Innovation in the mobile ecosystem Prepared by Claudio Feijoo - - PowerPoint PPT Presentation

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Innovation in the mobile ecosystem

Prepared by Claudio Feijoo (Universidad Politecnica de Madrid), Jean-Paul Simon (IPTS)

for the Acorn-Redecom Conference, Brasilia May 14-15, 2010

European Commission - Joint Research Centre Institute for Prospective Technological Studies - IPTS http://ipts.jrc.ec.europa.eu/

Disclaimer

The views expressed are those of the presenter and may not in any circumstances be regarded as stating an official position of the European Commission. Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of this presentation.

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IPTS Part of DG JRC of the EC Mission “to provide customer-driven support to the EU policy-making process by developing science-based responses to policy challenges that have both a socio-economic as well as a scientific/technological dimension”

European Commission – Joint Research Centre Institute for Prospective Technological Studies (IPTS)

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Summary

• The state of the industry
• The global market
• The US market
• The EU market
• Some trends
• Key innovation areas
• Appendix: case study
• The content provider view: Lagardère International

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• The state of the industry
• The global market
• The US market
• The EU market

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Market Data Summary (Q2 2009) Source GSMA 2010

Africa 416,303,821 Americas 475,193,998 Asia Pacific 1,906,764,743 Europe: eastern 462,040,510 Europe: western 506,982,364 Middle East 243,953,091 USA/ Canada 299,057,084 World 4,310,295,611

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Market Data Summary Source: ITU, IDATE 2010

3.058,8 3.410,7 3.818,9 4.272,5 4.714,7 5.198,0 5.756,9 0,0 1.000,0 2.000,0 3.000,0 4.000,0 5.000,0 6.000,0 7.000,0 2007 2008 2009 2010 2011 2012 2013 Millions

Total mobile subscriber base evolution

11% 9% 13% 12% 31% 10% 1% 13% North America South America West Europe East Europe Far East & China Indian Sub Continent Rest of Asia Pac Africa & Middle East

2009 world distribution of mobile subscribers (ITU)

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Mobile Internet Source: ITU, EC, Juniper, Informa 2009

Mobile penetration 2008 (%) Mobile internet penetration (%) North America 70% 11% South America 77% 4% West Europe

119%

16% East Europe

110%

15% Far East & China

69%

19% Indian Sub Continent

21%

5% Rest of Asia Pacific

62%

8% Africa & Middle East

57%

8%

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World revenues Source: IDATE 2009

610 678 742 100 200 300 400 500 600 700 800 2006 2007 2008

World mobile revenues ($ billions)

22,4 20,16 18,96 17 $ 18 $ 19 $ 20 $ 21 $ 22 $ 23 $ 2006 2007 2008

World average monthly revenue per user – ARPU ($)

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ARPU breakdown into voice and data Source: own estimations from industry data 2009

17,7 16,5 15,1 3,2 3,6 3,7 0,00 $ 5,00 $ 10,00 $ 15,00 $ 20,00 $ 25,00 $ 2006 2007 2008 Voice Data

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Mobile subscribers by technology Source: own estimations from industry data 2008

2.314.889.685 943.649.298 375.985.267 51.605.821 62,8% 25,6% 10,2% 1,4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 500.000.000 1.000.000.000 1.500.000.000 2.000.000.000 2.500.000.000 2G 2,5G 3G 3,5G+ Global mobile susbscribers by access technology Access technology penetration

9,6% 10,9% 15,9% 13,1% 24,5% 8,6% 7,6% 9,8% North America South America West Europe East Europe Far East & China Indian Sub Continent Rest of Asia Pac Africa & Middle East

Distribution of subscribers of 2G+ mobile technologies

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Mobile handsets Source: Gartner, IDATE 2009

Market share of smartphones suppliers

29% 56% 5% 10% Basic Phones Enhanced Phones Smartphones — Entry Level Smartphones — Feature

9% 11% 15% 54% 53% 39% 0% 7% 17% 37% 29% 29% 0% 10% 20% 30% 40% 50% 60% 2006 2007 2008 RIM Nokia Apple Others

