Mobile Broadband – New Applications and New Business

Models

Brough Turner

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IMT-2000 Vision (for 3G) includedLAN, WAN and Satellite Services

Satellite

MacrocellMicrocell

UrbanIn-Building

Picocell

Global

Suburban

Basic TerminalPDA Terminal

Audio/Visual Terminal

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The Internet is the killer platform

• Mobile Internet access driving 3G data usage

• Future business models an open question– Walled garden ?– Advertising ?– Other 2-sided business

models ?

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Leading Apps don’t depend on 3G

• Voice ― still the largest revenue source– Bar none!

• SMS ― 2nd largest mobile revenue source

• Voice SMS, picture mail & video mail coming on strong

Content !

Mobile TV

Mobile social networking

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Mobile Content

• More music sold on-line than off-line in both China and Korea

• Ringback tones– Created by SK Telecom in Korea in 2002; 30% adoption in

just 9 months

• Ringback tones today– Korea: ~55% adoption– China: ~50% adoption Any G,

1, 2, 3 or Fixed

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Japanese Music Revenues

Source: Infinity Venture Partners

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Mobile TV

70% of new handsets in Japanare Mobile TV enabled

Only Japan and Korea have multi-million Mobile TV subscriber bases

Broadcast services independent of 3G

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Mobile Social Networking

Source: Benjamin Joffe, Plus Eight Star Ltd.

50 M 6 M 10 M 3 MMobile users:

2000 2004 2006 2007Mobile launch:

Profit (USD):

$225M ~$100M ~$35M ($50M)

2.5G

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“3G” Services

• 3G-324M Video telephony

• Location-based services

• Push-to-Talk (VoIP w/o QoS)

• Rich presence (instant messaging)

• Fixed-mobile convergence (FMC)

• IP Multimedia Services (w/ QoS)– Video sharing (conversational video on IP)

• Converged “All IP” networks – the Vision

Limited adoption

Limited adoption

Limited adoption

Limited adoption

Bypassed !

No traction

Still waiting …

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Mobile operators miss the boat

• Location-based services (LBS)

• Required in US for 911 services

• Fully implemented (after multiple delays)

• Not made attractive for 3rd parties

Result:

• All US location-based services based on alternate location approaches– GPS, Cell ID, Navizon, Skyhook

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Mobile operators slow the boat

• Billing Services– Mobile operators have efficient billing systems &

own the customer relationship– DoCoMo showed (I-Mode in 1999) the enormous

potential of affordable billing services– Yet billing still offered only via premium rate #s

• Result:– 3rd party content is paid for via 3rd party billing

systems or (multiple) premium rate SMS(s)

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Mobile Broadband Access

US prospects for “over the top” access to the open Internet

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iPhone traffic per month

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iPhone glimmer of what’s possible

• Controlled eco-system– Applications approved by Apple– Must meet unpublished

standards under contract between Apple & AT&T

– E.g., can’t run VoIP over 3G, only over Wi-Fi

But, $30/ month flat rate data plan (on top of $40+ phone plan)

• Explosive growth in web usage

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Mobile Internet Access

• Available for PC’s with restrictions, e.g. no servers, no P2P, no substitution for private lines or frame relay

• AT&T: 5GB @ $60/mo

• Verizon: ditto

• Sprint: ditto

• No US operator offers flat rate unlimited plans

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Breaking Oligopolies

• Four or more viable competitors is what it takes; more than four and it can be rapid– Many examples in mobile voice telephony from

around the world

• 2009: Three established US 3G operators– AT&T Mobility, Verizon Wireless & Sprint PCS– Flat rate data plans exist; but with caps– No unlimited open Internet access

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Additional US 3G/4G Competition

• USA (well financed)– Paid $4.2B for AWS spectrum in 2006 and

committed additional $2.7B for initial rollout– Currently spending almost $1B per quarter, 3G

had reached 1/3rd of cell sites as of 3Q08

• (build out partially financed)– WiMAX on Clearwire and Sprint spectrum

Potential for affordable flat rate mobile broadband in the US in 2010

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Subscribers & Applications

• Historically, only applications pre-installed on handsets had any traction– “On-deck” applications and content offers

• Apple iPhone application store is on-deck– Provides access to 50K+ applications

• Andriod store, RIM, Nokia, Qualcomm, Palm, Handango, Adobe, Samsung, …

Application stores are the new “deck”

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Handset diversity

Remaining obstacle to widespread deployment of 3rd party applications

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IMS doesn’t solve inter-operability

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Handsets more & more diverse

