News Analysis: To reach business customers and consumers, wireless carriers and phone manufacturers will focus on rich applications and entertainment services, analysts say.Wireless providers are expected in 2007 to look for ways to reduce churn, gain customer loyalty and offer a wider variety of services.
In the process, the major wireless companies are reaching parity in their offerings to their customers, both in terms of services for business users and added features for consumers. In many cases, those offerings work hand in hand to provide customers with capabilities theyve only dreamed of in the past.
"What we see is that consumers are increasingly making the shift from using these devices for voice only to using voice and data," said Charles Golvin, principal analyst at Forrester Research. Golvin said the things that people do with their phones will drive these changes.
"Youll see the first broadcast networks for video. Video will be a lot more important. … Music is going to continue to be a big focus," Golvin said. "Well at least have resolution on whether the long-awaited Apple iPhone [will show] up in the market."
Golvin said consumer interest in music and video services market is increasing because the carriers are well along in the process of building out their high-speed networks, and hence can offer better viewing experiences. He said this is already causing a shift in the market. "That shift in [the use of] consumer devices is happening. Its not mainstream yet, but its happening," he said.
The improvement in networks is also fostering a growth in smart phones, especially those with high-speed capabilities and, in some cases, entertainment support. "Smart phones will increasingly take a larger percentage over 2007," said analyst Randy Giusto, IDCs group vice president for Mobility, Computing and Consumer Research. Giusto has just completed a major study on the future of smart phones for IDC.
"They do run richer applications. A lot was focused on business, but as the industry moves to entertainment youll see beefier ones," Giusto said. "Over 2007 youll see people begin to migrate more to smart phones," he added.
Giusto said the reason carriers are encouraging the move to richer applications is because it improves their ARPU (Average Revenue per User), a measure of how much people are willing to spend for mobile and wireless services. Although prices for service plans and mobile devices have gone down, he said, when companies make richer applications available and deliver content that people want, customers will spend more for it.
"Carriers and content providers will push on certain apps as well … Were starting to see more consumer applications pop up [such as] video conferencing, mapping and GPS services," he said.
But, of course, theres more to the wireless communications market than smart phones. Current Analysis Senior Analyst Bill Ho said entertainment is set to be the focus in 2007. "The mobile video market is being pushed heavily by Verizon Wireless. Mobile TV is being pushed," he said.
Click here to read more about the changing smart-phone market.
Ho said both Verizon and Sprint are working hard to bring video and music services to customers. "The difference with what [Verizon is] doing versus what Sprint is doing is that the picture quality is supposed to be better, so the user experience is better," Ho said. "This is almost like true TV. Complementing that is something called datacasting. Its broadcasting of data clips."
"Verizon Wireless has already announced that they will add YouTube video content," Ho said. "You can see anything viral and user-generated. Its been so successful that everyone is trying to bring it to play in the mobile space. … Anything thats online and popular will be given to the Vcast video content. Theyre trying to generate messaging use."
In addition, Ho said, "Well see more of a push for mobile music, even though its already been launched. Cingular announced something earlier this month. A lot of carriers are trying to push that. … Mobile video and mobile music are going to be the real moneymakers. … A lot of the music services depend on the 3G [third-generation] infrastructure. Carriers will continue to market mobile music," he said, adding that he expects to see a major push for true broadcast video in 2007.
Kiliaen Van Rensselaer, executive director of National Marketing for Cingular Wireless, which has headquarters in Atlanta, said he hopes 2007 will see a real move to convergence. "Consumers will carry around one device. Theyll stop carrying separate devices for music and e-mail. Well provide them the ability to access the things in their daily life on their phone," he said.
An example of a "converged device" would be the Cingular BlackJack, made by Samsung. The BlackJack is thin, works as a smart phone and PDA, and supports video and music. Van Renssaelaer said, "Were seeing a lot of growth in PDAs and smart phones. The BlackJack is great for corporate users and prosumers, and consumers are taking a liking to it as well."
Finally, "As we finish our plans to roll out a 3G network we will see a big emphasis on devices that can deliver 3G services," Van Rensselaer said. "Consumers are interested in escape during the day. What were interested in doing is giving them a quick escape. What we find more compelling are clips and highlights. We think consumers are more apt to drink that content," he said.
Read more here about Cingulars BlackJack smart phone, made by Samsung.
Van Rensselaer said much of the reason for the new capabilities and services carriers are offering is to keep customers loyal. "07 is a big year where a lot of [vendors in] the category [are] going to lower their gross ads, and focus on reducing churn," he said. "Theyll focus on taking care of their customers. They want to please their customer base."
Forresters Golvin, however, questioned whether such convergence will really happen. "Can they extend the iPod experience out into the mobile phone? Can they do it better than what has been done with the RAZR with iTunes?" he asked. For such moves to work, Golvin said, there needs to be new emphasis on the youth market in 2007. For example, it should involve the use of prepaid phones, which are popular with younger users.
"The carriers are trying to be all things to all people," Ho said. He said that in order to keep their revenue strong, carriers will provide a range of content that will appeal to a wide variety of customers, ranging from those who just want a phone to those who want a phone to be a full personal communications center. Carriers and phone manufacturers will need to provide business services and entertainment, as well as plain voice services, he said.
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