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I don't want to be the party pooper, especially with the annual Mobile World Congress jamboree in Barcelona in full swing, but it may be time for a mobile industry reality check.
Sure, the headlines out of the show are still dominated by new devices like Samsung’s Galaxy S6 announcement and LG’s latest smartwatch, but the real nexus of the industry has moved away from device manufacturers and even the operators themselves.
The evidence of this is all too apparent. The lower end of the handset market has already commoditized. Among device makers, Apple (and to a much lesser extent) Samsung, dominate the premium market and account for the lion’s share of profits.
But even they are under attack as lower-cost, Android-based Chinese manufacturers begin to target the top end of a relatively saturated market.Tablet sales have also stalled. In the fourth quarter of 2014, worldwide tablet shipments declined for the first time since Apple introduced the iPad in 2010. According to IDC numbers, Apple and its peers shipped 76.1m units between October and December compared to 78.6m devices in the previous year’s holiday quarter.
Network operators are also under pressure from regulators and price-based competition at a time of dramatically slowing subscriber growth and downward pressure on a key metric – average revenue per subscriber.
According to the GSMA which organizes the Barcelona show, the number of unique mobile subscribers worldwide now stands at 3.66bn, up 5.38 per cent on the year thanks entirely to continued growth in developing markets. Mobile industry revenue over the past year grew by a relatively modest 3.75 per cent to $1,130bn. Most significantly however, average revenue per subscriber declined by just under 4 per cent to $12.15.
Meanwhile regulators in the US (and potentially in Europe) have introduced Net Neutrality rules that limit the ability of operators to extract premium prices from internet content providers like Netflix for access to broadband ‘fast lanes,’ and could potentially lead to much tighter regulation of a wide range of telecom services.
(Many of the new networks, services, and business models that are being developed today by network operators in an effort to shore up revenues involve the use of technologies that allow operators to treat some Internet packets differently from others.)
Against this backdrop, I think we are at a tipping point for the mobile industry. As Ovum analyst Mark Newman noted recently, “for the first 30 years of its life, mobile communications felt like a standalone industry with its own technology, services, vendors, and service providers."
A select group of telecoms vendors created the technology road-map and vision; a relatively small number of investors and operators captured the most lucrative licenses to build and operate mobile networks; and a few European, US, and Asian vendors controlled the mobile phone sector.
"The Mobile World Congress (this week) will highlight just how quickly the technology and services landscape is starting to change. It will mark a further shift in the evolution of mobile communications from a sector in its own right to a service and a capability which other companies in other sectors – banking, enterprise technology and software, and digital media to name just a few – can use to deliver improved services to their own customers.”
The hot topics at MWC this week come mostly from the world of IT. Cloud, - including the big question is how telecoms operators can add value to the cloud services market rather than merely reselling public cloud services in a race to the bottom - data analytics, and SDN (software defined networks) will all feature prominently.
Significantly all are also tools designed to enable network operators to deliver more innovative services to their customers faster and more efficiently.
As Ovum’s Newman notes, enterprise services and applications have become a dominant theme, and much of the ‘future-gazing’ is around the topic of the Internet of Things. “
But while there is an expectation that IoT will drive many of the future requirements of mobile networks, the role of the operator and the value of licensed (as opposed to unlicensed) spectrum are both extremely unclear.
In addition, the IoT will require network operators to support a huge growth in the number of connections while at the same time delivering a significant reduction in the cost of supporting connectivity, be it in the device or in billing and operations support systems
All this marks a dramatic shift – and a big opportunity for enterprise software companies like SAP.
In the past, the Mobile World Congress had a much stronger focus on the consumer market than the enterprise sector, but this is now changing. Last year saw a massive influx of enterprise software and applications companies into the MWC exhibition halls. This year companies like SAP have an even bigger presence. (Bill McDermott, SAP’s CEO, delivers a keynote address on Tuesday.)
Rick Costanzo, SAP’s Executive Vice President of Global Mobility, believes the changing mobile market provides a big opportunity for SAP to sell its Big Data analytics tools and HANA in-memory computing technology to operators desperate to improve their customer management and customer experience.
“In 2014, it felt like every company that was struggling to grow its core business was launching an analytics product,” says Ovum’s Newman, “2015 will see no letting up in the number of new product and service announcements.
“The big difference this year is that operators will have a much clearer strategy around analytics – on the one hand to improve and extend their core offerings, and, on the other, to help build a value proposition around IoT.”
Rather than new handsets, and marketing campaigns aimed at consumers, this then is the new reality for mobile operators.
