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Opportunities at the intersection of 5G and IoT June 12, 2016

Posted by chetan in : 4th Wave,5G,Fourth Wave,IoT,Mobile Future Forward,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

There are two important discussion points in the mobile industry today are 5G and IoT. So, we decided to cover both of them under the same umbrella at last week’s Mobile Breakfast Series. The audience was glued, the speakers were brilliant, the weather was vintage Seattle, and I had a great time moderating the session. My thanks to our sponsor Netcracker for supporting the event.

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We had some excellent speakers who not only have the command over the subject but have a vision for the future. The audience was treated to a fantastic intellectual discussion on the topic.

Mark McDiarmid, VP – Radio Network Engineering, T-Mobile

Mark McDiarmid has 24 years of experience in the wireless industry in both domestic and international operations. Currently, Mark serves as VP, Radio Network Engineering and Development for T-Mobile US, where he leads several teams of industry-leading engineers focused on creating robust, operationally-efficient, and economic radio network designs. Recently, Mark was responsible for defining the evolution and system design of T-Mobile US’s HSPA+ and LTE mobile broadband network including the design and operationalization of new radio network transport solutions based on IP and Ethernet.

Hank Skorny, SVP – IoT, Neustar

Hank Skorny is Senior Vice President of Internet of Things at NeuStar, Inc. Mr. Skorny has extensive experience in the mobile software and services industry as well as in PC software for 25 years. Prior to joining Neustar, Mr. Skorny served as the Vice President of Software & Services Group and General Manager of the Intel Services Division at Intel Corporation, where he was responsible for the strategy and delivery of unified software services across device and operating systems including enterprise, cloud, IoT and developers.  Prior to that he was Chief Strategy Officer and SVP of RealNetworks, Inc., and President and Chief Executive Officer of mobile messaging startup, Thumbspeed, Inc. until its successful acquisition. Earlier in his career, Mr. Skorny directed product management, marketing and development teams at AOL, Adobe Systems, Microsoft and Apple Computer.

Paul Brody, Strategy Leader, Technology Sectory, EY

Paul Brody is Americas Strategy Leader, Technology Sector at EY. He is proficient in mobile finance strategy planning, technology of mobility and internet of things, with 20 years of consulting and strategy experience in mobile and electronics. Prior to joining EY, he served as Vice President and Global Industry Leader of Electronics at IBM. At IBM, he is responsible for building IBM’s services business in the mobile space, including the partnership with Apple, and developing solutions for connected devices.  Prior to IBM, Paul worked at McKinsey & Co. Paul has a degree in Economics and a Certificate in African Studies from Princeton University.

Dr. Rasmus Hellberg, Senior Director, Qualcomm

Rasmus Hellberg joined Qualcomm in 2006 and leads Qualcomm’s corporate technical marketing team that drives Qualcomm’s visions for future technologies, such as the wireless evolution, the path to 5G and the evolution of mobile computing. Rasmus has spent 20 years in the wireless industry and started his career in product management, working on the Japanese PDC system, the first commercial WCDMA products, and later on CDMA2000 1X and EV-DO focusing on radio access network products. Rasmus holds a Ph.D. in electromagnetic wave propagation and a master’s degree in electrical engineering from the Royal Institute of Technology in Stockholm, Sweden. He also holds a bachelor’s degree in business administration and finance from the University of Stockholm, Sweden.

Some of the highlights of our discussion:

It was a great discussion on some key 5G and IoT issues in the industry. We look forward to carrying on the conversation at Mobile Future Forward. Hope you can join us on Sept 27th. Until next time, have a great summer.

US Mobile Market Update Q1 2016 May 30, 2016

Posted by chetan in : 4G,4th Wave,5G,Chetan Sharma Consulting,Connected Intelligence Era,European Wireless Market,Internet of Things,Mobile Future Forward,Technology Cycles,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

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http://chetansharma.com/usmarketupdateq12016.htm

Highlights of the US Mobile Market Q1 2016

· Mobile data revenues increased by 17% YoY and now contribute 73% of the overall service revenues.

· QoQ, the service revenues declined again for the third straight quarter.

· The overall ARPU dropped below $40 for the first time.

· The Capex is likely to contract for a third year in a row given that most of the LTE networks are built out and there is pressure to preserve the margins.

· Device revenues declined sharply as consumers are upgrading at a slower pace than before and new device launches haven’t really motivated consumers to upgrade.

· EBITDA and Net Income saw double digit gains indicating operators are running a much tighter ship than before.

· Churn is at historic lows. Despite all the commotion in the market, fewer customers are churning each quarter.

· US will cross 400M in subscriptions in 2016.

· The data prices remained pretty stable throughout Q1.

· Mobile data traffic grew again with per sub smartphone consumption going past 4.0 GB/user/mo however, overall data traffic is expected to slow down in 2016.

· In the first 4-5 months of Binge-on, T-Mobile users chomped away over enough PBs of data for free to account for almost entire data traffic for the operator in 2013. T-Mobile experienced a net traffic reduction of 10-15% but given that consumers are consuming 3x than before, overall traffic is likely to rise again.

· AT&T continues to add more connected cars than rest of the operators combined. The operator is optimizing its business around profits. One side-effect of this has been a decline in postpaid phone net-adds for the sixth straight quarter.

· Verizon’s IoT/Telematics accounted for $195M in Q1 and is likely to cross the $1B mark in 2016 making US the hotbed for Connected Intelligence activities, growth, and continued experimentation.

· Apple again dominated the device market with over 39% revenue share, 74% profits share however it saw its quarterly YoY growth saw a decline for the first time in 13 years. The law of large numbers is starting to catch-up. Apple needs a new market narrative and/or another blockbuster. Given the pickup in R&D spend, speculators are hoping for the iCar to surface but it could be something as pedestrian as a new iPhone.

· Apple’s services business was greater than Facebook’s Q1 revenue but in context of its $50B quarter, Wall Street doesn’t appreciate the 20% increase in services revenue. Street’s eyes are squarely positioned on the iPhone numbers.

· Intel abandoned its existing wireless efforts leaving its future strategy and its role in the ecosystem a big question mark.

· Android ecosystem revenues and profits improved slightly primarily on the back of Samsung’s quarterly results. Sony, HTC, LG and some other Android players suffered deep losses in Q1.

· Operator tablet net-adds growth declined sharply.

· AT&T and Verizon on average made $17 per sub/mo, T-Mobile stayed into positive territory with $2 profit/sub/mo while Sprint eked out a 20c profit.

We will be doing an in-depth analysis of the future of the mobile industry at our 7th annual mobile executive summit Mobile Future Forward in Sept 2016. Hope you can join us.

Service Revenue Decline, what does 2016 hold in store?

The overall service revenue, postpaid revenue, overall and postpaid ARPU all declined again. After seeing the net-revenue decline for the first time in the history last year, there is a big question if 2016 will repeat itself or not. Q1 pointed downwards albeit only marginally. In general, the net-service revenue decline is not a good sign if it is market induced. In Europe, we saw net-revenue declines but the impact of the economic crisis was a big factor in determining the trajectory. After the economy has improved, we have seen the net revenue in effected countries rise again. In the US, the net-revenue decline is more market induced. The calculation of service revenue is a bit more complicated because device revenues are no longer part of the mix and as customers are weaning off the contracts, we have to adjust the service revenue for this accounting change. Regardless of the accounting distortions, there is continuous pressure on the postpaid revenues which is what is impacting the overall numbers.

Given the competitive state of the market, we might see further service revenue declines in 2016. The reversal might come down to consolidation in the industry in 2017 and beyond. The pressure on the revenues has had a positive impact though – operators are running far tighter ships than before. The net income surged in Q1 2016. Churn is at historical lows.

Spectrum Auction

FCC’s incentive auction will begin at the end of the month. It will be fascinating to see who beyond the usual suspects have aspirations in the mobile auction game.

Microsoft’s Tryst with Mobile

When Microsoft bought Nokia for a tidy sum, a reporter called me and asked, “What do you think?” I responded, “They will have to sell it once they are done realizing it was a mistake.” I have written extensively about the missteps in strategy and tactics that were so apparent from the start. Microsoft backed itself into a corner and had no choice but to buy Nokia and eventually destroy it. One of the highest market cap company disappeared right before our eyes. With market share falling below 1%, Microsoft has pretty much gotten rid of the last remnants of the business. This doesn’t mean Microsoft is out of mobile devices. If you carefully read between the words, Microsoft hasn’t given up and will be back. Its Surface strategy is finally taking shape and yielding better results and the pivot to services was the right call to get Microsoft enmeshed in the complex Connected Intelligence ecosystem. Old habits die hard. Microsoft might be making the same mistake with IoT.

Mobile Data Traffic Growth

In the last quarterly update, we mentioned that the Cisco’s data traffic numbers looked unreasonable for the US market. CTIA’s annual survey results proved the point earlier this week. Cisco will probably adjust its model and correct the numbers in its next update. We expect the US mobile data traffic to grow by 65% in 2016.

Messaging – the Next Big Platform Shift?

The last big platform shift in the computing space was the migration of attention, talent, and dollars from Windows to Android and iOS. The rise of the smartphones mirrored the rapid decline in Microsoft’s hold on the computing platforms. While Android and iOS have served us well, they haven’t evolved much. Despite having sensors and signals, some of the basic things like inter-linking of apps, contextual surfacing of app features and functions, and search remain complex and/or non-existent. The vacuum is being filled by the emergence of messaging as a platform. Messaging is primal. Consumers knew messaging before they knew smartphones. Given the availability of the processing power as well as the smarter software, some of the tasks can be moved to the messaging window is only natural. Asia has been the guiding light in this regard. How messaging emerges and how various players react to this phenomenon will be fascinating to watch in the coming days and months.

What’s next for Apple?

I have been saying for some time that Google has the best AI engine. Try driving in a remote part of the world and use Google Maps and you will see what I mean. The primary reason for this is that Google has been at it the longest with primary dataset on the most number of individuals. Facebook is starting to get there but the AI needs much more work. It will eventually get there. Another player that is sitting on a gold mine is Amazon and that’s why I say that they are most interesting tech company in the industry today.

Every company has at least one Achilles heel. Apple’s is software and services. Apple’s DNA is hardware and services come second. As I have said before, Apple’s problem with the market is more around controlling the narrative. Media and critics have been pretty hot and heavy about the future prospects of Apple. No doubt Apple has a weakness in software as has been apparent for many years but it has a very strong hold on brand loyalty of customers and a rock solid ecosystem of a billion+ consumers around the globe. Guess what, they also have an excellent stream of data on how consumers use devices, what apps they buy, what they surf and where do they go to but the way use it is quite different. I won’t count Apple out by any stretch. In fact, if one studies the acquisitions they have made over the last couple of years and connect the dots, some cool innovations could be released with the iPhone once the company figures out how to do it at scale.

However, as we have said in our Connected Intelligence thesis as well as Fourth Wave series of papers, services is where the action is going to be over the next decade or two. Apple, Facebook, Google, and Amazon are all well positioned to take advantage. How they execute against their strategy will determine who comes out ahead on the other side.

AI is as good as the datasets it has to train on. Neural networks of yesterday have become the AI algorithms of today just like M2M transformed into IoT. New buzzwords are like a necessary evil to keep the tech industry going. Apple has plenty of data, it just hasn’t started using it in a tangible way. You know who else has enormous amount of useful data? Mobile Operators – well, that’s a story for another day.

IoT Revenue Streams and what it means for the ecosystem

Service provider IoT revenue passed the important $1B mark back in 2013. So far it is tracking the growth of the early days of mobile data. However, they are different curves influenced by different factors. Mobile data was relatively an easier curve to climb as the revenues went up as more data handsets came online. The sales, business case, and ROI was straight forward. IoT is a bit more complicated as it across multiple vertical areas and it is not just about the data network, it is about the complete solution. The sales cycle and execution strategy is different and requires patience and resilience.

We will be doing an in-depth analysis of opportunities at the intersection of 5G and IoT at our upcoming Mobile Breakfast Series on June 7th.

Android vs. iOS: The fight for profit continues

Amongst the prominent Android OEMs, HTC, Sony, and LG, all lost money in their device business in Q1 2016. This again highlights the difficulty in differentiating on an open platform. Some of these players might give up on their handset business in 2016. Apple again dominated with 74% of the profit share and 39% of the revenue share with only 15% of the market share. Samsung’s revenues and profitability improved but it continues to face challenges both on the top and bottom end of the spectrum.

4th Wave Revenues

5 years ago, we put forth the theory of 4th wave to explain the upcoming changes in the mobile ecosystem. For the most part, the industry changes and tribulations have tracked the 4th wave curves. Last year, voice revenues fell down by 23%, messaging revenues declined by 18%, while data revenues grew by 23%. 4th wave revenues which now dominate the ecosystem now grew by a 60% YoY. We will have more analysis of the state of the 4th wave ecosystem later in the year.

Regulations for the new age

Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 54%+ of its voice calls are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.

Quad Moves

AT&T is integrating its DirectTV acquisition. Verizon acquired AOL, launched Go90 and is looking to acquire Yahoo (who isn’t?). Similar moves are afoot in Europe and other regions. Regular readers won’t be surprised. Video is a key offering for many service providers and by bundling quad plays, operators can further lower the churn. Content will continue to play a big role in how various offerings get bundled. The traditional cable bundle is being pulled apart in favor of more al carte OTT offerings. Media companies will have to figure out how they play in the new converged world. The ones that have been sitting on the sidelines will have to make some moves in the wireless ecosystem to stay relevant in the long-term.

The licensed vs. unlicensed: frenemies

Comcast is expected to launch its WiFi first MVNO with Verizon later this year. Google Fi hasn’t been a roaring success, perhaps it was never designed to be. Given that WiFi is carrying 75-80% of the traffic, it is easy to make the business case for a national WiFi operator. Companies like Republic Wireless have shown that this can be done.

Seeing the success of WiFi, FCC has rightly made more unlicensed spectrum available and it will be interesting to see how the ecosystem around 3.5GHz and other bands develop. This in light of what’s happening in the higher bands of cm and mmwave for 5G deployments. Technologies and business models that take into account benefits and drawbacks of both types of spectrum bands across a different uses cases will win out in the end. Despite advances, WiFi calling still has quality issues so the need for traditional networks is not going away anytime soon.

5G Economics

5G is gaining steam. All the major players have outline their preliminary plans to do trials on 5G (code word for we don’t want to be perceived as being behind). However, there is some real progress being made in short-range ecosystem of 5G. I have been working with many companies and talking to many researchers on this subject. I think what’s lacking from the discussion is the role of economics in 5G – what will be the cost structures, ROI, and the TCOs that will make it worthwhile for the operators to deploy 5G profitably. US is likely to be the key driving force in setting the standards and pushing the trials to deployments even though there is no Olympics as a motivator. But competition sure is.

We expect to explore this issue in more detail in the coming months. Our Mobile Future Forward Summit in Sept will tackle the questions in-depth with some seasoned experts.

Our paper on 5G covers the past, present, and future of the network evolution.

What to expect in the coming months?

2016 has started with a bang. The ecosystem is getting very complex and we need better tools to understand the relative strength of players and strategies. As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.

Against this backdrop, the analysis of the Q1 2016 and 2016 US wireless market is:

Service Revenues

· The US mobile data services revenues in Q4 2015 increased 2% QoQ and 17% YoY.

· Verizon and AT&T dominated the quarter accounting for 69% of the mobile data services revenue and had 67% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q1 2016. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 1.9%.  

· Data contribution to the overall revenues is now at 73%.

· All operators saw their ARPU decline by with Sprint and Verizon experiencing the sharpest declines.

Subscribers

· The US market increased its net-adds to 5.6M. T-Mobile gained the most and Sprint added the least.

· Tablet netadds declined sharply leading to a decline in big decline in postpaid netadds.

· There were more Car net-adds than there were phone net-adds

· AT&T has approximately 8M connected cars on their network – probably the highest of any mobile operator in the world.

