US
: inCode announces release of its Top 10 Global Wireless Predictions
for 2006. The Predictions identify key market changes for the coming
year, including: fierce competition that will leave only five handset
manufacturers standing, new business models enabled by converging
access technologies and new mobile entertainment brands.
“We see
two major developments in the market,” said Jorge Fuenzalida,
Director, inCode Technology and Strategy Group. “First, new
entrants are challenging existing business models, especially in mobile
music and mobile TV, which is increasing market competition. Second,
network operators are working fast to monetize 3G networks, which
cost billions of dollars to deploy. If these operators can better
align device design with market-leading applications, they can be
at the forefront of a smarter, more nimble wireless industry.”
Here are some
highlights of the 2006 Predictions (full text follows this release):
A digital music
innovator will launch a Mobile Virtual Network Operator (MVNO) focused
on mobile entertainment services
Consumers will “snack” on mobile TV, which will not be
a killer application
A new business model for voice services will emerge, based on mobile
Voice-over-Internet Protocol (VoIP)
At least one major network operator will abandon its retail brand
and use wholesale access as an innovative business strategy
China will become a telecommunications leader, and Chinese investors
may buy a controlling interest in a wireless company
Ninety percent of the inCode 2005 Predictions have come true, and
the 2004 Predictions were 80 percent accurate.
inCode Top 10
Wireless Predictions for 2005
1. New Entrants in Mobile Music Battle the iTunes Model.
The popularity of ringtones and music downloads has proven that wireless
subscribers want mobile tunes. However, if the music industry really
wants mobile music to take off, it should control its greed and work
with others in the value chain to align pricing, promotions and download
times across all access technologies (WiFi, cellular, etc.). Also,
look for a digital music innovator to take the industry to a new level
of handset/device “coolness” and launch a Mobile Virtual
Network Operator (MVNO) focusing solely on mobile entertainment services.
Moreover, this innovator will resolve pricing and download disparities.
2. First Movers
Using a New Business Model Disrupt Voice Services.
EBay’s recent acquisition of Skype and Skype’s deal with
German wireless operator E-Plus have accelerated boardroom action.
Next year will see a new business model for voice services - the “new
voice” - with advertising as the revenue generator and voice
as a loss leader. Most wireless operators will adopt a defensive position,
preventing access to their networks to avoid revenue cannibalization,
but an innovative few will launch aggressively priced services that
will rock current tariff plans. Expect the upstarts to garner 5 million
users by the end of 2006. These first movers will experience runaway
success and be difficult to catch by slower rivals. The market will
start to separate between best-effort, low-cost networks and high-quality,
pricier networks.
3. Mobile TV Struggles,
Remains an Experiment.
Video streaming over 3G networks to handsets won’t be a “killer
app” any time soon. Instead, subscribers will “snack”
on mobile TV where time value of information is important. Mobile
TV could quickly use up significant amounts of 3G capacity, so network
operators will attempt to limit bandwidth usage and control the customer
experience by promoting downloads of news, sports and music video.
Internet Protocol Television (IPTV) remains a wireline game for 2006,
but may only become a mobile solution in the distant future.
4. China Becomes
Birthplace of New Telecom Leaders.
China breaks out of its constrained role as a destination for technology
transfer and “just a big market” and takes a leadership
position in telecommunications, a crucial infrastructure area for
any developing economy. So far, the Chinese have invested in computing
(Lenovo Group bought IBM’s PC business in 2004) and attempted
acquisitions in energy (CNOOC’s July bid for Unocal) and consumer
appliances (Haier’s June offer for Maytag). Wireless could be
next with a network operator, handset or equipment manufacturer falling
under controlling interest of the Chinese.
5. 3G and WiFi
Duke it Out for Dominance.
The global 3G handset availability problem will be solved. In Europe,
poor 3G coverage, particularly indoors, will damage the user experience
and could leave the door open for WiFi to provide a more reliable
service in the short term. There is no current vendor solution for
this problem, since 3G resides at a frequency that doesn’t penetrate
buildings cost effectively. However, margins on standalone WiFi business
are thin to non-existent, and WiFi doesn’t offer full mobility.
