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July - 2007 - issue > Cover Feature
Opportunities-in-Mobile-Communications
Jay Boddu
Monday, July 2, 2007
A robust growth in global mobile subscribers and revenues, along with transition to next generation cellular technologies that enable a new class of mobile services is fueling venture capital investment in mobile communications. Venture investments in Telecommunications in Q1 2007 increased 27 percent over Q4 2006 with $588 million going into 63 deals. Within the Telecom sector, Wireless Communications captured $356 million for the quarter. Similarly, significant venture capital investment in Software, Semiconductors, and Networking Equipment sectors has been focused on mobile infrastructure and applications.

In 2008-2010, there will be acceleration in adoption of three main technologies capable of broadcasting wireless data at broadband speeds: Wi-Fi, WiMAX and cellular 3G/3.5G. These technologies, simplistically stated, enable the delivery of enhanced multimedia services at high speeds, thereby enabling the mobile media tide to shift away from SMS, ring tones and wallpapers to new growth opportunities like multimedia web browsing, games, video and conferencing. These new growth opportunities, in turn, will help create a new ecosystem of companies to support these services.

Startup Opportunities
Fans of Steven Spielberg or Tom Cruise will remember “Minority Reports”, a Sci-Fi crime thriller set in 2054. In this movie, there is a scene where John Anderton, a police officer played by Tom Cruise, walks through a mall. As he walks through the mall, several video billboards spring to life with advertisements calling him out by name and selling him everything from perfumes to cars.

While this is a scene from a futuristic movie, a new emerging area called cellular location based services (LBS) will make at least a primitive variant of such advertising possible soon. The integration of Global Positioning Systems (GPS) on to cell phones will allow the identification of a subscriber’s exact coordinates, thereby enabling the targeting of various services on the basis of the subscriber’s physical location. Conceivably, after subscriber’s approval, it will soon be possible to deliver an electronic discount coupon on to a cell phone for a store the subscriber is likely to purchase from, when the subscriber walks by the store.

For such a system to become reality, several components need to be put in place. For example, a Geographical Information System (GIS) that maps the GPS coordinates onto the store location data is required. Similarly, a system that matches the subscriber’s location and his or her buying preferences is required. In addition to several technology components, a viable business model is also required.

While some of these issues are opportunities for the existing vendors, others will be addressed by emerging startups. Some of these needs are already being addressed. For example, in GPS chip market, there are nine GPS semiconductor startups that have received series A or later funding in the past 24 months including Global Locate, Centrality Communications Amalfi Communications, GloNav, and u-Nav Microelectronics. Among these, Global Locate has been acquired by Broadcom and Centrality by SiRF Technology. Semiconductor investment is a harbinger of future investments in this space, and with these recent M&A activity, future investments in software and services are likely to follow.

The above example is only one of the several opportunities that are emerging in the mobile communications arena. Opportunities exist for startups in a variety of areas: components, systems, infrastructure and application software, and services, with potential target customers ranging from individual consumers to large service providers.

Areas of VC investment interest in components include devices that reduce power consumption, batteries with enhanced capacities, real estate efficient chipsets, higher density imaging chipset, power efficient or denser touch screens, and integrated antennas with greater range or frequency coverage. Startups focusing on designing components for mobile handsets should carefully examine their chances of choosing key handset vendors’ designs, since winning such designs is extremely difficult and the sales cycles can be excruciatingly long.

It is likely that newer handsets will support a large set of the mobile alphabet soup: quad-band, EVDO, WiFi, Bluetooth, HSPDA, GPRS, etc. onto a single handset. As these handsets continue integrating more access methodologies and protocols, coexistence of all these protocols on a single operating system will soon become a product development and integration challenge. There is an opportunity for startups designing power efficient multi-core, multi-threaded architectures, or other innovative architectures that simplify the integration and testing requirements. Similarly, there are opportunities for startups focused on developing products that reduce product development cycles or reduce integration challenges. Examples of such opportunities include software based codec implementations, software based radio, chipsets, and transceivers that support multiple protocols etc.

Efforts are underway to migrate the wireless networks to Internet Protocol (IP) based networks. These next generation networks, termed 4G networks, will leverage the scalability and cost benefits enjoyed by the wire-line IP networks. Such a migration also allows for a sharing of common infrastructure between certain sections of the wire-line and wireless networks. This transition provides for startups to focus on various integration elements that are not being addressed by existing equipment vendors.

Emerging avenues in mobile services include services like mobile search marketing, mobile advertising, mobile content management and distribution, and mobile messaging as well as niche technologies like via firmware over the air (FOTA) for platform management. Mobile handset search differs from PC based search in that the screens on handsets are smaller and the keyboards on them are often inconvenient to use, and users tend to launch fewer searches. These searches, however, have much higher click through rates. Opportunities exist for startups to design creative user interfaces and browsing alternatives to ease this pain point.

Opportunities in India
In India, most people do not have a high speed Internet connection such as DSL or cable at home. Moreover, most companies do not allow access to Internet at work. As a result, most people have started to use cell phone as their primary Internet access. As in telephones, Internet access in India is likely to leapfrog wire-line access and move directly to wireless based access.

As a result, India has emerged as the fastest growing mobile market in 2006, overtaking China. Indian mobile carriers signed up 73 million new customers last year, a 97 percent increase, to reach 149 million in total.

Several startups have started adapting their applications to Indian lifestyle needs such as movies, restaurants, shopping, and sports entertainment.

I am sure the next logical step in the Indian mobile services market is a startup focused on matrimonial services over the mobile phone – Is mobileShaadi.com taken?

The author is Kauffman Venture Fellow, Sofinnova Ventures. He can be reached at jay@sofinnova.com
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