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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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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.

New Paper: 5G - The past, present, and future of the mobile industry evolution March 16, 2015

Posted by chetan in : 4G, 4th Wave, 5G, Chetan Sharma Consulting, Connected Intelligence Era, European Wireless Market, Mobile 2015, Mobile Ecosystem, Mobile Future Forward, Mobile Payments, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

5G - The past, present, and future of the mobile industry evolution

- A Mobile Future Forward Research Paper

http://www.chetansharma.com/5G.htm

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Introduction

The deployment of LTE otherwise known as 4G is in full swing. Operators in US, Japan, Korea, Finland, Australia, and others started deploying the new technology some years ago and are nearing completion of their network build out. Others in Europe and Asia are on an aggressive schedule to catch-up. We can expect that a majority of the operators will have LTE up and running in the next couple of years. Operators have sunsetted 2G. In some instances they even stopped investing in 3G and are putting all of their investments in the 4G bucket. As mobile networks transition to all IP, operators will be able to re-farm their spectrum assets for 4G deployments. Beyond LTE, operators are looking at LTE-A to provide more efficiency and network bandwidth to consumers.

In mature LTE markets like the US, Korea, and Japan, the talk has shifted to the next generation technology evolution – 5G. Even Europe, which still has a long way to go before their 4G is built out have set their sights on 5G to recapture the mantle and the pride of the GSM days. Korea and Japan led the world in 3G but lost the lead of 4G to the US. They both are eager to be considered leaders in 5G. Japanese government has set the ambitious goal of having 5G by the Tokyo Olympics in 2020. US regulators have started to talk about 5G and the future spectrum needs as well.

Since the launch of 1G networks in late seventies and the eighties, we are now onto the 5th iteration of the network technology evolution. We have gone through a lot of technology skirmishes but with 4G and likely with 5G, we are narrowing the differences between technology options giving significant technology scale advantages to the ecosystem.

As network technologies have evolved, the application landscape has changed as well. 1G or AMPS was all about basic voice services. GSM and CDMA (2G) digitized mobile and we saw basic messaging and data services introduced into the market. 3G (WCDMA, EVDO) introduced the potential of data services to the ecosystem and the consumers. The launch of iMode in Japan became the poster child of data services for much of the 3G evolution around the globe. Midway in the 3G growth, new players like Apple and Google entered the ecosystem and laid the foundation of unprecedented data and application growth. Business models and control points in the ecosystem changed overnight. The insatiable data demand led to the acceleration of the 4G services in many leading markets. For the first time, the network technology was data-led. We are clearly moving towards an IP infrastructure where voice is just another app running on the data network.

In fact, data is the primary revenue engine for the services providers and rest of the ecosystem. In Japan, almost 80% of the revenue now comes from data services. In the US, we are approaching 60%. Other nations are not far behind. Even the emerging markets have caught up very fast and in some instances leap-frogging their western counterparts in certain application and services segments.

All through last four generations, the fundamental business model of “metering” remained the same. Barring some exceptions, there has been a direct correlation of usage and revenues. Will 5G be any different?

Another significant standard that has evolved is Wi-Fi. The impact of Wi-Fi on the mobile ecosystem can’t be overstated. It has become so pervasive that we have ask the question how long before nationwide Wi-Fi first networks start to make a run for the wallet share in major markets. How will Wi-Fi fit in with 5G, will the two standards merge?

Will 5G offer new business models or explore a different relationship between usage and cost? Will consumers warm up to the idea of value-based pricing? Or Will access just become a commodity layer like water and electricity and most of the value will reside in the platform and application layers? Though we have started to see the shifts (as discussed in detail in our 4th wave series of papers), how fast will future accelerate? Will the ecosystem landscape be markedly different than what we have in place today?

We won’t know the answer to some of these questions for a while but it is worth exploring the lessons from the past and potential disruptions that 5G could bring to the ecosystem that benefits the end customers. In the end, it might not be about the technology at all but about the business models that shape the technology landscape. This paper explores 5G through the lens of the past and explores the wireless world beyond 2020.

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. We will be discussing 5G and its impact on the ecosystem in more detail at Mobile Future Forward.

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.

5G: The history of the future February 18, 2015

Posted by chetan in : 4th Wave, 5G, Connected Intelligence Era, Fourth Wave, Internet of Things, IoE, IoT, Mobile Applications, Mobile Future Forward, Technology Cycles, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

5G: The history of the future

- Chetan Sharma

Note: This piece is based on an upcoming research paper on 5G

Over 50% of the world’s LTE subscribers are in the US right now. With aggressive 4G deployments aided by the thriving application ecosystem, US wrestled back the leadership mantle of the mobile world. While consumers are enjoying their mobile broadband devices and services, chatter around 5G has begun. Some new to the industry might be perplexed by all the talk of a technology cycle that is years away. However, if we study the 35 year old history of the mobile industry, things are going according to the plan.

All the major mobile markets have started to focus on defining 5G and the subsequent launch dates. Even Europe, which still has a long way to go before their 4G networks are built out have set their sights on 5G to recapture the mantle and the pride of the GSM days. Korea and Japan led the world in 3G but lost the lead of 4G to the US. They both are eager to be considered leaders in 5G. Japanese government has set the ambitious goal of having 5G by the Tokyo Olympics in 2020 (Russia wants to do it by 2018 for the FIFA World cup). US regulators have also started to talk about 5G and the future spectrum needs as well.

Students of the industry will observe that these network technologies evolve over a 20 year cycle. In general, the time to peak (the point where the net revenues for the technology peak and start dropping) is generally slower than the time from peak to sunset. This is primarily because as the last generation is peaking, investments and roll-outs of the new generation of technology starts thus taking away the share at a faster pace. On an average, the time-to-peak has been 12 years while the time from peak-to-sunset has been 7 years. Obviously, there are shifts in different countries depending on spectrum auctions; competitive dynamics, investment availability but they largely follow the 20 year cycle. For each of these 20 year cycles, the R&D and standardization time period of 7-8 years typically precedes the first major deployments of the network technology. So overall, these are big cycles of 25-30 years from initial concepts to the last subscription getting off the network technology. The research work for 5G got started in 2012 and we might have our first networks by 2018-2020.

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While there is no consensus yet on what 5G will feel and look like, there is some agreement on the types of performance criterion that are worth considering. Some of the performance goals for 5G under discussion are:

· Average - 300-500 Mbps and > 10 Gbps

· < 1 ms latency

· (Almost) 100% network coverage

· 1000 times reduction in power consumption

· Very high reliability in all circumstances especially indoors (99.999%)

· Deep indoor coverage (+20dB)

· 30x higher device density

· 10-100x connected devices

· Significantly higher security requirements

The first four generations have largely followed the same business model that of “metering.” The operator typically invested in assets such as spectrum, network build out, operational capacity, etc. and then built the business based on the usage. In the early days, it was more of a linear model with tight correlation between the usage and the cost of the usage but as the markets matured, the past revenue curves melded into the new ones. That’s the reason voice and messaging are offered as unlimited packages designed around the data services.

Will 5G offer new business models or explore a different relationship between usage and cost? Will consumers warm up to the idea of value-based pricing? Or Will access just become a commodity layer like water and electricity and most of the value will reside in the platform and application layers? Though we have started to see the shifts, how fast will future accelerate? Will the ecosystem landscape be markedly different than what we have in place today? We will answer these questions in due course.

Another important question for the industry will be around the control points. From 1G to 3G, the industry clearly revolved around the operators. Almost all of the revenue in the industry flowed through the operators and they controlled in excess of 75% of the industry revenue. However, primarily because of the broadband capability of the networks, the emergence of the powerful computing platforms in iOS and Android, and very powerful computing devices, the picture in the 4G era is changing. We estimate that the overall control of the industry revenues by the operators will shrink to 50% or lower within the next 5 years. This doesn’t mean that the operator revenues will decline in aggregate, they will continue to increase 1-3% globally but the ecosystem is growing much faster and as such the operator share will decline.

With 5G, it is very likely, that a highly distributed application and services ecosystem will become the dominant industry source of revenue around which rest of the mobile solar system will evolve. The tectonic shifts are likely to result in fewer mobile operators in the 5G technology era. Most of the countries will have 2 or 3 major operators. Given that so much mobile traffic is indoor, we will see the wireline and wireless operate merge at a frantic pace in the next 5 years. Many will also become content owners, banks, and might even operate car companies. On the flip side, we might see the rise of non-traditional MVNOs wherein vertical industry players will bundle in IP access with their services.

The noise around 5G will only grow louder in 2015 but it is normal. All mobile network technology evolutions have gone through the same cycle in the last 35 years and 5G will be no different. However, the ecosystem and the control points in 2025 are likely to look markedly different from the first three cycles. Tighten your seat belts and enjoy the ride.

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.

Chetan Sharma is the President and CEO of Chetan Sharma Consulting – a global management consulting firm focused on the mobile space. Chetan has been in the industry since the 1G days and is often found working with clients around the globe on strategies applicable to 4G, 5G and beyond. He is an author of over a dozen books and over 150 papers/articles on wireless. @chetansharma

Mobile Breakfast Series Recap: Mobile Commerce and Payments

Posted by chetan in : Mobile Breakfast Series, Mobile Commerce, Mobile Payments, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

We hosted our first event of the year yesterday and were blessed with some terrific weather and views of the picturesque Puget Sound. This year we want to tackle the topic of mobile commerce and payments. In our annual predictions survey for 2015, Mobile Payments emerged as the breakthrough category for the year. Additionally, mobile commerce is just booming in all parts of the world with some very interesting implications for the ecosystem.

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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.

We had a terrific group to discuss the mobile commerce and payments trends, folks who are in the trenches making things happen on a daily basis and come to the problem from different angles.

Sebastien Taveau, VP and Chief Developer Evangelist, MasterCard

Sebastien serves as Chief Developer Evangelist for the Open API team at MasterCard where he leads the outreach to the global developer community. Puzzle solver, strategic thinker, beyond-the-horizon watcher and hands-on doer, Sebastien has technical and professional experience spans more than 20 years in various industries. He was previously with Validity as CTO and Paypal leading the technology integration efforts.

Prat Vemana, VP – Mobile and Commerce, Staples

Prat leads Staples’ eCommerce product teams responsible for the online customer experience (CX) on desktop, mobile and retail-store digital interactions. He also manages global shared services teams for onsite search, user experience research, architecture, A/B testing and analytics. Prior to his current role, Prat lead Staples’ Velocity Lab in Cambridge and drove the company’s global mobile strategy. Prat’s product and CX teams operate out of the company’s corporate headquarters in Framingham, Massachusetts and Staples Labs across the country, including Cambridge, Seattle and San Mateo.

Sam Liang, CEO and Co-Founder, Alohar Mobile

Sam Liang is CEO and Co-Founder of Alohar Mobile. Previously, Sam was the platform architect and lead of Google Location Server and API, which powers thousands of mobile applications on Android and iOS. Sam held a number of patents in wireless and mobile technologies. Sam has a Ph.D. in EE from Stanford University. Alohar was acquired by Alibaba, now the 4th largest tech firm on the planet.

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(Source: Alohar Mobile)

The salient points of discussions were:

We covered a range of topics. Mobile Commerce is driving the 4th wave for sure with so many interesting ideas and companies popping up every month. As usual, I had a lot of fun moderating the panel and engaging the audience. Thanks to all who joined and we will be in touch regarding future events. For now, we are expanding the breakfast series to Vancouver where we will host an event on April 14th and our Mobile Future Forward annual summit will take place on Sept 29th. Stay tuned for more announcements.

Thanks and see you around.

Mobile Predictions 2015 January 1, 2015

Posted by chetan in : 4th Wave, 5G, Connected Intelligence Era, Mobile 2015, Mobile Future Forward, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

Mobile Predictions 2015

http://www.chetansharma.com/MobilePredictions2015.htm

 

 
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A very happy, healthy, and prosperous 2015 to you and your family. My thanks to all who participated in our 8th annual Mobile Predictions Survey. It is a unique polling of the insiders to get a glimpse into what the ecosystem is thinking about the future.

