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Tuesday, May 30, 2006

Voda data revenues

I'm wading through the mountains of information surrounding Vodafone's results and strategy review. I'm not going to go over the headline numbers, dividend policy, Verizon Wireless etc, as that's being well-covered elsewhere.

One of the things I'm trying to do is deconstruct some of the data services revenues.

The company's non-messaging data services revenues have increased 60% in the year, up from £516m to £832m. This is on a base of 27m Voda Live! handsets at the end of March, plus 7m Live 3G.

More interestingly, it had 648k 3G Mobile Connect PC data cards, and a handful of other "business devices" (presumably 2G cards and maybe some 3G-integrated laptops). It also had 426k Blackberries in use at the end of March.

I'm trying to gauge how much revenue comes from business vs. consumer use of 3G & other data services.

Looking at last year's numbers, the company had about 500k Connect cards (although more 2G ones), so it seems like an average of 600k during the year seems reasonable. At (and this is a hand-waving estimate) £40/month on average (which doesn't assume much international roaming), this equates to £288m. I suspect that some users are much higher than than £40/mo, while others in large corporates probably negotiate discounts. And let's say £25/mo for the push email part of the Blackberry service - so, at an average of maybe 300k users during the year, that's another £90m or so.

In other works, I'd estimate that perhaps £380m of the total £832m data revenues is from corporate users. Sure, there's a lot of guesstimates in that, but I reckon I'm being conservative if anything - I could easily believe the number's actually well north of £400m.

In other words, 34m Voda Live users (OK, probably an average of 32m across the year), of which maybe 5m were 3G, have contributed a grand total of £450m. Maybe £1-1.50 ARPU per month, probably more likely to be 50p-£1 for 2G, and £1-£2 for 3G users

Friday, May 26, 2006

Quadplay, FMC and multiple gateways

I can see a bit of a problem emerging with the new class of quadplay and FMC services. Most of them need some sort of "box" in the home, usually with WiFi included for local-area connectivity.

The culprits are:

- the usual DSL/cable router
- TV set-top box for cable/satellite/digital terrestrial
- an operator-custom FMC gateway for dual-mode phones (probably integrated with the router)
- operator-provided residential pico/femtocells (again, possible integrated into a router)
- cellular-backhauled fixed modems
- some sort of WiMAX termination
- anything integrated with the TV/gaming/audio system using WiFi
- probably a bunch of other things I've forgotten about

The problem comes with households with multiple people. All the operators I speak to have the vision of being the sole household quadplay provider, with one "Hub" gateway box for all the family's services.

I reckon that's unrealistic. What happens where one of the parents gets a work-provided mobile from another operator? Or if one of the kids really likes an MVNO like Helio which gives dual-mode phones? Or if people upgrade to a Fusion-type device and it comes with a free hub?

Bottom line is that some (most?) families are likely to get multiple FMC/gateway/picocell type boxes. Do they keep switching them over? Buy an ethernet hub & connect all of them? "daisy-chain" them via WiFi?

I see technical support nightmares ahead.....

Monday, May 22, 2006

Siemens... mixed messages on FMC

I'm at the Siemens Industry Analyst Conference in Munich at the moment.

Some interesting stuff, and a big focus on both FMC and IMS. I've got some more detailed one-on-one meetings tomorrow, but it seems to me that there are two sides to the story.

The Carrier division seems (to me at least), still pretty much focused on mainstream operators in mobile and fixed domains. Not a big surprise, as these tend to be the players with the big capex budgets, but I thought that a lot of the stories around IMS, beyond-3G radio networks and mobile TV seems to be a bit catering too much to carriers' wishful thinking.

I asked a couple of representatives questions along the lines of "well, that's a great pitch, but when do you think that massmarket phones will be available to take advantage of XYZ? (such as MBMS-based Mobile TV, for example). I got the same time "Well, what normally happens is that the networks get deployed & the handset guys lag a while longer,but will have to sort it out, as carriers will push them". Hmmmm. Given my research on IMS handsets, these sort of assumptions on devices tend to be overoptimistic to begin with, so I hate to think what the reality will be like. I can't see a sub-$150 MBMS-phone with decent battery life (ie suitable for a typical prepay subscriber) emerging before 2010 or later.

On the other hand, the enterprise group seems pretty clued-up on devices. They talked about dual-mode, commenting that they'd been trying out a new Windows-powered WLAN/cellular PDA from Fujitsu Siemens, but were also pushing hard on HTC/Qtek devices, looking at a Nokia Symbian E-Series port, and also considering Linux.

