MWC 2013 Takeaway:
White papers August 2013
Converting aspirations into actions
Authors Darren Tan - Research Director - email@example.com
Matthew Palmer - Principal - firstname.lastname@example.org
- The 2013 Mobile World Congress (MWC) theme, the New Mobile Horizon, underscores the mobile world of the future: connectivity everywhere and with everything. Mobile operators as well as consumer brands, organisations and industries touched by the mobile ecosystem took to the stage to share their perspectives on mobile’s outlook
- This year’s discussions centred on operator challenges and the proliferation of new devices and operating systems. However, vertical-specific sessions covering advertising, health, automotive, entertainment and education
- highlighted the progress achieved thus far
- 2013 is viewed as the year of converting the wider aspirations outlined in previous years into actions. The previously-apparent fear of the unknown appears to have given way to a positive sentiment which could be felt throughout the event – an encouraging sign for the sector
- However, the operator’s journey forward is not easy, especially given ecosystem complexity and multi-layered network challenges. Failure to react quickly to these will put an operator in a very tight spot for survival
- This perspective paper highlights the ten core areas that we believe will define the digital world in 2013
The recently-concluded Mobile World Congress (MWC) 2013 showcased the next horizon of the mobile world: connectivity everywhere and the Internet of Things. No longer is the event simply a showcase for cutting-edge gadgets; this year the stage was shared by device manufacturers, vendors and service providers who put forward their ambitions to shape the connected world.
Looking back at our MWC 2012 coverage, we see consistency in our views as the industry evolves. Among others, HTML5 is creating major disruption in the OS world, as reinforced by Mozilla’s recent announcement. Low-end smartphones are already superseding high-end feature phones, driving connectivity to the emerging mass market. Finally, operators and OTTs are beginning to establish partnerships, despite the industry challenges.
2013 will likely be viewed as the year of converting the wider aspirations outlined in previous years into actions – and the achievements showcased during this event bode well for the year. Moreover, the previously-apparent fear of the unknown appears to have given way to a positive sentiment which could be felt throughout the event – an encouraging sign for the sector.
This perspective paper highlights the ten core areas that we believe will shape the digital world in 2013.
1. Firefox OS – Open mobile web initiative to challenge OS dominance 1. and connect the next 1 billion
Mozilla used MWC 2013 to announce its intention to shake-up the mobile operating system (OS) landscape with a platform that promises an open developer- and consumer-friendly operating system with Firefox OS. Entirely web-based, Firefox OS will be built on HTML5 and other open web standards. Mozilla’s ambition is to define the Mobile Web standards as the company did for the Internet in the 1990s.
This OS initiative is led by Telefónica and well supported by 18 operators—an ever-growing number—and at least four key manufacturers: Alcatel, LG, Huawei and ZTE. Early low-cost devices are targeted at emerging markets including Brazil, Colombia, Hungary, Mexico, Montenegro, Poland, Serbia, Spain and Venezuela with the intention to connect the next 1 billion data users.
The open platform looks to have garnered industry support based on two fundamental reasons:
- Firefox may break the dominance of Apple’s iOS and Google’s Android in mobile internet by stimulating greater innovation across the value chain. Given that Apple and Google Android control over 70% of smartphone penetration, Firefox OS’s multi-platform compatibility will ensure consistent experience for users struggling with multi-platform devices
- As an open platform, Firefox OS will provide greater opportunity for operators and developers to foster innovation within the mobile-internet value chain. Apps will be HTML5-based allowing carriers to easily tailor the interface and develop localised services to match the unique needs of their customer base
According to Gary Kovacs, the CEO of Mozilla, Firefox OS brings the freedom and unbounded innovation of the open Web to mobile users everywhere.
The Delta Perspective: The battle for the position of third-placed OS is on. Seasoned OSs such as Windows Phone (WP) and BlackBerry continue their tussle while new entrants including Ubuntu, Tizen and Jolla’s Sailfish have entered the ring (detailed further in this paper).
2. Regulatory – Spectrum harmonisation and standards sought
Regulatory issues are not new but still echo in the conference halls. This year’s focus was the lack of standards and harmonisation on global LTE spectrum assignments, a subject deemed crucial for interoperability and global roaming.
