The Future of Pc/Mobile Convergence: Competing technologies and emerging business models for the mobile Internet

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The Future of Pc/Mobile Convergence: Competing technologies and
emerging business models for the mobile Internet
Published on March 2010

Report Summary

The global mobile phone industry has been extremely successful in the past decade, with an average year-on-year subscriber growth
of 24%. While the market has reached saturation in the more developed countries, it is still growing strongly in developing countries
due to a combination of cheaper mobile phone handsets and the relative lack of fixed line infrastructure. Mobile operators therefore
face two challenges: how to maintain or stimulate demand in the mature markets and secure a new client base and acquire market
share in the developing markets.
There were an estimated 1.2bn computers in use worldwide at the end of 2008 with mobile PCs driving the current and future
computer expansion although general PC growth is slowing. As is the case with the mobile phone industry, the bulk of the installed
base (nearly 60%) can be found in mature markets. However, developing countries will increasingly account for a larger share of the
global installed base and PC penetration is expected to double by 2013.
The lines have become more and more blurred between the mobile phone industry and computer industry with consumers demanding
more portability and mobility, processing capability and access to data and applications anywhere and at any time. The availability of
multifunctional devices such as smartphones with cloud computing capacities and portable PCs with integrated mobile technology
able to access 3G, EDGE and other mobile networks for data transfer is further contributing to the convergence between the PC and
mobile markets.

Key features of this report

' Overview of the market trends, technological and regulatory changes that shape pc/mobile convergence.
' Identification of the current issues influencing the convergence between the PC and mobile technologies.
' Description of the converged products and services currently available.
' Forecasts of products and services available in the future.
' Analysis of the threats and opportunities posed by PC/mobile convergence.

Scope of this report

' Review the current technologies, standards, regulatory frameworks and devices impacting the mobile phone and computer
industries.
' Identify changes in consumers' lifestyle and needs that stimulate offerings of converged mobile and PC products and services.
' Understand how technological advances in both mobile telephony and computing are leading towards a convergence between
mobile telephony and computing.
' Assess the implications, threats and opportunities of PC/mobile convergence for mobile operators, handset manufacturers and IT
companies.

Key Market Issues

The Future of Pc/Mobile Convergence: Competing technologies and emerging business models for the mobile Internet Page 1/9


' PC and mobile phone users in mature, developed, markets have higher expectations from their ICT providers. They demand more
portability, high-speed data and seamless mobility. They also expect multifunctional devices, networked products and combined
services. Faced with an increasingly competitive environment and demanding clients, IT and mobile companies are looking at new
ways of creating and sustaining demand through the integration of more advanced multimedia services.
' All-in-one devices that combine telephony with access to the Internet and multimedia services are becoming more popular across
the board, intensifying the competition between IT companies, fixed broadband operators, mobile operators and integrated operators.
Mobile and computer companies are trying to broaden their service offerings to meet and stimulate demand in increasingly
competitive mature markets, leading to networked products and converged services such as on-demand video, digital TV, high speed
Internet, VoIP and wireless applications.
' In developing countries mobile phones are replacing landlines due to the relative lack of fixed infrastructure. Investor interest and
future expansion and upgrade will pave the way for mobile broadband and converged services in those markets.
' Technological advances in wireless information transfer will make next generation wireless technologies a more cost-effective and
efficient option than 3G mobile Internet for mobile operators. This is, however, hampered by the finite amount of spectrum currently
available. The digital switchover and resulting digital dividend will bring convergence between the PC and mobile even closer by
making a vast amount of spectrum available to mobile operators.

Key findings from this report

' Mobile communications are replacing traditional fixed communications across the world. This trend is caused by increasing user
mobility and demand for portable devices and 'always on' ICT services in developed countries, and relative lack of fixed telephone
infrastructures in developing countries.
' Technological advances combined with tougher competition and changing lifestyles are contributing to the convergence between the
mobile telephony and PC industry and accelerating the decline of traditional computing and telephony.
' The IT and telecoms industries share technological standards for the provision of wireless connectivity, which contributes further to
the convergence of the two industries.
' Mobile and PC penetration levels are close to saturation in developed countries, while there is still room for growth in emerging
markets, where penetration levels are much lower. Emerging countries therefore present greater growth opportunities for ICT
companies and a number of them have already implemented strategies to exploit those markets.

Key questions answered

' What are the major trends and drivers behind PC/mobile convergence'
' What technologies and enablers will influence further development in converged mobile and PC products and services'
' Who are the major players in the PC/mobile converged market and how do they position themselves'
' What are the main threats posed by the convergence between PC and mobile products and services and how can companies
protect themselves'
' How will the PC/mobile converged market evolve and grow in the next 3-5 years'

Companies mentioned
Acer , Apple , Google , Huawei , Microsoft , Motorola , Nokia , Verizon Wireless , Vodafone

