Strategic Planning, P. Redman, T. Hart, W. Clark, J. Chapman, P. Dittner, R. Simpson, K. Foong, N. Ingelbrecht Research Note 20 November 2003 Changes in Store for Wireless WAN During 2004 The hottest growth areas in the wireless WAN technologies will be convergence between voice and data, Wi-Fi "hot spots," wireless data applications and new cellular devices. Core Topics Wireless and Mobile: Mobile Business Issues and Trends; Mobile Services and Markets Key Issues Which product and service vendors will make a contribution to the successful development of mobile business, and how? What are the opportunities and risk of mobilizing business processes and practices? What challenges will enterprises have to surmount to successfully exploit mobile business opportunities? Strategic Planning Assumptions Pricing for wireless telephony services in the United States will decline 10 percent overall, and pricing for mobile data services will decline 25 percent in 2004 (0.7 Lower-cost voice services will be the primary driver for W-CDMA adoption in the Asia/Pacific region (excluding Japan) through 2004 (0.8 The number of hot-spot users worldwide will triple in 2004, from 9.3 million during 2003 to 30 million (0.7 Increased demand for mobile access will drive enterprises to reduce the number of wired networks they use while increasing the number of wireless networks during 2004 (0.8 No single mobile operating system platform will emerge as the corporate standard through 2004 (0.6 probability), although Microsoft-based platforms will be the predominant choice in 30 percent of enterprises deploying personal digital assistants (0.8 There will be no major consolidation of wireless service providers during 2004 (0.8 Capacity constraints will only be a driver for Western European wireless network investments in 2004 (0.8 Alternative wireless mobile broadband data technologies will remain niche through 2004 (0.7 Wireless WANs (WWANs) continue to hold the attention of fixed and mobile users, enterprises and consumers. More focus in 2004 will be on wireless data activity, as coverage, costs, service technologies, applications and devices align to form relevant solutions. The hottest growth areas in the wireless wide-area technologies will be convergence between voice and data, Wi-Fi (Wireless Fidelity) "hot spots," wireless data applications and new cellular devices. Prediction Pricing for wireless telephony services and mobile data services in the United States will decline Consumers and enterprises will have greater bargaining power and less-expensive services as a result of competition in the market, promotions, fixed/mobile bundling, wireless number portability and continued penetration prepaid. Because of carrier efforts to further penetrate the wireless data market and grow revenue, the declining data prices will make services more affordable, driving adoption and use in 2004. The decline of data prices is a natural market reaction to an evolving technology. Carriers should use price drops in data service to motivate customers to adopt data services, and to bundle data with voice, Wi-Fi and other mobility services for lower cost, one point of contact and simpler management. Strategic Planning Assumption: Pricing for wireless telephony services in the United States will decline 10 percent overall, and pricing for mobile data services will decline 25 percent in 2004 (0.7 Gartner Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
Enterprises should continue to issue competitive requests for proposals and sign short-term contracts (no longer than two years). Carriers should offer leading service terms and conditions, promotions and handset deals rather than drop the price of the overall voice plans. In the enterprise, wireless will continue to be complementary to wired, but more consumers will be replacing their wired phone service with cellular. Telecommunications managers should begin to look at capabilities of integrating cellular telephony with enterprise private branch exchange (PBX) systems for better call integration and voice services. This will also reduce the cost of cellular by migrating traffic to the wireline when in the office. Prediction Low-cost voice services will drive W-CDMA adoption in the Asia/Pacific region (excluding Japan) The competitive situation in the key mobile markets in the Asia/Pacific region (excluding Japan) means that wideband code division multiple access (W-CDMA) has to deliver a clear value proposition against competitively priced voice services and where adoption of data services has been slow. Only 6 percent of cellular service revenue came from data in 2002 (excluding Japan), and this will just pass 21 percent in 2007. Thirdgeneration (3G) services, such as person-to-person video messaging, represent an attractive marketing proposition, but user interest is difficult to sustain, especially given terminal supply constraints. Due to W-CDMA coverage constraints and the challenges of interoperator roaming, early deployments have focused on discount voice services to drive W-CDMA service adoption. The strength of demand for basic voice services in developing markets means operators will initially look to W- CDMA as a means of lowering the cost of voice transport, especially where spectrum constraints and congestion exists in second-generation (2G) networks. Strategic Planning Assumption: Lower-cost voice services will be the primary driver for W-CDMA adoption in the Asia/Pacific region (excluding Japan) through 2004 (0.8 2G operators should continue to focus on network quality and coverage to stem the loss of customers to discount 3G voice services. W-CDMA service providers should test the market with pilot applications and delay extensive marketing activities pending the delivery of volumes of multimode W-CDMA terminals. Enterprise customers should focus on device and network-neutral application development and take advantage of W-CDMA bandwidth and capacity when coverage and quality of service allows. 20 November 2003 2
