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Tuesday, July 03, 2007

Words fail me

I don't like to take potshots at my competitors, but this quite frankly beggars belief.

Now, I should caveat my judgement in that I don't know the assumptions, definitions etc in the full report & model, but even so, this is so far beyond the "smell test" I don't know where to begin.

But lets start with:

  • Enterprise - UMA initiatives are going nowhere
  • Prepay (seen any FMC models suitable for 70% of the world's subscribers? I haven't)
  • Inapplicability to CDMA/WiFi (ie about 20% of users)
  • Limited base of broadband homes with WiFi
  • Refarming 900MHz to give better indoor coverage
  • Falling cellular prices making homezone pricing irrelevant
  • Femtocells
  • SIP & VCC standardisation coming with 3GPP R6 and R7
  • Lack of WiFi penetration into handsets

Some of this doesn't apply if the stats also include non-dual mode devices using UMA (eg femtos), but it still looks out by getting on for an order of magnitude. I haven't redone my full model & forecasts for a while, but if I had to take a punt, I'd be being generous if I said 10 million subs by 2012.

As always, let me know if you'd like a disruptive second opinion.

9 comments:

Chinese Circus said...

Kineto probably commissioned that research report with rosy forecasts...

Philip Solis, Principal Analyst, Mobile Broadband said...

Words do fail you, Mr. Bubley.

ABI Research typically does not respond to bloggers' comments on ABI press releases. In this case we will make an exception for the benefit of Mr. Bubley's readers. It is worth noting that ABI Research publishes independent research reports available for anyone to purchase. ABI Research has never taken part in commissioned reports and never will.

Mr. Bubley raises some points as to why the UMA market could not possibly grow to 65 million subscribers worldwide by 2012, as ABI Research has recently stated in a press release. I can easily address these points:

* Enterprise - UMA initiatives are going nowhere

This is one of two points Mr. Bubley made that is somewhat correct.

* Prepay (seen any FMC models suitable for 70% of the world's subscribers? I haven't)

While it is true that there will be an increase in prepaid subscribers in emerging markets, there is also a shift AWAY from prepaid for many operators. One example is Mobistar in Belgium, who has seen its prepaid percentage drop from 64.6% in 2004 to 56.0% in 2005 and to 48% in 2006. They are conservatively expecting this to decline to 45% in 2010, but the shift could be more drastic.

* Inapplicability to CDMA/WiFi (ie about 20% of users)

This is the other point Mr. Bubley is correct about.

* Limited base of broadband homes with WiFi

There will definitely be growth in broadband homes. Aside from the growth of DSL, cable, and FTTX, there is WiMAX. Even as the growth of WiMAX is just really getting off the ground, wireless ISPs using proprietary wireless broadband solutions (for now) such as Clearwire are seeing healthy subscriber growth. Wi-Fi as a means of distributing broadband access in the home is fairly commonplace.

* Refarming 900MHz to give better indoor coverage

The use of 900 MHz means greater coverage area and better indoor penetration to be sure. This will be highly useful in rural areas. In urban and suburban areas, however, carriers are always working to increase the capacity of their networks, not decrease it. The use of 900 MHz in densely populated areas means that millions of devices would fail to connect to overloaded towers. Just over 5 simultaneous data users on a 3G network is about the limit. Afterwards performance starts to degrade. The use of OFDMA (a fourth generation of mobile wireless air interface following AMPS, TDMA, and CDMA) is one solution to increase capacity. The use of more picocells, femtocells, and Wi-Fi access points is another one. The trend will be to offload data from the macrocell network when possible so capacity is adequate, performance is optimal, and RAN and backhaul costs are reduced.

* Falling cellular prices making homezone pricing irrelevant

Homezone pricing is merely a precursor to FMC. Homezone pricing reduces prices for consumers without reducing the costs for the mobile operator. FMC solutions can reduce the prices for consumers in a healthy way by reducing the mobile operator's costs of delivering service.

* Femtocells

ABI Research's Stuart Carlaw came out with the first research reports about femtocells - Mr. Bubley most likely learned about femtocells from ABI press releases.

* SIP & VCC standardisation coming with 3GPP R6 and R7

UMA, VCC, and femtocell solutions will all exist in the consumer market.

* Lack of WiFi penetration into handsets

This has been rapidly changing. Most smartphone vendors are already implementing Wi-Fi - the rest are planning for it. There are 9 UMA handset vendors today with 12 models and more to come. When mobile operators start deploying VCC-based solutions, there will be a new wave of Wi-Fi enabled handsets on this front.

* I haven't redone my full model & forecasts for a while, but if I had to take a punt, I'd be being generous if I said 10 million subs by 2012.

