Mobile World Congress 2010 Report

Dallas, USA / Munich, Germany - February 24, 2010

The Mobile World Congress (MWC) was held for the fifth time in Barcelona, Spain from February 15-18, 2010. Organizers claimed that the attendance touched 49,000 (representing 200+ countries), up from last year’s figure of 47,000. However, there was a definite drop in the number of exhibitors. We believe that the format of the event should be amended to lay more emphasis on services and applications compared to mobile infrastructure.

How is the industry doing? Latest figures from Wireless Intelligence indicate the mobile industry was fairly resolute in handling the global economic crisis. While GPD in the 30 OECD countries fell by as much 4.1%, mobile operators lost only 0.7% in revenue. Furthermore, we have just crossed the 4.6 billion mobile subscribers mark! China has reached 725 million subscribers at the end of last year, while India is adding 53 million new subscribers every quarter (50% y/y growth), and has reached 525 million subscribers. The industry has every reason to look forward to 2010 and the coming decade with optimism. If people drove the demand for mobile connections during the previous decade, this decade will see the true coming of ubiquitous device connectivity. By 2020, the number of subscribers is expected to hit 8 billion, an impressive growth of nearly 75% from today's figure. Large as the number might seem, it pales in comparison with Ericsson's prediction that 50 billion connected devices will be in the cloud by the time the decade draws to an end!

Major themes? The major themes of the Congress were Android phones, LTE deployments, the debate over flat rates, the return of Windows Mobile, mobile device management, mobile cloud computing, the green strategy of the industry, Google embracing mobile, apps and app stores, M-Learning and M-Health, femtocells (yet again!), mobile advertising, location-based services, SIM-based solutions and mobile payments among others. Let's look at each of these areas.

Android phones: Android was the most talked about subject during the Congress this year. People were showing off their Android phones as opposed to their iPhones! I have lost track of how many new Android phones were released or demoed during the show. But there were new devices at the HTC, Samsung, LG, Sony Ericsson, Dell, Acer, Lenovo and Garmin-Asus booths. The first Android powered tablets were seen at the event. They should be hitting the market soon giving Apple’s iPad a run for its money.

Google’s Nexus One took center stage at Google’s developers’ event, and Google gave away 2000 Nexus One phones to attendees, at the cost of about $1 million. HTC’s Hero, one of the most feature-rich Android phones, won the Best Mobile Handset Award at the end of the show! It is fair to say that Android has truly arrived in the wireless space. Ironically, the personality of the year award went to Steve Jobs, Apple’s CEO, who was not even there in Barcelona!

Is LTE roll-out around the corner? As we predicted last year, Verizon was not able to deploy LTE in 2009 but intends to cover 25 to 30 markets in the U.S. this year. There is a general consensus that LTE handsets will arrive sooner than expected, although the first devices will be dongles and data cards. Huawei unveiled an LTE modem that also supports GSM and HSPA.

Following Verizon's decision for adopting the new technology last year, AT&T has chosen Alcatel-Lucent and Ericsson for its own LTE deployment. NTT DoCoMo will also launch its LTE network by the end of the year. With much focus on the all-IP packet switched LTE network and wireless broadband so far, the industry has finally turned its attention to voice. The IMS based Voice over LTE initiative, established in November 2009, has about 40 members on board now including the biggest operators and vendors. Operators will have to upgrade processes for billing, service assurance, monitoring and other services. Several players who already have 4G ready solutions such as Germany’s IPTEGO and France’s Volubill should benefit from the trend. International roaming might still be an issue since LTE frequency bands range from the digital dividends (lower bands) to the 2.6 GHz band. Impeding LTE deployments augur rather well for start-ups like Blue Wonder Communications, 4M Wireless, Signalion and mimoOn.

