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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

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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

Mobile Future Forward: Network Evolution: Q&A with Dr. Hassan Ahmed, CEO, Affirmed Networks August 26, 2014

Posted by chetan in : 4G, 4th Wave, 5G, Fourth Wave, NFV, SDN, Worldwide Wireless Market , add a comment

Mobile Future Forward – Seattle – Sept 24th - Connected Intelligence Era

Registration (limited seats)

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

We are looking forward to welcoming you to our Mobile Future Forward Summit next month. We are doing interviews with some of the thought-leaders leading up to the event to give you a glimpse of the upcoming brainstorms. LTE has been the quickest deployment in the mobile industry history. However, the pace of change is so dramatic that the industry needs to come up with solutions on-demand. NFV, SDN, Cloud, 5G are being discussed at all major service providers. Japan is already planning a 5G rollout prior to 2020 Tokyo Olympics. EU is investing heavily to reclaim lost momentum. Affirmed Networks is in the middle of this evolution. We caught up with Mobile Future Forward speaker and industry veteran - Dr. Hassan Ahmed, Chairman and CEO of Affirmed Networks to get a pulse on the network architecture evolution trends that will define the next 5-10 years.

MFF: NFV gets thrown around in a lot of network evolution discussions. Why NFV? What does it mean to the operators and the larger ecosystem? And why should we care about it?

Hassan: This is an excellent question because it helps us to look past the buzzword and ask where the fundamental demand for NFV really comes from.  Unfortunately it also requires a lengthy answer.  Some may view NFV as just a natural evolution of technology in the networking space but that really misses the point.  In fact, the transformation of networks away from a collection of isolated, custom built elements to a holistically orchestrated set of virtualized software functions is central to realizing the evolving business model of operators in the face of rising market demand for internet services.  The move to NFV also represents one of the largest transformations in networking since the shift from TDM to IP technology. To illustrate the point, let’s examine the impact of NFV on mobile networks, arguably one of the first places we see the technology being adopted.

Data on mobile networks is growing by leaps and bounds.  Application richness is growing rapidly as well with video leading the charge.  Scaling networks has historically been a hardware game, i.e. building more and more powerful network elements as chips get faster while keeping the network architecture and software intact.  Unfortunately this approach has run its course because mobile data today is growing faster than the rate at which hardware can be commoditized.  Effective network scaling is now a game of parallel software that can take advantage of the computing performance curve.  By reducing expensive custom elements to virtualized software functions that operate on data center servers, the cost of scaling is dramatically reduced.  This is the first answer to why NFV.  However, this isn’t the whole story.

Even after operators invest in scaling their mobile networks, IP service revenue flows over the top with the operator failing to participate in the service revenue equation (except for access, of course).  Today’s networks are very inflexible.  The entire service architecture of the network needs to become more intelligent so that service treatment can allow operators to enhance the revenue in their business models.  With service function chaining and orchestration, NFV brings the necessary flexibility to simultaneously simplify network operation (thereby reducing opex) and increase service velocity for new revenue.  So the market really demands cost effective scaling and enhanced service intelligence.  Together, they create a compelling case for network transformation and NFV answers the call.

As you can imagine the impact on operators and the ecosystem is far reaching.  NFV done well (since not all supposed NFV products are done well) dramatically shifts the operators network costs, simplifies network operation and allows the operator to derive new revenues from the internet economy.  The business model impact is significant.  Costs come down and revenue increases.  However operators need to be wary of approaches that preserve the inflexibility of the legacy network by simply virtualizing old products.  Fresh approaches are necessary to realize the business model benefits.

The ecosystem as a whole will be impacted as well.  Operators will have more choice to “mix and match” applications rather than being beholden to a small number of vendors.  In fact the fortunes of many of the legacy vendors will shift as IT companies and new software-centric vendors start to participate in the network infrastructure.  The landscape of providers in the “intelligence” of the networks will look quite different 5-10 years from now than it does today.

For all of these reasons, I believe NFV, which will play out over some time, is a transformative force akin to the impact IP had on TDM networks.  That’s why we should care.  A decade from now, networks will be built, managed and monetized differently.  Business models will be much richer and the landscape of vendors will shift significantly.  The full impact of NFV will restructure the industry.

MFF: As network consumption grows and as it moves more and more to video, how does NFV help? Can it enable new business models?

Hassan: As we’ve already discussed, NFV impacts both cost and revenue.  Video growth is challenging network capacity and NFV enables operators to cost effectively add capacity rather than succumb to profitless prosperity.  However, I think your question is more about revenue and new business models that NFV’s service flexibility can enable.

NFV done well gives the operator the ability to quickly spawn new services.  This allows for increased innovation and the emergence of new business models. Specifically in the case of video content, today the operator primarily focuses on content delivery.  However there are many opportunities to create user experiences around events that can create a business relationship between the operator and the content provider.  Consider an event like the Tour de France which appeals to a relatively small affinity group compared to say the Superbowl.  Offering premium access to races with differentiated billing to subscribers who purchase a “Tour de France” viewing package is unthinkable in today’s network because the lengthy service creation process is too expensive for serving a small audience.  However NFV can reduce the service creation to minutes and allow the operator to profitably capitalize on hundreds of “medium tail” sports and entertainment events through content partnerships.  This is just a small example of how new business models can be forged when the tools are made available to the operator.

MFF: How should an operator think about offering cloud services to the consumers or their enterprise customers? Do they have shot at the game against Microsoft and Amazon?

Hassan: I think the operators have an excellent shot at the game.  To be sure, some players like Amazon are leading the industry today.  The revenue derived from cloud services today is impressive however I believe that we are very early on in the game.  Much of the growth lies ahead of us.  As operators move to a software centric network architecture they bring some critical advantages around managing scale and delivering reliable networks – arguably traditional strengths of the operator.  When combined with service architectures that enable customers to control and customize the network capabilities they receive, a very compelling product is created. 

If you believe that most computing/applications will move to the cloud over time, then the operators have a significant opportunity to capitalize on as this market grows.  However success will require moving quickly.  The large internet companies have shown what’s possible and the operators need to create networks that allow them to move in “internet time.”

MFF: The legacy network architecture hindered in launching new services quickly. How do things change with NFV, SDN, Cloud? What kind of impact does it have on the capex and opex for the operators? Is there a net gain or are we just shifting costs?

Hassan: We have discussed already how NFV brings considerably more service intelligence to the network.  With service function chaining and orchestration, the speed at which new services can be created and deployed is greatly enhanced.  This definitely creates a net gain.  Opex is significantly reduced on a number of fronts from service creation and provisioning to space and energy cost.  The cost of creating or modifying services comes down dramatically as the time to do so reduces to minutes from months.  Significantly less labor goes into the NFV service model and that is a net gain.

Capex also declines significantly for a number of reasons.  The most often stated one is the much lower cost of data center servers compared to custom hardware platforms comprising today’s network elements.  In addition when servers are pooled in data centers, capacity is more efficiently managed requiring less hardware purchases.  More efficient hardware deployment also leads to reduced space and power needs.

NFV represents a meaningful reduction in the cost of owning and operating a network.

MFF: How does rest of the ecosystem benefit from these network changes? Does it lead to more competition or collaboration?

Hassan: As you might imagine, it leads to more of both.  Certainly, the NFV framework enables more innovation because it greatly simplifies the ability to add functions and capability to the network.  The ease of experimentation is also greatly enhanced so we will see an expanding ecosystem fostering greater collaboration to enable increased and faster service innovation by the operators.  Service transparency across operators should also result in cross-operator collaboration.

