A Study in Digital Convergence: The Nokia Decade

(Please note, this blog has been totally updated, revised - and SHORTENED - with totally fresh numbers for January 2010, at this link:what to call it, the Nokia Decade)


The start of the year 2009 marks the tenth year anniversary for Nokia becoming the world's biggest mobile phone manufacturer. In that time the mobile phone has amassed an amazing array of abilities. While doing so, the mobile phone has also been able to become the focal point for digital convergence and Nokia quite astonishingly taken leads in several major industries far removed from telecoms.

CONVERGENCE

We've had convergence in various professional tools for a long time. The Swiss Army Knife is a good example of this. The first instance of convergence in the portable consumer electronics industry was to my best understanding the first Philips Radiorecorder, which launched a family of portable radios with cassette recorders (and later CD players too) which we now know as boomboxes. Philips was the inventor of the C-Cassette in 1963, for professional dictation machine use. The first Radiorecorder was a considerable innovation, in that it allowed the consumer to record "off the air" from radio broadcasts, direct to cassette tapes, without any microphones. For 1970, this was a considerable innovation. The portable electronics space would see more digital convergence, some more successful than the others, ranging from the Walkman type portable cassette players gaining FM radios, to the camcorder (merging the video camera with the portbable video recorder; the first consumer portable video camera outfits had separate video recorder devices you hung on your shoulder) to wristwatches with in-built calculators (yeah, I had one of those once, ha-ha).

Digital convergence could be said to start with the PC, when previously external peripherals started to be preinstalled to desktop PC units, such as the diskette drive and the modem. The laptop would take this much further, incorporating a completely self-contained computer setup, with monitor and keyboard all converged to one portable unit, with even the display - digital flat screen display - replacing the Cathode Ray Tube (CRT) of the analogue computer monitors of yesteryear. But we've also seen digital convergence in other digital home electronics, such as vidoegaming consoles becoming DVD players etc and the stand-alone digital still camera also shooting digital video (ie converging with the camcorder function) etc.

ENTER MOBILE

So lets move to mobile phones. The world's first cellular telecoms based mobile phone was invented by Motorola and commercially launched on a rival technology by NTT DoCoMo in Japan in 1979. Nokia made portable (carphone) type phones earlier, but its first truly handheld phone, what could be considered an early and very bulky mobile phone, was the Mobira Citiman in 1987 on the NMT analogue (1G) standard.

But from that point, Nokia's growth in mobile has been phenomenal and it would only take eleven years for Nokia to overtake Motorola and become the world's biggest mobile phone maker in 1998. Since January 1999 we could say we've had a Nokia decade, and during the past ten years alone, Nokia has shipped 2 billion mobile phones and is currenly used by 1.25 billion people; by far the most widely adopted brand in the technology space, there is a Nokia phone in the pocket of almost one in five people on the planet.

That is a breathtaking accomplishment. Consider the world's bestselling watch, Timex. It reached one billion sold in 2003, which was accomplished in 50 years, and certainly nowhere near one billion humans on the planet wore a Timex at any one time. The Sony Walkman never reached 100 million units sold and the Apple iPod is now reaching about 200 million shipped in its lifetime. For contrast, Nokia sold over 450 million phones just during the year 2008.

But now lets consider digital convergence. There is good reason to consider this decade the Nokia decade, as Nokia has relentlessly been pursuing digital convergence to expand the utility and popularity of its phones.

VOICE CALLS

Lets start with voice calls. When Nokia overtook Motorola as the biggest phone maker in 1998, the world had a total installed base of 308 million mobile phone subscriptions or one phone for 5% of the world's population. Nokia sold 37 million phones that year with a market share of 22% and made ten billion dollars in the process out of its phone business which accounted for about half of Nokia's total income.

The world had nearly a billion fixed landline phones at this time and the number would keep on growing until reaching a peak level of about 1.3 billion by 2006. Now total fixed landline connections are in slight decline worldwide. But yes, in 1998 there were more than 3 landline phones for every mobile phone. This would change in a hurry. By 2003 there were more mobile phones than landlines and today the advantage is 3:1 for the mobile phone and growing fast.

