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2012 Mobile Industry Predictions Survey January 3, 2012

Posted by chetan in : 3G, 4G, AORTA, ARPU, Applications, BRIC, CTIA, Carnival of Mobilists, Carriers, Connected Devices, Disruption, Enterprise Mobility, European Wireless Market, IP Strategy, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, M&A, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile Traffic, Networks, Patent Strategies, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , 9 comments

2012 Mobile Industry Predictions Survey

http://www.chetansharma.com/MobilePredictions2012.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 2012. My thanks to all who participated in our 2012 Mobile Predictions Annual Survey. It gives our community an insider’s view of trends.

2011 was a terrific year for the mobile industry. With all its ups and down, consumers embraced devices, applications, services, and technology with more gusto than ever before. In the waning hours of 2011, we crossed the 6 billion subscriptions milestone. While the first billion took 19 years, this last billion only took 15 months.

Smartphones are selling like hot cakes. We estimate that by the end of Q4 2011, over 60% of the devices sold in the US were smartphones and over 30% of the global sales were for the evolved brethren of the primordial featurephones. Sparked by insatiable consumer demand for mobile data, LTE and HSPA+ networks are sprouting all over the planet with US leading the charge for broadband deployment.

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 around the world participated to help see what 2012 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.

Fifteen names were randomly drawn for the limited edition of the Mobile Future Forward 2011 book. The winners are:

1. Tor Bjorn Minde, Head of Ericsson Labs, Ericsson

2. Sunder Somasundaram, Industry Solutions Practice Director, AT&T

3. C. Enrique Ortiz, Mobile Technologist, About Mobility

4. Russell Buckley, CMO, Eagle Eye

5. Marianne Marck, VP – Engineering, Starbucks

6. John Foster, President, ZED USA

7. Angel Luis Saez, Sr. Director, Orange Spain

8. Dilip Mistry, Senior Director, Microsoft Asia

9. Phyllis Reuther, Advanced Analytics Lab, Sprint

10. Gene Keenan, VP of Mobile, Isobar

11. Elizabeth Day, Director of Finance, Trilogy International

12. Alan Cole, Research Staff Member, IBM T.J. Watson Research Center

13. X J Wang, VP – GM China, Vesta Corp

14. Michelle Lee, Director, SK Telecom

15. Hemant Chandak, Sr. Analyst, Cisco Systems

Thanks again to everyone who contributed. We will be calling on you again next year. It has been a terrific year for us at Chetan Sharma Consulting and we are looking forward to an engaging and productive 2012.

Be well, do good work, and stay in touch.

Thanks and with warm wishes,

Your feedback is always welcome.

Thanks

Chetan Sharma

Now onto the 2012 Mobile Industry Predictions Survey Results.

1. What was most newsworthy in Mobile 2011?

 

Android had a spectacular rise in 2011 around the globe. Android OEMs collectively shipped the most number of devices and while margins shrank, they were able to put a united front to iOS. 2011 will always be remembered for the passing away of the industry transformer Steve Jobs. His work directly or indirectly touched billions of souls around the planet, many times over – something rarest of human beings are able to achieve in their life time. Regulatory tussles and significant increase in IP disputes also occupied the headlines. Amazon announced its intention for the mobile space with the launch of Kindle Fire.

2. What will be the biggest mobile stories of 2012?

 

As we look towards 2012, our panel voted for the continued growth of mobile data as the biggest story followed by Amazon’s entry into the mobile space. Some key questions for the year are: Will Microsoft/Nokia devices will make any meaningful progress? Will RIM survive the year? How does Google manage the fragmentation, decline in margins (for the OEMs), and the IP issues? Will any high-profile security and privacy mishaps lead to more regulatory entanglements? Facebook IPO and its mobile ambitions? How do operators manage the data demand? Which M&As will capture industry’s attention? Will Apple continue to dominate on both smartphone and tablet front? What does Apple do with mobile payments? and much more. Clearly, it is going to be a terrific year.

3. Who will be the most open player in the mobile ecosystem in 2012?

 

File this in the “perception is reality” folder. Despite all the criticism, Google has maintained its strong position as the most open player in the mobile industry.

4. What applications will define 4G?

 

Still looking for a killer-4G app? Video, cloud computing, and access will continue to drive 4G demand and growth.

5. What will be the breakthrough category in mobile in 2012?

For a second year in a row, the panel voted for mobile payments and mobile commerce as the top two category that will find their voice. Mobile advertising has become mainstream so it lost its ranking in the top 3.

6. What will be the most popular consumer mobile applications in 2012?

 

Apps preferences vary by regions depending on a whole range of factors. Messaging and Commerce are the top two categories for the developing world while consumers in the developed nations are likely to gravitate towards commerce and location based services.

7. Which will be the most dominant (unit sales) tablet platform in 2 years?

 

iOS and Android will dominate the tablet landscape for the next 24 months. A late entry by Windows 8 tablets could make a dent but don’t count on it.

8. Who will make the biggest mobile acquisition in 2012?

 

2011 had its fair share of block-buster acquisitions, some successful while others were not. Our panel expects Microsoft and Google to continue making the biggest acquisitions.

9. How will the "Apps vs. Mobile Web" debate shape up in 2012?

 

It seems like the pendulum is swinging towards the mobile web though hybrid solutions are likely to stay with us for a long time.

10. Who will define the mobile payment/commerce space?

 

The financial companies safely locked in the mobile payments space and while the value chain is fairly complicated and definition confusion abounds, the likes of Visa, Operators and Google will continue to drive the payments/commerce space.

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

 

Managing data growth and margins drives all strategies at mobile operators these days which in turns drives the value chain. 4G, tiered pricing, and mobile offload continue to be the top solutions if one has the spectrum that is.

12. Which category will generate the most mobile data revenue in 2012?

 

Messaging, access, apps, and advertising are the four broad categories that drive mobile data revenues around the world. The developing markets rely on messaging while the developed markets are increasingly looking to access as their dominant form of revenue generation.

13. What will help mobile cloud computing gain traction in 2012?

 

Mobile cloud computing will continue to be defined by enterprise, storage, and media needs.

14. Which enterprise segment will mobile impact the most?

 

Best buy is becoming the next Circuit City. Other retailers will follow unless they can successful reinvent themselves. Health is more regulatory driven so the progress will be slow though it is ripe for a complete overhaul and developing nations are moving much faster in this space.

15. What will be the dominant revenue model for apps in 2012?

 

In-app revenue model made good strides in 2011 but the combination of the various available revenue models will be the norm for most application developers.

16. What mode of mobile payments will get traction in North America and Western Europe in 2012?

 

2011 was the year to set the ground work for growth in the mobile payments space. Given the investment and focus, we are likely to see more movement and consumer involvement in 2012 with proximity based solutions and commerce of physical goods on mobile.

17. What will be the most successful non-mobile-phone category in 2012?

 

Tablets dominate. Period.

18. Which of the following are likely to happen in the near future?

 

The is a significant shift in computing taking place right in front of our eyes wherein tablets are replacing laptops and even desktops in the enterprise. European operators have been experiencing tough times while some of the Asian operators are flush with cash, they might make their move in 2012 though regulatory hurdles might prove to be an issue. 33% of the nations will have elections in 2012, maybe which will move mobile voting to the forefront in some nations. Our panel thought there is a better chance of humans discovering water on another planet than rise of another significant mobile OS.

19. Which areas will feel the most impact from Regulators in 2012?

 

Net-neutrality and market competitiveness will keep the regulators busy in 2012.

20. Who was the mobile person of the year?

 

Clearly, Steve Jobs was an easy choice but who will replace him 2012? Jeff Bezos has an early lead followed by Andy Rubin and Mark Zuckerberg. Angry Birds representing the developer community will be in for another terrific year. Other honorable mentions were Tim Cook, Paul Jacobs, Sanjiv Ahuja, Dan Hesse, and Glenn Lurie.

A lot to look forward to in the New Year. My thanks to all who participated and we hope you found it useful as you embark on your journey for a successful 2012.

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.

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

Mobile Breakfast Series – Mobile 2012: Trends and Opportunities December 15, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, Connected Devices, Enterprise Mobility, European Wireless Market, Patent Strategies, Patent Strategy, Privacy, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

We held our 8th Mobile Breakfast Series event earlier today. As is the tradition, we delved into discussing the trends and opportunities for the coming year. As usual it was a sold out crowd with terrific panelists representing different parts of the value chain.

 

2011 has been a fascinating year – with all the mergers, sky rocketing data growth especially in the US market. 2011 will also be remembered for the passing away of Steve Jobs, the man who helped change the global mobile industry over the course of the last four years. Locally, lots happening – Microsoft/Nokia alliance is launching new devices, Amazon has entered the mobile space with both feet, mobile gaming remains hot, and on a broader scale, we are going through the process of mobilification of everything.

Mark Anderson, CEO of Strategic News Service. I have known Mark for over 15 years now as one of the early subscribers to his wonderful newsletter. My good friend and coauthor Joe Herzog introduce me to Mark and since then I have been influenced by his writing. If you follow my blog, the name AORTA or Always On Real Time Access was coined by Mark in the late nineties and he generously allowed me to use it. Mark has also been writing about the carry-along-PC aka tablets for sometime and won the bet with bet with Michael Dell on the growth of this sector. He just finished off his annual predictions for 2012, so we had a lot to talk about.

Laura Marriott is CEO of Neomedia which is doing some pioneering work in the mobile barcode/mobile marketing space. But she is more famous for her work at the Mobile Marketing Association where she helped grow the industry and the association to make it a thriving enterprise.

Satya Mallya is Director at Orange. For those of you don’t know Orange is one of the top European Operators but he is based in the silicon valley working on some cool projects. He has been in the telecom space for almost 20 years working at Bell Labs, Octel and two startups

Brian Fling is CEO of pinchZoom a mobile agency that helps big brands like BBC, Paypal, Delta and others understand mobile design and development. He is passionate about mobile user experience, has spoken and written extensively about the subject.

Jay Emmet is GM OpenMarket, SVP, Amdocs and knows the messaging, commerce space on the back of his hand. Very successful stints at mblox, ATG and others. Knows the operator world really well and has been straddling both the on-deck/off-deck world for a long time.

We touched on a range of subjects from IP to platforms, from privacy/security to mobile commerce and payments, from Microsoft to Amazon .. and so on and so forth. Below is the summary of the discussion:

• While the economy in various regions has been shambles, the tech industry has been largely protected, especially, the mobile industry. We are lucky to be working in space. Amen!
• As far as the mobile platforms are concerned, there are only two that matter – iOS and Android with iOS still having a strong upper hand. Android is plagued with IP issues and OEMs are starting to have second thoughts about the cost and risks of supporting Android in the long-term. All this is of course very fluid and will depend on the outcome of a number of IP cases in courts.
• Microsoft has made some progress with Nokia but as recent shuffling indicates, all is not good and there is going to be considerable work needed in the coming days to get alliance working in sync and work a thriving ecosystem long-term.
• Siri has just changed the game at some many levels. Consumers now expect more from their devices and players are scrambling to deliver.
• This year began with the debate of apps vs. mobile web. Mobile Apps have fundamentally changed the mobile UI and design paradigm. Consumers don’t want to just browse a page on their devices, they want great user experiences all of which can’t be delivered on mobile web. Apps stay quite a bit ahead of the game.
• There is systematic IP theft and cyberattacks going on and western nations and companies are finally waking up to do something substantial. However, it is going to be a long journey to get it right.
• Many small companies have built good, attractive IP portfolios in mobile and given the investment and invention, they should be allowed to maximize the value of their IP.
• Amazon’s entry has changed the game. It has already become the number two in tablets and more to come. It will impact retail, advertising, and many other segments of the consumer economy.
• Over the last 20 years, capacity has been an issue every year but this time around, the capacity constraints are significant. While the services and consumption have gotten much better in orders of magnitude, the prices have largely stayed the same. To build capital-intensive networks, operators will have to find ways to increase data revenues.
• Operator channel is still a viable channel for the developers especially the ones who are looking for broader international reach.
• Mobile Security on smartphones remains a worrying concern and is an opportunity area for entrepreneurs.
• Mobile Privacy is a complicated issue. Many businesses are actually based on exploiting the privacy not protecting it so the business models are at odds with the privacy mantra and regulations. Something has to give. More regulations to come.
• QR codes and NFC will live in harmony for sometime.
• There are currently no clear winners in the mobile payments space. It is likely to stay very fragmented and is likely to become even more so over the coming days before any leaders emerge. Payments remains the most complicated ecosystem with many players involved and success stories will depend on the use-case scenarios.
• Cloud offers a differentiating opportunity for the operators and compete effectively with some of the OTT players.
• Many industry verticals are getting transformed by mobile. Big brands are aggressively pursuing mobile as a key strategic project. Health, Retail – opportunities abound.
• While traditional messaging is getting impacted by IP messaging, the decline is not universal and operators are reacting with new business models and technology initiatives.
• 2012 will be another great year for mobile. Fasten your seat belts.

It was a joy to moderate this terrific panel that kept audience glued to their seats till the very end. Thanks all for coming. We have some terrific events planned for 2012, Stay Tuned.

Until then, Wish you and yours a very happy and stress-free holiday season and enormously successful and prosperous 2012.

And don’t forget to fill out our Annual Mobile Predictions Survey for 2012. There are prizes for 10 lucky winners.

ps. As I mentioned in the opening, WA state dept has a wonderful program to help startup with their travel to Mobile World Congress in Barcelona next year. Details here. Startups should check it out.

US Wireless Data Market Update Q3 2011 December 12, 2011

Posted by chetan in : 3G, 4G, AORTA, Applications, CTIA, Carnival of Mobilists, Carriers, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Payments, Mobile Search, Mobile Traffic, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments

 

http://www.chetansharma.com/usmobileupdateQ32011.htm

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Summary

The US mobile market continued its blistering pace of growth and ecosystem restructuring. While China and India lay claim to the fastest growing markets on the planet, the many of the meaningful and impactful trends are originating out of the US market with software at the epicenter of creation, growth, change, evolution, and destruction.

The US wireless data market grew 5% Q/Q and 21% Y/Y to reach $17B in mobile data service revenues in Q3 2011 and is on course to increase Y/Y by 22% to $67B in 2011.

