Innovation in the mobile ecosystem

1
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.
2
European Commission – Joint Research Centre
Institute for Prospective Technological Studies (IPTS)
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”
Summary
3
 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
4
 The state of the industry



The global market
The US market
The EU market
Market Data Summary (Q2 2009)
Source GSMA 2010
5
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
Market Data Summary
Source: ITU, IDATE 2010
6
Millions
Total mobile subscriber base evolution
7.000,0
5.756,9
6.000,0
5.198,0
5.000,0
4.000,0
3.058,8
3.818,9
3.410,7
4.714,7
4.272,5
3.000,0
2.000,0
1.000,0
0,0
2007
2008
2009
1%
13%
2010
2011
2012
2013
11%
9%
10%
13%
31%
2009 world distribution of mobile
subscribers (ITU)
12%
North America
South America
West Europe
East Europe
Far East & China
Indian Sub Continent
Rest of Asia Pac
Africa & Middle East
Mobile Internet
Source: ITU, EC, Juniper, Informa 2009
7
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%
57%
8%
Africa & Middle East
World revenues
Source: IDATE 2009
8
742
800
678
700
610
600
World mobile revenues
($ billions)
500
400
300
200
100
0
2006
23 $
2007
2008
22,4
22 $
World average monthly
revenue per user –
ARPU ($)
21 $
20,16
20 $
18,96
19 $
18 $
17 $
2006
2007
2008
ARPU breakdown into voice and data
Source: own estimations from industry data 2009
9
25,00 $
20,00 $
3,2
3,6
3,7
15,00 $
10,00 $
17,7
16,5
15,1
5,00 $
0,00 $
2006
2007
Voice
Data
2008
Mobile subscribers by technology
Source: own estimations from industry data 2008
10
2.500.000.000
100%
2.314.889.685
90%
2.000.000.000
80%
70%
62,8%
1.500.000.000
60%
50%
943.649.298
1.000.000.000
40%
30%
25,6%
500.000.000
20%
375.985.267
10,2%
10%
51.605.821
0
2G
2,5G
Global mobile susbscribers by access technology
3G
1,4%
0%
3,5G+
Access technology penetration
9,8%
9,6%
7,6%
10,9%
8,6%
15,9%
Distribution of subscribers of 2G+
mobile technologies
24,5%
13,1%
North America
South America
West Europe
East Europe
Far East & China
Indian Sub Continent
Rest of Asia Pac
Africa & Middle East
Mobile handsets
Source: Gartner, IDATE 2009
11
10%
5%
29%
Market share of smartphones
suppliers
56%
60%
54%
Basic Phones
Enhanced Phones
Smartphones — Entry Level
Smartphones — Feature
53%
50%
40%
39%
37%
30%
29%
29%
20%
10%
0%
17%
11%
9%
15%
7%
0%
2006
2007
RIM
Nokia
Apple
2008
Others
Mobile applications
Source: Own elaboration from industry data 2010
12
250
200
150
Thousands of
applications available
in app stores
100
50
may-10
mar-10
ene-10
nov-09
sep-09
jul-09
may-09
mar-09
ene-09
nov-08
sep-08
jul-08
0
5
4,5
4
3,5
3
2,5
2
1,5
1
0,5
0
Billions of accumulated
downloads in app
stores
13
 The US market
Wireless Quick Facts I
(Source: CTIA 2010)
14
Year
2009
2005
2000
1995
285.6
207.9
109.5
33.8
91%
69%
38%
13%
22.7%
8.4%
N/A
N/A
(Year
End Figures)
Wireless
Subscribers
(millions)
Wireless
Penetration
(% of total U.S.
population)
Wireless-Only
Households (%
of U.S.)
Internet: going mobile
15
 « 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


through four recently created application stores with three already existing stores
40% increase due to the “iPad effect”.

more than any other country measured by Nielsen.
200,000 applications are available to U.S. consumers
The U.S. has the highest percentage of consumers actively using mobile
Internet capabilities
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).
16
 The EU market (the EU success story)
120
100
80
60
USA Penetration
EU Penetration
40
20
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
… but in the EU we measure SIM cards, while in the USA one subscriber=one phone …
The most dynamic of the electronic markets
17
 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.
But a maturing market
18

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
EU mobile broadband (1)
19
 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.
EU mobile broadband (2): various models
20
 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

