Changewave Research: Consumer Cell Phones, Service Providers and Voip Trends

ChangeWave Research: Consumer Cell Phones, Service Providers and VoIP Trends

ChangeWave Research Report:

Apple iPhone Rocks Cell Phone Industry

A Look at the Biggest Future Winners and Losers

Overview

The latest ChangeWave consumer cell phone survey shows the startling impact the Apple iPhone is continuing to have on the cellular industry. The survey was conducted April 4 -10 and a total of 3,489 ChangeWave Alliance members participated.

Bottom Line: The Apple iPhone. The excitement surrounding the mid-June release of the Apple iPhone is just as strong among consumers as it was three months ago. The current ChangeWave survey provides strong evidence that Apple should exceed its iPhone sales goals for 2008 – if its overall performance lives up to consumer expectations.

Nearly one-in-ten respondents (9%) say they are likely to buy the new iPhone product once it becomes available in June (3% Very Likely; 6% Somewhat Likely) – and four-out-of-five of this group say it will likely replace their existing cell phone.

Another 7% of consumers say they are likely to buy the iPhone as a gift for someone else.

Additional Surge in Demand if Price Drops. The iPhone’s overall integration of iPod, Phone, Camera and Email/Internet capability (28%) remains the top selling point among likely buyers. But how far would the price have to drop to turn those who are not considering the iPhone into potential buyers?

We asked the rest of our respondents the following question:

For those not considering buying an Apple iPhone, at what price point would you consider buying an iPhone?

Not
Interested / $199
Or Less / $200-$299 / $300-$399 / $400-$499 / $500-$599
4GB iPhone / 37% / 53% / 9% / 1% / 0% / 0%
8GB iPhone / 43% / 37% / 14% / 5% / 1% / 0%

Echoing our previous findings, if and when the cost of the iPhone comes down significantly, the results project an additional surge in demand. For example, a combined 10% say they’d consider buying a 4GB and 20% an 8GB iPhone if the price falls to the $200-$299 range.

I. The Looming Impact on Cell Phone Manufacturers

Current Market Share. Motorola (33%; up 1-pt) is still the leading manufacturer among current cell phone owners, with LG (15%; unchanged) in second. Nokia (14%; down 2-pts) now finds itself third.

Next 6 Months Planned Purchases. Importantly, when we look at longer term planned buying among Alliance consumers, the startling impact of the iPhone becomes apparent. For the second survey in a row, Motorola’s future share among consumers has registered a dramatic decline – falling from 33% in October 2006 to just 17% currently.

II. The Impact on Cell Service Providers

Current Market Share. Verizon (30%; unchanged) continues to hold the market share lead among our respondents. But number two Cingular (27%) – Apple’s exclusive service provider for the United States – has gained 1-point on Verizon since our previous survey in January. We note that Sprint/Nextel (12%) has dropped 1-point to a new low.

And Who Has the Momentum Going Forward? In a dramatic turn of events, Cingular (28%; up 6-pts) has surged ahead of Verizon in terms of future buying, and is now the top choice among those likely to switch service providers.

Verizon (22%; down 3-pts) has continued to trend down among this critically important group – falling to second place for the first time since we began asking this question in a ChangeWave survey.

III. Other Key Findings

Fiber Optic Services

Signs of Softer Demand for Verizon FiOS. For the second consecutive survey, we see a softening in potential demand for Verizon’s FiOS Internet service. While still very high, the 33% who say they’re likely to sign-up if it becomes available in their area represents a 9-pt drop since January. A similar softening is seen in potential demand for the FiOS TV service, with 41% saying they’re likely to sign up if it becomes available – 7-pts less than previously.

AT&T’s U-verse. In contrast, 33% say they’re likely to sign up for AT&T’s U-verse Internet & TV service if available, signifying a competitive threat to Verizon in the Fiber Optic market.

Triple-Play Penetration

Current Leader. Overall 17% of respondents say they currently pay for triple-play service, and another 17% say they’re likely to sign up for a triple-play in the next 90 days. Comcast (27%) remains the market share leader among our current triple-play subscribers, up 2-points since January 2007. Time Warner (17%) is in second but is down 3-points, and AT&T (13%; up 1-pt) is tied with Cox (13%; down 1-pt) for third.

Potential New Subscriptions. Verizon (29%; up 6-pts) is now the leading choice among those planning to get Triple Play in the next 90 days, with Comcast (25%; down 2-pts) second and AT&T (22%; unchanged) third.

