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US Wireless Market Update Q4 2011 and 2011 March 19, 2012

Posted by chetan in : 3G, 4G, AORTA, ARPU, Applications, BRIC, China, Connected Devices, Indian Wireless Market, LTE, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Future Forward, Mobile Payments, Mobile Search, Mobile Wallet, Networks, Patent Strategy, Smart Phones, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

US Wireless Market Update Q4 2011 and 2011

 

http://www.chetansharma.com/USmarketupdate2011.htm

Summary

The US market generated $67 billion in mobile data revenues in 2011 accounting for 39% of the overall revenues for the country. The mobile data market grew 4% Q/Q and 19% Y/Y to reach $18.6B for the quarter. For the year 2012, we are forecasting that mobile data revenues in the US market will reach $80 billion.

The US market accounts for 5% of the subscriber base but 17% of the global service revenues and 21% of the global mobile data revenues. It also accounts for 40% for the global smartphone sales.

If the Martians landed on earth in early 2012, they will conclude the following: there are only 3 things certain on earth – death, taxes, and the direction of Apple’s stock price. Apple had a monster quarter with record sales of iPhone and iPad not only in the US but also around the world. Apple sold over 93M smartphones outpacing its nearest rival Samsung by a good distance. Its share of the profits is more than rest of the OEMs combined. Its stratospheric rise is legendary by any measure. Today Apple eclipsed the combined market cap of Microsoft, Google, and Amazon. Think about that for a minute. In 6-12 months, you could probably add Facebook to the equation as well. The question on rivals’ mind is when will Apple stop defying gravity. Until then, better be a fast follower.

Smartphones continued to be sold at a brisk pace accounting for 65% of the devices sold in Q4 2011. US Operators are averaging 80% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The Obama administration formally placed featurephones on the endangered species list but either chamber is unlikely to pass any resolution to save it.

Nokia launched its Lumia series of devices with good acclaim however it remains to be seen if it will be able to win back the customers in big numbers in 2012.

The Post-PC Era

Ever since the iPad came into being, the chants of the post-pc mantra are getting louder. But what is it? Is it just the untethered devices? Isn’t iPad a person computer too? What about the smartphones? They have more horse power than my first few PCs combined. Is the personal computing morphing into something else or is there a clear delineation between the Mesozoic era and the new tomorrow? While we in the industry get obsessed by these minutiae, what do the real consumers think about it? Clearly, tablets are selling better than the PCs (as our previous research has shown) both in units as well as the revenue. But so did the laptops compared to the desktops.

So, does the miniaturization of a screen and improving computing power represents a big shift or is this just an evolution of personal computing. Consumers rarely think about what computing era they are in. Between the time they wake and go back to bed at night, there are a series of tasks they have to accomplish. The technology is their companion to accomplish them, from keeping calendars to creating corporate presentations to sending messages to watching TV for entertainment to socializing with family and friends.. the list seems endless. Often times, the time is too short. Technology finds a way to give the time back to us by reducing the distance between the tasks as well as compressing the duration.

As I have said before, nothing collapses time and distance like mobile. Tablets, particularly, iPad and the smartphones, if seen through the eyes of the year 2000 make us superhumans providing us capability to process several tasks in parallel. We can even direct the computing device to figure things out while we sleep. Computing is morphing into a true companion, a wily butler who just knows what’s needed next. Being untethered to a desk makes us more productive. Taking the computing evolution further – what if we can create a desktop environment wherever we are instead going to a desk. For my work setup, I have 4 or 5 screens running at the same time and it does help. It is hard to see tablets in their current incarnation competing with that task environment. However, it does allow us to collapse the desktop and take it with us.

Tablet+Network+Cloud is an enormously powerful value proposition. It should be noted that apps and services on the mobile platform are defining the desktop environment now.

For the enterprise worker, many of the day-to-day tasks don’t really need the real-estate of 3 big monitors; we can easily accomplish a lot with a smartphone or better yet the tablet. As such, we are seeing corporations de-investing in desktops and laptops and moving this investment into tablets, smartphones, apps and make their work force more nimble and competitive. This also means, apps that used to be written for Windows will be predominantly written on iOS and Android, at least for the near-term. Microsoft has a strong offering in 8 and the fact that it will work across the three screens gives it some chips to play in the new world. Whether we call it a post-pc era or the computing continuum doesn’t seem that relevant. What matters most is the set of tools that help us accomplish the tasks at hand on a daily basis. The shift is tectonic in nature, and it is creating winners and losers at an incredibly fast pace. However, my sense is that we are finally entering into the ambient computing era where the computing capability is all around us, something that Mark Weiser of Xerox PARC envisioned more than 20 years ago and something we imagined growing up with the original Star Trek.

We will be dealing with multiple connected devices which share a common identity, cloud, media, security layer, and most importantly the apps and services. The traditional PC won’t disappear but our reliance on one single machine for creation or consumption will continue to dissipate. We will have scores of radios around us, multiple objects that can think and communicate from cereal boxes to security alarms; from windows to fabric shirts; from tables to automobiles; it feels more like the connected era - where objects with brains and energy are connected to create an unprecedented universe of intelligence and productivity. This will indeed impact purchasing behavior and the commerce flow. The social and computing interactions are more intimate, have more purpose, and are available everywhere. The work-life boundaries only exist in one’s mind. A business can be started with an app on a smartphone, anywhere serving to any consumer on the planet. The impact on productivity, the shrinking human capital needed for a set of tasks, corporate and nation’s competitiveness is significant.

In many developing nations, the PC era never arrived. They jumped right into the mobile computing era. They have always lived in the post-PC era. The implications are profound.

More than anything else, the old guard is having a tough time adjusting to the new computing paradigm. HP, Dell, and others have tried but failed thus far to either launch a decent tablet or a smartphone. While Apple invented the new computing paradigm only Samsung has been able to stand up as a worthy rival. The success of a vertically integrated success strategy has seduced Microsoft and Google to the doorstep of a vertical strategy. Will they cross the chasm remains to be seen. Much depends on how Nokia performs for Microsoft and how long can Android juggernaut keeps growing for Google. Then, of course, there are Amazon and Facebook who are attacking the market from a services angle. With a strong entry of the likes of Huawei and ZTE, players caught in the middle are struggling for a viable long-term path to success.

The engagement model with the computing resources is undergoing significant evolution as well. Keyboard and mouse seem relics of a bygone era. We are falling in love with gesture computing combined with a myriad of input and intelligence techniques. Data processing at the speed of light is the new competitive advantage at all computing layers.

In every shift, winners and losers are created. The ones who fail to recognize and adapt become the relic of the historical past duly replaced by the new creators and implementers. If we look at the US household IT spend, over 50% of that spend now goes to mobile. The life time value will increase for players who can tie experiences together across multiple screens in a seamless fashion. This will enable them to not only capture the device revenue but also the commerce and services revenue built on top of it.

The battle for the consumer wallet is being fought on Apple’s turf; it is the one driving the industry narrative and the agenda for its competitors and the ecosystem at large. Am pretty sure we will stop using computer to define computing. Interesting times indeed.

Competition

In any other year, the AT&T and T-Mobile merger would have likely gone through. The interconnection of policy, politics, and private enterprise was on vivid display last year. The failure of the merger forced Deutsche Telekom to resort to the only second viable option - to take the plunge and invest in the US market. Whether 4 competitors can survive 3 years from now is still questionable. Given that DOJ and FCC have set the precedent, the only way a major M&A can take place in the US service provider segment in the near term is if one of the tier 2 operators falters Q/Q. We still believe in our thesis as outlined in our research paper “Competition and the Evolution of Mobile Markets” last year that the US market can’t support 4 large operators and we are likely to see further M&A activity in the sector before too long.

Mobile Data Growth – The Gigabyte Generation

Mobile data traffic growth continued unabated doubling again for the 8th straight year. We expect the mobile consumption to double again in 2012. Data now constitutes over 85% of the mobile traffic in the US. Approximately 30% of the smartphone users average more than 1GB/mo. As new devices and new network technology roll-out keep pace in 2012, the data traffic will grow at the expected pace. The signaling traffic is expected to grow in even faster. Stay tuned for our research paper in the Yottabyte series of papers on the topic later this year.

Mobile Patents Landscape

2011 was the most active year for mobile patents in terms of disputes. All the major players were active in filing and protecting their turf for the future battles. IBM topped the industry in the most number of mobile patents granted in 2011 in the US followed by Samsung and Microsoft. The rest of the top 10 in order included Sony, Qualcomm, LG, Ericsson, Panasonic, Broadcom and RIM. Of the major players, Nokia occupied #12, Intel #13, Apple #16, Motorola #21, and Google #23 spot in the top 50 ranking. Amongst the mobile operators, Sprint was the leader with 323 patents granted in 2011. We have more research coming out later in the year that shows the relative patent strength of the various mobile players.

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 in Sept. More details to come. 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.

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 Q4 2011 and full year 2011 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 keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2012. The next Global Wireless Data Market update will be issued in Apr 2012.

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

State of the Global Mobile Industry – Half Yearly Assessment 2011 July 7, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Connected Devices, Devices, Enterprise Mobility, European Wireless Market, IP, IP Strategy, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, Mergers and Acquisitions, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, Student Paper Contest, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , 6 comments

 

 

http://www.chetansharma.com/globalmobileupdate1H2011.htm

Download PDF (56 pages, 3 MB)

The big picture

The global mobile industry is the most vibrant and fastest growing industry. We expect the total revenue in the industry to touch approximately $1.3 Trillion in 2011 with mobile data representing 24% of the mix. Global Mobile Data revenues are expected to eclipse $300 Billion for the first time in 2011. It is also the first year in which non-messaging data revenues will make up the majority of the overall global data revenues at 53%.

We expect the total number of subscriptions to exceed 6 billion by the end of 2011. The first 1 billion took over 20 years and this last one is going to take only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. Indian and China are also entangled in the race to the billion. At the end of Q2 2011, China was ahead by 50M but India is adding subscriptions at faster rate and is likely to eclipse China before Q2 2012. By then, both nations are expected to exceed 1 Billion in total subscriptions making up 31% of the global subscriptions.

In Q1 2011, US became the first major market to exceed the 50% mark in smartphone sales. The global figure stands at approximately 26%. Some operators expect 90% of their devices sales to be smartphones by the end of the year. In terms of the actual smartphone penetration, we expect the US market to eclipse the 50% mark in 2012.

China leads in the number of subs but US dominates in both total and data revenue. A number of emerging nations are now in top 10 – Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant – Korea, UK, Italy, Germany have dropped off or slipped in rankings.

The number of mobile operators with more than $1B in data revenues will increase to 47 in 2011. This number was only at 13 in 2005.

Japan continues to be the leader in mobile data with NTT DoCoMo, KDDI, and Softbank Japan ahead of the pack in terms of mobile data revenue and data as a % of total ARPU. In 2011, it became the first major market to have more than 50% of its mobile revenue from data services. Next, Australia and the US have made good inroads in the last two years. In fact, if we look at the overall data revenue, US is much further ahead than any nation due to the size of the market.

While India has the highest subscriber growth rate in the world right now, the revenue generating opportunity remain down right anemic compared to other major markets with average dropping down to $3.50 in overall ARPU. Even with significant subscriber base, there is going to be a general lack of opportunity in the market for the next couple of years relative to other markets.

Mobile Trends for 2011

1.Total Global Subscriptions to hit 6 Billion

–India and China racing to a billion a piece

2.Total Global Mobile Revenues to hit $1.3 Trillion, almost 2% of Global GDP

–Top 10 operators control 43% of the global mobile revenues

3.Total Global Mobile Data Revenues to eclipse $300 Billion

–Non-messaging data now owns 53% of the global mobile data revenues

4.Mobile Devices are now exceeding traditional computers in unit sales + revenue

–Majority of the device sales in the US are now smartphones. Device Replacement is shrinking

5.Mobile Broadband (4G) is being deployed at a faster rate than previous generations

–Over 1 Billion broadband connections by 2011

6.Global Mobile Apps revenue has shifted to off-deck

–The decline is directly proportional to the increase in smartphone penetration by region

7.All major markets are consolidating with the top 3 players at 85% of the market

–Regulators will have to be more prudent and proactive about managing competitiveness and growth

8.Mobile Data Traffic will be 95% of the global mobile traffic by 2015

–Many countries are facing spectrum exhaust in the next 5 years

9.Connected device segment is growing at the fastest pace

–Operators will have to quickly adapt their strategies to stay relevant in this segment

10.Several multi-billion dollar opportunity segments are emerging

–Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few

11.Mobile Ecosystem has become very dynamic and unpredictable

–Apple, Google, Amazon, and Facebook have become the most important revenue generating mobile platforms

12. There will be more changes in the next 10 years than in the previous 100

– The value chains will keep disrupting every 12-24 months by the new players and business models

13. Intellectual Property has become a key component of long-term product strategy

– Top 20 control 1/3rd of the overall mobile patent pool

Devices

Apple has had the tablet space to itself. Thus far the response from the competitors has been tepid esp. on the pricing dimension. Apple has had such a mastery over the supply-chain and months ahead of the competition that by the time they figure out details, Apple already locks up the pricing advantage for the cycle. OEMs try to catch-up on the features but can’t do on the margins. OEMs can grow the pie by bringing products at a better price points that helps attract different demographics to the mix. Microsoft can make good inroads into the space with its Win8 tablet release in 2012 but it will be again in a catch-up mode as the iOS ecosystem will be even more robust by then. The cheaper Android tablets will do well in the market. As expected, tablets will pretty much eliminate the need for netbooks and are starting to eat into the desktop/laptop revenue.

Nokia and RIM are under severe market scrutiny as investors and developers leave in droves. Lack of product planning and execution has left their market share in disarray. Nokia’s valuation has been cut into half while the newcomer HTC edged past the industry giant in a remarkable story of the year. Nokia’s release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones. While the market hasn’t shown much appetite for Windows phone thus far, a good family of devices might be able to slow the loss trajectory and position the combined team for the up-for-grabs 3rd spot in the ecosystem. HP’s acquisition of Palm is finally bringing some new products to the market but the lack of an effective ecosystem means lack of traction in 2011. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.

Tablets are primarily being used in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher but will still be dominated by WiFi overall.

The number of connected devices per subscriber and per family will continue to increase over the course of this decade. As the cost structure and margin profile for these devices will be different, we are likely to measure performance of various operators using margin analysis for e.g. while the ARPU for connected devices is 5-10 times lower than the postpaid subscribers, the margins are typically higher due to lower costs of sales, marketing, support, and subsidy. As such the overall impact is dilutive ARPU but higher margins. So, instead of focusing on just the ARPU, the efficiency of operators will be measured in how well they maintain average margin per user (AMPU) and average margin per connection (AMPC).

Managing the data growth

As a result of the data tsunami, there are two types of opportunities that are being created, one that take advantage of the data being generated in a way that enhances the user experience and provides value and the other in technologies that help manage the traffic data that will continue to grow exponentially.

To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are already exploding. New technical and business solutions will be needed to manage the growth and profit from the services. Relying on only one solution won’t be an effective strategy to manage rising data demand. A holistic approach to managing data traffic is needed and our analysis shows that the cost structure can be reduced by more than half if a suite of solutions are deployed vs. a single dimensional approach and thus bringing the hockey stick curves of data cost more in line with the revenues and thus preserving the margins.

The decision making process within the operator organizations will need to be streamlined as well. Operators should also consider creating a senior post which focuses on both the cost side and the solution side so they can devise and institute a sustainable long-term policy and keep the margins healthy.

Competitive landscape

The Rule of Three is evident in all major markets. While the percentage market share might vary, on an average, the top 3 control 93% of the market in an given nation. It doesn’t matter if the market is defined by “controlled regulation” like in China, Korea, and Japan or if it is “open market” driven in markets such as the US, UK, and India. Eventually, only top 3 operators control the majority of the market. There are niches that others occupy but they are largely irrelevant to the overall structure and functioning of the mobile market.

Markets such as US and India experienced similar competitive environment in their hyper-growth phase. For the US, this phase was in the nineties-mid-2000s while India has been experiencing the similar environment in the last 3-4 years. In both cases, at the start there are 5-6 players with no more than 25% market share but higher than 10% of the mix but gradually the market forces enable consolidation. Over a period of 18 years, US is settling into a “top 3” operator market. India’s brutal price wars are going to trigger the consolidation in the next 12-24 months and will eventually settle into a structure similar to other markets.

