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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 , 5 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

US Mobile Data Market Update Q3 2009 November 9, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carnival of Mobilists, Carriers, Devices, European Wireless Market, IP Strategy, Indian Wireless Market, Japan Wireless Market, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Messaging, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Networks, Partnership, Speaking Engagements, US Wireless Market, Unified Messaging, Usability, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

 

Download PPT | PDF

Executive Summary

The US wireless data market grew 5% Q/Q and 27% Y/Y to exceed $11.3B in mobile data service revenues and thus exceeded $10B for the third straight quarter. As we mentioned in our Q1 2009 research note, given the strong growth in data revenues and overall service revenues, the worst is over for the US mobile industry. The US market touched 25% penetration of smartphones in Q3 2009, a new milestone.

While the flailing economy hit certain segments of the wireless ecosystem hard esp. the infrastructure and handset segments, consumers haven’t really pulled back on the mobile data overall spending. Additionally, the CAPEX spending has stayed strong in 2009 given the activity around 3G/4G deployments and trials. As expected, there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers. The US subscription penetration was approximately 91.3% at the end of Q3 2009.

As we mentioned in our last three research notes that this time around, the fate of the US mobile industry is more closely tied to the overall economy compared to the previous recessions. As the consumer sentiment improved over the last two quarters along with better than expected Q1-3 2009 earnings from corporations, the mobile industry is back on track. While the structural flaws in various industry segments remain, the outlook for the Q4 2009 and 2010 remains bright and we are expecting the overall data revenues to now increase by over 30% compared to 2008 with a record-setting Q4.

Q3 2009 reported a 3.5% increase in GDP compared to the 1% decline in Q2 and 6.4% decline in Q1, thus marking the official (technical) end of the recession. The GDP is expected to change by 3.2% for 2009 and the service revenues are expected to  account for 1.13% of the US economy by year-end. Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.

So, what does this mean? Well, the markets can still be volatile, but overall the market seems to be feeling better about the economy than it was in February. The Conference Board Consumer Confidence Index though retreated from June is at a healthy 47.7.

What to expect in the coming months?

The high unemployment has slowed the growth in the data card segment but the smartphone consumers have more than picked up the slack. Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid accounts for almost 20% of their customer base compared to 17% from an year ago. The fight for the low-end customer is also having an impact on the traditional prepaid players and the price pressure is reducing their margins. It is quite likely that 50-60% of such consumers don’t go back to postpaid thus permanently lowering the ARPU base for such customers and carriers who have experienced more postpaid to prepaid shift will have to make up for the lost revenues elsewhere.

In fact, the churning in the last few quarters has distanced the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) by the biggest gap in the history of the industry. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.

The trend of the landline replacement by Mobile continued in Q3 2009, now reaching almost 25%. In the third quarter, messaging growth slowed down. The messaging volume was up only 4% and messaging revenues were up 3% QoQ. With its expanding 3G network, T-Mobile like its peers has started to benefit from smartphone penetration reaching to 6% of its subscriber base. Overall, The increased use of smartphones and datacards is putting a pressure on carrier networks and accelerating their strategies to deploy LTE/WiMAX. We estimate that by end of 2009, the US mobile data traffic is likely to exceed 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, operators will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discuss mobile data traffic in much more detail in our paper "Managing Growth and Profits in the Yottabyte Era." We will have more on this subject in the coming days (You can also read our RCR Wireless columns on the subject - Defining Mobile Broadband and Solutions for the Broadband World).

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

Against this backdrop, the analysis of the Q3 2009 US wireless data market is:

Service Revenues (Slides 11-12, 17, 19)

ARPU (Slides 13-15)

Subscribers (Slides 16-18)

Applications and Services

Handsets

Policy and Regulations

· Q3 also marked the start of an intense FCC scrutiny of the wireless industry. In outlining the four key principles of a) looming crisis of spectrum shortage b) removal of red tape c) enforce net-neutrality and d) open Internet, things have already started to change in the US Wireless Industry. Google has played the game of Armadaian tactics with Kasparovian acumen. The impact of the codified principles (and the subsequent court battles) can have a significant impact on not only the US wireless industry but the global ecosystem as well.

Open

· While there has been much consternation around the word "Open," one is hard pressed to find a consistent definition what it might actually mean. One could provide access to one API and declare themselves an open heretic while others could end up opening up their business more than needed and yet be accused of being closed. Clearly, the degree to openness is in the eye of the recipient. There is no black and white, just shades of grey and that’s where the battles will be won and lost. In the end, it is all about "access" to the market and the "freedom" to earn profits. Rest is noise.

· It is worth debating as to what can be mandated to be open, do the rules apply just to the operators and OEMs, or we should extend the courtesy to software platforms, search indices, aggregated user profiles, billing engines, etc.

· It is also becoming obvious that we need to redefine the device categories. Featurephones are no longer dumb terminals, many empower the users with smartphone functionality. Devices like iPhone, Droid, Pre no longer fit the smartphone stereotype, they need a separate category for themselves - appphones, ddhmvcs (data devices that happen to make voice calls), platformdevices, mobilecomputers, geniusdevices, agilechips, astuteconceirge, you get the point.

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 Feb 2009. The next Global Wireless Data Market update will be issued in Mar 2010.

Watch out for our end of the year survey and commentary on global wireless markets and trends for 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 Wireless Data Market Update 2007 March 27, 2008

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

Global Wireless Data Market Update 2007

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

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

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

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.

Your feedback is always welcome.

Chetan Sharma

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

CTIA Wireless IT and Entertainment 2007 Roundup October 28, 2007

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Infrastructure, Intellectual Property, 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 Usability, Partnership, Privacy, Smart Phones, Strategy, US Wireless Market, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

cid:image001.jpg@01C81817.0F453F50

http://www.chetansharma.com/ctiaoct07.htm

The early morning full moon over the San Francisco bay was much more inspiring than any gizmos or gimmicks at the annual CTIA Wireless IT and Entertainment show. Maybe it is the conference fatigue setting in but the scaled back event failed to gather steam and one had to rely on alternate sources to get a sense of where things are headed in the next 6-12 months. This note summarizes the observations and commentary from the show.

First lets do the numbers. CTIA released its mid-year data survey for the year. In summary, as of June 2007 - 243M subs, $67.9B in revenues (first 6 months), $10.5B in data revenues for the year accounting for 15.5% of the total service revenue, MOU exceeded 1 Trillion minutes, 1B TXT messages daily. These numbers were in line with the numbers we reported back in Aug.

