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  • 1. Open Mobile What is at stake in the battle between operating systems? What is at stake in the battle between app stores? Which new ecosystem will emerge from the mobile Internet? Frédéric PUJOL Head of Radio Technologies & Spectrum Practice [email_address] Tel.: +33 467 144 450
  • 2. Open mobile <ul><li>Mobile market status </li></ul><ul><li>What is at stake in the battle between operating systems? </li></ul><ul><li>What is at stake in the battle between app stores? </li></ul><ul><li>Which new ecosystem will emerge from the mobile Internet? </li></ul>
  • 3. Mobile market status Mobile revenues, the end of mobile voice “el dorado” for operators The falling growth of mobile revenue <ul><li>The mobile communications market today is largely seen as having passed its growth phase, entering a state of saturation </li></ul><ul><li>Over the past few years, mobile revenue growth has seen a sharp decline for the EU5 and the USA </li></ul><ul><li>Japan, seen as one of the most advanced countries in the mobile field, has achieved ~0% growth for the past five years, and this trend is expected to be followed by the European countries and the USA. </li></ul><ul><li>China: 10.7 % in 2008 and 8% expected for 2009 </li></ul>Source: IDATE Declining mobile revenues in Japan and Western Europe <ul><li>In Western Europe, Germany, Italy, UK and Spain will experience declining mobile revenues in 2009 </li></ul><ul><li>In Japan, mobile revenues started to fall in 2004 </li></ul><ul><li>USA are still in a growth phase with a lower penetration rate </li></ul>
  • 4. Mobile market status Mobile revenues, the growing importance of data revenues Data & voice revenues World mobile data and voice revenues, 2009 (USD Billion) <ul><li>USA: an explosive growth of data revenues fuelled by 3G dongles and smart-phones </li></ul><ul><li>Asia: except in Japan, SMS represent the bulk of mobile data revenues </li></ul><ul><li>Western Europe: slower growth of data revenues than in the USA </li></ul>Source: IDATE – Mobile VoIP: Plenty are talking the talk, but can it walk the walk? 2009 market report Western Europe: an increasing dependence on data revenue Comparison of annual growth rates for mobile voice and data revenue, EU 2004-2009 <ul><li>Whilst the growth rates for both voice and data revenues are showing a gradual decline, the rate for data is considerably higher than that for voice revenue </li></ul><ul><li>Looking at the revenue shares of voice and data, data is gradually increasing its foothold </li></ul><ul><li>There are many reasons for this negative trend in mobile revenues: saturation of the mobile market, increased market competition and decreasing ARPU </li></ul>Data Voice
  • 5. What is at stake in the battle between operating systems? The smart phones battle <ul><li>Software layers in mobile phones: </li></ul><ul><ul><li>The operating system is the heart of the mobile phones </li></ul></ul><ul><ul><li>Essential interface with applications </li></ul></ul>Source: IDATE <ul><li>The OS smartphone market is fragmented </li></ul><ul><li>“ New” players with Android: </li></ul>Trends:
  • 6. What is at stake in the battle between operating systems? Horizontal and vertical strategies : A complex ecosystem for developers <ul><li>From few platforms available to develop applications or software code, the emergence of the smartphone market has greatly increased the complexity of developing applications </li></ul><ul><ul><li>Fragmentation is constantly increasing with more OS (iPhone, Symbian, Android, Windows Mobile, Moblin Linux, Blackberry, etc), mobile browsers (Opera, Safari, Chrome, etc), application standards (Java, iPhone SDK, Symbian, Android SDK, Brew, 5+ different widget standards, etc). </li></ul></ul><ul><ul><li>These platforms have their own programmation ecosystem (API) and use different native and managed code </li></ul></ul><ul><ul><li>Banned langages for iPhone are Ruby, Python, Perl, Java </li></ul></ul><ul><ul><li>Android has its custom Java Virtual Machine called Dalvik to have a tighter control on application development, whereas Java is controlled by Sun </li></ul></ul><ul><li>No direct interoperability between platforms </li></ul><ul><ul><li>Developers have to rewrite most of the code for each application depending on platform </li></ul></ul><ul><ul><li>Major companies are spending enormous amounts of time porting and maintaining their code </li></ul></ul><ul><ul><li>If Google provided tools to help more quickly port the BlackBerry Java app to an Android Java App for example, that could significantly reduce the time and effort required to get an app on Android, making the business case for doing so much more viable. </li></ul></ul>Developing 4 different OS versions of an application is possible although costly for most mobile services companies. Mobile game developers have dealt with this issue for some time with porting and testing costs making up as much as 80% of the total budgets which is bearable but certainly not profitable. On the other hand, the iPhone is a single, consistent platform... a developer can build one app and have it reliably run on the millions of iPhone 2G, 3G and iPod Touch devices in market. Consistency of Platforms appeal developpers Java (JME) - RIM Java, HTML 5 - Palm .Net Compact Framework C/C++ Microsoft Java (JME) C/C++ Symbian Foundation - Objective C, C/C++ iPhone Java (Dalvik VM) Managed Code Native Code Platform C/C++ Android
  • 7. What is at stake in the battle between app stores? 2008, the year Mobile Platforms broke <ul><li>Open Platforms and Open Software in the mobile market </li></ul><ul><ul><li>First platforms introduced in 2002 </li></ul></ul><ul><ul><li>However, success was low due to complex APIs, high porting costs, poor tools, … </li></ul></ul><ul><li>2008 : the turning point in the Mobile Software Market with a transition from closed to open ecosystem </li></ul><ul><ul><li>The Open Handset Alliance led by Google introduced in October first Android phones for the T-Mobile network in the USA </li></ul></ul><ul><ul><li>Nokia bought Symbian in July and introduced the Symbian Foundation, an open version of Symbian platform, in the end of 2008 </li></ul></ul><ul><ul><li>Apple launched in June the App Store for iPhone users </li></ul></ul><ul><ul><li>Many Applications Stores were launched in the second half 2008 by Platform provider (Android), Handset provider (Palm) and mobile operators (SFR, T-Mobile,..) </li></ul></ul>.. to collaborative platforms From Proprietary … Number of applications developed by platforms (from 2002 to 2008) Source: IDATE
  • 8. What is at stake in the battle between app stores? Mobile Platforms: building up the supply side <ul><li>Ecosystem of developers is key </li></ul><ul><li>AppStore from Apple is most successful platform to date </li></ul><ul><ul><li>1 year after introduction, 45 000 apps were available (200 at launch) </li></ul></ul><ul><ul><li>500 millions downloads in 6 months and 1 Billion in 10 months </li></ul></ul><ul><li>High impact on global mobile market </li></ul><ul><li>Number of mobile devices compatible with an application store is an important parameter </li></ul><ul><ul><li>The bigger the ecosystem, the more interested will be developers to target these devices (network effect) </li></ul></ul><ul><ul><li>Nokia’s Devices based on the S60 platform are for the moment the most widespread device, followed by Apple (iPhone) </li></ul></ul><ul><li>The widest offer available is in the game category (24% of available apps) </li></ul>AppStore: number of downloaded applications & number of available applications Source: IDATE Platform # of Applications # of Compatible Phones iPhone 100.000 33 M (as of end Sept 09) RIM 3 100 12 M Palm Web OS 250 Around 0.9 M Microsoft Launched Oct 2009 Windows Mobile 6.5 Ovi Store 4 000 50 M Android 14 600 3.5 M
