December 2010
Yankee Group’s 2011 Predictions:
4G Fuels the Decade of Disruption
by Jason Armitage, Senior Analyst, jarmitage@yankeegroup.com
Contributors: Carl Howe, Declan Lonergan, Chris Nicoll, Brian Partridge, Eugene Signorini and Ted Julian
The Bottom Line
2011 is destined to be a big year for 4G, as many operators around the world are set to roll out major LTE, HSPA+ and WiMAX implementations. Here’s where
Yankee Group sees 4G headed in terms of deployments, adoption and overall impact.
Once a Decade
In May 2001, NTT DoCoMo soft-launched the first 3G service.
Nearly a decade later, worldwide registered 3G lines broke
through the 1 billion mark. In the process, mobile usurped fixed as
the leading telecom sector, accounting for 77 percent of consumer
connections in 2010. In Q3 2010, NTT DoCoMo launched the Xi
Brand for its LTE service. It joins a handful of mobile operators
around the world offering what have come to be termed 4G
services—those running over LTE, WiMAX and (in some specific
cases) HSPA+. The incremental pace of deployments is reminiscent
of 3G, but this time around, we believe 4G mobile upgrades will
lay the foundation for the fundamental reshaping of the telecom
industry and commerce as a whole.
Yankee Group’s predictions for 2011 aim to answer three
questions: what are the considerations in upgrading networks, how
quickly will services be adopted and what broader impacts will
more bandwidth have? In all three stages, the message is there is
no Big Bang in the pipeline. Spectrum auctions are still to be held
in key markets across the globe. Operators, content owners and
consumers will tussle over Net neutrality, raising the likelihood of
protracted cycles of regulation. Early signs from the U.S. indicate
partial coverage and confusing marketing will slow adoption. Why,
the reader may ask, are we focusing on 4G now?
© Copyright 2010. Yankee Group Research, Inc. All rights reserved.
Because the one force that drives the rate of disruption is
connectivity: Mobile connectivity lowers the barriers of entry
into new markets, and with the arrival of 4G, mobile bandwidth
is about to get a lot cheaper. Once in place, 4G upgrades will
have swift and profound impacts across the industry. Management
should prepare their organizations now to adapt or die. Welcome
to the next decade of disruption.
Below are the most significant developments we see for 4G in
2011, concluding with our take on 2011’s winners and losers. Read
on to see what organizations and technologies are best positioned
to become 4G leaders next year and beyond.
Methodology
In the U.S., a “4G network” is one based on LTE, WiMAX or
HSPA+, but that definition is globally unique; elsewhere, LTE is
commonly regarded as the primary 4G technology. For this report,
we consider both definitions to denote “4G,” depending on the
geography examined. We base this report on our ongoing research
into 4G and the nascent Anywhere Network®, and we use findings
from several of our published reports as well as data from Yankee
Group’s August 2010 Anywhere Enterprise: 2010 U.S. Enterprise
Mobility/IT Decision-Maker Survey, Wave 1; our Anywhere
Consumer: US Consumer Survey - Wave 1-8 from September
2010 and Wave 1-9 from October 2010; and our Link Data: Global
ConnectedView Forecast, September 2010.
Yankee Group’s 2011 Predictions: 4G Fuels the Decade of Disruption

Prediction 1: 4G Will Be a Drop in the Ocean Exhibit 1: 4G Will Be a Slow Burner, Just Like 3G
Source: Yankee Group, 2010

The Upshot: Operators and infrastructure vendors always over-

Share of Global
estimate short-term demand for new wireless technologies. This will Mobile Lines
7%
happen again with 4G.
6%
By the end of 2011, the world’s most important 4G technology 5%
4% 3G (actual)
(LTE) will account for only 0.04 percent of all mobile lines.
3% 4G (forecast)
Penetration will be 0.33 percent in the U.S., but consumer
2%
awareness of 4G will remain stubbornly low. Despite operators’ 1%
substantial market budgets, by the end of 2011, less than 25 0%
percent of North American consumers will understand what 4G Year 1 Year 2 Year 3 Year 4 Year 5

means. We should not be surprised by this modest level of market

awareness and adoption. Until customers fully appreciate the link Prediction 2: 4G Will Fail to Win the Enterprise
between a new wireless network technology and the superior user
experiences it delivers, their interest in upgrading will naturally be The Upshot: Operators have a long way to go in conveying 4G’s value

muted. A slow ramp for 4G is OK. Remember, several companies proposition to enterprises. Marketing around speeds and technology

that were relatively late to 3G, such as Apple and Telefónica O2 in specs needs to take a back seat to demonstrating actual applications

the U.K., did just fine. Aggressive 4G players will be frustrated if and solutions enhanced by 4G.