So yes, today there are about 1.25 billlion fixed landlines in the world. And the installed base of Nokia branded mobile phones is exactly that too, 1.25 billion. We are just now, January 2009, at the point in time, where any caller on the planet, is more likely to be speaking on a Nokia branded mobile phone, than any type of fixed landline phone. Now, this in itself is a nice story about cannibalization of an older type of technology, but it isn't a story about convergence. But it sets the stage for us.

MESSAGING

Email started on mainframe computers in 1965 and by the time the PC came along in 1974, email was spreading to the desktop devices too. The first portable suitcase sized and extremely heavy personal computers that could theoretically do email "on the road" were made by Osborne in 1980, and the first practical laptop computer was the Toshiba in 1985. Email was the killer application for consumers to want to connect to the internet. In 1998 the world's PC installed base was 400 million and that grew during the past decade to reach just about 1 billion PCs as the total installed base, including all laptops and desktops.

Nokia did not invent messaging on a mobile phone. This very counter-intuitive concept was invented by Telecom Finland (now part of TeliaSonera) executive Matti Makkonen and we know it as SMS text messaging. This technology was first enabled on the GSM standard which launched in Finland in 1991. Nokia GSM phones were all SMS text messaging capable from the start. But SMS text messaging spread rapidly and overtook email in 2002 as the most widely used messaging platform on the planet. So today Nokia alone has more messaging enabled digital devices, than all computers in use on the planet made by all of the PC brands, HP, Dell, Lenovo, Apple, Acer, Toshiba, FujitsuSiemens, etc combined.

MUSIC.

The world's most recognized song is the Gran Vals by Francisco Tarrega (actually Francisco de Asis Tarrega y Eixea). You might not recognize the name of the song nor the composer - who died one hundred years ago. But this piece of classic Spanish guitar music is what most people think of as "the Nokia Tune". Note that the Beatles have sold about 1.3 billion records, and Michael Jackson and Elvis about one billion. But being embedded on every Nokia phone since 1994 - the first phone with the song was the Nokia 2100 - Tarrega's grand walse has been sold (as a tiny part of the bundle) over 2.1 billion times.

We've discussed the iPod vs musicphone "battle" many times at our our blog and in my books, so I'll keep this short here. Apple launched the iPod in 2001. The first MP3 playing musicphones were launched in South Korea in 2003 but Nokia was soon in that game and rapidly expanded its musicplayer line. By 2006 Nokia was selling more Nokia branded musicphones than all iPods sold that year. Today more than half a billion people have a Nokia branded MP3 player on their phone, whether they listen to it or not, vs about 200 million Apple branded iPods ever shipped (and many of those being replacements of earlier iPods to the same buyers, so the total installed base of iPod users is far less than 200 million worldwide).

CLOCK CLOCK, TICK-TOCK

So then some time around 1997 Nokia sticked a clock and alarm on the phone (Its astonishing to think that the early mobile phones did not have this basic feature, but yes, this was an innovation). I don't know who did this first for a mobile phone, but I know Nokia had it on the 6110. From this point on we start to see the migration of wristwatch use to the mobile phone as well as alarm clock use.

So yes, how many? I don't have a measure of how many people wore a wristwatch at the peak of that form factor, but since the early parts of this decade, we've seen a migration of wristwatch use to the mobile phone. A Portland University study in 2005 found that only 10% of university students were wearing a wristwatch. The peak year of wristwatch manufacturing was 2004, when 1.35 billion wristwatches were made, according to the JCWA, the Japanese Clock and Wristwatch Association which is the global body for the industry. Today the global production is 1.1 billion wristwatches. Timex has made the most watches in history, with about 1.1 billion produced in over 80 years. They were for example the makers of the original Mickey Mouse watch. Currently Timex is a small player with only 38 million wristwatches produced per year. Today the biggest watch brand is Seiko at about 300 million wristwatches sold annually. Most of those, by the way, are no longer manufactured in Japan. Seiko has for example a big manufacturing plant in Singapore.

So Nokia sold 450 million phones last year, and every one of them had a clock. So they sell 3 Nokia phones to every 2 Seiko watches sold. And of the total shipments, against Timex's 1.1 billion over 80 years, Nokia has sold far more expensive mobile phones 2.3 billion units since they started 21 years ago. As to installed base of users by brand, I don't have any numbers on the "installed base" of watch brands but it is going to be far less than the total shipped numbers of the biggest maker, Timex.