The competitive equilibrium point in the mobile industry seems to when the market shares of the top 3 are 46%:29%:18% respectively with the remaining 7% being allocated to the niche operators. To achieve some semblance of equilibrium in the market the top operator shouldn’t have more than 50% of the market share and the number three player shouldn’t have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer.

Mobile operators will face some hard choices in developing and protecting the role they want to play in a given region and the ecosystem at-large. The strategy they choose will have a direct impact on the expected EBITDA margins, investment required over the long-haul, how investors view them, and on the competitive landscape of the country. Given, the fast pace of globalization, new rules and trends might emerge over the course of this decade that further define “communications” and “computing” as we know it.

Apps and Services

As expected, mobile commerce and payment discussions are dominating the ecosystem. There is clearly a lot of investment and marketing dollars being spent. However, the traditional payments networks are largely intact. The new opportunities are being built on top of the existing payment platforms with convenience (Square) and offers and advertising (Google Wallet, ISIS, Groupon). Beyond payments, mobile is getting ingrained into every vertical and every facet of our lives – from healthcare to education, from energy to entertainment, from communication to socialization. And we are in the early innings of figuring out the business models, ecosystem leaders, user behavior, regulatory needs, and the overall impact on society.

Ecosystem Dynamics

It is very clear that the ecosystem dynamics can change very quickly, one just can’t take the competitive and friendly forces for granted. In the past, the silos and segments were clearly defined with little overlap. However, over the course of last couple of years, players have been migrating and surfing in segments across the board - from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company wants to capture the mindshare and piece of the consumer’s pocketbook. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&T’s business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoft’s enterprise business. One product launch, one acquisition, can change the game in an instant.  And this is only the beginning.

Mobile is fundamentally reshaping how we as consumers spend from housing and healthcare to entertainment and travel, from food and drinks to communication and transportation. Mobile not only influences purchase behavior but also post purchase opinions. When the share button is literally a second away, consumers are willingly sharing more information than ever before. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. The long-term battle is however for owning the context of the users. Having the best knowledge about the user to help drive the transaction is the simply the most valuable currency of commerce.

Mobile Future Forward

We will be discussing the global mobile ecosystem – the challenges and the opportunities at our annual mobile thought-leadership summit – Mobile Future Forward - brought to you in partnership with our terrific partners – Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12th.

Some of the distinguished guests include:

Abhi Ingle, VP – Advanced Mobility, AT&T Wireless; Amit Gupta, SVP and CTO, INQMobile; Bob Gessel, VP/Head of Technology and Network Strategy, Ericsson; Braxton Woodham, Head of Engineering, AVOS; Carlos Domingo, CEO, Telefonica; Charlie Herrin, SVP - Products and Technology, Comcast; Dale Nitschke, former President, Target; Danny Bowman, President - Connected Devices, Sprint Nextel; David Messenger, EVP, Head - Online/Mobile, American Express; Erik Moreno, SVP, Fox; Gibu Thomas, SVP - Online/Mobile, Walmart; Glenn Lurie, President, AT&T Wireless; Hank Skorny, Chief Strategy Officer, Real Networks; Janet Schijns, VP, Verizon Wireless; Jason McKenzie, President, HTC-Americas; Jay Emmet, GM, OpenMarket; Jeremiah Zinn, EVP, MTV; Jerry Batt, CIO, PulteGroup; John SanGiovanni, Cofounder, Zumobi; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel Lucent Wireless; Kris Rinne, SVP - Networks, AT&T Wireless; Mark Rolston, Chief Creative Officer, Frog Design; Matt Oommen, President, Reliance Communications; Mikael Back, VP of Products and Portfolio Management, Ericsson; Mike Mulica, President, Synchronoss Technologies; Paul Palmieri, CEO, Millennial Media; Prof. Cliff Nass, Human Computer Interaction, Stanford University; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP and Group President, Qualcomm; Subba Rao, former CEO, Tata DoCoMo; Suja Chandrasekaran, CIO, Timberland; Will Hsu, Chief Product Officer, AT&T Interactive

More information at http://www.mobilefutureforward.com

Your feedback is always welcome.

Thanks and have a great 2H 2011.

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 Aug 2011. The next Global Wireless Market update will be issued in Jan 2012.

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

Mobile Breakfast Series – Mobile Commerce and Payments June 29, 2011

Posted by chetan in : Mobile Breakfast Series, Mobile Payments, Mobile Wallet, Smart Phones, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , add a comment

We held our 7th Mobile Breakfast Series Event earlier today. The topic of discussion was “Mobile Commerce and Payments.”

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The killer views of the Olympics and the Sound

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Mark Young did a great job moderating the panel

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The panel expertly delved into the intricacies of the mobile commerce/payments opportunity

 

The 2011 Mobile Breakfast Series is sponsored by Amdocs. A big thank you for the support.

At the end of every year, we do a forecast survey. In the last survey, Mobile Payments and Commerce were considered the top two categories for growth in 2011. Given the activities thus far – Google Wallet, ISIS, number of startups – Payfone, BilltoMobile, existing players like OpenMarket, financial guys across the board – past few months have been full of significant activity. The mobile commerce developments are right behind the AT&T/T-Mobile proposed merger and Microsoft/Nokia partnership in terms of news coverage.

I remember back in 2001/2, I was writing my 2nd book with my good friend and co-author Nakamura-san who was CTO at NTT DoCoMo and while doing some work for DoCoMo and AT&T, we were exploring ways the mobile device will be used for commerce not only for digital goods but also for physical things. MCommerce has been around for the better part of the last 12 years in some form and fashion, in fact today it is a multi-billion dollar market already. Mobile payments are in different states of maturity and experimentation depending on the region. Do you know the value of US payment distribution - $75 Trillion out of which only 5% is based on cards which accounts for almost $3-4 trillion Total Transaction Value. Paypal is expected to process $4B in mobile payments this year generating over $70M in mobile payments revenue.

OpenMarket processes a significant amount of mcommerce business in the US today. As you will hear from the panelists, they are starting to see good traction from merchants and things are moving from digital to physical. However, things are very complicated – it is a highly regulated segment and changes don’t come every so often. The payment networks are from pre-Internet era and yet they maintain their complete dominance of the ecosystem. So, this sets up a very interesting next few quarters and a perfect time for us at Mobile Breakfast Series to assemble a stellar panel to unwind the realities of the evolving landscape.

Our panelists were:

Mark Young, VP - Strategy, NBC Universal and Digital Networks (moderator)

Rodger Desai, Founder and CEO, Payfone

Jim Greenwell, President & CEO, BilltoMobile

Andrew Lorentz, Partner, Davis Wright Tremaine

Michael Goo, VP - Mobile Strategy, T-Mobile

Joe Megibow, VP - Mobile and E-Commerce Optimization, Expedia

Mark has been involved in mobile for a long time and has been at the center of commerce on mobile since the ringtone days at Moviso. Rodger and Payfone have been in the news lately for some raising money and some key partners like Verizon and American Express. BilltoMobile has been involved in mobile payments first in Korea (under Danal) and lately in the US with all the operators for doing payments. Payments is a heavily regulated industry so players in the ecosystem need to have a firm grasp on regulatory winds to ensure their future revenues. Andrew with his deep background in the space was perfectly suited to bring up to speed with pending and existing rules. ISIS has been in the news throughout the year and Michael Goo has been representing T-Mobile to help define the operator strategy in payments. Expedia is one of the largest ecommerce companies and they are seeing some tremendous growth in mcommerce. Joe is right in the middle of all the craziness and his analytical mindset gave audience some great insights.

As i mentioned, mcommerce is not new but mobile web and apps infrastructure along with new methods of interactivity like the NFC are making things simpler for the consumers that it is moving from novelty to convenience to actual dollars.

The panel was just full of great insights and nuggets. The highlights of the discussion was as follows:

The panel was full of key insights that impact strategy in this space. I was thankful for the speakers to have made the time, especially the ones who traveled great distances to be with us to share their insights.

Next, our focus moves to our annual mobile thought-leadership summit – Mobile Future Forward on Sept 12th in Seattle. It is shaping up really nicely with some terrific speakers. You can take a look at the info here.

The goal of the event is to look a bit into the future 2-5 years out and see what’s on the horizon. We are deep into the planning stages of preparing another successful event. I want to thank our partners of this initiative – Qualcomm, Ericsson, AT&T, Openwave, Millennial Media, Real Networks, and Synchronoss Technologies.

Hope you can join us. It will be worth your while.

Until then, enjoy the summer.

US Mobile Data Market Update Q1 2011 May 9, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Connected Devices, Indian Wireless Market, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile TV, Mobile Traffic, Mobile Users, Mobile Wallet, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Data Market Update Q1 2011

http://www.chetansharma.com/usmarketupdateq12011.htm

 

 

The US wireless data market grew 4% Q/Q and 23% Y/Y to reach $15.4B in mobile data service revenues in Q1 2011 and is on course to increase Y/Y by 22% to $67B in 2011.

Of all the segments, the connected device category registered the highest growth at 9.6% Q/Q while the postpaid subscriptions growth was almost flat for the quarter. Connected devices (including tablets, M2M, telematics, eReaders, etc.) now account for 8% of the subscription base.

For the first time, the smartphone sales crossed the 50% share mark in the US. Also, the US now accounts for approximately one-third of all smartphone sales in the world.

The Big News - AT&T’s proposed acquisition of T-Mobile

The big news during Q1 2011 was of course the blockbuster announcement of the acquisition of T-Mobile USA. We had pondered on the viability of 4 operators in the US market in the past. All the major mobile market eventually settle with three main players controlling the market. So, the news wasn’t a surprise as we had expected something to break loose and conform to the natural market evolution. T-Mobile US has been under tremendous pressure for the last 2 years being unable to expand its postpaid base despite modernizing its network/backhaul and introducing a slew of impressive handsets. It was getting squeezed both from the top (Verizon and AT&T) and from the bottom (MetroPCS, etc.) while duking it out with Sprint in the middle. The decision window was closing as Deutsche Telekom had to decide if it wanted to invest in LTE or not (in the US market). Given that the parent business has been under pressure as well, it decided to take the most attractive available option.

The proposed merger will obviously have an impact on the market structure. The market power will get concentrated in the top 2. The HHI3 Index will go from .22 to .31 but the HHI3 value will be at par with UK, Canada (though the Canadian market is not a good proxy for a competitive market), and some of the other markets. The biggest task for the US regulators will be to analyze the impact on the consumer interest and service pricing on a market-by-market basis.

Putting things into perspective, this move is not unusual for a developed market. On average, the top 3 operators in the developed markets around the world control 94% of the market. The proposed merger roughly resembles the merger that took place in UK last year when T-Mobile and Orange, the number 3 and 4 player (each having approximately 19% of the share) respectively in the market merged to form Everything Everywhere and become the number 1 player in the market with 38% market share.

However, if we look at the history of competitiveness in the US mobile market, the market and revenue concentration will be at its highest in the history of the US wireless industry. Such a move is likely to have an impact on the ecosystem depending on the regulatory policies.

Last month, we published a first of its kind in-depth study on competition in mobile markets -“Competition and the Evolution of Mobile Markets - A Study of Competition in Global Mobile Markets”. The paper presents the analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets.

Transparency as a competitive advantage

An unfortunate side effect of an industry moving too fast is that regulations are often behind the curve (we discuss the role of regulators in our Competition paper mentioned above). Q2 will see a lot of heated debates around privacy and competition. Current regulatory framework in the US seems ineffective to meet the demands of the digital age. The indecision and a weak regulatory framework can be harmful to the ecosystem. While the industry has done a poor job of explaining targeting and relevancy and the associated consumer benefits, by over reacting, regulators can mess up the potential for better services. It is not the mechanics they need to regulate but the “transparency” of services and policies in plain English. Regulating transparency seems to be a more effective way. The ecosystem players will do better if they use transparency not as a threat but as a competitive advantage.

The new troika - AAG

A couple of years back, I gave a talk about the changing mobile ecosystem and what it means to compete in an environment where the ecosystem stacks get reshuffled every few months. I wrote about that in an essay that was published in the Mobile Future Forward book last year. While innovation is coming from all angles - fast and furious - the troika of Apple, Amazon, and Google is leading the way right now. Their interests are clashing in multiple dimensions - device, user data, cloud, advertising, local, commerce, books, etc. In a fast changing environment, either you define the market or be defined by it. The journey from being an arch-rival to a frenemy (and vice-versa) can be a short one.

A significant shift

As we mentioned in our last research note, 2010 marked the milestone of the start of a new computing and communications era. For the first time in the US, the smartphones shipments exceeded the traditional computer segments (that consists of desktops, notebooks and netbooks). Smartphones and the connected devices now account for 51% of the computing devices revenue in the US (devices include desktops, notebooks, netbooks, tablets, eReaders, and conventional feature and smartphones)

The growth in of connected devices

The connected devices category is the fastest growing segment of the market and while the ARPUs are low, due to the higher margins this segment will prove to be the most profitable in the coming years. By the end of 2011, connected devices will be commanding double digit market share. However, not all sub-segments are going to be successful in the operator channel until multi-device data pricing plans are introduced.

Apple’s iPad has been, as expected, a runaway success. Several other tablets launched in 2011 but none has come close to being a credible challenge. OEMs will do well to segment the market and price accordingly rather than follow Apple in performance and pricing. Market is fairly young and there is tremendous room for growth. Another trend that is obvious is the development of an alternate ecosystem. 85% of the tablets use primarily use WiFi for connectivity meaning that OEMs need more diverse distribution channels. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category.

We do expect multi-device or family data plans to start being introduced in the US market in 2011. Also, the $200-250 Android tablets will start to emerge during the second half of the year to broaden the choices for the consumers.

Turmoil in the OEM land

Another headline grabbing event in Q1 2011 was that of Microsoft’s partnership with Nokia. Nokia’s lack of a credible response to Apple and Android has left the company scrambling for survival. Nokia still dominates the unit sales but the domination of Apple and the Android OEMs has taken away significant profits and ecosystem mindshare. Industry is awaiting the first release of the Windows phone from Nokia which will have a lot riding on it. If the release of iPhone 5 coincides with this release, the Christmas selling season will be interesting.

The OEMs that have impressed the most are HTC and Samsung. The collapsed release cycles and the fierce pace of introduction of new devices have caught many of the traditional players unprepared. These things have a tendency of going in cycles so we expect the pendulum to swing again in the next 12-24 months.

There is a fight for the #3 spot and it is likely that Windows will fill that void. However, for developers, iOS and Android are the only platforms they need to worry about right now.

Verizon finally got its iPhone and as expected it didn’t make a big dent into the AT&T’s financials.

Platforms - Horizontal vs. Vertical

Over the past few quarters, we have seen a fascinating battle brew between the horizontal (Android and Windows) and the vertical (Apple, RIM, Nokia) device platforms. In the US, in the smartphone category, the horizontal platforms (primarily Android) has been gaining significant share since Q1 2010 and now have over 65% share of the new devices sold while the vertical platforms’ share has declined to 35%. However, the revenues and profits are still dominated by the vertical platforms.

What to expect in the coming months?

All this has setup an absolutely fascinating 2011 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the  industry is going to evolve in the next decade in our Sept 12th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. 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 2011 US wireless data market is:

Service Revenues

  • The US Wireless data service revenues grew 4% Q/Q and 23% Y/Y to $15.4B in Q410. The mobile data services revenues for the US market are expected to reach $67B in 2011.
  • Verizon and AT&T had a good mobile data quarter accounting for 76% of the increase in data revenues in Q1 2011.
  • T-Mobile’s HSPA+ drive is starting to pay dividends. While the postpaid net-adds were still in the red, its data growth is starting to match with its peers. The 27% smartphone base definitely helps.
  • For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 65% of the subscription base.
  • AT&T edged past China Mobile to become #3 operator by mobile data revenues. Verizon is already at #1 followed by NTT DoCoMo. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q1 2011. The proposed merger of AT&T and T-Mobile will make AT&T #1 by a distance and place 20% of the global mobile data revenues in the hands of the top two US operators.