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Mobile applications Source: Own elaboration from industry data 2010

50 100 150 200 250 jul-08 sep-08 nov-08 ene-09 mar-09 may-09 jul-09 sep-09 nov-09 ene-10 mar-10 may-10 Thousands of applications available in app stores 0,5 1 1,5 2 2,5 3 3,5 4 4,5 5 Billions of accumulated downloads in app stores

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• The US market

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Wireless Quick Facts I

(Source: CTIA 2010)

Year

(Year End Figures)

2009 2005 2000 1995 Wireless Subscribers

(millions)

285.6 207.9 109.5 33.8 Wireless Penetration

(% of total U.S. population)

91% 69% 38% 13% Wireless-Only Households (%

• f U.S.)

22.7% 8.4% N/A N/A

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Internet: going mobile

• « Broadband services have experienced explosive growth. The number of homes

receiving broadband services increased twenty-fold between 2000 and 2007.” U.S. Dep’t of Justice, Voice, Video and Broadband: The Changing Competitive Landscape and Its Impact on Consumers (November 2008),

• “Mobile wireless services are the fastest growing broadband segment”, id.
• “Symposium participants expected continued growth and competition among

telephone providers, cable companies, and other technologies, including wireless services” id.

• Broadband wireless networks ( Wimax: Clearwire/ Sprint, 4G/LTE or meshed/

city networks) are seen as a potential alternative third pipe

• i.e in the 2010 National Broadband Plan
• 200,000 applications are available to U.S. consumers
• through four recently created application stores with three already existing stores
• 40% increase due to the “iPad effect”.
• The U.S. has the highest percentage of consumers actively using mobile

Internet capabilities

• more than any other country measured by Nielsen.
• Subscriber counts for high-speed lines (over 200 kbps in at least one

direction) more than doubled and advance service lines (over 200 kbps in both directions) more than tripled since 2007

• the last year that FCC surveyed consumers.
• There are more new wireless Internet subscribers (approximately 58 million) than new cable and

DSL combined (approximately 41.5 million).

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• The EU market (the EU success story)

20 40 60 80 100 120 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 USA Penetration EU Penetration

… but in the EU we measure SIM cards, while in the USA one subscriber=one phone …

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The most dynamic of the electronic markets

• Mobile services have enjoyed strong growth since their introduction in the

early 1980s, accompanied by rapid network and service investments.

• With total revenues of €174 billion (rising from €88 billion in 2000)
• Mobile now ranks amongst Europe’s most important industries
• Mobile services are now available to nearly 100% of the population and 400

million Europeans have a mobile phone.

• Europe has the highest mobile penetration rates in the developed world, as a

result of high mobile handset subsidies and prepaid propositions

• The average EU penetration rate continued to grow and has now reached

119%.

• There are now only 4 Member States that have not exceeded 100% penetration.
• While this could be seen as a sign of a maturing market, notable increases are

still taking place in Member States with high penetration in previous years such as Italy with 152% and Lithuania with 149%.

• Over the last decade, the use of mobiles has increased very strongly.
• On average, Europeans now make 116 minutes of calls from their mobiles and

send 42 mobile messages every month (per head of population).

• Though still emerging, use of mobile data services is starting to take off
• The mobile market remains, along with fixed broadband, the most dynamic of

the electronic communications markets, due to increasing call volumes and the take-off of mobile broadband.

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But a maturing market

• The benefits of mobile are illustrated by very high levels of customer satisfaction.
• Consumers are far more satisfied with mobile than other services, including fixed-line, banking

and utilities

• The mobile industry has enjoyed revenue growth of 10% per annum over the last eight

years – however,the market is maturing and revenue growth rates now stand at 5% per annum

• This has led to continued operator growth over the past year despite a further decline in

voice revenues due to price decreases in domestic markets

• Competition between mobile network operators is very intense
• As illustrated by the growing share of third / fourth mobile operators and the additional

pressure from the market entry of MVNOs (Mobile Virtual Network Operators) over the last five years.