As predicted, Samsung overtook Apple as the leading smartphone OEM. However, Apple will continue to dominate profit share for the foreseeable future.

Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The featurephone as a device species is on the verge of extinction.

Mobile Ecosystem Complexity

As expected, Amazon entered the mobile tablet space with a killer value proposition - $200 for a tablet, something the market sorely needed. While other OEMs tried to compete with Apple on performance (and have been retreating from the market one by one), Amazon is entering the battle on its own turf – a hardware platform built on Android with a slew of services to underwrite the device discount. Incumbent OEMs just can’t compete with that strategy without a complete rethink of their product strategy. What happens when Amazon’s strategy migrates to handsets? While Kindle Fire is not a serious threat to Apple iPad, and the current version has a lot of deficiencies, Amazon has carved out a nice market for itself that will continue to grow in the coming days. In some sense, with its tight integration of commerce, cloud, and advertising, it has out-maneuvered even Google.

Amazon’s impact will be felt by many others in 2012 as its strategy becomes more apparent. Retailers will be facing the brunt of the wave that Amazon represents i.e. etailers supplanting physical retailers. Don’t be surprised if Amazon purses Apple like stores to showcase its merchandize and puts a dagger at the heart of retail.

Google has done a masterful job of shepherding Android through the turbulent platform waters and make it the dominant mobile platform in terms of shipments.

Microsoft and Nokia finally introduced the Windows devices and it has at least given them a fighting chance in 2012, though a far more competitive offering would be needed to make any significant market share or revenue share inroads. Microsoft’s Xbox/Kinect integration remains its best card for 2012.

In a severe case of corporate schizophrenia, HP first launched webOS devices, then backed away, then thought of re-launching only to give it away to open source. Similarly, RIM faces critical test in 2012 and all its hopes are pinned on the new OS that is expected to come to the market sometime next year.

Mobile is changing the way we spend

It is very clear that mobile will be at the center of the human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day.

Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend. We discussed this and more in the paper “How Mobile Will Change The Way We Spend”  that was released last quarter.

What to expect in the coming months?

All this has setup an absolutely fascinating 2012 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems.

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 2011 US wireless data market is:

Service Revenues

• The US Wireless data service revenues grew 5% Q/Q and 21% Y/Y to $17B in Q3 2011. The mobile data services revenues for the US market are on track to reach $67B in 2011.
• Verizon and AT&T had a good mobile data quarter accounting for 62% of the increase in data revenues in Q3 2011.
• For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 62% of the subscription base.
• Verizon maintained its #1 ranking again just edging past NTT DoCoMo who came in at number two with $5.95B in data revenues for the quarter. AT&T maintained its #3 position with $5.6B in data revenues. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q3 2011.

ARPU

• The Overall ARPU increased by $0.31. Average voice ARPU declined by $0.49 while the average data ARPU grew by $0.80 or 4% Q/Q.
• The average industry percentage contribution of data to overall ARPU was 37.6% in Q3 2011 and is likely to exceed 40% by Q1 2012. As expected, Verizon became the first US operator to eclipse the 40% mark with AT&T and Sprint close behind. (for reference, all three major Japanese operators are now above the 50% mark).
• The top three operators were neck-and-neck in data ARPU each recording a 39%+ performance. T-Mobile ended the quarter exceeding the 30% mark for the first time.
• We expect data revenues to exceed voice revenues in the US market in early 2013.

Subscribers

• Helped by the growth in connected devices, the overall net-adds increased by 4.9M with Verizon accounting for almost 50% of the growth.
• For the eight straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. AT&T now accounts for 43% of connected devices in the US (w/ cellular subscription of some sort).
• Overall, AT&T has 43% of the connected device share of the market. The connected device segment growth slowed down to 8% Q/Q and is still up 32% Y/Y.
• Sprint added more than a million subscriptions while T-Mobile added 126k.

Applications and Services

• After unseating Philippines as the king of TXT messaging last quarter, US TXT messaging continues to grow albeit at a slower pace. Philippines is seeing a sharp decline in per user messaging due to IP messaging. Some of the European operators are also experiencing the pain of declining SMS usage. As expected, this transition will continue around the world at different rates. In the US, while the change is underway, we don’t expect any dramatic declines like the Philippines market in the near-term.
• The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
• Q3 2011 again saw tremendous activity in the mobile commerce and payments space with lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months.

Handsets

• Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in revenue and mindshare.
• Nokia’s position in the market improved slightly with the launch of WP7 devices. 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.
• As predicted in the last update, Samsung overtook Apple in smartphone sales and is unlikely to relinquish the title despite a blockbuster iPhone 4S launch in Q4.
• 37% of all smartphones sold globally in Q3 were sold in the US making it the most attractive market for the OEMs.
• Smartphones now account for over 80% revenue of all phones sold in the US.
• In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
• 87% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. As expected, Verizon announced family data plans for 2012. Other operators will quickly follow or may even preempt Verizon.
• Verizon added another 1.4M LTE subscribers making it the leading LTE operator in the world. AT&T’s LTE plans are gathering steam and Sprint plans to offer LTE in 2012.
• iPhone finally arrived at Sprint. Sales of iPhone 4S have been brisk which is likely to make it the top selling device for the most important quarter of the year.

Mobile Data Growth

• While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.
• We will have the 3^rd edition of our “Managing Growth and Profits in the Yottabyte Era”research out early next year.

Global Update

• Race to a billion – India’s net-addition rate declined significantly in Q3 2011 while China kept its current pace. We expect that China will be the first country to exceed 1 Billion subscriptions by mid-2012. For India, the event will now occur in 2013.
• For more details, please see our Global Mobile Wireless Market Update released in July 2011.

Mobile Future Forward

Our annual mobile thought-leadership summit - Mobile Future Forward was a grand success. Our thanks to all those who attended as well as to the speakers, sponsors, and well-wishers for making it happen. Planning for 2012 summit are underway and we will keep you posted as plans develop.

More information at http://www.mobilefutureforward.com

Mobile Predictions Survey 2012

As is the tradition, we are running our annual Mobile Predictions Survey for 2012. Will appreciate your input in understanding the trends and news stories that will make 2012 another big year in mobile. Winners of the survey get our fabulous limited edition Mobile Future Forward 2011 book that contains 19 essays from the global leaders in the mobile industry. (Mobile Predictions Survey Results for 2011 here)

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, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.

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

New Paper: Managing Growth and Profits of Connected Devices September 6, 2011

Posted by chetan in : 3G, 4G, Connected Devices, Devices, Disruption, Mobile Applications, Mobile Future Forward, Smart Phones, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , add a comment

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

Paper is sponsored by Synchronoss Technologies

Mobile industry is the most dynamic global industry today. The connected mobile universe touches more than 4.5 billion consumers on the planet and these devices have effectively become an integral part of our daily lives. The pace of innovation and product introduction has also accelerated. The lifecycle of mobile network technologies, devices, applications is shrinking rapidly. While the 1G cycle lasted almost 20 years, the 2G cycle shrank to approximately 15 years. Though many countries are still launching 3G, the expected span for 3G in the US is likely to be 10 years. Similarly, on the device front, the average replacement cycles have decreased from over 24 months to less than 12 months in many mobile markets and demographic segments.

Mobility is also getting ingrained in the everyday objects, which make up for a fundamental reassessment of how things are done across industries in almost every region of the world. It is not just the phones and the data cards that are being enabled by the broadband connectivity but also the everyday electronic devices such as the tablets, eReaders, automobiles, picture frames, and cameras.

It is fairly apparent that mobile data is driving the growth in most developed nations. While voice is a stronger component in the developing nations today, it is the demand for mobile data and the lure of data revenues that is even forcing countries like China and India to embrace 4G at a much faster pace than they did 3G. The impact of data services is reflected in the operator financials. In Japan, Softbank became the first major operator to have more revenues come from data than voice. Others are following. In the US, over 37% of the revenues are coming from data services and the data revenues will account for over 50% of the revenues by early 2013.

The changing dynamics of the industry poses some serious questions about the supply-chain, product and service introduction cycles for the operators and the OEMs, and the management of the cost structure and margins of the business. If these elements are not effectively managed, both the competitiveness and the ROI of the products will be severely impacted.  Solutions to these problems must be repeatable, future-proof and –upgradeable, and cost effective, else the solutions won’t scale at the pace needed to manage the growth.

Participants in the ecosystem must identify cost reduction opportunities and streamline operations to take out limitations driven by legacy and drive convenience and seamless user experience for the consumer. Only then can the product introductions be sped up and the desire to maximize profits come to fruition. In this paper, we look at the issues and opportunities around connected devices and the solutions and strategies that will make the ecosystem more vibrant, scalable and sustainable.

Download the paper (1MB)

Of course, we will be discussing this topic in great detail at the Mobile Future Forward summit next week where the central theme is “Connected Universe. Unlimited Opportunities” I will be interviewing Glenn Lurie, President AT&T and Danny Bowman, President, Sprint on this very subject.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

US Wireless Market Update Q2 2011 August 18, 2011

Posted by chetan in : 3G, 4G, AORTA, Applications, Connected Devices, Enterprise Mobility, IP, IP Strategy, Intellectual Property, Mergers and Acquisitions, Mobile Applications, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Future Forward, Mobile Payments, Patent Strategy, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

 

http://www.chetansharma.com/usmarketupdateq22011.htm

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US Mobile Data Market Update Q1 2011

Summary

If Confucius was alive, he would have said, “We live in interesting times.” 2011 is proving to be the blockbuster deal year. After Microsoft/Nokia, AT&T/T-Mobile, Microsoft/Skype, Google made the $4*π billion play for Motorola and raised the stakes in the mobile ecosystem warfare. The ecosystem has entered into a phase that Sun Tzu and Chanakya would have loved to operate in.

In other news, the US wireless data market grew 5% Q/Q and 22% Y/Y to reach $16.2B in mobile data service revenues in Q2 2011 and is on course to increase Y/Y by 22% to $67B in 2011.

US unseated Philippines as the king of TXT messaging with almost 664 messages/sub/month. Philippines is seeing a sharp decline in per user messaging thanks to Facebook and app messaging.

Apple overtook Nokia as the dominant smartphone OEM though Samsung is right behind and is likely to overtake Apple later this year. However, Apple will continue to dominate profit share for the foreseeable future.

Smartphones continued to be sold at a brisk pace accounting for 55% of the devices sold in Q2 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The featurephone as a device species is on the verge of extinction. By Christmas, 90% of the US postpaid device sales could be smartphones.

Platform Moves

I am a Platform, therefore I am. Everything and everyone wants to be a platform that developers can build upon. The big 4 – Apple, Google, Facebook, and Amazon are having good success with frequent upgrades and rollouts. Consumers gravitate towards ecOSystems and the richness of the product offerings not specific OSes. OS is just a means to an end. However, the more developers you get excited about the platform, the more the ecosystem thrives and it becomes a virtuous circle. Companies left without the dancing partners need to ensure that they are not the one left standing when the music stops.

While a lot of attention has been focused on Apple and Google skirmishes, Amazon has been quietly tinkering with some interesting products – advertising enabled Kindle, the upcoming tablets and handsets, Android based appstores, mobile payments, distribution giant, cloud, and so on and so forth. Facebook with its nearly 800M friends can unleash several “billion dollar” features that can shake up different mobile microcosms.

In the meantime, Microsoft is trying to find a way to get back into the mobile market. Microsoft’s Xbox franchise gives it something unique and compelling. Their success might depend on how well they are able to integrate and tell a compelling story to the consumers. The upcoming Christmas quarter will be a critical test. RIM and HP don’t have much of an ecosystem to matter in the larger scheme of things. They can be successful in their own ways but attaining a leadership position remains significantly challenging.

AT&T/T-Mobile merger

AT&T’s proposed merger of T-Mobile continued to keep the regulators busy for the quarter. Earlier this year, we published a first of its kind in-depth study on competition in mobile markets -“Competition and the Evolution of Mobile Markets - A Study of Competition in Global Mobile Markets”. The paper presents analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets. Our research shows that an effective equilibrium point for the top three market share in a given country to be around 46%:29%:18% respectively. We expect that once all is said and done, we will end up in the vicinity of this equation.

Patent Warfare

On the eve of Android launch, I mentioned to one of the journalist to watch for some IP fireworks in about 3 years. For those of us who have been deeply involved in the mobile IP space, the IP events of 2011 have been largely predictable though the valuations have gone through the roof.

Over the last 15 years, I have seen patents and IP in the mobile space from all angles from authoring patents to testifying in ITC cases and pretty much everything in between. In the last six months, patents have become an essential tool for competitive strategy in the mobile device space. See our analysis on the major players with the number of granted patents in Europe and US (slide 13).

To paraphrase the oracle of Omaha, “Only when the litigation tide comes in do you discover who’s been swimming without protection.”

Mobile is changing the way we spend

It is very clear that mobile will be at the center of human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day.

Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend. We discussed this and more in the paper “How Mobile Will Change The Way We Spend”  that was released earlier this month.

What to expect in the coming months?

All this has setup an absolutely fascinating rest of the year in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are likely to see a few more blockbuster marriage proposals before the year is out.

We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 12^th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next.

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 2011 US wireless data market is:

Service Revenues

• The US Wireless data service revenues grew 5% Q/Q and 22% Y/Y to $16.2B in Q2 2011. The mobile data services revenues for the US market are on track to reach $67B in 2011.
• Verizon and AT&T had a good mobile data quarter accounting for 77% of the increase in data revenues in Q2 2011.
• For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 62% of the subscription base.
• Verizon maintained its #1 ranking just edging past NTT DoCoMo who came in at number two with $5.77B in data revenues for the quarter. AT&T maintained its #3 position with $5.4B in data revenues. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q2 2011. The proposed merger of AT&T and T-Mobile will make AT&T #1 by a distance and place 20% of the global mobile data revenues in the hands of the top two US operators. AT&T and Verizon will become the #1 and #2 players respectively.

