Mobile Broadband

Mobile Broadband – New Applications and New Business Models Brough Turner

IMT-2000 Vision (for 3G) included LAN, WAN and Satellite Services Global Satellite Suburban Urban In-Building Picocell Microcell Macrocell Basic Terminal PDA Terminal Audio/Visual Terminal 2

The Internet is the killer platform • Mobile Internet access driving 3G data usage • Future business models an open question – Walled garden ? – Advertising ? – Other 2-sided business models ? 3

Leading Apps don’t depend on 3G • Voice ― still the largest revenue source – Bar none! • SMS ― 2nd largest mobile revenue source • Voice SMS, picture mail & video mail coming on strong Content ! Mobile TV Mobile social networking 4

Mobile Content • More music sold on-line than off-line in both China and Korea • Ringback tones – Created by SK Telecom in Korea in 2002; 30% adoption in just 9 months • Ringback tones today – Korea: ~55% adoption – China: ~50% adoption 5

Mobile Content • More music sold on-line than off-line in both China and Korea • Ringback tones – Created by SK Telecom in Korea in 2002; 30% adoption in just 9 months • Ringback tones today – Korea: ~55% adoption – China: ~50% adoption Any G, 1, 2, 3 or Fixed 6

Japanese Music Revenues Source: Infinity Venture Partners 7

Mobile TV 70% of new handsets in Japan are Mobile TV enabled Only Japan and Korea have multi-million Mobile TV subscriber bases 8

Mobile TV 70% of new handsets in Japan are Mobile TV enabled Only Japan and Korea have multi-million Mobile TV subscriber bases Broadcast services independent of 3G 9

Mobile Social Networking Mobile launch: 2000 2004 2006 2007 Source: Benjamin Joffe, Plus Eight Star Ltd. 10

Mobile Social Networking Mobile launch: 2000 2004 2006 2007 Mobile users: 50 M 6M 10 M 3M Source: Benjamin Joffe, Plus Eight Star Ltd. 11

Mobile Social Networking Mobile launch: 2000 2004 2006 2007 Mobile users: 50 M 6M 10 M 3M Profit (USD): $225M ~$100M ~$35M ($50M) Source: Benjamin Joffe, Plus Eight Star Ltd. 12

2.5G Mobile Social Networking Mobile launch: 2000 2004 2006 2007 Mobile users: 50 M 6M 10 M 3M Profit (USD): $225M ~$100M ~$35M ($50M) Source: Benjamin Joffe, Plus Eight Star Ltd. 13

“3G” Services • 3G-324M Video telephony • Location-based services • Push-to-Talk (VoIP w/o QoS) • Rich presence (instant messaging) • Fixed-mobile convergence (FMC) • IP Multimedia Services (w/ QoS) – Video sharing (conversational video on IP) • Converged “All IP” networks – the Vision 14

“3G” Services • 3G-324M Video telephony Limited adoption • Location-based services • Push-to-Talk (VoIP w/o QoS) Limited adoption • Rich presence (instant messaging) • Fixed-mobile convergence (FMC) Limited adoption • IP Multimedia Services (w/ QoS) – Video sharing (conversational video on IP) Limited adoption • Converged “All IP” networks – the Vision 15

“3G” Services • 3G-324M Video telephony Limited adoption • Location-based services Bypassed ! • Push-to-Talk (VoIP w/o QoS) Limited adoption • Rich presence (instant messaging) No traction • Fixed-mobile convergence (FMC) Limited adoption • IP Multimedia Services (w/ QoS) – Video sharing (conversational video on IP) Limited adoption • Converged “All IP” networks – the Vision Still waiting … 16

Mobile operators miss the boat • Location-based services (LBS) • Required in US for 911 services • Fully implemented (after multiple delays) • Not made attractive for 3rd parties Result: • All US location-based services based on alternate location approaches – GPS, Cell ID, Navizon, Skyhook 17

