgrade path esp. for HSPA+, LTE, and WiMAX
Rama said that 4G is more about the business model than about the technology. A business model that enables and opens up the ecosystem at a low price thus fostering innovation and services in an accelerated way
Hugh added that it is also about the spectrum as what’s available and how it can be utilized for new services, new technologies, and new business models
Being a provider of the backhaul technology (a choke point in the network evolution), David discussed how the backhaul technology will need to be upgraded at an accelerated pace if we are to deliver 10Mbps+ speeds.
Fred brought in the perspective from the device and infrastructure provider and they are doing well with both WiMAX and LTE and that newer devices with much enhanced capabilities will drive more demand for bandwidth as well as the need to optimize applications to conserve batteries (which is another areas that needs innovation and breakthrough)
Chris gave a summary of the LTE efforts of operators around the world with folks like Verizon accelerating their rush to 4G due to end of lifecycle of EV-DO while others like ATT are pursuing a slightly slower approach trying to maximize the output from HSPA+.
Hugh has been playing with newer set of “alternate devices” like sensor networks, telemetry, projection glasses and so on and so forth and sees their importance in the growing ecosystem.
Australia is dedicating $43B to broadband expansion to 90% of the consumers in the country. An equivalent US investment will be close to $350B and we are investing $7B (stimulus package). As I have said before, the stimulus package was a huge missed opportunity and the govt. could have done much better.
The flat rate economy is not sustainable and something has to give in the future
The availability of broadband impacts consumer behavior and we are likely to see very diverse models and services emerge in the coming days

There were other host of areas I wanted to get into but you can only do so much in 30 minutes especially if you have great panelists. Wish I could have a day long session to discuss the nitty-gritty in much more detail. In any case, great panel and insights. Joe Sterling was at hand as well to do an artist rendition of our panel, art below.

As I mentioned before, the conference was filled with very interesting discussions like Ambassador Dennis Hays from Thorium Power discussing a world where the capacity of making nuclear weapons can be taken out of the nuclear materials to only focus on nuclear energy for energy purposes. Boy! won’t that change the geo-political dynamics. John Hagel talked about shaping strategy based on this recent HBR paper and his upcoming book on the subject.

Another highlight of the show is to gather the bright CTOs of leading corporations and give them a practical problem to solve like how to provide adequate safe water for future decades. Hosted by David Brin (cohost of TV ArchiTechs series), the panel delved into understanding the problem and delivering a framework for solutions. Not a typical session you see at a conference. Hey CTIA! how about putting together a problem solving panel for your next show?

I also was touched by the screening of the movie “The Cove” - winner of the 2009 Sundance Film Festival Audience Award. More details here. Synopsis:

In the 1960’s, Richard O’Barry was the world’s leading authority on dolphin training, working on the set of the popular television program Flipper. Day in and day out, O’Barry kept the dolphins working and television audiences smiling. But one day, that all came to a tragic end.

The Cove, directed by Louie Psihoyos, tells the amazing true story of how Psihoyos, O’Barry and an elite team of activists, filmmakers and free divers embarked on a covert mission to penetrate a hidden cove in Japan, shining light on a dark and deadly secret. The mysteries they uncovered were only the tip of the iceberg.

Visit the Movie home page

It will change your perspective of how you view dolphins for ever and those trips to seaworld will be ever so more poignant filled with self-introspection. More power to the activists like Richard O’Barry and directors like Louie Psihoyos for opening our eyes and making a remarkable piece despite the challenge.

Another highlight of the conference is the interviews of top technologists and emerging startups by BBC’s Stephen Evans. Each gets a sound byte to wow the world (the session is streamed to 150M people). Highlights - Xerox - how can we solve legal cases with technology? Radar Networks - NOW is the unit of change. Vlingo - Speech is changing. IMANI-Ghana - SMS to prevent drug counterfeits, Cisco - virtual reality, voice, and data are the three different waves of innovation, the opportunity for collaboration is immense, Liberty - 5 yr projection 1Gbps wired, 100Mbps wireless peak throughputs, avg - 200Mbps for wired and 10Mbps for wireless, Microsoft - it will be the Chinese century, companies shouldn’t worry about protecting their marketshare in China but worry about protecting their share from Chinese players overseas, Smaato - Mobile Advertising is going to be the most prevalent business model in mobile, and SIMtone - make terminals dumb again and have the network cloud take care of everything.

The current financial crisis was also discussed at length. Many thought Europe is in denial and lack fundamental understanding of the crisis, that China and US are intertwined more than ever before and will have to work together to lead the world out of the crisis, India is largely untouched and better days are ahead thanks to the recent electoral results.

(Larry with Kamran, Mark with Elon)

Larry Brilliant suggested that the vaccines are the best investment in human history. Can’t argue with that one. He also suggested that the world should be thankful to Mexico for releasing the data early and often enough for other countries to take precautionary measures (sometimes to the extreme, I might add). They have suffered significantly and have been ridiculed but hopefully they serve as a lesson for the world in future pandemics.

If FiRe represents the best in multidisciplinary thinking, Elon Musk represents the rare breed of multidisciplinary entrepreneurs. The guy can shift from intricacies of electric cars to the design of rocket ships to solar energy with ease.

My best session was at Calit2. I think Larry Smarr has the best office with many 10Gbps links and coolest toys to play with, especially the 125Mpixel Hyperwall. It was also nice to interact with Michael Sims, Manager and Planner for the Mars Rover at NASA and his team using the network and the wall. You can see some cool images below. The second set of pictures are an image of human brain where you can pick out the single neurons with ease.

Also, interacted with the next generation surface and touch technology that uses pressure as an input as well. Below is me doing a destructive face surgery on a poor soul.

Finally, I would be remiss if I didn’t mention the 0-60 mps in 3.9s experience in Tesla Roadster. That car is a rocket.

Overall it was a great conference. I left more curious about more things. The conference also has an intimate feel to it where you can discuss burning issues with top experts and award winners over coffee, stroll, and meals. Registration for 2010 is open now.

Global Wireless Data Market Update - 2008 April 28, 2009

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

Global Wireless Data Market Update - 2008

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

Executive Summary

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

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

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

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

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

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

Service Revenues

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

ARPU

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

Subscriptions

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

Others

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

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

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

CTIA 2009 Roundup April 6, 2009

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

CTIA 2009 Roundup

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

CTIA 2009 in Pictures

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

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

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

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

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

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

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

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

Broadband

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

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

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

Mobile Health

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

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

Applications and Services

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

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

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

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

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

Green

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

Miscellaneous

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

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

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

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

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

Your feedback is always welcome.

Thanks

Chetan

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

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

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

US Wireless Data Market Update Q408 and 2008

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

Executive Summary

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What to expect in the coming months?

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

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

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

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

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

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

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

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

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

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

Coming back to the 2008 forecasts, our estimate of the mobile data revenues was spot on. The annual mobile data services revenue stood at $34B. We will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings. Q109 numbers will give us a better insight into the impact of the current recession on the US mobile industry and the global markets at large.

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

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

Service Revenues (Slides 14 , 21, 22)

The US Wireless data service revenues grew 7.3% Q/Q to $9.4B in Q408. Compared to Q407, the data service revenues grew 38.7%.
AT&T’s data revenues grew the most - 12% QoQ and 52% YoY. Verizon experienced a 42% lift and T-Mobile saw a 30% increase in YoY data revenue growth. As expected, both AT&T and Verizon became two of the four operators to exceed $10B in data revenues for the year for the first time by (global) operators besides NTT DoCoMo (China Mobile is the other carrier to join the club).
AT&T surpassed Verizon in data revenues for the first time since 2005 though for the year Verizon still ended up being ahead for the third straight year.
AT&T and Verizon now account for 62.5% of the market data services revenues. Sprint had a third consecutive quarter of data revenue growth after falling behind its peers for the past couple of years.
The average industry percentage contribution of data to overall ARPU reached 25%. In 2007, the percentage contribution stood at approximately 19.3%. US market is likely to exceed the 30% mark in 2009.
T-Mobile USA edged past O2 UK to secure the 8th spot in the top 10 rankings of global mobile operators by data revenues. For the year, Verizon and AT&T improved their rankings to #3 and #4 respectively at the expense of KDDI which dropped to #5. Sprint Nextel maintained its # 6 spot. AT&T and Verizon are in the select group of four global operators who are now generating almost $3B or more in data revenues/quarter (the other two are NTT DoCoMo and China Mobile).

ARPU (Slides15-18)

Overall ARPU decreased by $0.36. Average voice ARPU declined by $1.13 while average data ARPU grew by $0.77 or 6% but couldn’t negate the drop in voice ARPU.
AT&T led in postpaid data ARPU at $16.30 (or 27.35% of the revenues) followed by Sprint at $14.50 (or 25.89%).

Subscribers (Slides 19-20)

In 2008, the US market added almost 15M new subscriptions down 32% from 2007. Q4 also saw a decline from Q3 net-adds for the first time in recent memory.
The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q408, Verizon had 74% of its subscribers using some form of data services. The messaging volumes in the US market now average over 110B messages/month or at the frequency of a message/sub every 2 hours. In comparison users in Philippines average routinely send on an average, a message every hour.
In terms of net-adds, AT&T led in Q408 with 2.1M net-adds, edging its friendly rival Verizon which added 1.4M net subscriptions. Sprint lost another 1.3M in Q408.
With its Alltel acquisition, Verizon became the number one carrier in the US easily overtaking AT&T. It now has 80M subs and secured the bragging rights to being the biggest operator in the Americas.
The 3G penetration in the US touched 40% in Q408. Verizon led the pack with over 65% 3G subscriber penetration. T-Mobile is slowly expanding its 3G coverage. The growth in 3G and smartphones is helping offset some of the downward pressure on the data revenues and overall ARPU.