they expect customers to flock to the new technology en masse in Wireless operators have mostly missed the mark when it comes
the first year (see our April 2010 report “4G Déjà Vu”). to marketing 4G services for business, and as a result, enterprises

Beyond 2011, however, the 4G market will ramp up steadily (see will be slow to warm to 4G. Although operators are banking on

Exhibit 1). The U.S. will lead the world in service adoption, and over business applications such as video conferencing, virtualization

one-fifth of all U.S. mobile lines will be LTE by 2014. This will far and machine-to-machine communications that will benefit from

exceed the global average of just 2.1 percent. During 2012, consumers’ the enhanced speeds and latency improvements of 4G networks

awareness of 4G will also increase significantly—it will climb to over to drive adoption among corporations, business decision-makers

50 percent in the U.S. All of this 4G growth will be driven by the don’t see the value—yet.

availability of more attractive devices and price plans, both fueled by Yankee Group’s Anywhere Enterprise: 2010 U.S. Enterprise
intensifying competition among the leading mobile operators. Mobility/IT Decision-Maker Survey, Wave 1 shows that less than

Incumbent operators deploying 4G networks will be the winners half of all mobility decision-makers say they strongly agree with the

because they will be able to align 4G investments with pragmatic statement “I understand what 4G wireless technology is.” More

adoption forecasts—unlike what happened with 3G. Examples importantly, only 29 percent strongly agree that “4G wireless

include AT&T, Vodafone and Telstra. The losers will be rich technology is important to enhancing the productivity of my

media or content companies such as the BBC, Sky and YouTube organization’s employees” (see Exhibit 2 on the next page).

that expect 4G to change the world—and drive their business

growth—within the next one to two years.

2 © Copyright 2010. Yankee Group Research, Inc. All rights reserved.

 December 2010

Exhibit 2: 4G Will Hit the Enterprise Market With a Whimper

Source: Yankee Group’s Anywhere Enterprise: 2010 U.S. Enterprise Mobility/IT Decision-Maker Survey, Wave 1

On a scale of 1 to 10, how strongly do you agree or disagree with the following
statements? (1 means “Strongly disagree” and 10 means “Strongly agree”)

I understand what 4G wireless

7% 16% 30% 47%
technology is

Low (1,2,3)
4G wireless technology is important
Low-medium (4,5)
to enhancing the productivity of my 12% 28% 32% 29%
High-medium (6,7)
organization's employees
High (8,9,10)

4G wireless speeds will be a big

6% 20% 38% 36%
improvement over 3G speeds

0% 20% 40% 60% 80% 100%

n=217
Base: Asked to those who have deployed or plan to deploy wireless broadband

However, business users stand to be a key target for operators as
they launch 4G. With consumerization playing a significant role in
driving enterprise adoption of mobile technologies, the best near-
term route for 4G business adoption is through users themselves.
Similar to how smartphone growth expanded in enterprises,
end-users purchasing 4G adapters and dongles will demonstrate
productivity benefits and business use cases for 4G applications.
To truly move the needle in enterprises, however, operators need
to be much more proactive in exposing the greater ecosystem of
application and solution providers to business decision-makers.
This could also mean creating white-label or jointly developed
out-of-the-box solutions that show off the advanced capabilities of
4G: Examples would be in the areas of virtualized applications and
unified communications/collaboration.
Prediction 3: The 4G Killer Device Will Be
a Hotspot
The Upshot: Personal hotspots allow consumers to choose which
connected devices need to be on a mobile plan. The result will be more
devices connected to the same subscription and a loosening of operators’
customer control.
Based on Yankee Group’s Anywhere Consumer: US Consumer
Survey - Wave 1-8, 2010, we find consumers continue to increase
their use of personal Wi-Fi hotspots (also known as MiFi
hotspots), and we expect this trend will accelerate in 2011 with
the arrival of faster 4G connections. Four devices sharing a 14-21
MB connection will still find performance far superior than that
experienced individually on a 3G connection.

In terms of the competitive landscape, Sprint is ahead of the game
in the U.S. When asked who the leader in 4G is, decision-maker
respondents select Sprint more than any other operator. Sprint’s
early mover marketing messages have at least resonated with its
audience. The ultimate losers from ineffective 4G marketing are
enterprises, which could once again be underserved by operators
that take the easier path of consumerization.
Before hotspots, multi-device users needed to deal with multiple
mobile device plans, one per device. In 2011, with an increasing
number of smartphones and stand-alone devices offering
integrated Wi-Fi hotspots, users can pick which devices need
to be on a mobile plan and which can piggyback on a 4G device
connection via Wi-Fi. Consequently, personal hotspots will
dampen 4G subscription uptake and revenue.