We will also see greater competition.  Competition will not just be among operators differentiating on service offerings but among vendors.  The move to NFV invites participation from IT companies that have historically had data center relationships with the operators but have not been suppliers in the network infrastructure.  NFV blurs the line between IT and network and market share will shift away from some legacy providers to traditional IT suppliers.

NFV enables major structural shifts in the industry and heralds an exciting time in telecom.

MFF: What’s your view of 5G? What features do you think should define the next generation?

Hassan: That is a tough question.  So much thought is going into 5G today trying to connect the art of the doable with perceived need.  If past is prolog, then we will see applications and usage emerge that we didn’t imagine.  However what we can imagine today is a rising importance of the network as applications and computing move to the cloud.  We can imagine ever more powerful entertainment services and we can imagine a two order of magnitude increase in the number of connected devices as the Internet of Things emerges.  Device to Device or vehicle to vehicle communication will enable lifestyle changes that we haven’t yet conceived of.  In order for such a vision to be successful, the network must change meaningfully.  Orders of magnitude more data capacity, data rates, connections combined with low latency to enable real time applications become fundamental requirements of a 5G network.  Accommodating disparate networks must be seamless.  In order to realize these capabilities, much of our attention focuses on the RAN and technologies that can create the data rates and capacities that we imagine.  However, the network service architecture has to become increasingly flexible as well to create and service these disparate applications and provide user control.  Today’s NFV evolution will create a foundation for 5G’s service architecture.

Thanks

Chetan Sharma

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.

Download (37 pages, 2.6 MB)

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.

Mobile Breakfast Series: IoT Q&A with Telefonica June 9, 2014

Posted by chetan in : Internet of Things, IoE, IoT, Mobile Breakfast Series, Worldwide Wireless Market , add a comment

We are delighted to have Carlos de otto Morera, CEO of Thinking Things at Telefonica join the panel next week. Carlos is an economist educated in the United Kingdom. He has 15 years of international experience including entrepreneurial experience in mobile, hardware and Internet startups.  He created the largest online music platform in Spain from 2008 till 2012. He is deeply passionate about his job designing and manufacturing connected products. Carlos is joined by execs from BMW, Intel, and Worldsensing and we will be exploring the opportunities in the “Internet of Things” world.

We caught up with Carlos to get a preview of our upcoming Mobile Breakfast Series event in London on June 17th.

Why did you and Telefónica start Thinking Things? Is it about simplification or are there more benefits to the modular approach?

Telefónica R&D created the Physical Internet Lab to design specific solutions using connected hardware. After a few projects for different customers, the Lab realized that we were always tackling the same problems: sensoring or measuring, communications and intelligence (SW) for many different types of problems. Thinking Things was created so all those cases could be solved through a seamless solution that allows you to measure, collect and act on the information. It has been designed in a way that allows anyone unfamiliar with hardware to create specific solutions to specific problems thanks to connected hardware. This modular approach allows one to create objects with different functionalities by simply buying new modules with different sensors on top of the basic modules.

What are couple of examples of how it is being used today?

Thinking Things is being used currently by one of the largest Medical Analysis companies in Europe. This company carries a large number of fridges from one lab to another (around the continent). It is very important for them to ensure the quality of samples contained. Thanks to Thinking Things they can track temperature around the clock of all fridges and samples around Europe.

We are working together with large logistics companies to help them track expensive items being deliver around the world. Sometimes these items, especially expensive ones get stolen. Thinking Things can be inside these packages and inform whenever these packages have been open, so central systems are aware in real time of any wrong doing.

How can developers be involved in using the Thinking Things toolkit?

Thinking Things has been designed for all those app and web developers and digital product designers that need and want to build new connected products and services. We provide them with an easy to use, plug and play solution where, by buying our connected hardware are able to build such products and services. Thinking Things comes with battery, different types of sensors and a connections device together with cloud services so by just using our API, you can build any software specific solutions on top.

Our back-end software allows you to access your data, as well as allows you to create rules and ways to interact with the devices.

What are you doing on the software-side of things and with data?

Thinking Things is a hardware project within Telefónica. But it’s a connected product so we developed our own front-end and back-end software platform to satisfy the needs of Thinking Things users and developers. On the front-end side of things, we provide users with all necessary functionality so you can use Thinking Things right away. In any case we are aware of the fact that developers want to build their specific solutions therefore we provide an open API so they can freely create on top of the framework.

Data as of today will be used by owners of end products and their end customers for whatever purpose those products are created. We foresee though that considering that a large variety of products can be built, data generated may be of interest to third parties allowing both Telefónica and developers to exploit it commercially.

Venue: Telefonica, 20 Air Street, London, W1B 5AN London, UK

When: June 17th. Breakfast and Registration: 8-9am, Panel Discussion: 9-10:30am, Networking: 10:30-11:30am

Registration

Internet of Things: Exploring the next big thing in mobile

Prof. Mischa Dohler, King’s College, London and Cofounder, Worldsensing

Dominik Fromm, GM – Mobility Services, BMW

Carlos de otto Morera, CEO, Thinking Things, Telefonica

Raine Bergstrom, VP and GM, Intel

Chetan Sharma, President, Chetan Sharma Consulting (moderator)

Look forward to seeing you next week.

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.

Mobile Breakfast Series: Internet of Things March 23, 2014

Posted by chetan in : Internet of Things, IoE, IoT, Mobile Breakfast Series, Mobile Future Forward, US Wireless Market, Worldwide Wireless Market , 1 comment so far

Internet of Things: Exploring the next big thing in mobile

We hosted our first Mobile Breakfast Series of the year at Columbia Tower Club last week and the topic was Internet of Things (IoT). IoT is the hottest thing in the mobile industry right now with investment pouring in from all sides. Our expert panel took a deeper look into the opportunities, the hype, and the challenges in the evolving mobile segment. Mobile Breakfast Series works to bring you the current thoughts, expert brains, and probing questions about the main issues of the day.

Internet of Things (IoT) has been hailed as the next big thing in the mobile industry. As connections from objects and things interconnect with existing and new end points, the networked effect can provide tremendous opportunities; reshape existing processes, user experiences, and expectations. But, really, how real is IoT and what will it take to reach the billions of dollars promised. Will it fundamentally alter how we do things? We are starting to see signs of tremendous progress. GE is investing $4B+ into its version of IoT – the industrial Internet and it is making the difference in operations and machine learning. Connected consumers’ gadgets are enabling us to lead healthier lives, work more efficiently, and manage our time more effectively.

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We had a superstar panel discussing the IoT evolution from different angles.

Bobby Morrison, President, Verizon PNW has his ears to the ground as he works with his customers big and small on using mobile to solve real-world problem that improves productivity and financial performance. Verizon is one the top digital operators in the world who understands the implications of the 4th wave and is investing appropriately.

Tim Moss, SVP, Ericsson was one the key guys behind the analysis that led to the 50 Billion connected devices paper in 2011. He has 20+ years of experience in the industry and worked across many verticals so has a real deep understanding how mobile can be incorporated in various industries.

Chris Murphy, Director, Brand Communications and Digital Marketing, adidas US is close to the consumers as to what matters most. Companies like adidas don’t introduce technology in their products for the sake of technology. Each mistake can be costly if it is not well thought out. It doesn’t mean that are constantly tinkering at the edges. His team has been introducing new concepts and new ways to engage the consumer throughout their

Shankar Chandran, VP, Samsung Catalyst Fund is part of the new investment group at Samsung in Silicon Valley who is looking to invest in cutting edge startups and technologies in both hardware and software that can give Samsung and its ecosystem an edge. His areas of interest are IoT, cloud, security, mHealth, and next-generation user interfaces. Samsung is one of the top 3 important players in the mobile and technology ecosystem.

