Tuesday, January 11, 2011

What to do to not become a dumb pipe?

As a new system evolves over a period of time, it expands. Over time, it becomes so huge that it's no longer self-contained small system. In fact, it becomes an eco-system. In business context, if a firm was initially a part of that small system, it may find itself too stretched out in order to cover the whole eco-system. It may lose its strategic focus and would rather become an assorted list of complementary business units. Few companies has been able to manage that. Apple, as an example, used to make its own hardware and software. However, as PC industry has expanded, they have given certain pieces to others, extended partnerships and find an evolving strategic vision which is consistent around an evolving yet sustainable competitive edge.

Today, Telecommunication operators are feeling the same way. In initial days, when the US telecom market was full of home grown local operators, mobile phone manufacturers had their brand and control. Over a period of time, as the telecom operators consolidated, the power shifted. As technology progressed and human needs evolved, communication expanded from voice to words to sharing information. When iPhone came along, for the first time, it made it easier for people to access internet over phone more easily than ever before. The applications took off. Now, the telecom operators collect the ARPU only from voice, text, data, and value added services. They are looking to venture out in other areas, but are not able to find a way. The games and applications revenue is split between phone manufacturers and game providers. Once again, the power is shifting and telecom operators are feeling the heat.

If they do not invent new revenue sources, business models or ways to increase ARPU, the growth will subside and they would actually become just dumb pipes. The question is, what choices do they have apart from becoming a dumb pipe? The ecosystem has expanded so large that the control has to be given up in order to survive. The focus has to be narrowed to keep territorial control.

The only way I think that telecom operators have to increase revenue is to expand the ecosystem. The information sharing need to increase in such a way that it is dependent upon not only creators of information, but also the carries of information. And, I strongly believe that one of the significant ways to achieve this is to connect devices to it. Now, the ecosystem would add on to people talking to people, people text messaging to people, people sharing information and accessing information via internet from people - people talking to devices, devices talking to people, devices talking to devices, devices accessing information from internet and posting information to internet. This expansion would require network and would help telecom operators gain their ground once again.

Tuesday, December 25, 2007

My optimism for year 2008

Here is what, I believe, year 2008 will look like. Let me know what do you think about the future for 2008 for telecom?

1. The launch of iPhone SDK will not be as great as the developer community expects! It will provide very limited flexibility to create new applications. In fact, apple might sell the SDK. Or, the applications created will need to be approved by apple first before they can run on the phone and the creators will share the revenue with Apple. Any how, the iPhone SDK will create new startups as Android did.

2. Launch of Apple iPhone 3G will be more successful than iPhone 2G. iPhone 3G will also have mobile VoIP application. It will hit the showroom around August 2008. It will be the same price but with many more applications created on the iPhone SDK.

3. Nokia will try very hard to come back very competitively and raise its market share above 10%. We might listen a launch of Ovi which will be in direct competition with apple iPhone in terms of price/services.

4. Android will not be as successful as Google expects. Motorola might find another Razr with android, though I highly doubt that. T-mobile's collaborated 3G network with android will give T-mobile a better position than it has currently.

5. The Android cell phones, though cheap, will not kick off until early 2009; but will lay a solid foundation for data oriented applications and mobile advertising, which has so far been done only for a very narrow customer base.

6. AT&T Uverse and Verizon Fios will get more business after 30% rule on cable TV. Mobile TV, even after 3G networks, will remain a business idea of future.

I believe that next year the changes in the industry will create an eco-system , where data applications will have the very capability to take over the revenue generated by voice. But this capability will not materialize completely and become prominent until year 2009.

Wednesday, December 19, 2007

Android suffers with early blows of criticism

After the first month of shakedown and hands-on coding experience, Android platform seems to have brought a lot of disappointment to the developer community. A news agency reported today that the developers are suffering with inadequate documentation, big holes in code and absence of some basic functionality. It was also reported that Google is not being very responsive to the issues submitted. The posts on the Android blog have reduced around four times in a month. With all this information at hand, some critics argue if this is a minor glitch or a sneak preview of things to come.

The report, though seem to be portraying the irritation and frustration of developers, seems to have taken the things too far. Till now, Google has a flawless reputation of providing excellent services and products. This is the first time the people have come so close to join hands with Google to create software. Thus, the expectations from the developer community and from everyone else are way too high.

