Mobile Analytics Workshop, Sheraton Downtown Los Angeles

Mobile Marketing Forum Workshop
Mobile Analytics Workshop, Sheraton Downtown Los Angeles
Monday, November 16, 2009, 2-5pm

The recent rise in mobile data uptake has not yet translated into increased demand for mobile advertising. Mobile carriers have long owned the richest source of raw data to drive effective targeted advertising. However, the industry lacks a proven method of turning the raw data into valuable insights and standardizing the interface between carrier and advertising systems. A contextually-aware data mediation platform is the essential link between carrier and advertiser – the spark the mobile ad marketplace needs to get rolling.
Sponsored by Openwave Systems, Inc.

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Presenters:
Anurag Patnaik: Director of Product Management, Analytics, Openwave Systems, Inc. 
Eswar Priyadarshan: CTO, Quattro Wireless
Chetan Sharma: President, Chetan Sharma Consulting
Zaw Thet: CEO, 4Info
Track:
Mobile Analytics
Session:
Data Mediation and the Advertising Ecosystem
Title:
Sharing the Carriers’ 360-degree-view of the Subscriber with the rest of the Mobile Advertising Ecosystem
The recent increase in mobile internet usage is a result of the following key factors: flat-rate and pay-as-you-go billing models, which are easier for the subscriber to understand; larger, touch-sensitive screens pioneered by the likes of the iPhone and other smartphones; and netbooks, data cards, and other internet-ready devices. But this sharp rise in mobile data uptake has not yet translated into increased demand for mobile advertising.

One of the fundamental ingredients in an effective internet advertising solution is the ability to leverage behavioral data for optimal ad selection. Because of its close relationship with the subscriber, mobile carriers own the richest source of data to drive effective targeted advertising in any channel. However, the industry lacks a proven method of turning the raw data into valuable insights, and standardizing the interface between carriers and advertising systems.
According to Anurag Patnaik, Openwave’s director of product management, the mobile analytics platforms embedded in mobile carrier environments play a key role in translating rich behavioral data to actionable insights. More importantly, there has to be seamless mediation between such insights and the adverting marketplace.

Ad targeting systems should be able to leverage subscriber data in an anonymous way and optimize the match between specific ad campaigns and available profiles. The result will be higher eCPMs and a growth in the overall appetite for mobile advertising. A contextually-aware data mediation platform is the essential link between carrier and advertiser – the spark the mobile ad marketplace needs to get rolling.

In this session, Mr. Patnaik along with ecosystem partners will discuss the mobile data mediation opportunity. They will explore challenges the different players within the ecosystem are facing and possible solutions. The panel will address the following questions:

• What are the biggest challenges preventing mobile advertising from realizing its potential?
• What is the function of a mobile data mediation platform and what is the specific integration with advertising networks and technologies?
• What kind of insights are needed to fulfill the current demand at ad networks?
• How do operators view the mobile data mediation opportunity?
• How can developers and publishers leverage mobile data mediation?

The next day, we will be doing a panel discussion

Panel: Mobile Analytics
The recent rise in mobile data uptake has not yet translated into increased demand for mobile advertising. Mobile carriers have long owned the richest source of raw data to drive effective targeted advertising. However, the industry lacks a proven method of turning the raw data into valuable insights and standardizing the interface between carrier and advertising systems. A contextually-aware data mediation platform is the essential link between carrier and advertiser – the spark the mobile ad marketplace needs to get rolling.
            Sponsored by Openwave Systems, Inc.

Moderator: Anand Chandrasekaran: Director of Product Management, Openwave Systems, Inc.
Zaw Thet: CEO, 4Info
Chetan Sharma: President, Chetan Sharma Consulting
Marcus Startzel: SVP of Sales, Millennial Media
Steven Rosenblatt: SVP, Quattro Wireless (invited)

Hope to see my mobile advertising friends there

Colleagues can register via the event website and include (25%MMF09) in the VIP Code box at:  www.mobilemarketingforum.com

AdAge - Could the Droid Be the Device That Finally Dethrones the iPhone?

SNS - FireGlobal - West Coast CTO Challenge

Xconomy - Highlights from FiReGlobal

TelecomsEurope - Getting it right on mobile broadband

RCRWireless - Defining Mobile Broadband

Mobile Marketer - Mobile CPM measurement standards are essential

Download PPT | PDF

Executive Summary

The US wireless data market grew 5% Q/Q and 27% Y/Y to exceed $11.3B in mobile data service revenues and thus exceeded $10B for the third straight quarter. As we mentioned in our Q1 2009 research note, given the strong growth in data revenues and overall service revenues, the worst is over for the US mobile industry. The US market touched 25% penetration of smartphones in Q3 2009, a new milestone.

While the flailing economy hit certain segments of the wireless ecosystem hard esp. the infrastructure and handset segments, consumers haven’t really pulled back on the mobile data overall spending. Additionally, the CAPEX spending has stayed strong in 2009 given the activity around 3G/4G deployments and trials. As expected, there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers. The US subscription penetration was approximately 91.3% at the end of Q3 2009.

As we mentioned in our last three research notes that this time around, the fate of the US mobile industry is more closely tied to the overall economy compared to the previous recessions. As the consumer sentiment improved over the last two quarters along with better than expected Q1-3 2009 earnings from corporations, the mobile industry is back on track. While the structural flaws in various industry segments remain, the outlook for the Q4 2009 and 2010 remains bright and we are expecting the overall data revenues to now increase by over 30% compared to 2008 with a record-setting Q4.

Q3 2009 reported a 3.5% increase in GDP compared to the 1% decline in Q2 and 6.4% decline in Q1, thus marking the official (technical) end of the recession. The GDP is expected to change by 3.2% for 2009 and the service revenues are expected to  account for 1.13% of the US economy by year-end. Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.

So, what does this mean? Well, the markets can still be volatile, but overall the market seems to be feeling better about the economy than it was in February. The Conference Board Consumer Confidence Index though retreated from June is at a healthy 47.7.

What to expect in the coming months?

The high unemployment has slowed the growth in the data card segment but the smartphone consumers have more than picked up the slack. Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid accounts for almost 20% of their customer base compared to 17% from an year ago. The fight for the low-end customer is also having an impact on the traditional prepaid players and the price pressure is reducing their margins. It is quite likely that 50-60% of such consumers don’t go back to postpaid thus permanently lowering the ARPU base for such customers and carriers who have experienced more postpaid to prepaid shift will have to make up for the lost revenues elsewhere.

In fact, the churning in the last few quarters has distanced the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) by the biggest gap in the history of the industry. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.

The trend of the landline replacement by Mobile continued in Q3 2009, now reaching almost 25%. In the third quarter, messaging growth slowed down. The messaging volume was up only 4% and messaging revenues were up 3% QoQ. With its expanding 3G network, T-Mobile like its peers has started to benefit from smartphone penetration reaching to 6% of its subscriber base. Overall, The increased use of smartphones and datacards is putting a pressure on carrier networks and accelerating their strategies to deploy LTE/WiMAX. We estimate that by end of 2009, the US mobile data traffic is likely to exceed 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, operators will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discuss mobile data traffic in much more detail in our paper "Managing Growth and Profits in the Yottabyte Era." We will have more on this subject in the coming days (You can also read our RCR Wireless columns on the subject - Defining Mobile Broadband and Solutions for the Broadband World).

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 2009 US wireless data market is:

Service Revenues (Slides 11-12, 17, 19)

• The US Wireless data service revenues grew 5% Q/Q to $11.3B in Q209. Compared to Q308, the data service revenues grew 27%.
• Verizon and AT&T accounted for 80% of the increase in data revenues in Q3 2009.
• The US mobile data service revenues crossed $10B for the third straight quarter and stays ahead of Japan and China by a distance.
• AT&T experienced the most growth with over 6% increase Q/Q followed by Verizon and Sprint at 5%.
• Verizon’s data revenues exceeded $4B/quarter only inches behind the global leader of over 10 years NTT DoCoMo.
• AT&T and Verizon now account for 68% of the market data services revenues and 61.5% of the subscriber base.
• The average industry percentage contribution of data to overall ARPU is now 28%. US market is likely to touch the 30% mark in 2009 though it might not quite eclipse it.
• The top four US carriers are now a permanent fixture in the top 10 global operators by mobile data service revenues occupying #3, #4, #6, and #8 spot respectively. Apart from NTT DoCoMo and China Mobile, Verizon Wireless and AT&T are the only two other operators generating more than $3B in quarterly mobile data service revenues.

ARPU (Slides 13-15)

• Overall ARPU decreased by $0.14. Average voice ARPU declined by $0.57 while the average data ARPU grew by $0.43 or 3%.
• Verizon led in (blended) data ARPU with $15.59 followed by AT&T and Sprint. In terms of % contribution, Verizon exceeded 30% to become the first US operator to do so. It was followed closely by AT&T and Sprint respectively. T-Mobile also exceeded $10 in data ARPU for the first time.
• AT&T experienced something unique - an increase in voice ARPU (for the first time in 10 quarters). The voice ARPU increased $.03 in Q3 2009.

