Time was when the wireless industry’s major, marketshaping impact in the telecom sphere was defined by the number of mobile phones that became substitutes for landline telephones, which historically consumers have relied on for day-to-day communications.
Just as Ma Bell back in the day grossly underestimated the potential reach of cellular technology, so too is the understated notion of substitution today.
But who could have known? Who’da thunk it? The whole wide world-phone, PDA, camera, Internet, MP3, TV, gaming device, wallet, GPS navigation and lots more in your hands and mine. And more monthly subscriber revenues in the pockets of wireless operators that have been spending big bucks to bulk up communications pipes to carry all that multimedia content at faster speeds. That is essentially where all this is headed in 2007 and beyond, with many twists and turns along the way.
2007 could offer a glimpse into whether there is profitable life after voice for the mobile-phone industry. And whether industry is up to the challenge.
“It’s about learning what people want and what they’re willing to pay. And I don’t think industry understands that,” said wireless guru Andrew Seybold.
Seybold said industry executives have to react quicker to fast-moving market trends and shifts, especially in the Internet space. That means taking more risks, a managerial mindset not in abundance in the cellular industry. “They must accept failures with the success,” said Seybold.
Being in the camp that doesn’t consider WiMAX a serious threat to the cell-phone industry, Seybold believes warring mobile-phone carriers’ biggest battle may well be with the bottom line.
Expect more consolidation in 2007, but not in all the usual places. The Big Four carriers-Cingular Wireless L.L.C., Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA Inc.-should remain relatively stable in the coming year, but the merger-and-acquisition business has a funny way of defying convention. So does the ever-changing wireless business model. The window will open wider in 2007 for Sprint Nextel’s dance with cable TV giants and T-Mobile’s campaign to be a 3G peer.
The legal landscape
Shrinkage is more apt in the vendor, tower and wireless applications sectors.
The same cannot be said of lawsuits, whether they involve consumer billing, intellectual property rights, cell-phone jamming, health or just about anything else you can imagine. When you’re a $120 billion industry, there’s a big target on your back. Perhaps some lawsuits will go away if industry can convince Congress to expand federal pre-emption of states’ rights. One likely vehicle: a new, Democratic-crafted telecom reform bill. Industry also will try to persuade the Supreme Court to review a lower court’s reversal of a Federal Communications Commission decision pre-empting state regulation of line-items on cell-phone bills.
But new legislation will do nothing to help carriers escape compliance with federal mandates such as enhanced 911, hearing-aid compatibility and universal service.
Down to business
By this time next year, or just maybe prior to kick-off of the Super Bowl in Miami, No. 1 Cingular Wireless L.L.C. should be wholly owned by AT&T Inc. Cingular, Verizon Wireless, Sprint Nextel Corp. and T-Mobile USA will be busy in 2007 getting nextgeneration wireless networks ready and rolling out new services that consumer-electronics companies once believed they owned.
But beware. The pursuers are being pursued. 2007 could be a pivotal year for WiMAX and municipal Wi-Fi.
Vendor speculation
On the infrastructure front, industry could see more consolidation, mostly among Wi-Fi and WiMAX vendors. In 2007, the big three vendors-L.M. Ericsson, Nokia Corp., Siemens AG and Lucent Alcatel Inc.-could have in their sights successful developers such as Alvarion Ltd., Tropos Networks, Strix Systems Inc. and Aperto Networks. The chipmakers could also consolidate. Qualcomm Inc. just picked up Airgo Networks. Agere Systems Inc. went to LSI Logic Corp., and somebody, perhaps Intel Corp., may buy a company such as Sequans Communications.
With data and video usage among subscribers finally catching on in larger numbers, 2007 could be a critical year for vendors, since carriers likely feel a need to upgrade and prepare for an absolute onslaught of demand in 2008. That means lots of 3G gear and all kinds of Wi-Fi products, especially handsets, could hit the market next year. Higher throughput Wi-Fi products may not be available to anxious consumers and businesses until later in the year, however. Faster Wi-Fi will spur upgrades and new purchases in several product categories, including laptops, music and video-sharing and location-enabled devices. Higher-speed Wi-Fi will also usher in new uses for short-distance wireless Internet access, since the technology will become more reliable, opening the door for more enterprise applications.
Radio frequency identification firms likely will get much more serious about their public-relations efforts, after getting beat up and staying largely quiet in 2006. State and federal policy-makers, egged on by special interest groups, will be watching the RFID privacy debate closely in 2007.