They also had a slide with a mobility management appliance, controlled by the enterprise itself to help "control mobility costs", by enabling least-cost-routing over VoWLAN. This caused much consternation among some US analysts, unused to the idea of a corporation buying "vanilla" phones & sticking any-old-SIM from any-old-operator into them. They wouldn't divulge whose Mobility appliance they were using, but after meeting DiVitas at the Wireless Event last week, it seems a remarkably similar proposition..... Siemens has even been thinking about the thorny issue of dealing with SMS-over-WLAN (probably with an SMS-IM gateway), which seems to have come as a nasty surprise to some of the less European-centric IP-PBX vendors.

Friday, May 19, 2006

Wireless business plans, spectrum and WRC '07

It hasn't yet received much attention, but there is a major international conference coming up late next year. The World Radiocommunication Conference is run by the ITU. A fair amount of what goes on at WRC is not especially relevant to mobile communications and the type of service & infrastructure I generally cover - there's lots of stuff about satellite communications and even orbits. But it also reviews & revises global the Radio Regulations, an international treaty.

In the past, it had run every 2-3 years - Oct '95, Oct '97, May '00 and Jun '03. This time around, however, there will have been a gap of over 4 years, until November of 2007.

Quite a bit will have happened during those 4 years, which could make the outcome very interesting from the point of view of the mobile industry:

- Unlicenced spectrum (& especially WiFi) has fostered a great deal of innovation, investment, deployment and commercial impetus
- 3G technologies have been deployed successfully - albeit late, and with patchy-at-best uptake
- Mobile devices have evolved to the point at which multiradio, application-centric communications are an increasing reality
- 2G technologies have continued to reach out to 100's of millions of new subscribers per year
- IP communications has become completely entrenched in the fixed telecoms world, and has started bleeding over into mobile, with unpredictable results
- Regulators have been innovating in areas such as spectrum trading, technology-neutrality, different auction techniques, setting committments for spectrum licensees
- Satellite-based services for mobile users have been confined to small niches (Iridium, Inmarsat etc) with the exception of GPS and (possibly) DMB mobile TV

Now, I haven't had a chance to trawl through all the various agendas and what these might imply for current or future mobile operators or wireless broadband providers.

But it seems clear to me that Nov 2007 may well alter the future economics of a whole variety of wireless industry business models. Maybe we'll end up with more spectrum for 3G, or a push towards more tech-neutrality, or a recognition that unlicensed spectrum generates economic & social benefits. Who knows? I imagine there's going to be a whole lot of strategising & lobbying going on over the next 18 months.

I'm wondering what this means for any "big decisions" taken in the intervening period. Is anyone really going to want to commit to a vision for 4G , or 3G "Long Term Evolution" before they know the outcomes? Just how much of a risk is there that something game-changing might come out of Geneva next year? If I was a CFO or investor, I'd want to know before signing off on anything particularly expensive.

To be honest, I don't know enough about the conference, its possible implications, or the processes that lead to recommendations. I need to get my head around it. But at least it's a "known unknown", a "rigidly defined area of uncertainty & doubt". But crucially, various decision-makers I've asked over the last couple of weeks haven't even heard of WRC, or know what it might imply. I strongly suspect that some "regulatory affairs" departments are on top of things, but I haven't seen much sign that they're liaising closely with people at the coalface of service and infrastructure development.

I'm wondering if it's another area of uncertainty & complexity which, whatever the outcomes, could have a negative short-term effect in delaying wireless deployments and investments. It could mean, for example, that the cellular industry takes a break from thinking about faster air interfaces beyond HSUPA, and concentrates on the transport/backhaul infrastructure side of things, which needs a huge upgrade anyway.

Thursday, May 18, 2006

Hilton Hotels WiFi - welcome to customer disloyalty

Right, I've threatened in the past to name and shame offenders in the "ripoff WiFi at conferences" stakes. Time to act.

I think possibly the most egregious pricing, and attitude to conference organisers, is courtesy of Hilton Hotels. I've just been informed that an event I'm attending at the Hilton Vienna next week charges €30 per day for WiFi. "Amusingly" this means it is actually cheaper for me to check email via ludicrously-priced GPRS roaming. As usual, I expect the hotel won't bundle this at a sensible rate for event organisers to provide as a courtesy to delegates.

The irony here is that the event is about "In-Building Wireless Solutions".

