Observations from Mobile World Congress 2012

I attended the 2012 Mobile World Congress in Barcelona. The following are my personal observations and extrapolations from the show based on my conversations with operators, customer meetings, colleagues and walking the floor.  I thought that you might find it of interest? 

1. LTE- Where’s the Party? – Last year was the year of LTE.  Vendors were flouting it and operators were demonstrating how it would change the world.  Even Verizon Wireless (an operator which never shows up at these things) had a big display showcasing LTE.  I think that this year the cold reality is kicking in – now that we have built it (or building it) will people actually use it?  What is the killer app?  Will all of that projected mobile video really go over LTE or will it be accessed from Wi-Fi powered tablets?  And of course, the elephant in the room – what will Apple do?  Will it bless the industry with its next iPads and iPhones running LTE?  That one decision will probably shape the payback curve more than anything.  The growing consensus may be that LTE makes sense but it is going to be a much slower burn than the vendors and technology prophets trumpeted.
2. Wi-Fi Comes In From the Cold – The new buzz was definitely Wi-Fi.  A technology that might at best have been found lurking in the far corners of a remote hall at past MWCs is now being viewed as something that operators really need to understand and embrace.  Of particular interest is how it can help mobile operators offload traffic from their congested networks.  However, the discussion is rapidly evolving with many operators asking what are the business models for Wi-Fi.  They are also beginning to explore how they not only integrate Wi-Fi into their network architectures but their overall business model and value proposition.
3. Mobile Payments… Again and Again – Once again, more promise and more solutions for providing mobile payments.  While these solutions hold promise, many think that the future of mobile payments will now be very different than we know it.  Look for the banks and the credit card companies to finally come out on top, doing what they do best, with tried and true systems and business architectures, to collect and transfer money.
4. Mobile Cloud – More than Just Words – Last year mobile cloud seemed to be mentioned just in passing – the concatenation of 2 hot words.  This year there was definitely more meat on the bone.  Key note presentations explained how it was the future, not just of mobility, but of everything.  Vendors proudly displayed mobile cloud solutions and showed off how they were really much more than just apps.  Judging by the packed room of people who came to attend  the mobile cloud panel, in which I participated, mobile cloud has definitely come of age and people are looking for answers… and opportunities.

5. Dumb Pipe or Smart Pipe? .. that is the Question Where the wireline industry grappled with this age at the turn of the century, this is now the issue of the decade for the mobile industry.  Operators are increasingly fearing becoming the mobile equivalent of the dumb pipe.  Many of the talks and discussions focused on explaining why mobile operators are critical to the mobile ecosystem and on how their networks are more than just conduits for Facebook and Youtube.

6. Not a Good Place for a Regulator – I wouldn’t want to wander around the convention floor with the word “regulator” emblazoned on my badge.  They were numerous swipes and references from participants to the challenges that unsympathetic views that regulators had on spectrum, pricing, caps and of course, net-neutrality.
7. Pricing and Policy to the Rescue – Cisco’s graph of exponential mobile data growth has become de rigueur in key note presentations, combined with a revenue line trending in the opposite direction to show that operators are struggling to justify further network investments.  There was talk of the end of unlimited data plans and paying for what you use, like electricity (a utility?), capping heavy users and slowing down certain traffic and usage behaviours.  AT&T made an interesting announcement around creating the “1-800” number for data, with the content provider paying for the access to be included with the application.  Is that like buying a TV with the electricity included in the selling price?  At the same time Vonage and other OTTs were launching services to make free calls and messaging over mobile networks.
8. M2M - The Rise of the Machines – As usual, operators and vendors were showcasing lots of M2M solutions and, of course, mobile interactions with vending machines.  But there seems to finally be enough of a critical  growing to tip M2M into the mainstream.  Mobile operators are starting to aggressively push this as a partial solution to issues identified above – filling LTE networks and smarter pipes.  And, machines are much more grateful than their human customers whose true loyalty increasingly lies with the OTT providers.
9. What’s The New Thing? – 3-D televisions and gaming devices have gone.  The world of devices seems to have converged to iPhone and iPad clones.  There was an interesting revival of the old Palm Pilot with Samsung’s Galaxy Note, that lets you write and draw with a stylus taking from a hiding place in the device (everything old is new again).  Cool, but I am not sure if it will ever become mainstream?  For a company given up as dead, Nokia had an exciting booth with lots of buzz.  And it’s new Windows based device is nice and very different than the clones.  But knocking Apple off its perch will be one monumental task?
10. Small Cells – Is Femto Bigger than Small? – Femto vendors last year seemed to be relegated to the dark corners of the floor and never spoken of.   However, they have now been officially re-labeled “small cells.”  But unlike the femto cells of old, small cells seem to be about data, less voice, and providing access in public locations as a fill-in strategy for macro cell networks, rather than being located in the corner of someone’s basement.  Also, unlike femto, mobile operators are very interested in small cells, realizing that they are reaching the limits on placement of macro cell towers and need small cells to increase coverage and capacity.

