Moderator: Scott Ellison, VP Mobility Wireless, IDC
Eric Zimits, Managing Director, Granite Ventures
Dev Khare, Vice President, Venrock
Tim Chang, Principal, Norwest Venture Partners
Scott Raney, Partner, Redpoint Ventures
Regarding the topic of a "spectrum crisis", which was highlighted at the recent CTIA Wireless I.T. & Entertainment show and is now a topic of much discussion in the FCC's mobile broadband plan, one of the panelists expressed the opinion that "price segmentation" will solve the problem of bandwidth overload, while complaining that his dropped calls are due to teenagers overloading the network with Facebook and YouTube.
One of the panelists predicted that Verizon Wireless will raise pricing for data plans in 2010, claiming that "it happened for SMS". Another panelist pointed out that this would be difficult to do, since many consumers just got signed up with flat rate data plans. One panelist was especially bullish on femtocells as a solution, though the question was raised on whether consumers would support this solution - especially if the femtocell was providing open access.
(Femtocells increase cellular network coverage by placing low power transceivers off towers, in consumer's premises or other privately-owned buildings. Femtocells are basically BYOB: bring your own backhaul, and would require a consumer to connect to their wireline broadband network. An open femtocell would be using a consumer's equipment and broadband connection to provide service to others.)
Just this week, Fierce Wireless published an article describing how wireless operators are LOWERING data plan pricing, not raising prices. While AT&T (especially) complains that they need more spectrum, they continue to sit on the 700MHz block they acquired in last year's FCC auction, while promising an HSPA upgrade and wait & see on LTE. Rather than complain about YouTube users, one should complain to AT&T.
I addressed the subject of network capacity in great detail back in July, in my report on The Emerging 4G Wireless Landscape in the U.S.My press release at the time had the title Explosive Growth in Mobile Video Shifts Advantage to WiMAX Providers Until 2012.
My opinion is that this "crisis" represents an opportunity for Clearwire and its partners (especially Sprint), IF they can meet their rollout goals to achieve a national footprint for mobile WiMAX, and IF they can get some slick dual-mode 3G/4G handsets on the market. With Google invested in Clearwire, will we see a dual-mode 3G/4G Android smartphone in 2010?
There is a lot of discussion in the wireless industry about trying to avoid being "dumb pipes", i.e. how to monetize delivery of content to mobile broadband users. Tiered-pricing is one of the strategies you will hear consultants discussing but never the operators themselves. One should keep in mind that uptake of 3G services only reached the 10% level recently, still an early adopter stage. Now that consumers (driven largely by the iPhone) are finally increasing their adoption, operators can't price them off their networks to solve capacity issues. It just doesn't work that way. Operators desperately need consumers as subscribers to mobile broadband data plans, because that is the only revenue growth area in the wireless industry, and the content consumers want requires capacity.
The panelists had already said that price discrimination wouldn't work... when they recalled the huge success that operators had increasing SMS pricing while texting-addicted consumers just kept subscribing anyway. What this disruption can cause is a rapid movement of subscribers to a competitive service, what the industry refers to as "churn". This is where the "Android Invasion" (the topic of my latest report at http://www.digdia.com/) will have a major impact, along with the increasing availability of 4G wireless services. The exclusive iPhone/AT&T relationship is extremely vulnerable.
The panelist from Norwest was particularly bullish on mobile technology in the healthcare field, citing the opportunity for low cost sensors connected wirelessly to "the cloud". But connected toilets? The idea described here (not sure if it is real but could be), is that your personal waste products could be monitored to detect and report on your state of health, i.e. sensors for predictive preventative health care.
This is a very hot field in wireless today, and a section of CTIA Wireless was devoted to it in the Wireless Health Pavilion.
This falls into the field of Machine-to-Machine (M2M) applications for wireless technology. Businesses can track equipment and merchandise to prevent theft. It doesn't necessarily require cellular connectivity to implement such a system. I saw a good demonstration of such a solution at CiscoLive! earlier this year.
It was no surprise to hear the VCs reflect a prevailing view that "Clearwire has a tough road ahead", and that their real opportunities may be in M2M. One VC made a statement that is often repeated regarding LTE - that the industry has finally settled on one standard. The "industry" in this case refers to the members of 3GPP, i.e. most of the incumbent wireless operators.
I won't dwell on this in great detail here, (see The Emerging 4G Wireless Landscape in the U.S.), but there really needs to be an understanding of just how far behind WiMax LTE is. Already, we see that Verizon Wireless is running behind in their announced plan to have “pre-commercial” deployments of LTE by the end of 2009. As I said in my analysis report, WiMax and LTE will co-exist for at least the next 5 years, if not longer. The opportunity for Clearwire is to be there first when these capacity issues really start to hit hard, which has already happened to 3G networks in other parts of the world.Clearwire's investors; primarily Intel Capital, Time Warner and Comcast, recently added $2B to complete the company's 2010 plan of reaching 120M pops in 80 markets.
Regarding Comcast's involvement as a mobile virtual network operator (MVNO), and investor in Clearwire, one of the panelists remarked that the cable industry "follows a five year cycle where they get interested in mobile". I contend that it is very different now, regardless of what may have happened in the past. People want access to video content on-demand, and the three-screen strategy (TV, PC, cell phone) is critical to Comcast's business. It makes sense that they have invested in the highest capacity wireless network that is currently available, rather than relying on 3G (or waiting for LTE) to deliver their content.
For the new wave of Android smartphones to compete with the iPhone, there must also be a convenient means to discover and purchase apps, akin to iTunes. (See Techcrunch for Android Market Badly Needs A Desktop Presence To Compete With The App Store). Google currently has the Android Market but that lacks consumer awareness. One of the attendee's proposals during the Q&A, which has also been suggested earlier (see FierceWireless), was for an Amazon app store. That would certainly solve the issue of consumer awareness.
A suggestion (or perhaps it was a prediction) from one of the VC panelists was that the Bump app for iPhones and Android could be used as a mechanism for peer-to-peer payments. Bump is currently used to enable contact information to be shared by bumping two phones together.
The consensus amongst the panel was that business plans for mobile advertising are non-starters. One of the VCs said he just hits delete when he sees one. The VCs agreed that traditional ads don't work on mobile, but the idea of hyper-local ads would be viable (i.e. linked to location-based services) I think that foursquare will develop this as their business model
To my friends at Intel.. I didn't say this, it came from the VCs!
The issue here concerned Intel's Atom processor vs. ARM in mobile devices. I was very surprised at how strongly negative the panelists were on this, with comments like "Atom is a loser". My interpretation is that the panelists must think that ARM will displace Atom in the rapidly growing netbook market, which Intel currently dominates.
I have heard discussions, most recently at the ARM Techcon3, aggressively positioning ARM cores against Intel, so that idea is nothing new. In smartphones, ARM does dominate. It appears to me that the VCs have swallowed ARMs argument that their cores result in a smaller, lower power die than Atom. But surely the VCs are aware that ARM cores do not run Windows 7, or Windows XT for that matter! This then is a 2-sided bet on ARM and Google Chrome. Highly unlikely in my opinion.
Apparently it is a tradition of the WCA "Hot or Not" meetings to have panelists give their stock predictions. I'm sure I didn't capture them all, as it was pretty rapid fire, but here are a few:
Buy: nVidia, Google, Foreign mobile operators. Africa, China, India. Motorola for smartphones, Picocells, Chinese game developers