So. My turn. I'm always being asked to speak or chair at numerous events by conference organisers, vendors, PR companies and assorted others. I had 3 invitations yesterday alone. I find it relatively difficult to choose which to go to.

Some obvious criteria apply: if I'm being paid (or at least reimbursed for expenses), if it's a topic that dovetails precisely with my research themes, or if it's an audience that includes loads of current or potential future clients.

I'll add another one - so listen up, Informa, IIR, Osney and everyone else.

As a default, I will no longer speak at, or attend events, held at Hilton Hotels. If it's something I absolutely HAVE to be at, I won't be staying at the hotel overnight, but another one nearby. I encourage all of you to do the same.

On the same theme, I was at the Wireless Event conference & exhibition earlier this week, at Olympia in London. Stupidly priced wireless due to venue owner obstinacy and near-extortion, so I used the fixed ethernet cable in the press room (how's that for another irony) and email via GPRS. I'll see if I can track down & personally contact the person responsible & point out how much he's alienating his customers' customers. I chaired part of the event this year, and I've told the very-affable-and-equally-frustrated organiser that I'm not prepared to do it again next year if the situation doesn't change.

And if any cellular operator would like to loan me a 3G-backhauled portable WiFi AP like this one from Voda & Linksys to take to conferences & run my own "rogue WiFi" I'll be more than happy to write about it here. After all, I give plenty of space to IP-oriented companies that can arbitrage around cellular operators' ripoffs, so it would be nice to see the HSDPA guys getting their own back.....

Monday, May 15, 2006

Mobile TV... I'm in two minds

Quite a lot of the discussion at last week's World Handset Forum was around Mobile TV... DVB-H, DAB/DMB, Mediaflo and all the rest. I also dropped in on the UMTS-TDD Alliance meeting which was occurring (by coincidence) across the other side of Prague, where they were discussing their TDtv technology.

I still like the underlying proposition - "It's TV, on your mobile" . Nice, easy to communicate to customers, and apparently with good results in customer acceptance during trials.

But there are a few issues.

I don't have time to write about all the issues about spectrum here, but clearly that's a big problem.

Similarly, it looks like getting good indoor coverage may also be an issue - at low frequencies (sub 1GHz), it may be do-able with a 50% premium in infrastructure spend vs. "outdoor + best-efforts indoor" coverage. But at higher frequencies like 3G-band 2.1GHz, this is likely to be much worse.

There also hasn't been much discussion about the handsets. Looking at some early devices, it seems that typically they have to have 30-70% larger batteries than ordinary 3G phones (which lets face it aren't the most power-efficient in the first place). Various commentators have said that they can get 2-4 hours viewing time, although this presumably excludes people using the devices for other 3G stuff like music downloads or serious gaming as well.

There's also the old favourite problem of user interface design, and integration with all the other bits of software on the phone. Unless we have a "velcro-type" (trademark acknowledged...) solution, it seems likely that we'll have to have a huge amount of integration work knitting in the various bits & pieces. Want interactive viewer-response? OK, customise the SMS client to behave in the right way. Want to have a Tivo-like experience? Get some more software (& memory). Want the TV to pause when you get a call coming in? Or maybe picture-in-picture when you get an MMS? Get writing some custom code....

Bottom line is that I reckon a handset may cost a lot more than just the additional hardware bits & pieces. Obviously it will depend on volumes, but I reckon that by the time you've done additional software work, added in a TV chipset / antenna / better screen / more memory / clever hinge etc, done some "useability" consulting and so on, it may add $50-120 to the price of a handset.

Now, supposedly people are prepared to pay a monthly fee of $10 / €10 for mobile TV. Some trials bear this out, although a speaker from Finland (ie pretty affluent mobile-centric country) thought €5-8 was more likely. I'd be surprised if massmarket punters would be willing to pay much more than €5 (ie roughly what they pay now for SMS per month). €60-100 per year, maybe. And unless you can persuade them to pay more for a device (€50 was mentioned as being acceptable), operators will need to subsidise it - so probably an extra €10-€50 per sub per year, given a 18/24 month upgrade cycle. Then there's the capex/depreciation cost of the network, marketing & sales & support, opex for the backhaul network, revenue-share with content owners or broadcasters etc.

