Is Sora an "iPhone Moment?"

Sora is OpenAI’s new cutting-edge and possibly disruptive AI model that can generate realistic videos based on textual descriptions. Perhaps it is not too soon to make an analogy to what we now call the “iPhone moment.” 

The phrase "iPhone moment" is used to describe a pivotal event, product launch, or technological advancement that significantly impacts a particular field or industry, as was the iPhone’s shift to touch screen interface in 2007, where prior smartphones had used keyboards. 

An "iPhone moment" might be characterized as one that:

• introduces a novel technology, feature, or design that significantly changes how things are done and therefore is disruptive

• has a profound impact on the way people use technology and becomes widely adopted and impactful

• creates a new paradigm or sets a new standard for the industry, influencing future developments.

Prior such moments might include:

• the invention of the internet

• the World Wide Web and multimodal media (video, graphics, image and sound plus text)

• social media platforms

• cloud computing

Sora and other text-to-image (TTI) and text-to-video (TTV) models are likely to be a significant turning point in how we interact and consume information, similar to the way the multimedia web expanded the internet beyond text-only interfaces. 

Some examples of other text-to-video platforms include:

• Runway Gen-2: This platform, available on web and mobile, allows users to create short videos from text descriptions. It offers various customization options and editing tools.

• Google AI's Lumiere: Released as an extension to the PyTorch framework, Lumiere focuses on generating high-quality 3D animations from textual prompts.

• Make-A-Scene: While not exclusively text-based, this AI tool allows users to create and manipulate scenes using natural language descriptions, offering a different approach to video generation.

• Imagen Video: This research project from Google AI demonstrates the ability to generate longer and more complex video sequences from text descriptions, showcasing potential future advancements.

Other examples of text-to-image platforms include:

• Midjourney: This platform offers stunningly realistic and detailed images generated from text prompts, with a strong focus on artistic expression.

• DALL-E 2: OpenAI's counterpart to Midjourney, DALL-E 2 is known for its creative and often surreal interpretations of text descriptions.

• Imagen: A Tencent project with the same name as Google’s Imagen

• VQGAN+CLIP: This open-source project allows users to experiment and create their own text-to-image models, fostering accessibility and exploration within the field.

As did prior “iPhone moments,” Sora and other text-to-video platforms will democratize content creation. As the multimedia web and broadband internet access enabled YouTube, realistic gaming, video streaming, video advertising; ridesharing; turn-by-turn navigation on a smartphone; video calling and all “rich media” including the future metaverse, so Sora and other text-to-video platforms could create new industries, firms and use cases. 

Sora is a major advance in user-generated and professionally-created content that might rival earlier changes wrought by the multimedia web; the internet; home broadband; smartphones and mobile broadband. 

As with those earlier changes, major changes could happen to legacy practices, industries and behaviors. As the smartphone replaced cameras, watches, GPS devices, video screens and home phones, so might TTI and TTV platforms reshape existing industries, firms, products and behaviors.

5G is Vital, if Not Yet "Revolutionary"

Though we are early in its life cycle, some argue 5G remains “revolutionary,” a “transformative leap” that will “reshape” connectivity. Others say it is a disappointment, either as a driver of near-term enterprise use cases, or as an enabler of higher-value, higher-revenue consumer mobile services.  

The eventual “truth” is likely to be far more nuanced. Some valuable new lines of business eventually could emerge. By design, 5G supports device density quite a bit higher than was available on 4G or earlier networks. By design, 5G supports network slicing, which enables private networks with some quality of service features. 

But 5G was always going to be a bit of a disappointment for most consumer accounts, which drive roughly 60 percent of total mobile operator revenues, for reasons related to the dynamics of all internet access and transport services. 

At a high level, demand for data consumption does not have a revenue elasticity that matches the consumption elasticity. In other words, mobile and fixed network operators cannot assume that increases in supply will produce increases in average revenue per unit that match the rate of consumption. 

To be sure, typical recurring charges for home broadband, for example, have increased since 1990, and access speeds for home broadband have risen as well. The cost to supply, on a per-unit basis, arguably is less important than the ability to charge more for higher consumption or higher speed. 

In the U.S. home broadband market, for example, per unit prices have plummeted, but typical  home broadband speeds have grown by an order of magnitude about every decade. Retail prices for stand-alone home broadband have not increased that fast, taking five decades to grow an order of magnitude. 

Year	Typical Speed	Typical Data Consumption	Price per Unit	Monthly Consumer Subscription Charges
1990	14.4 Kbps	10 megabytes	$1 per megabyte	$20 per month
2000	1.5 Mbps	100 megabytes	$0.1 per megabyte	$30 per month
2010	10 Mbps	1 gigabyte	$0.01 per megabyte	$50 per month
2020	100 Mbps	10 gigabytes	$0.001 per megabyte	$70 per month
2023	1 gigabit per second	1 terabyte	$0.0001 per megabyte	$100 per month

The key business takeaway is that supplied capacity must continue to increase, but will happen faster than price increases to match. 

Mobile operators have arguably had better outcomes where it comes to capacity supply and retail prices. In the U.S. market, it has taken three decades for prices to increase by an order of magnitude, as capabilities have grown three orders of magnitude. 

Year	Typical Speed (Mbps)	Typical Data Consumption (GB)	Price per Unit (GB)	Monthly Consumer Subscription Charges (\)
1990	1	0.1	100	20
2000	10	1	10	50
2010	100	10	1	100
2020	1,000	100	0.1	150

For such reasons alone, revenue expectations for faster mobile or fixed network internet access are likely to remain challenging. The argument that 5G would bring significantly-higher revenues, in the form of the ability to “charge more” for access speed, always was going to be quite difficult. 