Mobile operators slow the boat • Billing Services – Mobile operators have efficient billing systems & own the customer relationship – DoCoMo showed (I-Mode in 1999) the enormous potential of affordable billing services – Yet billing still offered only via premium rate #s • Result: – 3rd party content is paid for via 3rd party billing systems or (multiple) premium rate SMS(s) 18

Mobile Broadband Access US prospects for “over the top” access to the open Internet 19

iPhone traffic per month 20

iPhone glimmer of what’s possible • Controlled eco-system – Applications approved by Apple – Must meet unpublished standards under contract between Apple & AT&T – E.g., can’t run VoIP over 3G, only over Wi-Fi But, $30/ month flat rate data plan (on top of $40+ phone plan) • Explosive growth in web usage 21

Mobile Internet Access • Available for PC’s with restrictions, e.g. no servers, no P2P, no substitution for private lines or frame relay • AT&T: 5GB @ $60/mo • Verizon: ditto • Sprint: ditto • No US operator offers flat rate unlimited plans 22

Breaking Oligopolies • Four or more viable competitors is what it takes; more than four and it can be rapid – Many examples in mobile voice telephony from around the world 23

Breaking Oligopolies • Four or more viable competitors is what it takes; more than four and it can be rapid – Many examples in mobile voice telephony from around the world • 2009: Three established US 3G operators – AT&T Mobility, Verizon Wireless & Sprint PCS – Flat rate data plans exist; but with caps – No unlimited open Internet access 24

Additional US 3G/4G Competition 25

Additional US 3G/4G Competition • USA (well financed) – Paid $4.2B for AWS spectrum in 2006 and committed additional $2.7B for initial rollout – Currently spending almost $1B per quarter, 3G had reached 1/3rd of cell sites as of 3Q08 26

Additional US 3G/4G Competition • USA (well financed) – Paid $4.2B for AWS spectrum in 2006 and committed additional $2.7B for initial rollout – Currently spending almost $1B per quarter, 3G had reached 1/3rd of cell sites as of 3Q08 • (build out partially financed) – WiMAX on Clearwire and Sprint spectrum 27

Additional US 3G/4G Competition • USA (well financed) – Paid $4.2B for AWS spectrum in 2006 and committed additional $2.7B for initial rollout – Currently spending almost $1B per quarter, 3G had reached 1/3rd of cell sites as of 3Q08 • (build out partially financed) – WiMAX on Clearwire and Sprint spectrum Potential for affordable flat rate mobile broadband in the US in 2010 28

Subscribers & Applications • Historically, only applications pre-installed on handsets had any traction – “On-deck” applications and content offers • Apple iPhone application store is on-deck – Provides access to 50K+ applications • Andriod store, RIM, Nokia, Qualcomm, Palm, Handango, Adobe, Samsung, … 29

Subscribers & Applications • Historically, only applications pre-installed on handsets had any traction – “On-deck” applications and content offers • Apple iPhone application store is on-deck – Provides access to 50K+ applications • Andriod store, RIM, Nokia, Qualcomm, Palm, Handango, Adobe, Samsung, … Application stores are the new “deck” 30

Handset diversity Remaining obstacle to widespread deployment of 3rd party applications 31

IMS doesn’t solve inter-operability 32

Handsets more & more diverse • Browsers – Openwave, Opera, Safari, … – Using: WebKit, Netfront, Presto, … • Runtime environments as several levels – Adobe AIR, .Net/Silverlight, Brew, JavaME, … • Operating systems – Symbian, WinMobile, Android, OpenMoko… • Hardware capabilities – CPUs, supported codecs, screen size, … 33

Internet will win in the end, but… Mobile Facebook by: http://www.flickr.com/photos/philiphubs/ 35

Important trends • App stores! – Easier distribution; Easier discovery • More and more smart phones • Richer browser capabilities – Approaching PC browser functionality • New access to device capabilities – User data (contacts, logs, …), events (incoming calls) and core functionality 36

