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Devices 2.0 - Still No Consistent Industry Strategy

Below is a summary analysis of the Devices 2.0 session at the May 2009 Telco 2.0 Executive Brainstorm.

Executive Briefing Service Members: can do so via special Executive Briefing here. Non-Members: see here to subscribe.

 

The session involved short stimulus presentations from leading figures in the industry, group brainstorming using our ‘Mindshare’ interactive technology, a panel discussion, and a vote on the best industry strategy for moving forward. Below is the vote, followed by some of our post-event analysis on key lessons and industry next steps:

Devices 2.0: Vote

Participants were asked which device strategy would offer Telcos the most realistic opportunity to deliver profitable new services and business models in the future?

  • Telco designed and controlled smart devices (e.g. custom smartphones, operator specific digital picture frame)
  • Separate Telco controlled gateway device (e.g. femtocell, set top box) used with open edge device.
  • Open device with Telco control of policy software (e.g. netbook with sim & operator connection software).
  • Forget about controlling devices, we can manage everything in the network.

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Devices – lessons learnt & next steps

Unfortunately, Telco strategists still appear to expend more efforts on examining infrastructure and centralised application platforms, rather than the network “edge”. Although obviously some within operator organisations are focused on the users' hands and homes, there is often no more general recognition of the shifting balance of power – in terms of both influence and computation. The rise of the iPhone and similar devices has helped redress the balance somewhat – but even there, the emphasis has shifted to the more “comfortable” centralised AppStore as something for operators to emulate.

This is understandable. By and large, few fixed or mobile operators have successfully helped create new types of devices on their own. A few broadband providers have used home gateways as new service platforms, or as ways to reduce churn, but even these have tended to just be through the addition of functions like IPTV or VoIP. Few consumers would view their broadband “box” as a central hub of a home network – despite 10+ years of discussion of interconnection with consumer electronics, utility meters and home automation. All the talk of Telcos exploiting connectivity to HiFis or “screen fridges” has been hot air.

Alberto Ciarniello, VP Service Innovation, TIM: '''Apple shipped 1bn apps at significant average revenue per user. It's unprecedented. It's generated a lot of traffic and a lot of stickiness.''

In the mobile space, the power of Nokia, Apple, RIM and others is always set against operators' desire to customise applications or user experience. Although in developed markets, a high % of phones are sold through operator channels, the use of embedded operator-specific applications and on-device portals has had only limited commercial benefit. Probably the most important customisation has been the configuration of the Telco's own portal as the default browser home page. If anything, the shift towards smartphones and PC-based mobile broadband has further weakened Telcos' role – the majority of 3G data traffic goes straight to and from the Internet from “vanilla” devices.

Anssi Vanjöki, EVP New Markets, Nokia: Our user studies show that 12% of user time on the N-series is telephony or messaging; the rest is Web browsing, camera, media playback, e-mail, and applications.

The future possibly holds some more hope. The audience at the event was strongly in favour of pushing for Telco “control points” in otherwise open devices. This fits well with the heritage of SIM cards (which are expanding in capability) as well as standardisation in areas like the browser and widget frameworks (eg OMTP BONDI). Software pre-loaded with PC dongles or embedded 3G modems is another option. [Telco 2.0 is much more sceptical of the benefits of the RCS client advocated by the GSMA and certain operators]. In the converged triple/quadplay space, femtocells offer another point of control and service delivery, close to the customer – although the notion of a separate “gateway” product was viewed with less enthusiasm at the Nice event. New classes of devices such as MIDs, operator-enabled consumer electronics (Internet TVs, 3G musicplayers, in-car systems etc) also hold promise, but are seen more as low-risk experiments at this point.

In terms of next steps, the Telco 2.0 team feel that, in the short term (c12 months), operators should:

  • Aggressively pursue “must have” devices like the iPhone – even if there is a short-term pain point around loss of control. At the moment, customers are still device-centric.
  • Think twice about pushing end-users towards smartphones – instead, look at data plans coupled to higher-end featurephones, especially those with good browsers, touchscreens etc.
  • Assess the business opportunities around OMTP's BONDI model at a strategic level
  • Revisit the realistic opportunities afforded by next-generation SIM cards for both PCs and phones.
  • Beware of certain device categories which will need new business/charging models to succeed broadly in the marketplace – for example, embedded-3G PCs are an “elegant concept”, but fail to meet the needs of massmarket consumers (or enterprises) at present.

Longer term, additional considerations are more pertinent:

  • Look at exploiting devices used by customers on other Telcos' networks – there is no reason that operators cannot themselves become successful “over the top” players.
  • Look closely at using femtocells (plus handsets) as a new platform for innovative in-home services.
  • Work closely with utility companies on new smart metering / environmental monitoring applications.
  • Remain wary of new technical standards for devices that promise new opportunities – but require the creation of complete new ecosystems, and which potentially compete with other easier technologies. RCS and NFC are particularly exposed, in Telco 2.0's view.
  • Expect developers to migrate towards the coolest and most computationally-powerful platforms. This may mean that the API strategy of the operator needs to become more device-centric over time.

Event Participants: can access the full presentation transcripts, delegate feedback, and long-term recommendations for action at the event download page (NB. the URL has been emailed to you directly as part of your package).

Executive Briefing Service Members: can do so via special Executive Briefing here. Non-Members: see here to subscribe.