Subscribers (Slides 16-18)

• In Q309, the US market added approximately 2.7M new subscriptions down 1% from Q109.
• The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q309, 67% of US subscribers were using some form of data services.
• The messaging volumes in the US market now average almost 568 messages/subscriber/month or at the frequency of almost a message/hour/sub thus reaching close to the messaging leader Philippines.
• In terms of net-adds, thanks to the boost from the iPhone, ATT again led in Q309 with 2M net-adds, edging its friendly rival Verizon which added 1.2M net subscriptions. Sprint lost 565K.
• T-Mobile lost customers for the first time in its history. It lost 77K customers in the quarter.
• The 3G penetration in the US stays at a healthy 43% in Q309. Verizon led the pack while T-Mobile is slowly expanding its 3G coverage. The growth in 3G and smartphones is helping offset some of the downward pressure on the data revenues and overall ARPU.
• The gap between the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) is at its maximum. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.

Applications and Services

• Non-messaging services continue to grab 50-65% of the data revenues for the US carriers.
• The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe became more prevalent in the US market with industry wide flat-rate pricing plans that included data. All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 20% of the consumers have flat-rate data plans.
• There are probably 18-20 sub-segments within mobile data services and consolidation looms. While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene is starting to heat up.
• The usage and data consumption trends are enabling carriers to accelerate their 4G plans and develop long-term business and technical strategies.

Handsets

• Nokia sold 100M+ units in Q3 2009. Samsung again had a solid quarter with over 60M devices sold inching its market share to almost 21%. LG Electronics at 11%, Sony Ericsson at 4.9%, and Motorola at 4.7% rounded up the top 5.
• The third quarter was again dominated by blockbuster launches of smartphones. Androids have been invading the industry en-masse and 2010 looks to be a terrific year for consumers and competition.
• The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband - usage billing, UMA, Femtocells, Hotspots, WiMAX, LTE, and others.

Policy and Regulations

· Q3 also marked the start of an intense FCC scrutiny of the wireless industry. In outlining the four key principles of a) looming crisis of spectrum shortage b) removal of red tape c) enforce net-neutrality and d) open Internet, things have already started to change in the US Wireless Industry. Google has played the game of Armadaian tactics with Kasparovian acumen. The impact of the codified principles (and the subsequent court battles) can have a significant impact on not only the US wireless industry but the global ecosystem as well.

Open

• The appstores battle is intensifying with OEMs and carriers are announcing their plans and some of them are opening their wares to woo the developer community. In the midst of the appstores hoopla, Apple announced the passing of the 2 Billion download mark with increasing number of developers participating the ecosystem. The new functionality being released with 3.0 is taking the battle up a notch. The clear-cut business model of 30/70+ split is attractive to the long-tail of developers. While there is no dearth of applications, findability remains a challenge. Also, appstores are changing the monetization strategies for content and application developers.
• The App vs. Mobile Web debate is getting intense. The evolution is pretty clear - for the applications that don’t require significant UI resources, it will be better to develop in for the browser, for intensive games, the native platform will be ahead of the browser advances. The location API access on the iPhone browser is breakthrough to have developers start thinking about the webapps. But, what does it do to the control points and the revenue models?

· While there has been much consternation around the word "Open," one is hard pressed to find a consistent definition what it might actually mean. One could provide access to one API and declare themselves an open heretic while others could end up opening up their business more than needed and yet be accused of being closed. Clearly, the degree to openness is in the eye of the recipient. There is no black and white, just shades of grey and that’s where the battles will be won and lost. In the end, it is all about "access" to the market and the "freedom" to earn profits. Rest is noise.

· It is worth debating as to what can be mandated to be open, do the rules apply just to the operators and OEMs, or we should extend the courtesy to software platforms, search indices, aggregated user profiles, billing engines, etc.

· It is also becoming obvious that we need to redefine the device categories. Featurephones are no longer dumb terminals, many empower the users with smartphone functionality. Devices like iPhone, Droid, Pre no longer fit the smartphone stereotype, they need a separate category for themselves - appphones, ddhmvcs (data devices that happen to make voice calls), platformdevices, mobilecomputers, geniusdevices, agilechips, astuteconceirge, you get the point.

Misc.

• Not surprisingly, Venture capital market experienced a continued decline in 2009, with companies announcing $1.5B in financings vs. $3B for the same time period. (Source: Rutberg)
• In a sign of convergence battles to come, T-Mobile’s @Home and various Femto cell initiatives are taking hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service.
• China crossed the 700M subscription mark in Q3. India crossed the 500M mark for telephone penetration (wireline + wireless) of which 472 are mobile subscriptions. In terms of net-adds, India has outpaced China for the last 16 months. The Indian market added almost 155M vs. 101M in China during the last four quarters. (more discussion on the international market in our global market update next 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 Feb 2009. The next Global Wireless Data Market update will be issued in Mar 2010.

Watch out for our end of the year survey and commentary on global wireless markets and trends for 2010.

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

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

In the last column I talked about setting the goals and defining mobile broadband. While we are still a ways away in defining what constitutes broadband, another key debate has emerged in the past few weeks and that is how do we go about the solving the increased capacity problem. FCC Chairman Julius Genachowski has done a masterful job of outlining the principles, of holding public hearings in an open and transparent manner, of creating the urgency of dealing with the broadband issue, and of embarking on a practical national broadband plan, and of getting support of his fellow commissioners and industry leaders, the four key principles being:

1. Most importantly he described the spectrum shortage as a looming crisis and that additional spectrum capacity is needed to handle the demand of data traffic from data cards and smartphones (something we have illustrated in detail in the paper "Managing growth and profits in the Yottabyte era")
2. Removing red tape to allow wireless carriers to build their network faster, for example, the work with cell towers
3. Codify and enforce net-neutrality policies
4. Open Internet

To some in the industry, the broadband capacity problem equates to the lack of spectrum. In fact, the Chairman has spoken out about the "looming spectrum crisis" in great detail on several different occasions. It is apparent that to achieve 50-100 Mbps, new contiguous spectrum is needed. However, it will be a mistake if the dominant solution for the broadband capacity crisis is more spectrum, for the following reasons:

1. There isn’t enough spectrum, especially the right spectrum
2. It takes 7-10 years to procure the spectrum for wireless use
3. By focusing on spectrum only, we will be just postponing the current crisis
4. By giving out spectrum too soon, industry won’t have the opportunity to learn to thrive within its means and let new technology and business innovation show the way to handle the increased data consumption.
Like with all tough problems, to find an effective and a lasting solution, one has to break down the problem into smaller bits and find solutions that address not only those individual pieces but the problem as a whole. We know the following for a fact:
1. Broadband data cards (external or internal) account for over 73% of the data traffic (2009)
2. Smartphones esp. with full browser and media capability account for roughly 24% of the traffic (2009)
3. There are a small percentage (< 3%) of heavy users who regularly have very high data consumption
4. Majority of the data usage takes place in an indoor environment (60-80%)
5. Video and browsing are the two biggest application categories for data consumption (accounting for over 70% share)
6. Consumers launch full applications (or browsers) to get minor updates because that’s the only way to get access to those updates on the mobile devices. Alternate strategies like the one implemented by INQMobile series of devices and Motorola Cliq are good examples of rethinking applications
7. There is no incentive for the user to change behavior on content consumption
8. To cope with the data congestion issue, all three major elements of the network need to be upgraded - RF, core network, and the backhaul. Only RF portion of the network is predominantly dependent on the spectrum allocation (while some backhaul solutions require spectrum, the direction of the industry is towards laying fiber or adopting solutions that don’t require any additional spectrum)
9. Competition breeds innovation, legacy spectrum allocation regimes might have an opposite impact
10. Doing broadcast video over cellular is not economically feasible
11. Number of devices/user is increasing, however, not all connections need high-speed real-time availability
12. True 4G bandwidths (50-100 Mbps) are not possible without additional spectrum
13. Backhaul requirements for LTE will increase in the 200-500 Mbps range within the next 5 years
14. LTE is not going to have a major impact on the data consumption problem in the short-run (2010-2013)
15. LTE smartphones might not be in the market until 2012-13

To address the data consumption issue in light of the above facts, one has to figure out a set of solutions that work in concert with each other. Just focusing on one solution only gets you so far, however, a range of viable solutions that address each of the above problem elements are likely to prepare the industry much better for the long haul. Some of such solutions are discussed below:

1. Offloading traffic without impacting the user experience or requiring user intervention. Leverage existing WLAN footprint and invest in femtocells and WLAN expansion.
2. Congestion management through caching and intelligent buffering
3. Incentivizing users to shift consumption to fill the network troughs
4. Implementing network optimization across all media and application types, especially, video and browsing
5. Adopting broadcast mobile video solution
6. Tightly integrating highly used applications like Facebook and Twitter into the handset
7. Introducing tiered pricing plans so that light users pay for broadband connectivity relative to their consumption. This will also bring in a new set of users into the broadband fold who have been sitting on the sidelines due to pricing
8. Upgrading of the backhaul capacity irrespective of LTE
9. Investing in analytics to better understand user consumption behavior at a micro level to plan appropriate strategies, solutions, and pricing plans
10. Creative bundling of data plans to bring more users into the data ecosystem.

By considering such solutions in parallel, the industry will be better off in the long-run. It is the only way to tackle the problem in the short-term since neither the additional spectrum nor the announced deployments of LTE are going to make any meaningful dent to the data usage costs and margins. Wireless is one of the industries where policy can have a significant impact on the direction of the industry. By focusing too much on the spectrum, we will miss the opportunity to cultivate a better network and business ecosystem and to invent new technologies and revenue models that will have a far stronger impact on the evolution of the mobile industry.

