Watching the creative destruction of the mobile industry at MWC

The mobile device and infrastructure industries continued their familiar yet increasingly complex dance at last week’s Mobile World Congress in Barcelona: Consumers and enterprises receive ever more devices to choose from, while carriers scramble to figure out how to support, deploy and make money off the mix.

New devices with yet more operating systems are aimed at creating a class of inexpensive smartphones designed for those still vast audiences that are not using either a BlackBerry from Research in Motion Inc., an Apple Inc. iPhone or a handset based on Google Inc.’s Android operating system.

At the intersection of soaring mobile Internet traffic, enabled by ever more sophisticated client devices, and of rising infrastructure investments, in both enhanced third-generation wireless (3G) and powerful 4G networks, is an industry-wide experiment to create new services along with new revenue models.

“Right now, the service landscape [from which] mobile operators actually are gaining revenue in mobile data is very thin, with most of the revenues coming from data service subscriptions that are flat fees,” says Bettina Tratz-Ryan, a research vice president with Gartner Deutschland. “So, in order to justify the (Long Term Evolution wireless) deployments, which need more cells than in a 3G network to build out to higher bandwidths, mobile operators need to build out services with greater customer experiences. Those can be defined for instance in terms of quality, flexibility, and blended with social media for consumers or with unified communications for business users.”

Windows Phone: risen from the dead?

On the device side, the biggest story out of MWC was Microsoft Corp.’s radically redesigned Windows Phone 7 mobile operating system. The demonstration was only that – showing the new user interface – but it deftly blends typography and minimalist icon design in an easily navigable arrangement; applications, content, and information clustered in “hubs” that have common organization and navigation themes.

Microsoft deflected all questions about the kernel, new developer tools, Silverlight support, what kind of browser it has, or anything else deemed to be part of the “platform.”

Nonetheless, the user interface impressed observers. “[T]his was the radical change for which consumers have been waiting in order to reengage with Microsoft,” writes Avi Greengart, an analyst with Current Analysis, a technology advisory firm, assessing the news in an online post. “Windows Phone 7 series is competitive across the board – for entertainment, enterprise use, and personal productivity.”

Microsoft didn’t directly address changes or improvements aimed at enterprise users. But the demonstration showed the “Office Hub” for the Microsoft Office Suite, including the OneNote note-writing application, and important access to SharePoint, Microsoft’s enterprise collaboration, workflow, and document management system.

But there’s still skepticism about whether the OS can catch up to Apple, RIM, and, increasingly, Android. Veteran Microsoft watcher Joe Wilcox wrote in a post that Windows Phone 7 was “dead on arrival.” Microsoft has lost too much market share and mindshare, and faces too much successful competition from Apple and Google Android to resuscitate its mobile offering, he argues.

Both ZTE Corp. and High Tech Computer (HTC) unveiled lower-cost smartphones, making use of Qualcomm’s silicon and its recently introduced Brew Mobile Platform (Brew MP) operating system, which incorporates its Brew application framework. Among other things, it supports Adobe Flash. Both companies continue to roll out Windows Mobile and Android phones.

The ZTE Bingo will connect via HSDPA, with 7.2Mbps download speeds, has a variety of built-in popular Web services and applications, a 3-megapixel camera, a 3.2-inch touch screen and A-GPS. The HTC Smart will use HTC’s Sense user interface, has a 300MHz processor, the same camera resolution, a slightly smaller screen. Via Brew MP, both can support Adobe Flash. No prices were announced by German mobile carrier Telefonica. The carrier said it will offer HTC Smart “at less than half the cost of smartphones today,” according to a company executive.

Carriers coping with change

The device innovation highlights the struggles mobile carriers continue to have in a rapidly changing industry. Google CEO Eric Schmidt told his MWC audience that Google software engineers now focus development first on mobile platforms, and secondarily the desktop. The reason for that shift points to the tectonic changes taking place in the mobile industry.