2014 was without a doubt an awesome year for the mobile industry. Not only the ecosystem perform well on almost metrics, it has started to open up the tent to bring in other industries as well which is where lot of the action is going to be in the next 5-10 years. As we discussed in the Connected Intelligence Paper, the Golden Age of Mobile is here and we are in for one heck of a ride.

They were so many milestones that it is hard to capture them in a short note but it is worth noting the steady climb of subscriptions past the human population, the continuous of apps and data revenue, and the disruption of vertical industries like transportation, travel, and health were probably the defining highlights of the year. The 4th wave is indeed in full-effect. Many incumbents are struggling to adjust and the torrent of startup innovation is changing the global landscape of how new revenue is generated in the ecosystem. By our count, there were at least 38 companies generating a billion dollars of more from 4th wave services. This is a whopping 442% jump from 2012. The average amount of data consumed by smartphones doubled in most LTE markets and we can expect a similar jump in 2015.

Just consider the amount of change we have seen in the first half of this decade: 483% growth in digital information, 12,816% growth in mobile data traffic, 339% growth in smartphone sales, 1,344% growth in tablets sales, 73% growth in data revenues, 433% growth in OTT revenues, 50% growth in mobile industry revenues, and 341% growth in mobile apps revenue. Can you imagine what the next 5 years will be like? Stay with us and we will keep you posted J

Our annual survey is a way to engage our knowledgeable community on the trends we are likely to see the next year. We put some of the pressing questions to our colleagues and industry leaders from all corners of the world. The aggregated view and the nuances help us in getting a sense of what’s to come. Executives, developers, and insiders (n=175) from leading mobile companies and startups from across the value chain and from around the globe participated to help see what 2015 might bring to surprise us. The survey draws upon the unique collective wisdom of the folks who are the center of the mobile evolution. Thanks for being part of our annual ritual.

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25 names were randomly drawn for the limited edition of Mobile Future Forward 2014 Book and they have been notified. Welcome 2015!

Kind regards,

Chetan

1. What was most newsworthy in Mobile 2014?

The security and privacy breaches were rampant throughout the year, especially in the US so it is no surprise that it topped the big stories in 2014. The long awaited milestone of the number of mobile subscriptions passing the human population finally happened though it was anticlimactic. Apple Pay was a big story as well and the company has executed it perfectly so far. The likes of Uber and Airbnb continued to shake up the regulators and the logistics industry worldwide. The silent story of the year was the dominance of the Chinese OEMs who now control 40% of the smartphone sales. Samsung’s decline was quite predictable with competition on both ends. Will the company find a way to claw back to former prominence? The growth of a number of new 4th wave companies was also a big story for the year.

2. What will be the biggest mobile stories of 2015?

The connected devices are everywhere from our wrists to homes to streets. We might see some new device experiences in 2015. Foldable devices are rumored to be in the works. Will we grow past the rectangular screen in our hands? Mobile data will continue to define a bulk of the industry revenues. Will Apple watch be a big tipping point for the wearable market? 5G discussions have certainly heated up as we closed 2014 and we will see more noise and progress in 2015. Apple vs. Samsung has become an old story. Folks are expecting a change in leadership at the big 4. Net-neutrality is likely to be a big story in the first half of 2015.

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

Apple and Google continue to dominate the top two positions. While Samsung was still ranked #3, its influence waned a bit in 2014 while the stars of Facebook rose on the back of its mobile performance. Operators rounded out the top 5.Amazon and Microsoft suffered minor declines.

4. What will be the breakthrough categories in mobile in 2015?

Given the introduction of Apple Pay, there are a lot of expectations around mobile payments and commerce in 2015 and we could finally see the puncturing of the decade’s old financial system with some new energy and innovation. Other categories of interest are connected devices, wearables, health and fitness, and big data.

5. What will be the most popular consumer mobile applications in 2015?

Messaging continues to dominate the developing markets while there is more action around home automation, health, location in the developed world. Commerce and social remains hot everywhere.

6. What is likely to happen in the wearables category in 2015?

Will the wearables category stay niche or will the whole ecosystem grow? We are about to find out in 2015. Can Apple define the category like it did with the smartphones and can anyone besides make any money? Lot of questions, too early for the answers.

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

We have been asking this question for the last 5 years and the financial institutions have always come out ahead. However, this year, Apple surged to the #1 position on the back of Apple Pay. Will Google, Facebook, Paypal, Amazon, Startups cede the category to Apple? Some M&As are coming up in the space.

8. Who will make the biggest mobile acquisition in 2015?

Facebook surprised many with their blockbuster acquisition of Whatsapp and many think that Google and Facebook will continue to duel it out for big acquisitions in the same. They could be easily trumped by any Operator M&As which tend to have gazillion dollar valuations.

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

The space is fairly new and clearly startups are tinkering out with the most interesting stuff. Amongst the big companies – Google, Intel, Qualcomm, GE and AT&T are ahead of the curve.

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

Wi-Fi accounts for bulk of the mobile data traffic in almost all major markets hence the rise of mobile offload as the preferred solution for managing data growth. But, LTE deployment, spectrum acquisition, and tiered pricing remained the top solutions for the operators.

11. Which category will generate the most mobile data revenue in 2015?

Messaging tops in Asia and Africa. Apps and advertising do well in rest of the world. OTT services are starting to have a meaningful impact everywhere especially in Japan and Korea.

12. When will mobile commerce be greater than ecommerce?

The tipping point is coming sooner than you think.

13. The company bringing the most successful mobile gadget of the year - 2014 and 2015?

Apple and Apple. Xiaomi’s stars are on the rise and Samsung’s in decline. Can Xiaomi find success beyond Asia? Can Samsung muster innovation to challenge Apple and swat the challengers at the bottom?

14. Mobile company of the year - 2014 and 2015?

There was no argument that Apple rebounded with vigor and was clearly the mobile company of the year. T-Mobile and Uber won honorable mentions for being #2. For 2015, folks expect Google to surge and Xiaomi might surprise.

15. Automation and Digitization of industries will lead to?

I have been thinking about the question of impact from automation and digitization. As we discussed in our Connected Intelligence Era paper, there is no clear consensus on which way things might proceed. Historical evidence suggests net-growth in jobs but will enough high-end jobs be created to counter the decline the services industry jobs? It will be fascinating to watch and study the impact over the course of the next decade. More people thought there will be net-decline in jobs than those who thought we will gain the number of jobs from automation.

16. Which of the following are likely to happen in 2015?

A trillion dollar company was sheer fantasy until recently but can Apple defy odds to become the first company to achieve the milestone? In 2015? Many people thought so. We data rollover plans before they became reality this year. Expect data-only plans to start surfacing this year. Microsoft might sell rest-off Nokia and Alibaba is likely to make its US debut frightening the retail industry. Soft SIM M2M and Tablets are already a reality, will the trend move to Smartphones? A number of companies are up for grabs in 2015 so we can see a fairly active M&A season right away.

17. Which operator is best positioned for the digital world?

AT&T continues to be viewed as the leading operator in the digital space with Verizon, Telefonica, Softbank, and DoCoMo also investing heavily for their share of the 4th wave economy.

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

Mobile is impacting pretty much every major vertical. Our panel picked health, home, auto, M2M, fitness, and enterprise as the top disruption categories.

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

Disruption disintermediates incumbents as Uber and Airbnb showed so valiantly in 2015. The top categories for disintermediation were: transportation, advertising, retail, real estate agents and car drivers. Doctors and journalists are also on the list.

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

2014 was no contest for Tim Cook as he brilliantly led Apple to unprecedented growth. Apple ended the year with the market cap of $656 billion. Q4 is going to be darn impressive with probably the best revenue quarter in its history on the back of a record breaking iphone quarter. John “uncarrier” Legere came in second, followed by Jack “IPO” Ma, Sundar “Android” Pichai, and Mark “Internet.org” Zuckerberg. Honorable mentions were: Travis Kalanick, Jeff Bezos, Lei Jun, Lowell McAdam, and Ralph de la Vega. For 2015, folks are expecting Sundar Pichai to edge out Tim Cook who was closely followed by Jack Ma, Mark Zuckerberg, Jeff Bezos, and Lei Jun. Honorable mentions for 2015 went to Tom Wheeler, Travis Kalanick, Satya Nadella, Glenn Lurie, and Hans Vestberg.

So there you have it. Clearly a very exciting year on the cards.

Thanks again to everyone who contributed. Warm wishes for a terrific 2015. Look forward to seeing you around.

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 2015. The next Global Wireless Data Market update will be issued in Mar 2015.

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

Mobile 2014 - Highlights and Milestones December 29, 2014

Posted by chetan in : 4th Wave, Mobile 2014, Mobile 2015, Mobile Future Forward, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , 4 comments

Dear friends,

At the dawn of the Connected Intelligence Era, mobile continues to shape the digital landscape of opportunities and disruptions. 2014 was an incredible year with some key milestones, tectonic plate tremors, and events of significant consequence for the decade. In no particular order, the highlights and milestones of Mobile 2014 were:

If you haven’t taken the adventure ride on our 2015 Mobile Predictions Survey, kindly do so today. Survey closes on 30th Dec. Results will be announced next week. Winners of the Mobile Future Forward 2014 Book will be notified next week as well. Thanks to all who have already taken the survey.

· For the first time since the iPhone was launched, Apple will generate over $100B from the sales of iPhone alone. Samsung has generated over $100B from phones (feature phones + smartphones) in 2013.

· For the first time, US exceeded $100B in data service revenues thus becoming the first nation to do so.

· The Android device ecosystem will suffer its first and most significant drop in profits in 2014 with over 50% decline in expected profits for the year.

· In 2014, the number of cellular connections exceeded the number of humans on the planet (though this can be disputed depending on how one counts the cellular connections).

· The number of smartphones sold in the world exceeded 1.2 Billion.

· The number of phones sold in the world exceeded 1.9 Billion.

· The worldwide revenue from smartwatches was approximately $1.7B in 2014. 75% of this revenue was generated in the US.

· The number of operators making $1B or more from data services reached 50.

· The number of Internet users will exceed 3 billion in 2015.

· The messaging revenue continued to decline in the western markets. The usage was replaced by IP messaging usage but the lost revenue was not.

· Facebook is now operating at a $10B run rate revenue from mobile. Twitter and Yahoo also exceeded $1B in mobile revenue for the year.

· Amazon remained the king of the mobile commerce world with over $15B in revenues from mobile. Profits resembled a lake in the Sahara desert.

· Xiaomi became the leading OEM in China but the profit profile put it in the Amazonian camp.

· The success of Alibaba brought the Chinese giant into the company of giants becoming the 4th biggest technology player by market cap.

· The security breaches were rampant throughout the year especially in the US. Pretty soon it will be hard to find a qualified person without their credit and/or personal data compromised.

· The IoT hype machine was in full gear in 2014. The bulk of revenue was concentrated in the industrial/enterprise market.

· Apple introduced the Apple Watch, which is expected to be in the market in Q1 2015. It will define what the wearables market looks like for the next couple of years.

· The FCC had a blockbuster IPO, I mean, the spectrum auction, with almost $45B collected in the proceeds.

· The noise from the Net-neutrality wars reached its peak with President Obama weighing on the future of the Internet.

· The Sprint-T-Mobile deal fizzled before it could be announced but that didn’t stop big M&As to surface in both North America and Europe. Expect the big mergers to continue in 2015.

· Facebook completed the blockbuster acquisition of Whatsapp, which surprised many, but just like the acq. of Instagram, it will prove out to be a very savvy deal and leave the imprint of Mark Zuckerberg as one of the smartest and the gutsiest CEOs out there.

· There were several key industry leadership changes most notably the promotion of Sundar Pichai as the number 2 at Google and the placement of Satya Nadella as the CEO of Microsoft.

