The Fight for Voice: The saga of telcos vs. OTT players

[The golden era for telcos is slowly coming to an end, as they face increasing pressure from OTT (Over the Top) players, like Viber and Skype. Guest author Paul Golding assesses the disruption of Internet players to the telco industry and envisions the future of Voice]

VisionMobile - Telcos vs. OTTs - The Fight for Voice

Carriers have built vast empires and generated piles of cash by doing what ‘it says on the tin’: carrying voice. Not long ago, their services were the only way to carry voice over wired or wireless connections. However, the internet changed the game. With affordable and fast enough data connections, plus the freedom to install their own apps in a growing base of smartphones (at around 35% of total handset shipments in Q4), users can pick-and-mix alternative voice solutions, like Skype, Vonage or Viber.

Early Skype users would have experienced the mode of disruption documented by Clayton Christensen in his book Innovator’s Dilemma. Skype provided a low-cost (free) alternative to incumbent solutions, but with a fairly poor user experience characteristic of a disruptive early-stage technology. Sure, VoIP wasn’t that new, but as a downloadable offering to the masses via an ordinary household internet connection, it was.

From Disturbance to Disruption

As Christensen’s theories predicted, carriers mostly saw Skype as a minor disturbance, insufficient to warrant revision of their strategies.  But it marked a pivotal moment in the evolution of communications, which was the unbundling of voice from the carrier network. In other words, consumers can take their data connections from carrier X and their voice services from provider Y: Skype, Viber, or whomever. The industry refers to these unbundled services as “Over The Top” (OTT) solutions.

However, the minor disturbance has become, well – disturbing – at least to some carriers. The modes of disruption have been aided by several key trends, in no particular order:

  1. Open (enough) device operating systems – Android and iOS
  2. More afforable data tariffs and speedier internet connections
  3. Dramatic lowering of barriers to entry for internet platforms of all kinds
  4. Consumer behavioural changes
  5. Increase in carrier inertia preventing timely responses to OTT threats

These trends, and more, are covered extensively in my new book “Connected Services,” which, like this blog post, I wrote using my own “notes from the field” in the last 21 years of working in mobile generally, but the last 7 years specifically trying to evangelize Web paradigms to the boards and senior management of various carriers.

Open Device Platforms = choice

The consequence of open smartphone platforms is increasingly well understood. It enables users to choose how they want to experience their communications services. Viber is one of the best examples. It essentially replaces the standard dialer on the device with a custom one, not too dissimilar in experience, but enables calls to be placed for free via a data connection.

During the catastrophic Java ME era, before Android, replacement of the dialer on the phone was unthinkable. That’s all changed. The iPhone still doesn’t quite enable a seamless replacement of the dialer, as it won’t run an alternative at “boot-up,” but Android certainly does. Mr Number, a Palo Alto start-up, are busy exploiting this fact to provide an alternative Android dialer that essentially “unbundles” the calling and messaging experience, initially to manage call and texting spam. However, as with all disruptive technologies, the initial service is only the thin edge of the disruptive wedge. It is easy to imagine plenty of powerful disruptive scenarios orchestrated by or between these types of solution, enough to push the carriers out forever.

Faster, Cheaper Connections

Better technology gives us more bits for less money. Here in the US, that trend has jumped dramatically with the widespread availability of 4G (LTE) connections and devices. There is a class of users today who don’t need to talk that much, or at all, and so can easily do so via their data bundle using an app like Viber. In other words, they don’t need any voice minutes. These are the early adopters who threaten to disrupt carriers by usurping the “Carrier X” experience with the “Viber experience” or the “Whatsapp” experience. That road leads to obscurity and eventual death no matter how loudly and often marketing say “we’ve got the brand.”

Low-cost Low-friction Software Platforms

The remarkable fact about Viber, Mr Number and other OTT apps is that they are built by tiny start-ups with comparatively little budget but stellar teams. These financial lightweights are busy stealing the core communications experience away from carriers who might spend more on a single TV ad than the budgets of many of these start-ups combined.

The power of the developer has increased dramatically in the last few years and continues to grow. The proliferation of Software-, Platform and Infrastructure-as-a-Service products has lowered the barriers to entry to a point where any aspiring entrepreneur and a few developers can build services on tiny budgets that can challenge mighty carriers.

Moreover, entirely new breeds of software platforms have arisen to meet the needs of start-ups with aspirations in the voice and messaging world. Twilio is the perhaps the most talked about example. They provide powerful voice and messaging APIs without investing a single cent in infrastructure. Upon visiting their offices in San Francisco, they took great delight in revealing their “sophisticated” infrastructure – a solitary and lonely router sitting in an otherwise empty wiring closet. It would be funny if it wasn’t so painfully true. Twilio is built using Amazon’s Web Services, as are so many start-ups these days, starting at only a few dollars a month!

The emergence of a category of Communications-as-a-Service (CaaS) providers is an interesting development in the platforms market. Twilio were not the first. Companies like Voxeo were already there with services like Tropo.com, also offering powerful voice and messaging APIs with on-demand pricing to developers. I know that many of the well-known “darling” messaging start-ups in Silicon Valley are using Tropo “under the hood.” There are even companies specializing in API-enabling technologies, like apigee.com and developer-community design agencies, like AlphaPunk, such is the nature of software ecosystems.

Shifts in Consumer Sophistication

Blackberry Messenger, Whatsapp, Viber, Skype are no longer used by nerdy early adopters. Grandparents are using Skype to keep in touch with their grand kids. Indeed, a whole class of use cases has arisen just around Skype, from remote learning to baby-sitting. The tipping point for this shift has been the apps revolution, accelerated by the iPhone. Thanks to the marketing education of Apple and others (“there’s an app for that”), it is so easy to install an alternative service via the click of a button – one click and the “Carrier X” experience is toast!

Increase in Carrier Inertia

Relative to “born on the Web (2.0)” companies, carriers are the proverbial tortoise alongside the hare. They have exceptionally powerful voice and messaging apparatus, but not available in any form that enables innovation to happen.

Contrary to what some might think, carriers are not dumb. This is a point explored well by Christensen in his analysis of companies who failed to respond to disruptive innovation – “these weren’t companies run by idiots.” However, carriers do have is inertia, aggravated by the following factors:

  1. Their IT systems are too complicated, lacking in agility and mostly deployed in tactical “stove-pipe” fashion. By the way, even early dot.com darlings, like Yahoo, have the same problem (perhaps counter-intuitively for so-called “Silicon Valley” companies).
  2. IT systems are managed by external vendors with typically long development cycle times.
  3. Carriers are NOT technology companies. They lack the software expertise of a Voxeo or Twilio, who build their own platforms.
  4. The necessarily risk-cleansed IT frameworks and paradigms can’t in any way support agile innovation, even if carriers wanted to (and some of them do).

