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Strategies for Driving Mobile Broadband Adoption. Portio Research Ltd

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Increase non-voice service adoption, raise ARPU, increase consumer adoption of mobile data services.

Increase non-voice service adoption, raise ARPU, increase consumer adoption of mobile data services.

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  • 1. Strategies for Driving Mobile Data and Broadband Adoption © 2010, Portio Research. All Rights Reserved 1
  • 2. Strategies for Driving Mobile Data and Broadband Adoption Portio Research Limited. Published June 2010 by Portio Research Limited © Copyright 2010. www.portioresearch.com info@portioresearch.com Disclaimer and Legal Notices Disclaimer Every care has been t aken i n t he pr eparation of t his study to ensure t hat the i nformation contained herein is accurate, factual and correct to the best of our knowledge, at time of publishing. All opinions, suppositions, estimates and recommendations included in this document are solely the opinions of the authors unless otherwise stated. Portio Research Limited accepts no liability for any loss or damage or unforeseen consequential loss or damage arising from the use of the information contained within this document. The opinions, suppositions, estimates and recommendations within this document cannot be guar anteed, and r eaders use t his information at their own r isk. T he i nformation published i n t his document i s su bject to c hange w ithout notice at any t ime, and P ortio R esearch L imited acce pts no liability or obligation to inform the reader of such changes. Portio Research Limited do not promote or endorse any specific companies or products, the views and opinions w e ex press in this document ar e w holly our ow n assessments, an d i ndependent f rom an y external i nterest or influence. M any terms and phrases and t rade names used i n this document are proprietary and P ortio R esearch Li mited recognises and ackn owledges that all trademarks are copyright, b elonging to their r espective o wners. Where p ossible, t his d ocument acco rds such terms and phrases and trade names to their respective owners. All Rights Reserved. No part of this document can be copied, shared, redistributed, transmitted, displayed in the public domain, stored or displayed on any internal or external company or private network or electronic retrieval system, nor reprinted, republished or reconstituted in any way without the express written permission of the publisher. Forwarding of this electronic document without the correct legal licence is theft. It’s unethical, immoral and against the law. If you have any questions about the legal licence conditions under which this document has been distributed, please contact Portio Research on info@portioresearch.com If you did not buy this document and a co lleague or associate has sent it to you, do no t assume you are l egally entitled t o r ead i t, i t i s your responsibility to ensure yo u have t he correct l egal l icence t o read this document. 2 © 2010, Portio Research. All Rights Reserved
  • 3. Strategies for Driving Mobile Data and Broadband Adoption Contents Introduction ......................................................................................................................... 9 Worldwide Mobile Market ................................................................................................. 12 Worldwide Data Services Market...................................................................................... 16 Strategies for Driving Data ARPU ................................................................................................. 16 Strategies for Creating End-User Demand for Mobile Data Services .............................................. 19 Data Services .............................................................................................................................. 20 Worldwide Mobile Messaging........................................................................................... 22 Worldwide Mobile Messaging ....................................................................................................... 22 Dominance of SMS ...................................................................................................................... 23 Mobile Messaging – Strategy Case Studies..................................................................... 26 Case Studies ............................................................................................................................... 26 Telkomsel Indonesia .................................................................................................................. 26 China Mobile ............................................................................................................................. 31 SoftBank Japan ......................................................................................................................... 36 Conclusion ................................................................................................................................... 42 Mobile Broadband – Introduction and Basics ................................................................. 45 Evolution of Mobile Broadband – GSM.......................................................................................... 46 UMTS (Universal Mobile Telecommunications System)............................................................... 46 HSPA (High Speed Packet Access) ........................................................................................... 46 HSPA+ (High-Speed Packet Access Plus/ Evolved HSPA) ......................................................... 46 LTE (Long Term Evolution) ........................................................................................................ 47 LTE Advanced (Long Term Evolution Advanced) ........................................................................ 47 EDGE (Enhanced Data Rates for GSM Evolution) ...................................................................... 48 EDGE Evolution or EDGE II ....................................................................................................... 48 Evolution of Mobile Broadband – CDMA ....................................................................................... 50 CDMA2000 1X EV-DO (Evolution-Data Only) Revision 0 ............................................................ 50 CDMA2000 1X EV-DO (Evolution-Data Only) Revision A ............................................................ 50 CDMA2000 1X EV-DO (Evolution-Data Only) Revision B ............................................................ 50 Evolution of Mobile Broadband – WiMAX ...................................................................................... 52 WiMAX (Worldwide Interoperability for Microwave Access) ......................................................... 52 Drivers and Inhibitors – Mobile Broadband .................................................................................... 53 Drivers ...................................................................................................................................... 53 Inhibitors ................................................................................................................................... 54 Mobile Broadband – Hardware ..................................................................................................... 55 USB Modems ............................................................................................................................ 55 Internal Modems........................................................................................................................ 55 PC Cards .................................................................................................................................. 56 Regional Versions – Mobile Networks ........................................................................................... 57 Mobile Broadband – State of the Markets ........................................................................ 59 Market Size.................................................................................................................................. 59 Mobile Broadband User Base..................................................................................................... 59 Mobile Broadband Revenue ....................................................................................................... 63 Regional Trends........................................................................................................................... 66 Europe ...................................................................................................................................... 66 Asia Pacific ............................................................................................................................... 68 North America ........................................................................................................................... 70 Latin America ............................................................................................................................ 72 Africa and Middle East ............................................................................................................... 74 Mobile Broadband – Strategy Case Studies .................................................................... 77 Case Studies ............................................................................................................................... 77 Vodafone UK ............................................................................................................................. 77 NTT DOCOMO Japan................................................................................................................ 82 Verizon Wireless US .................................................................................................................. 90 Orange UK ................................................................................................................................ 94 Key Parameters for the Uptake of Mobile Broadband .................................................................... 97 Mobile Applications – Introduction and Market Size ....................................................... 99 © 2010, Portio Research. All Rights Reserved 3
  • 4. Strategies for Driving Mobile Data and Broadband Adoption Overview ..................................................................................................................................... 99 Value Chain and Ecosystem ....................................................................................................... 100 Mobile Application Stores......................................................................................................... 102 Business Model and Revenue Sharing........................................................................................ 103 App-centric Model.................................................................................................................... 104 Operator-centric Model ............................................................................................................ 106 Market Size................................................................................................................................ 108 Mobile Applications User Base ................................................................................................. 108 Mobile Applications Revenue ................................................................................................... 111 Mobile Applications – Strategy Case Studies ................................................................ 115 Apple App Store ......................................................................................................................... 115 Business Model ....................................................................................................................... 116 Key Developments .................................................................................................................. 116 Vodafone 360 ............................................................................................................................ 117 Business Model ....................................................................................................................... 119 Key Developments .................................................................................................................. 119 GetJar ....................................................................................................................................... 120 Business Model ....................................................................................................................... 120 Key Partnerships ..................................................................................................................... 121 Downloads .............................................................................................................................. 121 Conclusion ................................................................................................................................. 123 App Stores .............................................................................................................................. 123 Conclusion ...................................................................................................................... 127 Current Scenario ........................................................................................................................ 127 The Big Question ....................................................................................................................... 129 Investment in Mobile Broadband Networks ............................................................................... 130 Growing Demand for Data Services ......................................................................................... 130 Coping with High Data Use ...................................................................................................... 132 AT&T – A Lesson To Be Learnt ................................................................................................ 132 Possible Answers and the Way Forward ..................................................................................... 134 Augmenting Networks .............................................................................................................. 134 Getting the Pricing Models Right .............................................................................................. 135 Future Outlook......................................................................................................................... 137 Appendices ..................................................................................................................... 139 Glossary.................................................................................................................................. 140 Portio Research Classifications ................................................................................................ 153 Companies Mentioned in this Report ........................................................................................ 154 About the Authors .................................................................................................................... 157 Also available from Portio Research Limited................................................................................ 158 4 © 2010, Portio Research. All Rights Reserved
  • 5. Strategies for Driving Mobile Data and Broadband Adoption List of Figures Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: Figure 18: Figure 19: Figure 20: Figure 21: Figure 22: Figure 23: Figure 24: Figure 25: Figure 26: Figure 27: Figure 28: Figure 29: Figure 30: Figure 31: Figure 32: Figure 33: Figure 34: Figure 35: Figure 36: Figure 37: Figure 38: Figure 39: Figure 40: Figure 41: Figure 42: Figure 43: Figure 44: Figure 45: Figure 46: Figure 47: Figure 48: Figure 49: Figure 50: Figure 51: Comparison on the basis of Mobile Broadband Parameters – Regional .......................... 10 Mobile Subscribers – Worldwide (In Million, 2009 – 2014F) ........................................... 12 Worldwide Subscriber Base – Regional Contribution (In Percent, 2009) ......................... 13 Worldwide Subscriber Base – Regional Contribution (In Percent, 2014F) ....................... 13 Mobile Subscriber Base Growth by Region (In Percent, 2009 – 2014F) .......................... 14 Factors Behind a Successful Data Service .................................................................... 17 Data Services Covered in Our Reports ‘Strategies for Creating End-User Demand for Mobile Data Services’, ‘Strategies for Driving Data ARPU’ and ‘Strategies for Driving Mobile Data and Broadband Adoption’.......................................................................... 20 SMS and MMS Traffic – Worldwide (In Billion, 2009) ..................................................... 22 Mobile E-mail and Mobile IM Users – Worldwide (In Million, 2009) ................................. 22 Revenue of Mobile Messaging Services (In USD Billion, 2009) ...................................... 23 Comparison of Mobile Messaging Services ................................................................... 24 SMS Traffic – Telkomsel and Excelcomindo (In Billion, 2007 – 2009) ............................. 26 SMS Traffic – Telkomsel (In Billion, Q1 2009 – Q4 2009)............................................... 27 SMS Revenue – Telkomsel (In USD Million, Q1 2009 – Q3 2009) .................................. 27 SMS Tariffs and Promotional Plans – Telkomsel ........................................................... 28 MMS Users – China Mobile (In Million, End 2007 – End 2009) ....................................... 31 MMS Traffic per Active User per Year – China Mobile (2007 – 2009) ............................. 32 MMS Revenue – China Mobile (In USD Million, 2007 – 2009) ........................................ 32 M-News Paying Subscribers – China Mobile (In Million, End 2006 – End 2009) .............. 34 Number of S! Information Channel Applications – SoftBank (January 2010 – April 2010) 36 3G Subscribers as a Percentage of Total Subscriber Base – Japan (In Percent, Q2 2009 – Q4 2009) ..................................................................................................................... 37 Mobile Internet Subscribers – SoftBank (In Million, Q2 2009 – Q4 2009) ....................... 38 Data ARPU – SoftBank (In USD, Q2 2009 – Q4 2009).................................................. 38 Revenue CAGR of Mobile Messaging Services (In Percent, 2009 – 2014F) ................... 42 UMTS Evolution – Data Transfer Rates......................................................................... 47 LTE Evolution – Data Transfer Rates ............................................................................ 48 EDGE Evolution – Data Transfer Rates......................................................................... 49 CDMA2000 Evolution – Data Transfer Rates ................................................................. 51 Drivers of Mobile Broadband......................................................................................... 53 Inhibitors of Mobile Broadband ..................................................................................... 54 USB Modems/ Dongles ................................................................................................ 55 PC and Express Cards ................................................................................................. 57 Mobile Broadband User Base – Worldwide (In Million, 2009 – 2014F) ............................ 59 Worldwide Mobile Broadband Users – Regional Contribution (In Percent, 2009)............. 60 Worldwide Mobile Broadband Users – Regional Contribution (In Percent, 2014F)......... 61 Mobile Broadband User Base Growth by Region (In Percent, 2009 – 2014F) ................. 61 Mobile Broadband Users as a Percentage of Total Mobile Subscribers – Regional (In Percent, 2009 & 2014F) ............................................................................................... 62 Mobile Broadband Revenue – Worldwide (In USD Billion, 2009 – 2014F)....................... 63 Worldwide Mobile Broadband Revenue – Regional Contribution (In Percent, 2009) ........ 64 Worldwide Mobile Broadband Revenue – Regional Contribution (In Percent, 2014F) .... 64 Mobile Broadband Revenue Growth by Region (In Percent, 2009 – 2014F).................... 65 Technology Forecast — Europe (In Million, End 2009 – End 2014F) .............................. 66 Regional Trends — Europe .......................................................................................... 67 Technology Forecast — Asia Pacific (In Million, End 2009 – End 2014F) ....................... 68 Regional Trends — Asia Pacific .................................................................................... 69 Technology Forecast — North America (In Million, End 2009 – End 2014F) ................... 70 Regional Trends — North America................................................................................ 71 Technology Forecast — Latin America (In Million, End 2009 – End 2014F) .................... 72 Regional Trends — Latin America................................................................................. 73 Technology Forecast —Africa and Middle East (In Million, End 2009 – End 2014F) ........ 74 Regional Trends — Africa and Middle East ................................................................... 75 © 2010, Portio Research. All Rights Reserved 5
  • 6. Strategies for Driving Mobile Data and Broadband Adoption Figure 52: 3G Subscribers as a Percentage of Total Subscriber Base – The UK (In Percent, December 2009) .......................................................................................................... 78 Figure 53: Increase in 3G Subscribers Percentage – The UK (In Percentage Points, Q1 2009 – Q4 2009) .......................................................................................................................... 78 Figure 54: FOMA Subscribers and Percentage of FOMA Subscribers in Total Subscriber Base – NTT DOCOMO (Q2 2009 – Q4 2009) .................................................................................. 82 Figure 55: Packet ARPU – NTT DOCOMO (In USD, Q2 2009 – Q4 2009) ...................................... 83 Figure 56: i-mode ARPU – NTT DOCOMO (In USD, Q2 2009 – Q4 2009) ...................................... 84 Figure 57: Subscribers – Bee TV (In Million, Q2 2009 – Q4 2009) .................................................. 85 Figure 58: Subscribers – i-concier (In Million, Q2 2009 – Q4 2009)................................................. 85 Figure 59: Number of Content Sites – NTT DOCOMO (Q2 2009 – Q4 2009) .................................. 86 Figure 60: Subscribers – Pake-hodai (In Million, Q2 2009 – Q4 2009) ............................................ 86 Figure 61: PC Data Communication Devices Sold – NTT DOCOMO (In Million, Q2 2009 – Q4 2009) .. ............................................................................................................................... 87 Figure 62: PC Data Communications Flat Rate and Use Based Data Plan Subscriptions – NTT DOCOMO (In Million, Q2 2009 – Q4 2009) ................................................................... 87 Figure 63: Data ARPU – The US (In USD, Q1 2009 – Q4 2009) ..................................................... 90 Figure 64: Monthly Data Plans for Mobile Subscribers – Verizon Wireless (March 2010) ................. 92 Figure 65: MNOs’ Absolute and Percentage Growth in 3G Subscriber Base – The UK (2009) ......... 94 Figure 66: 3G Dongle Subscribers and Percentage of 3G Dongle Subscribers in Total 3G Subscriber Base – Orange UK (Q2 2009 – Q4 2009) ..................................................................... 95 Figure 67: Basic Value Chain of the Mobile Applications Market ................................................... 101 Figure 68: App-centric Business Model ....................................................................................... 104 Figure 69: Operator-centric Business Model ................................................................................ 106 Figure 70: Revenue Sharing in the Case of an Operator-centric Business Model .......................... 107 Figure 71: Mobile Applications User Base – Worldwide (In Million, 2009 – 2014F) ........................ 108 Figure 72: Worldwide Mobile Applications Users – Regional Contribution (In Percent, 2009) ......... 109 Figure 73: Worldwide Mobile Applications Users – Regional Contribution (In Percent, 2014F) ..... 110 Figure 74: Mobile Applications User Base Growth by Region (In Percent, 2009 – 2014F).............. 110 Figure 75: Mobile Applications Revenue – Worldwide (In USD Billion, 2009 – 2014F) ................... 111 Figure 76: Worldwide Mobile Applications Revenue – Regional Contribution (In Percent, 2009) .... 112 Figure 77: Worldwide Mobile Applications Revenue – Regional Contribution (In Percent, 2014F) 112 Figure 78: Mobile Applications Revenue Growth by Region (In Percent, 2009 – 2014F) ................ 113 Figure 79: Apple’s App Store – Total Application Downloads........................................................ 115 Figure 80: Break-out of Available Applications by Category – Apple App Store (In Percent, April 2010) ............................................................................................................................. 116 Figure 81: Mobile Broadband User Base as a Percentage of Total Mobile Subscribers – Worldwide (In Percent, 2009 – 2014F) ........................................................................................ 128 Figure 82: Revenue CAGR of Mobile Data Services – Worldwide (In Percent, 2009–2014F) ......... 129 Figure 83: Mobile Broadband CAPEX and Revenues by Region (In USD Billion, 2010F)............... 130 Figure 84: Average Monthly Data Use for USB Dongles, Feature Phones and Smartphones – Worldwide (In GB, 2009) ............................................................................................ 131 Figure 85: Average Worldwide Selling Price of Nokia Handsets and Apple’s iPhone (In USD, 2007 – 2009) ........................................................................................................................ 135 Figure 86: Average Cost per MB of Mobile Data Services – North America (In USD, 2007 – 2009) 136 6 © 2010, Portio Research. All Rights Reserved
  • 7. Strategies for Driving Mobile Data and Broadband Adoption List of Tables Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Table 25: Mobile Subscribers – Regional (In Million, 2009 – 2014F) .............................................. 12 Success Factors – Telkomsel Indonesia ....................................................................... 30 Success Factors – China Mobile ................................................................................... 35 Success Factors – SoftBank Japan............................................................................... 41 Factors Affecting the Uptake of Mobile Messaging Services .......................................... 43 Number of Network Providers with High Speed Network Deployments – Regional (March 2010) .......................................................................................................................... 45 Examples of Partnerships between Mobile Operators and Laptop Manufacturers ........... 56 Regional Versions – Mobile Networks ........................................................................... 57 Mobile Broadband User Base – Regional (In Million, 2009 – 2014F) .............................. 60 Mobile Broadband User Base as a Percentage of Total Mobile Subscribers – Regional (In Percent, 2009 – 2014F) ............................................................................................... 62 Mobile Broadband Revenue – Regional (In USD Billion, 2009 – 2014F) ......................... 63 Success Factors – Vodafone UK .................................................................................. 81 Success Factors – NTT DOCOMO Japan ..................................................................... 89 MNOs’ Key Performance Indicators – The US (2009) .................................................... 90 Success Factors – Verizon Wireless US ....................................................................... 93 Success Factors – Orange UK...................................................................................... 96 Strategies to Push Mobile Broadband Uptake................................................................ 97 Major Application Stores ............................................................................................. 103 Mobile Applications User Base – Regional (In Million, 2009 – 2014F)........................... 109 Mobile Applications Revenue – Regional (In USD Million, 2009 – 2014F) ..................... 111 Top 20 Applications on GetJar and Total Downloads, as of November 2009 ................ 122 Key Success Factors for Application Stores ................................................................ 125 Mobile Applications and Data Transfer Rate Requirements.......................................... 131 Strategies to Cope with the Increasing Demand Data Services place on Networks ....... 134 Prices of iPhone Models offered by AT&T ................................................................... 136 © 2010, Portio Research. All Rights Reserved 7
  • 8. Strategies for Driving Mobile Data and Broadband Adoption Chapter 1 Introduction 8 © 2010, Portio Research. All Rights Reserved
  • 9. Strategies for Driving Mobile Data and Broadband Adoption Introduction Mobile handsets have become an intrinsic part of users’ lives worldwide. For many, it is the only way to co mmunicate w ith f amily and f riends, and n ot o nly are these users today completely dependent on t heir mobile handsets f or communication, they also r ely on them for several other purposes that are equally important in their daily lives. Mobile handsets are now used for purposes previously associated with only PCs. Users are, for example, accessing the Internet on t heir hand sets, buyi ng tickets f or events and t ravel, and finding routes to their favourite destinations through maps. With the changing requirements of mobile subscribers, operators worldwide need to innovate and take proactive initiatives in order to retain subscriber interest in their services. Mobile broadband i s one s uch dynamic area where a num ber of changes are taking pl ace; millions of mobile applications are being developed worldwide and low-cost smartphones are being introduced by mobile network operators (MNOs). MNOs worldwide have taken several i nitiatives to cater to the i ncreasing uptake of mobile broadband services, i ncluding the deployment of advanced and high-speed mobile networks. Mobile broadband services are al ready popular i n advanced m obile markets and operators in em erging markets ar e al so m aking e fforts t o pen etrate t hese services. O perators ar e offering a variety of attractive price plans, ranging from ‘pay as you go’ to ‘flat-rate unlimited use’ pl ans, to provide freedom of choice to their subscribers to select a dat a pl an that best suits their requirements. Apart from pricing, operators are trying to attract more users to their mobile broadband services with a range of high quality hardware offerings, including laptops and dongles manufactured by leading manufacturers worldwide. In order to deliver these advanced offerings, operators are upgrading their mobile networks, including their core networks. Currently, more than 300 MNOs worldwide have deployed CDMA 2000 net works, which i ncludes both CDMA2000 1 X and 1x EV-DO. 1 The num ber of operators worldwide with hi gh s peed packe t acce ss (HSPA) depl oyments i s also abo ve 300. 2 Some of the major MNOs in advanced markets, such as the US and Japan, have already run trials on LTE or 4G networks; and many MNOs worldwide have expressed plans to depl oy LTE net works i n t heir r espective markets by end-2013. W ith such infrastructure deployments scheduled, the future for mobile broadband services looks promising. MNOs w orldwide hav e t o constantly make e fforts t o en sure t hat t heir mobile br oadband packages ar e b etter i n e very sense. T he four most im portant parameters that M NOs worldwide should focus on in order to make their mobile broadband offerings more attractive are listed below: • Network • Pricing • Content • Devices The figure on the next page compares the performance of regions worldwide on the basis of these parameters. 1 2 Source: CDMA Development Group (CDG) Source: 3G Americas © 2010, Portio Research. All Rights Reserved 9 Mobile broadband services are already popular in advanced mobile markets and operators in emerging markets are also making efforts to penetrate these services.
  • 10. Strategies for Driving Mobile Data and Broadband Adoption Figure 1: Comparison on the basis of Mobile Broadband Parameters – Regional Devices Network 5 4 3 2 1 0 3 Pricing Content North America Europe Asia Pacific Latin America Africa and Middle East Source: Portio Research Ltd. North America leads other regions worldwide in terms of advanced mobile network deployments and i nnovative co ntent o fferings. V erizon and A T&T ar e all s et t o launch 4G networks i n 20 11, f or which t rials ar e cu rrently running. When it co mes t o m obile co ntent, Apple’s App Store is the clear leader among application stores. Europe al so s cores hi gh on t his net work parameter, at tributable primarily to t he advanced Western European markets – as many countries in Eastern Europe are still developing their networks. In t erms o f de vices and pr icing of se rvices, A sia P acific i s the l eading regional m arket. In some co untries, such a s Chi na an d I ndia, MNOs are f looding the market w ith low-cost smartphones ca pable of per forming any function and r unning any application. Whereas in markets such a s Ja pan and S outh K orea, MNOs are offering some of t he most adv anced handsets t hat al low subscribers to get t he b est user experience f rom mobile appl ications. MNOs in Asia Pacific are known to offer mobile services at prices well below the worldwide average, as they recognise that pricing is probably the most important factor influencing the decision of the r egion’s m obile subscribers. For t his reason, MNOs i n Asia P acific are especially careful when pricing their offerings. 3 Note: The value of each axis ranges between 0 and 5, with 0 denoting the worst performer and 5 denoting the best performer for the respective parameter. For instance, a score of 5 for pricing does not imply that the region has the highest prices, but rather it is offering services at low prices keeping the subscribers’ price sensitivity in perspective. 10 © 2010, Portio Research. All Rights Reserved MNOs in Asia Pacific are known to offer mobile services at prices well below the worldwide average, as they recognise that pricing is probably the most important factor influencing the decision of the region’s mobile subscribers.
  • 11. Strategies for Driving Mobile Data and Broadband Adoption Chapter 2 Worldwide Mobile Market © 2010, Portio Research. All Rights Reserved 11
  • 12. Strategies for Driving Mobile Data and Broadband Adoption Worldwide Mobile Market The worldwide mobile market continues to grow at an exponential rate. In 2009, even as the world eco nomy was cl ouded by uncertainty owing t o t he do wnturn, t he worldwide m obile subscriber base saw a year-on-year increase of approximately 15 percent. Looking forward, the worldwide m obile s ubscriber bas e i s f orecast to grow at a C ompound Annual G rowth Rate ( CAGR) of 6. 7 per cent bet ween 2009 and 2014 , and reach 6. 3 billi on subscribers by end-2014. Figure 2: Mobile Subscribers – Worldwide (In Million, 2009 – 2014F) 7,000 Mobile Subscribers (In Million) 6,000 5,000 4,570.6 5,045.8 5,440.6 6,065.1 5,777.9 6,310.8 4,000 3,000 2,000 1,000 0 2009 2010F 2011F 2012F 2013F 2014F Year Source: Portio Research Ltd. F – Forecasted The figure below highlights the growth of the regional mobile subscriber bases from 2009 to 2014. Table 1: Mobile Subscribers – Regional (In Million, 2009 – 2014F) 4 Mobile Subscribers (In Million) Region 2009 2010F 2011F 2012F 2013F 2014F Europe 1,051.6 1,097.0 1,131.9 1,159.9 1,181.8 1,198.1 Asia Pacific 2,106.7 2,388.0 2,627.3 2,834.2 3,010.6 3,158.8 North America 311.3 327.5 342.0 354.9 366.3 376.4 Latin America 486.4 530.3 569.2 604.6 636.4 666.4 Africa and Middle East 614.5 703.1 770.1 824.3 869.9 911.0 Total 4,570.6 5,045.8 5,440.6 5,777.9 6,065.1 6,310.8 Source: Portio Research Ltd. 4 Note: Sum of regional numbers may not equal total due to rounding off errors. 12 © 2010, Portio Research. All Rights Reserved The worldwide mobile subscriber base is forecast to grow at a CAGR of 6.7 percent between 2009 and 2014.
  • 13. Strategies for Driving Mobile Data and Broadband Adoption Asia Pacific possesses the largest mobile subscriber base worldwide. In 2009, this regional subscriber base co nstituted 46. 1 per cent of t he worldwide m obile subscriber base; Europe placed second with a 23 percent contribution. The figure below shows the regional share in the worldwide mobile subscriber base in 2009. Figure 3: Worldwide Subscriber Base – Regional Contribution (In Percent, 2009) 5 46.1% 6.8% 10.6% 13.4% 23.0% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. Asia P acific will co ntinue t o dominate t he worldwide m obile industry in t erms of subscriber base in the coming years, and will strengthen its position further with over 50 percent of the worldwide mobile subscriber base residing in the region by end-2014. Europe is expected to lose some of its share, with its contribution dropping to 19 percent by end-2014. The figure below highlights the regional share in the worldwide mobile subscriber base in 2014. Figure 4: Worldwide Subscriber Base – Regional Contribution (In Percent, 2014F) 6 50.1% 6.0% 10.6% 14.4% 19.0% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. F – Forecasted 5, 6 Note: The percentages do not add up to 100 percent because of rounding off errors. © 2010, Portio Research. All Rights Reserved 13
  • 14. Strategies for Driving Mobile Data and Broadband Adoption The worldwide mobile subscriber base is forecast to grow at a CAGR of 6.7 percent between 2009 and 2014. During this period, Asia Pacific will lead regions worldwide in terms of subscriber growth with a CAGR of 8.4 percent, albeit with Africa and Middle East in close pursuit, w hile E urope is ant icipated t o w itness t he l owest gr owth r ate w ith a CA GR o f 2. 6 percent. Figure 5: Mobile Subscriber Base Growth by Region (In Percent, 2009 – 2014F) 8.4 CAGR (In Percent) 9 CAGR Worldwide = 6.7 % CAGR 6.7% 8.2 6.5 6 3.9 2.6 3 0 Asia Pacific Europe North America Latin America Africa and Middle East Region Source: Portio Research Ltd. F – Forecasted 14 © 2010, Portio Research. All Rights Reserved
  • 15. Strategies for Driving Mobile Data and Broadband Adoption Chapter 3 Worldwide Data Services Market © 2010, Portio Research. All Rights Reserved 15
  • 16. Strategies for Driving Mobile Data and Broadband Adoption Worldwide Data Services Market ‘Strategies for Dr iving M obile Dat a and B roadband A doption’ i s t he l atest edi tion in Portio Research’s series of reports covering the worldwide mobile data services market. It follows earlier anal ysis i n Portio’s ‘Strategies f or Driving Data ARPU’ (published in 2008) and ‘S trategies f or Cr eating E nd-User Dem and f or M obile Dat a S ervices’ (published in 2006), which both covered the popular data services of their time, and the strategies adopted by MNOs worldwide. The section bel ow briefly discusses the ev olution of m obile data services and the ef fective strategies adopted by MNOs to popularise their data offerings. Strategies for Driving Data ARPU The ‘Strategies f or Dr iving Dat a A RPU’ report anal ysed m obile oper ators’ shift i n focus towards data services, mainly due t o decl ining revenues from voice services. This r eport focussed on summarising successful data strategies adopted by mobile network operators, and covered the following types of services: • Messaging services  SMS  Mobile e-mail  Mobile IM • Non-messaging mobile services  Mobile music  Mobile games  Mobile TV and video  Mobile user generated content  Mobile commerce  Mobile portals Furthermore, t he r eport i ncluded i nformation on i nnovative dat a s ervices adopt ed by emerging nations such as India, Egypt, China, South Africa and Kenya. This r eport s ummarised various f actors t hat enabl e MNOs to l aunch and dr ive s uccessful data services. Let us look at the highlights of these factors. 16 © 2010, Portio Research. All Rights Reserved
  • 17. Strategies for Driving Mobile Data and Broadband Adoption Figure 6: Factors Behind a Successful Data Service Expand Perceived Value Continuing Updgrades Business Model Factors Behind a Successful Data Service Minimize 'Clicks to Access' Choosing the Right Data Service Launch Timing Source: Portio Research Ltd. Expand Perceived Value The r eport hi ghlighted t he im portance of implementing a s ervice t hat adds v alue t o subscribers, rather t han being just an addi tion/upgrade t o t he exi sting ar ray of s ervices. Furthermore, it is equally important to price the service while keeping in mind the target audience. The service price is a co mbination o f t he following factors – understanding t he target audi ence and t heir pr eferences, t he value t hat t he new service w ill deliv er t o the audience, and a cost that falls within the spending power of the target audience. Striking the right balance between these factors can make a new data service successful. A good ex ample o f de livering value t o s ubscribers i s V odafone E gypt’s M inicall s ervice. Minicall is an audi o m essaging service t hat all ows subscribers t o r ecord sh ort voice messages and send them as SMS to any network. Minimise ‘Clicks to Access’ For mass adoption of a data service, the operator should ensure that the usability of such a service is simple and t he service is easy to acce ss. A subscriber m ay lose i nterest if they have to go through several links/buttons to access the service. Though it is understandable that not all services can be provided at the single click of a button, the operator should ensure that the portal that hosts the data service is accessible and easy to use. 3 I talia launched new han dsets al ong with the l aunch of its mobile T V s ervices. T hese handsets came with a TV button that gave subscribers easy access to mobile TV. Choose the Right Data Service An oper ator should not onl y understand t he subscriber’s need for a dat a service, it should also under stand t he r esources required to im plement s uch a s ervice. Each dat a s ervice requires a different degr ee of r esources; an oper ator should keep a watchful eye over t he feasibility of i ntroducing a s ervice, eas e of upgr ading it, and t he ca pital and manpower required. © 2010, Portio Research. All Rights Reserved 17 An operator should not only understand the subscriber’s need for a data service, it should also understand the resources required to implement such a service.
  • 18. Strategies for Driving Mobile Data and Broadband Adoption Launch Timing Correctly planning the right time to launch a data service plays a very important part in helping subscribers to easily relate to the service. Correctly planning the right time to launch a data service Among the notable success stories highlighting the importance of effective launch timing is plays a very important part in NTT DOCOMO’s l aunch of m obile e-mail services in Ja pan, since Ja panese subscribers helping subscribers to easily were m ore i nclined to write lengthy messages, as opp osed to the general trend of sending relate to the service. SMS. Similarly, 3 Italia launched its mobile TV services during the 2006 football World Cup (which Italy went on to win). These two services garnered success with increased user base for the services, and subsequently increased data ARPU. Creating the Right Business Model For a data service to be a commercial s uccess, an appropriate business model must be identified. Even if a data service achieves high adoption rates, the operator may not gain the maximum benefit if the business model is not right. As data services involve other players in the value chain, it is important for the operator to have control over this value chain to garner success from the services. NTT DOCOMO’s DCMX (Mobile Credit Card) service was lauded for its successful business model. N TT DO COMO acq uired a s take i n Sumitomo Mitsui Car ds, a co mpany with experience i n del ivering cr edit ca rd s ervices. T his par tnership was cr ucial for cr eating a successful business model for the DCMX data service. Be Ready with Upgrades The success of a dat a service is qui ckly outlived by new i nnovative services; its lifecycle is short due to the high number of innovations in the mobile industry. Hence, operators should offer regular upgrades to the portfolio of services provided. The pr ogression f rom monophonic r ingtones t o pol yphonic ringtones t o ca ller r ing back tones, and f inally, to f ull track music downloads demonstrates the i mportance of upgr ades within existing services. 18 © 2010, Portio Research. All Rights Reserved The success of a data service is quickly outlived by new innovative services; its lifecycle is short due to the high number of innovations in the mobile industry.
  • 19. Strategies for Driving Mobile Data and Broadband Adoption Strategies for Creating End-User Demand for Mobile Data Services Our ‘S trategies for Cr eating E nd-User Dem and f or M obile Dat a S ervices’ r eport was released in 2006. As voice services were getting commoditised in the developed nations and operators were forced to adopt new data services, this report analysed the strategies adopted by operators for different mobile services. This report acted as a ‘best practice’ case hi story that co uld be f ollowed by mobile ope rators. S ome o f t he im portant recommendations made by the report are as follows: Choice and Flexibility A dat a s ervice w ill be s uccessful if it offers several options. T hese opt ions can be with respect t o t he a vailability of t he co ntent and t he hands ets, and al so h ow t he co ntent i s stored in the handset after its purchase. Segmentation Segmenting the data service according to the target audience is a key factor in the success of the service. A data service, even if it is good, may not achieve success if it is not targeted at the right audience. Low-Cost Services and Transparent Pricing A data service should be priced according to the affordability of the target audience. Additionally, a service should be cross-subsidised; for example, to drive the use of SMS, the operator can increase voice tariffs and simultaneously reduce SMS prices. High-Value Proposition A subscriber will use a data service only if they can realise the value in using such a service. The value offered by the service should be per ceived as greater than the cost of using the service. Focus on Brand Subscribers feel more confident in using the services of a known brand. Hence, branding is a key aspect that drives the uptake of a s ervice. Operators should create partnerships with leading brands to provide data services. Innovation Innovative s ervices al ways ca tch subscribers’ attention. A n i nnovative s ervice s hould be supplemented with devices that can support it. Simplicity and Ease of Use Operators and handset vendors should pay attention to the user-interface of a data service. A great data service that is not easy to use may not garner success. SMS is an apt example in this case, as the service is easy to use. Handsets Handset vendors should work in coordination with mobile operators to launch handsets that are ca pable o f s upporting i nnovative s ervices l aunched by operators. Handsets should be simple to use and offer several choices in terms of features and prices to match subscribers’ expectations. © 2010, Portio Research. All Rights Reserved 19 A subscriber will use a data service only if they can realise the value in using such a service. The value offered by the service should be perceived as greater than the cost of using the service.
