Land Lines are going away, right? Everyone says so. We hire young women, generally in their twenties, to help take care of my son. I can’t remember the last time one of their phones had an Area Code associated with the place they are currently living.

That’s because they don’t use landlines–many people in their twenties and thirties move around a lot, and rely strictly on a cell phone as their sole or primary telephone. If they have a couple of roommates, occasionally they will also have a landline. But the number usually isn’t given out, and doesn’t appear to be used much.

So does this mean that we are rapidly heading toward the wireless society that pundits have been predicting for a number of years? Or is wireless growth slowing and about to settle into mature market mode, with modest incremental growth in the future? There are a number of factors on both sides of this discussion–let’s explore a few.

Factors Pointing Towards Acceleration Of Wireless

Mobility
Society is becoming more and more mobile as time goes on, and everyone is getting used to being able to do things on the go, that used to be done only at home or the office. This trend appears to be one that will only continue–and is a positive thing to most people’s thinking. I do think there may be a bit of a backlash in this area–”too much of a good thing”–I’ll address this later on.

New Services
The addition of many new services should drive users to utilize wireless as an increasingly greater percentage of their total computing/communications device usage. Trends such as the merging of consumer cameras and music into smartphones create the types of new services that are driving increased wireless usage in the near term. Location-based services could provide another nice pop in growth, if they ever do reach their potential (and they’ve been “coming” for quite a while). I would note that I don’t consider these trends the type of major innovations that will cause a fundamental, “step-function” like shift and a major positive effect on wireless usage. I view these new applications as incremental, something to continue the modest growth we are currently seeing in the wireless market–in the western world, at least. Outside of the developed world, of course, there is some phenomenal growth occurring. In terms of market development, I view rapid wireless growth in developing countries as a “catch up” phenomena.

Cost
This is a bit of a two edged sword. Like any other technology-driven market, the cost of electronics and services are being continually driven down, especially as wireless has scaled into a mass market, with corresponding economies of scale. Up to this point, at least, there has been sufficient competition to drive down the price of services from the wireless carriers. There seems to be some flattening of this price deflation in the US recently, however. On the other hand, as new services have been introduced, the “total bill” that consumers end up paying for ALL of their technology services (wireless, TV, Internet Access, etc.) has been going up. There will be a point where consumers say “enough is enough”; the total tech entertainment and communications bill simply can’t rise forever.

Technology Innovation and Competition
I do believe that technological innovations, market scale, and competition will all play a factor in continuing to bring down overall costs in the long run. New technologies such as WIMAX, networked WiFi and in-home pico cell towers will provide technological alternatives for consumers, and therefore increased indirect competition. And there are certainly many exciting developments in research labs which we haven’t even heard of yet, that will lead to increased innovation and continuing industry growth. I really believe that the technological aspect of wireless is still in its infancy, and will be the major factor that leads to long growth in wireless markets.

Factors Pointing Towards Slowing Of Wireless

QOS
The biggest issue, in my opinion, that will limit the future growth of wireless, is the lack of sufficient Quality-of-Service. Current cell phone service in the US sucks. There’s no other way of putting it. Depending upon your carrier in a given metro area, service can still be spotty, with persistent dropped calls–even after all of these years, and the fact that cell phones are a ubiquitous mass market item. I still have 3 landlines in my house, two for business usage. I sure don’t want to talk to a new client on a cell phone connection–if I can help it. I know many business people that don’t feel this way, and use their cell phone exclusively–my opinion is hardly universal. But I don’t really understand it. Especially inside, in homes and offices, you just can’t trust that the call quality to be anywhere near what is demanded by an important business call. Some of this is based upon real issues–mountains in the way of radio waves, etc. But much of the problem is simply the wireless carriers jamming too many calls into too little spectrum, for cost reasons. I’m quite surprised that no one has yet come up with a “business quality” wireless service, which guarantees a higher level of call quality–much like a business or first class airline seat.

Complexity
As new features and services get added, even if they are welcomed, user interfaces and experiences almost always get more complex–at least initially. Complexity is the enemy of mass acceptance. So vendors need to be careful about adding new bells, whistles and new revenue-generating services faster than the market can become comfortable with them

Size
The size of devices, dictated by the need for mobility, works directly against a premium user experience for many functions. The new iPhone is a major step forward, for example, and sets a new standard for browsing the Internet on a truly portable device. Yet anyone that would rather surf the net on an iPhone, rather than any real computer, would have to be classified as insane. As more compelling online services are developed specifically for mobile devices, this may become less of an issue. But the size constraints required to make a good mobile device work against wireless devices for many current applications. Here is where I believe that truly breakthrough technologies–things like speech recognition, holographic displays and virtual keyboards–are needed to make a real dent in this issue.

User experience controlled by Telcos
The wireless carriers have held a stranglehold on the user experience thus far in the life of cell service. Because of this, you have large, conservative telephone companies basically deciding on what users want and should have, in an otherwise technology-driven space. Most of their decisions are driven by their own short term revenue concerns, with little vision on what can grow the market exponentially in the long run. At the most basic level, you can’t even take your cell phone and use it on a new carrier network. A few major technology vendors are pushing to open things up, such as Apple and the open browsing experience with the iPhone, and Google’s recent attempts to make new wireless spectrum open. But the wireless telcos still have a stranglehold on the market and will keep things as proprietary as possible for as long as possible. They’re terrified a being left as just commodity bandwidth providers, like their wired counterparts were in the dialup Internet market. No one on the carrier side wants to see THAT happen again. Because of this, innovation in user experience will continue to be stunted.

It’s Just “Too Much”
As I mentioned earlier in this article, we’re all becoming instantly accessible no matter where we are. I am an early adopter of many types of gadgets
–a real tech guy. I am also an email junkie. I always expected that I’d be one of the first users of a smartphone that provided the proper balance between a cell phone and a computer/data communications device. Certainly these devices have been refined, and exist today. But by the time it happened, I decided that I really didn’t need to be quite that accessible. I’m not an emergency room doctor, nor a high level commodities trader that needs instant access to everything. It’s rare that I’m not in front of a computer to get email access within a couple of hours. And I can always be reached with a regular call on my cell phone, office phone, or home phone. Do I really need a device that provides instant email, instant messaging and cell phone access? With the convenience of that device comes the penalty of never having a moment’s peace that is totally within your control. It’s my opinion that as modern life has accelerated to warp speed on a normal basis, more and more folks are going to be rejecting the notion that 24/7, instant access is a necessity–let alone a convenience.

Summary
It is always difficult to forecast how such a huge, important market will develop over time. In many ways wireless communications has already commoditized, and in other ways one can hypothesize that these technologies are in their infancy. If they are truly n their infancy–then forecasting the future is a dangerous game. My own feeling is that we are at a very early stage–a plateau of sorts, which appears much like the steady-state commoditization of mature markets. But I expect that there will be a number of disruptive technological changes coming, separated by a period of years where the negative factors slow growth, over the next couple of decades. Wireless communications will hit plateaus where it appears the market has matured and growth has slowed. Then a breakthrough new technology will appear, changing the game and re-igniting robust growth. What will those technological innovations be–holograms, speech recognition, or large increases in data throughput capacity in the wireless spectrum? That’s where the guessing game begins. How do you see this market? What breakthroughs do you see in the coming years? Post a comment and enrich our discussion on this interesting topic.

Phil Morettini
PJM Consulting
www.pjmconsult.com

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