4G Mobile VenturesPanel Discussion

Moderator:Scott A. Snyder, PhDsnyder4g@gmail.com

610-256-0662

©Scott A. Snyder 2010

Panel Introductions:

• Scott Snyder (moderator), DSI/Wharton School• Dan Deeney, New Venture Partners• Anton Wahlman, Industry Analyst• Macy Summers, Lockheed Martin• Andreas Koch, Juniper Networks

©Scott A. Snyder 2010

Is Wireless Ready to Take-off?• 4B+ wireless users• WiMax and LTE being widely deployed• 300M wireless sensors shipped to date (ABI Research)• App store model has demolished entry barriers• Immersive applications beginning to appear• Convergence of ICT trends towards a ubiquitous “Cloud”• Cuts across all major verticals and intersections• Government investing $7.2B into broadband initiatives via ARRA

Breakthru LLC Confidential Information

Is Wireless the Internet of the Coming Decade?

Strong Signals…

Breakthru LLC Confidential Information

“This year's International Consumer Electronics Show (CES) was all about wireless. In fact, wireless was probably the most pervasive of all technologies at this year's show, extending its reach to every sector of technology, from Ford's Sync system to set-top boxes, home entertainment systems, healthcare, e-readers, tablets and M2M.” 

- Blog Post by Andrew Berg Monday, January 11, 2010

Google has just announced that it has acquired AdMob, the mobile ad platform that has been especially popular on the iPhone, for $750 million. This is a big win for the company’s early investors, which include Sequoia Capital and Accel Partners (this is a huge day for Accel — they were also investors in Playfish, which was just acquired by EA). More recent investors include DFJ and Northgate Capital.

Mobile advertising company Quattro Wireless confirmed Tuesday that it's been acquired by Apple, in a blog post by Quattro CEO Andy Miller, who's identifying himself now as Apple vice president of mobile advertising. A price wasn't named, but AllThingsD reported that it's $275 million when it broke the news on Monday.

But the trends are not great…

• $3.3 billion invested in 252 mobile companies in 2006 (Thomson Reuters)

• $2.5 billion invested in 237 mobile companies in 2007• U.S. VCs put just over $2 billion into 204 mobile companies in

2008• $1 billion invested in 66 mobile companies through Q3 2009• Many venture capitalists believe that the Wireless sector will

experience declines with 37 percent predicting lower levels for next year as well (NVCA 2010 Predictions)

Mobile Investment/M&A Profile

Innovation Opportunities Exist at the Intersections

Retail/Financial

Security/Defense

Transportation

SmartHome

BioSensorsBiometrics

PortableHealth Records

Remote Diagnostics

HealthMonitoring

Location-basedAdvertising

PervasiveRetail

Remote HealthcarePersonal DiagnosticsRemote monitoringPatient Compliance

Energy/Environment

Demand ManagementGrid MonitoringMeteringBuilding ControlGeneration Monitoring

Wireless

eWallet

FitnessMonitoring

PervasiveEntertainment

Nav/TrafficManagement

Surveillance

SensorNets

DistributedGaming

©Scott A. Snyder 2010

8

4G Investment Landscape

8

Transmission

IP Core

RAN Packet Core

SGSN GGSN

IuPS Gn, APN

Voice Core

MGW GMSC

MSS

VoIP

Wireless Infrastructure

• Innovative backhaul solutions• Small base stations• Enterprise networking

Semiconductor / RF Components

• Baseband chips (3G / 4G)• Power amplifiers, RF filters• MIMO antennae configurations (4x4)

Mobile Applications

• Enterprise applications• Embedded software• Carrier grade BSS/OSS software

General Interest

• Security – network, devices• Mobile analytics / subscriber usage• Real-time optimization of IP traffic

Network Capacity Continues to be a Challenge

• Capacity problems experienced today in 3G networks will exist in 4G world

• While 4G capacity gains may initially be in 5-10x range, ‘effective’ capacity gains in urban

areas will be incremental

• New devices, services and applications will contribute to complex capacity planning and

network management

• Underlay network of small, dense sites needed to support umbrella of marcocells

• Investments that provide operators with increases in network capacity will gain traction

in the market

– Small base stations with innovative backhaul

– Real-time optimization of traffic in meshed 4G IP networks

• Improved network intelligence on capacity drivers will be key

– Mobile network analytics, subscriber profiles and usage patterns

– Improved service delivery based on device and service requirements

The Acute Need For 4G

• 3G in 2003: Solution in search of a problem

• 4G in 2010: Fire hose applied to a fire– LTE around the world…eventually– WiMax early lead, but struggling with phones– WiFi: augments everything

4G Megatrends• VoIP replaces GSM/CDMA2000

– But which kind of VoIP?• Carrier-based managed VoIP• …or over-the-top providers?

• Security, Security, Security– Hacking VoIP becomes #1 trend by 2011-12– VoIP encryption to become #1 most desired

app– …extending to IP-based videoconferencing

Consolidation: Too much already!

• Infrastructure systems– Ericsson, Huawei, Cisco, Alcatel, Motorola,

Samsung, Alvarion• Operating systems – and handsets

– RIM, Apple, Google, Microsoft, Nokia, Palm– Dell, Samsung, LG, HTC, HP

Mobile VenturesWhere Capital is to be Deployed? • Capital Markets are still investing in Mobile businesses. New trends in technology,

unattended sensors, enterprise integration and security will drive significant growth in mobile telecommunications capital deployment.

