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« What’s Wrong with iPTV? | Main | Henry Jenkins on why Convergence is a cultural phenomonen not a technological one »

October 16, 2006



Hi Tomi,

What a fantastic post! Your comments are very sharp and they have made me laugh.
There are too many people who happily say '3G is a failure' just because everybody says things like that, without spending a minute in analysing the reasons of such statement.

I strongly agree that 3G is a lot of things except an hallucination. Maybe it just has not fulfilled the hyped expectations, but that doesn't mean it has failed.

I have a lot of colleagues that firmly think that 'Mobile only operators (like Vodafone) will fail due to the lack of fixed line'. However, I don't believe in convergence like having a mobile and fixed line, but I believe in substitution. Yes, mobile offers a lot of compelling opportunities which make the future of mobile operators simply better.

Thank you for the post.
Best regards,

David Cushman

Good stuff. I'll point anyone I know who read the Economist article to make sure they read this to.

Absolutely agree about the actual size of Skype et al right now (see this post but I think the Fusion phone (also referred to in that post)may have a relatively large impact because BT is contacting all its broadband subscribers and offering it as part of one of their packages.
Even Tesco is now selling VOIP phones.
Both firm's strength of brand may offer significant take-up advantages over Skype.
I started using Skype after the second word-of-mouth recommendation.


Regarding the fixed line replacement trend, I can still see significant barriers to get rid of my fixed line:

* in-building coverage is not very good in my geography so I can´t rely on a network that is not always available or the quality is not always good enough

* in case of a serious power outage you don´t have to rely on your mobile phone's batteries

* broadband quality is much better than wireless broadband

* TV bundles

* home alarm connects to security centre through fixed line

David Cushman

A friend of mine pointed out that phone lines are the one utiliity for homes and businesses which haven't yet 'settled'. Perhaps it is because it is the newest? Water pipes are fixed, electricity lines are fixed, gas pipes are fixed.
Will your telecom link ever be fixed?

Michael Brown

I would suggest that the comment that the Economist had completely missed the mark with this article is a little harsh. The actual title was SURVEY: TELECOMS CONVERGENCE not the future of telecoms which was merely printed on the front cover to jazz things up a little. Therefore the focus is not on telecoms as such but on convergence. The graph in the first article states what the main areas are that the industry thinks are going to be interesting in the convergence arena which are: Voice and Data, Fixed and Mobile followed by Telecoms and Media etc. Fixed to mobile convergence is therefore the second article after Voice and Data. Can´t really argue with that.
The claim that this is three years out of date is probably correct if this is about the future of telecoms but it isn´t. Instead this is a "survey" of telecoms, reviewing what has happened to date and does not stretch too far with its predictions of the future. Doing so would lose the informational clarity that they are trying to get across to the readership, not all of whom work in telecoms, about a complicated industry.

Tomi T Ahonen

Hi Curro, OIM, David and Michael

Thanks for writing (and I do apologise for the extremely long posting, but once I started, I could not stop half-way)

Curro - A good point about the increased hype. I tracked it in 2000, 2001, 2002. First, before anyone had launched, there was a "race to 3G" - everybody wanted to be first.

Finland, in a rush to capitalize on the leadership position of the then-world-leading mobile penetration; and world's first launch of 2G, digital mobile ie GSM, SMS, WAP and value-add mobile services ie ringing tonees; and of the fact that Nokia had just grown to be the world's largest handset maker - the Finnish government allocated 3G licenses by beauty contest, and in a great hurry, to allow Finland to be first into 3G. But they forgot to issue a must-launch date into their 3G licenses, and while Finland was the first to issue 3G licenses, the operators were not even the first European 3G launches.

Spain wanted to be first. They actually wrote it in their license requirement, and originally specified a summer 2001 launch date. The Spanish operators brought in all the major manufacturers to convince the regulator that there were not mass-produced infrastructure and definitely not handsets to allow a launch of 3G on the standard, at this early date.

Japan wanted to be first. NTT DoCoMo was very dedicated and aimed for a May 2001 launch. They found it impossible, re-labeled it a 3G trial and pushed the commercial launch back to October.

BT/O2 wanted to be first. They selected the island of Man and found they could cover the island with a handful of base stations. They didn't have the video capable handsets, so they ordered a set of 200 sets of 3G voice terminals and connected small video displays - two devices connected by cable - so they could launch Europe's - and perhaps the world's first - 3G service.