4th Wave Progress

· The number of players making $250M/quarter on mobile continues to increase rapidly and these aren’t your traditional wireless players. For example, Mobile is now contributing 80% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: “Mobile 4th Wave: Evolution of the Next Trillion Dollars”)

· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.

· Verizon reported $195 million revenue from IoT and Telematics. At the current run-rate, this will likely be a billion-dollar business by 2016.

· Overall, the IoT business is tracking the early days of the mobile data growth.

Connected Devices

· Connected devices (non-phones) accounted for almost 69% of the net-adds in Q1 2016. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 97% of the devices sold in Q1 2016. The feature phone category is practically becoming extinct in the US market.

· The smartphone penetration in the US is now at 84%.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 87M making it the #2 LTE operator behind China Mobile which has more than three times the LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 92% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and at our annual thought-leadership summit – Mobile Future Forward in Sept 2016. The next US Wireless Data Market update will be released in Aug 2016.

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

Mobile Breakfast Series: Vancouver & Seattle April 17, 2016

Posted by chetan in : US Wireless Market , add a comment

We have two terrific events coming up in the Pacific Northwest, first in Vancouver on 28th April and then on June 7th in Seattle. They will feature some of the smartest execs on the most pressing topics of the day – 5G and IoT. Hope you can join us.

www.mobilebreakfastseries.com

Internet of Things – Exploring the next big thing in mobile

When: April 28th 7:30-8:30am Registration, Breakfast and Networking, 8:30-10:00am Panel Discussion, 10:00-11:00am Networking.

Where: Hyatt Regency, 655 Burrard St, Vancouver, BC V6C 2R7, Canada

Speakers

Shahid Ahmed, Managing Partner – Emerging Technology and IoT, PwC

Rob Tiffany, Global Technology Lead – IoT, Microsoft

Gonzalo Tudela, CEO and CoFounder, Vandrico Solutions

Rob Chandhok, COO and President, Helium

Chetan Sharma, CEO, Chetan Sharma Consulting (moderator)

Event Sponsor: Optimus Information

Shahid Ahmed is a Partner at PwC where he leads the Emerging Technology and IoT Practice. Previously, Shahid was the Managing Director with Accenture, where he had P&L responsibility for North America’s Communications business.  In this role, Shahid helped telecommunications clients build new capabilities, operate more efficiently and drive new growth.  He was also responsible for the Network practice in North America.  During his twenty-year tenure at Accenture, Shahid was involved in creating many practices including the formation of the Wireless Practice and helping to start the Accenture Cisco Business Group. Prior to joining Accenture, Shahid held several management positions at Sprint where he rolled out and expanded Sprint’s cellular services in North America.   Shahid was also responsible for rolling out the first cellular digital packet data (CDPD) capability in the US. Shahid is an active member of several wireless industry groups. He currently serves on multiple Advisory Boards such as the Smart Network Council, Cellular Telecommunication and Internet Association (CTIA), Northwestern University Masters in Engineering Management (MEM) Program and The Coral Group. In February 2011, Shahid was appointed as an Advisor to the Federal Communications Commission (FCC) Technical Advisory Council advising on technology issues facing the United States.  Shahid was chair of the M2M/IoT working group and currently chairs the cyber-security working group.

Rob Tiffany is the Global Technology Lead for the Internet of Things at Microsoft where he’s shipped smartphones and architected + developed many of the world’s largest enterprise mobile, IoT and wireless solutions. Prior to Microsoft, he spent his career as an entrepreneur, executive, strategist and writer of bestselling books on mobile and wireless technologies. A pioneer of the mobile revolution, he drove the development of the mobile app ecosystem and co-founded the world’s first cloud-based, mobile device management company. He started his career in the M2M business in the early days of wireless, bringing unintelligent vending machines to life.

Gonzalo Tudela is CEO and Co-founder of Vandrico Solutions, an enterprise wearables software company based in Vancouver Canada. With a background in Finance and Mining Operations, Gonzalo is an early champion of the positive impact wearable technology will have on large commercial operations. His insights have been featured in publications such as The Globe and Mail, Entrepreneur Magazine and TechCrunch. Gonzalo is a TEDx speaker who regularly presents to business leaders across the world. His expertise has been televised internationally to millions of viewers on the Globo TV network and on CBC. Gonzalo currently leads Vandrico in helping large global organizations use wearable technology as a way to overcome safety and operational challenges.

Rob Chandhok currently serves as President and COO of Helium, which provides a complete Internet of Things platform that makes sense of your things. Prior to Helium, Chandhok served as president of Qualcomm Interactive Platforms and senior vice president of Qualcomm Technologies Inc., where he was responsible for Qualcomm products and strategies that enabled people to benefit from the Internet of Everything, including wearable computing, vision-based computing via the Vuforia augmented reality platform, and the AllJoyn software development framework, an open source project of the AllSeen Alliance. Chandhok has years of practical and product-oriented experience in wireless communications and the Internet. He takes a systems-level approach to innovative communication oriented products, from chips up to applications and user interface. Chandhok holds 36 patents and has 23 published articles.

 

Connected Intelligence: At the Intersection of 5G and IoT

When: June 7th 7:30-8:30am Registration, Breakfast and Networking, 8:30-10:00am Panel Discussion, 10:00-11:00am Networking.

Where: Columbia Tower Club, 701 5th Ave #7600, Seattle, WA 98029

Registration

Mark McDiarmid, VP – Radio Network Engineering, T-Mobile has 24 years of experience in the wireless industry in both domestic and international operations. Currently, Mark serves as VP, Radio Network Engineering and Development for T-Mobile US, where he leads several teams of industry-leading engineers focused on creating robust, operationally-efficient, and economic radio network designs. Recently, Mark was responsible for defining the evolution and system design of T-Mobile US’s HSPA+ and LTE mobile broadband network including the design and operationalization of new radio network transport solutions based on IP and Ethernet.

Paul Brody is Americas Strategy Leader, Technology Sector at EY. He is proficient in mobile finance strategy planning, technology of mobility and internet of things, with 20 years of consulting and strategy experience in mobile and electronics. Prior to joining EY, he served as Vice President and Global Industry Leader of Electronics at IBM. At IBM, he is responsible for building IBM’s services business in the mobile space, including the partnership with Apple, and developing solutions for connected devices.  Prior to IBM, Paul worked at McKinsey & Co. Paul has a degree in Economics and a Certificate in African Studies from Princeton University.

US Mobile Market Update – 2015 March 9, 2016

Posted by chetan in : 4G,4th Wave,5G,AORTA,Applications,ARPU,Chetan Sharma Consulting,Connected Intelligence Era,IoE,IoT,Mobile 2016,Mobile Breakfast Series,Mobile Ecosystem,Mobile Future Forward,Smart Cities,Smart Phones,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

US Mobile Market Update – 2015

http://www.chetansharma.com/usmarketupdate2015.htm

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Highlights of the US Mobile Market 2015

· The overall mobile market expanded by 18% increase in revenues.

· Mobile data revenues increased by 17% YoY and now contribute 72% of the overall service revenues. In terms of data contribution, US is catching up with Japan which has been a leader in data % since the iMode days.

· For the first time in its history of the US market, the service revenues declined.

· For 2015, the voice revenues declined by 24%, messaging revenues declined by 18%, tablets saw the dip by 18%, handsets saw an increase of 5%, access revenues by 23% and 4th wave services dominated with an increase of 60%.

· The Capex contracted for a second year in a row.

· Device revenues are now 21% of the overall.

· EBITDA and Net Income saw double digit gains indicating operators are running a much tighter ship than before.

· Churn is at historic lows. Despite all the commotion in the market, 7% fewer customers churned in 2015.

· After falling sharply in 2014, the data prices remained pretty stable throughout the year.

· Mobile data traffic grew again with per sub smartphone consumption at 3.9 GB/user/mo (see note below on data traffic)

· In the first 10 weeks of Binge-on, T-Mobile users chomped away 34 PB of data for free or what was the entire year’s worth of data traffic on T-Mobile’s network in 2010. T-Mobile experienced a net traffic reduction of 10-15% but given that consumers are consuming 3x than before, overall traffic will rise again.

· AT&T added 4 million cars to their network. While postpaid business has its challenges, the connected devices business showed significant strength in 2015.

· Verizon’s IoT/Telematics accounted for $690M in 2015 and is likely to cross the $1B mark in 2016 making US the hotbed for Connected Intelligence activities, growth, and continued experimentation.

· Apple again dominated the device market with over 45% revenue share, 81% profits share with only 16%-unit share.

· Android ecosystem revenues grew by 5% but the profits declined by 2%

· There were more tablets added to the network than phones in 2015. Cars outperformed M2M by a good margin.

· T-Mobile edged past Verizon in postpaid netadds, AT&T was ahead in Prepaid, Verizon in Connected devices, Sprint in wholesale, and Verizon overall had the most netadds in 2015.

· AT&T and Verizon on average made $16 per sub/mo, T-Mobile turned into positive territory with $1 profit/sub/mo while Sprint stayed in negative territory with a loss of $0.55 per sub/mo.

· The valuation of Uber surpassed the combined market cap of T-Mobile and Sprint.

What to expect in 2016? Questions for 2016.

· We expect the overall US mobile market to pass the half a trillion-dollar mark in 2016.

· US will cross 400M in subscriptions in 2016.

· After the pause of dropping data prices in 2015, we could see intense price wars in 2016.

· The upcoming auction could be the big story of the year.

· What new 5G test results will be announced and will industry converge on some 5G standards ahead of the 2019 deadline?

· Will Comcast MVNO follow Google-Fi as a niche endeavor or does it have elements to fundamentally impact the market. 2016 will hopefully answer the question about the future of WiFi-first network strategy.

· Will the upcoming eSim integration in devices go far enough to disrupt the market?

· Will IoT gain sufficient steam to justify the forecasts?

· Can Android OEMs turn around the decline in profits in 2016?

· Can iPhone7 boost Apple’s growth numbers in 2016?

· Will the service revenue decline in the US reverse itself or are we seeing the start of the decline in revenues in the industry?

· Autonomous driving was a big story last year; what progress are we going to make in 2016? How will Uber shape the autonomous driving business models?

· AT&T and Verizon have bet big on video. How will the respective strategies pan out in 2016?

· The Apple-FBI is going to be one of the most watched cases in the world. Whichever way the final ruling lands has huge implications for the tech industry and consumers.

We will be doing an in-depth analysis of the future of the mobile industry at our 7th annual mobile executive summit Mobile Future Forward in Sept 2016. Hope you can join us.

Service Revenue Decline, what does 2016 hold in store?

The overall service revenue, postpaid revenue, overall and postpaid ARPU all declined. In general, the net-service revenue decline is not a good sign if it is market induced. In Europe, we saw net-revenue declines but the impact of the economic crisis was a big factor in determining the trajectory. After the economy has improved, we have seen the net revenue in effected countries rise again. In the US, the net-revenue decline is more market induced. The calculation of service revenue is a bit more complicated because device revenues are no longer part of the mix and as customers are weaning off the contracts, we have to adjust the service revenue for this accounting change. If we take the accounting distortion into account, service revenue is still in the positive growth territory but in terms of how operators report service revenues, this was the first year the category saw a decline. Regardless of the accounting distortions, there is continuous pressure on the postpaid revenues which is what is impacting the overall numbers.

Given the competitive state of the market, we might see further service revenue declines in 2016. The reversal might come down to consolidation in the industry in 2017 and beyond. The pressure on the revenues has had a positive impact though – operators are running far tighter ships than before. The net income surged in 2016.

The licensed vs. unlicensed: frenemies

Comcast is expected to launch its WiFi first MVNO with Verizon fairly this year. Google Fi hasn’t been a roaring success, perhaps it was never designed to be. Given that WiFi is carrying 75-80% of the traffic, it is easy to make the business case for a national WiFi operator. Companies like Republic Wireless have shown that this can be done. Keeping aside some of the technical challenges with WiFi, there are two major business challenges with the WiFi strategy. First, even with the rise of WiFi usage, the cellular usage hasn’t slowed down. Cellular data usage is still growing 60-70% YoY. As such, consumers will have to rely on cellular when they are out and about which means the economics comes down to the wholesale rate the MVNO has for cellular. The second big problem is the lack of handset choices. For consumers, handset choice is paramount. They want both iOS and Android devices to go with their data plans. WiFi operators generally have limited handsets. Over time this will change but to have a WiFi network of scale, economics, choice, and pricing are critical. By contract, cellular operators will always have a leg-up on the MVNOs unless access regulations are in place which of course are nowhere in sight.

Seeing the success of WiFi, FCC has rightly made more unlicensed spectrum available and it will be interesting to see how the ecosystem around 3.5GHz and other bands develop. This in light of what’s happening in the higher bands of cm and mmwave for 5G deployments. Technologies and business models that take into account benefits and drawbacks of both types of spectrum bands across a different uses cases will win out in the end. Despite advances, WiFi calling still has quality issues so the need for traditional networks is not going away anytime soon.

M&A 2016

As we mentioned last year, the service provider M&A window for 2016 pretty much closed late 2015 given the upcoming auctions and the presidential cycle.  There might still be some cross border opportunities but for any major transactions, it is better to wait it out to have a reasonable chance of success.

IoT Revenue Streams and what it means for the ecosystem

Service provider IoT revenue passed the important $1B mark back in 2013. So far it is tracking the growth of the early days of mobile data. However, they are different curves influenced by different factors. Mobile data was relatively an easier curve to climb as the revenues went up as more data handsets came online. The sales, business case, and ROI was straight forward. IoT is a bit more complicated as it across multiple vertical areas and it is not just about the data network, it is about the complete solution. The sales cycle and execution strategy is different and requires patience and resilience.

AT&T already had an active IoT developer program. Verizon introduced its ThingSpace platform to the developers last year. It is already selling complete IoT solutions in energy, transportation, security, and several other industry segments. As we mentioned before, Verizon is on track to crack the billion-dollar mark in IoT this year. For trivia buffs, Verizon passed the billion-dollar mark in mobile data revenues back in 2004 which at the time made only 5%of the overall wireless revenues for the operator.

We will be doing an in-depth analysis of the IoT Opportunity at our upcoming Mobile Breakfast Series in April and May.

Mobile data growth – Correcting the Cisco Numbers

Mobile data consumption (cellular) continues to grow as devices and networks continue to improve. There are 13 countries now with at least 1GB/mo/sub consumption. US is amongst the top three. At the end of 2015, the average consumption per sub in the US was at 3.9 GB/mo/sub.

Earlier this quarter, Cisco released its annual VNI report that forecasts data consumption and growth around the world. However, they did something very unusual this time, they pulled back their “factual numbers” by 36% for the US market. Based on our research which is corroborated by the data from the sources, Cisco’s numbers are low. Given that a lot of policy papers use these numbers as an input, we thought it will be worthwhile providing the reasonable estimates for data growth in the US market. These estimates match well with the data growth numbers in the Ericsson report.

Our estimates are that the US data consumption last year was close to 10.9 Exabytes. Ericsson reported approximately 10.5 Exabytes. Cisco adjusted its numbers from 9.2 Exabytes to 6 Exabytes.

Android vs. iOS: The fight for profit continues

Amongst the prominent Android OEMs, HTC, Sony, LG, and Lenovo all lost money in their device business in 2015. This again highlights the difficulty in differentiating on an open platform. Some of these players might give up on their handset business in 2016. Apple again dominated with 81% of the profit share, 45% of the revenue share, with only 16% of the unit share. Samsung’s profitability improved a bit but it continues to face challenges both on the top and bottom end of the spectrum.

4th Wave Revenues

5 years ago, we put forth the theory of 4th wave to explain the upcoming changes in the mobile ecosystem. For the most part, the industry changes and tribulations have tracked the 4th wave curves. Last year, voice revenues fell down by 23%, messaging revenues declined by 18%, while data revenues grew by 23%. 4th wave revenues which now dominate the ecosystem now grew by a 60% YoY. We will have more analysis of the state of the 4th wave ecosystem later in the year.