From wearables to automobiles to industrial automation, the use cases are endless and we are just trying to make sense of what such a connected world will mean to productivity, human behavior, safety, privacy, and the society at large.

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.

So, these are massive numbers. It does feel like we are entering a new phase of technology growth due to connected sensors, what I call the “Golden Age of Mobile” and I was seen that in my work in both developing and developed nations that the use cases are everywhere. In many instances, developing countries are not waiting but leapfrogging some of the developed nations. So, very exciting times ahead.

The salient point of discussions were:

I really enjoyed the discussion and we covered quite a bit of ground. As usual, the audience were well informed and did their homework.

Given the importance of the topic, we are expanding our Mobile Breakfast Series on IoT and going back to London this summer and in partnership with Telefonica hosting a session on IoT on June 17th. Hope our friends and colleagues in western Europe can join us.

We will also more details on our annual summit Mobile Future Forward in September. Stay tuned for more details.

Thanks and see you around.

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

Mobile Predictions 2014 January 2, 2014

Posted by chetan in : 4G, 4th Wave, ARPU, Bhutan, Chetan Sharma Consulting, Fourth Wave, Indian Wireless Market, Mobile 2014, Mobile Predictions, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

Mobile Predictions 2014

http://www.chetansharma.com/MobilePredictions2014.htm

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First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2014. My thanks to all who participated in our 2014 Mobile Predictions Annual Survey. It gives our community an insider’s view of the trends and predictions for the New Year.

2013 was a terrific year for the mobile industry. Mobile data continued to drive most of the mobile growth around the world. Whether it was LTE-minted markets like the US or the emerging economies like Indonesia, whether it was giants like China or the upcomers like Vietnam, mobile data growth was central to the economic activity in the ecosystem. Mobile is also transforming every major vertical industry around the globe. 2013 proved that connectivity has become the core of our fabric and we are entering the “connected intelligence era” that will enable the Golden Age of Mobile.

The competitive dynamics stayed quite vibrant in 2013. We saw epic battles in the field as well as in the courts. Many players struggled for relevance while some fresh blood was infused with startups around the world.

As we peer into 2014, we will see the total number of cellular subscriptions eclipsing humans on the planet for the first time. As the number of connected devices continue their march towards a multi-billion unit market, expectations of what’s possible are changing. Without a doubt, 2014 will be better than 2013 as new technologies, players, and business models shape the ever changing mobile landscape.

Our annual survey is a way for us to engage our community on the trends for the next year. We put some of the pressing questions to our colleagues and industry leaders. We are able to glean some valuable insights from their choices and comments, some tangible shifts, and get a sense of what’s to come. Executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain and from around the world participated to help see what 2014 might bring to keep us on our toes. What makes this survey unique is that it draws upon the collective wisdom of folks who are at the center of the mobile evolution around the world. The survey provides a view of how they collectively see the upcoming year for mobile.

1. What was most newsworthy in Mobile 2013?

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Smartphones and tablets established themselves as the most dominating computing platforms. If there was any doubts that the post-PC world is here, they were over as smartphones in most western countries are now over 90% of the devices sold every quarter. Once Nokia announced its shift to Windows, Microsoft’s acquisition was only a matter of time and with the acquisition (and a new CEO), Microsoft looks to a new beginning in 2014. Apple and Samsung continued to duel it out in the courts and the markets. The security breaches and the privacy revelations were a big deal in 2014. Facebook got its mobile mojo and many other consumer brands start to perform well on the mobile 4th wave.

2. What will be the biggest mobile stories of 2014?

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Mobile continues to transform industries and nations. The continued growth of mobile data around the globe was voted the top story third year in a row closely followed by the expectations of new experiences that go beyond the smartphones. The connected devices segment will keep wanting for more and the big M&As are not going anywhere. Given that cross-domain acquisitions have become the norm, expect some blockbuster deals in 2014. Privacy has also surged in priority for folks in the industry.

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

In mobile, Google, Apple, Samsung and the mobile Operators continued to be the most influential players in the ecosystem. Amazon, Qualcomm, Facebook, Microsoft, and Ericsson also hold significant sway as to which direction we will go in the New Year. The top 10 operators play a major role in terms of technology and business models evolution in the marketplace.

4. What will be the breakthrough categories in mobile in 2014?

It was no surprise that connected devices and wearable computing was voted as the breakthrough categories for 2014. We are in the early stages of understanding what’s possible and the entrepreneurs buoyed by the new business models are pushing the boundaries. Some of the early models lack the smarts but we will learn a lot this year about the new business models and technology boundaries to push with sensor-enabled societies.

5. What will be the most popular consumer mobile applications in 2014?

There is still quite a bit of disparity as to which apps dominate in the developed world vs. the emerging countries. The differences are due to the varying smartphone penetration, cost of data, regional requirements and interests. However, the gaps are closing every year.

6. Which will be the most dominant tablet platform in 2 years?

The industry expects iOS to continue to dominate the revenue pie and Android the unit share. While Windows made a bold entry with Surface, the lack of coherent strategy and execution has left the platform way behind in numbers and while we might see some incremental performance, iOS and Android will continue to dominate the tablet landscape for the next couple of years.

7. Who will make the biggest mobile acquisition in 2014?

Softbank made the biggest blockbuster deal in mobile last year with a $22B acquisition of Sprint/Clearwire. It is likely that Softbank will make a bid for T-Mobile in a deal of similar size in early 2014 and again lead the industry in M&As. A number of operators are also eyeing operators in Europe and so we might be in for a surprise. In a non-operator merger, our panel correctly predicted Microsoft to make the biggest acquisition (Nokia). This year, they pick Google ahead of Microsoft.

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

Due to fragmentation, no challenger has emerged who can put up a fight against the might of the financial companies like Visa and Mastercard. As such, the industry expects them to stay in the driver’s seat for some time.

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

LTE has been the fastest cellular technology being deployed in the history of the industry. 4G continues to be the focus for the operators with other solutions chipping in to help manage the insatiable appetite of consumers for more data. There are hopes that some alternate business models to fund mobile data broadband will emerge in 2014.

10. Which category will generate the most mobile data revenue in 2014?

Access has become the most dominant category for generating mobile data revenues worldwide. There are some regional differences for e.g. in North America, messaging’s contribution is tiny while in Asia and Africa, it is a dominant category. OTT services are also starting to make a dent in the overall revenue mix.

11. Which European operator is likely to emerge stronger from the weak economic climate?

Vodafone sold of its previous Verizon possession. Will it help in making the company stronger? Our panel thinks so. Deutsche Telekom and Telefonica make up the top three.

12. When will mobile commerce be greater than ecommerce?

As the holiday commerce data showed, mobile was already 50% of the digital traffic in 2013. The panel expects that within 2-3 years, each region is likely to see the tipping point.

13. The company bringing the most successful mobile gadget of the year - 2013 and 2014?

Apple continues to set the pace of the industry, however, Samsung has gone toe-to-toe with its rival and won many battles. Samsung understood the potential of bigger screens better than most and capitalized on it with blockbuster sales around the globe. If you go to Asia, you will see ease with which consumers interact with larger screen devices. Now, this phenomenon is taking over the western markets as well. As is always the case, folks expect Apple to surprise us with iPhone 6. There are expectations that Google (Motorola) and Amazon might spring in a surprise or two.

