Wireless dataApolak BothakurGary GilbertManfred Menzi

Wireless

Traditional mobile value chain Why will wireless data be important? Why do we need 3G? Who will use wireless data? Mobile Internet vale chain – Where‘s the

value? Regulations Porter Scenario Analysis

Section 1

Traditional mobile value chain

Traditional mobile value chain

Two main players – handset provider and the service provider (often network operator)

Economic value typically held by network operator, based on quality, coverage and price

Handset provider have lately become somewhat more powerful

Section 2

Why will wireless data be so important?

Why will wireless data be so important?

Connectivity: Always-on Free the power of Internet from the constraints

of desktop PCs. Customization: portable devices are

personalized– One user– Travels with user

Key technological drivers

3G: fast, always-on interactive data service (first 3G mobile phone system from NTT DoCoMo: May 2001, Tokyo, )

Bluetooth: short-range wireless replacement for cables and infrared links

Location service: ability to locate a cellular phone on the map in real time

Digital certificates: provides verification for phone user’s identity

Business Matrix

Advantages – Consumers

Location specific “push” and “pull” of shopping, entertainment, and services

step by step directions to customer flight check-in if you approach your airport… late flight

information on scheduled flights… Electronic wallet to complete transactions, pay vending

machines, access ATM’s Personal, vehicle, pet or other device locator service

(i.e., “Fluffy is 100m north of your current position.” or “Your car is parked at Legends Sports Bar.” )

Advantages - Business

have all your employees connected all the time: workforce scheduling… inform staff of their schedule changes, alerts, delivery confirmation…

checking order status, review contract terms ,inventory situation, ...

Advantages – Business

• Email, email to speech synthesis, access enterprise systems

• Efficient routing of taxis, toll collection, emergency vehicle override of traffic signals.

• Patient identification, monitoring, charting, and billing

M-Commerce

Wireless data will extend the boundary of richness and reach, providing a greater level of personalization and convenience than e-commerce.

M2M

M2P (many banking / ATM functions will move wireless)

M2M communication over a wireless network offers huge cost savings for a wide variety of industries through automatic interaction:– Utilities: remote monitoring and metering– Interactive stock ordering (vending machines)– Transportation (location specific repairs,

maintenance)– Agriculture (attending animals)

Section 3

Need for 3G

Why is 3rd Generation (3G) Needed?

Upper bandwidth limits:

•1G (CDMA, GSM, etc.) 10 Kbps•2G (High Speed Circuit Switched Data 56 Kbps•2G GPRS(General Packet Radio Service) 114 Kbps•2.5G EDGE(Evolved Data for GSM Evolution) 384 Kbps•3G UMTS(Universal Mobile Telecomm System) 384 Kbps•3G UMTS – Boosted (indoor environment) 2,000 Kbps

Benefit:3G provides for greater traffic capacity over 2.5GCommon international standard gives opportunity to offer larger networkCost:2.5G can be implemented for <7% of the cost for an existing 1G network

Perceived Need for 3G

1999 Survey of US corporate mobile data networking bandwidth demand (for file transfers, scheduling, messaging, and database access): Minimum Bandwidth Percent of Satisfied Respondents

• 10 Kbps 4%• 19 Kbps 17%• 34 Kbps 22%• 56 Kbps 80%•128 Kbps 90%•384 Kbps+ 100%

Applications’ Need for Bandwidth

Section 4

Who will use wireless data?

By 2003 there will be over 1 billion digital wireless users (Erickson, Nokia)

The most likely users of wireless data services are the young consumers, and business people

Who will use wireless data?

Section 5

Wireless data value chain

Wireless Data Value Chain

Content providers – weather, stocks Application developers Portals – aggregate content Mobile operators – own network Distribution channel Equipment Vendors – WebTV, PDA, phone Customer

Economic value varies according to application and value chain position

Where does value lie?

By application and value chain position Content providers – via applications that

deliver relevant data at needed time Owning the customer relationship – being the

mobile distribution channel of choice Portals – bookmark and customization

Revenue Streams

Service fees – fixed, per usage, airtime– Increasingly expected to be free in the future

Advertising – will become significant stream for content providers and portals

Commissions on transactions Content management – value add provided by

aggregators

Revenue streams

Expected revenue streams

Revenue flow models

Operator led – they partner with content providers

Financial service provider led – use established customer relationships. Unlikely

Portal led – contact with customer Cooperative model, players collaborate for

mutual benefit – unlikely.

Cost issues

Content providers – already have human resources, no major new costs

Portals – high cost in developing new mobile applications, and customizable software

ISP – gateway setup costs, low by comparison Mobile operators – high license costs and 3G

network setup costs

Section 6

Regulations

Regulations

History: Access networks are natural monopolies FCC deregulations– interconnection fees– universal service obligations– access deficit funding regulation

FCC controlling limited spectrum– Require companies to lease out spectrum?– Regulate competition / margins– Software Defined Radio „SDR“?

Section 7

Porter’s five forces

Porter‘s 5 Forces for Network Operators

Supplier PowerSupplier Power FCC Regulations Mobile Portals and Wireless Application

Service Providers WASPs (Yahoo, AOL, MyAladdin, Reuters, etc)

Wireless Devices (Nokia, Erickson, 3Com, Compaq, HP,...)