Chetan Sharma is President of Chetan Sharma Consulting and is one of the leading strategists in the mobile industry. He has served as an advisor to several Fortune100 companies in the wireless space and is probably the only industry strategist who has advised each of the top 6 global mobile data operators. His client list includes NTT DoCoMo, China Mobile, AT&T, Sprint Nextel, KDDI, Reliance, KTF, Sony, Juniper, Alcatel-Lucent, Qualcomm, Comcast, HP, and Disney. Chetan is also a leading authority and IP expert in the wireless industry, testifying in cases such as ITC – Qualcomm vs. Broadcom as well as the author of 5 best-selling books on wireless including co-author of Wireless Broadband: Conflict and Convergence (IEEE Press/John Wiley). Chetan has assisted many leaders in the global ecosystem in devising effective broadband strategies. He is interviewed frequently by global media and his research is widely quoted in respected publications such as NY Times, WIRED, Business Week, Fortune, WSJ, Reuters, AdAge, and MIT Technology Review. Chetan serves on the advisory committees of several startups. http://www.chetansharma.com

Talked to AdAge about Droid expectations

Could the Droid Be the Device That Finally Dethrones the iPhone?

Experts: Verizon Won’t Take Bite Out of Apple, Despite Glowing Reviews

by Rita Chang
Published: October 26, 2009

SAN FRANCISCO (AdAge.com) — With Apple posting record profits last week, thanks in large part to brisk sales of its iPhone, it may seem downright crazy to mount a smartphone challenge at all, let alone one that takes direct aim at the iPhone. But that’s just what Verizon, Google and Motorola are doing.

AP

Lowell McAdam, president-CEO of Verizon Wireless, holds up the Droid at a joint announcement with Google earlier this month.

With a teaser ad from Verizon zeroing in on the device’s perceived shortcomings, such as its lack of a physical keyboard, the triumvirate is beginning a big push for Droid, the flagship device of the Google-backed Android operating system. So far, industry observers are unmoved by the buzz and give the Droid long odds in its bid to become the next ubiquitous handset.

So far, Verizon and its partners have kept a tight lid on Droid, but the few early reviews have been effusive, with the influential gadget blog Boy Genius Report calling Droid "the most impressive phone we’ve used since the iPhone. It’s positively amazing." TechCrunch’s Michael Arrington, who famously chucked the iPhone because of AT&T’s spotty network service, also gushed: "According to people who’ve handled the device, the Droid is the most sophisticated mobile device to hit the market to date from a hardware standpoint."

The praise notwithstanding, analysts say it’s doubtful that Droid can dethrone the iPhone — even if the handset will live on what is widely perceived as the best wireless network in the country. The Blackberry Storm, and most recently the Palm Pre, both of which have been held up as credible iPhone challengers, came and went without incident to Apple, which just reported its most profitable quarter after selling the most iPhones in that time.

"There is a graveyard littered with iPhone wannabees, so the bar is pretty high for any new phone, no matter how good it might be," said wireless analyst Chetan Sharma.

Beating the network
For Verizon, a lot is at stake. The No. 1 U.S. wireless carrier needs something of a super-marquee phone to counter Apple’s iPhone, which has put millions of consumers on the network of its exclusive carrier, AT&T, many of whom are left to regularly carp about dropped calls. Thanks largely to the iPhone, AT&T last quarter added more contract customers than Verizon for the first time in recent history.

Others say Droid will post solid sales, but don’t expect a blockbuster.

"It’s going to be successful within the Verizon network, but it’s not going to come at the expense of the iPhone," said Matt Thornton, an analyst at Avian Securities. "This device will slow subscriber attrition, but it’s difficult to woo subscribers to another network just for the phone. The iPhone has been the only one that’s able to do that."

And once those customers settle on the Apple handset, it’ll be tough to tempt them to switch: The iPhone was the top-ranked brand on measures of user loyalty, according to a survey by Brand Keys that looked at 63 product categories. Moreover, for the first time in 12 years since the survey’s inception, three cellphone brands made the top 10 list of brands garnering the most loyalty — Samsung came in after the iPhone, and BlackBerry was ranked fourth.

"This says that cellphone brands are able to meet consumer expectations more than ever before," said Brand Keys President Robert Passikoff, who also noted that consumer expectations towards smartphones are also higher than ever. This means it’s all the more critical for Droid to live up to the hype, which is partly being manufactured by Verizon. The carrier recently launched a teaser ad attacking the iPhone for all the things it can’t do, but Droid can, leading some to call the strategy risky.

Not about features
"If Droid is anything less than stellar, then it looks like you’ll have failed at what you’ve set out to do," said Michael Gartenberg, VP-strategy and analysis at tech research firm Interpret. "It’s not a great idea to take a strong competitor head on."

As the Droid teaser ad ticks off a list of features that the phone supports, it may also be missing what consumers are really after, which is the overall user experience, and Apple has cornered the market on that. "You are not going to beat Apple on features, because iPhone buyers aren’t sitting there with a features checklist," said Avi Greengart, analyst at Current Analysis. "It’s not what features the iPhone has, but how they are implemented."

What Droid could do, with Verizon’s backing, however, is be an incremental force to stem the iPhone tide by accelerating Android’s momentum. So far, Android phones have only been available at T-Mobile, the smallest of the top four U.S. carriers, though about half a dozen Android devices are expected to be unveiled stateside by year-end. By 2012, Android is expected to have a 15% worldwide share, just eclipsing the iPhone’s 14%, putting it behind top smartphone operating system Symbian, according to Gartner. With a slew of phone makers hanging their smartphone offerings on Android, analysts also expect more developers to write for the operating system, whose paltry 10,000 apps today are dwarfed by the iPhone’s more than 85,000.

"Verizon’s backing … will bring Android to the forefront and give it more attention," said Tim Bajarin, principal analyst with Creative Strategies. However, don’t expect Apple to take the heated competition lying down. "I fully expect Apple to raise the bar with a new iPhone and new features," Mr. Bajarin said.

Have gotten great feedback from the first event

"I found the Mobile Breakfast Series to be informative and great for networking. We had 3 very substantial follow-up meetings from connections made at the event."

- Mike McSherry, CEO, Swype

"The Mobile Breakfast Series is a unique Seattle event - all the right people sitting down together to tackle the hardest problems in our industry"

- Dan Shapiro, CEO, Ontela

Hope you can join. Register at http://mobilebreakfastseries.com/ Bring friends and family. Help Spread the Word.

The topic of our next event is “The Impact and Evolution of Mobile Broadband” and the illustrious speakers are:

Om Malik, Founder, GigaOM (Moderator)

Scott Richardson, Strategic Advisor, Clearwire

Most recently Scott served as SVP and Chief Strategy Officer at Clearwire. As senior vice president - chief strategy officer, Scott Richardson was responsible for driving Clearwire’s mobile wireless broadband efforts, WiMAX strategy, technology investment and field trials. During two decades in the wireless and chip industries, Mr. Richardson has worked with key industry leaders to define and shape the WiMAX standards with the goal of delivering next-generation wireless broadband networks around the world. Prior to joining Clearwire in January 2007, Richardson spent 20 years at Intel in a variety of key management roles, most recently leading Intel’s broadband wireless business. Previously he served as vice president of Intel’s Mobility Group and general manager of the company’s Service Provider Business Group, where he was responsible for creating the IEEE 802.16 standard and delivering the company’s silicon products for WiMAX Certified wireless equipment and access devices. Earlier, Richardson served as general manager of Intel’s OEM communication systems business serving the networking and communications market and also led software efforts within Intel’s Enterprise Server Group.

Charlie Martin, Wireless CTO, Huawei Technologies

Charlie Martin is the Wireless Chief Technology Officer for Huawei Technologies (North America). Martin has more than 20 years of experience in wireless communications and has spent the past nine years in product management, business development and technology development. Previously, Martin served as Nortel’s Director of WiMAX Network and Systems Product Line Management, and, prior to that, as Director of Wireless Technology and Product Strategy for the company. Before joining Nortel, Martin held positions at two service provider companies. At GTE Business Data Products, Martin was a member of a five person product management team responsible for rolling out a nationwide ADSL service in more than 330 central offices in 1998. At Sprint PCS, Martin served as the Manager of RF Design for the Dallas/Fort Worth Engineering and Operations team, which rolled out CDMA service in 1996. Martin earned a Bachelor of Science degree in physics from the University of Maryland.

Ken Denman, CEO, Openwave

Ken Denman is chief executive officer for Openwave Systems (NASDAQ: OPWV) where he is focused on executing Openwave’s corporate strategy and growing the company’s global market share with innovative software infrastructure products and services for mobile and broadband operators. Ken’s career spans more than 20 years in the global telecommunications and IT industries. Before Openwave, Ken served as chairman and CEO of iPass, a world leader in platform-based enterprise mobility services where he guided the company in leveraging the explosion in new broadband and wireless access technologies to make them real and globally available to any enterprise or service provider. Under Mr. Denman’s leadership, iPass grew its revenue by 200 percent and went public in 2003. 
Before joining iPass, Ken was the founder, president and CEO of AuraServ Communications, a managed service provider of broadband voice and data applications. Earlier, he served as senior vice president at MediaOne’s National Markets Group (now part of Comcast) where his teams exceeded new subscriber growth targets and dramatically reduced customer churn. He also served as chief operating officer of MediaOne’s International Wireless Group, leading international joint ventures including what would become the leading wireless providers in Poland, Hungary and the Czech Republic.  Ken also serves on the board of ShoreTel, Inc., (NASDAQ: SHOR), a leading provider of Pure IP unified communications systems headquartered in Sunnyvale, California. Ken holds an MBA from the University of Washington and a BS in accounting from Central Washington University.

