FITC Mobile 2009, Toronto

Led by: Thomas Purves tom@thomaspurves.comTwitter: @tpurves

Ubiquitous broadband connectivity wired and wireless

Bandwidth seen as free by users Consistent un-fragmented mobile platforms Mature/Useful options for monetizing content High common-denominator of devices Ubiquity of mobile phones and of smartphones

It’s great if many Canadians have access to smartphones , much better if/when you could someday assume that everyone does.

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Canada

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HIGHLOW

Canada 2007 Canada 2009

Availability of leading devices and network speed

Canada in Global Comparison

Ouch

Circa April 2007:

Some of worst data rates in the developed world.

A country of Blackberry addicts, but low accessibility to most advanced devices.

Dominated by On-deck content, low accessibility to open content, open services.

High pricing to consumers, lagging wireless penetration, lagging adoption behaviours

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This was the icebreaker

June 2008, Rogers gets the iPhone

Canada (belatedly) gets 3G

Thanks to public outcry, Canada gets 6GB/$30 data plan

New spectrum Auction rules • 40% of new spectrum set aside for new entrants• Mandated tower sharing and in-country roaming• Attempt by Government to improve wireless services and accessibility by encouraging increased competition

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Canadian mobile share is dominated by post-paid

Prepaid share is slowly shrinking

Typical ARPU (fees/month) Prepaid <$20 Postpaid >$70

Smartphones, data plans only come with postpaid

There are no prepaid plans with data or data-only in Canada (grr)

Canada Q2 2009 (CTWA)

Just under half of new subscriptions are smartphones (Telus, Q2 2009)

Only about 20% of installed base is smartphone equiped

Caveat: some smart phones are smarter than others

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EXAMPLE COUNTRIES WITH HIGHER MOBILE PENETRATION THAN CANADA

United States Australia New Zealand UK Malaysia Jamaica Algeria Uruguay Vietnam Spain More…

EXAMPLE COUNTRIES WITH LOWER PENETRATION THAN CANADA

Egypt Iran Lebanon Cook Islands Angola North Korea Liberia Indonesia Somalia

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Nokia/LECG global connectivity scorecard for Canada

Commentary: Good basic broadband Low 3G penetration Low fibre/ultrabroadband

penetration Business and Consumer

usage patterns lag U.S. and other peers

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Price Data Effective Price/MB10MBps wired broadband 55 $/month 100 GB/month 0.00054$ $/MBRogers 6GB plan 30 $/month 500 MB/month 0.06$ $/MBRogers rocket stick 52.95 $/month 500 MB/month 0.11$ $/MBVOIP long distance 0.03 $/min 12.2 kbits/sec 0.34$ $/MBTypical prepaid minute 0.25 $/min 12.2 kbits/sec 2.80$ $/MBRogers long distance 0.90 $/min 12.2 kbits/sec 10.07$ $/MBRoaming calls 2.00 $/min 12.2 kbits/sec 22.38$ $/MBSMS (no pacakage) 0.25 $/msg 1120 bits 1,872.46$ $/MBSMS roaming 0.95 $/msg 1120 bits 7,115.34$ $/MB

What’s amazing is the huge orders of magnitude in effective pricing per bitdepending on the channel and the service being offered.

How long is this sustainable? How long until consumers figure out ways to arbitrage more expensive bits for much, much cheaper ones?

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We value backwards compatibility

Reliability Network effects Spectrum

regulations and monopolies

Limited competition Cunning marketing We value some

types of bits or messages more than others

Others?

But relax…

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As a very simple communication channel, DeBeers has every telco beat.

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Example high-value per bit:Engagement ring $3,500This product delivers1 bit of information (yes or no)

value: $29,360,128,000 / MB

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Example low-value per bit$32.99CAD Amazon.ca3-disc special edition25 GB per disc = 75GB

“value”: $0.00042 / MB

Example high-value per bit:Engagement ring $3,500This product delivers1 bit of information

value: $29,360,128,000 / MB

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Source CISCO forecasts 2009

Rogers just announced 21MBps service in Canada (cool!)

A standard GSM voice band requires only 12.2 kpps

Notionally, that’s now less than 0.01% of your phone’s available bandwidth

How long can this traditional but tiny little bit-stream continue to support 80% of the carrier’s revenue?

Gap between network traffic and service revenue widening Inevitable dumbification of the pipe Challenges of cross-subsidization an commoditization, the

demands and value of bandwidth exceed what carriers can easily bill for

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Cell phones as we know them will come and go in a relatively short period of time

Think of cell phones like the video rental industry

Carriers know this and are trying to Invest in new business models (e.g. Rogers

Venture Fund)

Make hay while the sun shines Forestall the future where possible

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Some new entrants:

However, new entrants focusing on talk/text New spectrum highly fragmented Most entrants paid a lot for thin amounts of

spectrum Not a lot of capacity for data until future

spectrum allocations Don’t expect new entrants to be promoting

smart phones Think cell phoning like it’s 1999 As mobile developers, this doesn’t really help

you

Canada’s 2008 spectrum auction exceeded expectations, raising $4 for the government

In retrospect, charging the industry a $4B tax on expansion feels like a strange way to help lower your cell phone bill

How could Canada invest that $4B? Some ideas: Reimburse carriers as tax credits on mobile

capital expenditures Fund mobile content creation Fund mobile startups and innovation in Canada

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Leapfrog potential Can we turn lagging adoption into an advantage

Unlike 2007, we have leading technology Fast networks The best devices (Iphone, bberry, palm, rocket sticks)

Game changing technology (starting with the iphone) has stoked competition

Rogers has shown that competing on technology (not just marketing) Canadians have voted with their wallets

HSPA competition coming soon Canada has a great mobile development and

startup community near very large global markets

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Devices (our addiction to handset subsidies is a problem) Floods of cheap Chinese android knockoffs? Invasion of non-phone devices, mids, nettops, who knows

whatsSpectrum

Openspectrum – whitespaces Mobile wimax (hasn’t worked yet) Foreign competition

Voip Googlevoice New management at Skype (3rd time is the charm?

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High costs remainRoaming pricing is outrageousNetwork neutralityPricing transparencyLimit length of contractsMore spectrumDeregulate foreign ownership

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Can we predict the death of: Area codes and long distance? Numeric phone numbers 3 year contracts SMS messaging

Or not? A century and a half after they first

thought up the idea deBeers is still selling diamonds

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