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« Disney experimenting in the converging media-telecoms-internet space | Main | 82ASK and Community-led Innovation in the Mobile & Wireless Sector »

April 13, 2006

Comments

Paul Jardine

While I differ on some details, broadly, I agree with you. Vodafone should be concentrating on mobile access. However they do have a significant fixed line player in Germany, which is a pretty large market. If Teliasonera should use their assets, shouldn't Vodafone use theirs? So, if they use their asset in Germany, how do they reconcile that with a group strategy?
The key to mobile is that you take your identity wherever you go, and with everything on IP, then the delivery mechanism (fixed, wireless, intravenous, satellite) is really not important. The current bunch of mobile operators own the mobile identity, if only they would realise how valuable it is. It's the dot in the centre of your Y!
I fear the current mobile operators are not dynamic enough to take advantage of the really big opportunities that are presenting themselves. They will be replaced by leaner, faster companies. It's still mobile, but not as we know it.

Tomi Ahonen

Hi Paul

Very valid points and I agree with both. Yes, wherever an operator (including Vodafone) has a fixed telecoms asset, they should utilize it to the fullest (including convergence). But also totally agree with you that the mobile operators are sadly too slow to capitalize on the huge range of oppportunities they now face. Thanks for writing Paul!

Tomi :-)

Xen Mendelsohn (Dolev)

this is a great example of the well known problem of major players in ANY field – their huge size doesn’t let them make quick and crucial (and risky) moves… [There are some advantages in being short, I tell ya' that ;-)]

Paul Jardine

Here's an example of Vodafone doing something right for a change! http://www.cellular-news.com/story/17054.php

Tomi T Ahonen

Hi Dolev and Paul

Thanks for the comments. I agree with you Dolev its very much a size thing. I'll take a look at the link Paul and see what good ole' VF is up to..

Tomi Ahonen :-)

Dean Bubley

Tomi

Sorry, but I have to completely disagree with you on this one.

Firstly "almost twice as many mobile phone subscriptions worldwide as there are fixed landline phone connections". This is misleading. The average fixed-line connection has considerably more than one user, while the average mobile user has considerably more than one subscription.

Vodafone is a "legacy mobile-only operator". It has only now started to grasp the idea that "mobile" and "wireless" are two distinct categories of communication. It has also (belatedly) grasped the idea that IP has taken root far faster in the fixed domain, and realised that "ethernet economics" will spill over into mobile via technologies like WiMAX.

Fixed communications is not going away, especially for data services. Fibre (or indeed copper) will always be less expensive per delivered megabyte (or terabyte), except in the most sparsely-populated areas. If anything, the gap is widening, 1Mb to 8Mb to 20Mb to 100Mb broadband speeds in an incredibly rapid time.

I would estimate that true, average, end-to-end speeds in the fixed-world Internet grow at 30% per annum, taking into account all links in the chain, including device, server & intervening networks. I think for mobile, it is closer to 20% per annum, not least because of the fundamental scarcity value of spectrum, and the slow progress of licencing it.

The world's interactive experience is dominated by fixed communications. There might be 2.1bn mobile subscriptions, but I would estimate that fewer than 10% of these use anything other than voice and SMS. Certainly if you strip out Japan and Korea, the figure would be well below 200m. Compare that with 200m broadband households, with (let's say) 2 users per home, plus many more who use broadband at work, school or public Internet facilities. Probably 500m - and that's just broadband users.

In my view, Vodafone is taking the right step, albeit 3 years too late.

Tomi T Ahonen

Hi Dean

Thank you for the very deeply considered, thought-provoking comments.

You make a lot of very good points, and probably points that many of our visitors may also have had. Let me address them each one by one.

1 "Misleading about more mobile than fixed." Why is this misleading? Because more use the fixed connection than use mobile? Have you seen modern usage in high-penetration mobile countries? NOBODY uses the fixed landline. It is not a family shared resource; it is an abandoned resource. Like the gas pipe in an apartment that switched its cooking and heating to electricity. Still exists but is unused.