ARPU

• The Overall ARPU increased by $0.41. Average voice ARPU declined by $0.48 while the average data ARPU grew by $0.89 or 5% Q/Q.
• The average industry percentage contribution of data to overall ARPU was 36.3% in Q2 2011 and is likely to touch 40% by year’s end. Verizon is likely to be the first to eclipse the 40% mark with AT&T a close second. (NTT DoCoMo became the second major operator to go past the 50% mark this quarter (if we don’t include Philippines) and Japan as a market follows Philippines in going past the 50% mark).
• Verizon and Sprint were neck-and-neck in data ARPU followed by AT&T. In terms of % contribution, all the top three operators exceeded the 35% mark. T-Mobile ended the quarter with almost 30% of its revenue coming from the data services.
• We expect data revenues to exceed voice revenues in the US market in early 2013.

Subscribers

• Helped by the growth in connected devices, the overall net-adds increased by 4.4M with Verizon accounting for almost 50% of the growth.
• For the seventh straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. AT&T now accounts for 43% of connected devices in the US (w/ cellular subscription of some sort).
• Overall, AT&T has 43% of the connected device share of the market. The connected device segment growth slowed down to 3% Q/Q but is still up 37% Y/Y.
• Sprint continued on its comeback trail by adding more than a million subscriptions for the third straight quarter, first time it has done it since Q2 2005.
• T-Mobile however continues to be sandwiched between the top three and the next three and hasn’t been able to add postpaid subs for five straight quarters. The net-adds declined for third straight quarter.

Applications and Services

• US unseated Philippines as the king of TXT messaging with almost 664 messages/sub/month compared to Philippines which is seeing a sharp decline in per user messaging due to IP messaging. Some of the European operators are also experiencing the pain of declining SMS usage.

• While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $5B in revenues.

• The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
• Q2 2011 also saw tremendous activity in the mobile commerce and payments space with lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months.

Handsets

• Smartphones continued to be sold at a brisk pace accounting for 55% of the devices sold in Q2 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare.
• For a first time in recent memory, Nokia sold less than 100M devices in a quarter and its marketshare shrank to 22% from a once dominant position of almost 40%.
• Apple unseated Nokia as the king of the smartphone hill but Samsung is right behind and is likely to overtake Apple later this year.
• 35% of all smartphones being sold globally are being sold in the US.
• Last quarter, smartphones sales exceeded the 50% mark. The % share jumped to 55% in Q2 2011. Smartphones now account for 80% revenue of all phones sold in the US.
• In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
• 85% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category.
• While the definition of 4G stays muddled, Sprint added 1.7M WiMax subs and Verizon incremented their LTE count by 1.2M.

Mobile Data Growth

• The mobile data consumption continues unabated. We expect per MB usage in the US to reach 675 MB by the end of 2011 just behind Sweden which is likely to end up at 760 MB.

• While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.

• We will have the 3^rd edition of our “Managing Growth and Profits in the Yottabyte Era”research out later this year. We will also be discussing this subject in great detail at our Mobile Future Forward summit with some of the most influential voices in the space.

Global Update

• Race to a billion - India went past 850M in Q2 2011 subs and China went past 900M. By mid 2012 both India and China will have more than a billion subscriptions.

• China Mobile crossed the 600M subscription mark however its 3G introduction has had a tepid response thus and its 4G strategy remains in flux.

• For more details, please see our Global Mobile Wireless Market Update released in July 2011.

Mobile Future Forward

We will be discussing the global mobile ecosystem – the challenges and the opportunities at our annual mobile thought-leadership summit – Mobile Future Forward - brought to you in partnership with our terrific partners – Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12th.

Some of the distinguished guests include:

Abhi Ingle, VP, AT&T; Biju Nair, Chief Strategy Officer, Synchronoss Technologies; Bob Borchers, Partner, Opus Capital; Bobby Morrison, President – PNW, Verizon Wireless; Braxton Woodham, Head of Product Development, AVOS; Danny Bowman, President, Sprint; David Messenger, EVP, Head of Online/Mobile, American Express; Gibu Thomas, SVP – Mobile Walmart; Erik Moremo, SVP, FOX; Glenn Lurie, President, Emerging Devices, Resale & Partnerships, AT&T Mobility; Hank Skorny, CSO, Real Networks; Jana Messerschmidt, Sr. Director, Twitter; Jay Emmet, GM, OpenMarket; Jason MacKenzie, President, Global Sales and Marketing, HTC; Jerry Batt, CIO, PulteGroup; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel-Lucent Wireless; Kris Rinne, SVP - Networks/Architecture, AT&T; Mark Rolston, Chief Creative Officer, Frog Design; Manoj Leelanivas, EVP & GM, Juniper Networks; Michael Wolf, VP, GigaOM; Mikael Back, VP – Products, Ericsson; Naoki Aoyagi, CEO, GREE USA; Paul Palmieri, CEO, Millennial Media; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP/Group President, Qualcomm; Suja Chandrasekaran, CIO, Timberland; Will Hsu, CPO, AT&T Interactive.

More information at http://www.mobilefutureforward.com

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, and articles. The next US Wireless Data Market update will be released in Nov 2011. The next Global Wireless Data Market update will be issued in Apr 2012.

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

New Paper - How Mobile Will Change The Way We Spend – A Mobile Future Forward Paper August 5, 2011

Posted by chetan in : 3G, 4G, AORTA, CTIA, Connected Devices, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Future Forward, Mobile Payments, Mobile Search, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

How Mobile Will Change The Way We Spend

A Mobile Future Forward Paper

The Mobile Future Forward 2011 Book will contain 18 essays from thought-leaders around the globe and is going to be distributed exclusively to the Mobile Future Forward attendees on Sept 12^th. The book is published by FutureText, UK.

The essays from the Mobile Future Forward speakers and industry luminaries are:

1. How Mobile Will Change The Way We Spend – Chetan Sharma, President, Chetan Sharma Consulting

2. The Mobile Cloud Connected Enterprise – Abhi Ingle, VP, Advanced Mobility Solutions, AT&T

3. Mobile and Health Possibilities – Subba Rao, CEO, Razi Health

4. Buying a Mobile Device in 2014 – Frank Meehan, CEO, INQMobile

5. Surviving and Thriving in the Age of Mobile Internet – An MNO Game Plan – Manoj Leelanivas, SVP and GM, Juniper Networks

6. Mobile Future Forward Interview with Steve Elfman – President, Sprint Nextel

7. Is Mobile Local Advertising Finally Poised to Take Off? – William Hsu, SVP and CPO, AT&T Interactive

8. Implications of a Connected Society – Danny Bowman, President, Sprint Nextel

9. Big Data and Mobile – Braxton Woodham, Head of Engineering, AVOS

10. Broadband for All – Sanjiv Ahuja, CEO, LightSquared

11. Wireless Competition and Innovation – Stephen Bye, CTO, Sprint Nextel

12. The Future of the Personal Information Economy: Enabling Success Across the Mobile Ecosystem – Ken Denman, CEO, Openwave

13. T-Commerce – Carving Out and Extending E-Commerce – Ramneek Bhasin, SVP and GM, TheFind

14. The Case for Building a Mobile Broadcast Content Delivery Network – The Critical Piece to Fulfilling Mobile Data Demands of the Future – Erik Moreno, SVP, FOX Network

15. Connected Devices – Redefining the Channel – Biju Nair, Chief Strategy Officer, Synchronoss Technologies

16. How Mobile Can Turn Retailers Into Media Companies – Dale Nitschke, CEO, Ovative Group

17. The Future of (Mobile) Communications – Carlos Domingo, CEO, Telefonica R&D

18. Competition and the Evolution of Mobile Markets – Chetan Sharma, President, Chetan Sharma Consulting

Download (http://www.mobilefutureforward.com and click on the White paper image)

 

Executive Summary

In his 1943 paper titled “A Theory of Human Motivation”, the famed philosopher Abraham Maslow theorized his observations of human needs and curiosities. His pyramid came to depict the human hierarchy of needs. If we map the physiological, safety, love, esteem, and self-actualization needs onto how much we spend as a community, it correlates rather well. As you would expect, human spending behavior is tightly tied to the basic needs. The amount of money we spend on these basic needs might vary by demographics or region but in aggregate, we tend to spend the most for the things that are the bottom of the pyramid – shelter, food, and water.

Over time, entrepreneurs have used technology to drive fundamental changes in consumer behavior for e.g. Microsoft with personal computers, Google with search, Apple with devices, Facebook with social connections. Of course, the web of interconnection, the various vertical industries that map against the human needs is very complex and as new technology cycles come into play, inventors get busy with enhancing performance sometimes by manifold to keep up with the insatiable demand and appetite to do more.

It is very clear that mobile will be at the center of human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day. As we alluded to earlier, it is not just the traditional phones that have cellular connection these days; we are slowly but surely moving into an era where a majority of electronic devices from small tags to giant billboards will have a communication channel that both machines and humans can interact with.

Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend.

In this paper, we will take a look at how the connected universe of devices and sensors are going to impact the way we spend and how all this creates new opportunities to meet the basic human needs.

Your feedback is always welcome.

Thanks

Chetan

Mobile Future Forward – Connected Universe. Unlimited Opportunities July 27, 2011

Posted by chetan in : 4G, AORTA, Applications, Connected Devices, Mobile Applications, Mobile Cloud Computing, Mobile Ecosystem, Mobile Future Forward, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

The theme of Mobile Future Forward this year is Connected Universe. Unlimited Opportunities. As a long time reader, you know the very foundation of this blog is depicted in its name – AORTA – Always On Real-Time Access. Since my early days in the mobile world, I longed for a time when connectivity became ubiquitous. In fact, even in my early books in 2000 (Wireless Internet Enterprise Applications) and 2002 (Wireless Data Services with Dr. Yasuhisa Nakamura, CTO, NTT DoCoMo), I had extensively talked about the connected universe. We are finally approaching that vision. To talk about this in more depth, we have the two distinguished leaders who are at the center of it all – Glenn Lurie, President – Emerging Devices, Resale & Partnership at AT&T Mobility and Danny Bowman, President – Connected Devices at Sprint.

Connected Universe. Unlimited Opportunities.

The connected devices segment is the fastest growing category of the market and is also the most profitable due to higher margins. Connected devices are impacting a rethink in virtually all key verticals – healthcare, housing, travel, entertainment, communication, energy, and others. It is also disrupting the traditional value chains and revenue models. Which segments are yielding the highest ROI? Does computing fundamentally change forever or are connected devices just a part of the PC hub? How does M2M fit into the world of smartphones and tablets? How are businesses and solution providers taking advantage of the growing connected universe? What’s most important for the consumer and what are their expectations on design, pricing, and connectivity? From connected cars to wireless pill bottles, our world is going to change forever. Meet the leaders who are shaping the growing connected devices ecosystem to get insights that will inform your strategy and decide your future revenue streams.

Glenn Lurie, President - Emerging Devices, Resale  & Partnerships , AT&T Mobility

Danny Bowman, President – Connected Devices, Sprint

State of the Global Mobile Industry – Half Yearly Assessment 2011 July 7, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Connected Devices, Devices, Enterprise Mobility, European Wireless Market, IP, IP Strategy, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, Mergers and Acquisitions, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile Traffic, Mobile Usability, Mobile Users, Mobile Wallet, Networks, Partnership, Patent Strategies, Patent Strategy, Patents, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, Student Paper Contest, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , 6 comments

 

http://www.chetansharma.com/globalmobileupdate1H2011.htm

Download PDF (56 pages, 3 MB)

The big picture

The global mobile industry is the most vibrant and fastest growing industry. We expect the total revenue in the industry to touch approximately $1.3 Trillion in 2011 with mobile data representing 24% of the mix. Global Mobile Data revenues are expected to eclipse $300 Billion for the first time in 2011. It is also the first year in which non-messaging data revenues will make up the majority of the overall global data revenues at 53%.

We expect the total number of subscriptions to exceed 6 billion by the end of 2011. The first 1 billion took over 20 years and this last one is going to take only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. Indian and China are also entangled in the race to the billion. At the end of Q2 2011, China was ahead by 50M but India is adding subscriptions at faster rate and is likely to eclipse China before Q2 2012. By then, both nations are expected to exceed 1 Billion in total subscriptions making up 31% of the global subscriptions.

In Q1 2011, US became the first major market to exceed the 50% mark in smartphone sales. The global figure stands at approximately 26%. Some operators expect 90% of their devices sales to be smartphones by the end of the year. In terms of the actual smartphone penetration, we expect the US market to eclipse the 50% mark in 2012.

China leads in the number of subs but US dominates in both total and data revenue. A number of emerging nations are now in top 10 – Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant – Korea, UK, Italy, Germany have dropped off or slipped in rankings.

The number of mobile operators with more than $1B in data revenues will increase to 47 in 2011. This number was only at 13 in 2005.

Japan continues to be the leader in mobile data with NTT DoCoMo, KDDI, and Softbank Japan ahead of the pack in terms of mobile data revenue and data as a % of total ARPU. In 2011, it became the first major market to have more than 50% of its mobile revenue from data services. Next, Australia and the US have made good inroads in the last two years. In fact, if we look at the overall data revenue, US is much further ahead than any nation due to the size of the market.

While India has the highest subscriber growth rate in the world right now, the revenue generating opportunity remain down right anemic compared to other major markets with average dropping down to $3.50 in overall ARPU. Even with significant subscriber base, there is going to be a general lack of opportunity in the market for the next couple of years relative to other markets.

