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June 11, 2007



Welcome Google, indeed. The most awaited presence in telecom for years. Not as a java app, but much bigger show ;))


I can't disagree with the scale of the opportunity. But the phenomena in question is "mobility" of which mobile operators are but a part (albeit dominant at this point). The age of integrated mobile/Wi-Fi devices is upon us and I think we will see this as a catalyst for an explosion of the activity you predict. Lower cost/higher bandwidth has always been a critical driver of networked activity. But while the scale of mobile operators is huge, by and large the bulk of their revenues remains voice derived (60-70% typically). I'm not convinced these guys can change fast enough to a 2.0 world, with a few notable exceptions. I'm watching WiFi operators and the growing confidence of device players to pick up the mantle.

Tomi T Ahonen

Hi Zec and Simon

Thank you for visiting our blog and commenting

Zec - yes, of the players not fully in mobile, who could make a difference in terms of their global size, and who seem to have the right focus and drive, Google is perhaps best poised today - although, Apple in my mind runs a close second, and both of these far ahead of their near rivals be they Yahoo, Microsoft, Dell etc.

Google took a stated mobile direction last year when their CEO Eric Schmidt wrote his feelings of the future in the long article in the Financial Times, and concluded that the future of the internet was mobile. It was the public catalyst to activate the Google staff to all think mobile. Since then we've seen many moves by Google into this space.

It does take about 18 months to go from clean slate to mobile phone in the store, so if last spring Google decided to enter this space, the Autumn of 2007 is about the time a first phone could be out there.

Obviously Google doesn't need to have a phone to be ever more present in the mobile area, but if they wanted, Google is one of the few that could disrupt the whole ecosystem if they so decided.

Now notice, Microsoft has been in mobile for five years, has targeted mobile even longer, but are a total bit player today, with a small fraction of the 120 million smartphones sold this year, and by no means seen as a visionary company in mobile. They haven't made mobile a priority.

I'd say its probably similar with Yahoo, they are moving in the direction, but not with "reckless abandon" like Google. I think when Steve Jobs announced the iPhone and simultaneously said Apple Computer will be renamed Apple Inc, and Jobs said the iPhone is their most important launch ever - this does signal that Apple is dead-serious of a radical shift in their strategy.

That is why I do think Apple is easily in a similar class of "total commitment" to mobile as Google. And they do face a wide range of very strong rivals already entrenched in this industry, who often have enormous advantages - Nokia, Motorola, Samsung, SonyEricsson and LG - enormous handset manufacturers with scale and speed. Apple seems to have one new phone (technically two models at launch) now in June and likely another two variants for the European launch (likely with 3G) for the Autumn. Thats four phones. Nokia releases four new phones every month.

And on the other side of the aisle are the mobile operators (carriers). Our American readers should totally dismiss their domestic American experiences with Cingular, Sprint, AT&T, Verizon, Nextel (and Canadian carriers) and simply understand that far more advanced carriers are out there, offering very advanced services, at reasonable costs, on networks that are far more reliable and on services that are far more user-friendly.

NTT DoCoMo and KDDI in Japan are at the far end of the spectrum. I visited KDDI's experience store in Tokyo this January - similar to Apple and Nokia showcase stores - and the KDDI store is truly that particular, that you cannot sign a contract, buy a handset or do any real business in the store that runs three stories high. Its just a showcase for KDDI near future, to let its customers come in and browse, to play with the prototypes, talk to the knowledgable staff etc. But if they want to buy something, they need to go to their "normal" KDDI store near their home. This kind of customer service and leadership.

South Korea is similar to Japan in the far lead in how advanced the carriers are - at times even more advanced than Japan's. In Scandinavia we tend to see the most advanced European mobile operators (with apologies to Italy, Austria, Portgual). They were among the first in the world where mobile phone voice minute charges were lower than fixed landline call costs.

The underground trains/subways in Helsinki serve as bomb shelters, they are drilled ten stories underground into hard concrete. But with rush hour traffic in the subway? Perfect cellphone coverage 100 feet underground and in the trains as they speed through the tunnels under Helsinki. Yet even in an otherwise advanced England, go to London with your mobile phone, take the elevator (lift) down ONE storie underground, and you lose the signal. Then be out of coverage for the 30 minutes of your journey (plus the inevitable London subway delays of an extra 15 minutes) and your mobile achieves reconnection to the network as you walk up the stairs and can see daylight. Its that bad. This in a major European capital city. Shame !