ALARM CLOCK

As to alarm clocks. A recent UK study reported in the Birmingham Post revealed that 71% of British people think their home alarm clock is obsolete, as they use their mobile phone as their alarm clock. How does that square with clock shipments? The JCWA also reports on clocks, which fall into three categories: Tabletop clocks (including alarm clocks), wall clocks, and instrument panel clocks like on cars, boats, airplanes etc. The clock manufacturing is still growing but tabletop clocks represent about half of all clocks. In 2007 the total of clocks made was 530 million units and half of those were tabletop clocks, or 265 million. Not all of these were alarm clocks. But yes, Nokia branded alarm-enabled mobile phones alone outsell all brands of stand-alone alarm clocks by something like 2:1.

VIDEOGAMING

The first computer designed for gaming was the Nimrod in 1951. The first successful arcade game was Pong in 1972 and that year Magnavox (later bought by Philips) launched its Odyssey, the first family of videogaming consoles for the home, that sold 2 million units. The most played videogame on consoles is the family of Super Mario Brothers games on Nintendo consoles, that has been sold 120 milllion copies in all of its variants. A far more popular videogame, however, is Solitaire, the game that has been shipping with Windows and as part of that package, has reached total shipments of nearly a billion units.

Nokia innovated again in the mobile space in 1997 by installing the Snake game onto its 6110 phone. Since then the classic PC game has been commonly called the "Nokia Snake" game and has reached a total shipment level of 2 billion. Currently over 1.2 billion people use a Nokia phone that has Snake pre-installed on it.

Nokia took videogaming further onto phones with the N-Gage, the first converged videogaming platform on a mobile phone. Total sales were disappointing and reached only 2 million or so, but the device spawned a big interest in portable gaming and helped in creating a big demand for the Sony PlayStation Portable which has since sold 44 million units and sold 16 million portable gaming devices in 2008. In April 2008 Nokia revised the N-Gage gaming engine on the N-Series phones and all N-Series and a few other phones support the revised gaming platform. While not selling them as gaming phones as such, all N-Series since April could be considered converged gaming phones. And how many N-Series does Nokia sell per year, about 45 million to 50 million. In the next 12 months Nokia will sell more N-Gage compatible gaming phones than all PSP's ever sold. Its this kind of power that the scale of the mobile phone gives Nokia.

CALCULATOR

So in 1999 Nokia releases the 6210, which includes a calculator. Again, I don't know if this is anywhere near the first phone with a built-in calculator, or even Nokia's first such model, but it was a mass-market phone that did have the feature. Since then the calculator function has expanded to most phones in the line. How does that compare? Casio invented the electronic calculator in 1957. It took them 49 years to sell their billionth calculator and they are the only brand of desktop and pocket calculators to reach that milestone. Nokia is the first brand to sell more calculators than Casio, as embedded devices in the phones and accomplished a billion calculators in their phones in only seven years.

INTERNET BROWSER

The first web browser was Mosaic, launched in 1993. Today there are about a billion personal computers with an internet connection and browser. Nokia was the first phone maker to include a WAP browser on its 6210 model in 1999. Today more people surf the "mobile internet" using WAP (and other technologies such as i-Mode) browsers than surf the "real internet" on a personal computer. I know this is not the same and am not claiming it to be the same as the "real internet" but just like an SMS text message is not email, yet both are forms of electronic messaging, so too WAP is not the Web, yet both are forms of browsing. And when measured by browers, the total installed base of Nokia branded phones with an inbuilt browser, of more than 1.1 billion, is more than all personal computers with internet browsers of any brand, combined.

CAMERA

So we come to the digital camera. Stand-alone digital cameras were introduced in 1990 and after a long struggle, took over from film-based cameras. According to the CIPA Camera Imaging Products Association, by 2006 film-based cameras formed only 4% of the total world camera shipments (excluding disposable cameras). IDC said that in 2008 stand-alone digital camera sales reached 111 million units.In 2004 approximately 120 million rolls of film were sold globally so that is the maximum possible active use of film-based cameras and the more an average user buys film per year, the less is the total active installed base. Meanwhile disposable camera sales grew dramatically since the first such camera was introduced in 1987. IDC said that disposable camera sales peaked in 2004. Roughly 200 million disposable cameras are sold currently but their numbers are dwindling dramaticallly year on year, at levels of 20% annually.