Also Google seems to have played a smart game by passing on the beta tested Android platform to the developers, who have gone ahead and thought of a lot more possible innovative applications than Google would possibly have in so much time and found the gaps in design and code. Thus, using prize money as a bait, Google gets to test the platform for free because the prize money goes to the one who stays till the end and then also gets selected. Google gets free testing, genuine defects and free advertising.

The reduced number of posts is not at all the correct index of interest and involvement of the developer community. With time, only the serious developers will stay in the game and others will get off the bus. Also, as the development kicks off in various groups and start-ups, they will get a good hang of how the platform works and will have lesser things to ask. Further, these groups will avoid asking questions to the Android forum, as their ideas might get leaked out.

Overall, it looks like a reality pinch to the developers. With time, as the defects will be fixed and Android platform will mature, things will start to shape up.

Monday, November 12, 2007

FCC to strangle Cable Operators. Advantage unfair to Verizon and AT&T.

The dominance of cable operators in video services market suddenly got limelight after NYTimes ran a story speculating that Federal Communication Commission may strangle the existing cable companies by opening up the market to rival video services and independent programs. Even worse, Mr. Kevin J. Martin, the chairman of Commission, hopes to complete this controversial decision before this year ends.

The commission will announce the state of video services as part of its annual report and may restrict the cable operators from growing if they fall under the so called 70/70 rule of the Cable Communications Act of 1984. The 70/70 rule means that cable television is available to at least 70 percent of American households, and at least 70 percent of those households actually subscribe to a cable service. Once the commission gets convinced that such a state has reached, the commission will open the market to promote the diversification of information sources.

As claimed by 24/7 wallst, this can very well be the death of cable operators, which are already facing strong competition by satellite TV and telecom operators. The new rule will put the independent video services such as NFL Network and Hallmark Channel to great advantage, which do not have a business affiliation with either of the three channels to reach end-user. It will also provide a great relief to Verizon and AT&T telecom operators who are trying to tap in the already saturated market. In recent past, when the mergers and acquisitions started and the idea of double and triple play got picked up, cable operators took advantage of their already established network and offered broadband and video services to the consumers much ahead of telecom operators.

The new regulations will restrict any company from holding more than 30% of the market share. Also, the regulations will prevent already established cable operators such as Comcast and Time Warner from acquiring smaller companies or increasing their market share in other ways.

The dominance of cable operators in video services market has been a matter of dispute. Most of the cable operators argue that the market is already set on a downward path and there are no proofs that such a condition has actually reached. The officials from cable industry have criticized the proposal and raised question marks on the authenticity of the results produced. On the other hand, one of the reasoning used by FCC is the high rise in price of video services in last few years compared to inflation. FCC suggests that such a price increase is a clear indication of monopolized market.

While the regulations has been welcomed by the consumers group asserting that this will reduce the prices and increase the options for consumers, the cable operators have argued that independent studies and the commission’s own analysis from last year concluded that cable television, while available to far more than 70 percent of American households, is actually used by far less than 70 percent of those households, and it cannot increase to more than 70 percent of households in less than a year when the market is not on the rise for some time.

While the new regulations will certainly nurture more competition and offer more choices and lower prices to consumers, their is also a possibility that the cable operators might get completely wiped out of the video services market in long run. Although it is certainly a great plan to open up the video services market, making the rules for only cable operators will be an overkill to cable operators and will be a huge unfair advantages to the competitors.

Wednesday, November 7, 2007

Googlization of Telecom Industry

Finally, the announcement (login required) of Android and Open Handset Alliance has put an end to all the speculations and rumors around the Google phone. Mr. Andy Robin, Director for Google Mobile Operations, quoted on Google official blog that this launch is more significant and ambitious than that of Google phone. As for now, his claim seems to be very right.

For the last ten years, Google has dictated the internet search market on its own terms, used non-traditional ways to do the business and stayed very successful. However, the arena of telecom market is much different than that of internet market. In internet market, the cost to reach the end user is negligible, thus the quality of content and service becomes the bottom line. However, the games in telecom market are still played by the old rules. The carriers and device manufacturers, which connect the end user with the content, play a huge role in shaping, guiding and leading the industry. These companies, in their own monopolized world, have been using the traditional methods of licensing and corporate alliances, in turn, discouraging innovation and creativity.