ARPU

  • The Overall ARPU increased by $0.11. Average voice ARPU declined by $0.36 while the average data ARPU grew by $0.47 or 3% Q/Q.
  • The average industry percentage contribution of data to overall ARPU was 35% in Q111 and is likely to touch 40% by year’s end.
  • Verizon and Sprint were neck-and-neck in data ARPU followed by AT&T. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with approximately 29% of its revenue coming from the data services.
  • We expect data revenues to exceed voice revenues in the US market before Q2 2013.

Subscribers

  • Helped by the growth in connected devices, the overall net-adds increased by 4.9M.
  • For the sixth straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. Connected devices are now almost 12% of AT&T’s subscription base.
  • Overall, AT&T has 43% of the connected device share of the market. The connected device segment grew 9.6% Q/Q and 48% Y/Y.

· Sprint is on good comeback adding over million customers. Sprint extended its streak of positive net-adds to four quarters by adding over a million subs  for the second straight time since Q1 2006.

· T-Mobile however continues to be sandwiched between the top three and the next three and is having a hard time adding postpaid subscribers.

Applications and Services

  • While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $5B in revenues.
  • The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education. The fight for the 3% block is finally in the open. Operators, financial institutions, and the internet players are all vying for a piece of the mobile wallet. Much more to come in 2H 2011. (We will be going in-depth into mobile commerce and payments in our upcoming Mobile Breakfast Series event on Jun 28th)

Handsets

  • Nokia sold 108.5M units in Q1 2011 accounting for 28% of the market share. Samsung continues to be one of the most agile players in the device business shipping 70M for a 18% share of the market. The nimble team at HTC outclassed its bigger peers and edged past Nokia in market cap.
  • Apple, a company that was given a lifeline by Microsoft in 1997 is now valued 45% or $100B more than Microsoft primarily on the strength of its wireless portfolio.
  • In the US, for the first time, 51% of the devices sold were smartphones. Global average is at 26%. One-third of all smartphones sold were sold in the US making it the hot bed for consumer devices.
  • Smartphones now account for 80% revenue of all phones sold in the US.
  • In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
  • 85% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category.

Global Update

  • Race to a billion - India went past 800M in Q1 2011 subs and is closing on China and we expect that by the end of the year, India will become the largest mobile market on the planet. By early 2012 both India and China will have more than a billion subscriptions.
  • China Mobile crossed the 600M subscription mark however its 3G introduction has had a tepid response thus and its 4G strategy remains in flux.
  • More details to come in our global market update.

Your feedback is always welcome.

Thanks.

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 Aug 2011. The next Global Wireless Data Market update will be issued in Jun 2011.

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

Mobile Future Forward 2010 Summit Summary September 20, 2010

Posted by chetan in : 3G, 4G, AORTA, BRIC, Carriers, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, Mobile Advertising, Mobile Applications, Mobile Ecosystem, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Search, Mobile Traffic, Mobile Wallet, Networks, Partnership, Patents, Privacy, Smart Phones, Speaking Engagements, Student Paper Contest, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

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Summit Summary

In proud partnership with

Amdocs, Millennial Media, Real Networks, ZTE, Clearwire, Ericsson, Openmarket, Bango, Intel, Openwave, Wavefront, and Department of Commerce

MFF_Summary_s

Download as pdf

Earlier this month, Chetan Sharma Consulting hosted its first mobile thought leadership executive summit – Mobile Future Forward. The sold-out event attracted leaders from the global mobile industry across the ecosystem to discuss and debate the future of mobile. This note summarizes the various discussions from the summit.

Some of the key themes discussed by the speakers and panelists were:

1. The Mobile Ecosystem is becoming more complex and competitive by the day

2. Broadband is exploding around the globe, Nation’s competitiveness and prosperity is being defined by the quality and depth of Broadband

3. Mobile Device is becoming central to our existence

4. Understand the user, generational usage patterns, geographical differences and customs

5. Communication modes are evolving and morphing rapidly

6. Emerging Devices are taking the lion of share of growth in some western markets

7. Given the devices and networks, content, media, services are moving to the cloud

8. New experiences are being introduced that will impact monetization and interaction with computing and technology

9. World is becoming flatter by the day

10. Mobile as a platform is booming and several industry verticals are exploding

11. Context and Analytics are key currency for tomorrow

12. There is significant reallocation of revenues underway

13. The fight for developer mind share is getting intense

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As technologists, we get too enamored with the technical details and specs but what’s most important is how can technologies be applied to make lives of every day consumers better. If a new solution or a service only benefits or thrills a few, it is destined to miss the mass market. No one understands the mass market better than Procter & Gamble, and no company in the world touches more consumers with more products than Procter & Gamble (with over 40-50 billion items per year). Technology plays a central role in how P&G thinks about engaging consumers. Last year, I had the privilege of spending some time with Steve David, our first keynote speaker. His understanding of the interplay between technology and consumer interaction and behavior is very deep and his enthusiasm for using technology to change the world infectious. Steve spent over 30 years at P&G , the final assignment as P&G’s CIO responsible for their Internet Strategy.

Steve laid out the case for Advocacy being the new measure of marketing. It has a lasting impact on the brand, the sales, and the relationship with the consumer. Companies who have a better understanding of the customer via sophisticated analytics and can quickly take the solutions and products that consumer want and need gain long-term competitive advantage. Insights from the market must be processed in real-time that can empower decision making at every level of the company. And mobile is central to this strategic shift. Mobile is being used to attack the counterfeit problem worldwide, in formulating personal recommendations as trust in brands erodes, in collecting analytics, and engaging interactions with products and services using NFC, etc. Steve ended with the old Chinese proverb, “When the wind changes direction, there are those who build walls and there are others who build wind mills.” What are you going to build?

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Fred Devereux, President, AT&T West in his address on “The Next Big Thing” honed in on the emerging connected devices ecosystem and how AT&T is retooling itself to take advantage of the boom. The AT&T Emerging Devices organization is setup to behave and operate like a startup with hundreds of devices being approved in a short amount of time. The new generation of connected devices range from eReaders, PNDs, Telematics, Cameras, Camcorders, Picture Frames, Tablets, Tracking Devices, Gaming Devices, and Smart Meters. While the ARPU of these connection is low, the margins are high due to negligible overhead in operations, sales, and marketing. The importance of this category is evident from the research data we reported in our last quarterly report which indicated that there are more connected devices being added than postpaid net-adds and operators are starting to list them as separate line items in their financial statements. Fred also discussed AT&T’s plans to deploy LTE in 2011-.

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Dr. Genevieve Bell, Fellow at Intel is one of the most fascinating anthropologists out there with an acute sense of technology evolution and how humans react and adapt to changes around them and how technology needs to adapt to humans and their needs in different habitats. She had some interesting stats from her research e.g. the household sizes vary significantly by countries – India has only 5% of the households as single-person households while France and Germany have over one third households as single-person. Boomers will represent more than half of the population of China, Japan, and EU by 2012. These demographic shifts have significant impact on how technology is used and how media is consumed. The keynote was filled with priceless anecdotes and research items that informed and gave the technologists something to think about and that the technologists are not the proxy for rest of the population. Her book “Telling Techno-Cultural Tales” is being published by MIT Press and is coming out next year. So, be on the lookout for that.

Mobile Advertising is in the news lately in the US. About 11 years ago, a young man named Takayuki Hoshuyama was making waves in the mobile advertising space. In 1999, he helped found D2Communications - a successful joint venture between the largest advertising firm in Japan - Dentsu and the largest and one of the most innovative operator on the planet - NTT DoCoMo. He was one of the original members of the Mobile Advertising Team for the i-mode service 11 years ago. In June, he was appointed CEO of D2C. Hoshuyama-san talked about the future of mobile advertising. Japanese mobile ad market is over $1B (though it represents only 1.7% of the overall ad spent) and with the advent of 4G/LTE the opportunities are enormous. Display outscores Search by 3:1 in ad revenues. Mobile is some embedded in Japanese culture that it is just assumed just like my good friend and coauthor Dr. Yasuhisa Nakamura, then CTO of NTT DoCoMo wrote back in 2002 in our book “the wireless infrastructure will become indistinguishable from air i.e. omnipresent”

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Hoshuyama-san also talked about the evolving role of the operators in the ecosystem with some of them focused on becoming the cloud service providers and broadcasters.

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After the keynotes, we shifted to panel discussions. The first one dealt with the disruptive forces in the ecosystem with Mike Sievert, Chief Commercial Officer, Clearwire, Lixin Cheng, CEO, ZTE USA, and Subba Rao, CEO, Tata DoCoMo – three leaders who are disrupting the status quo. All three agreed that the openness of Android will make it the most dominant OS in the coming years. Lixin talked about how the infrastructure business is becoming a software business with SDR design of technology standards and evolution. He also suggested that we as an ecosystem need to simplify the business models and the consumer purchasing process of bandwidth and connectivity before the connected device revolution takes significant hold. India is the fastest growing market but the ARPU levels are 1/10th of what they are in the US. Given that the market just spent over $100B on the 3G auction, the investment recovery model is unclear and the market is ripe for a big shakeout. Telenor, having lost over half a billion dollars is desperate to get out of the market. The pains of globalization are showing up in other regions as well. Mike mentioned the high average data consumption at Clearwire (currently at 7 GB/mo) – clearly a precursor of what’s to come (our research shows the national average was 230 MB/mo as of Q2 2010). In terms of new technology areas, the panel was interested in products that help with spectrum efficiency, reducing the cost structure, and in improving the battery performance.

As part of the Mobile Future Forward Initiative, we had also worked on two other projects:

· The Mobile Future Forward Book that consisted of thought provoking essays on the future of mobile from the speakers of the summit and

· The global student paper contest that invited the papers form university students from the around the world

It required enormous collaboration with the folks around the globe in a very short amount of time. We are very proud of the outcome.

Mobile Future Forward Book

The second project related to a limited edition book by Chetan Sharma Consulting (published by Futuretext) exclusively for the event. Some of these summit speakers put their insights and ideas on paper that resulted in this book. We are very grateful to the authors (and their respective organizations) who carved out time from their busy schedules to pen some really insightful commentary on how they see the mobile industry evolve both holistically and in the various segments of the ecosystem. While the views are quite diverse and bring together perspectives from different angles, everyone agrees, 2010-2020 will be one heck of a time period for innovation.

 

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The book has the following pieces:

1. The Next 10 Years - 15 Trends That Matter - Chetan Sharma

2. Sustainability in a Mobile World - Stephen David

3. Managing The Mobile Data Explosion - Wim Sweldens

4. Show Me The Money! - Brian Shepherd

5. Mobility Revolutionizing Every Product, Service, and Process - Russ McGuire

6. How Constant Connection Is Changing Our World - Ken Denman

7. 4G: The Next Big Thing - Mike Sievert

8. The Untapped Potential of Mobile Advertising and Marketing - Takayuki Hoshuyama

9. Mobile Operators are at the Center of Mobile Advertising - Krishna Vedati

10. Mobile Challenges - Three Imperatives in the Changing Game - Russ Shaw

11. Interacting With Everyday Things - Amir Mashkoori

12. In The End, It’ll All Go Through “Browse and Buy” - Anil Malhotra

13. The Future of Mobile: 5 Trends That Matter Most - Jay Emmet

14. India’s Mobile Future Forward - Subba Rao

15. Cellphone As The New Computing Platform - Sailesh Chutani

16. What 5 billion Phones Could Mean for Health Literacy - Jon Stross

17. Privacy: From Compliance To Competitive Advantage - Sarla Sharma

18. Managing Growth and Profits in the Yottabyte Era - Chetan Sharma

We will be giving out some copies of the book during our Annual Predictions Survey in Dec, so be on the lookout for that participation request.

Student Paper Contest

Despite, the summer recess, we received an a very positive response from students around the globe. The top six entries went through rigorous scrutiny of our judges:

1. Pankaj Kedia, Head of Mobile Ecosystems, Intel

2. Subba Rao, CEO, Tata DoCoMo

3. Len Barlik, VP, Sprint Nextel

4. Jeff Giard, Director, Clearwire

5. Paul Palmieri, CEO, Millennial Media

6. Matt Oommen, CTO, Sprint Nextel

7. Paul Struthers, Head of Regional Marketing, Amdocs

The top two students were Lun Huang and Smruthi Pariccha and they were invited to join us for the event and receive their prizes.

The final ranking was as follows:

1. UWB Based on Multi-Band MC-CDMA and Magnetic Near-FieldLun Huang, Electrical and Computer Engineering, Illinois Institute of Technology, US

2. Ubiquitous Peer Proximity Awareness in Mobile EnvironmentsSmruti Parichha, Dept of Computer Science and Engineering, University of California, Riverside, US

As a mobile strategist, I get to see some of the cool technologies before they hit the market. For the demo this year, we selected Microvision’s cool projection technology where you can interact with the projected screen in thin air by waving hands. Yes, you got it. You had to be there to see it. It was shown for the first time to the general public and we are thankful to Selvan Vishwanathan and Andrew Rosen, the two engineers (and their colleagues) behind this exciting emerging technology that will expand the horizons of mobile interactivity and media engagement.

The afternoon sessions started delving into specific topics and details that were touched upon at the high level during the morning sessions. Each of the panels had an absolutely stellar cast who are deeply engaged in defining the mobile ecosystem right now.

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Network and Mobile Data Evolution 2010-2015

Wim Sweldens, President - Wireless Division, Alcatel-Lucent,

Neville Ray, Chief Network Officer, T-Mobile,

Bob Azzi, Senior Vice President, Sprint,

Matt Bross, CTO and Vice Chairman, Huawei

Sean Cai, Vice President - Advanced Wireless Technology, ZTE,

Ken Denman, CEO, Openwave (moderator)

There is a big debate about network evolution - how fast does LTE need to come to the market? Will LTE be enough to help with the data tsunami. The consensus was a resounding No but LTE brings in some key capabilities like an all-IP network that enables new capabilities for multimedia applications and services, lowers the per bit cost, and reduces latency for superior user experience. Of course, the RAN is only part of the story, the backhaul needs to get upgraded as well to handle the load. The panel also emphasized simplicity in services without making things burdensome for the consumer with new technology. The other area of concern is of course the spectrum. Will there be ever enough spectrum? The issue is more acute for some operators. Finally, the focus need not to be on the bandwidth or the latency, from a user’s point of view, it is always about the services and things they can do with more bandwidth and lower latency.

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Future of Content, Engagement, and Monetization

Louis Gump, Vice President - Mobile, CNN,

Omar Javaid, Vice President, Converged Media, Motorola (moderator),

Paul Palmieri, CEO, Millennial Media,

Rob Glaser, Chairman, Real Networks and Partner, Accel

Superphones and smartphones have changed the landscape for content, engagement and monetization. Superphones are most open and it is reflected in the results, more engagement and higher app usage. Apple/Android have also put US back in the leadership role when it comes to devices. CNN has seen high degree of non duplicated reach and reach is king when it comes to mobile advertising. The ad platforms are going into the next stage of evolution with more multimedia, better monetization opportunities, and higher value for the consumer. For content providers, ads can’t be the only strategy to generate revenue, subscriptions and/or micro transactions need to be part of the equation as well.

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The Balance of Privacy and Monetization from Consumer Data

Krishna Vedati, Senior Vice President, AT&T Interactive,

Chris Murphy, Head of Digital Strategy, adidas

Dr. Nitin Shah, CEO, Feeva,

John Giere, Senior Vice President, Openwave,

Jeremy Lockhorn, Vice President - Emerging Media, Razorfish (moderator)

It is a complex issue and our insightful panel talked through the intricacies and the balance of monetizing using consumer data while meeting user’s expectations on privacy. One has to give something of value to the consumer before they trade up. Advertisers like adidas want to move from 1-2-many to 1-2-1 relationship with the consumer that increases the volume and quality of the transactions. The valuable variables to track are location, propensity to buy, past actions, traffic inputs, etc. Discovery and recommendations also become important part of the whole process. Of course, regulators are eager to jump in as well. It will be one of the key issues defining the industry landscape over the next 5 years.