Table of Content

Table of Contents



The Future of PC/Mobile Convergence
Executive summary 10
Market overview 10
The competitive landscape shaping convergence 10
Emerging converged products and services 11
Leading player strategies 12
The future of PC/mobile convergence 13
Chapter 1 Introduction 16
Introduction 16
Who is this report for and what is it about' 17
Definitions 18
3G 18
Convergence 18
Desktop PC 18
EDGE 18
GSM 18
HSPA 18
LTE 19
Mobile broadband 19
Mobile internet 19
Notebook 19
Netbook 19
Wi-Fi 19
WiMAX 19
Chapter 2 Market overview 22
Summary 22
Introduction 22
From desktop computing to mobile computing 23
Desktop computing is in decline but remains an important ICT segment 23
Portable devices are challenging desktop computers 23
The recession hits desktop PCs sales hard 25
The PC industry is adapting to the new trend 26
Usage of mobile computing services is set to increase 27
Mobile telephony: from GSM to 3G 28
Mobile telephony is the most popular ICT service in the world 28
The developing countries lead the mobile telephony boom 28
Mobile data services revenue is on the rise as usage increases 33
3G Mobile technologies drive PC/mobile convergence 35
Wi-Fi versus 3G 37
Wi-Fi is cheaper for both the operator and mobile user 37
Congestion is the main issue with Wi-Fi 38
Cost issues 38
Ease of use 38
Chapter 3 The competitive landscape shaping convergence 42
Summary 42
Introduction 43
Trends and drivers 43
Consumers are mobile and demanding 43
The shift from voice to data services forces new strategies 44
Lack of fixed infrastructure in developing countries benefits mobile ICT 45



Internet penetration in Africa 46
ICTs remain more expensive in developing countries 48
Price competition is key 48
Falling ARPU leads to converged service offerings 49
User-generated content and social networking blurs the line between
IT and telecoms services 50
The impact of the recession was milder than feared 51
Regulatory drivers and barriers 52
European Union initiatives 53
The Federal Communications Commission (FCC) 53
CDMA Development Group (CDG) 54
International Telecommunications Union (ITU) 54
Connect a Child Connect a Community 54
Connect Africa 54
Third Generation Partnership Project (3GPP) 55
The GSM Association (GSMA) 55
The Internet Engineering Task Force (IETF) 56
LTE SAE Trial Initiative (LSTI) 56
Voice over LTE ' One Voice initiative 56
Next Generation Mobile Networks (NGMN) alliance 56
Regulatory situation regarding radio spectrum allocation 57
In Europe 57
In the US 58
Convergence technologies and standards 58
EDGE 58
Evolved EDGE / EDGE Evolution 59
HSPA (High Speed Packet Access / 3.5G) 59
HSPA+ (evolved HSPA / HSPA Evolution) 62
Combining HSPA and EDGE 64
Long Term Evolution (LTE) 65
LTE advanced 68
WiMAX 68
CDMA (Code Division Multiple Access) 72
Main challenges to PC/mobile convergence 73
Limitations of mobile computing 73
Recommendations 74
Limitations of mobile telephony 74
Recommendations 75
Chapter 4 Emerging converged products and services 78
Summary 78
Introduction 78
Mobile broadband 79
Mobile broadband is increasingly popular 79
Mobile broadband penetration is lower in developing countries 81
Mobile VoIP 84
Voice over Wi-Fi 85
Multiplay devices 87
Handsets and smartphones 88
Notebooks and netbooks 90
Tablet PCs 90



Chapter 5 Leading player strategies 94
Summary 94
Introduction 95
Google 96
PC/mobile convergence is a huge opportunity for Google 96
Making partnerships to play in both the software and hardware fields 96
Identifying market shifts and trends 98
Opportunities through mobile advertising 99
Apple 100
The huge success of the iPhone and the App Store 100
Expansion into mobile advertising and search 100
Mixed reactions to the iPad 101
Opportunities in mobile VoIP 101
Microsoft 103
Microsoft is struggling in the mobile market 103
Windows Mobile does not meet consumer expectations 104
Microsoft's shifting mobile strategy 104
Targeting emerging markets 106
Nokia 107
Strategies to make up for lost ground 107
Competing at both ends of the market 107
Closing the app gap 108
Sticking with Symbian while developing Maemo 108
Preparing for the cloud 109
Motorola 110
Bouncing back and restructuring 110
Positioning as a leader in converged services 110
Building partnerships 111
Identifying successful future technologies 111
Mobile applications development 112
Capitalizing on social networking and music 112
Acer 113
Aiming to dominate the portable computing market 113
Mobile strategy 113
Pricing strategy 114
Emulating Apple 115
Partnerships to aid growth 115
Launching the Acer app store 115
Huawei 117
Successful low pricing strategy 117
Shifting the business model towards innovation in LTE 117
Innovation in consumer electronics 118
Verizon Wireless 119
Reinventing its networks 119
LTE deployment 120
Partnerships to drive app sales 120
New offers for customers 121
Verizon's new pricing strategy looks set to be a success 124
Vodafone 125
Shifting towards a new strategic direction 125



