In the first half of 2007, mobile subscriber additions slowed to 10.4 million, the lowest level since 2003, and on a percentage basis, to its lowest level ever, according to CTIA. Most market analysts believe that penetration, 80.7% as of July 2007, is slowing. As carriers struggled to attract new subscribers in this market, they offered cheap or free feature-packed phones and lower-priced voice minutes. Based on these trends, the future appears bleak.
Fortunately, slowing penetration growth and declining voice revenues are being offset by demand for richer mobile services. This demand will also drive new investment within existing carriers, it may attract capital to new mobile carrier entrants, and it will continue to draw private capital to new ventures within the mobile Internet ecosystem.
In 2008, these investment trends will reshape the industry, and may yet sustain wireless’ double digit revenue growth.
1. In the mobile world, it all starts with spectrum, and existing carriers need more of it to support network demand. The 700 MHz auction is set to start on Jan. 24, attracting an estimated $16 billion of capital, or more, from existing carriers and possibly from new entrants.
2. Existing and possibly new carriers will deploy 3G and 4G equipment to convert spectrum into broadband data capacity. We are all tired of defaulting back to CDMA2000 1x and GPRS connectivity. We’ll see better coverage and capacity for EV-DO Revision A and HSPA. We should even see a mobile WiMAX launch.
3. Mobile e-mail and Web access is essential for business users, but also for the soccer mom and for students. Many consumers will drop “dumb” phones for iPhones, Pearls, Voyagers, Centros, and other consumer smartphones, in turn driving mobile application development.
4. A race is under way to deliver mobile video between the traditional media companies, which adapt their mainline content to the smallest screen, and mobile media startups, which create mobisodes and other media snacks from scratch. In between sit companies like Rhythm NewMedia, Dish’s SlingMedia, MediaFLO USA Inc., and others that are developing technology and business models to deliver content to mobile subscribers. The big debate: Demand mix between broadcast vs. on-demand?
5. If we’ve got mobile media and eyeballs, then we’ll get mobile advertising. We’re still several years away from settling on effective and acceptable ad formats, targeting mechanisms, and payment models, but 2008 will be a year of new approaches, trials, and failures too. Now estimated at under $1 billion, it is expected to experience 100% annual growth in the next four years. However, don’t expect free wireless service that is fully-paid by ads – the economics won’t work.
6. The popularity of navigation systems proves that consumers understand and want location-aware services. It’s now a race between the mobile carriers and the in-vehicle navigation companies such as Garmin. Sitting behind them are dozens of existing and startup application developers identifying new ways to get the right data and entertainment to us at the right time and the right place.
7. Small screens and devices make search and recommendations even more critical to consumers. Expect developers to create new social media features that blend Facebook, YouTube, Netflix, Digg, and Plaxo to help consumers discover and try media, especially from new sources and brands, further driving consumption.
And beyond 2008? Advanced in-vehicle communications and entertainment, real fixed-mobile convergence, and true benefits from any sort of open applications and network environment probably won’t show up in the mass market until at least 2009. Until then, many of us will be hard at work evaluating these opportunities.
Rory Altman is director and co-founder of Altman Vilandrie & Co., a boutique strategy consulting group that focuses exclusively on the communications, media and related technology and investor sector. For more information, visit www.altvil.com.
