Year in Review 2007: Year of the iPhone

27-12-2007

by Ciara O'Brien

It was the year that the iPhone dominated the headlines, if not the sales channels, and operators trotted out trials of new services such as mobile broadband and Skype, giving us a glimpse at what may be in store for next year.

The mobile industry within Ireland is changing shape rapidly. With penetration at 114 percent, mobile operators have had to up their game, offering a range of services to try to entice and retain customers.

Wherever I wander, wherever I roam

But while mobile operators were working on new revenue streams, changes were afoot behind the scenes to ensure that consumers got a fairer deal. Long considered a bone of contention between both consumer groups and mobile customers, the spotlight was firmly on roaming charges.

In one of the most controversial decisions of the year, Information Commissioner, Viviane Reding entered into consultations aimed at capping mobile roaming charges. Several moves had already been made by operators themselves, but in May, the European Commission took matters into hand and set a limit on charges.

Under the new rules, the average wholesale charge that can be levied on the customer's regular network for calls made while out of the country is limited to EUR0.30 per minute. The Commission intends to drop this by EUR0.02 per year over the three-year regulation period. Customers, meanwhile, will be charged up to EUR0.49 per minute for making calls and EUR0.24 per minute for calls received while abroad.

The major networks in Ireland had already eliminated roaming charges to a certain degree between the UK and Ireland, but Three Ireland took it a step further, launching its "3 like home" tariff, which means that anyone roaming on any of their Three networks in the UK, Italy, Australia, Denmark, Sweden or Hong Kong would only be charged a price similar to what they paid at home. The full effect of this change remains to be seen.

Three turns up the heat

Competition between the networks was also increasing during 2007. While Vodafone saw its ARPU fall slightly during the year, Eircom-owned Meteor saw its average revenue rise, while O2 also boosted its ARPU slightly.

Three Ireland, meanwhile stepped up its pace a little. After its entrance into the prepaid market, there was only one market left to tackle -- business. The latter half of 2007 saw the 3G operator make a full-scale assault on the Irish business market, perhaps hoping to make a dent in the high customer numbers of rivals Vodafone and O2.

Vodafone though seems to be one step ahead of the competition. In November it announced it had bought telecoms firm Perlico for EUR80 million. The deal, considered by many industry commentators to be over-priced, will see Vodafone make a move into the fixed line and broadband market. The pair plan on launching joint mobile and fixed-line packages by spring of next year

Meanwhile, mobile network Meteor also quietly managed to boost customer numbers this year, adding 33,000 to its fold in its most recent quarter to bring tallies to date to 908,000 or 18.4 percent of the market as the full weight of the Eircom marketing machine kicked in behind it.

Mobile broadband for the masses

Mobile broadband was big on the agenda again in 2007, with all three major operators rolling out their services nationwide. Offering High Speed Downlink Packet Access (HSPDA) and speeds of up to 3.6Mbit per second, the new services brought broadband access to any area that had 3G coverage, providing a service to some who may have felt abandoned by the traditional operators.

It caused somewhat of a spat between Three Ireland and Vodafone at the tail end of 2006, as each claimed to be the first to launch mobile broadband in Ireland. Three rolled out its offering in December 2006 while Vodafone claimed to have been offering the service since November last year. However, since Vodafone had failed to publicise the service, preferring instead to opt for a "soft" launch, Three stole a march on the firm. The speeds of the service varied, with Vodafone initially offering 1.4Mbit per second, while Three went for broke with 3.6Mbit per second. O2 managed to get its service out to the masses in July.

While a welcome addition to the mobile communications market -- one Informa Teleocms report claims it will be the dominant broadband platform worldwide in 2011 -- mobile broadband services have not been without their troubles, as Three Ireland found out. A surge in demand led to problems with the service, and one disgruntled customer in particular took to the airwaves to air his grievances on Today FM. The network, however, was already upgrading its infrastructure to cope with the surge in demand from customers.

Now that the bulk of the wrinkles have been ironed out though mobile broadband is picking up quite a following. According to ComReg's most recent quarterly update there were 88,400 mobile broadband subscribers in the Irish market by the end of September 2007.

Skype out!