Bottom line: I'm getting sceptical about the business model ever working, even at €10 / $10 per month. Unless there's a hefty wedge coming from advertising - maybe $30-50 per sub per year. (I've got no idea what the comparative figure is for TV advertising although that would need to be multiplied up by average # of viewers per household subscription anyway)

The other possibility is getting additional voice / SMS calls from people talking about TV programmes they're watching, SMS'ing in for interactive votes etc. Which is all very well, but has to be weighed against the risk of people making fewer calls or SMSs or music/game downloads, because they're busy watching TV.

Friday, May 12, 2006

T-Mobile loses the plot with Web 'N' Walk

I'll confess: I've actually been pretty positive about T-Mobile recently. It seemed to be the only operator that truly understood that between the dreaded "dumb pipe" and unrealistic "full-service content provider" models, there existed a practical and potentially profitable middle-ground of value-added "smart pipe".

"Smart pipes" give good Internet experience. Think high speed, reliability, good data coverage, maybe managed security, perhaps mobile VPNs in future, WLAN/cellular integration, hosted anti-virus/anti-spam, all that sort of stuff that good fixed-line IP connectivity providers offer. It might not be sexy, and you have to invite lots of boring network & software people to your company Xmas party, but it's probably the way forward.

I've even got an MDA Vario on Web 'n' Walk from T-Mo UK myself. Seems to work quite well, even GPRS - and has a relatively sensible data tariff.

And now this: on its new laptop-centric service, the T's and C's explicitly prohibit "Voice over Internet Protocol and Messaging over Internet Protocol". So if you dare to use MSN Messenger, or Yahoo! , you're stuffed, let alone Skype or an enterprise-based IM client.

There are so many patently idiotic things about this that it's amazing.

Firstly, it means that as soon as T-Mobile deploys an IMS core IP network it's immediately guilty of hypocrisy. That's assuming it isn't already using IP somewhere in its voice transport network anyway.

Secondly, it doesn't appear to define "messaging over Internet Protocol" very well. Well, that'll be email knackered then, won't it? Or using an SMS/MMS gateway.

Thirdly, isn't this one of the companies that would like us to trust it to be the owner of our content, address database and maybe even bank card in the future? What happens next?

"I'm sorry, but we've detected that you've downloaded music from iTunes over the network. We therefore terminate your T-Mobile Music Account & SIM Card, and all your temporarily-leased content is now forfeit"

"Hello, this is the T-Mobile Mobile Banking and Credit Card Service. We detected phone calls to HSBC and American Express from our pipe, er sorry our phone. Your account is terminated and we're sending you a fine for this letter".

And fourthly, it shows that it's clearly "Web 1.0 'n' Walk" and that the company doesn't get Web 2.0. What happens if someone's Myspace web page has a voice component in it in future? What happens if eBay fires up a Skype IM window to bid on something? If I stream poetry rather than concert music over the connection, does that count as VoIP? And for business use, what happens if I use Microsoft's Office Communicator on my laptop, or various other corporate packages which blend VoIP with something like salesforce automation or CRM?

I think I may have overestimated T-Mobile's company's vision. Someone's clearly been smoking some sort of pipe, and it's certainly not a smart one.

Fashion phones

I've just spent three days at the World Handset Forum event in Prague. I've got quite a few themes I want to pick up on, including the SIP/IMS topic I raised earlier in the week, and also Mobile TV, around there was much debate.

First off, however, a quick thought on the subject of "Fashion Phones"

Over the last 3 years, there have been various fairly poor attempts at bridging the divide between cellular communications and trendiness. Siemens' Xelibri range had innovative designs, but poor marketing and ill-conceived distribution via places like clothes shops. The diamond-encrusted and hideously-expensive Vertu range of re-badged Nokias seem crass rather than cool. Mildly Ferrari-ised and Aston Martin-ised handsets have failed to accelerate sales. And if rumours are to be believed, we may get some new entrants into the handset space - perhaps brands like Nike or Gucci.

At the conference, I disagreed with a panel of design/useability experts that this approach was going to continue & eventually win out.

I think I've worked out what the problem is. It's the definition of "fashion". A Gucci-phone (or a Vertu) might be a style statement but it's not a fashion.

Think about it. This is what fashion really means:

1. The prevailing style or custom, as in dress or behaviour.
2. Something, such as a garment, that is in the current mode.

The prevailing style of handset at the moment is "thin and/or pink". Those are fashions, not the fact that Prada, Marks & Spencer or Daewoo slaps their own brand and colour scheme on a random phone.

For new handsets to represent a fashion, there have to be lots of interpretations on a central theme by all the main manufacturers, not just one.