Running Across Quicksand

Carriers like Telefonica are trying to do something about the OTT threat by simply embracing it, like with their Network-as-a-Service initiative BlueVia and their Viber-like client, called O2 Connect. They are amongst the most innovative of carriers, relatively speaking.

In my earlier work for Telefonica and O2 UK, the order of the day was to preach the mantra of low-friction platforms. Some success was achieved through the introduction of relatively radical platform ideas. One example is hashblue.com, the cloud storage solution with its real-time texting API. It was built in a matter of weeks, API first, using software technologies du jour, including so-called “No-SQL” storage and “trendy” languages. However, the messaging integration took up to three times longer to “implement,” by which I mostly mean configure some settings deep in the bowels of the infrastructure.

A more ambitious initiative was connFu, a project to build a set of low-friction web-friendly voice and messaging APIs in a Tropo.com fashion. Indeed, it is public knowledge that Telefonica collaborated with Voxeo in the production of Rayo, a new web-friendly API for building real-time communications services. The approach was 100% “Web 2.0” and light years ahead of other carriers, yet still not aggressive enough compared with the ongoing onslaught of OTT solutions. So why isn’t it enough?

Software DNA

It all boils down to one thing – the rise of the developer (facilitated by all of the above trends). Carriers have always had a rocky time figuring out developers and software paradigms. Even now, they mostly continue to misunderstand how software economics really work, in general, never mind the outlying, yet tremendously influential, innovation machine of Silicon Valley, which is like a mini empire of developers.

It isn’t just about app stores and their rev-share models! The software ecosystem that surrounds the Web is far more sophisticated and penetrating. Developers, by which I mean all those engaged in the ecosystem, not just the stereotypical “Garage guy” (which is how many carriers perceive them) yield increasingly significant power over the way that digital services are consumed and will be consumed in the future. This is an inescapable fact.

The digital revolution is all taking place via software, up and down the stack – from new database technologies, through new operating systems, all the way up to the apps, which are mostly the tip of the software iceberg that the carriers are crashing into. Nonetheless, the band keeps on playing on the deck and the porters keep shuffling the deck chairs in vain, yet well intended, attempts to innovate. But most of this will come to nothing and the OTT guys will triumph until carriers realize that having software DNA is a necessary condition for innovating in the world of digital services that many carriers believe they occupy. This too, is an inescapable fact.

– Paul

[Paul Golding is originally from the UK, but now living in Palo Alto, US. He has 16 patents in mobile and is the author of several leading books about mobile apps and mobile strategy, used in top companies and universities. In his 21 years in mobile, he has been Chief Architect, CTO and various senior tech/product roles for companies across the world, from start-ups to multi-nationals.]

Business model polarity: a win-win proposition for telcos and developers

[There’s 10s of telco programs targeting developers. But they all lack commercial traction. Isn’t it about time for telcos to question their approach? Guest author Jose Valles argues for a ‘polarity change’ in the telco business model and discusses the need to rethink the telcos’ relationship with developers.]

VM blog - Business model polarity

In life, we tend to take many things for granted; the Sun will rise and set every day and a compass will always point North. But we mustn’t forget that things do not, and in some cases should not, remain constant. The Earth’s magnetic poles are known to reverse their polarity every few hundred thousand years and then, the compass no longer points North, but South.

In business, we also need to question assumptions and remember that things do change. In the mobile industry, telcos (mobile network operators) have been around for over 20 years – many many generations in telco speak – but their relationship with developers has always been lukewarm at best ; telco APIs haven’t seen any significant take-up by developers.

What telcos need to do is to fundamentally question their assumptions about the software world and change their business model towards developers – in other words change the ‘polarity’ of their business model. Here’s why:

Some historical context

It is widely accepted that telcos desperately need developers; in today’s app economy, developers are a key source of innovation. If telcos want to capture value and innovation, they need to capture developer mindshare.

In the past 5 years, we have seen 10s of telco developer programs launch with different end-goals and flavours but with the same result: lack of commercial traction. Why have so many telco investments failed to see significant developer adoption? Failure is not such a bad thing, provided we can understand what went wrong and how we should fix it.

I would argue that most telco API programs have lacked two key ingredients; the lack of web mentality and a developer-centric business model.

The Web mentality

If you go to www.programmableweb.com, you can find thousands of APIs that allow developers to enhance their software and mobile apps with functionality coming from third party businesses. Functionality ranging from Google maps and eBay purchases to Tesco grocery lists, New York Times articles and pizza ordering can be accessed through cloud APIs. For a developer, this is an unprecedented source of content for their apps.

How do businesses like eBay, Tesco or NYT make it appealing to developers to use their APIs? How does the web world attract developers?

It’s the business model; in the web world APIs are often free (or freemium) so that developers don’t need to worry about upfront costs. It’s about ease-of-use; they’re also plug-and-play so that developers can experiment with functionality and see how it works. It’s also about adaptability; web businesses also adapt and change their APIs based on how developers use them.

That sounds easy. But what about telcos?

The telco mentality: the developer pays

If you go to any of the telco API programs that are out there and check their SMS API specifications, the first thing you will come across is the PRICE LIST.

Well, that may work if you have a strong developer brand or if the attractiveness of your APIs are top-notch but, honestly, that’s not the case with telcos. Developers dislike telcos – and I can say that working for a telco.

We telcos don’t have a good reputation in the developer space. And what do we telcos do?  We charge developers!

That’s not a developer proposition; it’s a wholesale mentality. And how do telcos think we are going to be able to compete in this space when much more agile voice application platforms like Twilio, Teleku, Jaduka or Vivox get fremium pricing and technology right?

The business model polarity change

 

If telcos are to grab developer attention, we need to see developers not as wholesalers – that is not a source of revenue but as the missing link between customers and telco services. When developers drive traffic or service usage we need not charge them, we need to thank them. And we need to charge not developers but end customers. We need to let developers focus on finding new ways to innovate with apps using telco capacities, not to worry about whether they have enough cash flow.

In other words, we telcos need to change our business model polarity; rather than using a “developer-pays” model, we need to move to a “customer-pays” model. If developers create apps that use telco APIs, they drive traffic or usage which benefit both the user and the telco. It’s not the developer that needs to pay – it’s the user.

VisionMobile blog - Business model polarity

Consider this; a developer builds an SMS-to-Twitter service; the user sends a new tweet by as a text to a shortcode. The reply, an SMS back to the user, is then paid by the developer. The developer is penalised for generating traffic to the network. This is the “developer pays” model and it doesn’t work.