A New World for the Mobile Industry

As I described in earlier articles, I believe that there are  Eight Core Industry Disruptors that are driving key tipping points – The Mobile Seesaw – that are ultimately redefining the mobile ecosystem.  These tipping points, or key strategic questions, serve as a useful framework for developing scenarios for the potential future of the mobile industry.   The creation of industry scenarios is a valuable means to comprehend and envisage a multitude of uncertain and interconnected factors in a tangible and actionable way.  These scenarios paint a picture of plausible future worlds in five years time.

 While there are several plausible future scenarios, I believe that there are two key scenarios that are both more likely to transpire, and are the most informative in identifying  key business choices and helping in developing winning strategies for future success.

Mobile Segments – Back to the Future

This is a world not that dissimilar to today, or to the industry over the past five years or so. Mobile 2.5 or Mobile 3.0?  Industry consolidation continues with large players dominate in each segment of the value chain.  The large players focus on their core strengths in their respective segments of the value chain, seldom venturing into other parts of the ecosystem.  The traditional application to device to connectivity model continues, although it is dominated by 3 largely independent operating platforms.  The mobile operators retreat back to largely providing connectivity and leaving other aspects of the customer experience to be delivered by the dominate players in the other relevant parts of the value chain.  This détente, or coopetition, amongst all of the players means that they all seek way to create extra value by using their core strengths and capabilities (e.g., network, channels, advertising) to augment other offers.  Most of the industry innovation in this scenario occurs in the start-ups; although, successful ones are quickly gobbled up by the behemoths in the consolidating industry seeking innovation.

The key attributes of the tipping point continuum that characterize the Mobile Segments scenario are:

1.             Applications – applications resident on the device purchased through a traditional app store

2.             Mobile Networks – traditional mobile, licensed spectrum networks rule and continue to explode; alternative networks largely remain for niche uses

3.             Device Centric – largely independent, and non-interoperable devices, based on 3 independent operating platforms, continue to be subsidized by MNOs

4.             Traffic Growth – operators cope with continued explosive growth by lowering network costs and improving efficiencies, as they focus primarily on being connectivity providers

5.             Mobile Operators – Core mobile services (e.g., voice, SMS, email) will continue to be largely delivered by the MNOs

Mobile Explosion – A World Without Wires

This is a world where everything is wireless.  Aside from big pipes to big TVs and fixed devices, everything else is connected over a wireless network.   Access type doesn’t matter, as the end user is completely unaware as to which of the multiple, inter-related, licensed and unlicensed, networks he is using to connect his device to the Internet.  Although three large platform ecosystems still dominated, there is good interoperability between devices, networks and applications or services.  Much of this interoperability is driven by mobile cloud.  The most compelling mobile services are delivered through the mobile cloud; finally delivering on the long awaited promise of services delivered anywhere, anytime and on any device.  Competition increases within, and across parts of the mobile value chain, as the number of networks increases, platforms and devices become interoperable and services are easily delivered at scale through the mobile cloud.  The lines between the segments in the value chain begin to blur as each of the players both compete and seek ways to partner or collaborate with others to help to enhance and differentiate their offering.  Once arch rivals, mobile operators and OTTs (over-the tops), seek collaborative opportunities to leverage their core capabilities to create new value for themselves.