· T-Mobile continued to make waves with its uncarrier moves and the price wars have pretty much ensnared all the operators now with everyone expected to experience revenue and/or profit declines in Q4 and beyond (at least in the short-term).

· China Mobile’s customer base exceeded 800M, which is almost twice the size of the western European market.

· The Indian mobile subscription base is expected to exceed the 1B mark in 2015.

· The Chinese device OEMs accounted for approximately 40% of the device sales in 2014 making it the most powerful bloc in the smartphone space by volume.

· The average data consumption continued to increase a good rate in the US with an average smartphone consuming over 2.2 GB/month by the end of 2014. Other LTE markets around the globe experienced similar or higher growth rates.

· In the western markets over 90% of the devices sold are now smartphones. Globally, the number was 65%.

· The noise around 5G has started to pick up around the globe with Japan and Europe being the loudest.

· 75% of service revenue in Japan now comes from data and digital services.

· 20% of the data service revenue in Japan now comes from digital or 4th wave services.

· IBM and Apple signed a historic deal to bring iOS to the enterprise putting a big dent in the windows enterprise ecosystem.

· NTT DoCoMo, KDDI, China Mobile, and AT&T generated > $1B from 4th wave services in 2014.

· In India, just like President Obama in the US, Narendra Modi ran an effective digital and social media campaign and uprooted its dynastic opponent in the biggest landslide victory in decades.

· There were at least 38 companies who generated $1B or more from 4th wave services.

· Brazil soccer world cup, Seattle Seahawks super bowl victory, and Sochi Olympics provided mobile moments for the industry when the usage spiked beyond everyone’s expectations.

· Ebola dominated the headlines for much of the year. Mobile couldn’t do much this time around but hopefully we will be better prepared next time.

· Mobile has become the universal language of protesters around the globe. Clashes/protests in the US, Hong Kong, Egypt, Palestine, Italy, etc. – mobile played a crucial role in connecting and organizing people.

· HBO’s decision to offer a standalone service was a major milestone in the industry. Will it open the floodgates in 2015?

· Apple introduced Apple Pay, which is starting to change the financial ecosystem and has laid the foundations for potentially significant disruptions in the coming years.

· Google accelerated the market development for connected car with almost every OEM planning to release some flavor of autonomous car before the decade is out.

· Uber was by far the most fascinating 4th wave company to watch in 2014 for it disrupted with color and flair around the globe.

What was the highlight for you this year? What are you looking forward to next year?

Your feedback is always welcome. See you in 2015.

Best wishes for a terrific new year.

Chetan Sharma

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

US Mobile Market Update – Q3 2014 November 10, 2014

Posted by chetan in : 4G, 4th Wave, 5G, AORTA, Chetan Sharma Consulting, Connected Intelligence Era, Mobile Cloud Computing, Mobile Ecosystem, Technology Cycles, The Golden Age of Mobile, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update – Q3 2014

http://www.chetansharma.com/usmarketupdateq32014.htm

Download

Summary

The US mobile data services revenue exceeded $25B for the first time and increased 23% YoY and 7% QoQ. The US market will easily exceed the $100B mark in data revenues in 2014 thus becoming the first nation to do so.

Verizon became the second operator after China Mobile to cross the milestone of 100 Million postpaid subs.

The average mobile data consumption (cellular) crossed 2GB/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 100 hours.

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.

Smartphone penetration increased to 72% and roughly 93% of the devices sold now are smartphones.

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.

After a relatively quiet year, Apple had a blockbuster quarter with new product introductions. The expected bigger screen device arrived and was an instant big hit. It is going to do really well in Q4. The 6+ was in severe short supply and in Q3, the ratio of 6:6+ was 10:1 in the US market.

Apple also introduced two new products – 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 more disruptive. Apple’s classic approach of embracing the ecosystem and thinking end-to-end might finally disrupt the otherwise staid financial sector.

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

T-Mobile recovered all of its postpaid losses since Q3 2009. At its peak, T-Mobile had cumulatively lost almost 5 million subscribers. However, in the last 4 quarters, the 4th place operator has added over 4.5M subs to recover in a dramatic fashion. Sprint on the other hand lost postpaid subs for the 11th straight quarter.

Due to its strong performance, T-Mobile has narrowed the gap with Sprint to roughly 1M subs. As expected, Sprint launched a series of price cuts to counter T-Mobile’s uncarrier moves to recapture the value share of the market. The Sept and Oct numbers show that Sprint has improved its performance but will it be enough to maintain its #3 spot that it has had forever?

The US market had the best net-add quarter in a decade and probably the 2nd best quarter in the history of the US wireless market.

The net-adds rebounded strongly in Q3 2014 on the back of strong performances by Verizon, AT&T, and T-Mobile. The ratio of non-phone to phone net-adds was 1.66. 62% of net-adds were connected devices.

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.

Samsung – Can It Rediscover Its Mojo?

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?

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 theConnected Intelligence Era trends here)

As expected Iliad gave up its dream of acquiring T-Mobile. The deal never made sense and had no market merit. This has left DT scratching for other options. The most likely scenario is that Sprint and T-Mobile try to get married in 2017 again or the FCC/DOJ have a change of heart due to declining financial performance of the two players. Another possibility is America Movil getting into the fray. And finally, some cable companies are likely to flex their muscles at an opportune time.

AT&T acquired Mexican operator Iusacell last week. If approved (and there is little reason why it won’t), it will make AT&T a clear leader in North America with almost 127 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. Perhaps, US Cellular should sharpen its pencil.

4th Wave Revenues

For the first time, US operators revealed some of their 4th wave (digital) services metrics publicly. Verizon reported $150M revenues from M2M and Telematics. At the current run-rate, this will be a billion dollar business by early 2016. AT&T reported 2M 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. Sprint is also quite active on the 4th wave front but hasn’t shared any details yet.

Globally, we expect 37 companies to be generating a billion dollar or more from 4th wave services in 2014 – a 311% jump from 2012.

Microsoft Freemium Moves

First it was the OS, Now it is the Office portfolio – Microsoft is leaving no sacred cow unturned in order to gain relevancy in mobile. However, it seems that for the Office apps, Microsoft is essentially doing what it did for Windows Mobile i.e. just pare down the desktop OS for mobile. It never worked. The Office apps on competitive platform is a good strategy but they are still the pared down versions of the desktop app. As such, while people are downloading these apps out of curiosity, they are really not using them. However, the recent moves do indicate a willingness to rethink the business models, the platforms, and the distribution models which is a good start.

Amazon’s Mobile Aspirations

While Amazon is the biggest mobile commerce player in the world by a distance, its hardware aspirations have failed to impress. As expected, the Fire Phone was a complete dud. As we explained previously, it never had a shot. It was Zuned out of the market in record time (Facebook Phone probably holds the world record but Fire Phone wasn’t too far behind). A product without any substantial differentiation doesn’t stand a chance in this crowded market. While Kindle tablets had a tempting price point that made them relatively successful, Fire Phone failed across all dimensions. Software mistakes can be iterated upon. Hardware mistakes show up on the balance sheet.

In the meantime, Amazon is poised to have a blockbuster mobile commerce quarter to make it one of the most dominant players on the 4th wave.

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.

Apple Watch

After visiting the show floor at CES in January, we noted that “The space is going to get commoditized very quickly and it is likely going to get stratified into two major buckets – really cheap $10-20 wearables. The other bucket will be high-end fashion driven wearables.”

Earlier in the year, Xiaomi released a $13 tracker and Apple announced its new product in almost 5 years – the Apple Watch. The mid-market will be under tremendous stress.

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 has been a tremendous year for the mobile as it becomes omnipresence in every industry. We have already seen some massive moves, astounding acquisitions, and interesting strategic endeavors.

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

Against this backdrop, the analysis of the Q3 2014 US wireless data market is:

Service Revenues

· The US mobile data services revenues in Q3 2014 increased 7% and crossed the $25B market for the first time.

· The mobile data services revenue is on track to exceed 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 Q3 2014. Sprint and T-Mobile also maintained their rankings in the top 10 global mobile data operators.

ARPU

· The Overall ARPU rebounded to increase by $0.08. 

· Data contribution to the overall revenues is now at 58%.

Subscribers

· The US market had the best net-add quarter in a decade and probably the 2nd best quarter in the history of the US wireless market.

· The US operators added 6.3M new customers with T-Mobile leading the pack.

· 62% of the net-adds in Q3 2014 were from the non-phone category. The net-effect has been that while overall subscriber count has increased, there has been a negative impact on the ARPU. 

· Verizon’s tablet net-adds soared accounting for almost 71% of the overall tablets that were added in Q3. Verizon has caught up with AT&T on the tablet front.

· T-Mobile’s postpaid continued to see the positive growth for the sixth straight quarter. It has almost recovered all its losses that began in Q3 2009.

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. 57% of postpaid accounts at Verizon are now on shared plans. For AT&T, the number is even higher at 62%.

· 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 66% (up from 30% in Q1 2013) to Facebook’s quarterly revenues. Latest addition to the club is Twitter which is now doing 85% 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.

Connected Devices

· Connected devices (non-phones) accounted for almost 62% of the net-adds in Q3 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.

· Tablets form 70% of the connected devices sold.

· QoQ, the non-phone segment grew 30%.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 93% of the devices sold in Q3 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 72%.

· Android again outperformed iOS by a good margin. iOS is likely to bounce back in Q4.

· While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off. It renewed its entry into the battlefield with Windows phone last year but sales have been poor. While Microsoft has made steady progress in other regions, in the US, it’s not gaining any traction and its share remains at a measly 1-3%. (Read our paper to get more insights into why Windows hasn’t been able to make a dent so far).

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 59M making it the leading LTE operator in the world (next 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 79% 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 Feb 2015.

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

Interview with Matt Grob, EVP/CTO - Qualcomm September 18, 2014

Posted by chetan in : 4th Wave, AORTA, Chetan Sharma Consulting, Connected Intelligence Era, Internet of Things, Mobile Advertising, Mobile Applications, Mobile Future Forward, Wireless Value Chain, Worldwide Wireless Market , add a comment

Mobile Future Forward – Seattle – Sept 24th 8am-8pm

Registration (Registration closes this Friday)

In proud partnership with: Amdocs, Ericsson, HYLA Mobile, Intel, Mio Global, MoBack, Oracle Communications, Qualcomm, Synchronoss, and Tata Communications.

Mobile Future Forward Preview: Q&A with Matt Grob, EVP/CTO – Qualcomm

We are looking forward to welcome many of you to our Mobile Future Forward Summit next week. This is the final interview in the series and it is with our opening keynote speaker Matt Grob, EVP, Qualcomm Technologies and CTO. I am really excited that we will kick off the summit with Matt as he has deep experience and knowledge of the space and a compelling vision for the future. In his 23+ years at Qualcomm, he has been instrumental in taking many technologies to the market that we take for granted today. I had a chance to catch-up with Matt to give you a preview of our discussion at the summit next week.

MFF: The chipset roadmap gives us a sense of what new devices will emerge from the mobile platform. What are some of the things on the horizon that you are excited about, and that developers should pay attention to?

Matt: We continue to see a tremendous amount of innovation in smartphones. In the next 5 years, analysts estimate that nearly 8 billion smartphones will be sold worldwide. That amount is larger than the world’s population! With such scale, there’s no doubt that mobile will continue to be a focal point for technology R&D — with major advancements not only in the chipset feature set, but also in the evolution of software, and mobile networks. Many of the things we foresaw a few years back are already in commercial devices, things like LTE Advanced, Ultra HD, wireless charging, surround sound, and computational photography.

Moving forward, I’m pretty excited about further advancements in LTE, things like LTE in unlicensed spectrum, and LTE Direct. These technologies will make mobile networks much more capable and useful. On the device side, we’ll see more low-power processing and sensor technologies, and new developments in computer vision that will improve the context awareness capabilities of mobile devices.