In the “consumer pays” model, a single API allows the user to pay for both outgoing and return SMSes in one shot and the developer gets to use the API for free. The developer can focus on building a viral service and won’t have to worry about success costs.

This is a fundamental polarity change; instead of the developer paying for access to network resources, the consumer pays, and the network benefits from increased messaging revenues.

APIs like SMS or voice can also be exposed under both polarities. In this case, the developer can choose if they want to use SMS or voice APIs in a developer-pays or customer-pays polarity, depending on the nature of their app or service.

Winning with developers

We telcos need to experiment with business models. We need to learn from how developers adopt and use APIs and pivot our business model until we get to a proposition that’s truly win-win for both developers and telcos.

As the Earth’s magnetic poles shift naturally, telcos also need to question assumptions. We need to reverse the business model polarity for telco APIs in tune with the web and look for new ways to attract developer talent and new ways to satisfy customer needs. We need to fundamentally change the developer perception towards telcos if we are to succeed in helping telcos capture a share of the innovation out there.

– Jose Valles
Head of BlueVia
@josevalles49

[Jose has been working for over 10 years in different parts of Telefonica. Since 2009, Jose has been building a concept under the working name “Open Telefonica”, which ended up bringing BlueVia to life. The BlueVia business model does not just make APIs free, but it also pays the developer. “If developers use our APIs, we pay them back for the usage”. Check it out.]

Connect, Interact, Transact: How mobile operators can bridge the communications gap

[As mobile operators compete with the over the top players (Skype, Google and Facebook), many question whether operators have a real value to add besides a pipe. This is the playbook of Martin Geddes, a recognized thought leader who has held positions at companies including U.S. mobile operator Sprint and UK incumbent operator BT. As Strategy Director at BT Innovate & Design Martin was influential in shaping the carrier’s view on Cloud Computing. Peggy Anne Salz caught up with Martin to discuss how mobile operators can prepare themselves to compete in this new world.]

Philosopher and poet George Santayana tells us that “those who cannot learn from history are doomed to repeat it.” The history of telecommunications shows us that the evolution of communications systems is inextricably linked with the needs of commerce and enterprise. As requirements change, systems evolve. They ultimately disappear altogether when they cease to be useful.

The telefax and the telegram, which triggered a revolution in communications, have long been replaced by email and text messages. Now new players and approaches – such as Skype, Facebook and FourSquare – have stepped up to take their place. As telecoms providers prepare to do battle against these over-the-top (OTT) players, Martin argues that the real power lies in neither scale nor scope. In his view the answer is innovation that allows telcos to solve ordinary, everyday interaction problems between businesses and their customers.

The money is in the space between the enterprise and the consumer – a space I call the ‘conversation gap.’” Martin explains. “Take a company that delivers white goods like fridges. You make outbound calls to your consumer customers to schedule deliveries as part of your service. If that customer happens to be roaming abroad in an inappropriate time zone, then you certainly won’t get the result you want.  Same is true if the customer is on the middle of an important call. Or if the customer is on a smartphone, they might just want the company to send them a link to a web page where they can set up an appointment for the delivery on their terms.”

Martin’s point: no service provider does a good job of thinking about the needs of the enterprise and ways to help them connect, interact and transact with their customers. “There is a void and we’re starting to see companies like Facebook rise up to take that space – or at least try.” As he sees it: “The fear that the Facebooks of the world are displacing the telecom industry’s core products — is real. But we shouldn’t overestimate it since Facebook are showing they are pretty inept at business model design.

Connect, Interact, Transact
After thinking this through carefully – and for nearly a decade — Martin has developed a new business model for telecom service providers determined to defend their turf from OTT players. He calls this approach, aimed squarely at enabling commerce and connecting enterprises with their customers, Connect, Interact, Transact.

So where will the Connect, Interact, Transact companies come from? Don’t limit your view to developed countries. To the contrary, Martin is convinced this new breed of company will rise from the emerging markets. A good bet is Africa. “That’s where we’ll see clever cloud communications companies that build products that target what’s known as ‘bottom of the pyramid’ consumers,” Martin says. “Not those living at subsistence level, but those who have a small disposable income. New business models evolve fastest where enterprises, NGOs and governments want to interact with these people – who are tomorrow’s consumers.”

Whether from developed or emerging markets, companies determined to compete against the likes of Google and Amazon should integrate with platforms these companies already provide.

After all, Google and Amazon have correctly focused their strategies on enabling commerce (Google dominates advertising and Amazon’s sphere of influence covers ecommerce and order fulfilment), and it makes little sense to reinvent the wheel. “If you are a small company, then you have to rethink your business to integrate with these companies and platforms to make communications with customers better and improve commerce. Put simply, you have to think about how to either use their APIs to improve business, or connect with those capabilities in some way to make your business more efficient and effective.”

Communications gap
Martin also urges companies to open up to business models and focus their efforts on bridging ‘gaps’ – places where there is a disconnect or mismatch between how people and enterprises communicate and how processes function.

So who stands to win in this new world where it’s all about closing gaps in communication? Martin in convinced that having the connection to the customer is more important than owning the billing relationship. “It’s whoever holds the final interface to the user that has the power. That’s where we’re seeing a massive battle because the operating system, the browser, the unified communications app — all of these have real estate on your smartphone. So now owning the container in which the final experience is being presented to the customer is where the power is.”

Where does the mobile operator fit in?
While many industry observers staunchly believe telecoms operators are doomed to be dumb-pipes, Martin vehemently disagrees with this blanket assumption. “It’s a gross mistake to underestimate the telcos. There are a lot of dead companies and business models that tried a direct full-on assault against the telecom industry and lost. Telcos also have an extraordinary range of customer data and relationship assets that, in principle, position them well to launch new ubiquitous communication products.”

However, operators also need to understand that competitive advantage does not lie in the offer; it lies in the size and breadth of the audience they can reach. “Telcos need to understand that they need to be able to have relationships with people whether or not they are customers,” Martin explains. “That’s particularly true in cases where telcos are trying to monetise services by offering business process efficiency effectiveness and security to third parties.  You don’t necessarily have to be able to bill the consumer at all; you want to just have millions of consumers who have relationship with you.”

Put another way, operators have a central position – one they can cement if they build an over-the-top experience that serves customers that aren’t necessarily their customers.

One operator that understands this model is France Telecom with its ‘On’ product. As Martin points out: “I can download On for my Android phone the Android marketplace and the mobile operator is in the middle of this experience, trying to capture that container experience for my address book dialler and other functions on my phone.”

