Subject: [NEXTEL-1] Wireless News: Mobile Market Will Drive the Growth of the Industry

From: Marcel <[email-masked]>
Date: Wed, 27 Nov 2002 12:13:20 -0500

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By Joshua Piven

November 26, 2002

Yankee Group recently reported that 50 percent of Americans own cell phones. While just three percent use their mobiles as their only phone, 26 percent of mobile users' minutes are already being displaced from wireline to wireless.

The wireless business in the United States is like a shark: If it stops moving forward, it will die. (And, of course, it tends to take a bite out of anything in its way.)

With the worldwide slowdown in wireless revenues and the collapse of telecommunications companies, however, it seems that now is a good time for wireless providers to take stock of the industry and make the changes necessary to stay healthy and competitive. And, in fact, this is exactly what several new reports are recommending for wireless service providers. But while analysts feel that consolidation is inevitable, they also stress that providers must keep their technology programs moving forward, or risk being gobbled up by larger, swifter, and hungrier competitors.

The first, and perhaps most important, point is that mobile operators who do not embrace public wireless LANs are in danger of extinction when wireless WANs (high-speed wireless or 3G) become prevalent. The home market for wireless networking is exploding and, though still relatively small in dollar terms, is expected to be attacked by Microsoft (Nasdaq: MSFT) at about the time you read this -- always a sure sign of its technological importance. (See the August issue of CTR for a discussion of Redmond's plans, available at www.wwpi.com.) But industry observers feel that for mobile providers, the key to effective penetration of the WWAN market, at least initially, is via public WLANs .

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Wireless Latte, Please

"Public WLAN services will help educate users on WWAN data usage, thus increasing their usage and adding to overall data ARPU (average revenue per user) incrementally while helping to alleviate the decline in voice ARPU," Donald Longueuil, an analyst with Cahners InStat/MDR, said in a recent research report.

Longueuil feels that mobile operators who ignore the rise in public WLANs -- in places like airports, coffeehouses, and hotels -- do so at their own peril, and risk being overtaken by competitors who either develop such technologies in-house or get them through strategic acquisitions. "Every mobile operator could achieve increased wireless data revenue if they implement a WLAN solution properly," Longueuil notes. "But to do this, they must start now, either by growing organically or by purchasing a WLAN service provider. Delaying entry into the market will likely prove detrimental in the long run."

While public WLANs are still in their infancy in the United States, In-Stat predicts that there will be approximately 5,000 so-called "hotspots" at the end of 2002 (worldwide) and approximately 41,000 at the end of 2006. Although private, non-telecom companies own the majority of public hotspots today, In-Stat says, that majority will shift to mobile operators by 2006. By that year, companies that offer combined WLAN and WWAN services will see nearly $700 million more in revenues than if they offered WWAN alone.

For mobile operators, public WLANs can serve as both a carrot and a stick. On one hand, they entice users to buy new phones that can take advantage of wireless networking services. On the other, they habituate users to the speed and convenience of such services, making going back to slower data rates particularly unappealing. (Pricing plans will also likely be structured to make going back especially uneconomical.) In particular, public WLANs can serve as an effective starting point for users who are just getting their feet wet with highspeed wireless.

"Offering WLAN services today will enable mobile operators to experiment with broadband services, to combine them with their GPRS and CDMA lx RTT offerings, and migrate users to WCDMA when it becomes available," Longueuil notes in his report. "If they delay in implementing WLAN technology, competitors will get a [head start] over mobile operators, covering all the hotspots and competing head-on with their future services."

Korean Food For Thought

The absence of a foothold in this market might prove particularly damaging in an economic and technology climate where consolidation is already taking place, and is expected to continue. For a preview of what might happen in the United States, and in Europe before that, it is helpful to examine the wireless industry in Korea, which is widely considered to be at least three years ahead of the European market (and hence four or five years ahead of the United States).

Over the past 18 months, the number of mobile providers in Korea has shrunk from five to three. Much of this consolidation, analysts contend, is the result of the elimination of economically unsustainable phone subsidies, which are common throughout Europe and the United States.

Next: Mobile Market Will Drive the Growth of the Industry - Page 2

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Mobile Market Will Drive the Growth of the Industry
Mobile Market Will Drive the Growth of the Industry - Page 2

© 2002 Computer Technology Review via ProQuest Information and Learning Company i/a/w ScreamingMedia, Inc. All rights reserved.
© 2002 NewsFactor Network. All rights reserved.

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Re: Mobile Market Will Drive the Growth of the Industry

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