© Copyright 2010. Yankee Group Research, Inc. All rights reserved. 3

Yankee Group’s 2011 Predictions: 4G Fuels the Decade of Disruption
Device manufacturers such as HTC, Motorola, Apple, Hewlett-
Packard, Sony and Nintendo stand to benefit because if their
device has a Wi-Fi connection, it’s now a winner. The operators
lose on a number of fronts: Yes, they get the small additional
ARPU bump provided by the Wi-Fi hotspot charge (typically $20
per month), but they lose the valuable information associated
with understanding which devices are accessing the network.
Wi-Fi-attached devices are seldom provided by the operator,
meaning a further loss of operator customer control and customer
relationship. 4G MiFi hotspots further reduce the operator to the
provider of a smart pipe.
Prediction 4: Competition in the US Will
Create a 4G Marketing Mess
The Upshot: 4G marketing across multiple technologies is creating a
lot of hype and confusion in the U.S. Expect subscriber take-up to suffer
in consequence.
In Yankee Group’s October 2010 report “US and Europe: LTE’s
Tortoise and Hare?,” we find significant regional differences in
how 4G networks are being marketed to consumers and in how
4G drives competition. Although Swedish operator TeliaSonera
rocketed to an early deployment lead in Stockholm and Oslo for
its LTE network, we expect by the end of 2011, the U.S. will have
rapidly overtaken Europe in LTE network coverage. A matter of
long-term concern, however, is the extent to which T-Mobile,
Clearwire, Sprint and Verizon Wireless are using the 4G moniker
as a marketing tool.
The lack of strong 4G momentum in the European Union reduces
the 4G marketing overload currently experienced by U.S. users,
who are just now recovering from confusing 3G marketing claims.
According to Yankee Group’s Anywhere Consumer: US Consumer
Survey - Wave 1-9, 2010, over half of U.S. users don’t know
what 3G is and two-thirds don’t know what 4G is. This creates a
marketing problem for operators trying to differentiate based on a
service that is poorly understood by the customer.
By contrast, European operators and consumers have had less of
an issue with competing 3G networks and services, plus they enjoy
a fairly clear message that LTE is 4G. Device manufacturers and
application vendors, therefore, can more clearly target which services
require a 4G connection or service, simplifying consumer decisions.
4 © Copyright 2010. Yankee Group Research, Inc. All rights reserved.
U.S. 4G operators and consumers stand to lose out. The 4G conflict
started early in the U.S., with Clearwire and Sprint positioning
their WiMAX network as “4G” simply to separate it from current
3G offerings—despite protests that no network technology would
approach the International Telecommunications Union (ITU)-
defined 4G speeds of 100 Mbps connection for several years.
This led to T-Mobile positioning its HSPA+ network in the U.S.
as 4G, based on its offering higher speeds than the Clearwire/
Sprint network, as well as higher speeds than the proposed LTE
network offered by Verizon. All in all, it spells a mess for consumers,
operators and the device manufacturers that will quickly confuse
users if they add a “4” to the name of any new device.
Prediction 5: A Denial-of-Service Attack Will
Take a 4G Network Down
The Upshot: Rabid mobile broadband demand and aggressive 4G
rollout schedules will pressure operators to cut corners on security. This
is dangerous and will cost operators dearly down the road. In 2011, a
denial-of-service (DoS) attack will take down a 4G network, squandering
the affected operator’s opportunity to grow revenue and steal share.
From a security perspective, 4G networks are a challenge for
mobile network operators because they are far more open and flat
than traditional operator network architectures. Securing them
effectively requires a different mindset and tools. This challenge
by itself might not be so bad. Unfortunately, it’s happening in the
midst of chaos. Operators are scrambling under an avalanche of
mobile broadband demand to both roll out 4G access and shore up
3G deployments. Virtually all operators are fighting this battle. But
AT&T’s struggle in the U.S. is particularly poignant as it strives to
meet iPhone demand on its 3G network at the same time it builds
out its 4G offering. The resulting frenzy doesn’t position operators
well to build security into their 4G networks from the ground up.
To meet deadlines, many will take shortcuts on security, hoping
to retrofit later on. This is dangerous, especially in competitive
geographies like the U.S., where most customers have several
operators to choose from.

