Global News

February 3, 2005
inCode reveals top-10 wireless predictions for 2005

UNITED STATES -- inCode, a global wireless technology and business consulting firm, is forecasting an increasingly competitive landscape in the communications industry as battles among its largest players fuel new developments and services. The fight for supremacy is a trend underlying inCode's top 10 predictions about the European and global wireless market in 2005.

Rob Chimsky, vice president and general manager, international operations and CTO, said: "We are entering an era when the mix of co-operation and competition among carriers, vendors and enterprises will change fundamentally. We will move from the warm and cosy world of what is often called co-opetition to the outbreak of almost open warfare for the hearts and
minds of customers."

Although the wireless market is one of the most competitive worldwide, inCode believes the battle for customers will intensify in 2005. It doesn't see 2005 as "open season" in the merger and acquisition market but even allowing for "on the stocks" mergers such as Nextel/Sprint and Alltel/Western Wireless the consultancy is forecasting that industry economics could force at least one other consolidation between major players in the year and adds that an increase in MVNO activity will mean that the remaining operators will see no competitive relief.

Indeed, inCode predicts that worldwide non-traditional players-multimedia companies with powerful content and cable TV arms, major brands with private-label wireless services and equipment vendors will muscle into wireless marketplace, bidding to win subscriber loyalty with attractive bundled offerings.

Chimsky added: "The world map of wireless companies could be redrawn on two battlegrounds. Conglomerates with huge content portfolios will challenge wireless network operators for control of the wireless 'pipe', forcing carriers to provide differentiated, compelling services for enterprises and consumers. The typically accepted, decades-long relationship between carriers and equipment vendors will cool as manufacturers will use music delivery and exclusive offers to attract wireless customers and marginalize carriers. But the industry players need each other. Hence, this will be the year of uneasy relationship."

To strike back, inCode believes wireless operators must strengthen their competitive advantage with these new weapons:

• New classes of premium, one-to-one and one-to-many voice services that generate new revenue streams and leave plain-vanilla, commoditised voice behind;
• Service-level agreements that ensure quality of service, not just quality of the network providing it, to attract and retain high-value enterprise customers;
• Better in-building coverage and "seamless mobility"-across the hallway as well as down the highway; and
• High-quality audio and video service with music, TV news and programming on mobile phones.