Applications and Services

Non-messaging services continue to grab 50-60% of the data revenues for the US carriers.
The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe started to take firm roots in the US market with industry wide flat-rate pricing plans that included data. All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 15% of the consumers have flat-rate data plans. We will see a further acceleration of this trend aided by the recession.
There are probably 18-20 sub-segments within mobile data services and consolidation looms. Who will be the last man standing post the nuclear winter? While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene will heat up by Q309.
Will Mobile Advertising be the rising star from the crisis or one of its victims? Clearly, there are a number of advertisers and brands that are scaling back on the experimental dollars thus shrinking the mobile ad spend. On the other hand there are some savvy brands that are pulling back from the traditional mediums like print which don’t really work and putting more money into digital including mobile. Mobile offers the best ROI of all mediums but there is lot of ground work to be done before it becomes a thriving advertising channel. In fact, for the mobile media and content ecosystem, mobile advertising lends very well to the belt-tightening trends. It will be interesting to see if operators use this opportunity to lay the foundations of a long-term mobile advertising strategy or ignore it completely. Stay tuned for some of our thoughts on the subject. Incidentally, this week marks the one year anniversary of our best-selling Mobile Advertising book. Our thanks to all the readers and companies who have adopted it into their education and sales curriculums and product strategies making it a worldwide success.
As we had mentioned back in July, Apple easily surpassed its 10M target in Q308 buoyed by its 100 country expansion plan. The broadband and appstore capabilities are quite attractive to consumers and it shows. VPN and direct access to Exchange is helping in getting many more users into the mix and making IT folks less apprehensive. The clearcut business model of 30/70 split is also attractive. While there is no dearth of applications, findability remains a challenge.
Apple’s success is inspiring carriers and OEMs to launch similar app-stores. Many operators launched an upgraded version of their existing Appstore offerings (and so did Google and RIM, even Microsoft and Nokia) along the lines of Apple’s initiative with promises of greater control to the application developers. However, many of such initiatives will fall flat due to weak developer ecosystems.

Handsets

Nokia eclipsed 100M unit sale in Q408 for the seventh straight quarter. It sold over 113M handsets in the quarter, more than the next three players combined. Nokia’s global market share stood at 38.6%. Samsung surged to 52.8M in handset sales for the quarter. For the year, the industry again eclipsed the 1 billion handset mark for 2008 and had a modest growth of 3.5% but the overall handset sales are likely to decline by 10-15% in 2009 (though still exceeding 1B).
The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband - metered billing, UMA, Femtocells, Hotspot buys, WiMAX, LTE, and others. We deal with the whole topic of Wireless Broadband in great detail in our recently released book “Wireless Broadband - Conflict and Convergence” (IEEE Press/John Wiley). We will have more to say on the subject in the coming days and months.
Q4 also saw the launch of the fabled G-phone as G1 Google phone launched by T-Mobile in the US market and it is slowly making its way into Europe. While G1 is no iPhone, it introduced long-awaited features such as multiple processes, more open APIs, and others. Motorola, HTC, and others are said to be planning to launch more Android devices in 2009. The smartphone segment has clearly shaken up the market with Apple, Google, RIM, and Nokia being the main competitors. Microsoft appears to be waking up from its slumber and is rethinking its mobile strategy starting with an easy button.

Misc. (Slide 23)

Not surprisingly, Venture money in the mobile sector experienced a rapid decline. Compared to Q407, venture financing declined by 36%, and the yearly totals are 26% lower than what they were a year ago. (Source: Rutberg)
While WiMAX was launched with great fanfare with several key players participating in the investment pool, its long term prospects look uncertain as the delays in getting a nationwide network by a major operator in a major economy threatens the underpinnings of this nascent industry segment. To be relevant, the WiMAX fraternity needs to figure out some solutions in a hurry.
In a sign of convergence battles to come, T-Mobile’s @Home and various Femto cell initiatives started to take hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service. Don’t be surprised by some acquisitions in 2009.

Preliminary Global Update (Slides 21-22)

China and India continued their red-hot growth throughout 2008. Combined, they added 212.8M new subscriptions with India edging China by 15% for the first time in yearly net-adds. India made mockery of the current economic climate by its unprecedented growth. In fact, for the past 5 months, India has been displaying Phelpsesque like flair (minus the pot excursion) in setting and beating its world record for 6 straight months. For the last 5 months, the market has been exceeding 10M net-adds/month with Jan 09 being at a whopping 15.4M making it a record for monthly net-adds in a given country at anytime in the history of the industry or any industry for that matter (we are still trying to figure out what led to such a jump).
NTT DoCoMo continues to dominate the wireless data revenues rankings with over $4B in data services revenue in Q408 and almost $15B for the year. Almost 42% of its overall revenue now comes from data services. DoCoMo also crossed 88% in 3G penetration in Q408 and will cross the 90% mark this week.
Most of the major carriers around the world have double digit percentage contribution to their overall ARPU from data services. Many operators are consistently exceeding 30% with DoCoMo and Softbank being over 40%.

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

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

Your feedback is always welcome.

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

Thanks.

Chetan Sharma

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

LBS - Latitude February 5, 2009

Posted by chetan in : Location Based Services , add a comment

Google’s offering of Latitude is an interesting step towards making LBS pervasive. We discussed LBS last week in Palto Alto at PARC. Om has a good overview. I have been looking at location based services since 96 or so. In the early days it used to be primarily E911 and RF Engineering but the promise was there. Oh! if I could get a dime for every analyst report on LBS. Things look promising this time around though with location api becoming much more accessible. But what about privacy, you might ask. well, that’s for another day, another post.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Despite the tough economy, overall, the mood is still optimistic that the mobile industry might be able to weather the storm a bit better than some of its counterparts.
There is predicted growth in prepaid subscriptions in the North American market.
Acceleration in the declining mode of downloadables already visible over the last few quarters.
The increase in the subscriber base will nullify the loss in data subscriptions, with the caveat that if the job loss rate increases substantially, there might be a flattening of data revenues in Q109 and gradual decline over the course of the year.
Continued growth in 3G and smartphone penetration especially in the western markets
Voice ARPU will continue its downward trend and data ARPU will become a more dominant factor of the overall ARPU mix by the end of 2009.
Wireless data is likely to help in carrying the wireless industry through these tough times; the global percentage contribution from data is likely to exceed 25% by the end of 2009.
OPEN will continue to be the buzzword for 2009 and Google is likely to set the agenda on “open” for others to follow.
While the overall advertising budgets will shrink, mobile advertising ad-spend will keep increasing from the 2008 levels. Targeting capability is increasing and CPMs are coming down making for a more efficient mobile channel for advertising. Brands are falling in two camps: one who are scaling down on inefficient channels like print and radio and moving money into digital including mobile and the others who don’t have quite the appetite for mobile and want to keep investing in channels that they are most comfortable with.
After many years of delay, India and China will finally start investing in 3G deployments with China focusing on TD-SCDMA/WCDMA and India on WCDMA.
Plans for mobile payments will get pulled back a bit due to economic crisis. Limited trials and rollouts will continue in western Europe and North America.
Infrastructure players are amongst the worst hit in the wireless ecosystem. Players like Nortel, Alcatel-Lucent, and others are suffering. Will they continue to exist in their existing form or will a Chinese player see an opportunity to acquire them? Handset market is also seeing resetting of the landscape with the Korean manufacturers rising above Motorola to be counted amongst top three. The biggest infrastructure contracts will come from China and India this year but the majority of the $50B budget will be spent on TD-SCDMA equipment so the opportunity might be limited to local vendors with minor participation from global players.
Tough economic times are also ripe opportunities for M&A. Companies with cash will be able to swoop the struggling players who don’t have runway to survive 2009-10. We are likely to see several transactions and fire-sales.
Finally, though venture money is scarce, bear markets also give birth to new business models, new companies, new darlings of the wall street, and completely new opportunities and value propositions that weren’t envisioned before. Overall, consumer mobile data spending is expected to stay strong through this time economic cycles.
Good Luck and Best wishes.

Thanks to Michael Bidu for inviting me to participate.

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

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

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

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

The panelists were

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

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

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

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

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

Location Based Advertising: 2009 and Beyond January 22, 2009

Posted by chetan in : 3G, 4G, AORTA, BRIC, Location Based Services, Speaking Engagements, Wireless Value Chain, Worldwide Wireless Market , add a comment

We have finalized our terrific panel for the discussion on location based advertising. It should be an engaging discussion on one of the hottest topics in the industry. Hope to see some of you there

January 27th 2009 — Networking @ 4:00pm, Panel @ 4:30pm - 6:00pm

WCA LBS SIG presents Location-Based Advertising : 2009 and Beyond
Venue: Palo Alto Research Center, Palo Alto CA

With better support in the newest smartphones for positioning, the opportunity for Location-Based Advertising is bigger than ever before. Will 2009 be the year it finally takes off? Find out on January 27th. The Wireless Communication Alliance’s Location-Based Services SIG will host a panel in which industry leaders will talk about technology, measurement, payment models, and the future of location-based advertising.

Moderating the panel is Chetan Sharma, President of Chetan Sharma Consulting and one of the leading strategists in the mobile industry. Chetan has served as an advisor to senior executive management of several Fortune 100 companies in the wireless space, and is the author or co-author of five best-selling books on wireless including Mobile Advertising: Supercharge Your Brand in the Exploding Wireless Market (John Wiley, 2008), which has become the industry reference on the subject.

