dw2

7 March 2009

What have operators done for us recently?

Filed under: collaboration, innovation, Mobile Monday, operators — David Wood @ 2:13 pm

Mobile Monday in London this Monday evening (9th March) will be on the topic of “What have operators done for us recently?”.

To quote from the event website,

What have mobile operators done for innovators and developers, lately? Our next MobileMonday London event will explore this issue. The event will be held on March 9th at CBI conference centre (at Centrepoint Tower) at 6:00 pm, sponsored by O2 Litmus and Vodafone. Panelists will include James Parton from O2, Terence Eden from Vodafone, Steve Wolak from Betavine, David Wood from Symbian Foundation and Jo Rabin representing dotMobi. The event will be chaired by Anna Gudmundson from AdIQ and Dan Appelquist will be your host for the evening.

At the time of writing, there are still a few registration slots left. If you’re in or around London on Monday evening, and you’re at all interested in the future of the mobile phone industry, you will almost certainly find the meeting worthwhile. From my past experience, these events are great for networking as well as for highlighting ideas and sharply debugging them. The breadth and depth of experience in the room mean that any superficially attractive proclamations from panellists are quickly challenged. I typically leave these meetings wiser than when I went in (and often chastened, too).

Usually people blog meetings after they happen (or whilst they are happening). In this case, I’d like to set down a few thoughts in advance.

Early last year, Symbian commissioned a third party report into the viewpoints and experiences of mobile developers. The report had a Californian bias but the results are familiar even in the context of Europe. The report did not specifically seek out the opinions of developers towards network operators, but these opinions came through loud and clear regardless. Here are some representative comments:

  • “Everyone in tech has rope burns around their necks from doing business with the carriers [network operators]. They hung themselves trying to do carrier deals.”
  • “The operator is an adversary, not a partner.”
  • “The basic problem with mobile is that operators are in the way.”
  • “The reality is that the mobile operators will screw you, unless they already want to do what you’re developing. They always ask, ‘What’s in it for me?'”

I raise these comments here, not because I endorse them, but because they articulated a set of opinions that seem to be widely held, roughly twelve months ago.

Operators are (of course!) aware of these perceptions too, and are seeking to address these concerns. At the Mobile Monday meeting, we’ll have a chance to evaluate progress.

Ahead of the meeting, I offer the following six points for consideration:

1: With their widespread high bandwidth coverage, the wireless networks are a modern-day technological marvel – perhaps one of the seven wonders of the present era. These networks need maintenance and care. For this reason, network operators are justified in seeking to protect access to this resource. If these resources become flooded with too much video transfer, manic automated messaging, or deleterious malware, we will all be the losers as a result.

2: Having invested very considerably in the build-up of these networks, it is completely reasonable for operators to seek to protect a significant revenue flow from the utilisation of these networks – especially from core product lines such as voice and SMS. Anything that risks destroying this revenue flow is bound to cause alarm.

3: The potential upside of new revenue flow from innovative new data services often seems dwarfed by the potential downside from loss of revenues from existing services, if networks are opened too freely to new players. In other words, network operators all face a case of the Innovators’ Dilemma. When it comes to the strategic crunch, innovative new business potential often loses out to maintaining the existing lines of business.

4. New lines of revenue for operators – to supplement the old faithfuls of voice and SMS – include the following:

  • Straightforward data usage charges;
  • A micro-share of monetary transactions (such as mobile banking, or goods being bought or sold or advertised) that are carried out over wireless network;
  • Reliable provision of high-quality services (such as would support crystal-clear telephone conference calls);
  • Premium charges for personalised services (such as answers to searches or enquiries)
  • A share of the financial savings that companies can achieve through efficiency gains from the intelligent deployment of new mobile services; etc.

But in all cases, the evolution of these new lines of service is likely be faster and more successful, if new entrepreneurs and innovators can be involved and feel welcome.

5. The best step to involving more innovators in the development of commercially significant new revenues – and to solving the case of the Innovators Dilemma mentioned above – is to systematically identify and analyse and (as far as possible) eliminate all cases of friction in the existing mobile ecosystem.