  • 20. Strategies for Driving Mobile Data and Broadband Adoption Data Services Figure 7: Data Services Covered in Our Reports ‘Strategies for Creating End-User Demand for Mobile Data Services’, ‘Strategies for Driving Data ARPU’ and ‘Strategies for Driving Mobile Data and Broadband Adoption’ Messaging Services • • • • SMS MMS E-Mail IM As indicated i n ou r e arlier r eports (‘Strategies for C reating End-User D emand f or M obile D ata Services’ and ‘ Strategies for D riving D ata A RPU’), S MS co ntinues to be t he m aster of al l messaging services. R evenue generated by SMS services currently equates to much more t han the consolidated revenues of the other messaging services and this trend is expected to continue. Emerging Broadband Services • • • Social Networking Audio and Video Downloads/ Streaming Online Gaming The evolution of mobile communication from simple voice and SMS to advanced data services and beyond has now led to the introduction of mobile broadband services. These services have started to achieve great popularity and penetration across most markets. Social networking has achieved immense worldwide popularity. Social networks allow subscribers to co nnect w ith f riends and al so upl oad p ictures/videos. A s m obile br oadband a llows access to social networks through mobiles, it was an immediate success. The key drivers for mobile social networking are ease of using the service, ability to access the service anytime and anywhere, and the availability of mobile applications to send and receive messages or upload pictures/ videos. In the near future, social networking is expected to be a major driver for mobile broadband. Audio downloads became popular when mobile handsets with audio playback capabilities were introduced i n t he market; t he sa me l ogic applied t o video dow nloads. F urthermore, w ith the increasing popularity of streaming websites, mobile audio/video streams are also on the rise. Another popular mobile broadband service is online gaming, which has achieved popularity due to the availability of high-end handsets. Online gaming is more popular among the youth generation, supported by the availability of free and ad-funded games. • Other Services • Services with limited popularity  Mobile TV  Video Calling Popular services from the past  Ringtones Mobile TV has yet not achieved the universal popularity it was expected to attain. Countries such as France and Italy, that have a particularly high inclination towards sports, have adopted Mobile TV quickly and have contributed to the success of such services in these nations. However, similar success has not been replicated in developing nations, mainly due to the high cost of services. Video calling services have also seen limited adoption, mainly due to the high cost of the services, but also because video calling requires 3G enabled handsets, which limits service use to high-end smartphones only. Ringtones slowly drowned under the evolution of mobile handsets and full track downloads. When a handset is capable of playing MP3 songs and the same can be used as a ringtone, the use of ringtones markedly declines. Source: Portio Research Ltd. 20 © 2010, Portio Research. All Rights Reserved
  • 21. Strategies for Driving Mobile Data and Broadband Adoption Chapter 4 Worldwide Mobile Messaging © 2010, Portio Research. All Rights Reserved 21
  • 22. Strategies for Driving Mobile Data and Broadband Adoption Worldwide Mobile Messaging Worldwide Mobile Messaging Mobile messaging services ar e t he m ost widely used m obile dat a services worldwide, and operators worldwide hav e been u sing these services to shore u p revenues i n recent years as v oice m argins have declined. SMS i s the m ost popular m obile m essaging service, and accounts for the largest contribution to MNOs’ data revenues. MMS has typically performed well in advanced markets, but has struggled in emerging markets. Mobile e-mail and mobile instant m essaging (IM) are f aring well i n developed mobile m arkets, and they are seeing uptake in developing countries as well. The figure below compares the worldwide SMS and MMS traffic for 2009. Figure 8: SMS and MMS Traffic – Worldwide (In Billion, 2009) 6,000 5,449.3 Traffic (In Billion) 5,000 4,000 3,000 2,000 1,000 119.4 0 SMS MMS Service Source: Portio Research Ltd. The figure below compares the number of mobile e-mail and mobile IM users worldwide for 2009. Figure 9: Mobile E-mail and Mobile IM Users – Worldwide (In Million, 2009) 350 330.5 Users (In Million) 300 250 191.1 200 150 100 50 0 Mobile E -mail Mobile I M Service Source: Portio Research Ltd. 22 © 2010, Portio Research. All Rights Reserved Mobile e-mail and mobile instant messaging (IM) are faring well in developed mobile markets, and they are seeing uptake in developing countries as well.
  • 23. Strategies for Driving Mobile Data and Broadband Adoption Dominance of SMS The m obile m essaging segment comprises four services—SMS, MM S, mobile e -mail and mobile I M. S MS r ules t he mobile messaging world beca use of its ubi quity in all mobile markets worldwide and its use by nearly every mobile s ubscriber w orldwide. The f igure below compares revenue generated by each mobile messaging service in 2009. Figure 10: Revenue of Mobile Messaging Services (In USD Billion, 2009) 120 102.3 Revenue (In USD Billion) 100 80 60 40 26.7 17.3 20 4.3 0 SMS MMS Mobile E -Mail Mobile I M Service Source: Portio Research Ltd. The figure c learly highlights t he dominance o f SMS; i t a lone gener ated over double the collective revenues for the other three services in 2009. The primary factors behind the popularity of SMS are: • Simplicity • Ease of use • Low cost • Compatibility with all handsets MMS, mobile e-mail and mobile IM services cannot be availed on simple handsets, and instead demand a certain set of handset capabilities. In addition, subscribers are required to possess greater technical kn ow-how t o use these services w hereas using S MS i s more straight forward. The figure be low co mpares t he f our mobile messaging s ervices on t he bas is of t he aforementioned parameters. © 2010, Portio Research. All Rights Reserved 23 MMS, mobile e-mail and mobile IM services cannot be availed on simple handsets, and instead demand a certain set of handset capabilities.
  • 24. Strategies for Driving Mobile Data and Broadband Adoption Figure 11: Comparison of Mobile Messaging Services SMS Simplicity MMS Ease of Use Mobile E-mail Cost Mobile IM Handset Compatibility Source: Portio Research Ltd. 24 © 2010, Portio Research. All Rights Reserved
  • 25. Strategies for Driving Mobile Data and Broadband Adoption Chapter 5 Mobile Messaging – Strategy Case Studies © 2010, Portio Research. All Rights Reserved 25
  • 26. Strategies for Driving Mobile Data and Broadband Adoption Mobile Messaging – Strategy Case Studies Case Studies Telkomsel Indonesia Mobile Subscribers: 81.6 million (End-2009) Market Share: 49.0 percent (End-2009) Monthly ARPU: USD 4.8 (2009) SMS Traffic: 26.9 billion (Q4 2009) About the Operator Telkomsel is t he l argest m obile net work operator i n I ndonesia with cl ose t o 50 per cent market share at end-2009. Rationale for Selecting the Operator The oper ator has l aunched several i nnovative services i n t he m arket t hat have spurred i ts data revenue, and in 2009 the MNO’s non-voice revenue was 29 percent of its total operating r evenue. S MS has l ed t he gr owth o f da ta s ervices i n Indonesia, w ith T elkomsel subscribers ge nerating t he hi ghest S MS t raffic in t he co untry. T he figure bel ow co mpares the annual SMS traffic for the two leading MNOs in Indonesia. Figure 12: SMS Traffic – Telkomsel and Excelcomindo (In Billion, 2007 – 2009) 7 120 100.4 SMS Traffic (In Billion) 100 78.0 80 60 63.6 49.5 40 20 12.6 17.8 0 2007 2008 2009 Year Telkomsel Excelcomindo Source: Portio Research Ltd. All oper ators i n Indonesia are t rying t o dif ferentiate their SMS o fferings w ith ch eap and attractive pr ice pl ans, and T elkomsel i s no ex ception. Ho wever, T elkomsel i s not onl y focussing on service pricing, but is also making efforts to increase the quality and appeal of its SMS o fferings; this i s done by ensuring regular S MS pl atform upgr ades and launching innovative s ervices s uch a s SMS Me , Web 2 SMS, SMS G IFT, SM S Pro , SM S2.0 a nd Facebook SMS. Furthermore, w ith t he i ncreasing use of S MS, i t i s al so m aking e fforts t o maintain network quality. Additionally, the MNO is promoting SMS by offering services that use SMS as the access platform. 7 Note: For Telkomsel, only chargeable SMS are shown in the Figure. 26 © 2010, Portio Research. All Rights Reserved With the increasing use of SMS, Telkomsel is also making efforts to maintain network quality.
  • 27. Strategies for Driving Mobile Data and Broadband Adoption The figure below highlights the quarterly growth in Telkomsel’s SMS traffic. Figure 13: SMS Traffic – Telkomsel (In Billion, Q1 2009 – Q4 2009) 8 28 SMS Traffic (In Billion) 26.7 26.9 Q3 2009 Q4 2009 26 24 23.9 22.9 22 20 Q1 2009 Q2 2009 Quarter Source: Portio Research Ltd. In 2009, SMS r evenue constituted 74 per cent of Telkomsel’s d ata revenue. T he average price o f an S MS has reduced ov er t he ye ars, but the s urge i n S MS t raffic has of fset t his decline, and this has enabled the operator to increase SMS revenue with each succeeding quarter of 2009. The figure below depicts the growth in Telkomsel’s SMS revenue in 2009. Figure 14: SMS Revenue – Telkomsel (In USD Million, Q1 2009 – Q3 2009) SMS Revenue (In USD Million) 300 279.9 280 282.5 Q3 2009 Q4 2009 260 236.6 240 220 206.1 200 Q1 2009 Q2 2009 Quarter Source: Portio Research Ltd. In 2009, T elkomsel’s S MS r evenue w itnessed a 23 per cent year-on-year growth. S MS revenue generated in Q4 2009 grew by 37 percent in comparison with Q1 2009 revenue. 8 Note: These are only chargeable SMS. © 2010, Portio Research. All Rights Reserved 27
  • 28. Strategies for Driving Mobile Data and Broadband Adoption Strategies Attractive Tariffs and Promotional Plans To maintain subscriber i nterest i n its SMS s ervices, t he oper ator f requently introduces promotional pl ans and t ariffs; this results in increased use of s ervices. The figure below highlights some of the plans launched by Telkomsel. Figure 15: SMS Tariffs and Promotional Plans – Telkomsel Jan 2009 ‘Free 300 SMS’ was launched and offered 300 free SMS to Kartu subscribers between 00.00-19.00 hours after they registered for the service by paying a registration fee of USD 0.2 (IDR 2,000) Mar 2009 ‘100 Get 100’ was introduced and allowed Telkomsel subscribers to send 100 free SMS after sending 100 chargeable SMS Apr 2009 ‘simPATI SMS Package’ was introduced offering cheaper SMS prices for simPATI users with two different packages: ‘Regular’ and ‘Gift’ May 2009 ‘SMS Mania’ was launched and offered a daily package of 50 SMS for USD 0.1 (IDR 1,000) to all Telkomsel numbers between 00.00-19.00 hours Jul 2009 ‘SMS Fun 2,000’ was launched and offered other content with SMS, such as celebrity gossip, fashion and horoscopes Jul 2009 A new SMS tariff for Kartu was introduced that allowed users to send SMS to any network for a fixed price, as against variable prices for on-net and off-net SMS Oct 2009 A cheaper SMS plan was introduced that allowed subscribers to send 500 SMS for USD 0.1 (IDR 1,000) Feb 2010 SMS pack ‘Kartu As’ was launched that offered free 1,000 daily SMS to Telkomsel subscribers USD 0.1 (IDR 1,000) after sending SMS worth USD 0.1 (IDR 1,000) Source: Company Website 28 © 2010, Portio Research. All Rights Reserved
  • 29. Strategies for Driving Mobile Data and Broadband Adoption Regular Upgrades of SMS Services and SMS Platform Telkomsel has transformed i ts SMS offerings f rom being a simple t ext-based service to an advanced service with features such as div ert, auto reply, bl ack li st and white list. S ome of their innovative SMS services are listed below: • SMS Me • Web 2 SMS • SMS GIFT • SMS Pro • SMS2.0 • Facebook SMS These efforts are aimed at making Telkomsel’s SMS services more personalised and attractive. The oper ator is not only upgrading its SMS services r egularly, but is also of fering services through t he m ost adv anced m essaging platforms. For example, i n Ju ne 2009, Telkomsel upgraded its SMS platform with Acision’s Text Suite, to enable users to enjoy additional features su ch a s bl ocking uns olicited S MS (or S MS s pam), aut omatic replies, message forwarding and automatic copy messages. Improving Network Quality and Capacity With i ncreasing s ubscriber numbers and d ata t raffic, m obile net works worldwide require frequent upgrades. Without such upgrades, networks will succumb to the increasing strain, affecting the quality of services. Keeping this in mind, Telkomsel has invested hugely in network expansion. In Q1 2009, it increased its base transceiver station (BTS) number by 28 percent and overall network capacity by 39 percent. In 2008, the operator added 6,014 new BTS that allowed it to carry 30 percent higher SMS traffic on the day of Lebaran (a religious festival), compared with its capacity in 2007. 9 Using SMS as a Platform for Other Services Telkomsel has i ntroduced several services t hat u se S MS as t he access platform. W ith the increasing upt ake o f t hese s ervices, SMS us e i s gai ning new hei ghts i n t he co untry. Telkomsel is offering mobile banking services through three platforms—SMS, single banking and IVR (Interactive Voice Response)—with SMS bei ng the most popul ar platform used by subscribers. In 2008, Telkomsel started its mobile advertisement services. This allows content providers to push and adv ertise t heir pr oducts t hrough S MS, along with ot her co ntent such as ne ws and information. 9 Source: Company Reports © 2010, Portio Research. All Rights Reserved 29 Telkomsel is not only upgrading its SMS services regularly, but is also offering services through the most advanced messaging platforms.
  • 30. Strategies for Driving Mobile Data and Broadband Adoption The t able below highlights t he f actors which enabl ed the operator to generate high SMS traffic. Table 2: Success Factors – Telkomsel Indonesia Factor Strategy Attractive Tariffs and Promotional Plans Telkomsel regularly introduces attractive SMS plans that offer cheap or free SMS. Different plans target subscribers with different use needs. Regular Service and Platform Upgrades Telkomsel has introduced several innovative SMS-based services, such as SMS Facebook. SMS Facebook is gaining rapid popularity among users and is driving SMS use further. Apart from interesting services, Telkomsel has increased the appeal of its SMS offerings with the introduction of features such as divert, auto reply, black list, white list, etc. Improving Network Quality and Capacity Telkomsel is focusing on network quality in order to continue delivering high quality services to its subscribers despite increased SMS traffic. It is also investing to strengthen network capacity. SMS as a Platform for Other Services Telkomsel is providing additional services that use SMS as an access platform, and these services are witnessing increasing demand in the local market. Source: Portio Research Ltd. 30 © 2010, Portio Research. All Rights Reserved
  • 31. Strategies for Driving Mobile Data and Broadband Adoption China Mobile Mobile Subscribers: 522.3 million (End-2009) Market Share: 72.4 percent (End-2009) Monthly ARPU: USD 11.0 (Q4 2009) MMS Users: 147.5 million (End-2009) About the Operator China M obile is t he largest M NO worldwide i n terms of subscriber base, with 522. 3 million subscribers at end-2009; the subscriber base grew nearly 14.2 percent during 2009. Rationale for Selecting the Operator Messaging services, such as SMS, MMS, mobile e-mail and mobile IM, have been the key focus of operators to generate data revenues. China Mobile’s continuous efforts to promote messaging se rvices, es pecially MMS, r equire a s pecial mention. M MS has per formed exceptionally well in t he Ch inese m arket, compared with i ts per formance in other m arkets where it has been a distant second to SMS. While many other markets are struggling to increase MMS uptake, China Mobile’s MMS user ba se ha s shown a double-digit growth rate during 2007–2009. During 2007–2009, the number o f China M obile’s MMS users increased at a CA GR of near ly 27.5 per cent, with year-on-year growth of MMS users standing at 15.1 percent in 2009. Figure 16: MMS Users – China Mobile (In Million, End 2007 – End 2009) 147.5 160 128.2 MMS Users (In Million) 140 120 100 90.8 80 60 40 20 0 2007 2008 2009 Year Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 31 While many other markets are struggling to increase MMS uptake, China Mobile’s MMS user base has shown a double-digit growth rate during 2007–2009.
  • 32. Strategies for Driving Mobile Data and Broadband Adoption MMS Traffic per User and Revenue Growth With Chi na Mobile’s M MS us er base growing at a steady pace and t he M NO’s efforts t o encourage MMS use, there has been a significant increase in MMS traffic per user and the revenue generated by this service. The f igure bel ow depi cts t he M MS t raffic per ac tive user p er ye ar f or Chi na M obile dur ing 2007–2009. Figure 17: MMS Traffic per Active User per Year – China Mobile (2007 – 2009) MMS Traffic per Active User per Year 350 290.1 300 250 200 255.7 198.2 150 100 50 0 2007 2008 2009 Year Source: Portio Research Ltd. MMS revenue grew at a CAGR of 53.3 percent between 2007 an d 2009. The f igure bel ow depicts the growth in MMS revenue of China Mobile during 2007, 2008 and 2009. Figure 18: MMS Revenue – China Mobile (In USD Million, 2007 – 2009) 484.7 500 MMS Revenue (In USD Million) 414.1 400 300 200 206.3 100 0 2007 2008 2009 Year Source: Portio Research Ltd. 32 © 2010, Portio Research. All Rights Reserved
  • 33. Strategies for Driving Mobile Data and Broadband Adoption Strategies Triggering the Uptake of MMS Services • • Challenge: The ear ly uptake o f M MS by subscribers i s co nstrained by the fact t hat creating and edi ting m ultimedia co ntent i s far more complicated t han w riting t ext messages. This hampers growth in P2P MMS traffic. China Mobile’s Strategy: China M obile s timulated MMS adopt ion by pushing A 2P MMS and ot her M MS-based i nnovative services. A 2P M MS-based s ervices—M-News, entertainment and gr eeting M MS a vailable on the Monternet Web portal mobile— provide addi tional im petus t o t ap t he pot ential of MMS. Dur ing 2007, A 2P M MS t raffic accounted for more t han 70 per cent of China M obile’s total MMS traffic; the r emaining percentage was P2P MMS traffic. 10 MMS traffic is still dominated by A2P MMS, with the continued success of the M-News and Monternet services. The use of A2P MMS in turns increase P2P MMS through the message forward facility. Subscribers simply forward t he M MS, without needing t o be co ncerned about creating the MMS, as it is generated by the application. Once subscribers are familiar with MMS services, us ers ca n cr eate t heir own M MS co ntent, and t his in t urn i ncreases t he popularity of the service among them. Innovative Offerings • M-News: This i s a m obile new spaper service that allows users t o r eceive information including breaking news alerts and weather reports through MMS (on their MMScapable hands ets). Chi na M obile pr ovides the M-News se rvice in co llaboration w ith media organisations, including China Daily (a national English newspaper) and other local news sources. The news alert MMS includes ten pages of headline news, weather information and photos. The alerts are provided twice a day at a monthly charge of RMB 5 (USD 0.7), and the service is exempt from data charges. Salient Features:  High cu stomisability allowing t he provision o f co ntent i n a nu mber o f ca tegories including news al erts and information in ar eas such as m usic, movies, lif e, s ports and finance  Option to forward M-News MMS to other users  Opportunity for subscribers to share their opinions with editors and other readers  Increased revenue opportunity for MNOs without the need to own any content  Easy to subscribe/unsubscribe to the service as subscribers merely need to send a text message for initiating/discontinuing the subscription Impact: The M-News service was received well by subscribers, and it became a major factor i n the growth of MMS traffic in Chi na. It was n ominated as a star service for the operator i n t he ye ar of its launch ( 2006), and the M MS t raffic per m onth in China has increased by more than seven times between 2006 and 2009. The paying subscriber base for the M-News service during 2006–2009 is depicted in the figure below. The number of M-News subscribers increased at a CAGR of nearly 107.5 percent between 2006 and 2009. 10 Source: http://wwwen.zte.com.cn/endata/magazine/ztetechnologies/2007year/no4/articles/200704/t20070423_161773.html © 2010, Portio Research. All Rights Reserved 33 The early uptake of MMS by subscribers is constrained by the fact that creating and editing multimedia content is far more complicated than writing text messages.
  • 34. Strategies for Driving Mobile Data and Broadband Adoption M-News Paying Subscribers (In Million) Figure 19: M-News Paying Subscribers – China Mobile (In Million, End 2006 – End 2009) 49.1 50 41.5 40 30 23.6 20 10 5.5 0 2006 2007 2008 2009 Year Source: Portio Research Ltd. • Monternet: Monternet i s a s et of dat a of ferings ba sed on the mobile I nternet platform provided by China Mobile. The service allows subscribers to use different content categories on the Monternet Web portal; subscribers can use their handsets (feature phones or smartphones) or ‘Go with E’ cards with their laptops to access the Monternet Web portal for sending and receiving MMS. Leveraging Events for MMS Promotion • Green Box Environmental Protection Plan—517 Special Event: In May 2007, China Mobile celebrated the World Telecommunication and Information Society Day, and invited i ts s ubscribers t o participate i n t he G reen O lympics. T he e vent enco uraged subscribers to throw their old phones into green boxes. The initiative attracted many celebrities, and the mobile operator organised an MMS photo shooting event – ‘Good Shape f or t he O lympics’ – to spread t he m essage of it s co mmitment t owards the environment. • Olympics 2008: China Mobile released an MMS containing the ‘2008 Olympics Mascot’ on the Monternet Web portal, and the company allowed its subscribers to download and send the MMS through their handsets and laptops. The promotion of the Olympics was the first of its kind in China, and was successful in pushing MMS services further into the market. 34 © 2010, Portio Research. All Rights Reserved
  • 35. Strategies for Driving Mobile Data and Broadband Adoption The t able be low hi ghlights t he factors that enabled the oper ator t o gener ate high MMS traffic. Table 3: Success Factors – China Mobile Factor Triggering the Uptake of MMS Services Innovative Offerings Leveraging Events for MMS Promotion Strategy China Mobile stimulated MMS traffic by pushing A2P MMS. A2P MMS received by subscribers then helped in increasing P2P MMS via the message forward facility, thereby stimulating the growth of P2P MMS. M-News and Monternet services provided ready-to-use MMS content to subscribers. Thus, they boosted MMS traffic significantly since they did not require users to create MMS, which is a major bottleneck in the uptake of MMS services. China Mobile used major national and international events to promote MMS services among the masses. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 35
  • 36. Strategies for Driving Mobile Data and Broadband Adoption SoftBank Japan Mobile Subscribers: 21.7 million (End-2009) Market Share: 19.4 percent (End-2009) Monthly ARPU: 21.5 USD (Q4 2009) 3G Subscribers as a Percentage of Customer Base: 96.4 percent (End-2009) About the Operator SoftBank is the third largest mobile operator in Japan, but the first operator in Japan to migrate its entire subscriber base to a 3G network. Rationale for Selecting SoftBank SoftBank has introduced a pack combining Web access and e-mail access. Considering the high I nternet us e by Japanese su bscribers and by combining e -mail wi th Web ac cess, SoftBank has paved the way for increased e-mail use by its subscribers. Subscribers using this pack can send and r eceive e-mails on the network for free, and to other networks at a minimal cost. The operator has introduced services that increase the presence and familiarity of mobile email among its subscribers. In January 2008, it l aunched S! Information Channel , a s ervice that deliv ers i nformation t o s ubscribers via e -mail. T he s ervice had near ly 2 million registered u sers as of April 2009, and continues to gr ow i n popul arity and add subscribers and applications at a steady pace. The figure below highlights the increasing number of applications on the S! Information Channel. Figure 20: Number of S! Information Channel Applications – SoftBank (January 2010 – April 2010) 21,700 Number of Applications 21,600 21,500 21,400 21,300 21,587 21,618 Mar-10 21,200 Apr-10 21,100 21,000 20,900 21,086 21,171 20,800 Jan-10 Feb-10 Month Source: Portio Research Ltd. 36 © 2010, Portio Research. All Rights Reserved SoftBank has introduced services that increase the presence and familiarity of mobile e-mail among its subscribers.
  • 37. Strategies for Driving Mobile Data and Broadband Adoption With the highest 3G penetration among subscribers, SoftBank has a solid f oundation for increasing i ts dat a A RPU. M oreover, a fter the decommissioning of its 2G net works by 31 March 2010, S oftBank is t he only network with 100 per cent 3G s ubscription. The figure below highlights the 3G penetration of SoftBank and its competitors in 2009: Figure 21: 3G Subscribers as a Percentage of Total Subscriber Base – Japan (In Percent, Q2 11 2009 – Q4 2009) 3G Percentage (In Percent) 120 80 81.2 77.8 75.2 93.9 96.4 92.9 94.9 91.6 92.8 100 60 40 20 0 Q2 2009 Q3 2009 Q4 2009 Period KDDI NTT DOCOMO Softbank Source: Portio Research Ltd. SoftBank introduced e -mail facilities for i ts s ubscribers t hrough a service ca lled S ! Mail. Though S! Mail was marketed and perceived as an MMS service, it offered traditional push e-mail s ervices to it s s ubscribers. S ! M ail s ubscribers ca n enclose pi ctures, voice c lips, videos, et c., while sending e -mails, and the s ervice permits users to se nd e-mails onl y by keying i n the r ecipient’s m obile nu mber. A ny subscriber using the S ! B asic data p lan w ill have access to e-mail, along with 3G and other Internet services including e-mail. SoftBank, after t he ch ange i n management from V odafone K .K., launched 3G services for the third time i n Japan i n 2005. This m ove garnered more success than the earlier two 3G service launches by Vodafone K .K. ( before acq uisition by SoftBank). Though late i n introducing 3G , mobile I nternet and e -mail s ervices, S oftBank has s een a significant increase in the adoption of its new services. The adoption of mobile e-mail by SoftBank subscribers has been steadily increasing; one of the m ain factors i s t he s ales of i Phones. S oftBank, pr esently the onl y operator t o o ffer iPhones in Ja pan, ex perienced a steady increase in i Phone s ales and dat a services including mobile e-mail. The following ch art depi cts t he i ncrease i n I nternet ado ption by SoftBank subscribers. 11 Note: SoftBank’s financial year starts on 1 April, hence Q4 for the operator implies the quarter ending on 31 March. However, in this report we have taken Q4 to mean the quarter ending on 31 December. © 2010, Portio Research. All Rights Reserved 37 The adoption of mobile e-mail by SoftBank subscribers has been steadily increasing; one of the main factors is the sales of iPhones.
  • 38. Strategies for Driving Mobile Data and Broadband Adoption Figure 22: Mobile Internet Subscribers – SoftBank (In Million, Q2 2009 – Q4 2009) Mobile Internet Subscribers (In Million) 17 16.9 16.8 16.6 16 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. Innovative data plans, 3G and mobile Internet adoption, and the subsequent use of web services led to a continual increase of data ARPU. The figure below showcases the increase in data ARPU for the last three quarters of 2009. Figure 23: Data ARPU – SoftBank (In USD, Q2 2009 – Q4 2009) 24 Data ARPU (In USD) 23 22 21 20 22.9 21.3 19 18 19.3 17 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. 38 © 2010, Portio Research. All Rights Reserved
  • 39. Strategies for Driving Mobile Data and Broadband Adoption Strategies Innovative Pricing Plans for Target Groups SoftBank launched innovative data price plans/offers for both enterprise and individual subscribers. Packages announced by SoftBank were a mix of voice and data services and, in a few cases, the company offered discounts of up to 80 percent. SoftBank’s strategy was to target specific groups, such as students and family members. The following are the types of pl ans and packa gers that enabled the high upt ake o f mobile I nternet and s ubsequently mobile e-mail use: • S! Basic: This pack enables subscribers to access S! Mail, along with several other services such as web access, PC Site Browser use (including PC mail) and PC Site Direct t ransmissions. A ll t hese s ervices ar e o ffered for a flat fee o f US D 3. 3 ( JPY 315) per month • White Plan: This plan, when clubbed with the S! Basic package, offers subscribers access to unlimited e-mails within the network and a minimal charge for e-mails sent/received from outside the network • Unlimited Packet Discount: This is an add-on package offering unlimited Web and e-mail access. The package cost ranges from USD 10.8 to USD 46.2 (JPY 1,029 to JPY 4,410) • Unlimited Packet Discount S: A plan similar to the one abov e; however, the cost of the package ranges from USD 4.1 to USD 46.2 (JPY 390 to JPY 4,410) • Monthly Discounts: A new subscriber, while purchasing a handse t f rom SoftBank and subscribing to a new connection for both voice and data services, can avail the S! Basic, Unlimited Packet Discount and Voice Call Fees for a charge of merely USD 0.2 (JPY 16) Automated Services to Increase E-Mail Use SoftBank introduced s everal p lans t o pr omote e -mail us e. M ost o f t hese s ervices w ere focussed on se nding aut omated e -mails t o its s ubscribers and , hence, increasing e -mail adoption. Innovative e-mail services offered by SoftBank are mentioned below. • Idokoro-mail: This i s a mobile appli cation installed on hand sets that i s used by children; it sends automatic e-mails to parents once the child reaches a destination. Also, in an emergency, a pre-defined key triggers an alarm, places a call and sends an e-mail to the parents with the location information. • Simple Select Video: This service, launched in April 2009, allows users to receive e-mails with video content. A wide variety of content such as sports, entertainment and news is available t hrough t his s ervice. Registered s ubscribers receive new videos through e-mails that can be watched at their convenience. • Easy Access Music: This music co ntent service w as launched i n June 2009. Its users receive e-mails w ith an update on m usic information, popul ar songs, m usic rankings, et c. Subscribers ca n also view i mages on t he e -mail or c lick on li nks, allowing them t o p lay or dow nload s ongs. A s t his i nformation is s tored i n e -mails, the s ubscriber ca n acce ss music information and pl ay or do wnload s ongs at t heir convenience. Focus on Corporate Users SoftBank’s focus has be en o n increasing its co rporate mobile s ubscribers. S oftBank Telecom (the fixed-line business) and SoftBank Mobile consolidated their efforts to accelerate growth in this segment. As a result, SoftBank Telecom achieved sales of 250,000 mobile handsets in the corporate sector in 2008. As co rporate s ubscribers use e-mails and web s ervices to a gr eat e xtent, a s ignificant increase in data ARPU was experienced. Notable corporate mobile subscriber deals in 2009 included: • Pfizer Japan purchased 3,000 X05HT handsets for its medical representatives • PriceWaterhouseCoopers Consultants purchased approximately 2,000 iPhone 3G handsets for their consultants © 2010, Portio Research. All Rights Reserved 39 SoftBank Telecom achieved sales of 250,000 mobile handsets in the corporate sector in 2008.
  • 40. Strategies for Driving Mobile Data and Broadband Adoption Wide Range of Handsets and Ease of Purchase SoftBank focuses on selling s tylish and hi gh-end h andsets t o i ncrease t he a ppeal and uptake of its dat a services, i ncluding mobile e -mail. All hi gh-end dat a-centric handsets ar e sold w ith dat a pl ans t o hel p i ncrease e -mail and Internet us e. Additionally, So ftBank introduced 24-month i nstalment plans, along w ith t wo-year co ntracts. T his r educed t he burden f or s ubscribers to r egularly extend t he co ntract, and it ensured r etention for t wo years. In addi tion, a new s ubscriber pur chasing a ne w han dset in t he 24-ment i nstalment deal receives s ubsidised m onthly rentals for us ing bot h voice and dat a s ervices. T he operator offered discounts of up to 80 percent on voice and data plans for 24 months. SoftBank is presently the exclusive distributor of iPhone in Japan. Also, iPhone was one of the key contributors to Q3 2009 sales and the increase in data ARPU for SoftBank. The M NO introduced s everal innovative plans to increase i Phone adoption. In Dece mber 2009, the “iPhone for all of SoftBank” plan was introduced to offer 32 GB iPhones for free to subscribers willing t o s ign up a two-year co ntract with S oftBank. A s imilar pl an w as also announced i n early 2009 called “iPhone for Everybody Campaign”, wherein any subscriber signing up for the two-year data plan received an 8 GB iPhone for free. Highest 3G Adoption in Japan SoftBank, though at number three in Japan in terms of total mobile subscriber base, places first with r espect t o 3G adopt ion. The ke y focus f or S oftBank is t o im prove dat a A RPU through i ts 3G s ervices, w hich i ncludes hi gh-speed Internet br owsing, e -mail and ot her services. Furthermore, SoftBank also upgraded its 3G network infrastructure to provide highservice quality to subscribers. Also, as SoftBank announced the cl osure of its 2G networks, existing 2G subscribers hav e been shifted t o 3G net works. He nce, a s of A pril 20 10, S oftBank was the onl y national operator with 100 percent 3G adoption. This fact is further expected to boost the use of data services, such as e-mail and web access. 40 © 2010, Portio Research. All Rights Reserved As of April 2010, SoftBank was the only national operator with 100 percent 3G adoption.
  • 41. Strategies for Driving Mobile Data and Broadband Adoption The table below highlights the factors which enabled the operator to increase the uptake of mobile e-mail. Table 4: Success Factors – SoftBank Japan Factor Strategy Innovative Price Plans for Target Groups Introduction of innovative plans targeting particular groups of people – both individual and enterprise customers. Some of these plans offered discounts of up to 80 percent. Automated Services to Increase E-Mail Use Introduction of a new service which sends automated e-mails to subscribers, with information on latest events, location information of mobiles used by children, video files, links to music downloads, etc. Focus on Corporate Users SoftBank, realising the heavy e-mail use by corporate users, focused on attracting more corporate subscribers and achieved significant success through this strategy. In 2008, Softbank sold 250,000 handsets to the corporate sector. Wide Range of Handsets and Ease of Purchase SoftBank achieved popularity in Japan for its stylish high-end handset portfolio. The MNO is currently the exclusive distributor of the iPhone in Japan. SoftBank also focused on attracting new subscribers by introducing two year monthly instalment schemes. Highest 3G Adoption in Japan SoftBank has achieved the highest penetration with respect to 3G subscribers. 3G subscribers will drive higher data use and a subsequent increase in e-mail use. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 41
  • 42. Strategies for Driving Mobile Data and Broadband Adoption Conclusion Mobile messaging services are the most popular mobile services after voice, and messaging services gener ated m ore t han US D 150 billion in revenues worldwide i n 2009 . F or ye ars now, m obile messaging se rvices hav e enabl ed oper ators worldwide t o sustain t heir A RPU and acq uire new s ubscribers. A s shown ear lier, SMS dominates the m obile m essaging world and greatly outperforms MMS, m obile e -mail and m obile I M – even as a co llective. MMS is often wrongly considered a failure, with confusion borne from over-enthusiastic prelaunch pr edictions t hat i t w as the su ccessor t o SMS . I n r eality MMS has s een s ignificant, impressive growth, and recorded annual revenue of USD 26.7 billion in 2009; worldwide MMS revenue is projected to hit USD 51.2 billion by end-2014. Although S MS w ill co ntinue t o do minate t he mobile messaging ar ena f or s ome years t o come, ot her s ervices s uch a s m obile e -mail and m obile I M ar e ca tching up fast. S ome experts even believe that mobile e-mail will supplant SMS in the future; however, this seems unrealistic in the foreseeable future. SMS i s well established with hi gh penetration levels i n the majority of markets worldwide, whereas mobile e-mail and m obile I M ar e s till in t he growth p hase and are hence expected t o witness higher-than-current growth r ates i n the future. T he figure bel ow co mpares t he CA GR of r evenues t o be gener ated by mobile messaging services between 2009 and 2014. Figure 24: Revenue CAGR of Mobile Messaging Services (In Percent, 2009 – 2014F) 33.3 35 CAGR (In Percent) 30 25 18.1 20 13.9 15 10 5 3.9 0 SMS MMS Mobile E -mail Mobile I M Service Source: Portio Research Ltd. F – Forecasted Operators worldwide have realised the importance of mobile messaging services, especially SMS, in the wake of falling ARPU. They are making conscious efforts to increase the appeal of their messaging solutions t hrough i nnovation i n t erms o f co ntent o ffered and s ervice pricing. To ach ieve t he intended popul arity of t heir messaging se rvices, oper ators have primarily focussed on the following areas: • Prices • Promotions and marketing • Quality of the service • Identifying the target segment for each service 42 © 2010, Portio Research. All Rights Reserved MMS recorded annual revenue of USD 26.7 billion in 2009; worldwide MMS revenue is projected to hit USD 51.2 billion by end-2014.