End of 'all you can eat' data tariffs? Concerns about 3G+ networks facing capacity issues were heard all too often at the MWC this year. HSPA dongles had an unprecedented year in 2009 and a large part of the traffic already originates from laptops, netbooks and smartphones. AT&T’s capacity problems in some urban areas in the U.S. have been talking points all of last year. CTO John Donovan indicated at this Congress that over 40% of their users have smartphones (probably mostly iPhones) that typically consume much more data traffic. As more networks face capacity problems, does this signal the end of the road for 'all you can eat' tariffs? A section of the industry touts the LTE deployments as an all healing panacea for the networks, but even LTE with its radically improved capacity does not escape the laws of physics that puts a cap on throughput. At some point, we believe the heavy users have to be reigned in through differentiated tariffs or off-loaded to WiFi networks. Or is this the rationale for femtocells?

Speaking of femtocells: The seemingly permanent 'next-big technology' has matured and has cut down on rhetoric about its potential. Informa Telecoms and Media recently commented on the 'healthy' growth that the industry would see with 49 million femtocell units being sold by 2014. picoChip, the leading silicon vendor in this segment, announced six new customers, mostly Taiwanese vendors that have become prerequisite for mass adoption in today's world. Qualcomm's impending market entry will provide further traction to the segment. On the operator side, Vodafone and AT&T recently launched their femtocell offerings with the former rebranding it as Sure Signal in the UK at £25/month. In general, femtocell prices are falling, sometimes below $100, making them far more viable now. Femtocell software vendors like Continuous Computing and Node-H are enjoying traction in the light of recent developments. One interesting femtocell application that was announced enabled printing using smartphones connected to femtocells: Ubiquisys and Software Imaging announced this service for Android phones. Also Alcatel-Lucent announced its enterprise femtocell solution at this year’s event.

Optimizing backhaul: Since some of the capacity bottleneck is in the backhaul, operators such as AT&T have to either increase the backhaul capacity by putting in optical fiber, and/or consider various backhaul optimization solutions. At this Congress, we saw several backhaul optimization solutions being promoted including application-aware ones that optimize video / YouTube traffic over the backhaul. Companies like Aviat (formerly Harris Stratex), Celtro, Flash Networks, Memotec, Saguna, and UDcast are among those offering solutions. Also companies such as Arieso, Cerion and PIworks are offering optimization tools that reduce OPEX and/or CAPEX for mobile operators.

WACing it away: 24 global carriers and 4 device manufacturers announced a global app store appropriately (but unsexily) named Wholesale Application Community (WAC). The sheer reach of the alliance which covers 3 billion subscribers makes it newsworthy. This move further underlines the concern by operators of turning into dumb bit-pipes. Keep in mind that 3 billion apps have been downloaded from Apple’s App Store to date. While this industry initiative is timely, praiseworthy and would offer developers a single API for app development, it remains to be seen whether and how such a group of operators (often bitter competitors) would work together to offer the user the seamless experience that the App Store currently delivers. The proposition to the developer is clear: develop once for all device platforms in a multi-platform world and reach the largest audience possible. Conspicuous by their absence were Nokia, Google and RIM, who also run their own app stores and will offer the greatest competition to this initiative. With more services moving to the mobile cloud, a clear set of network APIs might give the WAC an advantage. Interestingly, Ericsson, not part of the above initiative, announced its own app store solution during this show.

Mobile OS war heats up: Intel and Nokia have decided to merge their respective OSs, Moblin and Maemo, to create MeeGo, an OS for mobile devices such as smartphones, tablets and dashboard car-computers. The Linux based OS will support both x86 and ARM; this would certainly give Intel increased mindshare in the mobile business. Smartphones have traditionally favoured ARM based chips and Intel seems to have finally woken up to the fact that smartphones will outnumber PCs in the near future. With its Atom processor line, Intel seeks to gain market share in the smartphone segment besides the netbook market. Recall Intel’s announcement earlier this year about its own app store: AppUp is targeted at apps for Atom based devices. Meanwhile the Symbian group gave away source code on USB sticks, underlining Nokia’s open source path! Curiously for Nokia, we did not hear of any device launches at this Congress and the company held most of its events outside of the official fair grounds.

