Monday, June 30, 2008

Time for a change?

If we are to see Mobile to continue to grow, then some structural changes are needed. With change at the top of Vodafone could we have a catalyst for change?

The new CEO of Vodafone offers something different from the status quo. In Viterio Colao you have someone with the skills of a Strategy Consultant supplemented with Operational Experience of a Country Manager. Having worked in the Italian Media industry he also has developed diplomatic skills that sees him able to form federations.

The price of a mobile minute is afalling thanks to competition and regulation. Whilst I expect to pay some premium for my use of mobile over fixed it is not as great as it once was. The reason for the deflation in the value that I place on the value has to do with my perception that mobile coverage is not as good as it once was; along with the lack of innovation in the basic product, Voice. Those that offer Mobile Data Services have failed to grasp the fact that for me it is connectivity for my Laptop whilst I enjoy a coffee between meetings rather than ebay and facebook coverage on my handset.

With a new CEO vodafone can take advantage of their scale and influence to alter the way the whole ecosystem functions. They could acknowledge the fact that at this moment the revenue streams are out of kilter and recent adjustments have not achieved a better balance.

At the moment Equipment Manufacturers have little incentive to innovate with margins falling over the last two years to less than 5%. If Ericsson, Nokia Siemens Networks or Nortel cannot find a reason to invest in developing new data solutions then what chance the Mobile Internet? The current Mobile Broadband has placed a massive load on the OSS and BSS systems in Mobile Networks as 5% of users are consuming two thirds of all data on the network. Whilst Huawei have excelled in the development of HSDPA/HSUPA/HSDP+ as they have taken marketshare to the point that today sees them leading the field; what will motivate them to create the flat architecture needed to open the mobile web?

The content space is no better with those that provide free content doing better than those who have a subscription service. The quality of the network means that very few attempts to watch streaming media by myself have been a success. Efforts by Networks to impose additional standards have resulted in displacing successful content with bland services that nobody wants. The iTunes platform is not something loved by Artists because the economics are wrong however the portal approach of Mobile Networks seeks to replicate this.

The battle between Handset Manufacturers and Mobile Networks seems to have swung to much in favour of the Networks. Sony Ericsson joined others in reporting a slowing of sales this year and a lowering of its average selling price. This means that they will expect to get a better return on the investment it makes in handset design which means that we can expect handsets to stick around longer. The only people I know who upgrade the firmware on a phone are iPhone users who are prompted to do so when they connect the device to a computer rather than over the air. To many early adopters have attempted to do so on other devices and turned them into bricks because of Operator profiles. If we slow the rate of release of new handsets then we will slow the rate of innovation as this is the only way that we can seed new services. We are now looking a handset makers moving towards three platforms in a way similar to the computer market with Windows Mobile, Symbian and Linux. This lowers the cost of deployment for Mobile Networks and makes the developers lives easier because the APIs needed will be smaller.

Recent projects have seen me look at the launch of Mobile Banking in the US. Over the last year they have managed to get over 8M Consumers to move from the Internet to the Phone. Some are just doing simple queries whilst just under half are making payments. This market is serviced by a wide range of service enablers who have acted as trusted providers sitting between Banks and Mobile Networks. All in the process share the rewards in a federated approach no one is talking about "my customers" rather it is about users. Dependent on the handset and my financial needs I can Bank using SMS, Browser or Java Aplet. All those working in Mobile Banking have a common evolutionary path that sees them working towards Mobile Payments and then Mobile Wallet over the next 2-3 years. They will include Store Cards, Coupons, NFC, Access and Keys in the evolutionary steps. They are all able to work on the development of functionality because they have a framework that is stable thanks to the Federated approach.

The work of the European Commission seems to be to reduce the mobile premium to zero via regulation.

