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Wireless Markets
Amit Jain and Petter KaralMediaTech ClubSloan School of ManagementMay 9, 2000
Speaker backgrounds
Amit JainM.S. in Electrical Engineering4 years Technical Lead for Network
Planning at Qualcomm, Inc.
Petter J. KaralM.S. in International Business3 years at McKinsey & Company
(Telecom Practice)Co-President of the MediaTech Club
MediaTech Wireless 101
Technical workshop
How wireless worksToday’s different
systemsThe future of
wireless technology
Business workshop
Markets and players
TrendsSuccess factors
Today
TodayMay
2May
2
Agenda
Value chains and markets in wireless Physical networking Applications and services
Discussion / Q&A
The two wireless value chains
“Hardware”- physical networking
“Software” - applications and services
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Players in wireless “hardware”
“Hardware”
Network Equipment
DevicesNetwork Operations
Customer Handling
EricssonMotorolaLucentNortel
NokiaMotorolaEricssonSamsungSonyKyoceraPalmPanasonicCompaq
VerizonBellSouth/SBCAT&T WirelessSprint PCSNextelVodafoneNTT DoCoMoDeutsche TelekomOrange
Virgin TelecomPalm.netRIMOmniSkyGoAmerica
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Wireless Network Infrastructure
Infrastructure is very expensiveMust be extremely reliableEntrenched carriers want backward
compatibility with existing equipmentNew carriers in developed countries
want disruptive technologyNew carriers in emerging economies
want financing
The Incumbent Advantage
Carriers want: Reliability Backward Compatibility Financing Sales Support
The big four: Ericsson, Lucent, Motorola, Nortel
Attackers Use Disruptive Technologies
Samsung: cdmaOne Started with CDMA phone Entered GSM market in 1999, sold 17.6m phones In Feb 2000, shipped $30m of network infrastructure to
Sprint PCS for Peurto Rico
Cisco: Wireless data Data networks will be switched by Cisco routers Along with Motorola, bought LMDS group of Bosch Acquired Clarity Wireless, alliance with Broadcom for
chipsets
Example:Technology path
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Mobile Devices
Part of the consumer electronics industry
Brands are transferable across wireless standards
Consumers care about cost and designNew features (WAP), reduced weight,
and improved style brings repeat customers
Nokia Leads the Handset Market
26,9
16,9
10,5
6,25,5
Nokia
Motorola
Ericsson
Samsung
Panasonic
1999 worldwide market shares of leading manufacturersSource: Dataquest, as reported in the Wall Street Journal
As GSM soared, Nokia replaced Motorola as the number one phone manufacturer. Samsung is the new challenger.
Vertical disaggregationof device market
66 %6 %
12 %
9 %
7 %
Qualcomm
Intel
Nokia
Motorola
Phillips
Source: Micrologic Research
Intel and Qualcomm only make CDMA chipsMany new players in cdmaOne market: Samsung, Sansui, Sony
Market Share of Leading Wireless Chip Manufacturers
First Nokia, now Samsung
As GSM soared, Nokia replaced Motorola as the number one phone manufacturer Nokia’s strength: Fast product design cycles
Samsung entered the market on the CDMA wagon. Now expanding into GSM Samsung’s strength: Low cost, Nokia designs
New Wireless Devices
Palm VIIStrong ApplicationBase
Palm Vwith OmniskyMinistrel Modem
Blackberry from RIMConvenient Email
Never forgetthe Microsoftfactor!
The Device Paradox
GPS BluetoothMP3 Player
+
PDA
The Device Paradox
=
??
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Characteristics ofnetwork operators
Hold licenseBuild and operate the physical network
infrastructureCurrently all players are vertically
integrated into doing subscriber interface
Many players horizontally integrated into portals and Value Added Services (VAS)
Network operators
US cellular carriermarket (1999)
28%
17%13%
35%
Verizon
BellSouth/SBC Communications
AT&T Wireless
Others
Total = 86 million subscribers
Sprint PCS
7%
Trends in network operations
Consolidation Vodafone AirTouch + GTE + Bell Atlantic
Mobile = Verizon BellSouth + SBC Communications = ? Vodafone takeover of Mannesmann Stop press: NTT DoCoMo buys 15% of KPN
Mobile for $4.6bn (5/9/00)Battle for licenses (both 3G and in general)Emphasis on non-voice services
Issues facing network operators
What is the value of licenses?Open VAS platform or “fence in”Maximize load on network -
important economies of scaleSupply wholesale to VMOs*?Which technologies to invest in?
