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The Mobile Cloud: Ready or Not, Here It Comes

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This publication has been discontinued on January 30, 2014.

If there had been no development of cloud computing in the last few years, it would have been necessary to invent the cloud - just for mobile. The mobile cloud is a crucial and inevitable development that will have a massive effect on mobile communications and the entire IT industry in the coming years. In this study, we conclude that the mobile cloud will subsume cloud computing.

The accelerated development of the mobile cloud is being driven against the background of the underlying struggle between two groups of players:

  • 1. The Web Gang: A growing group of companies deriving from the computer/IT/Web world, led by players such as Apple, Google and Amazon.
  • 2. The Mobile Giants: The giants of the mobile communications industry in the U.S., namely AT&T and Verizon.

This report - the first in Heavy Reading's new Mobile Cloud Survival Series - explores the importance of the mobile cloud to the entire telecom ecosystem and the future of information flow. It examines how the mobile cloud will over time subsume the fixed cloud and analyzes how the evolution of the mobile cloud will fundamentally transform major parts of the mobile business.

As this struggle unfolds, there are at least six key factors that are driving the inexorable development of the mobile cloud:

Mobile Broadband. When the authors forecast in 2006 that mobile would overwhelm fixed communications in the broadband sphere more rapidly than it had in the voice market, this was considered a radical notion. Yet in five short years, it has already happened, with mobile users accounting for 67% of broadband access and the disparity growing every day. Broadband is a mobile phenomenon.

Traffic Deluge. Mobile traffic growth is being wildly underestimated by industry forecasts - most prominently the widely cited Cisco Visual Networking Index. We believe there is a stunning disconnect in the telecom/wireless industry consensus, and that the forthcoming demand for mobile data services will clearly be at least ten times the prevailing industry forecasts and estimates in the next five years and beyond. The industry is in a state of denial about the level of traffic that is coming in the next five years - ten times the Cisco forecast, which itself is being heavily discounted by the industry as excessive.

The excerpt below summarizes the comparison of forecasted traffic per U.S. cell site, by category of cell site, comparing our methodology against the Cisco VNI. While the Cisco VNI study indicated a total U.S. demand for mobile data of about 989 petabytes per month by 2015, our analysis concluded that demand would be about 10,620 petabytes per month in that timeframe.

Traffic per U.S. Cell Site, by Category of Cell Site, 2015

CATEGORYNO. CELL SITESVNI FORECASTBSG FORECAST
Heavy70,00088.82 Mbit/s972.46 Mbit/s
Medium30,00059.21 Mbit/s627.10 Mbit/s
Light31,00029.61 Mbit/s296.97 Mbit/s
Minimal198,0002.96 Mbit/s29.70 Mbit/s

Mobile Device Evolution. Mobile devices are evolving rapidly in ways that make them into "cloud devices." Over the past five years, these devices have been revamped, from "phones" with some limited data capabilities to handy computers with a mounting number of ancillary capabilities. This involves a paradigm shift from the "single device" concept to the "small number of devices," all of which will sync through the cloud. With multiple cores, high-resolution screens and ancillary capabilities such as dual cameras, these devices are not designed as standalone devices. They presume the existence of a cloud to reach their full potential and utilize the ever more complex and demanding range of mobile apps.

Advanced Mobile Networks. Networks are rapidly advancing toward "4G" status, which will enable a multiplicity of cloud functions to be performed efficiently. Verizon Wireless LTE covers a population of about 200 million, AT&T more than 70 million. (AT&T currently has HSPA+ coverage, as does T-Mobile, in substantial parts of their networks; Sprint/Clearwire covers about 120 million people with WiMax.) Verizon and AT&T should have national LTE coverage by 2014.

Applications. The world of mobile apps is the most vibrant area of the entire IT universe. Increasingly, these apps are being designed to rely on the cloud.

User Empowerment. The sudden rise of social networking is empowering users, changing the relationship between users and providers. With the mobile cloud, we expect this train of events to reach a new level of proactive communities that change the dynamics of areas such as search, but also profoundly affect marketing practices. This will be accelerated by the mobile cloud because of the factor of personalization.

The mobile cloud at this time is both vague and exciting. It is a concept in the making. In our opinion, what needs to be done is a thorough analysis tying together many streams of development that will feed into, impinge on, as well as be affected by, the mobile cloud.

The excerpt below summarizes the three stages of the mobile cloud, their approximate timing, and the concomitant network development that will accompany them.

Three Stages of the Mobile Cloud: Timing, Focus & Network Status

TIMINGFOCUSNETWORK STATUS
Stage 1:
Current to 2014
Early applications;extensive work on
standards, diagnostics, security-
“making the mobile cloud work”
3G;better with early 4G
HSPA+,LTE,WiMax);Wi-Fi
Stage 2:
Early examples
today;2014-2015
Hybridization;modification of
offerings to fit mobile cloud
Mass deployment of LTE by 2014
802.11n(with MIMO)widely available
Stage 3:
2015 and beyond
Explosion of resource dispersion;
cloud terns in on self;
users as cloud resources
LTE Advanced becomes available;
802.11ac(chpsets in 2012;
in Apple devices starting in 2014

Report Scope & Structure

The Mobile Cloud: Ready or Not, Here It Comes is structured as follows:

Section 1 explains our assessment of the Web Gang vs. Mobile Giants struggle; how it came to be, where it stands and where it is leading.

Section 2 summarizes our major findings on the mobile traffic deluge and how it is helping to propel the development of the mobile cloud.

Section 3 presents our analysis of the development of the cloud to date and the emergence of the mobile cloud.

Section 4 discusses the three stages of the mobile cloud and examines some of the key attendant developments we foresee, including the hybridized cloud strategies that are already emerging, their impacts on social networks and search, the rise of advanced proactive communities, and cloud security.