  • 9. What is at stake in the battle between app stores? A « Standard » revenue sharing model <ul><li>Replication of the AppStore model: </li></ul><ul><ul><li>Revenue Sharing – a standard 30-70% model where developers get 70% of revenue from Application sales </li></ul></ul><ul><ul><li>Desintermediation of the mobile application value chain </li></ul></ul><ul><ul><li>A fixed price to download the SDK (from 99 to 200 USD) </li></ul></ul><ul><ul><li>A catalogue of applications on a free or pay per download basis – Users can fix the price of applications </li></ul></ul><ul><ul><li>Low average price of applications remain ~ USD 2.5 </li></ul></ul><ul><ul><li>Application Providers are also beginning to offer monthly subscription for updating application, especially for games </li></ul></ul>Average Price of iPhone Applications (USD) <ul><li>iPhone App Store: A success with low revenues </li></ul><ul><li>Average Price of Application remains very low (2,5 USD) </li></ul><ul><li>Revenues from AppStore estimated to 25 to 45 Million USD </li></ul><ul><li>Given that Apple sold 13.7m iPhones in 2008, the AppStore is not a meaningful direct contributor to their overall revenue. Much like iTunes, Apple is using the AppStore to drive demand for hardware and foster audience monetization </li></ul>Source: IDATE Market Entry Fees Revenue Share Applica-tion Price Payments Method Apple 99 USD Standard 199 Enterprise 30-70% Free and 0.99 minimum iTunes Platform Microsoft 99 Standard - - - Nokia Free 30-70% Free and paid Credit Card or operator billing RIM 200 USD admin fee for listing 10 apps 20-80% developer pay 2.9% fee 2.99 minimum Paypal Android 25 Standard 30-70% Free and paid Operator Billing
  • 10. What is at stake in the battle between app stores? What Impact on the Mobile Market? <ul><li>The impact of Application Store on Mobile Device is still unclear </li></ul><ul><ul><li>The bump of iPhone sales in June 2008 is due to the introduction of the new generation of iPhone 3G, bundled with the Application Store </li></ul></ul><ul><ul><li>Non-users of mobile data would consider download application and software over the air in the top five data services they intend to use (Source Nielsen) </li></ul></ul><ul><ul><li>Not all users have installed Applications on their iPhone </li></ul></ul><ul><ul><li>App Store is viewed as a “nice to have” feature but won’t be the first driver for users to buy iPhone </li></ul></ul><ul><li>Which place for Mobile Operators? </li></ul><ul><ul><li>Smartphone and the ability to add 3rd party apps kills off MO Wall Garden </li></ul></ul><ul><ul><li>iPhone case has shown consumers were willing to change of MNO for a device </li></ul></ul><ul><ul><li>Operators can hardly compete with device manufacturers in terms of apps catalogue </li></ul></ul>3G iPhone Introduction + AppStore
  • 11. Which new ecosystem will emerge from the mobile Internet? Mobile Internet Status <ul><li>3G and 3G+ penetration is growing </li></ul><ul><li>Data traffic strong increase </li></ul><ul><li>Is LTE the solution? </li></ul>Source: Nokia Siemens Networks, Nokia UK Smartphone Study <ul><li>Smart phones functions will extend to midrange mobile phone </li></ul><ul><li>App stores have a strong impact on smart phone users </li></ul><ul><li>The end of the walled gardens? </li></ul><ul><li>The need for efficient mobile broadband </li></ul>A change in users’ habits? The mobile broadband growth
  • 12. Which new ecosystem will emerge from the mobile Internet? The data traffic increase HSPA traffic growth – World average <ul><li>A model for deploying 3G networks developed by IDATE highlighted the limits in terms of available capacity on HSPA networks by 2013. The problems will first appear in densely populated urban areas and, by 2014, in suburban areas. </li></ul><ul><li>Faced with these limits, operators could degrade the quality of their services (restricting available capacity, reducing speeds, etc.) or continue their deployments </li></ul><ul><li>Pressure on the RAN and on the backhauling network </li></ul> Overall, global mobile traffic has more than doubled in the past year, reaching 33 Petabytes (PB) per month in 2008, and 85 PB per month in 2009 Solutions: Source: Ericsson; IDATE – Radio Spectrum: w hich conditions for mobile broadband growth? - 2009 market report  Move to HSPA+