Keynotes - The central theme that tied the three keynotes was Be Open, Do Good Work, and Rest will take care of itself. The keynotes from Steve Ballmer, Microsoft, Dustin Moskovitz, Facebook, and Atish Gude, Sprint Nextel emphasized the need to have an open platform for innovation, applications, and services. Havent we been down this lane before?

Steve started by taking a page out of our (upcoming) book, literally (page 243 to be exact) and describing a vision where mobile device becomes the remote control of your life for both workstyle and lifestyle. Too often we focus on separating out personal vs. professional but our lives are so intertwined that one minute you are setting up a doctors appointment and the next minute closing a sale. Companies that focus on managing the experience start to finish (waking to sleeping) independent of everything else will be the ones that dominate these turf wars. Microsofts big announcement was the release of device management server that includes mobile devices in addition to the desktop world (but it is limited to windows mobile devices only, Open?). Microsoft has been making impressive strides in occupying its place in the mobile ecosystem. Though windows mobile and battery life dont go together, the fact that they are deployed with 160 operators in 55 countries, shipping 20M devices/year places them at a significant advantage in the coming days.

Facebooks Moskovitz made the plea for openness of networks, devices, and applications to enable the social networking phenomenon on mobile. The fact that Microsoft and Facebook were doing the keynotes on the eve of strategic investment wasnt a coincidence. Dustin brought out the elderly statesman Mike Lazaridis to announce the facebook app for Blackberry smartphones. The interesting thing was how the app was introduced - Facebook chose RIM and RIM chose T-Mobile for this app. Device manufacturers are surely getting bolder. Facebook extended its platform to mobile. Getting social networking apps on mobile is a no-brainer. In fact, the coming enhancements with Presence, IMS, Broadband, Profiling, Location, can make mobile social network a society of its own.

I thought the most forceful case for openness was delivered by Atish Gude, SVP of the XOHM (WiMAX) initiative at Sprint Nextel. In fact, it was exactly along the lines of our recommendations for the operators in our book. Atish talked about openness across network, devices, content, and applications to deliver a great customer experience. Operators focus on delivering the intelligent network by focusing on QoS, Network elements like Presence and Location, Security, and Consistency of throughput and performance and leave the innovation in applications and services on the ecosystem who know how best to exploit the medium. His definition of device expanded beyond the mobile phone into consumer electronics and appliances which is a smart way of looking at things. However, vision is one thing and execution is another. Will Sprint be able to deliver on this vision in a timely fashion amidst quarterly Wall Street pressure is going to define the industry more than any of the hoopla of 700MHz.

Enterprise MIA - One of the personalities was clearly missing from the show. Yes, there was an enterprise pavilion but nothing new and different surfaced. Microsofts late foray into the device management space was the only worthwhile news that emerged.

LBS - The LBS industry proudly presented its posterchilds TeleAtlas, Navteq, TeleNav, and others. Their imposing presence on the show floor and in some of the sessions was palpable. I have been working in or following this space since 1995 and it finally feels that there is going to be some activity in this space after years of posturing, delays, and hype. However, the true value of location cant be unlocked unless it truly becomes open for the application and service developers. The delivery of coordinates for every request is not cheap so some form of business model or technical break through is needed to make the use pervasive. Some of the newer players displaying their wares were Telmap, locr, and earthcomber.

Mobile Advertising - It is great to see the progress over the last 12 months. The distribution, inventory, and ad networks are all improving and size of the campaigns are starting to reach six figures on average. Some of the working demos I saw were really compelling and some unique solutions are going to be introduced in the market in the next six months. Though the space is still nascent, some trends have started to emerge - companies who are focused on solving the problem end-to-end from strategy to execution to understanding the results are separating themselves from the plethora of technology providers in the space. There is tremendous amount of work that needs to be done in the metrics and auditing space in addition to the integration of silos.

WiMAX picks up steam On the heels of WiMAX being declared as part of the IMT-2000 family, WiMAX is slated to gather momentum though a lot still depends on carriers like Sprint to deploy nationwide networks and device manufacturers like Nokia, Motorola, and Samsung to bring cheap devices to the market. Nevertheless, Ciscos acquisition of Navini, Beceems deal with NEC and others are signs of positive movement in this sector.

Mobile Video a dying market? Already? Only a couple of CTIAs ago, Mobile video took the event by storm only to find defending itself as a viable business in a short span of time. The video quality has improved significantly but the business models have not.

Entering the US market - US remains one of the most attractive market for mobile data but very few overseas firm succeed. One of the big European brands Zed is making an aggressive and impressive push into the US market and is expecting up to 30% (or $150M) of its revenues coming from the US market in the next 12 months. They have developed a good platform for interactive games that tie the experience across mobile and online really well. EA and the likes should take notice.

Open - not in my backyard The keynotes were in sharp contrast with some of the carrier panels. One of them seemed to be the replay of a session I attended in 2001 or was it 1997. Eerie.

Presence, IMS - The discussion around presence and IMS is intensifying. Demos are getting better and the coordination between carriers to standardize and interoperate is improving but we still have a long way to go.

Coolest gadget - NeuroSky filled the void of a gadget less show by showcasing its mind-over-matter technology. Using brainwaves which are detected by a sensor attached to your head, it allows the user to move, push, and float objects by just concentrating on them. Remember The Matrix. Now, if you throw in Philips amBX and Microvisions PicoP, your cell phone becomes this gaming platform that takes the die-hards to the transcendental state of nirvana.

iPhone continues to dominate the talk - iPhone continues to set the tone of discussion in the industry. Since July, there has hardly been a mobile conference worth its salt that hasnt had a session on impact of iPhone. There hasnt been a mobile device like this one and it shows. Attendees proudly fiddled with their iPhones in public and were eager to discuss their experience and forecasts.

US vs. Europe - There was quite a bit of us vs. them discussion. CTIAs Wireless Wave magazine started the discussion by its cover story article The Continental Divide (for which we were interviewed). It was soon covered by the likes of WSJ (Walt Mossberg - Free My Phone), GigaOM (How far behind is the US vs. Europe?), Steve Largent (Largent to Mossberg .. Wish you were here in San Francisco), and others. As I say in the article - the picture is more complicated .. and one needs to take a holistic view. This topic is crying for a detailed study.