Home VoIP Trends (See pp. 15-18)

Summary of Key Findings

The ChangeWave Alliance is a group of 10,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World ™

www.ChangeWave.com

Table of Contents

Summary of Key Findings 2

The Findings 5

(A) Apple iPhone 5

(B) Cell Phones 7

(C) Cellular Service Providers 10

(D) Triple-Play and Fiber Optic Services 12

(E) Home VoIP Trends 15

ChangeWave Research Methodology 19

About ChangeWave Research 20

I. The Findings

Introduction

The latest ChangeWave consumer cell phone survey shows the startling impact the Apple iPhone is continuing to have on the cellular industry. The survey was conducted April 4 -10.

Total Respondents (n = 3,489)

(A) Apple iPhone

(1) Question Asked: Apple recently announced its iPhone, a combination of three products – a cell phone, an iPod and an Internet browser – all using a touch-screen interface. The iPhone is expected to become available in June 2007 and will cost around $500 for a 4GB model and $600 for 8GB – with a 2 year Cingular (AT&T) service contract.

How likely is it that you will buy an Apple iPhone for yourself when it becomes available? (n=3,489)

Current
Survey
Apr ‘07 / Previous Survey
Jan ‘07
Very Likely / 3% / 3%
Somewhat Likely / 6% / 6%
Unlikely / 85% / 86%
Don't Know / 5% / 5%

(1A) Question Asked: Would the iPhone likely replace your existing cell phone, or would it be in addition to your current cell phone? (n=306)

Current
Survey
Apr ‘07 / Previous
Survey
Jan ‘07
iPhone would replace my existing cell phone / 79% / 80%
iPhone would be in addition to my existing cell phone / 9% / 10%
Don't Know / 5% / 6%
Other/NA / 7% / 4%

The Apple iPhone. The excitement surrounding the mid-June release of the Apple iPhone is just as strong among consumers as it was three months ago. The current ChangeWave survey provides strong evidence that Apple should exceed its iPhone sales goals for 2008 – if its overall performance lives up to consumer expectations.

Nearly one-in-ten respondents (9%) say they are likely to buy the new iPhone product once it becomes available in June (3% Very Likely; 6% Somewhat Likely) – and four-out-of-five of this group say it will likely replace their existing cell phone.

(2) Question Asked: How likely is it that you will buy an Apple iPhone for someone else (e.g., a family member) when it becomes available? (n=3,489)

Current
Survey
Apr ‘07 / Previous
Survey
Jan ‘07
Very Likely / 2% / 2%
Somewhat Likely / 5% / 5%
Unlikely / 87% / 88%
Don't Know/NA / 5% / 4%

Another 7% of consumers say they are likely to buy the iPhone as a gift for someone else.

(3) Question Asked: What is the most important reason why you are likely to buy an Apple iPhone for yourself when it becomes available?

Current
Survey
Apr ‘07 / Previous
Survey
Jan ‘07
Integration of iPod, Phone, Camera and Email/Internet / 28% / 34%
Features / 21% / 18%
Design / User Interface / 14% / 16%
Brand Reputation / 10% / 11%
Ease of Use / 7% / 3%
Internet Capabilities / 6% / 8%
Other / 13% / 9%

Top Reasons for Buying. The iPhone’s overall integration of iPod, Phone, Camera and Email/Internet capability (28%) remains the top selling point among likely buyers.

We also asked respondents who were not considering buying the iPhone why they were not interested:

(4) Question Asked: For those not considering buying an Apple iPhone for yourself or someone else, what's the most important reason why not?

Current
Survey
Apr ‘07 / Previous
Survey
Jan ‘07
No Need - Current Cell Phone is Sufficient / 55% / 55%
Cost of iPhone is Too High / 28% / 28%
Don't Like Requirement to Use Cingular (AT&T) Service / 7% / 7%
Technology is Too New / 2% / 2%
Don't Like iPhone Features, Appearance and/or Touch Screen Interface / 1% / 2%
Other/NA / 7% / 7%

Top Reasons for Not Buying. More than one-in-two (55%) say they don’t currently have a need for it, but the key finding appears to be “high price” – which is the most important reason why nearly three-in-ten consumers (28%) say they are currently not considering it.

But how far would the price have to drop to turn those who are not considering the iPhone into potential buyers?