Software Applications (Tivoli, MS, Sun) Content Providers

HIGH

Porter‘s 5 Forces

SubstitutesSubstitutes Conventional landlines / DSL Cable / TV networks Local Company owned Networks (for large

corperations e.g. Dell, UT,...)

Medium

Porter‘s 5 Forces

Buyer PowerBuyer Power Consumer Customers Intermediaries (Competitive Networking

Operator leasing spectrum, Chrysler, CocaCola, ...)

MEDIUM

Porter‘s 5 Forces

New EntrantsNew Entrants Typically 5 wireless suppliers per regionTypically 5 wireless suppliers per region High capital investments required to build High capital investments required to build

wireless networkswireless networks High economies of scale (cost of 3G licence High economies of scale (cost of 3G licence

fees!)fees!) Local Service Providers (OmniSky, Local Service Providers (OmniSky,

Metricom..,)Metricom..,)

Low

Porter‘s 5 Forces

RivalryRivalry High industry growth High exit barriers

(exception: Virtual Mobile Network Provider)

High product differentiations

Medium/HIGH

Porter Analysis

Medium/HIGHRivalryRivalry

HIGHSupplier PowerSupplier Power

MediumBuyer PowerBuyer Power

Low Threat of

New Entrants

MediumSubstitutesSubstitutes

Section 8

Scenario Analysis

Environmental Assumptions

•Wireless Spectrum remains costly at auction.•Other infrastructure costs continue to come down.•Basic end-user equipment become commodities similar to today’s PC’s. Equipment is not hardwired to a portal.•ASP’s / Dot.net takes off.•Security/encryption technology is adequate.•FCC forces network operators to lease bandwidth to ISP’s (mobile virtual network operators) or ISP’s create a wireless dial up connection to the internet.

Environmental Variables

Scenario Variables AlternativesWide-spread availability of broadband wireless? Yes/NoHomogeneous wireless communication standards?

Yes/No

Software defined radio (SDR) allows device to roam bands, power levels, and protocols

Yes/No

FCC requires leasing of spectrum to other service providers (a la Baby Bell’s)

Sooner/ Later/ Never

Network operator requires customers use their portal and content providers

None/ Some/ All

Scenario Building

Widespread Broadband Availability

X

Yes

Yes

No

No

Hom

ogen

eous

Sta

n da r

d s

Scenario Building

Widespread Broadband Availability

X

Yes

Yes

No

No

Hom

ogen

eous

Sta

n da r

d s

Scenario Building

Available/ Standards

Yes

No

Softw

are

Defin

e d R

a dio

Available/ No Stds.

Not Available/ Standards

X

Scenario Building

Available/ Standards

Yes

No

Softw

are

Defin

e d R

a dio

Available/ No Stds.

Not Available/ Standards

X

Scenario Building

Available/ Standards/

SDR

None

Netw

ork

P ro v

i de r

s Co

ntro

l Po

r tal a

n d C

onte

n t

Available/ No Stds./ No SDR

Not Available/ Standards/

SDR

Available/ Standards/

No SDR

Not Available/ Standards/

No SDR

Som

e/Al

l

Scenario Building

Available/ Standards/

SDR

None

Netw

ork

P ro v

i de r

s Co

ntro

l Po

r tal a

n d C

onte

n t

Available/ No Stds./ No SDR

Not Available/ Standards/

SDR

Available/ Standards/

No SDR

Not Available/ Standards/

No SDR

Som

e/Al

l

X X

X

Scenario Building

Available/ Standards/

SDR

None

Netw

ork

P ro v

i de r

s Co

ntro

l Po

r tal a

n d C

onte

n t

Available/ No Stds./ No SDR

Not Available/ Standards/

SDR

Available/ Standards/

No SDR

Not Available/ Standards/

No SDR

Som

e/Al

l

X 2Operator Tyranny X 5

In-town Network1

People Power

3Safety in Numbers

X 4Sparse

Network

Ranked in order of likelihood.

Scenario Descriptions

1. “Power to the People” Do-all PDA jumps between mLAN, Bluetooth and networks, with micro-transactions as it goes. Virtual mobile network operators thrive.

2. “Tyranny of the Network Providers” – lock-in.3. “Safety in Numbers” Network service providers form

alliances with portals, content and ASP’s to continually win customer loyalty.

4. “Sparse Network” effective utilization requires smart devices that can use whatever bandwidth is available. Rely upon dominant portals to link between your service provider and your target’s.

5. “In-town Network” don’t rely upon it for extended mobility.

Value Chain Winners by Scenario

1. “Power to the People” – large network providers who ally with equipment suppliers and fully utilize their spectrum internally or through leases.

2. “Tyranny of the Network Operators” – Network Providers hold oligopoly power.

3. “Safety in Numbers” – large, universally available network service providers who ally/buy best portals, and content providers.

4. “Sparse Network” – equipment providers, portals and settlement companies such as Enron.

5. “In-town Network” – first movers into a niche market become natural monopolies.