The Best Innovation In The Coming Years Will Be In This Area
The wireless sector is enormous and,
in general, I believe the wireless telecommunications sector is a long-term
growth sector. In spite of its recent woes, I continue to believe that some of
the best innovation in the coming years will be in this area. Although it is
hard to generalize, for the sake of simplicity, I would divide the world into
three categories:
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- Mature phone cultures, very
high Internet penetration (e.g. the U.S., Korea); - Mature phone cultures,
average Internet penetration (e.g. Europe, Japan), and - Developing phone cultures,
low Internet penetration (rest of the world).
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The first market
category will be driven by companies that can ensure seamless connectivity
between devices of all kinds and the Internet. That’s why
WiFi (aka
WLAN aka
802.11) is such a hot topic in the U.S. and
in other countries with high Internet penetration. If an user has a broadband
connection at home and at work, then he wants to be able to whip out their
laptop at any given time and be online at mega speeds. They want to be able to
access information (music, entertainment, news etc.) from anywhere using the
device that makes the most sense for the task. A music fan should be able to
download a song from anywhere at anytime (think MP3 player or handset), a
college student should be able to look up her homework assignment from the lawn
(think laptop, notebook, clamshell, etc.), and younger children should be able
to email their vacation pictures to their grandparents from
DisneyWorld (think digital camera or
handset). And all these devices should be able to talk to each other and should
be able to jump from one type of access technology to another seamlessly.
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The second market
category is trying to drive Internet penetration through alternative operators (Softbank/Yahoo
bulletin board in Japan, and numerous other firms like that around the world)
while at the same time compensating for the lack of widespread Internet coverage
by pushing the mobile Internet. Make no mistake: What seems like pipe dream in
the U.S. (mobile banking, mobile commerce, etc.) is a reality in parts of Europe
and in Japan. For many people, their phone is their link to the Internet.
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Looking at the
third market, voice still rules. In places like Russia, India, and Nigeria (all
mega-markets in terms of population and the potential for growth in penetration
rates), data revenues will take ages to come close to what voice generates.
Imagine a country like Nigeria, where over 100 million people suddenly get the
chance to talk to each other even when they’re not in the same room. This is
something the rest of us have been taking for granted since birth, but it is
revolutionary in a country that had less than 3 percent phone penetration prior
to the introduction of mobile telephony in 2001.
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All this means that
the telecommunications business is now extremely diverse. Firms like
Ericsson are coming to grips with this and
trying to figure out how to grab a piece of everything. The voice-centric
technologies of
CDMA and
GSM (the old workhorse) are growing faster
than ever thanks to the insatiable appetite of consumers in high-growth emerging
regional markets such as India, Nigeria, China, etc. At the same time,
3G needs to be rolled out fast and become
mature technology so that European and Japanese can consumers can enter the
endless world of the Internet many Americans have known for nearly a decade now.
And finally, any technology that provides a big, fat wireless pipe to all types
of devices will bring the U.S. to wireless nirvana — at least till whatever
comes next.
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The market
situation is that the big vendors like Sweden’s Ericsson, Finland’s
Nokia,
Motorola, and Germany’s
Siemens AG are at each other’s throats for
a piece of the market in the developing world.
Huwaei smells blood and is making a huge
push into these markets. I wouldn’t be surprised to see them take away more and
more market share from the “big boy” Nokia, while at the same time forcing down
prices.
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Meanwhile, the
global 3G rollout is going reasonably well, and I believe this technology will
fuel a lot of innovation in the coming years. Once mobile operators wise up that
fleeing consumers and restricting their ability to use certain services is no
way to grow a business, the market will take off. The reason text messages
didn’t take off in the U.S. had nothing to do with whether or not Americans
liked to text. The real reason was that operators restricted the use of the
service by created walled gardens around their customers. Imagine how popular
email would have been if end users could only email someone who used the same
ISP.
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Despite its
progress, the 3G rollout still has a long way to go, and I think there are too
many vendors on the field. Ericsson, Nokia, and Siemens/NEC
will probably last, but the rest (Nortel,
Lucent, Motorola) need to start winning
some big deals or pack up shop.
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Where all this is
heading it toward a future where there is no distinction between fixed or
mobile; there is only “voice anytime, anywhere” or “Internet anytime, anywhere.”
What remains to be seen is which companies are going to win in the race to bring
the big fat data pipe to all devices, with or without wires, and a cost that
allows providers to charge flat fees. If this happens the possibilities are
endless. Voice over IP (VOIP)
cuts the cost of phone calls to almost nothing, music, and video (live,
streaming, whatever) become instantly available, information is a click away,
and you’re never out of reach.
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Think of the
follow-on effects this is likely to have on the entertainment, e-commerce, and
financial services industries:
- How much more likely would
you be to buy a song from
iTunes if your
iPod connected to the Internet at blazing
speeds while you were sitting on an airplane? - How much more likely would
you be to send flowers to Mom if the urge suddenly struck you while you were
skiing, and you could complete the transaction in less than 30 seconds on the
ski lift? - How many days would you spend
away from the office if your laptop had a wireless
T-1 connection from the beach, and your
phone used the same fat pipe for VOIP?
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From this
wireless space will come the next big technology company, or if one of the big
boys gets there first they could turn into an even bigger gorilla. At the moment
everyone seems to be making baby steps at the same rate, but who knows …
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Melanie Hollands
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Editor’s Note:
Melanie will be away from her computer (and e-mail) for a couple of weeks.
Brice
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