We asked the rest of our respondents the following question:

(4A) Question Asked: And for those not considering buying an Apple iPhone, at what price point would you consider buying an iPhone? (n=2,766)

Current Survey (April 2007)

Not
Interested / $199
Or Less / $200-$299 / $300-$399 / $400-$499 / $500-$599
4GB iPhone / 37% / 53% / 9% / 1% / 0% / 0%
8GB iPhone / 43% / 37% / 14% / 5% / 1% / 0%

Previous Survey (January 2007)

Not Interested / $199 or Less / $200-
$299 / $300-
$399 / $400-$499 / $500-$599
4GB iPhone / 43% / 44% / 10% / 2% / 0% / 0%
8GB iPhone / 46% / 29% / 17% / 6% / 1% / 0%

Additional Surge in Demand if Price Drops. Echoing our previous findings, if and when the cost of the iPhone comes down significantly, the results project an additional surge in demand. For example, a combined 10% say they’d consider buying a 4GB and 20% an 8GB iPhone if the price falls to the $200-$299 range.

(B) Cell Phone Manufacturers

(5) Question Asked: Do you currently own a cell phone? (n=3,489)

Current
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06
Yes - With a Camera / 58% / 54% / 49% / 45% / 40%
Yes - Without a Camera / 36% / 40% / 45% / 47% / 52%
No - But Plan to Purchase a Cell Phone in the Future / 1% / 1% / 1% / 2% / 2%
No - Do Not Own a Cell Phone and Have No Plans to Get One / 5% / 4% / 5% / 5% / 6%

(5A) Question Asked: For those of you who currently own a cell phone, which company manufactures it? (n=3,285)

Current
Survey
Apr ‘07 / Previous Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06 / Previous
Survey
Dec ‘05
Motorola / 33% / 32% / 33% / 33% / 31% / 29%
LG / 15% / 15% / 12% / 15% / 13% / 14%
Nokia / 14% / 16% / 17% / 16% / 18% / 18%
Samsung / 13% / 13% / 13% / 13% / 14% / 15%
Research in Motion
(e.g., BlackBerry) / 5% / 4% / 3% / 3% / 2% / 2%
Palm (e.g., Treo) / 5% / 4% / 4% / 5% / 4% / 3%
Sony/Ericsson / 4% / 4% / 3% / 4% / 4% / 4%
Sanyo / 3% / 3% / 4% / 3% / 3% / 3%
Other / 4% / 6% / 8% / 6% / 7% / 9%
Don't Know/NA / 4% / 4% / 3% / 3% / 3% / 3%

Current Market Share. Motorola (33%; up 1-pt) is still the leading manufacturer among current cell phone owners, with LG (15%; unchanged) in second. Nokia (14%; down 2-pts) now finds itself third.

(5B) Question Asked: Do you plan on purchasing or upgrading to a new cell phone in the next 6 months? (n=3,324)

Current
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06 / Previous
Survey
Dec ‘05
Yes - New Cell Phone With a Camera / 19% / 18% / 18% / 16% / 16% / 16%
Yes - New Cell Phone Without a Camera / 7% / 8% / 11% / 12% / 11% / 13%
No, Will Not Be Upgrading/ Buying a Cell Phone Within Next 6 Months / 55% / 52% / 49% / 52% / 51% / 50%
Just Recently Upgraded to a Newer Model Cell Phone / 12% / 13% / 13% / 13% / 13% / 14%
Don't Know/NA / 8% / 8% / 8% / 7% / 9% / 7%

(5C) Question Asked: For those of you who plan on purchasing/upgrading to a new cell phone, which company is the most likely manufacturer of the phone you'll eventually purchase? (n=858)

Current
Survey
Apr ‘07 / Previous
Survey
Jan ‘07 / Previous
Survey
Oct ‘06 / Previous
Survey
Jul ‘06 / Previous
Survey
Apr ‘06 / Previous
Survey
Dec ‘05
Motorola / 17% / 24% / 33% / 34% / 31% / 33%
Apple / 13% / 6% / NA / NA / NA / NA
Research in Motion (e.g. BlackBerry) / 10% / 7% / 6% / 5% / 4% / 3%
Nokia / 9% / 11% / 11% / 12% / 12% / 14%
Samsung / 7% / 8% / 7% / 9% / 9% / 5%
Palm (e.g., Treo) / 5% / 4% / 6% / 6% / 10% / 6%
LG / 4% / 4% / 6% / 3% / 2% / 5%
Sony/Ericsson / 3% / 3% / 3% / 3% / 3% / 3%
Sanyo / 1% / 1% / 1% / 1% / 0% / 1%
Don't Know/Other/NA / 30% / 32% / 26% / 29% / 28% / 29%

Next 6 Months Planned Purchases. Importantly, when we look at longer term planned buying among Alliance consumers, the startling impact of the iPhone becomes apparent. For the second survey in a row, Motorola’s future share among consumers has registered a dramatic decline – falling from 33% in October 2006 to just 17% currently.