Prediction The number of "hot spot" users worldwide will triple Managed service providers such as ipass, FiberLink and GRIC will be key to enabling hot-spot uptake among enterprise users. Alliances, mergers and acquisitions will dominate the second half of 2004. During the first half of the year, there will be disappointments and continuing struggles to generate revenue; stand-alone hot-spot business models will remain unprofitable during 2004. Strategic Planning Assumption: The number of hot-spot users worldwide will triple in 2004, from 9.3 million during 2003 to 30 million (0.7 Enterprises must begin tracking hot-spot expenses immediately. They must examine managed service providers and include local exchange carriers and cable service operators. Mobile network operators must cultivate business models that address four main areas: commercial venues, premium venues, neighborhood networks and shared campus environments. In addition to these, managed service providers must provide access to free public hardware. Prediction There will be fewer wired, but more wireless, networks in the enterprise environment Convergence is beginning in the enterprise wireless systems. Many companies are looking to justify expenditures on new technologies such as 802.11x and are searching for return-oninvestment-based applications such as voice over Wi-Fi. The biggest issue is in application development and device choice. Make sure that decisions can support wired and wireless applications as the technology capabilities mature and adoption comes closer to Type A (leading-edge technology adopter) and Type B (mainstream technology adopter) companies. Strategic Planning Assumption: Increased demand for mobile access will drive enterprises to reduce the number of wired networks they use while increasing the number of wireless networks during 2004 (0.8 Enterprises have four distinct wired networks: a voice in building (LAN), a voice WAN, a data LAN and a data WAN. In the wireless world, voice and data generally exist in each of the wireless networks; however, these networks have unique spans 20 November 2003 3
of control. In the wired world, convergence will eventually bring a single ubiquitous network, but not for some time. There will be several phases or steps in the evolution. Some steps will be performed in parallel, and some independently, but many will be interdependent. Financial, functional and application requirements will drive the prioritization and order of events that an enterprise will need to achieve its individual goals. In the wireless world, spectrum and coverage issues, as well as different standards, will force users to work with multiple technologies for the near future. It will require users and intelligent technology to understand the appropriate solution for a specific application. Until wireless services become more dependable, enterprises should be cautious and add push capabilities and offline access to any application. Prediction New entrants in the mobile device market will continue to blur the line between a mobile phone and enterprise mobile device Traditionally, mobile device software has been proprietary and focused on improving the user interface experience in a device or platform. As wireless networks become capable data transports, the importance of integrating mobile devices with computers and other corporate devices becomes more pronounced. In addition, the needs of individuals and organizations will require a variety of form factors and platforms. Mobile device operating systems will remain fragmented during the next five years. Microsoft, Linux and Symbian will be available, with Microsoft having the most success in the enterprise arena, Symbian maintaining its position in the consumer market in Europe, and Linux continuing its success in the Asia/Pacific region. Form factors will similarly vary, depending on the users' needs and the applications that the user wants to access. Strategic Planning Assumptions: No single mobile operating system platform will emerge as the corporate standard through 2004 (0.6 probability), although Microsoft-based platforms will be the predominant choice in 30 percent of enterprises deploying personal digital assistants (0.8 Enterprise should insist on a platform standard internally for ease of management and reduced costs. Individual device or model standardization is not necessary because product life cycles are short or will de difficult to implement across an organization. Most companies have standardized on Windows Mobile, but Gartner 20 November 2003 4