I don't mean all fixed telecoms landlines are unused. I mean that INCREASINGLY they are. That for the young in the family, all studies show that the LAST phone they ever want to be caught using, is the family phone - because all family members can snoop on it. But their own mobile phone they can take to their own room, or go outside and talk in private - or best of all - to send text messages that the parents cannot even hear.

Note the stats from Finland and Portugal. 40% of all Finnish households that used to have a fixed landline phone, have totally abandoned it. Yes, remember Finland was always one of the most advanced industrialized countries in all telecoms, and all through the 1990s Finland had among the top 5 highest penetration of landlines and highest penetration of internet use, and highest penetration of mobile phones. In that battle, the mobile came to dominate.

All other countries are following the trend. Even in America already about 10% of all households have abandoned fixed landlines (according to the CTIA).

But if you don't like the user numbers, then how about usage? In 2004 more total revenues were generated by mobile voice than fixed voice. I think my point holds very well. The trend is inevitable. Growth in fixed landline users has stagnated and is expected to start to fall. Growth in mobile is continuing at incredible rates, most experts expect 3 billion mobile subscribers before the end of this decade. And if the majority of the money is also generated in mobile - and now we have all the added pressures of Skype etc to fixed telecoms - it is not the growth opportunity; mobile is.

2 "Mobile and Wireless are two separate categories?" Well, I think Vodafone has known this quite well for quite a long time. I have one of their 3G modems for my laptop and it has had the ability to use WiFi hotspots as well. I don't see the point of your argument. Mobile is a 625 billion dollar industry. Wireless internet is what, worth a couple of billion dollars - totally trivial business when compared with mobile? The WHOLE internet industry is worth less than 100 billion - thats broadband access fees and content fees and service fees internet advertising income all together.

3 "Fixed communications not going away" - fine, I'll grant you this. But it is clear fixed overall is not growing (only the proportion of broadband inside of fixed, is growing). All internet analysts got quite alarmed last year 2005 when they noticed the overall growth had stalled. It was in all the press. Mobile is growing at ever faster speeds. They sold 800 million handsets last year, and Nokia, Motorola, Samsung, SonyEricsson have all said this year they expect again a record year for mobile.

But yes, I'll be happy to grant you fixed will exist for a long time. Even so, it will have many times more competitors than mobile. Those competitors will have huge standards and price wars and squeeze profits out of the industry. They will be focusing most of the battle into the broadband internet space and offer to do it via copper, via fibre, via TV cable, via the electicity grid, via wireless like WiFi and WiMax and even via satellite. A huge slew of providers will JOIN this battle. Tripple play and quad-play from the cable TV operators, electicity providers (like recently Swedish electricity giant Vattenfall) etc. Yes, theoretically Vodafone could try to enter this battle, but it is a bloodied battlefield already. Why bother to be an also-ran in that battle, when Vodafone can see the next stages of virgin markets where there is no competition (as I explain in the end of my original posting)

So yes, fixed is not going away. It will see ever diminishing number of customers. Ever diminishing traffic in its traditional (eg voice) business. Ever diminishing revenues. Ever diminishing profits. All innovation in the fixed landline business will be around broadband internet. For that, there is a clear preference that broadband users also want mobility !! Whether it is through wireless like WiFi today and WiMax in the future, or through 3G today (like me with my laptop here in a cafe that does not have a WiFi spot here in London) or through 3.5G tomorrow.

So Vodafone can very safely take lucrative top-end slices of that battle, without joining the bloodbath elements of it where the various fixed service providers collide.

