GLG News by Ian Wood

Implications: Whilst the US has seen an explosion in Mobile Banking it is yet to see the users trust the service for Payments. Payments needs to address not just the Banked but the Unbanked, in Africa Vodafone and MTN have  established services that allow micropayments to be made to those that have no Bank Accounts.  The ability to make person-to-person payments is something that sees the service grow. Qualcomms Firethorn service whilst signing a number of contracts is yet to launch.  This service uses a Java Applet rather than SMS and Browser based technology to allow users to access multiple banks rather than a single bank.  This thus should enable a better uptake of Payments rather than Banking Services. The Stakeholders in the Mobile Banking world are moving towards a mobile wallet that uses NFC based technology to allow users to "wave and pay".

Analysis: I have been following the development of Mobile Banking in the US for the last year.  In this time I have been able to talk with Bankers, Service Providers and Mobile Networks about the efforts that they have made to seed the industry. 

I have looked on in envy as American Banks have spent over $240M promoting the mobile as another channel.  Wells Fargo are the most developed provider with 18 different mobile banking products that use SMS, Browser and Java technologies to allow customers to Check Accounts, Transfer Funds, Bill Pay and Authorise Transactions.  They are yet to launch a service that replaces Money and or cheques.   Bank Of America last month reported that it had 1M customers for its Mobile Banking Service, it also reported that less than 40% were using the payments service, but those that were we making payments of a high value than credit cards and the value was higher than they had forecast.

In Africa we see 2.5M Kenyans using the MPesa payments service from Vodafone.  The majority of these were not using the banking system and so have turned their handset into an ATM.  In the US 30% of the adult population are unbanked and so the potential to address these consumers with a service that also gets them to join the Mobile Phone community is of interest not just of Banks but also Operators.

For High Value customers Banks will use a Java Application as seen from Firethorn that will allow them to view more than one Bank at a time and thus manage funds between a National Bank, Local Bank and Payment Card.  The average American has 11 Cards and so needs to be able to view the funds available and move money across these accounts.  18 of the top 25 Banks have signed contracts to use Firethorn but the majority have yet to go live withy the service as they eductate customers in the mechanics of Mobile Banking.

The Ecosystem of trusted service providers in the US is highly developed, whilst in most other countries we see a few providers of the technology needed.  mFoundry is a provider of Banking technology that over the last two years has seen its service deployed by a number of leading US Banks and has just received investment from Bank of America amoungst others in its latest funding round as well as acknowledgement as one of teh leading private firms in mobile.  ClairMail is a Partner to mFoundry that allows banks to combine SMS and Browser based services.  Yodlee is a provider that some Analysts are talking about today in the same way that they were about Firethorn and mFoundry 12-18 months ago.

In the US you have three of the four Mobile Networks opening up to Banks and Trusted Service Providers to enable banking, T-Mobile are the only hold out.  Those in the sector see what they are doing today as the first steps towards a mobile wallet.  They see banking follwed by payments which will the include store cards, then they see ticketing moving to the mobile. Once you then start to store data on the phone they see the use of near field technology to access it.  This new short wave radio service can be built into the handset or SIM card and will see the handset used not just for payment but also security cards amd transit tickets.  Here in Europe later this year we see mass market services for Transit launch in France and Germany that use NFC technology after 12 months of trials. 

Implications: The market is still fragmented. In the big five we still see a wide spread of take up as consumers are yet to be won over. The mobile networks are still to discover a range of products that make the investment pay off. This talks about terminals rather than handsets and so a slowing of sales of phones is offset by a boom in USB Mobile Broadband Devices.

