Carl Howe, Chris Collins and Josh Martin from Yankee Group’s Anywhere Consumer research team join Yankee Group’s Chief Technology Officer Jeffrey Breen to add two more predictions to Yankee Group’s Top 10 predictions for 2009. In this second installment:

#7: The Apple App store will pass 2 billion downloads in 2009.
#6: Streaming becomes the killer app and Netflix finally sounds the death knell for Blockbuster in 2009.

Also in this edition, the secret reason why analysts are not representative of the general population.

Top 10 Consumer Predictions for 2009: #7-#6 podcast (mp3 / 5.1MB / 5:35)

Carl Howe, Chris Collins and Josh Martin from Yankee Group’s Anywhere Consumer research team join Yankee Group’s Chief Technology Officer Jeffrey Breen to start the countdown of Yankee Group’s Top 10 predictions for 2009:

10. Twitter is the new Facebook
9. AT&T/Verizon/IPTV subscribers will exceed 7 million in U.S.
8. Mobile becomes the key to quad-play success

Top 10 Consumer Predictions for 2009: #10-#8 podcast (mp3 / 11MB / 11:59)

As a product manager for our data products, one of the most common questions I get is the country granularity that we have in our ConnectedView forecasts. (ConnectedView is the name Yankee Group gives to our detailed forecasts of end user markets, which spans fixed and mobile in consumer and enterprise markets).

People find it hard to keep track of our coverage, because in September, we increased our coverage with 13 new countries detailed in the forecast (these are starred in the list), and ensured that all countries included all the metrics, which smoothed out one or two anomalies in Asia.

Yankee Group forecasts the global market, and now has 54 countries explicitly detailed as well as regional summaries. You can see what we cover by downloading an example file. Example files contain the full Excel files, with all the tools, but with the numbers scrambled. Take your pick here.

ConnectedView countries with detailed forecasts

Here’s a list of every country in the world, segmented by whether we have a detailed page for the country, or whether it is included in the total view of the region, but not explicitly detailed.

Whenever Yankee Group talks about a region, these are the definitions we work to.

North America

• Countries specifically detailed: Canada, United States

Latin America

• Countries with detailed break outs: Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela
• Additional countries that complete the regional view: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bolivia, Cayman Islands, Costa Rica, Cuba, Dominica, Dominican Rep., Ecuador, El Salvador, French Guiana, Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Netherlands Antilles, Nicaragua, Panama, Paraguay, Puerto Rico, Saint Kitts and Nevis, Saint Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, Virgin Islands (U.S.)

Western Europe

• Countries with detailed break outs: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom
• Additional countries that complete the regional view: Andorra, Cyprus, Faroe Island, Gibraltar, Iceland, Liechtenstein, Luxembourg, Malta

Eastern Europe

• Countries with detailed break outs: Croatia*, Czech Republic*, Estonia*, Hungary*, Latvia*, Lithuania*, Poland*, Romania*, Russia*, Slovakia*, Slovenia*, Turkey*, Ukraine*
• Additional countries that complete the regional view: Albania, Armenia, Azerbaijan, Belarus, Bosnia Herzegovina, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Macedonia, Moldova, Montenegro, Serbia, Tajikistan, Turkmenistan, Uzbekistan

Middle East

• Countries with detailed break outs: Saudi Arabia*, United Arab Emirates*
• Additional countries that complete the regional view: Bahrain, Iran (Islamic Rep. of), Iraq, Israel, Jordan, Kuwait, Lebanon, Occ. Palestinian Territory, Oman, Qatar, Syrian Arab Republic, Yemen

Africa

• Countries that make up the region: Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Rep., Chad, Comoros, Congo, Côte d’Ivoire, Dem. Rep. of the Congo, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libyan Arab Jamahiriya, Madagascar, Malawi, Mali, Malta, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Reunion, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Togo, Tunisia, Uganda, United Rep. of Tanzania, Zambia, Zimbabwe

Asia-Pacific

• Countries with detailed break outs: Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand*, Pakistan*, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam
• Additional countries that complete the regional view: American Samoa, Bangladesh, Bhutan, Brunei, Cambodia, Fiji, French Polynesia, Guam, Kiribati, Laos, Macau, Maldives, Marshall Islands, Micronesia (Fed. States of), Mongolia, Myanmar, Nepal, New Caledonia, North Korea, Northern Mariana Islands, Papua New Guinea, Samoa, Solomon Islands, Sri Lanka, Tonga, Vanuatu

Composite Regions

• Middle-East & Africa: this is all the countries in the Middle East and in Africa
• EMEA: this is Europe (Western and Eastern), Middle East and Africa
• Americas: this is all the countries listed above in North and Latin America

Last Thursday, Alcatel Lucent was holding its Innovation Days 2008 in Paris. This is, as the name suggests, an annual event which gives Bell Labs the opportunity to present to Alcatel Lucent customers, employees, analysts and the press a set of technologies, applications or service concepts that it thinks are the most promising.