In its Q4 15 earnings call, Verizon laid out its 3-Tier strategy which is similar to the 4th wave digital strategy we have been working on with many operators around the globe since 2011 (see paper and slides for details). Without moving up the stack, eventually, operators will run out of the data steam that is powering their revenues today.

Regulations for the new age

Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 50% of its voice calls are are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.

Connected Devices – Resetting the target

The 50B number by 2020 has gotten into the industry lexicon since 2010 when Ericsson first suggested that we are likely to reach this target by the end of the decade. Others picked up the number and either copied it or even went further by suggesting even 75B+ numbers. By the middle of this decade, it looks unlikely, we will hit 50B. Our research shows that we were at approximately 16B last year. It is tall order to make up 34B in 5 years. Given the new evidence and assumptions, Ericsson also revised its estimates down to 28B by 2021 (the 2020 number is just over 25B). 25B+ is still an excellent target and something the industry can be proud of. The 50B number still gets thrown around a lot by vendors and media. We will be better off as an industry if we adjust the forecasts based on ground realities and not unnecessarily hype things.

Apple – what’s next? Mastering the narrative

Apple’s profit in Q4 were the highest recorded in the history of mankind. Let that sink in for a minute. Its $18B in profit on $76B revenue was truly astonishing. Yet, the markets were disappointed. What gives? First, the markets care about growth more than they care about the size of the profits or revenue. If the growth number matches or exceeds the expectations, the stock price responds positively otherwise it moves in the other direction. Second, for the first time since 2003, Apple issued a negative guidance on sales.

The unwritten narrative for Apple’s success has been around the iPhone juggernaut. Now that the high-end market for smartphones is starting to saturate, Apple needs a new narrative that can tie to growth. Apple took a shot at it by releasing some new details around services revenue. In any other company, this would have been received very well. With Apple, expectations of the market are supersized so it is not clear if the pivot towards services will help reshape the basic narrative around Apple’s growth.

Connected Consumer

· On average, each US household spent approximately $3800 on access and devices in 2015.

· Roughly 80% or $3000 of the US household spend went to access of services such as cellular voice, mobile data, cable, landline voice, and broadband internet.

· Roughly 20% or $800 of the US household spend went to devices such as computers, smartphones, feature phones, wearables, tablets, e-readers, connected cars, drones, robots, connected home, and other connected devices.

· 41% of the household access spend went to cellular phones (for voice and data services).

· As a standalone category, mobile data is the biggest category approaching $1000 in yearly household spend.

· In the last 5 years, mobile data spend has risen the most and landline voice has declined the most. Cellular voice spend has also gone down while cable and broadband spend have seen relatively modest uptick.

· In devices, smartphone is by far the biggest spend category. Consumers spend almost 3x on smartphones than they spend on personal computers. Smartphones accounted for more than 50% of the US household connected spend in 2015.

· New categories such as wearables, connected cars, drones/robotics, and connected homes have started to make a tangible impact on consumer spend.

· US consumers spent more on wearables than feature phones in 2015.

· Chetan Sharma Consulting conducted its annual Connected Consumer survey of 1000 US households. The results confirmed the ongoing increase in the number of connected devices/household.

Quad Moves

AT&T is integrating its DirectTV acquisition. Verizon acquired AOL and launched Go90. Similar moves are afoot in Europe and other regions. Regular readers won’t be surprised. Video is a key offering for many service providers and by bundling quad plays, operators can further lower the churn. Content will continue to play a big role in how various offerings get bundled. The traditional cable bundle is being pulled apart in favor of more al carte OTT offerings. Media companies will have to figure out how they play in the new converged world. The ones that have been sitting on the sidelines will have to make some moves in the wireless ecosystem to stay relevant in the long-term.

The Upcoming 5G wars?

5G is gaining steam. All the major players have outline their preliminary plans to do trials on 5G (code word for we don’t want to be perceived as being behind). However, there is some real progress being made in short-range ecosystem of 5G. As I noted, in my MWC note, some of the demos coming out of the labs are exciting. In the US, Verizon’s announcement last year took folks by surprise. By Q1 16, both AT&T and T-Mobile announcement their version of 5G trials. Verizon was out with the first batch of results from its experiments indicating 10Gbps throughput at short-distances. Given the momentum behind cm/mm wave, it is possible that some consensus is built around the spectrum bands by country (and not wait till WRC 19) to get the device ecosystem going.

A lot is still unknown about 5G, specifically, what will be the economics of 5G and the business case for new capex and ROI. We hope to explore this topic in more detail in the coming months.

Our paper on 5G covers the past, present, and future of the network evolution.

What to expect in the coming months?

2015 was a tremendous year for mobile industry thus far as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. The final quarter which is typically the biggest in terms of revenue will lay the foundation for an exciting 2016.

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

Against this backdrop, the analysis of the Q4 2015 and 2015 US wireless market is:

Service Revenues

· The US mobile data services revenues in Q4 2015 increased 3% QoQ and 16% YoY.

· After crossing the $100B in data revenues for two straight years, the US market is set for another excellent mobile data services year though some slowdown has started to occur as predicted by our 4th wave thesis.

· Verizon and AT&T dominated the quarter accounting for 69% of the mobile data services revenue and had 67% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q4 2015. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 2.2%. 

· Data contribution to the overall revenues is now at 72%.

· After a minor blip of positive growth in postpaid ARPU by T-Mobile and AT&T earlier this year, all operators saw declines in postpaid ARPU in Q4 with Sprint showing the sharpest decline with 18% change YoY.

Subscribers

· The US market increased its net-adds to 6.7M. AT&T, Verizon, and T-Mobile all added approx. 2M or more subs. Sprint also showed positive net-adds though at a fraction of the top 3.

· Verizon again led in postpaid net-adds though a bulk of the net-adds are coming from tablets.

· AT&T has approximately 7M connected cars on their network – probably the highest of any mobile operator in the world.

4th Wave Progress

· The number of players making $250M/quarter on mobile continues to increase rapidly and these aren’t your traditional wireless players. For example, Mobile is now contributing 80% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: “Mobile 4th Wave: Evolution of the Next Trillion Dollars”)

· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.

· Verizon reported $200 million revenue from M2M and Telematics. At the current run-rate, this will be a billion dollar business by 2016. The current annualized run rate is $800M.

Connected Devices

· Connected devices (non-phones) accounted for almost 66% of the net-adds in Q4 2015. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 97% of the devices sold in Q4 2015. The feature phone category is practically becoming extinct in the US market.

· The smartphone penetration in the US is now at 83%.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 84M making it the #2 LTE operator behind China Mobile which has more than three times the LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 90% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in April 2016.

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

Mobile World Congress 2016 Observations February 29, 2016

Posted by chetan in : 4th Wave,5G,ARPU,Chetan Sharma Consulting,Connected Devices,Connected Intelligence Era,Disruption,Enterprise Mobility,LTE,Mobile 2016,Mobile Breakfast Series,Mobile Future Forward,Mobile World Congress,MWC,NFV,SDN,Technology Cycles,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

Mobile World Congress 2016 Observations

The second of grand slams of mobile events – Mobile World Congress has become the marquee events that helps get the pulse of the industry as to where things are headed for the year. With the attendance topping 100K for the first time, it is a massive undertaking and brings all major players in the ecosystem from all corners of the world. Vegas could learn a thing or two from Barcelona on how to host big events. Some of the major themes were predictable like 5G, IoT, and VR. Others were important but not widely talked about in public settings. This note presents the summary of our observations from the show.

5G – 5G entered industry’s consciousness last year and the activity around the globe has just caught fire since then. Each week there is a new trial announced. Last year, there were more questions about 5G than answers. Some of the questions are starting to get answered now and we are getting clarity on others. However, the specification timeline still stays around 2019 with full standard deployments not before 2020. Given the trial activity and the progress in the labs, there is a good possibility, that there might be some consensus on higher frequency use specifications especially around indoor and dense outdoor networks.

I had a chance to visit with a number of CTOs of major players and these guys are not the ones who give into hyperbole. As an engineer, I left the show quite optimistic about the solutions and technologies that will become part of the 5G portfolio.

Verizon was the first one to announce results from some early tests in the field – 10 Gbps for potential fixed wireless deployments. Nokia and DT both showed sub millisecond radio delay which is quite an achievement. Ericsson showed the power of beamforming to gain really high capacity at short distances. 25-30 Gbps was common in most of the lab setups. SDN/NFV will provide the key underpinning to the 5G architecture but it didn’t surface much in the discussions.

Fundamentally, 5G will be driven by economics not just technology. Europe’s quixotic approach to spectrum auction in 2000s led to a decade long stagnation that left Europe behind. To attain leadership in 5G and on the next wave of technology evolution of Connected Intelligence, policy, technology, and strategy have to work hand-in-hand in a country to gain an upper hand. Some of my thoughts mentioned in the Economist and WSJ.

We will be covering 5G and its implications in future papers and at Mobile Future Forward in Sept.

Gigabit Society – While 5G is still a ways off, work goes on the LTE front. Industry hit a major milestone of a 1B LTE subs. Lot of the 5G enhancements will also be available in 4G being termed as 4.5G, Xtreme LTE, pre5G, 5G ready, and really-really advanced LTE. Infact, many of the features talked about in 5G are going to be available in the 4G evolution path. Qualcomm showcased their X16 chipset capable of reaching 1Gbps by combining 10 100Mbps streams.

4th Wave – In 2011, we put forth the 4th wave theory and 5 years later, we are seeing the 4th wave in full effect. As I mentioned to the Economist and the WSJ, the value is moving to the applications and services layer. Operators who will invest to become “solutions providers” will be better positioned for the future vs. the ones who are purely “access providers.” We are seeing the theory play out in front of our eyes. In 2014, US became the first country where the 4th wave revenues were greater than the access revenues. We expect this to occur in every major market over the course of next few years. Operators such as AT&T, Verizon, Telefonica, DoCoMo, KDDI, and Orange are benefiting from becoming solution providers. The new found revenue speaks for itself (more on this next week in our US Market Update for 2015).

Ericsson – Amazon Cloud Deal – Ericsson and Amazon struck a clever cloud deal that helps mobile operators use the AWS framework while creating a framework to be in compliance with the safe harbor provisions of sovereign nations. Win-Win-Win for sure.

The Ad wars – Instead of innovating, the ad industry as a whole took shortcuts and the end result was the bombardment of useless ads with no frequency control. Consumers are responding by embracing ad-blockers. Operators view this trend as an opportunity to stall the OTTs. Some of it is genuine concern for the consumers who get slapped with ads which consume good portion of their data bucket and deteriorate the experience sometimes to a point of making the browsing completely unusable especially when network conditions are less than favorable. Operator 3 in Europe working with startup Shine is taking the stance to block out the ads inviting the scorn of the ad industry and a peek of curiosity from the regulators. It is unlikely to be an effective strategy. However, it clearly is an opportunity for the ad industry to step up and design new frameworks that are consumer friendly. When we wrote the first mobile advertising book at the dawn of the birth of the modern mobile advertising industry, we had proposed several ideas that use the data to enhance the consumer experience and ecosystem strength but we clearly have a lot of work to do.

Verizon XO investment – Verizon’s XO deal of $1.8B didn’t get much attention but it was a brilliant deal appreciated by the folks who really understand what is going on. Verizon gets a fiber network and more important wireless spectrum (28 and 39 GHz) suited for 5G.

Resurrection of RCS – RCS has been a poster child of inability of operators to work together on a global scale w.r.t applications. The growth of IP messaging is well documented. Not only did operators miss out but Google did as well. Now that messaging is emerging as a new potential commerce and engagement platform, this is an attempt by Google to take a shot at the messaging opportunity. A number of things have to go right for this program to work so the probability is stacked against it.

Facebook TIP – Having shaped the IT infrastructure, Facebook is focusing on influencing the telecom infrastructure stack. The focus is going to commoditize the stack and open source it. Some big names are joining the effort like Nokia, Intel, and DT.

Connecting the next billion takes a back seat – Last year, one of the big theme emerging out of MWC was the focus on connecting the next billion. The talk of 5G drowned out any discussion of connecting the unconnected. The show did discuss using balloons, drones, satellites unlicensed spectrum to lower the cost of access. The unintended consequence of FreeBasics ruling might be a dampening effect on experimenting with alternative business models to support low cost access in emerging markets in the short-term.

Net Neutrality – NN has become an emotionally charged debate. Regulators around the world are grappling with how to understand and regulate through the complex prism of the future. Regulators are rushing to issue their rulings based on the world they saw in the past not the society and how it is going to react to applications and services in the future. Participants are getting bolder in their approach and interpretation of Net Neutrality. T-Mobile’s Binge-On is being watched by operators worldwide and the regulators are trying to understand what it means in their local market.

Regulations for the new age – Some of the regulations in the communications space are over a 100-year-old. Communications itself has drastically changed though the principle of transferring the bits from point A to B remains the same. T-Mobile reported that 50% of its voice calls are are on VoLTE. IP messaging is many times the SMS global volume. Gradually, almost all voice and messaging will be on the IP layer – voice and messaging will just become apps on the data layer. So pretending and regulating these services as if it were 2000 doesn’t help. An ideal strategy for consideration should be that the IP layer gets regulated for fair pricing, competition, and consumer good while everything on the top of the IP layer gets regulated on a “same service, same rules” principle. The interconnection between apps to deliver services like connection to PSTN, E911, etc. can be addressed by fair market pricing principles. VR is going to become the next communication platform; IP messaging the next application development and commerce platform. To keep the regulatory regime simple and in with the times, by focusing on the access layer, one can guarantee that whatever takes place on the top has the opportunity to grow as the market desires. Similarly, data rules across all apps and services on top of the IP layer should be the same irrespective of the provider. This market shift is required to make the market more competitive and fair.

IoT – IoT use cases are becoming more crisp and clear. There is steady growth in how IoT is getting integrated into both industrial and consumer worlds. As expected there are efforts underway to streamline and unfragment the stack. Intel and Qualcomm got together for the larger good of the industry under the Open Connectivity Foundation. We will be taking a deep dive into the IoT world at our upcoming Mobile Breakfast Series event in Vancouver.

eSIM – eSIM is potentially one of the biggest disruptive force our industry has seen in some time. If you connect the dots into the future, it is becoming clear that there is significant tension along the fault lines. Regulators better get ahead of this wave in time.

VRthe next communication platform – The emerging world of VR/AR is quite exciting. The technology is getting there. One of the key 5G use cases is going to be VR as it will require high capacity delivery of bits to the headset. However, VR sales are not going to go through the roof anytime soon. Some of the same things that plagued Google glasses – price, performance, and dorkiness are going to impact the early days of VR (Google’s VR approach is actually more market friendly at this time) but it is exciting to see tech companies tackle a complex computing problem. I am looking forward to new experiences across different domains.

Security, Privacy, and the clash of the titans – Apple vs. FBI case was on the top of the mind of executives. It wasn’t being discussed openly for obvious reasons but it came up in discussions almost every day. It is a complex issue that has to be looked from the perspective of enforcement in international jurisdictions. Operators have been forced to comply with similar requests for years. It will be an interesting battle, something that every tech company, every govt. around the world is paying close attention to.

Handset launches – Samsung launched S7, LG showed G5, Xiaomi announced Mi5, Huawei had its MateBook which probably was the sleekest device at MWC this year. Overall, only incremental improvements while the industry awaits new ideas to surface.

Disruption from 3.5 GHz – When I talked to the White House last year about 5G, I focused on stressing that Bits/s/Hz/Km2/joule/$ will be a key 5G performance consideration. FCC has done well by making the 3.5 Ghz available to the industry. Given that 70-80% of data consumption is indoors, unlicensed WiFi+LTE can be used to provide a much better economics esp. for enterprise customers. Players of various stripes are taking a serious look at it – Ericsson, Lemko, Google, Nokia, and others. Expect more news to come during the first half of the year.

