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US Mobile Data Market Update Q3 2009 November 9, 2009

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

 

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Executive Summary

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

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

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

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

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

What to expect in the coming months?

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

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

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

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

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

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

ARPU (Slides 13-15)

Subscribers (Slides 16-18)

Applications and Services

Handsets

Policy and Regulations

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

Open

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

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

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

Misc.

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2009. The next Global Wireless Data Market update will be issued in Mar 2010.

Watch out for our end of the year survey and commentary on global wireless markets and trends for 2010.

Your feedback is always welcome.

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

Thanks.

Chetan Sharma

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

RCR Column: Solutions for the Broadband World November 6, 2009

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This column appeared on RCR Wireless earlier this week

In the last column I talked about setting the goals and defining mobile broadband. While we are still a ways away in defining what constitutes broadband, another key debate has emerged in the past few weeks and that is how do we go about the solving the increased capacity problem. FCC Chairman Julius Genachowski has done a masterful job of outlining the principles, of holding public hearings in an open and transparent manner, of creating the urgency of dealing with the broadband issue, and of embarking on a practical national broadband plan, and of getting support of his fellow commissioners and industry leaders, the four key principles being:

1. Most importantly he described the spectrum shortage as a looming crisis and that additional spectrum capacity is needed to handle the demand of data traffic from data cards and smartphones (something we have illustrated in detail in the paper "Managing growth and profits in the Yottabyte era")
2. Removing red tape to allow wireless carriers to build their network faster, for example, the work with cell towers
3. Codify and enforce net-neutrality policies
4. Open Internet

To some in the industry, the broadband capacity problem equates to the lack of spectrum. In fact, the Chairman has spoken out about the "looming spectrum crisis" in great detail on several different occasions. It is apparent that to achieve 50-100 Mbps, new contiguous spectrum is needed. However, it will be a mistake if the dominant solution for the broadband capacity crisis is more spectrum, for the following reasons:

1. There isn’t enough spectrum, especially the right spectrum
2. It takes 7-10 years to procure the spectrum for wireless use
3. By focusing on spectrum only, we will be just postponing the current crisis
4. By giving out spectrum too soon, industry won’t have the opportunity to learn to thrive within its means and let new technology and business innovation show the way to handle the increased data consumption.
Like with all tough problems, to find an effective and a lasting solution, one has to break down the problem into smaller bits and find solutions that address not only those individual pieces but the problem as a whole. We know the following for a fact:
1. Broadband data cards (external or internal) account for over 73% of the data traffic (2009)
2. Smartphones esp. with full browser and media capability account for roughly 24% of the traffic (2009)
3. There are a small percentage (< 3%) of heavy users who regularly have very high data consumption
4. Majority of the data usage takes place in an indoor environment (60-80%)
5. Video and browsing are the two biggest application categories for data consumption (accounting for over 70% share)
6. Consumers launch full applications (or browsers) to get minor updates because that’s the only way to get access to those updates on the mobile devices. Alternate strategies like the one implemented by INQMobile series of devices and Motorola Cliq are good examples of rethinking applications
7. There is no incentive for the user to change behavior on content consumption
8. To cope with the data congestion issue, all three major elements of the network need to be upgraded - RF, core network, and the backhaul. Only RF portion of the network is predominantly dependent on the spectrum allocation (while some backhaul solutions require spectrum, the direction of the industry is towards laying fiber or adopting solutions that don’t require any additional spectrum)
9. Competition breeds innovation, legacy spectrum allocation regimes might have an opposite impact
10. Doing broadcast video over cellular is not economically feasible
11. Number of devices/user is increasing, however, not all connections need high-speed real-time availability
12. True 4G bandwidths (50-100 Mbps) are not possible without additional spectrum
13. Backhaul requirements for LTE will increase in the 200-500 Mbps range within the next 5 years
14. LTE is not going to have a major impact on the data consumption problem in the short-run (2010-2013)
15. LTE smartphones might not be in the market until 2012-13

To address the data consumption issue in light of the above facts, one has to figure out a set of solutions that work in concert with each other. Just focusing on one solution only gets you so far, however, a range of viable solutions that address each of the above problem elements are likely to prepare the industry much better for the long haul. Some of such solutions are discussed below:

1. Offloading traffic without impacting the user experience or requiring user intervention. Leverage existing WLAN footprint and invest in femtocells and WLAN expansion.
2. Congestion management through caching and intelligent buffering
3. Incentivizing users to shift consumption to fill the network troughs
4. Implementing network optimization across all media and application types, especially, video and browsing
5. Adopting broadcast mobile video solution
6. Tightly integrating highly used applications like Facebook and Twitter into the handset
7. Introducing tiered pricing plans so that light users pay for broadband connectivity relative to their consumption. This will also bring in a new set of users into the broadband fold who have been sitting on the sidelines due to pricing
8. Upgrading of the backhaul capacity irrespective of LTE
9. Investing in analytics to better understand user consumption behavior at a micro level to plan appropriate strategies, solutions, and pricing plans
10. Creative bundling of data plans to bring more users into the data ecosystem.

By considering such solutions in parallel, the industry will be better off in the long-run. It is the only way to tackle the problem in the short-term since neither the additional spectrum nor the announced deployments of LTE are going to make any meaningful dent to the data usage costs and margins. Wireless is one of the industries where policy can have a significant impact on the direction of the industry. By focusing too much on the spectrum, we will miss the opportunity to cultivate a better network and business ecosystem and to invent new technologies and revenue models that will have a far stronger impact on the evolution of the mobile industry.

Chetan Sharma is President of Chetan Sharma Consulting and is one of the leading strategists in the mobile industry. He has served as an advisor to several Fortune100 companies in the wireless space and is probably the only industry strategist who has advised each of the top 6 global mobile data operators. His client list includes NTT DoCoMo, China Mobile, AT&T, Sprint Nextel, KDDI, Reliance, KTF, Sony, Juniper, Alcatel-Lucent, Qualcomm, Comcast, HP, and Disney. Chetan is also a leading authority and IP expert in the wireless industry, testifying in cases such as ITC – Qualcomm vs. Broadcom as well as the author of 5 best-selling books on wireless including co-author of Wireless Broadband: Conflict and Convergence (IEEE Press/John Wiley). Chetan has assisted many leaders in the global ecosystem in devising effective broadband strategies. He is interviewed frequently by global media and his research is widely quoted in respected publications such as NY Times, WIRED, Business Week, Fortune, WSJ, Reuters, AdAge, and MIT Technology Review. Chetan serves on the advisory committees of several startups. http://www.chetansharma.com

FiREGlobal CTO Design Challenge PPT October 27, 2009

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FiReGlobal CTO Challenge II 2009
View more presentations from jheitzeb.

AdAge article – Droid vs. iPhone

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Talked to AdAge about Droid expectations

Could the Droid Be the Device That Finally Dethrones the iPhone?