In the United States, 3G CDMA coverage is good and getting better.
Expect more price cuts as Evolution Data Only (EV-DO) CDMA operators
seek to knock out WiFi and compete with cable broadband and Digital
Subscriber Line (DSL).
6. A New “Converged
Virtual Network Operator” Category Emerges.
The CVNO will look to the consumer like a marriage of Vonage and Virgin
Mobile, combining characteristics of a BYOB (Bring Your Own Broadband)
Voice-over-Internet Protocol (VoIP) provider and an MVNO. These new
operators will attack the convergence space by offering VoIP, mobile
voice and mobile data, combining services in new ways that will surprise
the industry. In the future, these operators may also add broadband
in the form of WiFi hotspots and WiMAX when it becomes widely available.
The technology enabling this new operating model is IP Multimedia
Subsystem (IMS), the architecture for 3G core networks that allows
delivery of IP services in a consistent way to the user device, regardless
of the access technology. First offers may be as simple as “number
convergence” with a single number for multiple devices. The
first CVNOs will likely focus on combining VoIP over WiFi with CDMA
or GSM cellular. In the future, they will look to leverage strong
existing customer relationships to gradually grow the customer spend
and capture the "friends and family" network effect. In
2006, at least two announced CVNEs (Converged Virtual Network Enablers,
which are facilities-based wholesale enablers) will launch this phenomenon.
7. Undifferentiated
MVNOs Become MVN“F”s - Managed Virtual Network Failures.
In the MVNO world, those businesses with high added value, complementary
retail distribution and a potentially large customer base, such as
Walt Disney and Virgin Mobile, will flourish. However, MVNOs that
lack differentiation will either fail or be aggregated by a larger
player, resembling the shakeout among wireless resellers 10 years
ago. In 2006 the first high-profile MVNO will either fail or abandon
launch.
8. First “Bit
Pipe” Operators Emerge.
In 2006 the first network operator will depart from conventional wisdom
and ditch its retail brand on the premise that it’s better to
be a terrific wholesaler/access provider than a bad retailer. This
operator may be backed by a private equity firm and will drive innovation
in the market.
9. 3G Takes Hold
Before Fixed WiMAX.
Wi? CDMA and 3G technologies, now rolling out worldwide, will be quickly
deployed and adopted, especially in urban areas. But when it comes
to obtaining affordable wireless broadband, rural and suburban dwellers
without access to cable TV or DSL are asking Wi-Not us? It’s
a big issue across the United States. inCode economic analysis indicates
that fixed WiMAX could eventually help solve the rural broadband delivery
problem if certain equipment costs come down.
10. EV-DO Complements
RIM’s BlackBerry™, Eventually Kills WiFi Data.
Executives and road warriors devoted to BlackBerry devices are developing
an additional addiction - to EV-DO. Now available from Verizon and
Sprint Nextel in most U.S. markets, EV-DO enables fast, convenient
attachment downloads. However, users are more likely to view EV-DO
as a complement to, rather than a replacement¬ for, their purple
phones. This year EV-DO pricing is reduced again and displaces paid
WiFi because EV-DO offers mobility. The order of preference will become:
1) laptop on free WiFi, 2) laptop on EV-DO, 3) paid WiFi.
BONUS Prediction:
More Consolidation
11. Fierce Competition
Brutalizes Handset and Infrastructure Equipment Markets.
Expect a pitched battle among manufacturers and more competition from
new entrants. Within 12 months, five long-term survivors worldwide
will emerge from the brutally competitive handset market. Expect high-profile
casualties, since rapid price declines have damaged profitability.
The winning manufacturers will take all, and profitability will increase
in the future. On the infrastructure front, expect a large networking
company or even a Chinese manufacturer to buy a wireless equipment
vendor hurt by declining revenues and layoffs.