Windows Mobile 7 makes its debut: Microsoft showcased its latest offering in the mobile OS space by unveiling the WM7. The general view is that Microsoft has to get it right this time finally - now or never! Windows Mobile’s market share has fallen rapidly, causing concern in Redmond. While the demo was largely UI based and little was revealed about the kernel, it did provide some insights. The UI is more modern with iPhone-like icons, and functionalities are grouped into 'hubs' by use-cases. In fact, the integration of its digital media player Zune and some Xbox functionality could give it traction in the consumer segment. For the enterprise, there is integration with SharePoint, Microsoft’s collaboration tool which is a smart move given the OS’ strong enterprise user base. Lots of handset manufacturers and operators have already signed up for it; but the first handset that supports WM7 will not be available until year end 2010.

Samsung goes enterprise and smart: The device platform market got a bit more crowded with the entry of Samsung’s new OS bada. Samsung formally announced its Wave device developed on the bada OS. Interestingly, bada means Ocean in Korean, and Samsung will be coming up with new waves! Although the company has been slow in hopping onto the rapidly growing smartphone market, one has to pay attention when the world’s second largest device maker finally joins in. This move is part of a comprehensive enterprise mobile strategy, wherein Samsung will offer enterprise email, instant messaging, security, mobile device management, unified communications, customer relationship management, salesforce automation and business intelligence in association with partners. We were able to play around with a Wave device and it seems that it can become an iPhone contestant if the price point is chosen below Apple's.

There is so much concern about fragmentation, especially in the handset OS space but I take a contrarian view. It translates into more choice for developers, operators and customers. If there is going to be some consolidation in the OS space, let that happen through the natural process of elimination. Furthermore, there are great solutions in the market such as the one from Netherlands’ Service2Media which offer a Platform as a Service (PaaS) that allows developers to access all rich phone features from the app they are developing for all device environments. Similarly, companies such as Mobinex from Turkey, offer platforms and tools for fast publishing of mobile apps across different OS. Also, mobile publishing platforms such as those from Handmark, Netbiscuits and MoMac allow content providers to create rich mobile content that are engaging on all platforms. Finally, companies such as Mobile Distillery provide porting of apps on smartphones onto other platforms. Liquid Air Lab also has developed an application factory for launching cross-platform apps in general and in particular for several verticals. Thus so many solutions for the 'problem of fragmentation'!

Smartphone management becomes big business: RIM announced the release of the free Blackberry Enterprise Server Express in Barcelona. The BES is considered the gold standard in the industry when it comes to email, PIM server and device management. Gone are the days of an enterprise supporting only one platform handpicked by IT. The iPhone has found its place in the enterprise and so will many Andorid-based phones. The multi-platform opportunity has been spotted by companies such as Good Technology (which acquired CloudSync), Sybase, Trust Digital (with their Enterprise Mobility Management - EMM platform), Germany’s ubitexx and even Google which now offers some bacis device management over the cloud (but curiously not yet for Android). With F-Secure also announcing security solutions for smartphones, we believe that the traditional security players will also enter this exploding market. Great solutions from the laptop world that can remotely wipe data from stolen laptops are already being provided for smartphones by players such as ubitexx. Even in the consumer segment, operators are being expected to offer customers services like mobile data sharing and back-up using solutions from vendors such as Maeglin from France.

What did Google do? Eric Schmidt’s eagerly awaited keynote provided some insights into Google’s mobile strategy. The new mantra, 'Mobile First' was something that one could have already deduced by observing Google’s entry into the mobile OS, device and advertising markets last year. But Mr. Schmidt’s focus on the cloud and its significance for the industry clearly signal where the priority lies. The computing power of smartphones with ubiquitous connectivity would make the cloud even more potent. Google also gave a boost to Adobe’s Flash by announcing support for it on the Android platform.