Futureshock
Clearly, the operator has the capabilities to compete and win against OTT players. But winning may require them to transform more than their business model. In fact, Martin believes that the words ‘mobile operator’ might not have any meaning by 2015.  “It might be that there is a marketing organisation, that has a relationship with the customer and potentially controls various storefronts. But there will also be an infrastructure company. So, you might buy the Apple iDevice in 2015 and it’s a device that comes with content and connectivity bundled in. You don’t need to go and buy a separate service from somebody else; you just pay your service money to Apple. But, of course, Apple’s buying wholesale data from telcos in vast quantities.”

So where will Apple – today’s OEM role model – be in 2015? “The Apple business has a nasty flaw in it. It targets the top 15 percent of the market to get 50 percent of the profits. Yet in a communications market, the revenues are in selling to the new consumers in emerging markets.”

If Apple’s model isn’t about achieving volume, then can it survive in a market where the winners will likely be a mix of communications giants and companies that make commerce more effective?

It’s a tough one to call but Martin believes Apple’s model has some mileage left. “Let’s say that there is enough life in the model to last until 2015, so Apple does have five years left.  Looking further out, the grand growth opportunities around machine to machine, communications as a service and communication-enabled business processes – everything we’ve been speaking about – are not where Apple is.”

So is the future for mobile operators bright?
“Telcos simply got sidetracked by the media business and mobile advertising, areas outside their main focus, forgetting they’re in the business of communications and making communications simple and effective,” Martin observes. “The first thing telcos have to do is undergo corporate psychotherapy. They have to look at themselves in the mirror and accept that they are a phone company. They sell conveniently packaged communications.  If they do this, then they have a good answer to Facebook and Google.  If they stray from that path, then they deserve the awful fate that will become them.”

– Peggy

Martin Geddes is a thought leader sharply focused on what is right (and wrong) with business models in the telecommunications industry. His most recent white paper, Connect, Interact, Transact: A paradigm shift in the business model of communication service providers (www.martingeddes.com/papers), warns service providers of developments that could potentially wreck their current model and suggests new offerings that could secure them a new and even more lucrative position in the value chain.

Peggy Anne Salz is chief analyst and publisher of MSearchGroove, a top 50 influential technology site providing analysis and commentary on all things mobile.

Bringing the 'social' out of the operator walled gardens

[Mobile services have long been a carefully guarded commodity, kept within the ‘walled gardens’ of network operators. But as innovation moves to the software and social era, operators need to adapt. Guest author Avner Mor discusses how networks are inherently social and why they should open their walled gardens to developers]

Bringing the 'social' out of the operator walled gardens

A ‘walled garden’ is the term aptly applied to the last decade of mobile operator services. And Facebook is the generic name aptly applied to the social network revolution of our times.

Wikipedia defines ‘walled gardens’ as referring “to a carrier’s or service provider’s control over applications, content, and media on platforms … and restriction of convenient access to non-approved applications or content”. This has been the common sense approach to operator strategies; build high walls to protect your revenues – which by now we know is becoming irrelevant. Mobile operators are facing market saturation, declining ARPU, higher subscriber acquisition costs (see iPhone), fierce regional competition and viable threats of being replaced by the over-the-top players. In 2009 alone, global operator ARPU fell by 7.3% year-on-year and is forecasted to further decline around 10% y-o-y  according to Strategy Analytics. How come operators – having a ‘social’ network at their very core – have been steadily declining, whereas Facebook has risen to a 600 million user, $35B valuation business in just 7 years? Let’s take a step back.

[poll id=”9″]

2010 will probably be known as the year where mobile service innovation has moved squarely to the software domain. Think about the 100,000s of applications against the 10s of operator services launched in the last 2 years.

To compete in this software world, operators/carriers need to leverage their network capabilities to compete with the over-the-top players. For example, think of a voice application that automatically switches to taking a text or voicemail if it knows the other user is busy. Or a service provider in the travel business that can target their Java app and SMS campaign to users who travel abroad frequently. Or web pages that feature a 1-click-buy based on keying in your mobile phone number. Or a “where are my friends” service, where you opt-in to a friends location request no matter what phone you ‘re using. Or travel recommendations where a virtual concierge suggests places to visit in your holiday based on where your friends have been.

Such innovation has shunned the mobile world because network operators have adopted the walled garden business model of building a supermarket with their own branded goods – rather than a shelf (a platform) for third party goods that leverages on the social aspects of the platform. To compete in a world where innovation is defined in software and social, operators need to become a platform – and compete over the top, not in the network.

A platform business model is about leveraging operators’ underutilised, walled network assets, taking a cut from the delivery of innovative services, in the same way that Apple takes a cut from the delivery of mobile apps or Facebook takes a cut out of ad delivery. It’s not just operators that are playing in this developer game – it’s handset vendors investing in developer programs and app stores, online brands opening their assets to developers (from the BBC to Facebook) and Digital TV operators exploring methods to open STB, EPG and DVR channels to developers. Yet operators are the most ubiquitous and most social players of them all.

Leveraging the social side of the network

Networks hold lucrative assets within their walls including voice, messaging, location, presence, user authentication, billing – plus social graph, user profile and preferences. Take location for example; despite wide penetration of GPS receivers in handsets, network-based location covers any device, works indoors, and is particularly suited to emerging markets.

More importantly, mobile networks hole a treasure trove of information about its users; based a few key information like age bracket, ARPU bracket, address region, roaming characteristics and device model which are provided in an opt-in model, one can deliver better search results, ads or campaign targeting. Think about how restaurant recommendations can automagically cater to your spending habits, taste for international cuisines and social lifestyle – an app that knows you from day one.

There are tons more of examples where network APIs can enable unique applications. Yet, when developers try to connect their app to an operator network they experience barriers and restrictions, such as technology fragmentation, long and expensive technical integration, tedious commercial engagements, long time to payment, plus distribution challenges. What’s worse, developers need to engage and integrate separately with each operator. All of these factors hinder the vast majority of developer innovation and essentially diminish the operator ability to be the center of innovation gravity.

Many infrastructure vendors have jumped into the opportunity to connect operator networks to developers:

– Alcatel Lucent – A dominant SDP provider, extended a hosted ‘OpenAPI’ service for developers, providing Consent Management and  ‘LBS API’

– Ericsson – through their ‘Ericsson Labs’ initiative, the SDP provider offers a broad ‘Maps & Positioning’ API set: web & mobile maps, 3D maps, Cell-id look-up (with its own worldwide cell-id database) , operator based  cell-id and  consent management . Ericsson is currently working with operators in Sweden and Norway.

