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.

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