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Wireless dataApolak BothakurGary GilbertManfred Menzi
Wireless
Traditional mobile value chain Why will wireless data be important? Why do we need 3G? Who will use wireless data? Mobile Internet vale chain – Where‘s the
value? Regulations Porter Scenario Analysis
Section 1
Traditional mobile value chain
Traditional mobile value chain
Two main players – handset provider and the service provider (often network operator)
Economic value typically held by network operator, based on quality, coverage and price
Handset provider have lately become somewhat more powerful
Section 2
Why will wireless data be so important?
Why will wireless data be so important?
Connectivity: Always-on Free the power of Internet from the constraints
of desktop PCs. Customization: portable devices are
personalized– One user– Travels with user
Key technological drivers
3G: fast, always-on interactive data service (first 3G mobile phone system from NTT DoCoMo: May 2001, Tokyo, )
Bluetooth: short-range wireless replacement for cables and infrared links
Location service: ability to locate a cellular phone on the map in real time
Digital certificates: provides verification for phone user’s identity
Business Matrix
Advantages – Consumers
Location specific “push” and “pull” of shopping, entertainment, and services
step by step directions to customer flight check-in if you approach your airport… late flight
information on scheduled flights… Electronic wallet to complete transactions, pay vending
machines, access ATM’s Personal, vehicle, pet or other device locator service
(i.e., “Fluffy is 100m north of your current position.” or “Your car is parked at Legends Sports Bar.” )
Advantages - Business
have all your employees connected all the time: workforce scheduling… inform staff of their schedule changes, alerts, delivery confirmation…
checking order status, review contract terms ,inventory situation, ...
Advantages – Business
• Email, email to speech synthesis, access enterprise systems
• Efficient routing of taxis, toll collection, emergency vehicle override of traffic signals.
• Patient identification, monitoring, charting, and billing
M-Commerce
Wireless data will extend the boundary of richness and reach, providing a greater level of personalization and convenience than e-commerce.
M2M
M2P (many banking / ATM functions will move wireless)
M2M communication over a wireless network offers huge cost savings for a wide variety of industries through automatic interaction:– Utilities: remote monitoring and metering– Interactive stock ordering (vending machines)– Transportation (location specific repairs,
maintenance)– Agriculture (attending animals)
Section 3
Need for 3G
Why is 3rd Generation (3G) Needed?
Upper bandwidth limits:
•1G (CDMA, GSM, etc.) 10 Kbps•2G (High Speed Circuit Switched Data 56 Kbps•2G GPRS(General Packet Radio Service) 114 Kbps•2.5G EDGE(Evolved Data for GSM Evolution) 384 Kbps•3G UMTS(Universal Mobile Telecomm System) 384 Kbps•3G UMTS – Boosted (indoor environment) 2,000 Kbps
Benefit:3G provides for greater traffic capacity over 2.5GCommon international standard gives opportunity to offer larger networkCost:2.5G can be implemented for <7% of the cost for an existing 1G network
Perceived Need for 3G
1999 Survey of US corporate mobile data networking bandwidth demand (for file transfers, scheduling, messaging, and database access): Minimum Bandwidth Percent of Satisfied Respondents
• 10 Kbps 4%• 19 Kbps 17%• 34 Kbps 22%• 56 Kbps 80%•128 Kbps 90%•384 Kbps+ 100%
Applications’ Need for Bandwidth
Section 4
Who will use wireless data?
By 2003 there will be over 1 billion digital wireless users (Erickson, Nokia)
The most likely users of wireless data services are the young consumers, and business people
Who will use wireless data?
Section 5
Wireless data value chain
Wireless Data Value Chain
Content providers – weather, stocks Application developers Portals – aggregate content Mobile operators – own network Distribution channel Equipment Vendors – WebTV, PDA, phone Customer
Economic value varies according to application and value chain position
Where does value lie?
By application and value chain position Content providers – via applications that
deliver relevant data at needed time Owning the customer relationship – being the
mobile distribution channel of choice Portals – bookmark and customization
Revenue Streams
Service fees – fixed, per usage, airtime– Increasingly expected to be free in the future
Advertising – will become significant stream for content providers and portals
Commissions on transactions Content management – value add provided by
aggregators
Revenue streams
Expected revenue streams
Revenue flow models
Operator led – they partner with content providers
Financial service provider led – use established customer relationships. Unlikely
Portal led – contact with customer Cooperative model, players collaborate for
mutual benefit – unlikely.
Cost issues
Content providers – already have human resources, no major new costs
Portals – high cost in developing new mobile applications, and customizable software
ISP – gateway setup costs, low by comparison Mobile operators – high license costs and 3G
network setup costs
Section 6
Regulations
Regulations
History: Access networks are natural monopolies FCC deregulations– interconnection fees– universal service obligations– access deficit funding regulation
FCC controlling limited spectrum– Require companies to lease out spectrum?– Regulate competition / margins– Software Defined Radio „SDR“?
Section 7
Porter’s five forces
Porter‘s 5 Forces for Network Operators
Supplier PowerSupplier Power FCC Regulations Mobile Portals and Wireless Application
Service Providers WASPs (Yahoo, AOL, MyAladdin, Reuters, etc)
Wireless Devices (Nokia, Erickson, 3Com, Compaq, HP,...)