And so forth. For all of late 2000 and much of 2001, all wanted to be first, but then started to push back their launches. As the UK and German license fees came in (over 60 billion Euros for the two countries) - all investors were suddenly focusing on what this crazily expensive 3G was. Could it be that science fiction video-phones were now going to be reality. Surely it could not be. Then the dot-com bubble burst, and everybody found financing in high tech IT and telecoms disappearing. All ambitious plans to roll out fast, were scaled back.

Everybody was gun-shy, didn't want to launch in the glaring spotlight. The handset makers all pushed back their launch dates. The first Nokia 3G phone, for example (model number 6500 I think) - was killed internally so many times, it received the nick-name "Kenny" as in the South Park character, Oh my god, they killed Kenny (again). When originally specified, that phone was cutting edge in size, weight, battery life, screen, camera etc. By the time it finally was released, it was universally hated for being too big and clumsy. Yet as it had had so much development, it was a flawless phone - in fact out of my personal testing of SMS texting speeds, it has the fastest rating of any phone operated by one hand. But it was 18 months behind schedule by the time it was released.

But I digress - yes, eventually Manx launched with its trial network on the Island of Man. NTT DoCoMo did launch first on Oct 1, 2001, and the first European launch was the unceremonious launch by Telenor in Norway - where they openly stated they had only four 3G handsets (not models, actual handsets) in all of Norway - and these four were tester models used by Telenor senior staff - but the network was operational and covered over half of the population at launch.

The hype stage accelerated the expectations. The license auctions brought about the consultant views of what all could be in 3G.

As to fixed, and that any mobile-only player, like Vodafone in most of its markets, and for example Hutchison/Three - would be "handicapped" ? The fixed landline business was fully deregulated in most markets in 1998. Dozens if not hundreds of competitors emerged in every market, selling cheap long distance and international calls. That slashed profits. Now VOIP is eating most of the remaining profit. Then the customers themselves are in every single market shifting away from fixed landlines to mobile phones. The leading country is Finland - over 50% of households, and even America is at 9% of households already. So you have more competitors, less profits, a technical disruption happening and customers abandoning fixed. WHY would anyone want to fight in that space. By contrast - mobile telecoms is growing (note - in EVERY market, no matter how some clueless "experts" claim saturation for the eight year in a row - the total subscribers and total revenues in mobile continue to grow). The number of users grows. The total minutes and data bytes usage is growing. The total revenues are growing, and profits holding steady. But the NUMBER of competitors, by license and spectrum limitations are from 3 to 5 in most markets. The only real rivals are so-called MVNO's who are service retailers, and supplying wholesale traffic to these marketing organizations is ALSO a profitable business. Oh, and mobile telecoms is bigger than fixed, and note - mobile telecoms is three times bigger in revenues than broadband internet.

Then consider the convergence story. Music is migrating to mobile. Bronfman the CEO of Warner says its not the iPod, the future of music consumption is mobile. The internet goes mobile - says Google's new CEO Eric Schmidt. TV goes mobile - says (former) BBC General Director Greg Dyke. The personal computer goes mobile, says Bill Gates. Payments go mobile says (I forget the name) CEO of Korea's biggest bank. So its not only voice going from fixed TELECOMS to mobile; also TV, music, internet - and our credit card purchases - etc are migrating to mobile.

Now, with that. Do you focus your corporate resources on fighting in a shrinking and crowded pond of fixed telecoms, or do you learn to swim in the big opening ocean of mobile services? Vodafone is definitely taking its eyes off the ball in this stupid move to fixed (I've blogged about that too).

So yes, I agree with you, Vodafone would find more than enough of a market - with less competition, more customers, and more profits - and a FUTURE - if it built the mobile eco-system. Rather than suddenly demoralize its staff and go fight in the prehistoric markets of fixed, with the other dying dinosaurs. Ha-ha, but yes, thats my biased view ha-ha...

David - on fusion, BT and VOIP. I do believe in VOIP and WiFi on mobile phones. But the near term (next five years) opportunity is definitely on the side of the corporate/business customer. They do have an honest business need to "keep the employee fixed" - in very many cases.

Consider a calling centre. more and more of customer service is done by calling centres. For that, you just need to provide a small cubicle in a vast cubicle farm of 200 people or more, in a low-salary region (up North in the UK, or Ireland, India etc). Then a desktop PC and a VOIP phone (ie headset in this case). You don't WANT these people to wander away from their PC terminals. So "mobility" is actually a bad concept for this type of worker. That is why perhaps 20 million or more corporate VOIP phones have been sold by Cisco and Nortel and others.