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

Brian Levin, Useful Networks

Mr. Levin is CEO and co-founder of Useful Networks, a mobile

technology company creating Location Based Services for mobile

consumers. Useful Networks is a subsidiary of Liberty Media.

Prior to Useful Networks, Brian was co-founder and CEO of

Mobliss, a wireless media and marketing company. He serves on

the Board of Directors of the Cellular Telecommunications

Industry Association (CTIA) and the Mobile Marketing Association

(MMA).

Ujjal Kolhi, RhythmNewMedia

Ujjal Kohli, CEO of Rhythm NewMedia, is an entrepreneur in the

mobile advertising industry with an extensive background in

the wireless industry. Working with 60+ media companies and

50+ top name brand advertisers, Rhythm is number one in mobile

video advertising. Ujjal brings a unique perspective from both

the on and off deck worlds, recently launching vSNAX Videos, a

free entertainment app for Apple’s iPhone and iPod touch that

showcases Rhythm’s services for media and operator partners

including ad sales, ad serving, mobile site design, video

serving, application development, and hosting & management.

Previously, Ujjal was EVP of Marketing & Sales for AirTouch

Cellular, a $3.5 Billion revenue wireless carrier. Ujjal holds

a B.Tech from the Indian Institute of Technology (Delhi), an

MS from the University of Rochester and an MBA from Harvard

Business School.

Blair Swedeen, 1020 Placecast

Blair has more than nine years of experience across product

and business development in the LBS, digital content and

software areas. At 1020 Placecast, Blair is responsible for

responsible for 1020’s marketing and business development

activities with ISPs, web publishers, mobile application

providers and other distribution partners. Prior to joining

1020 Placecast, Blair founded Partenza Consulting, a strategy

and business development consultancy advising leading players

and investors in the LBS industry. Before Partenza, Blair had

overall responsibility for the Internet/Wireless product line

at NAVTEQ and launched the company’s mobile content product

line.

David Turner, Navteq

David is Technical Product Manager responsible for the

technical roadmap and architecture of the NAVTEQ

LocationPoint™ location-based advertising services. David

joined Navteq in 2006, and prior to moving into location

based advertising he led the design and development of

NAVTEQ’s Traffic.com Voice and Mobile Products. Before

joining Navteq, David worked for Reuters developing

brokerage web sites. David has over 15 years of experience

in technology development and over 10 years of experience in

Project Management. David has a B.S. in Computer

Engineering from Lehigh University and an M.S. in Computer

Engineering from Villanova University.

Ilan Zorman, AdYouNet

Ilan has more than 15 years of expertise in location

monetization models and local advertising in particular. A

serial entrepreneur, Ilan has been on the founding teams of

numerous companies including Nexus Telecom (Metro-Location

services, NASDAQ), Wireless OnLine (smart antennas), AppStream

(enterprise software), and ComMagine (UMA – Cellular/WiFi). At

present, Ilan is the founder and CEO of AdYouNet, an internet

platform for web direct marketing.

Cost: $10 at the door.

Directions/Map to Palo Alto Research Center

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Mobile Industry Predictions 2009 January 1, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, European Wireless Market, Gaming, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Privacy, Speaking Engagements, Strategy, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

Mobile Industry Predictions 2009

2009 Mobile Industry Predictions Survey

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

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

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

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

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

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

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

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

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

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

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

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

The winners are:

Akio Orii, CFO and VP, Toyota
Declan Carew, New Product Strategy Manager, Vodafone
Helen Keegan, Consultant, Beep Marketing
Rich Begert, CEO, Singlepoint, and
Russ McGuire, VP, Sprint Nextel
Jonathan Ebinger, General Partner, Blue Run Ventures

Congrats and Thank You.

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

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

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

Will Android handset sales exceed iPhone’s in 2009?

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

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

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

Will Apple launch new iPhone models in 2009?

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

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

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

Will India and China launch nationwide 3G in 2009?

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

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

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

Will Microsoft launch its own mobile phone?

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

Will Clearwire meet the 1.3 million subscriber target in 2009?

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

Will Mobile Open Source mitigate fragmentation?

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

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

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

Will Microsoft buy RIM?

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

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

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

Will carriers start launching Apple/Android style appstores?

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

Will Microsoft make windows mobile free to OEMs?

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

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

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

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

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

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

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

Despite conventional wisdom, what will not happen in 2009?

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

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

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

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

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

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

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

Greetings.

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

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

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

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

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

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

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

Survey ends Dec 28^th.

The questions are:

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

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

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

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

5. Will Apple launch new iPhone models in 2009?

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

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

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

9. Will Microsoft launch its own mobile phone?

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

11. Will Mobile Open Source mitigate fragmentation?

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

13. Will Microsoft buy RIM?

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

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

16. Will Microsoft make windows mobile free to OEMs?

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

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

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

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

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

Thanks and Have a safe and wonderful holiday.

For a prosperous and strong 2009.

Kind regards,

Chetan Sharma

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

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

Tomorrow’s Wireless Future

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

· Demand for bandwidth will keep growing.

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

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

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

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

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

· Awareness of context really important.

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

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

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

· Convenience and access trumps security concerns.

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

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

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

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

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

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

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

Image Courtesy: Global Connexus

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

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

US Wireless Market Q3 2008 Update Nov 2008 Chetan Sharma Consulting

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Recession: Nice to meet you.

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

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

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

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

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

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

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

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

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

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

The US Wireless data service revenues grew 7.3% Q/Q to $8.8B in Q208. Compared to Q307, the data service revenues grew 37.5%.
Overall ARPU decreased by $0.04. Average voice ARPU declined by $0.94 while average data ARPU grew by $0.90 or 8% almost negating the drop in voice ARPU.
Sprint led in data ARPU with $13.50 (or 24.11% of the revenues, followed by Verizon at $13.30 (or 25.49% of the revenues - first carrier to cross the 25% threshold),~~Verizon led in data ARPU with $13.58 (or 26.03% of the revenues - first carrier to cross the 25% threshold) closely followed by Sprint at $13.50 (or 24.11%),~~ AT&T at $12.29 (or 24.20%) and T-Mobile at $9 (or 18%).
All the top four carriers experienced approximately 8% increase in data revenues compared to the Q208 levels. Verizon with $2.8B in data revenues led AT&T at $2.7B, Sprint at $1.6B and T-Mobile at $850M. Both AT&T and Verizon are on target to be two of the three operators to exceed $10B in data revenues for the year for the first time by (global) operators besides NTT DoCoMo (the two US carriers are already over 75% of the target). China Mobile is the other operator which is going to cross the $10B mark in 2008.
AT&T and Verizon now account for 62% of the market data services revenues. Sprint had a second consecutive quarter of data revenue growth after falling behind its peers for the past couple of years.
The average industry percentage contribution of data to service revenues exceeded 23%. A year ago, the percentage contribution stood at approximately 17.7%. US market is likely to exceed the 25% mark in Q408.
The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q308, Verizon had 74% of its subscribers using some form of data services. The messaging volumes in the US market now average over 105B messages/month or at the frequency of a message/sub every 2 hours. In comparison users in Philippines average routinely send on an average, a message every hour.
In terms of net-adds, Verizon continued to lead in Q308 with 2.1M net-adds (aided by an acquisition), again edging AT&T which had 2M net-adds for the quarter. Sprint continues to lose subscribers at an alarming rate, loosing another 1.3M in Q308.
T-Mobile USA moved to number 9 in the top 10 rankings of global mobile operators by data revenues. For the quarter, Verizon and AT&T improved their rankings to #3 and #4 respectively at the expense of KDDI which dropped to #5. Sprint Nextel maintained its # 6 spot. AT&T and Verizon are in the select group of five global operators who are now generating $2B or more in data revenues/quarter (the other three are NTT DoCoMo, China Mobile, and KDDI).
Non-messaging continues to grab 50-60% of the data revenues for the US carriers.
The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe started to take firm roots in the US market with industry wide flat-rate pricing plans that included data. Sprint has been the most aggressive with its “Simply Everything” plans that include data services. 30% of its $100 plan is assigned to data revenues (for accounting purposes). All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 13% of the consumers have flat-rate data plans.
As expected, the blockbuster acquisition of Alltel by Verizon got approved and the deal will close in the next few weeks making Verizon the top carrier in the US market with close to 85M subs by the end of year.
Q3 also saw the launch of the fabled G-phone as G1 Google phone launched by T-Mobile in the US market and it is slowly making its way into Europe. While G1 is no iPhone, it introduced long-awaited features such as multiple processes, more open APIs, and others. Motorola is said to be planning to launch Android devices in 2009. The smartphone segment has clearly shaken up the market with Apple, Google, RIM, and Nokia being the main competitors. Microsoft keeps misreading the market and is heavily under leveraging its strength and experience.
There are probably 18-20 sub-segments within mobile data services and consolidation looms. Who will be the last man standing post the nuclear winter? While the valuations are still high for rapid consolidation, we think that by Q209, the M&A scene is likely to heat up.
Will Mobile Advertising be the rising star from the crisis or one of its victims? Clearly, there are a number of advertisers and brands that are scaling back on the experimental dollars thus shrinking the mobile ad spend. On the other hand there are some savvy brands who are pulling back from the traditional mediums like print which don’t really work and putting more money into digital including mobile. It will be interesting to see if operators use the opportunity to lay the foundations of a long-term mobile advertising strategy. Stay tuned for some of our thoughts on the subject.
Venture money in the mobile sector experienced a rapid decline. Compared to Q307, venture financing declined by 88%, and the yearly totals are 35% lower than what they were a year ago. (Source: Rutberg)
Nokia eclipsed 100M unit sale in Q308 for the sixth straight quarter. It sold over 111.7M handsets in the quarter, more than the next three players combined. Nokia’s global market share declined to 37%. Samsung surged to 52M handset sale. Apple surpassed RIM in smartphone sales. For the year, the industry looks to again eclipse the 1 billion handset mark for 2008 but the overall handset sales will decline in 2009 (though still easily exceeding 1B).
The 3G penetration in the US went past 35% in Q308, with Verizon leading the pack with over 61% 3G subscriber penetration compared to the 30% 3G subscriber penetration at AT&T. T-Mobile is slowly expanding its 3G coverage. 3G subs have over $23 in data ARPU. The growth in 3G and smartphones is helping offset any downward pressure on the data revenues and overall ARPU.
As we had mentioned back in July, Apple easily surpassed its 10M target in Q308 buoyed by its 100 country expansion plan. The broadband and appstore capabilities are quite attractive to consumers and it shows. VPN and direct access to Exchange is helping in getting many more users into the mix and making IT folks less apprehensive. The clearcut business model of 30/70 split is also attractive.
T-Mobile also launched its own Appstore (and so did Google and RIM, even Microsoft) along the lines of Apple’s initiative with promises of greater control to the application developers.
The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband - metered billing, UMA, Femtocells, Hotspot buys, WiMAX, LTE, and others. We deal with the whole topic of Wireless Broadband in great detail in our recently released book “Wireless Broadband - Conflict and Convergence” (Co-authored with one of the leading entrepreneurs in the space - Vern Fotheringham, published by IEEE Press and John Wiley). We will have more to say on the subject in the coming days and months.
After raising $14.5B from friends and family, Clearwire’s net-adds continued to drop in Q308. While the deal got approved, the economic climate is putting pressure on a comprehensive rollout strategy. Sprint did launch WiMAX in the Baltimore market with initial feedback from the sparse usage to be as advertised.
In a sign of convergence battles to come, T-Mobile’s @Home and Sprint’s Femto cell initiatives started to take hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service. Don’t be surprised by some acquisitions in 2009.

