Analyst Report: Mobile 2011: Data Consumption Will Explode


The mobile space is always unpredictable, but it enters 2011 at a particularly dynamic time. Carriers are now bringing 4G networks online (even as their definitions of “4G” vary), mobile data consumption is exploding and the FCC is trying to settle on policies both to regulate the industry and to free up more spectrum. The industry is positioned to enjoy another year of tremendous growth — and continued challenges — as our appetite for mobile data increases and as connectivity comes to a wide variety of devices, adding traffic to mobile networks already heavily congested. And while forecasting the path of mobile tends to be fraught with peril (ahem, feel free to weigh in on my predictions for 2010), here are trends I expect to see in 2011:

More network congestion and an increase in offloading technologies and policies. AT&T has so far been the only operator to suffer in a big way from mobile data usage; iPhone exclusivity, it seems, is a double-edged sword. But competitors like Verizon Wireless, T-Mobile USA and Sprint will have similar trouble handling traffic as Android gains steam and (as expected) Verizon begins to offer Apple’s iconic gadget. As Juniper Research recent noted, “network capacity will be sorely tested in 2011.” For both carriers and consumers, that congestion will have important repercussions — a rise in offloading technologies such as Wi-Fi and femtocells and the slow death of all-you-can-eat data plans.

Privacy concerns regarding location will make headlines. The Pew Research Center recently made news with a report indicating only 4 percent of mobile consumers use location-based services, but that figure is deceptively low. It refers only to users of apps like Foursquare and Gowalla, which share a user’s location information with others. But location is a key component of many offerings, from navigation apps like Google Maps to recommendation offerings like Yelp, and many users aren’t even aware that they’re sharing their whereabouts with the app developers and mobile site operators. They will become aware though, as location-based ads gain traction and as hyper-local offerings like Yahoo Local catch on. And there will be substantial backlash from consumers — and, maybe, from federal regulators.

Security finally will become a legitimate problem. Mobile malware has long been over-hyped by vendors of security “solutions” hoping to sell their wares, but those perceived threats will become real as smartphone usage ramps up (particularly among consumers once satisfied with feature phones) and as mobile becomes a foundation of data-sensitive industries such as health care and finance. Nefarious malware that distributes spam or accesses users’ personal information has become news in the last few weeks, with stories of one million smartphone users in China becoming infected with malware and the emergence of a Trojan virus that appeared in Android Market in the form of a fake Angry Birds app. In fact, the Trojan disguised as Angry Birds was deliberately submitted to Android Market to expose the vulnerabilities of Google’s laissez-faire acceptance policies when it comes to app submissions. Which is why I think such security threats will force Google (and perhaps other app store operators) to follow Apple’s lead and police their storefronts more aggressively.

Mobile enterprise apps will explode. With all due respect, Research In Motion co-CEO Jim Balsillie is wrong. While web-based apps may eventually become a standard, downloadable offerings are key in the short-term, both for consumers and business people. The mobile web is accessible by a vast range of mobile devices, but downloadable apps offer a more engaging, immersive and easy-to-navigate experience — basically the kind of user experience enterprises can leverage to make their employees more productive. Business-targeted enterprise apps will gain substantial traction on iPhones, Android devices and BlackBerrys, and they will begin to find audiences on the iPad and other tablets. That trend will be spurred as cloud providers such as Salesforce help businesses mobilize cloud-based services for their employees. And don’t be surprised to see the emergence of an app store that caters to the business set — a group increasingly impacted by consumer-targeted devices and the app ecosystem that supports them.

Growing pains for the Internet of Things. As Stacey wrote earlier this year, the burgeoning world of machine-to-machine (M2M) services is expected to offset falling revenues from voice and an increasingly saturated handset market. M2M applications typically offer an attractive combination of increased revenues with minimal network congestion. The space will become particularly compelling as 4G networks — which can deliver more data at far higher speeds — continue to come online. But while most of the pieces in the nascent M2M space are falling into place,  the development of sophisticated business models for these technologies present a huge challenge. A connected heart monitor, for instance, must be monetized not just by carriers and manufacturers, but also by health care providers. And as GigaOM Pro analyst Jody Ranck notes, transitioning health care data to the cloud might be cost effective, but such a move isn’t without its hurdles. Questions regarding customer service and billing arrangements, for instance, must be addressed: Who should a customer call if, say, a connected appliance breaks down? Ironing out those wrinkles won’t be easy.

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