The future of mobile
The world of mobile communication is changing. First we have seen new players shaking up the device market. Then we have seen disruptive changes in the mobile communication tariffs. We have seen mobile providers unbundling the communication cost from the handset cost. Flat rates were introduced and the traffic has changed. It has shifted from voice towards data or to be more precise towards video. In the future it is expected that two-thirds of the traffic on a mobile device will be video content.
How do the mobile operators react? How can they react?
Everybody is searching for the killer application and this did start long before the introduction of smartphones. The term “Content is King” has been around for a while as well. It seems like the killer app has been found – it’s video. But does that do the mobile operators any good? Do they own the rights on publishing videos in the internet? Do they operate video platforms like YouTube or Vimeo? No, they do not. So how can they jump on the wagon to profits in the future and avoid be marginalized to “stupid” bandwidth providers?
One approach is to force an entry into the content world. Deutsche Telekom and T-Mobile are a good example. They acquired the rights for the internet presentation of the German Bundesliga. That is quite an exclusive content. On the backbone of this and its IPTV offer for DSL customers Deutsche Telekom is building a package of content that could compete with the likes of Apple (Itunes), Google (YouTube) and Amazon that have had a head start on the content side of things. The weak spot of the Telekom approach is that so far it is a rather regional strategy. Even while the Bundesliga is a global product, though not as global as the Premier League, it is not enough to generate a global pull towards their mobile products.
So content is a market already claimed and making inroads there will be difficult.
A second part of the Deutsche Telekom approach is the so-called “Telekom Cloud”. A central space to store user-generated content. This is much more the idea of a digital locker rather than a sharing platform like YouTube. But being device independent, it is a competitive approach to the iCloud offering of Apple. It sounds like a great idea in the first place but over time there will be comparable offers in the market that will be neither tied to a network provider (fixes and/or mobile) nor to a hardware manufacturer. The digital locker will become a feature but not a differentiating factor.
The race is always on. It is the drive for who has the maximum bandwidth, has a global delivery capacity and who can drive down complexity and therefore costs. New models will emerge that go hand in hand with the move towards video content. Local caches in the domain of the provider to deliver videos and other content faster are one approach. Even constant pre-streaming towards mobile devices will be a way to make life easier, especially when mobile tariffs are not driven by amount of transferred MBs or GBs anymore. So as a mobile operator you could try to be on the bleeding edge of technology to keep your customer base. You could ensure that you create a continuum with fixed communications and broadband at home. But on the bottom line this way is very investment heavy and still bears the risk to be marginalized to a mere infrastructure provider.
This is the killer application of the new century. The company that figures out the solution to this will be leading the pack. Why, you wonder? Isn’t there already mobile advertising in the play? Have you not seen an ad lately while playing Tap Zoo or Poker on your iPhone? True, but let’s face it, nobody yet has successfully opened Pandora’s Box of mobile advertising.
Mobile advertising in people’s minds is like small pop ups in applications, a short spot prior to your video content being streamed or even a voice message like “This conference call is brought to you by Old Spice”. And with the majority of these kinds of approaches to mobile ads we are unhappy at least. I do wonder why the more subtle ways of e.g. in game advertising from console games have not yet found their way towards games on mobile devices. I keep thinking about more clever ways to attack this.
The company that solves mobile advertising challenge will drive the future of mobile revenue generation. The company should make sure to get a patent on it first. It cannot be that difficult if Apple gets a patent on “slide to unlock”. It has to be the top priority for all mobile operators! Otherwise the risk to become irrelevant in the future is extremely high. If someone like Google or even Microsoft cracks this, the role of the vodafones, Deutsche Telekoms, Verizons, KPNs, and so on will be reduced towards providing bandwidth. I am not even sure whether their brands will remain in the public domain or whether they will become kinds of white label infrastructure providers in the background. That could be a profitable business but I believe it is not what these companies aim at.
One example of the “how to cash in on mobile” discussion has come up lately is the upcoming IPO of Facebook. Their weak spot has been identified on the mobile site of things.
“We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven,” the company said in its review of the risks it faces.
Have a look here for a good summary of the mobility challenge of Facebook: http://www.nytimes.com/2012/02/06/technology/facebooks-mobility-challenge.html?_r=1&pagewanted=all
And what does that mean for consumers?
The consumer focus will shift over time. The key question will not be who is the first on LTE or the cheapest. The question will be who has the rights to the content I want or need. What happens if the rights move from one provider to the other? Will that impact my device or my contract? This shift will be happening within the coming years. It will require the consumers to rethink their strategies of purchasing contracts. Even nowadays the drivers have changed already with flat rates where you can get flat voice to all mobile networks and to the fixed line network and flat mobile internet starting at around 20,-€ a month. Some predict the drivers will be the devices but as we see with iPhone, exclusivity towards networks does not stand in the long-term. So the device will not be the decisive factor for consumers to choose one network over the other.
It is not easy to drive this post to a conclusion as I do see tendencies but do not have all the answers. But I can say: Watch the Space. It will be interesting to see how all these changes play out. We will see further consolidation, new players and shifting market models. It is a climax of what has been discussed in the mobile operator world at least for the past ten years.