Pankaj Kedia, Director, Global Ecosystem Programs, Mobility Products, Intel Corporation

Pankaj Kedia is the director of Global Ecosystem Programs for Mobile Internet Devices (MIDs) and Smartphones at Intel Corporation. He is responsible for working with the industry to enable complete hardware and software solutions for MIDs/Smartphones, ensuring the availability of rich, intuitive applications, content, and services, and taking the complete solution to market. Over the last 2 years, Pankaj has led Intel’s charge in establishing the Mobile Internet Device category in the industry and launching the Intel® Atom™ processor which is specifically designed for this category. Pankaj joined Intel in 1996 and has held a range of executive advisory, marketing, planning, and business development roles across the company. Prior to Intel, he was in the management consulting industry for 5 years leading projects in strategy, management, and information technology. Pankaj holds an MBA from Wharton, an MS from the University of Michigan, and a BS from the Indian Institute of Technology. Pankaj is a frequent industry speaker in the mobile, Internet, and wireless sectors and has been quoted in major publications including Wall Street Journal, New York Times, Fast Company, San Jose Mercury News, Wired and CNET.

The Vision

Mobile broadband is the network connectivity environment, where networks of different shapes and sizes collaborate to provide users unfettered access to the information they seek, the content they want to engage in, connect people in new and exciting ways, where time and distance are all but collapsed to provide access to anyone and anything, faster than the speed of thought. At least, that’s the vision.

In 1991, the late Mark Weiser of XEROX PARC, considered the father of ubiquitous computing, dreamed of an always on, always connected world in which humans and computers are seamlessly united. In 2002, my friend and coauthor Dr. Yasuhisa Nakamura, then CTO of NTT DoCoMo wrote in our book that his vision of mobile broadband is when wireless infrastructure becomes indistinguishable from air - omnipresent. It is just there without us consciously searching for it. Here we are in 2009, where the FCC is engaged in the noble task of defining broadband and various players are quibbling over a few kbps speed requirements. But as the national debate on broadband reaches a fervent pitch, one has to come back to the task at hand and figure out what defines "mobile broadband."

Defining Broadband

FCC’s current definition of broadband is stated as "The term broadband commonly refers to high-speed Internet access that is always on and faster than the traditional dial-up access." Faster than dial-up doesn’t really conjure up an image of a 21st century ready infrastructure, so, how do we go about defining mobile broadband, what benchmarks are meaningful, and most importantly, what factors would yield sustainable competitive advantage to service providers.

First of all, we shouldn’t mix wireless and wireline for some time. The inherent cost structures, economics, and physics of the two mediums are quite different. By expecting wireless to deliver wireline performance and pricing, we are setting ourselves for disappointment.

Real speeds, coverage, and spectrum

The speed of the network has long been the main benchmark for mobile broadband, esp. the peak rates possible using a given technology. For e.g. in the GSM family of technologies, GPRS roughly equates to 114 Kbps, EDGE to 474 Kbps, UMTS to 2 Mbps (stationary), HSPA to 7.2 Mbps, HSPA+ to 28 Mbps, and LTE to 100 Mbps (of course, there are differences in upload, download, peak, off-peak, min, max, etc.). However, the real-life network speeds experienced by average consumers are typically 40-60% of the peak rates. During peak traffic times, the speed drops even further.
We should be looking at the bandwidth requirements from the eyes of the consumer. Someone living in Bellingham, Wash., only cares about the coverage and the average bandwidth available to them at any given moment. What ultrafast networks are deployed in Washington, D.C., is of little interest to them. So, we need to measure coverage and consistency in performance across the nation. Also, one needs to keep the spectrum scorecard for we can deliver 100 Mbps but the spectrum required under current set of technologies is just inadequate. Hence, the benchmarks for mobile broadband need to be closely correlated to the national spectrum dedicated to mobile.
As a first step, we need to take the discussion away from peak rates to average rates and measure the average throughput at any given time across various markets. Any issues with the backhaul network will also be reflected in these numbers and thus will help us understand the state of the mobile infrastructure at a more granular level. Japan, Korea, and Australia are investing heavily in upgrading their national mobile infrastructure to stay ahead of demand. Progress in these countries will clearly serve as a guiding principle for the U.S. and other economies.

Latency
As we move into the 3.5G and 4G mobile network arena, latency (along with jitter) will start to become an important benchmark as well. Reduction in the time to fetch content enables better user experiences. An all-IP network introduces a flatter network architecture which in turn reduces the latency in the network. Better user experience paves the way for more usage and higher content consumption which in theory yields informed citizens and higher productivity.

Consumption
We should also keep track of the average bandwidth being consumed by users on a monthly basis. By keeping an accurate measurement, the ecosystem can plan better. Some other regulatory agencies like the Hong Kong Telecommunications Authority regularly publish mobile data usage. While the task is much bigger in the U.S., some measure of the pace of growth is necessary for the ecosystem to appreciate the risks and the opportunities.

Pricing
Next, we need to keep track of the average price paid by consumers for mobile broadband and mobile data consumption over time and the choice of providers available to consumers on a national basis. The above also needs to be measured from a demographics point of view by looking at the numbers for a wide variety of user populations. Additionally, these measurements need to evolve over time as our understanding of what’s important to the consumer changes.

Intelligent Platforms

Finally, while the debate is focused on how to deal with the data growth, little attention is being paid to how to use the terabytes of data that is being generated. In other words, there is a lot of focus on data creation but little on intelligence extraction. Most service providers are consumed by network upgrades, move from WCDMA to HSPA+ to LTE and so on and so forth but little investment is going into understanding the consumer and their mobile data behavior - how are they consuming data? what are their preferences and unmet needs? how do you tailor content, value added services, and pricing plans at a subscriber level? how to leverage mobile as a media channel? etc.
Don’t get me wrong, carriers absolutely need to build a robust network that can stay ahead of the consumer demand but they also need to continue to innovate on several key fronts. By focusing too much on network build out and too little on building intelligent platforms that can harness the power of these networks, many service providers are leaving the door open for others to extract more value out of these network upgrades. Sustainable competitive advantage can only be built by understanding the consumer better, mobile affords that opportunity. Players who are focusing on measuring intelligence of their networks are the ones who will be able to withstand emerging business threats better than those who are investing little in building out the platform. And, intelligence is something the FCC can’t regulate but consumers will see the difference.

Chetan Sharma is President of Chetan Sharma Consulting and is one of the leading strategists in the mobile industry. He has served as an advisor to several Fortune100 companies in the wireless space and is probably the only industry strategist who has advised each of the top 6 global mobile data operators. His client list includes NTT DoCoMo, China Mobile, AT&T, Sprint Nextel, KDDI, Reliance, KTF, Sony, Juniper, Alcatel-Lucent, Qualcomm, Comcast, HP, and Disney. Chetan is also a leading authority and IP expert in the wireless industry, testifying in cases such as ITC – Qualcomm vs. Broadcom as well as the author of 5 best-selling books on wireless. He is interviewed frequently by global media and his research is widely quoted in respected publications such as NY Times, WIRED, Business Week, Fortune, WSJ, Reuters, AdAge, and MIT Technology Review. Chetan serves on the advisory committees of several startups. http://www.chetansharma.com

Am looking forward to the Open Mobile Summit next week in San Francisco. Will be moderating two panels, one each day. The overall lineup of speakers is stellar and it should generate some really good discussion. If you plan on going but haven’t done the registration yet, let me know and I can pass on the discount.

Panel: What open means to apps providers

This panel takes the application / service developer perspective and asks:

• What are the merits of the different ‘open’ platforms?
• How do you deal with fragmentation and how do you choose between platforms?
• How to make apps into a real business: Addressing pricing and discovery
• Defining open, what would we like to see opened up that is not already available?

Moderator:

• Chetan Sharma, President, Chetan Sharma Consulting

Speakers:

• James Tagg, Founder and CTO, Truphone
• Rani Cohen, CEO, TuneWiki
• Bart Decrem, CEO, Tapulous
• Jason Loia, COO, Digital Chocolate
• Tom Conrad, CTO, Pandora

Panel: Apps in the cloud

• Is a write once, run anywhere environment possible for mobile?
• Roadmap for browser technology: How – and when - HTML 5 will change the game
• What’s the place for native apps in a cloud-centric world?
• Opening the floodgates to innovation: Web developers go mobile
• Who in the ecosystem benefits with “apps in the cloud”
• Does the business model change? And what new technical and business opportunities are created?

Moderator:

• Chetan Sharma, President, Chetan Sharma Consulting

Speakers:

• Kiyo Oishi, CEO, ACCESS Systems
• Frank Meehan, CEO, INQ Mobile
• Philipp Hoschka, Deputy Director, w3c
• Jon Von Tetzchner, CEO, Opera
• Hank Skorny, Exec. Advisor, Real Networks

Fiercewireless - Mobile advertising measurements still lack standardization

GigaOM - US leading the Global Mobile Data Boom

GigaOM - Mobile Advertising Metrics: What matters most?

Moconews - Full speed ahead as US carriers invest billions, is it too much?

