February 11, 2008

By Azita Arvani, The Arvani Group

REFLECTIONS OF 2008 IN WIRELESS

This issue sponsored by:

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Every New Year brings resolutions for the future and reflections of the past. We rarely keep our resolutions,but for this Inside Mobile column, I want to reflect on the most impactful events in wireless in 2008.

Determining impact is very subjective. I’d like to think of impactful events as potential tipping points for theindustry, not necessarily the points that got the highest hype in the media.

1. Moving towards one mobile broadband standard:In 2008, most tier-1 wireless carriers threw their support behind the new fourth generation (4G) wirelessnetworks standard, LTE (Long Term Evolution). These included dominant mobile operators, such as: Verizon.AT&T, Vodafone, DoCoMo, China Mobile, and Telstra. This is a big step towards having interoperable cellularnetworks across the US and around the globe. It will also have a profound impact on the prices of infrastructureequipment, and network deployment. This is a great move and should be applauded. The other 4G standardswere UMB and WiMAX. Despite all the push from Qualcomm, UMB was finally put to rest. WiMAX is currentlyconsidered a niche market. However, WiMAX got a big fire power in 2008. The two big WiMAX supportersdecided to pool their resources together. Sprint agreed to merge its Xohm (WiMAX network) operations withClearwire. This will boost efficiency of the joint WiMAX deployments and will help with scale. In addition,Clearwire got a $3.2B investments from Intel, Google, Comcast, Time Warner cable and others.

We should see LTE deployments in 2010-2012 timeframe.

2. What 700 MHz auctions could have been:The auction started with such great hype over vision of open mobile networks and how we would be able toaccess the future wireless networks similar to the way we access the wired Internet today, through any ISP andwith any device. This would be in contrast to the current walled garden approach of mobile carriers.

Google faked a shot by putting a minimum bid in for a portion of the spectrum (Block C) with no follow-up. Asmany had speculated, Google just wanted the FCC to mandate open access provisions on the eventual winnerof this block, which ended up being Verizon. The other big winner, not surprisingly was AT&T.

Bottom line, we talked a lot about openness and the possibility of having a new generation of mobile operators,but we ended up with the incumbents richer in spectrum.

3. iPhone 3G’s new business models:I don’t think the actual launch of the device on a faster network was so impactful. However, the change in thebusiness relations between Apple and AT&T was remarkable. In the first version of iPhone, Apple got a share ofthe coveted ARPU. Handset vendors sure took notice and were salivating to strike a similar deal. But beforethings got too hot and heavy, the business model changed to exclude ARPU from the iPhone deal.

Users can get their iPhone applications from Apple’s iTunes store. Apple, with its legendary end to end userexperience, started selling applications for iPhones in 2008 through its AppStore. This was the biggest off-decklaunch of any mobile application site. Developers flocked to the Apple AppStore in droves to showcase theirapplications. This not only set a new trend for open download of applications on a mobile handset. It alsocreated a new function for iPhones as a mobile game device.

4. Consolidation of US Mobile operators:AT&T and Verizon, the top two mobile operators in the US, are gobbling up the regional and rural carriers.Among the deals: Verizon’s acquisition of Alltel for $28B and AT&T’s acquisition of Centennial Communicationsfor $944M. The two are in a close race to be the top operator by number of subscribers. Upon completion ofVerizon/Alltel deal, Verizon Wireless will become the largest US mobile operators by number of subscriberswith over 80M customers. With over 80% cell phone penetration, it is natural that the US cellular market ismaturing and the growth happens by acquisition rather than organically. But are we heading towards a duopoly?And if so, what would be the implications on innovation, competition, and pricing? The infrastructure vendorswill feel the pinch of fewer customers.

© 2009 Frost & Sullivan Page 2

Reflections of 2008 in Wireless

Inside Mobile

5. Open source finally got some respect in wireless community:Google’s Android, the open source Linux-based mobile OS, was finally incarnated in body of a G1 phone fromHTC and offered by T-Mobile. The G1 phone is not all that it was hyped up to be. However, for the first time,an open source mobile OS is being taken seriously by major players, such as Motorola and DoCoMo.

6. Mobile became politically correct:The past year will be known as the year when Mobile Politics started. President Barack Obama and his campaignstrategists tapped deeply into power of mobile communication. They engaged their voter base with interactiveand instantaneous content. These included sending mobile alerts, such as announcement of Obama’s choice forvice president, campaign news, updates, ringtones, wallpapers, and interactive polling. The new administration inWashington is expected to be technology savvy and emphasize wired and wireless broadband, mobilecommunication, and other technological advances.

7. Creation of compelling developer’s communities:The mobile platform wars got more heated in 2008 as companies started to lure developers into theirdevelopment communities. Apple did it best by creating a passionate development community around theiPhone platform. KPCB, the leading venture capital group, created a $100M iFund to invest in innovationsaround iPhone platform. RIM created a $110M fund for investments around RIM OS platform. Google alsooffered cash incentives. The Android Developer Challenge had a $10M award for great mobile applications builtaround Android platform.

8. Femtocells came of age:A femtocell is like a cellular base station and an access point put into one. Femtocells provide better receptionindoors and take advantage of the wired broadband to transmit the data between the handset and theoperator’s network. Many mobile operators decided to offer femtocells, including Verizon, AT&T, and Sprint. Ifcustomers find the indoor reception acceptable, the femocells cause a faster transition for people who want toget rid of their wired phones and just keep their wireless phones.

These reflections give us signs for an exciting 2009 in wireless. I’ll cover wireless resolutions and predictionsfor 2009 in my next Inside Mobile column.

Written by:

Azita ArvaniThe Arvani GroupE: azita@arvanigroup.comP: 310-260-8558M: 310-650-8558

Azita is a contributor to Inside Mobile and will write a column from time to time during 2009.

Reflections of 2008 in Wireless

Inside Mobile

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