Saturday, 21 February 2009

As the dust settles, part 3: back in the real world

In amongst the industry hob-nobbing over the last week there was one announcement that will change the mobile experience for everyone. I'm talking about the GSMA announcement of a Universal Charging Solution (UCS). It's not the most eye-catching of announcements. Prosaic almost. But in terms of changing the experience of the average user it will be by far the biggest announcement at the show. While few average punters out there in mobile-land will be making use of LTE, app stores or watch phones, everyone needs juice.

Whether this was sparked by Chinese government mandate and thus de facto global dominance is a moot point. The important thing is that the GSMA announcement actually represents a positive change to everyday use of mobile, which is exactly the kind of thing the GSMA should be about. It also gives a fillip to new handset market entrants seeking to displace vendors such as Nokia, SonyEricsson, Samsung and LG. Standardised chargers mean fewer barriers to churning between vendors. It also effectively mandates much greater energy efficiency making mobile, yet again, one of the leading industries in considering environmental impact. Doesn't it make you proud?

The only cloud on the horizon is that the wording allows the vendors some slack "The group agreed that by the 1st January 2012, the majority of all new mobile phone models available will support a universal charging connector". Could it be that vendors will introduce UCS chargers for all devices in particular territories, e.g. emerging markets, but maintain their own proprietary versions in more developed markets, e.g. for smartphones. Let's hope not. Even if they do, UCS at least gives all the competing new entrants a standard on which to converge.

Friday, 20 February 2009

As the dust settles, part 2: the MNOs strike back

This is supposed to be a mobile broadband blog and specialisation is everything, but there was a lot of other interesting stuff going on at MWC that I thought it was worth commenting on.

The handset old guard are under threat. Nokia, Samsung, LG and SonyEricsson should be worried. Everything points to a rocky 2009 and 2010 for them. The handset market will be squeezed by lengthening handset replacement cycles. At the same time new and increasingly impressive competitors are biting at the heels of the incumbents. INQ won best handset at the GSM Awards, HTC were drawing plaudits for the Magic and even Palm is looking good. With RIM ironing out the bugs in the Storm and Microsoft putting a hot new version of Windows in the market the smartphone competition is really heating up.

It was interesting to see Nokia jumping back into bed with Qualcomm after so many years of antagonism. In the face of increasing competition, Nokia needs every advantage it can get. If Qualcomm's MSM platform allows them to compete more effectively with the rampant new-comers, they need to do that deal.

OS diversity and the poor application developer: Of course, all this OS diversity does nothing for the application developers. Developing for multiple variants is a substantial headache and it's getting worse. AT&T's Ralph De La Vega focused on this in his presentation, comparing OS fragmentation with the lack of SMS interconnection in the US for many years. Both, he said, were responsible for hindering adoption. Of course the analogy is imperfect. P2P and A2P have very different dynamics, but his point is well made.

Unfortunately there is no obvious solution. Less fragmentation = easier development environment but less choice and competition in the handset market. More fragmentation = tougher application development environment but richer diversity in devices. For the MNO the choice is clear. The latter is far preferable, given the economics of their business. Whatever revenue they could hope to generate through application sales is dwarfed by their expenditure on handset subsidies. More OS diversity means more handset diversity, which gives MNOs more sticks with which to beat their suppliers.

I have to confess that Ralph's was the only congress session that I managed to attend. I really must enforce a less punishing meeting schedule for myself next year.

App Stores: Everyone and their dog was pushing app stores this year. But hang on, I hear you cry, haven't we seen app stores somewhere before? Haven't operators and vendors been running these beauties for years? Why all the fuss now? The answers are yes, yes and because Apple have got it right. Vendors and operators are rushing to get on the app store bandwagon. Ironically, a bandwagon that they set rolling 5+ years ago.

All of this points to a swinging of the pendulum back in the direction of the mobile network operator. After several years of vendor expansion in the value chain (think Ovi, iPhone etc.) the operators are showing a few signs of getting back in on the act. I've seen some increasing willingness by MNOs to reassert their position on data services. Could this have been stimulated by the OEMs greater exposure to the economic downturn and an imminent rebalancing of power back to the operators. I think so.