 

Experts: Verizon Won’t Take Bite Out of Apple, Despite Glowing Reviews

by Rita Chang
Published: October 26, 2009

SAN FRANCISCO (AdAge.com) — With Apple posting record profits last week, thanks in large part to brisk sales of its iPhone, it may seem downright crazy to mount a smartphone challenge at all, let alone one that takes direct aim at the iPhone. But that’s just what Verizon, Google and Motorola are doing.

Lowell McAdam, president-CEO of Verizon Wireless, holds up the Droid at a joint announcement with Google earlier this month.

AP

Lowell McAdam, president-CEO of Verizon Wireless, holds up the Droid at a joint announcement with Google earlier this month.

With a teaser ad from Verizon zeroing in on the device’s perceived shortcomings, such as its lack of a physical keyboard, the triumvirate is beginning a big push for Droid, the flagship device of the Google-backed Android operating system. So far, industry observers are unmoved by the buzz and give the Droid long odds in its bid to become the next ubiquitous handset.

So far, Verizon and its partners have kept a tight lid on Droid, but the few early reviews have been effusive, with the influential gadget blog Boy Genius Report calling Droid "the most impressive phone we’ve used since the iPhone. It’s positively amazing." TechCrunch’s Michael Arrington, who famously chucked the iPhone because of AT&T’s spotty network service, also gushed: "According to people who’ve handled the device, the Droid is the most sophisticated mobile device to hit the market to date from a hardware standpoint."

The praise notwithstanding, analysts say it’s doubtful that Droid can dethrone the iPhone — even if the handset will live on what is widely perceived as the best wireless network in the country. The Blackberry Storm, and most recently the Palm Pre, both of which have been held up as credible iPhone challengers, came and went without incident to Apple, which just reported its most profitable quarter after selling the most iPhones in that time.

"There is a graveyard littered with iPhone wannabees, so the bar is pretty high for any new phone, no matter how good it might be," said wireless analyst Chetan Sharma.

Beating the network
For Verizon, a lot is at stake. The No. 1 U.S. wireless carrier needs something of a super-marquee phone to counter Apple’s iPhone, which has put millions of consumers on the network of its exclusive carrier, AT&T, many of whom are left to regularly carp about dropped calls. Thanks largely to the iPhone, AT&T last quarter added more contract customers than Verizon for the first time in recent history.

Others say Droid will post solid sales, but don’t expect a blockbuster.

"It’s going to be successful within the Verizon network, but it’s not going to come at the expense of the iPhone," said Matt Thornton, an analyst at Avian Securities. "This device will slow subscriber attrition, but it’s difficult to woo subscribers to another network just for the phone. The iPhone has been the only one that’s able to do that."

And once those customers settle on the Apple handset, it’ll be tough to tempt them to switch: The iPhone was the top-ranked brand on measures of user loyalty, according to a survey by Brand Keys that looked at 63 product categories. Moreover, for the first time in 12 years since the survey’s inception, three cellphone brands made the top 10 list of brands garnering the most loyalty — Samsung came in after the iPhone, and BlackBerry was ranked fourth.

"This says that cellphone brands are able to meet consumer expectations more than ever before," said Brand Keys President Robert Passikoff, who also noted that consumer expectations towards smartphones are also higher than ever. This means it’s all the more critical for Droid to live up to the hype, which is partly being manufactured by Verizon. The carrier recently launched a teaser ad attacking the iPhone for all the things it can’t do, but Droid can, leading some to call the strategy risky.

Not about features
"If Droid is anything less than stellar, then it looks like you’ll have failed at what you’ve set out to do," said Michael Gartenberg, VP-strategy and analysis at tech research firm Interpret. "It’s not a great idea to take a strong competitor head on."

As the Droid teaser ad ticks off a list of features that the phone supports, it may also be missing what consumers are really after, which is the overall user experience, and Apple has cornered the market on that. "You are not going to beat Apple on features, because iPhone buyers aren’t sitting there with a features checklist," said Avi Greengart, analyst at Current Analysis. "It’s not what features the iPhone has, but how they are implemented."

What Droid could do, with Verizon’s backing, however, is be an incremental force to stem the iPhone tide by accelerating Android’s momentum. So far, Android phones have only been available at T-Mobile, the smallest of the top four U.S. carriers, though about half a dozen Android devices are expected to be unveiled stateside by year-end. By 2012, Android is expected to have a 15% worldwide share, just eclipsing the iPhone’s 14%, putting it behind top smartphone operating system Symbian, according to Gartner. With a slew of phone makers hanging their smartphone offerings on Android, analysts also expect more developers to write for the operating system, whose paltry 10,000 apps today are dwarfed by the iPhone’s more than 85,000.

"Verizon’s backing … will bring Android to the forefront and give it more attention," said Tim Bajarin, principal analyst with Creative Strategies. However, don’t expect Apple to take the heated competition lying down. "I fully expect Apple to raise the bar with a new iPhone and new features," Mr. Bajarin said.

Mobile Breakfast Series shaping up nicely

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Our next Mobile Breakfast Series is coming up on Dec 4th 8:30-10am PT in downtown Seattle.

Have gotten great feedback from the first event

"I found the Mobile Breakfast Series to be informative and great for networking. We had 3 very substantial follow-up meetings from connections made at the event."

- Mike McSherry, CEO, Swype

"The Mobile Breakfast Series is a unique Seattle event - all the right people sitting down together to tackle the hardest problems in our industry"

- Dan Shapiro, CEO, Ontela

Hope you can join. Register at http://mobilebreakfastseries.com/ Bring friends and family. Help Spread the Word.

The topic of our next event is “The Impact and Evolution of Mobile Broadband” and the illustrious speakers are:

Om Malik, Founder, GigaOM (Moderator)

Scott Richardson, Strategic Advisor, Clearwire

Most recently Scott served as SVP and Chief Strategy Officer at Clearwire. As senior vice president - chief strategy officer, Scott Richardson was responsible for driving Clearwire’s mobile wireless broadband efforts, WiMAX strategy, technology investment and field trials. During two decades in the wireless and chip industries, Mr. Richardson has worked with key industry leaders to define and shape the WiMAX standards with the goal of delivering next-generation wireless broadband networks around the world. Prior to joining Clearwire in January 2007, Richardson spent 20 years at Intel in a variety of key management roles, most recently leading Intel’s broadband wireless business. Previously he served as vice president of Intel’s Mobility Group and general manager of the company’s Service Provider Business Group, where he was responsible for creating the IEEE 802.16 standard and delivering the company’s silicon products for WiMAX Certified wireless equipment and access devices. Earlier, Richardson served as general manager of Intel’s OEM communication systems business serving the networking and communications market and also led software efforts within Intel’s Enterprise Server Group.