The key attributes of the tipping point continuum that characterize the Mobile Explosion scenario are:

1.             Mobile Cloud – while applications will not completely disappear, innovative and integrative services will largely be delivered through the mobile cloud

2.             Mixed Networks – a HetNet (heterogeneous network) of licensed and unlicensed access will provide the most cost efficient and effective network at time of need

3.             Ecosystems – inter-operative ecosystems will allow people to use what they want, on whatever network, without any control from the mobile operators

4.             Profitability –  players will seek new sources of value and revenue enhancement strategies as the scope of competition increases

5.             Over-the-Tops – With multiple networks and platforms available , OTTs find new ways to connect with their customers; although they do value collaboration with MNOs for competitive differentiation

Future articles will explore the challenges and key choices that each of these scenarios will impose and successful strategies for different players in the newly defined mobile value chain.

The Mobile See-Saw - Tipping Points Re-Defining the Mobile Industry

The eight industry disruptors that I described earlier are creating a number of tipping points in the mobile industry – the outcome of which could radically alter the mobile ecosystem as we know it.  These key strategic questions are defining the future framework of how the mobile industry looks and operates.  The answers to these questions fall along a continuum, like a child’s see-saw or  teeter tooter, strongly tipping the industry in one direction or another.  Understanding these tipping points and their possible outcomes allows us to better define the future characteristics of the mobile industry.

I believe that the following 5 tipping points, or key strategic questions, are fundamental in framing the future characteristics of the mobile ecosystem.

1.       Applications versus Mobile Cloud

-        Will services continue to be delivered from an application resident on the device or be delivered on-demand through the cloud?

-        Will the business model switch from purchasing per application to paying for a service per usage or subscription?

2.       Mobile Networks versus Wi-Fi

-        Will the explosive growth of data traffic require that mobile operators increasingly use Wi-Fi to meet demand?

-        Will the cost to the user and improved experience force people to increasingly use Wi-Fi over mobile networks for connectivity?

-        Will the rise of Wi-Fi centric devices, increased availability and technology advances create an  alternative “mobile” Wi-Fi network?

3.       Devices versus Ecosystems

-        Will users purchase the device , for its own value, or simply as a means to access a broader ecosystem?

-        Will we have a universal, interoperable mobile ecosystem or a number of powerful, closed systems?

-        Will the mobile operator continue to exert power to control and subsidize  devices and functionalities on their networks or will all devices be equally welcome on all networks?

4.       Traffic Growth versus Profitability

-        Will mobile operators find ways to increase the revenue per MB or will they be forced to focus largely on cost containment to maintain network profitability?

-        Will mobile operators continue to make significant network investments or will they drastically scale back because they can’t get adequate returns on investment?

5.       Mobile Operator versus Over-the-Tops (OTTs)

-        Will OTTs displace significant revenues from the mobile operator’s core services (e.g., voice, SMS) or will they be more niche players?

-        Will mobile operators control or collaborate with OTTs or will they be relegated to principally transporting the OTT services on their mobile networks?

-        Will end users consume services beyond connectivity from mobile operators or will they see OTTs as the key providers of these services?

Future articles will explore how the potential outcome of the these tipping points will re-shape the mobile ecosystem and successful strategies for different players in the newly defined mobile value chain.

Now Is the Time for SPs To Invest in Cloud Services for SMBs

Small and medium-sized businesses (SMBs) are leading the way to cloud services. In fact, according to analyst estimates SMBs represent two-thirds of the public cloud market and are growing much faster as a cloud segment than enterprisesYet, many service providers (SPs) are wondering whether the rate of SMB cloud adoption makes it worthwhile to invest in cloud and managed services for SMBs.