MCommerce - Behind closed doors there is a lot of discussion on MCommerce and how to enable phone to become the wallet of choice (this will be music to the ears to my colleagues in Japan and Korea). Some new and interesting models are starting to appear. One is from Mobilians, a company that has had good success in South Korea and is now setting its sight on the US market. Their focus is to use the phone to enable payment of online and offline goods. In Korea, Mobilians is registering 7M transactions/ month and over $1B in goods sold/year with up to $250 items (which appear on the carrier bill). This is a totally untapped space for the carrier and is a threat to the credit card companies especially for the low cost items where the 2%+20-25c fee drives up the effective rate for the merchant. A tier-1 carrier is also looking to firm up its mCommerce strategy in the next few weeks. It should be noted that some of the smaller regional carriers who survive due to laser focus customer service are testing and rolling out innovative solutions ahead of their bigger peers. For e.g. CellularSouth launched picture application (with Ontela) and after their successful trials with NFC based payments is looking into launching WirelessWallet. Similarly, some others are in the process of getting some LBS, Mobile Search, and Mobile Advertising solutions in the next quarter or so.

Misc

AOL Mobile re-launched its mobile suite of products. It has a good suite of assets and the company is starting to integrate and enhance the user experience.

More M&A activities are expected in the mobile advertising space in the next 6-12 months as startups use every advantage to maximize the returns before the big boys catch-up.

There was hardly any mention of the gPhone or the zPhone.

Verizon and Sprint are boosting the holiday season lineups to counter the onslaught of iPhone with similar looking phones.

Becker - a 60 year old company which launched the first ever car radio showed off its Traffic Assist unit which had a good user interface and free real-time traffic info for life.

M2M players such as Telit and Numerex showed their solutions in the machine-to-machine communications space.

Talkster talked about its free global calls in exchange of listening to ads.

Your feedback is always welcome.

Chetan Sharma

Korean IT Leaders Summit November 15, 2006

Posted by chetan in : 3G, Devices, International Trade, Japan Wireless Market, Partnership, Speaking Engagements, US Wireless Market , add a comment

My love affair with Korea started last year when i was invited by the State Department to put together a Korean-US Trade Summit. I was honored to serve with several other dignitaries on the US advisory committee along with Co-chair Governor Gregoire. I had a chance to meet with several innovative companies at the event as well. Earlier this year, I was hired by the executive team at KTF, the number 2 carrier in Korea to do some strategy work. As a result, I spent sometime in Seoul and go to know more about the industry, the country, and the wonderful folks who are so digitally inclined that they rank #1 in ITU/UN’s Digital Opportunity Index (ahead of Japan and US which is #21). Their engagement with games is at a different spiritual level.

So, it was only fitting that my first sponsorship of an event was rolled out at the Korean IT Leaders Summit which was held in Seattle last week. Proudly displayed my company banner side-by-side with Microsoft. Several senior executives from the Korean companies like SK Telecom were present. It always amazes me that the gulf between the device quality between Korea/Japan and US. Though the gap is closing, we are still worlds apart. I have a top of the line EV-DO LG phone. Comparing it with some of the handsets i saw in delegates hand, there is no comparison. User experience is so much better on handsets in Korea/Japan that us consumers in the US are missing out. I will have more on the Korean market next year.

I will be finishing the year with a stop in Seoul later in December.

If you are looking to do business in Korea or Japan or vice-versa for a North American or European company, let me know.

US Wireless Data Market: 3Q06 update November 13, 2006

Posted by chetan in : 3G, AORTA, ARPU, Carriers, Devices, Infrastructure, Japan Wireless Market, M&A, MVNO, Mergers and Acquisitions, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Networks, Partnership, Smart Phones, Strategy, US Wireless Market, Worldwide Wireless Market , 2 comments

PPT Download (849 KB)

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

IBM and Telenor invent PASTA September 22, 2006

Posted by chetan in : AORTA, Carriers, Enterprise Mobility, Middleware, Partnership, Strategy , add a comment

It is great to see some progress in this space. I have been talking about such a system for some time.

IBM and Telenor have developed new mobile communications technology for global business users that will allow mobile devices and networks to automatically learn about their users whereabouts and preferences as they commute, work and travel.

Code-named PASTA for Presence Advanced Services for Telco Applications and developed by the two companies as part of a joint research initiative, the technology provides infrastructure for deploying next-generation mobile presence services. Presence technology used in applications such as instant messaging makes it possible to locate and identify a computing or communications device wherever it might be, as soon as the user connects to the network. Privacy issues are addressed by allowing users to control when they are available.

The PASTA infrastructure has the ability to learn about users preferences. As the network becomes smart about its users preferences, we believe we can reduce outgoing network load by up to 70 percent, said Vova Soroka, IBMs lead researcher on the project. That is a huge benefit to a network operator, but PASTA can also be used to create new end-user applications to enable new services in medicine, tourism, financial services, logistics and home care industries among others. Any business with a large mobile workforce will find potential uses.

I am sure it won’t be perfect but definitely a step in the right direction.

Nokia and Microsoft collaborate on Mobile Search September 21, 2006

Posted by chetan in : AORTA, Carriers, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Search, Mobile Usability, Partnership, US Wireless Market , add a comment

Nokia (NYSE: NOK) today announced that it has reached an agreement with Microsoft to integrate Live Search capabilities into its Mobile Search platform, thus enabling consumers access to Live Search directly from their Nokia Nseries multimedia computers and other compatible Nokia S60 devices. Live Search will provide advanced web search results in 14 languages to enable on-the-go access to the information and content consumers want most.

Microsoft will provide advanced search results for web search, as well as quick and easy access to information such as stock quotes, movie times, and common facts via Encarta Instant Answers*. The Mobile Search experience from Nokia allows users to find search results more quickly than by using the browser and finding the web page of an internet search provider, since in many cases search will be accessible directly from the menu screen.

“Adding the advanced searching capabilities of Microsoft’s Live Search to our Mobile Search platform provides our customers with unique and powerful new ways to search the internet on their multimedia computers and many other compatible Nokia mobile devices,” commented Ralph Eric Kunz, vice president, Multimedia Experiences. “The Mobile Search platform is dedicated towards creating a user experience that is easy to access and optimally integrated into other functions of the device. “

The Mobile Search application is expected to be available in select markets in the standard sales packs of the Nokia N80 Internet Edition, Nokia N73, Nokia N93, Nokia N70, Nokia N71, Nokia 6630, Nokia 6680, and Nokia 6681, it is also offered as a free download for select Nokia S60 devices from www.nokia.com/mobilesearch.

CTIA, MES, MECCA Fall 2006 Roundup September 18, 2006

Posted by chetan in : 3G, 4G, AORTA, ARPU, CTIA, Carriers, Devices, Enterprise Mobility, Federal, Gaming, General, Infrastructure, Intellectual Property, Location Based Services, M&A, MVNO, Mergers and Acquisitions, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Networks, Partnership, Patents, Smart Phones, Speech Recognition, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 2 comments

Los Angeles was the venue for the annual CTIA Wireless IT and Entertainment 2006. Pre-show events included Mobile Entertainment Summit (Chetan Sharma Consulting was a research partner) and MECCA. This note summarizes the observations and commentary from the above shows.

