Voice takes centre stage on day two of MWC

barcelonaIt’s the end of day two here in Barcelona and despite the wind, rain and the long queues at the entrance gates (not to mention the food halls), it’s been another overwhelmingly positive day. The hustle and bustle in and around the stands here at MWC is obvious and there’s clearly an upbeat mood generally, a marked contrast to last year’s event.

Perhaps one reason for the general positive feeling is that operators have remembered just how big this business is. There’s a lot of talk about the importance of data and whilst it will, of course, be the main revenue driver in the future, it’s worth taking stock of just how much the mobile industry has grown. Informa’s latest forecasts suggest that more than US$700 billion will be generated in operator service revenues from voice in 2010 alone.

It’s hardly any wonder then that there’s been a lot of talk today about how voice can be successfully migrated into the next phase of the industry’s generational evolution and onto LTE. Our discussions today point towards more momentum for the GSMA-led OneVoice initiative, although T-Mobile and Kineto Wireless are still resolutely pointing out VoLGA’s relevance as an interim solution before OneVoice gets its act together. All the while, circuit-switched fallback (CSFB) still has its fans.

The biggest announcement on voice though was undoubtedly reserved for Verizon Wireless and Skype, who finally came forward with the week’s worst kept secret; their wide-ranging partnership aimed at bringing Skype to Verizon’s 80 million plus customers in the US. We’ve long since said that partnership with Internet-based VoIP players is the best bet for operators developing a mobile VoIP strategy and we’re sure they’ll be plenty more deals ahead that vindicate that view. There’s plenty of money in voice to go around and Skype and co can be valuable partners in helping to grow users’ propensity to spend on data – just ask 3, who’ve always talked up the value of their Skype partnership in helping to bring data-hungry users onto their networks.

Friend or foe?
As expected, WiFi has been at the forefront of demos and discussions at this year’s show. It’s amazing to think just how quickly operators have moved to bring WiFi into their core network strategies for scaling their networks cost-effectively. It’s not that long ago that many European operators were actively disabling WiFi in the devices they sold through their direct channels.

That being said, WiFi’s transformation into the operator’s new best friend is still not 100% complete. A key hurdle that we still see is the need to overcome the issues of authentication and providing a better user experience for the customer when switching between cellular and WiFi networks. The days of logging in and out of hotspots need to go if operators really want to offload greater proportions of traffic onto WiFi. That being said, it seems that even with today’s pretty average WiFi experience on a typical smartphone, consumers are favouring WiFi over cellular. We heard today from T-Mobile that one-third of all mobile device-originated traffic is going over WiFi. We’ve not yet quantified how this will impact future femtocell volumes, but there definitely be co-existence of WiFi and femtocells and we would definitely divert any discussion away from this being an either/or question.

Is it’s good enough for Stephen Fry…
As we speak the lucky few are gathering to celebrate at the annual GSMA awards and listen to Stephen Fry talk mobile whilst putting away a few well deserved glasses of Rioja. Our Chief Research Officer, Mark Newman, got an unexpected chance to point out some of the show’s snazzier devices to the self-confessed phone geek earlier today. Mark and Stephen chatted about DOCOMO’s continual innovation in the handset space – their new wooden handset being another example of DOCOMO’s position as one of the leading operators in pushing forward device development. Mark also highlighted HTC’s HD2 device as one of the show’s more impressive new phones. Whether it’s impressive enough to persuade Stephen to ditch his iPhone, we don’t know. We also told Stephen to check out Windows Phone 7 – most of our 14 analysts have been quietly impressed with the rip-it-up-and-start-again approach Microsoft has adopted for its OS and the results it’s yielded. If you’re here at the show, do go and check out the demos on their stand.

Google puts mobile first
Eric Schmidt’s much anticipated evening slot at the conference today saw him serenade mobile operators with the well crafted line that Google sees mobile at the forefront of all its development activity – any time Google develops a new product or service it does so with mobile at the very centre of their thinking. We’ve already seen this with the way it thought about Buzz and how it put mobile in the middle from the beginning. Meanwhile, anyone who ever struggled with languages at school will be delighted at Google’s experiments in bringing real-time translation to the market – the days of speaking loudly with a slight foreign accent whilst abroad could soon be in the past.

Where do operators pick their battles?
We’re often asked by operators about where and when they should pick their battles with the over-the-top players from the Internet space. Operators know these days that they neither have the money, nor the competencies to develop services to address all of today’s users’ needs. There do remain however areas where operators continue to believe they can do things better than the rest and a consensus appeared to be emerging in our conversations today with T-Mobile and Orange that location, music and television are still major battlegrounds for Europe’s big mobile telcos. If ever they needed reminding of the value of partnerships with Internet players though, Facebook’s presentation today served to highlight the value of using big brands to help drive adoption of basic data access plans. Facebook and Vodafone UK experimented with offering free access to Facebook for customers not using data services. They saw an overwhelming success, with 20% of those testing out the trimmed down Facebook service adding data bolt-ons to their monthly plans.

Knowledge is power
Finally, we’re hoping to see an end to the use of the dumb pipe term. It’s outdated and pretty meaningless in our eyes. Eric Schmidt was asked during the Q&A following his presentation about why he’s turning operators into dumb pipes. Like a true pro, Schmidt sidestepped the question nicely and we’d have to question this continued focus on the term. Our view is that operators have far too much data to ever be turned into dumb utilities. They need to turn raw data into structured information and then draw insight and knowledge about usage trends and user behaviours from that. Fortunately, everybody is talking up their solutions for the emerging analytics space and we’ll be following with interest just how operators use the intelligence to create value down the line.

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