Top five take-aways from CTIA

April 6, 2009 | Jeff Bussgang | Comments | |

[Editor's note: This column has been republished from Jeff Bussgang's blog Seeing Both Sides. It also ran on PE Hub.]

The annual wireless industry trade show, CTIA, had some interesting trends this year. Putting aside the fact that Las Vegas feels like a ghost town, cab lines are uncharacteristically short, and my personal frustration that I find myself agreeing with an arch-conservative economist Arthur Laffer’s editorial in today’s WSJ on how Obama’s estate tax policy creates perverse Vegas incentives (!), here were my top 5 Take-Aways from CTIA:

1. The Lights Are Still On. The wireless industry is clearly a bright spot; secular trends for the industry’s growth and innovation remain strong. That said, the show was meaningfully affected by the recession. On the positive side, 2008 saw one trillion text messages (up 3x from the previous year) and double-digit growth in revenue and subscribers. Content and applications are exploding as everyone is trying to follow the iPhone’s pioneering moves and (finally) smart phones and the mobile internet are becoming mainstream in the US. That said, conference attendance was down 20 percent as compared to last year by some estimates and the show floor had a much, much emptier feel than usual.

2. Innovation is happening, but VC investment isn’t. An analyst firm Rutberg & Co reports that overall VC investment in wireless was down 30 percent in 2008 as compared to both 2006 and 2007, sharper than the 15 to 20% percent average VC investment decline in technology. I predict 2009 will also be a bad year for wireless VC investments. The conversations I had with VCs all rhymed:

  • “There are very few big ideas left in wireless.”
  • “We already have a number of chips on the table and don’t see the need for more.”
  • “The bar is very, very high right now.”
  • (Most damning) “The big guys (carriers, handset players, operating system owners) own too much of the value chain — there’s too little room for entrepreneurs.”

3. Device fragmentation is here to stay. The iPhone’s explosion from nowhere over the last two years is impressive, but the entrenched competitors, Blackberry and Palm, are fighting back. Blackberry’s open application store was a ho-hum launch, but at least they recognize that a thriving, open application store is now table stakes, and all the major content players are jumping on board. One carrier executive told me that every device manufacturer (think Nokia, LG, Samsung) is coming to them looking for help on their content and application store strategy. That’s not going to make things any easier on the leading application developers.

4. Video is mobile’s Next Big Thing. Everyone is talking about delivering high-quality video on mobile. With 22 million consumers in January 2009 accessing the mobile internet according to Comscore, double last year and likely to double again in 2010, rich content on the phone is clearly the next big thing, and video is a huge driver of that. GenY consumers are watching news, weather and sports on their phones as if it were the normal function of the device as opposed to a full-blown miracle as compared to only 5 years ago. (Full disclosure: I’m an investor in mobile video leader Transpera and so am highly biased here, but I’m also seeing the numbers explode!)

5. Carriers seem to finally get it, but it’s too late. Carriers are seeing their content revenue (ringtones, ring backs) flatten out and seeing voice minutes saturate, so they are all over applications and advertising. That said, it’s probably too late. The industry is ripe for disruption. The landline businesses are dragging the diversified players down and their entrenched, proprietary strategy will be hard to sustain as the world moves more open and off-deck. The commoditization of communications infrastructure is a movie we’ve seen over and over again (see Railroads, Bankruptcy of) and it may take 10-15 years, but we will see it again here. The communications companies are at risk at becoming the next Newspaper industry if they don’t adapt fast.

Anyone else there have other observations? Comment away or send me an email. You can also follow me on Twitter at www.twitter.com/bussgang.

Jeff Bussgang is a general partner at Flybridge Capital Partners in Boston.

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About the Author, Jeff Bussgang

Jeff Bussgang is a General Partner at Flybridge Capital Partners whose investment interests and entrepreneurial experience are in consumer, Internet commerce, marketing services, software and wireless start-ups. He was recently appointed to serve as an Entrepreneur in Residence at Harvard Business School’s Arthur Rock Center for Entrepreneurship.
His popular blog on helping demystify the venture business for entrepreneurs, "Seeing Both Sides", can be found at www.seeingbothsides.com. You can also follow Jeff on Twitter.

  • This is an interesting list. Here are my top 5 take aways from CTIA

    1) iPhone: Don't hate the players, hate the gamers.

    While the iPhone and AppStore have caused a lot of confusion for intermediary companies that link content and carrier, the fact remains that iPhone is more an indicator of platform play to retain control and user experience for the smart phone and mobile computing device. Games that provide amusement lead to devices that can do other things. Games have pushed the envelope so that there are latent capabilities in the hardware people carry in their pockets. The video streaming demos and tag line "we have a social network function too..." tell me that the game community ethos will spill out in ways that are not immediately apparent today. Maybe getting a MMOG team together for an assault might not be so different than trying to sync an enterprise calendar, contact list, and/or multiple communication paths for the humble business meeting. Hmm indeed.

    2) We know you like LOLcats and we plan to sell this information to Purina

    The presence and story from deep packet inspection (DPI) companies in attendance as well as the looming roll out of the capped ISP package from larger cable operations in the US all point to the micro-billing defense of sustained and normalized ARPU for mobile data plans. You will be tracked as a trend of use. You will be pushed into a data plan that lets us count on regular repeating revenues. The final visual in mind from last night was the Sprint commercial throwing around stats that would only come from intense scrutiny of what the subscriber aggregate is doing - right now.

    http://latimesblogs.latimes.com/files/ystg_9040...

    I think there are a lot of companies that would pay to know what mobile subscribers are doing. Don't you?

    3) Your local loops. Give them to me.

    I saw a lot of progress in the wake of the Sierra/Cradlepoint swallow fest. That progress is the explosion of mobile access routers. I'd expect these kinds of non DSL and non Cable and non Fiber connected SOHO routers to explode in popularity. Related to this, I was pleased to see the number of picocell, femtocell, etc. in pleasing kits, form factors, and generally speaking to the demand and customer expectation of ubiquitous access (i.e. promoting defensible monthly data plan rates).

    4) Little. Yellow. Different.

    I was impressed by multi-function devices like Option's uCan. While sites like Gizmodo attract comments to the effect of "I don't get it", the marketplace for carrying around your PC in your pocket, or in the cloud has traction. While the form factor of the USB cell modem might seem odd now, the ability to find terminals to launch the modem's OS or app stack might shift to what is possible on data cards in data centric mobile phones. iPhone, BlackBerry, and Nokia Nxx have shown that people will be attracted to smarter and smarter mobile computing. Push and replication of assets to the cloud (securely) will be of increasing value. The fact that you can toast your iTunes music and movies (DIY backup!) on a desktop vs. the ability to re-download licensed applications for iPhone from the AppStore show that there is creative thinking taking place to reduce consumer friction and increase satisfaction.

    5) The Hills Have Eyes... and an array of trending, reporting and related automation modules.

    Remote telemetry and sensing operations will be on the rise as truck roll oriented meter reading declines for obvious cost reasons. eFarming initiatives and US stimulus packages will place soil probes and resource meters in remote and vast locations. Solar panels and new methods of powering for purpose and sustainable operation will increase. Automation will require wireless backhaul technology to connect nodes and sensors to the backbones for final visualization and staffed call centers, purpose minded NOCs, and new management models will emerge as we SAP-ize all manner of processes outside of supply chain. All the piece parts were on display at CTIA and while they might not be the biggest booths, they will be a uniform dusting of the world around us going forward.

    All of this points to expansion of world economies... there were a lot of bitter, dejected, or jaded folks at CTIA I'm sure but my head is exploding with ideas and challenged assumptions.