AdAge - Mobile Video Gets Ready for the Masses

MIT Technology Review - The New Faces of Android

NewTeeVee - With MediaFLO disappointing, Qualcomm wants to become a Mobile CDN

GigaOM - Don’t Neglect the Network, The Ultraband Panel

NY Times - Customers angered as iPhones overload AT&T

RCR Wireless - The RCR Ecosystem - An Overview

IT Business Edge - The Death of the Early Adopter

GigaOM - New Metrics for Mobile Ad Networks

GigaOM - How the iPhone is driving a wireless bandwidth boom

Andrew Grill of London Calling delves into the world of mobile and social networking. There is significant traffic due to social networking. Who monetizes the best is the question.

Enrique has a compelling presentations on the concepts and technologies behind real-time demand data, a topic near and dear to me. Thanks for sharing.

Dennis Bournique of WAP Review does a review of the Bolt Browser.

Jose from Mobile Strategy writes about mobile application development.

There has been a lot of discussion about mobile advertising. An industry veteran, Mark Jaffe opines in his series - Ten Reasons Why Mobile Advertising Has Not Reached Its Potential.

Belen Barros of iQblog has a post on Mobile reverse innovation inviting you to expand your thinking beyond the western markets.

Mobile VoIP made a lot of news last week. Tsahi Levent-Levi of VoIP Survivor and a frequent contributor writes 5 reasons why mobile VoIP =#FAIL

My own contribution to the carnival is in the form of our CTIA Wireless IT and Entertainment 2009 Roundup

Q4 is shaping up to be a great quarter for developments that will impact the mobile industry. Be sure to read the Carnival each week as the mobilists track the progress. Next week, the carnival moves to A Consuming Experience.

Thanks and happy surfing.

CTIA San Diego Roundup

San Diego is a casual town so this year’s CTIA fit nicely with an equally casual show, that felt more like a networking party sprinkled with some striking keynotes and engaging sessions. However, the biggest tremors were felt a day before the event started with Verizon getting in bed with Google and AT&T embracing VoIP with open arms. FCC’s curiosity into the wireless world has yielded more action in 3 months than many years combined before. I was drawn more to the policy debate and the implications to the wireless industry in the US and to the rest of the world. There was intense discussion on appstores and their place in the future, mobile advertising and its maturity, enhancing retail experience, accelerated growth in mobile health in recent times, and of course the tremendous growth in the US wireless data market but if you already knew that. This note summarizes the observations and opinions from the event, discussions, and briefings.

A friend of mine at the FCC invited me to the FCC Broadband Field Hearing occurring simultaneously with the CTIA at the University of San Diego. I am glad I went. The first panel was on the App Ecosystem with a diverse panel of industry verticals – rural, public safety, health care, environment, air quality, health care complimented by the discussion of the iPhone and its impact on the mobile industry. Chairman Julius Genachowski is to iPhone what President Obama was to Blackberry. He described his love for the apps with tender affection.

I am finding that the whole process of broadband planning to be quite interesting. The proceedings have been open and participatory, interest and feedback has been intense, and the principles have been clearly stated. This helped with a broader question that my CTO team for the FiREGlobal panel (to be held on Oct 15^th) is addressing. We are tasked with a unique challenge of coming up with technology solutions for better civic discourse and our team consists of experts in the public and private enterprise to give a set of recommendations. We are currently under intense discussions and will unveil our suggestions on thursday. Stay Tuned.

Coming back to the FCC talk, Julius described four key principles:

1. Most importantly he described the spectrum shortage as a looming crisis and that additional spectrum capacity is needed to handle the demand of data traffic from data cards and smartphones (something we have illustrated in detail in our paper - "Managing growth and profits in the Yottabyte era")
2. Removing red tape to allow wireless carriers to build their network faster, for example, the work with cell towers
3. Codify and enforce net-neutrality policies
4. Operate more openly

While 1) and 2) have been discussed in the industry for some time, it is the mention of 3) and 4) that has changed industry in more ways than one. AT&T’s Ralph de la Vega took the stage after the Chairman and gave a spirited defense of the industry that requires no regulation. Frankly, the mere mention of the word "open" has had quite an impact on the industry in last 3 months. (I will be moderating two panels at the upcoming Open Mobile Summit on "What open means to apps providers" and "Apps in the cloud" in Nov, 2009)

Of course, as always, it is from the details that the devil flexes it muscles. How FCC will end up defining "open," "net neutrality," "network management" and other key items will determine the course of the industry. I wrote a piece that appeared in RCR Wireless “Defining Mobile Broadband” that outlined some of the same principles but from an operator strategy point of view suggested a much broader strategic imperative of building intelligent platform to survive long-term. The recommendations we made in our Yottabyte paper are being adopted and discussed much more openly since it was released in July. Due to significant interest, we will some follow-up research on the topic in the coming days, so stay tuned. I will be giving a ISACA luncheon keynote on the topic on Oct 20^th. Of course, our Mobile Breakfast Series panel on mobile broadband will delve into the details of the broadband ecosystem on Dec 4th. Be sure to register.

Each year our small community in Issaquah, WA celebrates a festival “Salmon Days.” As I was strolling around the hatchery, it helped me prepare for my talk on the Appstore ecosystem. The fish traveling upstream has several parallels to the developers trying to make in the 80,000 db appond. So, I focused my talk on how the ecosystem needs to come together urgently to build the fish ladder to give more developers a chance to make it to the next level to create a vibrant and sustainable ecosystem. While Microsoft’s mobile strategy is disarray right now, they are one of the few companies who understand the caring and feeding of the developer ecosystem (another one is Ebay). If the ecosystem focuses primarily on their profits and margins, the rich ecosystem might be at a risk of collapsing.

I discussed several factors that can help foster a healthier ecosystem starting with fish ladder. If you are interested in the presentation, please drop me a line. There was pretty good discussion from some experienced and successful developers. The emergence of appstore mania has been a double-edged sword. Developers are back in demand but their attention is finite and they are forced to allocate resources accordingly. I was also surprised to find out about the level of piracy and counterfeit goods in the appstore and how little is being done to protect legitimate developers. Some of the ladder factors I discussed were: greater revenue share, connection with investors, iTunes and carrier billing, location and presence, user profile and context, reports and analytics, $0 signup and certification, better search and discovery, social interaction and virality, flexible payment and billing models, better networks and devices, reduced fragmentation, more open APIs and marketing dollars. If you are interested, drop me a line and I will send you the ppt.

I also had a chance to moderate a panel on Mobile Advertising and the current state of affairs. While mobile advertising is the only advertising sector that has shown growth this year, it is not breaking out to stand on its own. Large media companies are primarily looking mobile as a complimentary channel though they are clearly enamored by its potential. Lack of clear, uniform, auditable metrics is another issue though various industry bodies have been working together and some guidelines are expected to be released next quarter.

Overall, the show felt like a sponsored networking party with hardly any new announcements, the show floor was easier on the feet, the attendance was down again. However, the hallway conversations and running into friends and colleagues from the distant past is always priceless. The only newsworthy highlight for me was the emergence of mobile healthcare and mobile retail as separate categories at CTIA. There is clearly much potential and interest in these areas. We will have more on these topics in the coming months.

Some of the news worth items were:

• John Donovan, CTO of AT&T opined on the growth in data consumption and how the company is tackling the upsurge in usage
• Qualcomm released FLO TV service and devices but at $250 and $9/month, it, like Kindle seems to be stuck in the fidelity belly.
• A number of local search services/apps are popping up: Geodelic, Aloqa, Decarta, etc. I built my first location app in 1996. 13 years hence, market seems to be coming around to the concept of LBS.
• Number of mobile health companies were displaying their wares: Airstrip, Corventis, TotGuard, Sensiotec, and others. Lot of investment will flow into this sector in the coming days.
• Companies like Openwave and Bytemobile talked about solutions for mobile data management.
• Mobile Retail is picking up with NFC and now Nokia’s initiative of Global Retail Executive Council
• More Androids are slated for release in 2010

It was great catching-up with friends and colleagues. Looking forward to the next one.

The views from the venue are stunning both at the crack of dawn and as the sun lit the valley

The first Mobile Breakfast Series Event was held at the beautiful Newcastle Golf Club on Sept 22nd with our elite panelists - Marianne Marck - SVP, BlueNile, Michael Mace, Principal, Rubicon Consulting, Mike Woodward, VP, AT&T, and Jim Hudak, VP & GM, INQMobile. Before I get into what was discussed, would like to thanks the founding sponsors - Openwave, Motricity, and Clearwire who stepped in right away to make the Mobile Breakfast Series possible. Also, Jeff Giard and Brendan Benzing helped shape the event along the way. Finally, thanks to the extended pacific northwest mobile community for such a tremendous response. Hope you guys keep coming back for more.

The diversity and the experience on the panel was apparent. Mike Woodward has a long history with ATT and has been managing the broad device portfolio for the company. Michael Mace with Rubicon worked with Palm and Apple and is a veteran of the mobile industry cycles, Marianne Marck with BlueNile has seen the growth of mobile digital content like few have and brought in the perspective from the developer and content provider point of view. Finally, Jim Hudak has worked in a wide variety of roles and is now with INQMobile which won the best handset award in Barcelona. This gave us a good forum to explore the various aspects of our evolving industry (Moconews coverage here).

