Ten years is a long time in any industry, but especially in one that moves as fast as the mobile sector. The last decade has seen the industry ride out by far its toughest times and still manage to turn out truly world-changing products and services. Here we take a look at what we can expect to happen in the ten years that stretches ahead of us.
Ten years ago, the newly merged Vodafone Airtouch was sealing its hostile takeover of German carrier Mannesmann, a move which CEO Chris Gent promised would create “the world’s leading mobile multimedia operator”. Virgin Mobile, the world’s first MVNO had just announced its launch, and the must-have handset was the Nokia 7110—attractive not so much for its rudimentary WAP capabilities as for the spring-release cover that enabled its owner to answer calls in a way that briefly emulated Neo from box office smash The Matrix.
The year 2000 had been hailed by some as the ‘year of mobile data’ in what would soon prove to be a hopelessly optimistic assessment. That year’s GSM World Congress saw the first prototype GPRS network on display from Ericsson, including a much vaunted prototype handset. As onlookers applauded this achievement it is doubtful that they could have imagined the post-iPhone industry that would be gathering in Barcelona ten years hence.
In many ways, of course, it was a drastically different world from the one we know today. But a look back at a post World Congress report from the March 2000 issue of Mobile Communications International reveals that, while much of the technology has evolved, some core concerns remain unaltered.
As speakers and delegates contemplated services and business models based on WAP, they were asking: “What is the consumer ready to pay for? How can every organisation in the value chain realise their share of the money?” And in an observation of worries that proved decidedly well placed, telecoms.com noted: “Mobile internet services seemed to be at the forefront of many delegates’ minds. But many were concerned about the impact of fixed internet companies moving into the mobile environment.”
George Schmitt, a stalwart of the conference sessions during those years, and the head of US carrier Omnipoint (to be absorbed by T-Mobile down the line) also had his finger on a crucial point: “Our networks have their electronic eyes on everyone with a GSM handset, practically pinpointing our subscribers’ every move to within a couple of metres” he said. “It’s important that we use this power for good.” Today it is network functionality like location that operators are having to exploit for their own good, never mind anyone else’s.
Clearly the industry has made huge strides over the past ten years. But what kind of evolution can we expect to see over the next ten? To put it another way: If we take the Nokia 7110 as an emblem of 2000 and the iPhone 3GS as an emblem of 2010, what might be used to represent 2020?
How about a refrigerator? Or an electricity meter? There seems to be an industry consensus that the next decade will see the creation of the “internet of things”. It can be summed up by Ericsson’s prediction that, by 2020, there will be 50 billion devices connected to wireless networks worldwide. The majority of this surge in connections will come from machine to machine applications, says John Cunliffe, chief technical officer at Ericsson UK. And this could have benefits beyond revenues for the cellular industry, he says.
“The ITC industry is responsible for two per cent of carbon emissions globally and we need to tackle that small chunk directly,” he says. “But the big benefit we can bring is to use our technology smartly and start to address the other 98 per cent from other industries. Ericsson predicts that this 98 per cent can be cut by 15 per cent through advances in telecoms. A smart meter, for example, could turn off a refrigerator for 15 minutes to avoid peaks in power demand on the grid,” he suggests.
And in a similar vein to Cunliffe’s eco-motivated application of technology, a service that was much on the industry’s mind ten years ago is being given another nod. “Mobile video calling will take off as companies and consumers start to see the benefit—both environmental and financial—of finding other ways to keep in contact over long distances without having to travel,” says Tom Alexander, CEO of Orange UK and, in 2000, the founding chief executive of Virgin Mobile.
Video calling, of course, was the holy grail of 3G and the headline service around which it was launched. It soon become clear, however, that the experience was frustratingly poor, partly due to the networks but mostly because of the limitations of the handsets. It became more white elephant than holy grail. Today the handset technology is certainly in place and the challenge is more sociological: Can users be persuaded that video calling is a desirable, practical and preferable alternative to voice or text? The question is really no closer to being answered than it was a decade ago.
Irrespective of the appeal of individual applications, how can we expect the already staggering capabilities of mobile handsets to further evolve in the next ten years? Alexander has a few ideas. “Video calling, as well as other services, including digital pictures and video, will also benefit from the advent of projector-phone technology,” he says. “Being able to screen your films or photos on the wall next to you will be a new way of immediately sharing experiences with friends, family and colleagues.