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mHealth - The Impact on Society and Global Health

Dr. Sailesh Chutani, CEO, Mobisante (moderator)

Jon Stross, General Manager and VP, Babycenter.com

Tim Wood, Director, Grameen Foundation

Greg Brandenberg, CEO, Columbia Basin Health Association

Dr. Suzanne Clough, Chief Medical Officer, Welldoc

mHealth is one of those areas which has been talked about for a long time and where mobile is starting to have a truly disruptive run at the industry. While the regulations and the dinosaur health care industry have been slow to adapt, there are a number of innovative companies like Welldoc, Babycenter.com, Mobisante, and others who are forcing rethink and change in the status quo. Greg’s CBHA is forced to think differently and has looked to technology to solve their challenges. Serving in the rural areas of WA state, his team has been testing out new solutions such as cell phone based ultrasound system from Mobisante that is 1/10th the cost of what GE sells for. It is much more portable and flexible and works well with the field work force. Tim’s Grameen Foundation is similarly leading the charge in nations like Ghana where mobile has been used to solve real-life health issues. Jon’s Babycenter has been expanding in other regions and increasing revenues at the same time. However, the test results and trials can still take inordinate amount of time (it was 3 years for one of the trials). The opportunity is immense but regulators, healthcare industry, pharma giants, and the rest are starting to come to grips with the role that mobile can play in transforming lives and P&Ls.

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Mobile Cloud Computing - At the Tipping Point?

Hank Skorny, Senior Vice President - Media Cloud Computing, Real Networks

Brian Shepherd, President - Mobile Services and Marketing, Amdocs

Marianne Marck, Senior Vice President, BlueNile

Mike Wolf, Vice President - Research, GigaOM (moderator)

Erez Yarkoni, Chief Information Officer, T-Mobile

Cloud is changing IT and cloud is going to change mobile media. It helps take out some of the complexities of media consumption, management, and sharing for the consumers and provides a lower cost structures for the media companies. There are opportunities for operators to provide cloud based services at many levels - storage, media, billing, bandwidth, profile, analytics, network intelligence and so on and so forth. Some are easier to implement while others requires more investment and change in DNA. From a developer’s perspective, cloud based services will be ideal to increase reach but we are not there yet as the capabilities of the browser are not comparable to the native environment on platforms like iOS and Android. Better user experience is essential and developers won’t compromise.

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Evolution of Communication and Social Interaction

Mario Queiroz, Vice President - Product Management, Google

David Weiden, General Partner, Khosla Ventures

Robin Schofeld, Principal, Booz&Co (moderator)

Erick Tseng, Head of Mobile, Facebook

Pankaj Kedia, Head of Mobile Ecosystems, Intel

The panel delved into how the communication ecosystems might evolve. While there is discussion about open and closed (too much at times), it is about executing on a strategy that touches the most number of consumers. The closed gardens of Apple is quite dominating and so is the evolving Android ecosystem which is relatively open. At the end of the day, developers are looking to make a buck with the least amount of resources and reach the most of amount of users. Cloud based communications services are about to change the landscape in a big way. Google and Facebook both have had good successes and both suggested that we are just getting started and more innovation is going to come in the form of personalization and social interaction. Operators while ceding some of the communication territory can still have a viable broadband business. As far as social on mobile is concerned, we are still in the early days with lots of opportunities to enhance and engage.

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Internet of Things - Emerging Ecosystems

Amir Mashkoori, CEO, Kovio

Danny Bowman, President - Integrated Solutions Group, Sprint

Mark Selby, Vice President - Industry Collaboration, Nokia

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Abhi Ingle, Vice President - Industry & Mobility Application Solutions, AT&T

Peter Koo, Vice President, Ericsson

The fact that there are more mobile phones than toothbrush brings home the point of the pervasiveness of mobile around the globe. The panel gave several examples of how “connectedness” is spreading across other electronic devices as well e.g. in Netherlands, 30K home care workers are equipped with NFC enabled devices which help interact with the patients (opens the door as well) without the need for paperwork, the records, helps with navigation. Overall result - happier workers, higher efficiency, and reduced carbon emission. The mobility for “connected devices” will try to leverage all RF radios as needed - 3G, 4G, Bluetooth, WiFi, Zigby, etc. Digital signage is emerging as a new area for consumer interaction and information. Some of the industries are on the verge of significant change - e.g. insurance where car insurance rates are given based on driving habits learned via telemetry vs. the old actuary table based rating systems. NFC is also enabling a lot of commerce opportunities by bringing the online world together with the physical world. However, as the ecosystem evolves, we need to also worry about QoS, security, and reliability concerns that various vertical industries have. Of course, the net-neutrality debate impacts the evolution. There are several scenarios where prioritization of data traffic is essential in emergency situations (ambulance transmission, fire fighting, etc.).

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At the Intersection of Gaming, Social, and Commerce

Tim Chang, Partner, NVP (moderator)

Prashant Fuloria, Director - Facebook Credits, Facebook

David Marcus, CEO, Zong

Andrew Lacy, Senior Vice President, Disney Games

Alex Tokman, CEO, Microvision

Micro transactions is the new currency that scales up to billions of dollars in gaming and social networking. Free drives interest and the core 2-5% drive the revenues. If you ask for payment up front, virality component fizzles and the longevity declines. iTunes has been the gold standard for payments, carrier billing is starting to shape up and it will benefit the developers. HTML5+ in theory makes sense and is nice enhancement but the app experience is compelling for users. Discovery continues to be the sore spot and the burning opportunity. Whichever platform and mode of operation helps developers make more money, that’s where the momentum will shift. Today it is the iPhone but rival models are starting to pop up.

Our heartfelt thanks to everyone who helped in making Mobile Future Forward successful especially the sponsors (Amdocs, Millennial Media, Real Networks, ZTE, Clearwire, Ericsson, OpenMarket, Bango, Intel, Openwave, Wavefront, and Department of Commerce), participants, the moderators, and the speakers. Thanks to Caroline Lewko and David Smith for taking good notes. Planning for Mobile Future Forward 2011 is underway. Until then, best wishes and good luck in your pursuits, and we hope to see you next year. Thank You.

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US Mobile Data Market Update Q2 2010 August 10, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Enterprise Mobility, European Wireless Market, IP Strategy, Indian Wireless Market, Location Based Services, M&A, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Search, Mobile Wallet, Music Player, Networks, Speaking Engagements, Speech Recognition, US Wireless Market, Unified Messaging, Usability, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

US Mobile Data Market Update Q2 2010

http://chetansharma.com/usmarketupdateq22010.htm

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Executive Summary

The US wireless data market grew 6% Q/Q and 22% Y/Y to exceed $13.2B in mobile data service revenues in Q2 2010 - on track so far to meet our initial estimate of $54B for the year.

Having narrowly edged NTT DoCoMo last quarter for the first time, Verizon Wireless maintained its number one ranking for the 1H 2010 in terms of the operator with the most mobile data revenues (though the difference was thinner than the amoeba membrane).  The total wireless connections for Verizon were almost 100M with 92.1M being the traditional subscriber base. Rest of the 3 top US operators also maintained leading positions amongst the top 10 global mobile data operators.

Sprint had the first positive netadd quarter in 3 years and has been slowly and steadily turning the ship around. T-Mobile did better on the postpaid netadds but overall additions declined again. The larger question for the market is if 4 large players can stay competitive. Generally, the answer is no. But these are different times and there are a number of permutations and combinations that are possible.

The US subscription penetration crossed 95% at the end of Q2 2010. If we take out the demographics of 5 yrs and younger, the mobile penetration is now past 100%. While the traditional net-adds have been slowing, the “connected device” segment is picking up so much that both AT&T and Verizon added more connected devices than postpaid subs in Q2 2010. Given the slow postpaid growth, operators are fiercely competing in prepaid, enterprise, connected devices, and M2M segments.

Data traffic continued to increase across all networks. By 1H 2010, the average US consumer was consuming approximately 230 MB/mo up 50% in 6 months. US has become ground zero for mobile broadband consumption and data traffic management evolution. While it lags Japan and Korea in 3G penetration by a distance, due to higher penetration of smartphones and datacards, the consumption is much higher than its Asian counterparts. Given that it is also becoming the largest deployment base for HSPA+ and LTE, most of the cutting edge research in areas of data management and experimentation with policy, regulations, strategy, and business models is taking place in the networks of the US operators and keenly watched by players across the global ecosystem.

As we had forecasted, the tiered pricing structure for mobile broadband touched the US shores with AT&T becoming the first major operator to change its pricing plan based on consumer consumption. We will see the pricing evolve over the next 2-4 quarters as the US mobile ecosystem adjusts to the new realities and strategies for mobile data consumption.

In the connected device category, iPad like its flashy cousin dominated the headlines, the sales numbers, and the industry profits. The device sent every slate maker back to the drawing board, many projects were cancelled and strategies are still being formulated to capture a new burgeoning space and Apple again has a massive lead of mindshare and pocketbook.

Kids of the now generation are growing with connected electronics that is fundamentally altering the behaviors and expectations of interaction, communication, consumption, and monetization.

All this has setup an absolutely fascinating period in the communication/computing industry. Convergence is everywhere and is leading to fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the  industry is going to evolve in the next decade in our Sept 8th event – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. Hope you can join the discussion.

What to expect in the coming months?

31% of the US subscription base is now smartphones.

The pace of product introduction is accelerating with each quarter. Devices of all shapes and sizes are coming into the market literally every week. Players are having to re-evaluate their businesses and long-term strategies. Several new impressive devices got introduced during the course of 1H of 2010 including the iPad and EVO.

There are several players whose future is at stake (to put it mildly). The competition has grown fierce and companies are finding it hard to take ideas from R&D to products in market in a short amount of time.

Microsoft announced its comeback with the W7 commercial launch imminent. The change in UI was refreshing and the expectations are quite high. W7 v2 is likely around the corner to update on the flaws of v1. HP acquired Palm in an attempt to become relevant again in the mobile device space. It has been an action packed 1H 2010 and we can expect more of the same for the remainder of the year.

2010 has also been active on the regulatory front as the national broadband plan was unveiled in March and the subsequent debate over the course of nations broadband future kept the spectrum, net-neutrality, and exclusivity issues at the forefront.

To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come. (We will be going in-depth into this subject at our Sept event with some very senior and experienced executives)

2010 is also the year of network rollouts. T-Mobile has been rolling out HSPA+ at an impressive rate, Clearwire announced its intention to move to LTE, Verizon is betting big on LTE and looking for competitive marketing advantage over the course of the next 12 months. AT&T has been adding backhaul, upgrading to HSPA+ and planning for LTE all at once. Even the smaller carriers like MetroPCS are looking for competitive advantage with quicker LTE launch and beat others by carrying the first LTE smartphone. (We will be releasing the next edition of our “State of the “Mobile” Broadband Nation” paper later this year)

As we had mentioned last year, the mobile data traffic kept on growing disproportional to the revenues. A series of solutions have come into the market from players big and small. We released the second edition of our in-depth research paper on data growth - "Managing Growth and Profits in the Yottabyte Era"  last quarter.

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 2010 US wireless data market is:

Service Revenues (Slides 7, 16)

ARPU (Slides 8-11)

Subscribers (Slides 12-14)

Applications and Services

Handsets

Data Traffic (Slide 15)

· As we noted in our last update, the data traffic is now significantly more than the voice traffic. By 1H 2010, the average US consumer was consuming approximately 230 MB/mo up 50% in 6 months. The good news is that there are several solutions available and are being invented that will help manage the data growth starting with the tiered pricing plans.

To discuss all these trends and more, we are putting together a unique Mobile Future Forward Executive Summit and are fortunate to have the company of some of the sharpest minds in the industry, folks who both have the vision to shape the evolution and the authority to invest billions of dollars this decade to make things happen. Hope to see you in Seattle on Sept 8th.

Abhi Ingle, VP, AT&T; Amir Mashkoori, CEO, Kovio; Anand Chandrasekhar, SVP & GM, Intel; Bob Azzi, SVP - Network, Sprint Nextel; Christopher Dean, Chief Strategy Officer, Skype; Danny Bowman, President, Sprint Nextel; David Weiden, General Partner, Khosla Ventures; Dr. Boris Nikolic, Sr. Program Officer, Global Health & Discovery, Bill & Melinda Gates Foundation; Dr. Genevieve Bell, Intel Fellow & Director, User Experience, Intel; Dr. Greg Brandenberg, CEO, Columbia Basin Health Association; Dr. Sailesh Chutani, CEO, Mobisante; Dr. Suzanne Clough, Chief Medical Officer, WellDoc; Erick Tseng, Head of Mobile, Facebook; Glenn Lurie, President, AT&T; Hank Skorny, SVP, Media Mobile Cloud Computing, Real Networks; Jack Kennedy, EVP, News Corp; Joe Sims, Lead Partner - Digital Convergence , Booz & Company; Jon Stross, VP & GM - Babycenter, Johnson & Johnson; Ken Denman, CEO, Openwave; Krishna Vedati, SVP & GM - Mobile, AT&T Interactive; Lirong Shi, President, ZTE; Louis Gump, VP Mobile, CNN; Mario Queiroz, VP - Product Management - Android, Google; Mark Selby, VP, Nokia; Matt Bross, CTO and Vice Chairman, Huawei; Michael Sievert, Chief Commercial Officer, Clearwire; Neville Ray, Chief Network Officer, T-Mobile ; Omar Javaid, CEO, BBDO; Paul Palmieri, Founder and CEO, Millennial Media; Rob Glaser, Chairman, Real Networks and Partner, Accel; Sean Cai, VP - Advanced Technology, ZTE; Stephen David, Former CIO, Proctor & Gamble; Subba Rao, CEO, TataDoCoMo; Takayuki Hoshuyama, CEO D2 Communications; Tim Chang, Partner, NVP;Tony Lewis, VP, Verizon; Wim Sweldens, President, Alcatel-Lucent

Each panel discussion will involve luminaries/experts on specific topics, for e.g.

Opportunities in Mobile

Mike Sievert, CCO, Clearwire

Dr. Genevieve Bell, Fellow, Intel

Shi Lirong, President, ZTE

Subba Rao, CEO, Tata DoCoMo

Evolution of Communication/ Engagement

Christopher Dean, Chief Strategy Officer, Skype

Erick Tseng, Head of Mobile, Facebook

Mario Queiroz, VP, Google

David Weiden, General Partner, Khosla Ventures

The size of the panel will be small and the time duration long so we can delve deep into the issues and questions. For more panel, speaker, sponsor, and program details, please visithttp://www.mobilefutureforward.com

Your feedback is always welcome.

Thanks.

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 Nov 2010. The next Global Wireless Data Market update will be issued in Sept 2010.

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

Announcing Mobile Future Forward Executive Summit June 14, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Gaming, General, IP, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Speaking Engagements, Speech Recognition, Strategy, US Wireless Market, Usability, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

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You have seen some hints of the project that we have been working on for sometime. We are proud to announce “Mobile Future Forward” Executive summit to be held in Seattle on Sept 8th, 2010.

Registration is Open Now. Early Bird expires June 30th 2010.

MFF is a gathering of some of the most brilliant minds in the mobile industry. The goal is to look at how mobile is likely to evolve over the course of this decade. We couldn’t have done this without the tremendous support of our excellent sponsors who are paving the way in their respective segments.

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The speaker list includes the who’s who of the mobile industry:

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Glenn Lurie, President, AT&T

Subba Rao, CEO, TataDoCoMo,

Mike Sievert, Chief Commercial Officer, Clearwire

Louis Gump, VP Mobile, CNN,

Paul Palmieri, Founder and CEO, Millennial Media

Dr. Sailesh Chutani, CEO, Mobisante

Abhi Ingle, VP, AT&T Wireless

Ken Denman, CEO, Openwave

Amir Mashkoori, CEO, Kovio

Stephen David, Former CIO, Proctor & Gamble

Dr. Genevieve Bell, Intel Fellow, User Experience, Intel

Hank Skorny, SVP, Real Networks

Jon Stross, VP & GM - Babycenter, Johnson & Johnson

Dr. Suzanne Sysko, Chief Medical Officer, WellDoc

Dr. Boris Nikolic, Sr. Program Officer, Bill & Melinda Gates Foundation

Krishna Vedati, SVP & GM - Mobile, AT&T Interactive

Christopher Dean, Chief Strategy Officer, Skype

Russ McGuire, VP, Sprint Nextel

Jack Kennedy, EVP, News Corp

David Weiden, General Partner, Khosla Ventures

Anand Chandrasekhar, SVP and GM, Intel

Chamath Palihapitiya, VP Growth/Mobile, Facebook

Rob Glaser, Chairman, Real Networks

Wim Sweldens, President – Wireless Division, Alcatel Lucent

Takayuki Hoshuyama, CEO, D2 Communications

Neville Ray, SVP, T-Mobile

Bob Azzi, SVP—Networks, Sprint Nextel

Mario Queiroz, VP—Android, Google

Matt Bross, Global CTO, Huawei

We will be covering the following topics in detail:

You can read more about what you can expect at the executive summit in the following whitepaper.