Mobile Trends for 2011

1.Total Global Subscriptions to hit 6 Billion

–India and China racing to a billion a piece

2.Total Global Mobile Revenues to hit $1.3 Trillion, almost 2% of Global GDP

–Top 10 operators control 43% of the global mobile revenues

3.Total Global Mobile Data Revenues to eclipse $300 Billion

–Non-messaging data now owns 53% of the global mobile data revenues

4.Mobile Devices are now exceeding traditional computers in unit sales + revenue

–Majority of the device sales in the US are now smartphones. Device Replacement is shrinking

5.Mobile Broadband (4G) is being deployed at a faster rate than previous generations

–Over 1 Billion broadband connections by 2011

6.Global Mobile Apps revenue has shifted to off-deck

–The decline is directly proportional to the increase in smartphone penetration by region

7.All major markets are consolidating with the top 3 players at 85% of the market

–Regulators will have to be more prudent and proactive about managing competitiveness and growth

8.Mobile Data Traffic will be 95% of the global mobile traffic by 2015

–Many countries are facing spectrum exhaust in the next 5 years

9.Connected device segment is growing at the fastest pace

–Operators will have to quickly adapt their strategies to stay relevant in this segment

10.Several multi-billion dollar opportunity segments are emerging

–Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few

11.Mobile Ecosystem has become very dynamic and unpredictable

–Apple, Google, Amazon, and Facebook have become the most important revenue generating mobile platforms

12. There will be more changes in the next 10 years than in the previous 100

– The value chains will keep disrupting every 12-24 months by the new players and business models

13. Intellectual Property has become a key component of long-term product strategy

– Top 20 control 1/3rd of the overall mobile patent pool

Devices

Apple has had the tablet space to itself. Thus far the response from the competitors has been tepid esp. on the pricing dimension. Apple has had such a mastery over the supply-chain and months ahead of the competition that by the time they figure out details, Apple already locks up the pricing advantage for the cycle. OEMs try to catch-up on the features but can’t do on the margins. OEMs can grow the pie by bringing products at a better price points that helps attract different demographics to the mix. Microsoft can make good inroads into the space with its Win8 tablet release in 2012 but it will be again in a catch-up mode as the iOS ecosystem will be even more robust by then. The cheaper Android tablets will do well in the market. As expected, tablets will pretty much eliminate the need for netbooks and are starting to eat into the desktop/laptop revenue.

Nokia and RIM are under severe market scrutiny as investors and developers leave in droves. Lack of product planning and execution has left their market share in disarray. Nokia’s valuation has been cut into half while the newcomer HTC edged past the industry giant in a remarkable story of the year. Nokia’s release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones. While the market hasn’t shown much appetite for Windows phone thus far, a good family of devices might be able to slow the loss trajectory and position the combined team for the up-for-grabs 3^rd spot in the ecosystem. HP’s acquisition of Palm is finally bringing some new products to the market but the lack of an effective ecosystem means lack of traction in 2011. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.

Tablets are primarily being used in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher but will still be dominated by WiFi overall.

The number of connected devices per subscriber and per family will continue to increase over the course of this decade. As the cost structure and margin profile for these devices will be different, we are likely to measure performance of various operators using margin analysis for e.g. while the ARPU for connected devices is 5-10 times lower than the postpaid subscribers, the margins are typically higher due to lower costs of sales, marketing, support, and subsidy. As such the overall impact is dilutive ARPU but higher margins. So, instead of focusing on just the ARPU, the efficiency of operators will be measured in how well they maintain average margin per user (AMPU) and average margin per connection (AMPC).

Managing the data growth

As a result of the data tsunami, there are two types of opportunities that are being created, one that take advantage of the data being generated in a way that enhances the user experience and provides value and the other in technologies that help manage the traffic data that will continue to grow exponentially.

To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are already exploding. New technical and business solutions will be needed to manage the growth and profit from the services. Relying on only one solution won’t be an effective strategy to manage rising data demand. A holistic approach to managing data traffic is needed and our analysis shows that the cost structure can be reduced by more than half if a suite of solutions are deployed vs. a single dimensional approach and thus bringing the hockey stick curves of data cost more in line with the revenues and thus preserving the margins.

The decision making process within the operator organizations will need to be streamlined as well. Operators should also consider creating a senior post which focuses on both the cost side and the solution side so they can devise and institute a sustainable long-term policy and keep the margins healthy.

Competitive landscape

The Rule of Three is evident in all major markets. While the percentage market share might vary, on an average, the top 3 control 93% of the market in an given nation. It doesn’t matter if the market is defined by “controlled regulation” like in China, Korea, and Japan or if it is “open market” driven in markets such as the US, UK, and India. Eventually, only top 3 operators control the majority of the market. There are niches that others occupy but they are largely irrelevant to the overall structure and functioning of the mobile market.

Markets such as US and India experienced similar competitive environment in their hyper-growth phase. For the US, this phase was in the nineties-mid-2000s while India has been experiencing the similar environment in the last 3-4 years. In both cases, at the start there are 5-6 players with no more than 25% market share but higher than 10% of the mix but gradually the market forces enable consolidation. Over a period of 18 years, US is settling into a “top 3” operator market. India’s brutal price wars are going to trigger the consolidation in the next 12-24 months and will eventually settle into a structure similar to other markets.

The competitive equilibrium point in the mobile industry seems to when the market shares of the top 3 are 46%:29%:18% respectively with the remaining 7% being allocated to the niche operators. To achieve some semblance of equilibrium in the market the top operator shouldn’t have more than 50% of the market share and the number three player shouldn’t have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer.

Mobile operators will face some hard choices in developing and protecting the role they want to play in a given region and the ecosystem at-large. The strategy they choose will have a direct impact on the expected EBITDA margins, investment required over the long-haul, how investors view them, and on the competitive landscape of the country. Given, the fast pace of globalization, new rules and trends might emerge over the course of this decade that further define “communications” and “computing” as we know it.

Apps and Services

As expected, mobile commerce and payment discussions are dominating the ecosystem. There is clearly a lot of investment and marketing dollars being spent. However, the traditional payments networks are largely intact. The new opportunities are being built on top of the existing payment platforms with convenience (Square) and offers and advertising (Google Wallet, ISIS, Groupon). Beyond payments, mobile is getting ingrained into every vertical and every facet of our lives – from healthcare to education, from energy to entertainment, from communication to socialization. And we are in the early innings of figuring out the business models, ecosystem leaders, user behavior, regulatory needs, and the overall impact on society.

Ecosystem Dynamics

It is very clear that the ecosystem dynamics can change very quickly, one just can’t take the competitive and friendly forces for granted. In the past, the silos and segments were clearly defined with little overlap. However, over the course of last couple of years, players have been migrating and surfing in segments across the board - from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company wants to capture the mindshare and piece of the consumer’s pocketbook. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&T’s business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoft’s enterprise business. One product launch, one acquisition, can change the game in an instant.  And this is only the beginning.

Mobile is fundamentally reshaping how we as consumers spend from housing and healthcare to entertainment and travel, from food and drinks to communication and transportation. Mobile not only influences purchase behavior but also post purchase opinions. When the share button is literally a second away, consumers are willingly sharing more information than ever before. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. The long-term battle is however for owning the context of the users. Having the best knowledge about the user to help drive the transaction is the simply the most valuable currency of commerce.

Mobile Future Forward

We will be discussing the global mobile ecosystem – the challenges and the opportunities at our annual mobile thought-leadership summit – Mobile Future Forward - brought to you in partnership with our terrific partners – Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12^th.

Some of the distinguished guests include:

Abhi Ingle, VP – Advanced Mobility, AT&T Wireless; Amit Gupta, SVP and CTO, INQMobile; Bob Gessel, VP/Head of Technology and Network Strategy, Ericsson; Braxton Woodham, Head of Engineering, AVOS; Carlos Domingo, CEO, Telefonica; Charlie Herrin, SVP - Products and Technology, Comcast; Dale Nitschke, former President, Target; Danny Bowman, President - Connected Devices, Sprint Nextel; David Messenger, EVP, Head - Online/Mobile, American Express; Erik Moreno, SVP, Fox; Gibu Thomas, SVP - Online/Mobile, Walmart; Glenn Lurie, President, AT&T Wireless; Hank Skorny, Chief Strategy Officer, Real Networks; Janet Schijns, VP, Verizon Wireless; Jason McKenzie, President, HTC-Americas; Jay Emmet, GM, OpenMarket; Jeremiah Zinn, EVP, MTV; Jerry Batt, CIO, PulteGroup; John SanGiovanni, Cofounder, Zumobi; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel Lucent Wireless; Kris Rinne, SVP - Networks, AT&T Wireless; Mark Rolston, Chief Creative Officer, Frog Design; Matt Oommen, President, Reliance Communications; Mikael Back, VP of Products and Portfolio Management, Ericsson; Mike Mulica, President, Synchronoss Technologies; Paul Palmieri, CEO, Millennial Media; Prof. Cliff Nass, Human Computer Interaction, Stanford University; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP and Group President, Qualcomm; Subba Rao, former CEO, Tata DoCoMo; Suja Chandrasekaran, CIO, Timberland; Will Hsu, Chief Product Officer, AT&T Interactive

More information at http://www.mobilefutureforward.com

Your feedback is always welcome.

Thanks and have a great 2H 2011.

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, and articles. The next US Wireless Data Market update will be released in Aug 2011. The next Global Wireless Market update will be issued in Jan 2012.

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

Mobile Breakfast Series – Mobile Commerce and Payments June 29, 2011

Posted by chetan in : Mobile Breakfast Series, Mobile Payments, Mobile Wallet, Smart Phones, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , add a comment

We held our 7th Mobile Breakfast Series Event earlier today. The topic of discussion was “Mobile Commerce and Payments.”

The killer views of the Olympics and the Sound

Mark Young did a great job moderating the panel

The panel expertly delved into the intricacies of the mobile commerce/payments opportunity

 

The 2011 Mobile Breakfast Series is sponsored by Amdocs. A big thank you for the support.

At the end of every year, we do a forecast survey. In the last survey, Mobile Payments and Commerce were considered the top two categories for growth in 2011. Given the activities thus far – Google Wallet, ISIS, number of startups – Payfone, BilltoMobile, existing players like OpenMarket, financial guys across the board – past few months have been full of significant activity. The mobile commerce developments are right behind the AT&T/T-Mobile proposed merger and Microsoft/Nokia partnership in terms of news coverage.

I remember back in 2001/2, I was writing my 2^nd book with my good friend and co-author Nakamura-san who was CTO at NTT DoCoMo and while doing some work for DoCoMo and AT&T, we were exploring ways the mobile device will be used for commerce not only for digital goods but also for physical things. MCommerce has been around for the better part of the last 12 years in some form and fashion, in fact today it is a multi-billion dollar market already. Mobile payments are in different states of maturity and experimentation depending on the region. Do you know the value of US payment distribution - $75 Trillion out of which only 5% is based on cards which accounts for almost $3-4 trillion Total Transaction Value. Paypal is expected to process $4B in mobile payments this year generating over $70M in mobile payments revenue.

OpenMarket processes a significant amount of mcommerce business in the US today. As you will hear from the panelists, they are starting to see good traction from merchants and things are moving from digital to physical. However, things are very complicated – it is a highly regulated segment and changes don’t come every so often. The payment networks are from pre-Internet era and yet they maintain their complete dominance of the ecosystem. So, this sets up a very interesting next few quarters and a perfect time for us at Mobile Breakfast Series to assemble a stellar panel to unwind the realities of the evolving landscape.

Our panelists were:

Mark Young, VP - Strategy, NBC Universal and Digital Networks (moderator)

Rodger Desai, Founder and CEO, Payfone

Jim Greenwell, President & CEO, BilltoMobile

Andrew Lorentz, Partner, Davis Wright Tremaine

Michael Goo, VP - Mobile Strategy, T-Mobile

Joe Megibow, VP - Mobile and E-Commerce Optimization, Expedia

Mark has been involved in mobile for a long time and has been at the center of commerce on mobile since the ringtone days at Moviso. Rodger and Payfone have been in the news lately for some raising money and some key partners like Verizon and American Express. BilltoMobile has been involved in mobile payments first in Korea (under Danal) and lately in the US with all the operators for doing payments. Payments is a heavily regulated industry so players in the ecosystem need to have a firm grasp on regulatory winds to ensure their future revenues. Andrew with his deep background in the space was perfectly suited to bring up to speed with pending and existing rules. ISIS has been in the news throughout the year and Michael Goo has been representing T-Mobile to help define the operator strategy in payments. Expedia is one of the largest ecommerce companies and they are seeing some tremendous growth in mcommerce. Joe is right in the middle of all the craziness and his analytical mindset gave audience some great insights.

As i mentioned, mcommerce is not new but mobile web and apps infrastructure along with new methods of interactivity like the NFC are making things simpler for the consumers that it is moving from novelty to convenience to actual dollars.

The panel was just full of great insights and nuggets. The highlights of the discussion was as follows:

• For Expedia, the majority of the mobile traffic comes from iPhone, roughly 60-70%, Android is around 25%, Conversion rates are much higher on iPhone, The order size on Android is 10% lower than iPhone.
• From a traffic perspective, iPad traffic is double the iPhone traffic though the device penetration is 1/10th. Conversion rates are much higher
• Two years ago, the mobile traffic was around 2% when Expedia didn’t have any mobile site. Now it is almost 6% with 10% on Saturdays, Average transaction ranges in the $200-300 range.
• Given the traffic dynamics on iPad, it is a unique category in of itself – something we have argued before – it is a new category in terms of consumer behavior.
• Most of the traffic for Expedia is from mobile web as SEO and paid search drive traffic to web, difficult to do deep linking, as such mobile web revenue is 5/6 times the app revenue.
• In a multi-device, multi-network world, consumers expect the services to just work across the board with same user experience.
• Fandango drives impulse purchases of movie tickets using “near me” feature of apps 2-4 hours prior to the show vs. 8-12 hours traditionally.
• Charlie Fodie who is on the board of Payfone expects the interchange in payments to go away over time. This will be indeed disruptive, the question is the timing.
• Only 25% of consumers have credit card in their profile with their operator in the US. 30% still pay $9-10B in cash/year to the operators by walking into the store.
• Payfone sees an opportunity by doing auction based underwriting in real-time to minimize the transaction fee.
• The uniqueness of the device can be used as its fingerprint for authentication. Payfone uses the SS7 network for authentication messaging.
• Consumers are unlikely to put $1200 plane ticket on their operator bill. The mind shift is not there, maybe things will shift, but not there in the short-term.
• Operators are exploring using the consumer data as a way to refine advertising, open it up to the ecosystem.
• Durbanization of all forms of exchange fees is near.
• Payfone allows transactions over WiFi on operator bill as well.
• In Korea, 80% of people do payments using mobile so the blueprint to get more people involved with mobile payments is there
• Verizon has a $25/mo limit on carrier billing. A Canadian operator has $500, so on a 6M sub base they have a $4B cash flow thus essentially becoming a bank. The mindset is quite different compared to the US operators
• Merchants are not bought into mobile payments yet. They want to see more adoption before they start investing more aggressively with NFC and other forms of payment.
• Industry is underestimating fragmentation, consumer confusion, regulatory headwinds, consumer adoption once friction is removed, and how soon all ecommerce will become mcommerce.
• Industry is overestimating how much of the space is going to be defined by the western markets

The panel was full of key insights that impact strategy in this space. I was thankful for the speakers to have made the time, especially the ones who traveled great distances to be with us to share their insights.