"This season, mobile phones will mostly be purple"
"I wouldn't be seen dead with a slider this summer"
"A pop-out TV screen is this year's must-have mobile accessory"

I've got no idea exactly how the clothing industry "decides" what next year's fashion is going to be. I can't believe that they all independently start to make white / black / short / satin / military-style shirts and dresses - there must be some sort of cross-pollination of ideas to find a core theme.

So how about it? If the whole industry decides to go with camouflage-coloured narrow-phones for 2007, maybe market growth & margin might continue to accelerate?

Monday, May 08, 2006

What's an IMS handset? And who cares? I've already got one with "Naked SIP"

5 years ago this week, the Economist published this article. 3G services, it commented, were going to be delayed by the slow development of 3G handsets.

It's time to lift the lid on the area I've been researching for some considerable time - IMS handsets. I'm just putting the finishing touches to a major research study on IMS- and SIP-capable phones. I'll be publishing it in the next week or so, and I'll put some highlights up on my blog (and finally get around to updating the main Disruptive Analysis website....)

Let's just say that the Economist should republish the same article, transposing the term IMS for 3G.

Only this time round, we're not even at the stage of operators standing up and saying "Er..... you know these IMS networks we're deploying? Well, we've got a small problem....."

This morning I did a Google search on a number of IMS-related terms. The results give a pretty clear idea of the relative focus of the industry on the infrastructure, rather than the devices:

"IMS applications" - 63,900
"IMS services" - 61,300
"IMS networks" - 25,400
"IMS handsets" - 103
"IMS phones" - 84

Look at any vendor presentation on IMS, and you'll see a small box in one corner labelled "UE". This is a phone - "User Equipment" in the IMS standards jargon. Now look at the standards that have been developed for these phones. Yes, they've got SIP. And some 3GPP extensions.

Now try & find anywhere that says how these phones should actually work in the hands of the user. How does the "IMS client framework" work with all the other applications on the phone? What are the standards for the user interface - telling the other presence user that your videocamera is switched off, or that the phone's in your pocket & you're using a Bluetooth headset? Does the phone need to be multi-tasking capable if you want several IM sessions, video-sharing and a buddy list working simultaneously? While listening to the MP3 player too? How should it behave differently if it's got WiFi in it? Should the applications be "bearer aware"?

The bottom line is that once phones ship that are properly IMS-capable (probably late 2007-early 2008), we should expect another 2 years of fiddling around trying to get them to be decently useable. Especially as the earliest ones will have operator-proprietary software stacks and applications. Reliable interoperability between handset brands (or operators) for anything other than the most basic push-to-talk or video-sharing applications is a LONG way off. And I haven't even factored in any unexpected problems with battery consumption or end-to-end service latency.

Oh, and if you think this is bad, the news gets considerably worse for IMS proponents.

You see, the comparatively "easy bit" of all this IMS handset software & UI stuff is installing a SIP stack in the phone. That is standardised. And there's a bunch of other good reasons to put SIP in the phone well before "full IMS" is needed - and not just the 3GPP/IMS version of SIP, but the Internet-friendly IETF version as well.

So, well before we get IMS handsets, we have SIP-enabled ones. They're already shipping - the latest versions of Windows Mobile and Symbian OS both include SIP. Future versions of handset Java will as well. Not only that, but 3rd party developers can access the SIP stack, and write their own applications that exploit it. VoIP, or IM, for example. IP-PBX clients. Conferencing tools. Open-Source SMS replacement applications. Cool Web 2.0 stuff. Use your imagination.

These are "Off-portal SIP applications", using mobile devices equipped with "Naked SIP".

I've done the numbers in my new report. I estimate that between now and the end of 2011, there will be, cumulatively, 980m more "Naked SIP" cellphones sold than "Closed IMS" handsets which restrict the user to the operator's billable IMS services.

That's a billion extra mobile devices capable of supporting disruptive non-operator SIP applications, developed by 3rd parties, over the next 5 years.

I've said before that IMS is less a "walled garden" than an "open prison". Well, the inmates have already started jumping over the fence, even before they've been shown to their cells.

The report includes comprehensive market forecasts, analysis of SIP/IMS usage cases and market drivers, and profiles of key handset IMS/SIP companies. It is around 160 pages long, and has been based on well over 100 interviews. If you want to know more about purchasing Disruptive Analysis' new "SIP- and IMS-capable Handsets" report, please email imsphonesreport@disruptive-analysis.com

Friday, May 05, 2006

Device divergence always beats convergence.