Uniquely Mobile Internet • Phase 1 – cut down web, e.g. WAP • Phase 2 – full web accessible on mobile • Phase 3 – designed-for-mobile web – Optimize the mobile user experience; speed ups • Phase 4 – client-side mashups – telephony, address book, location, camera… • Phase 5 – apparent persistence – Despite battery limitations; widgets; push; … 37

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Challenges • Handset diversity • Pace of change • User interface – minimum clicks; max speed • Battery life – “chatty” apps drain power • Application concurrency – Manage events over browser, native & helper apps • Persistent user experience across multiple applications 39

Dealing with handset diversity • Browser-based application first • Optimize for top N phones by market share – For most applications, N likely equals 1-3, not 10-12 SmartPhone market share Source: StatCounter 40

Smart Phones & Feature Phones • Smart Phone adoption soaring – Nokia, Blackberry, iPhone, RIM, WinMobile, Palm, Android, … – Moore’s law suggests it will only get better But • 85% of US phones are “feature phones” – Higher percentage in emerging markets • Application environments emerge – Java, Flash, Qt and ever richer web runtimes 41

Expectations are clear Today Mobile Telephony Phone Mobile Web Browser Camera Media Player 42

Expectations are clear Tomorrow Today Mobile Telephony Phone Mobile Telephony Phone Mobile Browser Web Browser Mobile Web 2.0 Camera Camera Media Player Media Player 43

Biggest Take-Away The initiative has passed to application developers 44

Dumb Pipes or New Service Opportunities? How operators can profit while providing open mobile access to the Internet 45

Advertising won’t cover lost voice $ Source: Telco 2.0 Manifesto, STL Partners Ltd. 46

Two-Sided Markets • eBay connects sellers and buyers • Nightclubs: women get in free • Media – Newspapers – low prices for subscribers facilitates sales of advertising – Broadcast TV – free attracts viewers facilitating sales of advertising • Akamai caching benefits – Free to ISPs; Paid for by content providers 47

800 numbers • The original telco 2-sided play • Bell system provided retail phone service to essentially all US consumers • Offered “800 service” to businesses, helping them connect with their customers and prospects 48

Billing Service • Most operators cautious about partnering – Fear of “dumb pipe” slow roll out of new services • DoCoMo i-mode 2G data service launched 1999 – Small screens, slow (9.6 kbps) data rate • But i-mode business model was wide open – Free development software kits; No access restrictions – DoCoMo’s “bill-on-behalf” with 9% commissions • i-mode big success in first 24 months – 55,000 applications, 30M subscribers ! 49

DoCoMo i-Mode: 2-sided business model • Subscribers pay for data access (flat rate monthly bundles) • Application providers pay DoCoMo for billing services 50

DoCoMo’s i-mode • Open to any application developer • Optional billing for a 9% commission 51

DoCoMo’s i-mode • Open to any application developer • Optional billing for a 9% commission Results: • Over 100K new applications in first 3 years • Over 15K applications use billing service • DoCoMo has highest data revenue per user, in the world, consistently for 10+ years 52

Operator Assets • Brand, PSTN numbers • Location (motion, context, …) • Fine-grained billing systems • User data – Name, address, age, devices, … • Rich presence • Customer relationships 53

Customers: Customers: Revenue Side 2 Revenue Side 1 Developers Retailers B2B VAS Millions of Government Telco Customers $ $ Brand Platform Advertisers Thousands Distribution Content of Segments Owners Telco – Retail Source: Simon Torrance © 2008, STL Partners Ltd/Telco 2.0TM Initiative 54

Rich mobile applications are coming Opportunities on all fronts 55

Rich mobile applications are coming Opportunities on all fronts but, business models will change, significantly 56

Thank you ! Brough Turner Ashtonbrooke Corporation http://www.ashtonbrooke.com Blog: http://blogs.broughturner.com Email: broughturner@gmail.com Skype: brough 57

Mobile Broadband

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