Charlie Martin, Wireless CTO, Huawei Technologies

Charlie Martin is the Wireless Chief Technology Officer for Huawei Technologies (North America). Martin has more than 20 years of experience in wireless communications and has spent the past nine years in product management, business development and technology development. Previously, Martin served as Nortel’s Director of WiMAX Network and Systems Product Line Management, and, prior to that, as Director of Wireless Technology and Product Strategy for the company. Before joining Nortel, Martin held positions at two service provider companies. At GTE Business Data Products, Martin was a member of a five person product management team responsible for rolling out a nationwide ADSL service in more than 330 central offices in 1998. At Sprint PCS, Martin served as the Manager of RF Design for the Dallas/Fort Worth Engineering and Operations team, which rolled out CDMA service in 1996. Martin earned a Bachelor of Science degree in physics from the University of Maryland.

Ken Denman, CEO, Openwave

Ken Denman is chief executive officer for Openwave Systems (NASDAQ: OPWV) where he is focused on executing Openwave’s corporate strategy and growing the company’s global market share with innovative software infrastructure products and services for mobile and broadband operators. Ken’s career spans more than 20 years in the global telecommunications and IT industries. Before Openwave, Ken served as chairman and CEO of iPass, a world leader in platform-based enterprise mobility services where he guided the company in leveraging the explosion in new broadband and wireless access technologies to make them real and globally available to any enterprise or service provider. Under Mr. Denman’s leadership, iPass grew its revenue by 200 percent and went public in 2003. 
Before joining iPass, Ken was the founder, president and CEO of AuraServ Communications, a managed service provider of broadband voice and data applications. Earlier, he served as senior vice president at MediaOne’s National Markets Group (now part of Comcast) where his teams exceeded new subscriber growth targets and dramatically reduced customer churn. He also served as chief operating officer of MediaOne’s International Wireless Group, leading international joint ventures including what would become the leading wireless providers in Poland, Hungary and the Czech Republic.  Ken also serves on the board of ShoreTel, Inc., (NASDAQ: SHOR), a leading provider of Pure IP unified communications systems headquartered in Sunnyvale, California. Ken holds an MBA from the University of Washington and a BS in accounting from Central Washington University.

Pankaj Kedia, Director, Global Ecosystem Programs, Mobility Products, Intel Corporation

Pankaj Kedia is the director of Global Ecosystem Programs for Mobile Internet Devices (MIDs) and Smartphones at Intel Corporation. He is responsible for working with the industry to enable complete hardware and software solutions for MIDs/Smartphones, ensuring the availability of rich, intuitive applications, content, and services, and taking the complete solution to market. Over the last 2 years, Pankaj has led Intel’s charge in establishing the Mobile Internet Device category in the industry and launching the Intel® Atom™ processor which is specifically designed for this category. Pankaj joined Intel in 1996 and has held a range of executive advisory, marketing, planning, and business development roles across the company. Prior to Intel, he was in the management consulting industry for 5 years leading projects in strategy, management, and information technology. Pankaj holds an MBA from Wharton, an MS from the University of Michigan, and a BS from the Indian Institute of Technology. Pankaj is a frequent industry speaker in the mobile, Internet, and wireless sectors and has been quoted in major publications including Wall Street Journal, New York Times, Fast Company, San Jose Mercury News, Wired and CNET.

Defining mobile broadband

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This piece appeared in RCR Wireless earlier this month.

The Vision

Mobile broadband is the network connectivity environment, where networks of different shapes and sizes collaborate to provide users unfettered access to the information they seek, the content they want to engage in, connect people in new and exciting ways, where time and distance are all but collapsed to provide access to anyone and anything, faster than the speed of thought. At least, that’s the vision.

In 1991, the late Mark Weiser of XEROX PARC, considered the father of ubiquitous computing, dreamed of an always on, always connected world in which humans and computers are seamlessly united. In 2002, my friend and coauthor Dr. Yasuhisa Nakamura, then CTO of NTT DoCoMo wrote in our book that his vision of mobile broadband is when wireless infrastructure becomes indistinguishable from air - omnipresent. It is just there without us consciously searching for it. Here we are in 2009, where the FCC is engaged in the noble task of defining broadband and various players are quibbling over a few kbps speed requirements. But as the national debate on broadband reaches a fervent pitch, one has to come back to the task at hand and figure out what defines "mobile broadband."

Defining Broadband

FCC’s current definition of broadband is stated as "The term broadband commonly refers to high-speed Internet access that is always on and faster than the traditional dial-up access." Faster than dial-up doesn’t really conjure up an image of a 21st century ready infrastructure, so, how do we go about defining mobile broadband, what benchmarks are meaningful, and most importantly, what factors would yield sustainable competitive advantage to service providers.

First of all, we shouldn’t mix wireless and wireline for some time. The inherent cost structures, economics, and physics of the two mediums are quite different. By expecting wireless to deliver wireline performance and pricing, we are setting ourselves for disappointment.

Real speeds, coverage, and spectrum

The speed of the network has long been the main benchmark for mobile broadband, esp. the peak rates possible using a given technology. For e.g. in the GSM family of technologies, GPRS roughly equates to 114 Kbps, EDGE to 474 Kbps, UMTS to 2 Mbps (stationary), HSPA to 7.2 Mbps, HSPA+ to 28 Mbps, and LTE to 100 Mbps (of course, there are differences in upload, download, peak, off-peak, min, max, etc.). However, the real-life network speeds experienced by average consumers are typically 40-60% of the peak rates. During peak traffic times, the speed drops even further.
We should be looking at the bandwidth requirements from the eyes of the consumer. Someone living in Bellingham, Wash., only cares about the coverage and the average bandwidth available to them at any given moment. What ultrafast networks are deployed in Washington, D.C., is of little interest to them. So, we need to measure coverage and consistency in performance across the nation. Also, one needs to keep the spectrum scorecard for we can deliver 100 Mbps but the spectrum required under current set of technologies is just inadequate. Hence, the benchmarks for mobile broadband need to be closely correlated to the national spectrum dedicated to mobile.
As a first step, we need to take the discussion away from peak rates to average rates and measure the average throughput at any given time across various markets. Any issues with the backhaul network will also be reflected in these numbers and thus will help us understand the state of the mobile infrastructure at a more granular level. Japan, Korea, and Australia are investing heavily in upgrading their national mobile infrastructure to stay ahead of demand. Progress in these countries will clearly serve as a guiding principle for the U.S. and other economies.

Latency
As we move into the 3.5G and 4G mobile network arena, latency (along with jitter) will start to become an important benchmark as well. Reduction in the time to fetch content enables better user experiences. An all-IP network introduces a flatter network architecture which in turn reduces the latency in the network. Better user experience paves the way for more usage and higher content consumption which in theory yields informed citizens and higher productivity.

Consumption
We should also keep track of the average bandwidth being consumed by users on a monthly basis. By keeping an accurate measurement, the ecosystem can plan better. Some other regulatory agencies like the Hong Kong Telecommunications Authority regularly publish mobile data usage. While the task is much bigger in the U.S., some measure of the pace of growth is necessary for the ecosystem to appreciate the risks and the opportunities.