4G networks are too new for their threat profiles to be known.
Lots of things could go wrong and some will. But Yankee Group
expects a DoS attack will render a substantial segment of a major
operator’s 4G network unavailable in 2011. There will be other
outages due to overwhelming demand; what we’re predicting is an
outage that’s the result of malicious intent. After all, 4G networks
offer attackers not only rich targets (relatively well-to-do early
adopters), but also unproven technology with security issues that
haven’t been worked out and a relatively flat architecture with
fewer protection points. To make matters worse, such an outage
can occur in many ways: bandwidth exhaustion, signaling overload
or application-level attacks are all quite capable of making a
network unavailable to subscribers.
With clean-up costs (including the network, IT, customer care,
media relations, etc.), fewer new subscriptions and increased
churn, the bill for this DoS outage will be a minimum of U.S.$10
million in the first month alone. Factor in the lifetime value of these
lost subscribers, especially in competitive markets, and the longer
term impact could increase the cost by an order of magnitude and
depress the stock price.
The winners include vendors like Arbor Networks and Radware
that help operators address these issues. But equipment vendors
like Alcatel-Lucent (ALU), Cisco, Ericsson and Huawei will also be
called on to assist, as will their professional services organizations.
The losers in this scenario include the affected network operator,
its network operations staff and its customers. Should the outage
coincide with a 4G launch and/or hot handset rollout, the brand
impact could be devastating as customer acquisition numbers
aren’t met and churn increases. As a result, revenue targets won’t
be met at the same time expenses climb to clean up after the
mess. These losses are particularly painful since the migration to
4G represents a rare opportunity to steal share for operators that
play their cards right. A massive DoS outage just as momentum is
building could squander that opportunity.
© Copyright 2010. Yankee Group Research, Inc. All rights reserved.
December 2010
Prediction 6: Chinese Vendors Will Beat 3G
Incumbents in Their Own Backyards
The Upshot: The breach of established infrastructure vendor accounts
will keep the pressure on Nokia Siemens Networks (NSN), ALU, Ericsson
and NEC. But competition will benefit Tier 1 infrastructure vendors: They
will need to get better at everything they do to ensure survival.
The pressure on incumbent telecom infrastructure vendors exerted
by Huawei and ZTE has been steadily increasing for years, as
evidenced by their strong top-line sales growth while established
vendors such as ALU and NSN have struggled. Both Huawei and
ZTE have benefited greatly from their pole position on immense
network build-outs covering their domestic 1 billion-plus population,
comparatively lower cost R&D and aggressive financing capacity.
To maintain their gaudy growth aspirations, Huawei and ZTE have
sought to aggressively expand their presence in all other regions
of the world and are targeting and winning key projects in the
transition to LTE. Huawei in particular came strong out of the
gates: It won a part of the first LTE network at TeliaSonera, added
design wins at WIND, Telenor, Vodafone Germany and Belgacom,
and gained the pole position in China Mobile’s TD-LTE rollout. The
TD-LTE win is important because it represents a viable path to LTE
for WiMAX network operators. For its part, ZTE notched LTE
wins at Pannon (part of Telenor Group) in Hungary and Optimus
in Portugal.
These vendors’ paths are not completely fated for success,
however. In a reversal of fortune, TeliaSonera chose NSN (along
with Ericsson) over Huawei for its LTE expansion project,
demonstrating the Chinese can still be beaten by proper
motivation and commercial terms. The U.S. will also remain a
challenge for Huawei and ZTE because geo-political security
concerns hold back U.S. Tier 1 operators from large-scale
commitments to either company, with a few exceptions. That said,
the days when Tier 1 competitors could simply dismiss Chinese
vendors as offering low-cost, technically inferior solutions are
behind us. Yankee Group predicts the encroachment of Chinese
competition into the Western world will only accelerate over the
next five years.
5
Yankee Group’s 2011 Predictions: 4G Fuels the Decade of Disruption
Prediction 7: 4G Users Will Spend Twice as
Much Time on the Mobile Web as Their Non-
4G Counterparts
The Upshot: 4G will increase the average amount of time consumers
spend on the mobile Internet. Companies that invest in mobile Web sites
and free or near-free rich media content are best positioned to benefit.
Yankee Group’s Anywhere Consumer: US Consumer Survey -
Wave 1-8 finds non-4G consumers currently spend an average
of 18 minutes a day browsing the mobile Web for both work and
personal reasons. By the end of 2011, we predict that figure will
reach more than 36 minutes a day for 4G users. Based on the
faster and more responsive mobile Web experiences provided by
4G, we further predict Web browsing will continue to dominate
consumer 4G network use, comprising more than 75 percent of
all consumer network requests on 4G and exceeding the request
rates of audio, video and mobile apps.
4G speeds will help the mobile Web to flourish. In just the last
two years, mobile Web sites have grown from a hobby to mobile
destinations that can serve nearly every type of mobile phone (see
the October 2010 Yankee Group Report “Best of the Anywhere
Web 2010”). 4G speeds will just accelerate that trend.
Companies such as Google, Bing, Walmart, JetBlue, Amtrak and
BART.gov that invest in high-value mobile Web sites targeted at
the needs of on-the-go consumers will garner even more traction
Exhibit 3: Global Mobile App Revenue Is on the Rise
Source: Link Data: Global ConnectedView Forecast, September 2010
Smartphones (in Thousands)
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0 $0
2010
Number of Smartphones In Use Worldwide
6 © Copyright 2010. Yankee Group Research, Inc. All rights reserved.
as mobile Web use increases with 4G. Similarly, free or near-free
audio and video content companies such as Pandora, Spotify,
YouTube and Hulu.com will continue to see mobile use grow.
Finally, companies with operations in mobile advertising—including
Apple, Google AdMob and Jumptap—will have an opportunity to
increase their revenue.
In contrast, businesses that assume 4G users are all on PCs and
therefore don’t prioritize on-the-go user Web content will see
their Web user bases decline, even as bandwidth availability goes
up. Oddly, mobile carriers such as Verizon, AT&T and T-Mobile still
don’t provide mobile Web sites today, and as such, are poised to
miss out on the 4G boom.
Prediction 8 : Mobile Video Will Not Drive
Consumers to 4G
The Upshot: Despite huge bandwidth demands, video won’t move
consumers to 4G. Mobile apps and Web browsing will continue to drive
revenue on upgraded networks.
4G consumer adoption will ramp up the mobile app gold rush
going on today (see the March 2010 Yankee Group Report, “The
Mobile App Gold Rush Speeds Up”). The average 4G user today
downloads eight apps every 90 days compared with only six apps
every 90 days for non-4G users. Based on this fact and our prior
research, Yankee Group predicts mobile apps will exceed U.S.$5.4
billion globally in app revenue for 2011 (see Exhibit 3).
App Store Revenue
(in Millions of U.S. Dollars)
$25,000
$20,000
$15,000
$10,000
$5,000
2011 2012 2013 2014
Global App Store Revenue

