Saturday, June 2, 2007

Trends in mobile business models

I spent the past two days at the LA Global Mobility Roundtable conference, hosted by the University of Southern California (in downtown LA) but held near LAX. This is the 6th annual conference but the first one that I attended. Compared to any other conference that I’ve attended (with the possible exception of the PDMA conference) it has a lot of more serious industry participation, both in terms of bodies but also in terms of the orientation of the sessions and the discussion.

By eyeball, the attendees seem 60% academic and 40% industry. While most of the papers are academic, the plenaries are all industry people. On a show of hands, the attendees are about 3:1 business vs. technical.

This year’s conference was focused mainly on wireless data. Within mobile data, there were three major themes:

  1. Network access. Several years ago the carriers were seeking to push their new 3G networks (which did not yet deliver broadband speed). Today, a major theme (at least among the Europeans) was about roaming between cellular networks and Wi-Fi hotspots. There was also a discussion of US municipal Wi-Fi/WiMax networks.
  2. Content, with a particular focus on video. There’s licensed content (with the Hollywood crowd prominently featured), custom content, and user-generated content. As the Hollywood panel made clear, having good (affordable) network access is a prerequisite to moving any significant amount of video content.
  3. Revenue models. People talked about “business models,” but (to someone who researches business models) that has a very specific meaning that includes making a profit. At LA GMR, people only talked about different revenue models. For video, that was subscription, per-download, embedded ads (pre-roll, post-roll) or product placement. Of course, there was an undercurrent (often right on the surface) over who gets how much of this revenue.
My own iPhone paper with Mike Mace fits into the content area — but the role of devices in providing content access.

Of course, voice is still the largest source of mobile phone demand and revenues for most countries. The number I heard for the US is a monthly ARPU of $62 for voice and $6-7 for data. If you count SMS with voice (it is a 2G technology), it seems that the only places where data is the major revenue source is in Japan and Korea.

Also at the conference, a number of researchers are looking at initial adoption of mobile phones in less developed countries (LDCs). This is where the growth is: developed countries have 80-120% per capita penetration, compared to less than 50% for most of Latin America, 35% for China and 13% for India. I gather Africa is in single digits.

Kas Kalba (a consultant from New Haven) estimated that penetration in Africa is going to take a handset cost of $10 - versus the $100-700 (pre-subsidy) cost of US phones today. (The LG phone chosen for the “3G for All” competition is a step in this direction). Along with that, Kalba said that LDC penetration also needs a carrier that can get by on a ARPU of $1-2 per month (all of that prepaid since the poorest have unreliable income streams). While this number seemed mind-boggling, Pakistan is already within an order of magnitude ($3-4/month).

I'll add links to specific posts as I have them.

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