In a very short while (a little over 6 months), France Telecom has sold 300,000 UMA handsets and has over 200,000 subscribers. British Telecom has much fewer, but will increasing its marketing efforts. T-Mobile USA has just launched its UMA service nationwide, and all comments from consumers and journalists are very positive. This is just the beginning. As the number of UMA handsets increases, as 3G UMA handsets start coming out, and as more mobile operators launch UMA solutions, expect UMA hold its own against competing FMC solutions.

When one does not understand every aspect of the complexities of delivering mobile wireless communications and the true benefits of FMC, his thoughts can lead to disruptive and misleading commentary. Contact ABI Research for a first opinion that brings clarity to emerging markets.

Philip Solis
Principal Analyst
ABI Research

Dean Bubley said...

Philip

Thanks for commenting on this. You make some reasonable points, but have perhaps misinterpreted a few of my own.

For your reference, I have been covering UMA since before publication of the first specifications documents in September 2004. I have been consistently critical of it. My own published research reports - viewed as horribly negative two years ago - now seem in hindsight to have been insufficiently pessimistic. I first published research on WiFi/cellular devices in 2003.

While some operators have been encouraging prepay users to shift to postpay (or actively managing their customer base mix), others have emerged that are prepay-centric, especially MVNOs. On balance, I see no signs of a massive shift in user behaviour in this regard.

900MHz: at present, 3G coverage is often poor in rural areas (as is 2G in some markets). Some predictions for newer 3G-enabled UMA variants suggest that it offers a more effective mechanism for delivery of 3G buildout. I contend that UMTS900 is simpler.

Homezone pricing - I was using the term to include both UMA-based and cell-ID specific pricing. If macro-based cellular voice pricing comes down further, it reduces the scope for savings with dualmode. In many cases this will occur naturally with increasing competition. It's also worth considering that as operator costs come down, some regulators will stipulate lower termination rates & prices to reflect this.

I don't dispute the growing number of homes with broadband + WiFi. However, the aggregate number - especially those with operator-managed WiFi-enabled gateways - is unlikely to get beyond 500-600m in the timeframe, many in countries in which UMA launch is unlikely. This is a critical gating factor on the size of UMA's addressable market.

"Mr. Bubley most likely learned about femtocells from ABI press releases". Bad call on that one I'm afraid. As it happens, I've been following picocells for 7 years, and advising on femtocells for about 3 years. I find your reference to Stuart Carlaw particularly amusing as I was sitting next to him on a conference panel on femtocells on Tuesday. You may wish to ask him if he felt I'd only heard of the concept through his efforts.

With a bit of luck we'll also find each other sharing a panel at some point. Could be an entertaining debate.

Anonymous said...

I think that 65m is maybe a tad high, but not completely unfeasable. Think about the handset value chain from its beginning, i.e. chipsets vendors. Qualcomm (through it acquisition of Airgo), TI, Philips/NXP are all already offering and/or quickly expanding both HW and SW solutions for 'UMA' type solutions. Throw in Intel's upcoming UMPC solutions with GSM integration and you may have some volume there. The key question is whether operators will do this; so far the operator response has been delayed and (with a few exceptions) lackluster. However, it would only take a major Asian (KDDI?) or US carrier (Sprint? + T-Mobile) to change that and get to this kind of annual volume. CB

Dean Bubley said...

Re: the anonymous commentator. It is a mistake to view all operator-oriented WiFi/cellular dual-mode services as UMA-based. At present, it's around a 50/50 split, with many providers using a SIP-based approach (DoCoMo, NeufCegetel etc), and some like BT adopting both paths. According to a speaker at a conference this week, T-Mobile is unlikely to extend UMA to its European operations.

I'd expect 10-15% of cellphones to ship with WiFi capability in 2012, plus some other devices like laptops & UMPCs to also be dual-mode. Probably around half of those will have WiFi used only for data, or not used at all. Not all will have a UMA/GAN protocol stack, and again, in many cases that capability may go unused.

At present UMA doesn't apply to CDMA networks, which writes off Sprint & KDDI. Qualcomm has made noises about dual-mode, but given the shift to all-IP cellular with Rev A, I'd expect it to be a more IMS/VCC-like than UMA-like model.

norwegian blue said...

I listened to John Strand last year at a UMA conference ... Dean came across as a wholehearted believer in UMA in comparison.

I wonder what Mr. Strands current viewpoint is?

James McGovern said...

What would it take for you to add the one.org banner to your blog to support charity? I have added it to my own and would love to see other bloggers amplify the need to stomp out poverty.

If the activism irritates you then I understand...

James McGovern
http://duckdown.blogspot.com/

Kris Tuttle said...

I wonder if either of the right and honorable gentlemen broke their sliderules or eyeglasses?

Anonymous said...

Hi Dean,

What is your take on third party software vendors (ISVs) success delivering VCC client solutions to ODMs?