Next, our focus moves to our annual mobile thought-leadership summit – Mobile Future Forward on Sept 12th in Seattle. It is shaping up really nicely with some terrific speakers. You can take a look at the info here.

The goal of the event is to look a bit into the future 2-5 years out and see what’s on the horizon. We are deep into the planning stages of preparing another successful event. I want to thank our partners of this initiative – Qualcomm, Ericsson, AT&T, Openwave, Millennial Media, Real Networks, and Synchronoss Technologies.

Hope you can join us. It will be worth your while.

Until then, enjoy the summer.

Mobile Future Forward Student Paper Contest June 15, 2011

Posted by chetan in : 4G, AORTA, Connected Devices, European Wireless Market, Indian Wireless Market, Mobile Future Forward, Student Paper Contest, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

To create the future, we must first be capable of imagining it
- Gary Hamel and C.K. Prahalad, Competing for the Future, 1994

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The Event

It was the most satisfying experience of my career. The contest and the Mobile Future Forward summit made me reevaluate my research and career from a fresh perspective.
- Lun Huang, Phd Student - Electrical Engineering, Illinois Institute of Technology, 2010 Mobile Future Forward Student Paper Contest Winner

Being selected as one of the winners of the contest presented me with an absolutely enriching experience. The most exciting part of the experience was the opportunity to interact and network with top industry leaders from all major mobile companies.
- Smruti Parichha, Grad Student - Dept of Computer Science and Engineering, University of California, Riverside 2010 Mobile Future Forward Student Paper Contest Winner

Mobile Future Forward is an executive summit attracting some of the most influential minds who are shaping the mobile industry. The experts and visionaries from around the globe will discuss the mobile industry 2-5 years forward, envision what the user experience and use case scenarios look like, discuss and debate the challenges and opportunities in the journey to that vision.

The Contest

The best student paper contest is open to universities and research institutes around the world. Your task is to help us imagine new technologies, new experiences, new applications and services, new use cases, new business models of the mobile future. The paper can be on a specific technical or business subject within the mobile industry from mobile teleportation to fuel cells to a new enterprise collaboration tool and everything in between. The idea is to let your imagination fly without any restrictions and dream of what’s possible in the next 5-10 years. Papers can be about technical solutions to the most pressing problems, about new revenue models, about your vision of how mobile will be used in the future, etc. Paper length: 1000-1500 words.

 

The Prize

Authors of the top two outstanding papers will get a paid trip to attend the conference and mingle with the who’s who of the wireless industry. Winners will also be eligible for more prizes. Please send in your entries by July 15th, 2011 tocontest@mobilefutureforward.com including a copy of your current student ID. Use of graphics and illustrations is encouraged. While an indication of interest is not required, it is appreciated. A panel of industry experts and executives will vote on the best papers. They will be ranked on originality, ambitiousness, creativity, depth, and clarity of vision. The goal of the contest is to bring out and reward the best thinking from the leaders of tomorrow.

 

2010 Student Paper Contest

Lun Huang of Illinois Institute of Technology and Smruti Parichha of University of California, Riverside wrote the top two winning papers respectively and were invited to meet with the senior executives in the mobile industry and attend the Mobile Future Forward Executive Summit. Our thanks to all the students who participated, the judges who helped us pick the winners, and Intel for supporting the contest. See details here.

For more Info, please contact contest@mobilefutureforward.com

iCloud – taking consumer cloud to the next level June 7, 2011

Posted by chetan in : Mobile Cloud Computing, Mobile Future Forward, US Wireless Market, Worldwide Wireless Market , 2 comments

Apple announced their iCloud offering today. Idea is pretty simple – Cloud becomes the data center for all devices especially for media content – photos, videos, songs, documents, etc. We wrote about that in our Mobile Cloud Computing paper in much detail.

I wrote about the key success factors for any mobile cloud computing offering -

For any mobile cloud computing service to reach the masses, it has to get the basics right specifically around the user experience and the pricing. As past experiences have shown - if one gets these wrong out of the gate, it is very difficult to get the users interested again.

The key success factors for any mobile cloud computing application or service are:

User experience

The success of a product or the service is defined by the “end to end” user experience and the perceived value users have. A product or service that has a positive impact on user’s emotions, needs, preferences, perceptions, and behaviors has a better chance of reaching mass market in a short-amount of time. In the case of mobile cloud computing, the picture is multi-dimensional, as the service has to adapt to multiple devices and networks and hide the complexity from the user. It should just work.

Pricing

Pricing is a key element that makes the difference between a niche service and a mass-market phenomenon. Consumers should perceive that they are receiving more value for what they are being asked to pay. Many excellent services never caught fire primarily because the value equation was imbalanced. For e.g. the MediaFLO service from Qualcomm was technically perfect but because of the high cost structure, limited operator promotion and distribution, and high pricing for the consumers, it never caught on. There are similar examples throughout the history of the mobile industry. Any new service should first earn its value.

Interoperability

We are living in an increasingly fragmented world. Our content and media consumption is across multiple sources and with different providers. Our preferences and tastes are continuously evolving. Any vertically focused service needs to account for this new reality. This means that interoperability is not a feature but a key functionality without which the service won’t get much traction. The cloud computing ecosystem is going to have multiple providers for example, a consumer is likely to have music files with Apple, books with Amazon, pictures with Google, address book with T-Mobile, friends photos on Facebook, family videos with Yahoo and so on and so forth. Any media cloud computing solution should be open enough to ingest content from any service and provide the capability of multiple cloud services from a single interface depending on consumer preferences. Cloud service providers who try to lock consumers into their databases without offering transparent interoperability will see their short-term advantage whittle away over time.

Discovery and Sharing

For the most part, mobile is still limited by the size of the screen. Consumers on the run have different expectations for media/content consumption. Instead of a series of links, they are looking for answers. Whether it is the song lyrics or associated social data of music and video files or the location and auto-recognition of the individuals in a photograph, rich metadata is key to automatically organize content as well as to instantly finding any piece of content across multiple libraries with gigabytes of data. As such, the value of meta data becomes extremely important.

Network and Device Intelligence

Even though the broadband capability has improved over the last few years, mobile is always going to be under the constraints of congestion, network load, and variable device capabilities. Also, it will be unwise to not take advantage of the device storage, capability and the processing power. A hybrid model provides a perfect balance of user experience, performance, and the range of options. Any cloud service should take advantage of the available resources on the device, in the network, and in the cloud infrastructure to deliver the best experience to the user in real-time. This can only be delivered if the service is aware of the network and the devices at all times. For example, the background syncing of music across various user devices can take place using Wi-Fi or during off-peak hours on a cellular network so as to not burden the network or transcoding the image or the video stream on the fly to adapt to the application, device and network characteristics. Hence, any mobile cloud computing service should be network and device aware at all times.

As always, Apple made the process simple and pricing super attractive. Now, others will have to respond in kind or try to do better with features. Pricing is set – FREE for 5GB (at least for now).

We will be discussing Mobile Cloud Computing and the infrastructure needs and requirements in our upcoming Mobile Future Forward event and will have some terrific speakers to address the topic.

New Paper: Mobile Cloud Computing May 25, 2011

Posted by chetan in : 4G, AORTA, BRIC, Connected Devices, Enterprise Mobility, European Wireless Market, Infrastructure, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Future Forward, Mobile Search, Mobile Traffic, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

Mobile Cloud Computing

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

Sponsored by Real Networks

These are exciting times in the wireless industry. The innovation in technology, services, and business models is driving the global industry to new heights. While the global markets were feeling the pain of a brutal recession, the wireless industry for the most part sidestepped the crisis, especially in the North American and Asian markets. Mobile data revenues around the world have been growing at a steady pace. Given the lucrative nature of the market, there are more developers focused on the mobile ecosystem than ever before.

The mobile industry is going through significant transition from being voice-centric to data-centric, from consumers spending 90% of their time talking to being engaged on mobile data services 80% of the time. In Japan, Softbank became the first major operator to have more revenues come from data than voice. Others will follow. In the US, over 35% of the revenues are coming from data services and the data revenues will account for over 50% of the revenues by early 2013.

Mobility is also getting ingrained in the everyday objects, which make up for a fundamental reassessment of how things are done across industries in almost every region of the world. It is not just the phones and the data cards that are being enabled by the broadband connectivity but also the electronic devices such as the tablets, eReaders, automobiles, picture frames, and cameras.

Anything that can be connected will be connected making access omnipresent.

In such a multi-device world, the role of cloud computing becomes central to the content access and sharing. Consumers won’t like to store and upload by device type but would want the same level of functionality available across all their devices necessitating the need for mobile cloud computing. In a mobile environment, one has to contend with the limitations of screen size, the variability of devices, and the network latency. Therefore, the cloud requirements will vary by context.

With the emergence of the smartphones, the mobile operators are being gradually cut out of the value added services space with most of the revenues shifting to rest of the ecosystem. Mobile cloud computing provides an opportunity to leverage their network infrastructure assets and their consumer relationships to open up new revenue streams.

This paper will explore the mobile cloud computing market, its drivers, the opportuniies and the key elements of success in this space. Further, the paper discusses why operators should take a more active role in this space. Mobile cloud computing is here to stay. The winners and losers will be decided based on how players will adapt to empower consumers.