First lets do the numbers. Just before CTIA, M:Metrics released some numbers from their most recent survey. Amongst the western nations, US has just over 5% 3G penetration with UK leading the way at 11.4%. Spain and France are at 8.9% and 7.9% respectively. In the US, Verizon is ahead with over 17% 3G subscriber penetration followed by Sprint at 6%. CTIA also released their survey numbers. 12.5 billion messages in the month of June 2006, up 71% from 7.3 billion messages in June 2005. There was 70% growth in service data revenues. You probably already knew most of the above after reading our research notes here and here, weeks and months ahead of the mainstream media.

MES and MECCA. The central theme from both the shows was community and advertising. The buzz shifted from Mobile Search, Mobile TV, and IMS during the last couple of shows to Mobile Advertising. The prospective lifecycle of product development goes like this build community (whether it is around user generated content, games, artists, bands or other) and monetize the community by advertising. The permutation and combination of the business models are: free application and/or free content, subscription, earn credits for watching ads, more credits for feedback/surveys, etc. Companies who are able to build a large mobile community (at least 5-10M active users) and gather some specific demographic data become hot property of the moment. It is important to note that the mindset for an exit strategy for companies in the social media and user generated content space has changed a bit. Instead of getting acquired by software or computing companies like Google and Yahoo (yes, yes, they are media companies as well) to traditional Media companies like FOX and HBO. This was quite apparent in a number of discussions I had with the executives from new media content companies.

Enterprise focus, Finally!. I have been involved in the mobile enterprise space since 1999 and have been coming to the CTIA for a number of years. The fall show is supposedly about dual personalities of Entertainment and Enterprise. For the first time it felt that the Enterprise side was given its due respect and was on an equal footing to its sibling personality - the glamorous, the attention-seeking Entertainment. CTIA started the conference with an Enterprise panel discussion (of course after the surprise Governator keynote). Though the discussion was too high-level to provide any key insights, CIOs confirmed what is well known now that the spending on wireless-data related projects is going up significantly. A surprise revelation was that Chinas growth in enterprise solution is among the highest in the world. It is all about productivity and ROI. Companies are also looking to outsource their IT operations related to wireless devices. Handset guys are coming out with Enterprise targeted devices though we are still in the very early stage development of the cycle. Throwing an email client on the device doesnt make it an enterprise device. Email client is a given in all new handsets now. When will we start seeing embedded enterprise apps? Mobile web services clients and frameworks?

Its an Ad, Ad, Ad, Ad world. Mobile advertising is clearly the buzz of the moment. Everyone wants to build an ad-supported model and also build their own ad network. Currently, most of the talk is around simple rotation of ads or tying ads to the category the user is interacting with. Not much attention on demographics, profiles, or context. Thats where the big impact and value will come into play. Currently, carriers sit on goldmine of user data that is begging to be leveraged for enhancing user experience. Unexpectedly, they sit on a big opportunity that will start to change the advertising industry over the course of the next 5 years. To see where things are going, we just need to look at trends in Japan and Korea. It was interesting that in almost all of the mobile advertising discussions, nobody talked about the elephant that was not in the room - Google, trendsetter in monetizing content. Also, missing were the agencies and their perspective. I have looked at this space quite a bit over the last two years and while agencies are excited about the prospect, they are not ready to jump yet. It will be quite entertaining to watch the new-generation media companies compete/collaborate with the carriers. For the next 3 years or so, carriers will still have an upper hand and if they execute it right, could dominate the space for a long time to come. People also talked about different types of ads IVR, Voice, Interstitials, banner, in-game, before-and-after, etc. Of course, click-to-call or click-to-action are going to be an especially important ingredient of this game. Sprint Nextel and Enpocket announced their mobile advertising program. AmpD also announced mobile advertising plans with Rhythm New Media. Bango launched its Ad initiative as well. Virgin mobiles Ad program Earn Airtime in Your Spare Time is innovative. They are truly in tune with their subscribers.

FMC. Kyocera had some trial handsets that supported WiFi/VoWiFi. One could theoretically make VoIP calls and download content over WiFi but will carriers allow it and how long will they resist. Non-traditional carriers like the MVNOs and the cable operators are very interested in exploring bundling offers. Sprint also announced EV-DO Rev A data cards that provide data rates up to 400-600kpbs. Cingular announced that they will have a majority of the top 100 markets deployed with UMTS/HSDPA by year-end. However, the choice of handsets is still missing and as such adoption for Cingular is behind schedule.

4G. While, we are just starting with 3G (except Japan and Korea), seven of the wireless industrys leading carriers have joined forces to develop a common vision for the future of mobile networks technology. Members of the Next Generation Mobile Networks initiative include China Mobile, KPN, NTT DoCoMo Inc., Orange, Sprint Nextel Corp., T-Mobile and Vodafone. The group said it has created a set of requirements for a future wide area mobile broadband network designed to offer enhanced customer benefits by delivering competitive broadband performance alongside high levels of interoperability. In plainer terms, the NGMN appears to be devising a roadmap for interoperable 4G networks. You can sense the arm-wrestling to come. 4G could end up having some serious IPR issues if all major patent-holders dont participate. The 3GPP licensing regime has been a failure, industry needs to be proactive, dedicate resources to the problem and get is solved to the extent it can.

Telematics. The number of firms talking about telematics or navigation on the phone or devices for your car increased quite a bit. Navteq, TeleAtlas, TeleNav, Inrix, Pharos, Kore, Teydo, and many others displayed their wares. On the consumer side, navigation is getting embedded into Local search apps which are enhancing the user experience quite a bit. FindIt and Google Maps are two examples. There were enterprise focused solutions from Tierravision, LiveCargo and @Road.

WiMax. Spent sometime with Lars Johnsson, VP at Beceem Communications talking about the prospect of WiMax worldwide. Clearly, Intel and Clearwires announcement has reenergized the industry and taken some uncertainty out. Lars is extremely knowledgeable person on everything WiMax. He co-founded Flarion which got sold to Qualcomm last year. It looks like the benefits of 802.16e will render 802.16d useless in short order. e provides better link capacity, Forward Error Correction, power efficiencies, and optimization. The cost of building a WiMax modem is lower than the WCDMA counterpart. A number of cable and wireline players are looking for triple-play offerings. Beceem has strong partnerships with OEMs worldwide and is actively involved in several trials in Korea, Taiwan, Japan, India, and US. The biggest challenges are around interoperability (as always) and quick resolution of IPR issues. From an application perspectives, gaming companies are the ones watching it closely. Also, automobile media player vendors are interested in using WiMax for Broadcast video. Tropos believes that Mesh technology will continue to have relevance in a WiMax-enabled world as the practical ranges of base stations wont exceed 5-10miles.