Software Applications (Tivoli, MS, Sun) Content Providers
HIGH
Porter‘s 5 Forces
SubstitutesSubstitutes Conventional landlines / DSL Cable / TV networks Local Company owned Networks (for large
corperations e.g. Dell, UT,...)
Medium
Porter‘s 5 Forces
Buyer PowerBuyer Power Consumer Customers Intermediaries (Competitive Networking
Operator leasing spectrum, Chrysler, CocaCola, ...)
MEDIUM
Porter‘s 5 Forces
New EntrantsNew Entrants Typically 5 wireless suppliers per regionTypically 5 wireless suppliers per region High capital investments required to build High capital investments required to build
wireless networkswireless networks High economies of scale (cost of 3G licence High economies of scale (cost of 3G licence
fees!)fees!) Local Service Providers (OmniSky, Local Service Providers (OmniSky,
Metricom..,)Metricom..,)
Low
Porter‘s 5 Forces
RivalryRivalry High industry growth High exit barriers
(exception: Virtual Mobile Network Provider)
High product differentiations
Medium/HIGH
Porter Analysis
Medium/HIGHRivalryRivalry
HIGHSupplier PowerSupplier Power
MediumBuyer PowerBuyer Power
Low Threat of
New Entrants
MediumSubstitutesSubstitutes
Section 8
Scenario Analysis
Environmental Assumptions
•Wireless Spectrum remains costly at auction.•Other infrastructure costs continue to come down.•Basic end-user equipment become commodities similar to today’s PC’s. Equipment is not hardwired to a portal.•ASP’s / Dot.net takes off.•Security/encryption technology is adequate.•FCC forces network operators to lease bandwidth to ISP’s (mobile virtual network operators) or ISP’s create a wireless dial up connection to the internet.
Environmental Variables
Scenario Variables AlternativesWide-spread availability of broadband wireless? Yes/NoHomogeneous wireless communication standards?
Yes/No
Software defined radio (SDR) allows device to roam bands, power levels, and protocols
Yes/No
FCC requires leasing of spectrum to other service providers (a la Baby Bell’s)
Sooner/ Later/ Never
Network operator requires customers use their portal and content providers
None/ Some/ All
Scenario Building
Widespread Broadband Availability
X
Yes
Yes
No
No
Hom
ogen
eous
Sta
n da r
d s
Scenario Building
Widespread Broadband Availability
X
Yes
Yes
No
No
Hom
ogen
eous
Sta
n da r
d s
Scenario Building
Available/ Standards
Yes
No
Softw
are
Defin
e d R
a dio
Available/ No Stds.
Not Available/ Standards
X
Scenario Building
Available/ Standards
Yes
No
Softw
are
Defin
e d R
a dio
Available/ No Stds.
Not Available/ Standards
X
Scenario Building
Available/ Standards/
SDR
None
Netw
ork
P ro v
i de r
s Co
ntro
l Po
r tal a
n d C
onte
n t
Available/ No Stds./ No SDR
Not Available/ Standards/
SDR
Available/ Standards/
No SDR
Not Available/ Standards/
No SDR
Som
e/Al
l
Scenario Building
Available/ Standards/
SDR
None
Netw
ork
P ro v
i de r
s Co
ntro
l Po
r tal a
n d C
onte
n t
Available/ No Stds./ No SDR
Not Available/ Standards/
SDR
Available/ Standards/
No SDR
Not Available/ Standards/
No SDR
Som
e/Al
l
X X
X
Scenario Building
Available/ Standards/
SDR
None
Netw
ork
P ro v
i de r
s Co
ntro
l Po
r tal a
n d C
onte
n t
Available/ No Stds./ No SDR
Not Available/ Standards/
SDR
Available/ Standards/
No SDR
Not Available/ Standards/
No SDR
Som
e/Al
l
X 2Operator Tyranny X 5
In-town Network1
People Power
3Safety in Numbers
X 4Sparse
Network
Ranked in order of likelihood.
Scenario Descriptions
1. “Power to the People” Do-all PDA jumps between mLAN, Bluetooth and networks, with micro-transactions as it goes. Virtual mobile network operators thrive.
2. “Tyranny of the Network Providers” – lock-in.3. “Safety in Numbers” Network service providers form
alliances with portals, content and ASP’s to continually win customer loyalty.
4. “Sparse Network” effective utilization requires smart devices that can use whatever bandwidth is available. Rely upon dominant portals to link between your service provider and your target’s.
5. “In-town Network” don’t rely upon it for extended mobility.
Value Chain Winners by Scenario
1. “Power to the People” – large network providers who ally with equipment suppliers and fully utilize their spectrum internally or through leases.
2. “Tyranny of the Network Operators” – Network Providers hold oligopoly power.
3. “Safety in Numbers” – large, universally available network service providers who ally/buy best portals, and content providers.
4. “Sparse Network” – equipment providers, portals and settlement companies such as Enron.
5. “In-town Network” – first movers into a niche market become natural monopolies.