This is the time of year when various industry pundits opine with their "year-in-review," "predictions," and related columns. My contribution to this effort is to outline five broad themes that I think will govern the wireless industry in 2009.
To help frame the discussion, I would say the development with the most far-reaching effect was the launch of the iTunes App Store, as it represents the next stage of what a phone can be used for. It has galvanized the development community, driven users toward flat-rate pricing plans, and shored up optimism about continued data growth, which is contributing to continued commitments to high capex.
Of course, the second half of the year has been dominated by the broader economic picture. Its effect on the wireless industry cuts across many of my key themes for 2009.
1. Battle for the home
The economic situation is helping to accelerate a trend that has been developing for years: people giving up their landlines. This will take some interesting new twists in 2009. First, we will see much greater competition in "family" plans, as wireless operators focus on household net present value. We have already seen this over the past couple of months, with aggressive and differentiated offerings from Sprint, T-Mobile, and MetroPCS, as they try to compete in an area dominated by AT&T and Verizon. Data plans, and how they figure into the "family share" nomenclature, will be a focus of activity.
In 2009, we will also see the introduction of a number of femtocell-based offerings. The integrated telcos will attempt to leverage their fixed line (phone and Internet) businesses as part an effort to offer "household" plans that make less of a distinction between fixed and wireless.
Finally, users want greater flexibility in pricing plans. This is in part due to the economic situation - where we have seen a rise in prepaid and other non-contract options--as well as the increasing role of the device in the operator selection.
2. Next phase of broadband wireless
This is a corollary to the "battle for the home" theme. The economy and continued high prices are contributing to a notable slowdown in the growth of PC-based broadband wireless services. But there will be lots of energy in this sector in 2009, driven by a host of new devices, such as the $100 Acer netbook being sold at RadioShack, and the continued expansion of 3G networks (AT&T, T-Mobile, Leap and MetroPCS). Also, as Clearwire builds out more markets, expect the cable companies to offer a mobile "extension" to their home broadband customers. Expect "quad play" offerings from the integrated telcos as well. I also believe there will be a wave of price competition for broadband wireless services, with new thresholds being set in the $30 range.
Consolidation will be a broad-based industry theme in 2009, and will touch nearly every sector of the wireless economy:
- Operators. US Cellular, Leap, and MetroPCS are among the remaining "regional carriers," so expect some consolidation here. I also believe that data might drive the next wave of consolidation, as I don't think there's room for six or more 3G/4G networks in this country.
- Infrastructure. Several leading infrastructure players are experiencing tremendous difficulty, despite a still reasonably positive global wireless capex picture. With base station prices falling through the floor, and tremendous development around cheaper and alternative forms of wireless infrastructure, there are too many suppliers. It is also possible that the challenging economy will hasten the movement toward LTE as the primary platform for 4G networks, at least in North America and Western Europe.
- Operating systems/development platforms. Apple and Google have become an integral part of the application development environment over the past year. Developers are both energized, but also frustrated at the 10 or so operating systems that exist in wireless today. We are already seeing developers and device OEMs coalescing around a smaller number of platforms, which will result in attrition in 2009.
I also expect a wave of consolidation in a number of crowded "sectors" in wireless. With VCs starting to rationalize their portfolios and the select few players with cash out there bargain hunting, we will see the emergence of one or two "winners" in key categories, such as location services, browsers and "on-device" platforms (widgets and so on), mobile search and advertising, femtocells and other flavors of micro, pico, etc., and application stores/mobile storefronts.
4. Focus on "cost" creates opportunities
Operators would rather not slow down capex or product development spending, given the pace of data traffic growth and innovation in devices, content and applications. This creates opportunity for increased savings on the cost side of the business. Three areas of attention include:
- Backhaul. After many years of talking about cheaper backhaul, we'll see some action in 2009. Lower backhaul costs is one of the reasons operators in other geographies can have profitable businesses on much lower ARPU.
- Billing and customer care. There will be greater emphasis on the Web and on-device capabilities for self-care, so expensive calls to agents can be used for higher-order issues. One might also see operators seek alternatives for servicing issues that are afield from their core value proposition.
- Gateways/platforms. Wireless operators today run a dizzying number of platforms and gateways for different applications: SMS, email, voicemail, MMS, music, video, location, and so on. This silo approach is costly and complex to manage, and prevents a more integrated user experience.There is no quick solution here, but look for some attempts to integrate some of these platforms and reduce the number of vendors under management.
5. Next Chapter in Search, navigation and advertising
The past year has seen a dramatic improvement in mobile browsers, and the range of content available for mobile devices. But the ability to quickly and easily search, discover, organize and navigate to and within all of this content will be an exciting area of product development over the next couple of years, and will include:
- Intensified phone browser competition. Continued product evolution, led by Apple, Google, Microsoft, Mozilla, Nokia, Opera and Novarra.
- Improved voice search capabilities. There have been well-received voice search applications for the iPhone and the G1.
- On-device portals. Users can more quickly move between different applications, or snack-able content, without having to constantly load Web pages. Also, look for better ways to view content "offline."
- Improved contextual search. The first phase of this focused on distinguishing between on- and off- deck content. We will see greater effort to deliver more relevant to results to the end-user, such mobile-optimized content, or more intelligent results based on the user's location, previous searches and categories of interest.
I also think we will begin a new chapter in mobile advertising in 2009. Budgets for mobile ad campaigns are tepid, but with the growth in mobile browsing, I think we will see greater attempts at creating a mobile version of the Internet model, based on click streams and contextual search. Tighter partnerships between major operators and the portals (Google, Yahoo, Microsoft) will be an important foundation for this growth. Also, expect some early and cautious efforts around the collection and sharing of subscriber data to enable more targeted advertising.