Pricing
Next, we need to keep track of the average price paid by consumers for mobile broadband and mobile data consumption over time and the choice of providers available to consumers on a national basis. The above also needs to be measured from a demographics point of view by looking at the numbers for a wide variety of user populations. Additionally, these measurements need to evolve over time as our understanding of what’s important to the consumer changes.

Intelligent Platforms


Finally, while the debate is focused on how to deal with the data growth, little attention is being paid to how to use the terabytes of data that is being generated. In other words, there is a lot of focus on data creation but little on intelligence extraction. Most service providers are consumed by network upgrades, move from WCDMA to HSPA+ to LTE and so on and so forth but little investment is going into understanding the consumer and their mobile data behavior - how are they consuming data? what are their preferences and unmet needs? how do you tailor content, value added services, and pricing plans at a subscriber level? how to leverage mobile as a media channel? etc.
Don’t get me wrong, carriers absolutely need to build a robust network that can stay ahead of the consumer demand but they also need to continue to innovate on several key fronts. By focusing too much on network build out and too little on building intelligent platforms that can harness the power of these networks, many service providers are leaving the door open for others to extract more value out of these network upgrades. Sustainable competitive advantage can only be built by understanding the consumer better, mobile affords that opportunity. Players who are focusing on measuring intelligence of their networks are the ones who will be able to withstand emerging business threats better than those who are investing little in building out the platform. And, intelligence is something the FCC can’t regulate but consumers will see the difference.

Chetan Sharma is President of Chetan Sharma Consulting and is one of the leading strategists in the mobile industry. He has served as an advisor to several Fortune100 companies in the wireless space and is probably the only industry strategist who has advised each of the top 6 global mobile data operators. His client list includes NTT DoCoMo, China Mobile, AT&T, Sprint Nextel, KDDI, Reliance, KTF, Sony, Juniper, Alcatel-Lucent, Qualcomm, Comcast, HP, and Disney. Chetan is also a leading authority and IP expert in the wireless industry, testifying in cases such as ITC – Qualcomm vs. Broadcom as well as the author of 5 best-selling books on wireless. He is interviewed frequently by global media and his research is widely quoted in respected publications such as NY Times, WIRED, Business Week, Fortune, WSJ, Reuters, AdAge, and MIT Technology Review. Chetan serves on the advisory committees of several startups. http://www.chetansharma.com

Open Mobile Summit Next Week October 26, 2009

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Am looking forward to the Open Mobile Summit next week in San Francisco. Will be moderating two panels, one each day. The overall lineup of speakers is stellar and it should generate some really good discussion. If you plan on going but haven’t done the registration yet, let me know and I can pass on the discount.

 

Panel: What open means to apps providers

This panel takes the application / service developer perspective and asks:

Moderator:
Speakers:

Panel: Apps in the cloud

Moderator:
Speakers:

In case you missed … October 13, 2009

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Stories from Sept ..

Fiercewireless - Mobile advertising measurements still lack standardization

GigaOM - US leading the Global Mobile Data Boom

GigaOM - Mobile Advertising Metrics: What matters most?

Moconews - Full speed ahead as US carriers invest billions, is it too much?

AdAge - Mobile Video Gets Ready for the Masses

MIT Technology Review - The New Faces of Android

NewTeeVee - With MediaFLO disappointing, Qualcomm wants to become a Mobile CDN

GigaOM - Don’t Neglect the Network, The Ultraband Panel

NY Times - Customers angered as iPhones overload AT&T

RCR Wireless - The RCR Ecosystem - An Overview

IT Business Edge - The Death of the Early Adopter

GigaOM - New Metrics for Mobile Ad Networks

GigaOM - How the iPhone is driving a wireless bandwidth boom

CTIA Wireless IT & Entertainment Roundup 2009 October 12, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Devices, Enterprise Mobility, European Wireless Market, Federal, Indian Wireless Market, Japan Wireless Market, Location Based Services, M&A, MVNO, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Usability, Mobile Users, Networks, Smart Phones, Speaking Engagements, US Wireless Market, Unified Messaging, Wireless Value Chain, Worldwide Wireless Market , 3 comments

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CTIA San Diego Roundup

San Diego is a casual town so this year’s CTIA fit nicely with an equally casual show, that felt more like a networking party sprinkled with some striking keynotes and engaging sessions. However, the biggest tremors were felt a day before the event started with Verizon getting in bed with Google and AT&T embracing VoIP with open arms. FCC’s curiosity into the wireless world has yielded more action in 3 months than many years combined before. I was drawn more to the policy debate and the implications to the wireless industry in the US and to the rest of the world. There was intense discussion on appstores and their place in the future, mobile advertising and its maturity, enhancing retail experience, accelerated growth in mobile health in recent times, and of course the tremendous growth in the US wireless data market but if you already knew that. This note summarizes the observations and opinions from the event, discussions, and briefings.

A friend of mine at the FCC invited me to the FCC Broadband Field Hearing occurring simultaneously with the CTIA at the University of San Diego. I am glad I went. The first panel was on the App Ecosystem with a diverse panel of industry verticals – rural, public safety, health care, environment, air quality, health care complimented by the discussion of the iPhone and its impact on the mobile industry. Chairman Julius Genachowski is to iPhone what President Obama was to Blackberry. He described his love for the apps with tender affection.

I am finding that the whole process of broadband planning to be quite interesting. The proceedings have been open and participatory, interest and feedback has been intense, and the principles have been clearly stated. This helped with a broader question that my CTO team for the FiREGlobal panel (to be held on Oct 15th) is addressing. We are tasked with a unique challenge of coming up with technology solutions for better civic discourse and our team consists of experts in the public and private enterprise to give a set of recommendations. We are currently under intense discussions and will unveil our suggestions on thursday. Stay Tuned.

Coming back to the FCC talk, Julius described four key principles:

  1. Most importantly he described the spectrum shortage as a looming crisis and that additional spectrum capacity is needed to handle the demand of data traffic from data cards and smartphones (something we have illustrated in detail in our paper - "Managing growth and profits in the Yottabyte era")
  2. Removing red tape to allow wireless carriers to build their network faster, for example, the work with cell towers
  3. Codify and enforce net-neutrality policies
  4. Operate more openly

While 1) and 2) have been discussed in the industry for some time, it is the mention of 3) and 4) that has changed industry in more ways than one. AT&T’s Ralph de la Vega took the stage after the Chairman and gave a spirited defense of the industry that requires no regulation. Frankly, the mere mention of the word "open" has had quite an impact on the industry in last 3 months. (I will be moderating two panels at the upcoming Open Mobile Summit on "What open means to apps providers" and "Apps in the cloud" in Nov, 2009)

Of course, as always, it is from the details that the devil flexes it muscles. How FCC will end up defining "open," "net neutrality," "network management" and other key items will determine the course of the industry. I wrote a piece that appeared in RCR Wireless “Defining Mobile Broadband” that outlined some of the same principles but from an operator strategy point of view suggested a much broader strategic imperative of building intelligent platform to survive long-term. The recommendations we made in our Yottabyte paper are being adopted and discussed much more openly since it was released in July. Due to significant interest, we will some follow-up research on the topic in the coming days, so stay tuned. I will be giving a ISACA luncheon keynote on the topic on Oct 20th. Of course, our Mobile Breakfast Series panel on mobile broadband will delve into the details of the broadband ecosystem on Dec 4th. Be sure to register.

