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MWC 2012: “Handset software is a commodity”

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MWC 2012 provided further evidence of an escalating war between operators and device manufacturers, according to analysts at Informa Telecoms & Media.

Apart from those launched by Nokia, there was only one device unveiled that ran on the Microsoft Windows Phone platform, which was one of the many launched by ZTE. Meanwhile, one of the announcements that caused waves in the industry was Telefónica’s news that it has teamed up with Firefox browser-maker Mozilla to develop a web-based mobile platform, B2G. The news could see a host of HTML 5 based devices running on the platform entering the market, and may lower the price of smartphones, as the OS will use open-source software.

According to Malik Saadi, principal analyst at Informa, there has been a trend of hardware and software vendors picking sides and creating closed ecosystems, and operators are now trying to combat this.

“We’re seeing a kind of verticalisation; these ecosystems are becoming quite vertical. The hardware requirements are becoming increasingly mandated by platform owners, such as Microsoft or Google,” he said.

“Software is becoming a kind of commodity – you have three major platforms; Android, Windows and iOS, and there’s a lack of differentiation on software. They’re now differentiating on hardware instead, and software is being deeply integrated with the hardware vendors.”

He added that this offers very little flexibility to operators, and they are losing control over the device value chain.

“They have no control over the product road map and there is no control over the software that should be implemented,” he said.

For the past two years, operators have been promoting the wholesale application community (WAC), which is an organisation that is creating a unified and open platform to allow mobile software developers to more easily write applications usable on a variety of devices, operating systems and networks. This initiative aimed to promote applications controlled by operators. However, in order to leverage that ecosystem, they have to partner with device vendors. Device vendors, however, have no incentive to implement WAC applications in their devices, because they have their own ecosystems.

“The same goes for Rich Communication Suite applications (RCSe). Operators have worked on RCSe to be commercially launched, for IP messaging and IP content. But the thing is, again, there is no incentive for handset vendors to implement RCSe in their devices. They have their own ecosystems and they are happy with that,” said Saadi.

“Android has been very attractive to operators because it provides flexibility to promote smartphones across all of their segments and attach data plans.  But what is wrong with Android for operators is that it is controlled by Google, and Google’s business model might conflict with operators’ business models. In an ideal world, they would want a platform like Android, but not controlled by a vendor like Google. That’s why some, such as Telefónica, are turning to Mozilla, with the B2G platform. B2G ideally provides operators the flexibility of Android with no supreme control by any other software player like Google, so it would enable them to get their framework like RCSe and WAC and be able to influence the roadmap of that platform, because that framework is open source.”

He added that contribution to the platform will come from all over the industry, and operators can implement their framework and maintain control, pushing their own content and services in line with their own road map, which is attractive to them.

“But the problem is that this is an open source framework without any governance. It needs a governance model – you need some control – some guidance towards how the roadmap of that platform should evolve. In environments where different competitors have different visions, strategies and business models, that would create a huge clash between different entities involved in that development.”

Saadi added that he believes the development on the B2G platform will be slow and will not support innovation at the same speed as a more controlled environment as Android and iOS.

“That’s my only worry – the lack of a governance model leading to slow speed of innovation compared with other platforms.

Meanwhile, Nokia’s devices were the most impressive at the show, according to David McQueen, principal analyst at Informa. Nokia has not had a stand within the Fira for MWC for the past two years, as they have been using one that was situated off-site. It returned this year with a huge stand, with half of it dedicated to app developers.

“We spoke to Kraft Foods, and they see Nokia as the intermediary between themselves and the app developers. Nokia have such a brilliant distribution channel, whether you like their devices or not. Their global reach and footprint is very impressive, and brands want to tap into that at a local level. Kraft, Coca-Cola and other such global brands want to get in at the local level and work with app developers, and they see Nokia as the intermediary,” said McQueen.

“These brands want to tap into that group of people in the emerging markets; “the next billion”, as it were. They are leveraging on the global reach and distribution channels that Nokia has,” he added.

Another observation that McQueen made was that there was an absence of LTE-enabled devices at the show. He said that there was very little on show from Samsung, none of the Sony devices were LTE-enabled and Nokia was actually showcasing the same devices launched at CES, but without LTE.

“In Europe, there has been an issue with spectrum allocation. Even from a network perspective, there was not a lot on LTE, the focus was more on small cells and wifi offload, rather than any huge focus on LTE. I think it’s just a bit too early for Europe. At CES, there was a lot more on LTE, because it’s in the US, even though MWC is a global show,” he said.

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5 comments

  1. Graham 12/03/2012 @ 4:17 pm

    B2K? You mean B2G (Boot2Gecko) right?

    • James Middleton 13/03/2012 @ 10:56 am

      Indeed, it is B2G. Although B2G is part of a wider initiative started by Mozilla last year known as the Open Web Devices platform (OWD). The idea is to use HTML5 apps as a web-based OS with hooks into the phone functionality of a device.

  2. Peter LeVictor 13/03/2012 @ 12:48 am

    Good points, especially raising the question about the future of mobile operators and how they will respond to the erosion of their revenues.

    However, how can Nokia play an intermediary role as you describe it between app developers and content providers? Nokia does not even have control of the software on its devices anymore? Nokia’s distribution channel is mainly physical. I fail to see why a Kraft foods would go to Nokia?

  3. Tim Deluca-Smith 15/03/2012 @ 5:08 pm

    Malik Saadi says that “Software is becoming a kind of commodity….They’re now differentiating on hardware instead, and software is being deeply integrated with the hardware vendors.”

    Our view could hardly be more in opposition to this – while software is becoming homogenized, it is the hardware that is almost indistinguishable from device to device for consumers. The smartphone ‘parts bin’ is seemingly shared across the OEMs, and what the handset guys shout about – dual core and quad core processors, for instance – are often meaningless to the vast majority of consumers. It seems to us that OEMs are increasingly unable to deviate from what is now the norm of an anonymous black slab, either because of restrictions in industrial design or cost pressure.

    How can customers develop loyalty to an OEM brand when most of the hardware looks and feels the same? And when two lookalike devices are both running the same OS…well, what’s the point?

    Trying to look like every other device out there, and offer the same features and functions, is no way for an OEM to gain market share or to engender customer loyalty. What has happened to the days of differentiated industrial design, and handset development that targeted a customer segment with a particular feature set or style? Long gone, clearly. But it can’t stay this way forever – one OEM has to buck the trend. I blogged about it here –> http://blog.wds.co/wdscompany/?p=635

    • Tom 19/03/2012 @ 3:35 pm

      I agree that there has been some industry-wide, cost-driven, device homogenisation, but think that this is part of a cycle which inludes, in order, after such profit-taking/maximising: customer confusion/lack of enthusiasm in a particular brand, market research, innovation, differentiated product, test in the market, copycatting.

      The question is whether a device maker can keep their innovation ahead of the copycatting, even while copycatting the innovation of their competitors. That’s why continuous R&D and market research are so critical to long-term success.
      Just look at the highs and lows of Apple. The more they’ve innovated, the better they’ve done.

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