Opportunities in mobile Internet 125
Opportunities in mobile music 126
Taking advantage of smartphones, new payment plans and the 3G network 126
Vendor summary 128
Chapter 6 The future of PC/mobile convergence 132
Summary 132
Introduction 133
The future of PC/mobile convergence 134
Mobile broadband and data services will drive growth in mature markets 135
Competition between mobile operating systems will intensify 136
Emerging business models 138
Fully converged 139
Semi converged 140
Advances in enabling technologies drive growth 140
Mobile VoIP solutions will be deployed as part of mobile operators' move to
4G 141
PC/mobile convergence will accelerate cloud computing adoption 142
The importance of the digital dividend and spectrum availability 144
Emerging markets will provide growth opportunities 145
Index 149

List of Figures
Figure 2.1: Global computing market ($bn), 2009-2014 24
Figure 2.2: Mobile connections and penetration in Africa, 2008-2014 29
Figure 2.3: Mobile connections and penetration in Asia-Pacific, 2008-2014 30
Figure 2.4: Fixed phone lines in Africa (m), 2008-2014 31
Figure 2.5: Global fixed voice lines and revenue, 2009-2014 32
Figure 2.6: Global mobile data services revenue share, 2009 35
Figure 2.7: Total global mobile services revenues ($bn), 2008-2013 36
Figure 2.8: Wi-Fi hotspot market share (%), 2007-2008 39
Figure 3.9: Total global mobile phone shipments (m), 2009-2014 46
Figure 3.10: Internet penetration (% of population with a connection), 2006-2009 47
Figure 3.11: Global mobile voice and data revenue share, 2009 50
Figure 3.12: Available HSPA devices, Dec 2009 61
Figure 3.13: Global LTE subscriptions (m), 2012-2015 67
Figure 3.14: WiMAX users by region (m), 2007-2102 69
Figure 3.15: WiMAX user penetration by region (%), 2007-2012 70
Figure 3.16: Global 3G+ Subscribers forecast by technology family, 2013 72
Figure 4.17: Fixed and mobile broadband subscribers (m), 2009-2014 79
Figure 4.18: Consumer fixed and mobile broadband revenue ($m), 2009-2014 80
Figure 4.19: Global broadband users, incl. mobile broadband (m), 2009-2014 82
Figure 4.20: Wi-Fi certified handsets by type, March 2010 86
Figure 4.21: Wi-Fi enabled phone shipments (m), 2007-2012 87
Figure 4.22: Smartphone shipments by region (m), 2009-2014 89
Figure 5.23: US smartphone market share by platform, Sep-Dec 2009 97
Figure 5.24: Verizon total data revenue ($bn), Q3 2008, Q2 2009, Q3 2009 123
Figure 5.25: Verizon total data ARPU ($), Q3 2008, Q2 2009, Q3 2009 123
Figure 5.26: Vendor summary ' Google, Apple, Microsoft 128
Figure 5.27: Vendor summary ' Nokia, Motorola, Acer 129
Figure 5.28: Vendor summary ' Huawei, Verizon Wireless, Vodafone 130



Figure 6.29: Influences on the future of PC/mobile convergence 134
Figure 6.30: Competing mobile operating systems' strengths and weaknesses 138
Figure 6.31: Emerging PC/mobile convergence business models 139
Figure 6.32: Global mobile cloud computing subscribers, 2008-2014 143
Figure 6.33: Per capita PC penetration per region, 2008-2012 147

List of Tables
Table 2.1: Global computing market ($bn), 2009-2014 25
Table 2.2: Mobile connections and penetration in Africa, 2008-2014 29
Table 2.3: Mobile connections and penetration in Asia-Pacific, 2008-2014 30
Table 2.4: Fixed phone lines in Africa (m), 2008-2014 31
Table 2.5: Global fixed voice lines and revenue, 2009-2014 32
Table 2.6: Top ten mobile markets worldwide by subscriptions, data revenue and service revenue, 2009 34
Table 2.7: Global mobile data services revenue share, 2009 35
Table 2.8: Total global mobile services revenues ($bn), 2008-2013 36
Table 2.9: Wi-Fi hotspot market share, 2007-2008 40
Table 3.10: Total global mobile phone shipments (m), 2009-2014 46
Table 3.11: Internet penetration (% of population with a connection), 2006-2009 47
Table 3.12: PC ASPs in the US, 2008-2009 48
Table 3.13: 37 Commercial HSPA+ networks launched by December 2009 63
Table 3.14: 29 HSPA+ networks in deployment or planned 64
Table 3.15: Global LTE subscriptions (m), 2012-2015 68
Table 3.16: WiMAX* users by region (m), 2007-2012 69
Table 3.17: WiMAX user penetration by region (%), 2007-2012 70
Table 4.18: Consumer fixed and mobile broadband subscribers and revenue, 2009-2014 80
Table 4.19: Global broadband users, incl. mobile broadband (m), 2009-2014 82
Table 4.20: Wi-Fi certified handsets by type, March 2010 86
Table 4.21: Wi-Fi phone shipments (m), 2007-2012 87
Table 4.22: Smartphone shipments by region (m), 2009-2014 89
Table 5.23: US smartphone market by platform, September-December 2009 97
Table 6.24: Global mobile cloud computing subscribers, 2008-2014 143
Table 6.25: PC penetration per region (PCs/1,000 people), 2008-2012 147



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The Future of Pc/Mobile Convergence: Competing technologies and emerging business models for the mobile Internet