As the dust settles, part 1: mobile broadband

As the sun sets, dust settles or curtains close (depending on your favourite metaphor) on another MWC, I've had time to collect my thoughts and nurse my blisters.

There were, of course, a number of interesting talking points on mobile broadband. Qualcomm's Gobi platform promises to position embedded laptops as the main form factor in future. The availability of spectrum was also heartily debated and some compelling and some spurious claims were made about the positive impact mobile broadband could have on dragging the world out of recession. For me, though, there were two major issues:

LTE: In my pre-show predictions I correctly identified LTE as a big crunch issue. Different operators are taking very different views on the likely roadmap. Sol Trujillo was his usual straight-talking self* in a press conference on Monday and made it clear that Telstra would be sweating its HSPA assets for several years before it made the jump to LTE. Sierra Wireless CEO Jason Cohenour described Telstra as "a lighthouse in terms of pushing the envelope" which, mixed metaphors aside, is true. Given that it has the most advanced mobile broadband network in the world, Telstra is a good bellweather for the industry.

Well...most of the industry. There are strong arguments for a faster rush for LTE from some of the 3GPP2 territories. Expect a relatively speedy deployment from Verizon, but a rather more measured approach from GSM-land. That said, however, there are no guarantees that the mobile broadband arms race won't manifest itself in a relatively rapid move to LTE. Vodafone, for instance, is relatively bullish, although in part that must be a result of finally being able to move to a common platform to Verizon Wireless.

The good news is that once MNOs decide to make that jump to LTE the ecosystem will be well established. Chipsets, handsets and infrastructure will all be ready well in advance of when I'm expecting most MNOs to launch. That should give, fingers crossed, a much smoother transition compared to what we saw from 2G to 3G.

That analogy is an interesting one. To what extent will the experiences of the 2G -> 3G evolution be reflected in 3G -> 4G? In the case of the former, the idea of sweating 2G assets with EDGE has proved mostly ineffective, despite the higher unit costs of UMTS and the lengthy time lag until we saw appealing handsets in the market. However, there is one major difference: no-one (I think I'm right in saying) has coverage obligations for LTE. MNOs knew that ultimately national 3G coverage was the end game and, while they may have chosen different ways to get to that, their strategies were always predicated on that outcome. With LTE the future is less clear.

The vendor community steps up to help MNO segmentation: The other big mobile-broadband issue that I noticed last week was the swift response from the vendor community to the evolving needs of the operators in enabling the segmentation, differentiation and efficiency savings that will be critical for providing the most compelling mobile broadband propositions.

With such a commoditised service MNOs will be hunting high and low for ways to differentiate their product, particularly if it allows for more segmentation. Chatting with 724 Solutions and Flash Networks, amongst others, the vendors are increasingly giving MNOs the tools to get to a much more granular segmentation. particularly by allowing differential charging and dynamically allocated bandwidth.

These may seem like relatively minor steps, but they allow a significant smartening of the pipe. Rather than one-size-fits-all pricing, it permits a much more targeted approach based on the needs of particular segments. And mobile broadband is all about the segments. There are many parallel and distinct mobile broadband markets (enterprise, students, second home owners etc) all of whom have very different requirements. Trying to hit them all with a limited range of plans will be inefficient either because they won't appeal to enough potential subscribers, or because the prices would have to be pitched so low that high-end users would become unprofitable. Segmentation and differential services is critical and MNOs don't need to look far to find vendors who can support them.

*although he shied away from answering my question

Thursday, 12 February 2009

Expectations for MWC

I, along with the rest of the mobile industry, am decamping to Barcelona on Monday for Mobile World Congress. Last year was the first for many years that I did not attend, so I'm rather looking forward to getting back into mobile's biggest bunfight. A lot of people have been asking my what I'm expecting of the show. So I thought I'd list them, in no order of importance:
  1. What time is LTE? – There remain big question marks about what we can expect from LTE. Will it be an overlay network or hotspots? What are the prospects for LTE handsets? What are the timescales, particularly in the light of the recession? Some of my colleagues have just put the finishing touches to a report on the subject. I’ll be interested to see what the vendors and the operators have to say on the subject in this public forum, and how much their views diverge.

