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Canaan Conference Summary:
                                       The GSMA Mobile World Congress 2009
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The following is a brief and non-exhaustive summary of several trends we thought may be helpful to share with you.

Handse...
volatile – as evident in the interchangeability of the most popular iPhone applications – application sellers
  will need ...
The Battle for the Home: Femtocells as an Alternative to FMC
Another way for operators to seek growth in mature markets is...
Expanding to Underserved, Developing Markets
Renewable energy, in addition to being more environment-friendly, enables dep...
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Canaan Conference Summary Gsma 2009

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Summary of GSMA Barcelona conference 2009, put together by Eli from Canaan Israel office.

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Transcript of "Canaan Conference Summary Gsma 2009"

  1. 1. Canaan Conference Summary: The GSMA Mobile World Congress 2009 February 16-19, Barcelona Eli Novershtern – March 2, 2009 General Impressions The general impression of many visitors to the 2009 Mobile World Congress (formerly and popularly known as 3GSM) was one of disappointment. Innovations were underwhelming, and the industry is clearly operating under increased uncertainty, stemming in large part from the general economic slowdown, which inhibits bold investments. Executive Summary Handsets: Touch screens were at the center of several improvements to handset “sensory” interfaces. Audio improvements and high-end multimedia capabilities (surround sound, attempts at high-definition video) complemented this trend. Most notably, the industry is attempting to emulate iPhone’s success, with handset manufacturers offering iPhone lookalikes and attempting to create mobile application stores similar to Apple’s. Mobile Applications: Increased demand will create an open ecosystem for mobile applications, which may behave much like entertainment titles, requiring a constant supply of fresh applications and platforms that will enable quick and cost-effective application deployments. Therefore, those players providing the leading enabling platforms may be in the best position to benefit from the emerging application ecosystem. The Mobile Network: Operators are attempting to extend the reach and revenue of their mobile networks by promoting new applications, such as mobile payments, machine-to-machine communications over the mobile infrastructure, mobile broadband subscriptions, and personalized advertizing - a space with many varied offerings but no clear winners as of yet. Femtocells: Femtocells were at the forefront of attempts to extend the reach of mobile communications in the home and position mobile operators to win the battle over Fixed Mobile Convergence (FMC). Infrastructure: Infrastructure improvements seem sluggish and underwhelming, due to the overall economic situation and the growing uncertainty it yields, with LTE seemingly the preferred option for upgrades among existing operators. Infrastructure improvements may provide, however, interesting growth opportunities in the future, as operators may be forced to expand capacity as communications volumes grow, driven by data applications. “Green” Energy: Attempts at utilizing renewable energy both on the handset and base station will increase for ecological and economic reasons and to enable mobile networks’ expansion to underdeveloped areas where electricity is not readily available. 1
  2. 2. The following is a brief and non-exhaustive summary of several trends we thought may be helpful to share with you. Handsets: iPhone After-Shock • Trying to catch up with the iPhone: Most significant handset manufacturers presented iPhone lookalikes, some embarrassingly similar to the original trendsetter, with varying degrees of market-readiness. • Touch: Touch screens were the most dominant trend we observed in the handset space. Samsung, for example, is putting touch screens at the center of its handset strategy. • Auditory improvements: Both startups and large handset manufacturers attempted to tackle audio quality, a long-standing pain of mobile users. Audience, a semiconductor startup based in the Silicon Valley, exhibited a chip-based solution that mimics the human ear in its ability to filter out background noise and enhance audio quality. Motorola, in an attempt to overcome its decline in the handset market, attempted to feature advanced noise-cancellation software as a differentiating factor. • High-end multimedia: LG offered the Arena multimedia phone, enhanced by a Dolby mobile sound system which can play surround sound, and Samsung offered its “Beat” handset, featuring Bang & Olufsen speakers, in another effort to cater to high-end media consumers. This was complemented by larger and better-quality video screens, and initial attempts at capturing Hi-Definition video. • Pico projectors were offered by several handset manufacturers to enhance handset audiovisual capabilities. Mobile Applications: An Emerging Ecosystem • Application stores: Various players are seeking to emulate the success of Apple’s mobile application store by setting up their own stores and platforms. Apple’s successful app store is especially envied as it managed to create differentiation, stickiness, and above all – revenue, over the head of the industry’s formidable gatekeepers (and toll collectors) – the operators. Nokia’s Ovi is a heavily-promoted attempt to recreate such a success. Vendors are reacting to this trend, proclaiming they will provide infrastructure and platforms for the creation of app stores. • Opening up the ecosystem: In order to satisfy the need for innovative and appealing applications, large industry players (including equipment vendors, mobile operators, and handset manufacturers) realized that it is in their best interest to harness the innovation of startups in order to create a rich application offering. Many have set up partnership programs, through which they seek to integrate startups’ innovations into their core offerings. • Applications as entertainment: With consumer demand for mobile applications being unpredictable and 2