Mobile Future Forward Paper

I hope to see you there.

Chetan Sharma

Chief Curator

Mobile Future Forward

US Wireless Data Market Update – Q1 2010 May 16, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Gaming, General, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Wallet, Networks, Partnership, Patent Strategies, Patents, Privacy, Speaking Engagements, US Wireless Market, Unified Messaging, WiMax, Wireless Value Chain, Worldwide Wireless Market , 5 comments

US Wireless Data Market Update – Q1 2010

http://www.chetansharma.com/usmarketupdateq12010.htm

Executive Summary

The US wireless data market grew 5% Q/Q and 22% Y/Y to exceed $12.5B in mobile data service revenues in Q1 2010 - on track so far to our initial estimate of $54B for the year.

In a significant milestone that went largely unnoticed, Verizon Wireless edged past NTT DoCoMo - the decade old leader in mobile data revenues to become the biggest mobile data operator by data revenues. Helped by its 93M subscriber base and high ARPU, the Verizon juggernaut is steamrolling. Rest of the 3 top US operators also occupy leading positions amongst the top 10 global mobile data operators.

The US subscription penetration was approximately 94% at the end of Q1 2010. If we take out the demographics of 5 yrs and younger, the mobile penetration is now past 100%. While the traditional net-adds have been slowing, the “connected device” segment is picking up so much so that both AT&T and Verizon added more connected devices than postpaid subs in Q1 2010. Given the slow postpaid growth in, operators are fiercely competing in prepaid, enterprise, connected devices, and M2M segments.

Data traffic continued to increase across all networks. US has become ground zero for mobile broadband consumption and data traffic management evolution. While it lags Japan and Korea in 3G penetration by a distance, due to higher penetration of smartphones and datacards, the consumption is much higher than its Asian counterparts. Given that it is also becoming the largest deployment base for HSPA+, LTE and WiMAX, most of the cutting edge research in terms of data management and experimentation with policy, regulations, strategy, and business models is taking place in the networks of the US operators and keenly watched by players across the global ecosystem.

We are starting to see the inevitable changes in broadband pricing starting with T-Mobile and MetroPCS. Over the course of this year, we are likely to see newer pricing models that tie usage to pricing and add multiple devices to a single data bucket.

The fabled iPad landed in the market and it is a winner. Apple’s latest gizmo has created a new user experience category of casual and couch computing that will foster growth in the connected device space. Kids of the now generation are growing with connected electronics that is fundamentally altering the behaviors and expectations of interaction, communication, consumption, and monetization.

Privacy brouhaha has been brewing for some time and the polity class is getting interested in stepping in. If people are really serious about tackling privacy, OEMs and carriers should build a physical/soft privacy button on the device with 3-5 levels (just like for the ringer volume) that allows users to open/close privacy across all applications and services with the touch of a button. All apps and services should adhere to the principle via APIs. The other mistake companies make about privacy is by treating everyone the same. Privacy is about the perception of control and transparency. If it is given back to the consumer, they are likely to engage more and have a more positive impact on revenue streams that are likely to flow.

In an another global milestone, Softbank became the first major operator to have more service revenues from data services than voice services. In Q1 2010, 55% of its service revenues were attributed to data services. (While Smart and Globe have been reporting 50%+ revenues from data services for a long time, the total revenues are not at scale with the leading global operators. Incidentally, for the first time in many years, the data revenue % slipped below 50% for the both operators in Q1). Based on current projections, US is likely to cross the 50% data revenue threshold in late 2012 or early 2013. NTT DoCoMo is next in line to cross the 50% mark this year.

All this has setup an absolutely fascinating period in the communication/computing industry. Convergence is everywhere and is leading to fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 8th event – Mobile Future Forward which is bringing leading industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. Hope you can join the discussion.

What to expect in the coming months?

The pace of product introduction is accelerating with each quarter. Devices of all shapes and sizes are coming into the market. Players are having to re-evaluate their businesses and long-term strategies. Several new impressive handsets got introduced during the course of 1H of 2010. iPad finally launched and even the next generation iPhone walked into a bar.

Microsoft announced its comeback with the W7 launch though the time it is taking to launch is making partners nervous. The change in UI was refreshing though the inability for the OEMs to differentiate is not winning friends. HP acquired Palm in attempt to become relevant again in the mobile device space. Some other players missed out in buying an attractive IP portfolio. It has been an action packed 2010 thus far and we can expect more of the same for the remainder of the year.

2010 has also been active on the regulatory front as the national broadband plan was unveiled in March (our thoughts on the plan). The Comcast ruling delivered a blow to the FCC and any directives or policies will hardly have any impact on the ecosystem in the short-term.

With the looming spectrum shortage, regulatory bodies can have a significant impact on the competitiveness of a nation. Many countries in South America have imposed unnecessary spectrum caps. Others are behind in sorting out their spectrum allocations. The industry and regulators need to work hand-in-hand to make progress beyond speeches and paperwork.

To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come. (Former FCC Chairman, Kevin Martin headlined our Mobile Breakfast Series event in March and discussed the Spectrum Crises. Our June 10th event is bringing CEOs of some of the most innovative mobile startups to discuss the ecosystem)

2010 is also the year of network rollouts. T-Mobile has been rolling out HSPA+ at an impressive rate, Clearwire has been expanding the network so fast that it has become the biggest construction company in the US, Verizon is betting big on LTE and AT&T has been adding backhaul, upgrading to HSPA+ and planning for LTE all at once. Even the smaller carriers like MetroPCS are looking for competitive advantage with quicker LTE launch and beat others by carrying the first LTE smartphone. (We will be releasing the next edition of our “State of the “Mobile” Broadband Nation” paper later this year)

As we had mentioned last year, the mobile data traffic kept on growing disproportional to the revenues. A series of solutions have come into the market from players big and small. We will be releasing the second edition of our in-depth research paper on data growth - "Managing Growth and Profits in the Yottabyte Era" later this month.

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 2010 US wireless data market is:

Service Revenues (Slides 7, 16)

ARPU (Slides 8-11)

Subscribers (Slides 12-14)

Applications and Services

Handsets

Open

Data Traffic (Slide 15)

· As we noted in our last update, the data traffic is now significantly more than the voice traffic. The good news is that there are several solutions that available and are being invented that will help manage the data growth. The question is how fast will the operators deploy some of these solutions.

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 Aug 2010. The next Global Wireless Data Market update will be issued in Sept 2010.

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

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

Global Mobile Data Market Update 2009 March 31, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Gaming, General, IP, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, Storage, Strategy, US Wireless Market, Unified Messaging, Usability, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

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Download PDF (3.6 MB)

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (combined) are adding almost 30M new subscriptions every month. Amongst the two, India is outpacing China 2:1. China touched 750M subscriptions while India crossed 525M by the end of 2009. With 4.6B subscriptions, the global subscriptions penetration was above 68%.

The global mobile data revenues reached $220B and mobile data now contributes 26% of the overall global mobile service revenues.

As expected, the overall global mobile revenues stayed pretty flat for the year at around $1.1 trillion as many regions were hit by the recession and the competition pushed the ARPU lower for many operators. While the countries like US, Japan, China, and India showed very little signs of pullback, most of Europe and the developing world experienced a decline in overall service revenues in 2009. All the major markets have their data contribution percentages above 10% now.

For some of the leading operators, data is now contributing almost 50% of the overall revenues. However, the increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. NTT DoCoMo continues to dominate the carrier ranking in terms of the mobile data service revenues, Verizon Wireless which became #2 replacing China Mobile and is slowly edging towards the #1 spot and is likely to overtake DoCoMo within the next few quarters.

Though 4G as a standard hasn’t been defined yet, the discussions around LTE and WiMAX deployments grew intense. Telia Sonera became the first operator to commercially launch LTE. At CTIA, Sprint/HTC became the first players to launch a WiMAX smartphone and MetroPCS/Samsung took the honors for the LTE smartphone.

2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic. In the US, the yearly mobile data traffic exceeded the voice traffic for the first time.

We are also entering the phase of global mega-mergers in telecom. Bharti Airtel of India just acquired Kuwait-based Zain Group to become the 5th largest telecom group in the world (at the end of 2009, it was #9). There are now 14 telecom groups with 100M or more subscriptions. While China Mobile’s ARPU is 1/5th of its western counterparts, it operates its business at higher margin, around 51%. There are a number of global players mainly in Europe and Asia who have mastered the art of running lean operations and if they have good bank balance they are going to go shopping in the days ahead.

From the revenue perspective, the $50 billion revenue club is more exclusive with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.

As we sit at the cusp of the iPad era, there is a bigger transformation taking place and that is of the connected consumer electronic devices (CEDs). Few years from now, most popular CEDs will have connectivity. We are also approaching the start of phase where pricing of access will start to morph - we will see the introduction of family data plans (something we have been advocating for some time), ability to connect multiple devices to the same GB plan, more granular use plans (per session/day/week/mo/yr etc, roll-over GBs anyone?). As the number of connected devices/consumer increases, we will start worrying about Average Margin Per User (AMPU) or Average Margin Per Connection (AMPC) because ARPU won’t quite capture the dynamics of the industry.

Exciting times indeed.

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

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

Impact of Global Recession

  • Telecom in general fared better than other industries. In some regions, it hardly caused a tremor. However, in most nations, the impact was felt by the operators. Amongst the 40 major operators we studied, SK Telecom, 3 Australia, KTF, T-Mobile Netherlands, Rogers, Softbank Japan, Singtel, Vodafone Italy, T-Mobile Germany, 3 Sweden, Telstra, China Unicom, and Vodafone Germany experienced increase in both the data ARPU and the overall ARPU during 2009. Some of increase was due to the fluctuation in international currencies e.g. Korea.

  • Looking at the data at a country level, most nations noted a decline in overall ARPU. Only Venezuela, Pakistan, Argentina, Bangladesh, Australia, and Poland showed positive increase in ARPU since 2008.

  • Rule of Three is kicking in most markets with smaller players having to consider the M&A option to remain viable. T-Mobile/Orange, Bharti/Zain tie-ups are just the start of that process. We are likely to see many international mergers in 2010 and beyond as power in the mobile ecosystem self-adjusts.

  • 5 new players joined the 100M subscriptions club. The new members are: Bharti Airtel (India), MTN Group (South Africa), Orascom (Egypt), Etisalat (UAE), and MTS (Russia). The top 9 telecom groups in the world are: China Mobile, Vodafone, Telefonica, America Movil, Telenor, T-Mobile, China Unicom, TeliaSonera, and Orange.

Service Revenues

  • US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $44.56B vs. $32.5B for Japan in 2009. China with $20.3B was ranked number 3. US registered the highest growth amongst the top 3 with over 40% increase from EOY 2008 levels followed by Japan and China.
  • The top 10 nations by service revenues are: US, China, Japan, France, Italy, UK, Germany, Brazil, Spain, and India.
  • The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Australia, Spain, and Korea.
  • NTT DoCoMo continues to dominate the wireless data revenues rankings with over $16B in data services revenue in 2009. Almost 46% of its overall revenue now comes from data services. DoCoMo also crossed the 95% 3G mark.
  • NTT DoCoMo was followed by Verizon Wireless, China Mobile, AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top 10 operators by wireless data service revenues.
  • Each of the top 5 carriers exceeded $10B in yearly mobile data service revenues in 2009
  • Data revenues for the top 10 operators now account for almost 43% of the global mobile data revenues.
  • The biggest jump in data revenues was experienced by Verizon, Softbank, and AT&T. DoCoMo saw an 11% increase for the year.
  • Most of the operators in the developed nations are contemplating future strategies to boost data revenues such that the decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPU.
  • China reported approximately $20.3B in data revenues for 2009 and the percentage contribution from data services is around 32%, data ARPU is around $3.2. For India, data ARPU continues to stay below $0.50 as most of the new adds are voice only subscribers and there is continued price pressure in the market.
  • China Mobile remains the most valuable telecom operator with over $195B in market cap. It is followed by Vodafone at around $122B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans.
  • In 2009, SMS’s vice like grip on data revenues continues to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
  • NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets. They are exploring new technologies and social experiments ahead of almost anybody else in the market. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends, technologies, and ecosystem dynamics in these markets to get a sense of what’s coming.

· From the revenue perspective, the $50 billion revenue club has limited membership with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.

ARPU

  • Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like DoCoMo, and Softbank are over 46%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK, Telstra, and 3 Sweden exceeded 35% and many others are on the verge of crossing the 30% mark.
  • NTT DoCoMo reported the highest data ARPU for the year while Rogers took away the honors for the highest overall ARPU. Other notable percentage increases in ARPU were from 3 Italy, SK Telecom, KTF, T-Mobile Germany, 3 Sweden, and T-Mobile Austria. The Japanese operators saw a decline in ARPU by 3%.
  • The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with over 53% (or $2) contribution coming from the data services.
  • Softbank of Japan looks set to be the first major operator (outside of Philippines) with more revenues coming from data services than voice.

Mobile Data Traffic

  • We have been calling attention to the tremendous increase in mobile data traffic for some time. The discussion has hit mainstream and many operators are scrambling to nail-down their short-term and long-term strategies to manage the data traffic growth in their networks. See our paper on the subject "Managing growth and profits in the Yottabyte era." The recommendations discussed in the paper are slowly being adopted by various vendors and operators worldwide.
  • The global mobile data traffic exceeded an Exabyte for the first time in 2009. In fact, the data usage is growing so fast that this year, the two territories experiencing the most growth - North America and Western Europe are both going to exceed an Exabyte in mobile data traffic.
  • 2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic.
  • For many of the superphone heavy operators, devices like iPhone and Android account for more than 50% of their total data traffic.
  • 2010 will mark the first year when the total number of mobile broadband connections will exceed the total number of fixed broadband connections.

For more mobile data traffic analysis, please stay tuned for the second edition of our Yottabyte research

Subscriptions

  • India continues to be the hottest market on the planet in terms of net-adds with (again) a world record-setting month in Jan 2010 with 19.9 million net adds. To give you a perspective, this is almost 1.5 times  the number of subscribers US added in the whole year. It is like adding a Canadian wireless market every month. For the year 2009, India added 177 million subs vs. 106 million for China. Combined, one year of growth in these two market is equivalent to the size of the third largest market - the US, to date. Making money on the net-adds is a different proposition all together (more discussion on the international market in our global market update later this month)
  • Thanks to the explosive growth in the emerging markets, the global mobile market went past 4.6B in 2009 and is likely to cross the 5B mark in 2010. The global mobile subscriptions now represent over 68% of human population on planet earth.
  • China crossed the 700M subscription mark in July while India’s total went past 500 in Nov. In the meantime, US crossed the 90% subscriptions mark in 2009.
  • In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by 2018.
  • The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan, Germany, Pakistan and Italy.
  • China Mobile became the first operator (and likely to be the only one for a very long time) to cross the 500M mark. It remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone. Telefonica, América Móvil, Telenor, T-Mobile, China Unicom, TeliaSonera, Orange, and Bharti Airtel round up the top 10 largest telecom groups in the world.

Mobile Apps

· The total number of app downloads in 2009 reached 7 billion resulting in approximately $4.1B in revenues 12% of which was from mobile advertising.

· The number of non-carrier appstores jumped to 38 from 8 in the previous year.

· While Asia had the highest percentage of the download share, North America had the highest share of the apps revenue accounting for over 50% of the total revenue.