As an analyst, part of your job is to anticipate future trends, but it’s not always easy because few vendors and/or telcos are as open about their own approach to the future as you’d like. To me, this was a nearly unique opportunity (as far as I know, none of Alcatel Lucent’s competitors hold similar events) to actually see and form an opinion on what may shape the telecom landscape of tomorrow.

Over the course of one morning, I was subjected to dozens of demos or concepts, and it was as exciting as it was brain-frying. I’m not going to go through the whole list of them, but just highlight those which I thought were promising, exciting, or thought provoking. The floor was organised in eight sections. Four of these were applications put in a usage context, namely home usage, mobile usage, enterprise usage and green Alcatel Lucent. The other four sections were more “under the hood” approaches to traffic management (control), communications, data speed and quality (bytes) and services.

The environment that I was most interested in was the home, but I didn’t find there an answer (or parts of answers) to my big question which is: which are the services that are going to drive the demand for next-generation access. They did have a 3D TV there, which unfortunately is something I can’t quite enjoy since I only see from one eye. But apart from that the mock home environment was not all that impressive.

On the mobile side though, there was some really cool stuff on display:

• the most impressive and immediately applicable was the Mobile Embedded Laser Video Projector. Bell Labs is not quite there yet, but had a working demo of a projector the size of a mobile phone and showed us how small the laser component to be embedded in a mobile was. Ranked really high on the “I want it now” factor!
• the other really cool app that they had was Tikitag, an RFID system where actions on a PC are associated with a tag. The reader is plugged into your PC and you decide what the PC does when a given tag is passed on the reader. One of the examples shown was how a tag stuck on a teddy bear’s leg would start children music and the tag on the other leg stop it. The tags were everywhere in the floor, for us to request info on a given demo, exchange contacts, etc. This is commercially available already.

In the “Transforming the World” section we saw a couple of really interesting innovations, and perhaps more importantly a concept that Alcatel Lucent wants to supersede “Always On” which is “On When Needed”. Its not the first time I hear about this from a vendor, but that doesn’t make it less crucial. The idea is that the network has to become a lot more elastic, being able to accomodate instand needs of a lot of capacity but also to be able to switch off when not needed. More concrete applications were:

• 3D Heatsinks promise to reduce the energy needed to cool IT components by up to half. When you consider that cooling accounts for 30-50% of energy consumption in IT, the potential impact is huge.
• Bell Labs also works on Wind Powered Basestations. Full independance from the electrical grid is not quite achieved yet, but improvements in wind power efficiency and in energy requirements for base stations make this a promising proposition.

The rest of the floor was devoted to various demos, all very different in nature. Here are three that jumped at me:

• Encrypted Traffic Identification is an interesting alternative to DPI. It uses statistical flow analysis to define a behaviour of a certain type of traffic (P2P, http, voice, etc.) and can identify the nature of a flow with a 2% error without deep packet inspeaction. I think a non-intrusive alternative to DPI is an interesting consideration from a privacy point of view. Of course, if you object to any form of traffic shaping, this is not going to be please you anyway!
• I expected not to be particularly interested in the Personal Content Manager, based on the name alone, but actually I found it one of the more promising services on the floor. I wrote recently about how the trend in telco replication of over the top services baffled me. Personal Content Manager could be a way out of that conundrum: what this does is to aggregate all the content available on all of a user’s content storage areas (whether in the cloud, on the PC or on other connected devices) and make it taggable and searchable. The clever bit is that this aggregation role is actually a lot more legitimate for a telco than for an over the top player…
• I also thought that Contact Me My Way was a really interesting app. Essentially, what it allows a user to do is to embed a clickable communication button in any document online or offline and associate a communication method to it. Say that I give a presentation at a conference and include such a button. I decide that it allows people to call me. When someone clicks on the button, the call is established and I know before I answer that the call was established based on that presentation at that particular conference. And if I don’t want to be bothered anymore, I can just deactivate the button or change the communication method to email. You can find more about this here.