It remains to be seen how much incremental new revenue might be created by internet of things connections, private networks or edge computing, the services most-often cited as “new” enterprise features of 5G. 

As it has happened, an unexpected “new” revenue source of some significant magnitude--in the form of 5G fixed wireless for home broadband--has developed rather quickly. 

Mobile Operator	Subscribers (Q1 2023)	Annual Subscription Revenues (Q1 2023)	Growth Rate (Q1 2022 - Q1 2023)
T-Mobile	3.2 million	$1.2 billion	120%
Verizon	1.5 million	$600 million	100%
AT&T	0.5 million	$200 million	50%

Whether one views such new revenue sources as “revolutionary” or “merely” significant is the issue. Still, the growth of 5G fixed wireless for home broadband clearly is important for contestants in the home broadband space. 

And 5G fixed wireless remains, at the moment, the clearest “new” revenue source for mobile operators. It always is conceivable that other enterprise-focused revenue streams will emerge as well, though the magnitude of those revenue streams remains more uncertain.

The point is that we likely err when arguing either for “revolutionary” or “disappointing” outcomes for 5G. We still are early in global deployment. New revenue sources generally take time to develop. 

But 5G remains vitally important for other reasons. All internet access providers, all data transport providers and data centers must increase capacity on a sustained basis. Each new mobile generation is the way that capacity increase happens.

Mobile operators may indeed be disappointed at the revenue outcomes from 5G so far. But 5G is essential for protecting the value of the business, as will be true of 6G and subsequent platforms. 

“You get to keep your business” might sound like a rather-trivial outcome. It is not.

Will Enterprise 5G Really be the Growth Driver?

5G IoT often is touted as a growth opportunity for mobile service providers, and rightly so. Sensors, appliances and computers supporting internet of things applications will generally have to communicate. 

So the need for internet and data connectivity is not really an issue. How big the revenue opportunity might be is the key question.  

The core problem for new 5G services in the edge computing, private networks or internet of things areas, for example, is that these lines of business will contribute almost non-measurable revenue increases for most mobile operators in the near to medium term. And even long term, one might argue that substitute products will satisfy much of the demand. 

Keep in mind that mobile service represents about 75 percent of global service provider revenues. And that business is close to saturated in many markets.

The new revenue streams will be small in magnitude, while even a modest decline in a legacy service can--because of the larger size of the existing revenue streams--can pose big problems. 

Still, many service providers, for example, expect big opportunities in business services, which underpin hopes for private networks, edge computing and IoT. But revenue magnitudes matter.  

Mobile consumer revenue always drives the bulk of mobile operator service revenues. Fixed services add about 25 percent. And revenue growth is the key issue for both types of business. 

Multi-access edge computing has been touted as a new value driver and revenue source for access providers. But how big a contribution might be possible is the issue. No matter how big the recurring service revenue becomes, it seems likely that most of the revenue will be reaped by the same sorts of firms that presently offer cloud computing as a service, and not access providers. 

Private networks and internet of things connections always are said to be growth opportunities, and that remains correct. The only issue is “who” earns those revenues and “how much” revenue can be generated. 

No matter how important internet and data connections are for IoT sensors and devices, most of that demand will likely be fulfilled by rival platforms, not mobile networks. Wide area network connectivity will play a role, but possibly mostly as indirect transport for devices that connect locally using Wi-Fi and other wireless in-building and in-home technologies. 

And even when the mobile operator does provide the connections, per-device revenue is going to be a fraction of what we are accustomed to seeing from phone accounts. 

The point is that it will be hard for new 5G services for enterprises and business to move the service provider revenue needle.

Mobility Drives 75% of Service Provider Revenues, Essentially All Revenue Growth

Since mobile services now represent at least 75 percent of total industry service revenues, what happens in the mobility segment arguably drives overall revenue performance these days. But what happens in the fixed networks segment also matters, as fixed networks still represent about a quarter of industry revenues.

MTN Consulting says that service provider revenues declined about six percent in the third quarter of 2022, after a similar six-percent decline in revenues in the third quarter of 2021, “largely due to weak service revenues.”

Recurring service revenue in the third quarter of 2022 actually dropped about seven percent, while equipment revenues grew two percent (largely mobile device sales). But services account for nearly 90 percent of total revenues.

Nor are the quarterly figures unusual. And there is a major nuance to consider when looking at revenue growth. As global mobile subscriptions have added billions of new accounts, total global revenue has grown modestly.

But discrete service providers in many markets have actually seen negative revenue growth rates. The trend also is complicated because fixed network revenue growth became negative as early as 1990, as competition ate away at profit margins and gross revenue. The counterbalance has been the growth of newer sources such as mobile phone service and home broadband. In the U.S. market, the trend has been pronounced. 

Year	Fixed Network Revenue Growth %
1980	10.0
1981	9.0
1982	8.0
1983	7.0
1984	6.0
1985	5.0
1986	4.0
1987	3.0
1988	2.0
1989	1.0
1990	0.0
1991	-1.0
1992	-2.0
1993	-3.0
1994	-4.0
1995	-5.0
1996	-6.0
1997	-7.0
1998	-8.0
1999	-9.0
2000	-10.0
2001	-11.0
2002	-12.0
2003	-13.0
2004	-14.0
2005	-15.0
2006	-16.0
2007	-17.0
2008	-18.0
2009	-19.0
2010	-20.0
2011	-21.0
2012	-22.0
2013	-23.0
2014	-24.0
2015	-25.0
2016	-26.0
2017	-27.0
2018	-28.0
2019	-29.0
2020	-30.0
2021	-31.0
2022	-32.0
2023	-33.0

Looking at all fixed and mobile services, global growth probably will average up to two percent annually for the foreseeable future. Given the challenges in the fixed networks segment, it is reasonable to argue that overall revenue growth will be driven by the mobile segment.