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Tablets are an emerging battleground in mobile: CTIA session

ORLANDO, FL ? Tablets are not just a fad. In fact, they will be one of the key drivers of revenue growth in the wireless industry going forward, according to an Ovum analyst at CTIA Wireless 2011.

The "Next Wave in Wireless" presentation provided an overview of the key battlegrounds within the wireless industry and the key trends that Ovum expects in the next few years. Where will growth come from in the wireless industry over the next few years?

?The global wireless market is characterized by dramatic differences between regions?some are reaching saturation, with stagnating revenues and subscriber numbers,? said Jan Dawson, New York-based chief telecoms analyst at Ovum. ?Others continue to grow rapidly, primarily in emerging markets in Africa, the Middle East, Latin America and Asia.

?However, all carriers are seeking new revenue opportunities and wondering where the next round of revenue growth will come from,? he said. ?Global connections and revenues are both going up and to the right, which is nice to see?revenues are growing, but moderately, fairly slowly?a [compound annual growth rate] of close to 3 percent, while connections are growing at CAGR of close to 10 percent.

?Revenue growth will be substantially slower than the growth of connections because it is a lower-revenue wireless customer than we?ve seen before?in contrast, there are very high ARPUs here in the U.S. compared to almost everywhere else in the world, and very heavy data usage.?

The telecoms research firm recently launched the Ovum Pocket Analyst application for Apple?s iPhone and Google?s Android.

Tablet wars
Tablets are the emerging battleground in devices. The revived product category is driving revenues across various industries, from manufacturers and carriers to publishers and marketers.

Smartphone vendors and some PC vendors are entering the space, most often with smartphone-based operating systems. Google?s Android Honeycomb OS is geared specifically toward tablets.

?Competition in smartphones is well established, but tablets are the emerging battleground in devices,? Mr. Dawson said. ?Apple took a category that already existed and took it to the next level?it has had fantastic success with the iPad running iOS.

?Early Android tablets used a stretched version of the smartphone OS, and newer tablets are using a tablet-oriented version, Honeycomb,? he said.

Research In Motion and Hewlett-Packard/Palm have announced but not yet launched tablets based on their respective proprietary operating systems, RIM?s QNX and HP?s WebOS.

Microsoft has yet to enter the market, partly because neither its smartphone OS nor the PC version of Windows seems appropriate.

?Microsoft seems to be a long way behind?it is still a ways away from launching anything, which means they are being left behind by competitors,? Mr. Dawson said. ?There is significant growth in tablet sales in markets around the world.?

Next wireless wave
In addition to tablets and other multimedia devices, where will the next wave of connections come from? Emerging markets, where penetration is low and growth rates are high, prepaid, machine-to-machine or M2M, and converting voice customers into voice and data customers.

In markets such as the U.S., where the focus has historically been on postpaid, the need for good credit has limited the addressable market, per Ovum.

Prepaid opens up a new customer base that is rapidly growing, especially for carriers aggressively targeting this segment such as Tracfone, Leap?s Cricket, MetroPCS

Sprint Nextel Corp. has also pushed into this space with the acquisitions of Boost Mobile and Virgin Mobile USA.

?Prepaid is no longer just the poor man?s wireless option?it holds attraction for many customers with good credit too,? Mr. Dawson said. ?We will increasingly see hybrid models mixing the best of postpaid and prepaid worlds.?

M2M, like many other technologies, is a concept that has been bouncing around in the industry for many years.

However, it does seem that its time has finally come, due to a variety of factors, per Ovum, including the widespread availability of 3G broadband networks, strong interest and investment from carriers and specific use cases?often in vertical industries?with a business case.

?This is not to say that it will take off overnight, as standardization is still a major hurdle to deployment, but we will see growth in this area,? Mr. Dawson said. ?Applications such as a chip in a dog collar to keep track of pets or a pill box to monitor an Alzeimer?s patient make it more attractive.?

Voice revenue is stagnant or declining, and all of the revenue growth is going to come from data, which will make up a greater and greater proportion of revenue over time, per Ovum.

Mr. Dawson said that some carriers around the world, including in the U.S., are banking on 4G as a source of data growth, but data does not have to mean 4G?3G is plenty for most people.

In addition, it will be some time before 4G, mostly in the form of LTE, becomes a significant force in the overall market, per Ovum.

?4G is not fundamentally different than 3G?it is just faster,? Mr. Dawson said. ?In addition, it is not yet clear that LTE will provide a boost to revenues, as many services are being sold at similar price points to 3G.?

Carriers will have to figure out how to monetize the shift to 4G, and also how to make the rollout as cost-effective as possible.

Network sharing is a major strategy being adopted elsewhere in the world to deal with these challenges.

LTE is going to be tiny on a global scale, even by 2015, per Ovum.

?Anyone banking on 4G being the savior of the wireless industry needs to think again,? Mr. Dawson said.

Next wave of content and services
As with the iPad, Apple reinvented an existing concept with applications.

Smartphone apps have now become the default way to get content of all kinds onto mobile devices?news, magazines, audio, video and even full-length movies, with Warner Bros.?s launch of ?The Dark Knight? and ?Inception? on iOS devices.

?The problem for carriers is that they don?t control the app stores,? Mr. Dawson said.

There are 350,000 applications in Apple?s App Store, 150,000 in Android Marketer, with Nokia?s Ovi, RIM?s BlackBerry App World and Microsoft?s Windows Phone 7 all lagging behind.

However, those major platforms are not the only players?it is a very crowded market, and will become even more so with Amazon getting into the game.

?Carriers have a big challenge ahead of them,? Mr. Dawson said. ?They will be forced to innovative more quickly.

?Because others are taking leadership positions in content and service delivery to the mobile devices, carriers must innovate quickly,? he said.

Final Take
Mr. Dawson