Mobility

January 11, 2007
Features and functionality walk the ramp

NEW DELHI -- "We want the mobile phones to play an integral role in the lives of users. We want to make this device a Swiss Army knife that can do anything for them," said China Mobile chief executive officer Wang Jianzhou in a recent interview with BusinessWeek.

Mobile handsets today offer an array of features that point toward the trend of ‘convergence’ making roots in Asia. Global handset makers are doing their bit to encash this opportunity to make money while the Sun shines. Handset manufacturers such as Nokia, Motorola, Samsung, LG, etc. are trying to position their gadgets as a must-have, multi-faceted digital appliances for those on the go.

The feature-power of mobile phones is bound to increase as 3G mobile handsets and ever-speedier wireless networks continue to be rolled out across the region. According to published reports, consumers are using their handsets to shoot digital photos and video clips and then transferring them to PC-generated home pages and blogs.

Perry LaForge, executive director of the CDMA Development Group, gives an insight on the features that are expected to walk the ramp. Excerpts.

Convergence Plus: What handset features are expected to dominate the Indian telecom market by the end of this decade?

Perry LaForge: Across all markets worldwide, mobile handsets are becoming important devices to access all types of communication services and content, including voice, SMS, instant messages, push-to-talk, Internet, daily news, daily prayers, games, entertainment, ring tones, photographs, video, radio, etc. The same devices are used to perform financial transactions like banking, purchasing, stock trading, etc. India is no different.

A recent study by the Yankee Group on the entry-level handset market has demonstrated that consumers in India increasingly want more than the lowest cost-voice centric handset. They are willing to pay more for functions such as a color screen, camera, games, Internet access, personalisation, and advanced messaging. According to John Jackson, who led the Yankee Group report, “Low-income consumers don't necessarily want the cheapest phone, and the lowest-priced handset may actually drive consumers away. They don't want to be treated as second-class citizens.” 

The Yankee study further suggests that subscribers targeted with sub-$50 handsets will demand sophisticated and aggressive segmentation similar to the rest of the market, including access to value-added data services. Jackson summarised the study by stating, “Rock-bottom pricing is not the singular determinant in handset sales. Rather, consumers choose a service provider based on factors such as device features and functionality including color screens, games, Internet access, personalisation, advanced messaging functions, and camera capability; brand awareness; quality perception; value of communications relative to other consumables; distribution and general product availability; and other intangibles.” As evidence to this, a single CDMA2000 entry-level handset, the ZTE C-150, surpassed the combined sales of all GSM Emerging Marketing Handsets (EMH) in India by a factor of three, since these handsets were first introduced in January 2006. Like India, Brazilian consumers have also shown little desire to purchase GSM EMH handsets since they don’t offer the same level of product guarantee, packaging and delivery that they are accustomed to receiving.

At the beginning of 2006, more than 50 percent of Reliance Communications’ customer base had multimedia-enabled phones across different market and geographic areas, and 65 percent of them used R-World services. Personalising mobile phones, by downloading ring tones and wallpaper, were the most popular, followed by TV, sports, games and greetings. At the same time, at the other end of the spectrum, fixed wireless phones and terminals offered by Reliance Communications and Tata Teleservices have been popular in rural areas for simple telephone and Internet access. Wireless data modem cards that slip into PC laptops to provide Internet access are also popular.

Like other emerging markets, these trends will continue in India, especially with the introduction of CDMA2000 1xEV-DO and HSDPA broadband services that support between 1-3Mbps data transfer speeds. These high-speed 3G networks will enable additional mobile applications and a much better user experience. The devices that operate over these 3G networks will have advanced capabilities such as larger high-resolution screens, high-resolution cameras, 3D graphics, advanced video capabilities, broadband Internet browsing, multimedia, etc. At a minimum, within the next few years, entry-level phones in India will support voice, simple messaging and radio functionality; mid-tier devices will support multimedia messaging, camera and radio; and top-tier devices will offer full 3G capabilities with advanced audio and video downloads, television and richly rendered 3D gaming displays.

CP: Given the fact that most of the entry-level handsets are not 3G-enabled, will the users be able to use such features?