But I digress, yes, European carriers are far ahead of American ones and Scandinavia leads the way with this. Telenor in Norway was the first European operator to offer full credit card functionality on their phones (with Visa). Danish operators invented the Home Zone concept of clever pricing, which is killing the business of corporate/enterprise customers with fixed landline phones (they give free calls on the mobile in a "Home Zone" which is defined as roughly the area of your office building(s) and its very immediate surrounding. When you step out of the office for lunch in town or to stop by at the bank, that is when normal mobile telecoms charges are levied. This means every employee can have - and indeed should have - a mobile phone from work rather than a fixed landline phone - and it means the employer will discontinue paying for its fixed landline telecoms service to the fixed telecoms provider/incumbent altogether. A clever move by pure-mobile players. Home Zone was the reason in Germany this Spring for example that T-Mobile/Deutchse Telekom the incumbent said they stop their fixed-convergence product.

But yes, I digress. My point was that even with Google and Apple (and Dell and Blyk) and others coming in, this is an industry which is very hot, growing very fast, and generally tends to be profitable. They arrive against entrenched competition of companies mostly larger than them, who are in it to win. We will see a lot of exciting moves in this industry as the giants clash.

But yes, your point, we definitely welcome Google very much as a force for change.

Simon - good point, and I've been monitoring that fixed-mobile convergence (and fixed-mobile substitution) since I was the Project Manager 11 years ago at Elisa Corporation/Helsinki Telephone with Radiolinja (the world's first GSM operator, part of our Group) and launched the world's first fixed-mobile service bundle in 1996. I then was sent to participate in telecoms standardization around fixed-mobile convergence for a couple of years and again at Nokia my first job was with the fixed-mobile convergence unit of Nokia at the time and my white paper on Indirect Access was indeed the first document to discuss how internet services could be provided by mobile operators. Its been a very close area of interest to me, which is partly why I was chairing the big Fixed-Mobile Convergence conference in Paris last year etc.

You make a good point that wireless data access ie WiFi today, WiMax also in the future will be a significant part of the move to mobile and wireless communication. I accept that.

I do think, however, looking at this situation from a global perspective, that WiFi has lost the battle. It will be a supplementary technology, in some markets, some countries (Singapore is rolling out free WiFi to the whole country, but it is a city-state, so this is relatively easy to do if you only need to cover one city) and some instances.

Today there are about 350 million laptops in use (WiFi for a desktop is no mobility, only a modem replacement technology). Out of the 350 M, only a small fraction are moved daily to the Starbucks to write blogs or at airport business lounges used by jetsetting road warriors. Is it one in ten, or one in five, certainly most laptops remain in the home, office, university, and are not moved outside of those three domains on a daily basis, often even not on a weekly basis.

So even though a vast majority of the laptop population today (remember PCs are replaced on average every 3.5 years) have WiFi, only something between 35 - 70 million of them are actually used in "mobile" ways. And not all of them even seek a wireless connection - due to the way laptops/PCs are used. Take me, for example, I am an author. When I write my books, I don't need an internet connection (in fact, it would be a distraction). This is why I like to write in airplanes for example when I travel. Nothing to break my concentration in my writing. Now obviously I also blog, so I am very much in need of my daily fix of connectivity, but I can - and at times I do - blog from a phone, so when we discuss laptop use, for some of my main reasons to have a laptop - I need a full-size keyboard obviously to type, I'm of the age who learned to touch-type, and can't imagine trying to write long texts without keys that are full-size on a PC - so yes, my main need of the computer (book authoring tool) does not need a network connection at all (most of the time), and certainly not a wireless one.

But for my blogging use. I had a broadband connection and a WiFi connection when I lived in London. Then Vodafone launched its 3G service - I took it for my laptop, and almost immediately cancelled my broadband connection and the WiFi subscription. While 3G is not as fast as WiFi, it is quite fast enough, but the full mobility far outweighs the marginal speed difference. If I still now lived in London, I'd be signed up to the 3.5G service (HSDPA) which is as fast as broadband and WiFi.

So yes, Simon, WiFi will be relevant, but its a very small market opportunity. The WiFi "operators" who all launched with much fan-fare a couple of years ago, tend to mostly have gone out of business. Its not a good business model. If you offer WiFi for free, you get lots of "heavy users" like multiplayer gamers and video bloggers and movie downloaders who hog up your capacity. They are low on their funds (often students) and couldn't care less about the ads that may be run to sustain the service. But as they swarm to free WiFi spots, they crowd out the "regular users".