Download Paper

US Mobile Data Market Update Q1 2011 May 9, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Connected Devices, Indian Wireless Market, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile TV, Mobile Traffic, Mobile Users, Mobile Wallet, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Data Market Update Q1 2011 http://www.chetansharma.com/usmarketupdateq12011.htm     The US wireless data market grew 4% Q/Q and 23% Y/Y to reach $15.4B in mobile data service revenues in Q1 2011 and is on course to increase Y/Y by 22% to $67B in 2011. Of all the segments, the connected device category registered the highest growth at 9.6% Q/Q while the postpaid subscriptions growth was almost flat for the quarter. Connected devices (including tablets, M2M, telematics, eReaders, etc.) now account for 8% of the subscription base. For the first time, the smartphone sales crossed the 50% share mark in the US. Also, the US now accounts for approximately one-third of all smartphone sales in the world. The Big News - AT&T’s proposed acquisition of T-Mobile The big news during Q1 2011 was of course the blockbuster announcement of the acquisition of T-Mobile USA. We had pondered on the viability of 4 operators in the US market in the past. All the major mobile market eventually settle with three main players controlling the market. So, the news wasn’t a surprise as we had expected something to break loose and conform to the natural market evolution. T-Mobile US has been under tremendous pressure for the last 2 years being unable to expand its postpaid base despite modernizing its network/backhaul and introducing a slew of impressive handsets. It was getting squeezed both from the top (Verizon and AT&T) and from the bottom (MetroPCS, etc.) while duking it out with Sprint in the middle. The decision window was closing as Deutsche Telekom had to decide if it wanted to invest in LTE or not (in the US market). Given that the parent business has been under pressure as well, it decided to take the most attractive available option. The proposed merger will obviously have an impact on the market structure. The market power will get concentrated in the top 2. The HHI3 Index will go from .22 to .31 but the HHI3 value will be at par with UK, Canada (though the Canadian market is not a good proxy for a competitive market), and some of the other markets. The biggest task for the US regulators will be to analyze the impact on the consumer interest and service pricing on a market-by-market basis. Putting things into perspective, this move is not unusual for a developed market. On average, the top 3 operators in the developed markets around the world control 94% of the market. The proposed merger roughly resembles the merger that took place in UK last year when T-Mobile and Orange, the number 3 and 4 player (each having approximately 19% of the share) respectively in the market merged to form Everything Everywhere and become the number 1 player in the market with 38% market share. However, if we look at the history of competitiveness in the US mobile market, the market and revenue concentration will be at its highest in the history of the US wireless industry. Such a move is likely to have an impact on the ecosystem depending on the regulatory policies. Last month, we published a first of its kind in-depth study on competition in mobile markets -“Competition and the Evolution of Mobile Markets - A Study of Competition in Global Mobile Markets”. The paper presents the analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets. Transparency as a competitive advantage An unfortunate side effect of an industry moving too fast is that regulations are often behind the curve (we discuss the role of regulators in our Competition paper mentioned above). Q2 will see a lot of heated debates around privacy and competition. Current regulatory framework in the US seems ineffective to meet the demands of the digital age. The indecision and a weak regulatory framework can be harmful to the ecosystem. While the industry has done a poor job of explaining targeting and relevancy and the associated consumer benefits, by over reacting, regulators can mess up the potential for better services. It is not the mechanics they need to regulate but the “transparency” of services and policies in plain English. Regulating transparency seems to be a more effective way. The ecosystem players will do better if they use transparency not as a threat but as a competitive advantage. The new troika - AAG A couple of years back, I gave a talk about the changing mobile ecosystem and what it means to compete in an environment where the ecosystem stacks get reshuffled every few months. I wrote about that in an essay that was published in the Mobile Future Forward book last year. While innovation is coming from all angles - fast and furious - the troika of Apple, Amazon, and Google is leading the way right now. Their interests are clashing in multiple dimensions - device, user data, cloud, advertising, local, commerce, books, etc. In a fast changing environment, either you define the market or be defined by it. The journey from being an arch-rival to a frenemy (and vice-versa) can be a short one. A significant shift As we mentioned in our last research note, 2010 marked the milestone of the start of a new computing and communications era. For the first time in the US, the smartphones shipments exceeded the traditional computer segments (that consists of desktops, notebooks and netbooks). Smartphones and the connected devices now account for 51% of the computing devices revenue in the US (devices include desktops, notebooks, netbooks, tablets, eReaders, and conventional feature and smartphones) The growth in of connected devices The connected devices category is the fastest growing segment of the market and while the ARPUs are low, due to the higher margins this segment will prove to be the most profitable in the coming years. By the end of 2011, connected devices will be commanding double digit market share. However, not all sub-segments are going to be successful in the operator channel until multi-device data pricing plans are introduced. Apple’s iPad has been, as expected, a runaway success. Several other tablets launched in 2011 but none has come close to being a credible challenge. OEMs will do well to segment the market and price accordingly rather than follow Apple in performance and pricing. Market is fairly young and there is tremendous room for growth. Another trend that is obvious is the development of an alternate ecosystem. 85% of the tablets use primarily use WiFi for connectivity meaning that OEMs need more diverse distribution channels. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. We do expect multi-device or family data plans to start being introduced in the US market in 2011. Also, the $200-250 Android tablets will start to emerge during the second half of the year to broaden the choices for the consumers. Turmoil in the OEM land Another headline grabbing event in Q1 2011 was that of Microsoft’s partnership with Nokia. Nokia’s lack of a credible response to Apple and Android has left the company scrambling for survival. Nokia still dominates the unit sales but the domination of Apple and the Android OEMs has taken away significant profits and ecosystem mindshare. Industry is awaiting the first release of the Windows phone from Nokia which will have a lot riding on it. If the release of iPhone 5 coincides with this release, the Christmas selling season will be interesting. The OEMs that have impressed the most are HTC and Samsung. The collapsed release cycles and the fierce pace of introduction of new devices have caught many of the traditional players unprepared. These things have a tendency of going in cycles so we expect the pendulum to swing again in the next 12-24 months. There is a fight for the #3 spot and it is likely that Windows will fill that void. However, for developers, iOS and Android are the only platforms they need to worry about right now. Verizon finally got its iPhone and as expected it didn’t make a big dent into the AT&T’s financials. Platforms - Horizontal vs. Vertical Over the past few quarters, we have seen a fascinating battle brew between the horizontal (Android and Windows) and the vertical (Apple, RIM, Nokia) device platforms. In the US, in the smartphone category, the horizontal platforms (primarily Android) has been gaining significant share since Q1 2010 and now have over 65% share of the new devices sold while the vertical platforms’ share has declined to 35%. However, the revenues and profits are still dominated by the vertical platforms. What to expect in the coming months? All this has setup an absolutely fascinating 2011 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the  industry is going to evolve in the next decade in our Sept 12th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. 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 Q1 2011 US wireless data market is: Service Revenues The US Wireless data service revenues grew 4% Q/Q and 23% Y/Y to $15.4B in Q410. The mobile data services revenues for the US market are expected to reach $67B in 2011. Verizon and AT&T had a good mobile data quarter accounting for 76% of the increase in data revenues in Q1 2011. T-Mobile’s HSPA+ drive is starting to pay dividends. While the postpaid net-adds were still in the red, its data growth is starting to match with its peers. The 27% smartphone base definitely helps. For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 65% of the subscription base. AT&T edged past China Mobile to become #3 operator by mobile data revenues. Verizon is already at #1 followed by NTT DoCoMo. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q1 2011. The proposed merger of AT&T and T-Mobile will make AT&T #1 by a distance and place 20% of the global mobile data revenues in the hands of the top two US operators. ARPU The Overall ARPU increased by $0.11. Average voice ARPU declined by $0.36 while the average data ARPU grew by $0.47 or 3% Q/Q. The average industry percentage contribution of data to overall ARPU was 35% in Q111 and is likely to touch 40% by year’s end. Verizon and Sprint were neck-and-neck in data ARPU followed by AT&T. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with approximately 29% of its revenue coming from the data services. We expect data revenues to exceed voice revenues in the US market before Q2 2013. Subscribers Helped by the growth in connected devices, the overall net-adds increased by 4.9M. For the sixth straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. Connected devices are now almost 12% of AT&T’s subscription base. Overall, AT&T has 43% of the connected device share of the market. The connected device segment grew 9.6% Q/Q and 48% Y/Y. · Sprint is on good comeback adding over million customers. Sprint extended its streak of positive net-adds to four quarters by adding over a million subs  for the second straight time since Q1 2006. · T-Mobile however continues to be sandwiched between the top three and the next three and is having a hard time adding postpaid subscribers. Applications and Services While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $5B in revenues. The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education. The fight for the 3% block is finally in the open. Operators, financial institutions, and the internet players are all vying for a piece of the mobile wallet. Much more to come in 2H 2011. (We will be going in-depth into mobile commerce and payments in our upcoming Mobile Breakfast Series event on Jun 28th) Handsets Nokia sold 108.5M units in Q1 2011 accounting for 28% of the market share. Samsung continues to be one of the most agile players in the device business shipping 70M for a 18% share of the market. The nimble team at HTC outclassed its bigger peers and edged past Nokia in market cap. Apple, a company that was given a lifeline by Microsoft in 1997 is now valued 45% or $100B more than Microsoft primarily on the strength of its wireless portfolio. In the US, for the first time, 51% of the devices sold were smartphones. Global average is at 26%. One-third of all smartphones sold were sold in the US making it the hot bed for consumer devices. Smartphones now account for 80% revenue of all phones sold in the US. In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column. 85% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. Global Update Race to a billion - India went past 800M in Q1 2011 subs and is closing on China and we expect that by the end of the year, India will become the largest mobile market on the planet. By early 2012 both India and China will have more than a billion subscriptions. China Mobile crossed the 600M subscription mark however its 3G introduction has had a tepid response thus and its 4G strategy remains in flux. More details to come in our global market update. 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, and articles. The next US Wireless Data Market update will be released in Aug 2011. The next Global Wireless Data Market update will be issued in Jun 2011. Disclaimer: Some of the companies mentioned in this paper are our clients.

Announcing Mobile Future Forward 2011 May 4, 2011

Posted by chetan in : Mobile Ecosystem, Mobile Future, Mobile Future Forward, Student Paper Contest, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment

I am really excited to announce or 2011 Mobile Future Forward. We have been working on it for a while and thanks to our wonderful partners and speakers, the program is starting to take shape. As usual, we are deeply focused on the understanding the underlying currents of the mobile ecosystem and how behavior, technologies, and business models will be morphed over time.

First of all, a big thanks to our current partners in this endeavor

    

We are also grateful to our fantastic thought-leaders who are eager to share and discuss the future of mobile. Current list of outstanding speakers includes:

• Abhi Ingle, VP, AT&T Wireless
• Amit Gupta, SVP and CTO, INQMobile
• Charlie Herrin, SVP - Technology, Comcast
• Danny Bowman, President, Sprint
• David Messenger, EVP, Head - Online/Mobile, American Express
• Erick Tseng, Head - Mobile, Facebook
• Erik Moreno, SVP, Fox
• Gibu Thomas, SVP - Mobile, Walmart
• Glenn Lurie, President, AT&T Wireless
• Hank Skorny, Chief Strategy Officer, Real Networks
• Jason McKenzie, President, HTC-Americas
• Jerry Batt, CIO, PulteGroup
• Ken Denman, CEO, Openwave
• Kris Rinne, SVP - Networks, AT&T Wireless
• Mike Mulica, President, Synchronoss Technologies
• Paul Palmieri, CEO, Millennial Media
• Prof. Cliff Nass, Human Computer Interaction, Stanford University
• Rob Glaser, Partner, Accel
• Sanjiv Ahuja, CEO, LightSquared
• Stephen Bye, CTO/VP - Technology & Strategy, Sprint
• Steve Elfman, President, Sprint
• Steve Mollenkopf, Group President, Qualcomm
• Suja Chandrasekaran, CIO, Timberland
• Will Hsu, Chief Product Officer, AT&T Interactive

We will keep you posted as we have more updates and news.

Mobile Future Forward Early bird registration is open now.

We are also launching our Global Student Paper Contest. If you are a student or you know of one in college, this is a great way to meet the movers and shakers of the industry. Last year’s contest was a runaway success and we are working hard to make this year’s memorable as well.

Thanks and hope to see you at the summit.

New Research: Competition and the Evolution of Mobile Markets April 28, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Devices, Enterprise Mobility, European Wireless Market, Gaming, General, India, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, Mergers and Acquisitions, Messaging, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Networks, Patents, Privacy, Smart Phones, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , add a comment

Competition and the Evolution of Mobile Markets A Study of Competition in Global Mobile Markets http://chetansharma.com/mobilecompetition.htm Over the course of the last decade, mobile communications has become an essential part of the global fabric of evolution. With almost 70% global subscription penetration as of 2010, mobility is being embedded into almost every facet of our lives. Mobility is also spreading across verticals whether it is m-pesa in Kenya or SMS based counterfeit medicine detection in Ghana or paying for your coffee using your NFC enabled mobile phone in a Tokyo café or watching the cricket world cup broadcast while hiking the Yangtze river near Tibet. Consumers expect access to information everywhere they are and the ecosystem is responding with continued innovation, which has become extremely critical in managing the competitiveness of nations. It is also apparent that some of the innovation and market dynamics has been evidenced by the competitiveness of these markets at different levels – network, devices, and services. While the market entry conditions into the devices and software services markets have gone through significant overhaul this last decade, the competitiveness framework of the mobile networks has been more structured and controlled in many instances. Given the importance of the mobile network infrastructure to every nation’s competitiveness, security, and productivity, it is useful to understand how the “competitive mobile markets” are formed. In theory, the perfectly competitive markets are in the best interest of the consumers as they provide the best value given the competitive dynamics and the equilibrium provides good checks and balances for the ecosystem. The global mobile networks have shown a remarkable adherence to the “Rule of Three” which states that in any mature industry, 3 top players dominate the market. Sometimes it has been dictated by the regulators and in other instances by the markets. Some markets like in Europe have settled into a state of equilibrium while other hyper growth markets like India are shuffling to find the right balance. The elements of globalization are also shaping how mobile network operators grow. The regulators and the political class are increasingly looking at mobile networks as national assets and any foreign ownership generally goes through tremendous scrutiny. Having worked in major mobile markets around the world, we have been intrigued by the framework  for a competitive market and this is the theme we explore in this working paper. Having the front row seat in an industry that is growing stupendously has given us some unique perspective on the competitive forces at work in the mobile space. We studied the competitive landscape in 40 top mobile markets around the globe. This paper presents the analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets. Download Paper (45 pages, 2MB) Disclaimer: Some of the companies mentioned in this paper are our clients.

Mobile Breakfast Series – The Universe of Connected Devices

Posted by chetan in : Carriers, Connected Devices, Devices, European Wireless Market, Mobile Applications, Mobile Breakfast Series, Mobile Content, Mobile Ecosystem, Mobile Future Forward, US Wireless Market, Worldwide Wireless Market , add a comment

Earlier this month, we hosted our 6th Mobile Breakfast Series Event in Seattle at the picturesque Columbia Tower Club. The topic is something that has been occupying everyone’s attention lately with some terrific growth numbers.

We were doing some math earlier this year and the chart above illustrates how fast the mobile ecosystem is subsuming the computing ecosystem as they become one and the same.

As you might have noted in our 2010 US market update, connected devices is the highest growing category in the market at 55%. It is creating new revenue streams and enabling new verticals to get mobilized. It is also disrupting the traditional ecosystems. This made it a perfect time to discuss the topic in-depth.

Our panelists were:

Tyler Davidson, VP, Amdocs

Martin Fichter, VP - Product Management Americas, HTC

Mike Mulica, President and Head of Strategy, Synchronoss Technologies

Ilja Laurs, Founder and CEO, Getjar

Erik Kling, Director - M2M, Vodafone Global Enterprise Group

Wilson Rothman, Deputy Technology and Science Editor, MSNBC.com (moderator)

As always, we try to bring players across the ecosystem to have a good discussion from multiple angles. Our panel didn’t disappoint.

First a bit about the panelists to give you some background on their viewpoints. Erik Kling is deep into M2M and Vodafone is pursuing a very aggressive M2M strategy worldwide with some smart value proposition to the enterprises. That can put some of the domestic operators at a disadvantage. Tyler Davidson focuses his energy on managing customers but also thinks deeply about the management of media in the connected world. The rage of apps is carrying from smartphones to tablets and other connected devices as well and Ilja Laurs knows a thing or two about apps – running the largest independent app store and being quite successful at it.

HTC just crossed Nokia in revenues which was just unthinkable even last year. HTC has run a very effective strategy in devices and Martin Fichter is one of the guys who is making things happen in the US market. If you have an iPhone, you have been touched by Synchronoss Technologies. They activate the iOS and other devices. A billion $ company you might have never heard of. Mike Mulica has deep experience in the mobile space and is driving the strategy of connected devices and related software forward. Last but not the least, our moderator Wilson Rothman has been covering gadgets most of his adult life and is a darn good moderator.

The highlights of the discussion was as follows:

• M2M is getting good traction in consumer electronics, telematics, and medical. Vodafone is doing a ton of business with the medical/pharma companies who would like connected devices without the worry of roaming, certification, etc. Within a year, Vodafone’s M2M group has grown up to 200 people and they are hiring at a rapid pace if anyone is looking.
• Other M2M areas that are evolving are: security, remote access, home monitoring, etc.
• Connected devices are accelerating the move from voice to data
• The fact that AT&T is advertising M2M Vending machines on TV shows it is serious business.
• HTC passed Nokia in market cap on the back of Android and the 4G devices. For tablets, WiFi is a preferred route rather than operators as that’s what the demand is.
• With connected devices avalanche coming our way, WiFi is going to be extremely important, need better technologies for WiFi/Cellular migration.
• Consumers chose a device or a service first and the operator is now an afterthought.
• Operators need an open environment to operate but want to create a preference for them – it is like “controlled openness” like Microsoft so they can certify devices and apps that go on their network
• All this connectivity does need billions of $ of investment so there is a need for a toll for these services. However, we need to reduce friction with security, payment, and plans.
• Apple doesn’t want to be an operator but does want a free ride like NetFlix and YouTube.
• WiFi is not only necessary, it is essential for the survival of the industry.
• Amazon launching an app store is a good thing for the industry, puts pressure on Google a bit.
• Companies like Skype would pay the operators for better bandwidth but the process is a bit cumbersome.
• Battery Life. Enuff Said.

We also announced that our annual thought-leadership summit on mobile - “Mobile Future Forward” will take place on Sept 12th in Seattle. We have some terrific speakers lined up which lead to some fabulous discussion. Stay tuned for more information early May.

My utmost thanks to David Smith, SVP at Enterprise Ireland for his notes from the event. It helped refresh my memory and pointed out things that I had missed amidst running around.

Thanks all for coming and making it a successful outing. Our next Mobile Breakfast Series is going to be on Mobile Commerce and Payments in late June. Stay Tuned for details.

