2005 may finally be the year that mobile phone manufacturers and carriers will lead or fall based on their ability to innovate and attract increasingly picky consumers.
By all accounts, 2004 was a banner year for the mobile telephony industry. Carriers increased their subscriber rolls, and started to persuade Generation Next to give up their landlines. Handset device manufacturers saw an extraordinary surge in sales. In fact, the industry shipped over 30% more units than they had in 2003. Consolidation reduced the number of network operators, sharply reducing the number of technologies in play, and increasing the likelihood phones would work wherever and whenever.
But the news was not all good. Voice traffic revenues for the carriers are expected to grow only very slowly over the next three or four years. Indeed, voice-traffic revenue in 2005 posted a sub-10% worldwide growth number for the first time ever. The growth in device sales is projected to slow dramatically, returning to a mundane 5% to 8% for 2005. And while growth in 2004 was up, Average Selling Price (ASP) for those devices was down in real terms.
Amid the up-and-own results, there is a message for all the companies involved in mobile telephony: customers are willing to pay for innovation, even as they are prepared to pay less and less for standard voice services. In the handset market, for instance, while overall ASP was down, vendors like Motorola and Sony-Ericsson saw tangible improvement ??“ these were the firms that focused extensively on camera phones. Carriers who started to roll out 3rd Generation (3G) data services started to see real interest and demand for wireless broadband and unified messaging. And that data service usage holds the key for increasing air-time usage, and, thus, Average Revenue Per User (ARPU), the key metric of any telco.
Ovum recently projected that worldwide data service revenues would continue to be dwarfed by voice revenues over the next four years. This masks, however, two key lower level trends. Firstly, the growth in data revenues will far outstrip that of voice services, at 21% versus just 5%. And secondly, the impact of data service revenues will disproportionately be felt in the most valuable markets. In fact, over 25% of overall revenues in Western Europe, North America and Asia could come from data services.
Just as the handset manufacturers must deliver the innovative features that command a price premium in the marketplace, carriers must deliver the goods if they are to capture data service users. Unequivocally, these offerings must be engaging, useful and easy for the user to simply switch on and use.
Early experience worldwide suggests that the two best ways to attract data users are gaming and unified messaging. Whether fighting off marauding aliens, or having email converted to speech on the fly, users seem more than happy to commit to, and pay for, these services.
Sun Microsystems, the origin and home of Java, is at the heart of many of today's -- and tomorrow's -- innovations. In the range of 85% to 90% of all games written for phones are written in Java. Indeed, 25% - 30% of users with a Java-enabled handset are regular users of Java applications. Sun is also behind a whole series of unified messaging options, designed for enterprises and individual consumers alike. With more than 20 years of experience in the telecommunications industry, Sun delivers the stability, security and scalability carriers need.
Many of the mobile innovations that will mark this year will be on display this month in Cannes, France. The annual 3GSM World Congress, which last year attracted nearly thirty thousand attendees, kicks off on February 14, 2005. The leading lights in mobile telecommunications will be on hand to share their vision of where the industry is headed. Sun Microsystems will demonstrate the solutions that are already helping over 100 carriers worldwide to monetize their investment in 3G -- and which may very well be the key to delivering the innovation carriers and manufacturers will need to compete in 2005.
Whatever else carriers and manufacturers see while in Cannes, they will all be looking for the technologies and products that let them conquer the market with innovation. This is the year that customers' seeming insatiable need for the next big thing will push some to the winners platform -- and others to the auction block.
About the Author
Simon Jones is an information architect and technology marketer. Since signing on as CTO to a leading web builder in the late 90's, he has advised dozens of firms on the design, content and architecture of their web properties. A certified instructor in several different technologies, he has developed instructional programs for several of the Bay Area's leading organizations. Simon holds an MA from Oxford University, and an MBA from the University of Phoenix, and has nearly 15 years experience in software engineering, network design and business process re-design.