Wireless Markets
Amit Jain and Petter Karal
MediaTech Club
Sloan School of Management
May 9, 2000
Speaker backgrounds
Amit Jain
M.S. in Electrical Engineering
4 years Technical Lead for Network
Planning at Qualcomm, Inc.
Petter J. Karal
M.S. in International Business
3 years at McKinsey & Company (Telecom
Practice)
Co-President of the MediaTech Club
MediaTech Wireless 101
Technical workshop
How wireless works
Today’s different
systems
The future of wireless
technology
May 2
Business workshop
Markets and players
Trends
Success factors
Today
Agenda
Value chains and markets in wireless
Physical networking
Applications and services
Discussion / Q&A
The two wireless value
chains
“Hardware”- physical networking
Network
Equipment
Devices
Network
Operations
Customer
Handling
Packaging
Portals
“Software” - applications and services
Mobile
Internet
Services
Software
Platform
Players in wireless
“hardware”
“Hardware”
Network
Equipment
Ericsson
Motorola
Lucent
Nortel
Devices
Nokia
Motorola
Ericsson
Samsung
Sony
Kyocera
Palm
Panasonic
Compaq
Network
Operations
Customer
Handling
Verizon
BellSouth/SBC
AT&T Wireless
Sprint PCS
Nextel
Vodafone
NTT DoCoMo
Deutsche
Telekom
Orange
Virgin Telecom
Palm.net
RIM
OmniSky
GoAmerica
“Hardware”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
Wireless Network
Infrastructure
Infrastructure is very expensive
Must be extremely reliable
Entrenched carriers want backward
compatibility with existing equipment
New carriers in developed countries want
disruptive technology
New 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”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
Mobile Devices
Part of the consumer electronics industry
Brands are transferable across wireless
standards
Consumers care about cost and design
New features (WAP), reduced weight, and
improved style brings repeat customers
Nokia Leads the Handset
Market
5,5
6,2
Nokia
26,9
Motorola
Ericsson
10,5
Samsung
Panasonic
16,9
1999 worldwide market shares of leading manufacturers
Source: 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 disaggregation
of device market
Market Share of Leading Wireless Chip Manufacturers
7 %
9 %
Qualcomm
Intel
12 %
6 %
Nokia
66 %
Motorola
Phillips
Source: Micrologic Research
Intel and Qualcomm only make CDMA chips
Many new players in cdmaOne market: Samsung, Sansui, Sony
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 VII
Strong Application
Base
Palm V
with Omnisky
Ministrel Modem
Blackberry from RIM
Convenient Email
Never forget
the Microsoft
factor!
The Device Paradox
+
PDA
GPS
MP3 Player
Bluetooth
The Device Paradox
=
?
“Hardware”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
Characteristics of
network operators
Hold license
Build and operate the physical network
infrastructure
Currently all players are vertically
integrated into doing subscriber interface
Many players horizontally integrated into
portals and Value Added Services (VAS)
Network operators
US cellular carrier
market (1999)
Total = 86 million subscribers
Verizon
Others
35%
7%
Sprint PCS
13%
28%
17%
AT&T Wireless
BellSouth/SBC
Communications
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 scale
Supply wholesale to VMOs*?
Which technologies to invest in?
*Virtual Mobile Operators
“Hardware”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
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
60
50
40
30
ARP U
20
10
0
1995
1996
1997
1998
1999
2,4
2,35
2,3
Call Length
2,25
2,2
2,15
1995
1996
1997
1998
1999
Source: Cellular Telephone Industry Association
Players in wireless
“software”
“Software”
Mobile
Internet
Services
Yahoo!
E*Trade
Amazon
E-compare
Ebay
Software
Platform
Packaging
Portals
Phone.com
Palm
RIM
AvantGo!
Microsoft
Symbian
NTT DoCoMo
Razorfish
NetMorf
Coola
Everypath
Spyglass
LiveMind
AvantGo!
Palm.net
Sprint PCS
Sonera Zed
Yodlee
AvantGo.com
WapIt
mServices:
i-mode
6.5m subscribers
End-to-end system
Access
VAS platform
Open VAS
environment
Independent service
providers (thousands)
“Hardware”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
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 wires
Smart cards vs. software-based security
WAP sites / Mobile Web sites
Information (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 bandwidth
User interface (physical and audio-visual)
“Hardware”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
The New Platforms
In the world of voice, software doesn't matter
In the new world of data services, software
applications are key
Who 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
EPOC OS
Pros
Support of leading
phone manufacturers
Technically superior
S/W development in
C++, Java
Cons
Small application base
Small developer base
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 Barra
Mykolas Rambus
Guest Speakers
Lobby 7, Inc.
May 9, 2000
“Hardware”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
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”
Network
Equipment
Devices
Network
Operations
Customer
Handling
Software
Platform
Packaging
Portals
“Software”
Mobile
Internet
Services
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
Broad Content
Go2online.com
Pick and Choose
Carriers
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