14. Which platform has a credible shot at becoming a viable and durable 3rd ecosystem in mobile?

In 2013, Windows established itself as the only viable third mobile ecosystem. The gap is likely to increase in 2014 though HTML5 and forked Android based OS might pose a challenge.

15. Mobile company of the year - 2013 and 2014?

Samsung’s performance in 2013 was outstanding. With a massive global footprint, its ambition knew no bounds. It performed exceptionally well generating multi-billion quarters and just dominating the Android landscape. In 2012, Samsung displaced the 14 year reigning champion Nokia from the top spot. In 2013, the company solidified its position and was voted the Mobile Company of the year. However, in 2014, the panel expects Apple and Google to duke it out for the top spot.

16. Which of the following are likely to happen in 2014?

Amazon smartphone is like water on Mars. It is much talked about but hasn’t been spotted yet. Will 2014 be any different? For the first time, expectations improved to 50%+. Microsoft might launch Surface smartphone instead of pushing Windows smartphones. 40% of the panel thought that Softbank will acquire T-Mobile and it will go through. Will Samsung fork Android? The question has been of much speculation in 2013 and will continue to see interest in the New Year as well.

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

As we outlined in our 4th wave series of papers, mobile operators are at a critical juncture of their evolution. The ones that embrace the digital world will live to see another decade of growth and prosperity while others will perish or be relegated to lesser roles. As we have worked with leading operators around the globe on this transition, I have become more convinced that the digital transformation will redefine the segment. AT&T, Verizon, Softbank, DoCoMo, Telefonica continue to lead. There are many sceptics as well. 2014 will be a year of change and progress.

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

As I have said before, we are entering the golden age of mobile and every vertical, every industry is going to be transformed by mobile. Which categories are ripe for disruption? Our panel voted for health and monitoring, home automation, wellness/fitness, entertainment, and auto as the top categories. We already saw great progress in 2013 and will see many more companies enter these spaces in 2014. Exciting times ahead.

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

The inefficiencies of a middlemen can be overcome by algorithms. The concept is not new but society expects more each year to narrow the gap between the thought and task execution. Advertising agencies, retail, real estate, transportation, and education seem to be on top of everyone’s mind as the areas that need some algorithmic infusion.

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

Samsung’s JK Shin was number two behind Tim Cook in last year’s vote. His ascendency to the number one spot for 2013 reflects the success Samsung has had this last year. He was closely followed by Masayoshi Son whose global ambitions put the mobile world on notice in 2013 and John Legere who brought back T-Mobile as a strong contender in the US market. Last year, the expectations were high for Jeff Bezos and they are high again for 2014. Will it be drones or space exploration or just a simple much awaited smartphone? There is a lot to look forward to in the New Year. There were several other leaders who are working on transforming the mobile industry like Sundar Pichai, Jack Dorsey, Tim Cook, Jony Ive, Mark Zuckerberg, Dick Costolo, Neelie Kroes, Lowell McAdam, Ralph de la Vega, Hans Vestberg, John Chambers, Dan Hesse, Tom Wheeler, Matthew Key, Glenn Lurie, Brian Krzanich, and many more.

Thanks again to everyone who contributed. Warm wishes for a terrific 2014.

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 February 2014.

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

2013 – The year in mobile December 23, 2013

Posted by chetan in : 4G, 4th Wave, Applications, Chetan Sharma Consulting, Connected Devices, Devices, Disruption, Enterprise Mobility, European Wireless Market, Fourth Wave, IP Strategy, Intellectual Property, Mergers and Acquisitions, Mobile 2013, Mobile Applications, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 41 comments

Mobile Predictions 2014 Survey: We launched our annual mobile predictions survey for 2014 last week. For all of you have already contributed – many thanks! Rest – will appreciate you filling out the short survey and helping us in analyzing 2014. We even have prizes J. We will have the full analysis from the survey during first week of January.

2013 – The year in mobile

Just like there is no “year of electric cars” or “year of razor blades” or “year of the Greek yogurt,” there is no “year of mobile” or “year of this or that.” However, as we have seen over the 30+ years of mobile evolution, the next year is better than the previous one and so on and so forth. So, 2013 ends in the long tradition and continuum of human endeavor to make significant progress in multiple mobile dimensions and make an impact on individuals and societies alike. 2013 proved that connectivity has become the core of our fabric and we are entering the “connected intelligence era” that will enable the Golden Age of Mobile.

In no particular order, here were some highlights of mobile 2013:

Number of mobile subscriptions ~ humans: the total number of mobile subscriptions got tantalizing close to the number of humans on the planet. Next year, we will go past the milestone but it shows the pervasiveness and strength of the mobile technology that it has become the basic part of our Maslow’s hierarchy.

More data please: As smartphones approach the 2B mark, the data appetite of consumers showed no signs of abating. In Sweden, the mobile broadband subs are consuming over 7GB/mo. In the US, some Android devices are consuming over 4 GB/mo on average. Operators will need to continue to refine their pricing and margin models as the demand for more spectrum will continue.

The dominance of Samsung and Apple: The tussles in the device segment has all the intrigue and juxtaposition of a Shakespearean drama and the ups and downs of a Pavarotti’s masterpiece. Through sheer muscle tenacity and the execution speed of Usain Bolt, Samsung was able to firmly dominate 2013 despite Apple’s grip on the high-end smartphone market. These two account for almost 50% of the smartphone shipments and almost all of the profits in the space. Apple continued to set the tone for the market with the launches of new iPhones and iPads. Though iOS trails Android in raw deployment, it trounces it in consumer usage. It is also remarkable how quickly consumers upgrade to the latest iOS in stark contrast with the Android fragmentation. Apple finally got access to the big Chinese market.

The disappearance of the legacy device brands: Nokia, Motorola, and RIM were dominant players a few years ago but Apple ensured the smartphone script is rewritten. They all made serious strategic errors one after another and while Nokia and Motorola have found new families to host their aspirations, their story should be a reminder of the turbulent cycles of the device business and that the complacency virus spares no one. The rise of the local OEMs should keep everyone on their toes in 2014.

Android juggernaut: In 2013, Android continued to create distance with Apple in terms of downloads, easily going past the mind boggling 1 billion milestone. Android has changed the industry for the better. While there is trouble in the house, Android will continue to play a major role in the device and app ecosystem in 2014.

The growth of OTT Services: As we discussed in our 4th wave paper earlier this year, OTT Services will be the biggest growth segment for the next decade. In 2013, the segment grew 50% ahead of any other telecom segment. Young IP messaging stalwarts fundamentally altered the messaging landscape with Whatsapp performing exceptionally. SMS usage and revenue numbers were impacted worldwide.

The digital revenue streams are very distributed with diverse players such as Facebook, Twitter, Starbucks, Expedia, Uber, Pandora, Amazon, AT&T, Telefonica, Verizon, DoCoMo, Netflix, China Mobile, Rovio, Square, Softbank, Ebay, Hertz, Apple, Google, and Microsoft. In our work with players around the world this year, it is clear that there is significant energy and application in mining the opportunities on the 4th wave. With nascent efforts in Bhutan, Vietnam, Malaysia to moonshots in the US and Europe, mobile is rewriting the rules in virtually every industry. Fasten your seat belts for another fast paced year in 2014.