Also important was the demonstration of Google’s Optical Character Recognition (OCR) technology coupled with Google Translate. A user can take a picture of a menu in German and see it displayed in English instantly. Although this is not cutting-edge technology in itself, it has a compelling use case and also indicates Google's attempt to enter the cross media marketing segment. Recall Google's shipment of QR codes to 100,000 local businesses in the U.S. to push Google Local Business last year.

Mobile messaging: What is next for mobile messaging? One hot area during this Congress was RCS (Rich Communication Suite) that has been promoted by GSMA, with 40+ companies starting to offer new real-time multimedia messaging services. Ericsson was demonstrating with Telefónica during this Congress, while Colibria from Norway was pushing their RCS and social networking solutions at their booth. Another interesting mobile messaging product is Voice SMS which fills a gap in the developed markets, but more importantly, it is critical for mobile messaging in emerging markets. Companies such as Kirusa are offering innovative solutions around Voice SMS, Voice IM and Call-n-Tweet as Value Added Services (VAS). Further, Cologne based Communology unveiled its instant messaging and visual voicemail offering for Android that enables carriers to offer rich messaging environments for this fast growing platform.

2D / QR barcodes, digital watermarks and cross media interactivity: On the heels of 2D barcode solutions vendor Scanbuy received funding from Motorola's venture arm earlier this month, Neustar teamed up with Visa for promoting 2D codes at this Congress. The market for 2D code readers is currently very fragmented and there exist the different formats such as QR, Datamatrix etc. Microsoft also recently launched its own colour 2D codes with readers for all phone platforms including Blackberry and Android. It’s a sign of things to come. The west will finally catch up with pioneering markets such as Japan. In fact, commercial deployment in our host country Spain has been pioneered by Madrid based aquaMobile with leading brands and publishers looking to engage buyers and readers with barcodes and scannable digital watermarks. Watermarks do not occupy valuable inventory and can be embedded into images making them a more visually appealing than barcodes. Interestingly, they count Anta Banderas, a winery co-owned by Antonio Banderas as customer. Talk about Hollywood approved technology! Spain does seem to be taking a lead on proximity marketing with Barcelona’s Futurlink showcasing refreshing ideas to interact with users through Bluetooth, WiFi, NFC, Digital Signage etc.

Location Based Services (LBS): This is a big theme for the coming years. The success of foursquare’s location based social network has attracted much attention across the world and did so at the Congress as well. A range of innovative ideas were seen this year. Navteq showed demos of urban 3D maps with pedestrian navigation. Sygic, on the other hand, makes software that turns any smartphone such as the iPhone into a full pedestrian or in-car navigation device. Centrl from New York offers free apps for iPhone, Blackberry and Android phones for location-based social networking. Aloqa from Munich offers a popular service that offers users suggestions based on their interests and current location. The boom in LBS has played out beneficially for vendors such as Genasys and Datatronics who are key enablers of creative LBS that typically require precise location determined by multiple data sources such as GPS, Cell ID, WiFi etc. Just about every part of the value chain is seeing action and these are certainly promising times for this segment.

Year of Mobile Advertising? Mobile advertising has seen some real activity lately. JP Morgan predicts that industry would be worth $3.8 billion in the U.S. in 2010. The ecosystem has changed dramatically since last year’s report with Admob now (almost) belonging to Google and reporting success with video ads on smartphones. Quattro Wireless was bought by Apple and RIM is launching its own advertising platform. It’s not only the big names that are creating waves. Smaato from Hamburg has received much attention lately for its SOMA ad optimisation platform. Location based advertising currently driven by iPhones also has a bright future ahead. Out There Media’s mobile advertising platform MoBucks created significant buzz at this Congress and it now has a reach of more than 150 million subscribers having won Russian operator Vimpelcom.

