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.

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