· The paid ASP in 2009 was approximately $1.9 and the advertising revenue generated from the free applications was approximately $0.09/user/app/year

For a more detailed analysis of the mobile apps market, please see our paper “Sizing the Global Mobile Apps Market”

Others

  • Messaging still accounts for the lion-share of data service revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have gradually chipped away the share from messaging. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
  • Nokia dominated the year as usual but the revenue share is shrinking and so is the lucrative smartphone share. Apple, RIM, and Google are relentlessly attacking the top tier while Samsung, LG, and others giving a tough fight for the bottom tier. We see a new middle tier emerging that has the form factor of a featurephone and functionality of a smartphone. The smartphone category is getting further split into regular qwerty smartphones like Blackberry and the touch and full browser based superphones like the iPhone and Droid.
  • The year was dominated by several blockbuster device launches like the iPhone 3GS.
  • Next few years will be big for infrastructure providers as many countries both developed and developing get into upgrading their infrastructure.
  • Willcom, the small Japanese carrier that started the flat-rate unlimited phenomenon filed for bankruptcy last month.
  • In the US, the increase in messaging volume catapulted US as the number one texting nation by messages/user/month going past the long-time leader Philippines.
  • Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines, even though 4G hasn’t been fully defined yet and the current candidates for 4G are nowhere near the performance goals of 4G (150Mbps/50+Mbps). Many larger operators have laid out their plans for deploying LTE starting this year.
  • We are also seeing regulators playing an active role in making the markets competitive and attractive in the long-term.

· The velocity with which the smartphones are being introduced into the market esp. the western markets, one wonders if in five years, we will be using the moniker to describe devices and if the "dumbness" in the device market will be practically eliminated. Led by Apple’s Appstore success, significant investments are pouring into the appstore world. In parallel, the debate over apps vs. mobile web is intensifying. The implications of the transition will be significant on the ecosystem on many levels.

2010 will be a critical year on many fronts. As usual, 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 2010. The next Global Wireless Data Market update will be released in Sept 2010.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

US Wireless Data Market Update: Q4 2009 and 2009 March 2, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, IP Strategy, Indian Wireless Market, Intellectual Property, International Trade, Location Based Services, Messaging, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Smart Phones, Strategy, US Wireless Market, Unified Messaging, Usability, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 2 comments

US Wireless Data Market Update - Q4 2009 and 2009

Download PPT | PDF

http://www.chetansharma.com/usmarketupdate2009.htm

Executive Summary

The US wireless data market grew 5% Q/Q and 24% Y/Y to exceed $11.8B in mobile data service revenues and thus exceeded $10B for each of the four quarters in 2009. For the calendar year 2009, the overall mobile data revenues for the US market grew 29% ending at $44 billion for the year (1% shy of our $44.5 billion estimate). For the calendar year 2010, we expect a 20% increase in mobile data service revenues accounting for over $53 billion in service revenues.

Verizon Wireless edged past China Mobile to become the second biggest mobile data operator by revenues.

The US subscription penetration was approximately 92% at the end of 2009. If we take out the demographics of 5 yrs and younger, the mobile penetration is 99%.

The messaging volume increased 7% from last quarter catapulting US as the number one texting nation by messages/user/month going past the long-time leader Philippines.

For the first time in the history of the US wireless industry, the data traffic exceeded voice traffic for the full calendar year. With almost 400 terabytes of data traffic, it exceeded voice traffic by a significant margin. We expect that the ratio between the two traffic sources is going to double in 2010.

Apple continued its iTunes juggernaut and if measured by billing relationships (of course not all accounts are mobile) Apple is  now the 10th largest mobile operator in the world.

Q4 2009 reported a 5.9% increase in GDP compared to the 3.5% increase in Q3 when the recession technically ended. While the overall economy is sputtering towards growth, wireless industry in the US remains vibrant as is evident by the increase in revenues and net-adds which jumped more than 5 million for the first time in 2 years.

What to expect in the coming months?

Christmas quarter generally yields best results of the year. Though the US mobile industry came out pretty unscathed from the recession, it will benefit from the improving economy. As such we expect the US mobile data service revenues to gain 20% to reach $53 billion in 2010. Mobile data will continue to be the engine of growth for the ecosystem providing at least 33% of the overall service revenues by the end of 2010.

The furious cycle of device releases is accelerating and one wonders if the longevity of each device is starting to shrink as even the hit devices like Droid and Nexus One are not allowed enough room to fully capitalize on their initial momentum. The app economy has been expanding as well. Part strategic, part hysteria, everyone is jumping into the pool to tap into the app river to pull in some revenues or use it more strategically to sell more devices, services, or advertising. (Stay tuned for more research on the subject in the coming days)

Microsoft is attempting a comeback with its 7 series devices though the delay in handset release as well as the lack of backward compatibility gives enough time for competitors to plan their moves. We are glad to see the industry going past the “PC like icons” for mobile phones (something we have advocating for more than 10 years, most recently in our paper “The Untapped Mobile Data Opportunity.” This will enhance user experience and help in extracting true value out of the mobile devices.

From the various announcements this year, we can expect an action packed 2010. However, it will be also an year of shakeouts with several key M&A transactions that will winnow down the competitive landscape in many segments.

Q1 2010 will also be important from the regulatory point of view with the national broadband plan being unveiled later this month. With the looming spectrum shortage, regulatory bodies can have a significant impact on the competitiveness of a nation. For example, in India, regulators haven’t been able to get their acts together for the past 3-4 years and its citizens continue to suffer from 2G. Similarly, many countries in South America have imposed unnecessary spectrum caps. The industry and regulators need to work hand-in-hand to make progress beyond speeches and paperwork.

To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come. (Former FCC Chairman, Kevin Martin will be headlining our Mobile Breakfast Series event on March 10th to discuss the Spectrum Crises).

2010 will also be the year of network expansion with HSPA+, WiMAX, and LTE all coming into play in the US. As we had anticipated last year, the mobile data traffic kept on growing disproportional to the revenues. At the end of 2009, the US mobile data traffic was almost 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, industry will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discussed mobile data traffic in much more detail in our popular paper "Managing Growth and Profits in the Yottabyte Era." We will be issuing an update later this quarter so stay tuned.

It is also good to see the mobile industry expanding into vertical segments like Health and Retail. More discussion to come on these topics.

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 2009 and 2009 US wireless data market is:

Service Revenues (Slides 8, 17)

ARPU (Slides 9-12)

Subscribers (Slides 13-15)

Applications and Services

Handsets

Policy and Regulations

Open

Data Traffic (Slide 16)

· For the first time in the history of the US wireless industry, the data traffic exceeded voice traffic for the whole calendar year. With almost 400 terabytes of data traffic, it exceeded voice traffic by a significant margin. We expect that the ratio between the two traffic sources is going to double in 2010.

Misc.

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 2010. The next Global Wireless Data Market update will be issued in March 2010.

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

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

New Whitepaper: Mobile VoIP – Approaching the Tipping Point February 17, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, India, Intellectual Property, Japan Wireless Market, M&A, MVNO, Mergers and Acquisitions, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Patent Strategy, Privacy, Smart Phones, Speech Recognition, US Wireless Market, Unified Messaging, VoIP, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

clip_image002

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

Mobile VoIP - Approaching the Tipping Point

Sponsored by Skype

This paper is a collaboration with Ajit Jaokar (FutureText) in London

Over the course of the last decade, mobile devices have become the most ubiquitous consumer electronic devices ever invented. Even in the poorest of the nations, mobile phones have evolved from being a luxury to an indispensible necessity. The paradigm of communication itself has undergone a significant transformation from just voice to multimode interaction. The trend is also discernable in the revenue numbers from the advanced mobile markets where voice revenue per user have been declining over the course of the last decade while most of the growth is coming from mobile data services. Mobile data services have evolved significantly from simple text messaging to multimode communication involving text, VoIP (voice over IP), video, and other forms of messaging and social networking interactions.

As we head into the next decade, the competitive landscape is going to change from year to year and sometimes even quarter to quarter. For major service providers, competition is no longer just from an operator who provides voice and data services but any company that captures the communication value chain. It is no longer sufficient to rely on voice revenues but providers need to think communications in a much more holistic form. Once the transport layer becomes all-IP in a given network, voice is nothing but another application that will work and interact with other applications in tandem often in real-time. The fear of cannibalization are unwarranted as our research shows that by offering consumers comprehensive services, the lifetime value of customers can be increased, churn can be reduced, and the overall value proposition of the operator increases tremendously.

The forces of technology, business models, consumer expectations, regulatory regimes, competition, and collaboration will help define the communication landscape of the next  ten years. This paper will take a look at the evolution of the Internet, mobile broadband, and mobile communication and how consumer behavior and expectations have changed. Next, the emergence and the role of VoIP is discussed in further detail before we delve into the intricacies of communication economics to dispel some myths and layout the framework for how operators should approach the new communications world.

Given the embrace by major tier-one operators, we believe that mobile VoIP is on the verge of becoming an integral part of the communications framework. This acceptance represents a tipping point in the evolution of mobile VoIP. The ecosystem participants who embrace and collaborate to provide a holistic and comprehensive communication solutions stand to benefit the most.

Download Paper (pdf)

2010 Mobile Industry Predictions Survey January 3, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Gaming, General, IP, IP Strategy, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Music Player, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, Storage, Strategy, US Wireless Market, Uncategorized, Unified Messaging, Usability, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 6 comments

2010 Mobile Industry Predictions Survey

http://www.chetansharma.com/MobilePredictions2010.htm

Mobile Predictions Survey (pdf)

Mobile Predictions Survey (ppt)

First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2010. Thanks to all who participated in our 2010 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way.

Before we dive into the survey results, let’s do a quick wrap-up of the year that was. Well, since we  just completed one heck of a mobile decade, let’s do a quick jog down the memory lane.

The Last Decade: 2000-2009

Each new decade brings its own consumer and technology trends. During the 2000s mobile cemented its place in the global society fabric, the use of mobility became addictive and pervasive, to be without mobile seemed a curse and innovation blossomed and took user expectations to new heights.

decadeglobal

From a pure statistical point of view, the global mobile subscription penetration grew from 12% in 2000 to approximately 68% in 2009 - phenomenal by any measure. The overall revenues grew over 400%, the data revenue grew 32,600% and the total subscriptions grew 563%. NTT DoCoMo paved the way with the i-mode launch in 1999 and they were the operator to emulate throughout the last decade, leading every single year in data revenues, in new application and service revenue sources, and in innovation and risk taking. They tried to export the success to other regions with little reward but DoCoMo clearly led the industry in taking mobile devices where they have never gone before.

China and India were late to the party but during the second half of the decade caught up with the western world and eventually surpassed all nations becoming number one and two nations by subscriptions respectively. In 2006, China Mobile became the most valuable operator passing Vodafone.

Mobile devices went significant transformation as well. From the early Bluetooth, camera, and music phones to the iPhones, the Storms, and the Androids, the industry was transformed by the introduction of Apple’s iPhone in 2007. While Bluetooth, sleek designs, camera phone defined the first half of the decade, the second half was all about the applications and the mobile web. While Nokia dominated the entire decade in terms of the sales and profits, having missed the touch revolution, it leaves the decade a bit battered and a bit behind playing catch-up to the newcomers who profoundly disturbed the status quo.

decadeoem

Razr carried Motorola through 2006 when its global share peaked but was left to reinvent itself during the second half. It seems to have redeemed itself with the successful launch of Droid and upcoming Android devices. While many in the industry predicted RIM’s demise, the company has only gotten stronger and is looking good for the 2010s. The emergence of Samsung and LG as strong players in the mobile ecosystem was also a big story of the decade with Samsung increasing its share by 380% and LG by 575% becoming the number 2 and 3 players respectively.

While Microsoft’s Windows Mobile had an early start and the enterprise market share, it lost its way through several missteps and is on dialysis as we enter the new decade. One shouldn’t count WM out though but there is a lot of work to be done before it can capture the imagination of the ecosystem which has been sequestered away by iPhone and Android.

While many new application areas were introduced during 2000s, none was able to displace SMS as the leading app category by usage and revenues. However, it’s relative share has started to come down especially in North America and Western Europe.

As data usage grew, so did the data traffic bringing many data networks to their knees. We expect the data traffic consumption to only accelerate. Many people are underestimating the growth rates (as they did previously) and the strain the increase in consumption will put on the unprepared networks. Projector phones will take media  consumption to a new level. Data management is going to be big business in the 2010s.

Overall, the mobile industry became a trillion dollar industry in 2008 and the data revenues are increasing in almost all regions. Voice is being commoditized at fast pace and that has put the traditional economics and ecosystem wealth distribution in topsy-turvy.

decadeus

The US market also experienced tremendous growth with mobile data service revenues climbing 21,327% and becoming a mainstay in the mobile economy. In 2008 it crossed Japan as the most valuable mobile data market. US was late in adopting SMS but caught fire once American Idol started using it and even played a good role in the 2008 Presidential election in showcasing the power of mobile. Verizon started the decade being the number one operator and after trading places with Cingular and ATT grabbed the title back in 2009 (after the Alltel acquisition) to become the most dominant carrier in North America. Many smaller players competed by being innovative with Cincinnati Bell launching the fist UMA device, Sprint the first mobile eReader, and TMO launched the hotspot business which has now become an essential component of an operator strategy going forward.

Mobile is also replacing landline at a much faster pace than expected and within the first half of the new decade, we will have majority of the users using mobile vs. landline. Just like the last decade, this one starts with a new standard deployment of LTE that will keep operators and vendors busy throughout the decade. However, a lot of the developing markets will still be deploying 3G during the first half of the decade.

Infrastructure providers suffered the most in the decade bookended by the two recessions. Consolidation of giants (Alcatel Lucent, Nokia Siemens), bankruptcies of the famous (Nortel), and uprising of the upstarts (Huawei) pretty much defined the decade for the segment. Ericsson and Huawei enter the new decade from a strong position and looking to dominate the global markets.

The last decade was also marked by some prominent IP battles such as RIM vs. NTP, Qualcomm vs. Broadcom, Sony Ericsson vs. Samsung, Upaid vs. Satyam etc. (disclaimer: we worked on some of these cases and testified as an expert)

Here is our “subjective” list of movers and shakers of the last decade

2000-2009

2010-2019

Operator of the Decade

NTT DoCoMo

DCM led the way in almost all new category of apps and services. Its data service revenue was highest in each of the last 10 years

DCM will continue to lead along with KDDI and SKT. However, it might be the carriers with tremendous scale who will have the calling cards in the new decade. Watch for China Mobile, Vodafone/Verizon, Telefonica, Orange, Bharti, Unicom, Singtel

OEM of the Decade

Nokia

Nokia dominated in sales and revenues in each of the 10 years and while the last couple of years took some shine off its glorious past, the company nevertheless came out ahead

RIM, Apple, Nokia, Samsung

Smartphone OEM of the Decade

Apple

Smartphones as we know them were introduced by RIM but Apple defined the category and the subsequent ecosystem

This space will be very competitive with Apple still the gold standard to beat

Infrastructure Provider of the Decade

Ericsson

Its prime rivals struggled to stay afloat while Ericsson grabbed most of the revenues from infrastructure contracts and is very well positioned for the next decade

Ericsson is joined by Huawei as the two top infrastructure provider with Huawei giving tough competition for LTE contracts. ZTE and other Chinese infrastructure providers will also replace some of the incumbents

Nation that led in mobile data

Japan

This is a no brainer. Japan led with Korea a close second. Finland, UK also impressed

US, China, and India are well positioned to make an impression but most likely during the second half. Japan will still be a major player

Device of the decade

iPhone followed by Razr

iPhone impressed with form and function while Razr with its global sales making it a top selling device of all times

The field might get more crowded as all OEMs focusing on the smartphone category. However, OEMs who also focus on the 90% of the market w/o smartphones might win the top prize

The year 2009

Apple continued to dominate the headlines for the third straight year - whether it was the launch of 3GS or the upcoming introduction of the fabled tablet. Google too kept the ecosystem active. It has executed on its mobile strategy with brilliant acumen though causing significant consternation amongst its partners who it needs to be successful. It has been often misunderstood by competitors, regulators, and partners. Often, they have focused on Google’s tactics vs. its strategy. Look for these two players to be very aggressive as they try to fight for the mantle and the mindshare.

While Nokia leads the OEM space by a good distance, its momentum in the smartphone space left a lot of question marks. Motorola made a credible comeback with Cliq and Droid. Samsung and LG continued to innovate and expanded on their share of shipments and revenues.

India outpaced China in net-adds and crossed 500M though it is still quite behind China’s 750M. The M&A and the consolidation process became active in Asia with several of the big regional operators looking to flex muscles in the international markets. After several delays, China started deploying 3G while India again fumbled and postponed its 3G auction.

US mobile data market continued its pace in 2009 with each of the four quarters exceeding $10B in data service revenues. The gap between the top two operators and the rest grew to be the biggest in the decade and the industry weathered the recession with ease. There was a clear shift towards prepaid especially for Sprint, T-Mobile, and the tier 2/3 operators.