The first cameraphones came from Japan in 2001. Soon Nokia too started to install cameras to phones. The world has 1.9 billion cameraphones in use or 56% of all phones. So Nokia's installed base of cameraphones in use is about 700 million. The industy sold about 900 million cameraphones in 2008 and Nokia's share of those is about 340 million. Even counting all film based cameras, and all digital cameras, and all disposable cameras; still Nokia outsold all other camera brands in 2008.

VIDEO CAMERA

The first portable (shoulder-mounted) video camera was the Ikegami ENG professional news gathering camera in 1973. The video tape recorder was a back-pack sized device that another engineer would carry, and which could only be operated when on a flat surface. Still, this was the beginning. Technology evolved and by 1980 Sony released the world's first camcorder (another converged product). I haven't found global shipments and installed base figures for camcorders but we can safely assume they are less than the levels of stand-alone digital cameras today.

Video recording ability was offered already on some of the early J-Phone cameraphones in Japan and Nokia had it from its early cameraphones too. So if Nokia bested stand-alone digital cameras, it certainly bested the camcorders too. And yes, most early cameraphones did very grainy poor quality video, but today top end Nokias (and many other cameraphones) record at DVD quality, perfectly usable for mainstream consumer video recording use.

CABLE TV

This is a quirky category, but bear with me. The first cable/satellite TV service was HBO in 1975 and twelve years later half of American households had subscription TV in some form of cable or satellite TV. Today there are 800 million subscribers of cable/satellite TV around the globe. But the point is, that on "regular" broadcast over-the-air TV, you need only to have a receiver and be in range with your antenna; with this model you get all the same channels as anyone else in the same broadcasting region. With cable TV, you need to be physically wired to the cable broadcast provider, and you then get their selection of channels, that you will then select from based on your paid package.

Now consider "mobile TV". The basic form of mobile TV is the "streaming" proposition. There were several early streaming TV services on the early 2.5G technologies like GPRS after first launched by Eurotel in Slovakia in 2002, but in 3G, it has become quite commonplace. Today hundreds of millions of 3G subscribers around the world have some kind of access to 3G based video content, including full 3G-equivalent TV/cable services like Sky TV on Vodafone in the UK and V-Cast on Verizon in the USA. Certainly as a TV experience, this is a poor substitute, and has lots of picture and sound quality issues, cost issues and tiny screen size issues (and channel-switching issues etc). But this is a fair adoption of the definition of cable TV. You have to be connected, you have channels to select from, you pay for your access. There is a schedule of "live" TV content, which is not delivered over the air, but in this case, through a dedicated 3G connection to your "set top box" which is the 3G video service on your 3G phone. This is an equivalent "cable TV" type of experience in our pockets, even if the picture and sound quality are rather poor and the cost rather high. 

How many subscribe to 3G? The world had over 400 million subscribers to 3G at the end of 2008 (and that with many of the world's largest countries by mobile subscribers without even launching 3G yet, such as China and India). Will this eliminate cable TV, of course not. Will it start to shift some of the viewing, some of the subscription revenues, and some of the advertising to mobile, of course it will. What of Nokia's share? Its actually not as big as its global market share, because two of the biggest 3G markets that launched first, Japan and South Korea, don't have (meaningful numbers of) Nokia branded phones. But we could roughly say one in four 3G phones in the world today is a Nokia phone. So watch this space, as we get ever faster cellular services such as HSDPA now (so-called 3.5G) and LTE (so-called 3.9G) soon, there will also be more of the cable-TV type of content offered to us. You and I might not subscribe to it, but the teenagers and young adults very well might.

REAL TV IE BROADCAST TV

This race has only started. The world has about 1.4 billion TV sets. The first digital TV tuners were built into mobile phones in South Korea in 2005 and today about one in five phones in Korea has a digital TV tuner on the DMB standard. Nokia got seriously into this game with the N96 and its in-built DVB-H digital TV tuner which is the most adopted standard in the world, but still not many countries have live DVB-H broadcasts. This is early going, but this will also be a quick win, once the price points for these handsets come down and the TV broadcasts go live. Watch this space, Nokia will be a major TV manufacturer soon as well.