Section 5 defines the mobile cloud market, including wireless usage, device proliferation, analysis of some of the most recent findings of changing user behavior, and issues relating to how the Web Gang is attacking through capabilities such as voice recognition (e.g., Siri) and augmented reality, as well as on a vertical-oriented basis (e.g., healthcare).

Section 6 analyzes the major dilemmas for the Mobile Giants, and particularly how the strain of acceleration in the mobile business cycle is impacting carrier plans and finances, as well as Wi-Fi's potential for disruption.

Section 7 provides some of our key conclusions on strategy options for the Web Gang, the Mobile Giants and Cable (i.e., Comcast).

The Mobile Cloud: Ready or Not, Here It Comes - the first report of the Mobile Cloud Survival Series - is published in PDF format.

Table of Contents

EXECUTIVE SUMMARY

1. THE “WEB GANG” VS. “MOBILE GIANTS” CONFLICT

  • The Mobile Cloud & the Four-Element Power Picture
  • The Underlying Struggle: The Web Gang vs. the Mobile Giants

2. THE MOBILE DATA TRAFFIC DELUGE & INDUSTRY RISK

  • Correcting Errors in Consensus Mobile Data Forecasts
  • Consensus Forecasts Underestimate Potential Market
  • The Mobile Industry “In Denial”
  • The Deluge & the Mobile Cloud

3. THE CLOUD & EMERGENCE OF THE MOBILE CLOUD

  • The “Cloud: A New Concept
  • A Consensus Definition of the Cloud
  • The Cloud: Getting to the Critical Elements
  • Broadband: The Key to Ascendancy of the Mobile Cloud
  • Cloud Drivers of Growth
  • Mobile Cloud & Device Evolution: Users as Part of the Cloud
  • The Mobile Cloud Imperative
  • Prelude to the Cloud
  • From the Business Cloud to the Mobile Cloud

4. THE DEVELOPMENT OF THE MOBILE CLOUD

  • Three Stages of Mobile Cloud Development
  • Stage 1
  • Stage 2
  • Stage 3
  • Hybridization Example: Polycom VaaS Cloud Platform
  • Social Networks & Search
  • The View Down From the Cloud
  • User Empowerment: Beyond Social Search
  • “A Cloud You Can Trust”
  • Dramatic Impact of the Mobile Cloud

5. DEFINING THE MOBILE CLOUD MARKET

  • The Market Wireless Subscriber Growth
  • Device Proliferation
  • Current Usage Studies Changing User Behavior
  • Interdependence of Apps Major Impact on Usage
  • Field Sales Example of Exploding Cloud-Based Usage
  • Sin: AWeb Gang vs. Mobile Giants Case Study
  • Web Gang vs. Mobile Giants: Other Examples
    • Augmented Reality
    • Health Monitoring
  • Security Video Monitoring
  • Outliers No; Harbingers Yes

6. THE MOBILE GIANTS DILEMMAS

  • Brief History of U.S. Wireless as a Business
  • ....And Then There Was the iPhone
  • The Two Major Dilemmas for the Carriers
  • The Acceleration in the Business Cycle
  • Verizon Wireless as an Example
  • Growth of Wi-Fi
  • Wi-Fi's Potential

7. KEY PLAYERS MOBILE CLOUD STRATEGY OPTIONS

  • Overview
  • The Web Gang
    • Enter & Compete
    • End Run
    • Accommodation
  • The Mobile Giants
    • Growth vs. Profit Issues
  • Outlook & Carrier Alternatives
  • Cable Comcast
    • New Wireless Initiative
    • Comcast Motivation & Strategy

ABOUT THE AUTHORS

LIST OF FIGURES

  • Figure 1: Former Relationship of Three Ecosystems
  • Figure 2: Mobile Industry Power Picture Four Key Elements
  • Figure 3: Traffic per U.S. Cell Site, by Category of Cell Site, 2015
  • Figure 4: Global Mobile Data Traffic 2012-2014 (Exabytes per Year)
  • Figure 5: The Cloud
  • Figure 6: Broadband Users per 100 Inhabitants, U.S. 2008 & 2010
  • Figure 7:: Global Broadband Wireless vs. Fixed Subscribers
  • Figure 8: Increase in Mobile Device CPU Capabilities, Pre-2000 to 2015
  • Figure 9: User as Part of the Cloud
  • Figure 10: Three Stages of the Mobile Cloud Timing, Focus & Network Status
  • Figure 11: Security vs. Scalability
  • Figure 12: Growth of Wireless Connections, U.S. 2006-2016
  • Figure 13: Growth in Wireless Devices, U.S., 2010 2016 (Millions)
  • Figure 14: Cisco “Mobile Cloud” Services
  • Figure 15: Data Consumption by Type of Smartphone (Relative to iPhone 3G)
  • Figure 16: Breakdown of Mobile Internet Traffic by Device Category
  • Figure 17: Breakdown of Wi-Fi Traffic by Originating Device Type
  • Figure 18: Mobile Media Applications Usage by Application Category
  • Figure 19: Estimated Breakdown of Smartphones vs. Feature Phones
  • Figure 20: Approximate Increase in Device Power 2000-2011/12
  • Figure 21: Verizon Wireless Capex Growth, 2002-2011
  • Figure 22: Verizon Wireless Capex Growth vs. Revenue Growth 2002-2011
  • Figure 23: Verizon Wireless Capex vs. Revenue Growth
  • Figure 24: Traffic From Wi-Fi Connections by Device Type, 8/11
  • Figure 25: Web Gancj vs. Mobile Carriers Key Differences & Entancjlements
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