The Apple iPhone idis 619 Capstone Assignment By

2) Social trends: Cell phone and wireless service industry continue to present a great promise of technology convergence. Globally, cell phone users continue to evolve as customers demand handsets to be the multi-faceted communication device with support for new features (such as camera, MP3 and video player, internet access, instant messaging, email access and other entertainment content) as an integral part of the product and service offering. While certain features like instant messaging continue to be more popular in certain countries and cultures (for example in Europe and Japan) due to social etiquette, other features like music, video and game playing have found worldwide acceptance. According to industry analysts at Jupiter Research, mobile music downloads will generate more than $14 billion in global revenues by 2011, with North America accounting for 18% of this revenue, up by 4% in 2006^ix. Also in Japan, for example, there is a growing trend of listening to books and novels on cell phones, driven by service plans that offer unlimited data transmissions at fixed reasonable rate. According to a publishing company in this product category, sales of electronic books in Japan in FY05 doubled to ¥9.4 billion from the previous year. There is also a growing global trend of cell phone users discontinuing landline phone access with 22% of the cell phone users not using a landline^x at all. This increases the usage of minutes of cell phone users and they tend to purchase more expensive monthly minute packages, thus providing more revenue potential to the wireless service providers. New, trendy, compact, high-end cell phones are also used as fashion accessories and to reflect wealth and social status. In the US, there is a growing share of prepaid mobile users, with the number of prepaid users doubling between 2002 and 2005 to about 28.9 million users and representing about 15% of all wireless subscribers in 2005, according to Telecommunications Industries Association (TIA)^xi. This has had a negative impact on revenues for the wireless service provider industry. There is also an increasing usage of family plans, which increases the subscribe base, but cuts significantly into Average Revenue Per Unit (ARPU), a critical metric used by the wireless service industry to gauge the revenue generated by a customer handset (the ARPU seeks to inform the service provider how effectively it is leveraging the customer’s revenue potential).

3) Technological trends: Cell phone handsets have outpaced the rate of growth of wireless service providers, since the year 2003 when the initial technological innovation of the camera phone came out in the global market (Please see Exhibit II (C) 3: Technological Trends). Since then, there has been an increased focus on providing data services like email, instant messaging and high speed internet access. Data services have become an increasing part of the revenue pie of service providers. As consumers are becoming increasingly dependent on using their handsets as full-fledged communication devices rather than just cell phones, service providers are setting up new network infrastructures to provide faster and better quality access to. An example of this is the move by US service providers from 2G networks to 3G networks in 2005-2006 (like Cingular, Verizon, Sprint and Nextel). The performance between a 2G and 3G network is analogous to a move from dial-up internet to broadband internet access^xii. China recently announced that it is in the process of conducting field tests for its 4G network and has put it into trial commercial use until 2010^xiii.

4) Governmental trends: In the US, the main regulatory role of the government in the wireless industry is to allocate frequency bands for wireless communication. The US government agency performing this function is the Federal Communications Commission (FCC). In recent years, the US government has started auctioning specific frequency spectrums and generating handsome revenues in the process. In August 2006, FCC’s auction of 1,122 licenses for advanced wireless services (which would merge with 3G network and could be used for fixed or mobile broadband applications) lead to total bids worth $13.6 billion^xiv. The Chinese government has further eased its regulations by offering licenses for 3G networks in order for state-owned phone companies to prepare services in time for the 2008 Olympics in Beijing.

5) Ethical trends: The advent of wireless communication for data exchange has raised some serious ethical issues related to security considerations. In 2004, a hacker “gained access to servers at T-Mobile systems for at least a year and used it to monitor U.S. Secret Service email, obtain customer passwords and social security numbers, and download candid photos taken by sidekick users, including Hollywood celebrities"^xv. With the increased adoption of wireless networks in areas like medical and financial information exchange, there is a whole industry that is evolving and developing security solutions to secure this kind of data exchange. There is also the issue of access to privacy with regards to consumer records, especially in the light of 9/11 attacks. There is still a lot of work to be done, with regards to striking a balance between providing security, and maintaining privacy of the consumer.

7) Demographic trends: According to figures from TIA^xvi, from 2000-2005, the United States population grew by 4.7%, while the mobile phone subscriber base grew by 100.3%. Research shows that the highest penetration in the cell phone market is on account of the younger generation, who are more active users and early adopters of new technological innovations. This is because more individuals in the same household, namely spouses and children are buying new phones. Data from Simmons Teen Survey indicates that cell phone use among teens has increased from 37% in 2003 to 47% in 2005^xvii. Research also highlights the importance of target marketing to certain minorities in the US such as the Hispanics as they spend 50% more time on cell phones than do Caucasians and also tend to more actively use multimedia features such as camera, video, and internet access^xviii. The most important criteria when selecting a wireless service are availability of free minutes in the plan, other family members that use the same service provider and network quality. Income also plays an important role when it comes to phone selection, with high median income members purchasing more expensive handsets. As shown in the graph (Exhibit II (C) 2 (a) – Usage and Significance of Cell Phones) from Mintel/Greenfield Online^xix, with 35% of the population in the 25-44 years age group opting to use a cell phone as their primary mode of communication, landlines are being rapidly substituted by cellular phones. From another Mintel/Greenfield Online survey (Exhibit II (C) 2 (b) – Reasons for choosing a cell phone), we conclude that across all age groups, consumers prefer to opt for the phone that comes free (or is relatively inexpensive) with a phone plan. This is followed by other criteria such as the look of the phone and the features which it offers (like mp3 player or a camera). It seems that almost two out of five consumers (Exhibit II (C) 2 (d) – Reasons to change mobile phone service) are happy with their wireless service provider and are not keen on changing service. But what is really interesting is that while almost 25% of the consumers are not happy with their wireless service provider, they do not wish to switch providers due to the hassle of deactivating their current account and activating a new one with another service provider. This would typically involve cancellation penalties with the existing provider and a new 1- or 2- year lock-in with the new provider. Based on a study of the features used by genders (Exhibit II (C) 2 (d) – Usage of Mobile Phone), we conclude that besides the basic functions of storing numbers and accessing voicemail, the other features like playing MP3 songs, taking pictures and playing games are still minimally used by most consumers. What is also striking is that there is greater interest in data transfer related features (Exhibit II (C) 2 (f) – Would like to use mobile features) as opposed to playing MP3 songs and videos. To conclude, there continues to be a significant worldwide increase in adoption of mobile technologies. Firms see new opportunities to compete in complementary services like providing streaming music, video and data.