Taking all of the points above I would hope that Stratergy in Vodafone would apply some degree of logic that says its time to make a massive change otherwise we face the risk of becoming a dumb pipe. If European Networks do not change the way that they deal with partners then they will find themselves by passed. The difference between fixed and mobile is that mobile has the payments mechanism built in thus connected consumers with retailers the mobile network could take a commission on the sale. If Vodafone were to look outside of Telecoms and say we will become a facilitator in the same way as Tecso's Clubcard provider the ARPU will not come just from handset user but from those that want to communicate with them; this is after all the plan of Blyk. Better software installed at the level of the base station could improve the information that the Mobile Networks gather and thus aid knowledge about the users. At this moment my Network providers know very little about me or my useage of mobile as I us more than one network and so simple bill anaysis fails.

In Europe rather than buying new subscribers the focus needs to be getting more of the current subscribers wallet. As a mobile user we all have a budget, some of the most informed users are those with a limited budget. My daughters and their classmates have an excellent knowledge of prices for mobile and are innovating how they share content off network. What they present for Vodafone is a communication chanel which used correctly will provide revenues far greater than the amount they spend on connectivity. The FMCG community has an excellent knowledge of Brands and are will to pay for a conversation with small groups who they can get to spend money on increasing the money they already spend on a product.

If you look at the failure of WiMAX, IMS, MMS ..... to find a market you will see that one common feature is the lack of a common ecosystem. Perhaps if these technologies had first attempted to form a Federation then they would have been a success? Vodafone has the power thanks to size and footprint. Does it have a CEO prepared to change the game?

Friday, June 27, 2008

Some quick thoughts

Have been busy causing trouble and disrupting poor thinking in some of the big clients that I consult for.

On one level I am ashamed by some of the thinking that I have seen from the Blue Chip Strategy Houses and have to hope that clients will reject the invoices when they are presented. However I fear that the fact that people were not fired if IBM were hired rings true when it comes to Bain and McKinsey.

Over the last week I have been forced to look at the published analysis of Mobile Broadband in Europe more than I would have chosen to. Clients have asked will we see the Mobile Networks follow the fixed in becoming just a dumb pipe? The one thing that I think will stop this is the payment relationship that the mobile networks have, if you already have one payment mechanism why would you need to invent a new one as you did with pay pal on the fixed internet. I also think that Voice could play an important part in the new data services that we will use. Vox shows some of the possibility with turning you voicemail into text. My Opera browser on the desktop shows some of what might happen with its voice controls. Before you buy into mobile broadband, the situation in Sweden, Finland or Austria is not something that can be used for the Globe or even the five biggest European markets on the basis of population. PC ownership in Spain and Italy is far lower than in Northern Europe for a start.

What are Nokia doing with Symbian?

Since the departure of Psion from the party it started Nokia have controlled the shape and direction of Symbian. We are told that Symbian leads the Smartphone market in terms of sales globally. However do Symbian phone's demonstrate that they are smart? When I was a Psion user you had a community of geeks who developed and exchanged software which they hoped they could replicated on Phones. They failed because the Networks were closed to personalisation that was more than just wallpapers and ringtones. I have explained that I see handsets as looking somewhat like the computer market of the mid-1980's in that we have too many Operating Systems. Only history will prove if Symbian was the DOS3.1 of mobile OS rather than VAX. The power of Nokia has put Symbian at risk because of its close association. At the moment all I see is Nokia saving money paying licence fees and the demise of S40 because the only reason it is used at present is because it has a lower charge. If they both have a zero cost Nokia will Supersize the OS with S60.

Was Motorola's new handset the last roll of the dice? This weeks new handset with its Kodac 5Meg Camera was behind the curve once again. Is this something to show that they still are around in the hope that they can find a buyer? Will be interested in seeing how public Huawei are about the PE House offers for a stake in their Handset Business. Should give an idea as to just what my old Motorola shares are worth not that I expect to be able to more than buy the family a round of ice creams with the "profits"!

Today's FT shows that what some Vodafone shareholders wanted may be about to come to pass with the Head of Verizon talking about taking control and buying assets overseas. The new CEO faces a challenging time when he takes the top job at Vodafone. I expect that those in Newbury are on for exciting times for the next 12 months.