Analysis: When I look at the take up of 3G in the major countries of Europe what I see is Italy out in front with over 40%, then you have Spain with 34%, the UK with 25%, Germany with 20% and France with 16%. The development of the market in Austria, Finland and Sweden present a risk in that they are very small and two of them are leaders in Mobile Technology. When I travel around Europe I look at what people are using and if I have time ask them about what they do with their phones. Too many times I hear that all they do is voice and text. The third most important feature seams to be the clock which is disappointing for someone who works in teh industry. The investmenst made by the mobile networks in high speed data networks required that they find a customers base. Whilst Sony Ericsson has droped the price of its popular K800i device to a point that it can take market share in the Pay As You Go market the devices are still generally to expensive. Therefore what you have seen is a boom in Mobile Broadband with Huawei and ZTE selling high volumes of USB devices that allow consumers to connect computers to the mobile web. The problem is that in Sweden 500K Mobile Broadband users have generated 2X the level of Data of 10M phones. The service is priced such that the networks will need to look at traffic shaping if they are not to drop quality of service. Sony Ericsson has said that this year thay have had difficulty with supply of compenents for 3G devices. Nokia have been focusing on lower end handsets for Emerging markets rather than get the handsets that were show in Barcelona to the market because of software issues. RIM have spoken about finally launching a 3G devices but it looks like this will be delayed in terms of launch, the credit crunch means that Financial Services have not been upgrading. HTC has managed to grow the Enterprise market with its Windows Mobile devices running UMTS. The Autumn will be critical in Markets such as Germany and the UK as a wide range of 3G handsets enter the market. In France, Orange will need to invest in a National 3G Network before the consumer can take up devices. As an Orange customers all to oftan I discover that my 3G device does not work in France. The current financial situation could mean that the Spanish and Italian cool on 3G handsets.

Implications: This is something that they should have launched 12 months ago.  Failing that then we should have seen it in February at GSM World. The design is dated and the technology is out of date. This new handset is not going to have Networks placing orders outside of the US.  At best this gets a C for effort.

Analysis: This is something that is evolutionary rather than an advance that means that once again Motorola can be seen as one of the big 4.  Not only will it not be a success in terms of sales it will not be something that shows that Motorola has the design skills to match the leaders in the field.

Motorola's failing in the Emerging market are not ALL of its own making; the fact that the logo can be seen on the radios of American Soldiers fights the war on terror means that they can write off sales in an Islamic nation.

What is more damaging is that in the developed market they just do not have the focus need to compete on price or functionality.  Last week Sony Ericsson launched a handset that will have 8-Megapixels and GPS.  So this new handset will go against the Sony Ericsson K850i and Nokia N82 both of which have been available for over six months.

This handset rather than showing that after another fall from grace Motorola have got its Mojo back and can rise again shows just how out of touch they are.  The smart move would have seen a handset with excellent graphics, will be running the new Symbian UIQ 4.0 OS and have GPS. 

The latest handsets running Qualcomm silicon have excellent graphics and the latest Nokia handsets have GPS.  Both of these show that the consummer expects something far richer than can be designed in house by Motorola.

They have the opportunity to show that they are back in the game with one last role of the dice in the Fall when they show what they have for the important Chrustmas market.  Get it wrong and the Executive team will not be selling the business off to a Private Equity House (No other handset guy will buy it).  Rather it will be laying everyone off and heading for the Business School case studies on how Innovation out performs Engineering.

Implications: With ever more of the business done by Nokia in the Emerging Markets just how important is a handset with such a rich feature set? The Blackberry like E71 whilst attractive suffers from a limited number of Enterprise Applications. How does these handsets fit into the OVI service?

Analysis: More and More Nokia is becoming the handset for the Emerging Markets.  Its dispute with Qualcomm means that Nokia's presence in the US is very small.  In Europe the Competition for the Consumer is extremely tight and the Mobile Networks are not looking to over pay for handsets that they will be giving away for free.  Thus the success recently with Nokia has been in India and Africa where they are able to sell feature phones to the consumer with acceptable margins.  These new handsets are likely to cost users over 3 months salary to by.  Whilst those who have been to Bombay do see someone on a bike using a N95 it is not commonplace.

The E Serries in general have some excellent features but it is still predominately a Symbian based device which has limited functions for the Enterprise User.  Thus you are looking at a Business Manager asking is this device lower cost than a Blackberry and will it give access to my SAP system.  BT Global Services are providing a number of leading corporates access to a wide range of scheduling tools but they are not doing ity with Nokia handset. 

I would question if the technology addresses the market?  What is needed is a handset that is a workhorse capable of working as a replacement for a Windows CE device in the hands of a bluecollar working.  These two handsets look fine in the hands of an office worker but my Plumber would distroy it within a month.

Nokia are focusing more and more attention to the Consumer sector and the potential for media content on a handset.  Does it neccesarily want to support another set of APIs for what is a business device?  If I were still a Road Warrior then I would wish to have a handset that allows optimum sharing of media.  A business handset by its very nature needs to be a closed system rather than an open one. So as a Consumer I would feel letdown by the fact that I have a Nokia handset but it does not give me access to the VIP lounge that is OVI.

