MWC 2012 – The Analyst’s View
The mobile industry had its biggest industry show last week in Barcelona. Going by the attendee numbers, the global economy seems to have rebounded, though riots on the streets indicated tough time for Spain ahead.
While there weren’t any blockbuster announcements, there was plenty to chew on. LTE, connected devices, mobile commerce, privacy, wi-fi offload, small cells, platform wars, mobile money, RCS, Connected Home, NFC, Cloud, and HTML5 had their share of debates and discussions. Here are my observations from the show.
China passes the 1bn subs mark - As we noted last month in our research piece, A Tale of Two Mobile Markets - China and India, China crossed the 1bn subscription mark this past weekend. In the last 10 years, China has become the second largest economy in the world behind the US, while India, which crossed the 900m subs mark last month, is edging past Japan to be the No.3. Given that mobile will have a central role in the ICT evolution of global markets and economies, what happens in the mobile markets of China and India will influence rest of the world.
Convergence of three screens - One of the fascinating trends is the convergence of the desktop, Tablets, and smartphones at the OS/apps layer, with Apple, Microsoft, and Google being the three major pillars. Each has its strength in a given segment, though Apple has the most mindshare across all three. Microsoft dominates the desktop world with over 90 per cent share, while Apple dominates the Tablet world, with over 60 per cent share. Apple also runs a close second to Google on the smartphone segment. This has significant implications for commerce, distribution, and lifetime value of the customer.
Operators vs. OTT: Round 2 - Mobile World Congress Keynotes started with two of the most prominent mobile operators proclaiming that the industry has significant challenges in the form of OTT (Over the Top) providers commoditizing their revenue streams, without any significant investment of their own into the network. Both Franco Bernabe, chairman and CEO of Telecom Italia, and Li Yue, president of China Mobile, painted a gloomy picture, and explained how operators need to focus on fundamentals if they were to survive the ever-growing pressure on their margins. Some, like KPN and SMART, are seeing deterioration of their business fundamentals. However, there are some success stories, as discussed in my GigaOM column.
A number of operators announced their support for Joyn – the face of RCS (Rich Communications Suite) services. The Operator/OTT story will be one of the most fascinating ones to watch in the coming months.
Mobile payments and commerce - There is significant activity in the mobile payments space, but activity shouldn’t be confused with progress. The number of announcements that include actual product offerings or roadmap is limited. There are some interesting case studies that are emerging, however, such as the one in Czech Republic, where operators are collaborating with the banks to lower the commission and share the proceeds. That’s the primary way the operator model is going to work. The financial guys have protected their turf very well. And now retailers are forming their union. There has been too much focus on NFC payments rather than NFC as a platform for doing other things besides payments. In summary, it will take a long time.
Mobile Cloud - The discussion of Mobile Cloud has moved to Smart Cloud. From devices to the network to the apps, all elements of the chain are looking for the Cloud to drive efficiencies in cost and performance.
Mobile security - Mobile security has emerged as one of the key opportunity areas for the ecosystem. Given that mobile devices are multiplying like gremlins, it is time to reign in the security aspect. Both consumers and enterprise customers will benefit from a safety net that can protect customers from loss of data, viruses, targeted attacks, and malware. You can expect a number of offerings in this space over the course of this year.
Intel is serious about mobile - Paul Otellini, CEO of Intel, said at the launch event that the company is introducing mobile technology at twice the pace of Moore’s Law, and this is a clear statement that Intel is serious about mobile. Intel announced Orange, Lava, ZTE, and Visa as its new partners (in addition to previously-announced partners, Motorola and Lenovo) for its mobile chipset platform (smartphones and Tablets).
While industry-watchers are waiting for one of the big shoes to drop (the likes of Samsung, HTC, Nokia), Intel is making steady progress, and its devices are blazing fast especially for 1080p video. Partners are all looking for mass-market devices (read sub-$50 after subsidy) within the next 2 - 4 months.
Managing signalling traffic - While data capacity issues are the subject of much discussion, signalling traffic and the problems it causes don’t get the same treatment. However, it is very clear that management of signalling traffic will remain important. Many applications are atrocious when it comes to signalling efficiency. For example, I saw one of the mapping apps at Procera’s booth, which requested connection for every single tile on the map, every time the map was rendered, so one map view could generate over a dozen signalling requests. So far, a lot of attention has been on policy management of data traffic; we had better start paying attention also to policy management of signalling traffic.
LTE/wi-fi - Infrastructure providers and operators are looking to tighten the bond between LTE and wi-fi such that the traffic can be policy managed at a granular level by application type, so that traffic can be optimized and routed accordingly, based on the real-time traffic conditions. SK Telecom, and Alcatel-Lucent, with its LightRadio technology, were among the players demoing the concept.
