Systems Providers Want Low-Rate Wireless PAN “In a Box”
The picture for the emerging 802.15.4 Wireless PAN (WPAN) technology looks quite promising. Based upon discussions with system providers, the closer silicon vendors can get to a “ZigBee in a box” solution, the greater the opportunities will be. Ease of portfolio management is one of the key reasons.
For those unfamiliar, an 802.15.4 chipset solution can be used with a proprietary network layer, or with the ZigBee specification that is close to final release. Overall, positive progress is being made to get systems onto the market. 2004 has been the year of development, or the year of silicon, while 2005 will be the year of pilots and test markets, with 2006 as the year of the solution when ZigBee really flies.
Using an aggressive scenario, annual shipments will surpass 150 million units in 2008. Although the ZigBee specification release is expected in 4Q04, taking lessons from the rollout of other new wireless technologies, we know that these rollouts do take longer than expected, and market acceptance does not happen as quickly as many would like.
Although other frequencies, or channels, may open up in China and Europe, these changes do not occur very rapidly. We continue to see the lion’s share of the worldwide 802.15.4 market being dominated by the 2.4GHz band; however, significant activity is occurring for 915MHz solutions, primarily in North America, and there is some potential for the 868MHz channel in Europe.
For more information on the opportunities for 802.15.4 and ZigBee, check out our new report, “The 802.15.4 Buzz: Providers Want ‘ZigBee in a Box’,” that is available from several In-Stat/MDR services, including the Multimedia & Interface Technologies service. You can access this report at:
Olympics in HDTV plus TiVo Making Dishwashing Machines Obsolete
NBC is doing an amazing job of bringing the Olympics to the worldwide TV market, with dozens of venues outfitted for audio, video and data services, plus a number of events being rebroadcast in High Definition.
NBC is providing coverage of the Olympics on six regular TV networks, plus NBC-HD is providing the High Definition feeds.
The six standard definition networks are:
NBC
C-NBC
MS-NBC
Bravo
USA
Telemundo (Spanish language version)
NBC expects that they will provide more than 1,210 hours of coverage, with many of these networks running three to six hour blocks that span coverage of a half-dozen events each.
People watching the High Definition feed enjoy around-the-clock programming and are reporting gorgeous video, good announcing, and a light commercial load. Because the HD feed is running 24/7, many events are repeated. Viewers like having multiple play-back times, because most people don’t have the ability to record and time-shift HDTV programming yet. (The VOOM satellite HDTV service provides an HDTV Personal Video Recorder, but they have fewer than 50 thousand subscribers.)
The biggest complaint about the HDTV feed appears to be the monotonous replaying of one particular Sony Wega HDTV ad during almost every break – the one with the guy up in the apartment, and thousands of people down in the street who want to watch his HDTV.
For those who are watching the Standard Definition feeds from the six networks, and have a Personal Video Recorder (PVR) available, a very interesting cultural side effect is emerging.
The Prime Time Olympics begin in Arizona at 7:00 PM. We tune in KPNX (Channel 12 – the NBC affiliate in Phoenix) and hit the “Pause” button. Our daughter usually sets up one of the other 5 networks to “record” so she can play it back later, after the old people go to bed. (I’m the old one – Vikki is still 37!)
Here’s the cultural side effect: Our family is eating supper later in the evening, setting the table about 7:30 PM. We all sit down and enjoy a traditional family meal. Since the Olympics are in Greece, my lovely wife, Vikki, has been doing a lot of recipes that involve olives.
After dinner, there is no big rush to load the dishwasher. In fact, we haven’t run the dishwasher since last Thursday. Instead, we take our time, clear off the table, and then casually soap up the sink, and carefully wash the dishes, by hand, the old fashioned way, like grandma used to do. Usually, I wash, because my hands are rough from hitting a keyboard for eight hours a day. Vikki rinses and our daughter dries. We take the extra time to put all the dishes away, up in the cabinets, and out of sight. We wipe off the table, and shake out the placemats and the napkins, fold them, and put them away.
Then, I usually open a nice bottle of red wine and let it “breathe” for a few minutes, before pouring it into goblets.
