Mobile Broadband – New Applications and New Business Models Brough Turner

2 IMT-2000 Vision (for 3G) included LAN, WAN and Satellite Services Satellite Macrocell Microcell Urban In-Building Picocell Global Suburban Basic Terminal PDA Terminal Audio/Visual Terminal

3 The Internet is the killer platform Mobile Internet access driving 3G data usage Future business models an open question –Walled garden ? –Advertising ? –Other 2-sided business models ?

4 Leading Apps don’t depend on 3G Voice ― still the largest revenue source –Bar none! SMS ― 2 nd largest mobile revenue source Voice SMS, picture mail & video mail coming on strong Content ! Mobile TV Mobile social networking

5 Mobile Content More music sold on-line than off-line in both China and Korea Ringback tones –Created by SK Telecom in Korea in 2002; 30% adoption in just 9 months Ringback tones today –Korea: ~55% adoption –China: ~50% adoption Any G, 1, 2, 3 or Fixed

6 Japanese Music Revenues Source: Infinity Venture Partners

7 Mobile TV 70% of new handsets in Japan are Mobile TV enabled Only Japan and Korea have multi-million Mobile TV subscriber bases Broadcast services independent of 3G

8 Mobile Social Networking Source: Benjamin Joffe, Plus Eight Star Ltd. 50 M 6 M10 M 3 M Mobile users: Mobile launch: Profit (USD): $225M~$100M ~$35M($50M) 2.5G

9 “3G” Services 3G-324M Video telephony Location-based services Push-to-Talk (VoIP w/o QoS) Rich presence (instant messaging) Fixed-mobile convergence (FMC) IP Multimedia Services (w/ QoS) –Video sharing (conversational video on IP) Converged “All IP” networks – the Vision Limited adoption Bypassed ! No traction Still waiting …

10 Mobile operators miss the boat Location-based services (LBS) Required in US for 911 services Fully implemented (after multiple delays) Not made attractive for 3rd parties Result: All US location-based services based on alternate location approaches –GPS, Cell ID, Navizon, Skyhook

11 Mobile operators slow the boat Billing Services –Mobile operators have efficient billing systems & own the customer relationship –DoCoMo showed (I-Mode in 1999) the enormous potential of affordable billing services –Yet billing still offered only via premium rate #s Result: –3rd party content is paid for via 3rd party billing systems or (multiple) premium rate SMS(s)

12 Mobile Broadband Access US prospects for “over the top” access to the open Internet

13 iPhone traffic per month

14 iPhone  glimmer of what’s possible Controlled eco-system –Applications approved by Apple –Must meet unpublished standards under contract between Apple & AT&T –E.g., can’t run VoIP over 3G, only over Wi-Fi But, $30/ month flat rate data plan (on top of $40+ phone plan) Explosive growth in web usage

15 Mobile Internet Access Available for PC’s with restrictions, e.g. no servers, no P2P, no substitution for private lines or frame relay AT&T: $60/mo Verizon: ditto Sprint: ditto No US operator offers flat rate unlimited plans

16 Breaking Oligopolies Four or more viable competitors is what it takes; more than four and it can be rapid –Many examples in mobile voice telephony from around the world 2009: Three established US 3G operators –AT&T Mobility, Verizon Wireless & Sprint PCS –Flat rate data plans exist; but with caps –No unlimited open Internet access

17 Additional US 3G/4G Competition USA (well financed) –Paid $4.2B for AWS spectrum in 2006 and committed additional $2.7B for initial rollout –Currently spending almost $1B per quarter, 3G had reached 1/3rd of cell sites as of 3Q08 (build out partially financed) –WiMAX on Clearwire and Sprint spectrum Potential for affordable flat rate mobile broadband in the US in 2010

18 Subscribers & Applications Historically, only applications pre-installed on handsets had any traction –“On-deck” applications and content offers Apple iPhone application store is on-deck –Provides access to 50K+ applications Andriod store, RIM, Nokia, Qualcomm, Palm, Handango, Adobe, Samsung, … Application stores are the new “deck”

