The more-open mobile Internet experience will translate into more and more people using their mobile phones to update their social networking profiles. However, the real money will come from consumers increasingly paying for personal location-enabled applications such as Zoombak and Loopt to identify the location of the important people and things like luggage, pets, and expensive toys in their lives.

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Operators also have focused a lot of attention on "converged services." For example, you may have seen commercials depicting a viewer watching a program on a large flat-panel TV, picking the program up on his mobile phone as he rides in a taxi, and then continuing to watch it from his laptop at the airport. 2009 likely will see the first example of this "three-screen" experience become reality.

Such services won’t come from network operators, though. Instead, they will come from partnerships between major media companies and Internet portals, such as Google, or a consumer electronics OEM, like Apple. That’s because content providers like major movie and television studios and networks have the most to gain by offering a common service to any Internet user, no matter what DSL provider, TV provider, or mobile network the customer uses.

Finally, telecom operators will become more hip by joining the green movement and announcing several major eco-friendly initiatives. The key factor for these projects is that while being environmentally friendly, they will also have real business payback. For example, Motorola’s Moto W2333 Renew is the world’s first mobile phone made from recycled water-bottle plastic (Fig. 3).

These factors all will play in a role in telecommunications market. Looking ahead, we can expect 10 clear trends.

No Safety in the Middle

Wireless operators and manufacturers that were stuck in the middle of the pack when the credit markets froze are in a precarious position. One or more of these companies will be acquired or broken up for its parts. On the carrier front, AT&T and Verizon will continue to jockey for top position by growing organically and acquiring companies. Smaller carriers such as Leap Wireless, Metro PCS, and U.S. Cellular will post gains with a ruthless focus on specific segments. Sprint, and to a lesser degree T-Mobile, will be left vulnerable. Meanwhile, Nokia and Ericsson will lead vendors with more than 60% of the market. In emerging markets, Huawei and ZTE will set the price floor. Those in the middle—Motorola, Alcatel Lucent, and Nortel—will suffer. The outcome? The ranks will shrink by one major operator and one major infrastructure vendor.

Cord Cutters "Leap" to Unlimited Plan Carriers

As economic pressures increase on America’s families, the trend toward substituting mobile voice for traditional wireline service accelerates. For the first half of 2008, U.S. government researchers said 18% of American households had cut the cord completely, and 31% reported getting all or nearly all their calls on wireless phones. Primary access line losses at AT&T and Verizon averaged 9% over the past year.

Companies like Leap Wireless and Metro PCS, which focus on wireline replacement at the low end of the market, will see their fortunes improve dramatically. With more mobile Internet options available from Clearwire (XOHM) and T-Mobile, fixed mobile substitution for data services will encroach on traditional broadband. However, those substituting mobile broadband for DSL and cable primarily are younger consumers and lower-income residents who move frequently.

Private Equity Slows Investment

Large private equity and VC firms will bypass high-tech investment opportunities except for those with the lowest risk profiles. The result will be stagnation for innovation in the traditional wireless industry. Very few, if any, large-scale deals will be announced except fire sales for companies with solid cash flow that can achieve attractive "unlevered" returns.

Many smaller, VC-funded companies that sell to operators and infrastructure vendors will struggle to get additional funding. Innovation may further shift to the major Internet firms, such as Google, Apple, and Microsoft, which have a longer history of supporting and acquiring leading-edge firms. That could increase the competitive threat to traditional wireless operators.

The Pack Almost Catches the iPhone

When Apple launched the iPhone in June 2007, the mobile device game changed from hardware and design differentiation to an integrated hardware-software-services model. Uptake for all the subsequent smart-phone imitators combined still pales against that of the iPhone. Expect a leading device innovator or new entrant to introduce a model that closes the user experience gap with the iPhone (Fig. 4).

This launch will come from a leading OEM (Samsung, LG, Motorola, HTC) and select Tier I global operators or from a device OEM with strong service integration, such as Nokia (Ovi) or RIM (BlackBerry). Meanwhile, Apple may cause another disruption in a different direction as it begins to integrate the PC, iPhone, iTunes, and Apple TV into a next-generation media experience.