also recommends Palm OS, depending on the organizational architecture, applications supported and user preference. Prediction Wireless service providers will not form any major consolidations As a result of continued growth, the North American markets and the solidification of carrier position in Western Europe and the Asia/Pacific region, no major consolidation is expected, but there may be some minor consolidation of weaker players in a few countries. In markets such as the United States and some countries in Asia that have many operators, there will continue to be a high level of attractive offers for consumers and business users. In markets such as Europe, Canada and parts of Asia that have a moderate number of operators, more-rational pricing and an effort to move more of the prepaid market to postpaid is expected. Partnerships for tower sharing and roaming will drive coverage. Strategic Planning Assumption: There will be no major consolidation of wireless service providers during 2004 (0.8 Enterprises should take advantage of the competitive markets and offerings for voice and data services, but choose a carrier based on quality of service, coverage and value-added service needs. There will be little or no consequences in long-term consolidation because the acquiring carriers will likely support current customer requirements, or existing carriers will make it attractive for customers to change service. For carriers, no consolidation will mean continued competitive pressures. Carriers should increase the use of voice on a traffic level and data services in general to increase revenue. Prediction Capacity constraints will drive investments in Western European wireless networks With the uptake of data services proving to be slower than anticipated, there has been a shift in the perception of the drivers for W-CDMA in Western Europe. Despite what vendors and operators had originally forecast, voice rather than data is a major driver for many operators' W-CDMA rollouts. With its increase in available voice capacity over the capacity on Global System for Mobile Communications (GSM) networks, W-CDMA enables network operators to offer subscribers dramatically increased volumes of voice-minute bundles without affecting the performance or available capacity of the W-CDMA network. Tight controls on capital spending by Western European operators 20 November 2003 5
during the past two years will result in capacity being a key driver for investment during 2004. Demand for voice capacity will enhance the migration to W-CDMA. Strategic Planning Assumption: Capacity constraints will only be a driver for Western European wireless network investments in 2004 (0.8 Enterprises in Europe should seek assurances from their mobile operators concerning available capacity and congestion issues affecting service. Service assurance levels for voice and data are new to the mobile operators, but should be actively pursued by enterprise customers. Outside of Western Europe, the capacity of the networks is less tight. In North America, cdma2000 1x networks have more voice and data capacity than the older CDMAOne networks. Also, time division multiple access (TDMA) migrations to GSM/EDGE include the data and voice improvements inherent in EDGE. Thus, convergence, rather than capacity, is shaping the infrastructure in North America. In the Asia/Pacific region, a few countries (such as Japan and Korea) follow the European model. These markets are also driven by technology advances and the demand for faster and improved data services. Prediction There will be little implementation and adoption of alternative wireless broadband technologies The limited availability of commercial alternative WWAN data technologies will mean that 2.5G and early 3G packet data will be the dominant mobile data bearer in 2004. With delays in the wide-scale deployments of W-CDMA networks in Europe and slow uptake of general packet radio service (GPRS), several alternative mobile technologies are vying for adoption during this time of disruption in the market. Companies such as Flarion Technologies and IP Wireless are promoting the potential to complement current GPRS offers and future W-CDMA services with high-speed broadband wireless technologies. Although these offer potentially high-quality wireless networks, they appear to have limited appeal among operators in Europe and are gaining ground only in rural U.S. markets. Mobile operators are more focused on their current networks and service offerings along with the timing of the rollout and commercial launch of W- CDMA. Strategic Planning Assumption: Alternative wireless mobile broadband data technologies will remain niche through 2004 (0.7 20 November 2003 6
Acronym Key 2G second generation 3G third generation PBX private branch exchange CDMA code division multiple access EDGE Enhanced Data Rates for Global Evolution GPRS general packet radio service GSM Global System for Mobile Communications TDMA time division multiple access W-CDMA wideband code division multiple access WWAN wireless WAN Although enterprises may like the idea of a truly mobile office in the wide-area environment, availability of alternative mobile data technologies will be limited, and 2.5G/early 3G will continue to dominate as the cellular data networking technology worldwide, including GPRS and cdma2000. Bottom Line: Mobile and wireless technologies encompass a wide array of capabilities. Assess the technologies independently and adopt them to relieve "pain points." The convenience and cost of wireless will drive many enterprise to continue to displace wired. These include applications such as in-building voice and data, fixed data networks within line of sight and wireless e-mail access. 20 November 2003 7