The MVNO Impact
There are a number of other trends that will shape the smartphone market in 2012 and beyond.
One has to do with players. Pre-paid providers, from pure plays like Tracfone to pre-paid arms of major carriers, are getting deeper into the smartphone market as more users want the functionality of these new devices without the inflexibility of a post-paid contract.
Furthermore, LightSquared will continue to make waves in 2012, enabling MVNOs to grow in a way that hasn’t been encountered before. Their wholesale model is a new feature in the U.S. market, as it sells connectivity as a totally wholesale commodity, as opposed to existing MVNO deals that typically rely on a retail-minus model, forcing MVNOs to make their profits within a very narrow window.
By providing a nationwide all-IP network, LightSquared can charge MVNOs by the MB for usage and free them to create whatever voice and data plans their subscribers desire.
This new network model may be able to teach all carriers something about network capacity and managing network demands. Analysys Mason predicts that, by 2012, the European app market will grow from EUR3.0 billion to EUR3.9 billion, at a compounded annual growth rate of 5%. However, the operator’s cut of that spend will decline to less than 30% in that same timeframe.
Hardware Trends
New trends in smartphone design, from crisper (and even flexible) displays to near field communications (NFC), will help to speed adoption of these new and different applications. However, none of that helps the carriers, whose networks will support the burden of these new services.
“Network capacity is a key problem the industry must solve,” says Kagan. He notes that short-term solutions may exist, but long-term solutions may be harder to come by. “Verizon is acquiring the cable television spectrum. That will give them breathing room for a few years. AT&T has been struggling for years with wireless data quality and thought acquiring T-Mobile would solve their problems temporarily.” With that deal washed away, their core needs remain. “They need the spectrum,” Kagan says.
So carriers, as usual, are left with some tough decisions. OSS technology can help to ameliorate network strain by better managing existing network assets and prioritizing traffic. However, network capacity concerns remain. These concerns are exacerbated by the growth in the tablet market, which is a whole other ball of wax. Smartphones put a strain on the network, but at least most people only have one. Throw in tablets, and already heavily taxed networks may really feel the strain.
Simultaneously, carriers must decide which phones to subsidize and support, and which to leave by the wayside. It’s worth remembering, in the meantime, that while the ARPU attraction of smartphone subscribers is hard to resist, not every user is on that page. At least not quite yet.
So enjoy your new year, and enjoy those messages, no matter what device brings them to you.