Post-PC beat PC+: Apple expertly wrote the post-PC narrative and while the PC+ crowd has a legit argument, perception is often reality and there in no doubt that from here on out, the industry will be talking about the post-PC world in one voice. Even Microsoft will grudgingly admit to the transition and likely shift its strategy accordingly. As we wrote long time ago, Tablets have fundamentally altered the computing paradigm. In our SMB research released earlier this year, it was clear that smartphones and tablets are the tools of choice for the enterprise and that is not only altering the device business but also the software landscape. Mobile broadband, the cloud, and the applications are altering the enterprises – big and small. Microsoft should take solace from a tough year of progress. Blackberry is practically done and Microsoft has established itself as the distant but a viable third mobile ecosystem. Had it not been for a series of strategic mistakes, Microsoft might have made better inroads in 2013.

LTE launches: LTE is the fastest growing generation of cellular technology in the history. With over 250 networks launched, the desire to launch IP networks quickly is on top of the agenda. US leads with all major operators having substantial LTE deployments but other nations are fast catching up. While there has been quite a bit of focus on LTE, WiFi has been emerging as the white knight and its importance only grew in 2013 with 60-70% of the mobile data traffic being carried by WiFi networks in most of the countries. It might lead to some interesting business models in the coming years. 5G entered the industry lexicon.

M&As: It is natural for fast growing and competitive industries to consolidate. 2013 wasn’t any different. There were some blockbuster and expected M&As: Microsoft acquired Nokia, Softbank surprised with Sprint/Clearwire acquisition, Verizon finally got hold of its destiny from Vodafone. As we have eluded to several times in our past research notes, we expect the global M&A to continue with several block buster deals slated for 2014. Stay tuned.

Patent wars: In maturing markets, patent wars are the unfortunate part of the ongoing battle for dominance. Mobile saw its share of patent wars. With roughly quarter of the USPTO grants becoming mobile related, it shouldn’t come as a surprise though.

Regulatory tussles: Regulators are generally always behind in understanding a fast growing industry. It was clear in 2013, that the convergence of the computing and communications world has left the regulatory world woefully short of expertise and imagination. Governments around the world will do better by hiring folks from the industry to get a grip of the fast-paced every-changing dynamics of the mobile world as the very competitiveness of a nation depends on it. From spectrum to privacy, from competition to commerce, regulators need to get up to speed on unexpected trajectories of the new world.

Security and Privacy: From Snowden revelations to industrial espionage, from credit card data loss to enterprise security, the security and privacy of mobile data, applications, networks, and devices became front and center of the security and privacy debate.

Operator disruption plays: In the telecom space, the #4 player generally doesn’t have a big impact on the overall mechanics of the industry. However, when it has nothing to lose, it can provide a potent dose of disruption to the market. Free in France and T-Mobile in the US were examples of that this year. In France, by offering cheap mobile data services at low margins, the newcomer altered the economics of the segment tumbling the incumbent revenues by 10%. In the US, through a series of financial and marketing maneuvers, T-Mobile was able to alter its net-add trajectory and had meaningful sub gains for the first time in three years. Also, for the first time, T-Mobile forced the top three to react to its moves and not the other way around. It also inspired other smaller players in other countries to rethink their strategies.

Connected devices: The promise of M2M and connected devices has been there for some time. Internet of Things has morphed into the gimmicky Internet of Everything. While the hockey stick curve hasn’t arrived yet, there was plenty to celebrate with the introductions of Google Glasses, wearables, smart watches, connected autos, glamorous thermostats, winking light bulbs, home security and energy management solutions and much more. GE is spending billions for its “industrial Internet” initiative. A nice platform has been set for continued feverish growth and product introductions in 2014.

Mobile’s impact on commerce: Mobile is changing every industry but its impact on commerce is particularly notable. In the 2013 holiday season (according to IBM), mobile made 17% of the online sales increasing over 55% from 2012. Tablet users spent $126/order.

Meteoric rise of mobile apps: In 2010, we evaluated the impact mobile apps will have on the industry. Much of the growth has been expected, however the players who lead in revenue and downloads have fluctuated across the various platforms. In 2013, Google started to match Apple in downloads though Apple easily wins in the revenues category and thus still remains more attractive to the developers though the gap is closing.

There was much more – Twitter IPO, Surface, Moto X, spectrum scandals, Facebook’s love for mobile, Google mobile advertising dominance, the rise of the Chinese OEMs, decline of HTC, and several other events captivated our attention.

I am positive that 2014 is going to be another terrific year for mobile. The progress and surprises will come from all quarters. New players will emerge, new business models will take hold, and we will make significant progress. I am also sure that you all will do your part in shaping the mobile cosmos.

Would love to hear from you. How was your 2013? And what are you looking to do in 2014 that will change the mobile world? Please be sure to fill out our annual predictions survey for 2014.

With best wishes for an outstanding 2014.

Yours truly

Chetan Sharma

New Paper: Mobile Apps Privacy Framework For Consumer Transparency and Control November 19, 2013

Posted by chetan in : 4th Wave, AORTA, Privacy, Security, US Wireless Market, Usability, Wireless Value Chain, Worldwide Wireless Market , add a comment

Mobile Apps Privacy Framework For Consumer Transparency and Control

A Mobile Future Forward Research Paper

The paper was originally published in the Mobile Future Forward 2013 Book - Mobile 4th Wave: Mining The Trillion Dollar Opportunity

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

Download PDF (1 MB)

mobileprivacy_s

Introduction

Mobile technology is an integral part of our daily life. Mobile devices help consumers in many ways. They help us connect with loved ones, provide directions, catch-up with news, send emails, text friends and family, monitor our heart rate, stream movies, interact on social media sites, and complete transactions in a matter of seconds. Most of the times, applications and services require end-user related data to understand the context and provide appropriate content. It is well understood that data is critical in providing a great user-experience. However, consumers don’t have a clear understanding of how their personal data is being collected, stored, and used.

The collection of consumers’ personal information is not new. The difference now is that there are tools available that help connect various dots to generate the precise information about the user and build a detailed user profile without consumer knowing about it. Because of the location based technologies and various apps on your phone, companies now have a log of all of your day activities. Over time, the data collected can generate significant details about your habits, likes and dislikes, and pretty much build your identity without you ever knowing about it.

There have been many concerns raised by consumers about privacy of their data collected through mobile devices. For example, a nationwide survey indicated that 57% of all the apps users have either uninstalled an app over concerns about having to share their personal information, or declined to install an app in the first place for similar reasons. A mobile app developer had to settle with the FTC because they were collecting kid’s information without their parent’s consent. Delta airlines had to settle with California State when they were cited for mobile apps privacy violation in a lawsuit. A popular social networking application Path was fined $800K by the FTC for improperly sending consumer’s contact information to their cloud. FTC has repeatedly warned leading mobile app developers and platform providers to be more transparent about consumer data and privacy and even issued a recommendation report in 2013.

Data that provides context to the application developer is definitely needed to provide a robust user experience. Google Maps won’t operate well without location information, Whatsapp will not work well without the address book, Facebook requires the interaction history to provide a better newsfeed, Amazon looks at past transactions to recommend new ones, and so on and so forth. However, there is a lack of a simple and consistent way to convey the intent and the value of the data being collected, stored, and used by various application providers.

These concerns clearly indicate that in order to build consumer trust, we must provide control to consumers over their personal information and be extremely transparent about what, when, and where companies are collecting personal information.  There must be a balance. While protecting consumer privacy, there shouldn’t be a negative impact on innovation.

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 February 2014.

