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Mobile Breakfast Series: Internet of Things March 23, 2014

Posted by chetan in : Internet of Things, IoE, IoT, Mobile Breakfast Series, Mobile Future Forward, US Wireless Market, Worldwide Wireless Market , add a comment

Internet of Things: Exploring the next big thing in mobile

We hosted our first Mobile Breakfast Series of the year at Columbia Tower Club last week and the topic was Internet of Things (IoT). IoT is the hottest thing in the mobile industry right now with investment pouring in from all sides. Our expert panel took a deeper look into the opportunities, the hype, and the challenges in the evolving mobile segment. Mobile Breakfast Series works to bring you the current thoughts, expert brains, and probing questions about the main issues of the day.

Internet of Things (IoT) has been hailed as the next big thing in the mobile industry. As connections from objects and things interconnect with existing and new end points, the networked effect can provide tremendous opportunities; reshape existing processes, user experiences, and expectations. But, really, how real is IoT and what will it take to reach the billions of dollars promised. Will it fundamentally alter how we do things? We are starting to see signs of tremendous progress. GE is investing $4B+ into its version of IoT – the industrial Internet and it is making the difference in operations and machine learning. Connected consumers’ gadgets are enabling us to lead healthier lives, work more efficiently, and manage our time more effectively.

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We had a superstar panel discussing the IoT evolution from different angles.

Bobby Morrison, President, Verizon PNW has his ears to the ground as he works with his customers big and small on using mobile to solve real-world problem that improves productivity and financial performance. Verizon is one the top digital operators in the world who understands the implications of the 4th wave and is investing appropriately.

Tim Moss, SVP, Ericsson was one the key guys behind the analysis that led to the 50 Billion connected devices paper in 2011. He has 20+ years of experience in the industry and worked across many verticals so has a real deep understanding how mobile can be incorporated in various industries.

Chris Murphy, Director, Brand Communications and Digital Marketing, adidas US is close to the consumers as to what matters most. Companies like adidas don’t introduce technology in their products for the sake of technology. Each mistake can be costly if it is not well thought out. It doesn’t mean that are constantly tinkering at the edges. His team has been introducing new concepts and new ways to engage the consumer throughout their

Shankar Chandran, VP, Samsung Catalyst Fund is part of the new investment group at Samsung in Silicon Valley who is looking to invest in cutting edge startups and technologies in both hardware and software that can give Samsung and its ecosystem an edge. His areas of interest are IoT, cloud, security, mHealth, and next-generation user interfaces. Samsung is one of the top 3 important players in the mobile and technology ecosystem.

From wearables to automobiles to industrial automation, the use cases are endless and we are just trying to make sense of what such a connected world will mean to productivity, human behavior, safety, privacy, and the society at large.

As we stand today, here are some of the forecasts:

In 2011, Ericsson forecasted 50 Billion Connected Devices by 2020

In 2012, Cisco agreed with the forecast and said they too expect the same number of connected devices and in 2013 came out with a paper talking about a $14.4 Trillion economy powered by IoE

In 2013, GE came out with their research and paper on the Industrial Internet powered by sensors and calculated that we could see $10-15 trillion dollar impact on the GDP in the next 20 years.

So, these are massive numbers. It does feel like we are entering a new phase of technology growth due to connected sensors, what I call the “Golden Age of Mobile” and I was seen that in my work in both developing and developed nations that the use cases are everywhere. In many instances, developing countries are not waiting but leapfrogging some of the developed nations. So, very exciting times ahead.

The salient point of discussions were:

I really enjoyed the discussion and we covered quite a bit of ground. As usual, the audience were well informed and did their homework.

Given the importance of the topic, we are expanding our Mobile Breakfast Series on IoT and going back to London this summer and in partnership with Telefonica hosting a session on IoT on June 17th. Hope our friends and colleagues in western Europe can join us.

We will also more details on our annual summit Mobile Future Forward in September. Stay tuned for more details.

Thanks and see you around.

2013 – The year in mobile December 23, 2013

Posted by chetan in : 4G, 4th Wave, Applications, Chetan Sharma Consulting, Connected Devices, Devices, Disruption, Enterprise Mobility, European Wireless Market, Fourth Wave, IP Strategy, Intellectual Property, Mergers and Acquisitions, Mobile 2013, Mobile Applications, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 15 comments

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

2013 – The year in mobile

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

With best wishes for an outstanding 2014.

Yours truly

Chetan Sharma

US Mobile Market Update Q3 2013 November 14, 2013

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

US Mobile Market Update Q3 2013

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

Download PDF (2MB)

Summary

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

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

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

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

Smartphone and Connected Device Growth

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

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

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

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

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

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

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

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

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

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

The Fourth Wave and the shift towards services

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

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

FCC chairman and regulations

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

What to expect in the coming months?

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

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

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

Service Revenues

ARPU

Subscribers

Shared Data Plans

4th Wave Progress

Handsets

Your feedback is always welcome.

Chetan Sharma

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

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

NEW BOOK: Mobile 4th Wave: Mining the Trillion Dollar Opportunity August 26, 2013

Posted by chetan in : Chetan Sharma Consulting, Mobile Future Forward , 9 comments

mff2013book

I am pleased to announce that our Mobile Future Forward Book for 2013 will be published and become available exclusively to Mobile Future Forward participants on Sept 10th. As is the tradition, the book has some brilliant essays and interviews from our speakers – the thought leaders and mobile industry senior executives, on trends, opportunities, innovations, and user experiences. More importantly, these thought-pieces highlight how some of the leading companies are gearing themselves to execute on the 4th wave. The book provides a perfect platform for our day long brainstorm about what the next 5 years in mobile will look like. We have extraordinary speakers and am really looking forward to the discussions throughout the day.

The essays are:

1. Mobile 4th Wave: Evolution of the Next Trillion Dollars – Chetan Sharma, President, Chetan Sharma Consulting

2. One-on-one with Ralph de la Vega, President and CEO, AT&T Mobility

3. Connected Car: Building a New Industry – Pavan Mathew, Head of Connected Car, Telefónica Digital

4. HTML5: Big Hurdles Exist, but Economics Will Always Win – Hank Skorny, Vice President/GM, Intel

5. Being Open: New Markets, New Opportunities – Tracy Isacke, Head of Americas, Telefónica Digital

6. Video is Not Data (or Voice) – Chris Koopsman, Vice President/GM, Citrix  ByteMobile

7. The Cloud and its Omnipresent Impact – Biju Nair, Chief Strategy Officer, Synchronoss

8. Digital Lifestyle Services: Winning ‘Life Share’ of Customers – Doug Suriano, Vice President, Oracle

9. Mobile Apps Privacy Framework for Consumer Transparency and Control – Sarla Sharma, Vice President, Chetan Sharma Consulting

10. The Internet of Things is Changing the Order of Things (and of Conversations) – Matt Carter, President, Sprint

11. Remaining Relevant and Sustainable in the Age of Smartphones – Stephen David, Former CIO, P&G

12. Building a New Business Within a Big Company: Keys to Success – Kevin Petersen, President, AT&T Digital Life

13. The Future of Mobile Healthcare – Raj Toleti, Chief Technology Officer, Patient Point

14. What Really Drives Mobile Devices Market Performance? – Chetan Sharma, President, Chetan Sharma Consulting

15. SDN – The Platform for Mobile Service Innovation – Steve Shaw, Director, Juniper Networks

The goal of the Mobile Future Forward Summit is to explore the future of the mobile industry, to create new connections, to openly discuss and debate new ideas. By bringing together a really diverse group of individual leaders – both speakers and audience, we are able to create an environment for constructive dialogue that will hopefully help in formulating your own strategies and product plans.

My thanks to all the authors and their respective organizations for making this year’s book possible.

Chetan Sharma

Mobile 4th Wave: Evolution of the Next Trillion Dollars August 25, 2013

Posted by chetan in : Chetan Sharma Consulting, Mobile Future Forward , add a comment

Mobile 4th Wave: Evolution of the Next Trillion Dollars

- A Mobile Future Forward Research Paper

http://www.chetansharma.com/4thwaveandthenexttrillion.htm

This paper is the second in series of the Mobile 4th Wave research papers. It is a required reading for Mobile Future Forward participants.