Sigfox/Lora vs. NB-LTE – Sigfox/Lora remind me of WiMax. WiMax is remembered for its role in accelerating LTE deployments. While Sigfox/Lora started the process of creating a network and business model suited for IoT, it forced the 3GPP members to come up with NB-LTE (in a hurry) and with the growing support of the ecosystem behind it, it is hard to see how in the long-run a non-standard approach can win out.

Wearables – It seemed like the hype around consumer wearables has died down at MWC this year. No new concepts. Industry has to get the basics right first. However, there is good progress on the enterprise front where the use cases and requirements are clear. There are a number of companies who are working to make wearables/VR/AR a reality in the enterprise space.

Misc – Selfie security (Mastercard), Gesture user interfaces, Stripe’s Atlas platform, Mobile Connect (2B enabled consumers), AT&T $10B investment to expand globally, Paypal loves NFC after all, Smart Cities, Mobile Commerce initiatives, Media and Telco convergence, Operator data monetization, Alternate connectivity solutions (drones, balloons, lasers, etc.), Digital divide, 1B LTE subs.

Booth of the year: Ericsson by a distance

Party of the year: Siris Capital, Qualcomm

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in March 2016.

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

Mobile Predictions 2016 January 3, 2016

Posted by chetan in : US Wireless Market , add a comment

Mobile Predictions 2016

http://www.chetansharma.com/MobilePredictions2016.htm

2016 mobile industry_predictions_survey_chetan_sharma_consulting from Chetan Sharma

 

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A very happy, healthy, and prosperous 2016 to you and your family. Hope you had a good holiday and area ready to take on the new year with vigor and purpose. My thanks to all who participated in our 9thannual Mobile Predictions Survey. It is a unique polling of the insiders to get a glimpse into what the ecosystem is thinking about the future.

As I have mentioned before, we are entering the Connected Intelligence Era and the mobile industry is growing beyond its traditional borders to transform every vertical industry and by extension – the global GDP. Proof is in the numbers. 7 Zettabytes of digital information created. 1.3 billion smartphones sold. 31 Exabytes of mobile data traffic (which btw will grow 15x+ in the next 5 years). 72 million wearables sold. 16 billion connected devices. Almost half trillion dollars in data revenues. Quarter billion dollars in OTT revenues. At least 62 companies generating a billion or more from 4th wave. At least 8 companies generating a billion or more from IoT.

The improving economy empowered consumers to spend more. Europe is starting to come out of the 2008 recession. Asia is on fire. Any slow-down in China has been picked up by startups in India who are transforming the commerce landscape. Even remote islands like Tonga are LTE-enabled and citizens everywhere have access to high-speed broadband networks. Affordability remains a key issue to address to bring in the next billions into the fold.

IoT emerged as a big category last year and we are just starting. While the potential is unlimited, industry needs to come together on a number of issues around fragmentation, security, policy, and privacy. The fact that we are selling more non-phone devices than phone devices on cellular networks in the US should be a hint of things to come. 2015 saw a wave of consolidation and we will continue to see stronger player get more aggressive this year across domains which is very exciting. We passed the mid-point of this decade and most certainly, the next five years are going to be full of action, surprises, and transformation. Stay with us and we will keep you posted.

We do our annual survey to engage our knowledgeable community on trends and events to keep an eye on. The composite view gives a glimpse into the future scenarios. Executives, developers, and insiders from leading mobile companies and startups from across the value chain and from the around the globe participated to educate us on what to expect of 2016. The survey draws upon the unique collective wisdom of the folks who are making it happen. Thanks for being part of the annual ritual.

25 names were randomly drawn for the limited edition of the Mobile Future Forward 2015 book and they have been notified. Congrats.

Welcome 2016!

Kind regards,

Chetan

What was most newsworthy in Mobile 2015?

2015 was a year of change in the mobile industry. The rise of Uber and its ilk are transforming traditional decades old industries in front of our eyes. T-Mobile’s impact on the mobile industry was felt far and wide and these two ended up being our top two stories of the year. Closely followed the continued rise of connected devices, IoT, and the mobile revenues around the globe. The emergence of Chinese players on the global platform is shifting things around. Apple’s tussle with Samsung subsided in the back pages of 2015.

What will be the biggest mobile stories of 2016?

2015 saw the launch of Google-Fi, 2016 might see the expansion of the concept by other players. Connected devices of all shapes and sizes will continue to transform the ecosystem and consumer mindset. We might see new experiences in VR and flexible displays introduced this year. Spectrum auctions and regulatory tussles will be a key story in 2016. Apple car rumors will continue. Mobile commerce growth in India was a big story in 2015 and will continue to only become more dominant this year.

Who are the top 4 important players in the mobile ecosystem?

Apple and Google continue to be the top 2 most important players in the mobile ecosystem. The biggest shift was that Facebook replaced Samsung at number 3 and Operators consolidated their position at number 4. There are 5-10 global operators who are influential in the direction of the industry. Will Samsung make a comeback in 2016 under the new leadership remains to be seen and will be the story to watch this year. While Microsoft ranked low, 2015 saw a shift from its failed strategy something we have advocated for many years. Can it recapture the love of the developers? It will be key to its future role in the ecosystem.

What will be the breakthrough categories in mobile in 2016?

For the second year in a row, Mobile Payments was voted as the key category for 2016 followed by Big data and analytics, Enterprise IoT, Connected Devices, and Mobile Security.

What will be the most popular consumer mobile applications in 2016?

Mobile applications are transforming many industries and 2016 will only accelerate this trend. Amongst the most popular app categories: Mobile Health and Wellness, Location Based Services, Mobile Payments and Commerce, Messaging which could emerge as the next major mobile OS this year, social and IoT.

Who will dominate the mobile payment/commerce space?

The introduction of Apple Pay last year shifted the long held view that Financial guys will dominate the space. However, the enthusiasm seems have subsided and the Visa and Mastercards of the world are back in the driver seat. Apple will continue to play an industry defining role. Operators have largely been marginalized mostly due to self-inflicted strategy blunders. Google could have played a more significant role but is operating on the edges. Amazon and Facebook can be disruptors in the space but so far haven’t shown must gusto to shape the industry.

Who will make the biggest mobile acquisition in 2016?

Google continues to be the player that startups and investors hope will help make their payday. Significant service provider M&As are also on the cards as they were in 2015. Facebook is perhaps the gustiest acquirer. Microsoft looking to stay relevant in the ecosystem is likely to be bolder and more strategic in its acquisitions in 2016.

Who is doing the most interesting work in the IoT space?

We are in the early phases of the connected intelligence era and startups seem to be doing the most interesting work in creating new solutions, hardware, and services. However, the big boys are investing heavily as well. Google, AT&T, GE, and Intel all are putting in a lot of resources and for some of them, IoT is already a multi-billion-dollar business. We expect several acquisitions in the space throughout the year.

What protocol will dominate IoT communications?

There is a race to dominate the IoT communications protocol layer. The emergence of Sigfox and Lora is similar to the introduction of WiMax which failed but played the role of rallying the GSM players to work on LTE. Similarly, NB-LTE has been rushed and positioned to address the IoT opportunity. In the absence of any widely adopted protocol, WiFi continues to dominate the remainder of the IoT industry and is likely to play a very important role in the coming years.

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

WiFi continues to play a very important role in handling mobile data demand. 70-80% of the consumption these days in most developed markets is taking place over WiFi (and hence fixed broadband). This hasn’t dampened the demand for cellular data though and it continues to increase albeit at a lower rate. Alternate business models like sponsored data and 5G have started to enter the conversation and we expect more discussion on the subject this year.

Which category will generate the most mobile data revenue in 2016?

The revenue trends are following the expected trajectory. Mature mobile markets have revenues divided between apps, access, OTT, and advertising. In the emerging markets, messaging (including SMS) still plays an important role though access is starting to generate some serious revenues for almost all mobile operators around the globe.

Which region will end up leading the world in 5G by 2020?

4G has been dominated by North American operators. There is a real race underway to take the honors for 5G. The collective wisdom right now is that Korea will end up kick-starting the 5G deployments though Verizon the US has stated its intention to be the leader. Europe and China also have several initiatives to make their mark in the race to 5G.

When will mobile commerce be greater than ecommerce?

We are at the tipping point in North America and Europe with Asia close behind.

The company bringing the most successful mobile gadget of the year – 2015 and 2016?

Since the introduction of the iPhone in 2007, Apple continues to dominate the race. Though 6s didn’t have as great of a reception as 6, it was enough for Apple to once again take the honors for the year. It is expected that while others will make some minor gains, Apple is again going to dominate in 2016.

Mobile company of the year – 2015 and 2016?

Besides Apple, Uber and Facebook really excited the industry – Uber with its breathtaking valuation curve and Facebook with its impressive revenue curves. T-Mobile with its many un-carrier moves shaped the US market decisively and unseated Sprint at #3 for the first time. The big two also had to respond to the pricing changes that TMO introduced. Operators beyond the US borders were also impacted as the tier-2 operators tried to copy TMO moves in their respective markets. AT&T with its heavy investments in the connected intelligence space is likely to make news in 2016. Google will continue to be an important player. The new corporate structure might help the company to be more aggressive. Amazon continues to be a juggernaut in the mobile commerce space – bigger than anyone else and with its complete hold over the consumer psyche, it will make further gains in the space.

Automation and Digitization of industries will lead to?

This is still an early area of discussion. We are still trying to understand how societies will be shaped by automation. Will past provide any guidance or are we unchartered territory. Arguments can be made on both sides. We continue to study the data points to inform our view on the subject. Opinions haven’t changed much since last year though there is a slight uptick in the number of people expecting automation to impact them negatively.

Which of the following are likely to happen in 2016?

Apple didn’t reach the trillion-dollar market cap but remains on course though 2016 could be a challenging year for the company. Wall Street has lofty expectations from the company that continues to defy expectations with its monstrous revenue and profits each quarter. It is a company unlike any other on the planet and remains a subject of intense curiosity amongst industry participants. Last year, the survey predicted Amazon opening a retail store which the company readily obliged. Data-only smartphone plans will start to become common. Some benevolent acquirer will end Yahoo’s misery run. Sprint and T-Mobile will continue to be the subject of M&A speculation. 5G marketing drama will intensify. Microsoft might make a comeback in devices. 2016 will keep us on our toes with its many unexpected turns and tribulations.

What category will be impacted the most by mobile in the next 5 years?

IoT, Home Automation, Health and Wellness, and Autonomous Cars are the most exciting categories for the year.

Which segments are likely to get disintermediated the most by algorithms in the next 5 years?

Algorithms can disintermediate a lot of industry job segments. At the highest risk are advertising agencies, transportation, real estate agents, retail, and car drivers. Fascinating trends to follow.

Who was and will be the mobile person of the year?

In the past executives from device companies have dominated the top honors. However, the mobile person of the year for 2015 was John Legere (first time someone at the mobile operator took the honor). With his colorful persona, he has reshaped the industry in many ways. Tim at Apple, Mark at Facebook, Sundar at Google, and Jeff at Amazon rounded out the top 5. The stars for 2016 are predicted to be Sundar Pichai, Tim Cook, Jeff Bezos, Mark Zuckerberg, Satya Nadella, and Jack Ma. Honorable mentions went to Lei Jun, Travis Kalanick, Masayoshi Son, Ralph de la Vega, Glenn Lurie, Marcelo Claure, Tom Wheeler, Steve Mollenkopf, Jony Ive, Nikesh Arora, Brian Krzanich, and many others.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in Feb 2016.

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

Request for input – Mobile Predictions 2016 Survey December 8, 2015

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Greetings,

Trust that the end of a fabulous mobile year is treating you well. Wish you and yours a very happy holiday season and best wishes for a terrific 2016.

As is the tradition, we are doing our 9th Annual Mobile Predictions Survey for 2016. I would like to request your input in the process. We rely on our community and colleagues to help us understand the trends for the upcoming year.

The survey is available at https://www.surveymonkey.com/r/MOBILEFUTURE

The questions are:

1. What was most newsworthy in Mobile 2015?

2. What will be the biggest mobile stories of 2016?

3. Who are the top 4 important players in the mobile ecosystem?

4. What will be the breakthrough categories in mobile in 2016?

5. What will be the most popular consumer mobile applications in 2016?

6. Who will dominate the mobile payment/commerce space?

7. Who will make the biggest mobile acquisition in 2016?

8. Who is doing the most interesting work in the IoT space?

9. What protocol will dominate IoT communications?

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

11. Which category will generate the most mobile data revenue in 2016?

12. Which region will end up leading the world in 5G by 2020?

13. When will mobile commerce be greater than ecommerce?

14. The company bringing the most successful mobile gadget of the year – 2015 and 2016?

15. Mobile company of the year – 2015 and 2016?

16. Automation and Digitization of industries will lead to?

17. Which of the following are likely to happen in 2016?

18. What category will be impacted the most by mobile in the next 5 years?

19. Which segments are likely to get disintermediated the most by algorithms in the next 5 years?

20. Who was and will be the mobile person of the year?

As an incentive, we will be giving away 10 copies of our exclusive edition Mobile Future Forward 2015 book (Connected Intelligence Era: Golden Age of Mobile) that is a collection of essays and interviews from some of the most influential mobile executives on the future of mobile.

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Deadline: Dec 29th. Results will be released in early January.

Thanks and see you in 2016.

Kind regards,

Chetan Sharma

Mobile Future Forward | Standard Saver expires Friday | Registration closes next week September 18, 2015

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Greetings,

In 2013, Time Magazine said that Mobile Future Forward is one of the best and most important conferences on mobile. Folks in our community know why.

We are putting the final touches to preparations for our Mobile Future Forward Summit coming up in a few days. There are some outstanding leaders, inventors, legends, professors, investors, startups, visionaries, and doers from around the globe in the mix and we are preparing for an outstanding day of brainstorm that will have implications on your assumptions, product plans, and strategic direction of your vision. The IP quotient of MFF speakers is the highest of any such gathering in the world.

We will be presenting a lot of data to back up our assumptions about various views of the emerging landscape, there will be discussion around IoT, 5G, architectures, applications, vertical industries such as retail, commerce, health, transportation, travel, insurance, media, advertising, and others. We have a brilliant panel on how to transform data into revenues. Will dig deeper in cyber security, VR, payments, spectrum demand, and much more. We will focus on what a connected enterprise means? What are the expectations of a connected consumer? What are the new business models? And most importantly, the new revenue flows – where is the “real” money in the value chain?

One of our guests last year put it succinctly:

The caliber of participants is extraordinary. Mobile Future Forward is a data driven event, the team has put together so much hard to find factual data that is unrivaled anywhere in the industry in terms of building the foundation of facts for analysis. I normally don’t learn new things at events but at Mobile Future Forward, I did. – North American Leader – IoT and Mobile, IBM

We expect to sell out so please grab your seats today. Standard Saver expires this Friday (9/18) and registration closes next week.

Summit Partners: Our heartfelt thanks to our terrific summit partners who made it all possible: Ericsson, Neustar, Oracle Communications, Overture Networks, and Tata Communications.

The Mobile Future Forward team, our esteemed partners, our fantastic speakers and our engaged community are really looking forward to Sept 29th.

We hope you will join us in what is shaping up to be an exceptional gathering of the mobile minds.

Thanks and best wishes.

Chetan Sharma

NEW BOOK: Connected Intelligence – Reimagine Everything

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We are pleased to announce that our Mobile Future Forward Book for 2015 will be published and become available exclusively to Mobile Future Forward participants on Sept 29th. As is the tradition, the book has some brilliant essays from our speakers – the thought leaders and mobile industry senior executives, on trends, opportunities, innovations, and user experiences. More importantly, these thought-pieces highlight how some of the leading companies are gearing themselves to execute in the Connected Intelligence Era. The book provides a perfect platform for our day long brainstorm about what the next 5 years in mobile will look like. We have extraordinary speakers and am really looking forward to the discussions throughout the day.

