While some elements of the mobile market continue to contract in light of the economic downturn, other signs point to a resurgence. Total mobile handset sales continue to decline (although at a slower rate than in 2008), however, smartphones sales have shown strong growth. Mobile broadband subscribers also are increasing at a rapid rate, expected to grow from 225 million in March 2009 to 250 million by year-end, according to some estimates.
Another sign of looming recovery is the renewed interest the investment community is showing in the wireless market. Investment in wireless has been down in recent years as funding has dried up, but there has also been an uncertainty in the investment community in terms of the profitability potential of some of the emerging elements of the wireless market, particularly in applications. While app downloads are skyrocketing, investors have been unsure of consumers’ short and long-term willingness to pay for apps. Nevertheless, investors are anticipating increased wireless investment in 2010, and even in the remainder of 2009, particularly in the areas of mobile advertising and location based services. This trend is already evident, looking at the funding to have emerged out of the third quarter, as two of the most notable startup funding awards went to mobile advertising firms.
As the market is poised for recovery, carriers are investing in their networks to support continued growth in mobile broadband usage. The debate between LTE and WiMAX continues, and although WiMAX actually has more people covered (Clearwire deployed their fourth city, Las Vegas, in the third quarter), it is thought that in the U.S. (and other developed countries) LTE will predominate. To this end, Verizon announced a stepped up LTE deployment plan in the third quarter. However, in emerging countries, particularly Brazil, India, and Russia, WiMAX is anticipated to fair very well as an alternative to landline telephony services. While this is not a new observation for third-quarter, the continued build out of carriers next-gen networks reinforces this expectation.
The carriers aren’t the only ones positioning themselves to dominate the mobile market. OS and handset players are also playing hardball. Google had a strong quarter with several handset wins for Android, including Motorola signing on and HTC committing more than 50 percent of its 2010 shipments to Android-based phones. iPhone continues to be a dominant player in the market, towering over Android-based phones, yet Apple appears to be defensive against Google’s growing competitive threat. Apple responded in the third quarter by banishing Google Voice from the iPhone, a move that was met with federal scrutiny.
A variety of federal regulation agencies, including the Federal Trade Commission, the Federal Communications Commission, the Department of Justice, and Congress, are looking closely at what is happening in the wireless market. These agencies are monitoring carriers and handset manufacturers for monopoly concerns as well as the legality of exclusive handset deals, which given their significant impact on a carrier’s success (e.g., the iPhone’s impact on AT&T) are thought to limit competition in the market. The mobile market is evolving rapidly and it is likely that the legal issues surrounding the market will continue to heat up in the months ahead.