US Mobile Data Market Update Q4 2010 and 2010 February 28, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Carriers, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, M&A, Mergers and Acquisitions, Microsoft Mobile, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Search, Mobile Traffic, Mobile Usability, Networks, Smart Phones, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Data Market Update Q4 2010 and 2010

http://www.chetansharma.com/usmarketupdate2010.htm

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The US wireless data market grew 5% Q/Q and 23% Y/Y to reach $14.8B in mobile data service revenues in Q4 2010. The final tally for the 2010 year was $55B and we expect this to increase by 22% to $67B in 2011.

The US mobile subscriptions officially crossed the 100% penetration mark in Q4 2010.

Of all the segments, the connected device category registered the highest growth at 55% while the postpaid subscriptions grew by only 3% for the calendar year. Connected devices (including tablets, M2M, telematics, eReaders, etc.) now account for 7% of the base.

A significant shift

2010 marked the milestone of the start of a new computing and communications era. For the first time in the US, the smartphones shipments exceeded the traditional computer segments (that consists of desktops, notebooks and netbooks). In 2011, the smartphone segment along with the connected devices (tablets and eReaders) will not only exceed the computer segment in unit shipment but more importantly in the overall revenues as well. Of course, these categories are merging and the lines are blurring but it is good to take stock of the transition which will create new ecosystems and decimate the old ones over the course of this decade.

The evolution of connected devices

The connected devices category is the fastest growing segment of the market and while the ARPUs are low, due to higher margins this segment will prove to be the most profitable in the coming years. By the end of 2011, connected devices will be commanding double digit market share. However, not all sub-segments are going to be successful in the operator channel until multi-device data pricing plans are introduced. Most of the tablets and eReaders can work well with only WiFi most of the times. Monthly data plans make sense for enterprise users but not for consumers who might use these devices occasionally. As such tablets will be more successful in direct and traditional retail channels.

Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category (We will be discussing the connected devices universe in our upcoming Mobile Breakfast Series event in April).

Similarly, OEMs who rely on the operators for sell-through of tablets/eReaders will see low volumes vs. players who have more diverse distribution channels (Apple and HP). We do expect multi-device or family data plans to start being introduced in the US market in 2011.

As we had mentioned in our last research note, iPad (and other tablets) are making Netbooks irrelevant. In fact, tablets are starting to eat into the laptop category as well. As expected, the device has been a hit with many enterprises with mobile workers. Many enterprises are giving out iPads to their workforce instead of laptops or Netbooks.

At CES 2011, hundreds of tablets were introduced. While the total number of releases was noteworthy, we expect iPad to dominate the space in 2011 as competitors will find it hard to compete across all dimensions - price, performance, ecosystem, distribution, and brand power.

Mobile Data Consumption

Mobile data consumption continued to grow across all networks increasing 2-5 times on major US networks. Many of the superphones introduced in 2H10 are clocking 1-1.5GB/mo average. The average data consumption in the US at the end of 2010 was 350 MB/mo. Thus, while the data revenues for the year increased 23%, the mobile data traffic grew 132%.

The significant rise in the smartphones sales and usage in the US market (over 50% devices sold in the US in 2010 were smartphones almost twice the global average) means that by the end of 2011, in the US, the smartphones will consume more data than the data cards for the first time. We also expect US to become the number 1 nation in mobile data consumption this year edging out Sweden. A detailed treatment of the subject can be found in our "Managing Growth and Profits in the Yottabyte Era"  paper. Another research update on the topic will be released in 1H11.

The center of gravity has shifted back to the US

As I mentioned in my Time magazine interview earlier this month, there is no question that the center of gravity of the mobile market has shifted back to the US. The Nokia-Microsoft announcement was a wake-up call to many in the industry who were in denial. The innovation is happening all around the world and in many areas other countries are years ahead. The markets are growing faster in India, China, and elsewhere. However, the coordinates of what’s next have clearly changed in the last three years. The software innovation and the next generation network launches in the US are laying the foundation of a solid mobile decade.

US is also the most dominant market in terms of revenue generation for the industry. While the US represents less than 6% of the subscription base, it accounts for over 21% of the data revenues with Verizon Wireless becoming the number one mobile data operator in 2010 edging past the decade long leader NTT DoCoMo. AT&T also went past China Mobile to gain its current number three ranking. By the end of 2013, the US market will account for 25% of the global mobile data services revenues  (We will have a detailed analysis of the global markets in our upcoming research note in march).

Nokia-Microsoft partnership

Nokia’s market problem can be summed up thusly - “While Nokia sold 10 times more devices than Apple in 2010, its market cap is 1/10th that of Apple.” It has been clear for some time that things had to change at Nokia.

Weeks leading up to the Mobile World Congress were rampant with curiosity of who will Nokia marry to continue its next phase of device journey. The multi-billion dollar offering from Microsoft proved too hard to resist for Nokia. This news completely dominated the MWC chatter and the topic comes up invariably in many conversations since then. One has to give points to Nokia for decisiveness and for moving quickly under the pressure.

It is also indisputable that the deal is a significant win for Microsoft who has been looking to come back into the game. However, impact on Nokia remains uncertain. While there were risks with Android, going with Win7 is not an assured path to resurrection either. It all comes down to execution. Can the troops be rallied to produce a slew of competitive devices quickly that consumers and operators will find attractive?

Microsoft understands developers better than most and the two companies can bring in tremendous scale and complementary toolsets to attack the market. Nokia has significant talent and it’s a proud company but jumping into the shark-infested cold waters miles away from the shore will require all the stamina, good weather, and skill it can muster to make landfall before thanksgiving.

MeeGo is likely to go back into Intel’s camp and might look interesting to the likes of LG, Samsung and even Motorola though creating a new ecosystem is a tall order. Never a dull moment in the industry, is there?

Impact of iPhone on AT&T

It finally happened. The Verizon iPhone has kept the media busy for the last 3.5 years. It was quite an anticlimactic moment when the device finally came to the 2nd operator in the US. It was inevitable that one of the longest exclusive relationship in the wireless world will come to an end. The  iPhone singlehandedly turned around AT&T relative to Verizon in the net-adds race. For 10 quarters leading up to Q2 2007, AT&T was adding less net-adds compared to Verizon, in fact the cumulative net-add loss was 3.7 million subs on an average of 374,000 subs per quarter. As soon as the iPhone was launched in Q2 2007, AT&T started adding more net-adds compared to Verizon with the 14 quarter cumulative net-add difference close to 6 million subs on an average of 426,000 subs per quarter.

What to expect in the coming months?

Kids of the now generation are growing with connected electronics that is fundamentally altering the behaviors and expectations of interaction, communication, consumption, and monetization.

Android and iOS are completely dominating the developer and ecosystem mindshare and the race to become a viable 3rd option is on. Operators would love to see another competitive force emerge in the market.

All this has setup an absolutely fascinating 2011 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the  industry is going to evolve in the next decade in our Sept 15^th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. More details to come.

US is also leading the way in smartphone sales. In Q4 2010, 48% of the devices sold in the US were smartphones compared to 25% globally. The fast pace of device introduction has catapulted the agile players like Samsung and HTC to the forefront while others like LG and Sony Ericsson have lost ground. By singularly focusing on Android, Motorola did quite well in 2010 but 2011 is going to be challenging.

The pace of product introduction is accelerating with each quarter. Devices of all shapes and sizes are coming into the market literally every week. Players are having to re-evaluate their businesses and long-term strategies. There are several players whose future is at stake. The competition has grown fierce and companies are finding it hard to take ideas from R&D to products in market in a short amount of time.

While 2010 started quite active on the regulatory front as the national broadband plan was unveiled in March little substantive progress has been made w.r.t. the spectrum, net-neutrality, and other broadband related issues. The matter has swiftly moved to courts where it will take months before anything useful comes out.

Operators are starting to diversify more aggressively than in the past. AT&T’s mobile enterprise business is a leading indicator of this trend. Their focus by verticals has yielded new revenue streams and positioning them to become a one-stop shop for devices, access, and services in the enterprise market.

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

Against this backdrop, the analysis of the Q4 2010 and 2010 US wireless data market is:

Service Revenues

• The US Wireless data service revenues grew 5% Q/Q and 23% Y/Y to $14.8B in Q410. The mobile data revenues for the US market reached $55B in 2010.
• Verizon, AT&T, Sprint had a good mobile data quarter accounting for 86% of the increase in data revenues in Q4 2010.
• T-Mobile’s 3G/4G drive is starting to pay off. While the postpaid net-adds were still in the red, its data growth is starting to match with its peers. The 24% smartphone base definitely helps.
• For the calendar year 2010, AT&T and Verizon accounted for 69% of the market data services revenues and 64% of the subscription base.
• Verizon Wireless edged past NTT DoCoMo and AT&T went past China Mobile to become #1 and #3 respectively in operators by mobile data revenues in 2010. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for 2010.

ARPU

• The Overall ARPU decreased by $0.58. Average voice ARPU declined by $0.90 while the average data ARPU grew by $0.32 or 2% Q/Q.
• The average industry percentage contribution of data to overall ARPU was 34% in Q410.
• Verizon led in data ARPU with $18.79 followed by AT&T and Sprint. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with approximately 28% of its revenue coming from data services.
• We expect data revenues to exceed voice revenues in the US market by Q2 2013.

Subscribers

• US crossed the 100% penetration mark in terms of total subscriptions.
• Helped by the growth in connected devices, the overall net-adds increased by 4.9M.
• For the fifth straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. Connected devices are now almost 10% of AT&T’s subscription base.
• Overall, AT&T edged past Verizon in total number of connected devices. The connected device segment grew 9% Q/Q and 55% Y/Y.
• Sprint made a nice comeback in 2010 reversing the 11 quarter negative net-adds trend by adding three straight positive net-add quarters. Sprint extended its streak of positive net-adds to three quarters by adding over a million subs  for the first time since Q1 2006.
• T-Mobile however continues to be sandwiched between the top three and the next three and is having a hard time adding postpaid subscribers. For the year, the operator ended the year 390K subscribers (postpaid) below the 2009 levels. It’s churn rate is almost 60% higher than the average of its top competitors and the cost of postpaid churn was over half a billion dollars in 2010. However, the increased smartphone penetration, quick HSPA+ deployment, backhaul upgrades, and a clever marketing campaign is helping on the mobile data front.

Applications and Services

• While the percentage share of the data revenues is declining for messaging, the revenue growth stays strong with almost $17B in messaging revenues.
• In 2010, there was a significant shift that took place in terms of app revenues. There was  more revenues generated (globally) from off-deck than on-deck for the first time and while the on-deck revenues are in billions, the decline trend looks irreversible. In the US, this shift will occur in 2011.
• The usage and data consumption trends are enabling carriers to accelerate their 3.5G/4G plans and develop long-term business and technical strategies.
• The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education. Much more to come in 2011.

Handsets

• Nokia sold 123.7M units in Q4 2010 accounting for 31% of the market share. Samsung continues to be one of the most agile players in the device business shipping a whopping 80.7M for a 20% share of the market. Apple again edged past RIM to be in the top 5 along with the new entrant ZTE which broke into the top 5 for the first time.

Data Traffic

• As we noted in our previous updates, the data traffic is now significantly more than the voice traffic. By end of 2010, the average US consumer was consuming approximately 350 MB/mo up 132% in 12 months. The good news is that there are several solutions available and are being invented that will help manage the data growth starting with the tiered pricing plans.
• Q4 10 also saw significant activity in the 4G space with Verizon launching its LTE network and after the ITU flip-flop, the HSPA+ deployments of T-Mobile and AT&T Wireless along with Sprint’s WiMAX made US the epicenter of 4G growth for the next few years.

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, and articles. The next US Wireless Data Market update will be released in May 2011. The next Global Wireless Data Market update will be issued in Mar 2011.

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

New White Paper: The Promise of Mobile Advertising February 2, 2011

Posted by chetan in : 3G, 4G, AORTA, Carriers, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Future, Mobile Future Forward, Mobile Usability, Mobile Users, Privacy, Smart Phones, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far

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

Commissioned by AT&T Interactive

Executive Summary

The world of advertising is changing at a dizzying pace. New media are transforming advertising, and consumer expectations have changed accordingly. In this dynamic environment, no communications platform holds more promise than the mobile device.

Mobile platforms present a unique opportunity to reinvent advertising. With mobile, the perception of advertising will shift from interruptive broadcast messages to targeted information services of real value to consumers and positive interactions that have an immediate top-line impact.

Advertisers care about two basic metrics – reach and purity. They want to communicate with as many people as possible (reach) and they want to reach the most accurately targeted audience possible (purity). In the past, advertisers have tried to compensate for a lack of purity by casting a wider net, spending inefficiently and often failing to reach their target audience.

With mobile, advertisers can deliver the right information to the right target at the most opportune time; delight the consumer with instant gratification; complete transactions and measure direct correlations between advertising, transactions, and return on advertising (ROA). With the power of real-time metrics in hand, advertisers can scientifically design, measure, and alter their campaigns and deploy strategies for one-to-one relationship building with customers.

Mobile is having a significant impact on local advertising. The attributes of immediacy, location, always-on connectivity, user profile and segmentation, and the viral nature of the medium make mobile the best channel for local advertisers to engage potential customers.

Download full paper.

Thanks.

Chetan Sharma

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

2011 Mobile Predictions Survey Results January 3, 2011

Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, CTIA, Carriers, Enterprise Mobility, European Wireless Market, IP, IP Strategy, Indian Wireless Market, Infrastructure, Intellectual Property, International Trade, Japan Wireless Market, Location Based Services, M&A, Mergers and Acquisitions, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Traffic, Networks, Patent Strategy, Patents, Privacy, US Wireless Market, WiMax, Wireless Value Chain, Worldwide Wireless Market , add a comment

2011 Mobile Predictions Survey

http://www.chetansharma.com/MobilePredictions2011.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 2011. Thanks to all who participated in our 2011 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way.

We put some of the questions to our colleagues and industry leaders in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=225) from leading mobile companies across the value chain and around the world opined to help us see what 2011 might bring.

