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?

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