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Introduction

Mobile is the most dynamic and exciting industry in the world today. It is playing a central role in driving the global economy across multiple dimensions. The speed with which the break-neck innovations are being introduced will make Captain Kirk and crew proud. We are on the verge of reaching an incredible milestone – when there be more cellular subscriptions than humans on earth. We are already beyond 10 billion connections worldwide and mobile is driving the business and human case for the rapid evolution and adoption.

Mobile has become the most critical tool to enhance productivity and drive human ingenuity and technological growth.

Indeed, we are entering the golden age of mobile.

Amidst the change, the ecosystem itself is undergoing a significant transition. As the tectonic plates shift, the revenue opportunities are shifting from voice, messaging, and access to the 4th revenue curve of mobile opportunities. The shift towards this curve is expanding the base of players who are going to participate, connect with the consumers, and vies for their pocketbook. While the progress of the past 20 years has been phenomenal, the “connect and mobilize everything” characteristic of the next revenue curve is going to define the industry itself while determining the new winners and losers for consumer’s mindshare.

The revenue generated on the fourth curve is going to be massive but much more distributed than previous curve. It will end up being a multi-trillion dollar market in a matter of a decade – growing much faster and scaling much higher heights than previous revenue curves.

This paper is the continuation of the discussion we started with our first in the series of the 4th curve papers – “Operator’s dilemma (and opportunity): The Fourth Curve.” In this paper, we will take a look how various players are adapting to the opportunity curve, how the overall value chains and ecosystems are being aligned and who are the early leaders and contenders to become the “Digital Lifestyle Solution Providers.”

The first paper looked at the emergence and the impact of the 4th curve from an operator viewpoint. In this paper, we expand the discussion to the broader ecosystem and how some of the leading Internet players and startups are participating in the 4th revenue wave of mobile. We will also look at how some of the leading operators have positioned themselves as leaders and contenders.

It is very clear that mobile will continue to have a tremendous impact on the global GDP, vertical industries, and consumers’ expectations of how communication takes place. Mobile is already a $1.6 trillion industry. The past growth has been dominated by mostly voice but as we move into the next decade, the digital services will take the lion share of the industry revenues. The shift will cause a lot of disruption and unpredictable growth for many players. Players who are better prepared and can adapt quickly will be able to successfully participate in the evolution of the next trillion dollars.

This paper attempts to define the space that is fast evolving and will have a lasting impact for years to come.

Download paper (2MB, 40 pages)

Your feedback is always welcome.

Thanks

Chetan

We will be discussing a number of issues raised in this research paper at our annual mobile executive thought-leadership summit – Mobile Future Forward on Sept 10th in Seattle. In fact, this is the first event of its kind focused on the changing dynamics of the ecosystem.

Mobile Future Forward–Preliminary Agenda August 21, 2013

Posted by chetan in : Chetan Sharma Consulting, Mobile Future Forward , add a comment

Greetings,

Mobile Future Forward is three weeks away and am pleased to announce our preliminary agenda. We have endeavored to gather our community to talk about the next phase of the industry growth. To paraphrase the legendary Wayne Gretzky, we ought to look at where the mobile puck is going. That’s what Mobile Future Forward Executive Summit is all about. By looking at what will generate the next trillions, we can start to put the pieces together to have a better grasp of the challenges and the opportunities.

We are expected to sell out so grab your seats today.

Introduction – The Golden Age of Mobile

It is very clear to us that we are entering the “Connected Intelligence Era.” These two operative words are going to define the next phase of human evolution and is going to dramatically change every industry vertical from the ground up. Welcome to the Golden Age of Mobile.

Chetan Sharma, President, Chetan Sharma Consulting

Keynote Fireside – The Shift towards Services

AT&T is one of the leaders in the mobile market. In fact, it is amongst the top three global players in terms of revenues from mobile data services. Under the deft stewardship of Ralph de la Vega, President and CEO of AT&T Mobility since 2007, AT&T has continued to pioneer new business models and revenue streams. He has led AT&T to become an undisputed leader in mobile broadband and smartphone adoption. Starting from the industry defining iPhone launch in 2007 to the launch of digital solutions in 2013, Ralph has been ahead of the curve. Ralph and his team saw the coming shift to solutions and services and mobilized the resources by focusing on some key vertical areas such as Home Security, Commerce, and Connected Auto. We will kick things off by getting the pulse of the industry and see opportunities through Ralph’s prism.

Ralph de la Vega, President and CEO, AT&T Mobility

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Keynote Fireside – Retail and Commerce

Marianne Marck, SVP – Consumer Facing Technology, Starbucks

Jude Buckley, President, BestBuy

Stephen David, former CIO P&G (moderator)

Break

Keynote Fireside - Rule of 3

Thom Gruhler, CMO - OS, Microsoft

Steve Elfman, President – Network Operations and Wholesale, Sprint

Hank Skorny, VP/GM – Software Services Group, Intel (moderator)

Keynote Fireside – Future of Devices, Computing and Consumer Services

Kevin Packingham, Chief Product Officer, Samsung

Rick Osterloh, SVP – Products, Motorola Mobility

Yung Kim, President and Chief Strategy Officer, Korea Telecom

Nick Wingfield, Technology Reporter, NY Times (moderator)

Lunch

Operators and 4th Wave

Glenn Lurie, President, AT&T

Fay Arjomandi, Global Lead, Vodafone Xone

Tracy Isacke, Director of Investments, Telefonica Digital

David Small, Chief Platform Officer, Verizon

Julie Woods-Moss, CEO – NextGen Business, CMO, Tata Communications

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Health and Wellness

Dr. Geeta Nayyar, CMIO, AT&T

Raj Toleti, CTO, Patient Point

Jef Holove, CEO, Basis

Madhu Nutakki, VP – Digital, Kaiser Permanente

Russell Benaroya, CEO, Everymove (moderator)

Building Blocks of the 4th wave

Tom Nagle, SVP and GM – Wireless Services, Comcast Communications

Vince Spinelli, Managing Director, Mobility Solutions Group, Juniper Networks

Chris Koopmans, VP and GM – Cloud, Citrix

Doug Suriano, VP – Products, Oracle Communications

Travel and Tourism

Drew Patterson, CEO, Room77

Joost Schreve, VP – Mobile, Tripadvisor

Curtis Kopf, VP, Alaska Airlines

Jeff Warren, VP – Mobile Expedia (moderator)

Media and Entertainment

Andrew Stalbow, Former EVP, Rovio

Manish Jha, GM – Mobile, NFL

Danny Bowman, Chief Sales Officer, Samsung

Ujjal Kohli, CEO, Rhythm New Media (moderator)

Man, Machine, and Data

Matt Carter, President, Sprint

Biju Nair, Chief Strategy Officer, Synchronoss

Rowland Shaw, VP - Strategy, Ericsson

Michael Castleman, President – KCD Brands, Sears Holdings

Rod Randall, Partner, Siris Capital (moderator)

Solving the biggest problems in computing/communications

 

Dr. Henning Schulzrinne, CTO, FCC

Dr. Avideh Zakhor, Professor EECS, UC Berkeley

Mark Anderson, CEO, SNS

Ariel Garton, CEO, InterXon

Wim Sweldens, Former President, Alcatel-Lucent Wireless (moderator)

US Wireless Market Update Q2 2013 August 13, 2013

Posted by chetan in : 4th Wave, ARPU, Chetan Sharma Consulting, Mobile Applications, Mobile Cloud Computing, Mobile Future Forward, Smart Phones, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update Q2 2013

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http://www.chetansharma.com/usmarketupdateq22013.htm

Download PDF (2MB)

Summary

The US mobile data market grew 4% Q/Q and 14% Y/Y to reach $21 billion in mobile data revenues. Data is now 46% of the US mobile industry service revenues and as we had forecasted a few years back, the cross-over point of 50% might occur later this year. For the year 2013, we are expecting $90 Billion in mobile data service revenues for the US market.