And I’m personally passionate about the developments we’ll see in the field of machine learning — the evolution of processor platforms that mimic the way the human brain thinks and sees. This will be a game changer — since we finally will be able to “teach” our machines instead of simply “programming” them.

MFF: We know that rising data consumption is a challenging issue for mobile operators worldwide. Looking out over the next 5 years, what kinds of solutions do you anticipate? And how big a part will unlicensed spectrum play?

Matt: Although the numbers vary depending on the region, we continue to see solid growth in data demand. According to the CTIA, mobile network operators in the U.S. saw a 120% year-over-year (YOY) increase in data traffic in 2013, compared to a 69% YOY increase in 2012. In emerging regions, we are still in the early days of smartphone adoption, so we should expect further increases in data demand, as people adopt more advanced mobile devices.

We anticipated a day in which networks will have to deal with a thousand times more data traffic than they handle today. We called this the 1000x data challenge. To solve it, our industry has implemented a range of strategies. Of course spectrum is critical. We’ll need to squeeze more out of existing spectrum and we’ll need to find more of it. That’s going to involve taking advantage of multiple access schemes, including licensed, unlicensed, and shared access.

We’re also working on continuing the evolution and enhancement of LTE, including carrier aggregation strategies. Other network efficiencies will be achieved through advancements in 3G, 4G and Wi-Fi technologies. Another key strategy is network densification. We’re working to beef up mobile network infrastructure with the deployment of advanced small cells.

We’ll need all of these tools to address the continuing rise in demand for mobile data, because the fact is that people in every part of the world love their mobile devices, which is a pretty exciting challenge for our industry.

MFF: Mobile is changing so many industry verticals — health, auto, retail, energy, and more. Which verticals are you the most excited about, and why?

Matt: The huge scale of the mobile industry and the rapid design cycles associated with it are driving a tremendous amount of technology innovation. And those breakthroughs are now driving innovation in a growing number of other industry sectors. The components and capabilities that have been invented, integrated, refined, and dramatically cost reduced within modern smartphones are now poised to revolutionize and enable whole new categories of devices, sensors — and machines.

I’m particularly excited about how these mobile innovations will accelerate the evolution of robotics. Drones and robots are taking a lot of the technology developed for smartphones. Things like wireless connectivity, image stabilization, computer vision, precise outdoor and indoor location, and low power processing, are all now contributing to the evolution of robotics as well. And the scale of deployment of those technologies is making robots much more affordable as well. Today we can find hobby drones that sell for less than $1,000.

As part of our R&D effort at Qualcomm we’re building experimental robots that can learn to perform some menial tasks without prior programming, things like sorting toys and organizing them in bins. And all running on the same Snapdragon processors that power many of the most popular smartphones today. It’s exciting to see how smartphone technology is accelerating the development of general-purpose robots and drones, and I’m grateful to have a front row seat, not only as a witness that evolution, but also as a participant in the robotics revolution.

MFF: The “Internet of Things” continues to make headlines and holds great promise, but the growth has been slow due interoperability, security, regulatory, and other issues. What will it take to move past these issues and see the growth rate graph take the anticipated hockey stick shape?

Matt: Everything around us is becoming intelligent and connected, changing the way we interact with the world: phones, tablets, cars, appliances, and health devices. We use the term “Internet of Everything” (IoE) because not only “things” are getting connected, but also places and people.

The IoE is still in its early days, but the ecosystem is coming together to solve some of the key issues preventing the full realization of its promise. Until recently, most IoE products and services have existed in silos, as vertical solutions — without the capability to connect and interact with each other. The challenge is, how to create a horizontal, secure, interoperable environment. We believe that AllJoyn is key solution for moving the industry in the right direction. AllJoyn is an open, universal, and programmable software and services framework, initially developed by Qualcomm Innovation Center and now hosted by the AllSeen Alliance.

Qualcomm backs the AllSeen Alliance as it drives the AllJoyn open source project forward, as the common language for the Internet of Everything. The AllSeen ecosystem consists of a broad representation of cross industry leaders looking to enhance AllJoyn via open source contributions, and to commercially deploy smart connected devices that can discover, connect and communicate with each other across brands and device categories.

The consortium now counts more than 60 members, including many big names in technology and consumer electronics. This level of support increases our confidence about the future. I think we’re close to reaching a tipping point in the development of a truly interoperable IoE.

Hope you enjoyed the insights.

We look forward to seeing you next week.

Kind regards,

Chetan Sharma

Mobile Future Forward: Announcing the Preliminary Agenda August 29, 2014

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

Homework for the Summit

To get the most out of the summit, it is recommended that you familiarize yourself with the following research papers:

-          Connected Intelligence Era: The Golden Age of Mobile

-          Mobile 4th Wave: Evolution of the Next Trillion Dollars

-          Operator’s Dilemma (and Opportunity): The 4th Wave

-          Industrial Internet at Work

-          Industry Transformation In the Networked Society

Morning Sessions (8:00am – 12:00pm)

Welcome – The Connected Intelligence Era

The major technology changes come in 40-50 year cycles. The telecom and Internet cycle that started in the 70s has perfectly setup the advent of the Connected Intelligence Era that is going to have a profound impact on the vertical industries, the global economy, and competitiveness of nations. At Mobile Future Forward 2014, we will discuss the emergence of this technology wave and its implications.

Chetan Sharma, President, Chetan Sharma Consulting

Fireside - Powering the Connected Intelligence Era

Matt Grob, CTO and EVP, Qualcomm

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Fireside - Industrial Internet: Transforming the Economy

Bill Ruh, VP – Global Software, GE

Hank Skorny, VP and GM, Intel

Steve Elfman, Former President, Sprint (moderator)

Fireside - Connected Intelligence: Platforms, Ecosystems, and Global Markets

Erik Ekudden, SVP, Ericsson

Benedict Evans, Partner, Andreessen Horowitz

Tim Bajarin, CEO, Creative Strategies (moderator)

Fireside - The Opportunities in the Golden Age of Mobile

Glenn Lurie, President and CEO, AT&T Mobility

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Afternoon Sessions (1:30 – 6pm)

Connected Intelligence Era through the lens of CIOs

Philip Fasano, CIO, Kaiser Permanente

David Webb, CIO, Equifax

Tim Campos, CIO, Facebook

Steve Mills, CIO, Motorola

Paul Brody, VP – Mobile Practice, IBM

Mark Fernandes, Managing Director, Sierra Ventures (moderator)

Connected Living

Kevin Peterson, President – Digital Life, AT&T Mobility

Liz Dickinson, Founder and CEO, MIO Global

Chris Putnam, SVP, Synchronoss

Josh Will, Chief Category Officer, Best Buy

Tim Wagner, SVP, Samsung

Dawn Chmielewski, Senior Editor, Re/code (moderator)

Growing the 4th wave Pie

Julie Moss-Woods, CMO/CEO – NG Business, Tata Communications

Rob Chandhok, President, Qualcomm

David Sprosty, CEO, Sprosty Network

Ed Lewis, Chief Strategy Officer, Syniverse (moderator)

Designing 5G and the Network of Tomorrow

Dr. Ron Marquardt, VP – Advanced Technology, Sprint

Dr. Hassan Ahmed, Chairman and CEO, Affirmed Networks

Glenn Laxdal, VP – Advanced Technology, Ericsson

Erik Moreno, SVP, Fox Networks

Harvesting the Opportunities in Mobile Commerce

Sharath Dorbala, Head of Mobile Financial Services, Amdocs

Andy Chu, VP – Mobile Commerce, Sears Holdings

Rajeev Tankha, Sr. Director - Applications, Oracle Communications

Mark Donovan, SVP, Comscore (moderator)

The Future of Consumer Engagement and Mobile Advertising

Vik Kathuria, Global Chief Media Officer, Razorfish

Erin Kienast, SVP, Starcom

Chia Chen, SVP, Digitas

Eric Mugnier, SVP, M&C Saatchi Mobile

Ujjal Kohli, Founder, Rhythm New Media (moderator)

Opportunities in the Emerging Markets

Mathew Oommen, President, Reliance

Andreas Gal, CTO, Mozilla

Nathan Eagle, CEO, Jana

Michael Fisher, Head of Intl. Biz Dev, Twitter

Cocktail Reception (6-8pm)

Chill, Network, and form partnerships for Life

Connected Intelligence Era: The Golden Age of Mobile August 21, 2014

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, Connected Intelligence Era, Fourth Wave, Technology Cycles, The Golden Age of Mobile, Wireless Value Chain, Worldwide Wireless Market , add a comment

Connected Intelligence Era: The Golden Age of Mobile

- A Mobile Future Forward Research Paper

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

This paper is the 5th paper in the Mobile Future Forward Series. It is a required reading for Mobile Future Forward participants.

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History and Background

In 1925, a soviet economist Nikolai Kondratiev observed in his book “The Major Economic Cycles,” that the growth of human history has been intertwined with economic cycles that resemble waves spread across multiple decades (figure 1). The duration of the cycles might vary but the pattern repeats itself. If we study the technology revolutions of the last 300 years that have shaped human history – the industrial revolution, the age of steam and railways, the age of steel, electricity, and heavy engineering, and the current age of information and telecommunications, each of these cycles lasted on average 50 years. There was GDP growth with every cycle and with each technology cycle, we made earth a better place to live even though sometimes it might not seem that way.

Early in the 20th century, an Austrian economist, Joseph Schumpeter expanded on the theory of business cycles and development and wrote perhaps one of the most influential book in economics – “The Theory of Economic Development.” Schumpeter posited that the entrepreneurs changes the equilibrium of any business cycle and is the prime cause of economic development (figure 2), which proceeds in cyclic fashion along several time scales. In fashioning this theory connecting innovations, cycles, and development, Schumpeter kept alive the Russian Nikolai Kondratiev’s ideas of 50-year cycles.

In 2003, another economist Carlota Perez from Venezuela expanded on the Kondratiev cycle theory in her book, “Technological Revolutions and Financial Capital: The Dynamics of Bubbles and the Golden Ages.” She drew upon Schumpeter’s theories of the clustering of innovations to explain why each technological revolution gives rise to a paradigm shift and a New Economy and how these opportunity explosions, focused on specific industries, also lead to the recurrence of financial bubbles and crises (figure 3). By analyzing the changing relationship between finance capital and production capital during the emergence, diffusion and assimilation of new technologies throughout the global economic system, Carlota’s book discussed some of the pressing issues in front of us.

This brings us to the present time. Where are we in the big economic cycles? Are we in the golden age of the last technology cycle of information and telecommunications that gave birth to the Internet and the modern wireless ecosystem as we know it or are we perhaps on the verge of a new age that will transform human history for the next 50 years? Given that the markers of transition are not always clear, we won’t know for sure which wave we are embarking on for some time but we are fairly certain that we are entering the golden period of the mobile industry.

There is also a strong possibility that we might be onto something new, something more transformative, something different that we would humbly propose is the start of theConnected Intelligence Era. These two operative words are going to define the next phase of human evolution. The confluence of mobile broadband network, smarter devices, pervasive connectivity, and our ability to program the intelligence around us is going to dramatically change every industry vertical from the ground up. Consider the health industry – sensors inside the body can send alerts days before a stroke, telemedicine can help direct a surgery in remote parts of Bhutan, mobile devices will educate and guide us on nutrition, wellness, and medicine compliance. In fact, technology might eliminate the need to go to a doctor completely except in the case of chronic diseases or an emergency. Some of this is already happening but we will see implementations on a global scale that will hopefully reduce the enormous burden on the global GDP.

Similarly, the travel and tourism industry is being transformed by intelligence at the fingertips of travelers in unfamiliar lands. The education segment especially in the developing world is being changed by the availability of affordable tablets. M2M is making the energy sector reinvent itself. In a few years, it will be hard to imagine a car without mobile broadband connectivity.

As we outlined in our Mobile 4th Wave paper series, change is in the air. Mobile is becoming the critical tool to drive human ingenuity and technological growth. Fueled by the revenue growth curves of voice, messaging, and access, the industry has flourished beyond anyone’s imagination.