PL: Up to 64 percent of all of the CDMA2000 devices sold in India are entry-level (below US $50 wholesale) 3G devices. Given the demand for and user experiences of CDMA2000, it is clear that 3G offers greater value than 2G to operators and their clients in emerging markets. With entry-level GSM and CDMA2000 handsets reaching cost parity, users in the most price-sensitive market segments are increasingly choosing CDMA2000 because it delivers more value with differentiated 3G services.

To take full advantage of the features currently offered by mobile phones, a user must have a device that supports high-speed wireless data access to the network. In India, ultra-low cost voice-centric GSM handsets have no data capabilities beyond SMS. In comparison, most all of the ultra-low cost CDMA2000 handsets available in India today support wireless data access, enabling the download of ring tones, wallpaper and simple games.

With the further economies of scale and greater competition continuing to drive down the cost of 3G devices, such as CDMA2000 1X and 1x EV-DO, they will become more affordable for India’s mass market (B and C circles). The Signals Research Group has estimated that entry-level EV-DO devices will reach US $33 by 2009. Not only will India’s consumers, small businesses, and enterprises be able to use the features and services mentioned above, they would be able to afford them.

CP: What are the expected challenges in determining features for the next-generation handsets?

PL: With the greater broadband speeds, lower latencies, enhanced audio and video decoders/encoders, 3D graphic displays and other advanced capabilities, 3G and next-generation wireless technologies will be able to support a much broader range of services to meet the needs of very diverse market segments. Also, as 3G expands globally, there will be some regional differences in the types of services users will demand.

Service segmentation, handset diversity and device pricing will be key determinates for the adoption and success of next generation services in India. The challenge for the Indian industry is to supply the selection of devices with different functionality and form factors and yet keep the costs down. Local device manufacturing, mobile software development and service creation will be essential to meeting this challenge. Also, as the wireless devices become more sophisticated (e.g., serving as a phone/TV/computer/radio) and more technically complex, the industry will be challenged to keep them simple and user friendly for the consumer. These two determining factors are especially important for mass market and entry-level phones.

CP: How will handset design evolve over the next five years?

PL: 3G and advanced wireless broadband technologies have revolutionised the mobile handset market. 3G technologies are embedded into mobile handsets, PDAs, PC laptops, ultra portable computers, Internet appliances, fixed wireless terminals, modems, automobiles, consumer electronic devices, location devices and machines. This trend will continue as IT, television broadcast, consumer electronics, entertainment and advanced multimedia become integrated. Some of these top-tier 3G devices will be available in India as well, but the low and mid-tier handsets with simple functionality for the rural market will continue to constitute around 50 percent of sales in India for the next five years.

CP: Will the present ratio of voice and data alter? Will data score over voice in the next five years? Will data-oriented features be a solution to your problems?

PL: With the introduction of 3G and especially broadband, we have seen data usage and revenues grow exponentially. In some markets in Asia, CDMA2000 operators are already generating up to 30 percent of their revenues from data. In the US, data usage is growing at close to 150 percent per year. Although voice will continue to be a key source of revenue for wireless operators, data revenues may eventually surpass voice revenues in the future, especially in India where the APRU for voice services is below US $6 per month. With wireless, cable TV, and wireline networks migrating to all-IP next-generation networks, all voice and data services will be IP-based; hence, the differentiation between voice and data will no longer be relevant. The CDMA2000 industry has already made a major step toward this convergence with the introduction of the IP-based EV-DO Rev A technology this year, at least two to three years ahead of the competition.

CP: How important will be longer battery life and smaller size?

PL: Longer battery life is essential to any portable device. It allows subscribers to use of the applications on their devices longer and without interruptions, which in turn leads to increased customer satisfaction and a greater period of time for which the service providers can generate revenue. Advanced 3G applications, especially video, and 3D multimedia graphic displays, requires more processing power. Furthermore, as consumers become more reliant on the mobile devices as their primary means of communications, they will use them more, putting additional demand on battery life. New low-power consumption, full-color, mobile device displays are being introduced by the wireless industry to reduce battery consumption. Size and form factors are also very important, including for entry-level phones. Wireless is a “personal” device that people carry with them everywhere and identify themselves with, so it has to fit their style.