inCode predicts wireless inflection point in 2010

While 2009 was punctuated by new entrants, network outsourcing and the rapid rise of prepaid, 2010 will be all about data, over-the-top and new ways of making money. These are a few of the trends that strategy advisory firm inCode Telecom is forecasting for North America in 2010. The firm, which boasts an 80% accuracy rate over the past seven years of offering predictions, said the wireless industry is at an inflection point more significant than at any juncture in North American telecom history.

“The best message [for operators] is to stick with a strategy and be very good at it because what you’ll see happening is if folks end up trying to do too much, they will end up doing too many things poorly,” said Jorge Fuenzalida, vice president and general manager for inCode Telecom. To back up this overarching advice, inCode laid out 10 predictions for 2010:

1. Netbooks will take off, bringing down the network with them
Netbooks were carriers’ pioneering fourth-screen device in 2009, and they will continue to be next year, but the momentum will prove taxing to their networks. As a secondary device, netbooks provide incremental revenue streams but act as bandwidth hogs on overly taxed data networks. Consumers view them as full computing devices, requiring laptop-type support, inCode said. As such, operators need to rack up their spending on synchronizing netbooks with consumers’ wireless devices or else outsource these capabilities to prevent backlash. “There is a collision between handsets getting smarter and computers having portability and mobility as a more important feature,” Fuenzalida said. “This is one step closer to that ultimate collision.”

2. FCC won’t appease anyone with net neutrality
Net neutrality, the great polarizer between wireless operators and IT companies, won’t be getting much help from the FCC anytime soon. The debate has already had a chilling effect on spectrum auctions and rural broadband stimulus participation, but the FCC’s eventual compromise will satisfy no one, Fuenzalida said. He said the FCC will have to be careful with the limitations it puts on traffic that may be detrimental to overall network usage. At the same time, operators will need to find ways to gain traction in an environment encouraging more OTT services.

3. Wireless operators tackle the 4G battery drain
As the carriers continue to move aggressively to 4G, they will be forced to reconcile issues around backhaul solutions that can cost-effectively handle increased traffic and high-speed data apps’ effects on device battery life. Innovations in battery life have lagged radio frequency technology advances, inCode said, and this gap will only increase. In-building coverage will also be strained as customers cut their data cords in favor of 4G, Fuenzalida added.

4. Smartphones will no longer be a discernable category
With a slew of newer, fancier smartphones coming to market, the category is no longer limited to high-end devices, nor are they priced as such. Prices are falling for smartphones, resulting in fairly extreme price wars for carriers in terms of subsidies, Fuenzalida said. The features of smartphones are also becoming table stakes for mid-tier devices. In 2010, today’s smartphone, defined by inCode as having an open operating system, big display and full Internet browser, won’t stand out from the status quo. It will be the status quo.

5. Incremental revenue will come from QOS
Now that all the operators have gone all-you-can-eat, there’s little room to take it back. inCode drew an analogy between airlines that couldn’t increase their basic rates and wireless operators that will be forced to charge for incremental features and capabilities as usage-based pricing becomes increasingly out of the question. Quality-of-service pricing is one option already being explored for apps such as VoIP or video streaming, to increase the total cost of service, but not the basic transport fee.