15 Trends That Matter
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 the U.S. and Asian markets. Mobile data revenues around the world have been growing at a steady pace, the subscriptions in India are skyrocketing, and growth in the African market is exploding. 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. Mobility is also getting ingrained in everyday objects, which makes up for a fundamental reassessment of how things are done across industries in almost every region of the world.
In a three-piece column, we will explore major trends that will occupy our imagination well beyond this week's events in Orlando – through this decade. The first five trends that matter are:
1. Mobile ecosystem is getting complex.
It is very clear that the ecosystem dynamics can change like the weather in Seattle, and you can 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 the 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, and so on and so forth. One product launch, one acquisition, one alliance can change the game in an instant. And this is only the beginning.
Globalization is forcing operators, who were once comfortable on their home turfs, to invest in emerging markets to capture value and future growth. From an infrastructure perspective, the investment clearly has been shifting from the developed world to the developing nations as they plan to expand coverage and bring new subscribers on board. Finally, there is a strong movement towards opening up access to the ecosystem so that the developers can offer applications and services on the mobile platform just like they do online. Such efforts will lead to more innovation and better services for the consumer including entertainment, enterprise services and public safety.
2. The world is flat – globalization and competition.
There is a significant readjusting of players going on right now with some of the Asian players flexing their muscles for dominant share of the market. Competition is driving more M&A, the gravity of the mobile data world is slowly shifting from Japan and Korea to the United States with Verizon overtaking the long-time leader NTT DoCoMo in terms of quarterly mobile data revenues. India's Bharti became the No. 5 operator after completing the acquisition of Zain. On the device front, Samsung and LG have been ferocious in their pursuit of market share and have been rewarded well by their performance, especially in the North American market. HTC has undergone metamorphosis and has become a serious competitor. Many non-traditional brands like Dell, Garmin, HP and Cisco are also flexing their muscles in the space that has become the computing battleground. On the infrastructure front, ZTE and Huawei are going to make life difficult for some of the players. We can expect the big "M&As" to continue as the industry consolidates around the Top 3 players in different markets and sectors. The local skirmishes will spill into the global arena. North American operators have been curiously silent on the global front. Being the most lucrative mobile market probably has something to do with it, but we can expect some of the bigger players to go shopping in the coming days.
The telecom growth in the developing countries over the past five years has been tremendous. In 1998, India and China had less than 1 million and 25 million mobile subscribers, respectively. By 2010, India was adding 20 million subs a month (compared to the U.S., where the growth is around 1.5 million subscribers/month or Japan, where the corresponding figure is less than 1 million). In fact, the majority of the growth over the next 10 years is going to come from the developing world. In 1998, the developed nations accounted for over 76 percent of the mobile subscribers worldwide. In 2010, this number dropped to 22 percent and by 2020, only 16 percent of the mobile subscribers will come from today's developed nations.
3. Mobile as a platform - let a thousand industries bloom.
The best way to think of the long-term mobile services platform is to envision a modular and decentralized framework that enables plug and play and integration through Software-As-A-Service (SaaS) architecture, where each module is available on demand (as opposed through a tedious integration effort with a single or multiple operators or other service providers). As shown in the graph, a mobile services framework is built on an operator network (which in addition to mobile might also have fixed online and cable networks) that could be built on different access technologies from mobile standards. On top of the access layer is the service enablement layer – a set of network features that help build applications and services modules on top.
The service enablement layer will have the most fundamental capabilities enabled by the network such as messaging and browsing; security and authentication; payment, banking, and billing; personalization and CRM; video and music streaming; location, presence and awareness; and much more. Using these capabilities, operators, third parties and other service providers can then build application modules that can either be operator specific or can run independent of the operator. In an ideal world, the capabilities of the network will be abstracted from the access network such that applications can take advantage of these features without complex integration that requires months of work.
By building modular components at each level and by abstracting and exposing the service enablement layer to third parties, operators can help build a compelling framework that can accelerate the introduction of new services and applications in a given market.