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

US Mobile Market Update Q3 2013 November 14, 2013

Posted by chetan in : 4G, 4th Wave, Big Data, European Wireless Market, Fourth Wave, Mobile Applications, Mobile Cloud Computing, Mobile Commerce, Mobile Ecosystem, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update Q3 2013

http://www.chetansharma.com/usmarketupdateq32013.htm

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Summary

The US mobile data market grew 5% Q/Q and 15% Y/Y to reach $22.8 billion in mobile data revenues. Data is now 48% of the US mobile industry service revenues and as we had forecasted a few years back, the cross-over point of 50% might occur next quarter. For the year 2013, we are expecting $90 Billion in mobile data service revenues for the US market making it the number one market in mobile data revenues ahead of Japan and China. Q4 2013 is looking to be another record breaking holiday quarter for the industry at many levels, which is setting up 2014 quite nicely.

For the quarter, the market added 2.2M new connections, a strong reversal from the paltry 139K last quarter. T-Mobile continued to impress after its strong reversal in industry metrics last quarter on the back of a series of marketing and pricing initiatives that seem to be gaining traction and having an impact on its image and fortune.

Given that Apple didn’t launch the device until Sept and then had severe supply-chain constraints, Android had its best quarter against iOS with 54% share in the US market.  However, iOS is likely to catch-up in Q4.

Smartphones are now past the 64% mark in the US and continue to sell at a brisk pace accounting for almost 90% of the devices sold in Q3 2013. Apple led the smartphone sales amongst the top 4 operators with 42% share for the quarter. While the US penetration of smartphones is 64%, the 64% of the sub base is concentrated in only 40% of the households thus leaving plenty of growth in the marketplace. Overall, connected devices remains the highest growth segment with 6% Q/Q growth.

Smartphone and Connected Device Growth

Though China has overtaken (primarily because of the sheer size of its population) US in terms of the overall smartphone penetration, US remains the market where OEMs have to be really successful in order to be consider a serious player on the larger canvas. Though the likes of Xiaomi and the Micromax have had good success in their local markets (and still have a great amount of growth left), the prized market to make a sizable dent in their overall revenue and margins is the US market. This is primarily due to handset subsidy that allows consumers to easily own premium brands at bargain-basement prices in addition to the higher disposable incomes. This has helped the ASPs to go up in this market unlike some of the other markets where they have been going down.

US also boasts four leading-edge LTE networks that allows the ecosystem to innovate at the edge, literally. Having access to fast mobile broadband impacts human behavior, application and service development and everything in between. As such, US has become the laboratory for many experiments that benefit the larger ecosystem. This absolutely doesn’t mean that innovative things are not happening in other parts of the world. Far from it. But the “enabling layer” of networks, devices, and platforms is in its most advanced stage in the US. This layer allows folks to build applications and services that will power the global economy.

So, in order to be considered credible in the smartphone space, one must have a decent scorecard in the US today. The pendulum could of course swing and China could take the lead. In fact, US and China are the G2 nations of the mobile world.

While there have been murmurs in the market about smartphone saturation, the upgrade cycles will keep up the demand for more devices in 2014.

Like any ecosystem or a market, there are winners and there are companies who couldn’t perform to their potential. Enough ink has been spilt on Blackberry to reiterate what was quite predictable. The only interesting tidbit that emerged was that as we expected, Lenovo made a serious run for it and the Canadian government stopped it. It is ok for Canadians to use Lenovo laptops but not the smartphones? Of course, the reasons were complicated and different from what have been generally reported. Can Blackberry make a comeback under a savvy CEO? If they continue with the same OS, it is hard to see how?

Apple for the first time launched two models – 5s and a slightly lower priced 5c. It seems like the strategy might have been two fold a) get the supply-chain ready for more than one new model at a time and b) given an additional option to the consumers (in the US) who used to go for a level down version. Since the supply chain was under pressure, it is hard to get a clear picture of what might be happening but the iPhone 5s/c launch allowed Apple to raise the percentage of new devices sold. In fact, based on the weekly sales data from ITG Research, they might have managed to flip the ratio. For e.g. in Sep and Oct 2012, the old models sold 3:1. During Sept-Oct 2013, the new models outsold the old models by 1.7:1. 5s outsold 5c 1.6:1.

The big block-buster deal of Q3 was Microsoft’s acquisition of Nokia. It was clearly one of the outcomes Nokia was on the path of the day it chose Windows Phone OS. Microsoft got an effective OEM distribution and design system for really cheap but how long will it take to turn things around? Its mobile fate might largely depend on who the new CEO is.

Tablets are making a tremendous impact in the post-pc era. In the US market, we are already approaching 100M unit sales/year run rate. While Android tablets have taken market share from iPad, Apple remains the undisputed king of the category primarily because of superior hardware and a more robust ecosystem. Android tablets can be cheap but also unreliable, the life expectancy of such tablets can be 50% or so compared to the iPad. The usage is even less. Microsoft launched a credible challenger in Surface but there have been so many missteps that it is not (yet) in the picture of the post-pc transition. 

There has also been quite a bit of excitement about smart watches, smart glasses, smart cars, smart homes, and on and on. However, we must remember that just because device is growing in the era of the smartphones, it doesn’t makes them smart. In fact, most of these devices are where smartphones were in the late nineties – basic, functional, and full of possibilities. The evolution, however, will be much quicker. Google is one company that is pushing the boundaries of across multiple dimensions. Regulators and policy makers better come up to speed on the emerging landscape quickly.

A good test of a platform’s importance is to find out what happens if the platform shuts down for 5 minutes – how much panic and revenue drop does that create in various parts of the world? Another measure of the platform is the value it creates by launching new companies and ideas. For mobile, the answer is fairly obvious.

The Fourth Wave and the shift towards services

It is evident that there is a subtle shift from devices/access to services/solutions. In our paper on the topic Operator’s Dilemma (and opportunity): The Fourth Wave, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skill set and strategic approach than the past three curves. As predicted, we are starting to see the impact of the 4th wave on a global scale and some operators have started to break out the 4th wave revenues in their financials. Operators with better balance sheets will also look for global expansion especially in Europe where economic impact on the telecom operators has been severe, however the M&A efforts will be complicated by respective governments desire to keep control of the national infrastructure provider.

We had a very successful Mobile Future Forward Summit last quarter. It was dedicated to exploring the 4th wave in more detail across multiple dimensions and verticals. The dialogue was incredible and validates the march towards the 4th wave that is redefining industries across the spectrum including the wireless industry itself, at its core. Some of these tectonic shifts aren’t very apparent and visible but as I have spent time working with some of the leaders in New York, Silicon Valley, London, Abu Dhabi, Barcelona, Hanoi, Singapore, Dallas, New Delhi, and Seattle this year, it has become abundantly that mobile industry is at a key inflexion point that is changing industries and the power structures, creating new opportunities and new revenue streams. In my interview at Mobile Future Forward, Ralph de la Vega, CEO of AT&T Mobility indicated that the ARPU from Digital Life customers is higher and the churn is lower. So, the fourth wave services have a direct impact on existing revenue streams as well. Conversely, absence of such services doesn’t yield a pretty picture.

FCC chairman and regulations

Amidst all the cacophony of device launches, acquisitions, and investments, FCC finally got its new chairman. Tom Wheeler is one of the savviest operative in the space with better grasp of the ecosystem, policy, law, and politics than most of his predecessors, so it will be interesting to see what the next FCC era brings over the next 3 years. Clearly, Incentive Auctions will be one of the most critical items on the agenda but some other issues like the potential T-Mobile acquisition and net-neutrality issues are likely to become important as well. Regardless, we are in for an interesting ride.

What to expect in the coming months?

2013 has been quite a year for the mobile industry and as we head into the holiday season, it’s a consumer’s market with plenty of choice and competition.

