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A new door, but is it open or closed?
Nokia has announced that they will fully replace their app store Ovi (”door” in Finnish) with a new incarnation this coming spring. While the rebuilding focuses on speed, user interface and reliability, new Ovi functionalities will include in-app payment, localized content and ”social networking elements”.
We appreciate Nokia’s candid acknowledgement that the Apple App Store rendered their first Ovi Store fairly uncompetitive and is excited about the announced Ovi Store changes. However, the remake does not address the underlying fundamentals that are still dictated by the demise of the Symbian Operating System. Yes, there are some 5,500 applications for Nokia phones and the store is delivering just under a million downloads per day, but a perception that Ovi is a failure is impacting developers, some of whom are abandoning efforts to develop Symbian applications in favour of Android and iPhone OS. Both latter operating systems are claimed to offer more cost efficient and modern development platforms, and are supported by considerable market hype. The new Ovi will only be successful if the planned new Symbian releases both help to access Ovi, decrease fragmentation, improve the developer support and include external improvement ideas, convincing developers that Symbian is indeed a more open operating system. A door to the world’s by far largest phone base ought to be tremendously attractive and an irresistible opportunity, but if it remains practically closed it’s not a very inviting prospect. As its common-life equivalent, a door may let people in or lock them out, we hope for the former.
23 Dec 2009 | Northstream
You can push any tariff you like ...
... as long as it’s flat!
Last week, AT&T’s CEO suggested that some customers were to blame for the poor performance of the AT&T mobile data network. With about 3% of smart-phone customers driving 40% of data traffic, AT&T is considering incentives to keep those subscribers from hampering the experience for everyone else. He then added “We’re going to focus on giving incentives to that small percentage of users to reduce or modify their usage.” We recognize the need to deploy various measures such as data caps and/or speed controls to limit outright abuse. On the other hand, to be a broadband operator means that you are in a business where the name of the game is to handle a doubling of traffic every year without compromising quality, too much. Therefore, it’s a bit surprising that the emphasis seems to be on “incentives” to reduce the data usage for a group of customers who clearly are finding value in using mobile broadband services. For years operators have tried to fill their 3G networks, and now when they do and they realize that they are not really able to handle the traffic. Mobile operators are not the only ones building broadband in the world. On the other side of the fence there is a very fast development of fixed broadband where 100Mbit/s is a pretty common offering to users, particularly in urban areas. If my iPhone is not working in my mobile network it will through WiFi work in my fixed network, where “femto cells” and usage are cheap. We believe the AT&T case is a good indication of the enormous task mobile operators have ahead of them when it comes to being able to handle ever growing broadband traffic, real broadband traffic where tariffs are flat and usage is doubling, every year! And revenue growth won’t come from preventing usage but rather from accepting the above fact and instead focus on building capacity, nurturing innovation, milking the long tail and do what one does best – operate a mobile internet access network.
21 Dec 2009 | Northstream
The Magical Mystery Tour - LTE goes public
TeliaSonera takes the lead on exploring new domains and launches the world’s first commercial LTE network! That’s all great, but what should we expect from these very first steps into the future?