The salient points of the 90 minute discussions were:

· The panel thought the big opportunities are in:

o Specialized devices, though there is little VC investment in the area, there is an opportunity to build something unique by verticals or segments

o Network Optimization and Management, given the tremendous growth in mobile data usage, more technologies are needed to effectively manage the growth

o Besides voice and data, location based services represent the biggest opportunity in mobile

o Empower Impulse buys, embed technology to make it simple for users to buy

o Taking advantage of the mobile browser economy. Companies like Skyfire are expanding the capabilities of the browser that enables better application reach and penetration

· ATT has experienced 5000% growth in mobile data usage in the last 12 quarters. And it is good for business but the future growth needs to be more effectively managed.

· Mobile data is clearly taking off but are there limits to this growth? Will everyone pay $50/month extra? It is probably not for everyone.

· LTE brings down cost of delivering the bits. If EDGE costs $1 to deliver one MB, then HSPA costs 13c and LTE is around 3c. There is significant motivation to move towards LTE.

· While the total number of apps downloaded have exceeded 2B, it is not clear if there are new companies emerging out of the app economy. Developers are still struggling to make ends meet and if we don’t cultivate the ecosystem, very few will be left at the end of the day

· For developers, browser provides the broadest reach but for some apps the richness of the feature/functionality is only available in client apps. Over the long run, browser platform is preferable and is likely to win out.

· Carrier billing is essential for the app economy to survive. Not everyone has iTunes interface for their appstores.

· Femtocells/WiFi play an important role in offloading traffic and providing consumers with better bandwidth and coverage options.

· 75% of ATT’s devices are converged devices. Significant uptick in the last few quarters. Data consumption has been growing as a result. ATT is investing $18B or so in upgrading the network as well.

· Mobile OS becomes less relevant over time.

· Cloud Computing is important for mobile to help with network management, storage, and user experience.

· Microsoft was a freakish event in history, something similar is not going to happen in the mobile space and the fragmentation is not going to go away any time soon.

· Developers like to get access to UI APIs that give them more control over the user experience. Access to location

· Mobile advertising promising but not there yet. Metrics and standards issues need to be worked out.

· TV is a passive experience, Online is less passive, and Mobile is interactive experience. We should be designing apps and services keeping that in mind.

· Handset has become a software business. Companies not having a concrete s/w strategy will be exposed

· We live in interesting times

If you liked the first event, you would love the next one.

The topic is Mobile Broadband and we are getting some of the top notch experts to discuss the very important evolution of the global mobile broadband markets. Date: Dec 4th.

Our good friend Om Malik has kindly consented to moderate the event. Current confirmed panelists are Scott Richardson, former Chief Strategy Officer and now Strategic Advisor at Clearwire and Ken Denman, CEO of Openwave. More panelists to be confirmed in the coming days. Registration is open at http://mobilebreakfastseries.com/

Finally, we would love to hear your feedback. Please help us shape the event and make it your own. How can we make it better? What topics would you like to see discussed? Which speakers would like to hear from? What venues work best for you, etc? Answers will help shape the future events so every bit of feedback is much appreciated. If you could please take a short survey and let us know what you thought of the event as well any guidance on future events, that will be great.

Thanks and see you on Dec 4th.

Download: PPT | PDF

Executive Summary

The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (together) are adding around 20M new subscriptions every month. China crossed the 700M subscriptions mark in July while India’s total went past 450 in Aug. Overall, the global subscriptions penetration is above 64%. During 2009, services revenues further tilted towards data services, increasing 21% from 2008 EOY.

The overall global mobile revenues (including equipment) for the year are expected to stay flat as the impact of recession was felt in many geographies in the first half of 2009. While countries like US, Japan, China, and India showed very little signs of pullback, most of Europe (except France) and the developing world are expected to experience a decline in overall service revenues in 2009. For the first time, mobile data contributes approximately quarter or 25% of the total global service revenues. Additionally, except for India, all major markets have their data contribution percentages above 10%.

For some leading operators, data is now contributing over 40% of the overall revenues. However increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. From the true and tested SMS messaging to the new services such as Mobile Advertising, Social Networking, Commerce, Mobile Wallet, and others, different services helped in adding billions to the revenues generated in 2009. US continues to lead Japan and China in total mobile data revenues by a healthy margin.

NTT DoCoMo continues to dominate the carrier ranking in terms of mobile data service revenues, however, Verizon Wireless which became #2 replacing China Mobile is slowly edging towards the #1 spot and is likely to overtake DoCoMo within the next few quarters.

The velocity with which the smartphones are being introduced into the market, one wonders if in five years, we will be using the moniker to describe devices and if the "dumbness" in the device market will be practically eliminated. Led by Apple’s Appstore success, significant investments are pouring into the appstore world. In parallel, the debate over apps vs. mobile web is intensifying. The implications of the transition will be significant on the ecosystem on many levels.

Though 4G as a standard hasn’t been defined yet, the discussions around LTE (and to some extent WiMAX) grew intense and started climbing the slippery slope of the hype curve. Many prominent operators have come out in support of LTE with Verizon being the most aggressive in launching their next generation network in 2010.

Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries - from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India.

This note summarizes the findings from the research with added insights from our work in various global markets.

Impact of Global Recession

• Telecom in general fared better than other industries. In some regions, it hardly caused a tremor. However, in most nations, the impact was acutely felt by the operators. Amongst the operators we studied, only 3, SK Telecom, O2 UK, Telefonica, T-Mobile Germany and Austria, Vodafone Germany and Italy, KTF experienced increase in both the data ARPU and overall ARPU during 1H09 (and some of increase was due to the fluctuation in international currencies).
• Looking at the data at a country level, almost all nations noted a decline in overall ARPU and majority in data ARPU. However, almost everywhere data for 1H09 improved over 2H08 indicating that the recession had a worse impact on the wireless sector last year compared to this year and in general the conditions in the telecom microcosm are improving globally.
• Rule of Three is kicking in most markets with smaller players having to consider the M&A option to remain viable. T-Mobile/Orange, Bharti/MTN tie-ups are just the start of that process.

Service Revenues

• US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $20.6B vs. $16B for Japan in 1H 2009. China with $8.6B was ranked number 3. US registered the highest growth amongst the top 3 with over 39% increase from EOY 2008 levels followed by Japan and China at 5%.
• The top 10 nations by service revenues are: US, China, Japan, France, Italy, UK, Germany, India, Spain, and Brazil.
• The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Korea, Spain, and Australia.
• NTT DoCoMo continues to dominate the wireless data revenues rankings with almost $8B in data services revenue in 1H09. Almost 45% of its overall revenue now comes from data services. DoCoMo also crossed the 50M or 90% 3G mark in June.
• NTT DoCoMo was followed by Verizon Wireless, China Mobile, AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top 10 operators by wireless data service revenues.
• The top 10 global operator groups now account for over 63% of the global mobile data revenues.
• Each of the top 5 carriers are expected to exceed $10B in yearly mobile data service revenues in 2009
• Data revenues for the top 10 operators increased 10% from 2H 2008 and now account for almost 48% of the global mobile data revenues though their subscriber share is around 30%.
• The biggest jump in data revenues was experienced by Verizon, AT&T and Softbank. DoCoMo suffered a 2% decline compared to 2H08.
• Most of the operators in developed nations are contemplating future strategies to boost data revenues such that the decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPU.
• China reported approximately $8.5B in data revenues for 1H09 and the percentage contribution from data services is around 28%, data ARPU is around $2.7. For India, data ARPU continues to stay around $0.50 as most of the new adds are voice only subscribers and there is continued price pressure in the market.
• China Mobile remains the most valuable telecom operator with over $200B in market cap. It is followed by Vodafone at around $122B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans.
• In 2009, SMS’s vice like grip on data revenues continues to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
• NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets. They are exploring new technologies and social experiments ahead of almost anybody else in the market. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends, technologies, and ecosystem dynamics in these markets to get a sense of what’s coming.

ARPU

• Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like DoCoMo, and Softbank are over 44%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK, KTF, Telstra, and 3 Sweden exceeded 30% and many others are on the verge of crossing the 30% mark.
• 3 Australia reported the highest increase in data ARPU from 2008 with 31% growth. Other notable percentage increases in ARPU were from 3 Italy, SK Telecom, KTF, T-Mobile Germany, 3 Sweden, and T-Mobile Austria. The Japanese operators saw a decline in ARPU by 3%. In terms of absolute dollar amount, NTT DoCoMo leads the pack with $25 data ARPU.
• The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with over 56% (or $3) contribution coming from the data services. Philippines is also the most active messaging nations where users average a message/hr round the clock though US txters have had the most acceleration in use.

Mobile Data Traffic

• We have been calling attention to the tremendous increase in mobile data traffic for some time. The discussion has hit mainstream and many operators are scrambling to nail-down their short-term and long-term strategies to manage the data traffic growth in their networks. See our paper on the subject "Managing growth and profits in the yottabyte era." The recommendations discussed in the paper are slowly been adopted by various vendors and operators worldwide.
• The global mobile data traffic is expected to exceed an Exabyte for the first time in 2009. In fact, the data usage is growing so fast that next year, the two territories experiencing the most growth - North America and Western Europe are going to exceed an Exabyte in mobile data traffic.
• 2010 will also mark the first year when the total number of mobile broadband connections will exceed the total number of fixed broadband connections.

