Advanced-Services Potential

By Joseph Palenchar On Jan 5 2006 - 8:00am

TWICE: How quickly are consumers adopting such advanced services as music streaming, downloadable applications, e-mail redirection and the like? Has growth in some of these services been fueled (or held back) by the supply of handsets incorporating higher-speed data technologies?

Laikin: Yes, the growth in data services has been fueled by higher-speed data technologies such as EDGE, EV-DO and W-CDMA. As the deployment of these higher data speed and quality networks continue, the demand for services such as music streaming, downloadable games, mobile email and others will continue to increase. I believe that data services will become a significant portion of the total ARPU for carriers and MVNOs globally in the next few years. In Europe and Asia-Pacific, data services revenue is already contributing significantly to ARPU.

Misuraca: We have seen some growth in Web access, downloadable games and applications. Most of this technology is not mainstream as of yet, but it's very close. Push-to-talk remains a strong seller in certain segments.

Overall, we don't see a large unmet need for these services at this time, but we think that may change in the near future.

Burke: Many of the services that you mentioned are at the early stages of their lifecycle for adoption. We have seen growth across all mobile services in the past year — from photo taking to photo messaging to mobile gaming — and expect this to continue as the experiences get better and U.S. consumers increasingly integrate their mobile device into many aspects of their lives.

Technologies and networks that offer mobile broadband speeds deliver better user experiences and in many cases enable new experiences. Broadband is an important enabler and will support agendas that encourage consumers to use their mobile for more than just voice and text.

Skarzynski: Adoption of advanced services has been slow to date. The combination of network speed, applications offered, handset design, business models employed have all contributed to slow adoption. However, these challenges are being overcome.

Samsung is a leader in almost every category mentioned. Samsung was the lead handset when Cingular launched PTT service in mid-November. Samsung will be one of the lead handsets (if not the lead handset) when Verizon launches MOD [music on demand download] service in January 2006. Samsung has launched the only targeted MOD handset at Sprint. By year end, Samsung will have launched the most handsets (five) that support Sprint's VOD [video on demand] service.

Stone: Verizon has seen tremendous growth in data services during the past couple of years, and we feel the infamous wireless data "hockey stick" is here. For example, the company did about $400 million in wireless data revenue in 2003. In just the first quarter of 2005, wireless data revenue rung in at more than $450 million, and by the third quarter that number jumped to $613 million.

As data-feature rich handsets penetrate the market, they help drive data growth — growth that comes collectively from a variety of data services, including music, e-mail, games and more. As announced in our third-quarter earnings, customers are quickly making data services part of their lifestyle. Some numbers from our Q3 earnings report show that 5.9 billion text messages were exchanged during the quarter — almost 1.3 billion more than last quarter and more than double year over year. Also, almost 110 million picture messages were sent in the quarter compared to 25 million in Q3 2004. That's a 75 percent increase since Q2. And there were 34 million downloads of Get It Now's more than 500 games, exclusive content and other applications compared to 26.8 million in Q3 2004.

EV-DO has been a catalyst to accelerate the growth of multimedia applications such as video downloads, 3D games and high-speed data access and the size and continued expansion of the Verizon Wireless EV-DO network is driving handsets, PDAs and embedded laptops to market at a record pace. In the past several months, we've announced relationships with Dell, HP and Lenovo for embedded services in laptops; Microsoft and Palm for a new Windows-based Treo; and introduced a half-dozen V CAST/EV-DO enabled handsets.

Verizon Wireless' national EV-DO network now includes more than 170 major metropolitan areas and 68 major airports, and is currently available to more than 140 million Americans coast to coast.

TWICE: How has demand been for live-TV services over cellular? Will the rollout of DVB-H or Qualcomm's Media FLO technology boost demand for such services?

Laikin: The rollout of Qualcomm's FLO (Forward Link Only) technology will certainly boost demand for mobile TV services. The FLO network will help carriers off-load heavy data traffic like video streaming, live TV and clipped content, and the carriers will use their 3G networks for other mobile content, thereby improving the end-user experience. Handsets will have a Media FLO client and a receiver chip, and the quality is expected to be comparable to HDTV. MVNOs such as Mobile ESPN will benefit, as live sports will be in high demand from the consumer.

Burke: Motorola believes that personalized media and information "clips," as in shorter segments that are more targeted for the consumer, are more likely to see broad adoption. These are likely to take root as an extension of existing mobile device-use patterns, service offerings, and capabilities.

We like the idea of "broadcast or programmed" video but believe that adoption will not be significant in 2006 and into 2007.

Skarzynski: The big question is, "What will consumer acceptance of TV over cellular be?" User experience is vastly different watching your favorite TV program on a 1.5-inch screen vs. a large 40-inch screen. That said, TV over cellular might appeal to areas with a large number of commuters who use public transportation. It might also have some appeal to people who spend a large amount of time waiting (e.g., frequent flyers).

Similar to the MP3 handset, Samsung had developed a "TV Handset" (with UHF/VHF TV tuner but not launched in the United States). However, the market was not quite ready.

Stone: Verizon Wireless recently announced we are working with Qualcomm and expect to launch mobile TV services over the MediaFLO network in approximately half of the markets already covered by Verizon Wireless' CDMA2000 1xEV-DO-based broadband network. Verizon Wireless will be the first U.S. wireless service provider to offer MediaFLO when the network is commercially available.

MediaFLO USA's network will allow us to provide compelling real-time multimedia services to wireless customers, complementing our industry-leading wireless voice and data services — including our successful V CAST broadband multimedia service.

As we aggressively expand our mobile multimedia offerings, MediaFLO will help us continue providing the most innovative multimedia services in the nation.

TWICE: What is your favorite season?

Laikin: Fall.

Burke: Fall.

Misuraca: Our prepaid division loves Q1, the post-holiday season. Our postpaid folks love late spring/early summer, which is traditionally when we have our biggest quarters.

Bent: Fall is a beautiful time to be in North Carolina.