2006 Top Ten: Hot Markets
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10. Fun and Games
Games aren't kid's play anymore. Massively multiplayer fare such as World of Warcraft is sending bandwidth demand zooming while creating new applications to fill up networks.
Virtual worlds are subsuming our own, the most famous being Second Life, the Linden Lab creation which has jumped to nearly 2 million users today, compared to 500,000 in August. Cisco Systems Inc. (Nasdaq: CSCO) and other big companies are sending in exploratory teams to test "in-world" marketing and training. (See Cisco's Second Life.) IBM Corp. (NYSE: IBM) has set up a group to study the business potential of virtual worlds, and consulting startups such as Metaversatility aim to help companies get the most out of a virtual presence. And they want real money for their services!
As for more traditional video games, North America hasn't reached the fever pitch of Korea, where 20,000 PC gaming establishments bring in 1 million customers a day, according to the New York Times. But the U.S. gaming community is building up -- witness the U.S.-based Cyberathlete Professional League (CPL), which held its ninth international championships the week of December 16 in Dallas.
Could there even be a business model in raw connectivity for games? At least one startup thinks so. GameRail , founded by staffers at St. Louis service provider River City Internet Group (RCIG) , launched this fall with a subscription service that connects gamers to game servers, bypassing the lag of the Internet.
In 2007, if fun and games are present, so too will be money and its suitors.
2007 will be the year that makes -- or breaks -- mobile WiMax, the nomadic sibling to the original fixed wireless version.
For the moment, mobile WiMax (or IEEE 802.16e, if you prefer) remains a work in progress. Intel Corp. (Nasdaq: INTC) is due to deliver its first WiMax chips toward the end of 2007, while smaller rivals will beat the silicon sumo to the punch. Meanwhile, Sprint Corp. (NYSE: S) and Clearwire LLC (Nasdaq: CLWR) are pushing to deploy initial mobile WiMax markets by the end of 2007. It's not yet clear which operator will be first to market, since a lot still depends on infrastructure vendors such as Motorola Inc. (NYSE: MOT) and Nortel Networks Ltd. , and their ability to deliver the goods.
Analysts expect the Asia/Pacific market to be the initial growth vector for WiMax. Research firm In-Stat says WiMax subscribers in the region will grow from 80,000 in 2005 to over 3.8 million by 2009. By then, the number crunchers say, Asia/Pacific WiMax subscribers will account for 45 percent of the users worldwide. In the U.S., meanwhile, spectrum issues loom, with Sprint Corp. (NYSE: S) currently holding the lion's share of usable licensed spectrum for WiMax services.
8. Not IMS. Or IMS... NOT!
OK, so we're at number eight and we've already lost our minds? "Not IMS" is a hot market?
Maybe. Here's the spin. IMS (IP Multimedia Subsystem) is undoubtedly a hot topic. It's burning its way through the PowerPoint stratosphere, and it's a "must reference" TLA (three letter acronym) when talking next generation infrastructure/service strategy. The thing is, IMS is a nascent blueprint, (relatively) fresh off the 3rd Generation Partnership Project (3GPP) standards production line, and you could probably count the number of true, built-from-the-ground-up, ready-to-deploy, commercially-available IMS network elements available today on one hand. (See Sources: Operax Scores With Tier 1 Carriers.)
And that's even if you've had an industrial accident with a meat slicer.
Carriers are keen on the promise of IMS -- the ability to build and provision services quickly, once, with reusable code, and then deliver them to customers across any network to any device -- but they want it now. Enter the pre-IMS, or IMS-ready systems, which enable some of these capabilities while IMS elements are developed, tested, and matured. These systems enable some services that IMSes, if they're ever deployed, will ultimately enable and provision -- but without the full subsystem in place. (See IMS: Dead?)
The "Not IMS" market includes a plethora of systems, including service delivery platforms (SDPs), fixed/mobile convergence systems, and individual elements, such as a Service Capability Interaction Manager (SCIM), that will become part of an eventual IMS but, in the meantime, enable greater service flexibility in pre-IMS networks. (See Is the IMS Honeymoon Over?, Look, Aint Bea! They Convergin!, Mavenir Converges on $13M, BridgePort Gets $13M, LongBoard Hops Video Roaming Wave, Camiant Supports IMS, Lucent, IBM Team Up , Carriers Buy Into SDPs, and SDPs: The Next Grand Design?)
7. Content Delivery Networks
The rise of CDNs is likely to be a hallmark of 2007 given the hype and investment flowing toward online content and IPTV technology providers. In fact, Level 3 Communications Inc. (NYSE: LVLT) provided a prologue this week by buying its way into the CDN game. (See Level 3 Spends $135M on Savvis CDN.)
The Internet will be the distribution mechanism for reaching a mass audience quickly and without regard to prime time TV schedules. That means someone, somewhere, will be pumping lots of investment into CDNs to make sure that mass audience can get what they're after, whenever they want it.
Now's the time to learn your CDNs and to watch them closely. Internet media successes and failures in the new year will trickle down to these players, and those that succeed will be famous. Those that don't will, too, but in a much different way.
The broadband wars will be hotter than ever in 2007, as cable MSOs rally around the new Docsis 3.0 standard in hopes of beating their telco competitors. The new Docsis will let MSOs offer shared data speeds as high as 160 Mbit/s downstream and 120 Mbit/s upstream, giving the cable guys the ability to offer significant voice, video, and data bundles at very competitive prices.
This is a huge development for fiber-to-the-home/premises/curb/node equipment makers because it makes 2007 the last full year for telcos to build out before Docsis 3.0 penetrates the mass market. So this year you'll see lots of carriers, big and small, hop down from the fence they've been riding regarding their fiber plans.
Analysts predict that homes reached by Docsis 3.0 will outnumber those reached by FiOS, the Verizon Communications Inc. (NYSE: VZ) FTTP service, in about five years. But until then, Verizon and others telcos have the chance to use fiber-fed services to offer even higher speeds, superior network capacity, and a better bundle of services. If telcos want to avoid a competitive stomachache in 2008, they'll eat plenty of fiber and FTTx gear in 2007.
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