2009 was also defined by significant activity on the application front. With Facebook eclipsing 100M subscribers and Appstore exceeding 2.5B downloads, sky is the limit.

The year also saw an unprecedented growth in mobile data consumption. As we had predicted, for some of the networks, the growth proved to be a double-edged sword. Many in the industry are banking on LTE to help relieve the pain but will be surprised that depending solely on the upgrade strategy will not be enough. Declaring spectrum as a looming crisis, FCC also started tinkering with the mobile industry and the broadband plan.

Japan exceeded 90% in 3G penetration while US subscriptions ventured into the 90% territory. Most of western Europe is way past 130%.

All in all, a terrific year considering that we went through one of the worst recessions in a generation. As we bid goodbye to the last decade, Nexus One and iTablet only serve to whet our appetite of what’s to come.

On a personal note, we started our consulting practice this last decade as we were coming out of the bubble recession and have been fortunate to work with some of the brightest brains and companies in the global ecosystem. We also had a chance to work on some key initiatives that impacted the ecosystem in profound ways. Many thanks to our clients, colleagues, friends, and readers. We will be involved with many new initiatives over the next decade and are looking forward to the conversations through the research notes, books, speeches, panels, whitepapers, blog posts, facebook and twitter feeds, and more.

Thanks and Happy New Year. May the upcoming decade leave you happier, healthier, and more successful than the previous one.

As we eluded to earlier, 2010 will be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?

We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=150) from leading mobile companies across the value chain and around the world opined to help us see what 2010 might bring.

11 names were randomly drawn for 3 special prizes. The winners are:

  1. Claire Boonstra, Cofounder, Layar- INQMobile 3G Chat device

  2. Michael Libes, CTO, GroundTruth - Open Mobile Book

  3. Henri Moissinac, Head of Mobile, Facebook - Open Mobile Book

  4. Subba Rao, CEO, TataDoCoMo - Open Mobile Book

  5. Saumil Gandhi, Product Manager, Microsoft - Open Mobile Book

  6. Sarah Reedy, Senior Editor, Connected Planet - Open Mobile Book

  7. Mike Vanderwoude, VP & GM, Cincinnati Bell Wireless - 2010 Mobile Almanac

  8. Pinney Colton, VP, GfK - 2010 Mobile Almanac

  9. Tim Chang, Principal, Norwest Ventures - 2010 Mobile Almanac

  10. Laura Marriott, President - 2010 Mobile Almanac

  11. Asha Vellaikal, Director, Orange - 2010 Mobile Almanac

Thanks to INQMobile and my friend Ajit Jaokar for contributing the prize gifts.

Despite conventional wisdom, what will not happen in 2010?

There were many. Sampling - Verizon iPhone, Microsoft Phone, Sprint will not be bought, Femtocells won’t gain traction, RCS will not happen, Google will not enter handset market directly, iPhone won’t lose steam, Android won’t bring coherence, NFC won’t take off, WiMAX won’t disappear, Nokia won’t bounce back, Palm won’t die, “Year of Mobile” noise won’t subside, carriers won’t be delegated as dumb-pipes.

It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem - monetization of social networks, augmented reality, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, Mobile 3.0, LTE, single purpose devices, 3G in India, Bada, app vs web, developer turmoil, featurephones, smart grids, M2M, Chrome, etc.

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

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

We hope you enjoyed gaining from the collective wisdom. Your feedback is always welcome.

Be well, Do Cool Work, Stay in touch.

Thanks.

With warm wishes,

Chetan Sharma

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

Now onto the 2010 Mobile Industry Predictions Survey Results

The panel comprised of movers and shakers from around the world

survey2_10 survey1_10

What will be the biggest stories of 2010?

survey3_10

Jan seems to be the Google Phone vs. Apple Tablet matchup. Our panel though voted for the continued growth in mobile data as the top story.

Have we recovered from the recession? (Please select one)

survey4_10

Majority thought we are out of it though some might still feel the pinch

Who will be the most open player in the mobile ecosystem in 2010? (Please select one)

survey5_10

Google has done a great job at maintaining its image as THE open leader

Will Android handset sales exceed iPhone’s in 2010? (Please select one)

survey6_10

Despite Androids coming in droves, iPhone will still be the king of the hill

When will we see tiered pricing plans for smartphones in the US from tier 1 operators? (Please select one)

survey7_10

There are indications that this might happen sooner rather than later

What will happen to the mobile prepaid subscriber base in the US? (Please select one)

survey8_10

Prepaid made a strong comeback in 2009 and a good majority thought that the trend is likely to continue

By how much will the mobile advertising ad-spend increase in 2010? (Please select one)

survey9_10

Mobile Advertising was the only advertising segment with positive growth last year so it is no surprise that folks expect it to more than double this year

What will be the impact of the FCC’s national broadband plan on the mobile industry in 2010? (Please select one)

survey10_10

Not much is expected from the various rulings that might come this year with most expecting the courts to have the final word.

Who will be the mobile comeback story of 2010?

survey12_10

Having bet its future on Android, Motorola was voted as the comeback kid of 2010

What will be the impact of Google Phone?

survey13_10

It’s pretty clear, Google and Apple are duking it out for the developer mindshare. Google wins in either case.

Which areas will feel the most impact from FCC?

 survey11_10

Net neutrality is the area where they will have the most impact

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

survey14_10

While only a holistic approach can provide complete relief, tiered mobile data pricing might have the most impact

When will the carrier-branded appstores lose steam? (Please select one)

survey15_10

Most expect carrier-branded appstores to be a thing of the past in 2010

What will help mobile cloud computing gain traction in 2010?

survey16_10

Mobile cloud computing is gaining steam and the reason is storage and media

What will be the most successful non-mobile-phone category in 2010? (Please select one)

survey17_10

Netbooks seem to be the strongest category followed by eReaders, Tablet, and M2M

What will be the breakthrough category in mobile in 2010? (Please select one)

survey18_10

Mobile Advertising and Mobile Payments share the top honors

By the end of 2010, which will have more subscribers? (Please select one)

survey19_10

LTE might have the momentum but WiMAX has the subscribers

How will Netbooks do through the operator channel? (Please select one)

survey20_10

No major impact from the operator channel

Which standards will gain traction?

survey21_10

No major impact from the standards

What mode of mobile payments will get any traction in North America and Western Europe in 2010?

survey22_10

The category will expand in different ways with more items being charged on the operator bill

Roundup of second Mobile Breakfast Series event – Mobile Broadband December 6, 2009

Posted by chetan in : 3G, AORTA, ARPU, CTIA, Carriers, Indian Wireless Market, Infrastructure, Location Based Services, Mergers and Acquisitions, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Mobile TV, Mobile Users, Mobile Wallet, Networks, Speaking Engagements, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 3 comments

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The second Mobile Breakfast Series Event was held at the picturesque Harbor Club in downtown Seattle on Dec 4th. The topic was “The Impact and Evolution of Mobile Broadband.” The lineup of speakers was awesome with who’s who of the mobile broadband world opining about the state of the industry, the opportunities, and challenges posed by the growth in mobile broadband:

Neville Ray, Senior Vice President of Engineering, T-Mobile USA

Hank Skorny, Senior Vice President, Media Cloud Computing and Services, Real Networks

Ken Denman, CEO, Openwave

Dow Draper, Vice President, Technology Partnerships, Clearwire

Charlie Martin, Wireless CTO, Huawei Technologies

Stacey Higginbotham, Senior Writer, GigaOM (moderator)

First of all, a big thanks to our generous sponsors: Motricity, Openwave, and Clearwire of supporting the event series. I am happy to report that Motricity has signed up to be the sponsor for the entire 2010 season. So, thanks Jennifer Moranz and Brendan Benzing. Thanks also to Ken Denman and Lupe Downing at Openwave, and Jeff Giard and Scott Richardson at Clearwire for their support. Thanks also to our esteemed panelists who have taken the time out of their busy schedules to be here with us this morning, esp. Ken, Charlie, and Stacey who had to hop on a plane to be at the event. Also, thanks to GigaOM and Moconews for being such terrific media sponsors.

As our operators continue to enhance the infrastructure both in the US as well as abroad, it is creating new opportunities and challenges for the industry. As you know, our friends at the FCC are also very consumed by the task of creating a National Broadband Policy and mobile is a key component of that proposal.

It was one of the best discussions on mobile broadband I have heard all year long. Panelists were really frank and insightful.

The salient points of the 90 minute discussions were:

Also, Tricia Duryee does a good summary of the discussion at Moconews

Our next event is looking to be another sellout affair with tech titan Rob Glaser, Founder, Chairman, and CEO of Real Networks headlining the event. Be sure to register early to avoid any sellout blues. Date: March 10, 2010.

Until then, a very happy new year to you and yours and have a terrific holiday season that helps you prepare for a successful 2010.

Global Wireless Data Market Update - 2008 April 28, 2009

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

Global Wireless Data Market Update - 2008

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

Executive Summary

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

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

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

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

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

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

Service Revenues

ARPU

Subscriptions

Others

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

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

Mobile Industry Predictions 2009 January 1, 2009

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

Mobile Industry Predictions 2009

http://www.chetansharma.com/MobilePredictions2009.htm

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

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

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

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

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

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

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

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

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

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

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

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

The winners are:

  1. Akio Orii, CFO and VP, Toyota

  2. Declan Carew, New Product Strategy Manager, Vodafone

  3. Helen Keegan, Consultant, Beep Marketing

  4. Rich Begert, CEO, Singlepoint, and

  5. Russ McGuire, VP, Sprint Nextel

  6. Jonathan Ebinger, General Partner, Blue Run Ventures

Congrats and Thank You.

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

survey1

survey2

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

survey3

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

Will Android handset sales exceed iPhone’s in 2009?

survey4

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

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

survey6

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

Will Apple launch new iPhone models in 2009?

survey5

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

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

survey7

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

Will India and China launch nationwide 3G in 2009?

survey8

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

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

survey9

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

Will Microsoft launch its own mobile phone?

survey10

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

Will Clearwire meet the 1.3 million subscriber target in 2009?

survey13

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

Will Mobile Open Source mitigate fragmentation?

survey14

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

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

survey15

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

Will Microsoft buy RIM?

survey11

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

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

survey16

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

Will carriers start launching Apple/Android style appstores?

survey17

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

Will Microsoft make windows mobile free to OEMs?

survey12

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

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

survey18

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

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

survey20

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

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

survey19

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

Despite conventional wisdom, what will not happen in 2009?

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

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

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

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

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

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

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

 

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

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

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

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

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

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

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

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

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

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

IKSMCover-s

Enterprise Mobility: Applications, Technologies and Strategies

IOS Press

Chapter Contribution

“Enterprise mobile product strategy using scenario planning”

SAMIMUNEER (SAP) and CHETANSHARMA

Download Chapter (154 KB)

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

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

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

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

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

You can download the chapter here.

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

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

Book Introduction

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

Enterprise mobile product strategy using scenario planning

Author(s): Sami Muneer and Chetan Sharma

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

The listing of the chapters is as follows:

Your feedback is always welcome.

Thanks.

Chetan Sharma

TiE-Seattle: Mobile Content Monetization - Challenges and Strategies June 1, 2007

Posted by chetan in : 3G, AORTA, ARPU, Carriers, Devices, Japan Wireless Market, Messaging, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile Usability, Mobile Wallet, Strategy, US Wireless Market, Unified Messaging, Wireless Value Chain, Worldwide Wireless Market , 7 comments

TiE Seattle Chapter hosted its annual mobile event earlier today. Given that Seattle is the mecca for wireless, it was no surprise that it was a sold out event with standing room only. I had the privilege of coordinating the event with my friend Sandeep Sinha - Director, Motorola. The keynote was given by Cole Brodman, Chief Development Officer, T-Mobile USA, a charismatic leader in the industry who rarely speaks at industry events, so it was great to have him participate.

The panel discussion was on “Mobile Content Monetization - Challenges and Strategies” - clearly a hot topic where lot of industry attention is these days. The panel was moderated by Len Jordan, General Partner, Frazier Technology Ventures. The panelists included:

Brendan Benzing, VP of Products and Marketing, Infospace

Jai Jaisimha, VP Product Development, Medio Systems

Satoshi Nakajima, CEO, UIEvolution

Hank Skorny, Executive VP, Business Dev & Partnering, OZ Communications

First let’s discuss the keynote and then I will get into the panel discussion. Cole walked us through the history of data growth in T-Mobile (he has been with the company for 11 years) and made some observations about the industry and the potential challenges and industry opportunities. Salient points included -

Then the discussion moved to a panel discussion with distinguished experts pondering over issues and future of the industry. key discussion points were:

When there is a carrier on the panel, it will be dishonest for the moderator to not touch upon the “closed garden” issue, the elephant in the room that no one wants to talk about in front of the carrier but endlessly ponder behind the backs. Well, Len didn’t shy away and put it straight to the panel. Satoshi, a veteran in the industry was bold to address it head-on, telling it like it is — carrier model in the US is a closed model and that hurts the entrepreneurs and if you think you will be in the next company which gets sold to Google, forget it. Lead time are so long that you might not survive. Brendan said it takes patience and commitment to scalability and reliability before you can crack the nut.

Cole to his credit acknowledged the issue and said, yes, as carriers, we do make things hard for the entrepreneurs to work with us, we haven’t built enough tools to make things simpler. However, he said, carriers need to take few issues into consideration, the biggest one being customer support costs. If there is a minor issue, multiply that by 26M and it can quickly become a nightmare. Secondly, User experience needs to be solid. We as an industry haven’t done a good job, he thought, by pushing out some of the half-baked solutions. And, finally, the spectrum isn’t free like the Internet, even when broadband comes, it will be an issue. However, industry needs to set the bar for introduction of apps a bit lower to test out the market, so instead of releasing it to 26M, introduce it to a small subset, test and expand. T-Mobile is working on figuring this out.

When asked, what’s the driving factor for mobile content, everyone agreed (of course) the personal nature of the device, the asynchronous capability, and personalization capability is important. Satoshi mentioned his nirvana moment was when he saw the first version of a mobile fishing game in Japan, where users could set the location for fish and when the back-end server ‘caught’ the fish, an SMS alert was sent. It affirmed the “different nature of this medium”. Hank narrowed it down to communication, jewelry, and entertainment being the key elements for mobile. Jai said that presence and location are going to make a huge difference in mobile UX.

The challenge of discovery of content was mentioned. Brendan thought the opportunity for “mobile advertising” is huge but it will take good amount of time for the market to develop. The models for advertising based content monetization will start to happen. Jai also thought indirect monetization models will start to happen soon and also Long tail content monetization will be significant as it is an untapped territory right now.

Len asked, how things are different in Intl market? Brendan said, some of the differences are in how people consume media, and how mobile fulfills the need for media consumption demands and needs.

To the question of how we pay for all this, Satoshi pointed out two business models, one is people will pay for mobilizing their Internet experiences. He said, Myspace is free online but the mobile version is $3.99 but is the biggest selling app on AT&T (value is in immediacy) and second the standard comcast/cable model of flat fee for services like VCast irrespective of the apps and content you consume (with bundling of course).

Brendan thought that Personalization will always be a big market. Also, an untapped market is the commerce on the phone. Online, 30% of search revenue is based on checkout or from ecommerce players. Micropayments for commerce and content will be big.

Cole emphasized that things need to be made very simple like RIM did for email - intuitive and easy to use. He said, carriers should focus on horizontal things instead of focusing too much on vertical elements. To the question on alternate billing models, they are looking at Paypal and other means for billing.

Satoshi thought that offdeck market is another opportunity that hasn’t been fully exploited yet but the challenge is getting eyeballs.

Finally, there was a question around why US is so behind. Cole countered that there is a perception that US is behind but we are doing fairly well. I agree, if you look the numbers, 12-15% growth Q-over-Q over past 10+ quarters ain’t bad. That’s clearly a misconception in the market as highlighted in our Q107 update.

So, a variety of issues tackled, some fun discussion, good networking, and a very successful event. Thanks to all those who were able to make it. The Wireless SIG is doing another event in June, stay tuned.

Chetan Sharma Consulting was a proud sponsor of the event along with other great sponsors.