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Each year our small community in Issaquah, WA celebrates a festival “Salmon Days.” As I was strolling around the hatchery, it helped me prepare for my talk on the Appstore ecosystem. The fish traveling upstream has several parallels to the developers trying to make in the 80,000 db appond. So, I focused my talk on how the ecosystem needs to come together urgently to build the fish ladder to give more developers a chance to make it to the next level to create a vibrant and sustainable ecosystem. While Microsoft’s mobile strategy is disarray right now, they are one of the few companies who understand the caring and feeding of the developer ecosystem (another one is Ebay). If the ecosystem focuses primarily on their profits and margins, the rich ecosystem might be at a risk of collapsing.

I discussed several factors that can help foster a healthier ecosystem starting with fish ladder. If you are interested in the presentation, please drop me a line. There was pretty good discussion from some experienced and successful developers. The emergence of appstore mania has been a double-edged sword. Developers are back in demand but their attention is finite and they are forced to allocate resources accordingly. I was also surprised to find out about the level of piracy and counterfeit goods in the appstore and how little is being done to protect legitimate developers. Some of the ladder factors I discussed were: greater revenue share, connection with investors, iTunes and carrier billing, location and presence, user profile and context, reports and analytics, $0 signup and certification, better search and discovery, social interaction and virality, flexible payment and billing models, better networks and devices, reduced fragmentation, more open APIs and marketing dollars. If you are interested, drop me a line and I will send you the ppt.

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I also had a chance to moderate a panel on Mobile Advertising and the current state of affairs. While mobile advertising is the only advertising sector that has shown growth this year, it is not breaking out to stand on its own. Large media companies are primarily looking mobile as a complimentary channel though they are clearly enamored by its potential. Lack of clear, uniform, auditable metrics is another issue though various industry bodies have been working together and some guidelines are expected to be released next quarter.

Overall, the show felt like a sponsored networking party with hardly any new announcements, the show floor was easier on the feet, the attendance was down again. However, the hallway conversations and running into friends and colleagues from the distant past is always priceless. The only newsworthy highlight for me was the emergence of mobile healthcare and mobile retail as separate categories at CTIA. There is clearly much potential and interest in these areas. We will have more on these topics in the coming months.

Some of the news worth items were:

It was great catching-up with friends and colleagues. Looking forward to the next one.

Carnival of Mobilists over at October 5, 2009

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VoIP Survivor hosted by Tsahi Levent-Levi The last one was hosted at Volker on Mobile As usual good readings from around the web.

Roundup of the first Mobile Breakfast Series event September 29, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, Carriers, Enterprise Mobility, European Wireless Market, Japan Wireless Market, Location Based Services, M&A, MVNO, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile TV, Mobile Users, Privacy, Speech Recognition, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

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The views from the venue are stunning both at the crack of dawn and as the sun lit the valley

The first Mobile Breakfast Series Event was held at the beautiful Newcastle Golf Club on Sept 22nd with our elite panelists - Marianne Marck - SVP, BlueNile, Michael Mace, Principal, Rubicon Consulting, Mike Woodward, VP, AT&T, and Jim Hudak, VP & GM, INQMobile. Before I get into what was discussed, would like to thanks the founding sponsors - Openwave, Motricity, and Clearwire who stepped in right away to make the Mobile Breakfast Series possible. Also, Jeff Giard and Brendan Benzing helped shape the event along the way. Finally, thanks to the extended pacific northwest mobile community for such a tremendous response. Hope you guys keep coming back for more.

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The diversity and the experience on the panel was apparent. Mike Woodward has a long history with ATT and has been managing the broad device portfolio for the company. Michael Mace with Rubicon worked with Palm and Apple and is a veteran of the mobile industry cycles, Marianne Marck with BlueNile has seen the growth of mobile digital content like few have and brought in the perspective from the developer and content provider point of view. Finally, Jim Hudak has worked in a wide variety of roles and is now with INQMobile which won the best handset award in Barcelona. This gave us a good forum to explore the various aspects of our evolving industry (Moconews coverage here).

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The salient points of the 90 minute discussions were:

· The panel thought the big opportunities are in:

o Specialized devices, though there is little VC investment in the area, there is an opportunity to build something unique by verticals or segments

o Network Optimization and Management, given the tremendous growth in mobile data usage, more technologies are needed to effectively manage the growth

o Besides voice and data, location based services represent the biggest opportunity in mobile

o Empower Impulse buys, embed technology to make it simple for users to buy

o Taking advantage of the mobile browser economy. Companies like Skyfire are expanding the capabilities of the browser that enables better application reach and penetration

· ATT has experienced 5000% growth in mobile data usage in the last 12 quarters. And it is good for business but the future growth needs to be more effectively managed.

· Mobile data is clearly taking off but are there limits to this growth? Will everyone pay $50/month extra? It is probably not for everyone.

· LTE brings down cost of delivering the bits. If EDGE costs $1 to deliver one MB, then HSPA costs 13c and LTE is around 3c. There is significant motivation to move towards LTE.

· While the total number of apps downloaded have exceeded 2B, it is not clear if there are new companies emerging out of the app economy. Developers are still struggling to make ends meet and if we don’t cultivate the ecosystem, very few will be left at the end of the day

· For developers, browser provides the broadest reach but for some apps the richness of the feature/functionality is only available in client apps. Over the long run, browser platform is preferable and is likely to win out.

· Carrier billing is essential for the app economy to survive. Not everyone has iTunes interface for their appstores.

· Femtocells/WiFi play an important role in offloading traffic and providing consumers with better bandwidth and coverage options.

· 75% of ATT’s devices are converged devices. Significant uptick in the last few quarters. Data consumption has been growing as a result. ATT is investing $18B or so in upgrading the network as well.

· Mobile OS becomes less relevant over time.

· Cloud Computing is important for mobile to help with network management, storage, and user experience.

· Microsoft was a freakish event in history, something similar is not going to happen in the mobile space and the fragmentation is not going to go away any time soon.

· Developers like to get access to UI APIs that give them more control over the user experience. Access to location

· Mobile advertising promising but not there yet. Metrics and standards issues need to be worked out.

· TV is a passive experience, Online is less passive, and Mobile is interactive experience. We should be designing apps and services keeping that in mind.

· Handset has become a software business. Companies not having a concrete s/w strategy will be exposed

· We live in interesting times

If you liked the first event, you would love the next one.

The topic is Mobile Broadband and we are getting some of the top notch experts to discuss the very important evolution of the global mobile broadband markets. Date: Dec 4th.