Whilst Nokia has been a success for more years than may predicted, has it finally got to a size that means that the communication lines are too long?  Does it need to focus on the high volume markets that it are core to its cash generation and become just a Comsumer manufacturer of handsets?  The specialisms needed to service the Business market a very different to those of Nokia.  They require that they work with stakeholders in the Enterprise Space and provide products at a pricepoint rather than feature rich.

Implications: When Colao left McKinsey to help run Omnitel as the COO he showed that he was more that a "Strategy Man" working alongside Francesco Ciao he showed that he was someone vary capable at Operational matters.  With Cioa gone, he steppped up to the CEO role and integrated the Omnitel into Vodafone. On his return to Vodafone he has spent the last 18 months getting ready to succeed Sarin by Optimising the network. Now with an Italian at the head you can expect to see Emerging Markets take a back seat as he follows the startegy of the Spanish Subsiduary and stimulates the market.

Analysis: Colao is someone who has Operational Experience of a level not usually seen in a CEO of a truly International Business.  He has a technical knowledge that makes it difficult for the Country Managers to hide.  He has the skills to streamline costs whilst still innovating products.

On his return in October 2006 he immediately addressed the cost base.  He informed Executives that they had a budget for a reason and that they were expected to live within their means.  He then set about taking down some of the Empires that were built at the time of Sarin's appointment.  He has invested wisely in an expansion of the ERP systems and restructured the IT structure so that at last the Executive have visability at a level not before achieved.

I am sure that he has plans for the first few days in the CEO role that will set the tone for the future.  I expect he to grasp the hard task of underperformance in the Emerging Markets.  Turkey has not performed as expected and he will seek measures that fix the Operation.  In the Emerging Market you have to remember that most of the network is powered with oil and the price has risen significantly.  Not only are the costs rising but also the income as consumers has less to spend because of risng prices of oil and food.  Colao has already started to address costs by changing they way that the network is cooled, and is looking if the network needs to be "on" 24/7.

Within the Big Five markets in Europe he will seek to resolve ownership in France. He is looking to offshore some of the transactional processes not to India but rather to Central Europe.  With Bond as Chairman you have tow Executives who believe in Insourcing rather than Offsoring.  It will be Centralised to two core data centres in Germany and Italy. His replacement as CEO Europe will be the current head of Spain who has been the Star performer over the last few years.  With him in charge you can expect to see Vodafone look at simple measures aimed at lifting useage of Voice and better customer segmentation.

On a Global level the new Vodafone Enterprise Services business will offer more than simple connectivity for Fortune 1000 businesses.  What you can expect to see is a business that operates in a similar manner to BT Global Services with revenues goming not from selling SIMs but rather providing solutions that lift operational efficency.

Vodafone will start to work on tools that improve the OSS and BSS in the businesses.  They are installing software from Aperto that allows them to serve dynamic adverts on the Live! platform without the need for Google.  Something that they are already doning in the UK now.  Other users of the software have focused on device management which have lowered the level of calls to Customer Service by 8%.

The other great news is that Vodafone will use Consultants in a more tactical basis.  As a former Partner of McKinsey he understands the value of using such services and knows the business model that they deploy.  Colao will be a nasty buyer of such services.  He will however use Game Theory to make sure that any new direction Vodafone make will be well planned.

Implications: Looking at the services businesses of Qualcomm and what you see is the development of a number of verticals.  One of which is BREW; the others are Location, Advertising, Payments, Video.  These services are aimed at helping to create Federations for particular services.  Having created these Federations Qualcomm will be able to influence the strategy of Mobile Networks which will lift the spend on Handsets that run Qualcomm silicon.

Analysis: In the days of walled gardens Qualcomm developed the BREW platform was has successfully developed a mobile data ecosystem far larger than the GSM networks in Europe have.  As we move towards an Open system the Brew model needs to change.

Nokia have developed the OVI platform in an effort to control the content strategy of Mobile Networks and the changes that Qualcomm are attempting with BREW mirror this. 

Here in Europe Brew is not as widely used as in the US.  We have a few networks who use it for vertical solutions.  TIM uses BREW for higher functionality 3D games; O2 use it for UI on its low cost own labeldevices as does 3. 

Qualcomm is aware that it takes time to develop a new technology.  The first experiences of UMTS were poor, but collaboration resulted in it becoming mass market and becoming comparable with the DSL broadband experience.  Now that the Mobile Broadband Ecosystem has been built BREW is needed to provide content and review from handsets.  Without the development of BREW you will have Mobile Networks becoming the dumb pipes that the fixed networks are.