Sunday, June 15, 2008

Thoughts from the Network Equipment World

Over the last few weeks I have been looking at the current and future trends in the world of Mobile Network Equipment.

Over the last few weeks we have seen Nortel move away from IMS and WiMAX and put its money behind LTE.

China have started to restructure its telecoms structure and so ZTE and Huawei might not have the workforce to continue to erode margins in Europe.

I was at a presentation from Nokia Siemens Networks where they spoke of the fact that they are managing over 1Billion HLRs for its customers, its new flex base station is saving money for operators by improved power management and the purchase of Apertio has given them the tools that might improve the user experience. The CEO is looking at becoming a Services business that aims at improving the cost of running a network rather than facilitating multimedia services.

The arrival of the Chinese in the market has effected margins to the effect that over the last two years they have fallen to less tha 5%, which explains why they have been buying business via outsourcing deals.

For the Mobile Data fanboys the Network guys are saying that until they have installed a flat architecture that allows users to conect to the internet at the base station the walled gardens will always be needed to shape traffic.

Saturday, June 14, 2008

Could Southern Europe jump Internet Banking for Mobile Banking?

Recent work sees me look at at the levers needed for Mobile Banking in Western Europe. Looking at what is available to date and outside the UK it seems that in Italy has seen innovation by the Post Office who are an MVNO. PosteMobile now offer bill payment over mobile phones. Customers with a PosteMobile prepaid card or BancoPosta bank account san pay bills. On a technical level the service sends an email and SMS to confirm successful payment. It costs €o.15.

The Post Office Bank in Switzerland plan to launch mobile payment services with a large marketing campaign targeting young people attending music festivals over the summer.

Now All I need to understand is the Post Office in Southern Europe still the main service for Bill Payment as it once was in the UK before Thatcher & Co put it to the sword. Am sure that Southern Europe is much more a cash based economy than Northern Countries and so Bill Payment forms a bigger part than the UK ,where a significant number use direct debit.

Thursday, June 12, 2008

More bad news for Mobile Services

I have spent the last few weeks looking at the boom in Mobile Banking in America. I have benefited from the excellent blog by Brandon McGee and LinkedIn's ability to contact the key people quickly to bring myself up to speed having focused on the Mobile Payments boom in the Emerging Markets.

The first thing that get me is just how much the Banks have spent on Adverts that educate Consumers to the fact that they can Bank on the mobile. Chase has spent $70M so far this year and others have matched that spend.

Wells Fargo have adopted the most diverse platform offering Customers the opportunity to Bank via SMS, Browser and Java Client. Bank of America leads the field with 1M customers after just 9 months.

That's the good new, the bad news is that the best way forward at present is a Simple solution that uses SMS because users are too dumb to find the Java ap once the have installed it and the networks use of content rendering solutions means that they can't present a consistent view via a browser.

So here in the UK we have a system that few have heard of and less are using. Mobile Banking is happening in the US and Payments are now at the centre of business plans in Emerging Markets as the channel to reach the Unbanked. In the UK we have little prospect thanks to the fact that mobile data is something that Consumers stay away from because of the assumed high costs. Will be held back because of a lack of clear thought or will it be because we are not financially literate?

The CEO of ClairMail is telling Banks in the US that mobile needs to be at the centre of their strategy because of the fact that it will drive Dialogue in the same way that Tesco's drives business with the Clubcard.

Wells Fargo are developing Mobile becuae it matches the profile of its customer base, this profile sounds like First Direct in the UK but HSBC do not seem to see the need for the service.

A few reference points for you, less than 70% of Americans have a Bank Account, under 40% have a Cell Phone. Yet they see the value in Mobile Banking not for Payments but rather in fraud protection and marketing terms! Here in the UK more people have a Bank Account and a Phone and yet we have no vissible services.

Mobile Banking is an ecosystem that needs to undertake defined steps if the Mobile is to replace the Walet. Without the simple account checking ability to educate users what hope does peer to peer payments have?