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October 21, 2010

Mobile Business Will Exceed $1 Trillion by 2014

By Gary Kim
Contributing Editor

Worldwide mobile voice and data revenue will exceed one trillion dollars a year by 2014, according to Gartner (News - Alert), Inc. About the only issue is how great a percentage of total revenue mobility will represent. Some estimates call for a global market generating $2.3 trillion before that time, with as much as 56 percent of total revenues already contributed by mobile services. 

“We see three major eras of mobility,” said Nick Jones, vice president and distinguished analyst at Gartner. The device era was characterized by iconic devices such as the Motorola RAZR and was dominated by device manufacturers. This was followed by the application era, which arrived with the iPhone (News - Alert), popularizing application and media stores. 

Going forward, the service and social era will build on the application era, but it will be characterized by cloud services and streaming media. Applications will survive, but often as a component of a more complex end-to-end experience involving the cloud, said Jones. 

It also is fair to note that trends in developing regions will be quite different from those of developed markets. In developed markets, existing fixed-line services will continue to be under pressure, while in developing nations, growth, particularly driven by mobile services, will be the pattern. 

In the U.S. and similar markets, fixed network services other than broadband continue to decline, it is fair to predict, though video and content revenues likely will become a more-significant factor over a decade-long time frame. 

Wireless growth will be highly susceptible to broadband and data services growth, balanced by a certain amount of "harvesting" of mobile voice revenue, which will decline, relative to broadband, over the decade, at least in the U.S. and other developed markets.

In developing markets, though growth rates of mobile voice services might slow, they will continue to be robust. 

It is probably worth noting that voice revenue trends have been through two fundamental cycles, with a third on the way. At one time, international long distance was the highest-margin product, followed by domestic long distance. That changed fundamentally between 1997 and 2007. Over that 10-year period, long distance, which represented nearly half of all revenue, was displaced by mobile voice services.

Since about 2000, fixed voice lines and revenue have been steadily declining, at least in the telecom service provider segment, with the cable segment able to grow the role of voice in overall revenue.

In the third change, mobile voice will follow a trend similar to that of long distance, at least in the U.S. and similar markets. That is no surprise, at this point. All service providers in developed markets expect that data revenues are going to replace voice as the key revenue driver. 

In each of the shifts already occurring, several things happened. Prices and profit margins steadily were compressed. And new competitors picked up significant share of the remaining business. In each of the three periods, the product has changed. In each period, there were different "key" products, and in each period, there was a decoupling of value. 

Between about 1997 and 2007, "long distance" became loosely coupled with local calling and local access. Long distance increasingly could be consumed "over the top," using prepaid calling cards or separate providers for "long distance" on a local line, for example.

Between 2000 and 2009, it became possible to use mobile phones to similarly displace both local and long distance calling, as well as to substitute mobility for fixed voice, while both over-the-top and IP-based calling options became available.

Over the next 10 years, both voice itself and long distance calling in the mobile and fixed realms likewise will be increasingly disaggregated and amenable to "over the top" consumption.

At the same time, the number of settings where voice is used likewise will disaggregate. Voice will be used as an embedded feature of many types of applications and experiences, using many types of terminals and featuring multiple revenue models.

All of that suggests wireless revenue could easily top $1 trillion by 2014. About the only question is what percentage of total revenue is contributed by wireless services, either in developed or developing regions and nations. 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Jaclyn Allard


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