– Amdocs –  an OSS/BSS leader moving into positioning as an open mobile service providers network to 3rd parties: “service providers have the opportunity to drive new revenues by monetizing their unique assets – networks, customer information, charging, billing and customer care…”

– Huawei – An emerging market player builds its position by partnering America Movil and Telefonica in LATAM. Telefonica has completed in 2009 the deployment of Huawei’s openness platform across 13 Latin American countries

Social cloud APIs

Yet such efforts are limited to single-operator deployments. In addition, they have limited developer outreach potential as many these infrastructure vendors stem from the network, not the software world.

The logical next step is a single, cloud-based network API platform across multiple operators, spanning not just regions and multiple screens, but the entire application lifecycle: develop – deploy – discover – monetize. This network API cloud paradigm is essentially a 4-sided platform connecting users (who discover and consume services), developers (who innovate and create services), the applications themselves and the developer program partners (with the tools and technology, go-to-market, support and community assets). Naturally, a multi-operator paradigm needs to support variable access policies for operator assets, including access to network assets, charging subscribers and accessing user info.

Such a developer-friendly cross-operator pilot program was announced recently in the form of WAC, the Wholesale Applications Community, a joint effort to create a standards based apps platform that operators can leverage to build their storefronts. Network API’s are also part of WAC, based on OneAPI, a Commercial pilot project aiming to establish a unified, developer-friendly API environment across operators. Aepona is the technology provider for the GSM Association’s “OneAPI” initiative.

So is WAC the answer? Operator alliances are essential to achieve this goal. Yet, historically we have seen internal complexity and operator competing agendas hinder effectiveness of these pilots. The missing piece is an infrastructure player that understands software innovation, developer programs and running telco-grade cloud infrastructure. A Facebook-like (software) player that can bring the Facebook out of the operator walled garden.

– Avner

[This article is dedicated with appreciation to the Telecom team at Microsoft Israel R&D center
Avner Mor has over 25 years of experience in senior management positions with leading Israeli hi-tech telecom companies and start-ups. In his last role, Mor served as the General Manager of Telecom Products at the Microsoft Israel R&D center.]

Why Mobile Operators have a crucial role to play in the second wave of “smart” apps

[Just how smart can mobile apps get? Guest author James Parton explains why most apps today are pretty much dumb, just scratching the surface of what could be possible and describes how mobile operators can help power the next-generation of smarter, context aware applications]

The noise level around Apps and App Stores has reached saturation point. Every day a new launch, a new report, or a new statistic hits the newswires.

We have passed the point where there are now more people accessing the internet via a mobile device than via a PC, overall revenue from mobile apps (including ads, payments, and in-app transactions) is expected to grow to $17.5 billion in 2012 from $4.1 billion today, the iTunes store has delivered more than 3 billion downloads, 22 apps are downloaded per second from Nokia’s Ovi store, there are more than 30,000 Apps available in the Android store… you get the idea…

There can be no doubt that the explosion of interest around the App ecosystem brought home just how important mobile will be as a future content delivery channel, typified by the increasing number of Apps being produced by leading brands. No digital marketer worth their salt would now neglect having an app story in their digital marketing plan, even if in all honesty some are not quite sure why!

However, make no mistake that we are still firmly in the realms of a version 1.0 ecosystem. The App retail delivery platforms are still very basic; in fact they have not yet significantly evolved in terms of features and capabilities from the content delivery platforms that were offering mobile games, wallpapers and ringtones at the beginning of the decade.

The Apps themselves are clearly “dumb”. What do I mean by “dumb?” The vast majority of today’s App’s sit on the customer’s handset and have no understanding, or appreciation of its context or the person using it. Yes, increasing numbers of Apps are using location to introduce geographic context, but that is hardly pushing the boundaries of the art of the possible.

To take the App ecosystem to version 2.0, Apps have to become “smart”. I believe this is where Mobile Operators finally have a key role to play in the progression of the App ecosystem.

Of course this role is not a divine right. The Mobile Operators need to go through considerable change in order to be able to contribute effectively. That change is both technological: opening up “smart enablers” to allow developers to easily consume these capabilities, and secondly: culturally – to embrace the independent developer community and relax their traditional command and control philosophy for mutual gain.

So what does a “smart app” look like?
Well consider today’s customer experience. You run an app and it is a one size fits all experience i.e. the app behaves exactly the same way for every one of its users, regardless of who they are, and how they are using it. Imagine a “smart” app that could customise the user experience based on intelligent, real time, information delivered from the Mobile Operator.

Examples of Mobile Operator unique enhancements to the customer experience could include:

  • On the fly customisation of the App UI based on a detailed understanding of the device currently being used. Remember that increasing numbers of customers are SIM swapping. How do you know that a customer using your service on a Monday via an iPhone is now using your service on a Tuesday using the same SIM in a 3G dongle connected to a Netbook?
  • On the fly customisation of content richness based on knowledge of the users  current connection speed (e.g. 2.5g, 3G, WiFi). For example trying to force rich video content to a customer on a slower 2.5G data connection will probably deliver such a poor customer experience they will never use your app again. If you know in real time their connection speed, you can deliver the most appropriate experience.
  • Personalisation of content and configuration of your App UI based on user demographics (gender, age, location, social economic profile, etc)
  • Targeting & profiling of the audience based on segmentation information e.g. travel profile (stationary, commuter, jet-setter), spend segment (>€100 per month, €50-100 per month, €30-50, etc).
  • Micro billing to the customer’s mobile bill or debits from their pre pay balance at VISA like transactions rates.
  • In-App interactivity via messaging or calling
  • Up -selling the customer from a basic service to a premium guaranteed service (for example low ping rate for multiplayer gaming apps).
  • Then for the owner of the App, post usage analytics providing data like who, where, how long their users are consuming their services, and other customers of the Mobile Operator that match their current users profile, who could be targeted by a marketing campaign.

Examples of the enablers that Mobile Operators could deploy include; quality of service, billing, handset information, customer analytics, network traffic analytics, messaging, call management, location, age verification, tariff information. The list can go on and on, and in fact in our own planning sessions we have identified over 50 potential enablers.

This is a more intelligent way of developing not only the App, but also the business opportunity. Via the Network Operators turning their network infrastructure and assets into a plug and play platform, Mobile Operators become vital in the creation process of the second wave of ‘intelligent’ apps that can deliver far richer experiences for users which will drive adoption, longevity, and profitability.

Evangelisation and education on the benefits of creating “smart” Apps is crucial – this won’t just happen by itself. We are at the start of the process, and many companies are only now trying to get to grips with their App 1.0 strategy.