4. Evolution of content, media, entertainment and commerce.
The Internet rearranged the musical chairs of the media world and mobile is doing it again. It is a given that the printed media is on its way out as a primary source of content consumption and revenue source. Various companies are trying the last bit of paywalls to extract some value but as has been true in the past, publishers have to go where consumers are consuming. "We will build and they will come" doesn't work anymore. Technology and creativity will keep on chipping at the old guard. There will always be a need for brilliant journalists, engaging op-eds, gripping investigative journalism and entertaining stories. The format will shift from print, radio to completely digital. Mass media print advertising just doesn't work; it has unmeasurable ROI and the ability to engage the end-user is limited. That's why the paid circulation numbers for 2009 were at the level of newspaper circulation in 1963. They have been dropping fast since the paid subscribers peaked in 1993. Mobile affords the opportunity for instant commerce, from first sight to complete transaction in a matter of seconds, unlike any other medium.
5. New sources of revenue: mobile advertising, commerce and services.
Mobile epitomizes the shift in power to the consumers who have grown accustomed to controlling the kind of media they consume, how they consume it, when they consume it and how they share their experiences with it. While the enormity of options available might seem overwhelming, it presents a rare opportunity for the advertisers to communicate directly with the intended audience through sophisticated targeting, to precisely measure the impact of individual campaigns, to positively persuade the consumer to buy and finally, to achieve the elusive nirvana of tying the purchase back to the advertising campaign in a scientific manner.
Mobile advertising presents a unique opportunity to the media ecosystem to not only make the traditional media more accountable but also to reinvent interactive advertising in the most fundamental way. The opportunity is to change the perception of advertisements from the annoying unfocused broadcast messages to the targeted valuable services.
In his classic book, "The End of Advertising As We Know It," Sergio Zyman, former CMO of Coca-Cola Company, surmised: There is only one rule: advertising must sell. The problem with advertising has been that for the most part, there is no way of tracking if advertising is indeed influencing purchase behavior and there has been no scientific way of precisely correlating sales to advertising. So, one doesn't really know the true effectiveness of any ad campaign.
While things improved with the advent of digital advertising using the Internet, the connection between advertisement and the intermediary stages of advertising impact – Brand Awareness, Message Association/Brand Recall, Brand Favorability, Purchase Intent and finally, Purchase/Loyalty (repeat purchase) – is not clear at all. While one can conduct surveys and studies, the accuracy of the understanding of consumer behavior is just not there. Mobile affords the capability to accurately measure interaction with the consumer at each stage, provide the ability to influence them and finally track the purchase transaction to provide the capability to measure "Return on Advertising."
6. Always On Real-Time Access – mobile cloud computing & instant access to anything.
The era of instant on, always available broadband connectivity is altering the media landscape in profound ways. Over the last two to three years, the consumption of digital media has evolved significantly. As content is becoming digital and as devices are becoming more powerful and able, the mobile device is playing a central role in how digital media is consumed around the world. The digital rush has helped make mobile a $1.2 trillion (as of 2010) industry. As the demand for mobile content consumption is increasing exponentially, service providers are rushing to enhance their infrastructure to keep up.
The younger generation is growing with the expectation that they can get access to any content from any device, anywhere. The constraints that don't allow them to do that are just not acceptable. As such, the mobile industry is scrambling to provide tools and technologies that help the digerati access content at will. All this has to be designed and developed against the current network, content and device constraints and evolution paths. Whether it is access to music or movies for a 15-year-old or availability of the entire corporate knowledge base, information will need to be available at the touch of a button. Companies big and small are investing in the infrastructure and software tools to make this happen.
7. Internet of things: Mobile device as a remote 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 connections 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. The basic functionality of camera, messaging, GPS, wallet, camcorder, gaming controls, rolodex, glucometer, scanner, presence and context-awareness can be used to build multitude of applications and services that are customized to specific demographics and regions and go beyond downloading of ringtones.
Already, in 2010, multi-gigabyte mobile devices are available that can process data at > 2 Mbps. By 2020, devices will take different shapes and forms, becoming foldable, extendable and flexible, thanks to the new display and projection technologies which are just starting to get out of labs. Chips will be everywhere – in sensors, processors, communication interfaces and storage. The portable device will connect to all of these interfaces to gather lots of information, process it and present it to the user. We also will become more accustomed to interacting with the devices with touch, stylus, gesture and voice.
While the network and device play a crucial role, the real intelligence will lie in the software that ties the middleware and the multiple end points. Sensors embedded in our infrastructure (roads, buildings, cars, homes, bridges, oceans, etc.) will alert us of impending troubles and changing environment. Mobile will make health care service more accessible and will help farmers across the globe in planning and selling of their crops, all by just a touch of a finger. We will use the devices to control security panels in our houses, instantly communicate with experts on topics of interest and use mobile devices as the sole payment, banking and remittance device. The applications and services that will emerge over the course of the next 10 years will bring basic services like health care, enterprise services and emergency response to the mass market in a much more efficient manner.