Many years ago, "convergence" meant voice+data. Everyone assumed that you'd have one network, one device, unified messaging etc.

I used to speak at a lot of conferences saying that convergence wasn't that simple. What happens is that underlying enabling technologies converge - chips, screens, memory, software, network protocols and so on. Inevitably, someone jumps to the conclusion that just because you can put all this stuff in one device / network / application / service, people will want it.

These "visionaries" then completely ignore the fact that the new scale-economies from all this "enabler convergence" also means it suddenly becomes much cheaper and easier to make "divergent" single-use products as well. Most "all in one" jack-of-all-trade alternatives are usually "master of none".

I used to illustrate this point with a picture of a toaster and a washing machine. Both use a "converged" electricity supply. It's entirely possible to equip your kitchen with a single converged toaster-washer, but why would anybody want one? Even with personal items, convergence isn't important. We could have had combined watch+wallet years ago. Sunglasses+hairband. Trousers with built-in belts. All feasible examples of convergence, but completely useless.

The same is true with mobile devices. "The MP3 player is dead" "Standalone digital cameras on the decline". A single converged device for everything! Yeah right.

My prediction: in the future, the average person will both own, and carry, more devices that they have today. And they'll have ever more ways to be contacted - multiple phone #'s, IM accounts, email addresses etc. It's interesting that some operators are now openly pitching the idea of customers having two or more phones. While others give away free iPods with a new handset.

Sure, some functions will get absorbed into other devices. But it'll be one step forward, two steps back. Standalone devices will always exist, and always be desirable. Why should I wait until I renew my phone contract to get a better digital camera? Why would I want my upgrade cycles for my games machine & my mobile web browsing gizmo to be in sync?

I'm fed up with Nokia & other companies saying "we're the leading MP3 player supplier". Maybe, but what proportion of them get used? You're probably the leading infra-red device vendor too, but you don't make a big song & dance about that, do you?

Most telling was my visit to Korea last November. As far as I could see, everyone had a really cool and capable cellphone. And a really cool & capable MP3 player. And a really cool & capable digital camera. And fast broadband & cool & capable PC at home. In the most advanced mobile market in the world, there are shops everywhere that just sell standalone MP3 players - 100s of varieties of them.

So remember..... divergence is the future.

BridgePort - Siemens deal... does it change the landscape?

Interesting to see BridgePort and Siemens announced a major reseller deal today. (Not a huge surprise, as the two companies were looking pretty friendly at 3GSM in February). I've been following BridgePort for some time, and the company has consistently had the largest mindshare among the horde of SIP-based fixed-mobile convergence vendors. In particular, it has probably been the loudest advocate of VCC (voice call continuity) which has all the signs of being the major carriers' favoured approach to knitting WLAN and cellular together. It has probably been helped by its decision to set up the MobileIGNITE industry group, and then subsequently "set it loose" as an independent entity.

It will be interesting to see how the other convergence vendors step up to the plate, partnering with other Tier 1 equipment providers. I've been quite surprised that haven't been acquisitions in this space already.

Other FMC collaborations that I'm aware of:

- NewStep is a partner of Cisco's (albeit not quite at the level of the BridgePort/Siemens deal)
- Convergin is working with Tekelec
- Kineto (UMA, rather than SIP) OEMs to Motorola & Nokia
- Azaire has done some data-oriented integration work with Nortel
- LongBoard (not quite in the same space) lists various infrastructure partners including NEC

Among the others:
- Stoke gets lots of comments but remains a fairly shadowy, semi-stealth organisation
- OutSmart seems to prefer selling direct to carriers for niche applications
- Cicero seems to be focussing more on the handset client side of things these days
- Accuris is still a relatively new entrant
- Tatara is focusing mostly on WiFi/cellular data roaming rather than voice

Wednesday, May 03, 2006

Wireless infrastructure & handset software - counter-synergies?

There are many providers of wireless network infrastructure and applications servers.

There are also many providers of embedded software for mobile handsets.

Surely, there must be synergies for companies (or deep partnerships) that provide both?

Not necessarily.

Generally, the only reason that an infrastructure company needs its own handset client software is if it has a proprietary product. If the technology isn't standardised or at least "open" to external developers, this means that the vendors needs to offer an "end-to-end solution". Great in principle, but it inevitably means it will only work on a restricted range of devices. Which is fine if the service is so compelling that customers will "take what they're given" in terms of phones, but not if they're average consumers deciding they need a pink RAZR or a black Chocolate before they think about what applications it can support.