The Fixed Internet might be able to operate on a few high end media phones but it will not be something seen on the normal users handset.  The architecture of the mobile networks is such that bottlenecks happen and will do so until the present basestations adopt the flat architecture of I-HSDP.  these facts mean that components of BREW will be needed if the operators are to deliver a differentiated service to their subscribers.

Remember that at this moment Europe is core to the development of Qualcomm as it is the leading market for WCDMA based technologies.  Qualcomm in recent years has been developing relationships with European Mobile Networks and helping them migrate to next generation networks and services.  They are supporting the Operators to deliver services to mobile users and BREW is a toll that allows some of the services needed.

But remember that Qualcomm is an IP based business are the majority of revenues comes not from services but from silicon in handsets. 

Implications: What you get with a Skypephone is a service that allows another form of IM as long as you have spent a minimum of £10 per month.  This is not VoIPoM this is something aimed at retaining customers and getting them to keep the phone on so that they can recieve calls.

Analysis: The customer base at Three UK is of such a poor quality the Management continues to take a disruptive approach to the market.  On the current path they will become the seventh largest network in terms of subscribers by the end of the year with TWO MVNO operators having a bigger customer base.

Talking to some who were at the launch of the Skypephone what you discovered  was that what you did not get was SkypeIn or SkypeOut and so the feature set was somewhat limited.

Last year Three were the first UK network to offer flat rate data tarrifs with the X series product that gave access to Skype as well as another services for contract customers.  The take up even with free equipment for slingbox services has not been great.

Now we have a service that gives consumers access to Skype services on a personalised handset.  Whilst some features like the dynamic address book are indeed excellent options I cannot see many people running to the shop to snap up a handset.  Those that use Skype are using the service from the kitchen table of office not out in the street and so I question the demand.

The day after the launch I went into all of the Three stores that I passed in the course of my work day, none were able to provide me with a handset as they were not is stoke and they did not expect them for another week.  This has lead me to suspect that this is little more than a PR push by Three before the launch of the iPhone next week by O2 in the UK and then the Google Phone the week after.

All I can think is that this is the actions of a network that have under performed in terms of Customer growth.  The launch of the Flext tarriffs by rival T-Mobile saw a significant number of price sensitive customers churn off the network.  The probability that the introduction of the service will reverse the decline in subscribers is unlikely in my view.

Implications: The V3 was something that was a victim to fortune. Motorola built a very sexy looking handset they just forgot to do something with the software.  So you got a large number of users who discover that this is not a Nokia or a Sony Ericsson and you need to read the instruction book. Life is too short for instruction books, and so people became unhappy that this was a phone that just made calls and sent texts.  As an internet device it is a nightmare. Not a great device for networks looking to raise ARPU with data services so limited lifespan. Motorola have been playing with just what OS to run on the handset.  You can get the Q which is using Microsoft as the engine for the Smartphone.  However the latest Smartphone sees them return to UIQ (Symbian) for the software and it does not have a QWERTY keypad and so once again data services will be limited. David Beckham as a Brand is outdated, just as LA Galaxy about bang for buck.

Analysis: My Wife has a V3 and she loves it.  But then she does not use her mobile much and when she does it is just for voice.  I refuse to use any handset from Motorola until they install software that is user friendly.  I have no wish to read the instruction book, just who learns to swim from a book?

Motorola used to have an excellent R&D function it was the salesforce in Europe who helped to set the agenda.  Then they hit on the STARtac and ground to a hault.  Because this was a flip phone that everyone loved they thought that the phone was all about Industrial design.  The team that was leading development in Swindon was allowed to depart to form key parts of others Development Groups.  The founder of Sendo was once in charge of development at Swindon as was a number of Senior Managers that formed Symbian.

Just like a bible story after the feast came the famine.  Then out of the wilderness came the RazrV3 and once again all was well in the Moto camp.  In the bright sunshine the executives fell asleep and they forgot to find a replacement they also did not listen to the gripes. 

Whilst fat on the profits Motorola decided that they could gain lost market by making a handset for emerging markets and told the GSMA that they would once again show the world and make a handset for the world that would cost less than $50.  Alas they have failed, the low cost market is very difficult because the consumer can aways trade up to a second hand handset rather than show people that they are too poor for anything than the cheap phones.  It's a shame as with a little work on the messaging software the f3 would be a great voice only handset.  As a second phone it has a battery do die for and any easy screen to read.  It could have been the Kalashnikov of mobiles if they had only sold it as a second phone to the road warrior for use alongside the Crackberry!