Despite the prodigious amounts of network bandwidth video
applications consume, they do so largely on behalf of only 30
percent of mobile users—those who watch video at least once a
week. Mobile video use isn’t just constrained by bandwidth, but
also by how much undivided attention mobile consumers can
spend on video. Without today’s constraints on mobile bandwidth,
we see consumers increasing their use of music services such as
Pandora and Slacker—which can be enjoyed while consumers do
other mobile activities (such as driving or walking)—more than
their video consumption. We expect Web browsing and mobile
apps to remain the vast majority of 4G network use for the
foreseeable future.
Companies such as Smule, Chillingo, DataViz and others that have
invested in serious mobile app development and production will
either grow to become mega-businesses or be acquired by other
companies that already are mega-developers.
The losers will be those companies that have spent millions to
develop pay mobile video platforms that largely go unused through
95 percent of a 4G user’s day. Companies such as Flo TV have
already gone bust; expect more to join their ranks as unpaid video
distributors such as YouTube continue to dominate the majority of
4G video usage.
Prediction 9: The Web Will Not Save
Operators in the Mobile Apps Market
The Upshot: Operators think a bigger role for the Web in mobile apps
will throw them a lifeline. Think again. In 2011, Apple and Google will lead in
Web authoring and discovery through the browser.
In 2011, the Web will increase its role in the mobile apps market
in two key ways: the development and distribution of mobile apps.
Operators have welcomed the increased importance of the Web
as an opportunity to boost their own profiles in apps development
and distribution. The reality is that apps authored in Web
environments and the browser offer no escape from the expanding
ecosystems controlled by Apple and Google.
The provision of software development kits (SDKs) for native
apps has drawn developer mindshare to OS owner storefronts.
In 2011, developers with a preference for Web authoring will
have a wider choice of frameworks and tools. Developers will
also use components of the HTML5 specification to deliver more
responsive, richer Web apps.
© Copyright 2010. Yankee Group Research, Inc. All rights reserved.
December 2010
In addition, next-generation network technologies will improve the
performance of Web apps. Faster download speeds will negate the
difference between content that resides on the device and content
that is based in the cloud. Web apps hold the key benefit of easy
portability across platforms.
Growth in Web authoring will not loosen the grip of the OS
vendors. Apple’s iOS and Google’s Android platforms are becoming
the best served in terms of Web authoring tools, and native apps
show few signs of declining popularity. Specifically, we expect the
apps consumers are willing to pay for—such as leading games—will
be developed for specific devices. In channel terms, apps reach
the end-user by three means: the device (preloaded), the app
storefront and the Web browser. An increased number of apps
residing in the cloud will benefit the browser.
Sadly for operators, Apple and Google own the most popular
mobile Web browsers and are well-positioned to optimize these
for app discovery and search. Revenue from this channel will
continue to evade operators. Players such as Vodafone and Orange
that have invested in storefronts have the most to lose.
Prediction 10 : MVNO Hype Will Build, But
Most of It Will Lead to Nothing
The Upshot: 4G does not represent a significant market opportunity
for most new entrant mobile virtual network operators (MVNOs).
In theory, 4G should lend itself to the MVNO model. Spectrum
fees and the capex required to build 4G networks are
considerable, and companies that build 4G networks need to
ensure they’re filled with profitable data traffic. Meanwhile, smaller
players with limited funds will perceive an opportunity to carve
out a piece of the 4G action without the need for huge upfront
investments. In theory, therefore, the 4G MVNO business should
be a booming one. But it won’t be. Most of the hype will lead
to nothing. MVNO business plans—and, in some cases, MVNO
launches—will fail for the same reasons the majority of 2G and 3G
MVNOs failed: Most don’t understand how to truly complement
their hosts’ businesses. Like a small bird on an elephant’s back, if
an MVNO can establish a symbiotic relationship with its host and
provide some direct commercial benefits, it can flourish. But it’s
critical the MVNO does not compete to any meaningful degree
with the host. First and foremost, both parties cannot target the
same customers.
7
Yankee Group’s 2011 Predictions: 4G Fuels the Decade of Disruption