Cisco IBSG recently undertook unique customer research to better understand what SMBs really want from cloud services and the size and scope of the market opportunity.  Highlights of the SMB Cloud research reveal some interesting findings: 

1.  SMBs’ awareness of cloud services has dramatically increased, resulting in an audience that is more discerning and demanding.

2.  Nearly half of SMBs will spend more than one-third of their IT budgets on cloud and managed infrastructure services in 2013.

3.  There is high, pent-up demand for software as a service (SaaS) and managed infrastructure services (IaaS) over the next two years. SMBs’ investment plans include advanced options such as conferencing and collaboration, managed VoIP, storage, and hosted business apps, in addition to the more basic services they currently use.

4.  Security assurances and demonstrated business impact are the key buying factors. Service providers need to emphasize that security is an integral part of the offer to help SMBs make the leap to cloud and managed infrastructure services.

5.  “Services tailored for SMBs” are the single biggest driver of provider choice. SMBs want offers that reflect an understanding of their businesses, and don’t want to pay for features they don’t value.

6.  SMBs look for cloud-based and managed infrastructure solutions—not stand-alone, technology-led offers. They gravitate to integrated solutions that let them accomplish everyday tasks more efficiently and effectively, without investing time to manage the technology on which they rely.

7.  Service providers are well placed to take advantage of the SMB opportunity. They are preferred suppliers to SMBs, with the ability to offer the network-based features SMBs want (such as integrated security, end-to-end performance, and reliability guarantees).

Now is the time for SPs to invest in bringing integrated SMB offers to market. To be successful, SPs need an in-depth understanding of the specific needs and concerns of the SMB market and should consider partnerships to help them introduce cost-effective, integrated solutions. Perhaps most important, service providers must be able to credibly guide SMBs as they embark on cloud investments—helping them overcome barriers and realize the value of cloud and managed services.

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8 Strategic Inflection Points Redefining the Mobile Industry

There are a number of major disruptions, or strategic inflections points, in the mobile industry which are radically altering the entire mobile ecosystem as we know it.  Some of these disruptions have been slowing building up steam over the last couple of years; although, many of these have just started and have yet to really play out.  However, these strategic inflection points are causing, and stand to cause even greater, disruption and uncertainty in the industry.

The following 8 key strategic inflection points that I believe will re-define the mobile ecosystem.

1.       Explosive Demand for Mobile Data –a 26-fold between 2010 and 2015

-        Cost challenges of building mobile networks to supply explosive demand

-        Monetization challenges  – how to make money  from increased demand?

2.       The Rise of Software Platforms – from “walled gardens to walled ecosystems”

-        From battle of devices to battle of ecosystems (e.g., Apple, Android, Windows)

-        A world dominated by Apple and Android ecosystems

-        The  ecosystem and its capabilities (e.g., apps) are what is important to the mobile user rather than  network connectivity, which is seen as a given

3.       Availability of New, Fast Mobile Networks

-        LTE Everywhere – battle for new services to get ROI and differentiate from 3G

-        Rise of Wi-Fi – quickly becoming a viable alternative or complement to mobile networks as it is often free, good coverage, better experience and fits well with the rapid growth in nomadic devices.  Could Wi-Fi be a viable competitor to LTE?

4.       A More Active Regulator in Many Countries

-        Spectrum gatekeepers – most operators are hungry for more spectrum

-        Public policy - desire to have universal broadband coverage

-        Net Neutrality – openness of the internet, strengthens the OTT model

-        Protecting the mobile customer – concerns over pricing, data caps, roaming fees

-        Industry structure and policy –  more discerning about acquisitions and consolidation

5.       Changing Industry Structure

-        Industry consolidation in every segment of the value chain – each segment dominated by 2-3 players

-        Major mergers and alliances – e.g., AT&T/T-Mobile, Nokia-Microsoft

-        Limited opportunities to expand in a dominant way into other segments of the value chain

-        Market and innovation leadership concentrated in few major companies – e.g., Apple, Google

6.       Growth of Network Connected Devices – Internet of Things

-        Tablets, eReaders, gaming devices, Machine –to-Machine, etc.

