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| From wireline to wireless and cellphones to converged devices |
May 8, 2004 |
By Jim Harris
The telecom world turned upside down not that long ago: there are now more mobile phones worldwide (1.28 billion) than wireline phones (1.1 billion). And the pace of mobile sales is accelerating. More than 510 million mobiles were sold in 2003 worldwide, and sales for 2004 are expected to grow 10 per cent, according to analysts.
Driving the shift from wireline to wireless is the rapid adoption of mobiles in developing countries such as China, India, Brazil and Russia, where it’s cheaper to install a mobile infrastructure than to lay wires. Only 29 per cent of the world’s population had a phone in 2000, according to the International Telecommunication Union, but by 2005 that number will rise to 50 per cent.
Mobile makers will maintain their growth through two different strategies. In developing nations, cellphone providers have to offer ever cheaper handsets, and in developed nations they have to provide more value and functionality in their handsets. This will drive ARPU, average revenue per user.
WITHIN NORTH AMERICA, THESE STRATEGIES WILL WORK THROUGH:
1) Short Text Messaging. The SMS phenomenon — sending short, 160 character messages to people on their mobiles — has yet to take off in North America, but in Europe and Asia it is the rage. More than 90 billion SMS messages were sent on mobiles in China in 2002, up from 18 billion in 2001. Worldwide more than 500 billion SMS messages will be sent in 2004, according to analysts.
2) Camera phones. These now account for 10 per cent of U.S. mobile sales. Verizon subscribers zapped one million photos across the network in the first month after the service was launched, at roughly 25 cents each.
3) Data services. In Europe, mobile providers generated up to 15 per cent of their revenue from data services, and for some carriers in Korea and Japan it’s more than 20 per cent, notes Andrew Cole, a wireless analyst with Adventis. By contrast, U.S. carriers earn just three per cent of their revenue from wireless data. Advertising in Japan on DoCoMo’s i-Mode network will soon exceed ad spending on all of Japan’s radio stations, and i-Mode was only launched in 1999.
4) Converged devices. Worldwide, there are 1.3 billion mobiles, more than 750 million PCs, about 100 million pagers (includes BlackBerrys) and more than 40 million PDAs, according to various sources. This range of devices creates a marketing opportunity.
Jeff Hawkins, the co-founder of both Palm and Handspring, was in New York a few years ago talking to a financial analyst, who said “Look, I can’t live without these devices: my Nokia cellphone, my Palm Pilot and my RIM BlackBerry. But why do you make me carry three devices? Can’t you build a single one that incorporates the functionality of all of them?”At that instant Hawkins said he was hit with a blinding flash of the obvious, and the Handspring Treo was born. On March 23, Rogers A&T launched Handspring’s latest version, the Treo 600, in Canada. A multi-function device, the 600 is a cellphone, a Palm equivalent, an always-on two-way e-mail device (like the BlackBerry), and it can surf the Web, has an embedded camera, expandable storage via an SD card slot, and it’s also an MP3 player. The device has won every award imaginable. Treos are addictive.
From the first moment I had a Treo I loved it; I had all 5,000 of my contacts with me at all times, and could easily phone any of them. The tiny QWERTY keyboard allowed me to type messages. The speaker phone function alone makes the device a must have. And the ease of use, because it employs the Palm OS, is addictive. The Treo uses GSM so it also works in Europe. The new 600 has a colour screen, a faster processor and longer battery life. The Treo 600 is a perfect example of how to blindside your competitors. When Handspring only made PDAs it operated in a small market of less than 40 million units. But now that its flagship product is a multi-functional device, it also competes with mobile phones (1.3 billion), pagers (100 million) and PDAs. By combining all these functions and more in a single device it adds radical new value. And sometime in 2006 one-inch, 20GB hard drives will be common, meaning a Treo or similar devices could contain all of a user’s essential files. And a device with that level of functionality will threaten the hegemony of Microsoft at the desktop level. And back to ARPU. One of the largest mobile carriers in Europe, Orange, has seen Treos deliver per-user revenues that are double that of average mobile users, according to PalmOne. So expect to see carriers pushing converged devices in the near future.
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