  • 43. Strategies for Driving Mobile Data and Broadband Adoption The table below discusses these factors in brief. Table 5: Factors Affecting the Uptake of Mobile Messaging Services Factor Strategy • • Pricing • • Promotions and Marketing • • • Quality of Service • • • Identifying Target Segment • Offering flat rate data plans with unlimited service access Providing free SMS and other services on festivals or other occasions to increase the uptake of services Offering discounts and different price plans to suit the needs of users with different requirements Promoting other services that use mobile messaging as a platform, for example mobile banking, video downloads through e-mail etc. Penetrating the service through A2P mode (especially for MMS) in order to increase users’ familiarity with the service Using mobile messaging services at a large scale to share information with masses during local and global events Regularly upgrading wireless networks to offer better user experience for services that demand high speed and more bandwidth Launching innovative services to increase the appeal of mobile messaging services Offering advanced handsets that provide rich user experiences and ease of use for mobile messaging services Identifying the target segment for each mobile messaging service, for example youth or students for SMS and business users for mobile email Introducing plans and offers that suit the needs of these target segments and encouraging them to use the service at a larger scale, for example free or discounted SMS during nights or weekends and flat rate e-mail plans for enterprise users Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 43
  • 44. Strategies for Driving Mobile Data and Broadband Adoption Chapter 6 Mobile Broadband – Introduction and Basics 44 © 2010, Portio Research. All Rights Reserved
  • 45. Strategies for Driving Mobile Data and Broadband Adoption Mobile Broadband – Introduction and Basics Mobile broadband allows subscribers to access high-speed Internet on the move. In this report, we consider all services with data transfer speeds of more than 256 Kbps as mobile broadband services. Three devices that enable mobile broadband access are: • Mobile handsets • Modems (USB Modems, often known as Dongles, and Embedded modems) • PC Cards Mobile data plans offered by operators al ong with any of the above mentioned devices will allow s ubscribers t o acce ss high-speed I nternet. S ubscribers’ d emand for comparatively simpler services like Internet browsing and e-mail access has now evolved to them seeking out advanced s ervices s uch as v ideo s treaming and mobile T V, w hich r equire high-speed data transfer rates and extensive coverage. This has led to several developments in the mobile br oadband s pace. Cur rently, mobile oper ators, t elecom as sociations and ot her players in the mobile broadband ecosystem are working towards achieving data transfer speeds of up to 1 Gbps, with a key focus on the quality of service. Mobile operators, telecom associations and other players in the mobile broadband ecosystem are working towards achieving data transfer speeds of up to 1 Gbps, with a key focus on the quality of service. The table below highlights the number of operators who have deployed high-speed networks worldwide. Table 6: Number of Network Providers with High Speed Network Deployments – Regional (March 2010) Number of Network Providers Network Asia Pacific Europe North America Latin America Africa and Middle East Worldwide HSDPA/HSUPA 55 143 8 52 67 325 CDMA2000 1xEV-DO Rel. 0 23 39 10 26 17 115 CDMA2000 1xEV-DO Rev. A 17 24 7 20 15 83 UMTS 63 153 8 53 69 346 Source: 3G Americas and CDG Broadly speaking, there are two types of networks providing mobile broadband—one bei ng a m obile phone net work that provides both v oice and dat a services ( for example UM TS, HSPA), and the other provides only data services (for example WiMAX). Mobile oper ators ar e al so wor king t owards enha ncing the subscriber ex perience on t hese advanced networks. Operators are taking key initiatives such as introducing innovative data plans, upgrading technology infrastructure to offer improved data transfer rates and exploring new technologies. This section covers these technologies and operator strategies in detail. © 2010, Portio Research. All Rights Reserved 45
  • 46. Strategies for Driving Mobile Data and Broadband Adoption Evolution of Mobile Broadband – GSM Mobile broadband using GSM technologies (data rates of more than 256 K bps) have been constantly evolving since 1999 with the introduction of UMTS/W-CDMA technology. UMTSenabled handsets have been able to achieve peak transfer rates of up to 384 Kbps. Currently, 3GPP (3rd Generation Partnership Project, an association responsible for developing globally acceptable mobile standards) is working on a 4G technology called LTE Advanced, which is expected to achieve peak transfer rates of 1 Gbps. Key GSM Technologies UMTS (Universal Mobile Telecommunications System) • • • • • UMTS is one of t he 3G mobile t elecommunications t echnologies, specified by 3GPP UMTS builds on t he GSM technology, and most UMTS handsets also s upport GSM, allowing dual-mode operation UMTS is t he first 3G mobile technology in G SM achieving br oadband speeds, with transfer rates reaching 384 Kbps UMTS enables the use of voice and high-speed data multimedia services such as music, mobile TV, video and web browsing The first co mmercial launch of U MTS s ervices w as i n Ja pan i n 2001 by NTT DOCOMO. The service is called FOMA (Freedom of Mobile Multimedia Access). HSPA (High Speed Packet Access) • • • • HSPA is an umbrella term for a set of technologies that define the evolution of UMTS HSPA includes the following technologies:  High Speed Downlink Packet Access (HSDPA): HSDPA is an enhancement to the UMTS network that enables high downlink data transfer s peeds of up to 7. 2 Mbps. T hese rates ar e ach ieved t hrough Adaptive M odulation and Codi ng, F ast P acket S cheduling and Hyb rid Automatic Repeat request (HARQ) techniques.  High Speed Uplink Packet Access (HSUPA): HSUPA i s an enhancement to the UMTS network that enables high uplink speeds while enhancing downlink transfer rates. It increases the data rate up to 5.8 Mbps for upl oading and 14. 4 Mbps for downloading. HSDPA uses the E nhanced De dicated Channel ( E-DCH) t o opt imise upl ink performance. Through these continuous enhancements, current HSPA networks can achieve data transfer rates of 14.4 Mbps on downlink and 5.8 Mbps on uplink As of February 2010, 315 commercial operators were present across 133 countries. Of t he oper ational HS PA net works, m ore t han 79 percent can achieve dat a t ransfer r ates of 3. 6 M bps or hi gher, and m ore t han 53 per cent can achieve data rates of 7.2 Mbps or higher. 12 HSPA+ (High-Speed Packet Access Plus/ Evolved HSPA) • • • 12 HSPA+, w hich is an upgrade t o t he cu rrent HS PA network, provides enhance d throughput speeds with higher performance and spectral efficiency It is more efficient in handling advanced services such as Push-to-Talk over Cellular (PoC), music and videos, V oice o ver I nternet P rotocol ( VoIP) and ot her s uch multimedia applications Enhancements, such as Multiple I nput/Multiple O utput (MIMO) ca pability, Continuous P acket Connect ivity (CPC) and Hi gher O rder M odulations, enable HSPA+ networks to achieve data transfer rates of up t o 42 Mbps o n downlink and 11.5 Mbps on uplink Source: Global Mobile Suppliers Association 46 © 2010, Portio Research. All Rights Reserved The first commercial launch of UMTS services was in Japan in 2001 by NTT DOCOMO.
  • 47. Strategies for Driving Mobile Data and Broadband Adoption • As of F ebruary 2010, 41 co mmercial oper ators l aunched HS PA+ net works acr oss 26 countries Figure 25: UMTS Evolution – Data Transfer Rates HSPA • DL: 3.6 Mbps • UL: 384 Kbps • DL: 7.2 Mbps • UL: 1.4 Mbps 2006 HSPA+/ Evolution • DL: 14.4 Mbps • UL: 5.76 Mbps 2007 2008 • DL: 42.0 Mbps • UL: 11.5 Mbps 2009 Note: DL: Downlink UL: Uplink Source: Global Mobile Suppliers Association LTE (Long Term Evolution) • • • • LTE, t he latest e volution i n HS PA net works, i s des igned t o i ncrease ef ficiency, capacity and data transfer rates. It is considered as a pre-4G technology while LTE Advanced is a 4G technology under development. It i s backw ard co mpatible w ith G SM and HS PA net works. I t use s a t echnology similar to HSPA+, with the application of Orthogonal Frequency Division Multiple Access ( OFDMA) in dow nlink and Single Car rier FDMA in t he up link enhanc ing spectral efficiency and increasing data transfer rates. LTE can achieve data transfer speeds of up to 100 Mbps on downlink and up to 50 Mbps on uplink. CDMA operators can al so depl oy LTE technology, with m ajor players such as NTT DOCOMO and V erizon Wireless working on depl oying LTE on t heir commercial networks According to the Global Mobile Suppliers Association, 59 operators worldwide have committed t o depl oy LTE, o f w hich 22 w ill be oper ational by end-2010 and the remaining networks will be ready by 2012 LTE Advanced (Long Term Evolution Advanced) • • • LTE Advanced is currently in the development phase and will be 3GPP’s candidate for 4G technologies defined by the International Telecommunication Union (ITU). The specifications for LTE Advanced are expected to be finalised by 2011. LTE A dvanced w ill incorporate new t echnical ad vancements s uch as Hi gh-Order MIMO (4x4 and beyond MIMO), the ability to use non-contiguous frequency ranges (alleviating frequency range i ssues), t he incorporation of F emtocells us ing SelfOrganising Network techniques, self back-hauling base station, etc. The data transfer rates of LTE Advanced is expected to reach up to 1 Gbps © 2010, Portio Research. All Rights Reserved 47 59 operators worldwide have committed to deploy LTE, of which 22 will be operational by end-2010 and the remaining networks will be ready by 2012.
  • 48. Strategies for Driving Mobile Data and Broadband Adoption Figure 26: LTE Evolution – Data Transfer Rates LTE (20 MHz) • DL: 100 Mbps • UL: 50 Mbps 2009 LTE Advanced • DL: 1 Gbps (Expected) 2011 Note: DL: Downlink UL: Uplink Source: Global Mobile Suppliers Association EDGE (Enhanced Data Rates for GSM Evolution) • • • • • As per the defined standards of the ITU, EDGE is considered as a 3G radio technology. However, considering the operable data transfer rates, EDGE is commonly denoted as 2.75G. EDGE is backward compatible with GPRS, hence subscribers travelling to locations with no EDGE network can still access voice and data services over GPRS Also, w ith a few addi tional updates o ver t he e xisting G SM/GPRS i nfrastructure, EDGE can be ea sily deployed i n a co st effective manner. Furthermore, it does not require any additional spectrum and it can be d eployed across 850/900/1800/1900 MHz bands. These features enable mobile operators to launch 3G services effortlessly, using EDGE. The data transfer rates in EDGE technology can reach up to 474 Kbps on both downlink and uplink As of F ebruary 2010, 487 EDGE net works hav e been l aunched acr oss 190 countries13 EDGE Evolution or EDGE II • • • • 13 EDGE has evolved continually since 2006; the seventh release of 3GPP’s standards saw EDGE evolving to EDGE Evolution EDGE E volution depl oys several t echniques us ed i n HSPA+. This enabl es subscribers of HS PA net works t o acce ss br oadband w hile r oaming i n EDGE networks. EDGE Evolution can achieve data transfer speeds of up to 1.2 Mbps (downlink) and 474 Kbps (uplink) Companies such a s Noki a, Siemens and RIM have endorsed EDGE Evolution and are committed to launch this technology as a software upgrade Source: Global Mobile Suppliers Association 48 © 2010, Portio Research. All Rights Reserved The data transfer rates in EDGE technology can reach up to 474 Kbps on both downlink and uplink.
  • 49. Strategies for Driving Mobile Data and Broadband Adoption Figure 27: EDGE Evolution – Data Transfer Rates EDGE EDGE Evolution • DL: 237 Kbps • UL: 237 Kbps • DL: 296 Kbps • UL: 237 Kbps • DL: 474 Kbps • UL: 474 Kbps 2006 2007 2009 • DL: 1.2 Mbps • UL: 474 Kbps 2010 Note: DL: Downlink UL: Uplink Source: Global Mobile Suppliers Association © 2010, Portio Research. All Rights Reserved 49
  • 50. Strategies for Driving Mobile Data and Broadband Adoption Evolution of Mobile Broadband – CDMA CDMA2000 was the first CDMA technology that was capable of providing mobile broadband services. The l atest evolution in CDMA technology can provide data transfer rates of up t o 14.7 Mbps on downlink. Currently, CD MA oper ators ar e moving t owards LT E ( a G SM technology) due t o t he numerous advantages, such as LTE’s ability to achieve data transfer rates of up to 1 Gbps in the future. Key CDMA Technologies CDMA2000 1X EV-DO (Evolution-Data Only) Revision 0 • • • EV-DO is a 3G-technology enhancement of CDMA networks It has be en standardised by 3rd G eneration P artnership P roject 2 (3GPP2) and i s an accepted standard of the CDMA2000 family EV-DO w as one of t he f irst m obile t echnologies of fering m obile br oadband at a downlink speed of 2.4 Mbps and an uplink speed of 153 Kbps CDMA2000 1X EV-DO (Evolution-Data Only) Revision A • • • • EV-DO Re vision A i s a back ward co mpatible e volution o f Re vision 0, w hich incorporates Orthogonal Frequency Division Multiplexing (OFDM) technology It enables Multimedia Broadcast and Multicasting Services (MBMS). It allows users to send e-mails with attachments, upload l arge files, m usic and videos, etc. due to its symmetric uplink speeds. Low network latency, IP-based br oadband i nfrastructure and quality of service (QoS) enabl e Revision A to support time-sensitive applications such a s Voice over IP (VoIP), Push-to-Talk (PTT) and video telephony Revision A can achieve data transfer rates of up t o 3. 1 Mbps on do wnlink and 1.8 Mbps on uplink CDMA2000 1X EV-DO (Evolution-Data Only) Revision B • • • 50 EV-DO Revision A with a multi-carrier enhancement and hardware upgrade is called EV-DO Re vision B . Revision B i s backward co mpatible w ith bot h Rev ision 0 and Revision A networks. By using statistical multiplexing, Revision B reduces latency which enhances the use of latency sensitive services such as gaming, video calling, web browsing, etc. Revision B i s ca pable of ach ieving t ransfer r ates of up t o 14. 7 M bps on do wnlink and 5.4 Mbps on uplink, by bundling multiple channels © 2010, Portio Research. All Rights Reserved EV-DO Revision A with a multi-carrier enhancement and hardware upgrade is called EV-DO Revision B.
  • 51. Strategies for Driving Mobile Data and Broadband Adoption Figure 28: CDMA2000 Evolution – Data Transfer Rates CDMA2000 1X EV-DO Rev. 0 EV-DO Rev. A • DL: 153 Kbps • UL: 153 Kbps • DL: 2.4 Mbps • UL: 153 Kbps • DL: 3.1 Mbps • UL: 1.8 Mbps 2000 2002 2007 EV-DO Rev. B • DL: 14.7 Mbps • UL: 5.4 Mbps 2010 (Expected) Note: DL: Downlink UL: Uplink Source: CDMA Development Group © 2010, Portio Research. All Rights Reserved 51
  • 52. Strategies for Driving Mobile Data and Broadband Adoption Evolution of Mobile Broadband – WiMAX WiMAX (Worldwide Interoperability for Microwave Access) • • • • • • • 52 WiMAX i s the commercial term of the IEEE’s (Institute of Electrical and E lectronics Engineers) Wireless M AN ( Metropolitan Area Networks) technology, al so denot ed as I EEE 802. 16. I t i s i n t he pr ocess of e volution and offers w ireless broadband access to subscribers. Mobile WiMAX has been evolving from I EEE 802.11 ( used i n Wi-Fi) w ith s everal enhancements in the process IEEE 802.16 is based on OFDMA (Orthogonal Frequency Division Multiple Access) technology and is approved by the ITU (International Telecommunication Union) as a 3G standard WiMAX includes high-order modulation, efficient coding, adaptive modulation and coding as well as Hybrid Automatic Repeat Request (HARQ), which is similar to the GSM technology HSPA (High-Speed Packet Access) Mobile WiMAX networks are not backward compatible, however they offer the following advantages:  Non-Line-of-Sight (NLOS) Operation: WiMAX does n ot r equire LoS , which makes it easy for widespread deployment  Quality of Service (QoS): WiMAX provides enhanced traffic management, achieving higher speeds in data transfer. This is accomplished by prioritising network traffic, controlling jitter and latency and improved loss characteristics.  Spectrum Efficiency: WiMAX ha s a t heoretical s pectrum e fficiency of 7bit/Hz/second  Interoperability: WiMAX m akes dat a t ransfer pos sible acr oss/between multiple operators Mobile WiMAX achieves data transfer rates of up to 70 Mbps i n both downlink and uplink One of the latest developments in the IEEE 802.16 family of standards, denoted as IEEE 802. 16m, is ex pected to qualif y for t he I nternational M obile Telecommunications-Advanced ( IMT–Advanced) 4 G standard and ach ieve dat a transfer rates up to 1 Gbps © 2010, Portio Research. All Rights Reserved WiMAX includes high-order modulation, efficient coding, adaptive modulation and coding as well as Hybrid Automatic Repeat Request (HARQ), which is similar to the GSM technology HSPA.
  • 53. Strategies for Driving Mobile Data and Broadband Adoption Drivers and Inhibitors – Mobile Broadband Drivers Figure 29: Drivers of Mobile Broadband Mobility • Mobility is one of the key drivers of mobile broadband; subscribers require access to the Internet while on the move Devices • Increasing s ales of s martphones and other high-end de vices w ill help augment the demand for mobile Internet by subscribers Data Services • Increase in the popularity of multimedia data services such as audio/ video downloads, gam es, m obile appli cations, et c. w ill dr ive t he need f or hi gher data speeds • Launch of attractive 3G services such a s video calling, mobile TV, etc. will increase the demand for mobile broadband New Mobile Services • Implementation of new mobile services that have the potential of daily use, such as mobile banki ng, m obile t icketing/ co upons, etc., will drive m obile broadband in developed and developing economies Social Networking, Blogs & Web 2.0 • Increased popularity of s ocial net working sites and m obile blogging w ill drive mobile broadband, par ticularly among t he yo unger generation. Web 2.0 which allows users to contribute in communities and generate their own content on the move will boost mobile broadband. Mobile Office • Business users require high data speeds to access their e-mails and office applications while on the move Initiatives by Mobile Operators • MNOs worldwide are expected to invest more than USD 70 billion on mobile broadband t echnologies in 2010 . Operators ar e m aking co ntinuous ef forts to enhance the technology for a bet ter s ubscriber ex perience, w hich will drive mobile broadband. • Operators’ m arketing campaigns and at tractive offers will pr omote the use of mobile broadband • Simple and flat data pricing will boost broadband adoption Source: GSMA and Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 53
  • 54. Strategies for Driving Mobile Data and Broadband Adoption Inhibitors Figure 30: Inhibitors of Mobile Broadband Infrastructure • Increasing mobile br oadband use will lead to i ncreased loads on ex isting infrastructure. Operators will ha ve to make h igh i nvestments to s cale up their existing infrastructure to support seamless broadband experiences. • With i ncreasing broadband adoption, the data traffic on the networks will also increase, which could hamper subscribers’ experience. Operators must use efficient data traffic management systems to ensure that the allotted bandwidth is not misused. • Most operators have implemented both 2G and 3G networks, and a few operators hav e started t o im plement 4 G LT E net works. Operators hav e to operate t hese net works simultaneously, s ince 3G adoption i s i n t he ear ly stages and the majority of s ubscribers still use 2G networks. T his significantly impacts the operational costs of operators. Regulatory Policies • Spectrum availability and cost of 3G li censes are major concerns f aced by operators. T his del ays oper ators’ plans f or 3G deploym ents, and hence significantly impacts revenue streams from advanced 3G services. Interoperability • As t here ar e se veral technologies pr oviding mobile broadband services, interoperability between networks, operators and equipment vendors poses a major challenge. Furthermore, operational spectrums are different across geographies, w hich means r oaming s ubscribers f ace dif ficulties in us ing mobile broadband in international markets. Flat Data Rates • Flat f ees for data use, a step taken by operators to increase broadband penetration, is expected to reduce data ARPU despite the increase in number of subscribers Intellectual Property • Intellectual property rights (IPR) battles delay operators deploying the latest technologies. For example, to streamline the LTE IPR, seven key players - , Ericsson, NE C, Nex tWave Wireless, Noki a, Noki a S iemens and S ony Ericsson – agreed to create a patent framework; however, Qualcomm, Broadcom, T exas I nstruments, Huaw ei, and a few o ther pl ayers ar e s till excluded f rom this f ramework. T hus, t his m ay pose a del ay in LT E deployment by operators unless the royalty payments are agreed bet ween the technology vendors. Security • As sensitive information i s pass ed t hrough t he Internet, s ubscribers might feel i nsecure i n s haring per sonal i nformation o ver mobile net works. Thus, the operators, while pr oviding m obile br oadband services, ha ve t o s ecure the air interfaces and devices to avoid any cases of information leakage. Source: Portio Research Ltd. 54 © 2010, Portio Research. All Rights Reserved
  • 55. Strategies for Driving Mobile Data and Broadband Adoption Mobile Broadband – Hardware USB Modems • • • • A USB M odem ( also kn own a s a USB Dongle) i s a ‘ Plug and P lay’ dev ice w hich provides i mmediate acce ss t o br oadband Internet i f co nnected t o a l aptop or a personal computer Mobility is t he ke y feature of a U SB modem; a s ubscriber ca n access broadband Internet on the move (within the service range of the mobile operator) The dat a t ransfer r ates of a US B modem depend on t he m obile oper ator and al so the data plan selected by subscribers USB m odems, l aunched i n 2006, gai ned i mmediate popul arity due to their ea se of use and mobility Figure 31: USB Modems/ Dongles Source: Vodafone and Orange Websites Internal Modems • • • • Internal modems are embedded in laptops, per sonal co mputers and ot her mobile Internet devices (MIDs) for access to mobile broadband Internal modems ar e more co nvenient t o use than other br oadband dev ices, since they do not require connection to any external device Data transfer rates of an embedded modem depend on the mobile operator and the data plan selected by subscribers Laptop vendors partner with operators to develop devices with embedded modems. These devices are sold with integrated network plans as bundled offers. © 2010, Portio Research. All Rights Reserved 55
  • 56. Strategies for Driving Mobile Data and Broadband Adoption Table 7: Examples of Partnerships between Mobile Operators and Laptop Manufacturers Laptop Manufacturer Mobile Operator Sony VAIO Verizon Wireless (US) Lenovo Verizon Wireless (US) HP Verizon Wireless (US) HP AT&T (US) Dell AT&T (US) Dell Vodafone (UK and Australia) Lenovo Vodafone (UK) Asus Orange (UK) Compaq Orange (UK) Dell TeliaSonera (Sweden) Intel Reliance Communications (India) Acer Reliance Communications (India) Lenovo Digitel (Venezuela) Dell Celcom (Malaysia) Source: Portio Research Ltd. PC Cards • • • • • 56 PC ca rds were one of the earliest devices pr oviding mobile br oadband access t o subscribers. These cards were developed and promoted by the Personal Computer Memory Card International Association (PCMCIA). These ca rds ca n be pl ugged i n t o t he de signated ca rd s lots of l aptops f or mobile broadband connectivity Similar t o ot her mobile br oadband har dware, t he dat a t ransfer r ates of a P C c ard depend on the mobile operator and the data plan selected by subscribers Constant innovations in PC card technology has led to the development of Express card technology, as the future replacement of PC cards Express cards can be plugged into the express card slot, or into the PC card slot via an adapt or. T hough t he dat a t ransfer rate i s depend ent on t he op erator, express cards are capable of achieving higher transfer rates than that of PC cards. © 2010, Portio Research. All Rights Reserved
  • 57. Strategies for Driving Mobile Data and Broadband Adoption Figure 32: PC and Express Cards Express Card PC Card Source: Company Websites Regional Versions – Mobile Networks Table 8: Regional Versions – Mobile Networks Technology Deployment Time Division Synchronous Code Division Multiple Access (TD-SCDMA) TD-SCDMA is a 3G technology and alternative to W-CDMA. China has adopted TD-SCDMA, to avoid dependency on western technologies. China Personal HandyPhone System (PHS) PHS uses a technology similar to that of a cordless telephone. The transmitting power of the PHS base station is less than two kilometres, hence limiting the deployment of this technology to densely populated areas. PHS is expected to achieve a peak transfer rate of 800 Kbps. Japan, China, Taiwan, Thailand, Vietnam Evolved UMTS Terrestrial Radio Access Network (EUTRA) E-UTRA is an evolution to the UMTS networks, capable of achieving high data rates and low latency. It is marketed as a 4G technology. Sweden ( Stockholm only), Norway (Oslo only) Wireless Broadband (WiBRO) WiBRO is a South Korean equivalent for the IEEE 802.16e standard (also known as mobile WiMAX). South Korea iBurst is a IEEE 802.20 standard, developed by ArrayComm and later adopted as the HC-SDMA standard. It is a widely used wireless broadband technology and has been implemented in a number of countries. Norway, Lebanon, Ghana, Congo, South Africa, Azerbaijan, Kenya, Tanzania, Mozambique, Malaysia, Canada, USA iBurst, also known as High Capacity Spatial Division Multiple Access (HC-SDMA) Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 57
  • 58. Strategies for Driving Mobile Data and Broadband Adoption Chapter 7 Mobile Broadband – State of the Markets 58 © 2010, Portio Research. All Rights Reserved
  • 59. Strategies for Driving Mobile Data and Broadband Adoption Mobile Broadband – State of the Markets Market Size Mobile Broadband User Base The mobile broadband market is gaining momentum worldwide. T he e volution o f mobile networks has en abled hi gh-speed dat a t ransfer and has m ade mobile broadband m ore attractive to s ubscribers. T he wor ldwide use r base f or m obile br oadband s tood at 371. 7 million at end-2009. With MNOs making huge i nvestments to im prove the quality and utility of services, the mobile broadband user base is expected to grow at a CAGR of 36.4 percent between 2009 and 2014 to reach nearly 1.8 billion by end-2014. Worldwide, the percentage of mobile subscribers using mobile broadband is expected to grow from 8.1 percent at end2009 to 27.8 percent by end-2014. The figure below depicts the mobile broadband user base from 2009 to 2014. Mobile Broadband User Base (In Million) Figure 33: Mobile Broadband User Base – Worldwide (In Million, 2009 – 2014F) 2,000 1,757.5 1,500 1,316.5 975.6 1,000 500 721.1 371.7 521.6 0 2009 2010F 2011F 2012F 2013F 2014F Year Source: Portio Research Ltd. F – Forecasted © 2010, Portio Research. All Rights Reserved 59 Mobile broadband user base is expected to grow at a CAGR of 36.4 percent between 2009 and 2014 to reach nearly 1.8 billion by end-2014.
  • 60. Strategies for Driving Mobile Data and Broadband Adoption The table below highlights the growth of regional mobile broadband users from 2009 to 2014. Table 9: Mobile Broadband User Base – Regional (In Million, 2009 – 2014F) 14 Mobile Broadband Users (In Million) Region 2009 2010F 2011F 2012F 2013F 2014F Europe 92.6 131.8 182.6 235.8 312.2 396.1 Asia Pacific 168.7 234.4 324.8 452.3 624.9 844.1 North America 74.0 94.7 119.1 145.9 175.2 216.1 Latin America 17.1 30.7 42.8 64.3 95.3 141.8 Africa and Middle East 19.3 30.0 51.9 77.3 108.9 159.5 Total 371.7 521.6 721.1 975.6 1,316.5 1,757.5 Source: Portio Research Ltd. Asia P acific had t he largest r egional mobile br oadband u ser ba se i n 2009, and t his constituted 45. 4 per cent of t he worldwide m obile br oadband u ser ba se. I t was f ollowed by Europe w ith a 24. 9 per cent co ntribution and North A merica w ith 19. 9 percent. T he figure below breaks out the regional share of the worldwide mobile broadband user base in 2009. Figure 34: Worldwide Mobile Broadband Users – Regional Contribution (In Percent, 2009) 45.4% 19.9% 4.6% 5.2% 24.9% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. Asia Pacific is expected to lead other regions in mobile broadband adoption in terms of user base, i n t he n ext five ye ars. T he r egion will ha ve 48 per cent of t he wor ldwide m obile broadband user base by end-2014, followed by Europe with a 22.5 percent share. The next figure highlights the regional share in worldwide mobile broadband user base in 2014. 14 Note: Sum of regional numbers may not equal total due to rounding off errors. 60 © 2010, Portio Research. All Rights Reserved
  • 61. Strategies for Driving Mobile Data and Broadband Adoption Figure 35: Worldwide Mobile Broadband Users – Regional Contribution (In Percent, 2014F) 48.0% 12.3% 8.1% 9.1% 22.5% Europe Asia Pacific North America Latin America Africa and Middle East Source: Portio Research Ltd. F – Forecasted The worldwide m obile broadband user base is forecast to grow at a C AGR of 36.4 percent between 2009 and 2014. Latin America, along with Africa and the Middle East, is expected to see t he hi ghest growth, since t he mobile br oadband user addi tions i n t hese r egions will happen on a lower user base compared with other regions. The growth rate in all regions is expected to be hi gh, as m ost o f t he markets ar e not expected to s aturate in t he next f ive years. Figure 36: Mobile Broadband User Base Growth by Region (In Percent, 2009 – 2014F) CAGR (In Percent) 60 CAGR Worldwide = 36.4 % 52.7 50 40 33.7 CAGR 36.4% 38.0 30 52.6 23.9 20 10 0 Asia Pacific Europe North America Latin America Africa and Middle East Region Source: Portio Research Ltd. F – Forecasted In 2009, in t erms o f mobile broadband user base as a percentage of total mobile subscribers, North America recorded the highest level with 23.8 percent, followed by Europe with 8.8 percent. The share of worldwide mobile broadband users in the total m obile subscriber ba se i s expected t o i ncrease f rom 8. 1 per cent i n 2009 t o 27. 8 p ercent by end2014. © 2010, Portio Research. All Rights Reserved 61 The worldwide mobile broadband user base is forecast to grow at a CAGR of 36.4 percent between 2009 and 2014.
  • 62. Strategies for Driving Mobile Data and Broadband Adoption The t able bel ow depicts t he co ntribution of mobile br oadband u sers i n the total m obile subscriber base. Table 10: Mobile Broadband User Base as a Percentage of Total Mobile Subscribers – 15 Regional (In Percent, 2009 – 2014F) Mobile Broadband Users as a Percentage of Total Mobile Subscribers (In Percent) Region 2009 2010F 2011F 2012F 2013F 2014F Europe 8.8 12.0 16.1 20.3 26.4 33.1 Asia Pacific 8.0 9.8 12.4 16.0 20.8 26.7 North America 23.8 28.9 34.8 41.1 47.8 57.4 Latin America 3.5 5.8 7.5 10.6 15.0 21.3 Africa and Middle East 3.1 4.3 6.7 9.4 12.5 17.5 Worldwide 8.1 10.3 13.3 16.9 21.7 27.8 Source: Portio Research Ltd. The f igure bel ow co mpares t he co ntribution of mobile br oadband u sers i n t he r egional subscriber base. Mobile Broadband Users' Contribution (In Percent) Figure 37: Mobile Broadband Users as a Percentage of Total Mobile Subscribers – Regional (In Percent, 2009 & 2014F) 70 57.4 60 50 40 33.1 26.7 30 20 10 8.8 23.8 21.3 8.0 3.5 17.5 3.1 0 Europe Asia Pacific North America Latin A merica Africa and Middle East Region 2009 2014F Source: Portio Research Ltd. F – Forecasted 15 Note: Mobile broadband users as a percentage refers to mobile broadband users as a percentage of total mobile subscribers in a region. 62 © 2010, Portio Research. All Rights Reserved
  • 63. Strategies for Driving Mobile Data and Broadband Adoption Mobile Broadband Revenue Mobile broadband services are helping MNOs increase their data revenues. Data revenues have been dominated by SMS revenues in the past and will continue to be over the next five years. However, in part due to the increasing mobile broadband use among subscribers, the contribution of SMS to worldwide data revenues is expected to decrease from 48.4 percent in 2009 to nearly 42 percent by end-2014. During the same period, the contribution of mobile broadband to worldwide data revenues is projected to increase from 19.9 percent in 2009 to 27.1 percent by end-2014. Figure 38: Mobile Broadband Revenue – Worldwide (In USD Billion, 2009 – 2014F) 79.9 Mobile Broadband Revenue (In USD BIllion) 80 65.7 60 51.1 72.8 58.1 42.0 40 20 0 2009 2010F 2011F 2012F 2013F 2014F Year Source: Portio Research Ltd. F – Forecasted The table below highlights the growth of regional mobile broadband revenues from 2009 to 2014. Table 11: Mobile Broadband Revenue – Regional (In USD Billion, 2009 – 2014F) 16 Mobile Broadband Revenue (In USD Billion) Region 2009 2010F 2011F 2012F 2013F 2014F Europe 15.0 16.8 17.6 18.9 20.3 21.9 Asia Pacific 14.2 18.8 22.7 26.3 28.8 31.4 North America 10.7 12.6 14.3 16.1 18.6 20.8 Latin America 0.9 1.2 1.5 1.9 2.3 2.7 Africa and Middle East 1.2 1.7 2.1 2.4 2.7 3.0 Total 42.0 51.1 58.1 65.7 72.8 79.9 Source: Portio Research Ltd. 16 Note: Sum of regional numbers may not equal total due to rounding off errors. © 2010, Portio Research. All Rights Reserved 63 Contribution of SMS to worldwide data revenues is expected to decrease from 48.4 percent in 2009 to nearly 42 percent by end-2014.
  • 64. Strategies for Driving Mobile Data and Broadband Adoption In 2009, Europe had the highest mobile broadband revenue, contributing 35.6 percent to the worldwide mobile broadband revenues. Europe was followed by Asia Pacific with a 33.8 percent contribution and then North America with a 25.4 percent contribution. T he f igure below shows the regional share in worldwide mobile broadband revenue in 2009. Figure 39: Worldwide Mobile Broadband Revenue – Regional Contribution (In Percent, 2009) 33.8% 25.4% 35.6% Europe 3.0% Asia Pacific North America 2.2% Latin America Africa and Middle East Source: Portio Research Ltd. Asia P acific is ex pected to inch ahead of Europe i n mobile br oadband r evenue by 2014. The r egion w ill acco unt f or 39. 3 per cent of w orldwide m obile br oadband r evenue by end2014, agai nst E urope’s co ntribution of 27. 5 per cent, and N orth A merica’s 26. 1 per cent share. T he f igure bel ow hi ghlights t he r egional sh are i n worldwide m obile br oadband revenue in 2014. Figure 40: Worldwide Mobile Broadband Revenue – Regional Contribution (In Percent, 2014F) 17 39.3% 26.1% 27.5% Europe Asia Pacific 3.8% North America Latin America 3.4% Africa and Middle East Source: Portio Research Ltd. F – Forecasted 17 Note: The percentages do not add up to 100 percent because of rounding off errors. 64 © 2010, Portio Research. All Rights Reserved
  • 65. Strategies for Driving Mobile Data and Broadband Adoption Worldwide mobile br oadband r evenue is forecast t o gr ow at a CAGR of 13. 7 per cent between 2009 and 2014, and all regions – except Asia Pacific – are expected to record double digit CAGRs. MNOs are expected t o promote mobile broadband adoption t hrough competitive pr icing, and t his may r esult in mobile br oadband r evenue gr owing at a s lower pace compared with the mobile broadband user base. This effect is anticipated to be more prominent i n l arge markets where M NOs place gr eater em phasis on u sing scale t o boo st revenues and network utilisation. Figure 41: Mobile Broadband Revenue Growth by Region (In Percent, 2009 – 2014F) CAGR (In Percent) 30 CAGR Worldwide = 13.7 % 24.0 25 20 19.3 17.2 14.3 15 CAGR 13.7% 7.9 10 5 0 Asia Pacific Europe North America Latin America Africa and Middle East Region Source: Portio Research Ltd. F – Forecasted © 2010, Portio Research. All Rights Reserved 65 Worldwide mobile broadband revenue is forecast to grow at a CAGR of 13.7 percent between 2009 and 2014.