-        Everything is becoming connected – e.g., home, healthcare

7.       Move to Cloud Delivery Models – “everything as a service”

-        Happening much faster than anyone had expected

-        App store model (application client) vs. the mobile cloud model (service)

8.       The Rise of the  OTT Threat – largely the battle for video distribution and services

-        Threat to existing video providers - e.g., NetFlix and Hulu vs. cable TV

-        Monetization for network providers – how do they get a bit of the OTT pie?

-        Economic balance of the ecosystem – network providers need a return to invest, OTTs largely successful based on cheaper operating model (content, distribution) – not a sustainable economic model

Future articles will explore how these inflection points will re-shape the mobile ecosystem and successful strategies for different players in the newly defined mobile value chain.

Will Wi-Fi Be the Death of Mobile?

In 97 countries around the world there are now more mobile devices than people. No wonder mobile networks are clogged with massive amounts of new traffic!  Mobile operators are struggling with how they can provide customers with the mobile broadband experience they expect, in a cost effective, scalable and profitable manner.  Cisco’s Internet Business Solutions Group (IBSG) believes that Wi-Fi, the “silent sleeper” of wireless access networks, may hold the answer.

The mobile industry is on the brink of a fundamental change. Just think of some recent key developments: There has been massive growth in Wi-Fi-enabled smartphones, tablets, cameras, and game consoles—and nearly half of network traffic growth is Wi-Fi. The number of Wi-Fi access points is also growing, with more and more free public access. At the same time, economic modeling by Cisco IBSG shows that mobile operators can reduce costs and improve customer experience by offloading mobile data to Wi-Fi networks. It’s not surprising that Wi-Fi is becoming an integral part of wireless network design. Wi-Fi has truly come of age and now realistically represents a viable wireless access network.

But will Wi-Fi be a complement, or competitor, to mobile wireless networks? Consider the following:

1.   Wi-Fi covers most of the places where we are: 80 percent of the time, people connect to the mobile Internet from their home, office or other indoor location—all areas that are addressed by Wi-Fi.

2.     Much of what we do is nomadic, not mobile: Two-thirds of the activities people do on smartphones are nomadic activities such as email, web browsing, gaming, using productivity tools and making video calls.  Wi-Fi is ideal for these activities. 

3.   New nomadic devices will consume even greater amounts of mobile data: While a smartphone typically consumes 24 times the data of a standard mobile phone, a tablet consumes 122 times more and a laptop 515 times more than a mobile phone.

4.   Consumers will happily use Wi-Fi as an alternative to mobile: Our research shows that U.S. smartphone users already use Wi-Fi a third of the time to access the Web.

5.   Wi-Fi can offer a more cost effective solution, and a better user experience: Wi-Fi delivers higher speed, good coverage and a better experience—all at a lower cost than mobile.  Complex price structures and device-specific data plans could actually encourage users to migrate to Wi-Fi. 

6.  There are several ways to make money from Wi-Fi: In addition to the traditional business of retail hotspots, there are now several other viable access models where operators can make money by charging mobile carriers or other Wi-Fi providers. 

Several types of service provider can create winning strategies to succeed in Wi-Fi. Mobile operators can use Wi-Fi to offload growing data traffic. Existing Wi-Fi network providers can (1) sell wholesale access to mobile operators for data offload, and (2) sell access and value-added services to retail hotspot owners.  Integrated providers, who typically already have both mobile and some Wi-Fi capabilities, can use Wi-Fi to offload data traffic from their mobile networks and differentiate their fixed broadband offers.

Wireless networks will evolve over time, but one thing is certain: Wi-Fi is a critical element in mobile networks. Wi-Fi is not the death of mobile, but it is the beginning of a new chapter for this revolutionary industry. 

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