• Deal Flow candidates: Mid-stage, recession resistant, capital efficient companies with attractive exit pathways and an experienced management team have the best profile for many Technology Funds.

1. NEW APPLICATIONS & TECHNOLOGIES

2. THE “SEA OF LTE” (AND WiMAX too)

3. NEW BUSINESS MODELS

4. CYBER & SECURITY

UNIQUE NEEDSGOVERNMENT & MILITARY Mission Markets

SECURITY

MOBILITY

TACTICAL QoS

Security, Governance, Enterprise Integration, Data Exposure, Mobility, RF Challenges, Tactical Quality of Service are some of the Government challenges using 3/4G wireless for Mission Operations.

GOVERNANCE

Today’s SP Network

Video

Network Features Dedicated to NSP Walled Garden Specific Services

Business Model Transformation

The New Services Ecosystem

Services Ecosystem

Network Transformation

OTT App/Content Providers

Developer Community

NSPsDevice OEMs

Fixe

d Li

ne V

oice

Mob

il Vo

ice

Fixe

d BB

Busi

ness

Dat

a

Dig

ital T

V (IP

TV)

Mob

ile D

ata

Serv

ices

The New SP NetworkService Elements in Cloud Computing Layer

Policy & Identity Management

Access and Transport Fabric

Wireline Voice

Mobile Voice

Fixed BB

Business Data

Mobile Data

Digital TV

Current Services ($1.8Trillion Revenue WW)

Future Services Revenue ($2.5Trillion)

Wireline Voice

Mobile Voice

Fixed BB

Business Data

Digital TV

Mobile Data

Network Outsourcing Mobile

BB Access

Location Based Services

Mobile Advertising

Cloud Computing, PaaS and SaaS

CDN

Managed Telepresence Targeted Online

Advertising

Online Video

Home Networking

The Open Mobile BB Challenge

Implications NSPs will have less bargaining power with content and device partners NSPs will need to find new ways of adding value to participate in content revenues! Mobile devices and network will become vulnerable to security threats

Affordable consumer smart phones

iPhone is changing the game– User friendly: easy access to web– ~50X BW usage of other smartphones– Millions sold even without subsidy – now

subsidized at prices $200

Elimination of handset/deck bottleneck Easier for content providers to go direct Massive increase of mobile IP traffic

True mobile broadband data speeds

3.5/4G Network Buildouts– HSPA, Wimax, LTE

Adoption of 3G/4G handsets

Elimination of bandwidth bottleneck Opens mobile to web applications

Advertising driven revenue models Emergence of mobile advertising models

– Search advertising (incl. local)– Targeted ad insertion

Growing role of search, portal and web services players

Subsidization of “free” mobile apps

Open handset operating systems

Open Handset Alliance Android – First open, free mobile platform– Google open OS with developer kit

Growing share of Linux operating systems

Carrier no longer controls OS and apps Proliferation of optimized mobile apps

SP Network and Cloud Based App AccessMega Data Centers(thousands)

Clients(billions)

Global High-Performance Network

Campus

Branch

Home

Mobile

Workforce Globalization

Data/App Consolidation

The Value of the Service Provider Network

Internet

Applications

Residential

Business

Identity

Experience

Best Effort

Enhanced

Assured

Security

L3/L4 Stateful

L7 Signature

L7 Application

L3/L4 Stateless

Virtualization

L2 VPN

L3 VPN

L7 VPN

Routing/Switching

Mobile

WebServices

Video

Gaming

HomeTelemetry

Network Monetization

2G

Packet Handling

Telco Apps &Services

SS7 based Apps &Services

Apps &Services

Unaware of Each Other

3G with IMS

• Improved service-specific control• Policy specific to services/applications

IMS On-netapplications

Agg. Edge

Policy

Core

4G Approach

• Service velocity • Revenue sharing models• Flexible service delivery platform• Operational Efficiency

Applications & Services

Open Platform for Policy Based App Development

Abstraction of Application Resources

Requests

IMS Off-net Web2.0

Operator Controlled Voice/SMS centric Devices

Open Devices and Applications

Operator Controlled Multimedia Devices

Operator Driven User and Device Driven

On-net OTT

CoreAgg Edge

Controlled User Experience

Policy

• Primarily voice• Inefficient resource utilization• Limited service differentiation

Hot areas for 4G network investmentsContext aware mobile multimedia applicationsThe Network Infrastructure Enabling Their Delivery• Context aware policy engines driving QoE and security• End to end mobile security – app to device to datacenter to network• Open service delivery platforms – enabling integrated OSS/BSS,

including clearinghouse DRM functions • Virtualization across wireless broadband networks• Thin client, cloud-based application delivery architectures• Advanced content distribution architectures optimizing trade offs

between CDN, P2P and

Context Intelligent Mobile Networking – Application Assured Cloud Infrastructure

Questions?

• Will investments in this space require a high degree of collaboration to succeed (operators, device vendors, app/content players, end-users, etc.)?

• What are the biggest lessons learned in making investments in emerging technologies like 4G?

• When will the enterprise application space become exciting as a 4G investment?

• Do you have any advice to start-ups with a 4G innovation looking for capital?