inCode, a VeriSign Company, has announced its Top 10 predictions for the game-changing events that will shape the wireless industry in 2008. The predictions cover major trends ranging from who will win the communication standard wars, what role Google will play in the wireless world after January’s spectrum auction and whether or not consumers will finally open up to digital content and mobile advertising.
The predictions, first created in 2003 by inCode, a global business and technology consultancy acquired by VeriSign in November 2006, are designed to help wireless industry players, partners and consumers better plan for the coming year.
“The coming year is going to be incredibly important for the wireless industry as new business models begin to take shape,” said Jorge Fuenzalida, vice president of communications consulting for inCode, a VeriSign company. “Beginning with the spectrum auction in January, to the continuing battle between fourth-generation (4G) technologies LTE and WiMAX, to what it’s going to take to make converged wireless a reality, wireless will look significantly different in several critical ways one year from today.”
Here are the first five predictions – come back tomorrow for the remaining five.
1. RF Technology Convergence Will Finally Start to Materialize
Prediction: The likelihood for global harmony is greater than ever; HSPA will continue to grow rapidly and the elements around LTE will be OFDM-based. The long-awaited “take-off-the-gloves” battle between LTE, HSPA, and WiMAX will not occur since the three technologies are in very different stages of maturity, HSPA is a mature technology with more than 10 million users around the world today and with a flourishing device market. WiMAX is still a technology in a very early stage with trial networks around the world and most likely with one to two more years before commercial volumes are reached. LTE is even further away, and with normal technology maturity timelines it will not be a commercial technology until 2012. With increasing development cost and vendor consolidation it is likely that it is in all parties’ interest to allow LTE be the first time ever we experience full global harmonization RF technology.
2. A New Wholesale Carrier Will be Born
Prediction: The 700MHz spectrum auction in the US presents a large opportunity for the emergence of a new wholesale carrier (i.e., no retail operations or direct customer) that focuses on being the most cost-effective player while avoiding the retail game. The wholesale carrier model will be driven by companies such as Google and will operate at a lower cost per minute, leverage technologies such as software-defined radios to support multiple standards and utilize offload techniques such as WiFi/femotcell that reduce spectrum requirements. This will also gain traction from MVNOs that want to move away from relationships with traditional carriers. Carriers have always had both retail and wholesale sides, and that duality has never allowed the MVNOs sufficient margin on which to thrive. The debate will consist of how much control Google and other potential bidders will want in the end.
3. Device Proliferation: Open Access as an Emerging Business Model
Prediction: Open access and strong competition in the chipset industry will push device and handset vendors to bypass carriers and build closer ties with the end user. Given the diversity and increased data usage of devices, we will see a great effect on open access rules and how subsidies are determined – including the use of advertising options, certification and even security models. For instance, the move from traditional cellular, where there is a somewhat closed system with high security, creates a need for security on the fly with devices that just “appear.” All told, the open access model is an opportunity to provide more differentiated services, but the downside is the elimination of subsidies by carriers for devices. This will be supplanted by advertising support subsidies, and customers will therefore have to trade carrier contracts in exchange for dealing with advertising in order to receive low-cost or free phones.
4. Quality of Service Differentiation – The Road Begins This Year
Prediction: Service stacking and quality will become very important, especially after the 700MHz auction and consolidation chapters close. When the number of players decrease, options on offerings increase – and carriers will change focus from expanding the network to optimizing the customer experience. The shift to IP networks and open access will create greater motivation and opportunity to look at real quality of service distinctions for carriers selling to customers. On the low end, end users can use a pure open access network, where one brings his or her own device without subsidies and receives services that are offered on a best-efforts basis. On the high end, users can get very high reliability, priority access, and QoS guarantees that provide consistent experiences on VoIP and other applications. There are also multiple levels in-between. Customers will self-select service based on the performance they want and the price they are willing to pay. Carriers will also be able to match costs of service much closer to the prices paid, rather than the situation today in which all minutes generated by all customers are essentially equal. There may be differences at the customer care or sales support level, but not in the actual provision of services or overall policies. In summary, when the real estate is bought up and you can’t build out, you build up.
5. Wireless Broadband is More About Speed Than Mobility
Prediction: We will finally have an answer for why European operators invested so heavily in 3G seven years ago, given a positive outlook for consolidated carrier markets for the next 3-5 years. Wireless broadband will continue to be the fastest-growing service since prepaid and SMS. Customers love it, but since it is priced and sold as a DSL service, there is very little focus on the strength of the cellular technology (i.e., mobility). Significant implications will revolve around the usage model, transport network and, equally important, revenues. Operator differentiation is more about a personalized service that best leverages a simplified user experience and customer support. 2008 will be a breakthrough year for broadband – HSPA will be the dominant technology in this space until LTE is commercially viable, and it will be increasingly embedded in laptops while WiMAX will be embedded in certain consumer devices. This trend will also boost the laptop market as it they will be better connected than ever before.