*Virtual Mobile Operators
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Customer handling
Most carriers handle their own customers Branding Customer service Billing
Virtual Mobile Operators are resellers of the capacity of network operators (Virgin, Palm.net, RIM, Sense.Communications)
Prepaid services are gaining popularity
Economics of wireless subscribers
Key Performance Indicators: Customer acquisition cost (currently ~$330) Churn (currently ~30%/yr, growing to >50%) ARPU (Average Revenue Per Unit; ~$45/mth)
Trends Increasingly aggressive marketing Churn reduction and ARPU increase through
Value Added Services
Users Call More, Pay Less
0
10
20
30
40
50
60
1995 1996 1997 1998 1999
ARPU
2,15
2,2
2,25
2,3
2,35
2,4
1995 1996 1997 1998 1999
Call Length
Source: Cellular Telephone Industry Association
“Software”
Mobile Internet Services
Software Platform
Packaging Portals
Players in wireless “software”
Yahoo!E*TradeAmazonE-compareEbay
Phone.comPalmRIMAvantGo!MicrosoftSymbianNTT DoCoMo
RazorfishNetMorfCoolaEverypathSpyglassLiveMindAvantGo!
Palm.netSprint PCSSonera ZedYodleeAvantGo.comWapIt
mServices:i-mode
6.5m subscribersEnd-to-end system
Access VAS platform
Open VAS environment
Independent service providers (thousands)
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Mobile Internet Services
“m-tailers” (Amazon, B&N.com, Mercata) Transaction and security infrastructure (credit
card companies, carriers, VeriSign, Sonera SmartTrust, Entrust, MeritaNordbanken)eWallet vs. phone bill vs. credit card vs. fund wiresSmart cards vs. software-based security
WAP sites / Mobile Web sitesInformation (BarPoint.com, Bloomberg, CNN.com)Personal services (iPlanet/AirFlash, WapIt, E*Trade)Business services (mySAP, Siebel)
Key drivers of Mobile Internet Services
Personalization (SIM “cookies”)Customization (location, time)Locality (interacting with
environment)Available bandwidthUser interface (physical and audio-
visual)
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
The New Platforms
In the world of voice, software doesn't matterIn the new world of data services, software
applications are keyWho will be the Windows of wireless devices ?
Palm OS EPOC (Symbian) Windows CE / Pocket PC WAP
Pros 78.4% worldwide
handheld market 4000 s/w titles Large developer
base
Cons Lacks
computational power (16 bit OS)
Partners
Pros Support of leading
phone manufacturers Technically superior S/W development in
C++, Java
Cons Small application base Small developer base
EPOC OS
Pros Large base of
Windows developers Works well with
Microsoft servers (!) Support of PC
industry Alliances with carriers
Cons Too bulky
W@P
Pros Makes the OS
irrelevant Broad industry
support 80% new phones
are WAP enabled
Cons Too restrictive for
3G?
Packaging wireless services
Hugo BarraMykolas RambusGuest SpeakersLobby 7, Inc.May 9, 2000
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Packaging Who’s Who
“Converters”: NetMorf, Argo, Spyglass
ASPs: i3 Mobile, Everypath, LiveMind, Ztango.com, MobileShift, Soprano, Bitmo, Opengrid, Geoworks
Solution firms: Aether Systems, Razorfish, AU Systems, W-Trade, 724 Solutions
Packaging
“Converters”: literally convert data from HTML to WML (usually on-the-fly)
ASPs: pre-developed platforms for content delivery, messaging, m-
commerce, customer management, workforce automation etc.
Solution firms: custom-developed solutions with a carefully elaborated wireless
“user experience” applications that leverage mobility and personalization in a
deeper level
“Hardware”
“Software”
Network Equipment
DevicesNetwork Operations
Customer Handling
Mobile Internet Services
Software Platform
Packaging Portals
Portals for Mobile Devices
Opportunities Localization: where am I ? Locality: who am I close to ? Personal device
Limitations Screens are small Input mechanisms are tough
A Few Mobile Portals
Go2online.com
Broad Content Pick and ChooseCarrie
rs
Different Approaches
Broad Content (Provide Everything) Pros: Can provide integrated user
experience Cons: Overcoming lock-in at other sites
Pick and Choose (Personalization) Pros: No need to overcome lock-in Pros: No need to build content Cons: User must customize before it works
Different Approaches - II
Carriers Pros: Can control user experience Cons: Limit number of services available
Agenda
Value chains and markets in wireless Physical networking Applications and services
Discussion / Q&A
