Industry fumbles to find light in shadow of the iPhone

By Paul Lambert

Almost three years after the launch of the iPhone, it was clear at the recent FT World Telecoms conference that the mobile industry is still catching-up with the new paradigm the device has created.

In recent months handset vendors such as Palm, Motorola, HTC and Nokia have launched new handsets that compare favourably with aspects of Apple’s device. However, notwithstanding the achievements of some handset manufacturers in emulating the iPhone, the mobile industry as a whole is still leagues behind Apple in creating a truly compelling user experience of mobile internet and services.

While it’s clear for handset vendors what they have to do to close the gap on Apple in the smartphone space – produce something that’s as good as the iPhone – operators are still struggling how to replicate the level of experience Apple has created for high-spending mobile users.

Mobile operators have long been guilty of burying their collective head in the sand when it comes to assessing the success of their mobile data efforts. For five or so years, countless operator CEOs would stand up at conferences and tout the success of their closed mobile portals.

This would probably still be going on today had Apple not forced them to admit the reality: the experience they were creating was appalling. It finally became clear that the success of these portals the CEOs said for so long was just about to happen was never going to happen. No wonder data about uptake and usage of mobile portals was always so hard to come by: had this been made public investors would have taken their money from the industry in droves.

But the iPhone changed everything in the mobile industry, not least forcing executives at operators to admit that they didn’t have a clue what they were doing with advanced mobile services.

Which brings us to this month. At the FT conference held in London, I was amazed to hear almost every single speaker, including senior figures at Vodafone, France Telecom and Deutsche Telekom, state that, essentially, they were still looking for the right approach to mobile services.

Each one of these speakers cited the iPhone experience as the benchmark they were all looking to emulate. And with the exception of Vodafone and its 360 initiative, none of the speakers had much of an idea about what their response was going to be to the iPhone.

And Apple wasn’t even at the event. Come to think of it, Apple hasn’t been a speaker at any major mobile event that I can think of. What’s incredible is that Apple hasn’t needed to come and find out from the mobile industry what the latest themes and trends are. It’s created the biggest shift the industry’s ever seen itself.

And I wouldn’t like to bet against Apple or another company outside the industry creating the next major shift, because on the evidence of this week, it’s not the senior executives at the mobile companies who have the slightest idea what this is going to be. And this by their own admission.

But I think this admission of ignorance is hugely positive. For once, the mobile industry is saying: we’re not making the most of the technology (mobile broadband) available to us, and we need help to do so.

Aside from the iPhone, the overwhelming theme of the conference was partnerships. This was also something of a first. One after the other, the speakers stated the need to become genuine partners with Internet companies to capitalise from the mobile broadband technology opportunity. Most admitted their past failings in this.

The great advantages operators have, and it’s almost the only ones they have, is that they own the networks and they bill the people who use them. Aware of this, Michel Combes, CEO, Europe region, Vodafone Group, spoke about being a ‘smart pipe’ for other companies to sell their services through. Combes said that Vodafone was aiming to be the best operator partner to work with for companies outside the industry. Vodafone, among others, has now thoroughly embraced this stance – a massive turnaround from two to three years ago.

Operator executives should be commended for admitting that they’ve been bad partners to companies outside the mobile industry. Now they’ve gone to the other end of the spectrum, and are tripping over themselves to be the best partner to outside companies that have popular services to sell in the mobile space.

The big question now is: will this new attitude create tangible benefits to operators?

One other theme that dominated the conference was application stores. Companies are tripping over themselves to make application stores, and I question the wisdom of doing this. Each of these companies is, of course, following the path created by Apple in the hope that making a comparable store will lure users away from the iPhone

But I think this is ill-conceived and misguided. People buy the iPhone not for the Application Store. They buy it because it’s the best designed and made device on the market, the one that also offers the best mobile internet experience, the best media player and a great email service. Oh, and you can also play some of the best hand-held games and do a host of other things too. But the latter are just compelling extras to the rest.

The Application Store has been great for software developers, but whether it will be equally as positive for device vendors and operators is another question. I find it hard to see people buying a device mainly because it’s got a great application store. The application store is just one small part of the puzzle.

No doubt the day will come when a new device offers a whole new experience that makes Apple’s look old-hat. But given the vision Apple has manifested in the past, and the dearth of new ideas coming from within the mobile industry, I wouldn’t be at all surprised if this new vision didn’t come from Apple itself, or another that is similarly outside the mobile industry.

Operators won’t be completely dis-intermediated by Internet companies in the future. But they will have to accept sharing much less of the pie than they would like.