  • 66. Strategies for Driving Mobile Data and Broadband Adoption Regional Trends Mobile operators worldwide are encouraging the growth of mobile broadband and are formulating strategies to suit the needs of different markets. Operator s trategies ar e dependent on t he market behaviour and the cu rrent s tate o f infrastructure in their respective markets. The appropriate network technology in one region might not be suitable in other regions because of the existing network technology, density of subscriber base , dat a use behav iour, investment r equired, and r egulatory environment. Similarly, a pricing or marketing s trategy that i s successful i n one r egion might not be sustainable in another region. This section discusses the regional trends in mobile broadband adoption and the MNOs’ strategy for mobile broadband proliferation. Europe There ha ve been e xtensive 3G depl oyments i n E urope, w ith oper ators upgr ading t heir networks and t echnologies t o s erve h igh dat a s peeds and ca pabilities. S ome European markets have even upgraded to HSPA technologies. The improved networks boost data use by enterprises and consumer segments. The figure below provides the 3G subscriber forecast for Europe. Figure 42: Technology Forecast — Europe (In Million, End 2009 – End 2014F) 1200 Mobile Subscribers (In Million) 1000 800 333.7 538.8 771.2 926.4 400 717.9 200 558.2 1,106.5 164.3 91.7 2012F 360.7 1,017.5 233.6 600 2013F 2014F 0 2009 2010F 2011F Year 2G and others 3G and above Source: Portio Research Ltd. F – Forecasted France, the UK, Spain, Italy and Germany are the key markets i n Europe with hi gh m obile broadband adoption. The region has witnessed a positive uptake of mobile broadband owing to the following factors: • Availability o f h igh-speed m obile net works with s peeds co mparable to fixed li ne networks • Increase in the installed base of smartphones and high-end feature phones • Availability of advanced services and applications that allow users to stay connected to friends and family through mobile email and social networking, and a growing online culture of sharing multimedia content including photos, videos, etc. The r egional t rends r elated t o t he depl oyment o f mobile br oadband ca pable net works, MNOs’ strategies, and development of key content categories are stated in the next figure. 66 © 2010, Portio Research. All Rights Reserved France, the UK, Spain, Italy and Germany are the key markets in Europe with high mobile broadband adoption.
  • 67. Strategies for Driving Mobile Data and Broadband Adoption Figure 43: Regional Trends — Europe Strategies and Key Developments Focus Area • • Technology • • • • Price and Packaging • • • Marketing and Promotions • Consumer Segments and Content Categories • • Widespread deployment of HSPA: Used by over 120 MNOs across 42 markets; enables high data rates (peak rate over 1.8 Mbps) LTE rollout: To offer data speeds comparable to fixed broadband; TeliaSonera Sweden launched its LTE network in December 2009, Telekom Austria and Telenor Sweden have plans to provide LTE coverage during 2010 Network sharing: Sharing agreements to reduce capital expenditure (CAPEX) include a multi-market network sharing agreement between Telefonica and Vodafone; TeliaSonera and Tele2 in Sweden; Vodafone and TIM in Italy; Vodafone and Orange in Spain; and T-Mobile and 3 in the UK Innovative devices: During H2 2009, several MNOs launched MiFi, 3G-based wireless router targeting business users Popular packages: Transparent flat-fee data plans allow use up to a specified limit; if exceeded, network speed is limited and extra charges are levied ‘Laptop for Free’ bundles: Mobile data access subscriptions bundled with laptops/netbooks or USB modems; payment for the device is distributed over the contract period International hotspot network: MNOs are bundling international hot spot use with their mobile broadband plans by leveraging their presence and collaborations in international markets. Orange Switzerland offers 2,500 free minutes of Wi-Fi access; Telenor Sweden uses this as a differentiating factor when marketing their plans Unlimited plans: MNOs are marketing ‘unlimited’ data plans to promote high use among subscribers Popularising investments in high-speed networks: MNOs are running pre-launch campaigns for technologies such as LTE, to make consumers aware of the network differentiation, and to swiftly gain critical mass of users to new technologies. Telenor Sweden launched a LTE trial campaign in 2009, highlighting the capabilities of the new networks– including peak data rates of 150 Mbps Increasing focus on prepaid segment: After an initial focus on postpaid subscribers (particularly for unlimited use), MNOs are now focussing on prepaid subscribers (casual use) to optimise network utilisation and revenue generation; Unlimited plans account for large data use per user at lower unit pricing, whereas prepaid plans provide an opportunity to cater to casual users with lesser data use, at higher pricing Mobile social networking: The developed markets in Europe have witnessed strong uptake of mobile social networking services and the use is driven by high data speeds and rich user experiences on advanced devices Other data-centric services: Online gaming, mobile video services, web TV broadcasting, etc. demand high speed mobile broadband connections Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 67
  • 68. Strategies for Driving Mobile Data and Broadband Adoption Asia Pacific Asia Pacific is the bi ggest market for mobile broadband, with the highest num ber of mobile broadband users reported at t he end of 2009 (168.7 m illion). The r egion i s w itnessing significant t echnology deployments and upgrades t o LTE and HS PA t echnologies. M NOs are pl anning to i nvest nearly USD 34 bi llion in 2010—the highest i n comparison with other regions—to upgrade their mobile broadband technology infrastructure. 18 The high-density of youth popul ation and a maturing voice s egment make A sia P acific one of t he most promising r egions for mobile br oadband. T hus, oper ators ar e co mmitted t o enhanc ing networks to tap this potential effectively. The figure below provides the 3G subscriber forecast for Asia Pacific. Figure 44: Technology Forecast — Asia Pacific (In Million, End 2009 – End 2014F) Mobile Subscribers (In Million) 3200 2400 288.3 465.3 798.7 1,922.7 1,828.6 1,252.9 1,819.7 2,422.2 1600 800 1,818.4 1,581.2 1,190.9 736.7 0 2009 2010F 2011F 2012F 2013F 2014F Year 2G and others 3G and above Source: Portio Research Ltd. F – Forecasted Japan, South Korea, Australia, India and China are the key markets in Asia Pacific with high mobile broadband adoption. The region has witnessed a positive uptake of mobile broadband owing to the following factors: • Higher margins in data revenues: Since mobile b roadband penet ration i n t he region i s r elatively low i n co mparison t o western regions, t he ut ilisation o f unus ed network capacity would generate addit ional r evenue s treams. Also, the v oice segment has no w m atured w ith pl ayers co mpeting mostly on pr ice; t hus dat a revenues tend to generate better margins. • Availability of technology infrastructure: Operators and Governments in the region have started to take initiatives to upgrade network infrastructure for providing effective communication services. As a r esult, network bandwidth and ca pacity are available t o s upport r ich co ntent s ervices t hat ca n be acce ssed t hrough m obile broadband. • Favourable demographics: Asia P acific is a gr owing r egion in terms o f t he percapita disposable income. Rising income levels, the growing number of enterprises, and a large youth population have all contributed to the growth of data services and mobile applications. This encourages MNOs to start offering these services through mobile broadband. The r egional t rends r elated t o t he depl oyment o f mobile br oadband ca pable net works, MNOs’ strategies, an d t he dev elopment o f ke y content ca tegories ar e l isted i n t he nex t figure. 18 Source: http://www.telecomtiger.com/Broadband_fullstory.aspx?passfrom=Broadband&storyid=8417&section=S212 68 © 2010, Portio Research. All Rights Reserved The high-density of youth population and a maturing voice segment make Asia Pacific one of the most promising regions for mobile broadband.
  • 69. Strategies for Driving Mobile Data and Broadband Adoption Figure 45: Regional Trends — Asia Pacific Focus Area Strategies and Key Developments • Technology • • • Price and Packaging • • Marketing and Promotions • • Consumer Segments and Content Categories • • Migrating to HSPA Technology: Over 60 MNOs across 25 markets; some MNOs are planning to upgrade their networks to LTE technology High speeds: Worldwide, Telstra Australia has the largest HSPA+ 3G network with a maximum downlink speed of 21 mbps; it is also testing dual carrier HSPA technology with a downlink speed of 42 Mbps Flat-rate charging: Users prefer unlimited/flat-rate charging Data packages: Data allowance plans are becoming increasingly popular; Optus Australia, Reliance India and Telkomsel Indonesia are offering more than eight different data bundles with data allowances up to 8 GB Tiered Plans: Operators are also offering innovative tiered plans; Celcom Malaysia is using tiered plans based on speeds, while Maxis Malaysia has tiered plans based on volumes Value proposition: Mobile broadband is marketed as a replacement to fixed-line broadband Differentiating factors: Pricing is not the only differentiator, network coverage and quality of service are considered more important parameters for mobile broadband purchase decisions Consumer segments: Youth and enterprise consumers are the primary segments that drive data traffic Prepaid mobile broadband: Prepaid mobile broadband (PC-based Internet connectivity using flash modem with download speeds of 384 Kbps and above) is witnessing high growth Content: New applications and language content are more popular in the region and are driving more traffic. Consumer e-mails, social networking sites, videos, etc. are popular content services Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 69
  • 70. Strategies for Driving Mobile Data and Broadband Adoption North America North America is preparing for wide-scale commercial 4G depl oyments – WiMAX and LT E. MNOs in the US, such as Verizon and Sprint, have been the regional pioneers in deploying next generation technologies through massive trials and investments. These new technology deployments will increase the data carrying capacity of the networks in terms of volume, as well as their speed. Con sequently, mobile br oadband will e merge as an ef fective replacement for fixed broadband. The figure below provides the 3G subscriber forecast for North America. Figure 46: Technology Forecast — North America (In Million, End 2009 – End 2014F) 19 Mobile Subscribers (In Million) 400 300 74.4 124.0 173.1 221.5 200 100 236.8 203.3 168.7 133.3 268.3 97.9 0 2009 2010F 2011F 2012F 2013F 314.2 62.1 2014F Year 2G and others 3G and above Source: Portio Research Ltd. F – Forecasted The US and Canada are the key markets in North America with high mobile broadband adoption. T he r egion has witnessed a positive upt ake of mobile broadband, owing t o t he following factors: • Availability o f h igh-speed m obile net works with s peeds co mparable to fixed li ne networks • Increase i n t he installed bas e of s martphones, such as i Phone, which enhances user experiences with mobile broadband • Data-savvy co nsumer popul ation and a l arge bus iness pop ulation—an oppor tunity for MNOs to push data use • Increasing us e of mobile on -the go and an increasing num ber o f Wi-Fi hot spots encourage data use • Availability of advanced services and applications that allow users to stay connected to friends and family through mobile e -mail and s ocial net working, and a growing online culture of sharing multimedia content including photos, videos, etc. The r egional t rends r elated t o t he depl oyment o f mobile br oadband ca pable net works, MNOs’ s trategies, and t he dev elopment o f ke y content ca tegories ar e stated i n t he f igure overleaf. 19 Note: We have revised our 3G subscriber forecasts as our previous forecasts were made keeping the ongoing recession period in mind. However, it is now apparent that the impact of recession on 3G subscriber growth was less dampening than we previously envisaged. 70 © 2010, Portio Research. All Rights Reserved MNOs in the US, such as Verizon and Sprint, have been the regional pioneers in deploying next generation technologies through massive trials and investments.
  • 71. Strategies for Driving Mobile Data and Broadband Adoption Figure 47: Regional Trends — North America Focus Area Strategies and Key Developments • Technology • • • Price and Packaging • • • Marketing and Promotions • • • Consumer Segments and Content Categories • • Trials for evolving technologies: The US telecom market has been at the forefront of technology evolution and has pioneered many trials: AT&T ( HSDPA i n 200 5, U S) and R ogers Communications (HSDPA i n 2006, C anada) p ioneered t he l aunch o f 3 .5G; M NOs ar e now conducting 4G trials, with V erizon an d A T&T following the LT E r oute with network launches planned in 2010 and 2011 respectively, whereas Sprint will be launching WiMAX in the near future Increased focus on mobile broadband: According t o GSMA, N orth America will ex perience the s econd highest investment in mobile broadband t echnologies in 2 010, af ter A sia P acific. T he MNOs are investing in their networks to be able to serve the growing demand for data services in the region Simplified data plans: MNOs are offering simple price plans which subscribers can easily understand Aggressive pricing strategy: MNOs are promoting flat-fee plans which have low per unit data charges; (these plans have 5GB upper limit ; if exceeded, network speed is often limited and extra charges are levied) Driving data use among 3G subscriptions: Verizon requires all its 3G subscribers to subscribe to one of the data plans; AT&T has been successful in increasing the number of 3G integrated (activated for 3G) devices by 15 million during 2009 Leveraging the popularity of smartphones: Mobile broadband offerings bundled with popular smartphones, such as iPhone and Motorola Droid, are pushing data use Highlighting network speed: MNOs are differentiating on network speeds offered through their networks – to create consumer awareness about their new network technology and achieve critical mass of adoption. Also, to gain first mover advantage in case of launching new services on these advanced networks Coverage: MNOs are also using network coverage as a tool to market their services to subscribers Device availability: The availability of popular smartphones and other innovative devices is also an important differentiating g factor Youth segment: The youth segment has emerged as a major contributor to mobile broadband use; growing popularity of data-centric services such as online gaming, mobile social networking and multimedia content sharing are driving data use Mobile applications: The mobile applications market has mushroomed in the region after Apple launched its App Store; this has led to the adoption of various Internet-based application and services on the mobile platform Data services for enterprise segment: Location-based services, web TV broadcasting, web conferences, etc. are driving data use for business users Source: Company reports, Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 71
  • 72. Strategies for Driving Mobile Data and Broadband Adoption Latin America Latin A merica has been a l ate s tarter i n the 3G an d high-speed net works arena, an d the region’s 3G subscribers co nstituted onl y 4.6 per cent of the t otal mobile subscriber base in 2009. Operators are primarily focussing on subscriber acquisition as the w ireless penetration is low in comparison with advanced markets worldwide, which generally means that advanced mobile data services are not a part of operators’ key strategies in the region. However, the future prospects for high speed data services look encouraging, as the penetration of 3G users is expected to increase to nearly 45 percent by end-2014. The figure below provides the 3G subscriber forecast for Latin America. Figure 48: Technology Forecast — Latin America (In Million, End 2009 – End 2014F) Mobile Subscribers (In Million) 700 600 59.2 110.6 170.7 232.6 299.1 464.1 471.1 458.6 433.9 403.8 367.3 2009 500 2010F 2011F 2012F 2013F 2014F 22.3 400 300 200 100 0 Year 2G and others 3G and above Source: Portio Research Ltd. F – Forecasted Mobile broadband has already gained traction i n major m arkets i n Latin America, including Brazil, Argentina, Mexico, Venezuela, Peru, Chile and Colombia. However, in other parts of the region it is still finding its feet. Given below are some of the factors that drive the current growth of mobile broadband locally and will encourage future demand for the service: • Support from local Government in markets such as Brazil to increase the presence of high-speed networks, even in remote areas • Telecom r egulatory bodies of fering full support f or mobile br oadband services and allowing MNOs to u se ex isting m obile band s at l ower frequencies f or the provision of mobile broadband services • Increasing penet ration of mobile subscribers i s dr iving I nternet acce ss on m obiles, since t he fixed br oadband penet ration in the r egion is l ow; t his i s dr iving mobile broadband use • Operators’ i nitiatives to grow mobile r evenues through ad vanced data s ervices to compensate for falling voice ARPU The r egional t rends r elated t o t he depl oyment o f mobile br oadband ca pable net works, MNOs’ strategies, and the development of key content categories are stated in the following figure. 72 © 2010, Portio Research. All Rights Reserved Latin America has been a late starter in the 3G and highspeed networks arena, and the region’s 3G subscribers constituted only 4.6 percent of the total mobile subscriber base in 2009.
  • 73. Strategies for Driving Mobile Data and Broadband Adoption Figure 49: Regional Trends — Latin America Focus Area Strategies and Key Developments • Technology • • • • Pricing and Packaging • • Marketing and Promotions • • • • Consumer Segments and Content Categories • Focus on 3G: Operators in the region prefer 3G over 2G since they believe it will increase network capacity and coverage; they further argue that 3G is more efficient in terms of increasing capacity and will prevail in future over older technologies Increasing deployment of HSPA: 49 MNOs across 22 markets (with theoretical peak download speed greater than 1.8 Mbps) LTE trials: Telefonica is planning to start LTE trials in six countries including Brazil and Argentina. By end-2013, most of the operators in major markets are expected to launch LTE networks Customised plans: MNOs have introduced new session-based price plans, which allow users unlimited Internet access for specific periods, for example one day, two days, one week, one month, etc. Tiered rates plans: MNOs are also offering plans which allow subscribers to download large files at discounted rates at night and nonpeak hours Mobile broadband and PC bundles: MNOs are offering bundled mobile broadband packages with laptops or netbooks embedded with 3G chipsets and Wi-Fi capability Promoting Internet instead of data: America Movil is focusing on Internet, rather than data, in its marketing campaigns Partnerships with local media: MNOs have partnered with local media and TV channels to promote mobile Internet services Easy to install: MNOs are promoting their mobile broadband solutions and PC dongles as easy to install solutions, keeping in mind the limited technical know-how of the subscribers in the region Offering new content and solutions: MNOs are offering new content services such as web TV and IPTV which will add appeal to their broadband offerings and increase the uptake of these services Focus on prepaid segment: Operators are focussing on penetrating their broadband services in the prepaid segment by providing broadband price plans suitable for prepaid users. It is expected that in the future, prepaid users will outnumber postpaid users as mobile broadband users. Capitalising on popularity of social networking: Social networking is very popular in the region; at end-2009, the highest number of Orkut, a social networking site, users originated from Brazil. MNOs are trying to capitalise on this popularity to drive mobile broadband use using mobile devices, since mobile devices are the primary medium for accessing Internet in several regional markets. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 73
  • 74. Strategies for Driving Mobile Data and Broadband Adoption Africa and Middle East Africa and Middle East has high-potential for mobile broadband growth. Currently, the number o f s ubscribers u sing m obile br oadband i s r elatively low co mpared with matured western markets, however, this presents an exciting opportunity for global MNOs – such as MTN, Z ain and Vodacom – to o ffer mobile br oadband s ervices at co mpetitive r ates and capture the untapped market. There ar e m ore t han ten undersea ca bles, either under co nstruction or at the planning stage, to provide the necessary network infrastructure and bandwidth capacity. 20 Increasing investment in br oadband i nfrastructure and a surge in m obile broadband u sers represent promising signs for this regional mobile broadband market. The figure below provides the 3G subscriber forecast for Africa and Middle East. Figure 50: Technology Forecast —Africa and Middle East (In Million, End 2009 – End 2014F) 21 Mobile Subscribers (In Million) 1000 800 600 60.9 135.9 239.2 356.0 567.2 530.9 468.3 474.8 595.9 400 200 553.7 395.1 315.1 0 2009 2010F 2011F 2012F 2013F 2014F Year 2G and others 3G and above Source: Portio Research Ltd. F – Forecasted The UA E, S outh Africa, I srael, K enya and E gypt ar e the ke y markets i n Africa and Middle East that have high mobile broadband adoption. The region has witnessed a positive uptake of mobile broadband owing to the following factors: • Building supportive infrastructure: The region is witnessing considerable investment in broadband infrastructure. The number of countries operating on HSPA technology is growing; some operators are also planning to launch LTE technology, which will provide hi gh bandwidth and s peed t o support r ich co ntent services. The Seacom fibre-optic cable was launched in 2009 to benefit African countries, and will enable data speeds of 1.2 terabytes per second. • Growing price competition: Owing to the low mobile broadband penetration and a substantial l ow-income co nsumer bas e i n A frican markets, M NOs ar e of fering broadband services at co mpetitive pr ices. Operators ar e i ntroducing various pl ans with dat a all owances, s ervice bundl es, et c., to i ncrease t he uptake of m obile broadband services. 20 Source: http://www.reuters.com/article/idUSTRE56K3F020090721 Note: The 3G subscriber forecasts have been lowered (from those published previously) as the uptake of 3G services has been marred by delays in network roll-outs due to regulatory issues and operators reluctance to invest during the recent economic downturn. 21 74 © 2010, Portio Research. All Rights Reserved The UAE, South Africa, Israel, Kenya and Egypt are the key markets in Africa and Middle East that have high mobile broadband adoption.
  • 75. Strategies for Driving Mobile Data and Broadband Adoption The r egional t rends r elated t o t he depl oyment o f mobile br oadband ca pable net works, MNOs’ s trategies, and t he dev elopment o f ke y content ca tegories ar e stated i n t he f igure below. Figure 51: Regional Trends — Africa and Middle East Focus Area Strategies and Key Developments • Technology • • Price and Packaging • • Marketing and Promotions • • Consumer Segments and Content Categories • Mobile broadband dominating fixed broadband: In Africa, 3G/HSDPA technology subscribers outnumber fixed line ADSL subscribers. Also, fixed line broadband service providers are moving to 3G – WiMAX services to keep pace with mobile broadband technology. Shifting to HSPA and LTE: The region is witnessing a technology shift from HSDPA to HSPA+, to provide download speeds of up to 21 Mbps; MTN South Africa will soon launch its HSPA+ services, Etisalat and Cell C are planning to introduce 4G (LTE) networks in the UAE and South Africa respectively Attractive data packages: In the UAE, various data use plans, such as ‘unlimited domestic’, ‘unlimited Global’, and ‘lite use Packages’ (offering up to 50 MB of data use), are available to suit the needs of different users. 3.5G ‘Data Packages’ are also available and offer flat rate monthly charging for a fixed limit of data use ,and use-based charging for use beyond the fixed limit Devices for access: Popular devices, such as mobile modems, routers, laptops and netbooks, data cards and smartphones, are being offered Focus on pricing: In the Middle East, operators such as Etisalat are using price as a differentiating factor and are providing services at discounted rates for limited periods Strategic partnerships: In the Middle East, operators are also partnering with smartphone vendors to launch product promotions and thus encourage data traffic on their networks Target segments: Enterprise users and business professionals are the target segments of most operators in the region. MNOs are targeting the SME (Small and Medium Enterprises) segment through bundled data plans; MTN – through its ‘MTN@ccess’ project – is targeting lowincome townships and aims to provide high-speed Internet access through its mobile broadband network. Content services: Popular content services including social networking sites such as Sembuse, navigation, instant messaging and mobile applications are increasing the demand for mobile broadband Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 75
  • 76. Strategies for Driving Mobile Data and Broadband Adoption Chapter 8 Mobile Broadband – Strategy Case Studies 76 © 2010, Portio Research. All Rights Reserved
  • 77. Strategies for Driving Mobile Data and Broadband Adoption Mobile Broadband – Strategy Case Studies Case Studies Vodafone UK Mobile Subscribers: 19.1 million (End-2009) Market Share: 23.7 percent (End-2009) Monthly ARPU: USD 33.3 (Q4 2009) 3G Subscribers as a Percentage of Customer Base: 38.2 percent (End-2009) About the Operator Vodafone i s one of t he l eading t elecommunication se rvices pr oviders of fering f ixed-line, mobile and br oadband services. Before t he r ecent merger of Orange and T -Mobile, it was the second largest mobile operator in the UK after O2. Rationale for Selecting the Operator The operator has led the growth of innovative and advanced mobile data services in the UK and ha s t he hi ghest num ber of 3 G s ubscribers i n t he co untry. With ded icated e fforts t o promote advanced data services, the operator h as witnessed an encouraging uptake of its mobile broadband services. The group’s mobile broadband revenue crossed GBP 1 billion in Q4 2009. 22 This out standing gr owth i n r evenues ha s been ach ieved through focused planning and effective promotional strategies. Vodafone is enco uraging i ts s ubscribers t o shift to advanced net works, which w ill o ffer subscribers b etter ex periences w hen u sing dat a services. I n addi tion, to offer bet ter experiences using its advanced mobile broadband services, Vodafone is offering laptops and dongles manufactured by leading manufacturers worldwide. The operator has the highest number of 3G subscribers in the country – who are the primary users of m obile broadband services – and the 3G user base i s increasing steadily highlighting the growing popularity of the operator’s mobile broadband services. Strategies Focus on Broadband Network Expansion and Quality Improvement Vodafone has clearly stated its intention to extend its high-speed wireless networks to every part of the country. It is also extending its broadband network coverage to countries outside the UK , to enable subscribers t o acce ss high-speed n etworks while r oaming in near ly 135 countries. Vodafone is pl anning to earmark a large pa rt of its capital expenditure (CAPEX) for mobile broadband expansion. From t he out set, V odafone has been pr oactive in l aunching and pr omoting advanced dat a services and has l ed t he way in t he UK. I n 2007, it became the first oper ator in t he UK t o deploy HSUPA networks. The oper ator i s al so i ncreasing i ts ca pabilities; it has introduced a 3.6 M bps p eak speed evolution of HSDPA across all its 3G networks and a 7.2 Mbps peak speed in key areas. It now plans to take its network capability to higher speeds of 14.4Mbps and 21.6Mbps, which will offer more reliability and higher average connection speeds. In 2009, V odafone’s m obile br oadband net work was judged t he ‘B est Cons umer Mobile Broadband’ by the ISPA (Internet Services Providers' Association). 22 Source: http://www.mobile-broadband.org.uk/news/vodafones-mobile-broadband-revenue-exceeds-1-billionduring-q4-2009-10000071/ © 2010, Portio Research. All Rights Reserved 77 Vodafone is encouraging its subscribers to shift to advanced networks, which will offer subscribers better experiences when using data services.
  • 78. Strategies for Driving Mobile Data and Broadband Adoption Transition from 2G to 3G Vodafone is pl anning t o gr adually migrate its 2G s ubscribers t o 3G net works. Cur rently, it has the highest 3G subscriber base in the country and the percentage of 3G subscribers in its total subscriber base is also increasing. The figure below compares the percentage of 3G subscribers in the total subscriber bases of major UK MNOs. Figure 52: 3G Subscribers as a Percentage of Total Subscriber Base – The UK (In Percent, December 2009) 45 38.2 40 32.4 3G Percentage (In Percent) 35 29.4 30 25 20 12.1 15 10 5 0 O2 Orange T-Mobile Vodafone Operator Source: Portio Research Ltd. The UK’s 3G subscriber base is increasing and each operator is trying to shift their 2G subscribers to 3G networks. The graph below clearly depicts that in the UK, Vodafone has managed to achieve the highest growth in its 3G subscriber base in 2009. Figure 53: Increase in 3G Subscribers Percentage – The UK (In Percentage Points, Q1 2009 – Q4 2009) Increase (In Percentage Points) 5 3.9 4 3.2 3.1 3.1 3.1 3.2 3 2 1 1.5 0.7 0.5 2.6 2.4 2.1 0.7 1.6 1.1 0.6 0 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Period O2 Orange T-Mobile Vodafone Source: Portio Research Ltd. 78 © 2010, Portio Research. All Rights Reserved
  • 79. Strategies for Driving Mobile Data and Broadband Adoption Attractive and Innovative Services to Drive Broadband Adoption Vodafone has introduced several attractive services and products to increase the uptake of its mobile broadband services. • In July 2009, Vodafone announced free Facebook access for its users for one week. This offer was part of the ‘Free Friday’ initiative started by Vodafone, which includes flat rate Internet browsing on Fridays. • In Dece mber 2009, V odafone updat ed i ts M obile Connect software f or M ac users. This enabled Snow Leopard (a Mac OS) users to go online using 3G mobile broadband dongles. • In January 2010, Vodafone Access Gateway was re-launched as ‘Sure Signal’. The hardware boo sts 3G s ignals and pr ovides a better indoor experience. W ith this launch, Vodafone claims to offer the best broadband and 3G user experience in the country. • In Ja nuary 2010, V odafone i ntroduced m obile br oadband packa ges with at tractive deals similar t o t hose available on l andline br oadband co nnections. T he packa ges are div ided i nto t hree ca tegories—Standard, P remium and Ult imate—to s uit t he needs of different users. • In Ja nuary 2010, V odafone introduced t ools w ith its broadband packa ges, which offer P C and file s ecurity t o us ers. T hese t ools ar e m ade a vailable for free w ith standard broadband packages. User Friendly and Transparent Pricing Vodafone has introduced di fferent pr icing pl ans t o suit t he needs of dif ferent us ers. I ts broadband plans are broadly divided into the following categories: • Plans for first time or occasional users • Plans for regular users • Plans f or r egular t ravellers ( with di fferent pl ans f or European an d worldwide travellers) In addition, the operator offers session-based pricing rather than per MB pricing. This allows users to choose their mobile broadband plans based on their needs. To assist users in selecting the right mobile broadband plan, Vodafone allows them to check the following plan-related information on its website: • Number of browsing hours • Number of e-mails that can be sent and received • Number of documents that can be downloaded and uploaded • Number of tracks that can be downloaded • Number of photos that can be downloaded and uploaded • Number of movies that can be downloaded • Number of software program updates that can be downloaded Handset and Laptops/Dongles Strategy Vodafone has p artnered with l eading handse t and l aptop vendors worldwide t o expand i ts mobile broadband device portfolio. Users can choose from a wide range of Dell and Lenovo laptops, which are available with built-in 3G broadband and Vodafone SIM cards. Apart from laptops, Vodafone 3G broadband modems also come embedded in netbooks. In July 2009, Vodafone became the first operator in the UK to offer the Samsung NC10 ultra-mobile net book with i n-built mobile br oadband c onnectivity. T he net book was of fered free of charge to users with a 24-month contract. In S eptember 2009, Vodafone announce d t he l aunch of V odafone 360, a s et of innovative Internet s ervices. The oper ator par tnered with S amsung t o m anufacture new d evices exclusively for V odafone 360 u sers for bet ter s ervice ex periences. T he oper ator al so partnered w ith Noki a t o s ell four Noki a Symbian s martphones pr e-loaded with V odafone 360. © 2010, Portio Research. All Rights Reserved 79 In July 2009, Vodafone became the first operator in the UK to offer the Samsung NC10 ultra-mobile netbook with in-built mobile broadband connectivity.
  • 80. Strategies for Driving Mobile Data and Broadband Adoption In January 2010, Vodafone strengthened its mobile broadband product portfolio by including Apple iPhone 3G and iPhone 3GS into its offerings. With this launch, Vodafone users have a device that arguably offers the best browsing experience over a mobile handset. The operator r eported sa les of 100, 000 i Phones i n t he UK w ithin t wo weeks of l aunch, w ith 50,000 units sold on the launch date.23 23 Source: http://www.mobile-broadband.org.uk/news/vodafones-mobile-broadband-revenue-exceeds-1-billionduring-q4-2009-10000071/ 80 © 2010, Portio Research. All Rights Reserved
  • 81. Strategies for Driving Mobile Data and Broadband Adoption The t able bel ow hi ghlights t he factors w hich ha ve l ed t o t he s uccess of V odafone UK ’s mobile broadband services. Table 12: Success Factors – Vodafone UK Factor Broadband Network Expansion Strategy Vodafone has always focused on the expansion of its advanced mobile networks, in order to cover larger numbers of subscribers. Transition from 2G to 3G Vodafone is encouraging its subscribers to migrate from 2G to 3G networks. This will increase the number of subscribers availing advanced services including mobile broadband, and provide a better user experience over high-speed networks. Attractive and Innovative Services Vodafone is attracting subscribers to its mobile broadband services with enticing plans such as free Facebook and deals that are similar to landline broadband packages. User Friendly and Transparent Pricing Advanced Handset and Laptops/Dongles Vodafone has introduced different price plans to suit the needs of users with varying broadband requirements. The operator offers transparent pricing and users can actually visit its website to know the amount of data they can avail in a particular plan – defined in terms of number of photos, number of e-mails, songs etc.. Vodafone has partnered with prominent laptop and netbook manufacturers, allowing its subscribers to choose from a variety of hardware options. Vodafone is offering the hardware with embedded broadband modems, which eases the installation process for subscribers, as they do not need to attach any external hardware. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 81
  • 82. Strategies for Driving Mobile Data and Broadband Adoption NTT DOCOMO Japan Mobile Subscribers: 55.4 million (End-2009) Market Share: 50.1 percent (End-2009) Monthly ARPU: USD 60.6 (Q4 2009) 3G Subscribers as a Percentage of Customer Base: 93.9 percent (End-2009) About the Operator NTT DOCOMO is the largest mobile network operator in Japan with over 50 percent market share at en d-2009, and l eads MNOs worldwide in terms of advanced mobile networks and innovative mobile data services. Rationale for Selecting the Operator NTT D OCOMO was one of the first operators t o o ffer mobile I nternet s ervices, with the launch of i -mode in 1999. Since t hen, its mobile I nternet and mobile br oadband of ferings have gr own steadily. T he oper ator i s kn own for offering the bes t m obile br oadband experience t o i ts s ubscribers with adv anced and cu stomised hand sets and high-speed networks. NTT DOCOMO has already run trials for LTE, the most advanced mobile network, and when deployed its mobile broadband offerings will become more attractive still. The operator, known for innovations in the wireless arena, launched 3G services in 2001. Its 3G s ervice, na med F OMA, had 52. 1 million s ubscribers at end -2009. T he figure bel ow highlights the growth of FOMA subscribers in 2009. 95 FOMA Subscribers (In Million) 53 93.9 52 92.9 94 93 51 91.6 52.1 51.3 50 92 91 50.3 90 49 Q2 2009 Q3 2009 Percentage of FOMA Subscribers (In Percent) Figure 54: FOMA Subscribers and Percentage of FOMA Subscribers in Total Subscriber Base – 24 NTT DOCOMO (Q2 2009 – Q4 2009) Q4 2009 Quarter FOMA Subscribers FOMA Subscribers as a Percentage of Total Subscriber Base Source: Portio Research Ltd. With the pressure of falling voice ARPU in the country, the operator is focussing on increasing i ts dat a A RPU. To do t his, i t is offering high-end dat a se rvices t hat pr imarily require f ast network speeds, a nd i n s upport of t his i s expanding and im proving its m obile Internet network infrastructure. It has been s uccessful in increasing t he upt ake of smartphones and P C-based m obile data devices among i ts subscribers. The effect of such developments on the operator’s data ARPU is highlighted in the figure on the next page. 24 Note: NTT DOCOMO’s financial year starts on 1 April, hence Q4 for the operator implies the quarter ending on 31 March. However, in this report we have taken Q4 as the quarter ending on 31 December. 82 © 2010, Portio Research. All Rights Reserved NTT DOCOMO’s 3G service, named FOMA, had 52.1 million subscribers at end2009.