What are the more successful examples of one company producing both sides of the equation, servers/infrastructure and also devices or device software? RIM springs to mind, but that's hardly mass-market. Maybe Motorola with its iDEN network & devices for Nextel. Macromedia/Adobe might get there with Flash. Opera's Java-based Mini client is getting some traction too. Maybe Real, and bits of Microsoft.

With the exception of iDEN (which looks like it's now on the wane anyway) all of these are "high level" applications, which can be ported relatively easily across devices and sit on top of smartphone OS's or featurephone app stacks or inside Java. They don't need too much messy integration with chipsets and protocol stacks.

(OK, Qualcomm is arguably the Daddy here, but it work on the basis of IPR licencing, rather than actually getting its hands dirty and building networks & phones itself).

I think there's another category of infrastructure vendors needing their own handset clients or integration expertise. It's where there aren't enough (or deep enough) standards spanning both protocol-level bits, and the higher-level user interface layers. In other words, handset vendors can't make decent phones even if they follow published standards, because they aren't sure how the user will interact with the service. Either that, or the chipset companies are unconvinced that it's worth them developing a full solution themselves.

I'd say UMA is a classic case here. Even though it's now been adopted by 3GPP as a standard, it's notable that its prime advocate, Kineto Wireless, has had to develop a large handset client arm to help foster development of UMA chipsets & phones. I can't believe it's actually making much money out of this - it's actually a "means to an end" to help it sell its networking hardware. No infrastructure company really wants to get their hands dirty with porting to 101 varieties of handset silicon, and the onerous & expensive development and testing work that entails, for a measly 50c or $1 per handset and some low-margin consulting fees. They'd much rather sell $100k or $1m lumps of tin & software.

Another example is IPWireless. Nobody seems particularly interested in making UMTS-TDD phones at the moment, so it has to try & stimulate demand itself, with its own reference design and a prototype developed with Atmel and UTStarcom.

Thought for the day: Has anyone noticed that it seems to be mostly IMS Infrastructure vendors that are developing their own IMS handset clients (eg Ericsson) , licencing them (Lucent, NEC), or acquiring them (NMS / Openera)? Now what might that tell us about IMS standards, interoperability, timelines, user experience and cross-platform portability? Stay tuned, I'll have more to say on this in coming weeks......

Active customer disloyalty and bundling

With the advent of triple/quadplay services, and the rise of ever-greater competition in the telecom space, there is an increased focus on customer loyalty, minimising churn, and cross-selling.

In theory, bundling helps to reduce churn. Some early results from carriers in North America and elsewhere bear this out. However, in my view this is a potential future minefield, with various little-considered secondary effects.

I wrote a couple of weeks ago about the notion of "resentment-based pricing":

"You know you're being ripped off hugely, but you "have" to pay as you have no immediate alternative. You grit your teeth, and (hopefully) expense it afterwards. You actively look for a way to avoid the cost, and minimise your usage. You complain to friends & colleagues. You develop "active customer disloyalty" and vow to switch suppliers, out of distaste for their show of customer disrespect, whenever you can. Examples: Hotel WiFi, cellular data roaming."

In the case of bundled services and customer lock-in, the resentment will start to simmer when specific service elements are priced wrongly. If I had a quad-play offer, and saw competing prices on mobile telephony falling faster than that tariff I had access to (or broadband speeds being increased more quickly, for example), it would wind me up.

Similarly, I wrote yesterday about the risks of heavy-handed lock-in from the lack of "portability" of content, email and so forth. Again, this is likely to ratchet up the "active customer disloyalty" and resentment factor.

Lastly, there is the issue of poor customer service. I already have my doubts about the ability of some service providers to offer adequate cross-technology support (fancy asking a mobile operator about your problems with Outlook? or asking your broadband provider about hooking up a Bluetooth headset?). I'll add to this the likelihood of crass attempts to cross-sell, abuse of privacy for marketing reasons and so on. There's a lot of fuss being made about the Google/Earthlink WiFi project in San Francisco.

I've had my own example this morning from Carphone Warehouse (my service provider for my personal O2 account) - I got some new T's & C's yesterday, and I immediately emailed their customer support team to ensure I was removed from their marketing lists as I've had SMS spam from them before. (Hey, if they want to market at me, they should pay me upfront. I might give them a refund if they're not wasting my time). I got an acknowledgement email this morning. Which essentially said:

"Sure, you're removed from our lists. No more marketing, promise! ..... Oh, and by the way, have you heard about our new XYZ service? It's great!!! Visit XYZservice.com to find out more!!!".