  2. It’s not easy being green – there have been a lot of pre-briefs on environmentally friendly products from base stations to low-cost handsets. Are MNOs interested in being green in the face of economic gloom?

  3. Laptop frenzy – The likes of Dell, Compaq, Asus and Toshiba* now have much more of a vested interest in the mobile industry, so it’ll be interesting to see how prominent they are at the show. Doubtless we’ll see a lot of announcements about new embedded modules and partnership deals between operators and laptop vendors.

  4. Hanging on the (smart) telephone – With the deepening recession, there is a very real threat to the smartphone market. My esteemed counterparts at vendor-oriented analyst firms who track and forecast device shipments are predicting a dismal 2009. However, with the falling cost of components, we should also see the functionality associated with the smartphone permeate the mid-tier of devices. So the question is: what is the danger for those vendors highly exposed to the smartphone market such as RIM, SonyEricsson, HTC and to a lesser extent Nokia?

  5. Paranoid Android - I expect a lot of coverage of an increasing number of vendors adopting (semi) open source operating systems. After several years of convergence on Symbian, Windows and a couple of other niche OSes, we’re getting increasing fragmentation. This is not overly healthy for the industry. Developers face an uphill struggle dealing with a diverse range of application development environments.

  6. Welcome to the jungle – a range of new handset players are set to get going, not least Asus in conjunction with Garmin. Can we expect to see another company that hasn’t historically been present in the handset market make a play?

  7. As easy as AAA – MNO mobile data strategies, particularly with regard to the consumer segment, is converging on a consensus that the real opportunities for revenue are three-fold: Access, Applications and Advertising. Access includes both laptop connectivity and handset-based internet access. By applications I’m specifically thinking of the opening up of APNs to third parties in exchange for revenue share. Mobile advertising has been well examined before, but I think long term this offers some significant revenue opportunities, although advertisers are still slow to realise the opportunity. MNOs have recognised that they have certain capabilities that have real value and that they can monetise. One is the access network as a ‘smart pipe’, another is as a holder of information on end users, be it demographic or location or whatever. Where they are not strong is in the provision of the ultimate application. Nor do they want to play in that applications space. It’s too crowded. The opportunity for operators is to sell access to a wide range of third-party applications and add some value-add to those applications in the form of more targeting of advertising and the provision of user data. I was a judge for this year’s GSMA Awards and, without giving too much away, the most interesting advertising ventures were from operators and the best music and video applications were mostly from 3rd parties.

  8. Are you experienced? – Linked to the above point. MNOs’ position as controller of the mobile user experience is threatened, e.g. by Ovi or Windows 6.5. Therefore they will look to identify areas where they can bring additional value to the end users. We’ve seen a few examples recently of attempts by operators to provide easier access to social networking sites. Ultimately I think this will be fruitless, but the MNOs have to try.
  9. Find me – Not location-based services again, I hear you cry! As a mobile service enabler, location has flattered to deceive for more years than I care to remember. I’ve sat through so many presentations from location-based apps vendors that illustrate how you can pinpoint users to within x metres. Ultimately no real revenue opportunity has materialised for operators. It has taken the availability of GPS on the device and – dare I say it – the circumventing of the mobile network operator in the value chain, for location-based applications to really generate some potential. But hang on, I hear you cry. How can you square that with the view that MNOs will make money from APNs, of which location must be one of the most valuable. They’ll have to bring their prices down! The lion’s share of phones won’t have GPS, so to get any kind of location functionality for the vast majority of the population will have to rely on cell-ID or something a little more sophisticated.
  10. Money talks – M-Commerce is set to raise it’s head again. There are increasing numbers of impressive looking applications, particularly in the emerging markets. One look at the GSMA Awards nominees will show how innovative and clever some of the applications are, going even further than ever before to provide banking, payment and financial services to people who have never enjoyed those things before. In developed markets, contactless technology finally seems to be making some headway. We’ve been talking about it for long enough. The question for me is still about the value chain for m-payment. I’m not convinced anyone has yet resolved that.
  11. Money’s too tight to mention – The “R” word. I think I got away with only mentioning it twice in the piece. The recession (three times) will loom large over MWC. It influences a lot of the points I mentioned above, from the demand for green infrastructure to the market for smartphones. Personally I think the impact will be felt hardest in the handsets market as users extend their handset replacement market, infrastructure vendors will feel a bit of the pain as network operators decide whether the time is right to roll out new kit (although the demand for mobile broadband capacity should provide a substantial boost) and network operators will feel it least of all. Mobile is sufficiently well established and affordable – although maybe not great value-for-money – that the worst we’ll see will be a small dip in revenue amongst the operators.