Our good friend Om Malik has kindly consented to moderate the event. Current confirmed panelists are Scott Richardson, former Chief Strategy Officer and now Strategic Advisor at Clearwire and Ken Denman, CEO of Openwave. More panelists to be confirmed in the coming days. Registration is open at http://mobilebreakfastseries.com/

Finally, we would love to hear your feedback. Please help us shape the event and make it your own. How can we make it better? What topics would you like to see discussed? Which speakers would like to hear from? What venues work best for you, etc? Answers will help shape the future events so every bit of feedback is much appreciated. If you could please take a short survey and let us know what you thought of the event as well any guidance on future events, that will be great.

Thanks and see you on Dec 4th.

Global Wireless Data Market Update - 1H 2009 September 21, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, MVNO, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 6 comments

Global Wireless Data Market Update - 1H 2009

Download: PPT | PDF

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (together) are adding around 20M new subscriptions every month. China crossed the 700M subscriptions mark in July while India’s total went past 450 in Aug. Overall, the global subscriptions penetration is above 64%. During 2009, services revenues further tilted towards data services, increasing 21% from 2008 EOY.

The overall global mobile revenues (including equipment) for the year are expected to stay flat as the impact of recession was felt in many geographies in the first half of 2009. While countries like US, Japan, China, and India showed very little signs of pullback, most of Europe (except France) and the developing world are expected to experience a decline in overall service revenues in 2009. For the first time, mobile data contributes approximately quarter or 25% of the total global service revenues. Additionally, except for India, all major markets have their data contribution percentages above 10%.

For some leading operators, data is now contributing over 40% of the overall revenues. However increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to the new services such as Mobile Advertising, Social Networking, Commerce, Mobile Wallet, and others, different services helped in adding billions to the revenues generated in 2009. US continues to lead Japan and China in total mobile data revenues by a healthy margin.

NTT DoCoMo continues to dominate the carrier ranking in terms of mobile data service revenues, however, Verizon Wireless which became #2 replacing China Mobile is slowly edging towards the #1 spot and is likely to overtake DoCoMo within the next few quarters.

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

Though 4G as a standard hasn’t been defined yet, the discussions around LTE (and to some extent WiMAX) grew intense and started climbing the slippery slope of the hype curve. Many prominent operators have come out in support of LTE with Verizon being the most aggressive in launching their next generation network in 2010.

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

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

Impact of Global Recession

Service Revenues

ARPU

Mobile Data Traffic

Subscriptions

Others

As usual, we will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Nov 2009. The next Global Wireless Data Market update will be issued in March 2010.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

Mobile Application Store event at CTIA September 20, 2009

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My good friend Ajit is hosting the first ever Mobile Application Stores conference at CTIA with a great lineup of speakers. Details below:

The Mobile Application Stores, Strategy and Deployment conference http://www.mobileappevent.com/ is proud to announce its all-star speaker lineup for this unique event. Mobile Application Stores is a partner seminar of International CTIA WIRELESS I.T. and Entertainment October 8th in San Diego

Mobile Application Stores is the only conference to focus exclusively on the business of mobile applications and will focus on the tremendous opportunities in the mobile apps stores ecosystem. The event is designed to give a complete understanding of how to capitalize on this dynamic market.

Featured speakers for the event include:

• Dr. Jin-Sung Choi Ph.D, Senior Vice President, Head MC Global

Product Planning Team, LG Electronics Korea

• George Linardos Vice President, Product Management, Media, Nokia

• Ilja Laurs Founder & CEO, GetJar.

• Tim Haysom, Chief Marketing Officer,OMTP

• Mike Merril, CEO-Smart Phone Technologies

• Ajit Jaokar, President-futuretext

• Chetan Sharma, CEO, Chetan Sharma Consulting

• Jouko Ahvenainen, Founder, Grow VC International

• William Volk, CEO, PlayScreen

• Sena Gbeckor-Kove, Chief Technology Officer, imKon

The timing is perfect for an event like this. The Apple Appstore announced its billionth download in less that 9 months after opening and the recent launch of LG’’s Applications Store and Windows Marketplace for Mobile as well as Android and the Blackberry App World are making tremendous impact in the mobile marketplace.

Mobile Application Stores is co-located with the largest wireless event in the U.S., International CTIA Wireless I.T. and Entertainment.

Registration is only $295 at http://www.mobileappevent.com/

About Mobile Application Stores: The Mobile Application Stores event is produced by futuretext, a London based research, consulting and publishing company. For additional information, please contact Larry Lockhart at NextVision Media at 727-388-9849 or Larry@nextvisionmedia.com or Ajit Jaokar Ajit.jaokar at futuretext.com The web site again for registration is: http://www.mobileappevent.com/

Mobile Breakfast Series – we are all set September 18, 2009

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Really excited about the upcoming Mobile Breakfast Series on Tue, Sept 22nd. Working out the kinks, taking care of last minute details. We have had a great turnout and support from the mobile community in pacific northwest. Additionally, thanks to folks who are making the trip from California, Oregon, and British Columbia. Your support is much appreciated. The quality of attendees is just excellent. See the graph below for yourselves

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Thanks to our generous sponsors – Openwave, Motricity, and Clearwire for making this possible.

State of the Union: Where do we go from here?

The Mobile Industry has been growing by leaps and bounds. We will take a stock of where we are as an industry and how are some of the battles, opportunities, and challenges are shaping up for the near and distant future. We will discuss Open, Appstores, Mobile web, Mobile Commerce, 4G, Business Models, Consumer Behavior, Smartphones, and much more. To help us guide through the discussion are some of the best minds in the industry.

Mike Woodward, VP, Mobile Device Portfolio, AT&T

Marianne Marck, SVP, Technology, Blue Nile

Michael Mace, Principal, Rubicon Consulting

Jim Hudak, VP & GM The Americas, INQMobile

See you there

Events this month September 5, 2009

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Sept is turning out to be a busy month. Events i will be attending are as follows:

First up is Mobilize on Sept 10th

Ultraband: A Fast Platform For Innovation

When the nation of Korea commits to providing its citizens with 1 Gbps wireless broadband by 2012, the world’s innovators should sit up straight and listen. It’s a clear sign that bigger and bolder things are coming. We assemble a panel of world-class thought leaders from the worlds of broadband, wireless and consumer services and ask them when we will see true Ultraband appear — and what innovations and costs that future holds. A must-attend panel for entrepreneurs, strategists and product managers to gain essential insights ahead of the curve.