Today what you have is a Global Administration with a focus on the US and China.  If you look at China what you will see is a Country that will get old before it gets rich, in less than 20 years over half the population will be over 50 and will have little will for an upgrade on their phone.  Nokia has moved into services look at what they have been bolting on to the handset business to make their handset a remote for your life.

At this time Zander has done what?  Who this week is the head of the Handset business and how long has he been in place.  If my former employer is not careful they will discover that they are not the biggest American handset business.  That could just be Apple if they learn from the early mistakes of the iPhone.

Everytime Motorola makes a mistake it loses traction not just to Nokia but also Sony Ericsson who are follow a more segmented strategy to great effect.  They cannot compete on price with the likes of Samsung and LG and so again they fall back.

If they do discover the next great handset I am affraid that they might just kill it with the Global Marketing strategy they currently employ.  Very few business can create a simple message that works around the Global.  Motorola needs to look at the Brand as well as the Device marketing that they undertake and find a way to promote the product by something more than product placement in the latest  hot TV drama.  Without a consistent plan that talks to the target groups they have little opportunity to pull out of the fall. 

The CEO needs to get a grip on both Engineer and Distribution and fix both.  Without it they might just be remembered as the Car Radio people that I was told wanted my as a business analysts when I joined them some 22 years ago.  Even worse they could just end up as the tetra radio guys.  Motorola had an opportunity with the V3 alas they drop the pass and now find themselves third and long.

Implications: The problem is one of market regulation in the UK, BBC has a track record of innovating before the competition because it has a public broadcast remit.  The Internet activities of the BBC have been cut back because Government and Competitors have complained that it has abused it position and stifled innovation. Having to work in the regulated market the BBC has had to launch the service slowly, hence the fact that at present they are using a form of windows media player to show MP4 content.  The vast majority o the archieve of the BBC does not have rights to broadcast on demand.  Old shows were made before DRM was an issue.  Newer shows are made by independents who did not give the BBC rights for anything other than broadcast.

Analysis:  Finally got my login details yesterday, and so far my three children have used the system more I have. To that point it is simple to use, works better than the On Demand element of my BT Vision service and unlike the Channel 4 service it is free.

The issue so far is one of content. Because of the reforms made to the BBC by John Burt a significant element of the BBC shows are made by third party companies, these have not given the BBC the right to show the programmes on the iPlayer. For example Extras is not available, the same is true with a number of older shows.

Over time as the BBC tests the market with what is a BETA service not only will other platforms be introduced but also the rights will be asquired for more content. The process is a slow one because if the BBC were to have gone live with a full service then they would hve found that the other broadcaster would have sought market control via OFCOM.

Over time as others start to test the market for On Demand then we will see the BBC start to ramp up content and the player.  It is a difficult balancing act and I would not expect the service to be market ready for another 18 months. My expectation is that the plan is to hold back until digital switch over has started to gather momentum.

Implications: What you are seeing in the US is something that we saw in Europe five years ago.  We are going to see a number of services that are extensions of banking services and then others that are payments based.

When you look at payments where we are currently seeing success is in the expansion of banking rather than a substitution of credit cards. The rules for Money Laundering make mass adoption of mobile payments very difficult to roll out the services.

Internationally the big area is in remittances, these services mean that Western Union is challenged and the size and frequency of payments increase.

Analysis:

Last week Jupiter Research put a research report that Consumers are not demanding the services that Banks are pushing at present.  It says that only 8% of users are using their mobile to access bank services.  A recent meeting with one of the former executives of SIMPAY (a joint venture between Vodafone, Orange, Telefonica & T-Mobile for M-Payments) said that what he sees in the US is the same mistakes as were made in Europe as five years ago.

If you want to look at just what might be possible in Mobile Banking what you have to look at are the services available in Africa.  MTN have been working with Standard Bank and the South African Government on a service that has added some 600,000 new accounts to the banking system.  Using a peer to peer text based service users can make payments, receive benefits and access cash machines, the fee is dependent on the type of transaction. Moving to Kenya what you see is a remittance service that allows the educated who are working outside of the country send money home, this service has meant that payments are more frequent that when Western Union is used.  Thus a parent can send a child $10 as a reward for passing a school exam.

