telecom expert on Dell wireless: 3GSM – The Church of The False God?
2/20/2002 Author: Dale Vile, Senior wireless analyst, Quocirca
The mobile industry has become far too wrapped up in itself, its problems, and its obsession with the mobile operator being the centre of the universe. Quocirca senior wireless analyst Dale Vile refuses to genuflect
This becomes clear when you look at the market positioning of many suppliers exhibiting at this week’s 3GSM World Congress in Cannes. The amount of operator worship is quite worrying. There are so many companies whose sales pitch majors on boosting the capacity of the operator’s network, increasing its performance and generally saving the operator money. Another large group of suppliers promise to drive the operator’s ARPU upwards and make them more competitive. The disappointing thing is that the number of independent application and content plays at 3GSM, like last year, is still relatively small. By independent, we mean services that do not rely on an operator to take them to market.
We shouldn't be surprised at this as most exhibitors are simply there to sell their wares to the operators – that’s mostly what 3GSM is about. But let’s not confuse all of this activity with what’s necessary to make pervasive use of mobile applications and services a reality. Building and optimising the networks is not the problem. We can just assume this will happen and let all of those engineers at 3GSM get on with it. The key question, is what happens then?
The operators would claim that they have this under control and that they are beavering away behind the scenes mixing their "killer cocktails". Unfortunately, a lot of what they are doing is invisible to the outside world. It would be nice to think that they are keeping things under wraps because it’s all going to be really compelling and they don't want to tip their hand to the opposition. But given their lack of track record delivering anything other than voice services, outsiders have a right to be sceptical about whether they really know what they are doing. They also have a right to be unsure about the quality of the offerings that will finally emerge.
Yet even if we give them benefit of the doubt and assume that they will eventually deliver the goods, there is still no guarantee that people will turn to the operator for mobile content, applications and services.
In the corporate sector, for example, if someone wanted to deploy a mobile solution to their sales force, who are they going to call? The chances are that they would pick up the phone to Siebel, Onyx, Pivotal, or whichever other vendor supplied their CRM system. Alternatively, they might turn to the systems integrator or IT Channel partner that worked with them on implementing it. One of the last suppliers they would think of is probably their mobile network operator.
In this corporate space, things will start really happening when the IT players begin to gather momentum. The application vendors are taking it slowly right now and gaining some initial experience. Similarly, the integration players such as IBM Global Services, CGEY, CSC, etc are content with helping some of their installed base work their way through early pilot projects. This slow build-up is a very important part of market development. It provides knowledge, experience and confidence for the broader business adoption that is to come.
Simultaneously, other players in the IT industry are starting to address some of the basic problems. We were really impressed, for example, with the recent announcement by DELL that it will be delivering preconfigured servers and laptops for "out of the box" optimised GPRS access. Trivial though it might seem in the greater scheme of things, this kind of offering is actually really important. Right now, it is very hard for companies to figure out how to put together all the pieces reliably, securely and cost effectively and this has been a major blocker to early adoption. What’s also interesting is that DELL is becoming an agent for the BTCellnet carrier service and will be taking the offering to market directly.
The question in the consumer space is whether you consider a mobile application or content proposition as being an up-sell from a telephony offering. The operators will try to drive this mentality by bundling data service subscriptions with devices through their traditional channels. They will undoubtedly have some success in doing so, especially if they employ clever subsidies. However, as we move up the value scale away from utility level voice services, things like content quality, diversity and richness, along with application functionality and lifestyle branding, start to become more important. In addition, multi-channel access is key. Clearly no one wants one messaging inbox for their mobile device, another for their PC and yet another for devices around their home – especially when everyone already knows their Hotmail address. Similarly, people don't want to subscribe to a music track more than once. For a single payment, they want the ability to play it on whatever device and over whichever network they choose – handset over 3G, X-Box over broadband, etc.
These factors play into the hands of the established players already out there in the wireline applications and services marketplace. Many of these have large and loyal customer bases along with significant economies of scale that the operators’ tied portal subsidiaries (e.g. Genie) can only dream of. This gives them a massive edge and some of them are already beginning to exploit it.
In the last couple of weeks, for example, we have seen MSN make some interesting announcements. It has laid out a roadmap for rollout of mobile services, starting with the extension of its massively popular Hotmail service to embrace SMS alerting. In the first month, this generated significant incremental revenue for both itself and its operator partners. This underlines the benefit of having access to a large customer base. MSN is now in the process of releasing more sophisticated services targeting the PocketPC device. Whilst this is never going to be a mass-market platform, its capabilities are more akin to the 3G devices of the future than the current generation of WAP phones. This gives MSN the opportunity to gain early experience with applications such as interactive mapping, find and guide, traffic monitoring and so on. With these moves, MSN is already striding ahead of many mobile operators who have been promising such things for a while but have not yet delivered.
As the market develops, it is likely that more people will turn to the established network/channel independent suppliers than to the mobile operator. This applies to both the business and consumer sectors.
So where does this leave the operator?
Well clearly, they have an important role to play. It is as crazy to suggest otherwise as it is to regard operators as the centre of the mobile universe. But the point is that they are only part of the equation and don't have an automatic right to own the market. It is therefore inappropriate to treat them as such. From their own perspective, they too would do well to realise this and start treating content providers and application companies as equals, recognising them for their contribution with appropriate win/win business models rather than attempting to grind them into the ground with measly margins and one-sided contracts. They also need to either work with, or get out of the way of, independents that are much more able to make the early market than they are.
If we really want success, let’s all start worshipping the customer rather than the operator. |