The essays are:

1. The History and the Future of Connected Intelligence – Chetan Sharma, CEO, Chetan Sharma Consulting

2. The New Strategic Competitive Advantage: Connected Intelligence – Doug Suriano, SVP and GM, Oracle Communications

3. Staying Ahead of the Wave – Glenn Lurie, President and CEO, AT&T Mobility

4. 5G Era: When Networks Transform Everything – Hossein Moiin, CTO and EVP, Nokia Networks

5. 5G: The Past, Present, and Future of Mobile Industry Evolution – Chetan Sharma, CEO, Chetan Sharma Consulting

6. Connecting with the Connected Consumer – Raja Rajamannar, CMO, Mastercard

7. Securing the Future of Connected Cars  – Sarla Sharma, COO, Chetan Sharma Consulting

8. The Cell Phone Redefined – Martin Cooper, Chairman, Dyna LLC

9. Interoperability – The Essential Step to Realizing the IoT Vision  – Hank Skorny, SVP – IoT, Neustar

10. Mobile Patents Landscape: An In-depth Quantitative Analysis – Chetan Sharma, CEO, Chetan Sharma Consulting

11. The Future of Money – Vijay Shekhar Sharma, CEO and Founder, Paytm

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

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

Chetan Sharma

Mobile Future Forward: Reimagine Everything August 28, 2015

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Mobile Future Forward means business. We got so many deals done that it is a no brainer to attend again this year – CEO and founder, Mobile Startup

Mobile Future Forward connects a lot of high-level people with very progressive thinking and it is at the cutting edge of how technology is absorbed – MD, Leading Private Equity Firm

Mobile Future Forward is the most intellectual conference – CEO and founder, Connected Watch Company

Dear Friends,

Here is a pop quiz to end the week.

When was the first instance of what is today known as IoT recorded?

a) 1991

b) 1980

c) 1812

d) 1836

e) 1901

f) 1930

g) 1958

Each year represents a milestone in the history of Connected Intelligence. The advent of telegraph, radar, telephone, wireless paved the way for 200 years of innovation evolution. Inventors such as Schilling, Gauss, Weber, Morse, Bell, Bose, Marconi, Ericsson, Galvin, Cooper (as you know Marty is joining us at MFF this year), and scores of other extraordinary individuals saw what others couldn’t and changed the trajectory of human civilization. However, the first instance of connected things took place before any of these remarkable individuals came to the scene.

The correct answer is 1812.

If you picked the right answer, you just won an automatic entry into the CI Historian Hall of Fame.

The first use of data transmission was recorded by P.L. Shilling who reported that the Russians telemetered the successful firing of remotely activated mines to stem the French invaders during the war of 1812. After that the notion of connected devices was used quite extensively in wars, weather reports, space exploration, transportation, medicine, entertainment, and the like. The taxonomy changed as different breakthroughs were incorporated into connected devices. From Telemetering, we went to Telemetry to M2M to now IoT. This has set us up nicely for a an explosive “Connected Intelligence” age to reimagine everything, each minute task, every revenue flow, every industry. We will explore “The History and the Future of Connected Intelligence” in the Mobile Future Forward 2015 paper that comes out next week.

In the meantime, we are busy preparing for the summit in four weeks and we have some brilliant minds that will test your thinking and grow your appetite for more.

Registration (First Come, First Served)

Additionally, here are some of the highlights of what we will be discussing during our annual brainstorm:

Connected Intelligence and the evolution of media consumption

Media remains a core part of our society. The entertainment, education, sports, drama, movies, and news events keep us captivated but how does the media creation, delivery, and engagement evolve with the new set of tools.

· Robert Gelick, SVP and GM – Digital, CBSInteractive

· Sanjay Macwan, SVP and CTO of NBCUniversal Media Labs

Disruption is my middle name

Every company present at Mobile Future Forward is disrupting the markets in their own ways, some more fundamentally than others, some more dramatically than others. We will look at the disruption of traditional industries and creation of new ones.

· Sunil Daluvoy, Head of Business Development, Uber Everything

· Dr. João Barros, Founder & CEO, Veniam

· Ralph Derrickson, President and CEO, Carena

5G and the Future of the Network

The 5G discussion is gaining significant momentum at all levels. We will have folks who understand the technology, the standards, and the economics better than most.

· Hossein Moiin, EVP and CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

· Mark McDiarmid, VP, Radio Network Engineering, T-Mobile

· Bob Azzi, Executive Managing Partner, Argylegriffin

Leading the Connected Intelligence Era

At AT&T, Glenn Lurie saw the emergence of the 4th wave before many of his peers (some still don’t see it). Under his stewardship, AT&T has become a trusted partner and leader in many of the emerging areas such as connected car, enterprise services, IoT, digital home, etc. We will explore the opportunities, the learnings and what does it take to prepare a big company for the Connected Intelligence Era.

Connected CIOs

CIOs play a critical role in keeping their company ahead of the curve in terms of tools and technology. We will have CIOs from different industries address the challenges and the solutions needed to prepare the enterprise for the connected age.

· Dr. Tony Yen, MD, CMIO, EvergreenHealth

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

· Mark Showers, CIO and EVP, Reinsurance Group of America

· Mark Fernandes, Managing Director, Sierra Ventures

Incredible India

India’s tech sector is on fire. It is the fastest growing economy with many terrific unicorns driving excitement and real revenue. We will have the top two companies who will educate us on what’s working in mcommerce in India and why.

· Anand Chandrasekaran, Chief Product Officer, Snapdeal

· Vijay Shekhar Sharma, Founder and CEO, Paytm

Convergence of industries, platforms, and opportunities

The IT and Telecom industries have collided and no one understands this better than Oracle as they work with all of the top 100 IT and Telecom clients around the globe. Hear from the executive who runs the global communications business on what’s changing in the enterprise and the wireless world and why.

· Doug Suriano, SVP and GM, Oracle Communications

Funding the next unicorn in the Connected Intelligence Era

It requires a different kind of mindset to invest in the next unicorn that can reshape an industry or the ecosystem. Meet the VCs who have a keen eye on finding such companies

· Tim Chang, Managing Partner, Mayfield

· Lo Toney, Partner – Catalyst Fund, Comcast Ventures

· Bubba Murarka, Partner, DFJ

· Colin Greenspon, Managing Director, Mithril

We will have discussion around Man and Machine, Industrial IoT, Building blocks of Connected Intelligence, New Platforms and Tools, Security, Robotics, Vertical Industries, and a ton more. We will have startups that will blow your mind, projects from the giants that will surprise you, and technology break-throughs that will inspire you.

What will be the $ flows, where are the early opportunities and successes, what are the use cases? We will tackle them all at Mobile Future Forward on Sept 29th. We welcome you to join us in the discussions and contribute to the collective knowledge of our industry. Give us your one day, and we will give you the next 5 years in mobile.

A number of key industry partnerships and relationships are formed at Mobile Future Forward. Make sure you are not left behind.

We are excited to partner with the industry leaders and thank them for their ongoing support: Ericsson, Neustar, Oracle Communications, and Tata Communications.

· Glenn Lurie, President & CEO, AT&T Mobility

· Dr. Eric Topol, Chief Academic Officer, Scripps Health

· Rima Qureshi, Chief Strategy Officer, Ericsson

· Hank Skorny, SVP – IoT, Neustar

· Raja Rajamannar, CMO, Mastercard

· Sanjiv Ahuja, Chairman, Tillman Global Holdings

· Hossein Moiin, CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

· Josh Will, SVP – Mobile, Best Buy

· Tim Chang, Managing Partner, Mayfield

· Prof. Shyam Gollakota, University of Washington

· Mark Fernandes, Managing Director, Sierra Ventures

· Mark Showers, CIO and EVP, Reinsurance Group of America

· Doug Suriano, SVP and GM, Oracle Communications

· Vishal Gupta, Chief Products and IoT Officer, Silent Circle

· Marty Cooper, Chairman, Dyna

· Vijay Shekhar Sharma, Founder and CEO, Paytm

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

· Andrew Hopkins, Managing Director – IoT, Accenture

· Lo Toney, Partner – Catalyst Fund, Comcast Ventures

· Robert Gelick, SVP and GM – Digital, CBSInteractive

· Bob Azzi, Executive Managing Partner, Argylegriffin

· Anand Chandrasekaran, Chief Product Officer, Snapdeal

· Dr. Tony Yen, MD, CMIO, EvergreenHealth

· Sunil Daluvoy, Head of Business Development, Uber Everything

· Dr. João Barros, Founder & CEO, Veniam

· Sanjay Macwan, SVP and CTO of NBCUniversal Media Labs

· Mark McDiarmid, VP, Radio Network Engineering, T-Mobile

· Bubba Murarka, Partner, DFJ

· Colin Greenspon, Managing Director, Mithril

· Kelly Fitzsimmons, CEO and Founder, Harqen

· Sam Shawki, CEO and Founder, MagicCube

· Ralph Derrickson, President and CEO, Carena

.. more to come

We will be announcing new speakers and partners through the course of the summer and look forward to seeing you in September. If you are interested in partnering, please reach out at info@mobilefutureforward.com.

Thanks.

Chetan Sharma

Mobile Breakfast Series–5G–July 16th June 5, 2015

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Dear friends,

Hope you are enjoying the advent of summer.

For our next mobile breakfast series event, we will tackle one of the hottest topic in the industry – 5G.

LTE is here and now. What’s next?  The networking wizards of the industry will put their heads together to help define 5G. What features are essential? How will our understanding of the data consumption on the 4G networks help define 5G? How should we tackle video and signaling? How do we tackle IoT? What applications will motivate 5G? What does the timeline look like for 5G? Will 5G enable new business models? How are we going to have a sustainable spectrum strategy? Will 5G empower operators to justify the investments? This panel will take a look at the fundamental elements of 5G that will be a key layer for the Connected Intelligence Era.

Our guest speakers are:

Dr. Ron Marquardt, VP – Technology Innovation & Architecture, Sprint

Mark McDiarmid, VP – Radio Network Engineering, T-Mobile

Two of the best network engineers anywhere so am really glad to have them. 5G will impact everyone and every industry. Get an early glimpse into what’s coming.

Background Reading

Registration is open now

Portion of the proceeds will be donated to the Nepal Earthquake Relief Efforts.

Thanks and see you in July.

Regards,

Chetan

Ps. Don’t forget to save your seat for the fall Mobile Future Forward Summit. Early bird expires next week.

Mobile Future Forward 2015 Update June 4, 2015

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Greetings,

Trust your summer is going well. The connected intelligence ecosystem continues to expand with each passing day. From startups like Prosyst, Axeda, 2lemetry getting acquired to mobile operators and chip manufacturers building billion dollar IoT businesses to Google proposing Brillo and Weave, there is tremendous activity all around. On the consumer front, wearable revenue is expected to cross $5B for the first time. In the industrial sector, investments and cost-savings are even bigger.

Partners and speakers at Mobile Future Forward are key companies and executives who are shaping the connected intelligence journey. We are delighted to add more speakers to the roster (see below). At the summit, each topic gets a thorough deep-dive to explore the intricacies of opportunities and challenges. Participants leave with a clearer picture of where the technology world is headed and more importantly what should they do about it, who to partner with, and what to ignore as noise.

At Mobile Future Forward (now in its 6th year), we delve into the nuances of innovation that trigger seismic activity which shapes the future generation of experiences, applications and services. This unique executive summit is a true meeting of the great minds who go beyond the headlines and hype to examine the growth trajectory of the future. It is a daylong data-driven brainstorm designed to make you think. The experts and visionaries from around the globe will gather in Seattle on Sept 29th to explore the world of possibilities, envision the opportunities, and inspire the entrepreneurship spirit within us to achieve more, faster.

We welcome you to join us in the discussions and contribute to the collective knowledge of our industry.

Registration is open now (Early bird expires next week)

We are excited to partner with the industry leaders and thank them for their ongoing support: Ericsson and Neustar.

Mobile Future Forward is causing everyone to think about what’s the next big thing. – CEO, Global Mobile Operator

Mobile Future Forward is the most intellectual conference  – CEO and founder, Connected Watch Company

The caliber of participants is extraordinary. Mobile Future Forward is a data driven event, the team has put together so much hard to find factual data that is unrivaled anywhere in the industry in terms of building the foundation of facts for analysis. I normally don’t learn new things at events but at Mobile Future Forward, I did. – North American Leader – IoT and Mobile, IBM

Some of the confirmed industry leaders are:

· Glenn Lurie, President & CEO, AT&T Mobility

· Dr. Eric Topol, Chief Academic Officer, Scripps Health

· Faisal Masud, Chief Digital Officer, Staples

· Rima Qureshi, Chief Strategy Officer, Ericsson

· Hank Skorny, SVP – IoT, Neustar

· Raja Rajamannar, CMO, Mastercard

· Sanjiv Ahuja, Former CEO, Orange

· Hossein Moiin, CTO, Nokia Networks

· Craig Moffett, Partner, MoffettNathanson

· Prof. Shyam Gollakota, University of Washington

· Tim Chang, Managing Partner, Mayfield

· Josh Will, SVP – Mobile, Best Buy

.. more to come

We will be announcing new speakers and partners through the course of the summer and look forward to seeing you in September. If you are interested in partnering, please reach out at info@mobilefutureforward.com.

Chetan Sharma

CEO, Chetan Sharma Consulting

http://www.chetansharma.com

US Mobile Market Update – Q1 2015 May 18, 2015

Posted by chetan in : 4G,4th Wave,5G,AORTA,ARPU,Chetan Sharma Consulting,Connected Devices,Connected Intelligence Era,IoE,IoT,LTE,Mobile 2015,Mobile Future Forward,Tablets,The Golden Age of Mobile,US Wireless Market,Wearables,Wireless Value Chain,Worldwide Wireless Market , add a comment

US Mobile Market Update – Q1 2015

http://www.chetansharma.com/usmarketupdateq12015.htm

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Summary

The US mobile data services revenue grew 4% Q/Q and 15% Y/Y. The overall services revenue declined 1%. The device revenue for the operators grew by 41% allowed the overall service revenues to grow 5% Y/Y.

We are forecasting that the mobile data service revenues will increase by 22% to $132 Billion in 2015. Verizon will become the first operator to generate more than $50B from data services in 2015.

After acquiring lusacell and Nextel Mexico AT&T became the biggest North American operator with over 136 million subs.

The average mobile data consumption (cellular) is approximately 2.5GB/mo. In the US, it took roughly 20 years to reach the 1GB/user/mo mark. However, the second GB mark has been reached in less than 4 quarters. An entire year’s worth of mobile data traffic in 2007 is now reached in less than 75 hours.

From 2010 to 2013, the data pricing declined by only single digits YoY. However, in 2014, the data pricing has plummeted by 77%. In Q1 2015, the data pricing stayed pretty steady.

The intense competition amongst the operators meant a 6% rise in OPEX QoQ and a 12% decline in CAPEX YoY. The income declined 4% while EBITDA grew modestly at 2%.

Smartphone penetration increased to 76% and roughly 95% of the devices sold now are smartphones.

4th wave services continue to grow at a very past face around the globe. At least 37 companies generated a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

The difference between Sprint and T-Mobile number of subs is just 300K subs now – the narrowest it has ever been. Like we suggested mid-last year, T-Mobile is likely to become the number three operator. This is more or less just a symbolic event with the transfer of bragging rights. Overall, churn was low for all operators in Q1 2015.

T-Mobile accounted for over 40% of the overall net-adds for the year with AT&T and Sprint coming in second at 26%. Verizon slipped to a distant fourth with only 8%.

Operator’s non-phone net-adds were 4 times that of the phone net-adds, highest it has ever been in the history of the industry.

M2M+Connected car is a billion dollar revenue stream for AT&T. M2M+Telematics will become a billion dollar stream for Verizon by 2016.

In our 4th wave series of papers, we had postulated for years that the 4th wave revenues will become bigger than any of the previous curves. This finally happened in 2014 in the US market with the revenues from the 4th wave applications and services built on top of the IP access layer surpassed both voice and data revenues.

