Big changes in cellular industry to start in 2006: study

Major changes in the way cellular operators do business will start to become evident in 2006, according to a report released Wednesday by market research firm Informa Telecoms & Media.

"The unsustainability of the traditional mobile operator business model will become more apparent in 2006," the company said in a statement. Much of the changes that will cause those changing business plans are the advent of wireless broadband, the research firm said.

"The arrival of IP and services based on unlicensed wireless networks will fundamentally change the mobile landscape over the next five years," Mark Newman, Informa Telecoms & Media's chief research officer, said in a statement. "Until now, spectrum 'ownership' has allowed mobile operators to control the marketplace. Over the next five years operators will lose this control."

However, this change in the structure of the mobile industry means that cellular operators will have to significantly cut costs and develop new sources of revenue, the report said.

Specific changes that will gather momentum in the next year, according to the report, include:

• Handset subsidies, which help keep the cost of mobile devices down, will be reduced. That would lead to higher device prices for end users.

• Prices for voice services, already in decline, will continue to decrease driven by increasing use of voice over IP.

• Increasing prominence of mobile virtual network operators (MVNOs), which are companies that purchase underlying services from existing cellular operators and market to specific niches of customers.

• Voice over IP will continue to drive down the price of mobile voice service.

• "Walled garden" approaches to providing mobile entertainment and other content, in which the operators dictate what content subscribers have access to, will face strong competition from services providing that content directly to users.

The report is based both on the firm's analysis and a survey of about 1,000 cellular industry professionals.

- Mobile Pipeline