• This competitive intensity is clearly evidenced by growing customer churn rates ( 22% on

average)

• and steeply declining prices – to an extent rarely witnessed in any other industry: across the

EU25, mobile prices fell by an average of 13% per annum between 2004 and 2006

• The view from the industry: 2008 (for the 30 EEA countries)
• "This report shows the European mobile industry at a crossroads: through

innovation and further investment operators can maintain a growth path, albeit in a climate of intense competition which will require even more efforts on cost efficiency and industry consolidation". A.T. Kearney project leader, Laurent Viviez, for the GSMA, European Mobile Industry Observatory

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EU mobile broadband (1)

• Mobile broadband in many Member States is now

a reality thanks to investment in high speed Internet access and flat-rate charging mechanisms.

• Revenues from mobile Internet are increasing and are higher than

those of the US.

• According to Analysis Mason, by the end of 2008,

mobile accounted for 20–30% of broadband subscribers in the more-advanced Western European markets, such as Austria and Ireland.

• The rise in data traffic carried over wireless networks in developed

markets has taken many network operators by surprise.

• At the same time, revenue per megabyte is continuing to fall, driven

down by increasing competition and the introduction of flat-rate pricing.

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EU mobile broadband (2): various models

• DSL replacement:
• Homezone offers also used on mobile broadband plans in Portugal and

Germany

 Common offers in these 2 markets, even from operators with DSL propositions

• Alternative to fixed broadband:
• 24% of Austrian 3G subscriptions are PC cards & USB modems

 Fixed broadband penetration is slowing at 45-50%, with over 15% of homes just use 3G broadband;  40% of Austrian homes have no fixed line and just use mobiles for voice. These have been the main target of 3G broadband services.

• Over 90% of consumer mobile broadband users use it as their only

residential broadband service.

• As a complement:
• Over 20% of 3G Subs in Sweden are PC Cards & USB modems

 consumers growing fast in 2008 to account for 2/3rds of data cards;  14% of consumer 3G subscribers are data cards, compared with 24% business 3G subscribers.

• Mobile broadband use largely complementary to DSL

 2nd-home ownership in Sweden a good source of mobile-only solutions for both voice and broadband data;  Telia pushing DSL/3G broadband bundles.

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Changing business models

• New players from the on-line world are also challenging the « walled garden »

model and lobbying in the EU as well for « openness »

• “Open systems and their impact are inevitable. It is clear that recreating existing business models will

not work. Savvy companies like Nokia, Google, Opera and Apple are leading the way in this space.” Ajit Jaokar (Futuretext)

• Beyond the industry first defensive arguments
• Exclusivity and long-term contracts are the counterpart of subsidized handsets
• The success of iPhone is nevertheless generating second thoughts about the willingness to pay for

expensive/ fancy terminals

• … the mobile industry is answering that « real openness » may well be on its

side

• As the on-line world is caracterised by fragmentation and a lack of

interoperability,this is especially true of:

• Mobile applications: applying Apple winning model and opening up for developpers increase

fragmentation (handset makers, cellcoes, GYM (GoogleYahoo Microsoft )…)

• Instant messaging: Microsoft was the uncontested leader with Hotmail/Live Messenger (320m users).

Instant messaging has now become a commodity in Facebook, MySpace, Twitter, BeBo, QQ, etc.

• Mobile 2.0: the communities (Facebook, My Space, Twitter) are « closed », not interoperable
• On mobile, only voice and SMS are interoperable with open and public

specifications and interconnection protocols

• With its « rich communication suite » (RCS) initiative to go beyond voice and SMS: with NGN/IMS

improved networks, a standard in GSMA

• A growing RCS community: Acme Packet, Alcatel-Lucent, Aylus Nteworks, Ericson, Gemalto, Nokia, Solaiemes…

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• Some trends

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Gartner (August 2009): smartphones continued to outperform the overall mobile devices market in 2Q09, and were a key factor in consumers upgrading devices. IDC (2010): 56.7% YoY growth, 54.7 millions smartphones as of May 2010

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Trends

Forecast of mobile social networking users (Millions) in comparison with world mobile subscribers and mobile Internet users. Source: C.Feijoo & al, « Mobile social computing and the increasing relevance of users in the mobile ecosystem » out of data from 2008 data of ABI Research, eMarketer, ITU, Juniper Research, Informa Telecoms & Media, and Netsize. .