With its aggressive expansion of mobile search and applications, and linking these with location services and mobile advertizing, Google has the potential to recreate the mobile industry in its own image, where services are free to the end user and paid for by advertising, according to Jagdish Rebello, director and principal analyst at iSuppli.

“Like the rest of the mobile value chain, Google is actively seeking to uncover new user behavior patterns and to drive social networking services through the promotion of cloud storage and computing, mobile advertising, and a variety of location-based services,” Rebello writes. “All of the free Google offerings are driving toward this goal.”

In Barcelona, mobile carriers revealed the latest experiments to cope with change. Twenty-four carriers banded together to launch a single, unified platform for mobile application development to compete with Apple’s App Store and Google’s Android Marketplace. The intent of the Wholesale Applications Community (WAC) is to provide mobile software developers with a cross-platform open programming standard, intended to make it simpler and faster for them to bring applications to market.

But multiple operating systems and application stores will still have to be supported. Telstra, Australia’s biggest mobile carrier, plans to create an online “shopping center” where subscribers browse through storefronts to select applications specific to their handsets. “We will build the shopping center environment, which means we won’t be bypassed in the value chain,” said Telstra CTO Hugh Bradlow at MWC. Telstra isn’t currently part of the WAC.

The LTE advance continues

The movement toward a new mobile infrastructure based on the Long Term Evolution (LTE) standard continued:

– There was agreement on a voice-over-LTE specification, part of a push to standardize LTE services and ensure LTE devices can run on different networks.

– China mobile carrier CSL concluded the first phase of a commercial LTE trial in Hong Kong where prototype USB modems reached download speeds of up to 100Mbps.

– Japan’s NTT DoCoMo showed a prototype notebook computer with an LTE modem.

– AT&T recently announced its selection of two base station vendors for its LTE build-out

But these capital investments are not the endgame, analysts say. The key is services, often in partnership with Internet companies. Executives from Facebook made a MWC presentation on their joint experiment with British-based mobile carrier Vodafone UK, noted Thomas Wehmeier, principal analyst with British market researcher Informa Telecoms & Media, in a blogpost. The two companies experimented with offering free access to Facebook for Vodafone subscribers not currently using data services. “They saw an overwhelming success, with 20 per cent  of those testing out the trimmed down Facebook service adding data ‘bolt-ons’ to their monthly [service] plans,” Wehmeier writes.

The Skype hype
Verizon announced at MWC that it will bring Skype’s VoIP application to Verizon smartphones in March 2010, including a range of BlackBerries, Motorola Droid and Devour, and HTC Droid Eris. Users will need a Verizon data plan (and in all likelihood a Verizon voice plan), and will be able to make and take unlimited, free calls with other Skype users, and use Skype Out to make international calls to any phone at Skype’s standard rates. But Verizon has released no other details.

“Those operators wanting to be serious players in the mobile Internet need to embrace openness and they need to allow Internet services on their devices, [and] this includes VoIP,” says Drio Talmesio, senior analyst at Informa Telecoms & Media. “Probably the majority of users don’t know VoIP, but those who use Skype are attached to it. It’s about segmentation. Verizon can both reduce churn and subscriber acquisition costs by targeting customers that use Skype. And they can also increase the uptake of data plans by bundling Skype with specific tariff plans.”

But beneath the flash of new user interfaces and consumer VoIP, is one nearly invisible vein of gold: machine to machine communications, a mobile network of things. The market research firm iDate estimated that the global cellular M2M market would grow from US$15 billion in 2009 to US$19.3 billion this year and then nearly double by 2013 to US$37.3 billion.

At MWC, Sierra Wireless unveiled a new modem, the AirLink GL6100, with embedded SIM, for this market served by GSM/GPRS networks. France’s Bouygues Telecom is already adopting as part of the “first pan-European pre-paid M2M airtime offer” aimed at industrial, sales and payment and security applications.

And Deutsche Telecom launched a new “competence center” devoted to machine-to-machine wireless solutions, with consulting and deployment services for nine markets, including transport and logistics, vehicle telematics, smart meters, industrial automation control and healthcare.


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