Global update

China and India added approximately 52M subscriptions combined in Q308 with India edging out China. In Sept, India added more than 10M monthly subscriptions for the second time this year and its net-adds total for the first 9 months stands at 82M. By comparison China added 77M and US increased its tally by 11M.
NTT DoCoMo continues to dominate the wireless data revenues rankings with almost $3.9B in data services revenue in Q308, thus exceeding the $10B mark in just 9 months. Almost 41% of its revenue now comes from data services. DoCoMo also crossed 86% in 3G penetration in Q308 and is expected to cross the 90% mark by early 2009.
Most of the major carriers around the world have double digit percentage contribution to their overall ARPU from data services. Many operators are consistently exceeding 30% with DoCoMo and Softbank being over 40%.

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

Your feedback is always welcome.

Happy Thanksgiving and Happy Holidays.

Thanks.

Chetan Sharma

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

Recap of the Vienna Summit November 11, 2008

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

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

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

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

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

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

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

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

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

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

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

Global Wireless Data Market 1h 2008 Update Sept 2008 Chetan Sharma Consulting

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http://www.chetansharma.com/globalmarketupdate1H08.htm

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

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

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

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

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

The global mobile markets continue to grow at an explosive pace reaching 3.6B subscriptions by 1H08 up 9% from EOY 2007 levels and will likely cross the 4B mark by the end of 2008. Significant growth is coming from India and China with both countries registering on an average 9M net adds per month. India and China combined to add approximately 107M new subscriptions during the first six months of 2008. Overall, the world market is now over the 50% penetration mark.
US edged past Japan again as the most valuable mobile data market in service revenue with US adding $15.7B vs. $13.6B for Japan in 1H08 mobile data service revenues. China with $7.8B was ranked number 3. US registered the highest growth amongst the top 3 with over 18% increase from EOY 2007 levels followed by China at 9% and Japan at 7%. These top 3 markets account for just under 50% of the mobile global data service revenues.
NTT DoCoMo continues to dominate the wireless data service revenue rankings with over $6.8B in service data revenues for 1H08; however, Q/Q growth is declining. DoCoMo crossed 84% in 3G penetration and is expected to touch 90% by end of the year.
DoCoMo was followed by China Mobile, KDDI, Verizon Wireless, AT&T, Sprint Nextel, China Unicom, Softbank, O2 UK, and T-Mobile USA to round up the top 10 operators by wireless data service revenues. It marks the first time, T-Mobile USA enters the top 10 list as it went past SK Telecom. All the top 10 carriers exceeded $1.5B in data revenues for the first half of 2008.
For the last couple of years, NTT DoCoMo has been the only carrier exceeding $10B in yearly mobile data revenues. In 2008, it is likely to be joined by China Mobile, KDDI, Verizon Wireless, and ATT in the exclusive 10B club.
Data revenues for the top 10 operators increased 10.3% from EOY 2007 and now account for almost 50% of the global mobile data revenues though their subscriber share is around 30%.
Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like KDDI, DoCoMo, and Softbank are approaching 40%. 3 UK, O2 UK, Singtel, and 3 Sweden exceeded 30%.
In March, India edged past the US to become the number two wireless market (by subscriptions) in the world. In last two years alone it has added almost 175M new subscriptions (in comparison China added 169M and the US market added 39M).
ATT reported the highest increase in data ARPU from 2Q07 with 32% growth. Other notable percentage increases in ARPU were from KDDI, DoCoMo, Softbank Japan, 3 Australia, Vodafone Italy, Rogers, Verizon Wireless, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.65.
In terms of absolute dollar amount, NTT DoCoMo and 3 UK lead the pack with $22 data ARPU. Operators who reported overall ARPU above $60 were 3 UK, Singtel, Rogers, and 3 Sweden.
The biggest jump in data revenues was experienced by the US carriers, the top 3 being ATT, Verizon Wireless, and T-Mobile USA respectively. SK Telecom, Sprint and O2 UK experienced declines. (For a complete US Market Update, please see our Q208 research note).
In 1H 2008, SMS’s vice like grip on data revenues continued to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
NTT DoCoMo regained its position vis-à-vis KDDI w.r.t. mobile data revenues. Their data coordinates stand at ($22, 39.5%) and ($20.3, 37%) respectively (please see slide 10 for reference).
Most of the operators in developed nations are contemplating future strategies to boost data revenues such that decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPUs. Comparing the ARPU for last 2 years, amongst the top operators, only Singtel, Rogers, T-Mobile UK, O2 Germany, O2 UK, Verizon Wireless and ATT experienced increase in both overall and data ARPU.
NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets and exploring new technologies and social experiments ahead of almost anybody else in the market. We looked at the data revenue growth at NTT DoCoMo since the introduction of i-Mode almost 10 years ago (see slide on page 17). During the last 9 years, overall ARPU has declined 33% though data ARPU increased over 1800% and now accounts for almost 40% of DoCoMo’s service revenues. The voice ARPU has declined almost 60%. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends and technologies in these markets to get a sense of what’s coming.
The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with over 66% (or $3) contribution coming from the data services. Philippines is also one of the most active messaging nations where users average a message/hr round the clock.
Even though China reported approximately $7.8B in data revenues for 1H08 and the percentage contribution is over 27%, data ARPU is around $2.3. For India, data ARPU continues to stay below $1 for all major carriers with Reliance experiencing a 50c data ARPU during Q208.
China Mobile with 428M (as of Aug 08) remains the #1 carrier in terms of total number of subscrptions followed by Vodafone at 269M and China Unicom with 171M subscriptions. Telefonica, América Móvil, SingTel, Deutsche Telekom (T-Mobile), and Orange (France Telecom) are the next five largest telecom groups in the world. In terms of individual carriers in a given country, AT&T and Verizon Wireless occupy the #3 and #4 spot respectively ahead of NTT DoCoMo, which is at #5 (Verizon will overtake ATT after its Alltel acquisition goes through later this year). The two Chinese carriers round up the top two positions and are likely to stay perched at their lookout vistas for many years to come.
China Mobile remains the most valuable telecom operator with over $200B in market cap. It is followed by Vodafone at around $125B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. Carriers in Japan and Korea are the most under duress.
As far as 3G is concerned, there were over 350M 3G users (69% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 80%+ penetration. 3G has picked-up steam in both western Europe and North America per our forecast in the 2005 cover story article “3G: Hitting the Mass Market” published in the Wireless World Magazine. Western Europe and US are at approx. 30% 3G penetration (Italy being the exception exceeding 40%).
China and India represent the biggest opportunities for the Infrastructure providers. China postponed its 3G decision again and couldn’t launch a network for the otherwise wildly successful 2008 Olympics. India is also going through its 3G spectrum policy and is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts will come from these two countries that are looking to expand coverage into rural areas.
Carriers with nationwide 3G networks and good distribution of handsets are seeing strong uptick in data ARPU. The Japanese and Korean carriers along with operator 3, Verizon, Sprint Nextel are all seeing benefits of rolling out their 3G service. Deployment of 3.5G technologies such as HSDPA and EV-DO Rev A (and B) is also gaining momentum. Networks are getting deployed and market is being seeded with some of the early handsets. For 4G, there is a strong momentum behind LTE, proponents of WiMAX are pushing the technology as a 4G candidate, and though it is starting to lose its time advantage, all eyes are on the imminent Clearwire launch.
In terms of applications, messaging accounts for the lion-share of data revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have also captured industry’s imagination. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than the other hot category - Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
1H 2008 saw the demise of the last standing next-generation MVNO in the US market - Helio, which got sold to Virgin Mobile at bargain basement prices. In Europe, Blyk continues to make good progress with its unique mobile advertising-based model. Asian market is also opening up for MVNOs.
Nokia eclipsed 100M/quarter unit sale in both the quarters thus far. It has sold over 237M handsets in 2008, more than the next three handset manufacturers combined. Nokia’s global market share edged past 41%. Samsung at 15%, Motorola with 9.5%, LG with 9.3% and Sony Ericsson with 8% rounded out the top five. For the year, the industry looks to again eclipse the 1 billion handset mark for 2008.
While the talk of “Open Access” and “Open Platform” consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon’s “Open Network” initiative elevated the consternation in the ecosystem. Apple launched its 3G iPhone while Android’s first device is slated to see the light of day next month courtesy of T-Mobile USA.
Apple launched its App-Store with iPhone 3G which has been quite successful though there is significant clutter to muddle through. The company is likely to announce soon that it eclipsed its 10M goal in Q308, a full quarter earlier than the stated target. These days, any new device that gets launched in the market is looked through the prism of iPhone.
In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by 2018 (see slide 8). For a more detailed analysis, check out our research paper sponsored by The United Nations Foundation on “Mobile Services Evolution: 2008-2018.” It was presented at The Rockefeller Foundation Healthcare summit in Bellagio, Italy in July 08. (Note: The dichotomy between developed and developing nations is a very simplified concept that has been around for about 50 years. It is clear that a transformation in the distribution of wealth worldwide will change the picture in the next 10 years. Countries that are considered developing in today’s definition will become economic superpowers in 10 years and more dominant than some of the developed nations, even if they have not caught up then with some in terms of GDP per capita. However, for purely the purposes of comparison and illustration, we are using the existing definitions to discuss the shift in the mobile ecosystem).
Several operators reported Mobile Advertising as their key strategic focus for the coming quarters, esp. China Mobile and Vodafone. Sensing the opportunity to seek new sources of revenue stream, Nokia and Google are getting active in the space as well. 2007 saw tremendous M&A activity in both the online and mobile advertising space and while it slowed down during 2008, it is likely to pick-up again in 2009 as consolidation looms.
Wireless Broadband continues to be a significant growth driver for the industry. We partnered with our good friend Vern Fotheringham - a true industry entrepreneur and who has been behind many of the industry firsts, to write an exhaustive treatment of the subject in our upcoming book - Wireless Broadband: Conflict and Convergence being jointly published by IEEE Press and John Wiley (see below). Details forthcoming.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