Walking down to the TeliaSonera store on the opening day, some things are just as you would expect from a grand opening, including Champagne and twiglets for everyone. But there’s no queue, no iPhone-launch type of masses lining up to become the first LTE customers. Perhaps most people are waiting a few more hours for the web register to open, avoiding the other season launch – the heavy snowfall in central Stockholm? In any case, for those of us that do show up it becomes apparent that the launch in “2009” is more of a promotion than a real launch. Instead of getting our LTE device and service we are kindly asked to sign up for a place on the waiting list and informed that service activation is expected early in 2010 when the very first USB dongles for commercial use will be shipped. To sooth potential disappointments, we are quickly getting our image of early adopter strengthened(?) by hearing that our devices will be “exclusively hand built”. Ok… Anyway, aside the feeling that some of the magic go mysterious we should not forget that technology evolution requires early birds like TeliaSonera pushing technology, suppliers and the market into the future. The aggressive time plan will surely ensure a quicker weed-out of teething problems and thus a better platform for early mass-adoption of LTE as more launches from other operators are just around the corner. All needed to develop a critical mass for establishing a functional and virtuous LTE ecosystem. We addressed this in more details in our LTE white paper some months ago, and if you haven’t read it take a look at "LTE when the time's right". So, as the LTE tour now sets off, it is likely to have a bumpy road ahead for both drivers and passengers, at least to start with. And, if we paraphrase what was pointed out by the frontrunners; ‘We are not sure where we’re heading with 4G but hope that you users will help us by showing what it can be used for’. Quite unusal but fresh to hear mobile operators openly state that for once we don’t really know what the future will bring, but still trust that it will bring enough to make the investment worthwhile. We agree to 100%. In the end, the mobile future will fundamentally be driven by what the internet innovation eco system delivers in response to user demands and preferences. Meanwhile, on our side, we are eagerly looking forward for our ‘dongle’ to be shipped so we can get on that ride and look at the view ourselves. Thinking about it, we hope it will be both magic and mysterious. Stay tuned…
16 Dec 2009 | Northstream
Oranges and Apples? Do they compare?
Orange continues its ambitious activities within mobile application development and provisioning by launching Orange App Shop. Initially, some 1.3 million Orange customers in France and UK will be able to use a special App Shop client in addition to previous WAP portal and web portal access for discovering, buying and downloading applications. From an end-user perspective this is a great step in packaging and visualising software-based experiences, similar to the somewhat familiar(…) Apple App Store. However, while potentially offering access to and for a large number of users in multiple countries and making mobile application consumption independent of credit cards, this storefront in itself does not solve the fragmentation problems driven by multiple OS and handset form factors. Also, from a developer perspective, there are some stumbling blocks in the details: An aggregator/distributor is engaged as a middle hand, each individual country operator has a say in accepting the application, the revenue sharing agreement is negotiated on a case-by-case basis and, currently, free applications are not available. Looking at lessons learned from Apple’s success, Northstream’s firm belief is that operators with App Store ambitions must focus on minimising the thresholds both for consumption and provisioning of applications. This includes ease of interaction, transparency and the ability to use ”try it, you may like it” mechanisms. As we wrote some days ago, due to their confined up-take area mobile operators are numerically disadvantaged when competing with the Apples and their likes for scales effects (on content, applications, brands, etc.) and therefore must find ways to make up by exploiting their own specific and unique differentiators. In the end, whether we talk fruit salads or mobile apps, it’s not the oranges or the apples that make the real difference, it’s the quality, look and feel of the accompanying cherries and berries.
13 Dec 2009 | Northstream
We will rock you – no more
Two weeks ago something that has been rumored for the last 6 months got confirmed. Nokia will not exhibit at the Mobile World Congress in Barcelona. Chew on that. The flagship company of mobility for the last 20 years will not exhibit at the flagship event of the mobile industry. Both Nokia and GSMA play down this news, “We absolutely will be at Mobile World Congress in 2010 however we will not have a Nokia stand at the event” says Nokia, “Nokia will not exhibit at next year’s Mobile World Congress. However Nokia remains committed to Mobile World Congress and to the GSMA”, says GSMA.
We believe such a mobile industry eco-system disruption is significant. What does it really signal? That in today’s competitive handset market the cost for exhibiting at the biggest event is too high, even for its biggest player? That GSMA’s prices are more a reflection of the profitability levels of the industry in the past. Maybe a little bit of both? As a result anyway, the 2 most important players in the device industry, Nokia and Apple, are not exhibiting at MWC. Now to the real reason for writing this post. Nokia, apart from being the biggest handset vendor, has always thrown the best party’s at MWC. Best entertainment, second to none. Even Ericsson people try to get tickets. So what should we do instead? Maybe go back to the hotel room and zap through Spanish TV channels, it will not be the same.
10 Dec 2009 | Northstream
Mobile networks take a hit by generous Santa?