Or then you offer a paid service, and suddenly you have something that is very bad in coverage compared to 3G or 3.5G which can offer similar speeds but universal coverage. A very bad business proposition. And customers vote with their dollars, 3G modems are selling better than any of the operators expected in major markets. And now 3.5G modems - Spain offers (almost) unlimited internet access for 1 Euro per day; Singapore offers a free month of (almost) unlimited 3.5G access for 20 US dollars per month.

It comes down to the devices. There are dozens of top end smartphones which have WiFi built in - I'm onto my fourth WiFi-combined cellphone today. I use 3G on my phones, and I do occasionally use WiFi. But guess what, I only use WiFi if it is free. I do at times observe say at an airport that it has free WiFi (say Singapore for example) or a given business lounge of an airport, etc. But paid WiFi. Couldn't bother. I have 3G already, that is good enough, and I've paid for a data package.

So with handsets we're looking at the total user numbers. There are over 200 million 3G phones in use. It will be about 350-400 million by end of this year. A tiny fraction of those have WiFi.

So for the person who is mobile, moving around with a data device that can access WiFi, or access 3G, we already are at the point where 3G is much larger, and growing much faster. This means the 3G operators will continue to make money, and the WiFi operators will suffer. Not all will die, not all will be out of business, but its a bad business to be in.

Now, the battle is re-joined with WiMax, there we have a new area where yes, a new wireless technology with further reach and different economics come into play. WiMax I would not count out. But WiFi, no, that battle was lost a couple of years ago. It will be there, but only as a marginal offering.

Notice that total PC shipments are at peak, starting to decline - this is seen in Japan for example, and Apple referenced it as part of its decision to drop Computer from its name and shift to the mobile market. In three countries already more internet access comes from mobile than from a PC - Japan, South Korea and China - and in Europe already many countries are in the 30% range of migration from PC to mobile phone based internet access.

Mobile phones are replaced globally every 18 months on average. 28% of mobile phone users have two phones. Thus the effective replacement rate for heavy users of mobiles is 9 months. Larger screens, faster internet access, more computing power, more applications, more content, more services. The shift is going on from a PC based (and broadband) internet to a mobile based (and 3G/3.5G) mobile world.

What you will find, Simon, is that the most bullish WiFi players are American - because they have not yet seen the full scope of mobile. Bear in mind, Scandinavia has near identical levels of PC penetration, internet penetration, broadband penetration, cable TV penetration, and wealth - as the USA - but Scandinavia has nearly twice as many cellphones per population as America does - and all Scandinavian incumbents - Telenor in Norway, TeliaSonera in Sweden and Finland, TDC in Denmark and Siminn in Iceland - are also major WiFi operators in their countries.

What do these incumbents in leading countries, who really know mobile and internet and WiFi - say about WiFi? They say the future belongs to mobile... WiFi is necessary for them as a gap-filler technology, a supplementary technology, for some specialized uses yes, but the majority of their countries and users will be on mobile.

In Finland we've already seen the first country which once had 100% fixed landline penetration in the homes, now have more than half of homes abandon fixed landlines altogether in favour of mobile phones - AND last year Finland became the first country where residential broadband penetration is greater than residential fixed landline penetration (as you can get broadband on cable modem, 3G etc)

Don't get me wrong Simon, yes WiFi will be there, and measuring it from the IT industry - the opportunity is big. But compared to mobile, WiFi is a nuisance at best, a trivial marginal factor. Yes, some phones will support it, yes some customers will at times split their traffic; but not enough for any mobile operator really to get worked up about.

But WiMax.. the jury is still out on that, the WiMax vs 3.5G battle will be interesting. There we may well see a major shift in the industry, perhaps. I'd still bet on the cellular telecoms/mobile side, but WiMax can well make this a new ball game.

Thanks for writing

Tomi Ahonen :-)


There are already a number of so-called iPhone applications in beta stages that you can test on supported browsers like Safari, IE7 and Firefox

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The phone and its user interface looks gorgeous and slick. I am great fans of Dell, this industry needs the innovation, we wish you the very best.

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This phone is genius. The design is outstanding and I would see a lot of consumers purchasing it.

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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 Helsinki 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 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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