The outgoing CEO of Deutsche Telekom, Rene Obermann, was particularly vocal and direct with his comments on over-regulation of operators while OTTs such as Viber continue their free ride. Obermann denounced the practice of over-regulation of spectrum as “stupid” and “wrong” and called for regulators to rebalance the industry by recognising the rise of OTT providers as the current status quo yet noting the situation in which mobile operators alone shoulder all infrastructure investments as “unsustainable”. Indeed, multiple operators used the conference as a platform to warn that overzealous regulation will curtail further investments.
On spectrum, fragmentation is a global issue with interoperability across multiple carriers and spectrum holdings far from consistent. While the precursor technology 3G was deployed globally over just a handful of spectrum bands, LTE has so far registered more than 40 different frequency combinations resulting in a complex landscape for equipment and component suppliers.
In particular, European operators need regulators to work together on this issue rather than focus on enriching their coffers. The low adoption rate of LTE (~1%) in Europe as compared to more than 10% penetration in North America, Japan and Korea clearly demonstrates the need for regulatory change.
The Delta Perspective: Europe can be singled out as the most complex regulatory regime while the US model can be considered the most liberal and successful model for emulation. We have seen regulatory intervention on OTTs (such as in Korea) and therefore note that regulatory support can be achieved with the right consultation. On the other hand, Governments should avoid maximising their coffers with spectrum auctions (as in India) but focus instead on harnessing the rewards of a successful digital economy if executed correctly.
In summary, operators must continue with active regulatory management to influence the regulatory agenda and, as a latter resort, threaten regulators with investment curtailment in specific countries.
Currently Mozilla seems content to enter the mobile market at its own pace. This rationale makes sense to us but—as with all good intentions—success lies in execution. However, the promise of connecting the unconnected (data) population and redefining the mobile experience from apps to mobile web appears highly compelling.
For the consumer, we fear that convincing customers to go with Firefox will nonetheless be challenging. Android-based devices are priced from US$50 and offer a mature ecosystem with great developer reach and support. However, if the price points for Mozilla-based devices are attractive enough coupled with the distribution power of some key operators, the dynamics could possibly change.
For the operator, this could signal less burden from subsidies for high-end smartphones dominated by the iOS and Android platforms. Furthermore, increasing diversity in the OS space could potentially lower device price-points to a level affordable for the mass market.
For the developer, the multi-platform capability of HTML5 applications means reduced time-to-market and wider distribution options (e.g. Apple App Store, Google Play or Firefox Marketplace). The other advantage of multi-platform compatibility is that consumers with multiple devices across different platforms will have a consistent user experience at any point. However, the buy-in among developers is essential to define and shape the platform as ultimately, the outcome will be in the hands of developers.
3.OTT/MNO Challenges – Coming to terms with cooperation
OTTs are here to stay and, as the emotional steam dissipates, operators are beginning to realise the opportunities in collaboration with OTTs. In a keynote session, the CEO of Viber, Talmon Macro, invited operators to seize the opportunity in the mediation/enablement layer (e.g. operator billing, customer care and order management capability, etc.). The strong push for partnerships, alliances and cooperation with the OTTs to monetise data is far from a bad proposition.
Operators are also realising that these OTTs have critical capabilities – and appeal – that operators themselves do not possess. Hence, partnering with and integrating the core competencies of both sides could help accelerate adoption and growth. There are thousands of providers out there with unique offerings that require a route to market and mechanisms to charge – operator collaboration will help earn a slice of the revenue.
Delta Perspective: Operators need to be nimble and agile by quickly establishing partnerships. The long and cumbersome process for defining cooperation agreements could
potentially thwart any great potential for collaboration with OTTs. Hence, as more operators strategise around a digital proposition, organisation structures will have to be defined but, ultimately, mind-sets will have to change. However, we still sense resistance both to change and embracing the true spirit of innovation among operators.
4. Innovation – Is operator-led innovation possible?
Past innovation showcased at MWC centred on devices and new service deployments such as M2M and enterprise connectivity. Operators are now aware that innovation has to start from differentiated service offerings and superior access connectivity that define customer experience.
The perspective on innovation from Rene Obermann of Deutsche Telekom sums it all up – service providers need to get smarter. This involves three main pillars: smart networks, innovative services and an innovative culture. On networks, Obermann talked of the need for integrated, efficient networks that were also customised to provide quality of service.