  12. Sore feet, lack of sleep and some sort of travel headache - Two years ago I was stuck on the tarmac at Barcelona for 5 hours while BA tried to find a replacement part, although the time flew by thanks to Tom Holland's excellent Persian Fire and the knowledge that Arun Sarin was on the same plane. Misery loves company, particularly in the form of major movers and shakers in the mobile industry.

* Before anyone complains that Toshiba has always had an interest through their handset division, I am only too aware of that. They were a client of mine for many years.

Monday, 9 February 2009

3 Australia...first victim of the credit crunch?

The big news this morning is, of course, the announcement that 3 and Vodafone would be merging their operations in Australia. The new 50/50 JV will be called VHA and will market its products and services under the Vodafone brand, although will retain exclusive rights to the 3 brand in Australia. Full details can be found here.

Surprised? Not really. Vodafone has trailed both Optus and Telstra in 3G coverage and technology upgrade path for a while. Meanwhile, 3 has never really got to grips with the fact that it doesn't have access to 850MHz or 900MHz spectrum. The other operators have been aggressive at deploying HSDPA at those frequencies, taking advantage of the technology-neutral approach adopted by the Australian regulator. 3's 2100MHz spectrum really can't compete on base-station density and indoor coverage. That make's it increasingly difficult for 3 to gain traction in mobile broadband, a market that it had made its own in Europe.

In a recessionary environment it is inevitable there will be some consolidation. Vodafone and 3 need each other. So it gets a thumbs up from me.

I don't think it represents a statement of intent about other 3 holdings. The approach has always been pragmatic. If there's a good offer on the table, take it. But good offers depend on specific circumstances. For instance, Hutch sold out of India because Vodafone we're so keen to diversify into emerging markets that they were prepared to put a good offer on the table. HWL could see themselves being squeezed in Australia, so they took the logical course of action.

There are a couple of minor niggles for me though. It looks as though the new JV will abandon the 3 name. Now that mobile has reached saturation virtually everywhere MNOs will thrive on segmentation and what better way to do it that through an already established brand? Abandoning that brand doesn't seem a sensible move to me. Secondly I wonder about the logic of Vodafone taking only a 50% share in a company in which they contribute 2/3 of the subscribers (albeit with a AUD500 million pay out as compensation for their reduced shareholding). They've sold out of many minority shareholdings and they've effectively adopted one here. Still, it's a minor issue and one that may have no implications for operations, depending on the details of the agreement thrashed out with HWL.

Another issue is the implications for 900MHz refarming elsewhere. Evidence from down under would suggest that any 2100MHz operator that finds itself unable to deploy UMTS at 900MHz will struggle. It is critically important that greenfield 3G operators get hold of refarmed spectrum. Otherwise their days will be numbered.

Friday, 6 February 2009

Ofcom rethink on digital dividend spectrum? Mixed emotions.

I read an article on the BBC website with interest yesterday. It looks like the deal brokered by Lord Lloyd Webber (which makes him sound like some sort of UN special envoy), to preserve some of the digital dividend spectrum for wireless microphones, may have collapsed. It's probably revenge, on behalf of the people of the UK, and indeed Europe, for the horror that is the UK's 2009 Eurovision entry, which he co-wrote with Dionne Warwick. I'm not a big fan of Eurovision at the best of times (although I did love the Latvian Pirates and crazy French guy last year) but our latest effort is truly awful.