8. Network evolution: More capacity, more bandwidth, tremendous usage.
In the U.S., by 2014, the gap between the wireless and wireline network will shrink to just four years in terms of the amount of traffic carried over the two networks. Gradually, we will start to consider wireless and wireline as part of a single network that works in concert to manage the broadband traffic. We will see similar trends in other western nations. In the developing countries, the traffic on wireless networks will be higher due to more emphasis on connecting the citizens using wireless.
The usage data from the iPhone, Android devices and the iPad indicates that the data consumption increased 50-100 times compared to the previous generation of devices. As such, the per-user megabyte (MB) consumption is multiplying at an accelerated pace in almost every part of the world.
One should also appreciate the move towards providing wireless connectivity to all electronic devices from cameras to security alarms to energy meters. In fact, Wireless World Research Forum (WWRF) forecasts 7 trillion wireless devices serving 7 billion people by 2017, which translates into 1,000 radios per person. Most will be in the form of sensors and tags that form the basis of ambient and context intelligence around us to truly make the mobile device a remote control of our lives. While this Always On Real-Time Access (AORTA) environment provides for instant access to information and intelligence, it also creates a mountain of data traffic that needs to be understood and managed.
However, one shouldn't just expect newer networks to take the load of the growing demand. One must consider a combination of strategies to lower the overall cost of managing the mobile data network traffic. To have meaningful savings, operators will have to develop holistic strategies that take advantage of multiple technologies and strategies over time. The ability to drive the cost/bit lower would become a significant competitive advantage.
9. Evolution of communication.
In parallel to the mobile broadband evolution, voice telephony has undergone significant transition in the past decade. As we are starting the new decade, "connectivity" to any electronic device is a given whether it is a tablet, navigation device, eReader, security alarm, game console, telematics console or a host of new devices we haven't even imagined yet. Once there is connectivity, it becomes natural to provide the ability to communicate if it makes sense. As such, from just a one dimensional landline-to-landline conversation, consumers expect to talk from any electronic device so that they can communicate and share their experiences.
Another evolution has been around the modes of mobile communication. As devices and network became capable and as new modes of communications evolved, consumers are communicating with email, instant messaging, Twitter, Facebook, video, VoIP and a host of other social networking applications that use a mix of voice, video and messaging. If the services are well designed and the software is tightly integrated, we can expect a jump in usage across the various modes.
It is clear from the trends that the users expect to use different modes of communication across different communication devices. It is also worth noting that while operators actively participate in the voice and text revenue streams, for many of the other services, the revenue is primarily coming from transport services, i.e. they are charged a fixed or a variable fee for the bits that are being transmitted from these applications. Some operators have taken a more proactive role in integrating some of the applications with the device and the network to enhance the services and offer differentiation which leads to increased customer lifetime value and lower churn. This desire to enhance has led to initiatives such as Rich Communication Suite (RCS), which allows multiple communication channels to be integrated and offer new value-added services.
10. New Experiences – display, interaction and commerce.
The man-machine interaction took a significant leap with the introduction of iPhone. Now the touch-interface is embedded in our evolutionary genes. There is significant work going in how to accomplish more with less friction with the help of new interfaces and experiences which can range from trying out a new outfit in front of a mirror – at home or in the store and with a flick of finger – choose the color, purchase it and get it shipped. The amount of time it takes to "accomplish any given task" is going to reduce dramatically. With the help of contextual sensors, extreme personalization and brainiac software, we will take automation to a new level. This will lead to new experiences that will enable more commerce, social interaction and participation, and general awareness and intelligence about everyday things.
11. Reallocation of revenues – winners and losers are decided in reallocation.
If we take a look at the spending habits of U.S. consumers on "access and communication services," which includes the spending on telephone, cable, Internet and cell phones, the total "access" spending over the course of the last decade has been consistently around 4 percent of the total personal income per capital.
However, the share of each of the services has been changing steadily. Telephone used to have 65 percent share of the spending but is going to be below 30 percent by end of 2010. Others have been climbing at the expense of telephone revenues, especially the cell phones, which since 2007 command the highest share. So, the overall spending has stayed constant while there has been significant reallocation of spending. Similarly, within cell phone services, data has gone from being less than 1 percent of the overall revenues to over 35 percent in 2010 and is going to be more than 50 percent of the overall revenue mix by early 2013.
