2010: The year of Google

In thinking about 2010, I believe 2009 will be viewed as an important transition year. By that, I mean there was nothing ground-breakingly new--it was in 2008 that we saw the introduction of the iPhone 3G, iTunes App Store, the Amazon Kindle e-reader, netbook, and the first Android device. In many respects, 2009 was an outgrowth of these developments: more smartphones, e-readers, netbooks, and app stores, all leading to exponential data traffic growth. There was no further consolidation in the operator space, no major reduction in voice or data pricing, and despite a lot of posturing, no major changes yet from the new FCC. Except for the expected downtick in global handset sales, the industry more than held its own in an otherwise challenging economy.

But lest you interpret my view of 2009 as "boring," two recent developments signal where we're headed: First, was Cisco's $2.9 billion acquisition of Starent, which both reflects the growth trajectory for data and ensures that traditional internet backbone players will play a greater role in the next stage of wireless networks. Second, was Google's $750 million acquisition of AdMob. This, when combined with the near daily news of some development related to Google's mobile initiatives (look at just last week alone!), shows how the balance of power in this industry is starting to shift.

Building on these, here are six key themes for 2010.

1. Urgency around network capacity, economics

We all know the stresses that data traffic growth is putting on wireless network capacity. Another developing issue is the profitability of services, where some devices are averaging 500 MB-1GB per month of usage. I believe this will lead to the following:

  • Robust capex spending. All of the major operators are in the midst of a 3G+ (HSPA+, etc) or 4G deployment, in a race to both keep up with current demand, capacity plan for the future, and reduce the cost per bit delivered.
  • Fast-track for more spectrum. This might be combined with some sort of "deal" on network neutrality.
  • New approaches to data pricing. We might see DSL-esque options (good-better-best), and some experimentation with usage-based pricing. I also think network consumption might be more reflected in content and app store pricing, in a similar way to how iTunes charges a premium for the "HD" version of TV shows and movies.
  • Innovation in infrastructure. There will be a greater diversity of lower cost backhaul solutions. You will also be hearing more about innovations in MIMO antenna configurations, which will deliver greater range and capacity out of current sites.

 2. WiFi, femto make a comeback

Three years ago, WiFi was viewed as a threat to mobile operators' data aspirations. Now it's a lifeline. Expect nearly every smartphone to be equipped with WiFi, going forward. Mobile operators will develop more partnerships with WiFi providers, and WiFi "hotspots" will become a part of a carrier's data "offerings," with incentives to use WiFi networks, where available.

As for the femtocell, those who proclaim this market "dead" because not that many femtocells have been sold to date are viewing the market through its first iteration prism of "in-building coverage solution." I see the femto market to be positioned more as a broad-based "network gateway" solution for the office and home, playing a critical role in adjudicating how traffic flows across various networks and devices. 

 3.  Year of Google

Here's a provocative statement: Google has accomplished more in wireless in the past year than Microsoft has in the past five years combined. It's hard to sum up what Google is doing in a neat paragraph, save to say that it is playing in nearly every key aspect of mobile: search, advertising, operating systems, apps marketplace, mobile-centric products/services, (location, commerce, video, voice, to name a few), and even devices. Google is re-defining the co-opetition model in wireless...Continued.

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