For the quarter, the market added a paltry 139K new connections, a decline of 95% from Q2 2012. It was the lowest net-adds quarter in the US mobile history (barring the early days of tepid growth). The biggest reason was the sun setting of the Nextel brand which was finally laid to rest after the grand experiment of 2004 went wrong.

However, the story of the quarter was the resurgence of T-Mobile which roared back with an industry leading net-add quarter, something it did last when George Bush was still the president. Not only that, the growth was on the back of postpaid net-adds, something it hasn’t done in 12 quarters. The merger with Metro has helped boost the subscriber count and the revenue numbers. However, the growth came at a cost with shrinking margins and lower overall ARPU.

AT&T sold more iPhones but Verizon sold more smartphones. Given the lack of new devices from Apple and some good ones from competitors, Android edged past iOS for the US smartphone market share for the quarter primarily coming from the Samsung success with the Galaxy brand. Nokia launched some new devices focused on cameras, Motorola/Google made its first foray into the smartphone world after the merger with MotoX. However, the market awaits the next iPhone which is going to be released next month.

The Sprint-Softbank-Dish drama finally ended and as expected Softbank got a hold of both Sprint and Clearwire though at a higher price which was the plan all along. With this merger behind, all eyes are squarely focused on T-Mobile as to who makes the bid for 4th ranked operator in the next 6-12 months.

Smartphones are now past the 60% mark in the US and continue to sell at a brisk pace accounting for almost 87% of the devices sold in Q2 2013. Apple led the smartphone sales amongst the top 4 operators with 42% share for the quarter. While the US penetration of smartphones is 60%, the 60% of the sub base is concentrated in only 35% of the households thus leaving plenty of growth in the marketplace.

Is the smartphone growth over?

There has been some speculation in the market that the smartphone growth in the US market is over. In the US, roughly 240M subscribers have 335M mobile subscriptions. Out of those 240 subs, roughly 145M have smartphones (many of them have two or more). These days newborns get an iPhone on their arrival as a welcome gift, but if we take out the 0-5 age group, we are left with 293M potential subs. This means the potential market for smartphones at this point in time is 148M subs who don’t have a smartphone (obviously, there will always be folks who just don’t want any wireless phone – smartphone or otherwise but the size of that group is shrinking). Add to the upgrade cycle which averages between 18-20 months in the US, the market for smartphone growth remains pretty healthy.

The global market is even more fertile. The emerging markets are quite price sensitive and the low-cost Android devices are rushing to fill the void. If Apple cares about market share, it will have to figure out a strategy to address the void in its portfolio.

The success factor of mobile devices and OEMs is not determined just by product but several other factors as outlined in our recent paper “What Really Drives Mobile Device Performance?” As I mentioned to the New York Times, it is no longer good enough to have a great product, an OEM needs to perform well across multiple variables. CNBC also referenced the research in one of their segments.

Predictably, Microsoft’s Surface RT made a dismal impact on the market. The fundamental strategy was flawed and it was surprising that so many OEMs fell for it.

Blackberry, Nokia, HTC, each once proud leader of the smartphone ecosystem is struggling. Can they come back? In this market, you don’t get too many chances and too many years to turn the ship around. Once the customer loyalty is lost, it is very hard to get it back because there are hungry competitors ready to take your spot. Blackberry and Nokia are a perfect case study for management schools. The cycle of complacency spares no one.

A more likely scenario for some of these players might be some form of M&A transaction. As we alluded to in our paper, Lenovo is the dark horse of mobile and while there are others like HP and Sony who are looking to, reenergize the market, and Huawei and ZTE inching-up every quarter, Lenovo seems better positioned to make an acquisition and make a run for the top 3 spot. But, it will have to make a decisive move and go global with its strategy quickly else as we know the mobile market doesn’t wait for no one.

In terms of Q/Q growth, Connected Devices segment grew 13%, Wholesale 1%, Postpaid 2%, and Prepaid 1%.

The disappearing Tier-2s

In our previous update, we suggested that the market for tier-2s in the US is practically over. The reason was pretty simple – there is no growth left for them. Given the postpaid saturation, the big guys are also focusing heavily on the prepaid segment leaving the tier-2s vulnerable. MetroPCS was first to go followed by Leap (acquired by AT&T, transaction is not complete yet). The next big shakeup in the industry will be the acquisition or the merger with T-Mobile. Like we suggested in our paper “Competition and the Evolution of Mobile Markets” in 2011, rule of 3 will ultimately prevail in the US market. We will be discussing the subject in the more detail at our Mobile Future Forward Summit next month.

The Fourth Wave and the shift towards services

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

The incumbent operators in Canada are getting really nervous about the potential entry of Verizon into the market that hasn’t seen any “real” competition in years.

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

OTT impact on legacy businesses and models

We will see the same impact of IP and mobility on the various verticals like Retail, Energy, Education, Entertainment, Travel, etc. Some operators have been preparing for this shift and going outside their traditional products and services to launch services like AT&T’s Digital Life to address opportunities in the home, Verizon’s efforts in health and public safety and Sprint’s steps in mobile advertising and analytics. Overseas operators such as Telefonica, Vodafone, Tata, and others are looking to make inroads into the US mobile 4th wave market.

What to expect in the coming months?

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

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

Against this backdrop, the analysis of the Q2 2013 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

· Shared data plans launched by Verizon and AT&T saw positive results. The tablet and other device attachment rate has gone up by 60%.

· Shared data plans are working so well for AT&T that most of its postpaid growth is coming from tablets. In the last 4 quarters, postpaid tablets accounted for over 72% of the net-adds.

· Shared data plans moved tablet session based consumers to postpaid tablet plans with more predictable revenue stream. The $10 surcharge for every device is still an inhibitor for many consumers. Over time, we expect this fee to go away to bring in many more consumers experience data services across devices other than their smartphones.

Applications and Services

· The market is seeing a lot of activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education. We will be discussing how mobile is changing all the vertical industries at our fall summit Mobile Future Forward where industry leaders in each of these vertical segments will convene to share their experiences and expectations.

OTT and the impact on legacy services

· In the last 12 months, Whatsapp has moved around more messages than all the mobile operators in the US and China combined. Those of you who have read our Fourth Wave paper shouldn’t be surprised by this shift.

Handsets

· Smartphones continued to be sold at a brisk pace accounting to almost 87% of the devices sold in Q2 2013.

4th Wave Solutions

· There were several launches of digital services by the operators but the most prominent has been the Digital Life home security and automation service launched by AT&T.

· There are other instances of companies revving up their mobile revenue base. Facebook is on its way to cross the 50% threshold, Pandora is at 60%, and Twitter is close to 50%. Starbucks and Expedia are doing well in their respective verticals. There are several mobile-only players that are eating up the revenue from traditional players who haven’t been quick to move into mobile.

· Google and Apple are ahead of the pack when it comes to raw revenue. We will have more details on the subject in our upcoming research sequel, “Mobile 4th Wave: The Evolution of the Next Trillion Dollars.”

Your feedback is always welcome.