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Trends: the technology roadmap

Spectrum availability and spectrum management?

HDPA (3,5 G) LTE (4G) Femtocells Mobile WiMAX (4G) IMT Advanced (4,5 G) NFC – Wireless sensors Cognitive radio and mesh networks Context – awareness and cognitive technologies Theoretical maximum data rates 14 Mb/s (downstream) 5,6 Mb/s (upstream) 100 Mb/s (downstream) 50 Mb/s (upstream)

• 50 Mb/s

1 Gb/s

• Typical data rates

3,6 Mb/s (downstream) 2 Mb/s (upstream)

• 10 Mb/s

100 Mb/s 1 Mb/s

• Begin of massive

deployment 2008 - 2010 2009 - 2012 2009 - 2010 2010 - 2011 (for handsets) 2009 -2011 2013 - 2017 2013 - 2017 2013 - 2017 2013 - 2017 Enhanced version HDPA+ 40 Mb/s (downstream)

• 100 Mb/s
• Critical

technologies MIMO OFDMA Management OFDMA Dynamic spectrum management UWB and similar Spectrum management Dynamic spectrum management 3D real virtual integration Artificial intelligence Main advantages Evolutionary from existing 3G Evolutionary from 3,5 G Fixed-mobile convergence Increase of coverage Not a legacy technology Evolutionary from 4G Smart environment Data rates Coverage Integration in daily life Main disadvantages Transition technology Time-to- market Integration in existing networks Business case for new technology Still in early stages of standardization process Business case for deployment Early development state Very early development state

Source: own elaboration from industry data

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Trends: a complex ecosystem

Creation - development - production Distribution - access Use - consumption - interaction

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Communication users Entertainment users Internet users Social networking users

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Mobile Internet Media

+ 200000 applications + 4,500 millions downloads + 150 smartphones + 20 operating systems

Variables:

• Technologies
• Infrastructures
• Platforms
• Standards
• Interoperability
• Business models
• Players’ strategies
• Users’ demands
• …

The value network The users’ demands The industries aims

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Trends: a complex ecosystem

Creation – development

• production

Service Networks Distribution - access Use Consumption Interaction APPLICATION / SERVICE LAYER INFRASTRUCTURE LAYER

Mobile social computing users Mobile content users

Mobile communication and broadcasting networks (UMTS, HSPA, LTE, WiMax, 4G, DVB-H, …) Communication services Content/applications distribution platforms Broadband wireless access (WiFi, Bluetooth, …) Mobile web platforms Location based services Context-aware and user profile services Mobile device applications and interfaces Mobile advertising Mobile search Mobile social applications Chipsets Batteries Memories Displays Cameras Suppliers Mobile devices suppliers Mobile devices operating system suppliers Mobile user-generated content Mobile web content Licensed / own content Content/applications-enabling platforms Mobile Internet applications

Mobile communication users Internet mobile users

Context –aware content and applications Mobile devices software platforms

Source: Feijoo et al (2010)

A plaformisation of the industry (Ballon, 2009) and a fight for the gatekeeping role

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• Key innovation areas

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Key innovation areas (1)

• The disruptive trends in technology

1. LTE-4G 2. Cognitive technologies 3. Artificial intelligence 4. Internet of things 5. New user interfaces 6. Location awareness of presence 7. Semantic structured knowledge 8. Cloud computing 9. Augmented reality – 3D 10. Mobile P2P – Mesh networks

Relevance Time frame (order of apparition)

1. Location awareness of presence 2. Cloud computing 3. LTE-4G 4. Cognitive technologies 5. Semantic structured knowledge 6. New user interfaces 7. Internet of things 8. Mobile P2P - Mesh networks 9. Augmented reality – 3D 10. Artificial intelligence

Source: panel of mobile content and applications experts (IPTS workshop 2009)

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Key service innovation areas (2) Source GSMA

• Mobile entertainment. An entertainment platform for usage on

the move.