Apple Watch – New Interaction Models

Apple is never the first one to introduce a new consumer gadget but it is generally the first to make it work for the market so allies and enemies are all eager for Apple to come in and create awareness. For me, the exciting part wasn’t the watch itself though it clearly the best smartwatch available in the market but the new interaction models it introduced. The reincarnation of Morse code in the language of vibrations and heartbeats. The splitting of screen on two different computers on the body is quite fascinating and has design implications for the developers. It will take time for us (as consumers and developers) to understand and absorb the advantages of such a model. The transmission of signals from the body is enormously powerful in creating the preventive care culture around the globe. The story on wearables is just starting out.

Q1 2015 – 4th wave in action

For a casual observer of the industry, Verizon’s acquisition might have come as a surprise but for the students of the 4th wave, it was normal course of action.  In my talks, I often say that for service providers to compete with the OTTs, they have to become OTTs themselves. One could argue if AOL was the right company for this strategy but large operators are opening up their checkbooks to do cross-domain acquisitions. AOL brings a new billion dollar revenue stream however it doesn’t solve the basic fragmentation problem that operators have. They can’t effectively compete with Google and/or Facebook without covering the entire market. Without domination (in market share) or collaboration, the opportunity will remain small and might even vanish in due time.

As we mentioned earlier this year, globally, 37 companies generated (not valuation) a billion dollar or more in revenue from 4th wave services in 2014 – a 311% jump from 2012.

Unicorns at incumbents

Tech press and the startup world is infatuated with unicorns. The billion dollar is a magical marker that inspires the ecosystem to be in the elite club but what about when a new unicorn stream is created at an incumbent? It rarely makes waves. At a 100+ year old incumbent, even less so. AT&T has been lighting up connected cars faster than any other mobile operator in the world right now. While 3.5M connected cars might not instill excitement, one must consider the replacement cycles of automobiles which is several times that of a smartphone.

Our estimates suggest that the connected car segment will become a billion dollar business for AT&T by 2016. The M2M+Connected Car revenue stream is already a billion dollar business for AT&T. Verizon is also slowly getting there. Their M2M+Telematics revenue stream should reach an annualized revenue stream of over a billion dollars by 2016. Some operators in Europe are also making inroads into the new connected devices revenue streams. Similarly, the likes of Microsoft and Google have created new billion dollar revenue streams in mobile. As a separate entity, these will be decacorns but don’t get appreciated when residing with the parent company.

Google Fi – Google Fiber for Wireless

When Google-Fi was announced, there was plenty of media frenzy around Google going after the operators. Folks who wrote such articles don’t understand the business of either Google or the operators. Google is a brilliant strategist which does some projects to push its strategy in the ecosystem. The goal is generally not a new revenue stream but twisting the value-chain enough to serve its purpose long-term.

However, there are couple of direct and subtle signals that Google did send to the markets. First, there are some technical tricks that Google was able to pull off to make WiFi/Cellular handoffs to work. Second, and perhaps more important is that the control point moved from the network to the device which at scale can be the biggest disruption the mobile industry has ever seen. It is not easy to pull off given the interdependency of OEMs to the operators. But sometime in the future, it is not hard to envision that for every session, the device (and associated cloud infrastructure) initiates the auction amongst the available networks and picks one based on performance, pricing, revenue share, and other parameters. That day is not here yet but service providers should start planning for this scenario.

WiFi-first network has good potential and we will see many of them pop up around the globe but getting scale is the biggest question mark in such endeavors (beyond some technical issues of seamless interop).

One should also remember that while WiFi usage in the US is 3x that of cellular usage, the use of WiFi hasn’t really slowed down the cellular data growth one bit. They both are growing at approximately 100% Y/Y.

Post-PC – Apple has no peer

There are has been a lot of debate around the PC and Post-PC worlds. Apple has benefited from the transition to the Post-PC universe like no other company. Its Post-PC revenue in Q1 was four times the Post-PC revenue of Google, Microsoft, Facebook, and Amazon combined. Largely due to the iPhone, Apple has been able to carve out a dominant space on the current wave of computing.

Service provider M&A

When Comcast initially announced the merger with Time Warner, it looked like a slam dunk but it was swiftly rebuffed by the regulators. This sets up an interesting 18 months for the US market. Unless there is a change in power (democrats to republicans), the big mergers in the same domain are off the table. So, how do existing behemoths grow? They start to look overseas (e.g. AT&T acquiring Mexican operators), look sideways (e.g. AT&T acquiring DirectTV) or look upwards (e.g. Verizon acquiring AOL). There are still a number of questions posed to the likes Comcast, Time Warner, Dish, T-Mobile and Sprint. Will this finally force Comcast to be a more active mobile player by acquiring one of the two smaller operators? Will the regulators allow such a move? Is Sprint back in the equation? How anxious is Deutsche Telecom to offload its US assets? How will Dish use its spectrum assets? We might see all these questions answered in the next 18 months or not.

Net-Neutrality and Zero-Rating Debates

In the tech world few things ignite the discussion with religious fervor as the net-neutrality debates. From Washington DC to New Delhi, from Brussels to Santiago, net-neutrality and zero-rating have inflamed passions. Most of the times those fighting on either sides have no clue about the issues at hand and what are they fighting for. Ask a protester on the street about the intricacies of net-neutrality and you will get blank looks or confused answers. Both issues boil down to “transparency” and “control” – who gets to decide what and what are they going to disclose. The answer to many of these debates is fairly simple – ensure there is enough competition and put the (granular) “control” and the “responsibility” in the hands of the customer for e.g. they should decide which apps should make it into the “Zero Rating” club for them. The problem goes away at least in principle.

The Upcoming 5G wars?

I started my career when 1G was all the rage. My first 4G project was back in 2002. By some measures, we are already behind on the 5G discussions. In general, it takes 7-10 years before the standards are finalized and then the network technology lasts for approximately 20 years before a market moves onto the next generation of technology. US led in the growth of 1G (AMPS, TACS) followed by Europe on 2G (GSM, CDMA). Japan took the leadership role with 3G (WCDMA, EVDO) and US wrestled it back on 4G (LTE). Japan and EU are determined to lead on 5G and have been making very public statements and R&D investments about their ambitions on 5G. Japan of course has a very clear goal of having 5G by Tokyo Olympics in 2020. Am sure some operator(s) somewhere will jump the gun and start calling LTE-A+ as 5G around 2017-18 or sooner. You can expect a lot of activities both in public and private on 5G as companies and governments try to figure out a way to claim the 5G leadership mantle.

We have summarized our thoughts on 5G in this paper – 5G: The past, present, and future of the mobile industry evolution. I have been giving a number of talks on 5G in North America and Europe and many of these will be made public in due course.

What to expect in the coming months?

2014 was a tremendous year for the mobile as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. 2015 promises to be an exciting year for the industry as well.

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

The next 10 years will generate almost 1000 Trillion dollars in global GDP, which is 60% more than the last 10 years. What will be significant is how the “Connected Intelligence” built using networks, sensors, and software is going to transform every industry, every nation. We will covering the future of the mobile industry in-depth at our Mobile Future Forward summit this fall on Sept 29th.

Against this backdrop, the analysis of the Q1 2015 US wireless data market is:

Service Revenues

· The US mobile data services revenues in Q1 2015 increased 3% and reached $30B.

· After crossing the $100B in data revenues last year, the US market is set for explosive growth and is likely to cross $130B in data revenues in 2015.

· Verizon and AT&T dominated the quarter accounting for 70% of the mobile data services revenue and had 68% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q1 2015. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 2.71%. 

· Data contribution to the overall revenues is now at 62%.

· The postpaid ARPU continues to decline for all operators with all but Verizon suffering double digit YoY losses.

Subscribers

· The US market had 4.6M net-adds. Probably for the first time, Verizon finished last in terms of net-adds for the quarter. T-Mobile led with 1.8M net-adds mostly postpaid.

· T-Mobile added almost as many postpaid subs as rest of the three operators combined.

· Connected devices (excluding tablets) had the best net-add performance followed by tablets.

· T-Mobile led in the phone category while remaining three operators added more than 1M non-phone customers.

Shared Data Plans

· Shared data plans launched by Verizon and AT&T have been quite successful. The attachment rates have increased tremendously over the course of 2013-14 with more consumers opting for cellular tablets and connected devices. 70% of postpaid accounts at AT&T are now on shared plans.

· Some more granular data plans for tablets have also spurred interest as the cellular broadband is becoming available on demand vs. expensive on premise Wi-Fi solutions.

· 50% of AT&T’s postpaid accounts are on 10GB+ plans.

4th Wave Progress

· The number of players making $250M/quarter on mobile continues to increase rapidly and these aren’t your traditional wireless players. For example, Mobile is now contributing 70% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 89% in mobile (of the total advertising revenue) up from 60% in 2013. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: “Mobile 4th Wave: Evolution of the Next Trillion Dollars”)

· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.

· Verizon reported $150 million revenue from M2M and Telematics. At the current run-rate, this will be a billion dollar business by 2016.

· AT&T reported 684K net-adds on the connected car platform. We estimate that connected car will become a billion dollar revenue stream for AT&T in 2015. Connected cars accounted for 62% of the connected devices for AT&T.

Connected Devices

· Connected devices (non-phones) accounted for almost 52% of the net-adds in Q4 2014. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.

· For AT&T, Connected cars started to form a significant base of the connected devices segment with 68% of the new connections in the segment coming from cars.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 95% of the devices sold in Q1 2015. The feature phone category is practically becoming extinct in the US market.

· The smartphone penetration in the US is now at 76%.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 71M making it the #2 LTE operator behind China Mobile which has more than twice LTE subs. Other three operators are also deep into their LTE deployments. Verizon reported that 86% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in Aug 2015.

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

Announcing Mobile Future Forward 2015 May 13, 2015

Posted by chetan in : 4th Wave,5G,Connected Intelligence Era,Mobile Future Forward,The Golden Age of Mobile,US Wireless Market,Worldwide Wireless Market , add a comment

Dear friends,

The next 10 years will generate almost 1000 Trillion dollars in global GDP, which is 60% more than the last 10 years. What will be significant is how the “Connected Intelligence” built using networks, sensors, and software is going to transform every industry, every nation. At Mobile Future Forward (now in its 6th year), we delve into the nuances of innovation that trigger seismic activity which shapes the future generation of experiences, applications and services. The unique executive summit is a true meeting of the great minds who go beyond the headlines and hype to examine the growth trajectory of the future. It is a daylong data-driven brainstorm designed to make you think. The experts and visionaries from around the globe will gather in Seattle on Sept 29th to explore the world of possibilities, envision the opportunities, and inspire the entrepreneurship spirit within us to achieve more, faster.

We welcome you to join us in the discussions and contribute to the collective knowledge of our industry.

Registration is open now.

We are excited to partner with the industry leaders and thank them for their ongoing support: Ericsson and Neustar.

 

Mobile Future Forward is causing everyone to think about what’s the next big thing. – CEO, Global Mobile Operator

Mobile Future Forward is the most intellectual conference  – CEO and founder, Connected Watch Company

The caliber of participants is extraordinary. Mobile Future Forward is a data driven event, the team has put together so much hard to find factual data that is unrivaled anywhere in the industry in terms of building the foundation of facts for analysis. I normally don’t learn new things at events but at Mobile Future Forward, I did. – North American Leader – IoT and Mobile, IBM

Some of the confirmed industry leaders are:

· Glenn Lurie, President & CEO, AT&T Mobility

· Dr. Eric Topol, Chief Academic Officer, Scripps Health

· Faisal Masud, Chief Digital Officer, Staples

· Rima Qureshi, Chief Strategy Officer, Ericsson

· Hank Skorny, SVP – IoT, Neustar

· Raja Rajamannar, CMO, Mastercard

· Sanjiv Ahuja, Former CEO, Orange

· Hossein Moiin, CTO, Nokia Networks

.. more to come

We will be announcing new speakers and partners through the course of the summer and look forward to seeing you in September. If you are interested in partnering, please reach out at info@mobilefutureforward.com.

Thanks and have a great spring.

Chetan Sharma

Webinar: Empowering the Digital Telco Transformation May 12, 2015

Posted by chetan in : US Wireless Market , add a comment

Oracle and Chetan Sharma Consulting will be hosting a webinar on how Convergent Charging and Policy can enable a telecom service provider to become a more digital player in the ecosystem. It will coincide with the release of a paper I have been working on.

Convergent Charging and Policy – Empowering the Digital Telco Transformation

The mobile industry is transforming the global markets in fundamental ways. The communications and the IT industries are merging. Digital is changing the expectations of both the consumers as well as the enterprises. The digital economy is providing an opportunity to service providers to transform the business processes and become a digital platform where new applications and services can blossom. The massive growth in connected devices and applications means we need a more robust framework for policy and charging.
This webinar will discuss the changing service provider landscape and the tools required to manage this transition.

Chetan Sharma, CEO, Chetan Sharma Consulting

Richard Hallett, Senior Director, Product Marketing, Oracle Communications

When: May 27 2015 7:30 – 8:30am PDT

Registration

Vancouver Mobile Breakfast Series Recap: Mobile Commerce and Payments April 16, 2015

Posted by chetan in : 4th Wave,Chetan Sharma Consulting,Mobile 2015,Mobile Breakfast Series,Mobile Commerce,Mobile Future Forward,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

We hosted our second event of the year in Vancouver (our first in Canada) earlier this week and had a great time. I have been going to Vancouver for 20+ years and have been thinking about doing something north of the border. It is also one of my favorite cities in the world. By strange coincidence, all 3 of our MBS cities outside Seattle have been Olympic cities – Atlanta, London, and now Vancouver. I guess we will have to go to Beijing or Seoul next.

With the help of my good friend Pankaj Agarwal and his team at Optimus Information and Wavefront, we were able to plan out a sold-out event. We continued the theme of Mobile Commerce and Payments given that it is such a hot topic right now and brought together three startup CEOs who are right in the middle of the action.

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The mobile ecosystem is evolving exactly we envisioned it in our 4th wave paper in 2012. The 4th wave is becoming the most dominant portion of the revenue stream as was witnessed from the revenue results in 2014 in the US.

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As I have said before in various public forums, one of the metrics I use to track progress in any segment is the number of $1B businesses being created each year. In 2012, there were only 9 companies mostly large enterprises like AT&T, Apple, Google, and Amazon that had > $1B digital businesses. However, in 2014, this number jumped to 37 with several new entrants – from known brands like Twitter, Walmart, and Xiaomi but several companies unknown to the western world like WeChat, FlipKart, Otto Group, GungHo, Suning Appliance, and others. While most of the concentration of digital wealth in the US, China is emerging very strongly as a player to reckon with. In fact, how China and US companies interact and play will perhaps define the next 10 years. While other economies like India, EU will play a role, I find China and US to be the most fascinating.

The speakers were:

Sam Gadodia, CEO & Co-Founder, Lotusflare

Sam co-founded LotusFlare with couple of his colleagues from Facebook with the objective to make mobile internet more accessible across the globe. Prior to LotusFlare, Sam worked at facebook and worked with Mobile Operators’ on SMS, Zero rating and other initiatives to drive growth on FB mobile app. Before this, Sam built and scaled TeleSign, one of the leaders in mobile authentication and verification space. Sam also co-founded and successfully built Global eProcure, a leading SaaS based SCM analytics Company with operation spanning from North America to Asia. While at Global eProcure, he received the Stevie award and was named by American Business Awards as Best Operation Executive.

Michael Gokturk, CEO & Founder, Payfirma

Michael Gokturk is the kind of entrepreneur who takes a company public in 3 years then launches a new business 3 days later. In 2011, Michael founded Payfirma with the goal of disrupting the highly competitive payments market by creating a solution to merge online, in-store and mobile payments. He has since grown Payfirma from the first company to introduce mobile payments in Canada into one of the top multichannel payment platforms. Before Payfirma, Michael founded and was the CEO of Versapay. A payments company specializing in point of sale systems and electronic bill presentment and payment (EBPP).