On services, providers have two different routes to follow. On the one hand, they should become enablers, opening APIs to third parties. This will enable services such as dynamic QoS, authentication and authorisation, carrier billing and messaging. On the other hand, operators also need to differentiate with smart connectivity, providing their subscribers with carrier-grade communication, end-to-end security, interactive TV, seamless streaming, software and content distribution and mobile payments, etc.
Delta Perspective: OTTs will continue to disrupt but operators should partner with these players to reduce value destruction. A smart service provider needs to instil an open culture and establish partnerships with multiple players, cooperating and competing with OTT players while driving innovation through its own service offerings.
To achieve this, innovation has to be instilled in the operator’s heart/vision; it cannot be a buzzword thrown out superficially at events in isolation from strategy and vision. While some operators have realised the need for radical transformation and worked hard towards this aspiration, for others, the process has been painstakingly slow – which unfortunately OTTs are not willing to provide allowances for.
5. Devices – The wow is on OSs, not devices
Overall, the devices showcased this year created very little excitement (possibly in anticipation of last week’s Samsung Galaxy IV launch). However, it was interesting to see how the Chinese players including Huawei and ZTE have stepped up to the challenge with
stheir latest brand positioning and device offerings. Some clear product differentiation included Samsung’s 8-inch Phablet (comparable to Apple’s iPad Mini, although with phone functionality), Sony’s renewed strategy in mobile devices with higher specifications (e.g. Xperia Z’s waterproof screen and richer pixel density) and HTC’s One (which won the best mobile device award) – but nothing show-stopping or revolutionary.
Other notable device developments included:
- Nokia pushing for mass-market strategy with enriched feature phones – Nokia has gone back to basics as it shifts towards mass-market adoption. Management sees an opportunity to differentiate with feature-rich handsets priced at US$20-25 in emerging markets. With the first internet experience for the next 1 billion to be through mobiles, Nokia’s budget phones (Nokia 105 and Nokia 301) could redefine the affordability price point for internet and email access. In addition, with standby battery life of 39 days, the proposition appears highly compelling
- Elsewhere, Nokia highlighted its music service as a key differentiator among other value added services for consumers
- Samsung challenges Apple TV with HomeSync – Samsung’s new home hub allows members to share content between devices. Based on cloud, HomeSync allows storage of videos, photos and apps compatible with the Android OS. Users can access content from multiple devices and stream wirelessly from a mobile device (e.g. tablet or smartphone) to a Samsung TV
- Wearable tech devices take centre-stage – Companies are starting to make more and more products capable of connecting to and communicating with smartphones. Devices such as Nike’s FuelBand, LG’s Smart Activity Tracker and Pebble’s smartwatch look set to lead the field of connected devices in the future. Google Glass—a wearable, voice-activated computer with Internet connectivity and head-mounted display—may well define a new frontier in digital innovation as well
- From an OS perspective and apart from heavy discussion around Firefox OS, OS wars now look set to define the innovative edge of product offerings. At MWC, three other OSs created quite a buzz:
- Canonical’s Ubuntu (gesture-centric smartphone): Ubuntu also used MWC to announce its venture into the smartphone world. Its Ubuntu-based OS was the main attraction given its gestural UI. Instead of a home button, slider-based lock screen, “settings” tile or app toggle, the user accesses these functions by swiping various edges of the screen. The resulting, elegant interface makes use of every side of the screen, minimising the time required to revisit the home screen
- Samsung’s Tizen: Seen as a potential alternative to the dominance of Android and supported by multiple operators, Samsung’s existing Bada OS forms the native applications framework although Tizen will embrace an open ecosystem as well. Operators including NTT Docomo and Orange have stepped forward with firm commitments to commercialise devices in H2 2013 while Samsung and Huawei have committed to make devices available. While no prototype was available at the conference, there is keen interest from Samsung to move away from its heavy reliance on the Android platform for their devices
- Jolla’s Sailfish: Sailfish is a Linux-based mobile operating system developed by the Sailfish Alliance, a division of Jolla Mobile and based on Nokia’s MeeGo and Mer. It also aims to challenge the dominance of Android and iOS platforms and is intended for use in both its upcoming smartphones and other devices
Delta Perspective: The quest for OS diversity will certainly be positive for the thriving mobile ecosystem given two points: the anticipated differentiating experience for consumers and alleviation of specific security concerns around Android/Google dominance (as cited recently by the Chinese Government). Regardless of whether it is a low-cost/feature-rich proposition such as Firefox OS or Nokia that helps lower the entry point for mass market adoption, this is extremely positive news for operators.