Three Ireland finished up the year by offering a new Skype phone to its pre-pay customers, which allowed you to call or message a Skype user for free. The move is an aggressive one by Three, which is raising its profile in Ireland and hoping to entice customers to sign up for its services before the exclusivity deal runs out and O2 and Vodafone are allowed to offer Skype services. Pushing the handset just before Christmas could give Three the edge it needs, although how consumers will take to the offer has yet to be seen. It's the latest in a line of extra services the operator is offering its customers -- customers of X-Series, one of Three's mobile broadband products, can also access media streaming services such as Slingbox or Orb through their mobile handsets.

iPhone -- the eighth wonder of the modern world?

Meanwhile, the launch of the iPhone in the US in June, and most recently in the UK, France and Germany, was one of the most eagerly-awaited mobile developments of the year. In early 2007, analysts had been predicting a modest market share for Apple in the coming months.

"We forecast Apple will gain a modest 2 percent share of total UK handset shipments in 2008," said Strategy Analytics analyst Neil Mawston. "High retail pricing, high contract pricing, limited distribution channels and a small product portfolio are restricting its total addressable market in the near-term. The US is, and will remain, Apple's most important market."

Prior to its launch, analysts had also speculated that the device would galvanise the market, forcing manufacturers to produce revolutionary devices in a bid to keep pace with the iPhone. Mawston described the iPhone as "both a threat and an opportunity".

"It is a threat to operators, because it may drive high-ARPU churn to O2 at the expense of rivals such as Three. It is a threat to the established handset vendors, like Sony Ericsson, because it brings a powerful global brand, some cool music services and an attractive handset portfolio. Apple is yet another firm competing for marketshare. However, it is also an opportunity. The iPhone is clearly raising awareness of smartphones and mobile media among the mass-market. It is, in effect, a 'free' advertising campaign for the mobile data industry. A rising tide of Apple hype may eventually lift all ships."

Rivals take up the gauntlet

Nokia certainly took up the challenge, launching devices such as the N95 on to the market, which includes a 5 megapixel camera and GPS functions -- although it lacked some of the iPhone's killer appeal, such as the touch screen. It is also touting a concept "Eco Sensor" phone, which claims to be better for the environment by using printed electronics, which are less reliant on non-renewable energy sources, and electrowetting, which uses less energy.

Speculation was also rife during the year that Google was planning its own "Gphone" to challenge the Apple hybrid. In the end the search giant actually ended up launching an open mobile platform, Android, which analysts are expecting will be in about 2 percent of smartphone handsets by 2008.

What's ahead for the iPhone?

Looking ahead to next year, it seems the iPhone will continue to dominate the headlines here, with the Irish launch slated for some time in 2008. Quite how the device will fare against existing 3G offerings has yet to be seen, given that Apple has provided rivals in Europe with more than six months to come up with an answer to its challenge.

It hasn't been an easy run for the iPhone. Already it has been subject to a price drop (USD200, for which existing customers were compensated with a USD100 voucher) and the threat of several lawsuits, including one possible class action suit over the iPhone's battery, one from a woman seeking damages for Apple's price cut, and another filed for a patent infringement.

The locked iPhone has already come under fire, with thousands of customers in the US choosing to hack them to either unlock them from AT&T, which has the sole rights to distribute the phone in the US, or add extra applications from third-party developers, such as virtual GPS and custom ringtones.

Apple's answer to this was to push out an update for the phone that effectively "bricked" hacked devices, rendering them useless as phones and earned them the wrath of many consumers.

The tech firm has also run into problems in Europe, thanks to its policy of choosing a single network for the phone. In Germany, Vodafone managed to get an injunction against T-Mobile selling the locked-down devices, prompting the firm to sell unlocked iPhones at a premium (EUR999, compared to EUR399 with a contract) and allowing existing users to unlock their iPhones. A subsequent ruling overturned the injunction, but T-Mobile reckons the damage has already been done, and it could have lost potential revenue thanks to Vodafone's action.

Meanwhile in France, consumer law prevents phones from being locked to a network exclusively for more than six months, so Orange will have a short monopoly on the device.

A sneak peek at 2008

iPhone aside, the mobile market is certainly a healthy one. Looking ahead to 2008, analysts expect the handset market to remain healthy and show some growth throughout the year, although it may not reach the dizzying heights of 2007.

"The total global handset market should grow by 10 percent annually in 2008, down slightly from 12 percent in 2007. Overall, demand remains healthy and it is a huge 1.2-billion-unit opportunity," said Mawston.

While the iPhone was expected to be the big success story of 2007, it seems that the smartphone is in line for some growth in 2008.

"This is when we will see multiple models from multiple vendors at multiple pricepoints in multiple regions. This market is attractive, profitable and growing fast," said Mawston.