Mobile operators need to figure out how to manage these reallocation undercurrents and maintain the overall lifetime value of the customer. It will come from re-architecting of the business and technology practices as well through the introduction of new services.
It should be noted that over the last 10 years, there has been a gradual move from on-deck traffic to off-deck traffic with on-deck accounting for very little traffic in most developed markets. So, operators will have to rethink business models that are just based on selling bandwidth. They need to migrate to models that are more based on value to the end customer and the ecosystem. In fact, it will be wise to figure out the business models prior to the technology investments discussed in the previous section.
12. Battle for the analytical mind – data, context and intelligence drives everything.
Many people don't realize that the battle for the consumer of 2015-2020 has already begun. The company that has the best understanding about the most consumers will have a pole position in the mobile ecosystem. Players like Google, Apple, Amazon, MasterCard, Microsoft, Facebook, Twitter, China Mobile, Disney, AT&T, Vodafone, Motorola and others are amassing information on individuals. Of course, data is a double edged sword – it can provide enormous benefits to consumers in terms of intelligence, experience and engagement and also prove to be problematic when privacy and data breaches happen. In fact, that will be one of the tightest ropes many, including the regulators, will have to walk this decade – figuring out what they call in Swedish–lagom – just the right balance.
13. Nurturing ecosystems – aggregating the developers and partners.
Developers have become the hottest property everyone wants to court these days. It will be true in the future too. Developers give players in the ecosystem what matters the most – SCALE; their platform and story becomes more compelling if thousands of developers are building on it and making money. If there aren't substantial numbers of folks making enough, the house of cards quickly collapses and that is likely to happen to a number of players. The ones left standing will reap the benefit. For many, developers are a means to an end, not the end itself, but they must be cautious and invest wisely in the ecosystem.
The love fest won't last forever, though; it will depend on how vibrant the various ecosystems become and how profitable individual developer shops are over the course of time. One thing Microsoft did very well with the Windows empire was to create a web of partners and developers who were incented to use the tools and develop for the platform. In a more fragmented world of mobile, things are a bit complicated. Developers don't have time or the energy to go after the newest, shiniest toy; what matters in the end is the "cost" to develop, "reach/distribution" of the platform and "potential" of the reach. Players who don't consciously make an effort to make developers thrive in their ecosystem will see their developer efforts go nowhere. While the media attention is squarely on iOS and Android, we are not heading down the duopoly path as the dynamics of the mobile ecosystem are significantly different from that of the PC. RIM, Nokia, Samsung and others will do well; the fight is over the relative rankings in the pecking order.
14. Regulatory excursions.
The much-awaited National Broadband Plan was finally unveiled last year. The FCC has done a great job of engaging the industry and informing the citizens – better than its predecessors. It is also taking a deeper interest in setting up guidelines for the industry. The Comcast ruling was a setup, but the FCC is moving ahead with its plans. It will be interesting to see the execution details and how they pan out over the course of this decade. Similarly, regulatory agencies in other nations are acutely aware of the role broadband plays in a nation's economy and competitiveness and what they need to do keep their country on track. The mad scramble for more spectrum is underway. FTC is also keeping a close eye on the mobile industry for privacy-related violations. If anyone has any doubts of how much regulators are likely to get involved in this matter, they should read through the settlement between the FTC and Twitter.
15. More changes in the next 10 years than the previous 100.
Despite all the commotion, excitement and turbulence in the ecosystem, the trajectory of winners and losers is not set. Like the Chaos theory, a lot depends on the dynamic elements of the mobile universe and reaction to changes. Players will do well to have strategies in place per scenario so they can change direction and keep the mother ship in the right direction. We can expect more changes in the next 10 years than the previous 100. The triggers for various scenarios will vary – regulatory, competitive, technology, business model, consumer adoption, economic – each of these can have an impact on how a trend becomes a fact of life.
It is pretty clear that "mobile" will become the platform of "everything." Anything that can be connected will be connected, and the information will make us smarter and more efficient. It will improve our daily lives, enhance our social engagement and help cultivate new interests and relationships. This decade will create new players that will dominate over the many incumbents that fail to adapt and seize new initiatives. Overall, the future is extremely bright and full of opportunities to make things better, whether it is in the enterprise or for the consumers.