Idiots. And I even warned them on the first email that I blog about the mobile industry.

Back on the triple/quad-play side of things, I'm also increasingly confused about how this will play out in households with multiple family members. Mum's on Vodafone, Dad's got a company mobile, they use fixed-line or Skype to call Granny in Australia, the kids have got prepay from cool new MVNOs, they want a particular brand of digital TV service for some specific content, and they want the new 20Mb broadband connection for their PCs. How can you get a tailored bundle to deal with all that? How do you do the migration? What happens when the next new, cool MVNO comes out, or little Johnny gets bought a new phone for Xmas? I see more huge potential for dissatisfaction and resentment.

(Off topic, but I'm starting to wonder if there's a new business model for "quad-play aggregators", who will themselves bundle together Company A's Mobile service with Company B's ADSL and Company C's TV. I also reckon that a lot of homes will need 2+ separate broadband connections. )

Overall, I suspect that while bundling might reduce churn rates in any one single service, reducing price-based "casual churn", it will have the unintended consequence that any act of customer disloyalty will instead be much more "active", based on genuine resentment & distaste. It is also likely to drive up "collateral damage", as such extremely dissatified customers wilfully look to move not just the "offending" service, but related ones in the bundle, plus probably influencing their family members' choices as well. It will also be an awful lot harder to win them back.

I know that if I had already had a Carphone Warehouse bundled offer this morning, I'd certainly be looking at the overall cancellation clauses in the contract right now, rather than just those the cellular component.

Monday, May 01, 2006

Churn, lock-in and portability

I'm trying to work out how stupid the "average" mobile consumer is. Just how much attempted "lock-in" can operators get away with, before their customers realise they're being trapped?

Let me think about other areas of business:

- I'm a loyal customer of my bank. I know I could change to another one, and that there are some fairly standardised ways of moving accounts, complete with standing orders etc, but I can't be bothered particularly.
- I haven't switched credit cards for some time, although this is on my "to do" list, when I get a chance, as I'm unconvinced by the customer service I get on some of them. I know it's not a big deal to switch.
- I may well change my broadband provider at some point, either if I move house, or if I decide to get a faster 8/24-MB connection. Sensibly, I don't use my ISP email address for most things.
- I use Yahoo! mail. It would be a real pain to change it, although it's free, so unless they shut it down, I don't mind the lock-in. (In fact, I pay for Yahoo!'s Mail Plus service). My only concern is that I can't download an email archive to create my own backups.
- I use Yahoo!'s calendar & some of its contact services - but I can download/sync these with Outlook, so I'm not locked-in
- I don't subscribe to cable or satellite TV
- I get my car serviced at the same place I bought it, even though it's an hour-and-a-half drive away. I don't need to - I just like & trust the people there, and they've got a discounted servicing scheme for loyal customers. I've bought 4 cars from the same place over the last 11 years.

Now, looking at mobile:

- I can port my O2 number to another operator any time I want, with minimal interruption or hassle. (I ported the number to them in the first place) I've been a customer for several years, don't use a subsidised phone, so I have no contractual obligations tying me to them. I may well churn at some point, as my voice tariff is too high. Alternatively, I may give them a chance to "lock me in" for another 12 months, if they give me a much lower price and a nice new subsidised phone.
- I am locked in to my business mobile contract with T-Mobile for 18 months. However, this was a considered decision, as the firm subsidised an expensive device down to free. In fact, the monthly tariff was such a good deal, it was almost just an 18-month zero-interest finance deal on buying the handset.
- No way would I ever entrust my music collection to an operator. Churn for good reasons (poor coverage, lousy data services, whatever) and lose my "owned" content? Yeah, right.
- Similarly, I wouldn't accept any other added-value service which locks me in, when I know from past experience I may want to shift operators for other access-related reasons. Branded IM? Operator email? Only if there's "IM portability" "content portability" and "email portability" laws.
- Handset / SIM as credit card or banking relationship? You must be joking.

I can see a huge upswing of consumer dissatisfaction over the next few years.

"You're moving house to another area, and want to shift your network-based contacts list to a different carrier? Sorry."

"You're emigrating to another country & want to keep your music? Hahahahaha"

"No, we won't forward email after your contract lapses"

Bottom line - operators should brand these type of services differently, and be prepared to both port then and offer them to other people who don't buy their access services. Unless all their customers are stupid, of course.