Chetan Sharma

We will be discussing a number of issues raised in this research update at our annual mobile executive thought-leadership summit – Mobile Future Forward on Sept 10th in Seattle. Thought-leaders include:

· Ralph de la Vega, President and CEO, AT&T Mobility

· Steve Elfman, President, Sprint

· Erik Moreno, EVP, Fox Networks

· Danny Bowman, Chief Sales and Operating Officer, Samsung

· Terry Myerson, EVP – Operating Systems, Microsoft

· Julie-Woods Moss, CEO – NextGen Business, CMO, Tata Communications

· Jef Holove, CEO, Basis

· Geeta Nayyar, Chief Medical Officer, AT&T

· Rowland Shaw, VP – Strategy, Ericsson

· Andrew Stalbow, EVP, Rovio

· Raj Toleti, President, Patient Point

· Manish Jha, GM – Mobile, NFL

· Drew Patterson, CEO, Room77

· Dr. Avideh Zakhor, Professor, UC Berkeley

· Rick Osterloh, SVP – Products, Motorola – Google

· Jeff Warren, VP – Mobile, Expedia

· Mark Anderson, CEO, SNS

· Doug Suriano, VP – Communications, Oracle

.. More to come

· Stephen David, former CIO, P&G

· Yung Kim, President and Chief Strategy Officer, Korea Telecom

· Glenn Lurie, President, AT&T Mobility

· Jude Buckley, President – Mobility, Best Buy

· David Small, Chief Platform Officer, Verizon Enterprise Solutions

· Tracy Isacke, Head of Americas, Telefonica Digital

· Marianne Marck, SVP – Consumer Facing Technology, Starbucks

· Henning Schulzrinne, CTO, FCC

· Fay Arjomandi, Global Lead, Vodafone Xone

· Biju Nair, EVP and CSO, Synchronoss

· Hank Skorny, VP/GM – Software Services, Intel

· Curtis Kopf, VP – Customer Innovation, Alaska Airlines

· Matt Carter, President – Emerging Solutions, Sprint

· Joost Schreve, VP – Mobile, Tripadvisor

· Rod Randall, Partner, Siris Capital

· Chris Koopmans, VP and GM – Cloud, Citrix ByteMobile

· Wim Sweldens, former President, Alcatel-Lucent Wireless

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in November 2013. The next Global Wireless Data Market update will be issued in October 2013.

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

Mobile Future Forward–Speaker Update July 24, 2013

Posted by chetan in : Mobile Future Forward , add a comment

Greetings,

Hope your summer is going well.

As Q2 earnings are coming in, the role of the fourth wave in shaping the mobile ecosystem is becoming apparent. The computing and communications landscape is changing in fundamental ways. Our fall mobile executive summit – Mobile Future Forward (Sept 10th in Seattle) is designed to explore these changes and opportunities in great detail.

Registration. Standard Saver expires July 31st (next week).

Wanted to provide an update on two important discussion areas –

Future of Computing and Communications

In the post-PC world, computing and communications are changing dramatically. What new device form-factors will evolve and what does that mean to applications, services, consumer interaction, and adoption? We will explore the deep stuff on this panel.

Kevin Packingham, Chief Product Officer, Samsung

Rick Osterloh, Senior Vice President - Product, Motorola, Google

Nick Wingfield, Technology Reporter, New York Times (moderator)

Operators and the 4th Wave

How are the operators taking advantage of the 4th wave and digital offering. We have 5 of the leading global operators to help brainstorm the next 5 years – where will the investments go, what strategies will be pursued, which verticals are ripe for disruption. Our distinguished guests represent practically every inhabited continent so am really looking forward to the global view of the opportunities in front of us.

Glenn Lurie, President – Emerging Enterprises and Partnerships, AT&T Mobility

Tracy Isacke, Head of Americas, Telefonica Digital

David Small, Chief Platform Officer, Verizon

Julie Woods-Moss, Chief Marketing Officer, Tata Communications

Fay Arjomandi, Global Lead, Vodafone Xone

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

We will provide regular updates as we add new executives to the program and continue to refine the discussion topics to give you the best learning and networking experience you can find in the mobile industry. As you know, our programs are deep in content and high on participant caliber. Each year we strive to bring together some of the leading thinkers and doers from around the world to brainstorm the future of mobile. As we like to call it – it is a mobile boot camp with the brightest brains in mobile.

We are delighted to be partnering with some of the leading players in the ecosystem: CitrixByteMobile, Ericsson, Intel, Juniper Networks, Oracle, Synchronoss, Tata Communications, and Telefonica.

Some of the outstanding group of executives who are responsible for changing the face of the industry every day will be leading the discussion. Their insights will be invaluable and actionable.

US Wireless Market Update Q1 2013 June 20, 2013

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

 US Wireless Market Update Q1 2013

http://chetansharma.com/usmarketupdateq12013.htm 

Summary

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

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

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

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

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

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

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

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

What really drives mobile device performance?

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

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

The Fourth Wave and the shift towards services

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

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

OTT impact on legacy businesses and models

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

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

Operator M&A – The Rule of Three Strikes Back

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

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

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

The Patent Battles

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

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

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

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

SMB leading indicator of mobile adoption

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

What to expect in the coming months?

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

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

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

Service Revenues

ARPU

Subscribers

Shared Data Plans

Applications and Services

OTT and the impact on legacy services

Handsets

Mobile Data Growth

Your feedback is always welcome.

Chetan Sharma

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

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in August 2013. The next Global Wireless Data Market update will be issued in July 2013.

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

Mobile Future Forward 2013 – Speaker Update June 14, 2013

Posted by chetan in : Fourth Wave, Mobile Future Forward , add a comment

Hope you are enjoying the last days of spring. Here is an update on our fall mobile executive summit – Mobile Future Forward (Sept 10th in Seattle).

One of the critical segments that the fourth wave of mobile is shaping is that of the operators. Many of the leading operators are investing heavily and are becoming strong digital contenders in the ecosystem. We are assembling what is arguably the best panel ever put together on the subject.

Senior executives from world’s top 5 operators (AT&T, Sprint, Telefonica, Verizon, and Vodafone) are coming together to discuss how they are building their portfolio of digital services. Combined they represent over $350 Billion in mobile revenues, $100 Billion in mobile data revenues, $0.5 Trillion in marketcap, and $15 Billion in mobile digital revenues. Their insights are going to be invaluable.

Glenn Lurie, President, AT&T Mobility

Fay Arjomandi, CEO – Vodafone Xone, President/Chairman – Vodafone Americas Foundation

Steve Elfman, President, Sprint

David Small, Chief Platform Officer, Verizon Enterprise Solutions

Registration. Early bird expires June 14th (Friday).

We will provide regular updates as we add new executives to the program and continue to refine the discussion topics to give you the best learning and networking experience you can find in the mobile industry. As you know, our programs are deep in content and high on participant caliber. Each year we strive to bring together some of the leading thinkers and doers from around the world to brainstorm the future of mobile. As we like to call it – it is a mobile boot camp with the brightest brains in mobile.

We are delighted to be partnering with some of the leading players in the ecosystem: CitrixByteMobile, Ericsson, Intel, Synchronoss, and Telefonica.

Some of the outstanding group of executives who are responsible for changing the face of the industry every day will be leading the discussion. Their insights will be invaluable and actionable.

Hope you can join us.

Mobile Breakfast Series Recap – Mobile Platforms and the future of HTML5 June 12, 2013

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, HTML5, Mobile Breakfast Series, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

We hosted our 15th Mobile Breakfast Series event yesterday. The topic was – Is HTML5 Really Disruptive?

HTML5 has been talked about for a long time as the most disruptive force for mobile applications since the Apple Appstore was launched 5 years ago. But, can it really change the industry dynamics? How do you solve the reach problem for the developers? Many interesting initiatives in 2013 like Firefox OS but will they make a difference? How do developers view HTML5?

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The platform wars are not new, they have been around since computing evolved. The discussion and debate just morphs into the flavor of the day. In the recent past, smartphones and tablets have redefined computing as we know it. The vitality and strength of any ecosystem is determined by the number of app developers developing for a platform and actively monetizing. Right now there are only two sheriffs in town – for units it is Android and for revenue it is iOS. Others play on the fringes. HTML5 has been in the discussion for a while and whether it can stand on its own as a platform has been a matter of great debate amongst the participants of the trade. As usual, we had an outstanding line of speakers which over a 100 years in combined experience in the mobile space, which is just phenomenal. These guys have worked with all the major computing and device companies so the depth of understanding of real issues, challenges, and opportunity really showed. The panelists were:

Hank Skorny – VP/GM – Software Services, Intel. Hank is a veteran of the platform industry with successful stints at Apple, AOL Mobile, Microsoft, Adobe, Infospace Mobile, and now with Intel. He recently acquired Mashery and Aepona to beef up the Open API initiative for enterprises, operators, and developers.

