The explosive growth in mobile data service offerings, service provider data revenues, and smart phone and mobile broadband device unit shipments during the past two years is spurring a dramatic shift for the global cellular industry and is poised to alter the balance of power in the mobile value chain.
In 2009, after seven years of strong double-digit growth, total revenues for wireless carriers worldwide will remain roughly flat at approximately $866 billion. However, total data revenue is projected to grow by almost 14 percent to reach $170.2 billion for the year. This follows 40.7 percent growth in 2007 and a 32.8 percent expansion in 2008 for total data revenue among the world’s wireless carriers. Clearly, mobile data is the key to the future of the continued health of the wireless carriers and the mobile value chain.
However, as mobile data gains increasing traction among consumers, various players - OEMs, content developers and content aggregators - are increasingly competing with wireless service providers. Companies like Apple, Google, Nokia, RIM and Microsoft are trying to muscle in on the wireless carriers for a share of the lucrative and growing mobile premium content, service and application pies.
Wireless carriers must develop and implement carefully thought-out business models to sustain the growth momentum in data revenues while working with these players. The critical question for the wireless value chain is: Who owns the customer?
For the industry to succeed, business models must align the needs of the carriers with the growth objectives of OEMs, content owners and application developers. To succeed in the competitive and dynamic mobile broadband environment, operators are developing strategies that are built around four central tenets:
* Monetize broadband access
* Cooperate with the mobile value chain to develop and offer compelling applications and content
* Offer revenue-generating services that take advantage of mobility
* Leverage mature billing capabilities and inherent customer trust to develop new applications that can take the industry to the next level.
iSuppli is forecasting that the total data revenues of carriers worldwide will grow to approximately $253 billion by 2013.
While the growth in wireless service provider data revenues is a healthy development for the industry, the rapid pace of the continued changes in the mobile broadband market, mobile content and services and the mobile ecosystem have surprised many of the players in the mobile industry value chain. It is increasingly obvious that:
* Mobile data revenue is critical to operator revenue growth
* Application availability and user interfaces will be critical elements in the customer selection of mobile devices
* The capability to stimulate usage of mobile data will be an important factor in operator choice of devices to offer in their product portfolio. Devices and applications that stimulate applications like cloud computing, online data storage and off-board services will find favor with operators
* Wireless service providers no longer enjoy a monopoly in offering content and applications to customers and will face increasing competition from device manufacturers and content developers
* Mobile broadband will alter the structure and dynamics of the mobile industry value chain.
iSuppli strongly believes that the mobile broadband revolution will change the competitive landscape at each node of the value chain. Adapting to these changes and developing business models, products and services that respond to and enable new mobile services, applications and revenue streams will be the key factors determining the success of the mobile operators, mobile device OEMs, application developers and content enablers.
Silicon suppliers and other component providers must, in particular, evolve their strategies to guard against becoming marginal players in the value chain. Developing value-added services that complement their hardware offerings will be critical to ensure continued relevance in the mobile value chain.
Specifically, it’s critical for service providers to implement new strategies and to develop business models optimized for each of the different revenue opportunities for:
* Mobile broadband access
* Content and applications marketing
* Value-added service offerings
Failure to do so will result in contraction in data and total revenues, excessive subscriber churn and a slowdown in market development.
As to mobile broadband access, wireless service providers are trying to develop plans to effectively monetize data traffic on their networks. Carriers now are increasingly moving to subscription services based on monthly flat rate pricing for unlimited data access on smart phones. Operators simultaneously are also promoting the use of mobile broadband on devices such as notebooks, netbooks and other Mobile Internet Devices (MIDs) through the subsidization of the sale of these devices and the offering of tiered data plans.
For carriers, netbooks and notebooks have the potential of driving increased mobile broadband data usage because they offer consumers larger displays, a familiar user interface in terms of the QWERTY keypad and mouse, experience with Internet access and application downloads and a domination of the Windows operating system. But carriers must be careful to manage customer expectations, in terms of pricing and capabilities of the devices and mobile access.
With regards to premium mobile content and services, operators are rapidly moving to open garden business models that allow for revenue sharing between operators and content, application and service developers that offer products over the operator’s networks.
In these models, the content, application and service creators are responsible for the product development and upgrades while the operators manage delivery to customers, billing and network management. These models enable the reduction of risks and levels of investment for the service providers, broader exposure for application, content and product developers who are able to work with multiple service providers and the increased availability of products, applications and services that customers value.
But operators are not alone in their desire to offer content and applications directly to consumers. Mobile device OEMs like Apple, RIM, Nokia, Palm and Samsung as well as operating system sellers like Microsoft have established or are in the process of setting up online stores to offer content, services and applications directly to consumers.
The establishment of application stores by OEMs and OS developers is a relatively new phenomenon in the wireless industry that gained widespread traction in 2008 with the introduction of the iTunes store, a unified storefront by Apple for the sale of third-party applications for the iPhone. Others like RIM, Nokia, Palm and LG since have started to highlight their own application stores as a way to encourage the adoption of their hardware devices.
While the primary intention of these players is to create an ecosystem of applications to increase the attractiveness of their devices and/or operating systems products for consumers, these stores are in direct competition with the operators. With mobile broadband access, customers can, and will, access content from a variety of on-line sites, including stores set up by service providers, OEMs, content developers and independent portals. This will adversely impact the growth of content revenue for operators. iSuppli believes that operators will be in a stronger position to offer services such as mobile TV, Location-Based Services (LBS) and navigation that can leverage the advantages offered by real-time data updates.
For content, operators are in a strong position to capture market share in the premium content market downloaded over smart phones. Operators can leverage their billing systems and the inherent trust that customers have with operators to develop single bills that include monthly access charges as well as charges for services and content that mobile broadband customers use. But users will download content from a wide variety of sites, when they access the mobile broadband network on devices like netbooks and notebooks. Consequently, netbooks and notebooks represent a double-edged sword for operators.
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