However, connecting the next 1 billion is not the only challenge. The larger question is if operators will be prepared to facilitate the data tsunami generated by these new users with a differentiated customer experience.
6. Mobile Payments – Who controls the wallet?
Near-field communications (NFC) was this year’s dominant theme in the mobile financial services space. The two credit card giants, MasterCard and Visa, announced significant commitments to mobile payments (and possibly stole the show); however, both referenced the significant challenges ahead in embedding NFC infrastructure at scale.
MasterCard launched MasterPass, an enhanced version of its mobile wallet PayPass, while Visa announced a global partnership with Samsung and a group of technology providers which will broaden its mobile payment programme and enable third parties to connect to the system.
The MasterPass concept is appealing, as consumers are able to store their payment credentials securely in the cloud along with information such as billing and shipping addresses. This cloud-based approach infers that mobile payments could move away from storing payment data on a secure element embedded in a mobile device.
The biggest challenge remains industry fragmentation with multiple payment models competing to define the space. For example, PayPal argues that NFC has no future while others believe that the credit card giants will dominate the scene. According to an SAP survey conducted during MWC, fragmentation has created too much confusion, delaying consumer adoption. Interestingly, the frank admission by Vodafone’s CEO that there is little money to be made from NFC gave the industry a point upon which to reflect.
Delta Perspective: The competition for control of the virtual wallet is the main cause of industry fragmentation. For instance, Google Wallet has been effectively blocked by Verizon Wireless on the NFC-enabled handsets which it offers to its subscribers. Instead, Verizon allows only Isis Mobile Wallet—of which it owns one third—on handsets it sells. Ultimately, operators want control of the wallet to develop scale.
We believe it is still too early to pinpoint an eventual winner as operators could achieve success by collaborating with relevant partners (e.g. banking institutions) and leveraging their presence (distribution and retail networks) in their respective markets.
7. Big data – An internal operational efficiency tool (for the moment)
Big data and analytics have been hailed as the next big thing for telecom operators. The buzz is expected to continue and will influence how operator functions will evolve in the future. While big data comes appears very promising from the context aware/personalisation angle, the industry is still grappling with the true definition of big data as it tries to distinguish conventional database warehousing from true big data analytics. That said, mobile operator Orange has claimed some degree of success in aggregating customer data and providing marketers with data for analysis.
Consequently, the biggest realisation from the conference was that currently big data is seen as a tool for tweaking internal operational efficiency (e.g. call-centre up-sell, churn management, CEM improvements, etc.). SK Telecom also illustrated how internal analytics helped them to understand the movements of their high-net-worth segment in the Gangnam District before relocating their existing branch to a more strategic location.
Nonetheless, operators currently feel the pressure to make sense of the huge amount of data available from both their customer base and their networks, and are seeking tools to help analyse and manage this. A new generation of software designed to handle big data queries has emerged specifically targeting the distributed programming of large datasets, including MapReduce, a programming model developed by Google.
In the short term, the challenge of monetising third party data is largely attributed to internal complexity and legacy systems that may not generate consistent and meaningful data. In addition, data privacy issues abound.
8. Future Networks – All about network intelligence
- While everyone is well aware of the expected data deluge over the coming years, vendors are offering solutions to solve today’s network complexities and challenges for operators. Many of the vendor-led speeches sought to help operators achieve a clearer view of network operations while taking advantage of cloud computing technology to virtualise network elements, improve quality of experience and reduce infrastructure costs.
- Intelligent Base Stations (IBS): Besides expanding network capacity, smarter base stations can provide diverse intelligent services while managing traffic. These stations go beyond traditional connectivity with the ability to identify services and allocate radio resource to higher-priority services. IBS may catalyse context-aware services tailored specifically to each customer based on analytics/information
- Software Defined Networks (SDN): With the advent of Software Defined Networks (SDN), the roles of software- and network-equipment-providers are blurring. From the operator perspective, this competition is positive and timely given that LTE and vast data volumes now require greater network flexibility, scalability and cost performance. From the equipment manufacturer perspective, IT vendors are attacking their core market. Juniper Networks is talking up its vision of SDN as a four-step roadmap with new software and services to support provisioning, virtualised services and mobile infrastructure.
