Challenge to Cellular Industry: More Judicious Use of Statistics

The cellular industry is very fond of big numbers - 1 billion phones shipped, 3 billion subscribers, 3 trillion SMSs - I'm sure you recognize them. Obviously, these are all important and impressive achievements and should be applauded.

However, the industry is also very fond of quoting these numbers in contexts in which their relevance is marginal. A typical examples compares 3-4 billion mobile subscriptions with around a tenth of that figure for fixed broadband connections. Another is "Pah, WiMAX will never get the scale economies - there's a billion phones sold a year, how can a measly 50 million or fewer units possibly compete?". Similar examples are used to demonstrate relative importance against TVs, PCs, SMS vs IM or email and so on.

There is a very common theme of comparing apples with oranges here.

If phones used for nothing other than voice & SMS. There is no obvious sign that this part of cellular marketplace is rapidly evolving to 3G, extensive use of data services, smartphones or other high-end devices. For all intents and purposes, it is a separate market. Interesting from a statistical point of view, but also misleading. Yes, Nokia (NOK) and Motorola (MOT) and Samsung get some extra buyer power with their suppliers on components like filters or memory or screens. But hang on a minute, which are the companies developing WiMAX devices as well?

And in fact, the addressable market for the type of high-end products that WiMAX is targeting first (dongles, PC modems, PDAs, game & web consoles etc) is much smaller than 1 billion - and yet it is this consituency that is already driving most of the traffic on HSPA networks - not phones. I'd go as far as saying that 3.5G and 4G networks aren't about 3 billion, they're about perhaps 300 million potential customers, at least in the next 10 years. Including the other 2.7 billion in the discussion obfuscates the argument.

It's notable that the PC / Internet industry doesn't play the "zero's" game as much. It could trumpet 3-billion (approx) ethernet ports or a roughly similar number of USB devices. It could constantly talk up $7 trillion (or whatever this year's number is) in PC-mediated e-commerce.

I read recently that foreign exchange trade volumes are in excess of $3 trillion per day, again mostly facilitated by traders with desktop computing hardware. That's a quadrillion dollars a year. But although it's an impressively big number, it's not relevant to most discussions about future technology.

So I'd challenge the mobile industry to be a bit more grown-up about the way it uses its statistics. I'd certainly agree that 3 billion people with access to telephony and messaging is incredibly impressive. A billion devices a year is almost incomprehensible. But don't wheel out the big numbers as PR collateral, just to support arguments that only apply to a tiny fraction - it smacks of either insecurity or a lack of knowledge about how an addressable market is really defined.

Comments

[IdaBemadtotellya]

I see the lack of take-up of mobile phones and mobile data connections hampering the mobile market for quite some time to come. This inhibits the penetration of mobile phones into the transaction space.

The main uses of the mobile phone are Voice and SMS, and will closely followed by transactions.

As new systems roll out later this year which enable anyone to use any phone for safe transactions and micro-payments there may be a further slow-down in smart phones and mobile data connections. With consumers being able to use any phone for those three tasks the demand for high end phones may be reduced. As for data connections, they'll be the first thing to go when the wallet shrinks. Viruses and other issues will also influence consumers in their choices and may see a predominance of simple no data connection or java phones, especially seeing they can still provide the three uses mentioned above.

There are every few mobile phone transaction systems with the potential for ubiquity under these circumstances and they are the ones to watch.