19 Handset diversity Remaining obstacle to widespread deployment of 3 rd party applications

20 IMS doesn’t solve inter-operability

21 Handsets more & more diverse Browsers – Openwave, Opera, Safari, … –Using: WebKit, Netfront, Presto, … Runtime environments as several levels –Adobe AIR,.Net/Silverlight, Brew, JavaME, … Operating systems –Symbian, WinMobile, Android, OpenMoko… Hardware capabilities –CPUs, supported codecs, screen size, …

22 Mobile Software Frameworks Source: Andrea Constantinou, ©2008 VisionMobile Research

23 Mobile Facebook by: Internet will win in the end, but…

24 Important trends App stores! –Easier distribution; Easier discovery More and more smart phones Richer browser capabilities –Approaching PC browser functionality New access to device capabilities –User data (contacts, logs, …), events (incoming calls) and core functionality

25 Uniquely Mobile Internet Phase 1 – cut down web, e.g. WAP Phase 2 – full web accessible on mobile Phase 3 – designed-for-mobile web –Optimize the mobile user experience; speed ups Phase 4 – client-side mashups –telephony, address book, location, camera… Phase 5 – apparent persistence –Despite battery limitations; widgets; push; …

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27 Challenges Handset diversity Pace of change User interface – minimum clicks; max speed Battery life – “chatty” apps drain power Application concurrency –Manage events over browser, native & helper apps Persistent user experience across multiple applications

28 Dealing with handset diversity Browser-based application first Optimize for top N phones by market share –For most applications, N likely equals 1-3, not Source: StatCounter SmartPhone market share

29 Smart Phones & Feature Phones Smart Phone adoption soaring –Nokia, Blackberry, iPhone, RIM, WinMobile, Palm, Android, … –Moore’s law suggests it will only get better But 85% of US phones are “feature phones” –Higher percentage in emerging markets Application environments emerge –Java, Flash, Qt and ever richer web runtimes

30 Expectations are clear Camera Media Player Phone Mobile Telephony Today Browser Mobile Web 2.0 Browser Camera Media Player Phone Mobile Telephony Tomorrow

31 The initiative has passed to application developers Biggest Take-Away

32 Dumb Pipes or New Service Opportunities? How operators can profit while providing open mobile access to the Internet

33 Advertising won’t cover lost voice $ Source: Telco 2.0 Manifesto, STL Partners Ltd.

34 Two-Sided Markets eBay connects sellers and buyers Nightclubs: women get in free Media –Newspapers – low prices for subscribers facilitates sales of advertising –Broadcast TV – free attracts viewers facilitating sales of advertising Akamai caching benefits –Free to ISPs; Paid for by content providers

numbers The original telco 2-sided play Bell system provided retail phone service to essentially all US consumers Offered “800 service” to businesses, helping them connect with their customers and prospects

36 Billing Service Most operators cautious about partnering –Fear of “dumb pipe”  slow roll out of new services DoCoMo i-mode 2G data service launched 1999 –Small screens, slow (9.6 kbps) data rate But i-mode business model was wide open –Free development software kits; No access restrictions –DoCoMo’s “bill-on-behalf” with 9% commissions i-mode big success in first 24 months –55,000 applications, 30M subscribers !

37 DoCoMo i-Mode: 2-sided business model Subscribers pay for data access (flat rate monthly bundles) Application providers pay DoCoMo for billing services

38 DoCoMo’s i-mode Open to any application developer Optional billing for a 9% commission Results: Over 100K new applications in first 3 years Over 15K applications use billing service DoCoMo has highest data revenue per user, in the world, consistently for 10+ years

39 Operator Assets Brand, PSTN numbers Location (motion, context, …) Fine-grained billing systems User data –Name, address, age, devices, … Rich presence Customer relationships

40 Telco Platform Customers: Revenue Side 2 Customers: Revenue Side 1 Developers Retailers Government Brand Advertisers Content Owners Telco – Retail B2B VAS Distribution Source: Simon Torrance © 2008, STL Partners Ltd/Telco 2.0TM Initiative Millions of Customers Thousands of Segments Millions of Customers Thousands of Segments $$

41 Opportunities on all fronts Rich mobile applications are coming but, business models will change, significantly

42 Brough Turner Ashtonbrooke Corporation Blog: Skype: brough Thank you !