Fighting potential irrelevance

Disclaimer: My employer, Essential Research, has worked with several of the UK network providers in the past, and hopes to do so again in future. All opinions expressed in this blog post – and this blog in general – are my own.

The first to market isn’t always the ultimate category “winner”. There were cars before Ford and social networks before Facebook, to give just two examples. Incumbents may hold the greatest influence, but through innovations and developments of products and services their position is rarely fully secure. Eventually a change of business strategy will be required.

I’m wondering if this is what the mobile phone networks are about to undergo.

For the past decade or two, the networks have had the power in the mobile market. They controlled the distribution – through both spectrum and their walled garden approach to content and services. Hence the huge bidding war when the UK government auctioned off spectrum for 3G a decade ago.

But this looks to be changing, as penetration of internet-enabled handsets that access the world wide web – both on a 3G network and on Wifi – shift the focus. While the debate over open access (symbolised by Google) and closed access (symbolised by Apple) continues, it appears that the shift in focus is to the detriment of the networks but the benefits of the operating system, and thus the handset.

This article – on the news that O2 and Orange are joining an open platform for applications – says that ‘The mobile phone networks fear that at the moment they are in danger of becoming little more than “dumb pipes in the air”‘

I’m sure they have methods to standardise the services across different screen sizes, resolutions, handsets and operating systems but it will be interesting to see whether it can compete with the OS based offerings of Apple, BlackBerry, Google and Nokia.

Do this mean mobile networks will go the way of ISPs? Viable businesses, but not wielding the level of power that AOL et al were hoping to achieve.

It is possible, but not inevitable. The main issue for networks is that when they work, they are invisible. We only notice when they fail, and most people will only contact network customer care when they want to complain (sales calls/contract renewals excepted). No matter how good (or otherwise) this service is, it is still ultimately dealing with negative issues.

A handset and operating system should also “just work”, but its visibility means we can also be delighted – whether through eye-catching menus or a satisfying tactility to the buttons or touch screen.

This visibility also means the handset is more closely associated with the service. Networks are still defined by the coverage and quality of voice communication above all else.

The networks risk becoming a utility, where price and quality are the only defining features.

The need to diversify is apparent, but I don’t think this should be in applications.

Aside from the handset/OS competition, there is a huge question-mark over the long-term viability of the applications market. Should HTML5 launch and grow, the balance of power may once again shift – this time from the operating system to the software or service provider. To the consumer, the delivery mechanism is largely irrelevant – they just want the best possible service in the most convenient format.

I’m also sceptical about exclusive content deals. Orange have successfully done this in France, but it raised anti-competitive issues and, ultimately, I think audience scale will mean openness will win out (I also think this is true with handsets trying to get content exclusivity).

Instead, I think partnerships – across a range of industries – are the answer. Mobile networks already have a significant presence in certain areas – such as O2 with live music and Orange with film – and these can be extended. There are also plenty of opportunities to provide complementary services – O2 moving into finance seems like a logical step, for instance.

Like gambling, one of the hardest things in business (so I’ve been told) is knowing when to call it quits. The era of networks dominating the monetisation of content and internet-based services looks like it is drawing to close. Yet there are many potential new revenue streams to develop. Whether picking the right strategy requires the luck of the gambler or not, time will tell.

sk

Image credit: Me

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Google Android and the Mobile Internet

I consider myself competent when it comes to navigating the internet. But mobile phones and the mobile web are alien to me.

This may soon change.

My current contract expires early next year. Previously, I have been happy with my low-price/basic-handset tariff. But the one-two punch of the iPhone and G1 is winning me over. A near-full browsing experience (excepting Flash on the iPhone) is looking extremely attractive. No more cumbersome WAP connection when I have forgotten to print off directions to my intended destination in advance. I am tempted.

To my untrained eye, there have been several barriers to mobile internet take-up which prevented myself and others from converting earlier. These have now mostly been overcome

• Size – more features require more components. Fortunately, the miracles in miniaturisation that engineers perform are continuing unabated. It surely won’t be long before I can fit a microwave in my back pocket
• Speed – wi-fi broadband has sorted this out
• Cost – paying for each data transfer was a ridiculous barrier to growing this sector. A growing prevalence of all-you-can-eat tariffs is welcome, though limits need to be higher than 1gb if mobile video browsing is going to take off
• Interest – People are increasingly using the web for entertainment as for particular information needs. Fun activities – Facebook, iPlayer, online gaming – are more compelling propositions than functional
• Site Design – Sites will still need to be optimised for mobile screens. But this should be a lot easier now, reducing the need for alternative sites such as the text-heavy WAP versions
• Content – it is surely inevitable that the iPhone will allow Flash. Then the only content restrictions will be licensing e.g. sports rights for Mobile and Web are sold separately. If these rights are combined at the next negotiations, another barrier has been overcome

Will 2009 be the year that the mobile internet finally becomes widespread?

sk

Photo credit: http://www.flickr.com/photos/misbehave/