But for the home? For "my generation" - I am 46 years old - it seems "logical" for a home to have a fixed phone line. And then, if my fixed telecoms provider, whether BT in Britain, KT in South Korea or DT in Germany offer a "wireless" phone for the home, that doubles as a mobile phone when I step out of the home, that does sound like a good "upgrade" of the home phone.

Except, that the paradigm has already shifted. NOBODY will "own" that home phone. When someone calls your wife, they don't call the home phone, they call her mobile phone. When someone calls your 17 year old daughter, all of her friends call her on her phone, never the home phone. Your 12 year old son, same story, except at that age its almost all SMS. And you? Your friends call you on your mobile.

So the home phone - no matter how cleverly wireless and perhaps cheap - is not used by anyone. Study after study have proven that people will be "lazy" and use their mobile phone rather than place calls on a fixed phone even when those calls might be cheaper or even free. But wait - so then what if you give this new home phone to one of your family members.

Yeah, good idea. Except, that each of them has a built-in loyalty to their brands and phones of preference. It has to be the slim and sleek Moto Razr. No I need my Nokia N-80 with its awesome video and camera. No I want my SonyEricsson Walkman for my music, etc. Nobody wants the Fusion phone.

That is why LG sells a million Chocolate premium smartphones in six months in Britain, while BT sells 35,000 Fusions in 12 months.

The Fusion idea would have been a killer in 1996. Its totally out of its market opportunity in 2006. Will never happen. Never.

What will eventually happen, is the major handset makers releasing WiFi phones (like my Nokia 9300i and my Nokia N-80 - and in fact my third cellular connection as well, my Vodafone data card manufactured by Qualcomm and also having WiFi as well). When these migrate down from the high end smartphones to the mainstream phones, we'll get a mass market opportunity for WiFi VOIP services. That will come. But a Fusion phone has no chance in this market contest against 100 new phone models by the big manufacturers every year.

And about being "settled" - water, electricity etc being settled but telecoms not? I'd say telecoms is rather solidly settled - all houses are built with telocoms wiring. But the technology has moved beyond this. I think its like gas, once a mainstay everywhere, gradually gas lines are diminishing, with households shifting to electricity in stead.

OIM - good points. But I'd say almost all of your reservations have bypass solutions already on mobile - say an alarm system that relies on a fixed cable is much more vulnerable than one that is based on cellular technology. For someone like you and me, who is "accustomed" to this technology and need, these are valid reasons. But for a younger person, who particularly appreciates the mobility - some compromises are acceptable. That person might fall in love in two months, move in with the new girl/boy friend in four months. Does not want to abandon the service portfolio but also does not want to be tied by cables. If wireless broadband is not as fast, and perhaps more expensive, it is fully portable to the next apartment. Cable TV? Same story, what if the next house is not wired. Better to invest in wireless premium TV like Freeview (and its uprades) in the UK, already UK's largest digital TV platform. And again is fully portable. If I move tomorrow, I can take my freeview box with me and most likely that new region (within any city areas in the UK) will also have freeview coverage. Cable TV? More unlikely than likely for any given apartment.

And so forth. These are not absolute reasons, these are relative reasons. For some customers some are more important than others. And you are right, there is a lot of fight left in fixed. But for young people, the choice is obviously clear. They want to be free. Mobile. They don't use fixed. Not EVEN for broadband. Finland is about to become the first country in the world with higher broadband penetration than fixed landline penetration this year. As more broadband is offered via cable TV, wireless and other means. The fixed line business is dying.

Michael - a bit harsh? Perhaps. But it was the Economist title, and honestly, the Economist should hold itself to a higher standard, and not hype a story by relabeling it on the cover. Shame on the Economist! As to convergence? Actually - if we're looking at convergence like the article defines, fixed and mobile telecoms, internet and TV. Then notice in the above response I've already shown EACH of these areas is converging towards the mobile. Not my words, but the biggest players in the world - Google, BBC etc - say not only fixed telecoms going mobile, but internet going mobile and TV going mobile. In a story about convergence, mobile was all but ignored in the story. Still bad reporting. Three years out of date.

Thanks for writing!! We'll track these stories here at this blogsite for you.

Tomi Ahonen :-)

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