  • 83. Strategies for Driving Mobile Data and Broadband Adoption Figure 55: Packet ARPU – NTT DOCOMO (In USD, Q2 2009 – Q4 2009) 25 28 Packet ARPU (In USD) 27.2 27 26.2 26 25 25.0 24 23 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. Strategies Early Start in Mobile Internet NTT DOCOMO started offering mobile Internet services as early as 1999 with the introduction of i -mode. The s ervice s et new bench marks and t rends i n the mobile I nternet arena, and being the first service of its kind instantly garnered encouraging uptake from Japanese users. The operator capitalised on the initial success of the service and complemented it with the launch of innovative services such as i-appli, i-area, i-motion and ishot. NTT DOCOMO also partnered with content providers and handset vendors to make imode s ervices m ore at tractive. I n as sociation w ith co ntent pr oviders, NT T DO COMO w as able t o gener ate co ntent t hat matched t he ex pectations a nd de sires of its s ubscribers. Furthermore, its partnerships with handset vendors allowed the operator to offer customised handsets, developed specifically to increase the appeal and utility of i-mode services. In addition, flat rate pricing models enabled unlimited access of the service to i-mode users. With s uch i nitiatives i n pl ace, NT T DO COMO w as able t o es tablish i ts m obile I nternet services t hrough i -mode. DOCOMO subscribers had al ready developed a pench ant for mobile I nternet services, and w ith t he advent of high-speed net works i n t he co untry, these services beca me all the more at tractive. The M NO’s s ubscribers hav e been us ing mobile Internet s ervices f or ye ars, and so subsequently welcomed t he t ransition t o hi gh-speed networks. Furthermore, years of familiarity with mobile Internet services assisted users in a smooth t ransition t o hi gh-speed net works an d ena bled t hem t o o vercome t he hur dle o f technical know-how – a major roadblock faced by subscribers in other markets to accepting mobile broadband services. i-mode is still growing strong with over 48 million subscribers to the service and over 95,000 Internet sites offering a variety of content.26 The figure on the next page depicts the ARPU of i-mode services. 25 Note: Packet ARPU comprises the basic monthly charges and packet communication charges for both FOMA and mova subscribers. 26 Note: http://www.nttdocomo.com/services/imode/index.html © 2010, Portio Research. All Rights Reserved 83 i-mode is still growing strong with over 48 million subscribers to the service and over 95,000 Internet sites offering a variety of content.
  • 84. Strategies for Driving Mobile Data and Broadband Adoption Figure 56: i-mode ARPU – NTT DOCOMO (In USD, Q2 2009 – Q4 2009) 40 36.4 i-mode ARPU (In USD) 35 30 24.4 25.5 Q2 2009 25 Q3 2009 20 15 10 5 0 Q4 2009 Quarter Source: Portio Research Ltd. Enhancing Content for Higher Broadband Use Japanese subscribers are typically tech-savvy, have a thirst for advanced data services, and expect continuous service i nnovation f rom t heir operators. Therefore, to s erve t he dat a needs of subscribers NTT DOCOMO has launched several attractive data services, which it regularly upgrades. As a result, subscriber levels of these services are increasing steadily. The oper ator ha s partnered with se veral co mpanies providing i nnovative co ntent, t o increase the appeal of it s offerings. In M ay 2009, NTT D OCOMO, i n a j oint v enture with Avex Entertainment Inc., launched the Bee TV service to promote video content among its subscribers. The content is specifically developed to suit the small screens of mobile devices, and the operator believes that mobile video will drive the uptake of 4G/LTE networks i n t he f uture – as subscribers’ demand f or hi gh-definition video s treaming i s growing. The operator i s continuously trying to im prove the ov erall ex perience of users, by offering easy-to-find content and faster download speeds, etc. 84 © 2010, Portio Research. All Rights Reserved NTT DOCOMO has partnered with several companies providing innovative content, to increase the appeal of its offerings.
  • 85. Strategies for Driving Mobile Data and Broadband Adoption The figure below highlights the growing popularity of the Bee TV service. Figure 57: Subscribers – Bee TV (In Million, Q2 2009 – Q4 2009) Subscribers (In Million) 1.0 0.8 0.8 0.6 0.9 0.4 0.4 0.2 0.0 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. NTT DO COMO has par tnered with DeNA —a pr ominent co mpany in e -commerce and the Internet advertising domain—to develop and launch a website with user-generated content. This will allow subscribers to share content generated by themselves with other users. The operator is also focussing on service personalisation to increase service uptake, and iconcier is one of the prime examples o f its efforts to make its services more personal and useful. T he s ervice d istributes i nformation t o us ers on t he bas is of t heir locations and preferences. The service’s encouraging uptake is depicted in the figure below. Figure 58: Subscribers – i-concier (In Million, Q2 2009 – Q4 2009) 4 Subscribers (In Million) 3.1 2.3 2 1.6 0 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 85
  • 86. Strategies for Driving Mobile Data and Broadband Adoption Furthermore, the oper ator has also r ealised t he i mportance of local co ntent t o pus h i ts services. I n Dece mber 2009, it launched ‘K anagawa S himbum newspaper’ that pr ovides information on e vents and f estivals t aking p lace i n K anagawa Prefecture, a district in t he southern Kantō region of Honshū, Japan. It i s al so gr adually increasing t he num ber o f it s content sites, to offer users a variety of content. The figure below shows the increasing number of its content sites. Number of Contet Sites Figure 59: Number of Content Sites – NTT DOCOMO (Q2 2009 – Q4 2009) 600 493.0 500 400 423.0 332.0 300 200 100 0 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. Promoting Flat Rate Plans NTT DOCOMO is aggressively promoting its fl at-rate subscription plan ‘Pake-hodai’. The main focus of the plan is to make us ers co mfortable about t heir data use and stop them worrying about t heir m onthly bills. T he MNO constantly revises i ts pl ans t o bet ter su it t he needs of its subscribers; for example, in 2008, Pake-hodai double and Biz-hodai double services w ere l aunched to enable users to adj ust t heir monthly fee on t he ba sis of each month’s use. To i ncrease the overall appeal of these services, NTT DOCOMO in May 2009 reduced the entry rates for the service from USD 12 to USD 5. In December 2009, it introduced the ‘Mail Tsukai-hodai’ service, which provided unlimited domestic i-mode mail access for a flat fee of USD 12.2 per month. With such offers i n pl ace, the operator has been abl e to successfully achieve its goal of higher flat r ate dat a subscriptions. T he gr owth i n t hese subscriptions i s shown in the figure below. Figure 60: Subscribers – Pake-hodai (In Million, Q2 2009 – Q4 2009) Subscribers (In Million) 25 20 19.6 21.5 23.1 15 10 5 0 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. 86 © 2010, Portio Research. All Rights Reserved NTT DOCOMO introduced the ‘Mail Tsukai-hodai’ service, which provided unlimited domestic i-mode mail access for a flat fee of USD 12.2 per month.
  • 87. Strategies for Driving Mobile Data and Broadband Adoption Promoting PC Data Cards NTT D OCOMO has focussed o n t he s ales of i ts P C data communication devices, and is promoting these dev ices through aggressive advertising on T V an d attractive pl ans – such as ‘T wo-tier-flat-rate dat a packa ge’ and ‘m opera U U flat-rate high-speed pl an’. I t has al so collaborated with PC manufacturers to offer PCs with in-built broadband modems. The figure below depicts the growth in its PC data communication device sales. Figure 61: PC Data Communication Devices Sold – NTT DOCOMO (In Million, Q2 2009 – Q4 2009) 0.2 Devices Sold (In Million) 0.16 0.12 0.1 0.08 0.0 Q2 2009 Q3 2009 Q4 2009 Quarter Source: Portio Research Ltd. The num ber of PC data communications subscribers availing flat rate data pl ans ha s risen considerably in comparison to subscribers opting for use based data plans. The figure below highlights the increasing trend for flat rate data plans. Figure 62: PC Data Communications Flat Rate and Use Based Data Plan Subscriptions – NTT DOCOMO (In Million, Q2 2009 – Q4 2009) Data Subscriptions (In Million) 0.45 0.39 0.38 0.40 0.40 0.28 0.30 0.20 0.15 0.00 Q2 2009 Q3 2009 Q4 2009 Quarter Flat Rate Use Based Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 87
  • 88. Strategies for Driving Mobile Data and Broadband Adoption Introducing Smartphones and Enhancing their Features To retain subscriber interest in its services, NTT DOCOMO has improved its content library and i ntroduced se veral s martphones f or us ers t o avail these services w ith bet ter user experiences. The operator is not only introducing smartphones, rather with each launch it is incorporating new and ad vanced features t o make it s co ntent more a ttractive and eas y to use. T he ne w s martphones ar e dev eloped and i ntroduced whi le ke eping the t hree most important factors in perspective—functions, prices and target consumers. Most smartphones offered by the MNO have s tandardised HS DPA functions and near ly 50 per cent o f its subscribers have hands ets equipped with HS DPA f unctions. I n No vember 2008, i t categorised its handset device portfolio into four series—the docomo STYLE, docomo PRIME, docomo SMART and docomo PRO—to suit the needs and lifestyles of its users. In 2009, it launched winter and spring handset models with advance designs and functionalities, and the operator cl aims t hat these i nitiatives ha ve s ignificantly helped improving o verall hands et s ales. A s of Ja nuary 2010, t he cu mulative s ales of it s ne w handset series reached 13 million. Along with feature advancements, the MNO is also trying to make devices attractive in terms of price, and has cut down on i ts development costs to reduce handset procurement costs. Leader in Advanced Wireless Networks NTT DOCOMO believes t hat it has to depl oy a r eliable and hi gh-quality mobile network to increase t he upt ake of advanced mobile dat a services, including mobile br oadband. I t has been among the leading MNOs worldwide in the development of advanced and high-speed mobile net works, and t he op erator considers hi gh-quality networks as one of t he m ajor reasons behi nd the encouraging u ptake of mobile broadband services. It depl oyed the first 3G network way back in 2001 and has already run successful trials for LTE (4G networks), which i t p lans t o co mmercially launch by end-2010. T he oper ator bel ieves t hat LT E is t he future technology and ha s expressed i ts i ntentions to phase out i ts 2G network completely by March 2011. T he MNO has regularly upgraded its net work to deliver a better user experience when acce ssing advanced services and co ntent. In June 2009, NTT DOCOMO launched a HSUPA network with a maximum uplink transmission rate of 5.7 Mbps. 88 © 2010, Portio Research. All Rights Reserved NTT DOCOMO believes that it has to deploy a reliable and high-quality mobile network to increase the uptake of advanced mobile data services, including mobile broadband.
  • 89. Strategies for Driving Mobile Data and Broadband Adoption The t able bel ow hi ghlights t he f actors w hich hav e l ed t o t he su ccess of NT T DOCOMO’s mobile broadband services. Table 13: Success Factors – NTT DOCOMO Japan Factor Strategy Early Start in Mobile Internet NTT DOCOMO started offering mobile Internet services in 1999 with the launch of i-mode, and over the years has been able to increase the appeal of its mobile Internet and mobile broadband offerings. These services have grown in popularity among its subscribers and are being used more frequently. Enhancing Content for Higher Broadband Use NTT DOCOMO has realised that with the improving quality and speeds of mobile networks, subscribers expect advanced and innovative services to make the most of these networks. The operator continuously upgrades its established services and launches new content matching the network and handset capabilities. Promoting Flat Rate Plans NTT DOCOMO is encouraging the uptake of flat rate pricing plans among its subscribers. Such plans allow users to access mobile broadband services without worrying about their monthly mobile bill. Subscribers have received such plans well, and the number of flat rate plan subscribers is increasing steadily. Promoting PC Data Cards NTT DOCOMO understands the importance of PC and laptops/netbooks in the proliferation of mobile broadband services. Hence the operator is pushing the use of such hardware (embedded with mobile broadband modems) through attractive pricing plans and aggressive advertising. Introducing Smartphones and Enhancing their Features NTT DOCOMO regularly introduces advanced smartphones in order to allow its subscribers to get the best experience from its mobile broadband offerings. In addition, it upgrades the features of its handsets to enhance the ease of use of these services. Leader in Advanced Wireless Networks NTT DOCOMO believes in offering the best and the latest technology to its subscribers. This enables the operator to extend the most advanced mobile data services to its subscribers and let its subscribers enjoy these services, without the hassle of network congestion and poor service quality. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 89
  • 90. Strategies for Driving Mobile Data and Broadband Adoption Verizon Wireless US Mobile Subscribers: 91.2 million (End-2009) Market Share: 31.9 percent (End-2009) Monthly ARPU: 50.8 USD (2009) 3G Subscribers as a Percentage of Customer Base: 34.5 percent (End-2009) About the Operator Verizon W ireless—a j oint venture bet ween V erizon C ommunications and V odafone Group with 55 per cent and 45 per cent ownership respectively—is one o f the l eading MNOs in the US. The oper ator pr ovides m obile services on CDM A networks, w ith 3G s ervices of fered over EV-DO Rev-A technology. Rationale for Selecting the Operator Among al l the oper ators i n t he US , i t had t he l argest 3G subscriber ba se a s well as t he highest figure for 3G s ubscribers a s a per centage of mobile cu stomers at end-2009. T he table below compares KPIs for the top-four MNOs (by market share) operating in the US. Table 14: MNOs’ Key Performance Indicators – The US (2009) MNO Market Share (In Percent) 3G Subscribers (In Million) 3G Subscribers as a Percentage of Customer Base (In Percent) AT&T Mobility 29.8 24.2 28.4 Sprint Nextel 16.9 14.2 29.4 T-Mobile US 11.8 1.9 5.5 Verizon Wireless 31.9 31.5 34.5 Source: Portio Research Ltd. Also, Verizon had t he hi ghest data A RPU a mong t he M NOs that report dat a A RPU. The figure below compares the data ARPU for Verizon, AT&T and T-Mobile. Figure 63: Data ARPU – The US (In USD, Q1 2009 – Q4 2009) Data ARPU (In USD) 20 12 9.4 15.6 16.2 15.1 15.6 14.6 15.0 13.6 14.2 16 10.2 10.1 9.9 8 4 0 Q1 2009 T-Mobile US Q2 2009 Period AT&T Q3 2009 Q4 2009 Verizon Wireless Source: Portio Research Ltd. 90 © 2010, Portio Research. All Rights Reserved
  • 91. Strategies for Driving Mobile Data and Broadband Adoption Verizon has better presence in terms of market share and 3G subscriber base, and has high data ARPU. Also, Verizon Wireless has been at the forefront of the deployment of new, capable t echnologies t o o ffer its subscribers hi gh qu ality of s ervice. T herefore, w e ha ve selected the operator to study its strategies for driving mobile broadband adoption. Verizon’s Mobile Broadband Service Verizon’s m obile br oadband s ervice is based on the EV-DO Rev-A network. T he s ervice, when accessed using EV-DO Rev-A capable devices, provides typical speeds of 600 Kbps– 1.4 Mbps for download and 500–800 Kbps for upload. However, when a subscriber does not have an EV-DO Rev-A capable handset or i s i n a s ervice area where EV-DO Rev-A is not present, lower broadband speeds are realised. 27 In June 2007, Verizon Wireless upgraded its entire EV-DO network to EV-DO Rev-A, which enabled USB modems, PC cards and select handsets to achieve theoretical peak download/upload speeds of 3.1 Mbps/1.8 Mbps. The oper ator began field trials for 4G Long T erm Evolution ( LTE) in B oston and S eattle i n August 200 9. I n M arch 2010, Verizon said the r esults of t he t rials i ndicated data r ates significantly faster than its deployed 3G networks: peak download speeds of 40 -50 Mbps and peak upl oad speeds of 20 -25 M bps peak rates were ach ieved us ing t he 4G LT E network. T he MNO ha s announced plans t o co ver 100 m illion peopl e t hrough i ts 4G LT E network by end-2010, and is utilising its 700 MHz spectrum for this LTE deployment – as it is suitable f or quickly deploying a wireless br oadband n etwork with e xcellent coverage. With LTE technology, Verizon ca n s ignificantly increase dat a t ransfer s peeds, and t his i s expected t o enco urage t he m igration o f s ubscribers f rom fixed br oadband t o m obile broadband. Devices Verizon’s mobile br oadband service ca n be acce ssed using f eature phones, smartphones, and m obile br oadband ca pable wireless dev ices, such a s P C C ards, E xpress C ards, embedded laptops and mobile broadband Connect cable wireless devices. Innovative product: MiFi • Verizon MiFi i s a 3G modem solution which integrates 3G modems and Wi-Fi, and acts as a hotspot for devices with Wi-Fi capabilities • The Wi-Fi connection is enabled by entering the network security code assigned to a MiFi • The de vice i s ea sy to i nstall on se veral oper ating systems ( OS). Windows O S identifies the MiFi as an E V-DO m odem and aut o-installs the drivers using a USB. The device is also compatible with Linux OS-based netbooks. Key services with high Internet use • V CAST: It offers music downloads and video streaming services • Get It Now: It allows subscribers to download and use applications and content on Verizon Get It Now-enabled handset Success factors • Acceptance and Adoption of Data Services: The US is one of the major markets worldwide in terms of data use. The market has a large number of subscribers with such service compatible handsets, and the market has witnessed strong growth with flat-rate dat a pl ans. V erizon Wireless witnessed a co nsistent gr owth i n dat a A RPU during all four quarters of 2009. • 27 Investments: Verizon Wireless ha s been m aking proactive investments in network upgrades to m eet t he dat a use demands of us ers. T he E V-DO Re v-A net work upgrade i n Ju ne 2007 al lowed t he oper ator t o ca sh i n on t he growing dem and f or data-centric services, i ncluding video and m usic downloads a nd the sharing of multimedia co ntent on s ocial net working pl atforms. T he oper ator ha s been o ne of Note: Typical speeds are noticeably lower than the theoretical peak speeds. © 2010, Portio Research. All Rights Reserved 91 Verizon’s mobile broadband service can be accessed using feature phones, smartphones, and mobile broadband capable wireless devices.
  • 92. Strategies for Driving Mobile Data and Broadband Adoption the pi oneers i n t esting and pl anning t he depl oyment of LT E. T his w ill further increase i ts net work’s ca pacity to meet t he gr owing dem and for dat a t hrough smartphones and netbooks. • Burgeoning Smartphone and Netbook Subscriber Bases: The US has witnessed t remendous gr owth i n t he sales of s martphones and net books t hat provide a better us er experience w hile acce ssing m obile br oadband. T his, along with t he a vailability of 3G hot spots and hi gh-speed n etworks ( EV-DO Re v-A), has resulted in an increase in the number of users opting to access broadband services on-the-go. Strategies Constantly Evolving Pricing The unit price of data in flat-rate pricing plans is significantly lower than the unit price of data in pay-as-you-go plans. Furthermore, the number of data pricing tiers has been decreased from four to three, to simplify the pricing structure. The figure below shows the data plans for mobile subscribers. Figure 64: Monthly Data Plans for Mobile Subscribers – Verizon Wireless (March 2010) 30.0 Pricing (In USD) 30 20 10.0 10 2.0 0 Per MB 25 MB Unlimited Data Use Source: Portio Research Ltd. This simple pricing structure encourages users to subscribe to flat-rate plans which help the operator i n terms of dat a use r equirements. Also, flat rate dat a pl ans enco urage hi gh dat a use am ong subscribers. T hus, an aggr essive pricing strategy for flat-rate dat a plans al ong with a provision of 3G hot spots and M iFi is an attempt to encourage relatively longer data sessions and higher data use. Strong Portfolio of Devices Verizon o ffers a w ide r ange of devices ca tering to varying us er r equirements. I ts de vices portfolio includes: • Feature phones  LG Chocolate Touch – Allows faster co nnectivity for V CA ST music with Rhapsody  Samsung Rogue – Pre-installed with VZ Navigator (GPS navigation software); has removable memory (helpful in transferring downloaded data)  LG enV3 – Has a pre-installed family locator application • Smartphones  Palm Pre Plus – Provides easy access to 3G hot spots  BlackBerry Storm2 – A 3G-enabled smartphone  Motorola Droid – A smartphone with Android 2.0 features for enhanced multi-tasking and acce ss to 10,000 m obile applications f rom Android’s App market 92 © 2010, Portio Research. All Rights Reserved
  • 93. Strategies for Driving Mobile Data and Broadband Adoption • MiFi  A 3G Modem with Wi-Fi capabilities, which has the potential of driving data use and increasing the reach of mobile broadband Building Large Base of Data Customers before 4G Launch Verizon, through attractive pricing and an extensive product and s ervice portfolio, is aiming to build a large base of mobile broadband users. This will help the operator generate better returns on their 4G investment with a reduced break-even period, once 4G is launched. The growing smartphone dev ice por tfolio w ill further help i n i ncreasing t he smartphone subscriber base, which will create additional demand for data intensive services. Driving Higher Data Revenues To drive higher data revenues, the operator requires all 3G phones to subscribe to monthly data plans. • Unlimited data plan for USD 30 for Smartphones • 25 MB plan for USD 10 for feature or 3G multimedia phones • USD 2 per MB p lans f or s imple feature phones or US D 10/ USD 30 mobile 28 broadband plans (PC cards, Netbooks, MiFi) Promoting Wi-Fi Use among Mobile Broadband Users Verizon’s G lobal A ccess i s an extension of t heir mobile br oadband service, which al lows subscribers t o acce ss Wi-Fi hotspots i n the US , C anada and M exico for no addit ional charge. The operator partnered with Boingo Wireless to provide access to Boingo hotspots. 29 The Global Access plans are available for subscribers accessing the Internet through Verizon’s USB modems, PC cards and netbooks. This strategy is useful in diverting some of the mobile broadband traffic to Wi-Fi networks, and therefore helps in decongesting 3G networks. The table below highlights the factors which enabled the operator to drive mobile broadband adoption. Table 15: Success Factors – Verizon Wireless US Factor Strategy Constantly Evolving Pricing Verizon has followed an aggressive pricing strategy for pushing flatrate data plans. The operator has simplified the pricing structure by offering data services under three plans. Strong Devices Portfolio Verizon offers a wide range of devices— including feature phones, smartphones, and Wi-Fi devices— catering to varying user requirements. Building Large Base of Data Customers before 4G Launch Driving Higher Data Revenues Promoting Wi-Fi use among Mobile Broadband users Verizon is aiming to build a large base of mobile broadband users to create demand for data services. Verizon requires all 3G phones to subscribe to data plans. This is useful in generating demand for data services. To provide high quality of service, Verizon has made efforts to divert mobile broadband traffic to Wi-Fi networks with the intention of decongesting the 3G networks. Source: Portio Research Ltd. 28 29 Source: http://investor.verizon.com/news/20100115/20100115.pdf Source: http://www.fiercewireless.com/story/verizon-adds-Wi-Fi-mobile-broadband-plans/2009-12-15 © 2010, Portio Research. All Rights Reserved 93 Verizon, through attractive pricing and an extensive product and service portfolio, is aiming to build a large base of mobile broadband users.
  • 94. Strategies for Driving Mobile Data and Broadband Adoption Orange UK Mobile Subscribers: 16.5 million (End-2009) Market Share: 20.6 percent (End-2009) Monthly ARPU: USD 35.4 (Q4 2009) 3G Subscribers as a Percentage of Customer Base: 32.4 percent (End-2009) About the Operator Orange—a subsidiary of France Telecom—is a pr ominent t elecom services pr ovider i n t he UK. With the recent merger of Orange and T -Mobile in the UK, the new m erged entity has become the largest mobile services provider in the country. Rationale for Selecting the Operator Some UK MNOs are facing the challenge of maintaining desired levels of quality of service. An ex ample of t his i s 3 UK and O 2 UK, who in Dece mber 2009 issued apologies f or poor quality of service in accessing data services, particularly in high-density areas. Orange has fared better and has received top awards in various consumer surveys for its mobile broadband network in categories such as reliability, ease of use and upload speeds. In July 2009, O range UK ’s m obile br oadband net work w as r ated by Ofcom, t he UK ’s communications regulator, as the best network for 3G coverage. Orange’s ke y strategy has been i ts f ocus on qual ity of s ervices and i ts m obile br oadband service is one o f t he main examples of t his strategy. The success of its m obile br oadband strategy can be judged f rom t he growth i n it s 3G s ubscriber bas e dur ing 2009; this i s depicted below. Figure 65: MNOs’ Absolute and Percentage Growth in 3G Subscriber Base – The UK (2009) 3G Subscriber Additions (In Million) 59.5 2 60 45.7 42.5 41.1 40 1 2.1 2.0 14.4 0.7 O2 UK 20 0.9 3 UK 1.6 Percentage Growth in 3G Subscriber Base (In Percent) 80 3 0 0 Orange U K T-Mobile U K Vodafone U K MNO 3G Subscriber Additions Percentage Growth in 3G Subscriber Base Source: Portio Research Ltd. In 2009, Orange UK’s 3G subscriber base grew by 2 million, second only to Vodafone UK’s 3G subscriber additions of 2.1 million. However, Orange led in terms of percentage increase in 3G subscriber base. In t he s ection bel ow we will briefly discuss t he m ethods a dopted by the oper ator t o popularise its broadband dongles among its subscribers. 94 © 2010, Portio Research. All Rights Reserved In July 2009, Orange UK’s mobile broadband network was rated by Ofcom, the UK’s communications regulator, as the best network for 3G coverage.
  • 95. Strategies for Driving Mobile Data and Broadband Adoption Strategies Pushing Broadband Dongles Orange’s 3G s ubscriber base i s i ncreasing at a s teady pace and t he per centage of these subscribers with 3G dongl es is al so i ncreasing. Don gles ar e an integral par t of Orange’s mobile broadband strategy. The figure below shows the growth in the uptake of 3G dongles. Figure 66: 3G Dongle Subscribers and Percentage of 3G Dongle Subscribers in Total 3G Subscriber Base – Orange UK (Q2 2009 – Q4 2009) 3G Dongle Subscribers (In Million) 0.33 0.28 7.0 8 7.2 7 0.2 6.4 6 Percentage of 3G Dongle Subscribers (In Percent) 0.38 0.4 5 0.0 Q2 2009 Q3 2009 Q4 2009 Quarter 3G Dongle Subscribers 3G Dongle Subscribers as a Percentage of Total 3G Subscriber Base Source: Portio Research Ltd. Building Brand Perception by Offering More Value to Users Brand i s an i mportant el ement in the highly competitive UK m obile m arket, and Orange i s making continuous efforts to build and strengthen its brand image. In October 2009, Orange Mobile B roadband w as re-voted as t he b est m obile br oadband service i n a s urvey conducted by YouGov, having achieved this feat earlier in April 2009. Orange has been launching attractive offers for it s subscribers and pays cl ose at tention to addressing subscribers’ concerns. For example, if a user wants to know the network quality of a particular area, they can visit Orange’s website and check the network coverage status of that ar ea. O range has cl early classified all r egions i nto f ive d ifferent ca tegories—low, moderate, good, very good and excellent—on the basis of network quality. F urthermore, Orange’s mobile broadband software is easy to install, and the interface is simple, reducing technical obstacles f or subscribers. O ne of t he bi ggest co ncerns f or subscribers regarding mobile broadband is the possibility of overuse and the associated costs. Orange has tried to address t his co ncern by offering free s oftware t hat al erts s ubscribers when t hey are approaching their data limit. Orange’s continuous efforts to improve its network and quality of service have helped to build a positive image. Killing Competition through Aggressive Pricing In August 2009, Orange launched a broadband plan for l ess than GBP 5 per month, which was then the lowest broadband tariff plan ever offered by a UK operator, and is available for both ‘pay monthly’ and ‘pay -as-you-go’ su bscribers. T he oper ator has also introduced several other attractive tariff plans, including the ‘Early Bird’ plan that offers unlimited mobile broadband between midnight and 9:00 AM. © 2010, Portio Research. All Rights Reserved 95 In August 2009, Orange launched a broadband plan for less than GBP 5 per month, which was then the lowest broadband tariff plan ever offered by a UK operator.
  • 96. Strategies for Driving Mobile Data and Broadband Adoption In February 2010, Orange announced plans to reduce the daily roaming fee for subscribers using mobile broadband services in Europe. The operator allows subscribers two options for using data while roaming: data up to 2 MB for GBP 2 per day, and data up to 50 MB for GBP 8.5 per day for heavy users. Wide Range of Laptops and Dongles Orange has partnered with l eading vendors such as Compaq, HP and A sus f or bundling laptops with its mobile broadband offerings; it has al so partnered with Huawei and Z TE for dongle offerings. In November 2009, Orange added two new laptops—Asus 1005H GO and the Com paq CQ61—to its hardware offerings. Asus 1 005H GO with buil t-in Orange m obile broadband is offered exclusively by Orange, while the operator offers a free ‘Orange e1752’ dongle with the Compaq laptop. Also, to make its hardware offerings more attractive, Orange combines them with advanced accessories to increase their appeal and utility. The t able bel ow hi ghlights t he f actors w hich hav e enabled O range UK t o dr ive mobile broadband adoption. Table 16: Success Factors – Orange UK Factor Strategy Pushing Broadband Dongles Promoting sales of wireless Dongles is an integral part of Orange UK’s mobile broadband strategy, as they account for more data use per device compared to handsets. Building Brand Perception by Offering More Value to Users Orange U K i s making co ntinuous efforts to build and strengthen i ts brand image. Its continuous efforts to improve its network and quality of se rvice have he lped t o bui ld a po sitive i mage i n t he m inds of subscribers. Killing Competition through Aggressive Pricing Orange UK’s initiatives – such as offering a broadband plan for less than GBP 5 per month, the ‘Early Bird’ plan to promote data use between midnight and 9 AM, and reduced roaming fees – have helped the operator to attract more subscribers to its data services. Wide Range of Laptops and Dongles Orange has partnered with leading vendors like Compaq, HP and Asus for its broadband offerings bundled with laptops, and has thereby increased the choice available to subscribers. Source: Portio Research Ltd. 96 © 2010, Portio Research. All Rights Reserved
  • 97. Strategies for Driving Mobile Data and Broadband Adoption Key Parameters for the Uptake of Mobile Broadband The four most important parameters that drive the uptake of mobile broadband service in a particular market are the following: • Network • Content • Pricing • Devices The table below discusses these parameters in brief. Table 17: Strategies to Push Mobile Broadband Uptake Factor Strategy • • Network • • • • Content • • • Pricing • • • • Devices • Proactively deploying advanced networks to gain first mover advantage Expanding networks as much as possible to decrease the number of blind or weak spots, and reach more subscribers Regularly upgrading networks to keep up with advancing networks worldwide Focusing on the Quality of Service to offer better experiences to subscribers and keep them interested in the services Providing innovative and attractive content to attract subscribers Personalising the content to increase overall appeal and better suit the needs of subscribers Developing and promoting local content to effectively connect with subscribers in a given market Introducing new content services and regularly updating earlier launched services to retain subscribers’ interest Transparent pricing plans for subscribers providing clear details of exactly what they are being charged for Customised pricing plans to suit high data use among postpaid subscribers, as well as casual data use in prepaid subscriber segments Competitive pricing to attract users and encourage high data use Advanced devices should be offered to let users get the best experience from the services and content Various devices should be offered from which users can pick the hardware of their choice, which they believe is the most suitable for the services they want to avail Partnering with top players in the hardware domain gains the confidence of subscribers Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 97
  • 98. Strategies for Driving Mobile Data and Broadband Adoption Chapter 9 Mobile Applications – Introduction and Market Size 98 © 2010, Portio Research. All Rights Reserved
  • 99. Strategies for Driving Mobile Data and Broadband Adoption Mobile Applications – Introduction and Market Size Overview From their traditional use f or voice and messaging, mobile handsets have transformed into information and ent ertainment de vices w ith per vasive appli cations. T hese appl ications provide us er i nterfaces for m essaging and ot her advanced dat a se rvices such as games, videos and Internet browsing, and are either pre-loaded on to mobile phones or can be downloaded by users over wireless networks and installed on their handsets. In this report, we have taken the mobile application user base as the number of subscribers who use their mobile handsets for downloading and installing third-party mobile applications. For enabl ing us ers to i nstall and r emove t hird-party mobile appli cations, m obile handsets need to ha ve an operating s ystem (OS) and an A pplication P rogramming I nterface (API). Popular operating systems include: • Symbian OS • BlackBerry OS • iPhone OS • Android OS • Windows Mobile OS • Palm webOS • Linux Mobile OS The availability of an operating system and A PI qualif ies hand sets a s smartphones. S ome applications also require handsets to have supporting platforms, such as Adobe’s Flash Lite, Java’s J2 ME and Qualcomm’s BREW. With handset v endors looking t o tap t he m obile applications market and using it as a differentiating factor, smartphones are being introduced at low prices; and the price difference between smartphones and feature phones is blurring. Some o f t he feature phones pr ovided w ith br owsers and s upporting pl atforms ca n acce ss basic applications, such as instant messaging (IM) and mobile banking, but are incapable of downloading and installing third party mobile applications, and therefore do not contribute to the growth of mobile application downloads. This report takes into account only the devices capable of running third-party applications. Currently, there ar e a v ariety of mobile appl ications a vailable to satisfy different consumer needs. Some of these are mentioned below: • Communication  E-mail and IM clients  Mobile Web and Internet Browsers  Search  On-Device Portals • Media and Entertainment  Graphics/Image Viewers  Audio and Video Players  Games  eBooks  Social Networking Portals • Productivity  Calendar  Calculator, Currency Converters  Task Manager, File Manager  Directory Services © 2010, Portio Research. All Rights Reserved 99 With handset vendors looking to tap the mobile applications market and using it as a differentiating factor, smartphones are being introduced at low prices.
  • 100. Strategies for Driving Mobile Data and Broadband Adoption • • Payments  Mobile Advertising  Mobile Payments Navigation  Google Maps  GPS These ap plications ar e differentiated by the r untime env ironments in w hich t hey are executed: • Native p latforms and oper ating s ystems, s uch as S ymbian, Windows M obile, BlackBerry, Android, Apple OS, and Linux • Mobile Web/browsers such as Webkit, Mozilla Firefox and Opera Mini • Other managed platforms such as Java/J2ME, BREW and Flash Lite Improved network technologies and growing demand for smartphones has led to increased customer ex pectations f or s ophisticated appl ications and r ich co ntent se rvices. O perators’ flat-rate dat a offers and unl imited dat a packa ges ar e pr omoting t he gr owth o f mobile broadband, and consequently the mobile apps market is benefiting. Moreover, i ntense competition in the application ecosystem is pushing app prices down, further stimulating the demand for mobile applications. Value Chain and Ecosystem The m obile applications ecosystem comprises pl atform developers, appl ication developers, aggregators, m obile oper ators, hands et v endors and appl ication s tore owner s; an d t he marketplace for mobile appli cations i s currently highly fragmented. M obile oper ators and platform pr oviders ar e focusing on l aunching t heir own app stores, while t here is i ntense competition among independent appl ication developers and t hird-party aggregators. This i s pushing do wn appl ication pr ices, w hich i n a w ay is s timulating de mand. How ever, since a majority of t he appli cation dow nloads ar e f ree, i t is co mmercially challenging for t he applications ecosystem. Market players are experimenting with different revenue approaches t o m onetise t he appl ications m arket. M obile apps ar e a vailable as either pai d applications or f or free. Al so, ad sponsored appl ications ar e gai ning popul arity since t hese are provided free of cost to consumers. App store o wners are also ex perimenting between different pay ment mechanisms, s uch as di rect billi ng through pa yment gat eways, oper ator billing and in-app purchases. In the following figure, we have explained the generic value chain for mobile applications. 100 © 2010, Portio Research. All Rights Reserved Mobile operators and platform providers are focusing on launching their own app stores, while there is intense competition among independent application developers and third-party aggregators.