6. Three instances of mobile ecosystem friction stand out:

  • The diversity (fragmentation) of different operator developer support programmes. Developers have to invest considerable effort in joining and participating in each different scheme. Why can’t there more greater commonality between these programmes?
  • The hurdles involved with getting sophisticated applications approved for usage on networks and/or handsets – developers often feel that they are being forced to go through overly-onerous third party testing and verification hoops, in order to prove that their applications are trustworthy. Some element of verification is probably inevitable, but can’t we find ways to streamline it?
  • The difficulties consumers face in finding and then installing and using applications that are reliably meet their expectations.

In all cases, it’s my view that a collaborative approach is more likely to deliver lasting value to the industry than a series of individualist approaches.

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9 Comments »

  1. Another point to consider is the customer service costs that operators must bear. Mobile innovation tends to offer distributed benefits, that the operators may share in, but concentrated costs that they bear alone. If an application causes damage to a phone or the network, operators hear the complaints and must act to fix the problems.

    Comment by olevine — 8 March 2009 @ 4:53 pm

  2. Hi Oren,

    >"If an application causes damage to a phone or the network, operators hear the complaints and must act to fix the problems"

    That’s a good point. On reflection, that’s an argument for the mobile industry to hurry up and provide the kind of solution that has long been talked about (and which, to be fair, has been partly implemented already): over-the-air diagnosis and fix capabilities, that reduce the costs of customer service and support.

    Once the potential downside costs of defective innovation experiments are reduced, it will make it more likely that operators (and others) will be keen to embrace such experiments.

    // dw2-0

    Comment by David Wood — 8 March 2009 @ 5:16 pm

  3. The real issue here is that the current revenues for operators are based on charging a lot for very little in many cases.

    Almost 10 years ago when working on the first GPRS stacks I did a few sums to see how much an SMS would cost to send as plain GPRS data (and that’s on the £’s/Mb that were being charged at the time). The figure, even than was a fraction of a penny. I’m astonished that this many years later there are still some tariffs where you can be charged 15p for sending a single SMS.

    The other problem is VoIP – if you’ve tried a VoIP service via a 3G connection you’ll know that all the talk about QoS is unnecessary for anything but important business communications. Unfortunately that leaves network operators as nothing more than ISPs with a mobility premium.

    With fixed line broadband costs down to £10/month or less unmetered, that mobility premium is too high for most consumers, including me (i.e use WiFi for data on my device and the mobile data only for very occasional emergencies). The operators have really painted themselves into a corner by competing on price with fixed line broadband for laptop users with a USB HSPA modem.

    As a consumer (and I expect many other value conscious consmuers see the same thing) I’m simply waiting for the deals they’re prepared to give for connection via a laptop to be available on my phone, with no restrictions on use of VoIP or 3rd party SMS providers.

    Here the interests of consumers and developers are aligned. In a fixed line environment regulators would step in to prevent the anti-competitive behaviour of the operators, but since governments around the world managed to rip the operators off so badly for 3G licenses, they’ve got to give them several more years to claw that investment back.

    Essentially your point 4 reads a bit like: Somehow ISPs should be entitled to a share of all business that is transacted using the small part of the network they provide.

    When you put it that way it seems absurd.

    It’s a difficult situation because we don’t want operators to stop investing in capacity expansion and new technology to upgrade bandwidth but it’s hard to see how that won’t happen if they’re reduced to utilities competing on price.

    More difficult is that if they opened up tomorrow, the early adopters would find no problem with the service but as people saw the value the networks would become flooded and suddenly quality of service would become important (and more people would be prepared to pay for it). However, a lot of pepole would be very unhappy with their provider, since the same service they were already paying for would have degraded.

    How do you manage this other than via the painfully slow expansion of services and reduction in pricing that we’ve seen so far?

    I’d guess that, if anything, the introduction of the iPhone App Store has pushed developer opinion even further against the operators as they’ve seen what can be done when everyone has unmetered access and the operators don’t control app distribution.

    My prediction is that mobile network operators are doomed to be utilities that compete on price eventually, but they won’t go down without a fight. It seems extremely unlikely that they’ll collaborate where it matters. I’d love to be proved wrong on that one though.

    Mark

    Comment by m_p_wilcox — 9 March 2009 @ 10:11 am

  4. I agree with m_p_wilcox. I can sympathise (up to a point) with the operators. Of course they need to cover their costs. However, as a consumer I want cheap, unrestricted data like I’m used to at home. A cheap bit-pipe is exactly what I want, nothing less, nothing more. I’m not sure how that circle is going to get squared but something’s going to have to give at some point.

