In contrast to the legacy ‘voice-centric’ E911 network, Next Generation E911 (NG911) will support a more diverse set of IP-based communications including text, data, photos, and video exchanges that will enhance the speed, accuracy, and preparation of first responders. The Federal Communications Commission (FCC) is currently working closely with key stakeholders in the public safety sector in order to ensure a seamless and cost effective transition to NG911.
What are the core elements of NG911?
The primary element of a NG911 system is the Emergency Services IP Network (ESInet) which is designed as an IP-based inter-network shared by all agencies involved in an emergency. The ESInet obtains and validates an emergency caller’s location and routes the voice, video, text and data exchanges to the appropriate Public Safety Answering Point (PSAP).
The Revenue Opportunity
The purchasers of NG911 systems are generally counties or states that control Public Safety Answering Points (PSAPs). Many states have centrally organized their PSAPs in order to conduct state-wide NG911 upgrades, while other states elect to purchase NG911 upgrades on a PSAP-by-PSAP basis or through regional coalitions.
The major costs for the PSAP are related to connectivity (i.e. costs to access the ESInet) and the chosen architecture (which can either be ‘dedicated’ or ‘hosted’) to provide the NG911 service. The dedicated model requires greater capital expenditures and on-going support as the PSAP owns and operates all network, call routing, and call processing equipment. With a hosted model, the PSAP can outsource these components to a third party service provider.
In September 2011, the FCC released a whitepaper which examined the cost of implementing NG911 in the US. Assuming that PSAPS do not consolidate operations as they transition to NG911, the FCC estimated that over 10 years, the costs for implementing NG911 could approach $3B (with $1.2B in non-recurring costs and $1.8B in recurring costs). Clearly this represents an enormous revenue opportunity for a variety of solution providers in the NG911 space.
Source: Federal Communications Commission (FCC) White Paper: A Next Generation 911 Cost Study
Players to Watch in the NG911/ESInet Market
To date, four vendors have received contracts for the ESInet portion of NG911 contracts: microDATA, Intrado, Telecommunications Systems (TCS) and Solacom. Contracts generally include non-recurring license and installation revenues, followed by a long-tail of required software maintenance and potential recurring managed services for network monitoring. With the acquisition of microDATA in July 2012, Frost & Sullivan research suggests TCS has recently emerged as the market share leader in ESInet contracts. Market share estimates are based on the addressable population of closed ESInet contracts.
Benefits to Stakeholders
The increasing demand for mobile consumer electronics has led to dramatic growth in smartphones, tablets and other emerging connected devices. In this environment, the benefits of introducing nationwide next generation E911 to the US communications market will be compelling for key stakeholders in public safety. End users will experience improved functionality that will allow them to efficiently relay video, text, data and voice calls in emergency situations. Public safety organizations will benefit from cost savings and increased network performance from the replacement of circuit switched networks to IP networks. Finally, first responders will have enhanced access to real-time, mission-critical data to assess, prepare, and respond to emergencies quicker and more efficiently than ever before.
BlackBerry smartphones with 7.0 and 7.1 operating systems were recently awarded FIPS 140-2 certification by the National Institute of Standards and Technology (NIST) and the Communications Security Establishment Canada (CSEC). While the FIPS 140-2 and Common Criteria certification were expected deliverables from RIM, there are some important takeaways from the announcement:
Security Still RIM’s Bread & Butter. FIPS 140-2 is a security standard used to accredit devices or modules that include both hardware and software components. In both the US and Canada, FIPS certification is required before a device can be used by a government agency. These are expensive processes to complete, both in terms of financial expenditures and resources, and RIM’s recent accreditation demonstrates a continued level of commitment to industries such as government, financial services, and healthcare which inherently disseminate highly sensitive information. With 7.0 & 7.1 blackberry devices and the PlayBook now certified under the FIPS program, government agencies and other highly regulated verticals are more apt to deploy an expanded RIM product portfolio.
Reinforces RIM’s Commitment to Government Sector. There has been speculation that some government agencies have become increasingly concerned over the long term viability of RIM. This has been fueled by highly publicized network outages, questions on blackberry’s future OS roadmap, and the company’s overall financial stability. Some analysts have even suggested that RIM may be phased out of certain government agencies as quickly as practical. The reality, however, is that RIM maintains an extremely strong government foothold with over one million active North American government users. Scott Totzke, senior VP of BlackBerry security at RIM, has indicated RIM continues to see 'steady and incremental growth’ in the federal sector in terms of new subscriber acquisition and refresh business. Churn rates are substantially lower in government then other verticals. Moreover, the recent security certifications only reinforce RIM’s commitment to the sector, so RIM’s foothold is unlikely to deteriorate any time soon.