All in all, this was a very interesting event to attend. I also felt that this heralded a change of approach to the market from Alcatel Lucent, another way of engaging their traditional telco customers which, perhaps, is the early result of the new management taking over. Alcatel Lucent is to announce its new strategic plan on Dec. 12th, which will undoubtedly give us a better feel for where they are going!

From today’s Wall Street Journal: “Nokia plans a do-it-all phone.”  What they’re talking about is the planned introduction in mid-2009 of a new high-end touchscreen model, the N97. Mobile sector people love to talk about the ”Swiss Army knife” strategy, in honor of something most of us regard as a successful pocketable product. Successful, I guess, apart from never being taken on board an airplane ever again.

Patek Philippe Calibre 89

And on that point, as we consider whether do-it-all phones will succeed, perhaps we should select a different analogous pocket product as our comparison: one that we can still take on board aircraft and, in fact, almost anywhere else we go. 

“Complications” is the watch industry’s term for added features beyond simple time-telling. At various times on various models, these have included astronomical and astrological elements (including calculating the date for Easter!), calendar features like days of the week and months of the year, diving aids, stop-watches, compasses, places for photos and locks of hair, and much more. At left, a Patek Philippe model touted by the firm as the world’s most complicated pocket watch, incorporating many of those features.

What’s my point? It’s summed up by this very telling fact: only four units of this rara avis have ever been made. Even if you don’t care when Easter is coming, you have to admit the larger message: the basic set of features for a timepiece is by now more or less fixed, and the market for a particular device isn’t grown by adding complications. I hereby state the following mobile device feature rule:

Features added to a mobile device ultimately reduce, rather than enlarge,
the market for that device.

The question is not, “Will we all ultimately use ‘do-it-all’ mobile handsets?” Clearly not. The question instead is, “What are the most logical combinations of features that sufficiently large consumer segments will pay for?”  To be fair, I think most handset manufacturers have figured that out; it’s the mass media that needs a more thoughtful approach to writing about their efforts.

Not my own prom, but not far from it

OK, so it didn’t involve limos, corsages, and crepe paper, but thirty years after my last prom, last week I went to another one.

At least that’s what Kevin Krupky, legislative counsel for Alcatel-Lucent and my date for the evening, called it. What it really was, was the annual dinner hosted by the FCBA for the chairman of the FCC. Just Kevin, me, a head table stacked with FCC commissioners and former chairmen, and about 1500 D.C.-based telecom lawyers and lobbyists.

What a scene — as full of potential for sociological dissection as any real prom. Given the outgoing status of FCC chair Kevin Martin, the table-hopping was less pronounced around him and more noticeable among the big K Street lobbying firms. In the frantic card exchanges, you could see signs of the game of musical chairs now underway with the likely shift of direction in U.S. telecommunications policy.

Martin’s after-dinner remarks had the anticipated roast feel; he claimed sponsorship of the ‘No Lawyer Left Behind’ Act due to his salvos at the cable industry’s bundling practices, and bemoaned the worsening economics in the sector, suggesting that “Comcast couldn’t even afford to hire seatwarmers to not laugh at my jokes.”

Underneath the jocularity, worries bubbled up at every table. “It took an economic meltdown and an election to do it, but in a few short weeks, ‘regulation’ has gone from a bad word to a good word,” rued one lobbyist. Another observed the reduction in the number of tables hosted by troubled firms like Motorola and Sprint Nextel. But the big worry, which I heard all evening as well as in meetings earlier that day at the USTA: Will the new administration’s support for expanding broadband access be twinned with ‘net neutral’ regulation?

Fair question. If that worry is realized, it will punish every network operator that has depended on lobbying to solve that threat rather than service differentiation. The answer that will skirt this trap while paying bigger financial dividends than lobbying bills is investing in the tools to create tiered connectivity services to consumers.

I enjoyed the dinner, though, even if I didn’t stay long enough to see who the prom King and Queen were.

Back in January last year, Emily and I had a discussion about net neutrality. One of the aspects of the discussion that I remember from back then was how framing the semantic context of a debate affects the debate itself. Emily’s example was  “pro-life”, a superb concept branding, because it’s really hard for opponents to say they’re “anti-life”. But “pro-choice” is a very clever response because it places the devate on a different level and it avoids going into the anti- territory.