Carnival of the Mobilists #141 September 15, 2008

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

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

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

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

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

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

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

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

Ram Krishnan at Mobile Broadband Blog discusses mobile broadband pricing.

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

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

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

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

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

CTIA Wireless IT and Entertainment 2008 Roundup September 12, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, M&A, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile Usability, Privacy, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

CTIA Wireless IT and Entertainment 2008 Roundup

http://www.chetansharma.com/ctiawirelessit2008.htm

CTIA in pictures

San Francisco hosted the CTIA Wireless IT and Entertainment 2008 show earlier this week. In addition, there were some pre-show events like Billboard’s Mobile Entertainment Live and Mobile Web Strategies. This note summarizes our impressions from the week.

First, Let’s do the numbers CTIA released its mid-year survey results. Bob Roche and John-Paul Edgette at CTIA do a great service to the industry by compiling 6-month of useful data and making it available at each CTIA. In Summary - 262.7M subs, $14.78B in data revenues accounting for 20.3% service revenues, 75B TXT messages/month. We released our US Mobile Data Update for Q208 last month, Global Update coming later this month.

Overall Impression – This year’s show was one of the dullest in recent memory, devoid of any buzz, energy, or announcements. Maybe it was due to the 50,000 other events happening the same week (many in San Francisco). Or maybe, Bernanke’s congressional testimony is playing out in the wireless industry. Or maybe it is just conference-fatigue.

My week started early as I had the honor of giving a keynote address to a group of influential executives at major international operators and agencies worldwide at a well-organized private event. The topic was “US Mobile Advertising: Today and Tomorrow.” We delved into what’s working and what’s not and what will it take to get the industry to the next level, which players are likely to succeed and why?

Next day, I split my time between Mobile Entertainment Live organized by BillBoard and Mobile Web Strategies chaired by our friend Ajit Jaokar. While most of it was rehash of previous events, presentation by Jouko Ahvenainen of Xtract was probably the standout for me where he talked in detail about the importance of “analytics” and “intelligence” in advertising and social media. One of the interesting announcements/discussion was from Nokia regarding “Comes w/ Music” to be launched in UK next month - music subscription is bundled with the device as long as the device is from Nokia. Reliance Entertainment also announced its aggressive push into the US market.

Trip down the memory lane US Wireless Industry is celebrating 25 years of existence. Steve Largent invited Craig McCaw and John Stanton to reminiscence about the good old days - $4000 phones, hundreds of dollars of monthly bills, no roaming, 30 min talk time, obligatory 100 lbs bricksters. Craig emphasized on innovation while Stanton accurately put his finger on the big picture – US operators aren’t thinking like global companies or the media companies and can’t succeed in the new economy over the long haul. Spot On, John.

My first job was with a company that wrote the billing software for McCaw Communications in the early nineties (at that time, I was writing code for fraud prevention using RF fingerprinting for GTE, Ameritech, Bell Atlantic, Nynex, Airtouch, and the likes .. those were the days)

Open is in the Air With each CTIA over the last 18 months, carriers’ embrace of “Openness” is getting tighter and more nuanced. It is amazing how competitive threat can help disrupt the status-quo. While the keynote session sounded very scripted, each of the 3 CEOs from T-Mobile (Dotson), Sprint Nextel (Hesse), and Verizon (Lowell) are putting in place their “Open” Strategy (the current no. 1 operator was MIA). T-Mobile is launching an Apple-like App-Store next week with 50-50% rev-share which goes up to 30-70% in favor of the app developer but advertising is allowed (unlike iPhone Appstore). Streaming is also not allowed. Tricia at Moconews has more details. The balance between open network, customer care cost, and application performance can be a tricky one and everyone is tiptoeing the boiling waters carefully.

My favorite quips:

Hesse – “We have opened the network, Knock yourself out”

Lowell – “Our definition of open is irrelevant, it is what the customer wants”

Dotson – “Walled garden is a thing of the past”

It should be noted that two of the biggest success stories in the industry - iPhone and Blackberry are closed systems. Everything boils down to user-experience and value. We shouldn’t lose sight of that in the Open debate.

Yahoo’s oneConnect Marco Boerries, EVP, Yahoo! (read the piece he wrote for our Mobile Advertising book here) gave a keynote second CTIA running. These guys aren’t distracted by the Microsoft acquisition drama and remain the bright spot in an otherwise flailing organization. Over the past few months, they keep on refining their distribution and monetization strategy but they do need to attract droves of developers to make the initiative successful. Marco announced the launch of “Blueprint” – a framework for building mobile Internet apps and services. The trick is of course to attract developers. AOL is also pursuing a similar strategy.

Mobile Advertising There was a lot of discussion around mobile advertising each day with some new players emerging. Companies like Hipcricket (and many many others) are making real progress but I get a sense of “being stuck” from some of the players. Maybe, it is a function of the economy, or perhaps – fragmentation, lack of education, metrics, is keeping the industry from opening up.

CTIA released a whitepaper on 2D bar code scanning. Good to see some progress but the big question is – who takes the initiative to spend marketing dollars to educate the consumers and to make 2D bar codes pervasive in the US.

Carriers are getting more active in pursuing their mobile advertising strategies but I still see some fundamental missteps. Keep an eye on some of the work we will release later in the year to help guide the discussion, hopefully, in the right direction.

Mobile Social Networking Lot of discussion around mobile social networking (infact too much at times, even the mobile email player Visto considers itself a social networking company now), mobile only social networking, monetization challenges and opportunities. Most of the players are just aggressively focused on building an audience as quickly as possible. The monetization strategies include advertising, value added services, app store. Verizon and ATT announced their social networking strategies (built on the back of Intercasting’s platform) which essentially focus on social networking aggregation. This keeps them pretty safe and relevant. Current monetization model is that of subscription and maybe advertising down the road. For mobile only players the models varies from advertising heavy (Mocospace) to VAS heavy (mig33).

M2M The percentage of M2M companies in the mix increased compared to last time. For the first time I saw, carrier booths in M2M pavilion which was quite interesting. They clearly see this is a growing segment.

Smartphone Mania Devices like iPhone and Instinct are accounting for a disproportionately high share of the mobile download business now. And if data services is the only growth engine, why worry about launching sub-ARM9 devices, the economics is pointing towards cheaper smartphones on a fast network, it doesn’t make sense to port to 50 other devices when 80% of the revenue will come from a small subset of the devices.

For those of you attended the show, hopefully, it warmed you up for a really great mobile event being organized by GigaOM – Mobilize. Some terrific set of speakers and panels. I will be moderating two excellent panels (details below).

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

New Book: Enterprise Mobility: Applications, Technologies and Strategies August 24, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, IP, IP Strategy, Indian Wireless Market, Japan Wireless Market, Location Based Services, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Mobile Wallet, Networks, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Strategy, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

Enterprise Mobility: Applications, Technologies and Strategies

IOS Press

Chapter Contribution

“Enterprise mobile product strategy using scenario planning”

SAMIMUNEER (SAP) and CHETANSHARMA

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

Each year, we work on strategies and product plans for our clients around the world that end up touching millions of consumers worldwide and do behind-the-scenes research, due-diligence, and analysis work on several critical deals and transactions that move our industry forward. But, rarely do we talk or write about them, due to obvious reasons.