Jeff Warren – VP – Mobile and Online Partner Marketing, Expedia. Jeff previously worked at Motorola and his team has been doing some great work in mobile at Expedia, a real example of how companies are adapting to the 4th wave that I have been talking about.

Asokan Ashok – Director – Content and Services, Samsung. Ashok has worked for Motorola, Nokia, Ericsson, HP, and now with Samsung. You can say, he knows a thing or two about devices.

Sundeep Peechu – Partner, Felicis Ventures. Remember Rovio or rather Angry Birds. Well, he was one of the early believers and investors when it was not fashionable to invest in apps. Now it is a multi-billion dollar industry. Felicis itself is fairly impressive. Just in 6-7 years, they have made 100+ investment with 46 exits.

I kicked off the discussion with an animation of how the market shares have changed in the smartphone space since 2004 from Symbian, Windows and Blackberry to iOS and Android. We do seem to go in cycles. Are we on the tip of another cycle?

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Source: © Chetan Sharma Consulting, 2013

Not a complete change but Hank made the case for HTML5 and articulate a well reasoned thesis that HTML5 is not going to be disruptive because it is the web but rather due the economic reasons. Companies are just running out of people they can hire to build apps and HTML5 provides a solution with more trained staff and cheaper cost of development.

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Source: © Hank Skorny, Intel, 2013

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Source: © Hank Skorny, Intel, 2013

Below is the summary of the discussion:

HTML5 needs a champion

Is it the economics, stupid?

Enterprise to lead the way

HTML5 needs to solve

The world is not either/or

What do consumers think?

All in all, a great discussion. Had insightful questions and comments from the audience as well who are well-plugged into the debate.

Thanks for all those who came and participated. My thanks to the speakers for making the time to share their insights.

Next, our Mobile Future Forward Summit is coming up on Sept 10. The early bird expires this friday so make sure you grab your tickets.

We also released our Mobile Future Forward Research Series Paper -

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It goes into details about why some players are successful in the device space and others aren’t. You can download it here.

Thanks and have a great rest of the month.

New Research: What (Really) Drives Mobile Device Market Performance?

Posted by chetan in : Chetan Sharma Consulting, Connected Devices, Devices, Mobile Ecosystem, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

What (Really) Drives Mobile Device Market Performance?

- A Mobile Future Forward Series Research Paper

http://chetansharma.com/What_Drives_Mobile_Device_Market_Performance.htm

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Introduction

The computing landscape has drastically changed over the last five years. Consumers are increasingly seeking connected devices with majority of them being mobile. In fact, due to the aggressive buying habits of the US consumer, the overall computing landscape in terms of quarterly sales has unquestionably tilted towards smartphones and tablets. While Apple wasn’t the first one to launch the smartphone, its iPhone completely changed the market dynamics. Google’s Android and Samsung have also ridden the tidal wave perfectly. The US market has been ground zero in the battle of the mobile ecosystems, the war of computing platforms, and quarter-over-quarter sales hand-to-hand combat.

During the 2008-2010 timeframe, it was obvious that the gap between the iPhone and rival offerings was tremendous. The user interface, ease of use, and just the quality of product design won consumers over. Microsoft to its own admission completely misread the shifting landscape and paid dearly. Its once dominant share of computing (95%) was cut into less than half in a matter of four years. The disruption from iOS and Android was so intense that Microsoft had to go back to the drawing board. Microsoft wasn’t alone in being complacent. Once proud leaders of the mobile smartphone era – Nokia and RIM were in denial for a long time of the changing market. They did end up launching pretty credible offerings in 2012-2013 but were clearly late by half-a-decade. LG who once used to go toe-to-toe with Samsung in all major markets just couldn’t keep up with the frantic pace of innovation and product cycles and its weak structural beams gave up under stress. HTC, once the Android darling of the industry, had several mis-steps and hasn’t been able to recover ever since despite launching some great devices.

Given the massive shifts in the computing landscape, it will be instructive to understand “What really drives device market performance?” What factors influence the purchase behavior of the consumer? And can OEMs change their strategy to impact sales? Why have Microsoft and Nokia not been able to make a dent in the trajectory despite having a compelling OS, range of devices, consumer-friendly price-points, better distribution, and increased level of advertising dollars? Will Blackberry be able to recover? Why hasn’t HTC One been able sell in similar numbers as the Galaxy S4 despite being better by most accounts? What will it take for LG to increase share? Can Motorola stay relevant? Can new entrants disrupt the waters? Can ZTE and Huawei come from the bottom and disrupt the top players? Will Apple and Samsung be able to protect their position on the top?

We have tried to address these questions using a framework that looks at the complicated equation of market performance. It is based on subjective assessment but it is informed by data on some of the key variables that impact device sales. The model is applicable to tablet sales as well. It gives us a reference model that can provide an understanding of the shortcomings of certain OEMs relative to others.

By honing in on the model, and with real-time inputs to the model, one can also get a fair assessment of the future device sales. However, sales is just one metric to consider. One has to also look at revenue and profits along with the competitive positioning in the marketplace to truly assess the “market performance” of the player. Having a strong unit share position in the market place is desirable but not a necessary condition to have a strong market performance in a given market. The size of the revenues and profits matter a great deal as well. Similarly, how a company manages and maintains its competitive advantage is very critical. From 2007-2011, Nokia had a dominant unit share but its competitive roadmap looked terrible and the market recognized that. Similarly, Blackberry (then RIM) was the dominant smartphone player of 2008-2009 but it was pretty clear that it is going to end up at a significant disadvantage if it didn’t change its ways in responding to the iPhone.

The mobile market is far from static, it has changed dramatically over the last ten years and it will change again in the next ten. However, the factors that drive market performance are likely to stay consistent.

The paper is primarily focused on the US market; however, model can be adapted for any region or country provided that enough reliable data is available to feed the model. Using the model and our understanding of the industry, we will try to answer the questions raised in this introduction and discuss the most important question of them all – What really drives device market performance?

Download from Mobile Future Forward website

Your feedback is always welcome.

Chetan Sharma

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

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

Announcing Mobile Future Forward 2013 - Mining the trillion dollar opportunity May 13, 2013

Posted by chetan in : Fourth Wave, Mobile Applications, Mobile Future, Mobile Future Forward, US Wireless Market, Worldwide Wireless Market , add a comment

Greetings,

I hope you are enjoying spring.

I thought I will provide an update on our fall mobile executive summit – Mobile Future Forward (Sept 10th in Seattle). I am very pleased to announce the preliminary program. We will provide regular updates as we add new executives to the program and continue to refine the discussion topics to give you the best learning and networking experience you can find in the mobile industry. As you know, our programs are deep in content and high on participant caliber. Each year we strive to bring together some of the leading thinkers and doers from around the world to brainstorm the future of mobile. As we like to call it – it is a mobile boot camp with the brightest brains in mobile.

The mobile industry is entering what I call the “golden period” of its evolution. The fourth wave of mobile is going to generate trillions of dollars over the course of the next decade. The ecosystem will become more diverse, each of the major verticals will get redefined by mobile, and consumers around the globe will benefit tremendously from connections to information, intelligence, objects, and each other. Enterprise productivity and efficiency will increase manifold and the golden period of mobile will help shape human history. But how and by whom? That will be the crux of the summit in September.

We are delighted to be partnering with some of the leading players in the ecosystem: CitrixByteMobile, Ericsson, Intel, Synchronoss, and Telefonica.

Some of the outstanding group of executives who are responsible for changing the face of the industry every day will be leading the discussion. Their insights will be invaluable and actionable.