M&A. Some major M&A news at the show Real acquiring WiderThan for $365M, Lucent acquiring Mobilitec for undisclosed amount, and FOX acquiring 51% stake in Jamba for $188M. This follows Sybases acquisition of Mobile365 last week for $400M. There are several factors at play. Clearly, some segments of the industry that have matured are facing price pressure and hence consolidation. Media companies are also realizing the potential and dont want to miss out or get behind the curve so acquiring companies that have traction, not necessarily the best technology. Some of the valuations just dont make sense but I guess some over-exuberance is to be expected at this time.

Handset launches. You might have missed the announcement; there was no Steve Jobs, no iPhone release. Pearl was probably the highlight of the show though plans had been leaked in the media sometime back. RIM has Razresque aspirations from the device. The big three didnt have anything interesting. Nokia launched E62 (thankfully, taking a cue from Motorola, they are getting rid of their number scheme), however it is missing 3G and WiFi support of its European cousin E61. Kyocera had some interesting devices as discussed above. Sprint launched two EV-DO Rev A data cards from Pantech and Sierra Wireless. Cingular announced a $150 HTC Smartphone. Linux handsets are also on the rise. Obigo/Teleca had some nice tools/products for mobile Linux Browser, IM, Media and Email client. The user experience was quite nice.

Mobile TV/video. At the last two shows, Mobile video and Mobile TV were all the rage. The solutions seem to have matured though uncertainty of its success remains (primarily around time-horizon to success). There are too many providers in the space offering solutions from individual codecs to end-to-end solutions, do-it-yourself toolkits (Nexage) to user-generated video solutions (ComVu, Juicecaster ComVus one click mobile broadcast capability was pretty good) to niche demographics (Viva Vision is getting good traction in the Latino market). Various pieces of the mobile video puzzle have been commoditized, now, it is all about packaging. There were a number of Mediaflo handsets on display as well. The quality of Broadcast is really good. I saw some Broadcast TV services in Seoul earlier this year and the user experience is pretty good. My partner watched the entire South Korea soccer world cup game on his mobile device as he wasnt near a TV. Once the market gets seeded with enough phones and service pricing settles to mass-market scale, we can expect good adoption rate for such services. Imagination Technologies out of UK showed some innovative SoC (System on Chip) solutions targeting Mobile Broadcast video. Some new names in the space are QuickPlay, Picsel (nice user experience), and Convisual. Expect some consolidation in this space over the next 12 months.

The ecosystem friction. The mobile data ecosystem tension is bubbling up. Carriers want control (some more than others) so that they can manage user experience and minimize customer support calls. Content companies want to bypass the carrier and go direct to the consumer. This was also evident in the Walt Mossbergs grilling of the carriers as well as other conversations with participants in the value chain. Things are improving but not at the pace everyone would like it to be. Clearly, ecosystem only proliferates if it is allowed to make money. If certain sections of the chain get strangled, holes start to develop which pollutes the system.

User experience. Didnt see much progress on the UX front. Saw a cool implementation from FAST for Optus in Australia where they used search technology to populate the Active Screen with user preferred content. Optus has been using this offering to entice users to 3G as it is not available on lower bandwidth network and is apparently having good success. Add context and some multimedia and it becomes very very compelling. It is one area that hasnt been exploited that much yet. In the US Cingulars MediaNet implementation uses the same concept but is more browser-based. In different sessions, carriers agonized over limited shelf space and mountain of content. Thats why man invented mobile search. The concept of deck is very limiting. Content needs to get exposed via search whether it is post-query or pre-populated dashboard based on context and preference.

Test equipment Whether it is entertainment or enterprise, very little attention is given to testing and monitoring data applications and services. Keynote launched a really useful product offering (Mobile Device Perspective) that enables developers to test their app from distance on a live network and live devices and control it through manual steps or automation. Currently, such testing is done by flying a team of testers, test, and optimize. This offering can reduce the cost of such operations. I took a look at their R&D and test setup and found it quite compelling. TestQuest also showed a product along the same lines though it is more of a platform play than a service offering.

MVNOs. There is a realization that MVNO business is hard. The unrealistic expectations for customer growth are being recalibrated. It is still a viable business model but one has to give time and execute like a carrier. Virgin Mobile noted that it requires at least 2M subs before a nationwide MVNO (in the US) will cross the line from red to black.

IMS. Talked to Lucent and NMS about their pre-IMS solutions. NMS was displaying a technology around P2P mobile video sharing while talking (though the tasks happened in time-slice mode). Lucent had a solution extensions which converged PBX and Mobility. An example would be you dial a 4 digit extension on your mobile phone that connects you to the other party as if you dialed it from your desktop phone. BUT, networks arent there yet and devices will arrive a bit later. In the interim, companies are looking to stimulate the simulated IMS experience.

Funding news. Several funding news from the show, the one that caught my eye was $10m for Bubble Motion in VoiceSMS (funded by Sequoia Capital). It should be noted that there is prior art in this space and the likelihood that the company is infringing on somebodys patents are high.

Coolest gadget. MyVus media viewer

Coolest booth. Infospaces Tony Hawk show was probably the most exciting thing happening on the show floor. Watching the masters go swing-swong had the crowd go wild with ooohs and aaahs.

Misc. News.

  • Melodeo won a major podcasting deal with Cingular.
  • Medio Systems announced the big Verizon deal (mobile search including use of voice as input).
  • Hookmobile Got a preview of the services coming out next week on all four operators. It is around Mobile Trading Community and using content to digitize trading cards, create some exclusivity and hence some viral effect. In future users can create their own trading cards for their social network. Carrier keeps 35% of the subscription fee. Hookmobile gets 27% and rest goes to the content guys. This could be good for the MMS infrastructure that is collecting dust right now. And yes, you guessed it right; there is an Ad model as well.
  • New York City is going to use IPWireless technology to build a $500 million network for police, firefighters and other public-safety agencies
  • Users of EV-DO data cards were much happy customers than free Wi-Fi users. Though things were better, under load, the free network comes to its knees fairly quickly.
  • SpinVox had a simple but useful offering converting voicemails to text messages. Use case you are in a meeting, somebody leaves a voice message, cant go out to listen, peek under the desk to see (the SMS) if it is important.
  • SNAPins solution is designed to address Carriers customer calls. It wouldnt be a stretch if carrier starts selling the deck to other companies especially in the airlines, insurance, and credit-card industry. You dial the number; phone captures it, goes into the system and brings you the answers to the questions you might be most interested in (in a data format).

