If you're one of the millions of cell-phone customers still contentedly toting last year's handset, be aware that it's only a matter of time before the temptation to upgrade will take hold.
It wasn't so long ago, after all, that most of us were perfectly happy using our mobiles simply for talking. Then came built-in web browsers, text messaging and cameras. Today, a few hundred dollars will buy a smartphone that surfs the web at reasonable speeds, handles e-mail and even records and plays short video clips.
According to cell-phone industry insiders, handsets are only going to get more complex. Get ready for phones that surf the web at broadband-quality speeds, video conference on the fly and download films with TV-like frame rates.
These apps, by and large, aren't on the market yet. But if you can't put a deposit on a futuristic cell phone yet, investment-minded mobile enthusiasts can find opportunities on the public market, where a varied assortment of carriers, startups and content producers are vying for a piece of the mobile multimedia future.
According to the analyst firm ABI Research, the number of global subscribers to mobile video services will grow from fewer than 1 million today to as many as 250 million by 2010. What is now a $200 million business will by the end of the decade be a $27 billion one.
To bolster chances of success, however, trend watchers advise investors to follow a few simple principles:
Look East: Wireless industry insiders view Japan and South Korea as leaders in deploying advanced mobile services. Both countries have exceptionally high mobile-phone penetration rates, lofty levels of broadband usage and wireless markets dominated by a single carrier.
In Japan, NTT Docomo (DCM) has the advantage of being the dominant mobile service provider to a populace famed for its willingness to embrace new technology. The Tokyo firm's mobile data platform, i-mode, gained widespread popularity in Japan four years ago. More recently, Docomo has been promoting a service called FOMA (short for "freedom of mobile multimedia access") that supports apps like streaming video, sports and movie previews.
"The demographic that you're looking at in Japan is much more into the latest gadget, so the average life cycle for gadgets is much shorter," said Derek Tam, chief technology officer for Mobile 365, a wireless data company that sells services on five continents. Japanese consumers' willingness to shed old phones, Tam said, has enabled Docomo to roll out new services at a faster clip than in other regions.
SK Telecom (SKM) of South Korea, like Docomo, serves a populace with a penchant for multimedia technology. The company recently launched a digital media broadcasting, or DMB, service that transmits content to mobile devices by satellite. Earlier this year, SK Telecom received another permit to provide wireless broadband, or WiBro, services in metropolitan areas.
The South Korean carrier is also establishing itself overseas. In March, SK Telecom announced it had formed a joint venture with internet service provider EarthLink to sell wireless voice and data services in the United States.
But no one is anticipating that U.S. expansion will be a cakewalk for SK Telecom. Across the nation, a handful of huge carriers already dominate the market for voice and are moving swiftly toward offering advanced multimedia services, which brings us to our next point:
Big carriers won't overlook video: In an emerging sector, it's natural for an investor to look for the low-profile startup that will turn into the next Microsoft. In the wireless video arena, however, it's quite possible that the dominant players in mobile voice will also reap the largest rewards as video applications go mainstream.
Top U.S. carriers already sell video services, such as Vcast, offered by Verizon Communications (VZ) and MobiTV, available to Sprint (FON) and Cingular Wireless subscribers. Today, most mobile video services lack the image quality and frame rate that TV-loving consumers crave, said Craig Mathias, founder of the research firm Farpoint Group. But Mathias expects the technology to improve dramatically over the next few years.
Anil Malhotra, co-founder of wireless content distributor Bango, views the dominant carriers as the blue-chip stocks in an otherwise risky and rapidly expanding mobile multimedia industry. Big cell-phone firms won't post the fastest-growing profits, but they're also not going to fold any time soon.
For investors with more appetite for risk, however, Mathias recommends looking at companies making content for the small screen, which brings us to our next point:
Small screens require a new approach to filming: From a purely technological standpoint, it is possible to watch your favorite television show on a display the size of your average cell-phone screen. The question is: Why would you want to?
As third-generation, or 3G, mobile communications services come of age, wireless companies are struggling to develop content for customers accustomed to vegging out in front of a much larger screen. While it's too soon to say exactly what works, filmmakers and distributors say early experimentation has yielded a few lessons.
"The mobile device doesn't support a lot of broad pans and sweeps," said Seth Cummings, vice president of wireless content and internet services for Amp'd Mobile.
Cummings believes it will eventually be common for Hollywood studios to employ camera crews shooting imagery for the mobile screen. 20th Century Fox has taken a lead in the mobile genre, producing short programs called "mobisodes" that are designed for the cell-phone screen.
Beau Buck, CEO of BigDigit, a company that licenses mobile content, envisions the emergence of a nascent industry of independent mobile-phone filmmakers. Some of these small-screen entrepreneurs will almost assuredly make it big.
Presently, however, small-screen filmmakers aren't floating their stock on Wall Street, so would-be investors in the sector will have to wait. In the meantime, a more feasible investment strategy might focus on how to get all those great films to your phone, which brings us to the next point:
Someone will win the standards wars: Ever wonder how your cell-phone carrier is able to transmit voice calls and text messages to such a wide spectrum of devices, including those made by its competitors?
If you're like most cell-phone users, it's not the kind of topic that keeps you up at night. Thankfully, there are telecom engineers and programmers who make a living figuring out this kind of stuff.
In the world of mobile video, however, such standards are only beginning to emerge. For investors, this means that foresight into which protocols produce the most compelling multimedia experience could potentially pay off handsomely.
In the wireless broadcast market, DVB H, a standard for distributing video to mobile devices, has already gained support from such industry heavyweights as Texas Instruments and Nokia (NOK), among others.
Qualcomm is investing hundreds of millions of dollars into a standard called FLO (short for "forward link only"). The San Diego wireless technology firm claims that using the FLO standard will reduce the cost of delivering wireless multimedia content by dramatically decreasing the number of transmitters needed to be deployed.
Even without a dominant standard, some entrepreneurs are betting there's gold in software that allows carriers to transmit content across networks that use different media formats.
"This may allow this world of disparate devices, senders and services to at least have some semblance of a decent video experience," said Shaili Jain, CEO of Adamind, a company spun off from Philips Electronics and Israeli wireless technology firm Emblaze that trades on the London Stock Exchange under the ticker symbol ADA.
Jain says creating standards is especially difficult because there are different common approaches to using mobile video: for filming and sending short clips, for videoconferencing and for replicating a televisionlike experience on the small screen.
"There's an attempt to standardize, but the world is fractured," Jain said.
Standardization will take time, which brings us to our final point:
Be patient, but not too patient: When any new technology arrives on the market, early adopters can expect to pay more and experience more kinks in service quality than those who wait a couple of years. Mobile video will be no exception.
Mobile 365's Tam estimates it will take two to three years for downloading mobile video clips to become commonplace in most of the industrialized world, with the exception of Japan and Korea, where such activities are already mainstream.
Adamind's Jain estimates that phones capable of filming and downloading reasonably high-quality video will be widely deployed in the 2007-2008 time frame. Phones with television-like capabilities probably won't be widely distributed for another eight years or so.
For investors, however, the time frame is shorter.
"Now is the time to be ahead of the curve," Jain said. "By the time the consumers have started to sign up, it will mean that the infrastructure has been built, and the investment has been made."
(Disclaimer: Wired News makes no representation as to the investment-worthiness of any companies mentioned in this article. Examples are provided for informational purposes only, not as a recommendation to purchase or sell any particular stock.)