  • 101. Strategies for Driving Mobile Data and Broadband Adoption Figure 67: Basic Value Chain of the Mobile Applications Market Applications OEM Platform Providers Application Developers Aggregators App Stores Consumers Revenue Flow Source: Portio Research Ltd. To achieve the successful implementation of m obile appl ications, the mobile applications ecosystem r equires al l s takeholders t o par tner t ogether and align t heir pr oducts and capabilities. The various stakeholders in the value chain collaborate with each other and combine their tools and expertise, to develop mobile applications for the end consumers. The various stages in the mobile applications value chain are explained below: • OEM Platform Providers – They provide de velopment platforms t o app lication developers for programmatic access to OEM devices and net work assets. They do not r eceive any direct revenue s hare in appli cation s ales. K ey companies include Apple, Google, Microsoft and handset vendors such as Nokia, BlackBerry, Palm and Sony Ericsson. • Application Developers – These i nclude appli cation development companies and small independent de velopers de veloping appli cations f or dif ferent p latforms and devices. • Aggregators – They provide turnkey application store solutions to mobile operators, handset vendors, ad vertisers, et c. They offer a w ide range of mobile app lications compatible with different devices and offer payment solutions. • Application Stores – These are onli ne or mobile marketplaces for end co nsumers to purchase mobile applications.  Device/OS Centric Stores – These are app s tores b uilt by device and O S vendors, and include s tores f or i Phone, B lackBerry, Windows M obile, Android, et c. The de velopment p latform might be open; ho wever, the applications run only on devices supporting that OS. Applications can be purchased from respective stores such as Apple App Store and BlackBerry App W orld. Developers receive high revenue shares: for example, in the case of A pple’s A pp S tore, de velopers t ypically r eceive 70 per cent o f revenues.  Operator Stores – These are stores operated by mobile operators, such as Vodafone and O 2. Developers par tner w ith m obile operators, who i n t urn manage the marketing, distribution and billing transactions. Operators have an opportunity to differentiate their stores by leveraging core assets such as subscriber i nformation, location and us e preferences. I n t his case, mobile operators take the majority of revenues, leaving a relatively lesser share for developers. © 2010, Portio Research. All Rights Reserved 101
  • 102. Strategies for Driving Mobile Data and Broadband Adoption  Third-Party/White Label Stores – These are stores operated by third-party providers s uch as G etJar and Handango. T hey work with developers and aggregators t o of fer app lications t o co nsumers, acr oss a range of de vices and O S. Developers r eceive a high r evenue share; h owever, these s tores do not have direct visibility. Mobile Application Stores App Stores are distribution channels to market; such stores distribute mobile applications to end consumers. App stores are owned and operated by application developers and by other players acr oss the value ch ain, including handset v endors, mobile operators and aggregators. The t able on t he nex t page provides a l ist o f the key App s tores acr oss different categories (OS vendors, handset vendors, mobile operators and others). 102 © 2010, Portio Research. All Rights Reserved
  • 103. Strategies for Driving Mobile Data and Broadband Adoption Table 18: Major Application Stores OS Players Handset Vendors Mobile Operators Others Google Android Market Apple App Store Vodafone 360 GetJar Microsoft Windows Marketplace Nokia Ovi Store T-Mobile Web2go Mobango Symbian Horizon BlackBerry App World O2 Litmus PocketGear (Handango) Java Store Motorola Shop4APPS Orange App Shop Handmark Palm App Catalog Sony Ericsson PlayNow Arena Verizon Wireless VZAppZone Handster LG Application Store AT&T Media Mall MobiHand (BlackBerry Applications) Samsung Apps China Mobile Market SlideMe Source: Portio Research Ltd. Business Model and Revenue Sharing Revenue generated through the sale of mobile applications is distributed among developers, aggregators a nd appl ication s tore ow ners, based on pr edefined r evenue s haring agreements. Apart from network data access, mobile operators in most cases work as billing enablers for handset/OS vendors and third-party stores. However, operators demand a large revenue s hare, which i s di scouraging for appl ication de velopers and s tore o wners. As a result, market players are also trying to establish credit card and other payment mechanisms to a void oper ator bi lling, and i n r eturn m aximise t heir r evenue s hares. Ho wever, t his arrangement i s generally less popular w ith consumers, i n par t due t o s ecurity concerns arising from sharing credit card information over-the-air. Apple is an exception, since it uses its well-established iTunes credit card billing mechanism for all App store transactions. Given a choice of paying via their operator or using a credit card, more than 80 percent of customers use operator billing. ― Nokia The following t wo bu siness m odels ar e t he ones applications market: • App-centric Model • Operator-centric Model predominately used i n t he mobile These models are briefly discussed over the coming pages. © 2010, Portio Research. All Rights Reserved 103
  • 104. Strategies for Driving Mobile Data and Broadband Adoption App-centric Model The A pp-centric business m odel i nvolves higher i ncentives f or the application de velopers. Apple’s App Store is the industry benchmark representing the App-centric business model, offering a transparent m arketplace for de velopers whi le byp assing t he oper ator from t he value chain. Also, Apple offers a rich user ex perience with easy access to the store from a device’s home screen, and – as m entioned – integrated bi lling with the iTunes di stribution mechanism. Operators charge high commissions for processing payments through their networks, and so logically – and following the success of Apple’s direct billing mechanism – app store owners are t rying t o es tablish di rect bill ing relationships with app s tore use rs. I n t his model, thirdparty billing enablers are present in the value chain, and they charge minimal fees (paid by app stores) f or pr oviding bi lling and ho sting s olutions. Ho wever, co nsumers ha ve m ixed feelings about using cr edit/debit ca rd pay ment mechanisms for appli cation dow nloads; again, Apple’s App Store is a key exception. Apple’s App Store is the industry benchmark representing the App-centric business model offering a transparent marketplace for developers while bypassing the operator from the value chain. Figure 68: App-centric Business Model Application Development Tools OS/OEM Platforms Application Developers Application Revenue App Stores Application Consumers Revenue Billing Enabler Source: Portio Research Ltd. OS/OEM platform owners invite application developers to join the developer community and provide them with tools and the software development kit (SDK) to develop the OS-specific applications. Application de velopers cr eate new an d ex citing appli cations und er dif ferent categories, which are launched in the app stores. App store consumers can download these applications on their devices, and the amount is debited to their iTunes account (in Apple’s case) or their credit card accounts – in the case of paid applications. Billing enablers provide the mobile payment gateways to enable credit card payments. 104 © 2010, Portio Research. All Rights Reserved
  • 105. Strategies for Driving Mobile Data and Broadband Adoption The payment process is executed as follows: • Application stores receive revenue from consumers, either directly (as in the case of Apple) or through third-party billing enablers • The total revenue received by app stores is then shared with application developers; generally a 70:30 ratio in favour of the developers • The billing enabler is paid by the app store owner separately © 2010, Portio Research. All Rights Reserved 105
  • 106. Strategies for Driving Mobile Data and Broadband Adoption Operator-centric Model In this m odel, the role of mobile operators i s magnified since they provide i ntegrated bill ing solutions f or pr ocessing paym ents t hrough t heir net works. Ho wever, market pl ayers and industry experts ar e not upbeat about this model gaining w idespread popul arity since operators take a majority of the revenue share, upsetting developers in this arrangement. Figure 69: Operator-centric Business Model Application Development Tools OS/OEM Platforms Application Application Developers Application Application Mobile Operators App Stores Consumers Revenue Source: Portio Research Ltd. App store owners, such as Vodafone, Nokia and GetJar, invite application developers to develop new and exciting applications for their users. These applications are compatible with a variety of handset features and OS platforms. For example, Nokia’s developer community develops appl ications for all Nokia S60 smartphones a nd other f eature phones. These applications ar e then launched in application s tores—both handset specific (Nokia Ovi) and independent s tores ( GetJar, and ot hers). T he app s tores, i n turn, par tner wi th mobile oper ators t o enabl e oper ator billi ng for appli cation dow nloads. Consumers ca n download t he appl ications on t heir de vices, and t he am ount is debi ted t o t heir mobile accounts in the case of paid applications. The payment process is executed as follows: • Consumers pay for the mobile applications purchased from app s tores, and t he bill is integrated with their operator bill accounts (added in the monthly bill or deducted from pre-paid accounts) • Mobile operators deduct their revenue share from the gross bill payments made by consumers. The operators’ revenue share usually ranges from 30 to 50 percent, depending upon agreements with store owners and developers. • The remaining revenue is passed on to the app stores, which is then shared between app store o wners an d dev elopers; generally a 70:30 ratio in f avour of the developers. This m eans that app stores ef fectively receive 18 –20 per cent of gr oss total revenues, while developers receive 40–42 percent. 106 © 2010, Portio Research. All Rights Reserved App store owners, such as Vodafone, Nokia and GetJar, invite application developers to develop new and exciting applications for their users.
  • 107. Strategies for Driving Mobile Data and Broadband Adoption The figure below describes the revenue sharing in the operator-centric business model. Figure 70: Revenue Sharing in the Case of an Operator-centric Business Model Mobile Operator 40% Remaining 60% The mobile operator, on av erage, receives 40 percent of gr oss r evenues; passing on t he remaining 60 percent to an app store. App Store 30% Developer 70% The remaining 6 0 percent is then s plit f urther, with an ap p store receiving 18 p ercent an d a developer receiving 42 percent of total gross revenues. Source: Portio Research Ltd. Mobile Operators can add value to the Mobile Application Ecosystem Mobile appli cations of fer a huge oppor tunity for mobile oper ators t o dr ive dat a use and increase revenue. How ever, oper ators need t o br oaden t heir s cope an d dev elop a ‘smart pipe’ s trategy to succeed i n t he v alue ch ain. Operators hav e uni que ad vantages t hat ca n help them build a robust mobile application ecosystem. • Direct relationship with customers – Operators have a large addressable market with close customer relationships. This provides them with a key advantage, as they can leverage customer information – location, presence, permissions, contacts, etc. – to create personalised offerings. • Well-established systems and processes – Operators have w ell-established billing systems and ot her pr ocesses t o cr eate compelling us er ex periences. They can of fer a seamless service, with purchase, bi lling and CRM functions al l linked together at their end. In s ummary, to s ucceed i n t he mobile app lications market, oper ators need t o cr eate a successful eco system w ith t ransparent r evenue s haring models t hat a ttract de velopers. Also, it m ust i nclude a well-managed appli cation distribution model acr oss div erse de vice portfolios to offer smooth end-user experiences. © 2010, Portio Research. All Rights Reserved 107
  • 108. Strategies for Driving Mobile Data and Broadband Adoption Market Size Mobile Applications User Base The growth in the mobile applications market has been largely stimulated by the introduction of Apple’s App S tore, w hich was opened in Ju ly 2008. M obile appli cations, apar t from providing an additional source of revenue, also act as a differentiating factor for an operator and as a channel to push mobile advertisements and mobile Internet. The mobile applications market has been witnessing a number of developments, including the launch of app stores by various smartphone v endors, MNOs and t hird par ty developers. S everal brands are also developing mobile applications to establish their position in the market and to get cl oser to consumers. The worldwide u ser ba se for mobile appli cations stood at 38.7 million at end-2009. The increasing penetration of smartphones and the growing a vailability of mobile applications in a number of categories is expected to boost the uptake of mobile applications, par ticularly in de veloped markets. T he m obile appli cations u ser ba se i s expected to grow at a CAGR of 32.5 percent between 2009 and 2014 to reach 157.6 million by end-2014. The percentage of worldwide m obile subscribers u sing m obile appl ications i s expected to grow from nearly 0.8 percent at end-2009 to 2.5 percent by end-2014. The figure below depicts the mobile applications user base from 2009 to 2014. Mobile Applications User Base (In Million) Figure 71: Mobile Applications User Base – Worldwide (In Million, 2009 – 2014F) 180 157.6 150 131.8 120 106.5 82.9 90 60 60.2 38.7 30 0 2009 2010F 2011F 2012F 2013F 2014F Year Source: Portio Research Ltd. F – Forecasted 108 © 2010, Portio Research. All Rights Reserved The mobile applications user base is expected to grow at a CAGR of 32.5 percent between 2009 and 2014 to reach 157.6 million by end2014.
  • 109. Strategies for Driving Mobile Data and Broadband Adoption The table below highlights the growth of regional mobile applications users from 2009 to 2014. Table 19: Mobile Applications User Base – Regional (In Million, 2009 – 2014F) Mobile Applications User Base (In Million) Region 2009 2010F 2011F 2012F 2013F 2014F Europe 11.1 15.2 20.2 26.0 32.4 39.3 Asia Pacific 11.4 16.2 21.1 26.8 33.9 42.5 North America 14.6 26.6 38.4 49.1 58.6 65.3 Rest of World 1.6 2.2 3.2 4.6 6.9 10.5 Total 38.7 60.2 82.9 106.5 131.8 157.6 Source: Portio Research Ltd. Aided by a growing num ber of smartphone us ers, North A merica had t he l argest r egional user base for mobile applications in 2009, and accounted for 37.7 percent of the worldwide mobile applications user base. Asia Pacific and Europe came next with respective contributions of 29.6 percent and 28.7 percent. The figure below shows the regional share in worldwide user base for mobile applications in 2009. Figure 72: Worldwide Mobile Applications Users – Regional Contribution (In Percent, 2009) 30 29.6% 37.7% 28.7% Europe 4.1% Asia Pacific North America Rest World Source: Portio Research Ltd. North A merica has shown an appetite f or m obile apps for both consumer and enterprise segments. Popular consumer segment apps include those from the following categories: • Mobile commerce • Location-based and location-aware applications • Gaming • Social networking and blogging • Media and entertainment • Lifestyle 30 Note: The percentages do not add up to 100 percent because of rounding off errors. © 2010, Portio Research. All Rights Reserved 109 North America had the largest regional user base for mobile applications in 2009, and accounted for 37.7 percent of the worldwide mobile applications user base.
  • 110. Strategies for Driving Mobile Data and Broadband Adoption North A merica i s al so w itnessing t raction f or ent erprise a pplications, including pr oductivity tools and location aware apps. North A merica w ill retain t he l argest regional mobile appl ications use r ba se ov er t he next five ye ars, and will have nearly 41.4 per cent of all worldwide m obile appli cations users by end-2014; Asia Pacific will place second with a 27 percent share. The figure below highlights the regional share in worldwide mobile application user base in 2014. Figure 73: Worldwide Mobile Applications Users – Regional Contribution (In Percent, 2014F) 41.4% 27.0% 6.7% 24.9% Europe Asia Pacific North America Rest of World Source: Portio Research Ltd. F – Forecasted The worldwide user base for mobile applications is forecast to grow at a CAGR of 32.5 percent bet ween 2009 an d 2014; r egional gr owth i s depi cted in the figure bel ow. Hi gh growth is primarily ascribed to the growing installed base of smartphones and the availability of mobile applications customised for different markets and user segments. Figure 74: Mobile Applications User Base Growth by Region (In Percent, 2009 – 2014F) CAGR (In Percent) 50 CAGR Worldwide = 32.5% 40 CAGR 32.5% 30.0 Europe 30 28.8 Asia Pacific 46.1 35.0 20 10 0 North America Rest of W orld Region Source: Portio Research Ltd. F – Forecasted 110 © 2010, Portio Research. All Rights Reserved
  • 111. Strategies for Driving Mobile Data and Broadband Adoption Mobile Applications Revenue Mobile applications are serving as differentiators, and they act as one of the deciding factors when a subscriber is choosing which smartphone vendor and MNO to buy products and services from. They are al so used by brands t o t ap i nto t he bur geoning mobile br oadband market. Mobile appli cations al so enco urage t he upt ake of o fferings – including l ocationbased services, online gaming, social networking, media and entertainment services – which boosts mobile broadband use. Therefore, generating revenues through mobile applications’ sales i s onl y one of t he benef its M NOs and smartphone vendors ar e l ooking t o ex tract by being involved in the mobile application value chain. Mobile applications revenue totalled nearly USD 1.6 billion in 2009, and is forecast to grow at a CAGR of 38.8 percent between 2009 and 2014, to reach USD 8.1 billion by end-2014. Mobile Applications Revenue (In USD BIllion) Figure 75: Mobile Applications Revenue – Worldwide (In USD Billion, 2009 – 2014F) 10 8.1 8 6.4 6 5.0 3.7 4 2 2.5 1.6 0 2009 2010F 2011F 2012F 2013F 2014F Year Source: Portio Research Ltd. F – Forecasted The table below highlights the growth of regional mobile applications revenues from 2009 to 2014. Table 20: Mobile Applications Revenue – Regional (In USD Million, 2009 – 2014F) Mobile Applications Revenue (In USD Million) Region 2009 2010F 2011F 2012F 2013F 2014F Europe 464.0 680.4 929.8 1,243.1 1,609.0 2,077.0 Asia Pacific 436.8 604.4 805.4 1,059.2 1,369.1 1,952.4 North America 631.6 1,162.7 1,785.4 2,329.0 2,938.2 3,553.2 Rest of World 40.4 36.1 139.5 334.8 491.4 526.0 Total 1,572.8 2,483.6 3,660.1 4,966.1 6,407.7 8,108.6 Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 111 Mobile applications revenue totalled nearly USD 1.6 billion in 2009, and is forecast to grow at a CAGR of 38.8 percent between 2009 and 2014, to reach USD 8.1 billion by end-2014.
  • 112. Strategies for Driving Mobile Data and Broadband Adoption North America had the highest regional mobile applications revenue in 2009 and accounted for 40. 2 per cent of worldwide m obile appli cations r evenue. I t was f ollowed by Europe with 29.5 percent and Asia Pacific with 27.8 percent. These 2009 regional revenue contributions are shown below. Figure 76: Worldwide Mobile Applications Revenue – Regional Contribution (In Percent, 2009) 31 27.8% 40.2% 29.5% Europe 2.6% Asia Pacific North America Rest World Source: Portio Research Ltd. North America is expected to witness a steep increase in per user downloads of mobile apps between 2009 and 2014, and t herefore this region will al so continue dominating the mobile apps m arket i n 2014 in r evenue t erms—with an e xpected 43. 8 per cent c ontribution t o worldwide mobile applications revenue. Europe’s contribution is projected to be nearly 25.6 percent by end-2014, cl osely followed by Asia P acific’s 24. 1 per cent. The figure bel ow highlights the regional share in worldwide mobile applications revenue in 2014. Figure 77: Worldwide Mobile Applications Revenue – Regional Contribution (In Percent, 2014F) 43.8% 24.1% 25.6% Europe Asia Pacific 6.5% North America Rest of World Source: Portio Research Ltd. F – Forecasted 31 Note: The percentages do not add up to 100 percent because of rounding off errors. 112 © 2010, Portio Research. All Rights Reserved North America is expected to witness a steep increase in per user downloads of mobile apps between 2009 and 2014.
  • 113. Strategies for Driving Mobile Data and Broadband Adoption Worldwide mobile app lications r evenue i s forecast t o gr ow at a CA GR of 3 8.8 percent between 2009 and 2014. The CAGR growth for revenue generated through mobile applications i n dif ferent r egions i s depi cted i n the figure bel ow. T he r evenue gr owth i s expected to be dr iven by t he gr owing a vailability of mobile app lications w ith M NOs ( either through oper ator-owned stores or i n co llaboration w ith t hird par ty application pr oviders). Revenue is also expected to be boosted by an increase in advertisement funded applications, which should encourage the uptake of mobile apps in price sensitive markets. Figure 78: Mobile Applications Revenue Growth by Region (In Percent, 2009 – 2014F) 80 CAGR Worldwide = 38.8% CAGR (In Percent) 70 67.1 60 50 CAGR 38.8% 34.9 Europe 40 35.0 Asia Pacific 41.3 30 20 10 0 North America Rest of W orld Region Source: Portio Research Ltd. F – Forecasted © 2010, Portio Research. All Rights Reserved 113 Worldwide mobile applications revenue is forecast to grow at a CAGR of 38.8 percent between 2009 and 2014.
  • 114. Strategies for Driving Mobile Data and Broadband Adoption Chapter 10 Mobile Applications – Strategy Case Studies 114 © 2010, Portio Research. All Rights Reserved
  • 115. Strategies for Driving Mobile Data and Broadband Adoption Mobile Applications – Strategy Case Studies Apple App Store Apple l aunched its mobile appli cation s torefront ‘A pp S tore’ i n July 2008, and i t i s now available i n 90 co untries with ov er 185, 000 app s av ailable for dow nload. A pplications ar e listed under 20 dif ferent ca tegories i ncluding games, business, ne ws, sp orts, health and travel. Highlights • • • Number of Applications: 185,000+ (April 2010) Free and Paid Applications: 25% Free, 75% Paid (February 2010) Average Price for Paid Applications in the US: USD 3.62 (December 2009) User Base • Over 85 million iPhone and iPod Touch users; 50 million iPhones sold (April 2010) Downloads • 4 billion downloads registered (April 2010) Developers • • Number of Developers: 125,000 (November 2009) Developer Submission Fees: USD 99/year The A pp S tore beca me an i nstant su ccess with i Pod and i Phone u sers, with 10 m illion applications do wnloaded within t hree days of its launch; with a wide r ange of apps f or advanced de vices, along with i ntegrated bil ling, t he s tore i s v ery attractive t o us ers. Furthermore, Apple changed t he gam e for de velopers w ith ef fective br anding, a simple distribution platform and incentivised revenue share. The following figure shows the App Store’s performance since its launch in July 2008. Figure 79: Apple’s App Store – Total Application Downloads Downloads (in Million) 5,000 4,000 4,000 3,000 3,000 2,000 2,000 1,000 10 100 Jul-08 0 Sep-08 Sep-09 Jan-10 Apr-10 Period Source: Apple, Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 115
  • 116. Strategies for Driving Mobile Data and Broadband Adoption Apple has reported that their net revenues from music-related products and services have increased, due to increased sales of third-party digital content and applications. “This growth in revenues is attributed to high consumer interest in third-party digital content and applications, wider iPod and iPhone customer base and overall growth of the App store.” – Apple Business Model Apple’s App S tore pioneered t he App-centric model offering a transparent m arketplace f or developers, while bypassing operators from the value chain. Apple has a direct relationship with developers and App Store users. Consequently, all revenue generated from the sale of mobile applications is shared between Apple (70 percent) and the developers (30 percent). Key Developments • • • In September 2009, the Apple App Store reached a milestone of 2 billion downloads, followed by 3 billion downloads as of January 2010, and 4 billion downloads as of April 2010. In F ebruary 2010, 24 m obile oper ators anno unced t heir plans t o l aunch an open applications platform to compete with the Apple App Store. This initiative is also being supported by the GSMA and three handset vendors (LG, Samsung and Sony Ericsson). In total, the group is expected to reach 3 billion subscribers worldwide. In the first 24 hours of the launch of iPad in the US, Apple’s App Store sold 1 million iPad apps, with a total of 3.5 million iPad apps downloaded as of 8 April 2010. The App Store offers nearly 3,500 iPad applications. The following f igure depi cts break-out of Apple A pp S tore’s av ailable applications by categories. Books, Games, Entertainment, Education and Utilities are the top five application categories with hi gher num ber o f appli cations a vailable. T ravel, lif estyle, music, s ports, business, navigation and other applications are included in the ‘Others’ category. Figure 80: Break-out of Available Applications by Category – Apple App Store (In Percent, April 2010) 6.0% 7.4% 11.9% 41.4% 15.3% 18.0% Books Games Entertainment Education Utilities Others Source: 148Apps, Portio Research Ltd. 116 © 2010, Portio Research. All Rights Reserved In the first 24 hours of the launch of iPad, Apple’s App Store sold 1 million iPad apps, with a total of 3.5 million iPad apps downloaded as of 8 April 2010.
  • 117. Strategies for Driving Mobile Data and Broadband Adoption Vodafone 360 Vodafone 360 is a new Internet service launched by Vodafone in September 2009. It offers an integrated mobile Internet experience with phone, e-mail and social networking combined together, and a wide r ange of applications – including music, ga mes and m ap services – through a single platform. Highlights (September 2009) • • • • Catalogue of over 1,000 applications available at launch, downloadable through the Vodafone Shop Access to the service through a variety of handsets and operating systems; select services also available for non-Vodafone customers Launch of a new range of Samsung Vodafone 360 handsets, designed exclusively for enhanced customer experience Available in Germany, Greece, Ireland, Italy, Netherlands, Portugal, Spain and the UK Vodafone has r eplaced i ts m obile co ntent por tal V odafone liv e! w ith it s V odafone 360 Internet s ervices. T he Vodafone 360 ex perience i ncludes a 3D u ser i nterface, co nnected address book, m usic, phot os, maps and the Vodafone app s tore. The addr ess book connects contacts from mobile, e-mail, instant messenger and social networks. The service offers easy access to a wide variety of content and applications to suit the needs of different users. It includes infotainment content, such as news, sports, health, finance, fashion, travel, movies and gam es, as well as useful appli cations su ch as a translator, co nverters and navigation maps. The service is currently available on LiMo, S60 and Android, with nearly two million devices that can run 360 apps. (March 2010) –Vodafone Vodafone 360 contained 1,000 applications when the service launched, and the application portfolio has grown steadily to over 7, 000 appl ications a s of F ebruary 2010. T here ar e 90,000 active users of Vodafone 360 service, with over a million apps downloaded. Features The following are the salient features of the service: • Connected Address Book: Vodafone 360 of fers an i ntegrated addr ess bo ok that collects co ntacts f rom phone, s ocial net works, e-mail and ch at acco unts. Additionally, the address book allows users to get status updates, share content and get r eal t ime updat es on t heir f riends’ whereabouts. It also provides t he opt ion of arranging contacts in to different groups to enjoy selective communication. • Communicate: Vodafone 360 allows users to communicate through calls, SMS, email and ch at, using single addr ess book. I t avoids t he need f or checking dif ferent websites, a s i t pr ovides a single view of al l social networks m aking i t all t he more convenient for subscribers. • Maps and Places: Vodafone 360 provides an effective navigation facility with turnby-turn maps and voice guidance. It allows users to update and share their locations in real time, along with the address and map link. • Photos: Vodafone 360 allows users to save their photos in their gallery so that they have a back up of t heir p hotos. Users ca n t ag phot os and share co mplete albums with other users or groups on 360 or other social networks. • Apps and Games Shop: Vodafone 360 o ffers a w ide r ange of Apps, gam es and music t o u sers for download ont o t heir mobile hand sets. S ubscribers c an cr eate their own pr ofiles, which al low t hem t o get per sonalised co ntent r ecommendations from the service provider. In addition, subscribers can read content reviews given by other users to assist their content buying decisions. © 2010, Portio Research. All Rights Reserved 117 Vodafone 360 contained 1,000 applications when the service launched, and the application portfolio has grown steadily to over 7,000 applications as of February 2010.
  • 118. Strategies for Driving Mobile Data and Broadband Adoption • • • My Web: Vodafone 360 m akes web br owsing a pl easant and easy experience f or users, with options to create shortcuts to favourite websites and to add different widgets and applications to a phone’s homepage. Music Shop: Vodafone 360 has a collection of over one million songs. Subscribers can sample and buy single tracks or complete al bums and dow nload these di rectly to t heir mobile hands ets. It also offers a service that allows u sers t o acce ss unlimited music content. Privacy Management: Vodafone 360 allows users to manage their privacy settings. Users can edit settings to allow or block a person from accessing their information, and are also able to update their online status – as “available” or” invisible”. Popular Handsets Vodafone has partnered with major mobile handset manufacturers to offer its Vodafone 360 services, and has i ntroduced t wo ex clusive V odafone 360 hand sets i n par tnership with Samsung. The tables below highlight the features of these two exclusive handsets. 360 Samsung M1 Features 3.2" TFT touchscreen 1 GB expandable internal memory (MicroSD card) Bluetooth 2.0 / HSDPA 3 Megapixel camera with 8x digital zoom 360 Samsung H1 Features 3.5" OLED touchscreen 16 GB internal memory Wi-Fi / HSDPA / Bluetooth 2.0 5 Megapixel autofocus camera with flash 118 © 2010, Portio Research. All Rights Reserved
  • 119. Strategies for Driving Mobile Data and Broadband Adoption Business Model Vodafone 360 is primarily based on the operator-centric model, with the company acting as the primary channel between developers and users. Vodafone has a direct relationship with its de velopers and the services ar e of fered t hrough t he V odafone pr oprietary platform. Vodafone directly receives all the revenue from the service and downloads, which in turn is shared with t he developers i n a 70:30 split in favour of the developers. Furthermore, the Vodafone 360 service includes integrated billing, which makes it convenient for users as all downloads made by them are charged directly to their monthly mobile bill. The s ervice o ffers de velopers access to V odafone’s large customer bas e across al l t he markets where it is launched. Additionally, it includes a direct billing platform. Vodafone also provides developers and partners with controlled access to other network capabilities, such as location awareness, to be able to create innovative and relevant Internet services. Key Developments • • • • • • In A pril 2008, Chi na M obile, SoftBank and V odafone announce d a n agr eement t o establish a Jo int I nnovation Lab (JIL) t o de velop mobile Internet s ervices. I n Ju ly 2009, V erizon Wireless al so j oined t he gr oup, and t he f our co mpanies deci ded t o develop mobile services for their worldwide customer base of 1.1 billion. In F ebruary 2010, Vodafone made it s V odafone 360 s ervices a vailable t o A ndroid users. I t w as al ready offering these s ervices t o S ymbian us ers, and with t his announcement is expected to increase its Vodafone 360 user base substantially. In February 2010, Vodafone announced that i t had sold about 300,000 units of the two exclusive Vodafone 360 handsets—360 Samsung H1 and 360 Samsung M1 In M arch 2010, WIN plc, an interactive information and m obile ent ertainment applications pr ovider, announce d t hat it will develop various applications, including Pocket Doctor, Lottery and Snow & Ski, for the Vodafone 360 platform In April 2010, Vodafone opened its 360 apps store for developers to publish its paid apps via the Joint Innovation Lab initiative Vodafone has announced an App Star competition and invited application developers to develop innovative apps for the Vodafone 360 service. Entries are invited from ei ght countries—the UK , Germany, Greece, I reland, Italy, the Netherlands, Portugal and Spain—with a total of EUR 1 million in prizes. © 2010, Portio Research. All Rights Reserved 119 Vodafone directly receives all the revenue from the service and downloads, which in turn is shared with the developers in a 70:30 split in favour of the developers.
  • 120. Strategies for Driving Mobile Data and Broadband Adoption GetJar GetJar i s an i ndependent m obile app s tore. The Li thuania-based company was f ounded i n December 2004, and has offices in California and London. The co mpany originally started as a bet a t esting web site f or mobile de velopers t o t est applications on various handsets and r eceive feedback. Over the ye ars, de velopers have started to use the site to distribute their applications. GetJar is a network agnostic service that is available through various handsets across major platforms, including Ja va M E, B lackBerry, S ymbian, Windows M obile and A ndroid. T he company has partnered with application developers and allows them to upload their apps on the developer portal f or f ree. GetJar is distributing content to consumers in over 200 countries, and received the 2009 Meffy Award for Best Direct to Consumer Service. Highlights (April 2010) • • • • Over 68,400 games and other application files available for download Nearly 314,000 developer accounts registered Nearly 2,076 devices supported 59,962 beta-testers registered Downloads • • Over 15 million users a month, serving 55 million downloads per month on average (April 2010) 750 million downloads registered as of February 2010 Business Model GetJar i s offering a majority of t he applications f or free, so t he store’s revenue i s cu rrently being gener ated by selling spots on t he web store f or t he pl acement of appl ications – the ‘App Placement’ model. App de velopers bi d t o get better pl acement i n t he s torefront t o showcase t heir appl ications, and GetJar is pai d t he bid pr ice each time an application i s downloaded; if there are no dow nloads on t he appl ication, the company does not earn any revenue on it. This benefits developers, since they can launch their applications to GetJar’s large cu stomer bas e f or free. Furthermore, de velopers of fer de mo or free t rial versions of applications on GetJar, while they launch the premium-paid versions on other storefronts/portals. In F ebruary 2009, G etJar also introduced t he ‘A ds Program’—which pr ovides addi tional revenue s treams—for de velopers. Under t his scheme, G etJar’s ad o ptimisation s ystem introduces co ntextual i n-app t ext and banner ads in t he appl ication, and developers then earn revenues if users click on those ads while using the apps. The co mpany has s tarted t o of fer pai d app lications and i s t esting dif ferent pay ment solutions. It plans to gradually roll out more paid applications in the current year. Additional Services In O ctober 2009, G etJar i ntroduced ‘A pp Do wnload P age’—a new service for mobile developers. It takes users to a mobile webpage that helps to detect their handset model and directs t hem t o t he appl ications a vailable for t hat par ticular hands et on G etJar. F acebook and P hotobucket w ere t he f irst few co mpanies t o t est and r oll out their appli cations on GetJar using the App Download Page. GetJar posted a link on the Facebook mobile website prompting users t o cl ick and download the Facebook Mobile application. Furthermore, t his ‘App Download Page’ enhances the user experience by offering them options for searching and downloading applications. 120 © 2010, Portio Research. All Rights Reserved GetJar has started to offer paid applications and is testing different payment solutions.
  • 121. Strategies for Driving Mobile Data and Broadband Adoption "With the GetJar store, consumers do not have to worry about what device they are using and which OS – We take the fragmentation out of the equation by auto-detecting what apps can run on which phones and offering consumers those applications." –GetJar Key Partnerships Major operators are partnering with GetJar to offer cross-platform applications to their subscribers, r ather t han managing pr oprietary s torefronts t hemselves. GetJar pr ovides a series of branded solutions and also white label solutions via its app catalog express (ACE) service. Sprint in the US has partnered with GetJar, providing its subscribers with access to GetJar’s applications. Under this agreement, Sprint has placed a link on its mobile portal that connects u sers t o t he G etJar s ite t o br owse t he ap p l ibrary and do wnload ap plications. GetJar is now available to all Sprint customers with feature phones, as well as smartphones running on BlackBerry and Windows Mobile. GetJar offers an easy to launch application storefront to mobile operators without them worrying about the back-end infrastructure, etc. Furthermore, S print and G etJar ar e not payi ng anyt hing t o each ot her f or t his par tnership. Other oper ators i ncluding Roger s Wireless ( Canada), 3 ( UK) and Virgin Mobile (France) have signed similar agreements with GetJar. Sony Ericsson has p artnered with G etJar t o link GetJar’s por tfolio of free appli cations with Sony Ericsson’s PlayNow arena app store. Whereas the Carphone Warehouse (UK) is using GetJar’s white l abel s ervice A CE for it s ne w cu stomer por tal. A CE w ill hel p the co mpany launch a mobile app store by sourcing the applications from GetJar. In April 2010, GetJar and Reliance Communications, India’s second largest MNO, signed an agreement to provide mobile application services to Reliance’s subscribers. Subscribers can access t hese ap plications t hrough R -World, Reliance's v alue-added s ervices pl atform. These apps will include games, social networking, sports, entertainment and productivity applications, and can be availed through a wide range of handsets including feature phones and smartphones. 32 Downloads eBuddy, O pera M ini, N imbuzz, mig33 and F acebook Mobile ar e t he most s uccessful applications on G etJar. T hese five applications have been very popular; acco unting for nearly 10 per cent o f total dow nloads on G etJar for s everal months i n 2009. The t able overleaf provides the top 20 applications on GetJar and the total downloads as of November 2009. 32 Source: http://telecomyatra.afaqs.com/news/?sid=805_RCom+inks+deal+with+global+app+store+GetJar © 2010, Portio Research. All Rights Reserved 121 Major operators are partnering with GetJar to offer crossplatform applications to their subscribers, rather than managing proprietary storefronts themselves.