By the time we sit down to watch NBC, it’s well past 8 o’clock. By delaying our viewing this way, we can successfully fast forward through ALL the advertising, and still come out “live” right at the end, about 11:00 PM.
If we do happen to catch up, we may take a mid-show break, pause the PVR, and go for a quick walk around the neighborhood, to give the PVR time to re-fill with more events.
So, in a completely unanticipated development, our TiVo is giving us back a traditional family dinner and neighborhood walks. Plus we’re drinking a lot more red wine.
The final irony is that TiVo is making our automatic dishwasher obsolete, because we may never use it again! Heck – we’ve even begun talking to the occasional neighbor in the evening!
There is a news group that provides real time comments from professional broadcasters, called the Open Digital TV forum –
When Gerry isn’t watching the Olympics and drinking red wine, he’s a principal analyst for our Multimedia Broadband Services and Infrastructure Service. You can access Gerry’s great insight into these markets at:
Tellabs is the leading vendor of digital cross-connects in North America, and also sells WDM optical transport systems, as well as other products. In June 2003, the company acquired multiservice switch start-up, Vivace Networks, to make a strategic expansion of their product portfolio into the services layer.
Tellabs has renamed the Vivace products, the Tellabs 8800 series of multiservice edge routers. The 8800 series provides similar functionality to a multiservice edge switch, but is intended, solely, to connect over an MPLS (Multi-Protocol Label Switching) common core network. It differs from a traditional edge router in that it has extensive Layer 2 functionality for Frame Relay, ATM, and Ethernet switching, and has fine-grained QoS (with thousands of hardware queues) similar to a multiservice switch. The multiservice edge router is becoming a key product for service providers looking to consolidate their networks as they migrate to converged MPLS core networks. Tellabs is competing in this space with products from Alcatel, Juniper, Nortel, and Laurel Networks.
Tellabs plans to create various synergies between their transport layer products and the 8800 service edge products. On the marketing side, they will attempt to sell the 8800 to their existing broad set of customers that purchase their cross-connects and WDM products. On the technology side, Tellabs will offer G-MPLS across the transport and services layers to enable dynamic provisioning of end-to-end circuits, and will also transfer data technology available in the 8800 series to their cross-connect product line.
In May of this year, Tellabs announced plans to acquire Advanced Fibre Communications (AFC), the leading vendor of DLCs (Digital Loop Carriers) in North America, along with Alcatel. AFC’s AccessMAX DLC product family has traditionally been widely sold to US IOCs (Independent Operating Companies), but they also sell to larger LECs (Local Exchange Carriers), such as the RBOCs. AFC acquired Marconi’s North American access business in January of this year, to significantly increase its market share in the DLC business. AFC also sells an integrated DSLAM/multiservice switch, called the Telliant 5000. AFC was chosen by Verizon for its FTTP buildout, but there are reports that there have been some problems in AFC having enough staff to support such a large program. Presumably, Tellabs will be able to provide more support personnel for such undertakings.
Tellabs has become a major player in the access network with its acquisition of AFC. They are attempting to make a mark in the multiservice edge area, as well, with the 8800 series. The access and multiservice edge offer greater growth opportunities in the future than their traditional transport layer products. Tellabs is focusing on the right areas to expand its product lines, and they are becoming a more important vendor of telecom equipment to service providers. Their challenge will be to exploit as many synergies as possible between their traditional business and these new areas to maximize the effectiveness of their new strategic direction.
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A recent article in the International Herald Tribune caught my eye last Friday. The headline read “Vodafone’s Japan unit loses subscribers.” “Uh oh,” I thought, “it’s getting worse.” Vodafone K.K., formerly J-Phone, is Japan’s third wireless operator, with less subscribers than either NTT DoCoMo, or KDDI. Vodafone K.K. has been struggling for some time to grow its share of the market and to prove that its parent can successfully compete in the most innovative wireless market on the globe. Last week’s news that Vodafone K.K. lost over 3,000 customers (2% of its customer base) in July, the first time any Japanese wireless operator has experienced negative growth, does nothing to further that goal.
Vodafone K.K.’s loss last month illustrates one of the quiet changes in global wireless services that are taking place right now. The largest operators of the US and Europe are reviewing their expansion strategies and are focusing on their core markets. Expansions outside of those markets are strategic, and based on business plans that look for under-penetrated markets that are ripe for growth. Vodafone’s Japanese business plan fails on both of these counts.