Ajay Hans, CEO and Co-Founder, Mobetize

Ajay Hans, Founder of Alligato Inc. and Co-Founder of Mobetize Corp brings over 15 years of diverse experience in the development, marketing and implementation of complex billing and payment related software technologies dedicated for MNO’s and MVNO’s. Ajay has overseen Mobetizes’ strategic vision and tactical execution since inception. He has held senior executive positions with leading telecom software technology companies where he successfully implemented solutions for brands including SaskTel, Sprint and AT&T.

Chetan Sharma, CEO and Founder, Chetan Sharma Consulting (moderator)

The three panelists are involved in advertising, payments, and commerce working with all parts of the value chain – banks, operators, startups, credit card companies, retailers, etc. We had a very interesting discussion that covered a breadth of topics.

The salient points of the session were:

In summary, mobile commerce remains a hot area and we are approaching a tipping point wherein mobile commerce dominates ecommerce in all parts of the world. I really enjoyed the moderation and questions from the audience. My thanks to Optimus Information and Wavefront for being our partners for the event. and thanks to the Vancouver mobile community for embracing us with open arms.

Our next event is going to be in our annual mobile summit – Mobile Future Forward on Sept 29th in Seattle. Stay tuned for announcements and details.

Mobile Patents Landscape – An In-Depth Quantitative Analysis – 4th Ed – 2015 April 1, 2015

Posted by chetan in : 4G,5G,Intellectual Property,Mobile Patents,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

Mobile Patents Landscape 2015

– Fourth Edition

http://www.chetansharma.com/MobilePatentsLandscape_2015.htm

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Download

Highlights

· The study looked at over 7 million patents granted in the US and Europe. The analysis focused on the patents granted to 65 technology companies in the mobile space.

· The gap between the number of mobile patents granted in the US vs. Europe widened again. US now accounts for roughly 79% of the mobile patents granted in the two jurisdictions.

· US companies comprise of 48% of the top 50 list followed by Japan, China, and South Korea.

· By the end of 2014, over 26% of all granted patents in the US were mobile related. In 2001, the percentage was 5%. In Europe, roughly 10% of the patents granted were mobile related.

· IBM recaptured its top spot from Samsung to become the leader in mobile patents granted in 2014 in the US while Samsung dominated Europe. Samsung still dominates the overall rankings. Samsung was followed by IBM, Microsoft, Sony, Ericsson, Qualcomm, Nokia, Google, Alcatel-Lucent, and Blackbery for the top 10 companies by mobile patent grants in 2014.

· Google was number 5 in mobile patent grants in 2014. Apple was behind at number 8.

· Despite dwindling market fortunes, Blackberry continues a healthy patents grant rate and appears in several top 10 categories.

· US Mobile Operators dominate the top 10 operator rankings: Patent top 10 Rankings: AT&T, NTT DoCoMo, Verizon, Sprint, British Telecom, Telecom Italia, T-Mobile, Swisscom, Orange, and SK Telecom.

· Mobile Infrastructure Patent top 10 Rankings: Samsung, Ericsson, Qualcomm, Alcatel-Lucent, LG, Intel, NEC, Siemens, Broadcom, and HP.

· Mobile OEM Patent top 10 Rankings: Samsung, Microsoft, Sony, Google, Blackberry, LG, Fujitsu, Panasonic, NEC, and Siemens.

· The top 5 categories for patents grants in the US for 2014 were Digital Multiplexing, Telecommunications, Digital Processing – Data Transfer, Digital Processing – Financial, and Computer Graphics.

· The top 10 filers of mobile patents in the US were Samsung, IBM, Qualcomm, Microsoft, Intel, Google, Apple, LG, Sony, and Ericsson. It was the second time that Samsung, Microsoft, Google and Apple showed up in the top 10 patent filers list together.

· Some of the Chinese companies started to increase their filings substantially. Notable amongst them are: Alibaba, Xiaomi, Mediatek, and Huawei.

· Huawei appeared in the top 10 rankings in Europe for the first time.

· Information security category saw the highest jump in patent filings in 2014.

Introduction

The idea of Intellectual Property (IP) is as old as the debates Aristotle used to have about philosophy and society. All mature civilizations and societies come to appreciate the value in preserving the IP created by its citizen and give the rights to the benefits that such IP creates. IP is enshrined in laws and principles of doing trade and business. It is also how nations outmuscle each other over long periods of time to become dominant economies.

In a knowledge economy, the very competitiveness and durability of the nation’s prosperity depends on how well the framework of IP and patents works in the country and the steps it takes to avoid theft and misuse of the laws while enforcing the rules and regulations on the books. IP has been an integral part of the economic engine of the western world for many decades if not centuries. Over the past two decades, nations and corporations have competed on the creation, funding, execution, and protection of the new ideas.

Mobile is first computing based technology that will encompass the entire human race and then some. In 2014, the number of cellular connections went past the human population. Additionally, the rise of IoT and Wi-Fi-led usage has meant that the use-cases for mobile and the impact it can have across verticals have exploded. Mobile has outgrown its own universe and now expanded to segments such as health, industrial, retail, education, agriculture, and more. As such, the intellectual property being generated has become very mobile centric. In 2014, the US crossed a major milestone, more than a quarter of the overall patents that were granted had something to do with mobile.

Mobile expertise and by extension the IP is being developed by more companies around the globe beyond the traditional ecosystem players such as Samsung, IBM, Microsoft, Qualcomm, and Ericsson. Billion dollar mobile companies are emerging from India, China, and Europe. Africa and Latin America are not far behind. As expected, mobile has removed the artificial boundaries of time and distance and empowered developers across regions. Mobile is also leveling the playing field, increasing the opportunities for entrepreneurs far and wide. A dreamer in Nairobi has as good a shot at success as anyone else in the west.

All the innovation and economic activity has also increased the patent activity around the world. While US remains the leader in terms of overall quality and quantity. China and its companies are starting to flex some muscles on the big stage. In 2014, China went past the European leaders Germany, France to become the 3rdplayer behind US and Japan to file the number of patent applications. While US, Europe, and Japan remain the overall leaders in patents both in quantity and quality; China’s is at the top in terms of growth rate. Amongst the top 3 filers, Huawei and ZTE are from China (Qualcomm was the third player on the list).

According to the US Patent Office (USPTO), in 2014, the number of patents granted grew over 8% by the end of 2014 for the same time period. The numbers of foreign filings are now in the majority for both the applications filed as well as the patents granted.

As we look into the mobile related patents, the growth is much more striking. The number of mobile related patents that were granted by the USPTO and the EPO increased significantly over the course of last decade. The US market saw a 440% increase while the European market saw a 71% increase in mobile related patent grants.

Another interesting fact is that in 2014, for the first time, over a quarter of all patents granted in the US were mobile related. This grew from around 2% in 1991 and 5% in 2001. In Europe, roughly 9% of the patents granted are now related to mobile. Europe saw a decline of 4% in mobile patents in contrast of 16% growth in the US market.

It is also interesting to note that a number of new Asian companies like Mediatek, Alibaba, and Xiaomi have stepped up their IP efforts and substantially increased the filings in the US.

Chetan Sharma Consulting analyzed over 7 million patents granted by the USPTO and EPO over the last two decades to understand how mobile has become a key enabler for all technology companies. Furthermore, we looked at patent granted to the top 65 technology companies who are active in the mobile space to understand their relative strengths and weaknesses in the mobile patents landscape. This study is fourth in the series that does an in-depth quantitative analysis of the mobile patents landscape.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in May 2015.

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

Mobile World Congress 2015 Recap March 9, 2015

Posted by chetan in : 4th Wave,5G,Connected Intelligence Era,Emerging Markets,Enterprise Mobility,European Wireless Market,Mobile World Congress,The Golden Age of Mobile,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , add a comment

Mobile World Congress 2015 Recap

Barcelona hosted its 10th edition of MWC last week. The beautiful weather in a lovely city provided the perfect setup to pontificate about the future direction of the mobile industry. This note presents the summary of the discussions and the observations from the show.

For a second year in a row, Mark Zuckerberg was the highlight of the show. The crowd and the buzz for his panel was probably more than for rest of the keynotes combined. Last year, Mark introduced the project, this year it was about the progress report. The operators look at Internet players with deep suspicion. The goal of getting more folks online is a shared objective in the industry but there is tension around the business model and the mechanics. Executives from Telenor, Bharti Airtel, and Millicom shared their experience (mostly positive) and the impact it has had on their data growth and revenues. All were cautiously optimistic.

One thing that will help the operators is to look at Internet players a bit differently and it requires a mental shift. Just like operators work with and compete against other service providers, they can find common grounds for collaboration in some areas and in other segments they will of course compete but having a one-track mind will detrimental to their progress. On the flip side, Internet players should appreciate the competitive dynamics in the market, the financial metrics that drives the business and the work to deliver a more customized partnership – something the Internet players are not that accustomed to. The Internet segment does a better job of managing coopetition than the telecom sector.

Probably the second most watched keynote was from Sundar Pichai. Rumors of a Google MVNO have been around for many months. The plans to launch the “nexus of networks” were discussed. Additionally, Sundar discussed how project Loon and project Titan could be used to provide the Internet backbone. The connectivity projects are nice science experiments at this stage but the MVNO project could have some implications depending on how far Google wants to take it. Will it be the Rokr project for Google or something more? Only time will tell.

Just like it has been for many years, Apple was at the center of many discussions at the show. In carefully orchestrated leaks, there was a steady flow of the news on Apple Watch. It will set the competitive bar for the segment and help everyone figure out their place in the market. Folks were deeply divided on the likelihood of success. Battery life might end up being the key-determining factor. There was also a lot of discussion around the news reports on Apple Pay fraud issues.

For the first 3 generations, technical guys were in charge of the wireless technology Gs. With 4G, the marketing department took over and it looks like they are not ready to relinquish their position anytime soon. The hype around 5G was at its highest at the show. In the last 3 months, every major entity has had something to say about what 5G should be and what will it enable. There is also a tussle for who gets to lead the industry on 5G.

Europe is anxious to regain the mantle it lost after GSM. But there is a big problem. The 4G penetration in Europe won’t even get past 50% until 2020, the investment wouldn’t have been recovered by then. Someone bring out the econ 101 book, please! It seems like 5G is going to revolve around mmWave spectrum and technologies (very few see a new interface coming) but this has massive capex and opex implications in addition to the practical implications of millions of nodes to deliver the desired throughput. That doesn’t mean they shouldn’t continue to work on pushing the boundaries and take leadership position in developing the standards and use cases. However, from a deployment point of view, we need a filter of reality.

Also, the industry is getting ahead of itself. Keep the marketing guys in the barn, settle on the definition, the how, the use cases, and then figure out the technical and marketing roadmap. (there was plenty of talk about pre-5G as well). Of course, one can achieve 10 Gbps today but mostly under impractical configurations. What’s also troubling is that the Internet players are not part of the standards process. Matt Grob, CTO of Qualcomm responding to a question about the timeline for getting 5M 5G subs suggested we might get there by 2022. As a reference, 4G reached the 5M mark in 2010. KT CEO gave a delightful presentation of 5G optimism. A number of position papers were released – fun reading for geeks if you are into these long reads. We will be releasing our own thoughts on 5G later this month expanding on piece we explored earlier this year.

All eyes were on FCC Chairman Wheeler after the landmark ruling last month. There was no new news per say but the topic was hotly discussed and debated in public and private forums. While the journey is just starting, the world is looking to see how things will end-up. As I mentioned to the WSJ, no country wants to be viewed backwards and whatever happens in the US market will have implications worldwide over the next decade and beyond. I also get the sense that we don’t quite understand the impact of unintended consequences. For e.g. there are several use cases like transportation, medical, financial, etc. where prioritization is required. Voice has been prioritized for ages and will be in the future. 5G will have different prioritization schemes depending on the radio, the applications, and the requirements. Ideally, you want the application to request a prioritization level. It is hard to justify that a moisture sensor in a sprinkler should get the same prioritization as the x-ray going over the wires. Prioritization exists in all forms of access and embedded in the way of life for good reasons. It is not quite clear what will be allowed and what will be dealt on a case-by-case basis. Maybe all this is taken care of in the ruling. Hopefully, the 300+ page tome will answer some of these questions.

The best phone launch belonged to Samsung. Learning from past mistakes, it was a no-nonsense presentation. The S6 edge looks sleek and beautiful, the camera is remarkable. However, for the purists the lack of the SD card and the removable battery is troubling. The price point for the highest end might go past $1K. It is unlikely that S6 will steal share away from i6 but it will probably take it away from other Android OEMs and will see a nice revenue bump in the 2nd half of the year. It might help stabilize the severe decline in profits from 2014. Samsung Pay puts Android on the mobile payments map as well. There were device launches from Nokia, HTC, and others but nothing captured the attention of the show. Orange/Mozilla came out with a unique offering of a 35 Euro package that includes a decent smartphone, 6 month of 500MB/mo, unlimited voice and messaging. It will be launched in the African markets to get more people transition over to smartphones and data services.

The current money in IoT is clearly in the industrial projects. IoT is a great enabler to re-architect business processes, revenue streams, business models, companies, and industries. While industrial IoT didn’t make a splash, in conversations with folks, there are all sorts of projects being done around the globe and there is serious money being spent. One project can sometimes account for the entire consumer IoT revenue stream. Accenture/Intel had some cool demonstrations to tell the story. Lot of work is going into IoT driven factories, buildings, and the supply-chain.

Consumer IoT didn’t make a big splash like it did at CES in January. There were no drones, robots, or humanoids running around. A number of OEMs came out with watches and sensor bands – nothing that will take the industry by storm. Huawei probably gets the vote for the best watch launch at MWC. In general, for the current stream of connected watches, the technical specs have triumphed the fashion specs. Can Apple change the equation this year?

In case, it wasn’t clear to some – AT&T is undergoing a significant transformation into becoming an international solutions provider – it was apparent from the show. In the European show, AT&T had the best presence amongst its peers. European operator landscape is dominated by the quad-play moves and consolidation. As usual, the Koreans and the Japanese impress with their quirky art of storytelling. Using a robot to emphasize low 5G latency by SK Telecom was my favorite. AT&T has been signing up the most number of connected car contracts and the numbers are starting to impact the financials in a material way. A select group of the operators are showing meaningful revenues from the 4th wave.

VR helps tell a good story. Several companies used VR headsets (mostly Oculus and Samsung) to have attendees experience their product, services or vision. Ericsson had a cool setup to remotely controlled excavator thousands of miles away. Will VR enter the boardrooms? Quite likely.

After a slow start, LTE-U is gaining quite a bit of traction. Qualcomm’s efforts are bearing fruit and we should be seeing some deployments in 2016. The Wi-Fi ecosystem has expressed concerns but nothing that can’t be overcome. Most of tier-1 operators in the western markets have some form of SDN/NFV initiatives in place. AT&T’s Donovan announced that they have already 5% coverage and are on track to reach 75% by 2020.

Security and privacy continue to be hot topic in the post-snowden era especially in Europe. Regulations are also tightening up. EU wants much stronger privacy regulations. European operators want harmonization of privacy regulation between operators and the Internet players. IoT multiplies the attack nodes and it has serious implications for both enterprise and consumer domains.

Few M&A transactions during the week got the attention of the industry. The biggest one was from Freescale and NXP who announced a mammoth $40B merger. Then Mavenir got acquired by Mitel for $560M. HP acquired Aruba to boost the Wi-Fi business and paid a premium at $3B.

Other items of interest were 3D biometric fingerprints (Qualcomm), autonomous cars in 2016 (Nissan), zero rating (Wikipedia), B2B $1B revenues (Ooredoo), sub-$50 devices (Android, Mozilla), Windows 10 (Microsoft), 100M mobile money users (GSMA), 5G Holograms (KT), Smart Home Air Service (Conway), Lighting as a Service (Philips), Resiliency and Fault-Tolerant SDN/NFV layer (Stratus), 6G (DoCoMo), Runcible (Monohm), Selfie’d Journalists (they were everywhere), Wireless charging furniture (Ikea), MoDe Electric Bike (Ford), Connected carry-on (Bluesmart), and more

Best launch – Samsung S6. Well executed. Generated lot of interest from media and partners.