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 2013 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

4th Wave Progress

Handsets

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 February 2014.

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

US Wireless Market Update Q2 2013 August 13, 2013

Posted by chetan in : 4th Wave, ARPU, Chetan Sharma Consulting, Mobile Applications, Mobile Cloud Computing, Mobile Future Forward, Smart Phones, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Market Update Q2 2013

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http://www.chetansharma.com/usmarketupdateq22013.htm

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Summary

The US mobile data market grew 4% Q/Q and 14% Y/Y to reach $21 billion in mobile data revenues. Data is now 46% of the US mobile industry service revenues and as we had forecasted a few years back, the cross-over point of 50% might occur later this year. For the year 2013, we are expecting $90 Billion in mobile data service revenues for the US market.

For the quarter, the market added a paltry 139K new connections, a decline of 95% from Q2 2012. It was the lowest net-adds quarter in the US mobile history (barring the early days of tepid growth). The biggest reason was the sun setting of the Nextel brand which was finally laid to rest after the grand experiment of 2004 went wrong.

However, the story of the quarter was the resurgence of T-Mobile which roared back with an industry leading net-add quarter, something it did last when George Bush was still the president. Not only that, the growth was on the back of postpaid net-adds, something it hasn’t done in 12 quarters. The merger with Metro has helped boost the subscriber count and the revenue numbers. However, the growth came at a cost with shrinking margins and lower overall ARPU.

AT&T sold more iPhones but Verizon sold more smartphones. Given the lack of new devices from Apple and some good ones from competitors, Android edged past iOS for the US smartphone market share for the quarter primarily coming from the Samsung success with the Galaxy brand. Nokia launched some new devices focused on cameras, Motorola/Google made its first foray into the smartphone world after the merger with MotoX. However, the market awaits the next iPhone which is going to be released next month.

The Sprint-Softbank-Dish drama finally ended and as expected Softbank got a hold of both Sprint and Clearwire though at a higher price which was the plan all along. With this merger behind, all eyes are squarely focused on T-Mobile as to who makes the bid for 4th ranked operator in the next 6-12 months.

Smartphones are now past the 60% mark in the US and continue to sell at a brisk pace accounting for almost 87% of the devices sold in Q2 2013. Apple led the smartphone sales amongst the top 4 operators with 42% share for the quarter. While the US penetration of smartphones is 60%, the 60% of the sub base is concentrated in only 35% of the households thus leaving plenty of growth in the marketplace.

Is the smartphone growth over?

There has been some speculation in the market that the smartphone growth in the US market is over. In the US, roughly 240M subscribers have 335M mobile subscriptions. Out of those 240 subs, roughly 145M have smartphones (many of them have two or more). These days newborns get an iPhone on their arrival as a welcome gift, but if we take out the 0-5 age group, we are left with 293M potential subs. This means the potential market for smartphones at this point in time is 148M subs who don’t have a smartphone (obviously, there will always be folks who just don’t want any wireless phone – smartphone or otherwise but the size of that group is shrinking). Add to the upgrade cycle which averages between 18-20 months in the US, the market for smartphone growth remains pretty healthy.

The global market is even more fertile. The emerging markets are quite price sensitive and the low-cost Android devices are rushing to fill the void. If Apple cares about market share, it will have to figure out a strategy to address the void in its portfolio.

The success factor of mobile devices and OEMs is not determined just by product but several other factors as outlined in our recent paper “What Really Drives Mobile Device Performance?” As I mentioned to the New York Times, it is no longer good enough to have a great product, an OEM needs to perform well across multiple variables. CNBC also referenced the research in one of their segments.

Predictably, Microsoft’s Surface RT made a dismal impact on the market. The fundamental strategy was flawed and it was surprising that so many OEMs fell for it.

Blackberry, Nokia, HTC, each once proud leader of the smartphone ecosystem is struggling. Can they come back? In this market, you don’t get too many chances and too many years to turn the ship around. Once the customer loyalty is lost, it is very hard to get it back because there are hungry competitors ready to take your spot. Blackberry and Nokia are a perfect case study for management schools. The cycle of complacency spares no one.

A more likely scenario for some of these players might be some form of M&A transaction. As we alluded to in our paper, Lenovo is the dark horse of mobile and while there are others like HP and Sony who are looking to, reenergize the market, and Huawei and ZTE inching-up every quarter, Lenovo seems better positioned to make an acquisition and make a run for the top 3 spot. But, it will have to make a decisive move and go global with its strategy quickly else as we know the mobile market doesn’t wait for no one.

In terms of Q/Q growth, Connected Devices segment grew 13%, Wholesale 1%, Postpaid 2%, and Prepaid 1%.

The disappearing Tier-2s

In our previous update, we suggested that the market for tier-2s in the US is practically over. The reason was pretty simple – there is no growth left for them. Given the postpaid saturation, the big guys are also focusing heavily on the prepaid segment leaving the tier-2s vulnerable. MetroPCS was first to go followed by Leap (acquired by AT&T, transaction is not complete yet). The next big shakeup in the industry will be the acquisition or the merger with T-Mobile. Like we suggested in our paper “Competition and the Evolution of Mobile Markets” in 2011, rule of 3 will ultimately prevail in the US market. We will be discussing the subject in the more detail at our Mobile Future Forward Summit next month.

The Fourth Wave and the shift towards services

It is evident that there is a subtle shift from devices/access to services/solutions. In our paper on the topic Operator’s Dilemma (and opportunity): The Fourth Wave, I proposed that we need a new framework to think about the next generation of revenue opportunities. The fourth curve opportunities are massive but require a different skill set and strategic approach than the past three curves. As predicted, we are starting to see the impact of the 4th wave on a global scale and some operators have started to break out the 4th wave revenues in their financials. Operators with better balance sheets will also look for global expansion especially in Europe where economic impact on the telcom operators has been severe, however the M&A efforts will be complicated by respective governments desire to keep control of the national infrastructure provider.

The incumbent operators in Canada are getting really nervous about the potential entry of Verizon into the market that hasn’t seen any “real” competition in years.

We will be discussing fourth wave in much more detail at our annual thought-leadership summit – Mobile Future Forward with the incredible leaders who are making billion dollar decisions every day.

OTT impact on legacy businesses and models

We will see the same impact of IP and mobility on the various verticals like Retail, Energy, Education, Entertainment, Travel, etc. Some operators have been preparing for this shift and going outside their traditional products and services to launch services like AT&T’s Digital Life to address opportunities in the home, Verizon’s efforts in health and public safety and Sprint’s steps in mobile advertising and analytics. Overseas operators such as Telefonica, Vodafone, Tata, and others are looking to make inroads into the US mobile 4th wave market.

What to expect in the coming months?

All this has setup an absolutely fascinating 2013 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. Players who firmly attach themselves to the 4th wave will reap benefits while the ones who miss it will see their fortunes dwindle. We are gearing up for our annual Mobile Brainstorm Summit – Mobile Future Forward on Sept 10th, hope you can join us.

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

Against this backdrop, the analysis of the Q2 2013 US wireless data market is:

Service Revenues

ARPU

Subscribers

Shared Data Plans

· Shared data plans launched by Verizon and AT&T saw positive results. The tablet and other device attachment rate has gone up by 60%.

· Shared data plans are working so well for AT&T that most of its postpaid growth is coming from tablets. In the last 4 quarters, postpaid tablets accounted for over 72% of the net-adds.