inCode Top 10 Wireless Predictions for 2005

1. Wireless gets into multimedia and consumer product bundle: Strong multimedia and cable TV brands must have wireless to round out their service bundles to customers. Big consumer brands need wireless to enhance their customer loyalty programmes. Europe leads the way with MVNO relationships, where wireless operators provide turnkey, private-labeled wireless services for major brands. In 2005, trend continues with several huge multimedia companies entering wireless market by mid-year and dozens of other companies getting ready to follow suit. Bundling is the initial step toward true wireline and wireless convergence across all-IP networks-about five years away. Eventually, VoIP will support delivery of all voice services, whether the subscriber is at home, on the move or at the office.
2. Killer app is dead, differentiated voice lives: In a highly penetrated and segmented market, a single killer application doesn't exist and carriers should stop looking for it. Plain-vanilla voice represents about 95 percent of wireless carrier revenue. However, it has become a commodity. In 2005, network operators finally begin to offer different classes of voice services, including priority communications, and one-to-many or many-to-many services, such as network-based cellular conferencing, group voice messaging and more. Enterprises and consumers value better, faster communications by paying for tiered, premium voice services. The trend begins in Europe, but rapidly pops up in North America, Asia and Latin America as well. No new wireless voice services appeared since the introduction of commercial push-to-talk services and cellular voice mail in 80s. These service options surprise and delight subscribers, bringing new revenue streams to carriers.
3. Integration of broadband devices takes off: Wireless carriers are making broadband technology choices from available options, including W-CDMA, 1xEV-DO/DV, TDS-CDMA, Flash-OFDM and Wi-Max. Some of these are personal (Bluetooth and infrared); others are local (various flavors of 802.11, fixed wireless and WiMax); and the remainder are wide area (UMTS, EV-DO, Flash-OFDM, HSDPA and UMTS-TD). Manufacturers will begin to integrate devices so they will work across two or more types of networks; devices bridging cellular and Wi-Fi networks will be first. However, Wi-Fi data roaming won't take off to any meaningful degree. Carriers initially protect their networks and their investments in technologies by refusing to let other carriers' customers on their networks, taking us a giant step backwards in terms of the advance of roaming.
4. Carriers battle to control content, with trends toward recorded programmes: High-performance phones and increased over-the-air throughput speeds are supporting a richer set of ownloadable content. A new battleground is emerging over who controls the value of this content, and carriers will have to fend off non-traditional players. Equipment vendors try to directly attack new revenue streams - for example, Apple and Motorola have teamed up to deliver music content to iPods. This new content battleground will intensify in 2005 with new services at its heart. In addition, the trend toward viewing recorded versus live programmes, which started with VCRs, continues in the wireless environment. Wireless devices with multi-gigabyte storage enable unprecedented freedom and convenience for customers. They can download, store and view the content they want, when they want and where they want.
5. Taking wireless seriously, enterprises begin to demand service quality: Enterprise CIOs begin to mobilise organisations as device and network performance meet expectations and enterprise wireless applications continue to emerge. With number transparency prevalent, enterprises apply wireline cost reduction strategies to their wireless spend. Corporations move big blocks of employee phone numbers to the carrier that meet their budget and mobility needs. Using this volume business as leverage, they demand service-level agreements that ensure quality of service, not just quality of the network providing it. Carriers must accept these SLA demands or prepare to lose high-value customers. Opportunities arise for enterprise network management companies that develop applications enabling enterprises to measure SLA compliance.
6. Battle for customers moves from highway to hallway: Increased traffic has degraded overall network quality, and subscribers are far less tolerant of dropped calls. In-building coverage becomes a big differentiator for corporate and consumer wireless users. Customer collateral material begins to include coverage information on the square footage of key indoor spaces, such as large office buildings, shopping malls and stadiums-in addition to square miles of highways and motorways in the service area. Enterprises begin to deploy dual-mode 802.11/GSM devices to save cellular costs and improve in-building wireless coverage.
7. Spam spares wireless no longer: Wireless industry focuses on protecting subscribers from handset spam-limited and out of the limelight until now. However, several high-profile spamming incidents will occur next year. Wireless carriers counterpunch with spam-stopping technologies and policies that could help clear the way for permission-based, mobile marketing by major brands.
8. Adult entertainment makes its mark: All forms of adult entertainment, gambling, games and pornography provide tempting revenue sources for carriers. The operators' need for increased ARPU will outstrip the pace of implementation of effective controls to block the delivery of unsuitable content to under-age subscribers. This raises the spectre of legislation to protect minors from unsolicited or inappropriate content.
9. Role of wireless in public safety takes center stage: The key public-safety communications tool for decades, wireless becomes more significant in the wake of the 9-11 commission report, which highlighted weaknesses in the US telecom infrastructure. Behind-the-scenes issues, including priority access for first responders, network interoperability and reliability, spectrum requirements for public safety and critical infrastructure concerns move to forefront. In UK, Germany, the Netherlands and Scandinavian countries, momentum slowly is gaining for a wireless E112 emergency dispatch system similar to E911 in the US. In the interests of homeland security, governments will move closer to allowing Radio-Frequency Identification (RFID) tags on containers that pass through customs at international ports and national borders. Use of electronic seals that detect tampering would speed container movement, benefiting shippers and trade. Did we say that wireless in public safety is important?
10. Directory listing gets wobbly start, wins over small businesses: In the US, opposition to a full-blown white pages directory of wireless subscribers is widespread and strong with Verizon leading the charge. Based on privacy and spam concerns, it is unlikely that the project will get far. However, a 'Yellow Pages' cellular directory that covers home-based and small businesses, and proves popular and profitable first of all in America but gains support in Europe. Think of all those SoHo and SME businesses that are away from their offices most of the day. Their mobile device is their primary mode of voice communication and a Yellow Pages listing is valuable to them.

Contact:
InCode Wireless
Tel: +1-858-337-3300
rlink@incodewireless.com
www.incodewireless.com