Confirmed Speakers

· Ralph de la Vega, President and CEO, AT&T Mobility

· Steve Elfman, President, Sprint

· Erik Moreno, EVP, Fox Networks

· Danny Bowman, Chief Sales and Operating Officer, Samsung

· Terry Myerson, Corporate Vice President – Windows Phone, Microsoft

· Marios Zenios, VP – Uconnect, Chrysler Group

.. More to come

· Stephen David, former CIO, P&G

· Glenn Lurie, President, AT&T Mobility

· Marianne Marck, SVP – Consumer Facing Technology, Starbucks

· Henning Schulzrinne, CTO, FCC

· Fay Arjomandi, Head Vodafone Xone, Vodafone

· Biju Nair, EVP and CSO, Synchronoss

The Mobile Future Forward team, our esteemed partners, our fantastic speakers and our engaged community are really looking forward to Sept 10th.

I hope you will join us in what is shaping up to be an exceptional gathering of the mobile minds. Registration is open now. Early bird will expire May 31st.

Thanks and best wishes.

Kind regards,

Chetan Sharma

Abhi Ingle – The Mobile Cloud Connected Enterprise May 6, 2013

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

image mffbook2011_s

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

Technology and Structural Change

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Changing Roles for Everyone In the Value Chain

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

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

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

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

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

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

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

Changing Role of the CIO and the Enterprise IT Department

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

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

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

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

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

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

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

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

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

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

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

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

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

Mobile Breakfast Series – June Events March 26, 2013

Posted by chetan in : HTML5, LTE, Mobile Breakfast Series, Mobile Future Forward, Wireless Value Chain, Worldwide Wireless Market , add a comment

Greetings,

It was awesome to see so many of you at the Mobile Breakfast Series Event last week. For those of you who couldn’t make it, here is the summary.

We also announced the date for our Mobile Future Forward program – Sept 10th in Seattle. Stay tuned for some really exciting announcements regarding speakers and the program.

Also pleased to announce the next two breakfast series events.

June 11th – Seattle – HTML5 – Is it really disruptive?

HTML5 has been talked about for a long time as the most disruptive force for mobile applications since the Apple Appstore was launched 5 years ago. But, can it really change the industry dynamics? How do you solve the reach problem for the developers? Many interesting initiatives in 2013 like Firefox OS but will they make a difference? How do developers view HTML5? We will take the pulse of the industry and ask the tough questions.

Hank Skorny, Vice President and GM – Consumer Software, Intel

June 25th – Dallas – LTE and Beyond – The Future of Mobile Networks

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

Kris Rinne, Senior Vice President, Architecture and Network Planning, AT&T

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

.. more speakers to be announced.

Registration is open now. First come, first served.

If you have any burning questions or any feedback, please feel free to send us a note.

Have a great spring and we will see you soon.

Thanks

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

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

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

Summary

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

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

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

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

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

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

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

Race for the 3rd ecosystem

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

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

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

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

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

Apple’s dominated 2012 – what’s next?

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

Samsung’s rise

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

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

The Fourth Wave has arrived – the shift towards services

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

The Patent Battles

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

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

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

The vanishing Tier-2s

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

Operator M&A – The Rule of Three Strikes Back

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

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

Surface, mini, and the tablet market

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

2012 – US Highlights and Milestones

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

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

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

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

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

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

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

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

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

· Smartphones penetration eclipsed the 50% mark.

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

· mCommerce started to eclipse eCommerce for some companies.

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

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

What to expect in the coming months?

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

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

Against this backdrop, the analysis of the Q4 2012 and full year 2012 US wireless data market is:

Service Revenues

ARPU

Subscribers

Applications and Services

Handsets

Mobile Data Growth

Intellectual Property/Patents

Your feedback is always welcome.

Chetan Sharma

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

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

US Mobile Data Market Update Q3 2012 November 12, 2012

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

US Mobile Data Market Update Q3 2012

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

 

 

Summary

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

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

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

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

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

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

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

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

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

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

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

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

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

Messaging Decline

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

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

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

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

Operator M&A – The Rule of Three Strikes Back

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

Connected Devices

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

More details available here.

Device ecosystem

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

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

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

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

Surface, mini, and the tablet market

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

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

Infrastructure segment faces a tough road ahead

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

What to expect in the coming months?

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

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

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

Service Revenues

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

ARPU

Subscribers

Applications and Services

Handsets

Mobile Data Growth

Your feedback is always welcome.

Chetan Sharma

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

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

Mobile Future Forward 2012 Book – Connected Universe. Monetizing Opportunities. September 13, 2012

Posted by chetan in : Mobile Future Forward, US Wireless Market, Worldwide Wireless Market , 7 comments

image

image

We just concluded another sold-out and successful Mobile Future Forward on monday. As is the tradition, we released our annual thought-provoking book containing some brilliant essays and interviews from leaders in the industry.

We requested some of our speakers and industry leaders to put their ideas on paper. We are very grateful to all the authors and interviewees who survived our grueling publication schedule. Hopefully, this collection will give you a good insights into how these leaders view the emerging landscape. Our thanks to Dan Hesse, Glenn Lurie, Mark Hillman, Stephen Bye, Kevin Packingham, Rebecca Prudhomme, Doug Suriano, Biju Nair, Vince Spinelli, Wim Sweldens, Erik Moreno, Abhi Ingle, and Carlos Domingo.

The thought-pieces and the interviews in this book are:

1. Operator’s Dilemma (And Opportunity): The Fourth Wave – Chetan Sharma, President, Chetan Sharma Consulting

2. Q&A with Dan Hesse, CEO, Sprint Nextel

3. The “Aha” Moment – The Case for the Embedded Tablet – Glenn Lurie, President, AT&T

4. Wasted Mobile Data – The $1B problem for Operators – Mark Hillman, SVP, Compuware

5. Q&A with Vince Spinelli, Managing Director, Juniper Networks

6. Growing the Fourth Revenue Wave – It is Now or Never – Biju Nair, Chief Strategy Officer, Synchronoss Technologies

7. LTE is here and now. What’s Next? – Stephen Bye, CTO, Sprint

8. Evolution of mobile phones: Consumer demand drives the evolution – Kevin Packingham, Chief Product Officer, Samsung

9. Q&A with Rebecca Prudhomme, VP, Amdocs

10. Mobile Operators as ‘Enablers’ to personalized ‘Anywhere, AnyTime’ Services – Doug Suriano, CTO, Tekelec

11. Q&A with Wim Sweldens, President, Alcatel-Lucent Wireless

12. The FUTURE of web is mobile – Carlos Domingo, CEO, Telefonica R&D

13. Q&A with Erik Moreno, SVP, Fox Networks

14. Mobile Patents Landscape – Chetan Sharma, President, Chetan Sharma Consulting

15. Industries That Will Never Be the Same Again – Abhi Ingle, VP, AT&T Services, Inc.

These brilliant pieces delve into all facets of the mobile economy from the chipsets to the applications, from new monetization strategies to innovative business models, from supply-chain dynamics to spectrum issues, from competitiveness to collaboration, from cloud computing to connected devices, and from data analytics to connecting with the consumers, and much more. The authors are executives who are deeply engaged in accelerating the evolution of the mobile industry, their insights will give you practical advice on how to apply knowledge to your own businesses over the course of this decade.

The book was again produced in record time but it was an exhilarating ride. Thanks to all the authors and our publishing team for making this happen.

Announcing Preliminary Agenda - Mobile Future Forward Leadership Summit, Sept 10, 2012 August 21, 2012

Posted by chetan in : Mobile Future Forward, Worldwide Wireless Market , add a comment

Greetings Everyone!

Hope you are having a great summer.

I am very excited to announce our preliminary agenda for our upcoming Mobile Future Forward thought-leadership summit with an incredible line-up of speakers, thinkers and doers. The meeting of the minds will hopefully inspire you, help meet the most influential decision makers in the mobile ecosystem, and learn a thing or two about the future direction of the mobile industry.

Give us your one day and we will give you the next 5 years in mobile.

Registration and other information at  http://www.mobilefutureforward.com

Please note: Olympics Saver is expiring this Thursday, Aug 23, 2012. Limited Seats.

In proud partnership with: Intel, Amdocs, Compuware, Ericsson, Juniper, Synchronoss, Tekelec.

Preliminary Agenda: Mobile Future Forward – Seattle – Sept 10, 2012

 

8:30 am

Keynote Panel: Looking back from Mobile 2020 – the last 10 years.