However, last year, I got an opportunity to briefly write about some of the strategy work. On the request of Dr. Basole at Georgia Tech, my colleague Sami Muneer (Sr. Director, Enabling Solutions at SAP – responsible for all things mobile) and I drew from some of the long-term strategy and product planning work we had done for SAP to put together a paper on “Enterprise mobile product strategy using scenario planning.” SAP is the leading global enterprise player and their view of the world is both comprehensive and long-term. It was a privilege to work with their global team on the project.

Our paper is being published as a chapter in the just released book “Enterprise Mobility: Applications, Technologies and Strategies” (IOS Press, Amsterdam. 272 pages, Editor R. Basole, 2008) as part of The Tennenbaum Institute Series on Enterprise Systems. The chapter is also being published in the special issue of peer-reviewed International Knowledge Systems Management (IKSM) journal published by Georgia Tech.

The book is a collection of 13 chapters from academics and practitioners in enterprise mobility. I often use scenario planning techniques when doing long-term strategic assessment and forecasting. In this chapter, we hope to provide a framework for scenario planning in mobile that can go across verticals, applications, and services.

You can download the chapter here.

IKSM is making available all the chapters online (for free) if you register for a free one year subscription.

For those interested in reading the paper copy can order the book here.

Book Introduction

As the number of enterprises using mobile ICT increases, it becomes imperative to have a more complete understanding of what value and impact enterprise mobility has, what drives and enables it, and in what ways it can and will transform the nature and practices of work, organizational cultures, business processes, supply chains, enterprises, and potentially entire markets. Enterprise mobility is therefore a topic of great interest to both scholars and practitioners. Enterprise Mobility: Researching a new paradigm aims to contribute to and extend both our theoretical and practical understanding of enterprise mobility by exploring the necessary strategic, technological, and economic considerations, adoption and implementation motivators and inhibitors, usage contexts, social implications, human-centered design issues, support requirements, and transformative impacts. The main objective is to discuss applications, technologies, strategies, theories, frameworks, contexts, case studies, and analyses that provide insights into the growing reality of enterprise mobility for scholars and practicing managers. This volume contains thirteen articles from leading scholars and practitioners and includes an examination of the changing nature of work, work practices, and the work environment; a discussion of critical enablers of enterprise mobility; authors exploring strategic considerations; and insightful case studies of enterprise mobility across multiple domains. Together, the articles explore enterprise mobility across the entire continuum.

Enterprise mobile product strategy using scenario planning

Author(s): Sami Muneer and Chetan Sharma

The Mobile industry is changing at a rapid pace and so is the behavior of enterprise workforce which uses mobile technologies. When planning for a long-term product roadmap, one has to consider a myriad of evolution trends and forecasts to determine the probable list of product functionality and their introduction timing in the lifecycle of the product. One has to look at the technology trends by market, the competitive landscape, and the mobile worker adoption trends. However, one can only come up with a prioritized list of capabilities by taking into context the company’s own core competencies, skill sets, and overall mission. This paper looks at how mobile product companies can use scenario-planning methodology to formulate their product strategy and roadmap.

The listing of the chapters is as follows:

Enterprise mobility: Researching a new paradigm
The convergence of wireless, mobility, and the Internet and its relevance to enterprises
Business mobility: A changing ecosystem
A socio-technical perspective of mobile work
Designing productive spaces for mobile workers: Role insights from network analysis
Telecommuting and corporate culture: Implications for the mobile enterprise
User requirements of mobile technology: A summary of research results
Mobile interaction design: Integrating individual and organizational perspectives
A comparative anatomy of mobile enterprise applications: Towards a framework of software reuse
Protecting data on mobile devices: A taxonomy of security threats to mobile computing and review of applicable defenses
Enterprise mobility and support outsourcing: A research model and initial findings
Enterprise mobile product strategy using scenario planning
The strategic value of enterprise mobility: Case study insights
Exploring enterprise mobility: Lessons from the field

Your feedback is always welcome.

Thanks.

Chetan Sharma

US Wireless Data Market Update - Q2 2008 August 10, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, M&A, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile Usability, Smart Phones, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 4 comments

US Wireless Market Q2 2008 Update Aug 2008 Chetan Sharma Consulting

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http://www.chetansharma.com/usmarketupdateq208.htm

The US wireless data market grew 40% in Q208 compared to Q207 to reach $8.2B in data revenues. The total for 2008 stands at $15.7B for the first six months, 38% higher than the total for the same time period in 2007. The news of Alltel acquisition, iPhone 3G, and the flat rate pricing wars dominated the news. Though the infatuation for iPhone was a few degrees lower, Apple managed to keep the device front and center of the news cycles. US again exceeded Japan in mobile data service revenues for the quarter and the market is on track to reach $34B in data revenues for 2008.

The US Wireless data service revenues grew 8.6% Q/Q to $8.2B in Q208. Compared to Q107, the data service revenues grew 40%.
Overall ARPU increased by $0.46. Average voice ARPU declined by $0.05 while average data ARPU grew by $0.50 or 5%.
Verizon lead in data ARPU with $12.58 (or 24.41% of the revenues) closely followed by Sprint at $12 (or 21.4354%), AT&T at $11.59 (or 22.91%) and T-Mobile at $8.60 (or 17%).
The strongest growth in Q208 came from Verizon with 13% increase in data revenues from Q108. Verizon generated an industry record $2.6B in data revenues closely followed by AT&T at $2.5B. Both AT&T and Verizon are on target to exceed $10B in data revenues for the year for the first time by any operator worldwide besides NTT DoCoMo (the two US carriers are already close to 50% of the target). AT&T and Verizon now account for 62% of the market data services revenues. Sprint reversed its decline in data revenues during last quarter to increase its data revenues by 3% in Q208. T-Mobile registered a 5% uptick.
The average industry % contribution of data to service revenues exceeded 21% and now stands at 21.41%. A year ago, the % contribution stood at approximately 17%.
The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q208, Verizon had that 49.6M (or 72%) data subscribers. Verizon, AT&T and T-Mobile subscribers joined to send over 169 Billion text messages in Q208 translating into almost a message every 2 hours or so. This compared to users in Philippines where average routinely surpasses a message every hour.
In terms of net-adds, Verizon continued to lead with 1.5M net-adds again edging AT&T by 200K subscribers for the quarter.
For the first time, T-Mobile USA entered the top 10 rankings of global mobile operators by data revenues replacing SK Telecom which suffered decline for the second straight quarter. In fact, SKT got pushed to the 12th spot by Orange France. The top three US carriers again maintained their respective rankings amongst the top 10 global carriers in terms of data revenues. For the quarter, Verizon, AT&T, and Sprint Nextel stood at #4, 5, and 6 respectively with Verizon and AT&T closing in on China Mobile (2nd) and KDDI (3rd). AT&T and Verizon are in the select group of five global operators who are now generating $2B or more in data revenues/quarter (the other three are NTT DoCoMo, China Mobile, and KDDI).
Non-messaging continues to grab 50-60% of the data revenues for the US carriers.
The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe started to enter the US market with industry wide flat-rate pricing plans that included data. Sprint has been the most aggressive with its “Simply Everything” plans that include data services. 30% of its $100 plan is assigned to data revenues (for accounting purposes).
Q208 saw the blockbuster acquisition of Alltel by Verizon which is likely to close by end of the year. The $28B acquisition will catapult Verizon ahead of AT&T in total number of subscribers by a big margin (10M or so) and make it a leader in almost all major categories.
There continues to be tremendous activity in the area of Mobile Advertising. AdInfuse, Admob, Amobee, Millennial Media, Nokia, Rhythm New Media, Yahoo, and others ran compelling campaigns. There was also meaningful activity on the carrier front with industry wide initiatives.

Venture money experienced a decline into the mobile sector. During the first half of the year, private wireless companies announced $1.8B in 173 financings, compared to $2.7B in 209 financings for the same time period last year. (Source: Rutberg)
Nokia eclipsed 100M unit sale in Q208 for the fifth straight quarter. It sold over 122M handsets in Q208 (out of the total 297M), almost as many as the next four combined. Nokia’s global market share edged past 41%. Samsung at 15%, Motorola with 9.5%, LG with 9.3% and Sony Ericsson with 8% rounded out the top five. For the year, the industry looks to again eclipse the 1 billion handset mark for 2008
3G penetration in the US went past 30% in Q208, with Verizon leading the pack with over 60% 3G subscriber penetration compared to 25% 3G subscriber penetration at AT&T. T-Mobile is slowly expanding its 3G coverage. 3G subs have over $23 in data ARPU. These trends are expected and the diffusion of mobile broadband will continue to create new opportunities and revenues for the ecosystem.
Apple announced a 3G iPhone in June and launched an aggressive expansion plan to reach 70+ countries. The broadband and appstore capabilities are quite attractive to consumers and it shows. VPN and direct access to Exchange will get many more users into the mix and IT folks less apprehensive. The clearcut business model of 30/70 split is also attractive. Apple is likely to announce in Sept (may wait for its quarterly results in Oct) that it has reached the 10M goal for iPhone.
Feeling the threat from Apple and Google, Nokia bought the remaining portion of Symbian and announced the plan to open-source the OS, making things interesting in the wireless ecosystem. It puts Microsoft on the defensive and will be forced to reduce its licensing fee per device closer to zero. While Apple basked in the glow of iPhone 2.0, Google spent time swatting rumors of Android delay. Giving the changing dynamics in the industry, Google might be forced to play its gPhone hand earlier than it had anticipated.
After raising $14.5B from friends and family, Clearwire’s net-adds dropped in Q208. It needs to get its content and handset strategy in place in short-order.
In a sign of convergence battles to come, T-Mobile’s @Home and Sprint’s Femto cell initiatives started to take hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service.