Pay, surf, navigate with a SIM: It never fails to fascinate me how much technology can be embedded (or squeezed!) into the SIM card. The Subscriber Identity Module card has clearly long outgrown its name. Sagem’s launch of a WiFi-ready SIM outlines the progress made in this regard. With this SIM, any phone can be converted into a router to create a hotspot! The use case is compelling; most netbooks use SIMs to authenticate the user anyway and now a WiFi-enabled SIM can turn any phone into a 3G connection for the netbook.

Seperately, Sagem along with Telenor and ST Microelectronics showed how to use the WiFi enabled SIM and an NFC key fob to turn any device into an NFC payment device for e-ticketing in public transportation applications. It is clear that operators intend to fully manage and control the NFC apps!

Yet another major SIM-based NFC payment system trialled with live Congress attendees, was from Samsung (Handset), Telefónica (Operator) and Visa (Transaction Clearing), with Giesecke & Devrient (SIM card provider), Ingenico (Payment Terminal) and La Caixa (Bank). The SIM card from Telefónica was preloaded with €60 that could be used to pay at select food and beverages stalls. It gave Congress attendees a realistic feel of how m-payment might work with SIM-based NFC technology.

SK Telecom has also made a couple of interesting demos and announcements related to SIM cards: (1) Android OS and processor in a SIM card, with 1GB of memory, intending to power mass-market phones, and (2) Theme SIMs, with sufficient storage for pictures, music and apps, to power mass-market phones. Both of these are interesting and promising developments!

M-payment is finally taking off although some would argue that it is already well-established in the emerging markets! Mobile transactions facilitated by operators in Africa have given access to banking services to previously unbanked segments of the population. Vodafone / Safaricom’s M-Pesa in Kenya, launched in 2007, now has 8.5 million customers and received the Best Mobile Money Service Award at this Congress. It plans to extend to other Vodafone markets in the developing world such as India. Fundamo, a South African mobile wallet player scored the largest ever deal in this space last year with MTN. Gemalto’s recent acquisition of Valimo, a digital authentication supplier underscores the amount of activity the segment is seeing. Watch this space!

M2M pledge and Mobile Healthcare: In a major development in the M2M market, the GSMA and 25 mobile organizations joined to draw up guidelines on design of M2M devices in order to drive down costs and drive up sales. An alliance between the GSMA and Continua Health Alliance has decided to work together on the standardization of embedded mobile applications. The GSMA suggested that the healthcare industry could save $175-200 billion annually by managing chronic diseases through remote monitoring. Companies such as Bluegiga in Finland that are members of Continua, were demoing Bluetooth modules for healthcare apps including remote monitoring at this year's Congress.

In fact, several mobile-healthcare apps emerged at this show – apps include collecting health related data from patients, delivering key information, and provisioning of healthcare services, including apps as simple as SMS reminders to patients when and how to take medication. Incidentally, the GSMA winner of the embeded mobile offering was Cinterion, a company focused on sleep therapy for patients!

Facebook Zero: For all the buzz regarding LTE and high speed networks, Facebook painted a sober and realistic picture of networks in the developing world by launching Facebook Zero, a text only, stripped down version of the Facebook site. Recognizing that 100 million users access Facebook using phones, Facebook’s offering targets the slower networks of the world. Yet, it might be missing a key point. Slower networks often go hand in hand with usage of mass-market phones. Popular social entertainment services such as Qeep have been cleverly exploiting the mass-market by offering a truly entertainment experience with a rich function set even for feature phones, not just smart phones.