Traffic onloading - Most vendors and operators talk about traffic offloading, but Wim Sweldens, president of Alcatel-Lucent’s Wireless division, had much to say about traffic onloading. Even at the show, wi-fi offload was being discussed along with LTE in the same sentence. With traffic offload, operators are also offloading the customer, he said - exposing the customer to potential security problems, and perhaps loss of revenue opportunities during that session. With Light Radio WiFi, operators will be able to more intelligently onboard the customer to their network, and provide the same level of service and security as they do with their cellular network. Wim suggested that this is a good marriage between the radio and the IP worlds, delivering the best service to the customer, while preserving the value for operators. We will have more research coming out on the subject later in the year.
GAMAF moves - While Eric Schmidt will argue Microsoft isn’t in the mix; the platform world in mobile revolves around the furious five – GAMAF (Google, Apple, Microsoft, Amazon, Facebook). Each has its own strengths and weaknesses. Amongst the five, Google had the biggest presence at the show, while Apple and Amazon were just there to scout talent, deals, and competition. Amazon and Facebook lack an OS to go with their ambitions, and are pinning their hopes on HTML5. Amazon has thus far used Google’s efforts to its advantage, and done a better job in some areas. MWC12 was the coming out party for Facebook Mobile. Microsoft is making steady progress with Windows 8, and hoping that it will prove to be its lucky number.
The empire strikes back - Microsoft and Nokia have been making steady progress in their quest to regain market share that stands decimated by previous strategic errors. While it is going to take an unforeseen amount of time to make up for the lost market value, Nokia’s product line looks good, and operators seem to provide a helping hand in creating the third viable ecosystem. Microsoft has been scrambling to get Windows 8 ready for the market so that it can launch Tablets and tie the three screens together. Things are finally coming together, and while a number of things can still go wrong, the two workhorses are moving in the right direction. The biggest question remains, however, whether consumers will give them a chance or not.
Facebook: HTML5 R Us - Facebook has been a bit tentative in mobile over the last few years, but is making a concerted effort in building its strategy around HTML5. It is also doing this by rallying partners from across the ecosystem. With its massive reach, it will be a significant player in mobile, commerce, and advertising.
Connected Home - One of my favourite MWC things to do is to visit the Connected Home to see how close we are getting to the reality of the Connected Home. AT&T and other partners showcased some of their latest technologies in home automation, and the remote monitoring and home automation platform is almost ready for prime time. AT&T expects the Digital Life platform to be available later this year.
Devices - There were a number of devices launched at the show. HTC got going first with the HTC One. The most significant part of the announcement was the distribution deal with 140+ operators. HTC is going to have a good Q2. Sony, LG, ZTE, Huawei also announced their line-ups. Nokia’s PureView stood out for me with its incredible new camera technology (even though it was built on Symbian). Apple, you can finish your Lytro acquisition now. Samsung feverishly pushed its Galaxy Note.
The Untouchables - With Apple launching its LTE iPad on 7 March, the non-Apple Tablet market is pretty much frozen. While there were some new Tablets launched at the show, an opportunity to change the game likely won’t occur until Microsoft comes out with 8, or Google springs a surprise. Amazon will continue to sell Kindle Fire, but it is hardly making a dent in Apple’s trajectory. Apple is so far ahead of its competitors in the top tier of this key emerging segment that you might as well classify the company as the Untouchables.
HyperLocal on a global scale - Hyperlocal targeting has been around for some time. With polygon targeting, the advertiser can draw a polygon of the area where the advertiser wants to target mobile users. The advantage is that the ads are specific and more context-aware, and hence the rate of engagement is higher. Advertisers get better leads, and these types of campaign are quite useful for time-sensitive activity. The capability is generally limited to certain regions or countries, but at the show Millennial Media announced an extension of its dev platform - mMedia allows developers and advertisers to do hyperlocal targeting on a global scale.
Privacy - There was a lot of discussion around privacy. Everyone has an opinion, but not necessarily a good solution. Everyone wants to be the guardian of consumer data, but they don’t want to be held responsible for breaches. This pretty much means regulators are going to move in, and it will be hard to predict the impact.
Retailers in mobile - Some retailers seem frozen in the Mesozoic era, and can’t seem to break free from their archaic strategies. They realize something is wrong, but can’t bring themselves to change how they drive commerce. There is still a lot of focus on driving traffic to the stores, rather than driving commerce to the stores.
Mobile health and wellness - Developed countries are driving mobile wellness, and developing countries are driving mobile health.
2012 is going to be another fast-paced roller coaster for the mobile industry. Looking forward to a terrific year ahead.
Chetan Sharma is president of Chetan Sharma Consulting