Erik Ekudden, Head of Strategy, Ericsson (moderator)

Stephen David, former CIO, P&G

Jeff Bradley, SVP – Devices and Developer Services, AT&T

Jason Hoffman, CEO, Joyent

9:30 am

1-on-1 with Renee James

Renee James, SVP – Software and Services, Intel

Chetan Sharma, President, Chetan Sharma Consulting

10:30 am

Future of Mobile Devices

Kevin Packingham, Chief Product Officer, Samsung

Mike Woodward, President, HTC Americas

Nick Wingfield, Reporter, New York Times (moderator)

11:30 am

Mobile Operators: Succeeding on the 4th Wave

Steve Elfman, President, Sprint

Glenn Lurie, President, AT&T

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

1:30 pm

LTE is here and now. What’s Next?

Stephen Bye, Chief Technology Officer, Sprint

Neville Ray, Chief Technology Officer, T-Mobile USA

Vince Spinelli, MD – Mobility Solutions, Juniper Networks

Soren Elsborg, Head of Mobile Broadband, Ericsson

Tyler Davidson, Vice President, Amdocs

Kevin Fitchard, Senior Writer, GigaOM (moderator)

Mobile Enterprise and the Cloud

Gus Hunt, Chief Technology Officer, CIA

Abhi Ingle, VP – Advanced Mobility Solutions, AT&T

Dave Whalen, VP/GM – Software Services, Intel

Marianne Marck, VP – Software Engineering, Starbucks

Ed Cantwell, SVP, West Wireless Health Institute

2:30 pm

When will Mobile Commerce eclipse Ecommerce? And How?

Michael Bayle, EVP, ESPN (moderator)

Jana Messerschmidt, VP, Twitter

Antonio Benjamin, Global CTO, Citi

Mark Young, VP, NBC Universal

Stefan Happ, SVP – mobile and online, American Express

nScreen Era – Engagement and Commerce

Oke Okaro, Global Head and GM – Mobile & Connected Devices, Bloomberg

Martin Fichter, VP - Products, HTC

Jorge Espinel, EVP, News Corp

Hank Skorny, VP/GM, Intel

Wilson Rothman, Deputy Editor, NBC News (moderator)

4:00 pm

Managing network growth in the Yottabyte Era

Dan Deeney, Partner, New Venture Partners (moderator)

Houck Reed, VP, Tekelec

Wim Sweldens, President, Alcatel Lucent Wireless

Erik Moreno, EVP, Fox

Biju Nair, SVP, Synchronoss

The fight for developers – Apps, OTT, APIs, and Dollars

Frank Meehan, Executive, Horizons Ventures

Todd Simpson, Chief Innovation Officer, Mozilla

Mark Hillman, SVP – Strategy and Business Development, Compuware

Carlos Domingo, CEO, Telefonica R&D

Brad Duea, SVP – Product Management, T-Mobile

John Malloy, General Partner and co-founder, Blue Run Ventures (moderator)

5:00 pm

Big Data, Big Opportunities

Anjul Bhambri, VP – Big Data, IBM

Jeff Warren, VP – Mobile, Expedia

Internet of Things – Journey to 50 Billion

Mark Anderson, CEO, SNS (moderator)

Amir Mashkoori, CEO, Kovio

Jeff Smith, CTO, Numerex

Kevin Howard, CEO, ICG

Bobby Morrison, President, Verizon

Sebastien Taveau, CTO, Validity

US Wireless Market Update – Q2 2012 August 13, 2012

Posted by chetan in : Connected Devices, Enterprise Mobility, Mobile Advertising, Mobile Cloud Computing, Mobile Future, Mobile Future Forward, Strategy, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

US Wireless Market Update Q2 2012

http://chetansharma.com/USmarketupdateQ22012.htm
Summary

The US mobile data market grew 5% Q/Q and 19% Y/Y to reach $19.3B in Q2 2012. Data is now almost 42% of the US mobile industry service revenues. For the year 2012, the market is on track for mobile data revenues in the US market to reach our initial estimate of $80 billion.

The US operators reversed the postpaid decline in last quarter to add almost 400K postpaid subs largely due to the strong performance of Verizon Wireless. Sprint and T-Mobile saw further postpaid declines. For T-Mobile, Q2 marked the eight straight quarters of postpaid losses.

In terms of Y/Y growth, Connected Devices segment grew 21%, Prepaid 12%, Wholesale 4%, and Postpaid was flat. AT&T, AT&T, Sprint, and Verizon are number one respectively in these categories. The connected devices segment has been an area of growth for the industry but for the second straight quarter, the Q/Q growth fell below 5%. This is largely driven by lower growth in the M2M segment.

Driven largely by the economy, the prepaid subscriptions went past 100 M for the first time in the US market. Given that the revenue from new subscribers has fallen below the 5% mark for the first time, the revenue growth will be primarily driven by services to the existing subscriber base. The new revenue will be dominated by data access revenues for the next couple of years.

As has been obvious for some time, the device ecosystem has become a two horse race – iOS and Android. Apple and Samsung. Google’s acquisition of Motorola finally closed and everyone is watching as to what comes next. Amazon showed off its ambition with Kindle Fire and is now getting ready to launch a new set of devices in time for the holiday season. Apple launches its iPhone 5 with LTE and gives some more polish to iOS next month. Microsoft will start selling its Surface tablet in a matter of weeks. The only one left out of the launching musical chairs is RIM which has pushed out its launch into 2013. 

Samsung continued its march of being the undisputed unit leader in mobile device space. After displacing Nokia in Q1 2012, it continued to dominate in units shipped in Q2 2012. However, Apple dominates both the device revenues and more importantly just crushes the competition on device profits. It has only 6% of the global unit shipment share but over 70% profit share. In tablets, Apple completely dominates the landscape in both shipments and revenue. In fact, 97% of the profits in the tablet segment go to Apple with the remaining ecosystem fighting for the crumbs. Apple has the complete stronghold on the supply chain and has sucked out the oxygen from the OEM world.

Nokia’s Lumia launch in Q2 fizzled in the US and elsewhere. It will get another shot at glory and perhaps its last with the Windows 8 launch in Sept.

If we exclude the M2M subscriptions and just look at the human subscriptions, the smartphone penetration went past 50% for the first time in the US market. Smartphone sales continued at a brisk pace crossing the 70% mark (of the devices sold) in Q2 2012.

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

Zuned Out

Apple launched iPod in 2001. During the early days, Microsoft ignored it until it realized it better start paying attention to the growing phenom. It asked its suppliers to build them a Microsoft iPod. One by one, they all failed. Depressed and frustrated, it took matters in its own hand and introduced Zune in 2006, full five years after the first iPod came into the market. By that time, Apple had already sold 66M units and still hadn’t hit its peak. As is customary, Microsoft took another few iterations to get it right. By the time a competitive product came out, it didn’t matter. The main reason was that the customers were Zuned Out. They had already made their choice, invested their time and money into a platform and it will take more than a crowbar to move them onto something new. Microsoft retired Zune in 2011

Fast forward to 2007. iPhone came out. Nokia, RIM, Microsoft and others dismissed it and more importantly failed to understand and acknowledge its impact. Their corporate schizophrenia is well documented. Microsoft wisely realized that it can’t just keep paring down the mothership OS for mobile and took time to rewrite it. The new OS was actually good and well designed, it was quite fresh. iOS and Android would do well to borrow some ideas from it to enhance the user experience. However, Microsoft’s partners by this time were more enamored with Android. So in Nokia, Microsoft found a partner who can help shine the light on its new shiny OS. By the time initial credible versions of the new windows OS started to ship, Apple had already shipped over 200M units of iPhone. By the time RIM ships devices with the new OS (if it gets to that point), Apple would have shipped over 300M units. Consumers have already invested their time and money into platforms and ecosystems. Will Microsoft, Nokia, and RIM get a second chance or will they be Zuned Out?