Competitive Environment Intensifies. Nevertheless, the mobile device landscape is evolving and it is inevitable that federal agencies will increasingly evaluate alternatives to blackberry such as Android and iOS devices. The Department of Defense, for example, has developed a secure kernel for the Android 2.2 OS with FIPS 140-2 capability and is currently testing a variety of customized applications. Military contractors, Harris and Intelligent Software Solutions (ISS), are actively developing applications for the iPhone, iPad and the Android platform. The diversity of mobile devices and overall competitive environment will only continue to intensify and, although adoption may move slower then what we have seen in other vertical markets, a more heterogeneous mobile environment in government is inevitable.
How can RIM Maintain Strong Government Foothold? RIM’s announcement of Mobile Fusion was an acknowledgement that RIM (finally) came to terms with the growing diversity of mobile devices in the enterprise. Similar to the early days of mobility in enterprise, RIM was once essentially the only ‘game in town’ for government employees. However, times have changed. Thus, it is critical that RIM stay ahead of the curve in the government sector and be proactive rather than reactive with respect to evolving trends toward device diversity. RIM currently has a number of enterprise beta customers for BlackBerry Mobile Fusion, however, none yet in the federal sector. So some advice for RIM: Leverage your existing foothold in government by continuing to emphasize and enhance core competencies such as advanced security capabilities and commitments to the most stringent security standards, but stay ahead of the curve by aggressively moving forward with Mobile Fusion for Government.
Focused-Based Services (FBS) are an emerging mobile category that will play a significant role in the next generation of location-based services (LBS). FBS are delivered based on what the user is looking at in real-time versus simply where the user is (location). In contrast to augmented reality, which combines location and mobile Internet search to provide information on landmarks in static environments, FBS enables the tracking and tagging of objects (or individuals) in moving or dynamic environments.
In simple terms, FBS leverage an assortment of advanced location determination technologies to enable mobile users to point their phones at moving objects or people to access real-time information about their subject of interest. This information may include real time data, statistics, or user reviews of the subject (whether a physical or human asset) and clearly presents some very unique and lucrative avenues for hyper-targeted marketing promotions, advertising, and mobile coupons.
Frost & Sullivan believes the initial traction of FBS is likely to occur in arenas or stadiums that support live events, as these venues can provide immediate revenue generating opportunities for mobile advertisers. For example, a mobile user attending a sporting event may focus his camera phone on a particular player for a photo, video, or tweet. The player’s sponsor might want the user to see ads for their products in the form of an enhanced augmented-reality overlay. A hyper-targeted mobile advertising or discount could then be sent directly to the user’s device where a real-time transaction can occur. Advertisers, teams, or event organizers can build a variety of unique value-added benefits beyond simply advertising, such as providing real time player or team statistics when a user focuses on a given player or object in the venue.
A powerful analytics platform will be a critical element of the FBS ecosystem to enable marketers and sponsors to best position ads for real-time shifts in crowd momentum and user engagement behaviors. Jon Fisher, CEO of CrowdOptic, a pioneer in the FBS space, explains, “If one asset is being viewed five times more, you can charge five times more. In a baseball game, for example, you might think a banner behind home plate is the best asset, but what’s the second or third best asset? We can validate that data,” Fisher says. “It’s a whole new advertising form.”
The concept of FBS will likely evolve beyond sporting events and into a variety of environments that inherently have large mobile crowd-sourcing traffic (i.e. metropolitan areas, theme parks, airports, shopping malls, tourist sites, subways etc). FBS represent the convergence of location based services, augmented reality, and mobile advertising and should be considered an attractive growth opportunity for a variety of market participants in the mobile & wireless space.
Facebook will likely make close to 20 acquisitions in 2011, up from 10 in 2010 (and one in 2009). To date, the pattern with Facebook acquisitions has been to hire the executive and/or development team in order to acquire their domain expertise, rather than to simply rebrand a service or new technology. Nevertheless, many of Facebook ’11 acquisitions provide some very interesting clues towards their future mobile direction and strategy.
Strobe Acquisition (Nov 10th, 2011): Platform for Mobile Apps Using HTML5
Strobe has developed a HTML5 (or web-based) platform for mobile application developement. Facebook currently supports application developement for iOS, Android, and the mobile version of their website. With the aquisition of Strobe, Facebook has aquired the tools to create a more complete and comprehrensive platform that can support device agnostic mobile applications.
Potential Implication: Simply building a stand-alone mobile application is not necessarily a true 'mobile strategy', however, building or acquiring a platform is. The inherent advantage of a HTML5 platform is that developers are not constrained to build multiple versions of their application for different platforms. The Strobe aquisition could enable Facebook to leverage cross-platorm application development, allow users to discover applications directly via Facebook's social channel, and encourage both users and developers to participate in the Facebook Credits payment system. Thus, a Facebook HTML5 platform could evolve to compete directly with Google’s Android Market and the App Store.