    Another issue IMHO, is that the operators’ own services I’ve seen haven’t been particularly enticing. They often appear to be “me too” knock-offs of existing things. For instance, why should I use an operator music store if I already have a collection of stuff from iTunes? Why should I use the operator web services when I’ve already got my news, search, photo sharing etc. covered elsewhere (e.g. BBC News, Google, Flickr etc.)? Why should I pay extra for some TV streams when I can get YouTube and iPlayer content for free?

    I’m not surprised they’re so paranoid about losing revenue to 3rd party services if that’s all they’re going to provide.

    They ought to come up with unique and/or superior services. I would have thought that one obvious option would be to provide a standardised billing framework for online transactions. Every customer already has payments to their operator set up in some way, so why not provide a system to apps and 3rd party services to tap into that in return for some sort of revnue sharing. E.g. if, as an operator X customer, I can go shopping online or use my favourite premium online services and just have all the fees added to my phone bill so that I don’t need to register my credit card each and everytime then that would be really useful. Behind the scenes operator X would be taking a 10% cut but as an app/service provider it would still be a good idea since adopting the service would probably attract more customers due to the increased ease of making payments.

    Comment by James — 9 March 2009 @ 12:05 pm

  5. MNOs are pipes, they just don’t know it yet. The question is how much longer people will be prepared to pay a premium for mobility.

    Witness 3: Unlimited Skype and IM on your phone for a £9/month tariff.

    As a consumer the only thing stopping me from switching off my landline is high-speed, low latency RELIABLE IP, in my area mobile coverage is stupidly patchy and I get dropped calls and on/off connectivity no matter what operator I’m with (I live in South London, not Somalia).

    As a developer, I hate operators with a passion, purely because they are a blocker rather than an enabler: I have to waste precious time and energy removing them as an impediment to my progress, rather than them being a partner who is invested in the success of their service provision.

    Handset providers are no better, having worked with Nokia and Apple in the past both were downright awful. From Sybian Certified to Nokia’s intransigence and Forum Nokia clique to Apple’s Fight Club NDA (the first rule of iPhone development: nobody talks about iPhone development) it’s always a huge struggle to get timely information out of the provider, and again they are a project risk rather than a resource or partner.

    No matter what your intentions are, the reality of the situation is that handset application development organisations are often small, lean, highly focussed and agile. Handset providers and MNOs are supertankers, and just as agile and responsive. As such this is a classic culture clash, and there’s little anyone can do without radical change in the culture and organisation of the providers, which seems unlikely to happen in the near future.

    Comment by Fox — 9 March 2009 @ 12:46 pm

  6. I am not sure how this event went but one thing is sure that unless operator shows a sign of really collbration not by meeting but by action any such discussion is time waste

    Comment by Anonymous — 11 March 2009 @ 7:48 pm

  7. In the days before VHS video tape, a team from RCA went to Disney and showed them a prototype for a home video player. It featured a one-time tape casette that would have to be returned to a rental shop to be rewound.

    The folks at Disney were apalled and said they would never consider offering Disney content on such a device.

    “Why not?” asked the team from RCA.

    “Because we have no way of knowing how many people are in the room watching the screen, so we don’t know how much to charge”.

    Disney got dragged kicking and screaming into the home video market a few years later anyway, but even today the MPAA approaches on-line video with the same mindset. Innovating revenue models scares large companies to the point of paralysis.

    I think carriers are suffering from the same problem. They are so afraid of endangering an obsolete revenue model that they are unwilling to consider innovations that might not only improve their bottom line, but take them off the consumer and developers “most hated” lists.

    Comment by RAM — 20 March 2009 @ 7:31 pm

  8. Hi RAM,

    That’s an interesting comparison! It’s a lesson we all need to keep in mind.

    // dw2-0

    Comment by David Wood — 21 March 2009 @ 1:14 am

  9. The easy way will be when operators understand the need for the change at the moment. But this will not be so easy since every change has a pain point.
    There needs to be a revolution in the telecom field which is similar to the internet business mail email and search. The same has happening today in the automobile world, the big car manufacturers went ahead with making more premium and big cars and forget the small car market, and today small car market is a major revenue generator world wide.
    If operator becomes enough smart and switches to other revenue model its good for him else they have face huge loss the way as most search and internet company lost revenue due to new revenue model introduced.

    Comment by rahul — 1 April 2009 @ 8:01 am


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