We as an industry are on the verge of incredible milestones in human history. Very soon, for the first time, mobile connections will exceed humans on the planet. Mobile broadband networks are being deployed at the fastest pace ever. Smartphones are in such great demand that in some countries, feature phones are already going extinct. The trifecta of fast broadband networks, well-designed mobile computing devices, and the insatiable supply of content, applications, and services has unleashed consumer demand like never before.

The last thirty years of industry growth were primarily driven by network access to voice, messaging and data. The next thirty will be defined by access to services and solutions that are customized to the individual consumer lifestyles. Enterprises around the globe are also rethinking their business processes and business models and how they can take advantage of the connected intelligence around us. As an industry, we have reached an annual run rate of $1.7 trillion in revenues. But how will the next trillion dollars be generated? Which services are going to dominate? Which players will get the lion share of the revenue stream? How will regulators regulate? How are we going to deal with the vexing issues of privacy and security? How will consumers adapt to the changing dynamics and will we truly realize the potential of the 4th wave? The next decade will yield the answers and determine the new winners of the mobile ecosystem.

In this paper, we make the case that we are in the beginning of the “Golden Age of Mobile” and discuss its impact and the early years of the transformation some of which we are already starting to see.

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Your feedback is always welcome.

Thanks

Chetan Sharma

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

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

We will be discussing many of the ecosystem and technology issues, opportunities and challenges for the coming years in our annual mobile executive summit Mobile Future Forward on Sept 24th in Seattle. Some of the confirmed speakers are: Bill Ruh, VP - Global Software, GE; Tim Campos, CIO, Facebook; Erik Moreno, SVP, Fox Networks; Glenn Lurie, President, AT&T; Steve Mills, CIO, Motorola Mobility; Hank Skorny, VP/GM, Intel;Dr. John Saw, CNO, Sprint; JD Howard, VP/GM, Lenovo; Dave Webb, CIO, Equifax; Dr. Hassan Ahmed, CEO, Affirmed Networks; Mark Fernandes, Managing Dierctor, Sierra Ventures; Ujjal Kohli, Founder, Rhythm NewMedia; Vik Kathuria, Global Chief Media Officer, Razorfish; Erin Kienast, SVP, Starcom Worldwide; Josh Will, Senior Category Manager, Best Buy; Steve Elfman, President, Sprint; Glenn Laxdal, VP, Ericsson; Matt Grob, EVP/CTO, Qualcomm; Julie Woods-Moss, CMO, CEO of Nextgen Business, Tata Communications; David Richter, VP, Uber; Paul Brody, VP & Mobile Practice Leader, IBM; Mathew Oommen,President, Reliance ; Andreas Gal, CTO, Mozilla; Chris Putnam, SVP, Synchronoss; Brian Angiolet, SVP – Consumer Product Innovation, Verizon; Sharath Dorbala, Head of Mobile Financial Services, Amdocs; Rajeev Tankha, Senior Director – Applications, Oracle; Andy Chu, VP – mCommerce, Sears Holdings; Philip Fasano, EVP and CIO, Kaiser Permanente;Erik Ekudden, SVP, Ericsson, Benedict Evans, Partner, Andreessen Horowitz; Dr. Mani Prakash, VP - R&D, Covidien; Dr. Corrina Lathan, CEO, AnthroTronix; Chia Chen, SVP, Digitas; Eric Mugnier, SVP, M&C Saatchi Mobile; Rob Chandhok, President, Qualcomm, and many more to come. We hope to see you there for the brainstorm.

US Mobile Market Update – Q2 2014 August 7, 2014

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, Connected Devices, Fourth Wave, Mobile Applications, Mobile Ecosystem, Mobile Future Forward, Mobile Patents, Wearables, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update – Q2 2014

http://www.chetansharma.com/usmarketupdateq22014.htm

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Summary

The US mobile services revenues in Q2 2014 declined marginally by over $200M. The mobile data services revenue however continued to increase and is on track to exceed the $100B mark in mobile data services revenue. Data contribution to the overall revenues is now at 55%.

T-Mobile continued to outperform its competitors in net-adds. T-Mobile has almost recovered all its postpaid losses that started back in Q3 2009 and continued till Q1 2013. It should move into the positive territory next quarter. T-Mobile also crossed the 50M sub mark and is now within a striking distance of Sprint and could become the number 3 operator in the country before early 2015.

AT&T registered the lowest postpaid churn in its history at 0.86. For the industry buffs, the US record is held by Verizon which recorded the churn of 0.84 in Q2 2012. The world record is held by NTT DoCoMo for its churn of 0.44 in Q2 2010. In general, Japanese have the most loyal customer base in the world.

The net-adds in the US market is now primarily driven by connected devices (tablets and m2m). 84% of the net-adds in Q2 2014 were from the non-phone category. Tablets are driving the connected devices segment with 70% share. The net-effect has been that while the overall subscriber count has increased, there has been a negative impact on the ARPU which declined by 2.27%. All operators saw their ARPU decline.

Smartphone penetration increased to 70% and roughly 93% of the devices sold now are smartphones. Android beat iOS handedly in the quarter. For the first time, Verizon sold more iPhones than AT&T.

M&A Season

From 2005 to almost 2008, the combined entity of Sprint and T-Mobile would have been the #1 operator in the US. Up until 2004, the “Others” were collectively the number #1 operator in the US. However, through a series of acquisitions, exclusive device deals, and just better business performance, Verizon and AT&T have dominated the mobile landscape in the US since 2007. Now, AT&T and Verizon are tied at the top while the market awaits the question mark on how the #3 will shape up. Iliad provided some market entertainment that kept media scratching its head with its offer to buy T-Mobile last week. It was an unattractive proposition as it doesn’t fundamentally offer to alter the US market structure. There are other global operators who are eying T-Mobile as a way to enter the lucrative US market. It might all come down to how desperate is DT to offload T-Mobile.

Yesterday, Sprint abandoned its pursuit of T-Mobile and probably saved itself a couple of billion dollars of break-up fee. The regulatory hurdle in the current environment of mega-mergers was just too high to overcome at this time.

So, will there be further consolidation in the mobile industry? Short answer is – Yes. The only question is about the timing. As we noted in the last note, T-Mobile has complicated things by being successful in the short-term. A third player with 30% market share will of course be better but T-Mobile has been able to change the market by being the fourth at 15%.

Is Windows Phone getting Zuned Out of the Market?

In 2012, we described “Zuned Out” as a phenomenon wherein the market punishes the player (even incumbents and dominant ones) for late entry into the market. The fast follower strategy that had served Microsoft so well for a couple of decades is no longer a useful framework for competing. Either one needs to be a “really fast follower” like Samsung (though they did invent the big-screen device segment that Apple is now following) or a trend setter like Apple/Google to have some command of the control points in the ecosystem.

Google was tempted by the lure of the device business and to some extent was forced to buy Motorola. It took 10 quarters to realize that the device business is a different beast, that there was a DNA mismatch, but the exercise did provide some key business insights to the management team. Google shed the device business and kept its partners happy. Microsoft’s acquisition of Nokia followed a similar pattern. Nokia threatened to go Android and Microsoft had no choice but to acquire the beleaguered company that has been just devastated since it picked up Windows as its primary OS. It was clearly a mistake both by Nokia first and Microsoft after that. The new CEO (to his credit) shed a good part of the business in a mere 3 quarters (a clear admission of a mistake). While the impending decimation of the once vaunted Finnish brand was very obvious, the bigger question in front of Microsoft is “what to do with Nokia that’s remaining?” The current plan is to continue churning out the Lumia devices at different price points and see what happens.

As is well known, Microsoft is very strong in the enterprise and in the cloud. Will the new “productivity and platforms” strategy look at the market facts and focus on where the company can be a player and invent new categories and experiences? Or will it focus on just chasing the competitors that have infatuated it over the last decade? Productivity is more than Office and Platforms have moved to iOS/Android. The “core” of the computing market is very different from what it used to be.

The market share of the windows devices in the US last quarter was 1.3%. Globally, it fared marginally better at 2.7%. Granted that in some countries, Windows is starting to approach double digit market share, even Microsoft admits its mobile strategy is in shambles. After being in the US market for more than 2 years with billions spent in marketing and distribution, 1.3% share is nothing to write home about. Microsoft can get better traction in markets where new-subs are entering the ecosystem vs. replacement markets like the US. However, what market is telling us is that despite the blood, sweat, and tears that have been spent over the past few quarters, there is little appetite or need for another platform.

Also, there is this issue of competing with your partners – Microsoft outperforms its ecosystem partners by a distance. I wrote at the launch of the new windows OS that is was a fresh approach, the OS is very well designed and the devices coming out a quite good. However, the current data indicates that unless something changes drastically, windows phones might be on the verge of being “zuned out” of the market. And just like Zune, the fault will lie not in the product or the distribution or the marketing but rather in the timing of the market entry. Microsoft might be better off giving up on its device dream and just focus on services on top of the platforms that dominate. It might be time for hermit crab strategy.

IBM-Apple deal

Intuitively, we have known for a while that the application development environment was moving from windows to iOS and Android. In 2012, we actually measured that shift and found that SMBs were moving to the new platforms in droves. The paper concluded:

“We believe that the SMB segment is a leading indicator of how larger enterprises and consumers in general will adopt mobile data solutions to enhance productivity and reduce costs.”

Fast forward 2 years. Last month, IBM and Apple announced their historic deal that woke up lot of people in the enterprise world. Apple is just looking to find a more efficient channel into the enterprise to sell iOS devices but IBM’s embrace means that the investment in iOS UX and app infrastructure will start to move more directly. Given that IBM is positioned well in all important enterprises across all industry verticals is a big coup for Apple. It also demonstrably indicates the shift from Windows to iOS and Android as the computing platform of choice.

Amazon phone

Amazon phone has been talked about for more than three years. It finally arrived but disappointed. While there were some interesting tech innovations seamed together to provide some differentiation, without any service pricing innovation (and the fact that it is only available on one operator), its fate seems similar to that of the Facebook phone.

Unraveling of Nokia

The mobile (more broadly digital) markets continuously remind us how brutal can the markets be if one is not quick enough to adjust strategies. As the old saying goes, “the bigger they are, the harder they fall.” Motorola was founded in 1928 and only a skeleton of the old glorious days remain as a subsidiary of Lenovo. An 80+ year old firm disappeared very quickly.

In the case of Nokia, the decomposition was even more stunning. A company founded in 1865 had 40%+ of the phone market only 7 years ago, employed tens of thousands of employees around the globe. After the latest round of rightsizing, only a few thousand remain (at least for the short term). Blackberry experienced a similar slide downwards. The cycle of complacency spares no one. The bigger the host, the more lethal the complacency virus is. This decomposition process is actually healthy for the ecosystem. Though the process is traumatic for those who are in the middle of it, it lays the fertile ground for new ideas and startups to germinate, and the cycle continues.

The bifurcation of the wearables market

After visiting the show floor at CES in January, we noted that “The space is going to get commoditized very quickly and it is likely going to get stratified into two major buckets – really cheap $10-20 wearables. The other bucket will be high-end fashion driven wearables.”

Last month, Xiaomi released a $13 tracker and Apple is expected to announce its wearable next month. The mid-market will mostly disappear.

What to expect in the coming months?

2014 has had an excellent start and rest of the year is looking great with a slew of announcements and activities planned for the rest of the year. We have already seen some massive moves, astounding acquisitions, and interesting strategic moves.

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

Against this backdrop, the analysis of the Q2 2014 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

4th Wave Progress

Connected Devices

Handsets 

Mobile Patents/IP

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 Nov 2014. The next Global Wireless Data Market update will be issued in Sept 2014.