Looking at Europe what we are seeking at the moment are trials of NFC solutions.  The one that I have been following in detail is the use of Nokia technology at the City of Manchester stadium by Manchester City F.C. which has given a handset to season ticket holders that is connected to a payment account and allows users to gain access to the stadium on match days and pay for goods at the team store as well as food stalls.  The phone is swiped and a pin number is needed to authorize the payment.  Such a service that sees a phone used as a stored value system has a future.  It might just see my phone become the personal control hub for everything I do.  With NFC based technology my phone could replace the smart card used to access by car, ID card used to access client offices, transit tickets and replace the coins in my pocket.  The issue is one of privacy, would I want my tracks to be so easy plotted?

In looking at the barriers to expand Mobile Banking the controls put in place post 9/11 mean that the service can never be used for wholesale payments.  The rules applies so far mean that the relative balances are low, the maximum value is limiting.  These functional limitations mean that what we can expect to see are solutions that are aimed at micropayments.  Such a strategy within the developed markets also means that the Mobile Operator does not have to face the challenge of increased regulation. If Mobile Payments does take off, when does my Mobile Network become a Bank? When it becomes a Bank my Network will have to have the same liquidity ratios; this is something that I do not think that they want. However it costs Banks and Shops vast amounts to move money around and if the Mobile can replace small value coins and notes they are unlikely to seek a review that leads to increased regulation.

Mobile Payments offers a number of stakeholders an excellent value proposition.  How ever as with the first efforts at Mobile Internet what is needed are services that are unique to a mobile phone rather than a transfer of current practices to a small screen. 

Implications: Mobile TV is all hype with little interest from the user in the street at present.

Content makers are yet to commit to support the Mobile TV sector.

Equipment makers need first off to agree on a global standard.

Analysis: Cards on the table, I do not watch a lot of TV at home and so I am not a likely candidate for Mobile TV.  However I do own a LCD HD television from Sony and I am one on the few in the UK who also have a HD feed. A number of former workmates are now developing Mobile TV services both here in the UK and in the US.  I have been "lucky" to be  involved in a number of trials in the UK of Mobile TV.  These few facts mean that I might be more qualified than most to make some observations.

I recent conversation with the head of new technology at the BBC was interesting in that he questioned the BSKYB numbers for Mobile TV, he also had reservations as to what content people will watch, when and where they will do so.  He does see a future for Mobile TV but at present he sees it as little more that side loaded video content, an if that is so say that people will prefer to watch such things on a PSP or Video iPod.  The fact that the BBC has extended a trail of Mobile News content for a year has see one rival complain to the OFCOM that they are stifling competition!

Talking to those that did try Sky content on their phones most said that they did so because they were not subscribers at home and when asked if they would pay to do so on a mobile most have said that at present the answer is no.  The Vodafone figures for MobileTV have to be seen in the light of the fact that you can get a subscription for free as part of the loyalty programme for contract customers spending over £35 per month. In the prepaid market how are Sky hoping to get people to pay £5 per month subscription charges when the average UK balance is less than £4 according to work done by M:Metrics?

Talking with senior executives in the Content creation market makes for an interesting time; a number see the new Qualcomm Mediaflow handset a fixing issues raised in early trials.  However they have not been able to source trial handsets at present to test services.  When it comes to outside the US, Qualcomm are not leading the field in chipsets for mobile and are someway off for the coming years.

Once you have a standard, then you are going to get some spectrum for it.  Whilst Governments like the idea of yet more Auction fees, the networks have got smarter since the 3G madness and are unlikely to compete with one another when the sale does take place.

If Mobile TV is to be a success then you will need to discover a business model that sees excellent content available for free to the consumer on a device that has broadcast quality in terms of screen, audio and signal.  Do we have that at present today with mobile phones? Just think when was the last time you dropped a call? Can you see the screen on a sunny day? If you cannot answer yes to the questions then I guess that it will not be TV it will be Video that you are watching on you phone and we have that already.

Implications: The Mobile Web is not about Web2.0 on your handset, if Yahoo! are to be successful they have to see that it is about more than just a smart UI.

Success will come from offering a service that makes them a destination site rather offer to manage Portal services fo the networks as they have done with the Fixed Networks.

Staffing and Politics are still an issue if Yahoo! are to be able to offer and execute a service that Mobile users will be happy with.

Analysis: With the appointment of Christian Lindholm Yahoo managed to appoint someone who understood that the Mobile Web was a difficult Ecosystem and that partnership was needed Yahoo! was to be successful. Lindholm was a Key Product Manager at Nokia and had developed a UI that people found easy to use.