Moderator - Chetan Sharma President, Chetan Sharma Consulting

Phil Asmundson Vice Chairman and National Managing Partner – Technology, Media and Telecommunications, Deloitte LLP 

Ken Denman CEO, Openwave Systems 

Abhi Ingle VP, Industry and Mobility Application Solutions, AT&T 

Rick Keith Senior Director of Strategy, Broadband Access Solutions, Motorola 

Then, i fly to Toronto for Mobile Media Week. I will be giving a keynote on “Mobile Data Tsunami” and how we manage this growth. And right after will moderate a panel with Motorola, Verizon, and Canwest

The Mobile Data Tsunami Keynote with Experts Symposium
Chetan Sharma – President, Chetan Sharma Consulting & Author: Wireless Broadband ~ Mobile Advertising
Michael Dixon – VP Wireless Networks, Motorola
Aditya Khurjekar – Director, New Business Development, Verizon
Paul Burns – VP Digital, Canwest Broadcasting

Then, we our inaugural sold-out Mobile Breakfast Series event in Seattle on 22nd where i will moderate a panel on “State of the Union” with

Mike Woodward, VP, Mobile Device Portfolio, AT&T

Marianne Marck, SVP, Technology, Blue Nile

Brendan Benzing, SVP, Product Management, Motricity

Michael Mace, Principal, Rubicon Consulting

Jim Hudak, VP & GM The Americas, INQMobile

Then, i fly to Dallas on 24th to participate in 3G Americas Analyst Summit.

In case you missed

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

here are the Aug stories that we contributed to ..

Fortune - Bandwidth hogs - iPhone and other smartphones

Telecompaper - US mobile data market grows over 30% in Q2

Mediapost - Prepaid: Too much of a good thing?

GigaOM - State of the US Wireless Market Q2 2008

IT Business Edge - Data Helps Wireless Carriers Work Through the Recession

FierceBroadbandWireless - Report: 3G penetration about 40% in 2Q

FierceMobileContent - US mobile data service revenues jump to $10.6B in Q2

IT Business Edge - Good Times Ahead for Telecom Vendors

Mercury News - FCC probes Apple’s rejection of Google Voice for iPhone

IT Business Edge - Cellular Data Explodes, Even in Bad Economy

Wireless and Mobile News - The worst is over says Chetan Sharma

US Wireless Data Market Update - Q2 2009 August 8, 2009

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Gaming, Mobile Search, Mobile Usability, Patent Strategies, Patent Strategy, Smart Phones, Speaking Engagements, Strategy, US Wireless Market, Unified Messaging, Usability, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

US Wireless Data Market Update - Q2 2009

Download: PPT | PDF

Executive Summary

The US wireless data market grew 7% Q/Q and 30% Y/Y to exceed $10.6B in mobile data service revenues and thus exceeded $10B for the second straight quarter. As we mentioned in our Q1 2009 research note, given the strong growth in data revenues shown by the top carriers and the increase in service revenues overall, the worst is over for the US mobile industry. In summary, the recession has been all but a tiny blip in its growth trend and the US mobile market has weathered the downward spiral in economy better than its counterparts in other developed nations. Of course, recession doesn’t treat all players equally, so, some have had a negative impact and will need more resources and effective strategies to claw back to the their previous market position.

The US subscription penetration was approximately 90.4% at the end of Q209. The current rate of net-adds (subscription) is approximately 3 every second (compared to a net gain in population of one person every 10 seconds). While the flailing economy hit certain segments of the wireless ecosystem hard esp. the infrastructure and handset segments, consumers haven’t really pulled back on the mobile data overall spending. Additionally, the CAPEX spending will stay strong in 2009 given the activity around 3G/4G deployments and trials. As expected, there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers.

As we mentioned in our last two research notes that this time around, the fate of the US mobile industry is more closely tied to the overall economy compared to the previous recessions. As the consumer sentiment improved over the last 3-4 months along with better than expected Q1-2 2009 earnings from corporations, the mobile industry is back on track. While the structural flaws in various industry segments remain, and the economy is a crisis away from the double dip, the outlook for the remainder of 2009 remains bright and we are expecting the overall data revenues to now increase by 32% compared to 2008 with a record-setting Q4.

US Wireless Industry in Recession - The light at the end of the tunnel is indeed not from the oncoming train

Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.

Q2 2009 reported a much better 1% decline (compared to 6.4% in Q1). On an yearly basis, the GDP is expected to change by 3.2% for 2009 and the service revenues are expected to  account for 1.13% of the US economy by year-end.

As mentioned in the previous reports, while in the past, the recession hardly impacted the wireless industry, this time around; it is going to be more tied to the recession. In the past couple of months, the consumer sentiment has improved and the Q109 earnings have been better than expected. While there are still many structural flaws in the financial and housing industries and the unemployment is at a 25 year high of 9.4% (though it dropped in July from 9.5% in June), consumers are feeling better about the economy and their own prospects in it.

So, what does this mean? Well, the markets can still be volatile, but overall the market seems to be feeling better about the economy than it was in February. The Conference Board Consumer Confidence Index though retreated from June is at a healthy 46.6.

Given that consumer sentiment is improving, it is clear that the US mobile data market is all but back from the recession. While some segments within the mobile industry might be suffering, there has been an increase in spending overall.

What to expect in the coming months?

We noted in our Q3 2008 note that we will get a better picture of the impact of the recession on the wireless industry in Q109 as it was the first full quarter after the seasonal holiday quarter. There are two micro trends that are clear. First, as expected, due to the high unemployment, the data card segment took a hit. It is starting to recover in due course as more of the workforce comes back over in the next 18 months.

Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid constituted 82% of the net-adds in Q209 up from 61% in Q109 and 21% in Q208. It is not clear if the good times will bring back the prepaid subscribers to the postpaid realm or like the consumers who are canceling their landline connections and moving to mobile, these customers will get used to savings and the prepaid lifestyle. The fight for the low-end customer is also having an impact on the traditional prepaid players and the price pressure is reducing their margins.

It is quite likely that 50-60% of such consumers don’t go back to postpaid thus permanently lowering the ARPU base for such customers and carriers who have experienced more postpaid to prepaid shift will have to make up for the lost revenues elsewhere.

The landline replacement by Mobile trend continued now reaching almost 24% by Q209. Messaging continues to grow. The messaging volume was up 15% and messaging revenue was up 11% QoQ. The data access (excluding data card) including flat rate data plan subscriptions have also show significant strength lately. In addition to smartphones, we are also seeing increased mobile data activity amongst feature phone users. With its expanding 3G network, T-Mobile like its peers has started to benefit from smartphone penetration reaching to 6% of its subscriber base. Overall, the US market will exceed 25% penetration of smartphones in Q3 2009.

The increased use of smartphones and datacards is putting a pressure on carrier networks and accelerating their strategies to deploy LTE/WiMAX. We estimate that by end of 2009, the US mobile data traffic is likely to exceed 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, operators will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discuss mobile data traffic in much more detail in our paper “Managing Growth and Profits in the Yottabyte Era.” (I will be giving keynotes on the subject at the Mobile Innovation Week in Sept and at the ISACA meeting in Oct)

The positive factors are helping negate the negative factors and given the strength of 3G and smartphone adoption, the increase in activity on the appstores front, and in general, a better awareness of mobile data services and applications amongst consumers, any decline due to the loss of data card revenue and postpaid transition to prepaid accounts has been taken care off. In particular, Verizon and AT&T have done really well. Smartphones remain a bright spot, which in turn has a direct positive impact on the data revenues. Even with the decline in handset sales, smartphone segment will continue to increase in 2009 accounting for almost 30% of the overall device shipments.