Best booth – Ericsson. They have really mastered the art of storytelling through physical and digital assets.

Best parties – Siris Capital and Qualcomm

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward.

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

US Mobile Market Update Q4 2014 and 2014 February 23, 2015

Posted by chetan in : 4G,4th Wave,5G,AORTA,ARPU,Chetan Sharma Consulting,Connected Devices,Connected Intelligence Era,Devices,European Wireless Market,Fourth Wave,Internet of Things,IoE,IoT,LTE,Mobile Applications,Mobile Cloud Computing,Mobile Devices,Mobile Future Forward,Technology Cycles,The Golden Age of Mobile,US Wireless Market,Wi-Fi,Wireless Value Chain,Worldwide Wireless Market , add a comment

US Mobile Market Update Q4 2014 and 2014

 

Summary

The US mobile market continues to be the biggest market by revenue and 2014 was a key transition year for the industry. The overall market grew 21% to almost $400B. Voice revenues declined by 15%, messaging by 16%, and tablets by 4%. The biggest winners were the 4th wave/OTT services which grew by 92%. Access revenues increased by 32%, handsets by 11%, and wearables by 150%. Verizon, AT&T, and Apple were the top 3 players by revenue (from the US market).

Last Jan, we had estimated $108 Billion in mobile data revenues for the market and the revenues ended spot on at $108B making US the first market to surpass the $100B mark. We are forecasting that the mobile data service revenues will increase by 22% to $132 Billion in 2015. Verizon will become the first operator to generate more than $50B from data services in 2015.

Verizon became the second operator after China Mobile to cross the milestone of 100 Million postpaid subs. After acquiring lusacell and Nextel Mexico (still pending), AT&T became the biggest North American operator with over 131 million subs. In 2014, US also crossed the 350 million subscription mark.

The average mobile data consumption (cellular) crossed 2GB/mo in 2014. In the US, it took roughly 20 years to reach the 1GB/user/mo mark. However, the second GB mark has been reached in less than 4 quarters. An entire year’s worth of mobile data traffic in 2007 is now reached in less than 100 hours.

From 2010 to 2013, the data pricing declined by only single digits YoY. However, in 2014, the data pricing has plummeted by 77%. It is having an impact on the industry financials which might help clear the way to further M&A in the US market.

The intense competition amongst the operators meant a whopping 20% rise in OPEX QoQ and a 1% decline in CAPEX YoY. The income stayed flat while EBITDA grew modestly at 3%.

In our 4th series of papers, we had postulated for years that the 4th wave revenues will become bigger than any of the previous curves. This finally happened in 2014 in the US market with the revenues from the 4th wave applications and services built on top of the IP access layer surpassed both voice and data revenues. The operator share of the US mobile industry revenues fell below 50% for the first time since the birth of the industry.

Smartphone penetration increased to 75% and roughly 95% of the devices sold now are smartphones.

The Android OEM ecosystem suffered its first major profit decline in 2014 – the profits dropped precipitously by 44%. iOS revenues increased by 31%. The difference in profits between the two major ecosystems is now $33 Billion – the highest it has ever been.

Apple broke more records in a single quarter than most athletes break in their lifetime. The amount of revenues and profits generated by a rectangular screen sent everyone in a tizzy. To get a sense of the scale, consider this – Apple’s iPhone generated more revenue than revenues generated by entire portfolio of products from Microsoft, Google, Facebook, and Twitter combined. Add in Macs and Tablets and you can mix a dozen more companies in the mix. The laser focus on quality and the benefit of the brand loyalty and aspiration catapulted into the business stratosphere that few can even dream of reaching.

Apple also introduced two new products late last year – Watch and Apple Pay. While it is too early to figure out the overall impact of Apple Watch (it clearly will put some Swiss Watchmakers out of business), Apple Pay appears to be more disruptive. Apple’s classic approach of embracing the ecosystem and thinking end-to-end might finally disrupt the otherwise staid financial sector. Apple Pay is already seeing significant traction and the financial industry is nervously promoting the service. Rumors of Apple Car will keep media on its toes for the next few years.

4th wave services continue to grow at a very past face around the globe. At least 37 companies generated a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

The difference between Sprint and T-Mobile number of subs is less than a million now – the narrowest it has ever been. Like we suggested mid-last year, T-Mobile is likely to become the number three operator in a matter of weeks now. This is more or less just a symbolic event with the transfer of bragging rights.

T-Mobile accounted for over 40% of the overall net-adds for the year with Verizon coming in second at 30%. After having a lack-luster year in 2013, the operators doubled the net-adds in 2014 with connected devices driving most of the growth.

Race To The Bottom?

The mobile data traffic has been doubling YoY in the US. The consumption is clearly growing with the introduction of new devices, network upgrades, and application enhancements. Operators are seeing tremendous pressure on data pricing due to the competitive environment. EBITDA declined for the second straight quarter.

From 2010 to 2013, the data pricing declined by only single digits YoY. However, in the first 9 months of 2014, the data pricing has plummeted by 77%. It is having an impact on the industry financials which might help clear the way to further M&A in the US market.

Is Android in trouble?

Samsung suffered one of the biggest mobile revenue and profit declines in its history. As the dominant leader of the Android ecosystem, it is caught in the middle of two major trends that ironically enough Samsung had influenced. The bigger screen phone segment that Samsung seeded has become the fastest growing segment in smartphones. Apple following Samsung into the segment meant that it took away the single biggest differentiating factor and as such a serious impact on its high-end line. The lower end which yields higher volumes but much smaller ASP has attracted hordes of local developers in China, India, and Russia who have better logistics and operational advantage. Many of these players are becoming successful. To damage Samsung, they all don’t need to be successful, just enough to be in the market to sway the market. As such, Samsung has seen its share dwindle in the two biggest emerging markets.

Much of the current situation has been predictable for some time. While Samsung has ridden the smartphone wave masterfully, it hasn’t been able to build a platform moat, something that helps fundamentally differentiate its products in the sea of Android devices around the planet. They are not in a Blackberry or Nokia panic situation yet as some in the media have surmised. But, they need to figure a way out of the middle band. Unlike Nokia or Blackberry who were blinded by their success and ignorance, Samsung has shown it is a more nimble competitor. Samsung’s R&D and marketing is also second to none. Its diversified portfolio also helps in cushioning the drop in the phone segment. Historically, OEMs with such sharp revenue declines haven’t been able to arrest the decline. Can Samsung do it? Samsung is launching Galaxy 6 at MWC this weekend.

Given that Samsung controls most of Android ecosystem profits, the Android ecosystem suffered a 44% decline in profits. The woes of OEMs such as Sony, Motorola, and others also contributed to the decline. We can expect some of the Android OEMs leaving the device business altogether.

Operator M&A

In his classic book, “Competition in Telecommunications,” Nobel Laureate Jean Tirole wrote, “With digital technology, telecommunications, cable TV, broadcasting, and computers have become a single industry, which will be a critical element of our economies’ backbone. With the impending opening of competition, industrial restructuring is progressing at a fast pace.” The book was written almost 15 years ago. As I have written before, the computing and communications industries are merging into one and that collision is generating ripple effects some of which we are starting to understand (more on the Connected Intelligence Era trends here)

One of the implications of the 4th wave evolution is that there will be fewer mobile operators in the world. As we have argued in the papers, many of the smaller players just won’t be able to keep up and compete. AT&T acquired Mexican operator Iusacell (it also made the bid for Nextel Mexico) which made AT&T a clear leader in North America with almost 131 Million subscriptions. As we mentioned in our 4th wave series of papers, the number of operators will continue to shrink with fewer global operators who will seek to combine wireless and wireline assets to strengthen their moat. It is quite likely that US Cellular will be acquired in 2015.

Net-Neutrality Debates

After a blockbuster spectrum auction, FCC is looking to put its stamp on the future of the Internet by proposing net-neutrality rules later this week. President Obama decisively tilted FCC’s position on the subject. However, this is not a done deal yet. The legal and political apparatus is likely to react quite strongly to the ruling and we are in for a tough fight on this one. Other governments and regulators are also keenly watching the debate and the final ruling. Dish ended up acquiring a bulk of the spectrum wares. Is this a precursor of their wireless moves or was this just old-fashioned asset hoarding?

4th Wave Revenues

For the first time, US operators revealed some of their 4th wave (digital) services metrics publicly. Verizon reported $585 million in 2014 up 45% from a year ago. At the current run-rate, this will be a billion dollar business by 2016. AT&T reported 2.8M connected car connections and 140K home security connections. The connected car segment is clearly on its way to becoming a billion+ dollar business for AT&T. Connected cars accounted for 62% of the connected devices for AT&T.

Globally, 37 companies generated a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

The Upcoming 5G wars?

I started my career when 1G was all the rage. My first 4G project was back in 2002. By some measures, we are already behind on the 5G discussions. In general, it takes 7-10 years before the standards are finalized and then the network technology lasts for approximately 20 years before a market moves onto the next generation of technology. US led in the growth of 1G (AMPS, TACS) followed by Europe on 2G (GSM, CDMA). Japan took the leadership role with 3G (WCDMA, EVDO) and US wrestled it back on 4G (LTE). Japan and EU are determined to lead on 5G and have been making very public statements and R&D investments about their ambitions on 5G. Japan of course has a very clear goal of having 5G by Tokyo Olympics in 2020. Am sure some operator(s) somewhere will jump the gun and start calling LTE-A+ as 5G around 2017-18 or sooner. You can expect a lot of activities both in public and private on 5G as companies and governments try to figure out a way to claim the 5G leadership mantle.

We have a 5G paper coming out in March. You can read the summary here – 5G: The history of the future.

Apple Pay

Mobile Payments has long infatuated mankind. Many players with deep pockets have invested in the segment but in truth, the market was waiting for Apple to show up and show up it did with the launch of Apple Pay. In an ambitious orchestration of the financial supply chain, Apple introduced a simple payment proposition. The basic strategy is for commerce to flow through iOS. The institutions are even paying a share of the transaction to Apple which previous payment explorers are watching in utter disbelief. Ladies and Gentlemen, get ready for iTunes 2.0.

What to expect in the coming months?

2014 was a tremendous year for the mobile as it becomes omnipresence in every industry. We saw some massive moves, astounding acquisitions, and interesting strategic endeavors. 2015 promises to be an exciting year for the industry as well.

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

Against this backdrop, the analysis of the Q4 2014 and 2014 US wireless data market is:

Overall Industry Revenues

· The overall market grew 21% to almost $400B.

· Voice revenues declined by 15%, messaging by 16%, and tablets by 4%.

· The biggest winners were the 4th wave/OTT services which grew by 92%.

· Access revenues increased by 32%, handsets by 11%, and wearables by 150%.

Service Revenues

· The US mobile data services revenues in Q4 2014 increased 3% and crossed the $25B market for the first time.

· The mobile data services revenue crossed the $100B mark in mobile data services revenue to become the first country to generate $100B from mobile data services.

· Verizon and AT&T dominated the quarter accounting for 70% of the mobile data services revenue and had 68% of the subscription base.

· Verizon and AT&T are at #2 & #3 global mobile data revenue ranking respectively in Q4 2014. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU fell by 2.57%. 

· Data contribution to the overall revenues is now at 60%.

· The postpaid ARPU continues to decline for all operators with AT&T and T-Mobile experiencing double digit losses for the year.

Subscribers

· The US market had the best net-add year in the last 7 years.

· The US operators added 20M new subscriptions with T-Mobile leading the pack at 40%.

· Verizon’s tablet net-adds accounted for almost 50% of the overall tablets that were added in Q4. Verizon has caught up with AT&T on the tablet front.

· T-Mobile’s postpaid continued to see the positive growth for the seventh straight quarter. It has recovered all its losses that began in Q3 2009 and is now growing in the positive territory.

Shared Data Plans

· Shared data plans launched by Verizon and AT&T have been quite successful. The attachment rates have increased tremendously over the course of 2013-14 with more consumers opting for cellular tablets and connected devices. 61% of postpaid accounts at Verizon are now on shared plans. For AT&T, the number is even higher at 70%.

· Some more granular data plans for tablets have also spurred interest as the cellular broadband is becoming available on demand vs. expensive on premise Wi-Fi solutions.

· 52% of AT&T’s postpaid accounts are on 10GB+ plans.

4th Wave Progress

· The number of players making $250M/quarter on mobile continues to increase rapidly and these aren’t your traditional wireless players. For example, Mobile is now contributing 69% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 88% in mobile (of the total advertising revenue) up from 60% in 2013. Even traditional players like Hertz, Sears, and Starbucks are generating meaningful revenues from mobile. There are now dozens of such players and the list is just growing. (for more discussion on the topic please see: “Mobile 4th Wave: Evolution of the Next Trillion Dollars”)

· In 2014, we are also seeing continued investments from the operators especially AT&T, Verizon, and Sprint in non-traditional segments like home security, healthcare, insurance, automotive, enterprise mobility, advertising, and security, and others. Collectively, this is already a multi-billion dollar business in the US.

· The cloud and security segments have also gained significant traction with incumbents as well as startups launching new initiatives and technologies.

· Verizon reported $585 million in 2014 up 45% from a year ago. At the current run-rate, this will be a billion dollar business by 2016.

· AT&T reported 2.8M connected car connections and 140K home security connections. The connected car segment is clearly on its way to becoming a billion+ dollar business for AT&T. Connected cars accounted for 62% of the connected devices for AT&T.

Connected Devices

· Connected devices (non-phones) accounted for almost 52% of the net-adds in Q4 2014. This means that while there is a healthy smartphone sales pipeline, it is for the existing subs and as such net-adds for the phone business is tapering off and we can expect that new net-adds will continue to be dominated by the connected devices segment.

· For AT&T, Connected cars started to form a significant base of the connected devices segment with 62% of the new connections in the segment coming from cars.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 95% of the devices sold in Q4 2014. Within the next two years, the feature phone category will practically be extinct in the US market.

· The smartphone penetration in the US is now at 75%.

· After ceding the lead to Android for the last three straight quarters, iOS roared back to reclaim the lead with 54% share of the smartphones sold. For the year though, Android edged out iOS.

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 67M making it the leading LTE operator in the world (this year China Mobile will overtake Verizon to become the number 1 LTE operator by subscriptions). Other three operators are also deep into their LTE deployments. Verizon reported that 84% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

Your feedback is always welcome.

Chetan Sharma

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, articles, and our annual thought-leadership summit – Mobile Future Forward. The next US Wireless Data Market update will be released in May 2015.

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

Mobile Breakfast Series–The Future of Mobile Commerce/Payments January 30, 2015

Posted by chetan in : US Wireless Market , add a comment

Greetings,

In 2014, Mobile Commerce is going to generate over $100 billion+ in revenue. Mobile Commerce already accounts for over 12% of the digital commerce in the US. This is the revenue that didn’t exist a few years ago. We will talk to executives who are driving mobile commerce and who are powering the technology behind these billion dollar initiatives. Digital only retailers are likely to take 75% of the mobile commerce revenue share. How are the traditional players reacting to the threat and the opportunities? How does the difference in behavior on smartphones and tablets impact commerce? As we move into the Connected Intelligence Era, how will commerce change in both the physical and the digital worlds? How will Apple Pay transform the financial industry? We will tackle some of the thorniest questions in front of our industry.

Sam Liang, CEO and founder of Alohar Mobile (Alibaba)

Prat Vemana, VP – Mobile and Commerce, Staples

Sebastien Taveau, VP and Chief Developer Evangelist, MasterCard

Chetan Sharma, CEO, Chetan Sharma Consulting (moderator)

We will explore the mobile commerce opportunities and shifts in the ecosystem in detail across the globe. You don’t want to miss this one.

Registration: http://www.mobilebreakfastseries.com/register.html

Venue: Columbia Tower Club, 701 5th Ave #7500, Seattle, WA 98104

Date: Feb 17th 7:30 – 10:30am

Look forward to seeing you soon.

Regards,

Chetan