· Shared data plans moved tablet session based consumers to postpaid tablet plans with more predictable revenue stream. The $10 surcharge for every device is still an inhibitor for many consumers. Over time, we expect this fee to go away to bring in many more consumers experience data services across devices other than their smartphones.

Applications and Services

· The market is seeing a lot of activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education. We will be discussing how mobile is changing all the vertical industries at our fall summit Mobile Future Forward where industry leaders in each of these vertical segments will convene to share their experiences and expectations.

OTT and the impact on legacy services

· In the last 12 months, Whatsapp has moved around more messages than all the mobile operators in the US and China combined. Those of you who have read our Fourth Wave paper shouldn’t be surprised by this shift.

Handsets

· Smartphones continued to be sold at a brisk pace accounting to almost 87% of the devices sold in Q2 2013.

4th Wave Solutions

· There were several launches of digital services by the operators but the most prominent has been the Digital Life home security and automation service launched by AT&T.

· There are other instances of companies revving up their mobile revenue base. Facebook is on its way to cross the 50% threshold, Pandora is at 60%, and Twitter is close to 50%. Starbucks and Expedia are doing well in their respective verticals. There are several mobile-only players that are eating up the revenue from traditional players who haven’t been quick to move into mobile.

· Google and Apple are ahead of the pack when it comes to raw revenue. We will have more details on the subject in our upcoming research sequel, “Mobile 4th Wave: The Evolution of the Next Trillion Dollars.”

Your feedback is always welcome.

Chetan Sharma

We will be discussing a number of issues raised in this research update at our annual mobile executive thought-leadership summit – Mobile Future Forward on Sept 10th in Seattle. Thought-leaders include:

· Ralph de la Vega, President and CEO, AT&T Mobility

· Steve Elfman, President, Sprint

· Erik Moreno, EVP, Fox Networks

· Danny Bowman, Chief Sales and Operating Officer, Samsung

· Terry Myerson, EVP – Operating Systems, Microsoft

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

· Jef Holove, CEO, Basis

· Geeta Nayyar, Chief Medical Officer, AT&T

· Rowland Shaw, VP – Strategy, Ericsson

· Andrew Stalbow, EVP, Rovio

· Raj Toleti, President, Patient Point

· Manish Jha, GM – Mobile, NFL

· Drew Patterson, CEO, Room77

· Dr. Avideh Zakhor, Professor, UC Berkeley

· Rick Osterloh, SVP – Products, Motorola – Google

· Jeff Warren, VP – Mobile, Expedia

· Mark Anderson, CEO, SNS

· Doug Suriano, VP – Communications, Oracle

.. More to come

· Stephen David, former CIO, P&G

· Yung Kim, President and Chief Strategy Officer, Korea Telecom

· Glenn Lurie, President, AT&T Mobility

· Jude Buckley, President – Mobility, Best Buy

· David Small, Chief Platform Officer, Verizon Enterprise Solutions

· Tracy Isacke, Head of Americas, Telefonica Digital

· Marianne Marck, SVP – Consumer Facing Technology, Starbucks

· Henning Schulzrinne, CTO, FCC

· Fay Arjomandi, Global Lead, Vodafone Xone

· Biju Nair, EVP and CSO, Synchronoss

· Hank Skorny, VP/GM – Software Services, Intel

· Curtis Kopf, VP – Customer Innovation, Alaska Airlines

· Matt Carter, President – Emerging Solutions, Sprint

· Joost Schreve, VP – Mobile, Tripadvisor

· Rod Randall, Partner, Siris Capital

· Chris Koopmans, VP and GM – Cloud, Citrix ByteMobile

· Wim Sweldens, former President, Alcatel-Lucent Wireless

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 November 2013. The next Global Wireless Data Market update will be issued in October 2013.

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

Lessons from Bhutan July 18, 2013

Posted by chetan in : 4th Wave, Bhutan, Worldwide Wireless Market , add a comment

 

Bhutanreport1_s

 

Lessons from Bhutan

Download Report (ITU website)

When I started thinking about the Mobile 4th Wave a few years ago, I was initially focused on the western markets as it was logical that the fourth wave will arrive in these markets first. The markets were getting saturated, the voice and messaging revenue waves were in decline, and the access revenue curves were going to be under tremendous margin pressure. The situation was going to be exacerbated by the economic doldrums in Europe as well.

However, one of the pleasant surprises was the speed with which the emerging markets were ramping up on the 4th wave of mobile with new applications and solutions. So, it was a great honor and privilege to work with the ITU/UN on the request of Government of Bhutan to lead a project to help formulate Bhutan’s national mobile apps policy and strategy. There aren’t many nations who think about a national mobile apps strategy. Bhutan is a very young democracy with a progressive regulatory regime (BICMA). The 205 villages in 20 districts are separated by massive mountainous terrain and the most critical national infrastructure is mobile. For government-to-citizen communication, mobile forms the lifeline to remote areas beyond Thimphu, the nation’s capital. It is no surprise that in a matter of few years, the mobile penetration has reached over 75% while fixed penetration languishes below 4% (the Internet penetration is 26%).

We were tasked with identifying the top four most important application areas that will serve the Bhutanese people the most. The team was also to advice on developing a framework where such mobile applications can thrive and prosper. We met with almost all the important ministries in a short amount of time (a similar endeavor in the western world would have taken months) and quickly came to the conclusion that the areas that matter the most to Bhutan and where something tangible can be accomplished are health, finance and banking, agriculture, and emergency and disaster management. Bhutan is the only country that puts Gross National Happiness (GNH) ahead of GDP, so our mobile apps framework needed to satisfy the GNH requirements as well. The chosen application areas satisfied this key criteria for the GNH council. It also needed to fit within the national ICT roadmap

Indeed some of these areas are important to other emerging markets as well and disciplines of health and emergency are important to any nation. In fact, it is surprising that the governments around the world don’t have a comprehensive national mobile apps strategy for health and emergency – something that governments are responsible for. It is not overly burdensome to implement a national emergency plan that has mobile at the center of it for interacting with accurate information can help save lives.

Same goes for healthcare. In fact, Bhutan has already built a mobile based home-grown health emergency system that served the country. This is something that other nations should embrace. My colleague on the project Dr. S.K. Misra, who is a leading global expert in telemedicine having worked on several UN and WHO assignments around the world had already helped set up a telemedicine facility in Bhutan that let the doctors to consult their colleagues in India. Dr. Misra was the author of the mHealth section of the report. Sameer Sharma, Senior Advisor at the ITU based out of Bangkok, provided valuable policy guidance.

As part of the project, we produced “Bhutan Project Report on Emerging Mobile Applications Opportunity,” a report that is serving as a blueprint for the mobile application development in Bhutan. My thanks to the ITU and the Bhutanese government for making the report available last month so that other governments and groups might find it useful.

The 4th wave is about applications, solutions, and services that can not only help create new markets and expand the existing ones to directly contribute to the global GDP. But it is also about solutions that impact day-to-day lives of billions of citizens. It is about building the apps, computing, and communications infrastructure that becomes the backbone of the nation in the new digital economy. The nations who “get” that and are able to navigate the turbulent digital waters are better positioned competitively for the next few decades.

I am heading to Hanoi next week to work with the ITU and meet with the regulators, telecom operators, and developers in South-East Asia to discuss how they should think about the 4th wave of mobile and develop applications that become an essential part of the national commerce and support infrastructure.

We will go into much more detail on how 4th wave is impacting the mobile and economic landscape and the opportunities that are emerging as a result at our annual mobile executive summit – Mobile Future Forward on Sept 10th

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 August 2013. The next Global Wireless Data Market update will be issued in August 2013.

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