There is also a concerted effort underway to move beyond the traditional subscriptions and expand the mobile universe to wireless-enable other consumer devices (What did your refrigerator say to your microwave while you were gone?).

Coming back to the 2009 forecasts, we are raising our estimates for the mobile data service revenues to $45B for the year. 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 Q209 US wireless data market is:

Service Revenues (Slides 11-12, 17-18)

ARPU (Slides 13-15)

Subscribers (Slides 16-17)

Applications and Services

Handsets

Misc.

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

Your feedback is always welcome.

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

Thanks.

Chetan Sharma

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

In case you missed August 3, 2009

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

here are the July stories that we participated in ..

WSJ - Big Phone Companies Are Unlikely US Antitrust Target

GigaOM - Mobile Broadband Will Trigger Global Innovation

BusinessWeek - The Wireless Data Boom Will Cost the Carriers

Gestion - Del compromiso a la compra (in Spanish)

BusinessWeek - AT&T’s Designs for the Wireless Market

Mediapost - IAB Unveils Mobile Media Buying Guide

Xconomy - A Yotta Insights on Making Money in Mobile

Mediapost - AT&T Wants Devices To Expand Use of Wireless Networks

Mobilize - discount available for a great conference August 2, 2009

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gigaom-sponsor

mobilize-sponsor

GigaOM’s Mobilize conference is one of those events that i can recommend without reservation. I thoroughly enjoyed the event last year, having moderated two sessions.

This year’s event is looking to be a great one as well. I will be moderating the Ultraband panel (more on this later).

I am happy to pass on a 10% discount to AORTA readers.

Avail by clicking here

More info on the conference:

The iPhone and a billion downloaded apps is just the start of a boom. Will Netbooks be next?

Mobilize 09 is a one-day conference that brings together the thought leaders and practitioners of the mobile web and telecom ecosystems for demonstrations and debate. We’ll examine what it means to have wireless broadband speeds at the Gigabit scale and how the explosion of platforms beyond traditional handsets creates new opportunities for entrepreneurs, investors and consumers.

Sanjay Jha the co-CEO of Motorola and Cole Brodman, CTO of T-Mobile are this years Keynotes. With over 50 confirmed speakers to date, you should not miss this opportunity to network with the leaders who are defining the future of wireless broadband.

Plus of course our annual Launchpad competition where 10 of the newest mobile startups are debuted!

http://events.gigaom.com/mobilize/09/launchpad/

Hot Topics to be Covered Include:

* The Netbooks, MIDs and the Ultraportable Boom

* Ultraband: A Fast Platform For Innovation

* Monetizing your Apps

* Monetizing Context and Location

* Innovating New Products And Service Ideas

* “Appstore” Models

* Mobile Analytics Panel

* VC Outlook on Investments

Find your area of interest at http://events.gigaom.com/mobilize/09/

FCC probes Apple’s rejection of Google Voice for iPhone

Posted by chetan in : US Wireless Market , 2 comments

Talked to Mercury News about FCC’s decision to look into the Apple app rejection of GVoice

FCC probes Apple’s rejection of Google Voice for iPhone

By Troy Wolverton and John Boudreau

Mercury News

Posted: 07/31/2009 07:37:55 PM PDT

Signaling heightened scrutiny of the wireless industry, the Federal Communications Commission said Friday it was investigating why Apple rejected the Google Voice application for the iPhone.

The FCC sent letters to AT&T, Apple and Google asking for information about the decision and, more broadly, about how Apple runs its applications store.

The informal inquiry comes as part of a broader look by the agency into competition in the wireless industry. Earlier this year, prompted by Congress, the FCC started investigating the exclusivity agreements that tie particular handsets to specific carriers, such as the one that binds the iPhone to AT&T.

“Recent news reports raise questions about practices in the mobile marketplace. The (FCC’s) inquiry to these companies about this matter reflects (its) proactive approach to getting the facts and data necessary to make the best policy decisions,” FCC Chairman Julius Genachowski said in a statement.

The inquiry focuses on voice over Internet (VOIP) applications on wireless phones. It seeks information on how Apple has treated other VOIP programs submitted to its application store and whether AT&T has permitted the use of Google Voice on phones other than the iPhone. The agency also wants to know what role, if any, AT&T played in Apple’s decision to reject Google Voice for the iPhone and remove the other applications.

But the inquiry goes far beyond just that issue, seeking information from Apple and AT&T about what other applications Apple has rejected and why.

A Google representative acknowledged that Apple had rejected its Voice application for the iPhone and said Google would respond to the FCC’s inquiry, but didn’t comment on concerns raised by the agency.

An Apple representative declined to comment on the inquiry.

AT&T points at Apple

AT&T spokesman John Britton said the cell phone service provider is not involved in approving applications for the iPhone. “Apple manages the application store,” he said.

But Britton declined to say whether AT&T sets guidelines for Apple about what programs are or are not acceptable on its network. There are indications that it does.

In May, Apple blocked Sling Media from releasing an application that would have allowed iPhone users to watch television programs transmitted from a Slingbox over AT&T’s network. Instead, the application was limited to transmitting those television signals over Wi-Fi networks.

In explaining the decision, an AT&T representative said at the time that the company’s terms of service — which had been updated immediately before the release of Sling’s application — forbade the use of its network to transmit television signals.

But other phones on AT&T were previously able to use the Sling application, suggesting that the company may be treating the iPhone differently. Similarly, Google Voice is available on phones other than the iPhone, including, according to reports, ones that work on AT&T’s network. But users of those other phones, which include models of the BlackBerry from Research in Motion, are able to download applications from more than one store. In contrast, iPhone users generally can get applications only through Apple’s store.

Chetan Sharma, an independent wireless industry analyst, said the FCC appears to be staking out new ground in regards to mobile phone applications.

“The FCC is looking to take a stance that if an app is available on one platform, there should be no reason it is not available on another platform,” he said. “The FCC wants to make sure consumer interests are not being harmed.”

Phenomenal success

Apple’s application store has been a phenomenal success since it launched last summer. IPhone users have now downloaded a total of 1.5 billion programs from the store and can choose from some 65,000 of them.

But developers have often been frustrated by the way Apple has run the marketplace. The company has at times taken weeks to review applications after they’ve been submitted and typically provides no explanation when it rejects them.

Developers and users both have also been frustrated by what have seemed capricious or self-interested decisions about which applications or features of applications are prohibited. For example, some programs have been allowed to stream video over AT&T’s network, while others haven’t. Meanwhile, Apple has not permitted any applications that might rival its iTunes music store or would allow iPhone users to make VOIP calls while connected to AT&T’s network.

After previously taking a largely hands-off approach, the FCC has started to take a closer look at the wireless industry. The agency is considering whether it should mandate “open access” rules for the industry that would require carriers to allow consumers to use the devices and applications of their choice.