The German consumer electronics industry expects a good Christmas sale for this year with EUR 6.9 billion in revenues, slightly more than in 2008, according to the German association for entertainment and communications electronics - Gfu. A quick look at European operators seasonal promotions in shops and on the net reassures us that iPhone will be a popular gift in many European countries, and so will the mobile broadband USB stick and connected netbook. A lot of display space is devoted to the Korean device manufacturers too. Are the HSPA networks ready for the surge in data traffic on Christmas day when millions of excited advanced device users start their mobile broadband voyage of discovery? Mobile Operator CTO’s should be on red alert!
08 Dec 2009 | Northstream
Prediction #5 - What North America lost on the swings it regains on the roundabouts
In the mobile infrastructure supply market North America is doing poorly. From being a leading technology and supplier market in the 1G era (the AMPS, TACS and NMT days) the decline started 15-20 years ago when the Europeans had invented something called GSM which became the global standard. While the North American vendors spent time in competing internally what should be their 2G national/global standard, NAMPS, D-AMPS, CDMA etc. they were caught in a very distractive situation where they needed support all technologies. In our opinion this is the most important reason why there in reality remains only one North American global mobile infrastructure player left, which is half French by the way.
Having said all this, the North Americans are now on the path of getting their revenge. Something they got right was the internet. Almost all leading intertnet and IP players have their roots and Head Quarters on the US west coast. So now when North America accepted WCDMA and LTE as usable technologies just like the rest of the world, and when mobile is evolving to mobile broadband, the rules of the game has changed. Suddenly what is being developed in North America will work elsewhere without (or with minor) changes. Suddenly the the game is about internet, SW and developer community skills. This is why we see Nokia and Sony Ericsson losing their grip on their market to Google, Apple and RIM. Both MNOs and handset vendors in Europe will need to address this fundamental market shift and adapt to the new rules of the game. Our prediction is that North American device and SW vendors will dominate the global smartphone segment from 2010 and onwards.
04 Dec 2009 | Northstream
Prediction #4 - Not even the sky is the limit
One of the most interesting and probably most trend setting events during 2009 was the very fast growth of the Amazon Kindle e-reader in the US. It encapsulates a few important characteristics that we believe is showing the way for an upcoming and flourishing connected device market (in the past called M2M market).
Firstly it’s developed by a vertical player for its own vertical, in this case media retailing. This increases the likelihood of success since they are closer to and understand their customers’ needs better than the traditional Operator or handset player. Secondly, although the Kindle user is using mobile operators’ networks for the service no special subscription form is required since that is dealt with through a wholesale agreement between Amazon and the host Operator(s). It’s a simple one stop shop for the customer. Thirdly we begin to see the enormous impact of having ubiquitous mobile broadband networks globally. Anything that can be connected, will be connected, and in not too far a future. Our prediction is that 2010 will be the real take up year for the connected device market. Networks are ready, price points for mobile chipsets are dropping radically and will continue to do so. And many Operators have started to understand that it’s a market that requires a different business model than their traditional retail market. Expect a fast growing market that by the end of the next decade is far greater, not in revenues but in connections, than the traditional handset and subscription market.
04 Dec 2009 | Northstream
Prediction #3 - Shoemaker stick to your last
Currently, the mobile operator sector is the healthiest one in the mobile industry, at least for the #1 and #2 player in each market. In a way this is not strange given the oligopolistic nature of that business due spectrum licensing regimes and other high barriers to entry. From this perspective we predict the Operator sector, again for the #1 and #2 player in each market, to be the healthiest one for many years to come. The challenge is that it’s not so much a growth sector anymore. Take away emerging market assets from global operators and you will see that there have been revenue and margin pressure throughout this decade. In the same time frame there have been numerous product, application and service launches from Operators beyond building revenue streams voice and messaging. The result, in most cases, after all these years of trying is a revenue contribution in, to speak IR language, low single digit range.