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

We will be discussing many of the ecosystem and technology issues, opportunities and challenges for the coming years in our annual mobile executive summit Mobile Future Forward on Sept 24th in Seattle. Some of the confirmed speakers are: Bill Ruh, VP, GE; Tim Campos, CIO, Facebook; Erik Moreno, SVP, Fox Networks; Glenn Lurie, President, AT&T; Steve Mills, CIO, Motorola Mobility; Hank Skorny, VP/GM, Intel; Dr. John Saw, CNO, Sprint; JD Howard, VP/GM, Lenovo; Dave Webb, CIO, Equifax; Dr. Hassan Ahmed, CEO, Affirmed Networks; Mark Fernandez, Managing Partner, Sierra Ventures; Ujjal Kohli, Founder, Rhythm NewMedia; Vik Kathuria, Global Chief Media Officer, Razorfish; Erin Kienast, SVP, Starcom Worldwide; Josh Will, Senior Category Manager, Best Buy; Steve Elfman, President, Sprint; Paul McNamara, VP, Ericsson; Matt Grob, EVP/CTO, Qualcomm; Julie Woods-Moss, CMO, CEO of Nextgen Business, Tata Communications; David Richter, VP, Uber; Paul Brody, VP & Mobile Practice Leader, IBM; Mathew Oommen, President, Reliance ; Andreas Gal, CTO, Mozilla; Chris Putnam, SVP, Synchronoss; Fareed Adib, Global Head of Telecom Partnerships, Google; Brian Angiolet, SVP – Consumer Product Innovation, Verizon; Sharath Dorbala, Head of Mobile Financial Services, Amdocs; Rajeev Tankha, Senior Director – Applications, Oracle; Andy Chu, VP – mCommerce, Sears Holdings; Philip Fasano, EVP and CIO, Kaiser Permanente; Erik Ekudden, SVP, Ericsson, and many more to come. We hope to see you there for the brainstorm.

Mobile Future Forward: Connected Living and Lessons from Emerging Markets July 30, 2014

Posted by chetan in : Connected Devices, Emerging Markets, Mobile Future Forward, Wireless Value Chain, Worldwide Wireless Market , add a comment

In one of my interview with Time magazine last year, I alluded to the “Connected Intelligence Era” that is slowly but surely touching the various technology microcosms. It is transforming how we live and expect technology to behave. Glenn Lurie at AT&T has been investing in “Connected Living” products and services for well over 5 years in areas such as home security, health, and connected cars. Similarly, Tom Nagel is leading Comcast’s strategic initiatives to drive value from a connected home. Chris Putnam at Synchronoss has been working with service providers to help make some of these visions possible. We will explore the multi-trillion dollar “Connected Living” market with some of the leading global experts in the space.

Not too long ago, emerging markets used to follow the developed markets in technology adoption. While some of it is still true, many emerging markets are adapting and leapfrogging at a fast pace. Companies operating in India and China are often coming up with innovative solutions for the constrained environment and the lessons can be applied anywhere. We are fortunate to have two industry leaders who are leading the way. Mathew Oommen is a long time industry veteran who is doing some terrific technology work at Reliance. Similarly, Andreas Gal is leading Mozilla in mobile in LatAm and Asia.

Opportunities in Connected Living

· Glenn Lurie, President, AT&T

· Tom Nagel, SVP, Comcast Cable

· Chris Putnam, SVP, Synchronoss

Lessons from the Emerging Markets

· Mathew Oommen, President, Reliance

· Andreas Gal, CTO, Mozilla

We at Chetan Sharma Consulting are deeply involved in these changes and use our global mobile executive brainstorm forum to kick-off another year of ideas, networking, and industry collaboration. Our work on the 4th wave has shaped strategies of players around the world and we continue to strive to bring you the best of “global mobile thinking” at Mobile Future Forward.

When: Sept 24th in Seattle.

Registration

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

Some of the confirmed industry leaders are:

· Dan Hesse, CEO, Sprint

· Bill Ruh, VP, GE

· Tim Campos, CIO, Facebook

· Erik Moreno, SVP, Fox Networks

· Glenn Lurie, President, AT&T

· Steve Mills, CIO, Motorola Mobility

· Hank Skorny, VP/GM, Intel

· Dr. John Saw, CNO, Sprint

· JD Howard, VP/GM, Lenovo

· Dave Webb, CIO, Equifax

· Dr. Hassan Ahmed, CEO, Affirmed Networks

· Mark Fernandez, Managing Partner, Sierra Ventures

· Ujjal Kohli, Founder, Rhythm NewMedia

· Vik Kathuria, Global Chief Media Officer, Razorfish

· Erin Kienast, SVP, Starcom Worldwide

· Josh Will, Senior Category Manager, Best Buy

· Steve Elfman, President, Sprint

· Jason Hoffman, VP, Ericsson

· Matt Grob, EVP/CTO, Qualcomm

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

· David Richter, VP, Uber

· Paul Brody, VP & Mobile Practice Leader, IBM

· Tom Nagel, SVP, Comcast Cable

· Mathew Oommen, President, Reliance

· Andreas Gal, CTO, Mozilla

· Chris Putnam, SVP, Synchronoss

.. 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.

Thanks

Mobile Breakfast Series–IoT–London July 3, 2014

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, Internet of Things, IoT, Mobile Breakfast Series, Mobile Ecosystem, Mobile Future Forward, Smart Cities, Wireless Value Chain, Worldwide Wireless Market , add a comment

We hosted our Europe Mobile Breakfast Series in London last month in partnership with Telefonica and they have been gracious host for the series. The topic of discussion was “Internet of Things: Exploring the next big thing in mobile.” Regular readers will notice that it is the same topic we covered in our Seattle breakfast event in March. IoT is gaining lot of share of the news cycle and investments from big companies like GE and Caterpillar to startups like Fitbit and Smart Things. Many traditional computing and communications players like Telefonica, AT&T, Intel, Qualcomm, Microsoft, Google and others are also plunging full-steam ahead into the segment.

I have written about the notion of the coming “Golden Age of Mobile” and IoT, IMHO fits right into that growth strategy. In previous notes, I suggested that:

It is very clear to us that we are entering the ‘Connected Intelligence’ era. These two operative words are going to define the next phase of human evolution and are going to dramatically change every industry vertical from the ground up.

We are starting to see the signs in all directions. We had assembled a great panel to delve into some of the early opportunities, solutions to problems, and the traction areas. Executives from BMW, Intel, Telefonica, and Worldsensing were at hand to share their opinions and experiences in the space.

IMG_0383IMG_0391IMG_2613IMG_2611

Dominik Fromm is responsible for expanding BMW Group’s Mobility Services in the United Kingdom under the BMW, MINI and BMW i brands. Strategy, Mobility and Financial Services have been his professional focus in recent years. The current work builds on this wealth of experience, gained whilst working in the United Kingdom and in BMW’s global headquarters in Munich.

Raine Bergstrom is a vice president in the Software and Services Group at Intel Corporation and general manager of API Services. He takes the lead on market and product definition, as well as the execution of API management. He also defines the IoT Services Platform strategy, helping deliver a true end-to-end IoT solution for some of Intel’s largest customers.

Carlos de otto Morera is an economist educated in the United Kingdom. He has now 15 years of international experience including entrepreneurial experience in mobile, hardware and Internet startups. Created the largest online music platform in Spain from 2008 till 2012. Deeply passionate about his job designing and manufacturing connected products. Currently running Thinking Things, connected Hardware initiative from Telefónica.

Mischa Dohler is Chair Professor in Wireless Communications at King’s College London, UK. He is Distinguished Lecturer of IEEE ComSoc, Senior Member of the IEEE, and Editor-in-Chief of ETT. He frequently features as keynote speaker and had press coverage by BBC and Wall Street Journal. He is a tech company investor and also entrepreneur, being the cofounder, former CTO and now with the Board of Directors of Worldsensing.

So, as you can see, we had quite an eclectic group of individuals with diverse backgrounds and perspectives.

To recap, as we stand today, here are some of the forecasts:

In 2011, Ericsson forecasted 50 Billion Connected Devices by 2020

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

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

The salient points of the discussions were:

Overall, it was a great discussion on the practical aspects of IoT and the audience was great in keeping us honest. I always enjoy interacting with the London mobile crowd and this time was no different. My thanks to the attendees, the partners, the speakers, and to Telefonica for making this event possible.

Given the importance of the topic, we will be dealing with it again at our annual summit Mobile Future Forward on Sept 24th in Seattle and will have more speakers talking about their perspectives and experiences on IoT including GE.

US Mobile Market Update – Q1 2014 June 2, 2014

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

US Mobile Market Update – Q1 2014

Summary

The US mobile data service revenues grew 4% Q/Q and 23% Y/Y to $25.9B in Q1 2014. In 2014, we expect US to become the first country to cross the $100B mark in mobile data services revenue. We have also started to see digital services appear in the revenue maps as more companies rely on mobile to generate their revenues.

With the acquisition of Leap, AT&T has virtually tied Verizon for market share at 34%.

T-Mobile continued to impress with 66% share of the net-adds. Even Verizon felt the heat in Q1 resulting in a subpar performance. Smartphone penetration increased to 68% and roughly 93% of the devices sold now are smartphones.

M&A Season

FCC must have cancelled all summer vacations for its staff as it is going to have a busy summer. As expected, Comcast made a bid for Time Warner and AT&T for DirectTV. Encouraged by the M&A season, Softbank is going to make a run for T-Mobile and pop the question to the FCC – so what do you think?

This in addition to the net-neutrality religious wars that have been triggered.

So, how will this all end-up?

It’s complicated.

The basic problem is that the communications and computing worlds have collided and nobody told the politicians. One can’t develop a policy framework in vacuum. It has to synchronize with the real world and with the facts on the ground. In my travels around the globe, I find that some of the most underdeveloped countries have better policy framework than some of the developed nations. Obviously, they don’t have the legacy to work with but they are more progressive in terms of national competitiveness and creation of jobs as the central underpinning of their framework.

As we noted in our 2011 research paper, “Competition and the Evolution of the mobile markets,” the mobile markets gravitate towards three player composition. Over time, every market approaches this equilibrium. We looked at the world’s top 36 markets and the average HHI (Herfindahl-Hirschman Index) for these markets is 0.344. If we just look at the developed markets, the HHI is 0.327. The US market HHI stands at a relatively lower number of 0.25 which is right at the cusp of what DOJ calls heavily concentrated and moderately concentrated markets. In fact, 30 of the 36 markets are over this line and that includes pretty much every developed market except UK.

If and when Softbank proposes the T-Mobile merger, the HHI will increase to 0.28 and will clearly cross the DOJ marker of heavily concentrated markets. For contrast, the cable industry is at 0.13 HHI. Clearly, just looking at HHI is inadequate and misleading as we showed in our paper back in 2011.

In heavy Capex industries, it is natural to have consolidation. It allows more efficient deployment of the capital or else everyone gets bloodied in the turf war as is evident in Indian mobile market which is on the verge of a major restructure.

In the last 20 years, the share of top 3 operators has grown from roughly 40% to 80%. The number of mobile subscriptions have grown 14x during the same time period.

So, will there be further consolidation in the mobile industry? Short answer is – Yes. The only thing up for debate is whether it happens in this administration or the next. As we said in the last note, T-Mobile has complicated things by being successful in the short-term. A third player with 30% market share will of course be better but T-Mobile has been able to change the market by being the fourth at 14%.

FCC’s dilemma is that it can’t evaluate these proposed mergers in isolation and Congress hasn’t done a good job of clearly defining FCC’s authority.

It is going to be an interesting summer for sure.

What’s next for Microsoft?

With a new CEO at the helm, Microsoft made some key (albeit late) changes to its strategy: Office for non-windows devices, zero-rating the OS licensing fees, doubling down on the enterprise class Surface. In light of the plummeting PC sales, Microsoft is trying to figure out its place in the post-PC world. Surface 3 is good device but there are also significant hurdles. Having failed to stem the tide of iPad and Android tablets, Microsoft seems to be focusing on the high-end by trying to change the discussion around the wisdom of carrying multiple devices.