To Skype or not to Skype, we asked last year. Verizon’s decision to tie-up with Skype at this Congress is a significant development. It is an acknowledgement of the changing world where voice is essentially another sort of packet traffic, albeit of central importance to operators, making up 70-80% of their revenues. According to Verizon’s announcement, smartphone users (including those using Blackberry and Android phones) will be able to call other Skype users but would have to pay for calls to normal U.S. phones. Further, calls using WiFi will not be allowed and Verizon’s own network would be used to route calls. A data plan is still required, but on balance it is a move that could change the game. Skype’s service with Verizon is therefore not true FMC, as it is not seamless. Still, we should expect similar deals with Vodafone, Orange and Telefónica in the near future. Skype already represents 12% share of the international voice traffic market with 54 billion minutes per year causing a $13 billion revenue impact on fixed line operators around the globe last year. The key message here is that mobile operators are coming to the realization that voice has become marginalized and there is no way they can keep their revenues or margins focusing on voice going forward.

Smart Grid tops green initiatives: GSMA realizes its role in reducing the global carbon footprint. The recent smart2020 report mentions that global emissions can be scaled back by 15% by 2020 through extensive use of ICT. While green technologies such as Smart Grids represent a massive ecological opportunity, they also offer a huge business opportunity to the industry. Connecting smart meters and other devices to the smart grid could be bigger business than connecting people (at least from a volume perspective). The industry sees itself as a key enabler for Smart Grids using power line communication (PLC) as well as wireless ZigBee standard. PLC has tremendous traction in Europe where large utilities such as Enel, Aldeasa, EDF are already deploying PLC meters based on chipsets from ST Microelectronics, Texas Instruments and promising start-ups such as ADD Semiconductor from Spain and Watteco from France. The U.S. market is expected to lean towards wireless technologies, although both wireless and PLC standards should co-exist. Another promising technology is coming from EnOcean, a Siemens spin-off, that has pioneered self-powered wireless sensors for use in buildings and industrial installations.

Telenor and Vodafone announced their commitment to the GSMA’s Green Mobile Manifesto that targets cutting CO2 emissions by 40%. The central measure here is to take base stations off-grid and use solar power for 90% of the time backed up by diesel for the remaining 10%. We also observed that ZTE is focusing more on solar powered handsets targeting the mass-market in emerging countries.

M-Education: Queen Rania of Jordan, gave a very impressive speech at the Congress, promoting 'education for all'. The wireless industry has to set targets to help reduce illiteracy and eliminate poverty around the globe, given its unparalleled reach. Now the GSMA has taken a step in the right direction by joining with the FIFA and other organizations for the 1GOAL initiative that aims to hold world leaders accountable for providing primary education to all children by 2015. Currently, there are 72 million children in the world who are denied the chance of primary education. The mobile industry can help by holding mobile campaigns, mobile advertising, messaging and creative apps for marketing of such initiatives. For more information on 1GOAL initiative and how to help, please go to http://www.join1goal.org/

Operator consolidation and M&A environment: Mobile operator consolidation is continuing; India’s Bharti is bidding over $10 billion for Zain’s operations in 14 African countries. After 2 rounds of failed merger / acquisition talks with Africa’s largest operator MTN, Bharti’s bid looks promising, considering that Zain has been losing money in Africa. We should expect to see several similar bids for operators in emerging markets in the coming years.

Recognition: Some of the major awards given during MWC:

• Best Mobile Game - Iricom – The Last City – Fight For Your Life!
• Best Mobile TV Service - CBS Mobile – TV.COM
• Best Mobile Enterprise Product or Service – RIM – BlackBerry Enterprise Server v5.0
• Best Mobile Handset - HTC – HTC Hero
• Best SDP - Huawei Technologies Co Ltd – Huawei SDP solution
• Best Mobile Technology Breakthrough - Orange – Mobile High Definition Voice
• GSM Chairman's Award - Carl-Henric Svanberg, Former CEO of Ericsson
• Mobile Industry Personality of the Year - Steve Jobs, Co-Founder and CEO Apple

Various rumours that MWC may be moving to another city are not correct. The MWC 2011 will be held in Barcelona from 14-17 February 2011. See you there!

Dr. Mehmet Unsoy
Partner
Cartagena Capital
munsoy(at)cartagena-capital.com
www.cartagena-capital.com