CTIA SPECIAL EDITION – APRIL 3, 2008
During tough economic times, tech companies need to get creative.
Every year, CTIA’s Wireless show casts an exuberant spotlight on the highest of high technology, propelled by an industry that, according to a report from U.K.-based Portio Research, will top $1 trillion in annual worldwide revenues by the end of this year. Strolling through the endless array of exhibits at Wireless 2008, however, you might detect a bit less optimism than in recent years.
If there is some measure of malaise in the industry right now, I suspect it derives from two main sources. First, and most obviously, there is the economy in general. The consensus among experts appears to be that we are at the beginning of what may become a serious recession. It is not yet clear how this will affect consumer and business spending on wireless, but I don’t see much evidence of the enthusiasm that, just last May, led Apple to predict sales of 10 million pricey iPhones by the end of 2008.
The second reason for concern is that irrespective of the general economy, the era of explosive growth in the wireless industry here in North America and in Europe has largely passed. With market penetration now over 80%, focus has shifted to increasing the “average revenue per user” (ARPU) as the primary route to industry expansion.
For years, most hopes for increasing ARPU have been pinned on delivery of new mobile data services. Although it’s taken far longer than was hoped, revenues from data services are finally beginning to make an impact. But that incremental growth, such as it is, has to be shared by a staggering number of different hardware, software and service providers. Indeed, perhaps half the companies exhibiting at Wireless 2008 are scrambling for a piece of the mobile data revenue pie.
If we are in an age of economic uncertainty and questionable new revenue opportunities in the North American and European markets, where can we find continued industry growth? Right now, it’s mostly in the developing countries of Asia, South America and Africa. In fact, the economies of developing countries have over the past few years been growing at a remarkable average annual rate of around 7%.
I don’t think it’s a pure coincidence that this growth has coincided with significant improvements in telecommunications in these countries, largely provided by new wireless networks. Even more significantly, cell phones have become perhaps the most coveted consumer goods for the billions of people in emerging economies.
Tapping growth opportunities for the wireless industry in developing countries requires products and services attuned to that market. Bare-bones handsets produced at the lowest possible cost, yet rugged enough to withstand third-world abuse, will sell much better than phones laden with every conceivable feature. Also, many customers won’t have the convenience of an electric outlet to plug in a charger, so you may need to provide one that uses a hand crank.
Infrastructure systems have to take into account unpredictable and unreliable availability of commercial power. Backhaul? Better plan to bring your own, and it better be literally bulletproof. On the other hand, where high-tech sophistication is needed is in the area of network design and deployment. There aren’t a lot of skilled wireless network engineers in Africa, at least not yet, and operators there can really benefit from tools that substantially automate the process. Also helpful is infrastructure equipment small and light enough to allow deployment in areas with poor roads and little heavy construction machinery.
Most Wireless 2008 exhibitors and attendees make their livings in the domestic wireless industry. We all hope that with the latest in high-tech wizardry our business will continue to prosper despite current economic uncertainty. But the biggest opportunities for wireless are probably in basic services for developing countries. Companies addressing that market may be the ones enjoying the most growth over the next few years.
Drucker is president of Drucker Associates.
He may be contacted at firstname.lastname@example.org.