To ensure Mobile Operators both identify and capitalise on the opportunity to become relevant in the App ecosystem, it is vital they adopt an open and transparent approach. Therefore there cannot be enough effort to bring together the various players in the App ecosystem to share thinking, create strategy and influence product roadmaps, and marketing plans.

A great example of this is the Mobile Entertainment Forums Smart Enabler Initiative. I’d strongly recommend you check it out and get involved.

Critically the experiences and enablers I have described here are not commercial reality today. Talking and listening to developers will be essential to ensure that the Mobile Operators invest in the right technology enablers and introduce compelling business models to encourage their adoption.

Of course enablers are just one piece of a complex App ecosystem. There are many other challenges that hinder unlocking the full commercial value of the market place, not least the fragmentation and choices available to developers at the handset Operating System level. However, our approach is the same: dialogue and insight.

That is exactly why O2 Litmus has partnered with VisionMobile to undertake the largest developer research to date. We’re encouraging all mobile developers to participate, and we look forward to sharing the results with you all.

Have your say at visionmobile.com/developers.

I’d welcome your thoughts on both this piece and some key questions it poses:

  • Have you used a Mobile Operator enabler? What was the experience like?
  • What enablers do you need to make your App “smart”?
  • How can we effectively spread this message?

James Parton
Head of O2 Litmus
You should follow me on Twitter at @jamesparton

[James is a Chartered Marketer specialised in Mobile. With an award winning track record of product delivery including twenty five major launches, featuring twenty first to market achievements, including MMS, mobile video, mobile music downloads, the UK DVB-H Broadcast TV trial in 2005, and the ticketing and interactive services supporting The O2 Arena in London. Recognised by Revolution Magazine as one of the “Future 50”, James is a regular industry speaker, panellist, judge, blogger, and has lectured in Marketing and New Product Development at The University of Oxford Faculty of Continuing Education and Reading University.]

The Wintel future for mobile: a wake up call for network operators

[The PC-esque commodisation of the mobile industry has been prophesied many times before, but never before has it become so lucidly clear. Research Director Andreas Constantinou uncovers the dynamics of the mobile industry that will lead to a Wintel future, and the impending disruption to the network business model]

We ‘ve all heard this before. The story of the bit-pipe future for mobile networks/carriers and the threat of Google and Facebook to the mobile industry status quo. But this time the facts are clear; the dice has been cast and is pointing to a Wintel future for the mobile industry. Bear with me – this is a long argument.

The virgin years of mobile
The mobile industry has rapidly evolved through two decades:
– 1990s growth: The 1990s was the decade of unrestrained growth, building up huge empires on thin air (a.k.a. radio spectrum). Operators invested on building networks with worldwide reach, on increasing spectral efficiency (more bits per pipe, setting 2G to 3.5G standards) and snapping up new subscribers
– 2000s competition: The 2000s was the decade of competition, reality check and disillusionment. Operators invested in competing with more complex tarriffs, deeper device subsidies, unique devices (custom or exclusives) and bundling fancy services on the device (from mobile TV to myFaves and social networking).

Next up: survival
The 2010s decade is about survival. It’s no secret that ARPU (average revenue per user) has been dropping for the last few years, and the much-promised data services have failed to deliver. Plus networks are threatened by the establishment of over-the-top services like OEM-own services (Apple App Store, Nokia Ovi, Sony Ericsson PlayNow, RIM Blackberry services), the entry of alternative payment providers (Apple iTunes, Paypal Mobile, Google Checkout), alternative voice providers (Skype, Google Voice) and of course the myriad of social networking services (epitomised by Facebook and Tencent).

So, how are operators differentiating today beyond tariff games?

Investing on device subsidies: Network operators are spending big money to snap high-spending customers away from their competitors; for example investing 300-400 EUR on the top models from RIM, HTC/Google and Apple (case in point: Orange France). The subsidies are recouped back from such customers in around 9 months, but without factoring in the disproportionately high cost to the network, where the cost increases linearly per-MB consumed. All this, for a short-lived advantage, no stickiness to the network. Worse than all – operators are pouring marketing and subsidy investments into the same companies – including Apple, Google and RIM – that aim to commoditise their network.

Selling broadband Internet dongles and mobile WiFi (MiFi) hotspot devices at flat-rate bundles that aim to drive revenues, but at the same time lead to surging network OPEX costs. To appreciate this irony, consider that operator marketing budgets are never linked to the network infrastructure OPEX budgets; and so marketing groups may spend away into fancy deals, while resulting in alarmingly high network costs, especially for network maintenance and upgrades. Operators are investing into the bit-pipe business without knowing how to monetise it.

Customising devices (a favourite pastime of operators) like Vodafone 360 and Orange Signature that aim to deliver own services on the mobile, while limiting the experience to high-end devices. Although 360 has some strategic attributes (locking customer contacts into the network), its execution has been inefficient to say the least with a team of 250 people at Vodafone needed to launch the service (which could have been accomplished with perhaps 50 people in a software startup environment). Operators are pushing Internet brands to the forefront of the customer experience (see Skype promos from Three and Verizon) for a short-lived advantage of customer attraction.

To sum this all up; operators are investing in their demise, pouring money into the same Internet companies that aim to commoditise them into bit-pipes. Worst of all is they ‘re drawn into a inward spiral, a black hole that is near impossible to escape from; as an operator, if you don’t have the latest devices and cheapest tariffs, your competitors will.

The loss of control points
The situation is much more dire, as the current balance of power in the mobile industry is about to be shaken up. Operators control around 70% of the mobile industry pie of $1 trillion, thanks to three very important control points:

device subsidies: operators (with few regional exceptions) pour large marketing budgets into promotions and device subsidies, thereby in effect dictating terms to their handset suppliers. Only Apple has been able to challenge this status quo to date, but on a tiny 2% of the mobile market. Yet, a new disruption is appearing in the form of Android that might extend to well beyond a tiny market share, to significantly drop retail price points and render subsidies meaningless (more on this Wintel phenomenon later).

mobile termination: by design, mobile operators are the exclusive gateway to reaching any specific subscriber. That’s how operators have been able to charge ridiculously high voice and roaming charges (incl. receiver pays model). However, mobile termination is slowly coming under threat as more and more services are being delivered over the network like social networking and VoIP, while flat-rate tariffs for mobile Internet is becoming the norm. Consider that Google might at some point offer free voice calls amongst Android device users. It’s a question of when, not if. But abstracting the service from the underlying network carrier, the service providers assume the mobile termination gateway role, by acting as the service transport across networks and devices.

payment broker: The premium SMS boom is the best example of how operators have leveraged their billing relationship outside their network, charging often 50-60% commission for reverse billing, i.e. the ability to charge users for a ringtone, game or televoting from their mobile phone bill. Yet, Internet players are now carving up their niche into the operator-own game in the form of Apple App Store (no doubt to be transformed into a payment gateway for third parties) followed by Paypal Mobile and Google Checkout.

