WCA - What’s Hot (and What’s Not) in Mobility 2010

WCA (Silicon Valley's WIreless Communications Alliance) held their popular annual "What’s Hot (and What’s Not) in Mobility 2010" event last week. As in year's past, a panel of venture capitalists shared their opinions and offered predictions regarding a wide-ranging set of topics and issues in the world of wireless technology.

The moderator for the discussion was Shai Goldman, Director at Silicon Valley Bank.
Panelists were:

• Eric Zimits, Managing Director, Granite Ventures
• Steve Goldberg, Venrock
• Bob Borchers, General Partner, Opus Capital (and former Director of Worldwide Marketing for the iPhone)

What follows is a summary of my notes from the meeting, which was conducted as a round-robin Q&A with questions from the moderator (mostly) and audience members. I have inserted my own comments and clarification along with answers from the discussions.

What were the Highlights of 2010?

• Steve - This year was smart phones and apps. There is a big appetite in the VC community for apps. Is this another “bubble”?
• Bob -  Having liquidity come out (from acquisitions of startups) is a net positive. Will investment decline next yr?
• Eric - No single event this year, a combination of devices, networks and pricing plans. Are we moving in the wrong direction with tiered pricing plans? It's important to be a contrarian, run away from the herd.

Penetration of 3G

• Steve - a lot of infrastructure has been put in. we’re in pretty good shape from infrastructure point-of-view. There are more go-to-market issues than infrastructure.
• Bob - backhaul capacity is a bigger issue than cell coverage, where fiber can’t go, issues with indoor coverage.
• Eric - agree with Bob, capacity is the issue.
• Steve worked in backhaul industry, been more than enough technologies.. It’s a business model problem. Not a ton of innovation left there.
• Eric - we are running out of room for current network topology. Are femto cells the answer?
• Steve - more a network management issue. The physical layer is resolved.

Opportunities for LBS (Location-Based Services)

• Steve - there is lots of money in advertising and mobile commerce. Creates incentives (for LBS development).
• Mobile coupons? 
• Eric - LBS has been a buzzword for a long time. Look at the “Starbucks example”. A phone must know the owners preferences. What if I'm A Peet’s guy? Location is just one ingredient for a successful LBS application, you also need a user's history and preferences.

 What about privacy? 

• Bob - data gathering is a problem only if the value being delivered is not clear. The magic cookies that follow is a problem.
• Eric - relevance of ads is not sufficient, needs to be something more than targeting, which has created backlash. A more interesting technology is how to make yourself invisible.
• Steve - cookies and tracking will come to a head soon. Legislation always lags technology.
• Eric - mobile lacks ease of deleting tracking that is on desktop.

Are there opportunities in RFID?

• Bob - retail looks attractive in theory, but there are problems in practice. Stores don’t have accurate information on the location of the products they sell.
• Steve - it is incredibly difficult to get something everyone can use. Everyone doesn’t have smartphone. Swiping a credit card is already pretty simple.
• Shai - makes more sense in other countries.

Mobile transactions, NFC (near-field communications) and "bump technologies"

• Bob - Nexus-S reference platform (referring to Eric Schmidt's interview at the recent web 2.0 conference) ... What are you going to tap against?
• Steve - very few people in the U.S. don’t have access to banks.

Enterprise Applications

• Shai - not a big fan of BlackBerry, there is a concern at RIM for loss to new platforms.
• Eric - is there now an open revolt against RIM? (Employees want iPhones and Android devices for work as well as personal use). More enterprises will support multi-platforms as a result.
• Bob - the challenge for the enterprise is “consumererization of IT”. We will live in a fragmented world from the OS point-of-vie. HTML-5 will be a fantastic opportunity for enterprises, offering security, and ability to write an app just once (for multiple devices & OS).
• Steve - it's hard for startups to sell into enterprises. There is an opportunity for corporate social media, to connect workers. Upsells security to protect against loss through social networks.

Random comments

• Eric - the move to LTE is a big deal!
• Steve - (on the breadth and availability of open source): Disruptive is good, but a technology can’t be so radically new that it takes 7-10 years to develop because of the time to exit requirements for VCs.

Acquisitions and exit opportunities: AdMob, Quattro, Adclicks acquired in 2010. Next is video ads?

• Bob - best path to high valuation is getting Apple & Google to bid against each other. A bigger opportunity in ads is focusing on the phone as a communication device, not a smaller browser. Trend is for apps that equal ads, like Nike GPS. Bigger transformation will be reinventing advertising for mobile
• Eric - the world doesn’t want a glut of branded apps. 
• Branded apps.. Little interactive ads. How to engage in mobile ads?
  Bob - example: Nike CMO not buying banners. An underutilized area is incorporating voice telephony in apps. Push voice calls?
  
