Mobile

ITU approves 4G technical requirements

The ITU has approved its technical requirements document for 4G services and will be ready to consider technology applications this fall. This will certainly kick up the noise level in the WiMAX versus LTE battle, but the truth is that the issue may be less relevant because of the continued failure of the mobile operators to find a strong business case for non-voice services other than Internet access.

Cellular services at 100 Mbps may be technically feasible under either of the standards sets, but there is no way that Internet mobile access could sustain the investment given the price resistance of the users.

There are clearly major steps needed here, and the ITU and other standards bodies are not focusing on any feasible approach, in part because the business side of the process is out of their scope. We believe that the operators themselves have been struggling with what to do next, and they are becoming a bit more direct in their criticism of equipment vendors’ lack of help in this area.

SK Telecom sniffs around Sprint

The low dollar may be contributing to interest in Sprint by SK Telecom, though many international operators have eyed acquisition as a means of entering the US market.

There isn’t much commentary on the deal, but we are hearing the SK Telecom may be betting that the WiMAX position in the US will be worth more than investors currently believe it will, and that the value of Sprint will therefore be higher.

There is no assurance that regulators would buy such a deal, even if Sprint were to agree. However, if the deal is even attempted it would likely show that Sprint’s board is concerned about the company’s future. Sprint continues to be dependent, in our view, on getting a lot of non-traditional devices onto WiMAX, and it is not likely that much progress can be made in this area until 2009, even with the backing of Intel.

Fixed mobile convergence makes global progress

T-Mobile is launching its broadband voice @Home service throughout the US, which prepares them for an agressive FMC position. French telecom carriers are also expected to push harder on FMC and wireline broadband expansion as the consolidation in the market finally draws to a close, but that we believe is mirroring a worldwide trend.

Consolidation hasn’t been holding other projects back, it’s simply been a safer early response to declining revenue per bit. We believe that operators worldwide are preparing for a “transformation test” around FMC, broadband services, partnerships with Internet companies and developers, and other new areas. They’ll fund what works and cease funding what does not, and this could result in some pockets of spending and reductions as everyone takes the measure of their market. We think the situation will be more predictable in 2009 than in 2010 through 2012, when only some successful revenue initiatives will drive spending growth in service provider infrastructure.

Apple MobileMe as major competitor?

Apple’s MobileMe may be more than an “Exchange Killer” (or at least a competitor); it may be the beginning of Apple’s challenge to Microsoft’s Connected Services Framework (CSF) and also a challenge to network operators. Finally, it may be a boon to Cisco. The reason is that MobileMe is an example of an over-the-top application of advanced service features, and thus a step in further disintermediating operators that might want to offer similar services themselves.

That’s what Microsoft has been doing, but more in partnership with operators than as a competitor.  But it’s pretty much what Cisco had hoped to do (and presumably still hopes to do) with WebEx Connect. In all, we think MobileMe may be the most important thing about the latest iPhone announcement because it may be setting off a new industry trend. We also think that MobileMe is the revenue kicker that Steve Jobs sees in his new iPhone deals with providers, which eliminate the Apple cut of future service revenues in favor of a one-time subsidy.

WiMAX consortium getting serious

WiMAX companies are proposing a patent pool to create a stable and reasonable royalty picture for the technology, hopefully stemming any loss of interest due to perceived risk in patent payments to third parties. Intel, Cisco, Sprint, Clearwire and Alcatel-Lucent are all involved. WiMAX, a new service framework likely dependent on wide acceptance by portable device vendors, poses greater risk than something like 3G, whose market is already established. The move is seen as a way to encourage participation by equipment vendors. This shows that the Clearwire WiMAX consortium formed here earlier is likely serious about trying to make WiMAX work.

Telecom consolidation continues in U.S. and Europe

Verizon is in advanced talks with Alltel, aimed at acquiring the mobile player. The move would make Verizon the largest mobile operator in the U.S. and a more effective competitor to AT&T. It also signals yet again the shift in the mobile market.  Consolidation is not a move that is undertaken in a dynamic and growing market, but rather in one that is already facing commoditization. France Telecom has also announced negotiations to acquire Swedish phone company TeliaSonera, a move that would create the EU’s largest operator. All consolidation moves are aimed at creating economies of scale, and in FT’s case, these are targeted initially at operations costs and core network costs, since access networks are not generally overlapping and don’t generate any real consolidation economies. In the case of Alltel, we believe there will be a net reduction in mobile spending.

Verizon backs LiMo

Verizon’s backing of LiMo is being perceived increasingly as a shot across Google’s bow, and also something that may be linked with an operator shift toward FMC and a more software-driven mobile strategy that moves away from IMS. The latter issue is, we believe, an important one for the industry, since any open platform strategy like LiMo or Android will devalue the network if no features are hosted there; everything becomes “over the top” by necessity.

Sprint/ClearWire WiMAX move to shake industry

ClearWire and Sprint have finally married, apparently, brokered by Comcast, Google and Intel. The move is said to be preparing to shake up wireless carriers, but the most significant impact will be to expand the notion of a hot spot into something with metro or even national scope. As we have said continually, WiMAX is portable user technology not mobile technology, and thus will have its greatest impact where 3G is used for laptop connect. We expect to see pricing for wireless laptop plans fall, but all wireless including WiMAX has a significant limit in total bandwidth per cell, and this will result in sub-par performance relative to wireline broadband connections.

Intel’s non-voice mobile devices to jumpstart WiMAX?

In what may well be a key announcement for the industry, Intel revealed that it had 25 partners working with it on portable Internet devices, or “mobile Internet devices” (MIDs) in the new-speak. These boxes will be designed for use while away from home or work but not mobile as the driver of a vehicle, and are larger than a cellphone but smaller than even the smallest laptops. Intel and others believe that the future of wireless non-voice services will lie in these devices, whose screens are large enough to deliver a credible viewing experience. Intel hopes these will jumpstart the WiMAX market, a key market sector for Intel and also one that has seen recent rumors of partnerships involving Intel, Sprint, Clearwire and Comcast.

Verizon open handset policy could promote loyalty

Verizon Wireless is launching its “open handset” strategy, a move that may have more impact on cellular voice pricing than its cap plan did a short time ago. Under the new program, handset makers can certify against what Verizon says will be minimal requirements and then sell directly to consumers, who will have to sign up for Verizon service but would not be required to sign service contracts. We hear that the non-contract services will be pricier than contracts offered, but that contract prices sans phone will likely be better. This will create additional slide in wireless cost and, we believe, further reduce infrastructure investment by wireless operators until an alternative revenue model is validated. We also believe it will promote FMC as a means of securing loyalty that was previously cemented through handset deals.