Your comments are always welcome.

US Wireless Data Market - Mid Year Update 2006 August 13, 2006

Posted by Chetan in : 3G, AORTA, ARPU, Carriers, Devices, Enterprise Mobility, European Wireless Market, Japan Wireless Market, MVNO, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Networks, Partnership, Smart Phones, Speech Recognition, Strategy, US Wireless Market, WiMax, Worldwide Wireless Market , 2 comments

Download PPT - http://www.chetansharma.com/midyearupdate06.htm

  • US wireless data market is growing at an impressive rate. Top 4 US carriers (Cingular, Verizon, Sprint Nextel, and T-Mobile) accounted for over $6.3B in wireless data revenues for the first half of 2006. Overall, wireless data service revenues exceeded $7B and the figures are likely to exceed $15B for the year 2006. This is almost a 75% jump from end-of-2005 number of $8.6B. The growth rate slowed down only slightly from 2004-2005 growth rate of 87%. SMS and data transport still drives bulk of data revenues but their percentage share is declining.
  • Among the top 4 US carriers, Verizon has made the most impressive strides in the last 4 quarters, increasing their wireless data revenues by a whopping 114%. Next Sprint with 71%, T-Mobile with 65%, and Cingular with 54% also netted impressive gains.
  • Verizon became the first US carrier to net over $1B in wireless data revenues in a quarter. Cingular was close second with $979M and Sprint with $935M are likely to cross the $1B mark next quarter.
  • Sprint retains its leadership position of highest wireless data ARPU in terms of absolute dollar amount at $7.25 but lost its number one spot in the % data ARPU to Verizon which now leads the US carriers at almost 13%. Average data ARPU is now $6.3 or 12%.
  • Overall ARPU (voice + data) increased slightly from Q106 but declined $0.27 from Q405. The general trend is towards slow decline. Data revenue is barely keeping up with the decline in voice ARPU. On an average voice ARPU has declined 8% from a year ago and data ARPU has increased 48%. Average Overall ARPU was $53.04. Sprint led with $62 followed by T-Mobile at $51, Verizon at $49.7, and Cingular with $48.4.
  • If the current trends hold, Verizon Wireless is likely to surpass Cingular Wireless as number 1 US carrier by Q307.
  • US had about 7M 3G subscribers by Q206, primarily from Verizon and Sprint Nextel. With Cingular joining the fray, the 3G growth is expected to accelerate with 2007 being the inflection year.
  • US wireless subscriber penetration stands at approximately 74% and is likely to exceed 78% by the end of the year.
  • Top 4 carriers added 12.7M subscribers from Jan-Jun 2006.
  • The top 4 US carrier account for 79% of the subscribers, 86% of the service revenues, and approximately 95% of the wireless data revenues.
  • US Off-net revenues for the year are likely to exceed $750M.
  • Data ARPU of CDMA/EV-DO carriers was 20% higher than GSM/WCDMA carriers.
  • Several high-profile MVNOs were also launched in the last few months and the overall results have been disappointing primarily due to poor execution, instant crowding effect, and competition from big 4.
  • US wireless carriers are steadily climbing in their wireless data performance as compared to their peers worldwide. Verizon, Cingular, and Sprint ranked number 4, 5, and 6 respectively, amongst the top 10 operators worldwide in terms of total wireless data revenue generated for first half of 2006.
  • The #1 carrier worldwide in terms of total wireless data revenue for the first six months of 2006 is NTT DoCoMo which has maintained its position for a number of years. It is now generating almost $900M/month from wireless data revenues.
  • The top 10 carriers in terms of total wireless data revenues for 1H06 in order of rank are NTT DoCoMo, China Mobile, KDDI, Verizon Wireless, Cingular Wireless, Sprint Nextel, O2 UK, Vodafone Japan, SK Telecom, and China Unicom. (6 Asian, 3 US, 1 Europe. Who says US is behindJ). Vodafone Germany, TMO Germany, and TMO US are also closing in.
  • All the top 10 carriers in the list exceeded $1B in data revenues for the first six months of 2006. China Mobile and China Unicom benefited from their huge subscriber base of 274M and 135M respectively while DoCoMo and KDDI did well because they are generating over $17 (or 28%) in wireless data ARPU.
  • The top 10 carriers accounted for almost $24B in wireless data revenues for the first six months of 2006. The top 10 carriers account for approximately 700M (or approx 28%) subscribers worldwide.
  • In terms of wireless investments, over $2.8B was invested in wireless related companies/startups from Jan-Jun 2006 (this figure jumped to $4.1B in July). Source: Rutberg. Mobile TV/Video, Mobile Personalization, Mobile Search and Advertising, Semiconductor, Carrier infrastructure, Device design and development are hot areas. M&A activity also picked up quite significantly.
  • WiMax industry got a big boost with almost $1B investment in Clearwire and due to Sprint Nextels announcement of WiMax deployment. Sigh of relief for Intel and Samsung. Puts pressure on Qualcomm. Maybe Intel will renegotiate with Clearwire.
  • Worldwide Handset market share: Nokia and Motorola dominated with 35% and 23% market share respectively. Samsung with 12% stands third. Source: iSuppli. Though Apples iPhone rumors have been clouding the market, it is Motorola which continues to lead in launching must-have handsets. Windows mobile is starting to make serious inroads in the handset market but performance issues and high price points deter mass market adoption.

Download PPT http://www.chetansharma.com/midyearupdate06.htm

Tech heavyweights team up on 3G July 27, 2006

Posted by Chetan in : 3G, AORTA, Devices, Mobile Ecosystem, Networks, Partnership, Strategy, Worldwide Wireless Market , add a comment

http://news.com.com/Tech+heavyweights+team+up+on+3G/2100-1039_3-6099393.html?tag=sas.email

A group of tech heavyweights have teamed up to develop hardware and software for third-generation cell phones.

NEC, Matsushita Electric Industrial and Texas Instruments announced Thursday that they have formed a joint venture, called Adcore-Tech, that aims to create “a competitive communications platform” for 3G handsets. The partnership also includes NEC unit NEC Electronics and Matsushita subsidiary Panasonic Mobile Communications.

It will be interesting to see if this stays afloat one year from now.

