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Keith Mallinson |
While plenty of firms have risen and fallen with the rapid ascent of mobile communications over the last 30 years, the markets for products and services have served consumers extremely well. Many factors have caused the enormous growth and success in mobile communications including human desire to communicate pervasively; competition among technologies, manufacturers and operators; extensive innovation; and the means by which this can be shared among suppliers through open and collaborative standards including technology licensing.
While large and successful players always attract the attention of competition authorities, particularly when companies seek to merge, the trustbusters should be very wary of intervening to regulate prices or commercial practices among companies where there is no sign of market failure, and with such abundant evidence of outstanding success.
Fair shares in a trillion dollar ecosystem
As 2015 draws to an end it seems this will be yet another bumper year in smartphone sales and mobile broadband growth. According to Gartner, smartphone sales increased by almost 15 per cent to 353 million units during the third quarter of 2015 compared to the same period last year. Much of this growth is with low-cost devices sold in developing nations by new market entrants. GSMA Intelligence indicates that LTE connections grew 124 percent to 876 million in the same time frame. That is 11% of the world's 7.6 billion mobile connections within five years from the first LTE service launches.
Incentives and rewards spread widely in the trillion dollar plus mobile ecosystem. The graph shows how some revenues and expenditures are distributed.
Market developments reflect many things working well together and apart. Technologies continue to advance rapidly and quality-adjusted prices are falling steeply. Moore's Law effects are significant in communications as well as in computing technologies, which means that both the communications speeds and computer processing power per dollar or euro spent on devices and network services have increased exponentially. With the demise of vertical integration bar a few notable exceptions, different firms now specialize in core technology developments, chip design, chip fabrication, device design, device fabrication, mobile operator services, operating system software and over-the-top applications. Well-established commercial practices including pricing mechanisms enable technologies, products and services to flow freely and competitively among the above.
If it isn't broken don't fix it
The mobile ecosystem is effective and booming, and yet competition authorities around the world are seeking to change the ways firms transact. For example, the US Department of Justice has leaned on standard-setting organizations to adjust their intellectual property policies on the basis of unsubstantiated theories that patent owners "hold up" manufacturers with excessive licensing fees. So far, it is IEEE which is responsible for WiFi among many other standards that has responded with a policy change, rather than ETSI which is responsible for mobile standards including LTE as a partner in 3GPP. According to my analysis, allegations of high costs for licensing Standard-Essential Patents are based on misinformation and it is instead the fair and balanced workings of the existing arrangements that have fostered the market success we observe. We see this on the demand side from consumers with continuing rapid growth, as reported above. It is also evident in the very dynamic supply side including specialized rather than vertically-integrated OEMs producing Android-based smartphones, many of whom are new market entrants, in rapidly-advancing technologies including LTE, and in steeply-reducing prices per Mbps peak speed in smartphones and per GB per month for operator services.
With the demise of vertical integration in the mobile communications ecosystem, technology licensing is increasingly the means of facilitating trade. It is quite bizarre that authorities, particularly in developed nations --where patent rights used to be most strongly upheld and where mobile intellectual property is mostly developed -- should be seeking to undermine those rights. Smartphone suppliers are already finding the markets devoid of barriers to entry with cheap access to the standardized technologies and components they need.
Keith Mallinson is a leading industry expert, analyst and consultant. Solving business problems in wireless and mobile communications, he founded consulting firm WiseHarbor in 2007. Find WiseHarbor on Twitter @WiseHarbor.