  3. 3. volatile – as evident in the interchangeability of the most popular iPhone applications – application sellers will need continuous fresh supplies of innovative applications. As it seems virtually impossible to predict the winning titles in this space, we believe that the market for mobile applications will behave in a similar way to the market for entertainment content, in which many titles are continuously offered, catering to many different tastes, and creating few hits followed by a “long tail.” • Titles vs. platforms: In order to satisfy the application market, sellers will need to dramatically cut costs and shorten implementation times to bring new applications to the market. Therefore, those best positioned to win in this market may be the platform providers: those who could lower costs and accelerate time to market across many operators and handsets will be able to concentrate much of the application market and create strong positions regardless of the popularity of specific titles. Accenture is attempting to create such a platform, promising to enable deployment within 3 months or so, instead of 18-24 months, as they claim the situation is today among operators. Extending the Reach - and Revenue - of the Mobile Network In a quest to find growth in their mature markets, operators are seeking to find new uses for the mobile infrastructure they own, especially on the data side. Examples for such uses include: • Mobile Payments: Visa was prominently present at the exhibition, in an attempt to claim ground in the nascent mobile payment space. • Embedded, Machine-to-Machine (M2M) uses, such as mobile remote control of home appliances (lights, locks, etc.), or using the mobile network as communications infrastructure for commercial applications (e.g. security cameras) were also prominently present. • Broadband: Operators and supporting vendors are attempting to compete with landline broadband providers (cable, DSL) by offering mobile USB modems that are competitive in quality and price with landline subscriptions. These seem to be especially attractive to second-home owners, who by using their mobile modem across locations can eliminate broadband subscriptions. • Personalized advertising, often using the knowledge operators already have on their subscribers (demographics, calling patterns and destinations, etc.) is creating a large ecosystem. A multitude of different companies and business models were offered, yet the winning positions still seem up for grabs. • Specialized advertising models targeting developing countries where technological capabilities may be limited, but mobile may be an attractive advertising channel as it has greater reach compared to the web, were are also offered. These models (for example the one offered by the Israeli company Pudding Media) often use seemingly simple technologies such as SMS. 3
  4. 4. The Battle for the Home: Femtocells as an Alternative to FMC Another way for operators to seek growth in mature markets is to gain control of their existing mobile customers’ home communications, displacing landline vendors. The most prominent tool utilized in this regard is Femtocells, home-sized cells backhauled via broadband, which enable the mobile handset to be used instead of a home cordless phone. This increases the reach of the mobile network to spaces it sometimes cannot access and unloads traffic from the already saturated mobile RF space. More importantly, from the mobile operators’ point of view, Femtocells place them in a winning position in the arena for Fixed Mobile Convergence (FMC), presenting an effective alternative to earlier approaches to FMC: instead of changing the handset (by adapting it to use with landline-based access points, such as WiFi, which threatens mobile operators’ core business), it changes the access point, while maintaining the seamless use of existing mobile handsets. Backhaul & Infrastructure: Sluggish, Uncertain Progress, Dominated by LTE Even though WiMax, which is thought to appeal more to new entrants rather than to established players, is usually less prevalent at MWC, its relative absence was still noted this year. The cost of re-deploying new infrastructure compared to enhancing existing networks seems a major inhibitor to WiMax adoption (with the exception of new markets which have no infrastructure at all). The Long-Term Evolution (LTE) of existing UMTS infrastructure, the more incremental approach to network upgrades, was also disappointing in capabilities and uptake, with DoCoMo, a traditional pioneer in the mobile industry, announcing first commercial deployments only in 2010. However, even given the current reluctance to make significant infrastructure investments, due to the current economic gloom and increased uncertainty, network capacity enhancements may still provide interesting opportunities in the future. This would be especially true if operators succeed in increasing data traffic, thus over-burdening mobile infrastructure which is often already saturated. “Green” Energy Going Mobile The renewable energy trend has reached the mobile world as well, with vendors like Samsung offering the “Blue Earth” handset, made partly out of recycled materials and with a solar-based charger on its back – a feature that independent vendors are offering as an add-on. Even more significant in terms of energy-saving are several efforts to utilize renewable energy for base stations, such as solar panels or wind turbines to be mounted on base stations. 4
  5. 5. Expanding to Underserved, Developing Markets Renewable energy, in addition to being more environment-friendly, enables deploying mobile networks and handsets to underserved areas where electricity is not readily available. Several solar and manual charging mechanisms were offered for such areas. In addition, providers offered more cost-effective networks that will enable deploying mobile networks to developing rural areas, where traditional networks are not cost-effective. Such low-cost networks are enabled by modular “DIY” base stations, placed on village rooftops without requiring engineers for deployments. To Our Portfolio CEOs: As your partner, Canaan is here to give you the actionable tools, resources and support you need to make your business a success. The Canaan Conference Summaries have been developed to give you a recap of the industry’s biggest and most influential conferences. If you have any questions or suggestions on how we can better serve you, or if you would like to be added to or removed from this distribution, please contact Gina Vakili at gvakili@canaan.com. ebr ati n el g c + YEARS f e o ex c c el l e n 5

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