Subscriptions

• The global mobile market continues to grow at an explosive pace and is expected to go past 4.5B subscriptions in 2009 and is likely cross the 5B mark in 2010. The global mobile subscriptions now represent over 64% of human population on Earth.
• China and India continued their red-hot growth in 1H09. Combined, they added 132M new subscriptions with India easily surpassing China in each of the last 12 months in terms of net-adds.
• China crossed the 700M subscription mark in July while India’s total went past 450 in Aug. In total, China is still years ahead. In the meantime, US crossed the 90% subscriptions mark earlier this year.
• In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by 2018.
• The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan, Germany, Pakistan and Italy.
• China Mobile became the first operator (and likely to be the only one for a very long time) to cross the 500M mark. It remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone at 264M. Telefonica, América Móvil, Telenor, T-Mobile, China Unicom, TeliaSonera, Orange, and Bharti Airtel round up the top 10 largest telecom groups in the world.

Others

• Messaging still accounts for the lion-share of data service revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have gradually chipped away the share from messaging. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
• After falling below the 100M/quarter in Q1, Nokia rebounded to sell 103M units in Q2 09. Samsung also exceeded 50M with a strong second finish at 52M. LG finished a strong third with almost 30M in its bag and Motorola showed signs of strength by selling close to 15M units.
• The second quarter was dominated by two blockbuster launches of iPhone 3GS and Palm Pre. While iPhone continued to attract new customers, Pre suffered from a less than adequate launch strategy. By lowering the 3G device price to $99, Apple set the new bar in smartphone pricing leaving the rivals scrambling for response. The release of a slew of Android handsets sets up the stage for fierce competition during the holiday season and into 2010.
• China and India represent the biggest opportunities for the Infrastructure providers. China launched 3G across the three operators earlier this year. India is also going through its 3G spectrum policy and is likely to resolve some of the contentious issues shortly. Some of the biggest infrastructure contracts are coming from these two countries as they look to expand coverage into rural areas.
• Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines, even though 4G hasn’t been fully defined yet and the current candidates for 4G are nowhere near the performance goals of 4G (150Mbps/50+Mbps). Many larger operators have laid out their plans for deploying LTE starting next year.

As usual, 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 2009. The next Global Wireless Data Market update will be issued in March 2010.

Your feedback is always welcome.

Thanks.

Chetan Sharma

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

The Mobile Application Stores, Strategy and Deployment conference http://www.mobileappevent.com/ is proud to announce its all-star speaker lineup for this unique event. Mobile Application Stores is a partner seminar of International CTIA WIRELESS I.T. and Entertainment October 8th in San Diego

Mobile Application Stores is the only conference to focus exclusively on the business of mobile applications and will focus on the tremendous opportunities in the mobile apps stores ecosystem. The event is designed to give a complete understanding of how to capitalize on this dynamic market.

Featured speakers for the event include:

• Dr. Jin-Sung Choi Ph.D, Senior Vice President, Head MC Global

Product Planning Team, LG Electronics Korea

• George Linardos Vice President, Product Management, Media, Nokia

• Ilja Laurs Founder & CEO, GetJar.

• Tim Haysom, Chief Marketing Officer,OMTP

• Mike Merril, CEO-Smart Phone Technologies

• Ajit Jaokar, President-futuretext

• Chetan Sharma, CEO, Chetan Sharma Consulting

• Jouko Ahvenainen, Founder, Grow VC International

• William Volk, CEO, PlayScreen

• Sena Gbeckor-Kove, Chief Technology Officer, imKon

The timing is perfect for an event like this. The Apple Appstore announced its billionth download in less that 9 months after opening and the recent launch of LG’’s Applications Store and Windows Marketplace for Mobile as well as Android and the Blackberry App World are making tremendous impact in the mobile marketplace.

Mobile Application Stores is co-located with the largest wireless event in the U.S., International CTIA Wireless I.T. and Entertainment.

Registration is only $295 at http://www.mobileappevent.com/

About Mobile Application Stores: The Mobile Application Stores event is produced by futuretext, a London based research, consulting and publishing company. For additional information, please contact Larry Lockhart at NextVision Media at 727-388-9849 or Larry@nextvisionmedia.com or Ajit Jaokar Ajit.jaokar at futuretext.com The web site again for registration is: http://www.mobileappevent.com/

Thanks to our generous sponsors – Openwave, Motricity, and Clearwire for making this possible.

State of the Union: Where do we go from here?

The Mobile Industry has been growing by leaps and bounds. We will take a stock of where we are as an industry and how are some of the battles, opportunities, and challenges are shaping up for the near and distant future. We will discuss Open, Appstores, Mobile web, Mobile Commerce, 4G, Business Models, Consumer Behavior, Smartphones, and much more. To help us guide through the discussion are some of the best minds in the industry.

Mike Woodward, VP, Mobile Device Portfolio, AT&T

Marianne Marck, SVP, Technology, Blue Nile

Michael Mace, Principal, Rubicon Consulting

Jim Hudak, VP & GM The Americas, INQMobile

See you there

First up is Mobilize on Sept 10th

Ultraband: A Fast Platform For Innovation

When the nation of Korea commits to providing its citizens with 1 Gbps wireless broadband by 2012, the world’s innovators should sit up straight and listen. It’s a clear sign that bigger and bolder things are coming. We assemble a panel of world-class thought leaders from the worlds of broadband, wireless and consumer services and ask them when we will see true Ultraband appear — and what innovations and costs that future holds. A must-attend panel for entrepreneurs, strategists and product managers to gain essential insights ahead of the curve.

Moderator - Chetan Sharma President, Chetan Sharma Consulting

Phil Asmundson Vice Chairman and National Managing Partner – Technology, Media and Telecommunications, Deloitte LLP 

Ken Denman CEO, Openwave Systems 

Abhi Ingle VP, Industry and Mobility Application Solutions, AT&T 

Rick Keith Senior Director of Strategy, Broadband Access Solutions, Motorola 

Then, i fly to Toronto for Mobile Media Week. I will be giving a keynote on “Mobile Data Tsunami” and how we manage this growth. And right after will moderate a panel with Motorola, Verizon, and Canwest

The Mobile Data Tsunami Keynote with Experts Symposium
Chetan Sharma – President, Chetan Sharma Consulting & Author: Wireless Broadband ~ Mobile Advertising
Michael Dixon – VP Wireless Networks, Motorola
Aditya Khurjekar – Director, New Business Development, Verizon
Paul Burns – VP Digital, Canwest Broadcasting

Then, we our inaugural sold-out Mobile Breakfast Series event in Seattle on 22nd where i will moderate a panel on “State of the Union” with

Mike Woodward, VP, Mobile Device Portfolio, AT&T

Marianne Marck, SVP, Technology, Blue Nile

Brendan Benzing, SVP, Product Management, Motricity

Michael Mace, Principal, Rubicon Consulting

Jim Hudak, VP & GM The Americas, INQMobile

Then, i fly to Dallas on 24th to participate in 3G Americas Analyst Summit.

Fortune - Bandwidth hogs - iPhone and other smartphones

Telecompaper - US mobile data market grows over 30% in Q2

Mediapost - Prepaid: Too much of a good thing?

GigaOM - State of the US Wireless Market Q2 2008

IT Business Edge - Data Helps Wireless Carriers Work Through the Recession

FierceBroadbandWireless - Report: 3G penetration about 40% in 2Q

FierceMobileContent - US mobile data service revenues jump to $10.6B in Q2

IT Business Edge - Good Times Ahead for Telecom Vendors

Mercury News - FCC probes Apple’s rejection of Google Voice for iPhone

IT Business Edge - Cellular Data Explodes, Even in Bad Economy

Wireless and Mobile News - The worst is over says Chetan Sharma

Download: PPT | PDF

Executive Summary

The US wireless data market grew 7% Q/Q and 30% Y/Y to exceed $10.6B in mobile data service revenues and thus exceeded $10B for the second straight quarter. As we mentioned in our Q1 2009 research note, given the strong growth in data revenues shown by the top carriers and the increase in service revenues overall, the worst is over for the US mobile industry. In summary, the recession has been all but a tiny blip in its growth trend and the US mobile market has weathered the downward spiral in economy better than its counterparts in other developed nations. Of course, recession doesn’t treat all players equally, so, some have had a negative impact and will need more resources and effective strategies to claw back to the their previous market position.

The US subscription penetration was approximately 90.4% at the end of Q209. The current rate of net-adds (subscription) is approximately 3 every second (compared to a net gain in population of one person every 10 seconds). While the flailing economy hit certain segments of the wireless ecosystem hard esp. the infrastructure and handset segments, consumers haven’t really pulled back on the mobile data overall spending. Additionally, the CAPEX spending will stay strong in 2009 given the activity around 3G/4G deployments and trials. As expected, there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers.

As we mentioned in our last two research notes that this time around, the fate of the US mobile industry is more closely tied to the overall economy compared to the previous recessions. As the consumer sentiment improved over the last 3-4 months along with better than expected Q1-2 2009 earnings from corporations, the mobile industry is back on track. While the structural flaws in various industry segments remain, and the economy is a crisis away from the double dip, the outlook for the remainder of 2009 remains bright and we are expecting the overall data revenues to now increase by 32% compared to 2008 with a record-setting Q4.

US Wireless Industry in Recession - The light at the end of the tunnel is indeed not from the oncoming train

Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.

Q2 2009 reported a much better 1% decline (compared to 6.4% in Q1). On an yearly basis, the GDP is expected to change by 3.2% for 2009 and the service revenues are expected to  account for 1.13% of the US economy by year-end.