Global update

China and India added approximately 52M subscriptions combined in Q208 with China marginally edging out India. For the year, both countries have added almost identical number of subscriptions (53M). By comparison, US added 7.5M for the same time period.
NTT DoCoMo continues to dominate the wireless data revenues rankings with almost $3.4B in data services revenue in Q208. Almost 40% of its revenue now comes from data services. DoCoMo also crossed 84% in 3G penetration in Q208 and is expected to cross 90% by early 2009.
Most of the major carriers around the world have double digit percentage contribution to their overall ARPU from data services. Operators like KDDI, DoCoMo, and O2 UK are consistently topping 30%.

More details in our worldwide wireless data market update in our Global Wireless Data Market Update Sept 2008.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

Bellagio Presentation August 4, 2008

Posted by chetan in : 3G, ARPU, BRIC, Carriers, European Wireless Market, Indian Wireless Market, Intellectual Property, Japan Wireless Market, Location Based Services, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Search, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

UNF Mobile Services Evolution Bellagio Presentation

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CTIA Wireless 2008 Roundup April 4, 2008

Posted by chetan in : 3G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Smart Phones, Speaking Engagements, Speech Recognition, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

CTIA Wireless 2008 Roundup

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

The Sin City hosted CTIA Wireless 2008 earlier this week. On Wednesday morning, just before leaving for the convention center, I caught some portion of Ben Bernanke�s congressional testimony on the US economy woes. Few minutes later, strolling the show floor, talking to various companies, and hearing the keynotes, it seemed like I was on a different planet. Either someone failed to deliver the memo or the wireless industry is resilient enough to weather the turmoil in the financial and housing markets with some ease. The show was bigger with more attendees, the booths were returning to their glamorous heydays of the past, and the general buzz and energy at the show all seem to indicate the industry is going to do just fine and is primed for further growth. The general themes were around open network and access, user experience, and bandwidth.

This note summarizes our impressions from the show.

CTIA Wireless in Pictures

First let�s do the numbers: CTIA released their semi-annual statistics on the US market. In summary: For 2007, $23B in data revenues, 2 trillion in MOU, $139B in total service revenues, 48B txt messages/month. (We released our US Market and Global Market updates last month)

Keynotes: In terms of style, Sir Richard Branson stole the show with his pompous exuberance and pep talk (the talk of imaginary flight to Mars was hilarious; investors in Microgin and Viroo must be upset). For substance, Marco Boerries, President, Yahoo Mobile gave a nice compact overview of Yahoo initiatives and products in the market which are pretty darn good. (Marco wrote an opinion piece for our Mobile Advertising Book � �The future of Advertising is in the Consumers� Pockets�). Yahoo has sewn together a number of deals worldwide that gives them a potential reach of over 600M users.

Vodafone is one operator which has been quite vocal in stating its positions on future infrastructure roadmap and data opportunities. Arun Sarin is probably the only CEO of major global operator who has publicly stated that Mobile Advertising will constitute a significant portion of their revenues in the coming days (Arun�s point person on the initiative Richard Saggers also wrote an opinion piece for our book �Opportunities for Mobile Advertising.� Let me know if you are interested in reading these two opinion pieces).

Microsoft�s Robbie Bach had the tough task of following the Branson-fest. He announced the arrival of a full-blown browser (finally!) for windows mobile. Also, the new windows mobile device from Sony Ericsson (Xperia) looks pretty darn cool. FCC Chairman Martin announced the rejection of Skype petition on the carterphone principle (to Skype�s dismay, it was not an April fool�s joke). Clearly, the definition of �open� is in the eye of the beholder. It means different things to different people. It has also been clear from the various activities and keynotes that the industry is trying its utmost to remain a �Self-regulated� industry and stay away from the clutches of eager politicians.

Lowell McAdam, CEO of Verizon Wireless conducted a panel with CEOs from Alcatel-Lucent, Ericsson, and Nortel and probed them on the 4G migration path, trends in applications and services, and contrasts in adoption and introduction of new technology in various parts of the world. Final day was marked by what is now becoming a trend - keynotes from politicians. This time around Sen. Edwards and Sen. Thompson graced the podium.

Mobile Advertising: In talking with numerous players in the value chain from small developers to large operators to ad networks to media companies, the impression was that things have matured over the last six months. It was gratifying to hear that some companies are adopting strategies and recommendations we propose in our book. Still, some of the basic problems remain � majority of the inventory remain unsold indicating weak demand, CPM rates are still over-rated though they are starting to come down, and fragmentation continues to remain an issue.

The good news is that the size of the mobile campaign budgets are getting bigger with several seven figure RFPs floating around. While some companies are still trying to throw a lot at the wall in the hope that something sticks, others are maturing as companies and are more focused in their positioning and product roadmaps. Integration of various channels is starting to appear on the horizon and the integration with the publishers is becoming tighter. The issue of measurement and auditing standards remains a big issue and unfortunately not much progress to report. There are carrier initiatives and various industry bodies are taking the challenge to rally the ecosystem, but, frankly, consolidation of such efforts is necessary, we can�t afford yet another layer of fragmentation in an already complex ecosystem.

We were interviewed on Mobile Advertising prior to the show by several publications. Some of the articles were published this week to coincide with CTIA

Wireless Wave (CTIA) � Moving Targets: Mobile marketing reaches consumers on their terms by Lynn Thorne

BrandWeek � Mobile Marketing � Fantasy vs. Reality by Ken Hein

Wall Street Journal � Personalized promotions: Sending the right ads to your phone � Peggy Anne Salz

NFC: There were many more NFC-enabled devices on display this time and vendors were talking and demoing NFC and Biometrics based payment solutions. While there are handsets on the roadmap, this market is still very nascent in North America and Western Europe.

Inspiration: The inspiration for new and creative services still comes (at least for yours truly) from Japan (and Korea). I love spending time in DoCoMo�s booth for it gives a glimpse into what�s to come. No other company better understands the development of devices, services and applications that overlay on lifestyles than DoCoMo (e.g. a wellness handset that is a pedometer, heart rate monitor, body and bad breath monitor and yes, you can make voice calls too). They view wireless air-interfaces as nothing more than enablers to solutions that enhance daily lives. Various device manufacturers also displayed some really cool devices. The quality and diversity of handsets that have been introduced into the global markets over the last four quarters is just astonishing. The cycle of innovation and time-to-market keeps on accelerating.

Femto Cells: A number of players like Airwalk, Airvana, and others are bringing Femto cell solutions to the market and carriers are starting to pull this into their strategy as well and look forward to deployments beyond the trials.

4G: LTE vs. WiMAX (vs. UMB): Since the decision of Vodafone and Verizon to support LTE, UMB has been disappearing from the discussion. The 4G discussion is convulsing around LTE and WiMAX now (though Nortel did indicate its support TD-SCDMA as a 4G candidate). Without a doubt the operator community is rallying behind LTE and there might be an opportunity to finally converge to a single standard (haven�t we seen this movie before) but frankly, the advances in silicon to integrate multiple radios has made the standards debate less relevant. WiMAX has forced acceleration of LTE standardization process but is starting to lose its time (and cost) advantage. All eyes are on Sprint�s XOHM business rollouts in the coming days and months.

Accessories: I have never seen so many accessory and reseller outfits at a CTIA show. Business must be booming.

Best Booth: Thought there were several good layouts, LG and Samsung continue to impress with their creativity and �art of marketing.�

Developer and Publisher woes: Along with John Philips (Astraware) and Peter Baldwin (Cellmania), I helped facilitate a few developer session at the Mobile Jam Session organized by WIP. The issues of distribution, discovery, and monetization remain challenging for the small developers worldwide. Even with million user base, they are finding it difficult to monetize but we did discuss a number of success stories. The core elements of success that emerged from the discussion were: choosing the right market, embedding viral component into everything you throw out there, there is no room for mediocrity, and personalizing and customizing go a long way to get traction. An interesting tidbit: the number of page views for mobile MySpace app is a magnitude higher on off-deck vs. ondeck. Several of the companies are trying mobile advertising with varying degrees of success. After spending 4 hours with the developers, I sat on a carrier panel discussing mobile advertising. The contrast between the two worlds was so apparent. Clearly, more needs to be done to help both sides understand each other a bit better.

Green CTIA: There is a stronger emphasis on recycling and contributing to save the environment. The show itself is a big resource hog, so every bit helps.

Alternate Mobile Devices: The universe of alternate devices is expanding. Companies are buying wholesale data packages from the operators and integrating broadband chipsets into hardware to do digital signage (ICG), M2M (Sensorlogic), PND and much more. The definition of being �mobile� keeps on changing.

On Being �Open�: Obviously, given the recent activity around openness, getting a penny for each time the word was uttered by a speaker would have paid off for a lifetime of CTIA trips. While talk is cheap, demonstrable progress is being made by the likes Yahoo, Apple (btw, 3G iPhone is on its way), and AOL.

Another MVNO experiences turmoil: Movida - a Spanish focused MVNO which has garnered almost 300K subs filed for chapter 11.

Voice is becoming mainstream: With the product launches from Nuance, SpinVox, Vlingo, Jott, Yahoo, and many others, voice based navigation and its tighter integration with data services is becoming mainstream.

