Mobile World Congress 2011 Wrap-up: Competition Intensifies for Operators
Last week I attended Mobile World Congress in Barcelona, Spain, along with 60,000 other attendees—a new record according to the GSM Association. While mobile is obviously hot, the consensus was that there was a dearth of big, industry-moving announcements, partly because of all the news at the Consumer Electronics Show (CES) in January, but also because of the focus on the pre-show Nokia-Microsoft mobile partnership announcement.
Though short on big news, there were several themes running through the show – some good and some not so good, depending on who you are.
Device makers rule MWC, just like CES
Between the Nokia-Microsoft announcement, LG’s new 3-D phone and packed device maker booths – HTC, Samsung, etc., it’s clear that devices are where the action is. Apple—which didn’t even attend MWC but whose IPhone 4 was named “Best Mobile Device”—has raised the level of competition and innovation across the mobile industry. The winners in this race are the end users – consumers and businesses. The losers are the slower moving operators, who are still trying to find their place in the new communications paradigm but determined not to be marginalized as providers of “dumb pipes.”
Operators need to get their act together
With platform players like Google (Android), Facebook and Apple now dominating the very industry that operators created, operators have to step up their game. According to the analysts I spoke to at the show, slow-moving initiatives—like the Wholesale Application Community (WAC), in which operators are encouraging the use of open standardized technologies that enable developers to write one application that can be deployed across multiple devices and across multiple operators—and walled-garden services are not going to cut it.
To put it bluntly, device makers aren’t going to wait for operators to get together and deliver something like WAC. Take another operator initiative, Rich Communication Suite (RCS), for example. RCS is supposed to provide a common way for operators to deliver advanced multimedia and messaging services on 3G and 4G networks. But according to one RCS supporter from a large European operator with whom I spoke at MWC, RCS is moving way too slowly to make an impact. The market is changing faster than the RCS specs can be updated. And based on a video demo of the planned RCS functionality that I saw, it doesn’t look much different than what I can do with the Android handset that I have today.
The Cloud is now mainstream… and it won’t be free
A few years ago at MWC, NewBay talked about the “content cloud” and most people had to go back to their rooms to look it up on Wikipedia. Since then, “cloud” has evolved to include many things – content in the cloud, cloud services, cloud computing, etc.
I’d say we’ve now reached the apex of the cloud “hype cycle,” as Gartner so eloquently put it years ago. There are an unsustainable number of companies moving forward with cloud initiatives and just a few of them will be successful. We’ve seen several consumer content cloud services/companies launched in the last few years and then disappear shortly afterwards. But now there seems to be a growing realization that the ad-supported model doesn’t always work for these services, and they need to get paid in order to survive.
In that context, Mozy’s announcement that it is dropping its unlimited back-up service in favor of a paid, tiered model should come as no surprise. As we all learned from the Internet boom of the 1990s, the era of “free” can only last for so long. Eventually start-ups either burn though all their funding or established companies burn through so much cash that it starts to impact their financial results. In much the same way, a new era of higher value, cloud-based content services is here.
The road ahead for operators
Operators have to realize that they are no longer the center of the universe, but that doesn’t mean they have to settle for being a ‘pipe’ provider. Though Nokia-Microsoft have anointed themselves the “third ecosystem,” I believe the third ecosystem could actually be operators and their partners. Operators can position themselves at the center of an ecosystem of different types of companies including social networks, premium content providers, advertising firms, etc. Operators own the network, and most importantly, have a billing relationship with the subscriber. Instead of trying to “own” the subscriber, they should be looking for ways to get a piece of the action that they’ve thus far ceded to the platform players like Amazon, Apple, Google and other new entrants. For example, they could:
• Store all user content in an online digital vault and charge a subscription fee for this service
• Make it easy for users to upload, download, stream and share user content with social networks, friends & family – driving bandwidth usage and moving subscribers up a tier on their data plans
• Finally start to leverage metadata for analytics and business intelligences to serve up targeted ads (like Google), sell relevant premium content (like Apple) and to cross promote additional services (like Amazon)
Based on internal calculations, I show that operators could be missing out on an average of at least $15-$20 a month in incremental revenue per subscriber. That represents a 20-30 percent increase in revenues for most tier-1 operators, and more so for others.
We are in an era of phenomenal innovation in the communications space. If I took anything from MWC it’s that the windows of opportunity for success open and close quickly. In this market big companies can be broken by missing just a single trend or technology cycle and new stars are made riding these new trends. This is not the place for the weak nor those who want to get by on cruise control. This is the place that the best come to test their skills.