Ten names were randomly drawn the limited edition Mobile Future Forward book. The winners are:

1. Jared Cornfeld, Industry analyst, FCC

2. Abhi Rele, Marketing, Microsoft

3. Christopher Billich ,Head of Mobile Advertising, Deutsche Telekom AG

4. Gary Cohen, VP/GM North America, Flirtomatic

5. Peter Jarich, Service Director, Current Analysis

6. Darren Austin, Director of Mobile, Expedia

7. Craig Fisher, Software Client Leader, IBM

8. Steve Wood, CEO, Perlego Systems, Inc.

9. Elliott Hamilton, Sr. Director of Strategic Planning, TeleCommunication Systems

10. Vishal Gupta, Vice President North America, Qualcomm Inc

Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly

living in "interesting times" with never a dull moment in our dynamic industry. It has been a terrific

year for us here at Chetan Sharma Consulting and we are looking forward to 2011 and seeing many of

you along the way. We hope you enjoyed gaining from the collective wisdom.

Be well, Do Cool Work, Stay in touch.

Thanks. With warm wishes,

Your feedback is always welcome.

Thanks.

Chetan Sharma

Now onto the 2011 Mobile Industry Predictions Survey Results

The panel comprised of movers and shakers of the mobile industry from around the world.

What will be the biggest stories of 2011?

In last year’s survey, Google/Android narrowly missed out to be the biggest story of the year but this year, the verdict was clear that Google will continue to dominate the headlines with Android devices and new updates and apps. Given that we are in the midst of 4G deployments and ITU’s flipflop on the definition, we could be in for an interesting year.

When will Verizon iPhone launch?

Inordinate amount of ink has been spilt over Verizon’s iPhone speculation. However, given the chatter, our panel voted for a Q1 launch.

Who will be the most open player in the mobile ecosystem in 2011?

In all our surveys Google has consistently cemented its perception of being the most open in the ecosystem.

Will Android tablet sales exceed iOS tablet sales in 2011?

Last year, Android OS edged past iOS, however, given the lead iOS has had in tablets, it might be hard to overcome the number of shipments in 2011.

Who will make the biggest mobile acquisition in 2011?

Got Cash? Big players are likely to go shopping but who will score the blockbuster deal of the year. Google and Microsoft will duke it out with Google taking the spoils.

How will the "Apps vs. Mobile Web" debate shape up in 2011?

Apps vs Mobile Web has been as hotly debated in the industry as the CDMA vs. GSM battles of the past. Our panel thought Apps will continue to grow though mobile web starts to show its muscle.

By how much will the mobile advertising ad-spend increase in 2011?

Our panel was more bullish on mobile advertising than last year with a good 50% of respondents aiming for 200% growth and higher.

Which market will be the biggest infrastructure in 2011 for sales opportunities?

India and China are laying out 3G and North America is expanding on 4G. Infrastructure contracts abound.

Who will be the mobile come back story of 2011?

Many long-time players are under the gun this year. Will Windows 7 help Microsoft or will Meego make Nokia competitive. Story will unfold this year.

Who will end up having the strongest position in the mobile payment/commerce space?

While Japan/Korea markets have developed mature mobile payments solutions, the battle royale of mobile payments in North America will play out between the financial guys and Operators with Internet players making a strong run at it as well. 2011 might help decide the long-term winners in the space. Our panel thinks, the likes of Mastercard and Visa will edge out others in the tussle.

Which areas will feel the most impact from Regulators in 2011?

Regulators can have a huge impact on the course of the industry and nation’s competitiveness. With the laws all but laid out, the real rulings might come from the courts.

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

2010 saw the emergence of tiered data pricing in North America and operators all over the world are bracing for a long-term challenge of managing mobile data growth. We have written extensively on this subject in our Yottabyte series. Our panel voted for Tiered pricing and 4G as the top two solutions.

Which category will generate the most data revenues in 2011?

Global markets are quite different and while data service revenues have been growing in all regions, our panel breaks down by categories in terms of expected contribution from various segments.

What will help mobile cloud computing gain traction in 2011?

Mobile Cloud Computing is expected to take several strides in 2011 with Media and Enterprise demand at the forefront.

What will be the most successful non-mobile phone category in 2011?

As we have highlighted in our previous research, Connected devices have shown tremendous growth in 2010. Tablet seems to be clear category winner.

What will be the breakthrough category in mobile in 2011?

Mobile payments and commerce are starting to take off and are expected to show the most growth in 2011.

By the end of 2011, how will we end up defining 4G?

ITU’s flipflop means, anything above HSPA+ will be deemed a 4G technology.

Which enterprise segment will mobile impact the most?

Mobile as a platform is booming with Retail finally getting into the swing of things and will show the most activity in 2011.

What will be the dominant revenue model for apps in 2011?

While paid apps dominated the revenue stream in the early days, advertising and in-app payments are taking off on iOS and Android. Developers will play with a combination of models depending on what works on a given platform.

What mode of mobile payments will get traction in NA and WE in 2011?

Operators experimented with mobile payments over the last few years, now is the time to put the solutions to the test.

Who was the mobile person of the year?

Who can compete with King Jobs. Launching iconic devices year after another, Steve Jobs has set the direction of the industry since 2007 and was a clear favorite for the mobile person of the year. The tremendous success of the apps personified by blockbuster hit of "Angry Birds" took away the second spot with Andy Rubin’s Android effort won him the third spot.

Well, there you have it. The top trends and stories we will be talking about in 2011. Thanks again for all who participated and we hope that you found this useful as you embark on your journey for the year.

We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Mar 2011. The next Global Wireless Data Market update will be issued in Mar 2011.

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

US Mobile Data Market Update Q3 2010 November 7, 2010

Posted by chetan in : 3G, 4G, AORTA, ARPU, CTIA, Devices, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Intellectual Property, Location Based Services, MVNO, Mobile Advertising, Mobile Applications, Mobile Content, Mobile Ecosystem, Mobile Event, Mobile Future, Mobile Future Forward, Mobile TV, Mobile Traffic, Smart Phones, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , add a comment

US Mobile Data Market Update Q3 2010

http://www.chetansharma.com/usmarketupdateq32010.htm

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Executive Summary

The US wireless data market grew 7% Q/Q and 25% Y/Y to exceed $14B in mobile data service revenues in Q3 2010 - on track to meet (and most likely exceed) our initial estimate of $54B for the year.

Sprint had a second straight positive net-add quarter. T-Mobile also reversed its losses and had a net-positive quarter though postpaid additions were down for both the carriers. 2011 is shaping up to be an interesting year with some big M&As on the cards. The launch of 4G networks provides an opportunity to realign the industry.

The US subscription penetration crossed 96% at the end of Q3 2010. If we take out the demographics of 5 yrs and younger, the mobile penetration is now past 101%. While the traditional net-adds have been slowing, the “connected device” segment is picking up so much that AT&T, T-Mobile, and Sprint added more connected devices than postpaid subs in Q3 2010. Given the slow postpaid growth, operators are fiercely competing in prepaid, enterprise, connected devices, and M2M segments.

The role of connected devices

In the connected device category, tablets led almost singlehandedly by the iPad is taking away the lion share of the revenues. The whole category is catching up speed in the US with 12% growth Q/Q much higher than in the postpaid segment which has trickled down to 1% Q/Q growth by Q3 2010.

We expect that in less than 5 years, the connected devices category will generate more revenue for the operators than the entire prepaid segment in the US. While today, connected devices represent only 3% of the quarterly data revenues, this segment didn’t really exist a few months ago and will keep on gaining strength every year for the foreseeable future.

In terms of financials, the addition of connected devices units and revenues to the mix masks the tremendous growth in smartphone related data revenues. For example, T-Mobile lost 360K postpaid subs but added 300K connected devices for a net loss of 60K subscriptions. Because of lower ARPU, Connected devices have a dilutive impact on the revenues and ARPU so the overall ARPU for postpaid segment for T-Mobile was $52 instead of $55.

iPad literally created a new category and rest of the industry is scrambling to respond. Some just want to follow Apple’s trail to cash in while others don’t want to competing head-to-head with Apple so they are launching smaller sized units. There will be others who will launch devices at every inch increments just to see what sticks. However you might slice and dice the market, the segment is here to stay and as we had mentioned before, Netbooks will take a hit as the category was the creature of a falling economy and with a viable alternate, the need for Netbooks diminishes.

Mobile Data Consumption

Data traffic continued to increase across all networks. There are some superphones that are routinely average more than 1 GB/mo, superphones as a category is averaging 700-800 MB/mo. By the end of 2010, we expect the average US consumption to be approximately 325 MB/mo up 112% from 2009. This puts US right behind Sweden in the top two by per capita mobile data consumption. While the US lags Japan and Korea in 3G penetration by a distance, due to higher penetration of smartphones and datacards, the consumption is much higher than its Asian counterparts. Given that it is also becoming the largest deployment base for HSPA+ and LTE, most of the cutting edge research in areas of data management and experimentation with policy, regulations, strategy, and business models is taking place in the networks of the US operators and keenly watched by players across the global ecosystem.

As we had forecasted, the tiered pricing structure for mobile broadband expanded further with Verizon and T-Mobile following AT&T in deploying policy management strategies for controlling data margins. We will see the pricing evolve over the next 2-4 quarters as the US mobile ecosystem adjusts to the new realities and strategies for mobile data consumption.

What to expect in the coming months?

Kids of the now generation are growing with connected electronics that is fundamentally altering the behaviors and expectations of interaction, communication, consumption, and monetization.

Microsoft launched its much anticipated Windows Phone 7 in a bid to recapture the mind- and unit-share. By taking a different UI route, it actually has a shot to be a viable third option to iPhone and Android and pushing RIM from the top 3.

All this has setup an absolutely fascinating 2011 in the communication/computing industry. Convergence is everywhere and is leading to fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the  industry is going to evolve in the next decade in our Sept 15^th event – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. More details to come. We will also be discussing the trends and opportunities in our Dec Mobile Breakfast Series event.

US is also leading the way in smartphone sales. In Q3 2010, 47% of the devices sold in the US were smartphones compared to 24% globally. The fast pace of device introduction has catapulted the agile players like Samsung and HTC to the forefront while others like LG and Sony Ericsson have lost ground. By focusing singularly on Android and by broadening the device portfolio, Motorola has written a great comeback script.

The pace of product introduction is accelerating with each quarter. Devices of all shapes and sizes are coming into the market literally every week. Players are having to re-evaluate their businesses and long-term strategies. There are several players whose future is at stake (to put it mildly). The competition has grown fierce and companies are finding it hard to take ideas from R&D to products in market in a short amount of time.

While 2010 started quite active on the regulatory front as the national broadband plan was unveiled in March little substantive progress has been made w.r.t. the spectrum, net-neutrality, and other broadband related issues.

To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come.

ITU christened LTE-A and Wireless MAN-Advanced as the “official” 4G technologies but the marketing departments cared less.  (We will be releasing the next edition of our “State of the “Mobile” Broadband Nation” in the coming months.

As we had mentioned last year, the mobile data traffic kept on growing disproportional to the revenues. A series of solutions have come into the market from players big and small. We released the second edition of our in-depth research paper on data growth - "Managing Growth and Profits in the Yottabyte Era"  earlier this year.

Finally, operators are starting to diversify more aggressively than in the past. AT&T’s mobile enterprise business is a leading indicator of this trend. Their focus by verticals has yielded new revenue streams and positioning them to become a one-stop shop for devices, access, and services in the enterprise market.

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 2010 US wireless data market is:

Service Revenues (Slides 7, 17)

• The US Wireless data service revenues grew 7% Q/Q to $14B in Q310. The mobile data revenues for the US market are likely to reach $55B in 2010.
• Verizon and AT&T accounted for 85% of the increase in data revenues in Q3 2010.
• T-Mobile’s 3G drive is starting to pay off. While the postpaid net-adds were still in the red, its data growth is starting to match with its peers. The 21% 3G smartphone base definitely helps.
• AT&T and Verizon now account for 70% of the market data services revenues and 62% of the subscription base.

ARPU (Slides 8-11)

• The Overall ARPU decreased by $0.17. Average voice ARPU declined by $0.99 while the average data ARPU grew by $0.82 or 5% Q/Q.
• The average industry percentage contribution of data to overall ARPU is now 33% in Q310.
• Verizon led in data ARPU with $18.61 followed by AT&T and Sprint. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with approximately 27% of its revenue coming from data services.

Subscribers (Slides 12-15)

• Helped by the growth in connected devices, the overall net-adds increased by 4.5M.
• For the fourth straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. Connected devices are now 8% of AT&T’s subscription base.
• Overall, Verizon and AT&T are tied in terms of total connected devices on the network thought AT&T has a much more diverse and revenue-rich base.
• The connected device segment grew 12% Q/Q and 42% Y/Y.
• Sprint extended its streak of positive net-adds to two quarters by adding over 600 subs  while T-Mobile reversed its customer losing streak thanks to the growth in the prepaid and connected devices segments.
• The national prepaid penetration is touching 20%.

Applications and Services

• Non-messaging services continues to grab 60-65% of the data revenues for the US carriers.
• There is a significant shift taking place in terms of app revenues. In 2010, there will be more revenues generated (globally) from off-deck than on-deck for the first time and while the on-deck revenues are in billions, the decline trend looks irreversible. In the US, this shift will occur next year. (We released our mobile apps economy research paper earlier this year)
• The usage and data consumption trends are enabling carriers to accelerate their 3.5G/4G plans and develop long-term business and technical strategies.

Handsets

• Nokia sold 110.4M units in Q3 2010 amounting for 32% of the market share. Samsung continues to be one of the most agile players shipping a whopping 71.4M for a 21% share of the market. Apple also edged past RIM to be in the top 5.
• While rest of the industry counts units, Apple counts $ and leads in the revenue share. It shipped 9.1M iPhones in Q3 despite the backlash over the antenna design.

Data Traffic (Slide 16)

· As we noted in our previous updates, the data traffic is now significantly more than the voice traffic. By end of 2010, we expect the average US consumer was consuming approximately 325 MB/mo up 112% in 12 months. The good news is that there are several solutions available and are being invented that will help manage the data growth starting with the tiered pricing plans.

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, and articles. The next US Wireless Data Market update will be released in Mar 2011. The next Global Wireless Data Market update will be issued in Dec 2010. Be sure to participate in our annual mobile industry predictions survey coming out in Dec 2010.

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

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