For their part, hackers will keep proving that the technology is not fool-proof.
Advancements in IMS (IP multimedia subsystems) technology will continue, but large-scale uptake will prove to be elusive. Convergence is a romantic goal, but it will take years.
Tower players will continue to consolidate, with the medium-sized companies ripe for the taking by the Big Two-American Tower Corp. and Crown Castle International Corp. Medium-sized tower companies could join forces themselves, and although they wouldn’t have the scale of the Big Two, they could still operate a strong business. Vendors have developed smaller, lighter tower equipment gear, and that type of equipment should be deployed more in 2007. This smaller/lighter trend will reduce the amount of revenue a carrier has to pay for tower space, but at the same time, the tower owners will have more space per tower to lease out, so they will not necessarily lose revenue.
The new frontiers
China, the world’s largest mobile-phone market, will have to move on its 3G network buildout. TD-SCDMA likely will come first, followed by W-CDMA and CDMA2000. All three types of networks will be built by 2008, so vendors should see a boon in equipment sales during 2007. ZTE Corp. and Huawei Technologies Co. Ltd. will see most of the sales, but western vendors will profit by offering design and management expertise.
India can be expected to revise its spectrum allocation policies much to the delight of Qualcomm and the CDMA vendors. The technology will probably gain some ground in India as a result.
Devices
In the handset arena, look for more than one handset vendor to exit the market. Sanyo Corp. is said to be considering the move and, given BenQ’s retreat from its Siemens partnership as well as gains in market share by Nokia, Motorola Inc. and Sony Ericsson Mobile Communications L.P., vendors with lesser market positions may find themselves out of luck. Conversely, trends favor the continued rise of HTC Corp., which is partnered with Microsoft Corp. in the smart-phone space.
Mobile TV is set to come on in 2007 in the United States. Uptake will be closely watched.
Nokia should be watched closely for a palpable split between mobile phones and mobile computing devices that can also make phone calls. Nokia may no longer see Motorola as its main competitor, but rather Microsoft, Apple Computer Inc., and the range of consumer-electronics companies that make multimedia devices and/or games. Reality-such as slow market uptake-could intrude.
Content
Elsewhere, 2007 could be a key year for advertising and wireless applications.
2007 will be the year the rubber hits the road for advertising-supported wireless services, and consumers could begin to complain about the foul smell from the friction. Tech-savvy users will increasingly explore the off-deck world of the
wireless Internet, experimenting with a variety of ad-supported services including video clips (both news and entertainment), games and other Internet-based services. Less adventuresome subscribers will also be subjected to marketing messages, suffering through clickable banner ads as they navigate carrier decks. Either way, though, network operators will be the ones irate consumers blame for any unwelcome, intrusive ad campaigns. And there will be plenty.
Carriers will be quick to off-load the data-heavy traffic (witness MediaFLO’s early successes in finding operator partners), but consumers will continue to be slow in paying for multimedia services on the mobile phone, and operators will struggle to offer packages that balance compelling offerings with ad-supported content.
User-generated content will increasingly be the killer app in search of a business model. Internet powerhouses such as MySpace and YouTube will throw their considerable weight around in mobile, but wireless-based services like AirG, Jumbuck and FunMobility will provide stiff competition for their better-known competitors.
Cingular’s flexible full-track download service could gain substantial ground compared to similar offerings from early entrants Sprint Nextel and Verizon Wireless. Music-loving wireless consumers may look for open-ended mobile music solutions rather than tie themselves up with proprietary, carrier-branded services.
It will get more personal in 2007, according to Martin Dunsby, senior vice president and general manager of global services at OpenWave Systems Inc. Dunsby said 2007 will see wireless devices becoming more intuitive and accommodating of groups and communities of users. One challenge will be figuring how groups technically interconnect with each other.
The X factor
Is there a dark horse disrupter-an X factor-waiting in the wings in 2007? Perhaps so, according to The Shosteck Group. It revolves around Hutchison Whampoa’s 3 announcement last month it would offer flatrate pricing for Internet telephony and TV services to its 3G customers in the United Kingdom-again distinguishing itself from competitors. The X Series will become a reality in 2007, initially launched on two different handsets: the Nokia N73 and the Sony Ericsson W950i.
“What helps sets 3 apart with this news is that this announcement was made with other feared and rabble rousers companies such as Skype, Sling Media, and Yahoo and Microsoft instant messenger services. It is much more than just a new tariff. It is potentially a paradigm shift for the mobile industry,” stated The Shosteck Group.