Rel8tion Acquisition (Jan 25th, 2011): Localized Mobile Advertising + Analytics
Rel8tion focuses on location and demographics-based ad targeting tools for mobile devices.
Potential Implication: Facebook currently has monetized mobile users through its LBS promotions system, Facebook Deals, which presents users coupons and discounts at local businesses when they 'check-in' through Places. With web advertising currently generating the lion's share of Facebook’s revenues, it is inevitable that mobile advertising will become an even more important revenue source going forwad. Facebook continues to entice users to expose more location-based details related to personal and workplace environments. This data, coupled with advancements in mobile location determination technologies, will likely be leveraged by Facebook to furher enhance location-based advertising opprtunities.
Digital Staircase Acquisition (Nov 9th 2011): Visual Editing Tools for Mobile Users
Allows users to edit photos & video and create professional-looking image effects on a mobile device. Digital Staircase has already introduced a number of premium photo/video applications for iOS that have seen traction in the App Store ecoystem such as SmartSplice, StereoCam and MovieCam. Facebook is likely to discontinue these applications for iOS and leverage the visual editing tools from the aquisition to create a stand-alone customized Facebook application.
Potential Implication: Expect a Facebook branded photo editing application for smartphones to materialize in the near future. With Facebook users uploading an estimated 250 million photos a day and over 350 million mobile users, an extremely large addressable market exists for this type of application.
Steve Jobs was clearly a brilliant innovator, but what set him apart from other great technology pioneers was his ability to distribute, market, and monetize that innovation on an unprecedented scale. Though Jobs always evangelized great products as the foundation of Apple’s success, it was his inordinate ability to simplify complex ecosystems that has been paramount to the commercial success of Apple products.
Simple Can be Harder than Complex
“That’s been one of my mantras — focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.” – Steve Jobs 1998
There is no better example of this then the App Store. In a customer's buying decision for an iPhone or an iPad, the App Store is at the front and center of the value proposition. The backend complexity of delivering an integrated storefront experience on a mobile device (from application discovery, to purchase, to delivery, to billing) is no easy task. Jobs was at the forefront of driving the vision for a simplified, seamless experience for mobile users to access premium digital content, while simultaneously creating an ecosystem where application developers could easily monetize these transactions.
The success of the App Store has been astounding with over 350,000 apps available today, over 10 billion downloads, and a cumulative $2 billion sent to developers for apps sold in the App Store. Interestingly, before the introduction of the App Store, the complexity of completing a mobile transaction was often considered a greater inhibitor to the propensity to purchase then the cost of the transaction, which further strengthens the argument that much of the commercial success of the App Store can be tightly tied to the very concept of simplicity. Former Apple CEO, John Scully, once said of Jobs, “He’s a minimalist and constantly reducing things to their simplest level… He simplifies complexity.”
Control the Vision, Own the Ecosystem
In order for Jobs to maintain control of his vision he believed strongly in end-to-end ecosystems and, in particular, that the integrated hardware + software approach is superior to the approach of a common software platform crossing disparate hardware providers. In contrast to many of Apple’s competitors, which have focused on select pieces of the value chain (and outsourcing everything else), Jobs advocated comprehensive ownership, not simply to maximize margins but, more importantly, to maintain Apple’s high standards of quality across the full supply chain. Recent industry developments, such as Google’s acquisition of Motorola Mobility and Microsoft’s partnership with Nokia, are increasingly validating the integrated approach as the more attractive long-term model.
Products Speak for Themselves, but Perception Drives Reality
Jobs has often downplayed the importance of advertising and public relations in interviews but it is no secret that Jobs was the mastermind behind Apple’s marketing brilliance. John Scully has said the concept of making Apple a ‘product marketing’ company was discussed quite frequently in Apple’s early years: “We talked often about how perception leads reality and if you are going to create a reality you have to be able to create the perception… a high level of perception of expectation will sort of tease people to want to find out what the product is capable of”. Clearly, Jobs had a perspective that always started with the product, but it was his unique view of defining the ‘user experience’ that separated him from the pack. Jobs viewed the user experience as the full end-to end journey, from marketing, advertising and discovery, to user interaction with the physical product.
The profound impact that Jobs has had on technology, business, and marketing has been unprecedented and unlikely to be replicated anytime soon. Jobs has been called everything from a visionary to a creative genius. He often downplayed his iconic status:
“Creativity is just connecting dots. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new ideas… Unfortunately, that’s a rare commodity. A lot of people haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions...” –Steve Jobs
So for future visionaries, some dots worth pondering: 1) Focus on Simplicity 2) Control the Vision, Own the Ecosystem; 3) Products Speak for Themselves, but Perception Drives Reality…
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