2007's New Realism
Having learned hard lessons from the dot-com fiasco of 2001, the wireless industry has tippy-toed away from that year of living dangerously all the way to 2007, the year of living realistically.
As the dot-bomb era becomes a more distant memory, it gets a little simpler to breathe easy. In fact, 2006 proved an almost pleasant year for the wireless industry. Investment and productivity were up and, for most companies, there was modest to impressive growth. Now that the industry has regained its footing, what should we expect in 2007? Here are a few of my thoughts.
Viral Applications: Peer-to-peer sharing, mobile communities, social networking, user-generated content, super distribution. Carriers that figure out how to connect these dots will gain the keys to the data kingdom.
Healthy Carrier Capex: 2007 will see capital expenditures from wireless carriers in line with or slightly above 2006 figures. U.S. carriers still are spending tens of billions of dollars to expand coverage and support the rollout of new data services and applications. The big story in 2007 may revolve around new data offerings such as mobile TV and video apps, but the real story will be about how reliable the network and coverage are. In some cases, perhaps a larger percentage of capex should go into assets that improve coverage.
Financial Markets: Wireless carriers will find that their images on Wall Street are shining or tarnishing depending on their numbers. For instance, carriers with 1+ percent churn rates will have their work cut out for them in light of the Street's critical view of high operating costs. Even introducing the latest whiz-bang technology won't be enough to compensate. Carriers delivering high churn numbers should be afraid, very afraid.
Corporate Governance: Companies experiencing a steep drop in share price, lower profit forecasts, reduced market share and delays in promised product delivery can count on swift action from boards and financial markets. Once glacially paced, today's companies now move quickly to repair sinking ships, even if the captains have to walk the plank, like they did at Deutsche Telekom and Yahoo!.
Customer Carelessness: Here in the United States, consumers have been trained to expect less-than-exceptional service. Although mediocrity dominates most customer interactions in retail, food and service sectors, wireless has become the most visible customer care whipping child. Have a bad waiter? Typical. But have a bad wireless experience? Call out the Better Business Bureau. Customers are sharing and comparing notes about what their carriers have – or have not – done for them lately. And happiness isn't found or lost solely in customer care centers. Health issues, coverage performance, billing, taxes and more shape overall opinions about carriers. "Buyer Beware" is shifting to "Carrier Beware" as customers recognize that their wallets as well as their phones are mobile.
Mobile TV: Tune in to commercial TV and video offerings in 2007 for the Battle of the Discordant Bands: What users want vs. what the industry thinks it wants. The earliest adopters will not define future users. Regardless of other analyst predictions, my money remains on one size will not fit all. Like its living room counterpart, mobile TV and video will take many forms, support many content arrangements and transform over time. What we see in 2007 won't define the market but will better enable it. There's still plenty of room for new ideas.
MVNOs: The MVNO startup rage is over. I don't expect to see any major players emerge in the coming year. The current MVNOs will claw their way to viability or die trying. Mobile ESPN's demise provided a great wake-up call.
Phones I to Z: Microsoft recently predicted it will sell 1 million of its Zune music players through the first half of 2007. Although that figure barely registers as a nano-blip compared to Apple's hard-charging iPod sales (60 million to date), it's a good start. The $250 Zune, with its 30-gigabyte hard drive capable of holding 7,500 songs, offers a Wi-Fi content-sharing capability that iPod doesn't. In music circles, as wireless companies are discovering, sharing will represent a key component to viral sales. Although DRM allows Zune-sters to play a shared song three times before vaporizing, it is an important attribute. Incidentally, both Apple and Microsoft have the deep pockets and marketing reach to add, dare I say, other wireless capabilities such as voice and data. Rumors continue to swirl about a potential launch of an iPhone. Might Jan. 9's Macworld Expo in San Francisco be the site of the coming-out party?