The upshot is that Ofcom has reviewed the award of the 790-862MHz digital dividend spectrum and now has decided to bring it into line with other European markets by moving PMSE (mostly wireless microphones) and digital TV, which previously had operated within the digital dividend band, to a lower frequency.

So, with more spectrum available for mobile broadband and more harmonisation, I should be happy right? Yes, except that I go to quite a lot of festivals and I'm going to pray that it doesn't affect my enjoyment of the dulcet tones of Bruce Springsteen, Neil Young, The Courteeners & Badger at Glastonbury Festival this year. Evicting radio mics from the top end of the 800MHz band could mean chaos for the live events industry. Equipment will be rendered useless and events that have run hitch-free for years could end up disappointing thousands of attendees. I can understand the thinking behind reusing that spectrum. However, Ofcom has a public service obligation that surely requires it to consider the public good. One thing is for sure, if Ofcom does ultimately evict wireless mics, it needs to quickly find suitable alternative spectrum and compensate the entertainment industry. Doubtless there will still be glitches though.
Surely there must be some other way to get back at Andrew Lloyd Webber? Revoke his peerage for crimes against music perhaps?

Thursday, 5 February 2009

Swift action will hasten France's mobile broadband catch-up

The French government is acting to allocate additional 3G spectrum and increase competition, which hopefully should have knock-on effect for boosting mobile broadband penetration.

According to an article in Les Echos (and assuming my translation skills are up to the job) the French government has decided to split the soon-to-be-allocated 3G spectrum into three lots and award it in two stages, the first to a new operator and later the second and third lots to existing operators. Nominations are invited by mid-March for the new licence holder, with spectrum to be awarded in the summer. The spectrum reserved for existing licence holders will be allocated by the end of the year.

The splitting of the spectrum block removes one of the main barriers to a new entrant, the cost. In 2007 there were no bidders for the full block of spectrum. Although EUR619 million seems cheap by the standards of 1999/2000 it seems that it has discouraged some would-be bidders. The price for the smaller blocks should be around EUR200 million each. A bargain, but there will be coverage obligations.

The French government is also clearly weighing up its options with regard to the allocation of the additional spectrum to the existing operators. It may, for instance, mandate wholesale access for MVNOs, which would further encourage competition. Or it may include tougher coverage obligations. The option of awarding by auction, rather than beauty contest, has not been ruled out.

Front-runner for the new licence is CLEC Free which has caused waves in the French telecoms market with its discounting approach, with Les Echos particularly identifying its EUR29.99/month triple play (or "le triple play") as an indicator that it will be a catalyst of increasing competition in the market.

I've recently been putting together European mobile broadband forecasts and France is one of the more difficult markets to call. It's certainly underdeveloped at the moment due to a lack of competition and high prices. The question is, will it follow the same growth trajectory as other comparable markets in Europe. My view is that eventually it will. The addition of a fourth greenfield 3G operator will certainly help, as will the arrival of mobile broadband MVNOs and more stringent coverage obligations. By 2012 this will start to have an impact.

In other European markets the presence of a new 3G operator (usually Hutchison 3G) has tended to spur competition greatly. The one exception is Spain, where Yoigo has yet to make much headway in mobile broadband. That is mostly a coverage issue. Once it reaches a reasonable proportion of the population I think we can expect Yoigo to pursue this opportunity. If the coverage obligations are strict enough, we're unlikely to see a similar thing occur in France.

A potential stumbling block in France is the strides being made in next generation access. However, my assumption is that mobile broadband will be predominantly a complementary service, meaning that the impact of NGA rollouts will be modest. Leadership in fibre deployment would not preclude a relatively high mobile broadband penetration. Check out Benoit Felten's Fiberevolution blog for all you could want to know about the latest on NGA.

The main barrier to adoption of mobile broadband in France is high prices caused by lack of bandwidth and lack of competition, both of which are being addressed rapidly by this announcement.

Wednesday, 4 February 2009

Digital Britain: My reaction to the reaction

I thought I'd pick out a few comments on the Digital Britain interim report that I commented on last week.