 Photo Credits: Shashi Shashidhar

Sell Phones: What will make Mobile Advertising tick? October 19, 2006

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Devices, European Wireless Market, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, MVNO, Mergers and Acquisitions, Messaging, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Mobile TV, Mobile Usability, Mobile Wallet, Partnership, Privacy, Smart Phones, Strategy, US Wireless Market, Unified Messaging, Usability, Wireless Value Chain, Worldwide Wireless Market , 2 comments

The full version of the paper is available now -

http://www.chetansharma.com/sellphones.htm(pdf download)

Introduction

Mobile Marketing and Advertising is the new it in the industry. All the three recent industry shows (MES, MECCA, and CTIA)[1] in LA last month were buzzing with the potential of mobile advertising. For carriers, who until now had not paid attention to this evolving sub-segment, have started to organize internally to be the clearinghouse and magnet for agencies and advertisers. The advertising agencies and big brands have started to throw MDF[2] dollars at experimenting with this new medium called mobile. Analysts have started predicting billion dollar markets by 2010[3]. The ecosystem has also started shifting and new alliances are being probed and tested for positioning. Is mobile marketing going to be another over-hyped industry segment or will it actually help generate revenue, drive exits for VC investments, enhance content value-proposition, and most importantly, deliver value to the consumers? This article discusses the elements that are critical for the long-term viability of the mobile advertising and marketing industry.

How big is the market?

To get a grip on the potential market in the US or Western Europe, we take a look at Japan[4] as the harbinger of whats to come in this space. According to Dentsu, mobile advertising revenues for 2006 will be approximately $373M or close to $3.8 per subscriber (for the year). By 2009, this number is likely to scale to over $6/sub/year[5] (Figure 1). According to InfoPlant, almost 60% of the Japanese consumers use mobile coupons and discounts more than once a month[6]. The US market is just starting to get organized and move from SMS marketing to mobile/local search marketing, interstitials, in-content ads, banner ads, etc. In 2006, US will do less than $1/sub (for the year) in mobile advertising revenues, bulk of which will be SMS marketing. Europe is also slowly waking up to the possibilities around mobile ads and has been experimenting with some clever business models such as Operator 3 subsidizing usage and phones in lieu of advertising on the phone. These models are also being offered in the microenvironments of downloadables, subscriptions, video streams, etc.

Figure 1. Mobile Advertising Revenue Growth in Japan[7]

It is apparent that due to the availability of context, immediacy, and personalization, mobile has significant advantages over the other channels as an advertising medium.

The potential is clearly there but how long will it take to reach a critical mass? How many years before the industry cracks $1B? $10B? For reference, it took 2, 4, and 5 years for Broadcast, Internet, and Cable advertising respectively, to cross the $1B revenue mark; 5 years for Internet and Broadcast advertising to cross the $5B mark. None of them crossed $10B mark in their first 10 years of existence[8] (Figure 2). Will mobile be any different? Instead of being a blip in the advertising revenue stream, when will the mobile segment start rivaling revenues generated from advertising on Internet, Radio, Newspaper, and TV? Can it? If yes, what does it take to get there? What technical, business, and legal issues need to be addressed before agencies have dedicated staff to tackle mobile advertising and real dollars instead of MDFs as part of the budgeting exercise? Finally, who will be the dominant players controlling the ecosystem five years from now?

Figure 2. Annual Ad revenue growth in broadcast, cable, internet in the first 11 years[9]

Technology Requirements

First, lets discuss the technology piece. As we have seen in Japan and Korea, higher processing power handsets and 3G pipes play a significant role in the adoption of rich advertising content. If an ad is non-intrusive, delivers value, and is relevant to the consumer; there will be a higher propensity of adoption vs. when after 45 seconds of connecting to server screen, an ad rears its ugly head to slam in the face of an already frustrated consumer. In the US, 3G is being adopted fairly aggressively and when Cingular picks up pace with its WCDMA/HSDPA deployment, growth is going to accelerate into 2007. By 2008, 3G penetration will reach over 25%[10]. Adoption of Smartphones is also increasing (Figure 3). With Motorolas Q and RIMs Pearl, price point is getting near mass-market consumption levels. By next year, we will start seeing $100 smartphones. In the US, 25% of the converged devices sold during the first half of 2006 were 3G devices. This is up from just 3% in 2005. User interfaces are also getting better. UIOne, MYDAS, Flash, Screen 3, 1mm, and other proprietary solutions are extending the possibilities. In terms of options, there are different channels available SMS, MMS, Search, Browser, Games, Video/TV, etc. each with its pros and cons and maturity level in the market (Figure 4 and 5).

Figure 3. Expected lifecycle of various key technologies in the US[11]

Figure 4. Mobile advertising channels[12]

Most of the effective mobile advertising and marketing will be search driven whether it is based on declared intent from the user or passive impressions based on users context, history, and preferences. Google is an example of the former while Amazon is a brilliant case study of the latter. Local search and advertisements will be a significant part of the equation. As Mark Anderson, CEO of Strategic News Service[13] recently quipped in his recent column Searching for Transactions, Search isnt about advertising, its about shopping, which is why the advertisers have to be there. It is truer in the mobile environment. Astute advertisers realize the proximity and intimacy of the medium and already conjuring up clever ways to engage the consumer. Service providers with good mobile search engine technology will be at competitive advantage as they build a strategic framework to address the bigger opportunity.

Figure 5. Consumption of various services in key western nations[14]

For mobile advertising to be successful, one needs reach, purity, and analytics (Figure 6). Reach is how many real customers do you have? Purity is the quality of information on the customers. Name and address just dont cut it. Analytics is matching users interests implicit and explicit, context, preferences, network and handset conditions to ads and promotions in real-time. Not just bucketing a user in a group and giving them a number but understanding the user in every way possible and customizing every single interaction, every single push, every single imprint, and every single promotion to the finest degree possible.

So, who has the reach? Clearly, carriers with millions of billing relationships currently have the tightest relationship with the end-customer in this ecosystem and has the most relevant transactions to build a good customer profile fingerprint[15]. On the other end are the Internet brands like Yahoo, Google, and MSN with over half a billion unique visitors each. Other important players include giants like Amazon, EBay, Myspace, Youtube, Skype, AOL, and Paypal.

Figure 6. Mobile Advertising and Marketing Framework

The internet brands have good reach but limited purity. Purity is about good profile data. The customer profile information that Internet players have assimilated doesnt really always translate well into a view of a customers interests and preferences. They can and will build a direct relationship with consumer but it will take time and has to overcome some technical and business hurdles.

Finally, one needs the analytical framework. The goal of the framework is to capture the behavior and interests of the user while they are browsing, shopping, interacting with a variety of applications and content, and even simply calling 1-800-Flowers. This knowledge mixed with the explicit profile helps enable build characteristics and traits of users on a mass scale. Once the segmentation and understanding of the user is fine-tuned, the gathered knowledge can be continuously applied to enhance the user experience while they are interacting with their mobile phone by targeted promotions and offers sent to the user, and mobile advertising can be enabled such that it adds value to the user experience.

In terms of platforms, there has been a lot of activity on building backends, but little progress on the front-end where it matters the most. What is absolutely needed is an easily accessible control framework for permission advertising/marketing so that the user can selectively or globally switch-on or off the types of ads/promotions they would like to entertain and when. We need a SIP/Presence like capability that works across all apps and services and is as universally accessible through open APIs. Mobile advertising is not just all visual either. It can interact with the customer while they are on hold or support free 411 or premium services or can be integrated with podcasts, essentially finding clever ways to provide ad/promotion content in exchange for something that provides value to the end-user. The context engine combines various inputs and uses location and other contextual information to package information before it is pulled or pushed to the consumer. This is true for all the application areas such as portals, storefronts, local search, mobile search, off-net access, and other applications.

The value chain

As the convergence continues, the mobile ecosystem keeps shifting. Currently, the mobile advertising chain consists of the following main segments (Figure 7):

Campaign Sponsors American Express, P&G, GE, Toyota, etc.

(Advertisers)

Marketing Agencies Ogilvy, Universal, Carat, Mindshare, etc.

Enablers ThirdScreenMedia, Admob, MobiTV, Enpocket, Rhythm NewMedia, Medio, ActionEngine, Screen Tonic, Google, Yahoo, Tellme, MSN, Infospace, etc.

Content Provider CNN, Disney, Yahoo, YouTube, ESPN, Mixxer, Intercasting, etc.

Aggregators mBlox, Infospace, WSC, etc.

Carriers Sprint Nextel, NTT DoCoMo, Vodafone, Telefonica, Verizon, Cingular, Virgin, ampD, Clearwire, etc.

Consumers You and Me

For each of the participants, there are some inherent benefits, specifically,

For the carrier, it is an excellent way to build loyalty and stickiness. It is also a way to take the saturated levels of data users to another level by subsidizing premium content and even transport costs by advertising thus lowering the barrier-to-usage. However, the carriers need to balance the influx of users and data traffic with the potential for additional revenues. Spectrum is still limited and it needs to be used wisely in any strategic scenario.

For the user, relevant (opt-in) and targeted advertising and promotions deliver value. In all recent surveys, the number of users willing to pay for the Mobile TV service is a very small fraction of the number of users who want to use the service. With advertising, they can afford more and start enjoying the full capabilities of their handsets.

Figure 7. The emerging mobile advertising value chain[16]

From an advertisers point of view, mobile provides unparalleled reach and a reliable and fairly accurate measurement tool. The ad/promotion system should have the capability to create promotions at national and local level (city, zip code, location) and everything in between. The system needs to support extensive querying and segmentation capability to design sophisticated campaigns for e.g.

Give me users who are most likely to purchase a new ringtone from Usher.

Give me users who are Pop aficionados, have coke as their favorite cola, wear Nike shoes, single, living in large metro areas on the east coast, income level above $120K, have ARM11 or higher devices, and have responded to at least 50% of ads in the past 2 months.

For evaluating the mobile medium, advertisers are using the same criterion as they have used for other channels, namely:

Reach how big is the audience esp., unique and regular visitors?

Purity how good is the user profile information?

Frequency how often is the audience exposed to advertisements?

Performance whats the quantitative measurement criterion to determine effectiveness of the campaigns?

Advertising inventory whats the availability of ad slots on premium properties?

Advertising units whats the size and shape of advertising content?

Tools what kind of tools are available to run the lifecycle of a campaign? How does mobile advertising fit into the larger advertising budgets and planning?

For content providers, both big and small, it offers an ability to go direct in addition to working with carriers on revenue-sharing arrangements. If a content-providers has traction and user profile data for a few million loyal subscribers, advertisers would love to talk to you. But, as we discussed earlier, it comes down to reach and purity of the subscriber base.

Risks

While the potential is immense, there are also significant risks and potential challenges that need to be tackled before the industry evolves into a vibrant advertising medium. The prominent amongst them are privacy and data security. Once you start mining user data, significant profile information can be developed. Then how that information is used and by whom becomes an issue, and a significant legal minefield. In addition, if the industry doesnt want regulators to get involved, the security policies and procedures need to be in place to protect the data from theft or misuse. Next, the advertising ecosystem needs to be fostered so that everyone in the value chain benefits relative to their contribution.

Some people have compared the advertising ecosystem to lions (advertisers) and antelopes (consumers), where you need enough antelopes to attract the lions but not enough lions that you scare away the antelopes[17]. As Omar indicates in his article, advertising needs to align the interests of different players in the value chain to keep plenty of antelopes around the watering hole. As we have seen time and time again, if the ecosystem is healthy, segment thrives otherwise it is relegated to slow growth or the interest dissipates altogether. There needs to be a good balance of power between advertisers, content providers, carriers, and consumers.

Value-chain dynamics

It is clear that mobile advertising and marketing has big potential if certain technical and business requirements are met and industry strives to take into account the user considerations that matter the most. But, which players will dominate and control the ecosystem. Without a doubt, carriers have the purest profile information available, but can they execute their strategies? Well, they have approximately 3-4 year window. Once 3G and Smartphone penetration curves collide and pass 20-30%, if the carriers havent built a good mousetrap (value proposition) by then, all bets are off. Different dominant players will start to emerge, as it will get easier for Internet and traditional brands to build direct relationships with a good proportion of the subscriber base. It is also possible that in some geographies carriers and brands will work closely to establish a tight service offering and equitable revenue split. Role of savvy brands like P&G who are generally ahead of the curve on most technology trends is going to be important. Brands and service providers who are able to integrate user experience across channels will benefit the most (Microsoft will be a strong player in cross-channel advertising). There is real value in understanding user behavior on the Internet and mobile and cross-leverage in a) building a solid profile fingerprint and b) using it to push content.

Then, there is the whole world of off-net advertising and marketing. Carriers are increasingly playing a lesser role in that segment. But the market is very fragmented amongst hundreds of content providers and mini-aggregators. They only have a piece of the (reach and purity) puzzle and hence the analytics they apply will be limited in scope. Could they collaborate to work to leverage each-others strength? Certainly. Can the user profile information be available as a web service (with users permission of course)? Sure. Can carriers start to offer that to trusted providers in exchange for revenue-share? Possibly. There is clearly enough room for experimentation in both technology and business models arena of this nascent industry segment. Finally, ads and promotions should be super-distribution-friendly (across carriers and devices) meaning — treat ads and promotions like content that can be passed around easily.

Conclusion

It is quite clear from the industry trends that mobile industry (especially in the US) is moving from an emerging state to a more interactive and immersive application and services environment. By 2011, advertising industry will be close to $600B. Can mobile start to increase its revenue share from its current levels of less than 0.2% to 2-5% by then? Since this medium can provide context, immediacy, and personalization, the answer is yes. However, there are technical, business, and legal hurdles to be crossed before the industry becomes a thriving institution.

Until then, stay tuned to our commentary on the shifts and turns in the ecosystem.

Acknowledgements

My thanks to Sunil Jain, Victor Melfi, Amar Patel, Anne Baker, Sarla Sharma, Shawn Conahan, and Subhadeep Chatterjee for their valuable assistance with the article.


[1] Coverage of fall shows (2006) is available at http://www.chetansharma.com/ctia0906roundup.htm .

[2] Market Development Funds (MDF) are typically allocated for new media activities.

[3] In a recent report, Informa estimated that the mobile advertising market is going to be worth $871m this year, and will jump to $11.35bn in 2011.

[4] Japan is the second largest advertising market in the world behind US. Japan is also the first country to exceed 50% 3G penetration earlier this year.

[5] Source: Dentsu, Chetan Sharma Consulting

[6] Source: http://www.wirelesswatch.jp//modules.php?name=News&file=article&sid=2021

[7] Source: Dentsu, Chetan Sharma Consulting

[8] Year 1: 1995 for Internet, 1980 for Cable, and 1945 for Broadcast TV (Source: IAB).

[9] Source: IAB Internet Advertising Revenue Report, 2005 Full Year Results, PriceWaterhouseCoopers

[10] For a more exhaustive discussion on 3G, please see http://www.chetansharma.com/cover%20story_3G.pdf

[11] Source: Chetan Sharma Consulting

[12] Source: Chetan Sharma Consulting, Q206

[13] http://www.tapsns.com

[14] Data Source: M:Metrics, Aug 2006

[15] While carriers have the most pertinent data on the users, it resides in disparate locations and very few have realized the long-term value of such an exercise.

[16] Source: Chetan Sharma Consulting

[17] Lions and Antelopes in the Advertising Ecosystem, Omar Tawakol, Revenue Science

HP’s Memory Spot July 24, 2006

Posted by Chetan in : 3G, AORTA, Devices, Enterprise Mobility, General, Middleware, Mobile TV, Mobile Wallet, Storage, US Wireless Market, Usability , add a comment

Last week, HP spoke about Memory Spot - http://www.hp.com/hpinfo/newsroom/press/2006/060717a.html

The experimental chip, developed by the Memory Spot research team at HP Labs, is a memory device based on CMOS (a widely used, low-power integrated circuit design) and about the size of a grain of rice or smaller (2 mm to 4 mm square), with a built-in antenna. The chips could be embedded in a sheet of paper or stuck to any surface, and could eventually be available in a booklet as self-adhesive dots.

The chip has a 10 megabits-per-second data transfer rate 10 times faster than Bluetooth wireless technology and comparable to Wi-Fi speeds effectively giving users instant retrieval of information in audio, video, photo or document form. With a storage capacity ranging from 256 kilobits to 4 megabits in working prototypes, it could store a very short video clip, several images or dozens of pages of text. Future versions could have larger capacities.

A step forward in our AORTA world. Potential apps listed in the press release