• Browsers – Openwave, Opera, Safari, …– Using: WebKit, Netfront, Presto, …

• Runtime environments as several levels– Adobe AIR, .Net/Silverlight, Brew, JavaME, …

• Operating systems– Symbian, WinMobile, Android, OpenMoko…

• Hardware capabilities– CPUs, supported codecs, screen size, …

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Mobile Software Frameworks

Source: Andrea Constantinou, ©2008 VisionMobile Research

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Mobile Facebook by: http://www.flickr.com/photos/philiphubs/

Internet will win in the end, but…

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Important trends

• App stores!– Easier distribution; Easier discovery

• More and more smart phones

• Richer browser capabilities– Approaching PC browser functionality

• New access to device capabilities– User data (contacts, logs, …), events (incoming

calls) and core functionality

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Uniquely Mobile Internet

• Phase 1 – cut down web, e.g. WAP

• Phase 2 – full web accessible on mobile

• Phase 3 – designed-for-mobile web– Optimize the mobile user experience; speed ups

• Phase 4 – client-side mashups– telephony, address book, location, camera…

• Phase 5 – apparent persistence– Despite battery limitations; widgets; push; …

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Challenges

• Handset diversity

• Pace of change

• User interface – minimum clicks; max speed

• Battery life – “chatty” apps drain power

• Application concurrency– Manage events over browser, native & helper apps

• Persistent user experience across multiple applications

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Dealing with handset diversity

• Browser-based application first

• Optimize for top N phones by market share– For most applications, N likely equals 1-3, not 10-12

Source: StatCounter

SmartPhone market share

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Smart Phones & Feature Phones

• Smart Phone adoption soaring– Nokia, Blackberry, iPhone, RIM, WinMobile,

Palm, Android, …– Moore’s law suggests it will only get better

But

• 85% of US phones are “feature phones”– Higher percentage in emerging markets

• Application environments emerge– Java, Flash, Qt and ever richer web runtimes

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Expectations are clear

Camera

Media Player

PhoneMobile

Telephony

Today

BrowserMobile

WebMobileWeb2.0

Browser

Camera

Media Player

PhoneMobile Telephony

Tomorrow

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The initiative has passed to application developers

Biggest Take-Away

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Dumb Pipes or New Service Opportunities?

How operators can profit while providing open mobile access

to the Internet

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Advertising won’t cover lost voice $

Source: Telco 2.0 Manifesto, STL Partners Ltd.

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Two-Sided Markets

• eBay connects sellers and buyers

• Nightclubs: women get in free

• Media– Newspapers – low prices for subscribers

facilitates sales of advertising– Broadcast TV – free attracts viewers facilitating

sales of advertising

• Akamai caching benefits– Free to ISPs; Paid for by content providers

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800 numbers

• The original telco 2-sided play

• Bell system provided retail phone service to essentially all US consumers

• Offered “800 service” to businesses, helping them connect with their customers and prospects

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Billing Service

• Most operators cautious about partnering– Fear of “dumb pipe” slow roll out of new services

• DoCoMo i-mode 2G data service launched 1999– Small screens, slow (9.6 kbps) data rate

• But i-mode business model was wide open– Free development software kits; No access restrictions– DoCoMo’s “bill-on-behalf” with 9% commissions

• i-mode big success in first 24 months– 55,000 applications, 30M subscribers !

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DoCoMo i-Mode: 2-sided business model

• Subscribers pay for data access (flat rate monthly bundles)

• Application providers pay DoCoMo for billing services

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DoCoMo’s i-mode

• Open to any application developer

• Optional billing for a 9% commission

Results:

• Over 100K new applications in first 3 years

• Over 15K applications use billing service

• DoCoMo has highest data revenue per user, in the world, consistently for 10+ years

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Operator Assets

• Brand, PSTN numbers

• Location (motion, context, …)

• Fine-grained billing systems

• User data– Name, address, age, devices, …

• Rich presence

• Customer relationships

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Telco Platform

Customers: Revenue Side 2

Customers: Revenue Side

1Developers

Retailers

Government

Brand AdvertisersContent Owners

Telco – Retail

B2B VASB2B VAS

DistributionDistribution

Source: Simon Torrance © 2008, STL Partners Ltd/Telco 2.0TM Initiative

Millions of Customers

Thousands of Segments

Millions of Customers

Thousands of Segments

$ $

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Opportunities on all fronts

Rich mobile applicationsare coming

but,business models will change, significantly

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Brough TurnerAshtonbrooke Corporationhttp://www.ashtonbrooke.com

Blog: http://blogs.broughturner.com

Email: broughturner@gmail.com

Skype: brough

Thank you !Thank you !