Kevin Russell, 3 UK: "The opportunity here for people in the U.K. is clearly set out in this interim report. What is lacking is clarity as to if this will be driven by access and quality of service or the desire for Treasury income. I believe the former provides the best way forward for all," he said in a statement. A 3 spokesman explained that selling off spectrum in a public auction could have a negative impact on the U.K. mobile industry. "The hunger from operators for bidding on spectrum is debatable, and a new player could come along, build out another network and cause even more fragmentation in the market," he said. (Additional comment from the ever-excellent Total Telecom).

Here I'll (mis)quote Mandy Rice-Davies: "well, he would say that wouldn't he". It comes as little suprise that a mobile network operator would favour a government approach that neither prioritises generating funds for the treasury nor looks to increase competition in the market. The fact is that there is unlikely to be much appetite for either at the moment. Market maturity and economic blight means that M&A is more likely than a sixth player wanting to enter the UK market. It's also unlikely that an auction will raise significant funds. For the UK government, imposing strict universal service obligations is about the best they can hope for.

Further comment from 3 indicate a belief that 900 MHz spectrum should be equally allocated between the existing operators for UMTS. Again, no surprises here. Given that they currently hold no spectrum here and it will be an excellent way of improving in-building coverage it's little surprise that 3 is all for dividing up the spectrum.

Jim Hyde, T-Mobile: "We welcome this insightful report, which identifies the issues we all need to address to make Britain a winner in the digital world. It clearly understands the contribution mobile has already made and the even more exciting potential mobile broadband offers. It also puts its finger on a key current roadblock – the inability to use all existing mobile spectrum for 3G and to do so on an equitable, competitive basis. We have long argued for this. It is important economically and socially. It would enable the more rapid achievement of the widest high speed mobile broadband coverage and the much more efficient use of the industry's spectrum. We look for ward to working with Lord Carter and his Digital Britain team and with Ofcom and all operators to resolve this rapidly."

Jim hits the most important nail on the head. We'll be sad to see him go. He has clearly identified 900MHz refarming as a big immediate stumbling block to mobile broadband, which it is. Everyone wants to use 900MHz for UMTS. That has never been an issue. The issue is how? Who gets what spectrum, where? In its interim phase this review doesn't address that issue. It will have to be resolved.

And I've scoured the net for comments from any other pertinent parties but no-one seems to be saying much.

Mobile broadband - not just terrible when it snows!

I've been meaning to get on and blog over the last couple of days but Monday's snow hampered me considerably. It wasn't the snow specifically that impaired my blogging you understand, it was the reliance on mobile broadband. As an MBB-only household (and have been for the last 3 months) we struggled on Monday to stay connected sharing one dongle, delivering pitiful bandwidth, between two laptops. This can only have been exacerbated by the thousands of other like-minded souls who thought "I'll work from home and use the mobile broadband". I live in Kensington, possibly the highest concentration of potential WFH-ers in the country.

If I was being generous I'd say the inclement weather indirectly increased the contention ratio around my local cell resulting in diabolical service. If I was being less generous I'd say that mobile broadband just isn't up to the job of providing me with an alternative to DSL. I'll be on the phone to BT today to get myself wired up again. The final straw was actually Sunday when there was no snow at all. I wanted to find out what the quickest route to get to the Royal Academy. I have to confess that, culture vulture that I am, it’s not a route I take often. So, I thought to myself, get the mobile broadband going and check on the excellent Transport for London website. Over the course of the next 20 minutes I could load neither that site, nor indeed any other site. My download speeds peaked at 105Kbit/s (although for how long I got that speed is a moot point; for the first 5 mins all I got was 0.6Kbit/s) and despite disconnecting and reconnecting, pages were timing out faster than they could load. So, furious with my MBB service, I grabbed my Blackberry, fired up the GPRS (remember that?) and got straight onto the TFL site and got the information I needed. In my frustration I actually did screen shots of the speeds I'd achieved every 5 minutes, but I won't bore you with them.

I hate sample groups of one and I tend to avoid using personal experiences to flavour my view on the market. However, indications are that a large proportion of users have a similar experience to me. This naturally colours my view and encourages my belief that the future of mobile broadband lies firmly as a complement to DSL.

Back to some more substantive material now...