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Over-optimistic femtocell forecasts?
I've seen quite a lot of large numbers and hockey-stick curves recently, all indicating an imminent huge explosion in femto shipments in the next few years.
ip.access' very good femto blog has links to quite a lot of the studies, some of which suggest shipments are going to hit 10's of millions of units as early as 2010-2012. I haven't got copies of my competitors' studies, so I don't know exactly what assumptions, methodologies and caveats they are using.
My current view is rather more pessimistic. We're already in the middle of 2008, with various trials ongoing. I'm expecting to see lots more trials during H2 2008 and H1 2009 with a variety of results being published, both positive and negative. I'd agree with the assertion of one of my peers that 2008 shipments should be in the 100,000 range, although precise numbers are likely to be a little fuzzy in terms of defining "shipments" versus orders, versus paid installations in active users' homes.
I think there will have to be a lot of efforts made during 2009 to fix all the problems these trials throw up - nothing unusual there, just the normal technology deployment cycle. Getting everything right first-time, and immediately flipping the switch on the massive manufacturing plants, seems implausible to me. I can't think of anything else that's ramped up that quickly.
Sure, we'll see some niche deployments - perhaps in certain groups in Japan, or in bits of the US with lousy macro coverage. But are we going to climb to rapid adoption among the addressable market (essentially the world's 400m or so home broadband subscribers)? I'm unconvinced by the business model or demand just yet. It'll come, but there are a lot of prerequisites still not in place, not least of which is a sufficient population of 3G handsets or other devices, and people who actually want to use them for high speed access.
And even at $100 or $50, femto capability is too expensive to put into a home gateway if it's not going to be used. (If it's $5 or $10 like WiFi, it's cheap enough to just put it in the box by default - if the user doesn't switch it on, it's no big deal).
But more importantly, I'm starting to come round to the view that femtos will only become truly massmarket when we get to LTE deployment, and that HSPA and EVDO femtos may only be a starter to 4G's main course. I have various reasons to think this, and I'll have to annoy some readers with a bald assertion that it's about application related issues, and radio/spectrum reasons. I'm intending to publish a report in the next few weeks that will clarify my thinking on some of this, so keep reading.
As a last part of the post, I've taken a punt at some numbers. I'll be absolutely upfront, I haven't done a rigorous model on this at the moment, these are just educated guesses, based on my understanding of mobile, device and broadband markets, and having watched the evolution of picos & femtos for more than 7 years.
I'd currently estimate the number of shipments at maybe:
500k-1m in 2009 [this might be skewed by early large orders that end up in warehouses though]
2-3m in 2010
4-5m in 2011
5-8m in 2012.
In the 2009-H1 2010 period, I'm expecting the market to be driven by a small number of major operator advocates (much like dual-mode WiFi/cellular services today).
After 2013, when LTE starts hitting mainstream devices like phones in a big way, then I can potentially see a much larger uplift. Price points should also enable femto capability to be added to broadband home gateways 'for free', and also by that point we should have resolved issues like multi-operator femtos, and what the business model might be for femtos+prepay mobile.
Comments are welcome, although if anyone wants to discuss thoughts on the femto market privately, I can be reached at firstname.lastname AT disruptive-analysis.com
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BT - FMC and VoWLAN for conservative customers
I went to a launch event for BT's new upgraded version of its Total Broadband service yesterday. This is a package the company has offered for some time, which bundles assorted additional capabilities along with the basic (and fairly slow - just 8Mbit/s) ADSL Internet connectivity - online backups, access to BT OpenZone WiFi hotspots, BT Broadband Talk VoIP service and so on. It's centred on BT's Home Hub gateway which also provides WiFi, a DECT handset and remote management.
In the past, the Home Hub also acted as the centrepiece of BT's ill-fated Fusion dual-mode UMA service, which has been quietly interred, after singularly failing to set the world on fire.
But BT has now reincarnated its FMC plans, calling it Total Broadband Anywhere, but binning the 'seamless' UMA rhetoric and focusing more on what I see as a sort of consumer-grade BlackBerry proposition, with a bit of added VoIP when in WiFi coverage. At first sight, I was a bit critical of the offer, which features a couple of fairly humdrum 2G-only HTC phones from yesteryear (especially as it was announced on the same day HTC debuted its shiny new Diamond iPhone-challenger device).
But then I had a think about the demographics of BT's broadband customer base. As BT's ADSL service tends to be at the more expensive end of the market, I reckon it tends to be populated by a few particular constituencies:
- Conservative life-long BT customers with an aversion to the hassle of switching ISPs and telephone providers
- People who aren't bothered by cable TV & so aren't particularly interested in Sky's or Virgin's 3/4-play bundles.
- Home workers who feel that paying a bit more gives some sort of peace of mind, but who aren't prepared to stump up for a dedicated Business Broadband line. (I'm in this category myself).