There will, however, be opportunities for companies that learn
from today’s relatively few successful MVNOs. In cases where
the host network is not in the retail business, genuine 4G MVNO
opportunities will emerge. The LightSquared model in the U.S. is
one such example. Other viable opportunities for virtual players
will be in key verticals where operators need help to build the
market and distribute their products. Examples include the
connected vehicle and specialist enterprise mobile data services.
But overall, the 4G MVNO space will be characterized by a
relatively small number of focused players. 4G will certainly not
herald a tidal wave of new MVNO market entrants because the
2G/3G lessons are still relatively fresh in entrepreneurs’ minds.
The winners will be MVNOs that know how to complement
their host operator’s own 4G business and have a clearly defined
addressable market that is not being well served by the host. All
other 4G MVNOs will fail.
come built-in as standard. This started with 3G (e.g., Amazon’s
Kindle) but it will really take off with 4G as operators try to fill
their data pipes with profitable data from a wide variety of sources.
The end result of this pricing innovation is that 4G users, unlike
most of their 2G and 3G counterparts, will learn to live with
customized and tiered data packages. Insistence on flat rate
will give way to acceptance of “you get what you pay for.” As a
result, 4G pricing—unlike that used for most 3G services—will
enable rich and sustainable user experiences and a model that is
economically sustainable for network builders. Every player in
the mobile ecosystem will ultimately benefit from this, although
some won’t appreciate it at the time (we discuss mobile broadband
pricing options in detail in Yankee Group’s December 2009
Report “The Holy Grail of Mobile Broadband Pricing”). Exhibit 4
summarizes the key findings.

Prediction 11: Pricing Will End in Tiers Exhibit 4: The Holy Grail of Mobile Broadband Pricing:
Personalized, Converged and Dynamic
Source: Yankee Group, 2009
The Upshot: 4G will herald the introduction of more innovative and
tiered mobile data pricing models. Flat-rate pricing will be gone forever.

Tiering of 4G mobile data propositions will become the norm in

2011 and beyond. These will typically feature a combination of data
Personalized
Flexible price plans
volume (measured in gigabytes) and network speed (measured in and usage thresholds
are customized to
Mbps). Quality-based or performance-based pricing will also be individual needs and
introduced widely. These plans will usually feature two to three Converged preferences.
Dynamic
Land-line/mobile
main service tiers. Vodafone has already deployed a version of broadband connectivity Pricing based
and mobile handset-based on individual
this in Spain with its 3G services. Based on results there, the context and
services (voice, messaging,
variable network
company intends to extend this approach to other markets. Most applications and mobile
parameters
Web) are integrated.
operators will follow in Vodafone’s footsteps. Operators will do enables targeted
real-time offers.
everything possible to draw attention to 4G technology’s superior
performance as a way to encourage customers to upgrade.

With 4G, operators will also introduce more flexibility into their
price plans. Consumers will be offered data connectivity as a
stand-alone product, to be used to connect a wide variety of
communications and consumer electronics (CE) devices. In other
cases, where the business model supports it, connectivity will

8 © Copyright 2010. Yankee Group Research, Inc. All rights reserved.