4 "estimates of fixed broadband vs mobile speeds". I can grant you that point, but it does not in any way alter my point. Yes broadband speeds get faster at a more rapid pace than on mobile. But users are not engineers, most users are lazy and want convenience. If we give them convenience on the mobile phone, they will take a lesser experience and use more of it, provided we do it in a "functions out of the box" type of setup. And it greatly helps if it works on the world's favourite gadget, the mobile phone, rather than what is seen as a complex device (by mass markets, remember, not by us engineers) the personal computer. My sister is a medical doctor. She says she'll send an e-mail to me, when in fact she sends an SMS text message from her mobile phone. That is the level of sophistication we have in the mass market.

Twice as many people (1.3 billion) use SMS text messaging as use e-mail (668 million e-mail users who maintain 1.2 billion e-mail boxes according to latest stats by Radicati).

So even if the fixed broadband speeds are faster, and keep growing faster (no argument), still the majority use mobile !!

5 "world's interactive experience is dominated by fixed communications" Here I TOTALLY disagree with you. The numbers are TOTALLY against you, sorry. The world's most used interactive experience is NOT your broadband with 200 million users. It is SMS text messaging which is used by over SIX TIMES more people - 1.3 billion - worldwide.

Come on, in China alone there are more users of SMS than all of the world's broadband users combined.

Why do you conveniently exclude SMS? When you look at the internet usage, do you eliminate e-mail? Do you think e-mail - the most used application on the web - is somehow "not internet"? Why then is SMS not an interactive messaging and data application on mobile? Of course it is.

And a huge one at that. Delivering 75 Billion Dollars of service revenues, SMS alone is bigger than all of broadband internet access revenues worldwide !! SMS is 15% of European mobile operator revenues and well over 40% of revenues with for example Philippines mobile operators Globe and Smart.

I am afraid Dean, that it was you, who was misleading with this statement. You cannot exclude SMS from comparisons of data usage on mobile and fixed. SMS is the world's most widely used data application - and from a business point of view, it is one of the few that is on a solid business foundation (it makes enormous amounts of money).

With all that, I think we have some common ground. I will agree with you that it is not a clear black-and-white proposition. Certainly if you are currently a fixed landline (only) operator, you HAVE to get into wireless and mobile (and they are distinct markets as you say). That is what AT&T did last year and BT two years ago, when they both acknowledged what a gigantic mistake they had made when they sold their own mobile arms, and returned to mobile.

If you are an existing incumbent with both a mobile and fixed network asset - then of course you should use both, and build convergence.

And I will agree with you, that it is a possibility for a pure-mobile operator, to go into fixed.

As a separate issue is the mobile operator launching a wireless data play. That is most prudent and almost all mobile operators are doing that or have done that. Vodafone has already done that. But wireless data is trivial in size compared to mobile, and will not provide the growth potential, so this is more of an option than a strategic direction.

The big question is what business and strategic potential is there in fixed (broadband) for a pure-mobile operator like Vodafone. I have argued that the customers are shifting away from this market. Young users detest fixed connections. They will be willing to pay incredible premiums for services that are totally mobile, and those can be provided by the mobile operators (only) with their licensed spectrum using technologies like 3.5G that is coming online now in 2006. The only ones who will hang onto their broadband connections are us "old fogies".

The handsets are replaced faster, are subsidised, and the user interfaces will improve. As an ever higher proportion of all internet access is via mobile (did you see the two related postings at this blogsite - 25% of all internet access is ONLY by mobile, and over half of all internet users use mobile in part for their web surfing, already today. Only about 40% are exclusively on PCs to access the web) - the content will migrate and soon all content is formatted for mobile.

In that future, Vodafone and other pure-mobile operators are by far best suited focusing all of their energy to the FUTURE convergence, that of media and telecoms, not on the old convergence of fixed and mobile telecoms.

I have enjoyed the discussion and hope you will return with further thoughts. I also noticed you had posted another comment also at our blogsite, I'll go read that too.

Thanks for visiting

Tomi Ahonen :-)


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Lisa Strutton

I think the new telephone leaders will be companies like twilio and similar that offer flexibility, a lot of options and at the lowest prices

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Available for Consulting and Speakerships

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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