Operators look to 'fourth wave' as voice, messaging and data revenues start to decline

SEATTLE--Much of the research on the wireless industry predicts a grim future for traditional mobile revenues: voice and messaging revenue are on the decline and some experts say that even data revenue has hit its peak. Where, then, should operators look for new sources of income?

Consultant Chetan Sharma says that following voice, messaging and data is the "fourth wave" and it will come from operators becoming "digital lifestyle solution providers," where they offer end-to-end solutions to customers. Such offerings can come in almost any vertical industry, like finance, real estate and travel, he said. Sharma spoke during the annual Mobile Future Forward conference that he organizes here each year.

AT&T Mobility (NYSE:T), Verizon Wireless (NYSE:VZ) and Telefonica all shared insight into how they are pursuing the fourth wave, including how they choose which direction to go in.

Given the size of AT&T Mobility, it first tries only to target opportunities that could represent at least $1 billion in business, AT&T Mobility CEO Ralph de la Vega said.

"We have a strategy group that is continuously looking at opportunities," de la Vega said. "We look for areas that are growing and complementary or adjacent to what we do well."

The key is finding opportunities in growth areas of an industry and making sure to invest early enough, he added.

Telefonica takes a three-pronged approach: discover, disrupt and deliver, said Tracy Isacke, director of business development and investments for Telefonica. The operator discovers new potential through its labs where it invests in uncertain technologies with potential, she said. The disrupt phase involves partnering with others or building products or services that might be disruptive in the industry. An example would be over-the-top services that Telefonica has launched in the U.K. By deliver, Telefonica means continuing to support services it's already generating revenue from, she said.

One example of a fourth wave initiative that de la Vega is excited about is Digital Life, the company's home security and automation offering. Home security and automation is a segment that's big and fragmented but has good margins, he said. In fact, ARPU for the service, now available in 39 cities, is higher than AT&T initially expected, he said. Plus, it requires a host of functions that AT&T already knows how to do, like running call centers and dispatching technicians.

"It's a perfect case of a great fit and a fourth wave opportunity that sits on top of our existing infrastructure," he said.

In addition, there are "endless" possibilities for the kinds of applications that AT&T can build on top of Digital Life. For instance, as seniors' age and want to stay in their homes for longer, new kinds of applications built on top of Digital Life can help their family members better watch over and care for them in their homes, de la Vega said.

Another example of a fourth wave opportunity for AT&T is in the automotive market. Over the next five to ten years, de la Vega expects a host of new auto related applications that make cars safer to drive, connecting to traffic systems and other cars to make vehicles aware of what's around them. "The car itself will be safer, it will be more entertaining for passengers and more effective for car manufacturers to take care of and know more about customers than they ever have before," he said.

Verizon also cited automotive as a market with strong potential. Verizon realized that it already had the experience beyond just the mobile network to target this market. "Yes, there's connectivity but we have call center, marketing, customer relations, trouble resolution, loyalty, the entire spectrum of capabilities," said David Small, chief platform officer for Verizon.

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