At Yahoo! Lindolm quickly managed to turn around Yahoo!Go from its early solution into the Widgit driven offering that it has started to roll out now.  He also managed to forge relationships with European Operators that Yahoo! had failed to do before he joined.  However he also entered a political minefield that at the turn of the year saw him leave Yahoo! in frustration.

So now we see a business that needs a figurehead short of someone suitable.  It is now the end of Q1 and the best that Yahoo! can show in Europe is someone who is a former Strategy Executive at Orange who now works in the Corporate Development arm of the business when asked to put up a speaker!

Just what is the Mobile Internet? Yahoo! have discovered that it is about more than just a Search Engine for Mobile, what will also be needed is Conections not just data connections but something that allows a mobile user to discover who and what are close by and how they may wish to interact. It is about a better browser than you have on a Computer so what you see is a lot cleaner. Content wise it will need to have news, some entertainmet and be fun. It would also be good if it can have some advanced PIM functionality so that I can access the important stuff I have stored on a number of PCs.

The problem is that once you have built the ultimate destination site for mobile just how do you get the consumer to it?  Opera Mini has been the most successful application in terms of user downloads.  However it has had only 15M downloads since it went live to add to the 50M handsets on which it is installed as standard. With someone like Yahoo! trying to get traction on mobile data the Networks who invest Billions a year in Customer acquisition and retention will fight to stop becoming little more than a dumb pipe.

Yahoo! mobile is an improvement on the current UIs seen in mobile but we were starting from a very poor base.  The launch of the iPhone has seen a number of people up their game as they seek to gain share before Apple enters the market.  A couple of interesting spins outs from the Microsoft Lab for example show what might be coming. 

The big issue is that with pricing moving towards flat rate the promissed replacement of falling voice revenue with data revenue is not going to happen.  The Mobile Networks know that they are not able to sign exclusive deals with the content guys that produce significan value and so are opening up walled gardens.  However does more choice make for better choice or will the confusion just result in people giving up on Mobile Data as they have on MSM because it it too complex to be sucessful.

Implications:

Convergence

- is, when it boils down to it, something of a myth

- convergence is a term dreamt up by consultants

- it is lazy short hand for collection of trends

- customers have exactly zero interest in convergence as a concept

- it is therefore a distraction

- it is just one of a number of potential means by which companies can choose to address customers

- it may be right for some customers in some circumstances - but that doesn't make it into the magic bullet that many in the industry believe it to be

- divergence has had a far more impressive track record thus far, in terms of value creation (iTunes, iPod etc are divergent; digital TV's many standards are divergent; digital radio standards are divergent etc)

- convergence has become a dangerous obsession for many players

- FT, DT, BT etc all have a "Convergence Strategy"

- Triple and quad plays are the most common manifestations

- Forrester reckons that on average, a European triple play customer will represent a cumulative loss of €3000-€4000 by 2010

- Their latest work calls triple play "financial suicide"

- IPTV is certainly a weak, immature technology competing against very efficient, well established technologies and highly effective and slick media companies

- Today, there are only 285 million broadband connections ON THE PLANET

- Of them, only 20 million or so are capable of 2mbps or faster ... and this is the total addressable market for IPTV

- In many respects, convergence therefore is another disaster waiting to happen

- strategic herding and lack of imagination threatens the long term prospects of a number of players

Analysis: So having for the past ten years worked for a number of cable firms in London who have attempted Convergence in a number of formats all I can say that whenever someone talks to me about triple/quad play its time for me to sell the stock!

As a consumer did I ask for all in one?

No I did not ask for my Telephone Company to become a TV Company nor did I ask for my Mobile Network to become an ISP. As well as connectivity what I am paying for is customer service. In trying to run a triple play you are pushing up the demand from the customer without raising the number of CSA. Hence what I get is poor service and thus become more likely to leave not less!

When it comes to my Mobile Network lets remember before be buy the line that this is a pocket computer lets first remember that it is a phone and thus it is for making voice calls!

Lets remember that Mobile Voice is worth $1 TRILLION globally today! At present its volume is roughly equal to fixed by 2015 mobile voice is likely to be 2x greater than fixed with 8-9 trillion mobile minutes per annum. VoIP is only 10-15% of total volume so lets not get to hung up by technology.

Elasticity exists - look at what has happened in the German and French markets.