Microsoft’s massive media spend next year May 5, 2006

Posted by Chetan in : AORTA, Infrastructure, Mobile Advertising, Mobile Entertainment, Partnership , add a comment

Microsoft's over $2B spend next year will start to have implications to the mobile world in 2008. Seattle Times has good coverage http://seattletimes.nwsource.com/html/businesstechnology/2002973119_microsoft05.html

CTIA and Mobile Entertainment Summit Roundup April 10, 2006

Posted by Chetan in : 3G, 4G, AORTA, Carriers, Devices, Enterprise Mobility, Federal, General, Infrastructure, International Trade, Location Based Services, M&A, Mergers and Acquisitions, Middleware, Mobile Advertising, Mobile Content, Mobile Entertainment, Mobile Wallet, Partnership, Speaking Engagements, Strategy, US Wireless Market, Usability , add a comment

My week started with a presentation on “US Wireless Market: Trends, Technologies, and Opportunities” to the CTIA-bound Japanese delegation that included very knowledgeable executives from NTT DoCoMo, KDDI, Kyocera, Mitsubishi, Base, MCPC, Vodafone, and Willcom. During networking, had some interesting conversations with our Japanese friends regarding content business, UMA, WiMax, 4G, and new business models.

Spent next three days attending Mobile Entertainment Summit (April 4th; Chetan Sharma Consulting was research partner for the event) and CTIA (April 5-7th), talking to companies, looking at demos, visiting with colleagues and friends, and just absorbing the atmosphere and distilling things down to “what does this mean?” Below is the summary of key observations, thoughts, and digressions.

General atmosphere – As expected, the show grew bigger in terms of attendees (over 40K) and exhibitors marked by return of double story booths, glitz, and million dollar marketing budgets. Samsung and LG clearly were dueling it out for the most recognized brand out there trying to out-do each other in invoking a subliminal conversation with the customers. There was tremendous excitement at the opportunities, fear of missing it out, and yearning for figuring things out to ride the wave.

Booth of the show award is a tie between LG and Motorola with Samsung close behind. Honorable mentions: Philips, Lucent, and Siemens.

Typically, the main CTIA show focuses a lot on infrastructure, middleware, network, and handsets. This time, it was also about applications. There are readjustments going on in the value chain and with the looming consolidation wave, the rubric cubes will be rearranged in several sub segments. Wireless email had already starting shifting that way even though we are below 10% penetration.

Convergence was a big theme of the show. Consulting firms Deloitte and PwC released their reports on the subject and every major infrastructure player was talking about the impact of Fixed-Mobile Convergence (FMC). Convergence across PSTN, Cellular, WiFi, Bluetooth, Cordless Telephony Profile (CTP), Unlicensed Mobile Access (UMA), Session Initiation Protocol (SIP), IP Multimedia Subsystem (IMS), and Digital Living Network Alliance (DLNA) were all discussed in some detail. From a consumer point of view, it comes down to how fast the network is upgraded to provide the functionality and the number of devices in the market to take advantage of the feature-set at reasonable prices. Until then, it is just talk.

Positioning – Several companies are coming around to what DoCoMo taught us about i-mode. It was all about – improving the life experiences of customers. Nokia’s tag line changed from “voice goes mobile” to “life goes mobile” and “work goes mobile”. MTV expresses itself as a “content experience” company. Microsoft is all about “Discover, Innovate, Deliver” while Motorola wants to produce “must do” experiences.

Mobile TV is another area that is priming up for some consolidation as various components are commoditized (esp. for Unicast). It is not that, we are done with the innovation in this segment, in fact, we are only getting started, however, the drive will come from how the video content is packaged with other pieces of content and applications and made more interactive with humans and machines. The number of companies in the space almost doubled since last show (Ortiva, VectorMax, Snell & Wilcox, NMS, Nexage, Vimio). Everyone agrees that MobiTV has a huge advantage. It is a good case study of “first mover advantage”. It will be interesting to see if they can build on their success and compete effectively against broadcast solutions. Broadcast is the future of MobileTV. Mediaflo rocks. Key questions are: can the carriers get the business model right at launch that promotes usage and will the political and regulatory climate foster Mediaflo growth in light of DVB-H (Modeo in US) and DMB. Japan, Korea, and US are fertile ground for this battle. Qualcomm is working on Mediaflo as well as DVB-H chipsets. Slingbox was also showing their place-shift mobile video solution. It will be interesting to see how carriers block-and-tackle this one.

AORTA and 3G revisited – Since the article “3G – Hitting the Mass Market”, the tipping point assessment has been validated by several other analysts. In US and Europe, 3G deployments will start hitting critical mass in the first half of 2007 and we are getting closer to the vision of Always-On Real-Time Access (AORTA).

Mobile Search – During last couple of CTIA shows, mobile search has been an upcoming thing. During the last six months, 3 of the top 5 carriers have launched mobile search solutions with some incredible returns and actual impact on the bottom-line. Some branded solutions have also been launched and various business models are being tested. One can feel the tension between carrier-branded search and solutions from the likes of Google, and Yahoo. Who can build a better mouse-trap? Will carriers cede control and help non-carrier solutions with carrier-resident data? Feature-set is straightforward. Question is what customer data can one use to enhance the user-experience. If carriers are smart about it, they will work with white-label vendors such as Infospace (also Medio, Jumptap, etc.) to develop some really neat analytics that feeds back into user experience. Voice search solutions are also becoming more prominent. In the last 6 months, Voicebox, Voicesignal, Promptu, and V-enable have announced voice search solutions.

User Interface is getting better – Players in the value chain are paying more and more attention to the user-experience. As predicted, MVNOs are having an impact on how device manufacturers and carriers think about customization. Amp’D, ESPN, Disney, and Helio all have custom clients. Rather than relegating the user experience on device browser and archaic transcoding solutions, these MVNOs want to provide a controlled and immersive user experience. With 2nd tier device guys eager to do what-ever-it-takes to make the user experience attractive, mainstream device manufacturers and carriers will need to get their acts together in a hurry. Verizon’s announcement (about using Flash) is recognition of this trend. Also, there were some apps with really cool UIs from startups such as DSI.

Community and User-generated content – There was tremendous activity in the mobile community and user-generated content space, from blogs and SMS to video and music content around community networks. Indeed, it is all about communities and user-generated content plays an incredibly important role in it. Though we have seen significant amount of growth in ringtones, graphics market, this will explode when UGC (including music, video) is put into the mix. This has been validated by multiple data points, the newest one being from 3 in Europe through seemetv service. How quickly will carriers embrace this so that the poor schmuck with 10 goofy videos with no technical capability gets to put their content for sharing, for barter, or for sale. Companies such as Intercasting, Juicewireless, AirG, SMS.ac, Bango, Blogstar, Helio (Myspace) are coming at the opportunity from different angles.