Yankee Group expects several types of companies to profit from
innovative pricing models. Mobile broadband end-users with light-
to-medium usage will benefit from customized data offers and
attractive price points. Early innovators such as TeliaSonera can
achieve a price-based competitive advantage. Policy management
vendors (including Telcordia, Mobixell, Acision, Bridgewater,
Tekelec, ALU and Ericsson) can provide the solutions operators
need by supporting differentiated 4G services and pricing.
Ultra-heavy mobile broadband users will lose their near-unlimited
flat-rate offers. Operators that try to stick with today’s flat-rate
structures will also suffer. Their networks will be swamped by the
heaviest and most unprofitable 4G users. In this case, a short-term
competitive advantage will give way to unsustainable bandwidth
economics. In addition, bandwidth hogging application providers
such as YouTube will see lower overall usage as subscribers
become more frugal with their data consumption.
Prediction 12: Carrier VoIP Will Still Be
AWOL, Despite 4G
The Upshot: Operator-provided VoIP services over 4G are not likely to
launch in the market in a large way until 2013. This leaves the door open for
over-the-top (OTT) companies to gain an early lead.
Based on our interviews with operators and results from our
Anywhere Consumer: US Consumer Survey - Wave 1-8, we find
operators are still in the early strategy, planning and testing stages
when it comes to delivering VoIP across their mobile networks.
Early operator trials with OTT services have been limited in
scope and success, and the voice-over-4G (Vo4G) standards such
as VoLTE are not yet mature. We believe 4G networks need to
achieve a level of consistent coverage before Vo4G rolls out, and
we predict it will be 2013 before operator-provided Vo4G comes
to market in a large way.
4G improves the multimedia experience, but it’s just not needed
for voice. Over 10 years ago, operators believed voice ARPU
would shrink and data ARPU would increase, as users needed
voice less and it decreased in importance. Instead, voice ARPU
has remained flat and its traffic has decreased only slightly, while
data volumes have soared, creating problems for operators (see
the October 2010 Yankee Group Report “Early 4G Leaders and
Followers”). Even with the move to 4G, 3G and 2G networks will
remain viable for the next several years, possibly into the next
decade, negating the need for a quick move of voice onto high-
performing 4G data networks.
© Copyright 2010. Yankee Group Research, Inc. All rights reserved.
December 2010
OTT companies that provide voice and unified communications
services are clear winners here. With operators currently choosing
to partner rather than compete, OTT players like Skype, Google,
Vonage and others will retain their loyal customer base in 2011.
We also expect these companies to enrich their services in 2011
to take advantage of 4G networks’ improved performance (and
spotty coverage). Users also win because they will be able to take
advantage of different price points for different voice services.
The operators stand to lose out in the short term. All 4G
operators to date, TeliaSonera, Clearwire/Sprint and now Verizon
Wireless (which launched its network Dec. 5), are pushing voice
to their 3G networks or do not directly support Vo4G offerings.
Only T-Mobile and other operators using HSPA+ carry voice
natively on their “4G” networks. The longer users avail themselves
of alternative service offerings such as Skype, Google Voice and
others, the deeper those services become ingrained in users’
habits. While some users will always gravitate to the free/lowest
cost option and some will always gravitate to the higher cost/
higher quality option, the real battle is for the users in between.
As the XYZ generations and their voice-limited habits arrive,
operators face the loss of significant voice revenue in the long run
one way or another.
Prediction 13: Google Will Take the Wheel in
Mobile Data
The Upshot: Google will move to a dominant position in the mobile
data value chain as next-generation deployments roll out. More
bandwidth means more data traffic, and Google is the most successful
company at monetizing that traffic.
Google has created a rich ecosystem on the Android platform, but
its business objective in this space is simple. The leader in online
marketing wants to extend its dominion to mobile data. Acquiring
a mobile OS, launching the Android Market, deal-making with an
enormous list of partners—all these investments are steps toward
this single objective.
In 2010, Android proved three points about Google in the mobile
space: its ability to create a popular platform for a wide base
of partners (operators, handset vendors and developers); its
leadership in online marketing, regardless of network or device;
and its knack for making money (as of Q3 2010, Google’s mobile
business is already turning over U.S.$1 billion a year).
9
Yankee Group’s 2011 Predictions: 4G Fuels the Decade of Disruption

Why does Yankee Group highlight Google as the mobile player to ecosystem, using clear marketing targeted at core early adopters,
watch in the coming year? After all, Symbian and iOS outstripped leading on innovative pricing and maintaining adequate levels
Android in terms of device activations by a wide margin in 2010. of security. Internet players and service providers should build
And Google makes less money from dynamic sectors of the mobile conservative forecasts for short-term revenue from business plans
data market (e.g., apps) than Apple. We cite one statistic to built around 4G.
support our contention: In Q3 2010, Google announced its mobile
Operators, OS vendors and Internet players will find the
search queries had increased by five times in two years. Simply, the
same rules apply across the board: More connectivity speeds
giant from Mountain View is primed to extend its lead in online
competition and reinforces first-mover advantage; core activities
marketing to mobile. Mobile marketing is just getting started. The
should be placed at the root of the business; and opening internal
combination of search, location and mobile payment systems will
resources to the wider ecosystem of partners will be critical to
create whole new markets in mobile commerce.
remaining competitive.
Note also the levels of competition in mobile devices and software.
In 2011, the growth of all vendors will be hit by Google’s disruptive Further Reading
tactic of offering a leading mobile OS for free. Dominance in
mobile marketing holds three advantages over devices and Yankee Group Research
software: the market is nascent; global expansion requires lower
investment; and leadership is nearly impossible to assail, as online “Best of the Anywhere Web 2010,” October 2010
marketing is far more prone to network effects.
“US and Europe: LTE’s Tortoise and Hare?” October 2010
Yankee Group recognizes a question mark hangs over the last
“Early 4G Leaders and Followers,” October 2010
point. All leading players are prone to disruptive market entrants.
Google will keep an eye on Facebook, which is taking a new “Preparing for 4G Video Services,” July 2010
approach to marketing and this year turned its attention to the
“2010 Global Telecom Capex Forecast: As North America
mobile opportunity. But the hypothetical emergence of a Google
Recovers, Asia-Pacific Falls,” April 2010
challenger will offer little relief to existing players in the mobile
value chain. OS vendors, including Apple, Nokia and RIM, will “4G Déjà Vu,” April 2010
struggle to compete, while operators will be shut out from mobile
marketing revenue. “The Mobile App Gold Rush Speeds Up,” March 2010