For the fixed operator the potential for mobile to fixed substitution has not been attempted. Most of us select a phone on the functionality, it is the fact that our mobile handset is more advanced that means that we use it to make calls in buildings 70% of the time. If the fixed guys started to update a handset that is 15 years plus behind to our mobile phone then we would use the cheap calls, most of us know the price of a coffee in Starbucks better than we do the tariff we are on when it comes to phone calls!

A few more thoughts:-

Competitive landscape

- more consolidation in Europe likely

- some markets already overpopulated with players

- MVNO death/absorption inevitable (easyMobile etc)

- brief details on the difference between a viable MVNO contract (Virgin Mobile) and a dead duck (BT Mobile) : Virgin have fixed on-net plus termination plus mark up, as well as inbound termination - BT has fixed price inc term & no inbound term

- threat growing from fixed-mobile

- over 70% of mobile calls made in buildings ... not out and about

- therefore potential re-substitution threat

- operators need to examine pico/femto cells and urban/suburban in-building coverage

- fixed operators can still claw back a lot of traffic - particularly if they deal with the handset (which is 20 years behind the mobile handset for no apparent reason)

- fixed can compete on price, quality and reliability - and traffic patterns suggest that mobility is not such a critical factor

- FMC is not the answer - BT Fusion has been a complete disaster ... too complex, too expensive, ridiculously high drop rate and no obvious benefit over pure mobile

- T-Mobile@home in Germany - pure mobile home zone offering, massively successful, & encouraged displacement

- Vodafone's FMC proposition in Germany has not generated anything like the same interest or revenues

- divergence of call types ... short, local and national - mobile; long, national and international - fixed; very long international - VoIP

- reshaping of data competition ... access battle, mobile operators will try to displace ADSL using HSPA ... and will mostly fail (except in countries such as Czech where there's virtually no DSL)

- still too much contrivance ... but some winners starting to emerge???

Regulatory landscape

- more termination rate cuts expected (country by country basis)

- all EU countries aiming for LRIAC rate of around €0.075 per minute by no later than 2012

- many countries will reach this level before 2012

- potential for SMS termination caps - France is setting the precedent

- roaming regs to be implemented this year

- H3G has started a trend that others may have no choice but to follow (no additional charge for own customers roaming anywhere on company's footprint)

- this approach would help to deal with Ms Reding, but would not represent a complete solution (and would of course wipe out anything up to 10-12% of EBITDA for many operators)

- LLU pressure expected in many markets (Germany particularly acute)

Channel issues

- disproportionate power in the hands of CPW et al

- business model at odds with that of operators (churn versus retention)

- growing tension and discomfort - no obvious long term solution to satisfy both camps

- distributors playing weak operators off stronger ones - commission wars will end in tears

- note incorrect penetration assumptions by operators ... there is still around 10% population penetration left in Europe (circa. 30 million individuals)

- explain human versus implied penetration and show how difference is material

- but beyond that 10%, the rest is a washing machine ... operators pay billions to swap around 1/3 of their customer base each year

- remove SARC and other channel costs and operators would be massively profitable

- what happens next? Who moves first? When? Impact?

- many operators expanding own stores to squeeze CPW et al - TMUK a good example

- limited impact and massive cost

- others boycotting CPW ... shooting themselves in the foot?

Implications:

Most users select their phone on the basis of feature set not cost.

Just why will Networks connect VoIP calls?

Analysis: My work sees me involved in a number of FMC trails here in Europe all of which have been a failure in one way or another.

The only VoIP services that MNO allow at present are those that are SIP based so they get some revenue for terminating the call.

As a user I complain that my 3G handset needs charging every other day, if it started using power on the same speed as WiFi  I am just going to give up!

The assumption that most consumers are price sensitive is wrong.  Just llok at how many of us fore go low cost calls by using a mobile to make a call in buildings! As a consumer what we like to see is a long address book and a call history so that we can quickly connect.  The fact that we communicate with less than 5% of the people in our address book is over looked what we want is everyone we know.

Talking with users I find that most have no understanding of what the tariff is that they are on.  Many do not even open the bill sent to them! With the Networks now looking at using bundles to retain customers that have elements of home zoning we as users will become even less interested in the unit cost of a call.  What the Networks are starting to understand that the more we communicate the more people communicate with us in  return.  

If I were the CEO of a Telephone Company I would publish all my customers contact details regardless of their wishes so more calls are terminated on my network and stop worrying about VoIP.