• Initially, mobile operators and content providers focused on providing basic

mobile music, gaming and short video services.

• Increasingly, mobile services will include multimedia-rich content.
• For example, mobile broadcasting services are under development in a number
• f European countries – with the first commercial launch by Hutchison 3G in Italy

in June 2006.

• Mobile commerce. Mobile offers new, more convenient mechanisms for

carrying out payments, transfers, ticketing and other transactions.

• Public authorities are using mobile services to provide more convenient, cost

effective means of payment for transport and parking, banks are offering mobile banking services, and airlines are introducing mobile ticketing.

• According to Telecoms Market Research, 87 million mobile users in Europe will

be using their mobiles for mobile ticketing by 2010.

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Key service innovation areas (3) Source GSMA

• Mobile monitoring and surveillance. Mobile is enabling

companies to monitor equipment, people and the natural environment remotely.

• For example, farmers are using wireless weather stations to monitor environmental

conditions and maintain healthy crops,

• healthcare providers are using mobile to monitor heart patients for abnormal heart

activity,

• and security and law enforcement agencies are using mobiles to track criminals

and carry out surveillance.

• With mobile technology, these new applications are allowing companies to reduce

costs while increasing safety / security and speed / quality of service.

• Mobile advertising. Mobile provides new ways for companies

to reach potential customers, with opportunities to communicate with customers in more personalised and interactive ways.

• Marketeers are exploring a wide range of different mobile advertising options

including SMS texts, video clips, location-based advertising and click-to-call advertising.

• Industry analysts Informa Telecoms & Media predict that mobile advertising will be

worth $11.5 billion by 2011.

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• New business models

 Advertising (columns 1-4) being a fundamental business models  Packaging (columns 5-7) in new ways, not traditional “walled garden”  Services (columns 8-11) is the preferred category, in particular premium  Standards de facto and community (columns 12-13): skepticism  Public provision (column 14): non-negligible

Business models (%)

0% 5% 10% 15% 20% 25% 30% 35%

advertising advertising + product placement merchandising / affiliation user profiling packaged with device packaged with mvo services packaged with good/service non-ICT premium services value-added services pay-as-you-go subscription critical mass of users user community public service

Source: mobile search scenarios Delphi (IPTS 2009)

Key innovation areas (4)

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• New user role

Key innovation areas (5)

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• Some conclusions

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Some conclusions (1)

• Uncertainties about demand as macro environment

remains challenging

• Therefore innovation is key
• 4G is coming
• The deployment of wireless broadband is on its way
• “Mobile Broadband” is a key part of many operators’ strategies though a clear

picture on value creation is missing

• However, business models are still unclear

 How to monetize services perceived as free v. standard charging schemes for mobile?  Role of advertising: now seen seen as a main future avenue by industry

• The exploding smartphone markets may not be the ultimate solution for

carriers:

• “Apple's iconic iPhone device may be a hit with consumers but it is doing little to

increase operator profits, Strand Consult”. Mobile Business Briefing, August 18, 2009.

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• Consensus from industry on:
• increased value of the user profile in the mobile domain

 But dangers of an excess of commercialisation of user profiles without the tools and the institutional regimes to empower users

• importance of the moment and circumstances of usage
• role of the mobile device as the tool in between the real and virtual worlds
• long-tail of applications and niche markets derived from the variety of daily

activities, local cultures and lifestyles of mobile users

• limited role of mobile operators or device suppliers as “packagers”
• relevance of interfacing and interoperability issues

Some conclusions (2)

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Thanks

cfeijoo@cedint.upm.es http://upm-es.academia.edu/ClaudioFeijoo Jean-Paul.Simon@ec.europa.eu JRC-IPTS-idea-TEAM@ec.europa.eu