Report Excerpt: The Mobile Data Explosion

Editor’s note: The following is an excerpt from our most recent Sidecut Report, The Mobile Data Explosion, an in-depth look at the reasons behind the recent surge in wireless data usage, and where devices, networks and service plan charges are headed in the near future. The following excerpt takes a look at the reasons behind the recent surge of data usage, and why it caught even the biggest service providers by surprise. (To download your free copy of the report, click here.)

WHY IT HAPPENED NOW

How did such a shift in data usage catch an experienced provider like AT&T so unaware? Part of the blame might be the fact that there was a sort of perfect storm hitting the mobile data arena the past few years, radical shifts that might have been manageable had they happened alone — but hard to predict or plan for when they happened all at once. The introduction of “superphones” like the iPhone, combined with faster wireless broadband speeds and new addictive applications like Facebook and Twitter gave people the ability and reason to increase data use rapidly — far beyond than what had ever been seen before.

“AT&T is managing [wireless data] volumes no one else has experienced,” CTO John Donovan told the Wall Street Journal in an interview regarding the stress caused by the iPhone.

Why did the iPhone change the wireless data game so radically? When it was first made available to the public in June of 2007, the most paradigm-shifting thing about the iPhone was its touchscreen interface, an innovation that eliminated keyboard buttons in favor of a screen that was immediately much larger and sharper than that of any previous handheld device.

While the touchscreen was in and of itself a cool toy — making its users easily identifiable as iPhone owners with their telltale finger swipes — the combination of a larger screen size and an advanced browser was the real game-changer, providing for the first time an interface that could mimic a full-page website with enough clarity to make iPhone-version applications immediately understandable.

This was a huge shift from the traditional world of cell phone “applications,” which often required a user to navigate numerous byzantine screen configurations only to arrive at something that looked like a 1980s Atari game, with blocky graphics and stuttering performance.

While some mobile platforms succeeded in developing applications that worked and mattered enough for folks to master — the BlackBerry and corporate email come to mind — such devices and their applications still required users to graduate past a steep learning curve, figuring out and remembering the correct button sequences that got them to the promised land of mobile application use. For the iPhone, the real revolution started in the Fall of 2007 when Apple announced a software developer kit to help third party developers build iPhone “apps,” which Apple would market through its popular iTunes online store. The race to win the phone back from the provider was on.

On July 10, 2008 Apple formally launched the App Store, and one day later it made available the iPhone 3G, which could use AT&T’s fastest 3G network, with data download speeds that reached into the megabits per second — according to Apple, it was twice as fast as the previous version iPhone. Now users just didn’t only have a whole menu of applications to load onto their phones (as opposed to the few applications that service providers used to include baked into a new device) — they had a way to download them faster and use more bandwidth, courtesy of the AT&T 3G network.

While the phone was cool, it quickly became clear that Apple’s takeover of the mobile phone “deck” (the industry term for a mobile device’s application platform) was the real revolution. In the past, mobile phone data applications were the ultimate closed and expensive gardens. The only applications available were those that came with the phone, and the only services were those that could be purchased through the provider, often at a steep premium. Remember paying $2 and more for a poor quality digital reproduction ringtone?

The iPhone and the App Store changed the parameters of that game forever, introducing the radical economic efficiencies of the full Internet to the handheld device. Instead of paying through the nose for bad browser interfaces and hobbled applications, users could now pick and choose from an assortment of apps almost as big as the web itself, with many free to the user as app providers pursued the ever elusive eyeball and attention of potential customers for goods, services, or advertisements.

So did the idea work? Quite well — too well, in fact. In the first three days the iPhone 3G was on sale, more than 1 million devices were purchased, while at the same time more than 10 million apps were downloaded from the App Store.

What did a lot of the new iPhone users do with their new toys? Spend a lot of time sending messages tailor-made for mobile creation and consumption on a new service called Twitter. Spend a lot of time updating their pages on Facebook or MySpace. Send messages to friends, complete with the pictures they just snapped with their phone. Check Google Maps to see where they were, or view mashups with live traffic feeds to see where they should be going. With the iPhone apps downloads now well into the billions, it’s clear that many folks are still finding out new things to do while on the move — and making AT&T CTO Donovan’s job tougher each and every day.

Because of its exclusive deal to sell iPhones in the U.S., AT&T more than any other provider has borne the brunt of the iPhone-related parts of the mobile data explosion. But other providers like Verizon are no doubt catching up rapidly on their data loads as competitive devices, especially those based on Google’s Android operating system (a relative iPhone lookalike with touchscreen capabilities and application-hosting ease) come online. Research in Motion’s BlackBerry, long the preferred choice of mobile professionals, is still a big seller but it is trying to get into the app game too, enticing enterprises into putting custom applications into their salespeople’s hands. With wireless data contracts less of a question on a corporate expense account, it’s no surprise that business use of the mobile web picked up the pace alongside the consumer-based explosion.

To cap it all off, the last few years also saw the emergence of a new class of computers, the small-form portables known as netbooks, typically much lighter and much cheaper than traditional laptops. Available from many providers for prices of $500 or less, netbooks were easy enough to carry more places than you might want to tote your traditional laptop — meaning that even more people were persuaded to join the mobile data ranks. More netbooks were sold alongside cost reductions for cellular plug-in modems, and netbooks with 3G connectivity built in could be purchased sometimes for as little as $99 a month, under special promotions from providers like AT&T, Verizon and Sprint.

According to research by networking giant Cisco, a single “superphone” like an iPhone or a BlackBerry typically generates more data traffic than 30 basic-feature cell phones. A laptop with a plug-in cellular modem, meanwhile, could generate as much mobile data traffic as 450 basic feature phones. In 2009, Cisco said the mobile data traffic worldwide had increased by 160 percent over the previous year. Any idea what is expected for the future? Here’s a hint: This is just the beginning.

(The Sidecut Report The Mobile Data Explosion is now available for free download.)

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