With “net neutrality”, whoever coined the terminology also framed the debate. Think about it: can a telco say he’s for “net discrimination”? Of course not. Opponents to net neutrality have yet to find an equally effective term to balance the odds. Something that could be printed on T-Shirts and displayed at rallies (assuming telco execs wear T-Shirts and/or attend rallies).

Anyway, I was reminded of this discussion last week as I was preparing a presentation for a conference on Next Generation Access in Madrid. Not about net neutrality but about another piece of terminology that has a huge impact on the whole debate about where the telecom industry is moving: “dumb pipes”.

“Dumb pipes” is the term used by telcos to describe what they do not want to be. They want to be high added value service providers, way above their historical business of network and communications. They want to prove to the markets (and to themselves) that they are not a utility business and in no way comparable to water or electricity. Hence relegating the “old” business to the status of “dumb pipes”.

(Let’s disregard for a minute the fact that, in an economic downturn such as the one we’re going through, being a utility is not the worse place to be.)

It strikes me that telcos may have - through the recurring use of this particular piece of terminology - convinced themselves not only that they were above the lowly utility business but that pipes were, by definition, dumb.

I keep being amazed at how little telcos are open to leveraging their capabilities for other players in the economy, and what I did in Madrid was try to demonstrate that the tricky FTTx business plan might look a lot better if telcos were willing to leverage their pipes intelligently. Unfortunately, if you’ve been drilling your troops for years telling them that your network business was dumb, it doesn’t exactly encourage them to think creatively about extracting value from it. Even we at Yankee Group are sometimes guilty of this, with some internal suspiscion around the ”wholesale” telco business.

Not surprising, really, when the terminology of the debate has already been framed (willingly or not). I therefore propose to promote (internally and externally) the concept of “intelligent pipes”. Intelligent pipes are network assets used to enable third-party services therefore creating new business models outside the telecom industry. From its direct contribution to these models, the telco can legitimately earn a revenue share that it’s been struggling to obtain from over-the-top services (another tricky piece of terminology, as Daniel points out…)

Since the U.S. election, I’ve continued consuming more than my normal diet of political content. Pundits on Meet the Press today were discussing what Obama needs to do next, given the worsening state of the economy in particular. Talking about the potential parallels to Roosevelt taking over from Hoover, Doris Kearns Goodwin pointed out that Roosevelt was handed a phenomenal chance to be the history-making leader he became. She finished: “From great crisis comes great opportunity.”

And so it is with the revolution in ubiquitous connectivity that we call Anywhere. Will network providers, enterprises, and consumers all cut their connectivity spending in the coming two years? That seems beyond question at this point; instead the concern is by how much. And slowed spending, particularly by network providers whose continued investments are critical to a seamless, intelligent, high-capacity communications fabric, will slow the evolution of the Anywhere Economy. But with the right 21st century New Deal, here’s what else could happen:

• Free wireless broadband. The looming return in February of 2009 of U.S. wireless spectrum freed by the end of analog TV broadcasting is a tremendous opportunity to take the long view. What better time for a proposal like that of M2Z Networks, which wants to use that wireless capacity to offer a free, advertising-funded consumer broadband service.
• ‘No house left behind’ fiber mandate. Why stop with wireless? The New Deal funded national infrastructure both to provide jobs and to create public good. Roads, dams, public art, and Social Security all stemmed from the belief that public funding for the right type of endeavors would prime the economic pump. Rather than help the U.S. automotive sector continue to make cars we don’t want to buy, the government could fund a national fiber buildout to needy homes and schools.
• Access devices anywhere. From a chicken in every pot, to the means for all Americans to use the public networks. We can’t replace manufacturing jobs that went to China with new manufacturing; that’s looking backwards. What we need to do is prepare more U.S. workers to join our service economy — which means giving them the means and the education to participate online.

Am I dreaming? Perhaps. But at one point I thought electing this President might be a dream as well.

If you’ve read earlier entries here, you’ll know one of my favorite topics is how wireless connectivity will progressively augment more devices in our lives, making them more useful to us in much the same way that electricity transformed the tools in our lives a century ago.

To help prove my point, I collect near-term examples; in addition to my Ambient Devices connected umbrella, Vitality pill-bottle and EyeFi camera card, of course the best-known one in the US marketplace is the Amazon Kindle. Yamaha hasn’t yet offered to send me one of their connected grand pianos to try out -– they must not know that I can play. (Note to self: send a demo tape to their PR folks.) This last device makes huge sense; why shouldn’t a source of its bits be the entire Internet?