Then came the iPad that completely took Microsoft by surprise. It pioneered the concept a decade earlier but was completely outflanked by the wily Apple. Zune wasn’t significant to Microsoft’s core business. It had ignored mobile as well for the better part of the decade as it didn’t disturb the Office and Windows PC franchises. But tablets are different. Apple singlehandedly created a new category in 2010 and has dominated it ever since. It is altering the basic notion of computing. Enterprises are dumping their PCs and moving to iPad. We have seen that in our work as well. All of a sudden, there is a direct threat to Microsoft’s core business. This time the implications are very serious. It can no longer afford a misstep. So, instead of letting partners produce mediocre products that have no chance of success in the market, Microsoft is taking the matters in its own hands early on and produce something that on surface looks a pretty compelling product. If it can get the pricing right, it can make a dent and be a contender in the new computing landscape. It can use its products, distribution power, developer ecosystem, and the bank balance to alter the scales. But Apple has a big lead. By the time Surface comes out, Apple would have sold over 100M iPads. If Microsoft executes, maybe there is a chance to not get Zuned Out this time around. If it fails, the company itself might be Zuned Out in due course along with many of its longtime partners.

In the theory of market entry, fast follower is actually a smart strategy. Microsoft was a master at it. However the strategy has its limitations. Against an agile and ruthless competitor like Apple or Google, you better be a really fast follower (Samsung) else time starts to work against you. A slow follower strategy only works if you have something truly innovative (iPhone) or the incumbents are asleep at the switch (Xbox) or the business model is disruptive (Netflix). Also, the fast follower strategy is only sustainable when you are adept at anticipating competitor’s future chess plays.

Shared Data Plans

We have been advocating shared data plans to create more consumer demand for over two years. When I talked to CNBC earlier this year (Jan), I said that in all likelihood the family data plans will be introduced in the US market in 2012. I discussed this more with Bloomberg and USA Today and suggested that most likely Verizon will launch them first. Verizon and AT&T launched the shared data plans this summer with AT&T getting the benefit of launching it second. While it is a great start, to be truly effective, some of the fees need to be reduced or completely eliminated.

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

While the European operators are feeling the heat from the OTT players (which is further compounded by an abysmal economy), the impact on the US operator revenues hasn’t been significant, yet. Last quarter we released our Mobile Future Forward Research 2012 Paper that took an in-depth look at the evolving landscape. The first of its kind study looks at the revenue curves over the course of the mobile history and discusses the need to invest in the fourth curve. The paper results were discussed in WSJ, The Economist, GigaOM, Seattle Times, and many other fine publications around the globe. The fourth curve will define the fate of many providers. Earlier this year, we discussed the topic in-depth in our Seattle and London forums and we will go even deeper into the subject at our annual brainstorm - Mobile Future Forward on Sept 10th with all major participants.

mCommerce > eCommerce: Mobile First to Mobile Only

In the last couple of years, the realization in the industry set in that mobile is going to reallydominate the world. Very quickly, we are at another pivot point wherein the mobile first doctrine is going to move to mobile only. It is not that the desktop world will disappear into oblivion. Far from it. But, the investments, strategy, and execution will be driven by mobile. As we said in our global research update earlier this year, in 3-5 years, with few exceptions, if a company is not doing majority of its digital business on mobile, it is going to be irrelevant. There are already several data points to support the theory. Leading apps and services like Facebook, Twitter, Pandora are already operating in the world where mobile is driving majority of their user engagement. Expedia, Fandango and others are seeing the early signs of migration into the mobile dominated world. Starting soon we will start to see businesses with mCommerce Revenues > eCommerce Revenues.

Postpaid Doldrums

The prepaid subscriber base exceeded 100M in the US for the first time. As postpaid growth sputters, prepaid is picking up the net-adds. So, the question emerges, where will the net-sub and net-revenue growth going to come from in the next few years. The smartphone penetration in the US is at 50% (excluding M2M), so the significant opportunities are in the upgrades and non-data to data conversion. Family data plans (see above) will help in bolstering data revenues as well. Multiple devices/consumer will increase the sub penetration which is at 110%.

Mobile Data Growth – The Gigabyte Generation

The overall data consumption in the US market in 2012 is expected to exceed 2000 Petabytes or 2 Exabytes. Since the advent of the iPhone five years ago, the US market has seen triple digit growth in mobile data consumption. In 2012, we expect the mobile data growth to be around 80%. This has largely been driven by the introduction of data tiers, the use of WiFi offload, more developer education, throttling in some instances, and some compression and offloading solutions. However, as LTE becomes more widespread in the US, we expect the traffic growth to pick up again.

Market Consolidation

Even though the regulators have indicated their distaste for big mergers, it hasn’t stopped the industry to play the M&A speculation parlor game. Except for a few impossible scenarios, all sorts of deals are being contemplated. The market economics is clearly crying out for more consolidations. The smaller M&As won’t move the needle and bigger M&A are not going to be on the table until we get into a new calendar year.

New Revenue

At the turn of the century, roughly 15% of the service provider revenue came from new subscribers. By the end of the year, we expect this will drop down to 3%. This means that the new revenue will have to come from a) converting non-data to data subs and b) launching new services in different verticals for the existing subs.

Connected Universe, Monetizing Opportunities

While 2011 was the year of figuring what the opportunities are in the new connected era, 2012 is starting to focus on how to monetize those opportunities. That will be the theme of our Mobile Future Forward Thought-leadership summit on Sept 10th. Almost all the vertical industries are benefiting from the connected devices and ubiquity of broadband networks – security, health, retail, utility, transportation, entertainment, and others. We will take a deep dive into the issues, the best case studies, the opportunities, and the players. We are assembling industries who’s who to help you figure out where the industry is headed next.

What to expect in the coming months?

All this has setup an absolutely fascinating 2012 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems.

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

Against this backdrop, the analysis of the Q2 2012 US wireless data market is:

Service Revenues

ARPU

Subscribers

Applications and Services

Handsets

Mobile Data Growth

Global Update

Your feedback is always welcome.

Chetan Sharma

We will be discussing a number of issues raised in this report in our annual mobile executive thought-leadership summit - Mobile Future Forward on Sept 10th in Seattle. Confirmed speakers include: Abhi Ingle, VP, Advanced Solutions, AT&T; Antonio Benjamin, Global CTO, Citi; Brad Duea, SVP – Products, T-Mobile; Biju Nair, EVP and Chief Strategy Officer, Synchronoss; Bobby Morrison – President, Verizon; Carlos Domingo, President and CEO, Telefonica R&D; Dan Deeney, Partner, New Venture Partners; Dave Whalen, VP/GM, Intel; Ed Cantwell, SVP, West Wireless Health Institute; Erik Ekudden, Head of Strategy, Ericsson; Erik Moreno, EVP, Fox; Frank Meehan, Executive, Horizons Ventures; Glenn Lurie, President, AT&T Mobility; Gus Hunt, CTO, CIA; Hank Skorny, VP/GM, Intel; Houk Reed, VP, Tekelec; Jana Messerschmidt, VP, Twitter; Jeff Smith, CTO, Numerex; Kevin Fitchard, Senior Reporter, GigaOM; Kevin Packingham, SVP – Product Innovation, Samsung; Marianne Marck, VP – Engineering, Starbucks; Mark Anderson, CEO, Future in Review; Mark Young, VP – Mobile and Connected Devices, NBC Universal; Michael Bayle, SVP and GM, ESPN Mobile; Mike Woodward, President - Americas, HTC; Neville Ray, Chief Network Officer, T-Mobile; Nick Wingfield, Reporter, New York Times; Oke Okaro, Global Head of Mobile, Bloomberg; Renee James, SVP, Software and Services Group, Intel; Stephen Bye, CTO, Sprint; Stephen David, former CIO, Proctor & Gamble; Steve Elfman, President, Sprint; Todd Simpson, Chief Innovation Officer, Mozilla; Wim Sweldens, President, Alcatel-Lucent Wireless.

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Nov 2012. The next Global Wireless Data Market update will be issued in Oct 2012.

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