Wintel and the Google game
A very important change in industry dynamics is underway. Google’s Android has morphed from a feared entrant to a loved ally, with all handset manufacturers (except for Nokia) investing in Android-powered handsets thanks to Android’s low cost of creating a differentiated handset. In parallel, chipset vendors led by Qualcomm and Mediatek are rolling out out-of-the-box solutions that pre-integrate hardware + a software platform + applications (e.g. Android Market), that can be easily differentiated in both plastics and UI.

These out-of-the-box solutions will rapidly decrease in price led by the impending price competition amongst chipset vendors (led by Mediatek exports) and the advancement in silicon manufacturing (with sub-40nm chips squeezing smartphone capabilities in feature-phone price points). Combined with Android (low cost of UI differentiation + bundled apps market so incremental revenue) this should lead to a diversity of Android-powered phone at $100 retail price points in the 3-year horizon. This is a game where Asian mobile and consumer electronics manufacturers will gladly play, by creating low-cost, on-demand phone + service solutions for media brands and operators.

This is the Wintel game of the PC industry, making its appearance in the mobile industry; only the title of ‘Intel-inside’ is still up for grabs. What’s more, with smartphone prices at $100 dollars, the operator subsidies are going to become meaningless, in effect creating a handicap for network operators and a sudden loss of negotiating power. The tables are slowly turning.

What about Symbian and Windows Mobile, you might ask? We believe Symbian will become a Nokia-only operating system (more this on a future post), while Windows Mobile is driven by short-lived motivations today (a fresh UI and an operator interest in it), which can easily be delivered by Android, once UI design and technology firms release customisable layers on top of Android (something that Ocean Observations is hinting to be working on with Brandroid = Brand + Android).

What about Apple, Nokia and RIM; the few tier-0 handset OEMs that have developed vertical propositions (from hardware to services) will still be able to command premium prices; making this so very similar to the PC industry where you can buy an Apple computer at premium price or get the same functionality for half the price in a PC clone.

The shock to the operators will be like the shock that the music industry got when they woke up one day and realised that the Internet has disintermediated their brick & mortar business model.

All is not lost
Operators can still get their act together. It’s rare that operators have invested in long-term strategy – see Orange’s investment in mega-SIMs in 2007 (albeit betting at the wrong standard). And there might be the odd operator that has the conviction and foresight at the management level to achieve such long-term planning. We ‘ve long advocated that operators should platformise (read: Network-as-a-Service) while creating new control points and meaningful brand deliverables – for a brief analysis see our Mobile Megatrends 2010 deck, especially the chapter on ‘new smart pipe strategies at the intersection of brands and consumers’. Or drop us a line.

Comments welcome as always,

– Andreas

2010 in review: Under-the-radar trends at Mobile World Congress

[Following a week of frantic announcements and marketing hype at MWC 2010, VisionMobile’s Research Director, Andreas Constantinou looks at what really matters – the under-the-radar trends that will make the biggest impact in the next two years]


The annual Mobile World Congress, besides a circus frenzy of 49,000 people has also traditionally been a barometer of mobile industry trends. This year we look at the under-the-radar trends that may have gone unnoticed, but will make a major impact during 2010-11.

1. Building developer bridges
If there was a theme to this year’s Mobile World Congress it was Developers. This year’s App Planet show-in-a-show gathered 20,000 visitors, making the stands of LTE vendors and the CBoss showgirls look pale in comparison.

Imagine that. After years and years of efforts in ‘pushing’ the next-gen killer technology (on-device portals, Mobile TV, widgets, ..), the mobile industry is finally seeking inspiration beyond its own confines; at the software developers that will generate even more ‘apps for that’ and drive innovation that will actually pay for the bandwidth investments.

The race is on to grab the best mobile developers – and the mobile industry is spending big money on it. This year’s sponsors of mobile developer contests and events are not just platform providers or handset OEMs. Just look at the some of the sponsors of the WIP Jam developer event at MWC: Qualcomm, Alcatel Lucent, Ericsson, NAVTEQ, O2 Litmus, Oracle.

Developer mindshare is expensive as developers have to be attracted away from other platforms which they have invested in; and as such we would argue that the average DAC (developer acquisition cost) is much higher than the average SAC (subscriber acquisition cost). Thankfully there are plenty of marketing budgets to throw into the challenge. Palm is spending $1 million to build its own developer community in a dire effort to win back its once-thriving community of mobile developers.

It’s ironic given that it only took the mobile industry 20 years to learn what the software industry understood since the early 1990s; that the smartest people work for someone else, but they will gladly work for your platform if you give them the right tools and audience. And it’s most appropriate that this realisation is happening right now, as the two industries are coming together in the post-iPhone era.

One of the big announcements at this year’s MWC was the Wholesale Application Community (WAC), the new operator collaborative effort at connecting to developers. WAC is born out of the merge of two initiatives: OMTP’s BONDI (device API specs for securely accessing user information on the device) and the Joint Innovation Lab, JIL (which besides the hype has had delivered only a widget spec). WAC is an intent of operator collaboration, but one which yet needs to decide what it will be delivering.

The GSMA App Planet, WIP Jam, WAC and many other initiatives are trying to capitalise on one of the hottest, yet perhaps understated trends of 2010: building commercial bridges or matchmaking platforms between software developers and the mobile industry. Next question: what’s your platform’s DAC (developer acquisition cost)?

[shameless plug: at VisionMobile, we ‘re running the biggest mobile developer survey to date, spanning 400+ developers, 8 platforms and 35+ data points across the entire developer journey. Best of all, the results will be freely published thanks to the sponsorship by O2 Litmus]

2. Quantum leap in mobile devices
Industry pundits have been overoptimistic about the dominance of smartphones, time and time again.; but contrary to predictions, the smartphone market share has remained at circa 15-17% of sales as phone manufacturers have remained risk averse; Instead of porting high-cost, high-risk operating systems like Symbian and Windows Mobile on mass market phones, OEMs have preferred to patch their legacy low-risk RTOS platforms with high-end features (read touchscreen, widgets and the like) – see earlier analysis here.

Yet the mobile software map is about to change rather abruptly; not because of Android, but as chipset vendors make the leap to sub-40nm manufacturing. Chip cost plays a major role in handset BOM (bill of materials) and that cost is directly proportional to the surface area of the silicon (excluding royalty payments). With the move to sub-40 nm manufacturing processes, you can fit a GPU (graphical processing unit) and even ARM Cortex architectures within the same die size. This means that the smartphone BOM will reduce from $200 to $100 in only 2 years, based on our sources at chipset vendors – and implies that MeeGo, Symbian, Windows Mobile and Android can penetrate into a far large addressable market than was possible before.

