Sideloading the Next Revolution
By CSMG
Telephony Magazine, February 20, 2006

The market entrance of open sideloaded handsets will have profound implications for all players across the value chain, while accelerating the convergence of the telecom, cable and media industries.

When the wireless industry started buying 3G licenses in the mid-1990s, they did so with the expectation that these licenses would not only support enhanced voice capacity but drive the delivery of lucrative entertainment value added services. The reality today is quite different. The introduction of new open sideloaded handsets-by incumbents and new entrants-will establish a very different paradigm. By allowing handsets to receive data from an in-home media devise such as a PC or set-top box, the reality will likely be a 3G network delivering voice and messaging and the fixed broadband network delivering value added services directly to the phone.

To some this is a very logical and desirable outcome, but to the insular wireless industry, it's coming as a big shock. Suddenly, wireless carriers must leverage the wireline/cable network to deliver entertainment services, and they need to do so in direct competition not only with each other, but with formidable new competitors such as Comcast, DirecTV and devise manufacturers like Apple. Thus, the rapid convergence of the formerly distinct wireless, wireline, cable and media industries is accelerated.

The sideloading of entertainment services and content elevates the significance of a unified fixed and mobile portal- this becomes the iTunes-like store from which end users purchase services and content downloaded to their PC and then sideloaded to the handset. For most wireless carriers this will mean the re-engineering of existing portals, most of which are low grade and ill-equipped to compete for non-voice revenue. Perhaps the best example of a carrier response to this new market reality is Verizon Wireless and its VCAST music service. The service leverages both the fixed broadband-enabled PC as well as OTA to deliver songs to users, and puts Verizon in head-to-head competition against Apple, the Cable/Sprint alliance and other key convergence players. Expect major portal innovation to follow.

The soon-to-be-ubiquitous sideloading USB cable-the new wireless/wireline umbilical cord-will also draw together the wireless and wireline entities owned by the RBOCs. The wireless carriers have been fiercely independent, but now the need to dominate the home and to offer competitive Triple Play services is changing everything. To execute a new strategy, even Verizon Wireless will ultimately be drawn to the unified embrace of its wireline counterpart.

The sideloading trend is also representative of the carriers' shift of focus from sheer number of customers towards revenue per customer. With large customer bases of 50 million subscribers and with declining churn rates reflecting more stable communities, Sprint, Cingular and Verizon Wireless must increasingly focus on share of wallet within key customer segments. This is essential to avoiding commoditization of plain old wireless services. With this new Value Strategy, carriers will seek to dominate a larger percentage of household revenue, and in so doing, competitively inoculate themselves and benefit from low churn and high profits. In parallel, they must also open their networks to other portals and the internet at large and compete for portal-based value added services revenue.

At its core the wireless devise is simultaneously becoming a critical entertainment devise and a hub for the control and management of in-home entertainment services; its increasing sideloaded connection to other media devises in the home will accelerate this trend. Sideloading also will allow wireless devises to be constantly upgraded via software patches sent through the broadband network, driving their evolution away from the isolated, static devises that we see today.