One of the basic problem that the current strategy faces is that of articulating a valid value proposition. On the pricing axis, it doesn’t make a dent. MacBook Air is still the best notebook around and iPad is still the best tablet and you can get both of them for $1500 while a comparable Surface configuration will set you back $1200-1300, a drop of less than 20%. The reason Kindle and other sub $200 tablets got some traction was that the price difference was 60%. It forced Apple to reconsider and launch the mini to secure the mid-tier.

However, it is smart of Microsoft to fight the battle on the top end in the enterprise where their biggest strength lies rather than in the low-mid tier consumer segment which is nothing but a bloodbath for new OEMs.

The mobile ecosystem will clearly benefit from a stronger Microsoft but it has to address some key strategic questions for its partners and customers. It has started to shed some legacy constraints, is getting some product thinking behind its strategy, and is becoming more open which is a good start.

About that Google Car

The autonomous car that Google showcased earlier this week is probably the most interesting technology development in the last couple of years (in addition to whatever Elon Musk does). Given that going from point A and point B is so central to our civilization, a rethink of how it should be done is going to have profound effect on not only the existing value chains and industries but more fundamentally, how humans organize themselves as social beings. There are a number of exciting and terrifying (for some) questions in front of us – how quickly will autonomous cars become the norm in major markets – 5 years? 15 years? What does this do to the driver segment? Auto sales? Cost of transportation? Design and investment of infrastructure? Privacy and security of data? Mobile network infrastructure to support a radical societal architecture? Will tech companies become car OEMs? Should they? How quickly will the regulators catch-up? Months? Years? Decades?

I do think Google car is a perfect embodiment of the connected intelligence era and this is going to have such profound implications that we haven’t yet built a model to grasp its impact (more to come on this topic).

What to expect in the coming months?

2014 has had an excellent start and rest of the year is looking great with a slew of announcements and activities planned for the rest of the year. We have already seen some massive moves, astounding acquisitions, and interesting strategic moves.

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 2014 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

4th Wave Progress

Connected Devices

· Connected devices (non-phones) accounted for almost 50% of the net-adds in Q1 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.

· Tablets form 63% of the connected devices sold.

· YOY, the connected devices segment grew 23%.

We hosted our IoT Americas session last quarter with Verizon, Ericsson, Samsung, and adidas and are planning our IoT Europe panel with Telefonica, BMW, Intel, and Worldsensing in London on June 17th.

Handsets 

· Smartphones continued to be sold at a brisk pace accounting almost 93% of the devices sold in Q1 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 68%.

· Android had its best showing in the US market with 54% share of the quarter. Q2 is expected to strong as well.

· While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off. It renewed its entry into the battlefield with Windows phone last year but sales have been poor. While Microsoft has made steady progress in other regions, in the US, it’s not gaining any traction and its share remains at a measly 3%. (Read our paper to get more insights into why Windows hasn’t been able to make a dent so far).

· Verizon continues to sell more LTE smartphones as its LTE sub tally rose to 48M making it the leading LTE operator in the world. Other three operators are also deep into their LTE deployments. Expect the “fastest network” marketing to continue for at least another seven quarters. Verizon reported that 73% of its total data traffic is on the LTE network now, clearly the fastest technology transitions we have seen in the US wireless industry.

· Mobile operators also announced their VoLTE launches.

· Verizon and AT&T sell more iPhones than Android while the reverse is true for T-Mobile (by a big margin) and Sprint. There is always a beauty contest amongst operators as to who sold more iPhones. AT&T again bested its rivals by selling roughly 36% of the iPhones in the US.

Mobile Patents/IP

· 24% of the patents granted by the USPTO were mobile related. Samsung, IBM, Microsoft, Sony, and Ericsson make the top 5 patent players in mobile. We will have more details in our coming paper on Mobile Patents Landscape next month.

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

· Samsung was again the leader in mobile patents granted in 2013 in the US and worldwide. Samsung was followed by IBM, Qualcomm, RIM, LG, Sony, Microsoft, Ericsson, Google, and AT&T for the top 10 companies by mobile patent grants in 2013.

· Google made an entry into the top 10 overall mobile patents list for the first time. AT&T did the same for the mobile patents granted in 2013.

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

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

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

· The top 5 categories for patents grants in the US for 2013 were Telecommunications, Digital Multiplexing, Digital Processing – Data Transfer, Digital Processing – Financial, and Computer Graphics.

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

· Facebook’s mobile patent filings increased by 177% YoY.

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 2014. The next Global Wireless Data Market update will be issued in July 2014.

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

We will be discussing many of the ecosystem and technology issues, opportunities and challenges for the coming years in our annual mobile executive summit Mobile Future Forward on Sept 24th in Seattle. Some of the confirmed speakers are Dan Hesse, CEO, Sprint; Tim Campos, CIO, Facebook; Ben Fried, CIO, Google; JD Howard, GM and VP, Lenovo; Erik Moreno, SVP, Fox Networks; Glenn Lurie, President, AT&T; Steve Mills, CIO, Motorola Mobility; Mark Fernandez, Partner, Sierra Ventures; Dave Webb, CIO, Equifax; John Saw, CNO, Sprint; Hank Skorny, VP/GM, Intel; Hassan Ahmed, CEO, Affirmed, and many more to come. We hope to see you there for the brainstorm.

Mobile Patents Landscape–An In-Depth Quantitative Analysis April 20, 2014

Posted by chetan in : 4th Wave, Mobile Patents, Patent Strategies, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

Mobile Patents Landscape - 3rd Edition - 2014

http://www.chetansharma.com/MobilePatentsLandscape_2014.htm

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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 76% of the mobile patents granted in the two jurisdictions.

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

· By the end of 2013, approximately 25% 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.

· Samsung was again the leader in mobile patents granted in 2013 in the US and worldwide. Samsung was followed by IBM, Qualcomm, RIM, LG, Sony, Microsoft, Ericsson, Google, and AT&T for the top 10 companies by mobile patent grants in 2013.

· Google made an entry into the top 10 overall mobile patents list for the first time. AT&T did the same for the mobile patents granted in 2013.

· Despite dwindling market fortunes, RIM 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, Sprint, Verizon, Telecom Italia, Swisscom, T-Mobile, Orange, SK Telecom, and TeliaSonera.

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

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

· The top 5 categories for patents grants in the US for 2013 were Telecommunications, Digital Multiplexing, Digital Processing – Data Transfer, Digital Processing – Financial, and Computer Graphics.

· The top

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

· Facebook’s mobile patent filings increased by 177% YoY.

· Due to the ongoing work in the LTE/LTE-A space, the Multiplex Communications category saw the highest jump in patent filings in 2013.

Introduction

The value of Intellectual Property (IP) have been debated since the days of Aristotle in the fourth century B.C. In 1624, The Statute of Monopolies passed as the first statutory expression of English patent law. Patent systems evolved from there and helped lay the foundations of the patent system that we are familiar with today. In any given industry, IP forms the core basis of technology, the competition evolves and its protection becomes paramount to not only its inventors but also to the geographical boundaries of operations.

In a knowledge economy, the very competitiveness and durability of the nation’s economy 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’s role in transforming industries and countries is being appreciated in every corner of the planet – whether it’s streets of Thimpu or high rises of Hong Kong, whether it is the hustle-bustle of Cupertino or a relaxed afternoon in Paris, mobile forms the connective tissue of the global society. As mobile devices have moved from being a luxury good to becoming an everyday necessity, innovation in various segments of the industry has accelerated the reach and impact of mobile technology worldwide. Mobile is also levelling 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, 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. In 2013, China’s patent applications grew 15.6% compared to the US at 10.8%. Amongst the top 5 filers in 2013, ZTE and Huawei are from China.

According to the US Patent Office (USPTO), in 2013, the number of patents granted grew over 62% by the end of 2012 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 449% increase while the European market saw a 105% increase in mobile related patent grants.

Another interesting fact is that in 2013, roughly 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 10% of the patents granted are now related to mobile.

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 third 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 2014. The next Global Wireless Data Market update will be issued in May 2014.

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

2014 Mobile World Congress Observations March 3, 2014

Posted by chetan in : 4th Wave, Applications, Big Data, Hetnets, Internet of Things, IoE, IoT, LTE Broadcast, Mobile World Congress, NFV, SDN, Smart Cities, Smart Phones, US Wireless Market, Wearables, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , 3 comments

2014 Mobile World Congress Observations

Last week all mobile roads led to Barcelona for the annual industry get-together. Many of the discussions at MWC were through the lens of previous week’s blockbuster deal of Facebook/Whatsapp. The deal touches upon many of the technology and business trends up-and-down the mobile stack.

According to industry sources, the first 3GSM had a grand total of 72 attendees cobbled together by self-interest and coaxing. Fast-forward to 2014, and the show has become the most dominant show on the planet, reporting over 80K attendees from around the globe. Perhaps, it is an indication of the improving economy and the fact that we are firmly on the 4th wave impacting every industry vertical.

This note presents the summary of the observations and discussions from the show.

The deal everyone was talking about

The news that everyone was talking about and dissecting was the one that Facebook struck with Whatsapp in a blockbuster announcement few days ago. For folks who were looking primarily from the financial metrics couldn’t come to grips with the magnitude of the deal. However, as I mentioned on CNBC, the deal has to be understood from the point of view of strategic moat for Facebook. Additionally, when the street measures the company by the number of active users, at $130/user, the deal was a bargain. Having said that, there is whack-a-mole element to this strategy. It takes enormous courage to strike such a deal but if you look it from a strategic point of view, Facebook could have easily spent $25B to secure their future in the short-term. The cost of not acting is much higher.

Connecting the unconnected

Connecting the unconnected was by far the biggest theme of the show. From Mark Zuckerberg’s keynote to the launch of $25 devices from Mozilla, there was concerted discussion around how to increase the 3.5B consumers to 5-6B. The business models were hotly debated both in public and private meetings. How does this get funded? Clearly, cheaper devices, lower infrastructure costs, lower application delivery models are key, but how do you onboard these users is one the biggest challenges of the next 5 years.

SDN/NFV

The emergence of the 4th wave and the competitive dynamics in the markets has put tremendous pressure on the operating margins of the operators. In order to compete and make the organization more nimble and future-ready, one has to tackle the problem on multiple front – reduce the number of resources required to accomplish the tasks, get rid of the network architecture that is limiting and controlled by proprietary interfaces and vendors, drastically reduce the cost of operations, and enable the API layers for quick service creation and deployment. As a result of this pressure and desire to change, SDN and NFV took more prominence this year compared to the past and operators are urgently moving to cloud-based infrastructure. AT&T’s CTO John Donovan emphasized the need to work with startups and more nimble/innovative players than the incumbents to reduce cost and introduce new services quickly (this paper on the subject is worth the read).

5G – 5GPPP and NGMN

While 4G has been the fastest network technology in the history and we are seeing deployments around the world, industry has officially set its sight on defining 5G. A couple of prominent efforts were announced at MWC – 5GPPP led by the Europeans and NGMN – an operator led initiative. A couple of things will have to be worked out as industry bodies look to define 5G and its use cases. While there is politics and jostling to get an advantage, someone will have to harmonize the definitions and requirements. And more importantly, the discussions of 5G should involve the leading OTT players given that 5G will be applications-led network technology.

Ecosystem value shifts

There are significant value shifts that are taking place in the ecosystem. The value is shifting to the upper layers of the stack. This is what is defining the current turbulence, which is exciting to many and depressing for some. Regulators are caught in the middle unable to understand the OTT landscape and design policies that work for the overall growth of the industry that drive the investments, innovation, and GDP growth. We are likely to see the overall pie grow but the tremendous value creation and destruction within the confines of this growth.

Wearables

MWC picked up where CES left off in wearables. There were many more players who launched watches with different flavors and price point. Industry is also getting conscious of the design elements is what is going to drive the industry. On a larger scale, the industry is waiting for Apple to release its version of wearables and watches, create awareness, and hope that the rising tide lifts all. Huawei, Motorola, Sony, and others announced watches to the market in 2014 without any information on pricing or availability dates. As we mentioned in our CES summary, the wearables market is likely to split into the commoditized layer and the fashion segment.