But where are the rest of my connected gizmos? I feel some days as if I’m waiting for a missing train – getting up periodically from the bench, pacing the platform, and peering down the track, wondering if I’ve gotten confused about the schedule.

Certainly the CE sector is grappling with numerous challenges: cratered consumer confidence, wildly swinging foreign exchange rates, and incredibly tight product margins, to name just three. YG foresees further problems, such as lengthening consumer upgrade timetables on key products like digital cameras and DVD players. So why aren’t manufacturers moving faster to add connectivity features to devices?

I was chatting with Bruce Anderson, the head of IBM’s $4B electronics sector business providing product and services to the CE sector among others. His thoughts only amplify the opportunity: “Where was the value captured in the rise of the PC? Not in the devices themselves, but at the semiconductor level and the OS. Manufacturers are driven to scale, and then from there to marginal profitability.” Right–they need new features and a service-oriented model. So what am I mssing? I see three main obstacles; here are my rebuttals.

• Which network? Try a European operator with 3G capacity to sell in a market with a high density of CE products. Or a struggling US vendor, Sprint; they seem pleased as punch with their Amazon deal. Why wouldn’t they? It’s one-way text, not bit-sucking two-way video. And they haven’t let pride get in the way of whose brand faces the consumer.
  
• How pay for it? Bundle it in; it’s the simplest way. This means focusing for now on more narrow-band uses, with more predictable transmission needs -– things that update themselves a few times a day with specific data — so that the price you have to add into the upfront product cost is manageable.
  
• Will consumers get it? Maybe these businesses are so large that they suffer from the problem that new offers have to have a huge initial opportunity or extraordinarily stubborn stewardship to move ahead. (This recent Business Week article about Sony’s efforts here wasn’t encouraging.) You have to start with a small core group of consumers, such as Actualized Anywheres or Outlet Jockeys, two segments of the population who respond well to messages about portability of experiences.

Maybe I’m feeling a bit grumpy, but I suspect that it’s really a crisis of imagination dressed up with these surmountable hurdles. It’s easy to look enviously at the elegant Apple product family, and wish you had your own vertical product+service structure to power your quarterly margins. But the key differentiator isn’t the iconic graphic design or the simple user interface. It’s that their creators thought of it. Where is the thinking about how to radically change what devices do? Intel’s trying to inspire the sector with MIDs… That’s inside-out thinking. What we really need are some creative use cases … from the outside in. Let’s start with key consumer behaviors and find ways that devices, with connectivity, can make them easier.

PS Rich Miner was asked at our Mobile Internet World event whether he thought Android would show up in embedded systems — devices besides phones. His response: The open distribution plan almost guarantees it, revealing that academic organizations have flocked to the website for the code since Google opened it up last week.

Lately, Carl Howe has been getting cranky every time anyone (namely me) brings up the expression “Over The Top.” I wouldn’t say that it’s pure crankiness but more like qualified clarity. Carl likes clear definitions and telling stories from the beginning — in other words, he’s a consummate analyst who prefers for us to not use ambiguous shorthand such as over the top.

And the reason for this is simple. If you have a color — say, green — then the color blue falls equally in the categories “not green” as well as “not red” and so on and so forth. “Over the top” is another such slippery slope. By defining “over the top” businesses as any business that runs across a communications network but that isn’t monetized as a transaction on that network, we quickly reach the simple ideas such as online advertising, internet video, and iTunes as over-the-top businesses that somehow manage to escape monetization from the network itself — the Anywhere Network of yore.

But what about transactions? If I buy a car online, is that a transaction that goes over the top? Or is that just the nature of telecommunications?

At some point, we no longer expect that the network will participate in revenues. If we transact a billion-dollar deal over a combination of airplanes, hotels, conference rooms, rental cars, e-mail, mobile telephones and conference bridge lines — we clearly don’t count the deal as accruing to those companies involved in the delivery of the underlying services.

Most of our economy consists of over-the-top transactions. Which makes it ambiguous to define some digital media as being “over the top.” Someone is making money off of these activities, it’s just not the same set of companies each and every time.

There has to be a better way to talk about this, and as analysts, it’s our job to develop new terminology while speaking in language that makes sense to everyone. This means that we can’t invent new terms every day and expect everyone to step to our new rhythm.

But with that in mind, it’s time for us to get to work.