Vodafone K.K. is a 3G operator; offering WCDMA service based on 3GPP as well as older 2G PDC-based technologies. It was the first provider of picture mail service – the groundbreaking Sha-Mail, in 2000. It has 15 million subscribers, and by the end of this month will cover 99.6% of Japan’s population with 3G. With all of this going for it, what could be wrong?
What’s wrong is that Vodafone is in an innovative, but near-saturated market. Currently, more than 60% of Japan’s population has a mobile phone. If current growth trends continue, that penetration level would reach 94% by 2009. Even a more realistic penetration level of somewhere in the mid-80% range (similar to Northern European markets) would represent an attractive growth market. However, as wireless industry veterans know, growth after 50% (or 60%) penetration levels are reached is infinitely more difficult to achieve than pre-50% growth. The most valuable, higher MOU and higher ARPU customers have already been signed up, future growth comes from market segments that have been previously neglected. In other markets those segments would include youth, elderly, and immigrants, sectors with lower buying power. The Japanese market is, however, different. Mobile phones are ubiquitous among young people, immigration is low, and many of the elderly that don’t yet have a mobile phone don’t want one. Growth will have to come from elsewhere.
Other growth opportunities can come from an operator’s existing customer base, as customers are encouraged to pay for and use new services. Vodafone K.K.’s Sha-Mail is a good example of this kind of service, where the introduction of phones with embedded cameras in 2000, drove people to take pictures and send them from their phones to other phones. However, much of the technological innovation in the Japanese wireless market comes from NTT DoCoMo, the market leader, whose early i-mode service first introduced Japanese customers to the idea of using their phones to play games and send cartoons to each other.
To succeed in the services-game, an operator’s services and technology must be at least as good as their competitors’. However, Vodafone K.K.’s 3G network rollout has lagged behind that of its rivals. As importantly, its new handset rollout schedule has lagged too, and it currently has no new handset introductions scheduled before December. In Japan, where customers choose operators based on handsets as much as service, and where customers often upgrade their handsets more than once a year, the perception is that Vodafone K.K. is simply not as innovative as DoCoMo and KDDI.
The proof of this is easily seen in the number of 3G subscribers each operator is able to attract. While KDDI was the early leader in adding 3G customers, DoCoMo has started closing the gap in recent months. KDDI has 14.7 million 3G customers (though that does include slower 1xRTT subscribers) and added 219,700 new ones in July; DoCoMo has 4.6 million WCDMA subscribers and added 225,700 in July. Vodafone K.K. added only 19,400 3G customers, down 10,000 from the previous month – and most of those were upgrades of its existing 2G customers; overall lost 3,100 customers.
This brings up the question of why Vodafone thought it should compete in the Japanese market. Vodafone K.K. handsets and services are currently inferior to its competitors’, it is operating in a saturated market, and for the first time for any Japanese wireless operator, it is losing subscribers.
Meanwhile, large operators in the rest of the world are focusing on their core markets. In the US, Cingular is purchasing AT&T Wireless so that it can challenge Verizon Wireless’ dominance. Bell South has sold its Latin American wireless operations so that it can better focus on its role in Cingular (and to raise cash for the AT&T Wireless puchase). Spain’s Telefonica Mobiles has frozen its 3G plans for Austria, Germany, Italy, and Switzerland and is investing in low-penetration/high-growth markets in Latin America. DoCoMo has also rolled back its international expansion plans for i-mode in Europe and the US to devote more time and money to its home market. These operators are leading the way for all operators, showing that foreign adventures in tough markets are not the best way for an operator to grow their business. They are focusing on core-markets where they can leverage their core expertise, and on home markets that they want to protect. Japan is neither of these for Vodafone.
Vodafone is in a lose/lose position in Japan. It can’t pull out of the market without losing both face, and a large cash investment, and it will never surpass DoCoMo or KDDI. It needs to find a way to attract customers and to be profitable in its third-tier position. To do so in the Japanese market, it will have to offer customers better service, more features, and a more innovative handset line-up. However, to do this will require continual investment, and Japan will never be a substantially profitable market for the operator.
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