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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Uncle Frank who wrote (19838)	3/11/2000 10:10:00 PM
From: LindyBill	Read Replies (3) \| Respond to of 54805

RE: Tero They say a James Bond movie is only as good as its villain, and sometimes our discussion is much improved by having a good antagonist, but I am afraid I may have spawned an smart "Jach" here, Frank. Tero seems to love to find Q bulls and argue. I may get so pissed I will buy back in!

To: Uncle Frank who wrote (19838)	3/12/2000 10:28:00 AM
From: tero kuittinen	Read Replies (7) \| Respond to of 54805

Uncle - I didn't mean to cause a disruption and this is the last post I write to avoid further anxiety attacks. I read the book last year and I agree with most of what's in it. That's the reason I don't understand why Nokia's role in mobile internet infrastructure has never really been addressed here. The real problem is this: I can't answer 14 posts without being accused of intruding the thread. And now when I leave I'm guilty of evasion. It's a perfect trap. And it shuts out effectively any real dissent. Moreover - I can't really go as far into mud as people who use pseudonyms can, since I'm writing under my own name. So the slur contest is one I'm going to lose every time. As far as mass market is concerned, 70% of the world's mobile subscribers in 2004 are expected to use GSM or TDMA. No mobile internet solution that does not address this subscriber base can claim dominance. Discussing technologies that will be implemented by 10-20% of the world's mobile operators under Gorilla thread can be done. But not without bending the rules beyond breaking point. The potential of GPRS and EDGE of actually reaching their intended mass market is high, because the handsets won't have to be markedly more expensive or bulky than what consumers are used to. It's a huge mistake to assume that 3G phones will immediately sell in high volumes if they initially carry stiff weight and/or price premiums. That's the case for the two-prong approach. Proprietary open architecture? What many readers of this thread may not realize is that no GSM operator is ever going to implement 3G without implementing GPRS first. Nokia was one of the companies designing the W-CDMA proposal accepted by ETSI and one of the features is that GPRS is designed to become incorporated into the future W-CDMA network. 90% of operators order their upgrade solutions from the company that landed the initial infrastucture deal. This is the classic captive audience. People keep asking why GSM operators wouldn't opt for cdma2000 instead. The answer is simple: they are already being locked into the W-CDMA upgrade with their adaptation of GPRS. The barrier to entry is there and it's huge. Operators are conservative, skittish and mostly unwilling to switch to new vendors unless they have a compelling reason. Nokia has designed their new network gear to include upgrade slots for GPRS, EDGE and W-CDMA. Anyone entering this upgrade pathway is going to need a very good reason to exit it. It's this traditional reluctance of mobile operators of switch vendors that makes the Japan Telecom W-CDMA order with Nokia important. It's one of the few recent cases of a a vendor breaking into a new, major market. What compelled JT to bypass Lucent, Motorola and many Japanese companies to place the order with Nokia? The most likely answer is that Nokia's role in creating the original W-CDMA proposal gave it enough credibility to swing the deal. And that's the crux of the whole situation. Nokia's proposal ultimately vanquished the Motorola/Siemens/Alcatel proposal for 3G architecture, because Nokia together with Ericsson has the global market share to get their standard proposals adopted. Japan and Korea are falling into line, because they need the European market. They have to get access and they get it by accepting Nokia's preferred standard. At that point, Motorola, Siemens and Alcatel had already fallen behind, due to their early resistance to W-CDMA. Standards like GPRS and W-CDMA are open, of course - but the companies formulating and adapting them first will always have the edge. The power entity here is not Nokia, but rather Nokia-Ericsson axis. The global telecom market is so fragmented that no single vendor can ever get market share majority. But this duopoly can and does have most of the world's mobile infrastructure market. They created most of the new mobile internet standards like GPRS and W-CDMA; and they are now together locking up 60-70% of the early orders. It's not the Microsoft situation, it's not the Intel hammerlock, it's not even the Cisco dominance. But it's the closest thing to Gorilla status that can be achieved in the telecom market. Operators will never consent to giving total dominance to one single network vendor. But they can accept the duopoly situation. Whether this is enough to merit Gorilla status - I don't know. But I sure know it should be worthy of discussion. We are talking about one billion GSM/TDMA subscribers in the year 2005 and their access to mobile internet. This pool of consumers is far, far bigger than anything Wintel will ever reach. The criticism aimed at EDGE would have more credibility if the critics weren't the same people who said that GPRS would never work. Now that the number of GPRS orders is closing in on 100, that line is not looking so good anymore. One key question is who benefits most of W-CDMA; vendors or Qualcomm? The answer is the same it was a year ago: the licensing fee situation has not cleared up. There are people expecting 3-5% fee for all equipment to Qualcomm, there are people claiming that Ericsson is getting as much as it is giving, there are people saying Nokia's IPR claims on W-CDMA are as solid as any company's. This situation won't be resolved until the agreements are announced. Until then, it's a matter of faith. Tero