The Open Handset Alliance (OHA) and Android, provided things fall in place, have the potential to change the way telecom industry works. More than 30 companies such as Motorola, Texas Instruments, HTC and T-Mobile, which represent carriers, device manufacturers and developers, will take different roles to sustain the life cycle of a mobile phone. This whole approach brings a real hope to the whole telecom industry from the controlled business dealings of device manufacturers and mobile carriers. It also poses a strong competition to established players such as AT&T, Verizon, Nokia, and Symbian, which currently have more than 60% of the telecom market in their subsequent domains.

In the telecom industry, the entry of Apple and Google has received much fanfare. Although both the companies have been very focused in their strategy and future goals, their approach to these future goals and business strategy are completely different. Apple, as I see it, is a designers approach to an electronic device. It has been known to create things which are appealing and innovative. Thus, the launch of iPhone from Apple is not that big a surprise. This is what Apple is known to be doing for the past 20 years. Google, on the other hand, is an internet based software company and search is what they provide best. After making its mark globally in the internet search market, Google plans to expand its search from desktop to mobile world. After all, there are much more mobile phones in this world than PCs. But, to achieve that, Google needs to convince the device manufacturers and carriers to use Google as a default search engine. Further, similar to IP market, it wants to generate the revenues from the clicks on sponsored links, which on a mobile becomes Mobile Advertising. In a traditional telecom world, where Mobile Advertising is still miles away from being an established business, the idea of using revenue from mobile advertising on search based results to reduce the cell phone cost would have been very difficult for the bigger players to digest. In addition, companies like Nokia, which plan to launch its own internet mobile services (Ovi) will not like the new competition from Google. The idea of sharing revenue to the search company will not leave the telecom carriers in a comfortable position either.

All these reasons force Google to build its own mobile phone and create business completely from scratch rather than fit in the existing model. As Mr. Andy Rubin said, “It's important to recognize that the Open Handset Alliance and Android have the potential to be major changes from the status quo -- one which will take patience and much investment by the various players before you'll see the first benefits.” It will not be surprising to see the alliance falling weak if the first Android release does not prove to be a successful one and a lot of future investment and growth will depend upon the initial few months feedback after Android is launched in mid 2008. So far, the telecom carriers have waited long in hope of a killer application which will make data services publicly accepted but have avoided taking any solid steps in that direction. More than anything else, the OHA and Google are doing the best thing to make data services click on mobile phone - by making it cheaper so that more people will take these services and thus breaking the status quo.

Friday, October 26, 2007

Mobile phones will be mobile phones

Mobile phones are destined to be tiny and no matter what technology goes in them they will still remain small. Sounds pretty trivial, yup..it is. Though this fact seems very very obvious, most of the companies are missing it by a margin and investing in a future that will never dawn in reality.

Somehow, the perception of an ideal mobile phone is a device which will let a user do everything that she can do from a desktop. A phone which will enable her to send and receive e-mails, create documents and presentations, conduct research on products and services, use search engines to look for specific information, download music, pay bills, do online banking, as well as arrange, tag and upload photos. A hope that one day the storage capacity on a mobile phone will be as large as desktops and that day we will no longer require a desktop. If you just believed in what I portrayed, probably you also missed the point here.

Lets go back to our initial postulate. mobile phone is by definition a small device and it will always be. It's largest screen, no matter how large, still 7-8 times smaller than 14 inch laptop. It's keyboard (even touch sensitive which zooms in..think iPhone) will remain smaller by a similar ratio. Given all these physical limitations, why will a user use a mobile phone to do such tasks, which she has been doing on a PC in the past. Well, the reason is simple: 1. it's on the go. 2. Mobile phone does not need to be switched on and then be waited for five minutes before it can be used. Thus, there is a trade off: Do you want to dig out from your couch and walk away to your desktop or you want to put the cable remote down and pick up your phone. And the answer quite simply depends upon the total expected time that it will take to accomplish the task.

Based upon the standard of general laziness and comfort, being a small interface, a mobile phone remains user friendly as long as the user is involved in a passive activity. In other words, the user is not running the show. Examples of passive activities are: listening to music, watching video, playing a downloaded simple game, reading comic (illustrated) book. Active ones will be: using search engines to find the best deal on printer, buying stuff from an online store, reading a novel (imagine a thick novel...War and Peace!), writing a document, creating a presentation, trying to read the A4 sized pdf copy of detailed bill. Simply put, anything that requires a lot of typing or a lot of scrolling will take the pleasure away from doing things on the mobile phone, doing things on the go.