Mobile broadband use largely complementary to DSL
 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.
 2nd-home ownership in Sweden a good source of mobile-only solutions for both
voice and broadband data;
 Telia pushing DSL/3G broadband bundles.
Changing business models
21
 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…
22
 Some trends
23
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
24
Trends
25
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. .
Trends: the technology roadmap
26
HDPA (3,5 G)
LTE (4G)
Femtocells
Mobile WiMAX
(4G)
IMT Advanced (4,5 G)
NFC – Wireless
Cognitive radio and
sensors
mesh networks
Context – awareness
and cognitive
technologies
100 Mb/s
Theoretical
14 Mb/s (downstream)
(downstream)
5,6 Mb/s (upstream)
50 Mb/s
maximum data
rates
-
50 Mb/s
1 Gb/s
-
-
-
-
10 Mb/s
100 Mb/s
1 Mb/s
-
-
2009 -2011
2013 - 2017
2013 - 2017
2013 - 2017
2013 - 2017
100 Mb/s
-
-
-
(upstream)
3,6 Mb/s (downstream)
-
Typical data rates
2 Mb/s (upstream)
2009 - 2010
Begin of massive
deployment
2008 - 2010
2009 - 2012
2010 - 2011 (for
handsets)
HDPA+
-
Enhanced version
40 Mb/s (downstream)
Critical
technologies
MIMO
OFDMA
Management
OFDMA
UWB and similar
Dynamic spectrum
management
Spectrum management
management
Fixed-mobile
Main advantages
Evolutionary from
Evolutionary
existing 3G
from 3,5 G
convergence
Not a legacy
technology
Main
Transition technology
integration
Artificial intelligence
Data rates
Evolutionary from 4G
Smart environment
Integration in daily life
Coverage
Increase of coverage
disadvantages
3D real virtual
Dynamic spectrum
Time-to-
Integration in
Business case for
Still in early stages of
Business case for
Early development
Very early development
market
existing networks
new technology
standardization process
deployment
state
state
Source: own elaboration from industry data
Spectrum availability and spectrum management?
Trends: a complex ecosystem
27
The users’ demands
The value network
The industries aims
Communication users
Mobile
Creation - development - production
Entertainment users
Distribution - access
X
X
Internet
Internet users
Media
Use - consumption - interaction
Social networking users
+ 200000 applications
+ 4,500 millions downloads
+ 150 smartphones
+ 20 operating systems
Variables:
 Technologies
 Infrastructures
 Platforms
 Standards
 Interoperability
 Business models
 Players’ strategies
 Users’ demands
 …
Trends: a complex ecosystem
28
Mobile user-generated
content
Mobile social applications
Context –aware content
and applications
Mobile Internet applications
Mobile advertising
Location based services
Mobile communication and broadcasting networks
(UMTS, HSPA, LTE, WiMax, 4G, DVB-H, …)
Chipsets
Batteries
Memories
Displays
Cameras
Suppliers
Mobile search
Content/applications-enabling platforms
Content/applications distribution platforms
Communication services
Mobile web content
Mobile web platforms
Context-aware and user profile services
Broadband wireless access
(WiFi, Bluetooth, …)
Mobile device applications and interfaces
Mobile devices
suppliers
Mobile devices software platforms
Mobile devices operating system suppliers
Source: Feijoo et al (2010)
Service Networks
Distribution - access
Use Consumption
Interaction
INFRASTRUCTURE
LAYER
Licensed / own content
Internet mobile users
SERVICE LAYER
Mobile communication users
APPLICATION /
Creation – development
- production
Mobile social computing users
Mobile content users
A plaformisation of the industry (Ballon, 2009) and a fight for the gatekeeping role
29
 Key innovation areas
Key innovation areas (1)
30
 The disruptive trends in technology
Relevance
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
LTE-4G
Cognitive technologies
Artificial intelligence
Internet of things
New user interfaces
Location awareness of presence
Semantic structured knowledge
Cloud computing
Augmented reality – 3D
Mobile P2P – Mesh networks
Time frame (order of apparition)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Location awareness of presence
Cloud computing
LTE-4G
Cognitive technologies
Semantic structured knowledge
New user interfaces
Internet of things
Mobile P2P - Mesh networks
Augmented reality – 3D
Artificial intelligence
Source: panel of mobile content and applications experts (IPTS workshop 2009)
Key service innovation areas (2)
Source GSMA
31
 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
of 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.
Key service innovation areas (3)
Source GSMA
 Mobile monitoring and surveillance. Mobile is enabling
companies to monitor equipment, people and the natural
environment remotely.




32
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.
Key innovation areas (4)
33
 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 (% )
35%
30%
25%
20%
15%
10%
5%
Source: mobile search scenarios Delphi (IPTS 2009)
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




Key innovation areas (5)
34
 New user role
35
 Some conclusions
Some conclusions (1)
36
 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.
Some conclusions (2)
37
 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
38
Thanks
[email protected]
http://upm-es.academia.edu/ClaudioFeijoo
[email protected]
[email protected]