  • 122. Strategies for Driving Mobile Data and Broadband Adoption Table 21: Top 20 Applications on GetJar and Total Downloads, as of November 2009 33 Ranking Application Total Downloads (as of November 2009) 1. Facebook Mobile 27,538,238 2. eBuddy 34,332,347 3. Opera Mini 30,084,550 4. mig33 26,964,199 5. Nimbuzz 24,552,801 6. Google 4,404,400 7. Qeep 8,627,926 8. Change Ringtone 1,699,917 9. Rocketalk 2,362,095 10. TicTacToe Game 2,643,234 11. eBuddy Lite Messenger 2,014,420 12. Google Maps (featuring Latitude) 8,816,316 13. KD Player 2,217,069 14. Snaptu 2,671,648 15. Yahoo Mobile! 2,272,326 16. iRadio 309,000 17. Evan-mp3-Player 1,781,231 18. Mobile Tribe in English 1,907,893 19. Kamus Lengkap 2,723,411 20. Majiplayer Music Player 4,038,835 Source: Distimo Report 33 Note: The ranking given is only for the month of November 2009 and is not based on the cumulative total of application downloads. 122 © 2010, Portio Research. All Rights Reserved
  • 123. Strategies for Driving Mobile Data and Broadband Adoption Conclusion The market for mobile applications is far from reaching its peak, and represents a growing market with tremendous oppor tunity in t he coming years. Since v oice is saturating i n m ost markets worldwide, dat a services ar e t he pr imary growth o pportunity for oper ators. M obile messaging, mobile entertainment services, mobile social networking and mobile applications are key drivers of growth of data revenues, while there is also an immense demand for productivity enhancement tools, navigation tools and ot her appl ications. Market players are building the ecosystem to provide mobile applications and content services to fulfil consumers’ communication and entertainment needs. One of t he primary factors that w ill boos t t he gr owth of dat a s ervices i s t echnology infrastructure for improved mobile experiences. Mobile operators worldwide are investing heavily in network infrastructure and new technologies, to enable high-speed data services. According to the GSMA, mobile operators in 2010 will invest nearly USD 72 billion in mobile broadband t echnologies. 34 Operators ar e r apidly deploying HS PA net works t o of fer hi gher data transfer rates and better user experiences. Furthermore, in the US, Europe and Japan, operators ar e t esting 4G LT E r ollouts t o be abl e t o offer ad vanced services i n t he near future. Additionally, the availability of attractive data tariffs is boosting the adoption of mobile broadband services. For example, flat-rate data plans are quite effective since these are transparent and s imple enough f or us ers t o under stand. A ll these f actors co mbined ar e driving mobile data use. According to the GSMA, mobile operators in 2010 will invest nearly USD 72 billion in mobile broadband technologies. With im proved high speed network technologies and i ncreased cu stomer ex pectations, the demand f or m obile applications has skyrocketed, and is growing further. The rapid expansion o f t he s martphone m arket i s also providing t he m uch-needed im petus t o t he mobile applications market; smartphones provide seamless PC-like Internet experiences for value-added and Internet-based services and applications, and are thus driving data traffic. However, the mobile application market is facing challenges, as there is large diversity in the market w ith thousands of d ifferent de vices and O S, hundr eds of app ca tegories and a plethora of big and small players in the space. This makes the market extremely fragmented. App Stores Apple has spurred the growth of the mobile applications market by completely changing the game for de velopers. T he hi gh r evenue s hare, along w ith A pple’s strong m arketing and distribution, has hel ped d evelopers quickly reach out t o co nsumers. M oreover, Apple’s unified platform offers consistent application development, and the integrated billing system has made Apple the industry benchmark in the mobile apps business. The success of Apple’s App Store has prompted others to follow. Mobile operators, handset and OS vendors, and independent companies are am ong those racing to jump on the app store band wagon. Nev ertheless, dif ferent p layers ha ve dif ferent obj ectives t o t arget consumers. Apple’s primary objective is to sell more devices, and so its main strategy is to offer attractive services and applications over advanced devices. Additionally, Apple i s offering an enhance d m obile ex perience with the App S tore di rectly accessible t hrough a device’s home screen and pai d downl oads l inked to the i Tunes accounts. This comfortable familiarity with - and dependence upon - device features and services is expected to create additional future demand for Apple devices. On the other hand, mobile operators have a very different approach. Mobile billing is one of the primary sources of revenue for the operators i n the m obile applications value chain, as well as earning revenues through data access. Operators are launching their own application stores, or are partnering with independent stores and white-label services to offer mobile apps to their subscribers. For example, Sprint has partnered with GetJar to offer GetJar’s thousands of appl ications to Sprint subscribers 34 Source: http://www.gsmworld.com/newsroom/press-releases/2010/4621.htm © 2010, Portio Research. All Rights Reserved 123 Apple is offering an enhanced mobile experience with the App Store directly accessible through a device’s home screen and paid downloads linked to the iTunes accounts.
  • 124. Strategies for Driving Mobile Data and Broadband Adoption for free. Such an appr oach helps op erators to i ncrease their data services revenues, since subscribers are motivated to download free applications and this download process generates data t raffic for t he oper ators. T he dem and f or pai d appl ications i s al so hi gh, particularly for games and productivity enhancement apps. Also, applications such as social networking, i nstant messaging (IM), navigation and music players/radio have hi gh demand, and these are primarily network-connected applications, which in turn increase data usage. These users stay connected to the network in order to use these applications and they also consume more data. 124 © 2010, Portio Research. All Rights Reserved
  • 125. Strategies for Driving Mobile Data and Broadband Adoption The table below highlights the key factors facilitating an app store’s success. Table 22: Key Success Factors for Application Stores Factor Strategy • Ease of Use (Application Discovery, Downloads and Payment) • • Appeal to Developer Community • • Attractive Pricing • Key Partnerships Convenience – Accessibility through device’s home screen; categorisation and labelling of different applications with easyto-locate options; quick downloads over high speed networks Billing – Integrated billing systems, such as App Store iTunes account, or operator billing are more convenient than payments via credit cards Transparent Process – A simple and inexpensive process to publish content will encourage more developers; integrated billing and effective marketing will free developers to focus on the applications only. Developer Incentive – Monetizing applications with reasonable revenue sharing and other incentives will encourage developers to join the developer community. Also, application development on a consistent platform with a large customer base will offer critical mass to the developers. For example, Apple’s App Store includes 85 million iPhone and iPod users and apps are developed for just Apple OS. Free Versions – Developers should launch two versions–a free t rial ve rsion and a full premium ve rsion–of t he same application. In this way, the trial version with limited features and co ntent a llows users to t ry t he app , and, if i nterested, to come back for a purchase. New Business Models – Subsidized co ntent, ad -funded application downloads, i n-app payments, etc. have a higher uptake Strategic partnerships are integral for the success of application stores, and the following key partnerships are essential: • Platform – Operator application stores, such as Vodafone’s, need to partner with software vendors to launch their application platforms. These application platforms will provide the SDK to the developers to create exciting apps. For example, Aircel in India has partnered with Infosys to launch Infosys’ proprietary platform – Flypp. • Services – Operators are also partnering with independent white-label stores to offer applications to their subscribers. For example, Sprint has partnered with GetJar to offer free apps to its customers. • Billing – Many independent players are partnering with mobile operators, to enable operator billing solutions for their subscribers - since operator billing is more convenient for users. For example, Nokia is partnering with operators for its Ovi Store. Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 125
  • 126. Strategies for Driving Mobile Data and Broadband Adoption Chapter 11 Conclusion 126 © 2010, Portio Research. All Rights Reserved
  • 127. Strategies for Driving Mobile Data and Broadband Adoption Conclusion Current Scenario Mobile broadband services—which were until recently looked upon as a luxury for subscribers in advanced mobile markets—have started to spread their presence in to almost every wireless m arket w orldwide. M NOs w orldwide, i ncluding those i n t he de veloping markets of Africa and Middle East and Latin America, are planning to roll out and expand the coverage o f ad vanced net works to a much wider s cale t han cu rrent levels. T he pr imary reason behi nd t hese d eployments i s t he ant icipated gr owth and uptake of m obile dat a services, of which mobile broadband forms a substantial part. Looking at how the industry has evolved over the last two or three years, it seems as though the r eality of “ the mobile I nternet” i s f inally delivering on i ts promise. T he i ndustry started trying to promote the mobile Internet to consumers as WAP was rolling out in 1999 and 2000, but in truth accessing and downloading web content over mobile devices was a pretty poor co nsumer e xperience back t hen. As t hat e xperience has f allen far s hort o f the consumer web experience over a fixed li ne desktop P C, so t he m obile i ndustry has had a hard time gaining traction in the mass market Finally, thanks to the boom in high-end feature phones and smartphones over recent years, and the increases in network speed and capacity, mobile Internet is becoming an expected norm in m any markets. I nnovations i n hand set de sign – such a s larger and b etter qual ity screens, touch co ntrol, accelerometer, m ore co mplex graphics support, and f aster processing – have dr amatically im proved t he quali ty of t he end -user ex perience. A t t he same time, networks have been r amping up sp eed, c overage and ca pacity in recent years and no w r eliable 3G is t he nor m i n many markets, with s peeds i mproving a ll the t ime. Finally, the mobile Internet is a r eality, co mparable i n e xperience t o t he fixed des ktop environment, smaller in display, but winning for convenience and anytime-anyplace access. Currently, t he percentage of mobile br oadband us ers within the t otal w orldwide mobile subscriber base is a single digit number; however, with expected rapid growth in the uptake of these services, this percentage is forecast to grow to nearly 28 percent by end-2014. © 2010, Portio Research. All Rights Reserved 127 The primary reason behind advanced mobile network deployments is the anticipated growth and uptake of mobile data services, of which mobile broadband forms a substantial part.
  • 128. Strategies for Driving Mobile Data and Broadband Adoption The figure below highlights the share of mobile broadband users within the worldwide mobile subscriber base between 2009 and 2014. Figure 81: Mobile Broadband User Base as a Percentage of Total Mobile Subscribers – Worldwide (In Percent, 2009 – 2014F) 27.8 Contribution (In Percent) 30 25 21.7 20 16.9 13.3 15 10 8.1 10.3 5 0 2009 2010F 2011F 2012F 2013F 2014F Year Source: Portio Research Ltd. F – Forecasted MNOs ar e ba nking on services s uch a s M MS, m obile e -mail, mobile I M, m obile video downloads/uploads, social net working, l ocation services and m apping, and m obile banki ng and paym ents to dr ive t he gr owth of mobile dat a in the coming ye ars. T o date, S MS has been the most successful mobile dat a s ervice and will continue t o outperform o ther data services i n t erms of penet ration and use for s ome ye ars t o co me. Even by 2014, we still expect SMS to co ntribute appr oximately 41.4 per cent o f t otal MNO non -voice s ervice revenues w orldwide. However, in t erms o f gr owth rates, ot her services are set to get the better of SMS as the services grow both in terms of use and popularity. The f igure on t he nex t page compares t he gr owth rates of dif ferent mobile dat a s ervices between 2009 and 2014. 128 © 2010, Portio Research. All Rights Reserved In terms of growth rates, other services are set to get the better of SMS as the services grow both in terms of use and popularity.
  • 129. Strategies for Driving Mobile Data and Broadband Adoption Figure 82: Revenue CAGR of Mobile Data Services – Worldwide (In Percent, 2009–2014F) 45 38.3 CAGR (In Percent) 40 33.3 35 30 25 20 13.7 15 10 5 13.9 Mobile Broadband MMS 18.1 8.6 3.9 0 SMS Mobile Gaming Mobile E mail Mobile I M Mobile Applications Service Source: Portio Research Ltd. F – Forecasted Although mobile broadband is set t o t ake off, there are s ome co ncerns t hat need t o be addressed in order for it to a ttain t he ub iquity and a cceptance l evels of voice and SMS services. The Big Question As M NOs wor ldwide are r olling out advanced br oadband of ferings and s martphones t o increase the uptake of mobile broadband services, they first need to answer the question of whether t heir net works ar e r eady to hand le t he ca pacity s train which t he higher uptake of broadband services brings. The popularity of smartphones i s i ncreasing with the launch of i nnovative- and utility-driven services. Smartphone shipments are i ncreasing significantly and the smartphone users are increasing worldwide. As the number of smartphone users grow, so will the use of advanced mobile dat a services and the need for network upgrades – both i n t erms of ca pacity and quality. While M NOs ar e busy promoting s martphones and br oadband services, i t se ems many MNOs have been s urprised by just how rapidly bandwidth dem and has i ncreased. In some ca ses, dur ing 2008 and 20 09 M NOs were pushing so-called “ all inclusive” or “uncapped” or “all-you-can-eat” data plans, but by 2010 those MNOs – after feeling the heat of ca pacity and bandw idth cr unch – have been f orced t o ca p s uch plans, l imiting t he excessive use of video downloads and other such bandwidth-hungry applications. Despite t he gener al under standing t hat US B dongl es use m ore da ta t han s martphones, smartphones ex ert m ore pr essure o n net works than dongles since t hey demand higher signalling l oads because of the continuous ex change of messages with t he net work – commonly known a s ‘chatter’. Hence, the i ncreasing n umber of smartphone users, al beit a good sign f or M NOs wor ldwide in dat a r evenue t erms, will also translate i nto some bi gger infrastructure concerns. MNOs need t o ke ep a watchful eye on r evenues. As v oice has beco me a co mmodity product, so no w the ca sh-cow that i s SMS l ooks threatened with a f uture of rising dem and against f lattening r evenues. A dvanced dat a s ervices, i ncluding mobile br oadband, of fer many MNOs their l ast great hi gh-margin opportunity. However, those same MNOs need t o invest hea vily in t heir net works in or der t o o ffer the latest s ervices t o t he widest pos sible audience and to keep up with bandwidth demand. © 2010, Portio Research. All Rights Reserved 129 The increasing number of smartphone users, albeit is a good sign for MNOs worldwide, will also translate into some bigger concerns.
  • 130. Strategies for Driving Mobile Data and Broadband Adoption Investment in Mobile Broadband Networks The depl oyment o f 3 G net works pr ovided a boos t t o m obile br oadband se rvices as t his enabled higher network speeds. Initially, MNOs were facing problematic delays in recovering their investments in 3G network deployments, as data use did not pick-up significantly, and low network utilisation was a major challenge resulting in high capital expenditure (CAPEX) to revenue ratio (low CAPEX to revenue ratio is an indicator of a high return on investment). However, with the evolution of devices and the increasing need to access data services while on-the-go, mobile broadband adoption has been stimulated. MNOs have m ade e fforts t o t ap t his opportunity by investing in net work coverage and capacity expansion f or mobile br oadband ca pable net works. T he CAPEX investments and mobile broadband revenue forecasts in different regions during 2010 are given in the figure below. Figure 83: Mobile Broadband CAPEX and Revenues by Region (In USD Billion, 2010F) Amount (In USD Billion) 40 34.1 30 18.8 20 16.8 19.1 14.1 12.6 10 2.9 5.0 0 Asia Pacific Europe North America Rest of W orld Region Mobile Broadband Revenue (2010F) Mobile Broadband C apex ( 2010F) Source: Portio Research Ltd. F – Forecasted Planned CAPEX investments for mobile br oadband i n A sia P acific, North America and the Rest of W orld exceed t he e xpected r evenues f rom mobile br oadband. T his may be attributed t o costly 3G r oll-outs i n a num ber of markets i n A sia P acific and Rest of World; while in North America, it might be explained by high investment in research and development o f 4G technologies t o co pe w ith e xpanding ca pacity requirements and on going trials, and the expected roll-out of LTE. For Europe, mobile broadband revenue is expected to be gr eater than the a ssociated CAPEX for m obile broadband, as the region i s reaping the benefits of earlier investments in mobile broadband capable networks. Growing Demand for Data Services With the emergence of smartphones, USB dongles, and a slew of better, customised content and applications, data use per subscriber has increased. The figure overleaf depicts data use for subscribers based on devices used for accessing mobile broadband services. 130 © 2010, Portio Research. All Rights Reserved With the evolution of devices and the increasing need to access data services while onthe-go, mobile broadband adoption has been stimulated.
  • 131. Strategies for Driving Mobile Data and Broadband Adoption Figure 84: Average Monthly Data Use for USB Dongles, Feature Phones and Smartphones – Worldwide (In GB, 2009) MOnthly Data Use (In GB) 1.5 1.50 1.2 0.9 0.6 0.27 0.3 0.05 0.04 BlackBerry Feature P hone 0.0 USB Dongles iPhone Device Sources: Nielsen, Validas, Camiant and Portio Research Ltd. The increasing number of smartphone and USB dongle users has resulted in better network utilisation and has justified MNOs’ investments in high-speed networks. This was seen as a positive de velopment for M NOs w orldwide f or e xpanding t heir dat a revenues, an d t hey typically went ahead to push flat-rate data plans to encourage higher use among subscribers. T hese data pl ans al ong with t he a vailability of de vices – such a s i Phone, BlackBerry, Motorola Dr oid, Nok ia N97 and net books – and appl ications – such a s social networking, na vigation t ools, onli ne ga ming, and phot o and video s haring – have r adically increased network capacity requirements, and in most cases caught MNOs off-guard. The increasing number of smartphone and USB dongle users has resulted in better network utilisation and has justified MNOs’ investments in high-speed networks. The popularity of mobile applications has pressured mobile network capacities, as there are several popul ar appli cations that require high network speeds f or proper f unctioning. Some of t he appl ications an d t heir hi gh dat a t ransfer r ate r equirements ar e giv en i n t he t able below. Table 23: Mobile Applications and Data Transfer Rate Requirements Mobile Applications/Tasks Data Transfer Rate Required (Mbps) Online Gaming 1-10 Mbps Enterprise Applications 1-10 Mbps Mobile TV/Video Streaming 2 Mbps Responsive Web Browsing More than 1 Mbps Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 131
  • 132. Strategies for Driving Mobile Data and Broadband Adoption Coping with High Data Use The use of data-centric applications causes diminished network speeds and session drops, particularly at the fringe areas of the network with lower reach and in urban areas with a high concentration of smartphone and USB dongle users. The situation is fraught with the following risks: • Networks failing to meet user expectations of high data transfer rates and quality of service deterioration • MNOs losing out on the revenue generation opportunity that has now emerged after years of investment and huge advertising spends If u sers aren’t provided w ith the high dat a transfer r ates and quality of s ervice they have been promised and are expecting, they may move to other MNOs who do deliver. Therefore, flat-rate pr icing, which once worked i n M NOs’ favours to attract more s ubscribers f or hi gh data use, is now working against them and is clogging networks. There ha ve been ca ses where a small nu mber o f users, par ticularly iPhone and ot her smartphone users, formed a major chunk of data users through unconstrained data use and degraded t he service experience for ot hers. S ome of the m ajor ‘victims’ have been A T&T, O2 UK and 3 UK. 35 At the time when iPhone was launched in the US and the UK, AT&T and O2 UK had exclusive distribution deals with Apple. Owing to high data use by iPhone users, the quality of service reportedly suffered. In Dece mber 2009, O 2 UK ap ologised f or poor qu ality of s ervice w hile acce ssing d ata services particularly in London, which has a high density of smartphone users. The increase in data-savvy smartphone users (especially iPhone owners) caused UK data traffic to increase 18-fold in 2009.36 3 UK , i n Dece mber 2009, ad mitted instances of poor m obile br oadband ex periences in some of its coverage ar eas. T he MNO allowed subscribers t o t erminate t heir co ntracts if dissatisfied with the service quality, and also offered service discounts. 3 UK also suspended dongle sales temporarily in affected areas with poor data speeds. 37 AT&T – A Lesson To Be Learnt The US-based operator AT&T represents one of the major examples of a network straining under smartphone use. In 2007, AT&T became the exclusive distributor of the iPhone in the US, and this exclusivity helped the operator greatly increase its popularity and brand value – as the country’s subscribers were seemingly ready to shell out anything for this high-profile gadget. iPhone owners soon became the major contributors to AT&T’s data revenue, as they began downloading m usic and videos, and br owsing the Internet o ver their dr eam handset. I n addi tion, t hey were u sing t heir hand sets f or ot her pur poses, such a s checking match scores, getting weather updates and using maps to check for directions. It transpired that t hese iPhone u sers were u sing the majority of t he net work capacity, resulting i n less available bandw idth for ot her s martphone us ers, who w ere act ually experiencing poo r network performance. T he situation degenerated f urther as t he number of iPhones being used on t he operator’s network grew. W ith e xcessive data use by iPhone users, AT&T’s other s ubscribers were f acing pr oblems s uch a s dr opped ca lls, del ayed t ext and voice messages and sluggish download speeds. This in turn resulted in disappointed subscribers who even contemplated changing their service provider. The operator used iPhone to i ncrease the uptake of its data services, but while it proved a means to achieve this goal, it also created new concerns for AT&T; and in a great irony, the motivation behind the iPhone launch actually created the MNO’s biggest problem. AT&T wanted its iPhone users to avail its data services at a larger scale, but never imagined that 35 Source: http://www.infoworld.com/d/mobilize/att-moves-closer-usage-based-fees-data-579 Source: http://www.telegraph.co.uk/technology/news/6904792/The-head-of-mobile-phone-operator-O2-hasapologised-to-customers-who-were-unable-to-make-calls-after-the-groups-network-was-swamped-by-people-usingsmartphones.html 37 Source: http://www.fiercewireless.com/europe/story/3-admits-patchy-mobile-broadband-coverage-stops-donglesales/2009-12-02 36 132 © 2010, Portio Research. All Rights Reserved If users aren’t provided with the high data transfer rates and quality of service they have been promised and are expecting, they may move to other MNOs who do deliver.
  • 133. Strategies for Driving Mobile Data and Broadband Adoption the smartphone would drive the level of use to such heights that it would ultimately become difficult for s ubscribers t o acce ss data se rvices with dece nt net work quality. T oo many iPhone us ers accessing dat a se rvices simultaneously l ed t o net work congestion, which i n turn r esulted i n poor e xperience – as accessing more da ta s ervices and appl ications became difficult. Soon t he oper ator r ealised t hat the excessive i Phone use was actually cr eating t rouble for other smartphone users and damaging its brand value with poor network performance. The operator neither foresaw such exceptional uptake of data services after the iPhone l aunch; nor had its networks prepared to deliver at such highly demanding rates. AT&T’s network failing under high data use by smartphones During 2009, near ly 3 per cent of smartphone users a ccounted f or using 40 per cent of the network capacity. High-bandwidth co nsuming activ ities i nclude video and audi o streaming. Several applications on t he i Phone pr ovide nons top I nternet r adio ( and w ere r esponsible f or increasing data use). Ralph de la Vega CEO AT&T Mobility and Consumer Markets (At a UBS Conference in New York, December 2009) AT&T’s pai nful e xperience is a pr iceless l esson. K eeping i n mind the r ate a t w hich smartphones are being accepted in mobile markets worldwide, any MNO could face such a scenario in the near future without careful forethought. This brings us back to the question of whether or not m obile networks worldwide are realistically ready to deliver on the promises they are making regarding the performance of their advanced mobile broadband offerings. 38 After the “ first false s tart” a decade ago, it would be enormously damaging to t he mobile industry as a whole if we were to yet agai n over-promise the m obile Internet experience to consumers and yet ag ain under-deliver. It is i n the i nterest of everyone i n this bu siness, of every player in the value chain, to ensure we del iver-on-promise to the end us ers. Efficient software, efficient devices and ef ficient net works m ust all combine t o deliv er a high quali ty end-user experience. In 2007, the release of the first iPhone hel ped inspire and l ead a new generation of mobile devices and a ne w gener ation of m obile co nsumers. Hundr eds of m illions of smartphones and hi gh-end f eature phones are no w i n use worldwide, and net works are f ighting har d t o keep pace with bandwidth demand: in 2009, worldwide smartphone shipments stood at 159 million and are expected to grow to over 200 million in 2010. While at end-2009, there were nearly 450 m illion fixed-line br oadband u sers worldwide i n co mparison t o 37 1.7 m illion mobile br oadband us ers, i t i s likely that there w ill soon be m ore peopl e acce ssing t he Internet e very day over a mobile net work than s trictly t hrough fixed li ne net works. T he industry must keep pace with this demand. 38 Note: After facing this network quality degradation, AT&T has initiated work to revamp its network. According to a recent press release, the operator intends to cover over 250 million subscribers under a HSPA+ network by end2010. The operator has already invested in major areas such as New York, Ohio, Pennsylvania, Iowa etc. that suffered earlier network crunch issues due to excessive mobile data use. © 2010, Portio Research. All Rights Reserved 133 In 2007 the release of the first iPhone helped inspire and lead a new generation of mobile devices and a new generation of mobile consumers.
  • 134. Strategies for Driving Mobile Data and Broadband Adoption Possible Answers and the Way Forward Mobile s ubscribers worldwide ar e m aturing and ar e demanding m ore f rom their service providers, bot h i n t erms of quant ity and quali ty. V oice i s no l onger t he onl y reason subscribers u se their hand sets; d ata ha s already become an inseparable par t of mobile services and data use will only grow bi gger as m ore and m ore l ow-cost s martphones (especially in Asia Pacific) flood the markets, and ope rators l ure subscribers with attractive and low-priced data plans. However, as the use of data services grow, mobile networks worldwide must manage this traffic in a more efficient manner, or they will simply fail to deliver quality services to subscribers – and fail to deliver on the promise of advanced data services. Augmenting Networks The t able below briefly discusses strategies t hat oper ators ca n us e t o ke ep up with the increasing demand for data services. Table 24: Strategies to Cope with the Increasing Demand Data Services place on Networks Measure Strategy Deploying More Cell Sites Operators can deploy more cell sites to cover larger areas and cater to larger numbers of subscribers. In addition, larger numbers of cells allow operators to reuse the frequency more easily and serve greater subscriber numbers with the limited amount of spectrum available. Buying New Spectrum With an increasing mobile subscriber base, services penetrating to remote areas, and a practical limitation on cell site numbers, operators could buy more spectrum in order to cater to the newly acquired subscriber base. Deploying New Technologies Operators can deploy new technologies such as LTE and WiMAX that increase network efficiency and allow operators to cover a larger subscriber base with a particular amount of available bandwidth. Offloading to Other Networks In order to lessen the burden on their networks, operators can shift some network load to networks such as femtocells and Wi-Fi. These networks are easy to deploy and assist the operator to decrease interference between cell sites. Upgrading Backhaul and Core Network In order to meet the increasing demand of subscribers, operators can upgrade their backhaul and core network – as upgrading network capacity alone won’t solve the problem. Operators can replace the traditional T1 cables between core network and cell sites with fibre and microwave radio connections. Source: Portio Research Ltd. 134 © 2010, Portio Research. All Rights Reserved
  • 135. Strategies for Driving Mobile Data and Broadband Adoption Getting the Pricing Models Right Pricing is a cr itical par t in stimulating, as well as r egulating, the mobile br oadband market. Therefore, MNOs have tried to be pr oactive in introducing effective pricing models to boost the upt ake of mobile broadband s ervices, w hile r efraining from under-pricing t he services and possibly – ultimately – overloading their networks. Flat-rate pr icing h as def initely been i nstrumental in driving t he us er dem and for m obile broadband services. However, simply replicating the flat-rate pricing model for data services isn’t s ustainable. A s f ar as voice services are concerned, t here i s an amenable l imit for network use. F or dat a s ervices, if a s ubscriber use s audi o and v ideo s treaming, onli ne gaming and navigation services for long sessions, the network becomes clogged and degrades t he qual ity o f service for ot hers. T his pr oblem needs t o be t ackled through a number of effective action points, including strategies pertaining to the pricing and packaging of mobile broadband services. MNOs and handset vendors are aware of the price sensitivity of subscribers for their mobile broadband offerings and han dsets/smartphones. T o k eep t heir of ferings within t he comfort zone of users, MNOs and handset vendors are gradually reducing the prices of their services and products. This declining trend is highlighted in the figures below. Figure 85: Average Worldwide Selling Price of Nokia Handsets and Apple’s iPhone (In USD, 2007 – 2009) Average Selling Price (In USD) 600 549 449 500 400 335 300 200 118 109 2007 2008 100 88 0 2009 Year Nokia Handsets Apple iPhone Source: Portio Research Ltd. © 2010, Portio Research. All Rights Reserved 135 Flat-rate pricing has definitely been instrumental in driving the user demand for mobile broadband services.
  • 136. Strategies for Driving Mobile Data and Broadband Adoption Figure 86: Average Cost per MB of Mobile Data Services – North America (In USD, 2007 – 2009) 0.60 0.52 0.47 Cost per MB (In USD) 0.50 0.38 0.40 0.30 0.20 0.10 0.00 2007 2008 2009 Year Source: Portio Research Ltd. The table below highlights the prices of different iPhone models offered by AT&T in the US. Table 25: Prices of iPhone Models offered by AT&T 39 iPhone Model Period Price (In USD) iPhone 2G (4 GB) June 2007 499 iPhone 2G (8 GB) June 2007 599 iPhone 3G (8 GB) June 2008 199 iPhone 3G (16 GB) June 2008 299 iPhone 3G (8 GB) June 2009 99 iPhone 3GS (16 GB) June 2009 199 iPhone 3GS (32 GB) June 2009 299 iPhone 3GS (16 GB) May 2010 97 Source: Portio Research Ltd. 39 Note: These prices are only available to customers subscribing to a two year service contract. 136 © 2010, Portio Research. All Rights Reserved
  • 137. Strategies for Driving Mobile Data and Broadband Adoption MNOs currently seem set on of fering unr estricted data al lowances to enco urage adoption, which will put pressure on the network capacity in the medium to long term. While adhering to quality of service guidelines, MNOs need to regulate the content offered through devices in f lat-rate pr icing, for the sustainable gr owth of mobile broadband s ervices. Furthermore, MNOs need t o s egment their o fferings t o im prove t heir r eturn on i nvestment and al so o ffload some of the traffic by bundling their services with Wi-Fi access through hot-spots. Future Outlook Despite al l t hese ca pacity crunch s ituations par ticularly with M NOs i n t he dev eloped markets, the long-term pr ospects f or m obile br oadband ar e br ight. For MNOs which ha ve deployed 3G networks and plan to upgrade their networks to 3.5G networks, the incremental cost is low. LTE-deployments ar e ex pected t o enhance t he net work capacity and ca pability for M NOs. Femtocells are expected to boost signal strength and the quality of service at indoor locations, and are useful in offloading the backhaul to wireline broadband connections. Wi-Fi hotspots – both i n publ ic pl aces and i n private homes - are proving successful i n diverting some of the data traffic over to w ireline net works, an d ha ve been particularly effective in coping with high data consumption by netbook users. While M NOs deal with al l t hese i ssues, t hey must al so co ntinue t o ke ep a watchful guar d that they are not turned in to the dreaded “dumb pipes” they have feared for some years. As most MNOs are painfully aware, it seems almost everyone wants to sell mobile products and services now – software co mpanies, hands et vendors, P C manufacturers, co ntent ow ners and m any more besides. Gone are the days when m obile devices onl y handled voice, and MNOs onl y sold v oice, and t he r elationship was v ery clear for all t o under stand. No w t hat mobile s ubscribers have t he unlim ited w onders of the open I nternet i n the palm s of t heir hands, MNOs must fight to retain a meaningful relationship with each and every end user. This r eport is t he fourth r eport in a s eries ex ploring t he e volution o f non -voice m obile services and how MNOs effectively deliver those services to mobile consumers. As we have examined go-to-market strategies for non-voice services over the last six years, we see time and again the same key points that help MNOs to differentiate their services and retain valuable customers. Focus must remain on quality of service; innovation; desirable branded content; useful messaging bundles that meet consumer needs; transparent, fair, accessible pricing; market s egmentation; br oad r ange of ch oice of fering flexibility to en d us ers; desirable hand sets; ut ility and value-for-money. In s hort, o ffer peopl e s imple and us eful things they need, de sirable things they want, prices they can afford and net works that ca n deliver. © 2010, Portio Research. All Rights Reserved 137 Offer people simple and useful things they need, desirable things they want, prices they can afford and networks that can deliver.