“Furthermore, developments in 3D technology will only mean greater multimedia offerings for the consumers. With 3D films already being produced and 3D TVs currently a reality, it won’t be long before this technology finds its way onto mobile—allowing us to receive the full visualisation experience wherever we are,” he says.
Today handsets have evolved to encompass a huge variety of functionality. They serve as personal media players, still and video cameras, internet-capable computing devices, gaming consoles and mores besides. The telephony function is now just one of many and the fact that they are still called ‘phones’ is a legacy rather than an accuracy.
In fact the telephone functionality could be seen more as a limiting factor than anything else, given that handsets still have to be of a size and shape that allows them to be held to the face, listened to and spoken into. But, says Andrew Bud, chairman of mobile transaction specialist mBlox, this constraint may lessen as the decade draws on.
“The form factor of the handset will be dictated by its use as a ‘personal information terminal’, not a phone,” he says. “The trend to use separate wireless headsets rather than talking into the phone itself will continue and will have a profound effect on phone shapes and sizes. The personal information terminal will become a central source for a user’s entire access to culture, rendering obsolete the home book, the DVD, game and music library—why have collections on your shelf when you can carry them round in your pocket? The terabyte phone will see to that.”
The phone as storage device is one option, but industry consultancy Ovum believes that the future of applications and storage lies in ‘The Cloud’. By 2020, the firm posits in the executive summary of its industry wide ‘Telecoms in 2020’ report, most connected devices will have “direct access to web-based cloud content and applications through the widespread adoption of core web technologies and a small number of de facto standard RIA technologies on those devices.” This expanded cloud, Ovum says, will “act as both a source and store” for the huge range of direct to consumer services.
In turn this will impact both carriers and OEMs, Ovum suggests. Device-side software fragmentation will push innovation into the cloud, shifting responsibility for complex application development to cloud platform providers. These players will then sell their platforms to services providers on a managed services basis, drastically reducing the spend that operators are required to make in application platforms and development of their own. In Ovum’s world view, the OEMs will also cede responsibility in this area, leaving them more focused on brand and design competition, while their drop in investment should negate the need for costly device subsidies.
Nonetheless, there will be some constants, according to Bengt Nordstrom, head of Northstream Consulting. “In 2020, Nokia remains the largest player [in the handset market]” he predicts, “but it has been forced to surrender considerable market share globally; to North American players in the advanced device and smartphone segment, and to Chinese vendors in the midrange and low-end segments.”
One of the defining competitive battles of the next decade will surely be for leadership in this new software platform space. Winners are doubtless already familiar faces within the industry. Google, Facebook, Apple, Nokia, Research in Motion and a number of carriers are among those in contention. By way of illustration, Nordstrom takes a punt on the 2020 Mobile World Congress awards. The event, he suggests, will be happening in Beijing. “’Facebook Free Talk & Chat’, already the world’s most popular voice and messaging service, also wins a GSMA award,” he predicts (although it will be surprising if the GSMA hasn’t had a rebrand of its own by this stage).
The role of the operator in this new world is a source of much debate. The most advanced carriers seem universally desperate to retain their position at the customer end of the value chain and are beginning to invest heavily in their own software platform programmes. Few seem willing to focus primarily on excelling in what have been their historical core competencies, as the shift to managed services—which can only gather greater momentum as the decade unfolds—clearly illustrates.
Ovum foresees two types of operator in 2020. SMART players (for Services Management Applications Relationship and Technology) play at the very front of the industry, while LEAN players (Low-cost Enablers of Agnostic Networks) represent the evolution of what today might be called the ‘dumb pipe’ model. For mobile operators that have grown up as the dynamic and glamorous element of the telecoms industry, the LEAN proposition offers insufficient flattery to the ego, says Tony Cripps, a senior analyst at Ovum.
“In many instances this ego-led business planning probably doesn’t make sense,” says Cripps. “In general we think that the SMART proposition is a difficult one because it is based around competencies in software infrastructure and application development platforms that the operators don’t really have.