I suspect that BT broadband is less popular among younger groups like students who perhaps focus on cheaper or "free" offers and prepay mobiles, or gadget-hungry enthusiasts who want iPhone along with their HDTV. I also suspect the "traditionalists" and their spouses are perhaps less likely to have company-issued BlackBerries. And the device UI seems to be pretty user-friendly, and BT has focused on some fairly simple setup & configuration procedures. In other words, there's probably a segment of BT's 4m-odd broadband subscribers who could see the benefit in paying an extra £5 a month for an extra email & web device, also usable for BT's VoIP service when in range of home, hotspot or FON WiFi. It's not going to sell in its millions I suspect, but it should help BT maintain its ADSL margins and minimise churn. It's also notable that it's not being positioned as a replacement for users' existing phones, although clearly the company hopes that some users will choose to port numbers and use the device as their primary handset. However, there are a couple of flies in the ointment. The 10MB data allowance outside of WiFi coverage is meagre, and perhaps reflects BT's ageing MVNO deal with Vodafone needing some renegotiation. The absence of 3G handsets is also bit weak - although of course both iPhone and BlackBerry seem to do pretty well without it. But what I think is a glaring gap is the absence of a consumer 3G dongle for their laptops. And also that the Windows Mobile devices rely on 'pull' rather than 'push' email, and also don't have any dedicated IM capability. Overall, I'm more positive on this than I was about the original Fusion proposition. Just one last thing though.... given that the package seems to encourage customers to get another mobile device, and split their calling between that and another phone, perhaps they could have come up with a snappier brand? I reckon that "BT Fission" would have been appropriate.....
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iPhone non-exclusivity in Italy - it's all about prepaid
There?s much confusion and discussion today about Apple selecting two operators to sell iPhones in Italy ? Vodafone and Telecom Italia. Plenty of observers are pointing to a huge shift in Apple?s exclusivity strategy, or debating whether the iPhone is uncompetitive in the Nokia-rich European marketplace.
But in my opinion, there?s a much simpler explanation, especially missed by most of my counterparts on the other side of the Atlantic.
It?s just about prepay.
In the US, prepaid mobile phone services are viewed by many with disdain ? they?re for socioeconomically disadvantaged people, or migrants without US bank accounts or who fail credit checks. Americans seem to think that all real mobile users are always happy to be tied into 2-year cast-iron contracts with monthly subscriptions.
I?ve lost count of the number of conversations I?ve had with people from the US who are genuinely amazed that most of the world?s mobile subscribers use prepay. And in many cases this is not because they have to use prepay because of economic circumstances, it?s because they prefer to. Many simply do not want to be ?on contract? because they want the flexibility to top-up their account and control their spending. Some like to swap SIMs to play tariff arbitrage. Many want multiple phones and numbers, and not need to maintain ongoing accounts for each. Some want to buy a phone separately to the service component. Or because the contract-based plans don?t meet their needs in terms of bundles. Some just do it because they?re used to it ? it seems natural.
Take me for example. As well as a couple of contracts, I have a prepay SIM from H3G because it gives me cheap mobile data on unlocked phones. And I regularly get prepay SIMs to use when I travel - if I'm in Mozambique or Bolivia or wherever, why not spend just $3 for a SIM to make local calls to hotels or restaurants? What's the point in routing calls back via London & paying huge roaming charges for the privilege? I also prepay for travel in London on my Oyster card, and I prepay for beer in the pub, rather than after I've drunk it, or via a monthly subscription. (Hey, now that's an idea...)
But people from the US tend to think there?s some kind of stigma attached to prepay, rather than it just being the way it?s done, no big deal.
It?s similar to the way that the rest of the world looks at the US and is amazed by the preponderance of phones in hip holsters ? which in our eyes have an equivalent social stigma. But for people in the US, wearing your phone on a Batman-type utility belt seems as acceptable for a trader on Wall Street or a fashionista on 5th Avenue as it is for the geekiest nerd in the IT department ? it?s just the way it?s done, no big deal.
And so to Italy and the iPhone.
Vodafone Italy has 22.8m customers, of whom 91.2% (about 20m) are prepaid customers.
Telecom Italia Mobile has 36.3m subscribers, of whom 85% ( 30.8m) are prepaid.
And many of the contract customers are actually corporate users, or even subscriptions for 3G modems or embedded M2M modules. While plenty of prepay customers have shiny, high-end smartphones.
In other words, the number of individual consumers in Italy who would buy an iPhone, together with an 18/24-month contract, is roughly twelve. Apple has obviously realised that its much-vaunted monthly revenue-share business model isn?t going to work very well in Italy, especially if it only has one carrier as a route to market. And given that prepay top-ups make it is almost impossible to identify which phone they are used with, I can?t see how Apple is going to get a revenue share on prepay that way either. Far better to try and persuade Italian consumers to pay full-whack retail price for the device, and then use it with the prepay SIM from the operator of their choice.
