4G: Lead App Might Not be the Business Model

Some statements are astounding first by their seeming ordinariness; others by their seeming incongruousness. For anybody who has watched telecommunications, one of the safest observations, irrespective of year, is that billions of people have never once made a phone call.

So when Ericsson President and Chief Executive Officer Carl-Henric Svanberg says the company vision is "now that basically anyone who wants a mobile phone will soon be able to have one," it is a stunning reminder of just how much has changed in the global communications.

"We envision an all-communicating world where the majority of people everywhere will have access to information and the ability to share it instantly, whenever and wherever they want," Svanberg says. You might find that an unremarkable statement as applied to residents of North America, Europe or Japan. You might be surprised to know that Svanberg really means a majority of people everywhere.

"We aim to do the same for broadband what we have already done for telephony: make it mobile, available and affordable for the majority of the world’s population," he says..

Ericsson also anticipates that by 2013, there will be some 6.5 billion mobile subscriptions and over two and a half billon broadband subscriptions of which more than two-thirds will be mobile. That flip--many more mobile than fixed users--will not surprise anybody who follows the industry. The magnitude of wireless broadband accounts just might.

One might argue that mobile these days is the way people prefer to "talk." Svenberg says mobile also will be the way they prefer to use the Internet and, by implication, large amount of media and entertainment consumption as well.

When Svenberg notes that "users expect to be connected wherever they are," that's pretty much a statement of conventional wisdom these days. When he says "we will also be more personalized," it's doubtful Svenberg could get a dissenting view.

There's perhaps more chance of disagreement--mostly over magnitude--when he says "we will all be content providers and creators." Keep in mind that depending on how far one wishes to take the matter, Twitter and other "where are you know, and what are you doing?" posts are content. So are blog posts.

In another example of developing consensus, Svenberg says "we will be a world of connected devices." That's the machine-to-machine frontier mobile executives now talk about when saying mobile penetration could grow to 500 percent or six hundred percent.

"So far the prime target has been the household and the business," he says. "With mobile telephony we were targeting people." But mobile broadband is about connecting devices as well.

"Our ambition is to do for mobile broadband what we already have done for telephony," he says.

Of course, there are more-practical observations as well. To some extent, new networks are financially justified by the size of new revenue streams that can be created by the networks. Though digital networks were said to improve voice quality over analog first generation networks, more than add new services, by the time we get to 2.5G networks, new messaging services clearly are on the agenda.

Broadband 3G networks more centrally were said to be platforms for new services, though progress to date has been less robust than its backers had anticipated. Coming 4G networks likewise are said to enable many new services 3G networks cannot provide.

That will be true, of course. It also is true that as older generations of networks are decommissioned, the older traffic types are similarly rolled up onto the newer networks. Which leads one to note that no matter what executives say about the matter, the stated unique value of each new network is financially buttressed by revenues from older services that are rolled up onto the new networks.

When fixed broadband was yet a young business, people incessantly looked for the killer app for that service. As it turns out, broadband is itself the killer app. Still, for some providers, an argument could have been made that voice was the killer app.

More currently, some might argue entertainment video is the killer app. The point is that older revenue streams wind up buttressing the business cases for newer networks, irrespective of what executives might claim is the unique value--and business model behind--those networks.

What might be fair is to note that each new generation of networks is touted as featuring, and ultimately does feature, some new class of applications that the older networks cannot support. That's not the same thing as saying any of the new networks will achieve a successful business case based strictly on the lead application. In fact, all the new networks are multi-service networks, with revenue from any number of applications.

There might be signature apps. Texting probably has been the signature 2G app. Mobile Web probably will develop as the signature 3G app. These days 4G networks are said to be about machine-to-machine apps. There will be signature apps. Ultimately, though, the financial underpinning will be all the legacy apps that contribute to the business case.