MVNO launches Since last CTIA, ESPN Mobile and Amp’D have launched. This CTIA marked the launch of Disney Mobile and the concept resonated with most attendees esp. folks who have kids. They also got their handset strategy right by pricing it for mass consumption. Service will become available in June. Helio is supposed to launch around the same time. In the meantime, Vegas started taking bets on which MVNO will be the first to fold. As I have discussed in prior articles, MVNOs have clearly raised the bar on user experience and will continue to push the envelope. The willingness of Asian manufacturers to customize at a frantically rapid pace is going to put pressure on the big boys and is already having an impact on their strategy and roadmaps.

Enterprise – Though there were a couple of Enterprise pavilions, the substance was pretty light. Revenue potential of enterprise solutions is equally big if not bigger than the consumer segment, yet it fails to get attention beyond mobile email which itself is becoming a commodity play. It should be noted that there were a couple of vendors that are trying out new approaches to the consumer email such as using MMS for email (Memova).

Mobile Diagnostics and Performance measurement – With the advent of 3G and numerous data apps, the impact on network storage and performance is enormous but is often not talked about. The amount of bytes generated in 3G networks is many times more than 2G and 2.5G networks. As such, the networks need to be planned and monitored appropriately. Testing and simulation of applications, services, and handsets also become more important. Companies such as Vallent, EMC, Keynote, Schema, and Argogroup are looking at the problem from different angles.

4G – Though no body in the industry agrees what it is, some semblance of “Beyond 3G” solutions started showing up at the show from IMT-Advanced solutions from DoCoMo (1Gbps) to WiMax pavilion. Samsung had the WiBro gear at the show – handsets and infrastructure – very cool to see things end-to-end. WiBro trials are ongoing in Korea and we are likely to learn a lot from the results that will help decision makers in the WiMax segment. However, we are still a long ways away (2008) before we see any meaningful mass market penetration for mobile WiMax (There are a number of trials going on around the world from DoCoMo, Willcom, Softbank, KDDI, Sprint, SKT, and KT). It should be noted that US spectrum auction is slated to start June 29th, 2006. It will be interesting to see who ends up with what esp. Clearwire and if any of the non-traditional players such as Google, Disney, DirecTV, and Microsoft make a run for it.

Near Field Communications (NFC) – DoCoMo has had success with FeliCa (Sony’s technology) launch in Japan. Things are increasingly looking bright for NFC-based solutions (mobile wallet, venue check-in, authentication, etc). Mastercard is running some trials on East coast. Cingular has been running some trials in Atlanta area using Nokia phones with Philips NFC technology. In addition to contactless payment capability, NFC-equipped phone can also read data from compatible tags, opening new content discovery avenues. The biggest challenge is of course getting the required infrastructure in place and endorsement or participation by at least one or two major retailers such as Starbucks or McDonalds. Many companies from Philips to smaller players such as MobilyT had neat NFC prototypes. Paypal also launched its mobile payment solution. Many companies are looking to bypass carrier billing so they have more control – it will be an interesting battle to watch.

M2M – With most major western markets reaching saturation, focus has been shifting to M2M applications and device-to-device networking. In addition to the big players such as Siemens, Motorola, and Phillips, newer players such as Esmertec were discussing the potential and applications.

Chinese presence – In the CTIA roundup one year back, I noted “Chinese are coming”. If there was any doubt, it was pretty clear from this show that Chinese wireless players are going to be significant force to reckon with. They are already making an impact in markets outside China, such as in India, Eastern Europe, and Latin America. Booths and showcases from ZTE, UTStarcom, and Huawei rivaled their western counterparts. Noticeably, several software and SI Indian firms also had presence at the show.

Handset business will continue to be brutal. Samsung, LG, Motorola, and Nokia all had a good line up of new handsets. Chinese manufacturers such as Techfaith wireless and Amoi also had some sleek handsets on display (Amoi even had knock-offs of Razr and iPod phone)

Mobile Advertising – Not much substantive progress since last time, except for more talk, and more companies popping up. The concepts and business models are starting to get more serious discussions from carriers, content providers, aggregators, and advertisers. Some interesting ad performance tools are also coming up (Integrated Media Measurement Inc.). It comes down to who has the relationship with the customer, what’s the depth of consumer profile information, and the trust-level established with the customers. ActionEngine’s MSNBC launch, new startups Rhythm NewMedia and VibesMedia, and Free DA (supported by Ads) were among the highlights in this area.

Location Based Services – I remember working on LBS solutions back in 97-98 timeframe and the technology was going to change the world (in the US). Largely due to FCC’s inability to enforce its own rulings, we didn’t see much progress for a number of years. Though Nextel has been providing LBS in the enterprise sector, it was only recently with Sprint opening up its APIs for selected developers that we are seeing some LBS based apps for the consumer sector e.g. FindIt. Disney Mobile is also making location a key feature of its offering for kid-tracker types of apps.

Microsoft dominance starts – It has taken a number of years, but shift is noticeable now. With smart phones penetration increasing, Microsoft is starting to dominate the high-end market. A good percentage of new smart phones are running MS software though Linux is also making some inroads in this market (DoCoMo, China). If the battery power issues can be resolved and the OS moves into the sub-$200 market, it will accelerate MS’s dominance of handsets. There was also talk about Opensource OS for mobile devices.

Open gardens – Pretty soon, being “open” will be considered a competitive advantage. At the two extremes are T-Mobile International (which gave up and opened up its greenhouse to the likes of Google) and Verizon (which might be one of the last ones to open up its nursery). Then we have carriers such as Cingular who are slowly but surely opening up access and getting closer to the i-mode model (e.g. recent Myspace announcement)

Misc. – Impatica was showing their solution of running PowerPoint from blackberry. Pretty slick and easy. Another interesting app I learned about was that of using SIM as a token generator for authentication. This can be really handy for corporate security.

Later this week, I am leaving for Korea to meet with some really smart guys in the wireless industry and experience the wireless broadband capital of the world first hand.

Your comments are always welcome.

Copyright, 2006 Chetan Sharma Consulting. All Rights Reserved

Teaming up with iHollywood Forum March 7, 2006

Posted by Chetan in : 3G, AORTA, Carriers, Devices, Infrastructure, Partnership, Speaking Engagements, Strategy , add a comment

We have teamed up with iHollywood Forum as their Research partner on upcoming conferences to provide research and coverage on mobility issues.

The two upcoming conferences are:

Mobile Entertainment Summit April 4th, 2006 and

MoTV: Mobile Video and TV Forum at NAB - April 25th, 2006

Hope to see you there.

Deluxe Ticket holders will get a copy our recent research and industry brief.