  • 138. Strategies for Driving Mobile Data and Broadband Adoption Chapter 12 Appendices 138 © 2010, Portio Research. All Rights Reserved
  • 139. Strategies for Driving Mobile Data and Broadband Adoption Appendices This market study has been written in a way that avoids excessive use of market acronyms (except w here appr opriate) and industry technical t alk, as we hav e tried t o keep t he t ext open t o al l r eaders, not just t hose with i n-depth kn owledge of t he w orld’s mobile markets. Because t his study covers all geographical r egions and m any emerging markets, a gr eat deal of the data contained within this study will potentially be of interest to investors, financial ana lysts, co nsultants, venture ca pitalists and ot hers al l around the world who do not work within the mobile i ndustry itself every day of their liv es. To m any of these peopl e, some of the industry technical talk and acronyms may be confusing, so we have attempted to write this study in a self explanatory way that assumes little prior knowledge, but in doing this, some of the speech chosen may seem somewhat "obvious" to our more knowledgeable readers. We hope this offers the best possible solution to everyone, and we hope this does not cause any confusion or inconvenience. Where w e ha ve us ed t echnical terms or acr onyms, w e of fer an e xplanation o f those expressions below. © 2010, Portio Research. All Rights Reserved 139
  • 140. Strategies for Driving Mobile Data and Broadband Adoption Glossary 2G or Second Generation Packet Data Networks The second-generation packet networks recently introduced consist of combined voice and packet data networks based on global standards. 2.5G 2.5G des cribes t he state of w ireless t echnology and ca pability usually associated with General Packet Radio Services (GPRS) - that is, between the second and third generations of wireless technology. The second generation or 2G-level of wireless is usually identified as Global S ystem for M obile ( GSM) s ervice and t he t hird gener ation or 3G -level is usually identified as Univ ersal M obile Telecommunication S ervice ( UMTS). E ach gener ation provides a higher data rate and additional capabilities. There is also a fourth generation (4G) of t echnology in t he p lanning a nd r esearch s tages. 2.5G protocols e xtend 2G s ystems t o provide additional features such as packet-switched connection (GPRS) and enhanced data rates (HSCSD, EDGE). 3G or third generation 3G i s an I nternational Telecommunication Union (ITU) specification for the third generation (analog ce llular w as t he f irst gener ation and di gital P CS 40 was t he second ge neration) of mobile communication technology. Third gener ation Wireless Wide A rea Net works ( WWAN) co mmunication s ystems ar e characterised by high-speed dat a r ates ( 144 K bps 41 to 2+ M bps42) suitable f or m ultimedia content. 3G technologies typically are packet-switched and use Code Division Multiple Access (CDMA) technology to communicate. Examples of 3G include EDGE43, 1xRTT, HDR and W-CDMA. 44 3G protocols in mobile telephony support higher data transmission rates, measured in Mbps, intended for applications ot her t han voice. 3G support broadband and bandwidth applications, such as full-motion video, video conferencing and Internet access. 3G as a Percentage 3G as a per centage r efers t o 3G s ubscribers a s a per centage of t otal activ e mobile subscribers in a country. This represents the proportion of 3G subscribers in the total mobile subscriber base of a country. 3G Penetration 3G penetration refers to 3G subscribers a s a per centage of total popul ation of the country. This i s similar to t he t erm ‘mobile penet ration’, which means t otal num ber of activ e mobile subscribers in a country as a percentage of total population of the country. 4G or fourth generation 4G or fourth gener ation WWAN communication s ystems ar e characterised by high-speed data r ates at 20+ M bps, s uitable for h igh-resolution movies and t elevision. T he i nitial deployment of 4G communication systems is expected in 2006-2010. The proposed features of these systems include 100 Mbps speed, location sensing and self-tailoring to user needs. A2P Application-to-Peer: I n t he mobile m essaging world A 2P m essages ar e def ined as messages g enerated by an a pplication and se nt t o s ubscribers, f or ex ample, t he advertisements sent through SMS/MMS on subscribers’ handsets. 40 Personal Communications Service (PCS) Kilobits per second (Kbps) 42 Megabits per second (Mbps) 43 Enhanced Data for Global Evolution (EDGE) 44 Wideband Code Division Multiple Access (W-CDMA) 41 140 © 2010, Portio Research. All Rights Reserved
  • 141. Strategies for Driving Mobile Data and Broadband Adoption AAC Advance A udio Codi ng: It is an adv anced audi o co mpression al gorithm us ed f or downloading music files, streaming video, audio and satellite-radio applications. Application Programming Interface (API) It is an i nterface im plemented by a software pr ogram to communicate with ot her software. Operating systems and applications use API to determine the way to call or send requests to other software. Average Profit per User (APPU) Measures the av erage monthly profit generated f or each customer uni t, such as a hand set or pager that an operator has in operation. Average Revenue per User (ARPU) Measures the average monthly revenue generated for each customer unit, such as a handset or pager that an operator has in operation. Backhaul It refers to the process of transmitting voice and dat a traffic from a r emote site to a ce ntral site. BMP BMP is an extension for files containing graphics. It is used as a graphics file format on the Microsoft Windows platform. It stores image formats of different bit sizes. It regenerates the image in its own form and does not have any compressing capabilities. However, i t ca n adapt i tself to ot her im age s oftware’s r unning on ot her oper ating s ystems. T his gr aphic format al so co mes w ith . DIB ( device-independent bi tmap), . XBM, . XPM and . TGA extensions. BMP files can s upport l ossless dat a co mpression algorithms beca use of t heir spare capacities. BoP Bottom of Pyramid: It refers to poorest socio economic groups. BREW Binary Runtime Environment for Wireless: It is an application development platform developed by Qualcomm. It enables wireless users to download and run applications, such as enha nced e-mail, l ocation pos itioning, ga mes, etc., t o B REW-enabled hands et. BREW was f irst introduced and developed f or CDMA handse ts, but i t now su pports GSM/GPRS and UMTS handsets as well. © 2010, Portio Research. All Rights Reserved 141
  • 142. Strategies for Driving Mobile Data and Broadband Adoption Broadcast Technologies for Mobile TV Some of the broadcast technologies for mobile TV worldwide are: DVB-H 45 (Digital Video Broadcast – Handheld): DVB-H t echnology allows simultaneous broadcast of television, video and radio channels on mobile, and helps operators to preserve network bandwidth for other data and voice services. It has been accepted as the standard by the European Telecommunications Standards Institute (ETSI). ISDB-T (Integrated Services Digital Broadcast – Terrestrial): It is t he t ransmission standard that has been developed in Japan to help the radio and television stations support digital content. DMB (Digital Media Broadcast): It is a t ransmission standard, which transmits video feed via s atellite ( S-DMB) o r terrestrial (T -DMB) mode. T he s tandard i s cu rrently deployed i n Korea and is being increasingly used in other parts of Asia as well as Europe. MBMS (Multimedia Broadcast/Multicast Service): This standard al lows t he t ransmission of multimedia content over the UMTS and GSM network. BTS Base T ransceiver Station: I t is t he equi pment t hat facilitates t he w ireless co mmunication between user equipment such as mobile handsets, computers etc., and the mobile network. BWA Broadband Wireless Access: It is a form of fixed wireless access system. Byte Byte is a co llection of bits i n which each bit ca n take a value of eit her 1 or 0. K bps, M bps and G bps denote t he num ber of byt es transferred per se cond; K bps, M bps an d G bps translate to 103, 106 and 109 bytes per second respectively. CAPEX Capital Expenditure: It refers to the cost of developing a product or system. CDMA Code Div ision M ultiple A ccess: I n a CDM A s ystem, each voice c ircuit i s l abelled w ith a unique co de and t ransmitted on a s ingle ch annel simultaneously along w ith m any other coded voice circuits. The receiver uses the same code to recover the signal from the noise. CDMA2000 1x CDMA2000 1x : This i s r egarded a s t he first phas e of CDM A2000 t echnology used f or providing voice and data services over mobile networks. Data speeds of 307kbps are using a single channel while with two channels speeds of 614kbps are possible. Churn Rate It is the rate at which the subscribers cancel their subscription with the existing operator and sign up with another operator. Concatenate It refers to the operation of joining of two character strings end to end Disposable income Disposable income is gross income minus income tax applicable on that income, and hence the am ount o f income left to an i ndividual a fter taxes ha ve been pai d that i s available f or spending and saving. 45 Source: http://www.strategiy.com/inews.asp?id=20041127000355 142 © 2010, Portio Research. All Rights Reserved
  • 143. Strategies for Driving Mobile Data and Broadband Adoption DoJa It is a JAVA-based technology/application developed for DOCOMO's i-mode mobile handset. I t a llows u sers t o acc ess m ore i nteractive appl ications or co ntent t han t he conventional HTML-based i-mode content. Dongle Dongle is a portable device which is connected to a laptop or desktop and resembles a USB flash drive. It is widely used as a wireless broadband adapter. DRM Digital Rights Management: It refers to a s et of technologies used f or the adm inistration of digital content. It authorises the nature and restricts the frequency of the usage based on the administrative poli cy settings. I t s ustains the r evenue of t he mobile net work operator by regulating the usage of content at end user. DSL Digital Subscriber Loop: I t is a t echnology that pr ovides di gital da ta t ransmission o ver t he copper lines of a PSTN network. DVB-H Digital V ideo B roadcasting-Handheld i s a m obile TV f ormat. B roadcast s ervices ca n b e brought to mobile handsets using this technical specification. EBITDA margin EBITDA margin is the ratio in percentage of EBITDA to the total revenue earned by an MNO. E BITDA is t he ear nings of an M NO bef ore acco unting f or I nterest, T axes, Depreciation and Amortization. EDGE Enhanced Data rates f or Global Evolution: An enhanced m odulation technique designed to increase net work capacity and dat a r ates in G SM net works. E DGE s hould pr ovide dat a rates up t o 384 K bps. E DGE w ill let oper ators w ithout a 3G li cense co mpete w ith 3G networks offering similar data services. Emoticon Emoticons ar e symbols or co mbination o f s ymbols us ed t o co nvey emotional co ntent in messages. EV-DO Evolution Data Only, Evolution Data Optimised: It is a wireless radio broadband data protocol being adopted by many CDMA operators. It is being used as a part of CDMA2000 networks in Japan, Korea, the United States and Canada. It provides better data speeds in comparison to GSM technologies such as GPRS and EDGE. ExEn Execution E nvironment: It i s an appl ication developed by Infusio for developing gam es f or higher-end mobile devices. FDMA Frequency Division M ultiple A ccess i s a ch annel acce ss pr otocol t hat all ows a us er dedicated allocation to single or multiple frequency bands. Gbps Please see “Byte”. © 2010, Portio Research. All Rights Reserved 143
  • 144. Strategies for Driving Mobile Data and Broadband Adoption GIF Graphics Interchange Format: It is a file extension to a different kind of bitmap image. This format of file is capable of compressing the size of the file, unlike a normal BMP format file. The compression process does not result in loss of data. This feature ensures the quality of image by simultaneously reducing t he dow nloading t imes by a co nsiderable am ount. T his format is onl y suitable for im ages of 256 and l ess colours. It causes l imitation in formatting picture files. GPRS General Packet Radio Service (GPRS) is a packet-based standard for mobile communication, w hich r uns at s peeds up t o 115 ki lobits per s econd, co mpared w ith G SM systems' 9.6 kilobits per second. GPRS supports a wide range of bandwidths and makes efficient use of limited bandwidth. It is particularly suited for sending and receiving small bursts of data, such as e-mail and web browsing, as well as large volumes of data. Applications f or GPRS may i nclude any of t he following: ch at, t ext and visual information, still images, moving images, web browsing, document sharing/collaborative working, audi o, job di spatch, co rporate e -mail, I nternet e-mail, vehicle pos itioning, r emote Loca l A rea Network (LAN) access, file transfer or home automation. GSM Global System for Mobile communications, the most widely used digital mobile phone system and t he mobile telephone s tandard i n Europe. I t w as originally defined as a pan European open standard for a digital cellular telephone network to support voice, data, text messaging and cr oss-border r oaming. GSM i s now one of t he w orld's main 2G di gital wireless standards. GSM i s present i n m ore than 160 co untries and acco rding to the GSM Association, accounts for approximately 70 percent of the total digital cellular wireless market. GSM is a time division multiplex (TDM) system. Implemented on 800, 900, 1800 and 1900 MHz frequency bands. GUI Graphical Us er I nterface ( GUI) is t he front-end i nterface and na vigation des ign o f an application. T his i ncludes s tandard f ormats f or r epresenting t ext and gr aphics. G UIs have become the standard ways for interaction between users and digital devices. HSPA High Speed P acket A ccess co mprises t wo m obile pr otocols: Hi gh S peed Downl ink Packet Access ( HSDPA) and Hi gh S peed Upl ink Packet Access ( HSUPA). T hese pr otocols enhance the performance of WCDMA protocols. HTML Hyper Text Mark-up Language: It is a syntax based language used for designing web pages. The content of HTML, written in standard syntax, when opened in a web browser takes the form o f Web page. T he nas cent version of H TML was u sed with eas y syntax r ules i n comparison t o exi sting HT ML and M HTML versions of it . In r ecent t imes, t he o fficial standards of World Wide Web recommend Web developers to use XHTML 1.1, XHTML 1.0 and HTML 4.01 versions. IC An Integrated Circuit which is also known as a chip is a small electronic circuit made out of semiconductor material. IC is used in almost all electronic equipment in use today. iMelody It is a standard format through which music tones can be transferred between devices. The format has volume modifiers to vary the volume throughout the tone duration, codes for 144 © 2010, Portio Research. All Rights Reserved
  • 145. Strategies for Driving Mobile Data and Broadband Adoption flashing phone’s backl ight and ot her features. iM elody was dev eloped by association (infrared communications). the irDa Instant Messaging Instant Messaging is an Internet-based service that alerts users when their friends or colleagues are online and allows them to communicate with each other in real-time through private online chat areas. With i nstant messaging, use rs create a l ist of other us ers with whom t hey want t o c ommunicate. When a u ser f rom t heir li st i s onl ine, t he s ervice al erts them and enabl es an i mmediate co ntact with t he ot her user. While instant m essaging ha s primarily been a pr oprietary service offered by Internet service providers such a s AOL and MSN, businesses are starting to employ instant messaging to increase employee efficiency and make expertise more readily available to employees. Integrated Mobile Broadcast (IMB) It is a 3G PP Rel ease 8 S tandard t hat em powers MNOs t o of fer M ultimedia B roadcast Multicast S ervices i n a sp ectrally efficient manner in t he 3G T DD ban ds. It i s depl oyed existing 3G FDD unicast technology. Intranet The i ntranet is a pr ivate net work inside a company or an or ganisation, and us es so ftware similar t o t hat us ed on t he I nternet. Co mpanies us e int ranets t o manage pr ojects, pr ovide employee information, distribute data and information, etc. i-mode i-mode i s a pr oprietary packet-based i nformation s ervice for mobile hands ets. I t del ivers information (such as mobile banking, and train timetable) to handsets and enables exchange of e -mail from mobile hands ets on t he P DC-P n etwork. Launch ed i n 1999 by NTT DOCOMO, i-mode is very popular in Japan (especially for e-mail and transfer of icons). IMPS IMPS (Instant Messaging and P resence Service) is an i nstant messaging system designed for mobile environments. Presence refers to the availability of a user for communication. IMS IMS IP Multimedia Subsystem i s an extension of the GSM / 3GPP GPRS co re Network. I t uses S IP ( Session I nitiation P rotocol) to s et up, m aintain and t erminate packe t-switched voice and multimedia sessions. Interoperability This is def ined as t he abili ty of a net work to oper ate w ith ot her net works, s uch as t wo systems based on different protocols or technologies. J2ME Java2, Micro edit ion: T he M icro E dition o f the Ja va 2 P latform pr ovides an appl ication environment t hat specifically addresses t he need s of commodities i n the vast and r apidly growing co nsumer and e mbedded s pace, i ncluding mobile hands ets, pager s, per sonal digital assistants, set-top boxes, and vehicle telematics systems. Java A s imple pl atform-independent obj ect-oriented pr ogramming language us ed f or w riting applets t hat ar e d ownloaded f rom t he World Wide Web by a cl ient and r un on t he cl ient's machine. JPEG Joint Photographic Experts Group: This i s the most commonly used format for storage and transmission of im ages on t he I nternet. T he f ormat uses l ossy co mpression t echniques wherein t he co mpressed d ata i s v ery close t o t he or iginal form. A n advanced form of the © 2010, Portio Research. All Rights Reserved 145
  • 146. Strategies for Driving Mobile Data and Broadband Adoption JPEG standard known as JPEG File Interchange Format (JFIF) is capable of formatting the size of graphics according the storage capacity of computer and transmission medium. Kbps Please see “Byte”. LTE Long-Term Evolution (LTE) is the standard being developed by 3GPP to achieve download rates of 100Mbps, and upload rates of 50Mbps for every 20MHz of spectrum and is termed as a 4G standard. LT E will have support for bandwidths r anging f rom 1. 25MHz to 20M Hz. The LTE group is expected to come up with concrete recommendations by September 2007. M2M Machine-to-Machine: M2M generally means the communication between machines. However, i n the m obile world, i t i s sometimes defined as Mobile-to-Mobile, which basically refers to communication that involves only mobiles and not landlines. MAN Metropolitan Area Network is a computer network that normally encompasses a city or a big premises. It is formed by connecting several local area networks. MBMS Multimedia B roadcast and M ulticast S ervices i s a br oadcasting s ervice pr ovided through GSM and UTMS mobile networks. Mbps Please see “Byte”. MIDI Musical I nstrument Di gital I nterface: I t is a pr otocol w hich act s as an i nterface bet ween musical not es of an el ectronic instrument and co mputer. The orchestral per formance and notes ar e def ined ( formatted) i nto a f orm, w hich ca n be und erstood and pl ayed by computers, i. e., MIDI is ca pable of pl aying t he act ual piece of or chestra unl ike a r ecorded version. MiFi MiFi i s a co llection o f w ireless r outers t hat ar e us ed a s m obile Wi-Fi hot spots. T he technology is developed by Novatel Wireless. MIMO Multiple-Input and Multiple-Output refers to the use of more than one antenna at the transmitter and receiver end to enhance the communication process. Mobile Broadband Users as a Percentage Mobile broadband users as a percentage refers to mobile broadband users as a percentage of t otal activ e mobile s ubscribers i n a co untry. T his r epresents the pr oportion of mobile broadband users in the total mobile subscriber base of a country. MNO Mobile Network Operator. MNO market penetration It is the mobile subscriber base of an MNO expressed as a percentage of total population of the country of operation. 146 © 2010, Portio Research. All Rights Reserved
  • 147. Strategies for Driving Mobile Data and Broadband Adoption Mobile Number Portability (MNP) MNP is a facility which allows mobile subscribers to retain their mobile number when moving between mobile networks. Mobile penetration It is t he m obile s ubscriber bas e i n a co untry expressed a s a p ercentage of it s t otal population. Modem A modem is a device which modulates and demodulates analogue and digital signals for the transmission of signals over different carriers. MP3 It is an expert compressing tool, which has been widely used in musical content rendering. It is capable of co mpressing audio f iles up to 10 per cent of its or iginal size. M PEG layer-3 (MP3) format can retain the full quality of an actual song by unperceivable deviations. MVNO Mobile Virtual Network Operator: Term used for a mobile operator who does not own its own spectrum and us ually does not hav e its own network infrastructure. Instead, M VNOs have business arrangements with t raditional mobile oper ators t o b uy minutes of us e ( MOU) for sale to their own customers. Near Field Communication Near Field Communication (NFC) is a wireless communication technology which uses shortrange high frequency to enable the exchange of data between devices in proximity with each ot her. T he d istance bet ween t he co mmunicating de vices has t o be l ess t han 10 centimetres. NF C-capable de vices ca n co mmunicate w ith s martcard r eaders as well as other NFC-capable devices. Node - B It is a t erm us ed i n Universal M obile T elecommunications System ( UMTS) to refer t o the Base Transceiver Station (BTS). Nokia Binary It is an audi o f ormat de veloped by Nokia, w hich al lows mobile us ers t o send r ingtones t o some Noki a handsets a nd other brands. It i s al so known a s SCKL, since al l the messages begin by //SCKL. ODM An original design manufacturer (ODM) is a firm involved in designing and manufacturing a product according t o s pecifications pr ovided by another firm. T he pr oducts ar e s old under the brand of the firm which gives the manufacturing contract to the ODM. OEM An or iginal equi pment manufacturer ( OEM) i s a f irm which acquires a pr oduct (or a component) for reuse or incorporation into the products branded under its name. OMA-IMPS Open Mobile Alliance-Instant Messaging and Presence Service: It is an open mobile alliance enabler for instant messaging and presence. The first cut of this specification was developed by the Wireless Village consortium. OPEX Operating Expenditure: It r efers t o t he ongoi ng co sts for running or oper ating a pr oduct or system. © 2010, Portio Research. All Rights Reserved 147
  • 148. Strategies for Driving Mobile Data and Broadband Adoption Packet Data Packet dat a i s a method o f t ransmitting i nformation i n s mall packe ts each co ntaining a certain a mount o f the i nformation. P acket dat a net works al low t ransmission of h igh-speed data to and from devices connected to the network. Packet Data is similar to dial-up Internet access available in homes or in businesses with cable modems, ADSL46 lines, etc. P2P Peer-to-Peer: In t he mobile messaging world, P 2P messages ar e def ined as m essages exchanged bet ween subscribers. T hese m essages or iginate from and t erminate t o mobile subscribers’ handsets. PCO Public Call Office: It refers to the telephone facility located in a public place. PCS networks Personal Com munications S ervice Net works: I n t he U. S., the 1. 9 GHz band has been allocated for PCS systems; the allocated spectrum is 120 MHz wide and is licensed as two 30 MHz segments f or the 51 major trading areas, and three 10 M Hz segments f or the 493 basic trading areas. PDA Personal Di gital A ssistant: A por table co mputing de vice ca pable of transmitting dat a. This device makes poss ible s ervices s uch a s pagi ng, dat a messaging, el ectronic mail, computing, facsimile, date book and other information handling capabilities. PDC This stands for Personal Digital Cellular, a Japanese cellular standard. PHS system This stands for Personal Handy phone system, a Japanese cordless standard. PIM Personal I nformation M anager: A lso kn own a s a " contact manager," is a form o f s oftware that l ogs per sonal and bu siness information, s uch a s contacts, appoi ntments, li sts, not es, occasions, etc. PNG Portable Net work Graphics: T his t ool r eplicates t he G IF format in its functioning w ith compression a s an add ed f eature. T his f ormat s imilar t o G IF i s ca pable of w orking on different platforms, backed by library functions. It is a non-lossy compression tool. POS Point o f s ale ( POS) refers t o t he l ocation o f a t ransaction. G enerally, har dware or an instrument is installed at the merchant’s location to execute the transaction process. PTT Push to Talk is a two way communication system which allows only one user to talk at any given t ime. T his s ystem, co mparable t o w alky-talky is unlike m obile handsets which al low multiple users to speak at the same time. QCP QCP is a format used for ringtones. The format was developed by Qualcomm PureVoice. 46 Asymmetric Digital Subscriber Line (ADSL) 148 © 2010, Portio Research. All Rights Reserved
  • 149. Strategies for Driving Mobile Data and Broadband Adoption RAN Radio A ccess Network: I t i s a co mponent t hat exists bet ween t he m obile handset an d t he core net work. I t performs t he r adio functionality of t he net work and pr ovides co nnection t o the core network. RFID Radio frequency identification (RFID) denotes a system employed to convey a unique serial number using radio waves. It does not require contact or line of sight for communication. An example of the deployment of this technology is in electronic toll collection using RFID tags. SDK Software Development Kit is a set of tools used for the development of an application for a software package. Service Revenue Service revenues are the revenues earned by MNOs through the provision of services only, i.e. revenues after deducting revenues earned from sales of equipment/products. SIM card It i s a s mart ca rd t hat giv es G SM hands et i ts u ser identity. The ca rd i s i nserted i nto a GSM/TDMA or GSM-only mobile handset containing subscriber-related data. The card contains 18 digits code for GSM markets and 20 digits code for TDMA markets. SIM Toolkit Subscriber Identity Module Application Toolkit: It is used by network operators to provide a user friendly interface on a subscribers’ handset to access value-added services provided by them. T hese appl ications al so pr ovide a mechanism for s toring and us ing any service specific parameters. These appl ications ar e bui lt w ithin a S IM card by mobile net work operators. SIMPLE SIMPLE ( Session I nitiation P rotocol for I nstant M essaging a nd P resence Lev eraging Extensions) is an open standard instant messaging (IM) protocol. SIP Session I nitiation P rotocol or S IP i s a standard m ultimedia and t elephony protocol f or initiating an i nteractive us er s ession ov er mobile ne tworks. T he s ervices under S IP may include call forwarding, number delivery, authentication and other telecoms applications. Smartphone A smartphone is a mobile handset which runs on operating system (OS) software and offers some of t he ca pabilities of a P C. I t pr ovides s tandardised i nterface and pl atform for application de velopers and ar e enabled with advanced f eatures, s uch as , e-mail, I nternet and e-book reader. Some of the other features expected from a Smartphone include built-in full keyboard/external USB keyboard, powerful microprocessors, memory, built-in m odem and large screens. SMS TV This is defined as the use of SMS for variety of applications, such as voting, teletext chat for TV programmes. SMSC Short Message Service Centre (SMSC) provides the routing of all SMS or text messages in any mobile network. Similar to e-mail server, the SMSC handles large volumes of messages sent between two mobile handsets or a mobile handset and a software application. © 2010, Portio Research. All Rights Reserved 149
  • 150. Strategies for Driving Mobile Data and Broadband Adoption SoC System on Chi p: It r efers t o t he pr ocess of i ntegrating al l the components of an el ectronic system into a single integrated circuit or chip. SS7 SS7 i s a global s tandard f or t elecommunications defined by ITU T elecommunication Standardisation Sector (ITU-T). The standard defines the procedures and protocol by which network elements in the public switched t elephone network (PSTN) e xchange i nformation over a di gital s ignalling net work to ef fect mobile ( cellular) and wire-line ca ll s etup, r outing and control. Thin Client Thin Cli ent r efers t o a cl ient co mputer or cl ient s oftware i n cl ient-server ar chitecture networks. The primary purpose of Thin Client is to convey input and output between the user and the remote server. TIFF Tagged Image File Format: It is a platform free image format, which enables reproduction of an im age created on a pl atform, such as Macintosh, on ot her pl atform such as an or dinary PC. It is an ad vanced tool for storing bit map or graphic image on d ifferent platforms. TIFF format supports scanned image, fax and other applications involving editing of image. TDD Time Division Multiplex: This is a scheme for allowing simultaneous transmission and receiving of data at the same frequency, but with the different time slots allocated to them. TDMA Time Division M ultiple A ccess: A T DMA channel i s a single FDMA ch annel divided up in time into multiple time slots. TDMA system is able to transmit multiple voice circuits per channel. Three users can take it in turn to share one radio channel. The channels can vary in bandwidth and depending on the type of system, the time slots can transmit all or part of a voice circuit. Each user's speech i s stored, compressed and t ransmitted as a qui ck packet, using co ntrolled time s lots t o di stinguish t hem-hence t he phr ase ' time di vision'. It us es 30 KHz channels a nd a v ocoder r ate o f 8 K bits/sec. A t t he r eceiver, t he packe t i s de compressed. TD-SCDMA Time D ivision S ynchronous Code Div ision M ultiple A ccess: It i s an ai r i nterface us ed i n UMTS mobile t elecommunications net works. I t has been depl oyed i n Chi na to r eplace WCDMA technology. UMTS Universal M obile T elecommunications S ystem: T his is t he future t ransmission network for third gener ation mobile t elephones, as def ined by the I nternational T elecommunications Union (ITU). In time, UMTS could reach transmission capacities of 2 M bits/sec. (compared to 9. 6 K bits/sec. for G SM). Initially UMTS w ill o ffer rates of 144 t o 384 K bits/sec. T his standard will make the development of new multimedia services having very wide bands and new uses, notably in the transmission of video, images and sound possible. UMTS TDD Universal Mobile T elecommunication System ( UMTS) T ime-Division-Depleting ( TDD): UMTS T DD M obile B roadband t echnology is a packet dat a im plementation o f t he international 3GPP UMTS standard and is designed to work in a single unpaired frequency band. It is designed to generate typical data transfer rates of up to 2 Mbps. 150 © 2010, Portio Research. All Rights Reserved
  • 151. Strategies for Driving Mobile Data and Broadband Adoption UMTS FDD Universal M obile T elecommunication S ystem ( UMTS) Frequency Division Dupl ex (FDD): It is designed to generate typical data transfer rates of up to 384 Kbps and is suitable for wide area coverage due to potentially high reach. USB Universal Serial Bus i s a specification used to i nitiate data transfer between d evices and a host controller. USSD Unstructured Supplementary Service Data (USSD) is a standard for transmitting information over GSM networks. It is primarily used to access the information on prepaid balances and similar details. VAS Mobile oper ators of fer various se rvices which ar e not par t of t he bas ic voice of fer. T hese services ar e av ailed of f separately by the m obile subscribers. I t i ncludes services su ch a s SMS, MMS , m obile e-mail, m obile games, m obile m usic etc. T hese also include s ervices such as WAP, voicemail, call diversion, etc. vCalender It i s a s tandard f ormat us ed t o ex change i nformation about s chedules an d act ivities electronically via an e-mail attachment. vCalender requires a personal information manager (PIM) t ype of application pr ogram. T he format was de veloped by a co nsortium founded by Apple, AT&T, IBM and Siemens. vCard vCard is an el ectronic business ca rd u sed f or exch anging per sonal i nformation di gitally. It contains name, address information, company logos, URLs, photographs and sound clips. It was developed by a consortium founded by Apple, AT&T, IBM and Siemens. WAP Wireless Advance Protocol: WAP i s a s pecification for a s et of communication protocols to standardise the way mobile devices, such as handsets and radio transceivers, can be used for Internet acce ss. T he WAP s tandard i s ba sed on Internet s tandards (HTML, X ML and TCP/IP). I t co nsists of a Wireless M arkup Langua ge ( WML) s pecification, a WMLScript specification, and a Wireless Telephony Application Interface (WTAI) specification. The WAP protocol is the leading standard for information services on wireless terminals such as digital handsets. Some e xamples of WAP for ac cessing i nformation incl ude t he following: ch ecking t rain timings, pur chasing t ickets, f light check-in, viewing t raffic information, ch ecking w eather conditions, looking up stock values, looking up phone numbers, looking up addresses or looking up sport results, and there are countless more. WAV It is a widely used audio format for wireless devices which is limited to files less than 2 GB in size. WBMP It is a gr aphic file format used for sending Web co ntent t o wireless dev ices. T he format is designed to support multiple image types for WAP-enabled wireless phones. W-CDMA Wideband Code Division Multiple Access is a 3G wireless network air interface standard. © 2010, Portio Research. All Rights Reserved 151
  • 152. Strategies for Driving Mobile Data and Broadband Adoption WiBro Wireless Broadband: The technology was f ormulated by South Korean telecom industry as an equivalent to mobile WiMAX international standard. Wi-Fi Wireless Fidelity: It is used to pr ovide w ireless l ocal ar ea net work through enhance d interoperability of the network. Services such as Internet, VoIP phone acce ss, and gam ing, etc., can be provided using Wi-Fi. WiMAX Worldwide Interoperability for Microwave Access: It is a telecommunication technology used for wireless data transfer over long di stances through point-to-point li nks as well as m obile cellular type access. It is based on standards that are useful in wireless broadband access. Wireless MAN Wireless Metropolitan A rea Net work: T he t echnology is u sed to pr ovide w ireless network over a larger area as compared to local area network. WLL Wireless Local Loop: It refers to the wireless devices that are situated in fixed locations. The signal transmissions occur through the air and it provides connectivity to the users in remote and isolated areas without the need for laying new cables. WMA Windows Media Audio: It is a compression format with Digital Rights Management features incorporated i n i t. It compresses the content to half of what an MP3 can do with the same content. This feature makes it more adaptable to lower memory devices such as handsets. WML Wireless M ark-up Lan guage i s an XML and a HT ML-based l anguage u sed f or cr eating content, which can be delivered to wireless hand-held devices. This language supports WAP (Wireless Application Protocol) standards just as HTML supports World Wide Web (http) standards. WML is useful in accessing text on web pages over hand-held devices. W-CDMA Wideband Code Div ision M ultiple A ccess: T he t hird gener ation s tandard of fered t o the International T elecommunication Uni on by GSM pr oponents. T his i s a 3G t echnology that increases data transmission rates in GSM systems by using CDMA instead of TDMA. W-CDMA has beco me t he Di rect S equence m ode in t he I TU's 3G sp ecification, w hich includes t he 1 x M ulti-Carrier mode ( 1x M C) and 3x Multi-Carrier mode (3x MC). 1x MC (formerly known as cd ma2000) and 3x MC comprise the 3G upgrade pat hs f or operators already using CDMA. 152 © 2010, Portio Research. All Rights Reserved
  • 153. Strategies for Driving Mobile Data and Broadband Adoption Portio Research Classifications Geographical Regions: There i s sometimes a dif ference i n the way research f irms classify t he major geogr aphical territories. At Portio Research, we follow 'obvious' geographical lines, but for the record, here are the regional definitions we follow, unless otherwise stated in the report: Western Europe: Standard classification includes Iceland and various islands Central and Eastern Europe: I ncludes s tandard l ist o f Cent ral and E astern E uropean countries, and the Baltic states, Balkans, Russia, Greece and Turkey Asia Pacific: I ncludes A ustralasia, t he I ndian S ub-Continent, Pakistan, A fghanistan, S ri Lanka, Maldives and the Former Soviet Union Central Asian republics North America: Standard classification, including Hawaii and islands to the North Latin America: I ncludes al l South and Cent ral A merican co untries including Mexico, The Caribbean and The West Indies Middle East: Includes Israel and all Middle Eastern countries East of Egypt, South of Turkey and West of Afghanistan Africa: Standard classification includes territories in Western Indian Ocean Mobile Subscribers Generally, w e co unt act ive S IMs, and we co nsider ac tive as bei ng u sed within 3 m onths, but, of course there is some room for variance, depending on what figures operators themselves publ ish or report to u s when we i nterview them. When running spot-checks on operator num bers, we ar e gov erned by the f igures t hey give us, and as we ar e al l aware, many individuals and companies around the world count their subscribers/subscriptions by a number o f d ifferent cr iteria. We r efer t o " total s ubscribers" f or a net work/country or globally, as a count of the total number of active subscriptions those networks have, and as such this can cause a slight distortion of any country-penetration rate. Currency and Monetary Values All monetary values quot ed i n t his r eport ar e i n US Dol lars as t he m ost widely recognised benchmark internationally. The currency conversion has been done on the year average basis. Whilst researching global mobile markets, we use http://www.oanda.com/ for all currency conversion calculations. © 2010, Portio Research. All Rights Reserved 153
  • 154. Strategies for Driving Mobile Data and Broadband Adoption Companies Mentioned in this Report Company 3 www.three.co.uk 3 Italia www.tre.it 3G Americas www.3gamericas.org Acision www.acision.com Adobe www.adobe.com America Movil www.americamovil.com Apple www.apple.com Asus www.asus.com AT&T www.att.com Boingo Wireless www.boingo.com Broadcom www.broadcom.com Carphone Warehouse www.carphonewarehouse.com Celcom www.celcom.com.my CDMA Development Group www.cdg.org Cell C www.cellc.co.za China Mobile www.chinamobileltd.com Compaq www.compaq.com Dell www.dell.com DeNA www.dena.jp eBuddy www.ebuddy.com Ericsson www.ericsson.com Etisalat www.etisalat.ae Excelcomindo www.xl.co.id Facebook www.facebook.com GetJar www.getjar.com Google www.google.com Handango www.handango.com Handmark www.handmark.com Handster www.handster.com HP www.hp.com Huawei 154 Website www.huawei.com © 2010, Portio Research. All Rights Reserved
  • 155. Strategies for Driving Mobile Data and Broadband Adoption Company Website International Telecommunication Union www.itu.int KDDI www.kddi.com Lenovo www.lenovo.com LG www.lg.com Maxis www.maxis.com Microsoft www.microsoft.com Mobango www.mobango.com MobiHand www.mobihand.com Motorola www.motorola.com Mozilla Firefox www.mozilla.com MTN www.mtn.com NEC www.nec.com NextWave Wireless www.nextwave.com Nimbuzz www.nimbuzz.com Nokia www.nokia.com NTT DOCOMO www.nttdocomo.com O2 www.o2.co.uk Ofcom www.ofcom.org.uk Opera www.opera.com Optus www.optus.com.au Orange www.orange.com Palm www.palm.com Pfizer www.pfizer.com PriceWaterhouseCoopers www.pwc.com Qualcomm www.qualcomm.com RIM www.rim.com Rogers Communications www.rogers.com © 2010, Portio Research. All Rights Reserved 155
  • 156. Strategies for Driving Mobile Data and Broadband Adoption Company Samsung www.samsung.com Sembuse www.sembuse.com Siemens www.siemens.com SlideMe www.slideme.org SoftBank www.softbank.jp Sony www.sony.com Sony Ericsson www.sonyericsson.com Sprint www.sprint.com Sumitomo Mitsui www.smbc.co.jp Tele2 www.tele2.com Telefonica www.telefonica.com Telekom Austria www.telekomaustria.com Telenor www.telenor.com TeliaSonera www.teliasonera.com Telkomsel www.telkomsel.com Texas Instruments www.ti.com TIM www.tim.it T-Mobile www.t-mobile.com Verizon Wireless www.verizonwireless.com Virgin Mobile www.virgin.com Vodacom www.vodacom.com Vodafone www.vodafone.com Webkit www.webkit.org WIN plc www.winplc.com YouGov www.yougov.com Zain www.zain.com ZTE 156 Website www.zte.com © 2010, Portio Research. All Rights Reserved
  • 157. Strategies for Driving Mobile Data and Broadband Adoption About the Authors Vikas Kumar Vikas K umar is w orking as a Senior Business Analyst w ith P ortio Res earch and Evalueserve. He has worked on v arious pr ojects r elated t o t elecom domain. He gr aduated from IIT Delhi, India. He has been working with Portio Research and Evalueserve since July 2007. Deepak Mahajan Deepak Mahajan i s working a s a Senior Business Analyst with P ortio Res earch and Evalueserve. He gr aduated from Del hi College of Engineering, India. He has been working with Portio Research and Evalueserve since May 2008. Natarajan P Natarajan is working as a S enior Business A nalyst with P ortio Research and E valueserve. He graduated from Madras University, India. He has been working with Portio Research and Evalueserve since February 2010. John White John White has been Editor and contributing author for this report. John is Business Development Director for Portio Research and has over 18 years experience in the technical publishing industry. Working in the IT sector previously and in the telecoms industry for the last 11 years, John has extensive experience in the mobile sector. © 2010, Portio Research. All Rights Reserved 157
  • 158. Strategies for Driving Mobile Data and Broadband Adoption Also available from Portio Research Limited Portio Research Ltd is a UK-based research company focussing on the mobile space, providing reports, handbooks, directories and database products. New and Best Selling Reports include: Africa and Middle East Mobile Opportunities 2010-2014: Packed-full of invaluable data, market sizing and growth forecasts, this must-have new study delivers vital insight into the exciting mobile markets of the AME region. With essential regional, country and operator-level analysis of this growing mobile space, the detailed report includes mobile subscriber, penetration, technology and messaging forecasts; as well as subscriber numbers, service revenues, market share and ARPU data, and strategies and developments of key mobile operators – plus so much more. With the AME mobile market now the subject of intense interest, this essential 96-page market report provides an understanding of the size, scope and major players of this changing mobile market. Please click here for more details. Mobile Payments 2010-2014: Examining the exciting worldwide mobile payments market, this essential new report delivers analysis of mobile payment services including in-app payments, mobile ticketing and mobile coupons, and identifies the opportunities in the mobile payments space. This invaluable research provides growth forecasts and market sizing; details the various types of mobile payments and different platforms they use; reveals the drivers and challenges affecting mobile payment development; appraises mobile payment business models and compares value chains; and offers supporting case studies and profiles of major markets, key players and successful mobile payment services. Please click here for more details. Mobile Messaging Futures 2010-2014: The highly anticipated fourth edition of our best selling messaging report is now available to order. This new edition is packed with detailed market analysis, traffic and revenue forecasts and a brand new vendor survey. This massive 355-page market study gives you all the data you need for SMS, MMS, mobile e-mail and mobile IM markets worldwide, and includes a BONUS 26-slide Executive Summary presentation. With essential insight into a market that is forecast to be worth USD 233 billion by end-2014, this is one of the most detailed and popular reports ever written on the worldwide mobile messaging market. Please click here for more details. If you have any questions or if we can be of any assistance to you, please contact us by e-mail: info@portioresearch.com Copyright 2010. Portio Research Limited 2010 www.portioresearch.com 158 © 2010, Portio Research. All Rights Reserved