Thus, the future of mobile phones rather lies in developing applications, which involve user passively. Apart from what is listed above, cell phone can also provide location based services, which are instant information: local weather, live score of a game, maps, closing time and phone number of top 10 restaurants around that location, very limited banking: reminders for credit payment last date and total amount due, reminders for monthly bills last date and total amount due, mortgage payments, activities around local area which can be seen in calendar, online access to personal information such as user name and passwords for different online accounts, currency converters.

The differences between active and passive activities are subtle but huge. Though there will be a variance in acceptance and choice by geography and age group, general trends will remain the same. And above all, one of the important things which cannot be ignored is pricing. Most of the customers who opt for data services, are either corporate or have high monthly income. An average customer would rather do all such activities online at home than pay $20 to do things on the go. Also, in North America where most of people drive to work will have no time accessing data services because according to my opinion, that is the time when people want to do such things - going to their office in train which takes more than 20 minutes.

While the telecom industry is struggling to get the killer application (mobile TV, VoIP), which will promote the telecom world from 2.5G users to 3G users, it will be interesting to see the kind of applications that will be developed around it. For, until the prices drop and customers see a point in doing things on phone rather than online, 3G will remain to be a technology of future.

Thursday, October 25, 2007

Mobile Advertising - The Road Ahead

Mike Baker, CEO of Enpocket, in one of its articles talks about the three possible ways of mobile advertising - SMS, MMS and WAP (http for mobile phones). SMS, which has primarily been popular in Europe and Asia, has recently gained serious momentum in North America. In the last 2 years, total SMS messages sent has increased 4 times from 7 billion to 28 billion per month. Also, unlike MMS and WAP, almost all the phones support the capability to send and receive SMS, making it one of the primary vehicles for advertising.

The idea of advertising via SMS works on the simple push/pull method. Advertisement is pushed to the user and if the user is interested, user pulls the more information possibly making a purchase. MMS also uses the same method, but it delivers a rich media interactive ad to user and has a much stronger impact than SMS, having a much higher click through rate and purchase rate (sometimes as high as 20%). WAP, the third channel, provides richer colors and more interactive experience and further, avoids the need for opt-in or user initiated reply message. However, the click through rate and purchase rate is not significantly different than MMS.

Despite the method, daunting challenges remain the same in all channels: finding the right customer, impressive ads presentation (as the same layout will not look impressive on all phones, colored phones have different resolutions and display size), and deliver the right content which created the spark to view the advertisement in the first place. Mike argues that marketers can't just blast out the advertisements to users without opt-in. Regular media channels are used for promotion leading to user selection, typically asking to send a message to a short code (normally 4-5 digit number). Interested users send the message and advertisement is pushed to the user. If the user remains interested, he clicks through to reply to the message or reach the wap site of the brand- sometimes making a purchase, downloading promotional content, calling the toll free number, opting to participate in further ad campaigns or accessing the brand information at a later time through internet.

Mobile advertising companies like Enpocket are just one part of the whole picture. MMA, in one of its papers, presents the whole picture and calls it mobile marketing ecosystem. According to MMA, the ecosystem is comprised of four interconnecting spheres-Product & Services (brands, content owners and marketing agencies), Applications (discrete application providers and mobile ASPs), Connection (aggregators and wireless operators), and Media and Retail (media properties, “brick ‘n’ mortar” and virtual retail stores). Brands want to advertise, marketing agencies help brands create the ad campaign, applications are created to show these ads, telecom providers to send these ads to the subscribers. Retails are used to create awareness and promote using its traditional channels. The ecosystem coherently works to create the best experience for the end user.

Mobile advertising has clear advantages over all the other channels, the most obvious is that the user is accessible to it all the time, unlike internet, TV or print media and the user can respond to the advertisement instantly and does not need to preserve the spark. Also, since the phone screen is small, typically there is only one advertisement per page, getting the maximum attention of the user.

However, a close look at the case studies presented at Enpocket suggests that mobile advertising still delivers a very very specific goal, unlike other mediums of advertisements. With the limitation of 160 characters and no graphics (SMS), the content and relevance become the only motivating factor for a user to participate. In such a situation, unlike TV, print media or even internet, the advertisement cannot be just pushed to all the users.

But as we will see more people using enhanced handsets and data services, the face of mobile advertising will change and become more like traditional media. While mobile advertising will continue to serve a very specific purpose, the user selection process will become much more flexible and user's opt in will be highly derived by the sites and contents downloaded by the user. This will, to an extent, reduce the role of retail and media that it currently plays to popularize the mobile advertisements and help brands find the right users. But that day is still at least a couple of years away.