Wireless Markets Amit Jain and Petter Karal MediaTech Club Sloan School of Management May 9, 2000.

transcript

Wireless Markets

Amit Jain and Petter KaralMediaTech ClubSloan School of ManagementMay 9, 2000

Speaker backgrounds

Amit JainM.S. in Electrical Engineering4 years Technical Lead for Network

Planning at Qualcomm, Inc.

Petter J. KaralM.S. in International Business3 years at McKinsey & Company

(Telecom Practice)Co-President of the MediaTech Club

MediaTech Wireless 101

Technical workshop

How wireless worksToday’s different

systemsThe future of

wireless technology

Business workshop

Markets and players

TrendsSuccess factors

TodayMay

Agenda

Value chains and markets in wireless Physical networking Applications and services

Discussion / Q&A

The two wireless value chains

“Hardware”- physical networking

“Software” - applications and services

Network Equipment

DevicesNetwork Operations

Customer Handling

Mobile Internet Services

Software Platform

Packaging Portals

Players in wireless “hardware”

“Hardware”

Network Equipment

Customer Handling

EricssonMotorolaLucentNortel

NokiaMotorolaEricssonSamsungSonyKyoceraPalmPanasonicCompaq

VerizonBellSouth/SBCAT&T WirelessSprint PCSNextelVodafoneNTT DoCoMoDeutsche TelekomOrange

Virgin TelecomPalm.netRIMOmniSkyGoAmerica

“Hardware”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

Wireless Network Infrastructure

Infrastructure is very expensiveMust be extremely reliableEntrenched carriers want backward

compatibility with existing equipmentNew carriers in developed countries

want disruptive technologyNew 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”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

Mobile Devices

Part of the consumer electronics industry

Brands are transferable across wireless standards

Consumers care about cost and designNew features (WAP), reduced weight,

and improved style brings repeat customers

Nokia Leads the Handset Market

6,25,5

Motorola

Ericsson

Samsung

Panasonic

1999 worldwide market shares of leading manufacturersSource: 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 disaggregationof device market

66 %6 %

Qualcomm

Motorola

Phillips

Source: Micrologic Research

Intel and Qualcomm only make CDMA chipsMany new players in cdmaOne market: Samsung, Sansui, Sony

Market Share of Leading Wireless Chip Manufacturers

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 VIIStrong ApplicationBase

Palm Vwith OmniskyMinistrel Modem

Blackberry from RIMConvenient Email

Never forgetthe Microsoftfactor!

The Device Paradox

GPS BluetoothMP3 Player

The Device Paradox

“Hardware”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

Characteristics ofnetwork operators

Hold licenseBuild and operate the physical network

infrastructureCurrently all players are vertically

integrated into doing subscriber interface

Many players horizontally integrated into portals and Value Added Services (VAS)

Network operators

US cellular carriermarket (1999)

17%13%

Verizon

BellSouth/SBC Communications

AT&T Wireless

Others

Total = 86 million subscribers

Sprint PCS

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 scaleSupply wholesale to VMOs*?Which technologies to invest in?

*Virtual Mobile Operators

“Hardware”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

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

1995 1996 1997 1998 1999

Call Length

Source: Cellular Telephone Industry Association

“Software”

Software Platform

Packaging Portals

Players in wireless “software”

Yahoo!E*TradeAmazonE-compareEbay

Phone.comPalmRIMAvantGo!MicrosoftSymbianNTT DoCoMo

RazorfishNetMorfCoolaEverypathSpyglassLiveMindAvantGo!

Palm.netSprint PCSSonera ZedYodleeAvantGo.comWapIt

mServices:i-mode

6.5m subscribersEnd-to-end system

Access VAS platform

Open VAS environment

Independent service providers (thousands)

“Hardware”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

“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 wiresSmart cards vs. software-based security

WAP sites / Mobile Web sitesInformation (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 bandwidthUser interface (physical and audio-

visual)

“Hardware”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

The New Platforms

In the world of voice, software doesn't matterIn the new world of data services, software

applications are keyWho 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

Cons Lacks

computational power (16 bit OS)

Partners

Pros Support of leading

phone manufacturers Technically superior S/W development in

C++, Java

Cons Small application base Small developer base

EPOC OS

Pros Large base of

Windows developers Works well with

Microsoft servers (!) Support of PC

industry Alliances with carriers

Cons Too bulky

Pros Makes the OS

irrelevant Broad industry

support 80% new phones

are WAP enabled

Cons Too restrictive for

Packaging wireless services

Hugo BarraMykolas RambusGuest SpeakersLobby 7, Inc.May 9, 2000

“Hardware”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

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”

“Software”

Network Equipment

Customer Handling

Software Platform

Packaging Portals

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

Go2online.com

Broad Content Pick and ChooseCarrie

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

Wireless Markets Amit Jain and Petter Karal MediaTech Club Sloan School of Management May 9, 2000.

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