opinion


Industry fumbles to find light in shadow of the iPhone

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.


6 comments

  1. Avatar Martin Wilson 26/11/2009 @ 4:03 pm

    Paul,

    Great article.

    Some two and a half years on I find the obsession towards the iPhone amazing. I also believe a component hindering progress is the fixation around control.

    I recently wrote a couple of posts that you may find of interest.

    Mobile strategy – iPhone should factor but certainly not dominate.

    Apple’s push into the mobile market has been interesting – some say a game change – they have certainly shaken the market up, but have they really delivered the results? If only they had sold as many devices as column inches that they have achieved.

    There seems to have been a global obsession with the iPhone. From the moment of first launch back in the summer of 2007 the iPhone has been headlining, the fixation still continues today. Apple has yet again demonstrated that it is a remarkable media machine. The iPhone receives a disproportionate amount of attention from the media, mobile industry and businesses alike…….. http://www.indigo102.com/archives/824

    Media: It is a control thing!

    Partnerships and Joint ventures have to be a way forward.

    The market opportunity in the new media world will be realised by the those that have grown up around the digital environment – the indigenous – as they are the ones that are most likely to get it and understand how the business models can and will work. These will be individuals that understand the operations of traditional media but are not held back by the need to re-think the traditional business models and operating principles. The traditional media owners still have a very important role to play — they know how to deliver revenue….. http://www.indigo102.com/archives/737

    Understand why the iPhone has hit a cord with consumers (basically it does things well) and how a more open approach to partnerships will add value to the consumer offer, it is likely that the value chain players will move the industry on and see far greater riches all round.

    Regards,
    Martin

  2. Avatar RantOn 26/11/2009 @ 9:19 pm

    It’s all an absolute joke – On the consumer and most of all the ‘operators’ for being so misguided in their efforts to control and create new revenue streams to the detriment of the consumer! WAP… pfft.

    Check out Sony Erricssons P800 released in 2003/4. The blurb at the time stated it was the best they could achieve given technology at the time. It had a touch screen full internet, camera, video etc etc etc Nearly 7 years ago! How oh how has it taken this long for someone to emulate and improve on that!?

    It’s their own fault, old timers should be removed from making decisions in this type of industry.

    A good example would be new touch screen phones including a slide qwerty keyboard… why bother!? pandering to technophobes will not secure future growth.

  3. Avatar Ian James 27/11/2009 @ 1:24 pm

    I agree 100%. But Apple have simply done what NTT DoCoMo did in Japan in 1999: i.e. control the handset design, open up the interface to content and application developers and – critically – offer a generous revenue share. It worked 10 years ago just as it works now. Few GSM operators have ever managed to replicate this success (Vodafone Live being one possible exception) because they were/are a) too greedy and b) don’t spend enough/any time on creating a compelling user experience.

    The smart-pipe concept, based on partnerships, might have worked 5 years ago, but today most of the operators’ assets can be replicated in other ways (think: Google Maps positioning capability) and most of the content and applications people want now resides on the Internet, usually for free, or is transferred directly from phone to phone.

    Operators have missed the boat through arrogance and greed. It’s time for them to bite the bullet and admit they have become utilities. They should slash their cost base and break it to their shareholders that it is no longer possible to continue to operate their business at margins of 40+ percent.

  4. Avatar Mike Lewis 02/12/2009 @ 4:48 pm

    It seems the only way any of them are going to compete with the iPhone is with Android. No other OS even comes close.

  5. Avatar App Developer 08/12/2009 @ 2:21 pm

    Superb article Paul, thank you.
    Martin, I think you’re making the same mistake as the operators and manufacturing incumbents – underestimating Apple and their ability to deliver an experience to the end user/ consumer that is beyond everything else on the market.
    I watch my 3 year old daughter seamlessly and naturally look at photos, play videos and play games on my iPhone without any help from an adult. There’s no other UI that is that intuitive and satisfying.
    Perhaps, there’s a good reason Apple isn’t at the events… they’re busy making great products while the rest of the industry talk partnerships!
    Ian, I think you’re correct on the future for the operators…

  6. Avatar Simon Buckingham 08/12/2009 @ 3:36 pm

    Great article- I agree that realization is a positive step. The twin advantages that operators have of location and billing need to be leveraged sooner rather than later if they are not going to change from being active “operators” to passive “carriers”. The problem is priority from the top to get these changes to happen in a timely manner given the economy and given that services are still a rounding error on the P&L account compared to voice, churn etc. And everyday there are more GPS enabled devices and more consumers get comfortable using their credit card on their mobile device, just as they did on their PCs….

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