“The Holy Grail of Mobile Broadband Pricing,” December 2009

Conclusions
“Huawei Shows Impressive Growth, but the US Market Is Still
4G’s full effects will not be experienced in 2011, but companies Elusive,” May 2008
across the industry need to position themselves for the coming
changes. Network vendors are already locked into fierce Yankee Group Data
competition; operators are balancing investments in upgrades with
the challenges of monetizing mobile data; and Internet players and Anywhere Consumer: US Consumer Survey - Wave 1-9,
value-added service providers are poised to unlock the potential of November 2010
all-IP infrastructure.
Anywhere Consumer: US Consumer Survey - Wave 1-8, October
The disruption and competition under way creates opportunities 2010
and new markets across the industry. Exhibit 5 on the next page
Link Data: Global ConnectedView Forecast, September 2010
and our predictions indicate there will be winners and losers across
the industry. As the largest upfront investors, operators stand Anywhere Enterprise: 2010 U.S. Enterprise Mobility/IT Decision-
to lose the most in the first stage of rollouts. Steps that will help Maker Survey, Wave 1, August 2010
them position themselves for the mid term include harnessing the

10 © Copyright 2010. Yankee Group Research, Inc. All rights reserved.

 December 2010

Exhibit 5: 2011’s Winners and Losers

Source: Yankee Group, 2010
Winners Losers
1 4G Will Be a Drop in the Ocean Incumbents like AT&T, Vodafone and Telstra Content companies like the BBC, Sky
and YouTube

2 4G Will Fail to Win the Enterprise Sprint Enterprises

3 The 4G Killer Device Will Be a Hotspot Device manufacturers like HTC, Motorola, Operators
Apple, Hewlett-Packard, Sony and Nintendo

Competition in the US Will Create a 4G Operators in EMEA U.S. 4G operators, consumers and
4 Marketing Mess device manufacturers

A Denial-of-Service Attack Will Take a 4G Companies like Arbor Networks and
5 Network Down Radware, plus equipment vendors like
Alcatel-Lucent (ALU), Cisco, Ericsson and
Huawei (and their professional services
organizations)
The affected network operator, its
network operations staff and its
customers

6 Chinese Vendors Will Beat 3G Incumbents in Huawei and ZTE Companies like Nokia Siemens
Their Own Backyards Networks (NSN), ALU, Ericsson and
NEC

4G Users Will Spend Twice as Much Time on Companies like Google (with AdMob), Bing, Companies like Verizon, AT&T and
7 the Mobile Web as Their Non-4G Counterparts Walmart, JetBlue, Amtrak, BART.gov, Apple, T-Mobile
Jumptap

8 Mobile Video Will Not Drive Consumers to 4G App development companies like Companies that have spent millions
Smule, Chillingo and DataViz to develop pay mobile video
platforms

The Web Will Not Save Operators in the Companies like Apple and Google Companies like Vodafone and
9 Mobile Apps Market Orange that have invested in their
own storefronts

10 MVNO Hype Will Build, But Most of The few 4G MVNOs that know how to Most 4G MVNOs
It Will Lead to Nothing complement their host operator’s own
4G business

11 Pricing Will End in Tiers Most users, plus companies like TeliaSonera, Ultra-heavy MBB users and
Telcordia, Mobixell, Acision, Bridgewater, bandwidth hogs like YouTube
Tekelec, ALU and Ericsson

12 Carrier VoIP Will Still Be AWOL, Despite 4G Companies like Skype, Google and Vonage Companies like TeliaSonera,
Clearwire/Sprint, Verizon Wireless

13 Google Will Take the Wheel in Mobile Data Google Companies like Apple, Nokia, RIM
and operators

© Copyright 2010. Yankee Group Research, Inc. All rights reserved. 11

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