A year ago it was rumored that 250 Apple employees were at CES 2012, even as the company refused to participate directly. The company could do no wrong and didn’t need the industry. For the better part of 9 months that appeared to be the case and Apple’s stock outperformed the market by 55%. But a few months on, and a screen size too small for phones and too big for tablets, a mapping app too limited, and finally a buggy OS, Apple’s excess performance over the market has narrowed to 10%.
Two major themes of this year’s CES--mobile device screen size and extensive application ecosystems to connect just about anything--will place Apple’s mobile dominance and lead further in doubt. To us it was already in evidence last year when we talked about the singularity. But the real reason today is becoming apparent to all, namely that Apple wants to keep people siloed into their product specific verticals. People and their applications don’t want that because the cloud lets people update, access and view information across 3 different screens and any platform. If you want Apple on one device, all your devices have to be Apple. It’s a twist on the old Henry Ford maxim, “you can have any device…as long as it is Apple.”
This strategy will fail further when the access portion of the phone gets disconnected from all the other components of the phone. It may take a few years for that to happen, but it will make a lot of sense to just buy an inexpensive dongle or device that connects to the 4G/5G/Wifi network (metro-local or MAN/LAN) and radiates Bluetooth, NFC and Wifi to a plethora of connected devices in the personal network (PAN). Imagine how well your “connection hub” would last if it didn’t need to power a screen and huge processor for all the different apps? There goes your device centric business model.
And all that potential device and application/cloud supply-side innovation means that current demand is far from saturated. The most recent Cisco forecasts indicate that 1/3rd of ALL internet traffic will be from mobile devices by 2016. In the US 37% of the mobile access will be via Wifi. Applications that utilize and benefit from mobility and transportability will continue to grow as overall internet access via a fixed computer will drop to 39% from 60% today.
While we believe this to be the case, the reality is far different today according to Sandvine, the broadband policy management company. This should cause the wireless carriers some concern as they look at future capacity costs. In their recent H2-2012 report Sandvine reveals that power smartphone users are already using 10x more than average smartphone users, or 317 megabytes a month vs 33. But even the former number is a far cry from the 7.3 gigabytes (20x) that the average person uses on their fixed broadband pipes (assuming 2.3 people per fixed broadband line). Sandvine estimates that total mobile access will grow from ~1 petabyte in H2-2012 to 17 petabytes by H2-2018.
My own consumption, since moving from 3G to 4G and going from a 4 to 4.7 inch screen is a 10x increase to 1-2 gigs 4G access and 3-6 gigs wifi access, for a total of 4-8 gigs a month. This is because I have gone from a “store and forward” mentality to a 7x24 multimedia consumption model. And I am just getting comfortable with cloud based access and streaming. All this sounds positive for growth and investment especially as the other 95% of mobile users evolve to these usage levels, but it will do the carriers no good if they are not strategically and competitively well positioned to handle the demand. Look for a lot of development in the lower access and transport layers including wifi offload and fiber and high-capacity microwave backhaul.
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