Towards the end of the year, we get Time
magazine’s Person of the Year, the Nobel prizes, and other recognitions
of the year about to wrap up. It’s all a mechanism of keeping score on
who’s up and who’s down; what’s hot and what’s not. So in this spirit
let me share with you my highlights of 2009 and how this is going to
evolve in the year to come.
Without a doubt the three areas that
defined our industry in 2009 were App Stores, 4G and Cloud Computing.
They all punched significantly above their weight during the year – a
fact that most of us failed to predict on January 1.
App Stores Storm the Castle
Nobody would have guessed on January 1, 2009 that apps would explode as
they have. Even for those of us immersed in the communications
business, a year ago apps were considered more of a sideshow than a
real force to be reckoned with.
Apple
launched its App Store in 2008 to coincide with the release of the
iPhone 3G handset. At first, it was an interesting side business, and
people started slowly downloading interesting apps. Then before we
could blink, there were over 87,000 apps available and something like 2
billion app downloads.
While this seems hugely consequential,
I feel it’s my duty to do a sanity check on all of this. What matters
from a business perspective is the number of apps that are being
downloaded and paid for. The vast majority of the apps in the
App Store and other similar app stores are free. The estimate is that
somewhere around 1 in 40 of all downloaded apps are paid for. So while
it is interesting to see that users now have access to a wide array of
free toys to play with on their phone, it doesn't do much for the
economic argument underpinning all the network and device investment.
It
is estimated that the total revenue from the first billion downloads
of iPhone apps is somewhere between $70 million and $160 million. While
this is a nice chunk of change for anyone, it’s a drop in the ocean
when divided between the 30,000 or so apps developers and, more
importantly, looked at in perspective of the $1.5 trillion industry it
is trying to change and rejuvenate. So we are still at the very early
stages of this new business model, and it is all still up for grabs.
What
is important however is that we’ve moved from a theoretical or
intellectual exercise of what will be the content genre of the future
to the very practical reality that the content of the future (at least
the next 12 months) is all of these games and apps. The most
interesting part of this in my opinion is the fact that the companies
making all the running in this space (Apple and Google) are not telcos.
Looking ahead to 2010, I can pretty much guarantee that one of the
biggest focus areas for telcos will be how they themselves can break
the Apple/Google stranglehold on the app store business. It’s an easy
enough prediction; what’s harder is guessing how it’s all going to turn
out. How will the telcos plan their Apps counter-attack? Will they
create their own app store environments, or will they align themselves
with Apple, Google or another third party? There are a lot of
interesting twists and turns here, so I recommend that you keep an eye
out for app stores in 2010.
4G Picks Up Speed
The second thing I didn’t really see coming in 2009 was the speed –
pardon the pun – of 4G/LTE. At the beginning of the year, LTE was just
a twinkle in the eye of the industry, and maybe was mentioned once in
TM Forum’s strategic plan. But over the past 10 or 11 months, things
have moved so fast that we’re now talking about dozens of viable field
trials and serious commercial launches happening in 2010. That’s
incredibly soon when you consider that 3G has still not penetrated many
markets around the world.
But
when you’re talking about speeds ranging from 10 Mbits/sec to 50
Mbits/sec to the handset, and the potential to be a DSL killer, LTE is
a huge game changer. So while 2009 could be called the year of 4G/LTE
and all the bells, whistles and hype that go along with that, I do
think 2010 will be a different story altogether.
I predict that
next year will actually be a huge disappointment for 4G/LTE. Rollouts
will not happen as planned, and handset availability will be terrible.
It’ll be more like 2011 before the industry picks up the pieces and
starts getting more serious about LTE. But when it does, it will
seriously change how we look at communications services.
But
let’s not repeat the sins of past generations. Traditionally our
industry has focused on network and handset rollout and conveniently
forgotten about the software & systems that deliver the next
generation of services and manages the complexity of a new generation
of mobile. Without this, LTE will bump along the ground as an expensive
3G replacement. Without the design and development of new services
that take advantage of the capabilities of LTE, and their integration
into the delivery and billing capabilities of the service
provider, there will be no bonanza from LTE. Without investing in
working out how to manage challenges such as the huge backhaul
requirements of LTE, growth will be stifled.
These are the
hot spots that TM Forum is focusing on through a wide variety of
collaborative activities around new service creation and the core
network, service and information management challenges LTE presents.
Looking Up at the Clouds
The third topic that was a surprise to many in 2009 was the rapid rise
of cloud computing. It’s gone from a vague discussion that people might
have brought up in conversation 6 months ago to a topic that’s been the
focus of hundreds of articles and dozens of conferences. Everyone is
talking about it, but I do have to bring it all back down to Earth and
say that as compelling as cloud computing might be, it’s not the
solution to all the worlds ills.
There
are security, reliability and portability issues to solve, and I think
we’ll actually see a backlash in the first half of 2010 as people that
jumped onto the cloud bandwagon in 2009 discover that it’s not all it’s
cracked up to be.
The small and medium businesses have naturally
started gravitating toward cloud due to the short-term cost savings,
but they may be in for a rude awakening come next year when they want
to change providers or bring their data back in-house.
I think
next year cloud won’t be so much about the hype as it will be much more
balanced on the pros and cons and practicalities of the technology. The
TM Forum cloud services program is addressing these issues from the
traditional telcos and wider enterprise perspective.
So there
you have it – my look at what’s changed the communications world in
2009 and what we can expect from those areas in 2010. But knowing how
unpredictable our industry is and how things can quickly shift, I
imagine a year from now I’ll be writing on a whole new slate of topics
– including some that we haven’t even conceived of today!