Where are the opportunities? Last week, I was moderating a panel with executives from AOL Mobile, T-Mobile, Motricity, and Formotus and the themes that emerged were around platform play, user experience, and productivity. At CTIA, in addition to these areas, there was a lot of discussion around social networking (though the market is being saturated with the MoSo noise). It is also clear that we are moving into the phase of �aggregation of fragmentation� with initiatives from Yahoo, AOL, and Google dominating the landscape.

Home Screen Effect: I have been talking about using the home screen for driving data usage for the last 8 years. I think we will see good innovation this year on that front starting with Yahoo�s One Platform. There are several other initiatives in the works where operators and OEMs will be deploying frameworks and technologies to bring information to a �click-less� idle screen environment.

Overall, no major news but industry stays vibrant, healthy, and exciting.

Your feedback is always welcome.

Chetan Sharma

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

Global Wireless Data Market Update 2007 March 27, 2008

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, European Wireless Market, India, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Networks, Partnership, Speaking Engagements, Speech Recognition, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 8 comments

Global Wireless Data Market Update 2007

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http://www.chetansharma.com/globalmarketupdate2007.htm

As you read this End of Year (EOY) 2007 Global Wireless Data Market update this week, somewhere in India, a new subscription will catapult India over the US as the number 2 global wireless market. 2007 was a banner year for global wireless data market. The global service revenues for the year touched $700 billion, the data service revenues were more than $120 billion, China signed its 500 millionth subscription, and both India (in feb 08) and the US crossed the 250 million subscription mark. 2007 continued to enhance mobile data�s role in the operator ecosystem with approx 17% of the revenue is coming from data services.

For some leading operators, data is now contributing up to 35% of the revenues however increase in data ARPU is not completely offsetting the drop in voice ARPU. From the true and tested SMS messaging to new services such as Mobile TV, Enterprise apps, and others, different services helped in adding billions to the revenues generated for 2007. Japan and Korea remain the envy of the global markets and the countries to study and learn from w.r.t. new services and applications. The US market has been steadily making strong comeback and for the first time exceeded Japan in service revenue generated from mobile data.

The worldwide markets continue to grow at an explosive pace reaching 3.3B subscriptions by Q407 up 20% from 2006 levels. Significant growth is coming from India and China with both countries registering close to 8-9M net adds per month. India recorded 8.8M net adds in Jan 08 while China added 9.4M in Feb 08. Overall, the world market is at almost 50% penetration.
US surpassed Japan as the most valuable mobile data market in service revenue with US adding $24.5B vs. $23.2B for Japan in 2007 mobile data service revenues. China with $12.5B was ranked number 3. US registered the highest growth amongst the top 3 with over 55% increase from 2006 levels followed by China at 37% and Japan at 18%. These top 3 markets account for over 50% of the global data service revenues.
NTT DoCoMo continues to dominate the wireless data service revenues rankings with over $12.13B in service data revenues for 2007 however Q/Q growth has dropped to single digits. DoCoMo crossed 80% in 3G penetration and is expected to touch 90% by end of the year.
DoCoMo was followed by China Mobile, KDDI, Verizon Wireless, AT&T, Sprint Nextel, O2 UK, SK Telecom, Softbank, and China Unicom to round up the top 10 operators by wireless data service revenues. All the top 10 carriers exceeded $3B in data revenues for the year.
Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like KDDI, DoCoMo, 3 Italy, 3 UK, and O2 UK are topping 30%.
Both India and China added a whopping 85 million new subscriptions (most of them prepaid). This week India edges past US to become the number 2 wireless market (by subscriptions) in the world. In last two years alone it added almost 150 million new subscriptions (in comparison China added 155 million and the US market added 44 million).
Vodafone Italy reported the highest increase in data ARPU from 4Q06 with 76% growth. Other notable percentage increases in ARPU were from Rogers, AT&T, Verizon Wireless, Sprint, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.70.
In terms of absolute dollar amount, 3 UK leads the pack with $29 data ARPU (qualifying limit: 4 million subs). By comparison, the rest of the top 4 operators are below $22. In fact, 3 UK reported the highest ARPU recorded for the year at approximately $94 (in Q2). Other operators who reported overall ARPU above $60 were KDDI, NTT DoCoMo, Rogers, and 3 Sweden.
The biggest jump in data revenues was experienced by Verizon Wireless with over 68% increase from 2006 followed by AT&T with 63% jump and O2 UK making 49% gain.
In 2007, SMS�s vice like grip on data revenues continued to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
The top 10 operators increased their revenue by 32% during 2007 (from 2006) to reach almost $62 billion in data service revenues, thus accounting for almost half of the global data service revenues though they account for only 27% of the global subscription base.
NTT DoCoMo�s position at the top of the wireless data world has been challenged recently by several carriers esp. by its archrival KDDI. Their data coordinates stand at ($21.5, 35%) and ($21, 34%) respectively (please see PowerPoint for reference). Since the takeover from Vodafone, Softbank has been making significant strides in the market by taking the highest share of the net-adds in last 9 months.
The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers � Smart Communications and Globe Telecom with almost 55% (or $4) contribution coming from data services.
Even though China reported approximately $12.5B in data revenues for 2007 and the percentage contribution is over 23%, data ARPU is around $2.3. For India data ARPU dropped below $1 for all major carriers.
China Mobile with 369M (as of Dec 07, the numbers increased to 384M by Feb 08) remains the #1 carrier in terms of total number of subscribers followed by Vodafone at 252M and China Unicom with 160M subscriptions. Telefonica, Am�rica M�vil, SingTel, Deutsche Telekom (T-Mobile), and Orange (France Telecom) are the next five largest telecom groups in the world. In terms of individual carriers in a given country, AT&T and Verizon Wireless occupy the #3 and #4 spot respectively ahead of NTT DoCoMo, which is at #5. The two Chinese carriers round up the top two positions and are likely to stay perched at their lookout vistas for many years to come. China Mobile also surpassed Vodafone in market cap which stands at $288B (vs. $164B for Vodafone). Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. Carriers in Japan and Korea are the most under duress.
As far as 3G is concerned, GSA reported 293 WCDMA commercial launches worldwide with over 270M 3G users (66% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 75-80% penetration. 3G has picked-up steam in both western Europe and North America per our forecast in the 2005 cover story article �3G: Hitting the Mass Market� published in the Wireless World Magazine. Western Europe and US are approximately at 25% 3G penetration (Italy being the exception reaching 40%).
China and India represent the biggest opportunities for Infrastructure providers. China has postponed its 3G decision for the umpteenth time and has been having technical and political problems to get something in place before the 2008 Olympics. India is going through its 3G spectrum policy but unlike China is likely to resolve the issues in short order. Some of the biggest infrastructure contracts will come from these two countries that are looking to expand coverage into rural areas. In India, regulators are considering inviting bids for the 3G spectrum from foreign entities as well.
Carriers with nationwide 3G networks and good distribution of handsets are seeing uptick in data ARPU. The Japanese and Korean carriers along with operator 3, Verizon, Sprint Nextel are all seeing benefits of rolling out their 3G service. Deployment of 3.5G technologies such as HSDPA and EV-DO Rev A (and B) are also gaining momentum. Networks are getting deployed and market is being seeded with some of the early handsets. In terms of 4G, there is a strong momentum behind LTE, UMB in its current incarnation is practically dead, and proponents of WiMAX are pushing the technology as a 4G candidate, though it is starting to lose its time advantage.
In terms of applications, messaging accounts for lion-share of data revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have captured industry�s imagination. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
2007 also saw the demise of some high-profile MVNOs like Amp�D. Helio continues to struggle while the newer ones like Sonopia and Blyk are testing the treacherous waters with different business models. Asian market is also opening up for MVNOs.
Nokia eclipsed 100M/quarter unit sale three times in 2007. It sold over 437M handsets in 2007, more than the next three handset manufacturers combined. Nokia�s global market share stood at 40.2%.
While the talk of �Open Access� and �Open Platform� consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon�s �Open Network� initiative elevated the consternation in the ecosystem.
Several operators reported Mobile Advertising as their key strategic focus for the coming quarters, esp. China Mobile and Vodafone. Sensing the opportunity to seek new sources of revenue stream, Nokia launched its ad service as well. 2007 saw tremendous M&A activity in both the online and mobile advertising space. In a matter of weeks, several billion dollar transactions took place highlighting the intensity in preparing for the next battleground. The estimated market for mobile advertising in 2007 was approximately $2.3B with messaging, search, and browsing accounting for over 84% of the revenues.

Your feedback is always welcome.

Chetan Sharma

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

older posts »

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Bellagio Presentation August 4, 2008

CTIA Wireless 2008 Roundup April 4, 2008

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Future in Review (FiRe) 2009 roundup May 31, 2009

Global Wireless Data Market Update - 2008 April 28, 2009

CTIA 2009 Roundup April 6, 2009

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

LBS - Latitude February 5, 2009

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

Location Based Advertising: 2009 and Beyond January 22, 2009

January 27th 2009 — Networking @ 4:00pm, Panel @ 4:30pm - 6:00pm

Mobile Industry Predictions 2009 January 1, 2009

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

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

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

Recap of the Vienna Summit November 11, 2008

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

Carnival of the Mobilists #141 September 15, 2008

CTIA Wireless IT and Entertainment 2008 Roundup September 12, 2008

New Book: Enterprise Mobility: Applications, Technologies and Strategies August 24, 2008

US Wireless Data Market Update - Q2 2008 August 10, 2008

Bellagio Presentation August 4, 2008

CTIA Wireless 2008 Roundup April 4, 2008

Global Wireless Data Market Update 2007 March 27, 2008

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