  • I wonder if this is even legal. Do you want your minutes consumed by a call from an advertisement?
   

What is the revenue model going to look like for operators? Decline of voice?

• Steve - M2M? Model has been to buy a number, now AT&T, T-Mobile, and Verizon Wireless do deals at 20cents/mo/MB for M2M. We can start to see new things because of smaller byte-size pricing.
• Bob - it's not going to be about cost/MB, it will be about cost to access the network.

Do tablet computers change opportunities?

• Eric - No!

Are operators turning into dumb pipes?

• Bob - it's not just a result of the iPhone. The biggest innovation by Apple was ripping control from the carriers. Where do carriers add value?
• Eric - I haven’t heard the term "walled garden" in 9 months.. Things changed.

How will enterprises use mobile apps?

• Bob - larger companies are waiting for the environment to settle down. Example of CVS (large chain of stores with no mobile app) - won’t chase technology. Smartphones still don’t have a high market share for their customer base.

Forecasts for Opportunities and Trends in 2011? Any predictions on M&A?

• Eric - there is a challenge of business models around network management. Smartphones as the dominant computing platform in the enterprise.(Interesting - not tablets as many Apple fan boys have predicted).
• Steve - the infrastructure around applications, the apps stores. How are applications discovered and distributed?
• Bob - even with LTE, spectrum is scarce. What about white spaces? Highlight so far (in M&A) has been talent acquisitions, look for a big acquisition to come from Apple.
• Steve - interfacing with mobile device in-car. Said that he likes interacting with his phone while driving. Heads-up displays? Audio interface? A great opportunity. Developing a standard interface for mobility in vehicles.

The ideas in Steve's comment above are likely to run up against (what I think is justified) attention from the DOT over the dangers of distracted driving. See "Waging War on Distracted Driving"

What about Nokia?

• Eric - in 12-18 months we will see a partnership between Nokia and Microsoft for the Windows phone. 
• Bob - they still have a strong brand, scale and dominance of emerging markets. Nokia needs to concentrate on their core competencies and do that well. Stop moving into services (OVI), that compete with carriers. Nokia is not a software company. (Tell that to the MeeGo developer community).
• Steve - Nokia still has high standards and brilliant people, but the problem is that decisions have been made in Finland. Hard to compete globally.
• Eric - inevitable that their market share will shrink. When it gets to the critical point they will do something bold.

Regarding rumors of a Facebook phone

• Eric - it's all part of a package. Consumers buy smartphones buy forthe hardware.
• Bob - biggest trend is that the value of the software has gone up more than hardware. This resulted in a pwer shift from Nokia to Silicon Valley.
• Eric - it would be a bad idea for Facebook to get into an OS.
• Bob - Rumor stems from the INQ phone. Facebook is heavily branded but they are not going to become a phone.

What about mobile gaming?

• Eric - there are some opportunities, but its a “hits” business.
• Bob - capital needed is too low to be interesting to VCs, and the returns are also small. Need to be confident that you can predict next big hit.
• Steve - more a lifestyle businesses than for VCs

Are there opportunities in tools for app developers?

• Bob - you can’t sell tools for apps development, but there are opportunities help to application developers make money.
• Steve - huge wave in crowd-sourcing. Tools that enable crowd-sourcing for vertical market apps.

Opinions on Clearwire? (recently reported to be running out of cash)

• Eric - They are a little orphaned. LTE transition?
• Steve - the 4G marketing wars (as in T-Mobile labeling HSPA+ as 4G), kills their differentiation?
• WiMAX
  
  • Eric - I didn’t come here to bury WiMAX. Nobody outside of Clearwire, except for overseas.
   

EReaders, Competition with iPad?

• Eric - different tools for different jobs.

Windows-Phone 7

• Bob - I heard the best quote from Microsoft: “we have a last mover advantage”! What is the play, can’t be making significant revenue from WP7. Charging OEMs $10/phone is not tenable.
• Eric - value chain, their value is in the software. There should be economics for extracting value for Microsoft.

Palm?

• Steve - game over!

Mobile video

• Bob - Neflix.
• Eric - the pipes need to be fixed to support streaming.

Smart grid

• Steve - Silver Spring, Trilliant.. Private networks, or public cellular? The LAN side of the problem has stalled.

Recommendation on stocks of public companies

• Sell RIM? Eric - not sure, lots have lost. Well traveled ideas
• Bob - lots of opportunities for Qualcomm. The transition to LTE will be successful for them.
• Eric - agreed, Qualcomm is remarkably well positioned and they will continue to dominate UMTS. Motorola might be something to look at.
• Steve - optical companies in backhaul space. Components for optical networks, optical connectivity.

A happy #WirelessWednesday everyone. 

And I hope that all of you here in the U.S. have a  warm and wonderful Thanksgiving.  Thanks for reading!

-Mike