Galaxy S5

MWC was light on any major device launches except for S5 from Samsung who announced the device in a low-key press conference. There were some other interesting concepts introduced like Yotaphone with an e-ink interface on the back and the privacy-infused-Blackphone. The display is one area, which could bring in new form-factors and use cases as industry gets saturated with existing designs.

IoT

IoT is going through its hype cycle right now. IoE takes the notion even to a next level. Everyone wants to make things connected but how will this all pan out, what are “real” use cases? Who bears the cost of the additional BOM? What form of connectivity is required? How do you unify the underlying platform so IoT is exposed as an opportunity to the developers? There are still more questions than there are answers. The most ambitious practical initiative is from GE, which is looking ways to improve its operations using sensors in a significant way. Intel, Cisco, AT&T, Telefonica, Ericsson, Google, Facebook, and many others are all contributing to defining what this connected world will look like in a few years.

I moderated a couple of panels on the role of network APIs in the IoT world. There was significant interest in the developer community on how to tap into this emerging opportunity.

The connected universe will generate opportunities for many players especially the chip manufacturers. Qualcomm has had a dominant role in the chipset space for sometime and continues to operate from its high perch but market is seeing credible solutions and traction from Mediatek who is attacking the market at the bottom end and Intel, which is taking a more performance-centric strategy.

We will be conducting two in-depth sessions on IoT in the coming months. IoT Americas in Seattle (March 18th) with AT&T, Samsung, and adidas and IoT Europe in London (June 17th) with Telefonica and Intel.

Smart Cities

There was a lot of talk about Smart Cities and by extension Smart Nations. However, we haven’t settled on a set of operating models to fund such initiatives. Smaller nations have a better chance to execute on the vision. Countries that have the political breed, regulators, and the industry in sync will see quicker progress than the ones mired by constant election cycles and lackadaisical regulatory regimes. Japan, Korea, Australia, Israel, Spain are a the forefront of what a “Smart City” means and more importantly how will these initiatives will get funded.

Connected Cars

This year connected cars feel more real with imminent launches and data become a key selling point for the OEMs. The primary use cases are safety, diagnostics, and navigation. Next come entertainment and the larger developer ecosystem. Business models vacillate between the kindle model (of embedded connectivity) to shared data plans (attach your cars to the data plan you already have). We are likely to see much activity, deals, and progress in 2014 as the likes of Ford and GM have become regular fixtures at MWC.

Carrier-Aggregation and Hetnets

Carrier aggregation (CA) and Wi-Fi-cellular integration is not new. Vendors and operators have been talking about it for sometime. Most of the LTE operators are in the process of implementing CA to boost the bandwidth and gain more efficiency out of their spectrum assets. Integration with Wi-Fi also gives a boost though there are some enhancements needed to fully utilize Wi-Fi. KT perhaps had the most impressive demo with 3 CA demonstrating speeds of 400-600 Mbps. In a country where 100 Mbps is commonplace, it is no surprise that Korea is pushing the boundaries with LTE.

Network investments - $1.7 Trillion in the next five years

All the progress that has been on the mobile economy has been on the back of trillions of dollars of investment over the last couple of decades. With declining margins, how long do operators continue to invest and at what pace? What’s the margin profile they are willing to live with? What’s the role of government in building out the infrastructure when high-speed mobile networks are concerned? Japan, Korea, Israel have all based their competitiveness on connected broadband world. Can others follow? The impact of Whatsapp launching voice services and Netflix/Comcast deal were hotly debated in the hallways. It is one thing to put out national broadband plans and it is entirely another reality to have an execution path to deliver on the plan. The broadband investment has much far reaching implications than most people and governments realize.

Move towards data-only plans

As we have chronicled in our 4th wave series papers, the past revenue curves of voice and SMS though still generating significant revenues are on their way out. We will be transitioning slowly but surely to the “data-only” world where consumers pay for data packages and voice and SMS are just IP apps on the network being offered by the operator or other 3rd parties.

LTE broadcast

While the industry still has the Mediaflo hangover, LTE broadcast seems to be gaining more traction as more operators are committing to trials and experimentation. The business model (for generating new revenue) still stays elusive.

OTT regulations

The cacophony of OTT regulations is increasing. Faced with OTT impact on their core business, operators are asking regulators to take a broader look at how communications is regulated. Most of the regulators seem incapable or unwilling. There is an urgent need to overhaul the policy framework worldwide and more harmonization is needed so that the developers are not constantly looking at a moving target. However, it feels like the current tools are inadequate to keep with the times. Nations who get what it means to be “digitized” are investing and positioning their respective countries for greater competitive position for the next decade while others will be forced to fight the cycles of unemployment, sluggish growth, and widespread apathy.

Big data – data is the resource that feeds the economic engine and industry growth

Not surprisingly, there was a lot of talk about using data to fuel new industries and business models. While we are having pertinent debates about security and privacy, the opportunity to use data for greater efficiency and new revenue streams is no more academic. Companies who have gone through the investment of collecting and streamlining the data sources from not only their internal operations but also partners and the developer ecosystem are going to reap better rewards in the long-term. All this is to have an unfair competitive advantage in the “battle of context” which is going to get played out for the second half of this decade. However, big data is also raising big questions about security and privacy.

Security and Privacy

The requirement for tighter end-to-end security and regulators involvement in managing privacy is becoming very important especially in Europe. Given the pervasiveness of Android, it remains the favorite target of the hackers and the frequency of attacks has seen an enormous increase over the last 12 months. The Snowden effect is having tangible impact on US businesses in Europe and elsewhere and given that mobile is platform of choice, many governments are trying to figure out how to regulate security and privacy.

Nokia’s love affair with Android

The fact that Nokia announced more Android devices than those on the Windows OS pretty much sums up the conundrum Microsoft is in today. Nokia’s recognition that Android is a ticket to recognition proved that its Windows-only strategy had been flawed all along. Had it chosen a dual Android/Windows strategy at the outset, Nokia’s history could have been different and the company might have not seen such destruction in value. In any case, the Android device roadmap was prepared primarily to seal the Microsoft deal so we don’t expect any major Android handsets on Microsoft’s roadmap.

Best Booth – Ericsson

Best Party – Siris Capital

Your feedback is always welcome

Chetan Sharma

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

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

2014 CES Observations January 12, 2014

Posted by chetan in : 4th Wave, Chetan Sharma Consulting, Connected Devices, US Wireless Market, Wearables, Wireless Value Chain, Worldwide Wireless Market , 4 comments

2014 CES Observations

International CES is not an event where game-changers are launched but it is a celebration of technology and gadgets. It is a good place to understand what is on its way to hope (many if not most of the products never make it to the market), hype (“innovation” was the most used word for defining pretty much anything, second year in a row), and commoditization (how many body tracker does the world need?). It is a place for like-minded people to congregate and pontificate, to do deals, to validate their roadmaps, spy on competitors, meet new partners and suppliers, and just get warmed-up for the year ahead. CES is a good place to get a sense of where the investments might flow this year.

Here is the summary of our observations from 2014 CES:

The big numbers – CEA expects the overall consumer electronics market to grow 2-3% in 2014 to $208 billion. The new growth areas are connected devices, tablets, wellness devices, connected auto, 3D printers, etc. Smart watch sales are expected to double in revenues in 2014. The wearables are expected to grow 25%. At CES, clearly, the connected universe was in full display in all its current glory. It was a mix of some new ideas, incremental improvements from last year, and innovators from all walks of life getting into the value chain.

Wearables – It was no surprise that wearables were one of the highlights of the show. The good news is that the barrier to entry is fairly low. The bad news is that the barrier to entry is fairly low. The space is going to get commoditized very quickly and it is likely going to get stratified into two major buckets – really cheap $10-20 wearables (if one can have < $50 smartphone, there is no real reason for a common wearable to be > $100 given that the components are fairly standard and algorithms are well understood. The other bucket will be high-end fashion driven wearables. Companies that can afford to get some classy designers involved and get good retail distribution are going to cater to the “jewelry” conscious market. The big winners are obviously the component folks who don’t really care who wins as long as there are many players in the pond. Wearables might congregate around natural islands of geography, distribution, and ecosystems. Intel’s keynote was focused almost entirely on wearables.

Connected Auto – There were announcements in the connected auto space. This year things matured a bit with more investments flowing in. AT&T and Google announced their respective platforms for connected auto. While there are significant opportunities in the space, it is still quite fragmented and as such less appeal for the wider developer population.

Robotics – While we are still ways away from the household robotic butler, tiny robots are becoming very sophisticated. Robotics has been around for ages but the connected environment gives them their soul. Toys, games, entertainment, emergency verticals, etc. are natural categories.  Unlike the wearables segment, robotics is less commoditized but has lesser overall mass appeal.

Sponsored data – Maybe sponsored data rubs some folks the wrong way but alternate data monetization models are needed in the market. AT&T announced their sponsored data platform. There are already numerous examples of sponsored data all around us across the world. In fact, in some regions, sponsored data will become a key ingredient of the overall mobile data strategy. There are several other alternate sponsored data models that will benefit users and markets should be encouraged to explore them. If it is indeed a bad idea, the market will take care of itself.

US mobile industry – While I work around the globe and there are some fascinating markets with new developments, US is by far the most interesting mobile market right now.  Not only does it have the most innovation going on, the competitive dynamics make it a great study for the students of the industry. T-Mobile, having decided on the value strategy is disrupting the market dramatically from the pricing structure point of view. Just like Free in France changed the market within 12 months, T-Mobile is doing the same in the US. They pre-announced their Q4 numbers at CES and they are stunning. 1.6M net-adds, 900K postpaid adds. For the year, they added 4.4M subs. To understand how dramatic of a reversal this is one has to only look at 2012 numbers – 2M postpaid losses compared to 2M postpaid gains in 2013. US industry has never seen such reversal in a short amount of time. Fasten your seat belts, 2014 is going to be a fascinating ride.

Healthcare connected devices – This super category of the wearables is something that is actually quite interesting and can be quite lucrative if you get it right. Sensors that can alert of impending heart attack or food poisoning or help manage diabetes and cancer by understanding the markets inside the body are revolutionary. If we get the price points to manageable levels, the impact on global health is going to be astounding and unprecedented. Of course, regulations and a moribund industry stands in the way.

Curved TV – The 3D TVs were a big flop. Consumers really didn’t warm up to the idea. The curved TV introduced by Samsung won lot of accolades and it was indeed a good experience if you find the right spot to view the screen in front of you. The 4Ks were out in full force as well with Vizio even touting one for under $1K. it is another matter that the UHD content doesn’t really exist in any meaningful way to while there was buzz, there might be little biz on the cards in the short term.

3D Printing – We all appreciate the potential for 3D printing - it is enormous. However, the impact could surprise us. With printers coming down in price to below $500, it is becoming more affordable and could really unleash the creativity of individuals of all shapes and sizes.

Smart Home – There is lot of activity and some real dollars flowing into the segment. AT&T has had some good success with their Digital Life rollout and it is generating new ARPU and increasing LTV of the customers. Additionally, startups are coming out with specific improvements around security, energy, entertainment, appliances, communication, and other related areas.

Disconnect between data and security – There is so much data emanating out of the wearables and the personal IoT devices that NSA or the hackers don’t really have to worry about the lack of data. Given the massive breach at Target, it is time for regulators to step in and work with the industry to formulate some basic guidelines on data protection. It should be unacceptable that these incidents are increasing in audacity and frequency.

Virtual Reality – Oculus VR was one the biggest hits at CES. The marriage of gaming and VR is a natural one and whoever tried the space-age headset at CES seemed immersed into an experience previously unexplored.

Best Booth – Samsung again took the honors

Best Booth Engagement – GoPro has some loyal fans

Your feedback is always welcome.

Chetan Sharma