“You hear about initiatives that operators have that see them moving in this direction but there’s a sense that the companies that do this as a core competency are not just already there—they’ve already moved on to the next level,” he continues. “Typically, and it may not even take ten years, it’s going to be companies for whom software platforms are already a core competence that will be likely to dominate this space.”
It is unlikely that Ovum’s view will dissuade mobile operators from pursuing their glorious dreams but the networks do remain essential to all players in the mobile value chain. Software platforms aren’t much use if applications can’t be delivered to end users. So what will network competition look like in 2020; will it even exist? After all, the suggestion has been made more than once that multiple carriers should be able to compete using brand and proposition on a single, shared network. As Mike Short, CTO at Telefónica O2 Europe puts it: “Network as the primary differentiator has already ceased to be the main story in town.”
Ericsson’s John Cunliffe argues that regulatory pressures will ensure that multiple network markets perpetuate throughout the decade. “Maybe you could drop to two or three networks in each market but not one, because regulators will always want to see some physical competition out there,” he says. It follows that if the number of networks in each market does drop that network sharing will continue to be a popular option for mobile operators looking to cut network costs.
While in 2010 there are a good number of passive sharing deals in place whereby operators share sites and masts, operators have been far slower to embrace active sharing deals where all aspects of the network are commonly held. The MBNL joint venture between 3 and T-Mobile’s UK operation has broken ground in this area (the upcoming merger between T-Mobile and Orange will inject a new degree of complexity) and it seems a safe bet such deep integration will be necessitated and replicated in other markets as the squeeze on costs continues.
It won’t all be about sharing, though, and that squeeze will, for some operators, throttle them out of business altogether. “I don’t think it’s impossible that we will see some big telcos go bust over the next few years,” says Ovum’s Tony Cripps. “It’s not foolish for carriers to feel out these new areas of operation but it requires a level of commitment and investment that I don’t think many of them truly have.”
And in the best tradition of the value chain, any pain felt by the operators will undoubtedly get passed down the line to the vendor community. Those players that are building a solid business in managed services, with Ericsson being the leader, are more likely to prove resilient to a squeeze on the supply side. And those with markedly low cost bases, like the Chinese players, are best positioned to tough out leaner times. As Tony Weiner, head of technology strategy at German carrier T-Mobile’s British outpost says: “There will be major vendor consolidation in the next decade. In some ways it’s unfortunate but Huawei’s performance is staggering; they’re just sweeping the board.”
The Chinese vendors may well be positioned to take advantage of economic factors over the next ten years, but what about the country’s end users—customers, indeed, in all developing markets? Africa, Latin America, China, India and, to a lesser extent, Russia—these are the growth markets in 2010 and will fuel the land grab of the next decade. But will 2020 see a greater parity between the services available to customers in developed and developing markets?
It seems highly likely. For one thing, handset technology is increasingly being pushed down the product ranges so that even midrange handsets from the early part of the decade will be highly capable internet-enabled devices. And the lack of fixed reliable fixed infrastructure in many developing markets—which has made an enormous contribution rapid uptake of mobile telephony—is already fuelling carrier plans for mobile broadband. Bengt Nordstrom’s second prediction for the 2020 Mobile World Congress is that: “China Mobile is the first operator to demonstrate 5G technology, which is capable of delivering data speeds of up to 1Tbps. The first commercial launches are planned for 2021.”
And the argument applies not just to communications infrastructure. Hannes van Rensburg at mobile financial services outfit Fundamo believes that mobile will enable extremely rapid growth in banking services in developing markets that lack advanced financial sectors. “It’s taken around 100 years to ‘bank’ the majority of those in developed nations,” he says. “With the advent and accelerating growth of mobile financial services it could be only a matter of years to ban the remaining global unbanked population. By 2015, never mind 2020, the developing world will have superior financial services—more convenient, secure and ubiquitous—than the so-called developed world.”
The only truly reliable prediction one can make about the state of the mobile industry ten years from now is that there will be elements to it, products and services within it—even companies leading it—that, in 2010, do not exist and cannot be imagined. But the fact that central concerns from 2000 have resounding echoes in 2010 does indicate that we can make educated guesses as to how certain trends will shape out over the course of the decade.
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