Adobe is banking on this very trend, planning (hoping?) that Flash penetration will reach 50% of smartphones by 2010, or circa 150M devices sold per year. Similarly, Nokia sees revenue contributions from S40 handsets dwindle from around 55% in 2009 to 35% in 2011, replaced by MeeGo (circa 10%) and Symbian (circa 55%) – see slide from Nokia’s Industry Analyst event. This also goes to show Nokia’s continuing investment in Symbian, at a time when the future of the Symbian Foundation is shady.

Virtualisation technology is further accelerating the BOM reduction, by allowing the likes of Android and Symbian OSes to sit on the same CPU as the modem stack. OK Labs introduced off-the-shelf reference designs for virtualised Android and Symbian earler in 2009, while at MWC 2010 Virtualogix announced similar deals with ST Ericsson and Infineon. The third (and last!) virtualisation vendor, VMWare (who acquired Trango), is yet to make a similar move.

Last but not least, we are seeing new attempts at re-architecting low-cost smartphone software. Qualcomm is making a comeback with its BREW MP software positioning this as a feature-phone operating system and getting major commitments by AT&T. Kvaleberg (a little-known Norwegian engineering company) has productised its 10-years of feature phone integration know-how into Mimiria, a feature phone OS with a clean-room UI architecture that makes variant creation a swift job requiring only 2-3 engineers to customise. Myriad has announced an accelerated Dalvik implementation to speed up Android apps up to 3x, allowing those to run more comfortably in mass market designs.

3. Analytics everywhere
Another under-the-radar trend at MWC 2010 was analytics, which was making inroads into the feature set of products across the spectrum – from SIM cards and devices to network infrastructure solutions.

Application analytics is the only visible tip of of the iceberg for now, with analytics services available from Adobe, Apprupt, Bango, Distimo, Flurry (merged with PinchMedia), Localytics, Medialets, Mobclix and Motally. There is also plenty of innovation to be had here, with a startup (still in stealth mode) delivering design-time analytics on the type of applications and their use cases. Or another startup which is delivering personal TV program management, and monetising (among others) on the analytics on what TV programs users are watching, searching and sharing.

Moreover, analytics is slowly penetrating into operator networks for delivering smarter campaign management, subscriber analysis or network performance. There is a long list of vendor solutions here from Agilent, Airsage, Aito, CarrierIQ, Rewss, Umber Systems, Velocentm Wadaro and xTract among others. One related under-the-radar announcement was that from SIM manufacturer Giesecke & Devrient (G&D) who is launching a product for measuring network quality on the handset.

Taking analytic to the next level, the GSMA and comScore recently launched the Mobile Media Metrics product. This is the first census-level analytics product for measuring ad consumption and performance, starting with the UK market, which follows the lucrative business model of TV metrics.

Analytics is indeed the most underhyped trend, whose magnitude the industry will only realise in 5-10 years from now.

4. Mobile identity in the cloud
Cloud storage for personal data is ubiquitous on the Internet; Google Buzz, Facebook and Dropbox are perhaps the epitomy of this trend. The mobile industry has traditionally fallen behind, but is rapidly catching up in 2009-10 with the cloud-stored Windows Mobile UI, the social networking connectivity layer on the idle screen as seen in Microsoft’s One App, the socially-connected handsets from INQ Mobile, HTC and Motorola (Motoblur), and the 10+ solution vendors who offer addressbook syncing solutions (Colibria, Critical Path, Funambol, FusionOne, Gemalto, Miyowa, Newbay and many more).

We used to think of user data as migrating from the SIM card (the operator stronghold) to the handset (the OEM territory). Now the data is once again migrating away from the handset to the cloud, the home-turf of Internet players.

This is the next battlefield, in the landgrab to define the interfaces that determine access to our mobile identity. There are two camps competing here; the Internet players who have defined user data access standards (Google, Facebook and Twitter), versus the players who have defined mobile data access standards to date (network operators – see Vodafone 360 and handset OEMs – see Nokia Ovi).

This is one of the important battles that will determine who can reap the most profits out of user information by controlling the interfaces that connect them to the outside world (for background see Clayton Christensen’s thesis on the relationship between interfaces and profits). And it’s also what network operators should be rushing to standardise right now, in one of the last battles that will determine their smart-pipe vs bit-pipe future.

Comments welcome as always,

– Andreas

Low cost Android: crossing the $100 barrier

[Where’s Google’s Android going? Guest blogger Ben Hookway uncovers the race for low cost Android taking place behind the scenes of the mobile industry, and how this may change the face of Android as we know it]

Low cost Android devices have been forming a large part of R&D activity for some time now. Behind the scenes of the mobile industry all major players – including semiconductor vendors, software vendors, software services companies, ODMs, OEMs, and network operators – are putting considerable resources into rolling out low cost Android phones. It’s a silent revolution in the making that, once set in motion, should see Android shipments lift off from the single-digit millions.

So how low is ‘low cost’? Reports of $75-$110 reference designs are emerging from Asia; these are fully featured touchscreen devices, albeit with an EDGE (2.75G), rather than a 3G baseband chipset.

Why the interest in low cost Android? Low cost means volume which in turn means market share, and a consistent platform for the provision of services. There are multiple parties with a compelling interest in having a low cost Android device.

Semiconductor companies are under pressure to better address the market for  Android platforms. Qualcomm is the overwhelming leader in 3G chipsets for Android phones in Western markets. Their competition such as ST Ericsson, Broadcom and Infineon are responding and a low cost Android niche may be a way for them to break into the current Qualcomm dominance.

The majority of handset manufacturers are investing heavily in Android. With so much effort going into a single platform, there is an inevitable pressure to be able to scale that platform on as wide a range of phones as possible. While the lion’s share of press coverage is on ‘smartphones’, the mass volume still is in lower end devices.

Network operators are already developing and deploying ‘operator packs’ comprising of specific operator applications and service enablers, designed to run on Android devices. Longer term, Android may end up affording operators the standardised  platform for devices they have been craving for years; a standard platform they can consistently deploy their own ‘pack’ on. That’s assuming operators can gain access to low cost, mid-range Android devices on which they can deploy standard operator packs on and therefore extend the operator experience to the mainstream consumers.  Moreover, with subsidies widely practiced in the mobile industry, it is in the best interest of the operators to reduce the cost of Android phones.

Continue reading Low cost Android: crossing the $100 barrier