As mentioned in the previous reports, while in the past, the recession hardly impacted the wireless industry, this time around; it is going to be more tied to the recession. In the past couple of months, the consumer sentiment has improved and the Q109 earnings have been better than expected. While there are still many structural flaws in the financial and housing industries and the unemployment is at a 25 year high of 9.4% (though it dropped in July from 9.5% in June), consumers are feeling better about the economy and their own prospects in it.

So, what does this mean? Well, the markets can still be volatile, but overall the market seems to be feeling better about the economy than it was in February. The Conference Board Consumer Confidence Index though retreated from June is at a healthy 46.6.

Given that consumer sentiment is improving, it is clear that the US mobile data market is all but back from the recession. While some segments within the mobile industry might be suffering, there has been an increase in spending overall.

What to expect in the coming months?

We noted in our Q3 2008 note that we will get a better picture of the impact of the recession on the wireless industry in Q109 as it was the first full quarter after the seasonal holiday quarter. There are two micro trends that are clear. First, as expected, due to the high unemployment, the data card segment took a hit. It is starting to recover in due course as more of the workforce comes back over in the next 18 months.

Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid constituted 82% of the net-adds in Q209 up from 61% in Q109 and 21% in Q208. It is not clear if the good times will bring back the prepaid subscribers to the postpaid realm or like the consumers who are canceling their landline connections and moving to mobile, these customers will get used to savings and the prepaid lifestyle. The fight for the low-end customer is also having an impact on the traditional prepaid players and the price pressure is reducing their margins.

It is quite likely that 50-60% of such consumers don’t go back to postpaid thus permanently lowering the ARPU base for such customers and carriers who have experienced more postpaid to prepaid shift will have to make up for the lost revenues elsewhere.

The landline replacement by Mobile trend continued now reaching almost 24% by Q209. Messaging continues to grow. The messaging volume was up 15% and messaging revenue was up 11% QoQ. The data access (excluding data card) including flat rate data plan subscriptions have also show significant strength lately. In addition to smartphones, we are also seeing increased mobile data activity amongst feature phone users. With its expanding 3G network, T-Mobile like its peers has started to benefit from smartphone penetration reaching to 6% of its subscriber base. Overall, the US market will exceed 25% penetration of smartphones in Q3 2009.

The increased use of smartphones and datacards is putting a pressure on carrier networks and accelerating their strategies to deploy LTE/WiMAX. We estimate that by end of 2009, the US mobile data traffic is likely to exceed 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, operators will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discuss mobile data traffic in much more detail in our paper “Managing Growth and Profits in the Yottabyte Era.” (I will be giving keynotes on the subject at the Mobile Innovation Week in Sept and at the ISACA meeting in Oct)

The positive factors are helping negate the negative factors and given the strength of 3G and smartphone adoption, the increase in activity on the appstores front, and in general, a better awareness of mobile data services and applications amongst consumers, any decline due to the loss of data card revenue and postpaid transition to prepaid accounts has been taken care off. In particular, Verizon and AT&T have done really well. Smartphones remain a bright spot, which in turn has a direct positive impact on the data revenues. Even with the decline in handset sales, smartphone segment will continue to increase in 2009 accounting for almost 30% of the overall device shipments.

There is also a concerted effort underway to move beyond the traditional subscriptions and expand the mobile universe to wireless-enable other consumer devices (What did your refrigerator say to your microwave while you were gone?).

Coming back to the 2009 forecasts, we are raising our estimates for the mobile data service revenues to $45B for the year. 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 Q209 US wireless data market is:

Service Revenues (Slides 11-12, 17-18)

• The US Wireless data service revenues grew 7% Q/Q to $10.6B in Q209. Compared to Q208, the data service revenues grew 30%.
• Verizon and AT&T accounted for 90% of the increase in data revenues in Q2 2009.
• The US mobile data service revenues crossed $10B for the second straight quarter and stays ahead of Japan and China by a distance.
• Verizon and AT&T experienced the most growth with over 8% increase Q/Q followed by T-Mobile at 6%.
• Verizon’s data revenues are now almost $4B/quarter only inches behind the global leader of over 10 years NTT DoCoMo.
• AT&T and Verizon now account for 69% of the market data services revenues and 61% of the subscriber base. Sprint had the fifth consecutive quarter of data revenue growth.
• The average industry percentage contribution of data to overall ARPU is now $27%. US market is likely to touch the 30% mark in 2009.
• The top four US carriers are now a permanent fixture in the top 10 global operators by mobile data service revenues occupying #3, #4, #6, and #8 spot respectively. Apart from NTT DoCoMo and China Mobile, Verizon Wireless and AT&T are the only two other operators generating more than $3B in quarterly mobile data service revenues.

ARPU (Slides 13-15)

• Overall ARPU decreased by $0.23 thus reversing the trend of the last three quarters. Average voice ARPU declined 13-15by $0.45 while average data ARPU grew by $0.68 or 5% and easily negated the drop in voice ARPU.
• Sprint led in data ARPU with $15.5 followed by Verizon at $14.96. In terms of % contribution, Verizon led with 29.28% followed by AT&T at 28.74%.

Subscribers (Slides 16-17)

• In Q209, the US market added approximately 2.8 M new subscriptions down 6% from Q109.
• The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q209, 65% of US subscribers were using some form of data services.
• The messaging volumes in the US market now average almost 540 messages/subscriber/month or at the frequency of almost at a message/hour/sub thus reaching close to the messaging leader Philippines.
• In terms of net-adds, thanks to the boost from the iPhone, ATT led in Q209 with 1.4M net-adds, edging its friendly rival Verizon which added 1.1M net subscriptions. T-Mobile net-adds reduced to 325K while Sprint lost 214K.
• The 3G penetration in the US stays at a healthy 40%+ in Q209. Verizon led the pack while T-Mobile is slowly expanding its 3G coverage. The growth in 3G and smartphones is helping offset some of the downward pressure on the data revenues and overall ARPU. (I will be moderating a panel “Ultraband: A Fast Platform For Innovation” at GigaOM’s Mobilize in Sept. We will discuss the future of broadband and its implications)

Applications and Services

• Non-messaging services continue to grab 50-65% of the data revenues for the US carriers.
• The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe became more prevalent in the US market with industry wide flat-rate pricing plans that included data. All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 18% of the consumers have flat-rate data plans.
• There are probably 18-20 sub-segments within mobile data services and consolidation looms. While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene is starting to heat up.
• The usage and data consumption trends are enabling carriers to accelerate their 4G plans and develop long-term business and technical strategies (We will be discussing the state of the industry and what lies ahead at the inaugural “Mobile Breakfast Series” on Sept 22nd in the panel discussion “State of the Union: Where do we go from here”)
• The appstores battle is intensifying with OEMs and carriers are announcing their plans and some of them are opening their wares to woo the developer community. In the midst of the appstores hoopla, Apple announced the passing of the 1.5 Billion download mark with increasing number of developers participating the ecosystem. The new functionality being released with 3.0 is taking the battle up a notch. The clear-cut business model of 30/70+ split is attractive to the long-tail of developers. While there is no dearth of applications, findability remains a challenge. Also, appstores are changing the monetization strategies for content and application developers and the industry is trying to figure out what “Open” means in the long-term. (Will be discussing this and more at CTIA in Oct)
• The App vs. Mobile Web discussion reached a surprisingly new crescendo. The evolution is pretty clear - for the applications that don’t require significant UI resources, it will be better to develop in for the browser, for intensive games, the native platform will be ahead of the browser advances. The location API access on the iPhone browser is breakthrough to have developers start thinking about the webapps. But, what does it do to the revenue model? (I will be moderating two panels on the subject in Nov at the Open Mobile Summit)

Handsets

• After falling below the 100M/quarter level in Q1, Nokia rebounded to sell 103M units in Q2 09. Samsung also exceed 50M with a strong second finish at 52M. LG finished a strong third with almost 30M in its bag and Motorola showed signs of strength by selling close to 15M units.
• The second quarter was dominated by two blockbuster launches of iPhone 3GS and Palm Pre. While iPhone continued to attract new customers, Pre suffered from a less than stellar launch strategy. By lowering the 3G device price to $99, Apple set the new bar in smartphone pricing leaving the rivals scrambling for response. T-Mobile launched another Android device last month.
• The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband - usage billing, UMA, Femtocells, Hotspot buys, WiMAX, LTE, and others.
• Rest of 2009 is eagerly awaiting the release of Palm Pre, several Android handsets from HTC, Samsung, Motorola, and others, Windows devices along with follow on of Danger devices, new model(s) of iPhone, and other touch screen devices.

Misc.

• Not surprisingly, Venture capital market experienced a continued decline in thefirst half of 2009, with companies announcing $1.2B in financings vs. $1.6B for 2H08 and $2.1B for 1H08. (Source: Rutberg)
• In a sign of convergence battles to come, T-Mobile’s @Home and various Femto cell initiatives are taking hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service.
• China crossed the 700M subscription mark last month. In terms of net-adds, India has outpaced China for every single month of the last one year. The Indian market added almost 140M vs. 100M in China during the last four quarters. (more discussion on the international market in our global market update next month)

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 Oct 2009. The next Global Wireless Data Market update will be issued in Sept 2009.

Your feedback is always welcome.

Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.

Thanks.

Chetan Sharma

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