From a Northstream perspective such weak outcome is not strange. Operators have a, sometimes neglected, scaling challenge. While everything that Google, Facebook, Skype and other Online Service Providers (OSP’s) do reaches all PC’s and Laptop’s in the world, the average Operator reaches 30% of the mobile users in one market with its services. Since Operators focus more on differentiation rather than seeking scale through cooperation with peer Operators the scaling challenge will prevail (international roaming being the most embarrassing example). With the fast growth in mobile broadband and Smartphones, OSPs start to reach a significant number of mobile users as well. In 2009 we have seen OSP’s services becoming more and more popular among mobile users, Facebook with its 80 million mobile users being a good example. Our prediction for 2010 is that OSPs will emerge as the leading service and application providers for mobile users. Beyond that, in 2010 they will start to compete in core revenue segments for Operators i.e. voice and messaging. Watch out for OSP talk and messaging clients! Operators that embrace this development and focus on coverage, quality and operational excellence are winners.
03 Dec 2009 | Northstream
Prediction #2 - No country for old men
The mobile infrastructure market has been very competitive throughout this decade, something we have witnessed firsthand as sourcing advisor to Operators around the world. As an example of changes, look at how NSN did for period of time not participate in price wars, resulting most of the times in a two-horse race between Huawei and Ericsson when it came to winning contracts. With the new guard at NSN they have changed strategy and are now as aggressive in their bidding as any other vendor. The market has thus gone from very competitive to ultra competitive. Winners, short term at least, are Operators than now can do complete swap-out of old GSM and WCDMA networks to brand new high capacity multi standard networks, including LTE, for price levels that previously were mere down payments for similar deals. For how long can this go on?
Not more than a year in our opinion. Current prices are clearly not at levels that sustainably can support multiple mobile infrastructure players. Our prediction is that the number of global full infrastructure players will be reduced to 3 during 2010. We believe that Ericsson and Huawei are strong candidates for two of the seats, while the number 3 slot will be found among one of Alcatel-Lucent, NSN and ZTE, or a combination…. Two of them has gone through painful mergers this decade, better luck next time?
03 Dec 2009 | Northstream
Prediction #1 - HSPA to the masses
The short version is that LTE is good and HSPA is great. LTE will indeed be commercially launched in 2010 and be surprisingly good considering that it is new technology. As with all new mobile technologies we will become more excited about what it promises for the future once systems are stable, coverage is built out and when there is an ample supply and variety of devices. Our biggest concern for LTE is the spectrum situation. As we learnt with WCDMA, take-up of a new technology gets significantly delayed unless it has spectrum available in “coverage” bands. The digital dividend band becoming available for LTE is just a starter for what is required for nationwide coverage and capacity of mobile broadband. Accelerated refarming of 900 and 1800 MHz bands is the solution.
The real blockbuster in 2010 is however HSPA. We know for sure that it adds top line growth for Operators while we sometimes wonder about margins, particularly in light of network impacts for devices like iPhone and its peers. 2010 is the year when the device market for HSPA will explode. The competition in chipset and device market for HSPA is fierce, which will lead to very low prices for HSPA devices leading to hockey stick type of take up for HSPA connections (we use a different model than IPCC though). Total number of HSPA connections globally will reach 400 million. Epicenter for this growth will be Unicom’s HSPA network in China, which already today is, with magnitude, the biggest HSPA network in the world. Any and all device players need to be there when millions of Chinese users are going for mobile broadband.
03 Dec 2009 | Northstream
Introducing our blog - NorthstreamingWelcome to ‘Northstreaming’, a new leading light on the blogosphere. I’ve read somewhere that there are more people in the world writing blogs than there are reading them. I don’t know if it’s true, but I hope it will not be the case for this one. We’re launching ‘Northstreaming’ so that we can publicly share some of our observations, insights, views and opinions about the telecom, internet and media industries, and we hope it will shed some light and give new angles on trends and developments we’re all confronted with. Most of the time, the detailed outcome of our analyses and reflections are restricted to the ears and eyes of our clients, and it will of course stay like that, but at the same time there’s still an ocean of generic insights and wisdom stemming from our day-to-day work, and sharing it in this form we believe will provide food for thoughts, stimulate further discussions and help progressing the path to a fully connected world!As a starter, from today and over the next couple of days we will discuss our predictions for 2010.
03 Dec 2009 | Northstream
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