  • 13. Which new ecosystem will emerge from the mobile Internet? What solutions can LTE bring? <ul><li>LTE (Long Term Evolution) is a new air interface with OFDM multiplexing and improvements in modulation and coding </li></ul><ul><li>LTE provides higher efficiency and will benefit from new spectrum resources to support mobile data growth </li></ul><ul><ul><li>Part of the GSM/HSPA family </li></ul></ul><ul><ul><li>Flexibility in spectrum use: channel width, TDD/FDD duplex mode </li></ul></ul><ul><ul><li>Increased spectrum efficiency  higher data rates (~40 Mbps today) </li></ul></ul><ul><ul><li>Full-IP & a flat architecture </li></ul></ul><ul><ul><li>Lower cost expected (improvements in modulation, SON, re-use of existing cell sites…) </li></ul></ul><ul><li>But there will be a transition period: HSPA+ will benefit from many improvements (64 QAM, dual carrier) and will offer a similar spectrum efficiency when LTE starts </li></ul>LTE architecture Multiple antenna systems OFDM multiplexing Source: IDATE – LTE: a compelling answer? - 2009 market report
  • 14. Which new ecosystem will emerge from the mobile Internet? What solutions can LTE bring? <ul><li>LTE spectrum: the Digital Dividend… </li></ul><ul><ul><li>Digital Dividend (800 MHz in Europe, 700 MHz in the USA) will play a key role in LTE deployments </li></ul></ul><ul><ul><li>NRAs positions will be key on the distribution of the spectrum between actors: bandwidth (5, 10 MHz), RAN sharing, Spectrum caps… </li></ul></ul><ul><li>… and the 2.6 GHz band </li></ul><ul><ul><li>… FDD/TDD distribution in the 2.6 GHz band </li></ul></ul><ul><ul><li>The 2.6 GHz band not fully harmonized in Europe: </li></ul></ul>Source: IDATE – Radio Spectrum: w hich conditions for mobile broadband growth? - 2009 market report <ul><li>Open spectrum? </li></ul><ul><ul><li>Unlicensed/Licensed & « White space » concept </li></ul></ul><ul><ul><li>Impact of new radio technologies? </li></ul></ul>
  • 15. Which new ecosystem will emerge from the mobile Internet? LTE deployment roadmap – starting end of 2010 <ul><li>Earliest LTE deployments announced for end-2010; many more operators are set to follow </li></ul><ul><ul><li>The forerunners of LTE deployment are NTT DoCoMo of Japan and Verizon Wireless of the USA </li></ul></ul><ul><ul><li>A host of other big-name MNOs is committed to deploying the technology from 2011 onwards </li></ul></ul>Geographical mapping of early LTE commercial deployment Major operators LTE commercial deployment schedule Source: IDATE Source: IDATE – LTE: a compelling answer? - 2009 market report
  • 16. Which new ecosystem will emerge from the mobile Internet? LTE forecasts: 380 millions subscribers in 2015 Global LTE adoption forecast (End-2012 to end-2015) (Million subscribers) Source: IDATE <ul><li>USA </li></ul><ul><ul><li>USA is a battlefield for competing mobile technologies </li></ul></ul><ul><ul><li>Verizon Wireless early LTE deployment will be a game-changer and will lead to faster adoption by AT&T </li></ul></ul><ul><li>Japan and South Korea </li></ul><ul><ul><li>They lead the world in terms of 3G penetration and will be pace-setters for LTE </li></ul></ul><ul><li>Europe </li></ul><ul><ul><li>Depending on the competition and the spectrum allocation schedule </li></ul></ul><ul><ul><li>Major European operators may decide to act more cautiously and opt to first observe and learn from the other pioneering countries </li></ul></ul><ul><li>China </li></ul><ul><ul><li>Operators deploy both 3G and TDD LTE simultaneously, much of the equipment can be shared </li></ul></ul><ul><ul><li>China will drive TD-LTE market </li></ul></ul>Source: IDATE – LTE: a compelling answer? - 2009 market report 0 50 100 150 200 250 300 350 400 End-2012 End-2015 China EU5 + Scandinavia Japan + South Korea USA
  • 17. Questions <ul><li>Mobile broadband is already here thanks to 3G/3G+ services - growth has started but an higher expansion will happen during next years </li></ul><ul><li>Facing to voice revenue decrease, how to raise data revenue? </li></ul><ul><li>Operating Systems for smart phones: who will dominate this booming market? </li></ul><ul><li>App Stores: a radical impact on the value chain? </li></ul><ul><li>This strong growth of data traffic is already creating congestion on current networks. How to handle it? </li></ul><ul><li>Is LTE the solution for facing data traffic increase? </li></ul>
  • 18. Thank you!

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