- eMBMS (Enhanced Multimedia Broadcast Multicast Service): Currently pursued by Alcatel-Lucent, the concept leverages the location-aware capabilities of small cells to determine what content should be available close to the consumers to deliver compelling video content. This works well where popular video content, such as an instant replay, is viewed by many people. However, there is as yet no commercial deployment with Verizon the only operator to have expressed an interest in launching eMBMS services in 2014 over their LTE networks
Delta Perspective: The onslaught of data demand is forcing operators to devise ever-more-intelligent ways of deploying future networks and optimising data transmissions with edge
caching and dynamic video compression capabilities, etc. The SK Telecom session exemplified how operators can understand local data demand patterns and customise solutions to preserve networks.
On the SDN front, the long-term vision is to evolve the wireless network into one that is programmable and flexible with network management virtualised and centralised in a cloud environment. However, if the vision of specialised software running on commoditised hardware becomes reality, infrastructure vendors have a lot to lose.
Nonetheless, we expect mobile operators to still partner with large vendors to some extent for their whole network, rather than contract a variety of smaller specialists. However, until an operator takes the lead with a trial, SDN may end up like many other formats/technologies that have been shelved. At the very least, it will take a few more years before these solutions become a core component of any intelligent network.
Delta Perspective: We sense that the transition from traditional relational database systems to big data systems will be slower than anticipated. Furthermore, these application- and analytics-advances are predicated upon a major assumption – that organisations will have the ability to effectively gather sufficient big data reserves, analyse them and exploit them in a relevant and timely fashion.
The reality is that big data is easier said than done. When relying on multiple legacy systems, many organisations discover that big data transfers are time-consuming and may not deliver the required dataset to inform such decisions. Operators must therefore invest in the right systems and in-house analytics capabilities (e.g. pool of data scientists) to deliver on the big data proposition.
9. Internet of Things (IoT): mHealth
- Mobile technology is expected to play a key role in bringing healthcare to remote, underserved areas. The GSMA claimed that mobile-enabled and mobile-activated services will become integral to healthcare delivery by 2017, resulting in a global market worth approximately US$23 billion. Consequently, at MWC several operators were seen rushing to clinch deals and kick-start partnerships with medical and health companies to enter the medical arena. Some of the interesting observations on global m-health are highlighted below.
- AT&T Vitality GlowCaps: Patients’ failure to take their prescribed medicine on time is a constant challenge for healthcare providers. These medicine bottle caps use mobile technology to discipline patients to stick to their prescription routine
- Mobisante/MobiUS SP1 Ultrasound System:• Although ultrasound imaging is a vital diagnostic tool that can save lives, this technology is not accessible to around 70% of the world’s population, especially patients in developing countries. This device, a portable ultrasound probe which can be plugged into a smartphone, allows for handheld imaging and brings ultrasound technology to remote areas, miles away from traditional facilities. Images can then be relayed via mobile networks or Wi-Fi
- Telenor home monitoring trial: This embedded mobile technology, in which devices and machines wirelessly communicate, helps the elderly live independently by using sensors in the home to monitor for signs of distress or illness. The machine-to-machine (M2M) technology includes a fall detector, e-pill dispenser, moisture sensor (for bed linen), epilepsy alarm and a GPS location detector. Triggering an alarm sends a text message to healthcare providers
- SIMAP (Intelligent Personal Alert Monitoring System): The Vodafone and Spanish Red Cross project aims to give Alzheimer’s patients the confidence to live independently. To achieve this, the patient is given a mobile device with GPS transmitter which updates its position every three minutes. Should the patient go beyond a pre-defined geographic area, health providers can schedule the device to send them an alert
Delta Perspective: We see a major push towards connecting all possible devices in the future – particularly on the mHealth front. The momentum felt was greater this year, evidenced by GSMA’s mHealth Tracker that currently lists over 900 global initiatives. While certainly moving in the right direction, the real challenge is to achieve a critical adoption rate as the mass consumer market still needs to grasp the true value proposition of mHealth.
At the same time, another real challenge is aligning all the stakeholders across the value chain – from defining Government policies to securing participation from industry players. However, these stakeholders have to be convinced by the proposition which, while not impossible, is not easy either.
