The Year Ahead
By Carlo Longino, Mon Dec 22 09:00:00 GMT 2003
2003 turned out to not be so bad for the mobile industry, and things should carry on in 2004.
It’s pretty much required when you’re a technology writer to spend some time at the end of the year prognosticating about the coming 12 months, looking back at the last 12, and seeing how far off the mark your predictions from last year were.
All in all, 2003 wasn’t a bad year in the mobile industry. While there certainly wasn’t the wild growth of the boom years, a healthier environment of realism and decent revenues emerged. With much of the wheat separated from the chaff, a leaner, meaner industry moved forward quite a bit, thanks to a shift from dealing with financial concerns to developing business.
Handset sales have been overwhelming at times, with retailers struggling to keep hot models on their shelves, with sales easily surpassing estimates from the beginning of the year and on track to reach 500 million, an 18% increase from the roughly 420 million sold in 2002. The market for network infrastructure wasn’t quite so rosy, staying flat to slightly lower than last year, but things seemed to improve for a lot of carriers. 3G was launched in Western Europe and continued to grow in Asia, and content services like Vodafone live! proved there’s a real interest among consumers in advanced mobile content.
2004 looks to hold much of the same. Here are some key trends to follow:
- 2004 will be the year of Wi-Fi.
While Wi-Fi has already grown like wildfire, the next 12 months will see it become even more pervasive, as it becomes standard equipment on new laptops and PDAs. But what will push it over the edge is when mobile phones with included Wi-Fi hit the scene – the first models should emerge in the first quarter with a significant number available by the end of the year. But wireless VoIP won’t make a dent, these devices will sell strictly on their high-speed data capabilities, with the announced WLAN/mobile phone BlackBerry looking the most likely to become the touchstone for enterprise devices, though its form factor could leave an opening for a more traditional device with similar functionality to emerge as the leader.
- Handset sales will continue to grow.
2003’s handset sales were driven by growth in low-end models in emerging markets like India and Russia and a natural replacement cycle coming to a close in Western Europe. These trends will carry on into 2004, and the widespread availability of 3G by the end of the year could give an additional boost to the market. But the European replacement cycle will continue to churn, as handsets get cooler, devices with cameras and color screens become more pervasive, and simply as older handsets wear out.
- Handset sales will drive growth in mobile content and services.
As the number of new advanced handsets that support things like MMS and Java in consumers’ hands grow, so too will the market for content, application and services. While services like Vodafone live! have been well received, they still represent a small fraction of total users. MMS will take off as people will actually have a fair number of contacts to whom they can send the photo messages, and the number of handsets should reach critical mass to make the mobile content and application market explode. One interesting metric to keep an eye on, though, will be how MMS traffic and revenues affect European carriers’ SMS revenues, and if carriers will be able to grow their revenues and traffic overall, or if MMS will simply cannibalize SMS.
- WCDMA launches will continue, but EDGE will come into favor with European carriers.
2004 should see the bulk of WCDMA launches by European carriers, but they’ll continue to be hamstrung by a lack of handsets in both quality and quantity. I’d be surprised if it was before the fourth quarter that handsets with the right mix of size, design, and features to appeal to the general public were available in sufficient quantities, and until they are, carriers will have a hard time attracting people to their 3G networks and services like video calls. EDGE, on the other hand, will be supported by a sizable number of handsets in the first half of the year, and its relatively cheap upgrade cost and reasonably fast speeds will appeal to a lot of carrier looking to offer services that were previously thought to require the throughput of 3G.
- 2004 will see the first steps to make network technology increasingly irrelevant to the end user.
This will happen both out of necessity and as an opportunity for carriers to generate revenues from premium services. Necessity will mandate that UMTS/WCDMA phones be compatible with GSM/GPRS networks, and that services be available across them as well. Users will not want to have to worry about being in a certain area or having a certain type of coverage in order to use particular services. Meanwhile, carriers that have worked to build global coverage but are plagued by differing standards around the world will be able to offer a premium service to high-end business customers that features truly global roaming, regardless of the standard in use or its frequency. GSM/CDMA 1x handsets should emerge early in the year that will make trans-atlantic, trans-standard roaming the first step in this process.