This is also quite possibly why Vodafone?s announcement yesterday was so terse ? Apple is probably going to have to reinvent its whole revenue model for the iPhone in prepay-centric markets, and somehow communicate that to its investors. And face down its current contract-based partners wincing about paying Mr Jobs a 10% tax for the privilege of selling his device.
And I?d guess Apple probably wants Vodafone to keep quiet about exactly how this will play out in other prepay markets like India, Egypt, Turkey et al.
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Vodafone + iPhone...
I wonder whether there's a deeper story behind Vodafone's remarkably terse announcement this morning that it's going to be selling iPhones in 10 of its national markets.
There is no quote from either Jobs or Sarin - just two abrupt sentences. As I'm writing this (9am in London), the release isn't up on Apple's own site either. No details on pricing, contract length, how Voda will work with (or around) iTunes...
.... and even more importantly, no indication whether "the iPhone" might be a new 3G version.
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IMS Rich Communications Suite - Necessary but not sufficient?
At the Informa IMS conference in Paris last week, there was a lot of discussion about the new acronym du jour - RCS, or Rich Communications Suite. I'd had a bit of a heads-up on this at 3GSM in February, but I got to drill a bit deeper, see some demo's, and harass a few of its advocates with awkward questions.
In a nutshell, it's a lowest-common-denominator IMS mobile client, that incorporates a presence-enhanced address book with some IM capabilities and bits of file/image/video-sharing. It's being pushed by a semi-formal alliance of the largest handset vendors and a few of the more IMS-centric operators who share a fairly centralising/walled-garden view of the world. (I talked a bit about Orange & Telefonica as being 'old school' in February, and their central role in RCS just enhances my view - and I'd add TeliaSonera to the list as well).
Interestingly, RCS is being pitched as a lowish-end standardised client suitable for embedding onto featurephone platforms, as well as higher-end smartphones. This makes a huge amount of sense to me: smartphone-only software is of little use for services that require Metcalfe's Law to be exploited (ie value growing with the square of the number of connected users). The chances of everyone in a group of friends or IM buddies having a smartphone any time in the next 5 years are essentially zero.
In a nutshell, it seems like RCS is destined to join the fairly short list of very-standardised set of native applications on most phones:
- Phone dialler
- SMS client
- MMS client
- WAP browser
- (on 3G phones) - videotelephony
The more observant reader may recognise that not all of these have been a monumental success. The amount of 3G videotelephony traffic is utterly negligible, and there are no reasons to believe that it's going to change any time soon. Some of the RCS features like IM are fairly uncontroversial, especially if the operators deploying it are prepared to "play nicely" with existing Internet IM brands. However, the exclusion of those same Internet players from the RCS closed-shop is a major negative. There's also been little involvement of the myriad of smaller IMS-client framework vendors that have been working hard on presence-enabled phonebooks and the like for several years.
I'm pretty negative on things like video-sharing, but at least having a standardised solution means that less money is wasted on dozens of individual projects. Filesharing and image-sharing are more worthwhile - I just place a low value on real-time variants like video.
Also a negative is the pointless rhetoric about RCS enabling a "community of 3 billion mobile users". Amusingly, I heard this roughly 48 hours after posting about the misuse of the exact same figure. Nothing I heard suggested that RCS' promoters had actually bothered to understand the sociology of how communities & social networks form and evolve, and to design the software to accommodate this. I strongly suspect that the way in which engineers form networks of friends & contacts differs substantially from the way in which FaceBook, Bebo et al have emerged. As an extreme example, consider the role of the "cool" people who inevitably act as social-network hubs, migrating large groups of their friends en masse. Given that a reasonable chunk of such super-influencers have iPhones or steer their social empires from their PCs, it strikes me that courting them upfront could have disproportionate effect on RCS' success.
There are plenty of other unanswered questions, as not that much information on RCS specs have been released publicly yet. But some more food for thought:
- will operators provide presence data for free to prepay users, in the hope that one day they'll send a message?
- how "realtime" is the presence function if you have 100 buddies?
- will anyone bother to put an RCS client on a "vanilla" handset sold through non-operator channels? How is it configured?
- what happens if an end user wants to use an IMS service provider other than his/her access provider? If I'm an Orange customer but I really like a Telefonica app, how can I get it?
- what happens to people who belong to multiple existing social groups or online communities? Can I get access to my Skype buddies? Or should I just download fring to give me full access?
- is there a developer API? How is it used? Through Java JSR281?
- how well does RCS integrate with "legacy" users who won't have it enabled on their phones at first?
My gut feel is that RCS is primarily being designed as a walled-garden defensive play to protect SMS revenues, by trying to push some form of IM as "SMS v2". I certainly can't see it driving additonal revenues on its own, in its current version, but I'll keep an eye out for future developments.
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