Nonetheless, we have seen proven cases such as Orange’s partnership with the French Ministry of Health to host private medical data and enhance the synergies across the healthcare value chain. Given the size of prize, there is merit in pursuing this opportunity.
10. Internet of Things (IoT): Connected Cars – Closer to reality
The vehicle will be the next connected device. Depicted as the original “mobile” device, the connected car initiatives are now being pursued by major manufacturers in the US, Germany, France and Japan. Intelligent vehicle systems with internet connectivity will be the norm in the future and will include messaging and email, real-time fuel-price/traffic updates, social networking, music services, information on events, weather, news, etc. According to Francesca Forestiera, director of the GSMA’s mAutomotive initiative, almost half of new cars delivered will include connectivity by 2015.
Some of the key initiatives observed during the MWC include:
- AT&T and General Motors: AT&T announced that it will replace Verizon Wireless as the connectivity supplier to General Motors (GM) and as the network behind GM’s OnStar service. Starting in 2014, GM plans to install AT&T LTE modems in all its U.S. Chevrolet, Buick, GMC and Cadillac vehicles
- Ford’s SYNC AppLink: Ford showcased another solution to provide connectivity as an interim measure until universal SIM cards are widely incorporated. Ford’s SYNC AppLink is just one of many voice-controlled, in-vehicle infotainment systems that can connect with smartphone apps. AppLink does not require the user to download any apps to the car. Instead, it connects with apps on the user’s smartphone and provides control through the car. The SYNC solution allows users to physically connect almost every smartphone (290 different models), integrating through a voice-activated app. Ford cars will also have access to Spotify’s millions of music tracks via voice-controlled, on-demand music in its SYNC AppLink-connected vehicles
- Deutsche Telekom and BMW: The two companies currently provide a connected-car service based on LTE and Wi-Fi technology to Sixt, Germany’s biggest car-rental company. The BMW ConnectedDrive hotspot is a 4G solution where drivers and passengers can surf online via a high-speed LTE connection at up to 100 Mbps, using up to eight WLAN devices (such as smartphones, laptops and tablets) at the same time. BMW and Sixt had previously launched DriveNow, a premium car sharing venture that allows customers to hire and return vehicles at any location at their convenience. Available vehicles can be tracked and reserved via the internet or a smartphone app
- Audi: Audi will incorporate M2M technology in all of its new vehicles before the end of this decade
Delta Perspective: We have a positive view both on the prospects for and progress with connected cars. The Connected Car Consortium (CCC) currently constitutes more than 80 percent of the world’s automakers including Daimler, Honda, Fiat, BMW, Mazda, Mitsubishi, Toyota, Volkswagen, Renault, Ford and GM. Furthermore, it has created a global standard for smartphone and in-vehicle connectivity called MirrorLink. However, operators need to become more-actively involved to define standards or risk ending up as dumb telematics providers.
As proclaimed by Stephen Girsky, Vice Chairman of GM, “we’ve only scratched the surface of what is possible when the automotive and wireless worlds converge”. While the possibilities for IoT/M2M are positively mind-blowing, we agree with some European operators’ call for greater progress on the development of “horizontal” M2M standards independent of the vertical industries that are being addressed. These standards need to be defined and should not only include connectivity. Scalability is key, otherwise technological silos as seen in the past will lead to failures.
The mobile industry has always been in flux, driven by ecosystem complexity and multi-layered network challenges. Today is no different with operators inundated by myriad challenges. Failure to react quickly to these will put operators in a very tight spot for survival.
Hence, moving towards a digital strategy as per some of the leading operators is the right step. However, putting these aspirations into action requires a thorough assessment of internal capabilities and frank recognition of inadequacies.
Constant transformation will become the new norm. The ability to adopt an innovative mind-set and react with an OTT’s agility will differentiate the best. Establishing partnerships within the ecosystem will be healthy for the industry; shying away from value-destructive behaviours will foster growth for all.
This year is indeed about linking actions to aspirations set in the past – making the promise of Internet everywhere a reality. We have seen some green shoots in the digital strategy of certain leading operators – but the journey forward is complex and challenging.
Operators stand to be rewarded for best in class execution. It is not the time for contemplation but rather the time to act.
© 2017 Delta Partners.