FM RADIO

Radio was invented by Marconi and he didn't conceive of it as being a broadcast medium with consumers listening to radio broadcasts. He only could foresee radio as a telecommunications method, to wirelessly connect across seas and oceans, to let ships communcite with the land (such as being in trouble) and also to allow telegraph services - morse code - sent over seas and oceans. Soon however, what we now call AM radio emerged and people started to listen to news and music and entertainment on the early "wireless sets". The technlogy improved and with FM radio we had what can be considered modern radio, with clear sounding music and other programmes.

So how many radio sets are there in the world? I've been chasing this number and seen anything from 2.5 billion to 4 billion units in use, and nothing ever from a very credible source. (If anyone has good stats on FM radios in use worldwide, please tell us). But the more relevant point is that radios are strongly clustered in the wealthy parts of the world. In North America and Western Europe we have a multitude of radios. There is the stereo HiFi set in our living room (with a radio/receiver); the clock-radio in our bedroom as our alarm, the kitchen radio, the boom box with radio, the one in our car, etc etc etc. Lots of radios per person in the West.

That is not the case in the Developing World. There radios are still luxury items and often a family will only have one radio, as well as one TV set. I would argue, because of the price differential, that there are more households with a radio than those with a TV set in the Developing World, but it is nowhere near one radio per person or more, as it is in the West. So the total unique owners of radios is probably nearer to the number of TV set owners than the four billion total radios in the world. I have done some modelling on this and find unique radio owners probably in the range of 2.2 billion to 2.5 billion.

Well, what of our phones then? Nokia started to put FM radios into its phones around 2001 and today mroe than half of its lineup has inbuilt FM radios. Not every Nokia model, and some of the lowest-end models are the ones without, but it is starting to be a standard feature. My guesstimate is that the installed base of Nokia branded FM receivers in the pockets of consumers worldwide (built into their Nokia phones) is about 500 million, give or take 100 million. But recognize if this was Sony or Philips or Samsung (or Microsoft or Apple), who had invaded the home entertainment area of FM radio reception, and started to cannibalize this market, we'd hear about it. Yet we don't.

GPS, COMPASS, PDA, COMPUTER

There are many more. Its likely that Nokia is about to be (or perhaps has already become) the world's biggest supplier of GPS equipment. Now they are adding the compass functionality to phones. The PDA battle was long since won by the Nokia Communicator series (now part of the E-Series) and yes, I wrote just before New Year, that Nokia is now the world's largest computer maker too, just by counting its smartphones, not all phones. But that is also still a controversial view, so you might want to read that article if you missed it at this link Nokia biggest computer maker in 2008.

THE CANNIBAL OF CANNIBALS

Lets go back that ten years. In early 1999, the camera industry considered that the big contenders were Nikon, Canon, Minolta, Konica, Kodak, Polaroid. They saw a digital revolution coming, and probably could guess that Sony (Cybershot) would emerge as a rival. But could they have foreseen that an obscure Finnish geeky techie mobile phone brand would become their biggest challenger? Now Konica and Minolta have quit the camera business. Kodak has quit all but the disposable cameras and even those it only sells in selected markets. Polaroid has gone bankrupt, twice. Nokia towers over them in total cameras made and total pictures taken with them.

The watchmakers thought ten years ago that it was a fight between Seiko and Citizen and Timex and Swatch and Casio; and there were ultra-cheap Hong Kong and Chinese digital watchmakers and ultra-expensive luxury watchmakers in Switzerland. But they could not see that the phone would take their market and Nokia would eat their cake. That the catwalks of Milan and Paris and New York and Tokyo would soon feature luxury phone brands like Vertu alongside the Omegas and Rolexes; and that the major fashion brands would start to design phones like Armani, Prada and Dolce & Gabbana.

The computer makers did see a pattern of the shrinking computer, and did expect a pocket computer or palmtop computer, and they invested heavily in the PDA market, from HP to Apple, but they did not expect that the cellphone would emerge as their biggest rival (and to tower over the shipments of stand-alone PDAs).

WHY NOT THE INCUMBENTS?

And to the others? Philips was there at the start of consumer electronics trend of convergence with the RadioRecorder. They have a long history of this space and were once one of the major handset makers of the world. But they missed this boat. Motorola invented the mobile phone but could not see past voice calls, and lost their lead about when SMS text messaging went mainstream on digital networks. That they would partner with Apple, and end up with the Rokr, while Apple would then release the iPhone, tells vividly the story of Motorola not trying. Motorola could have produced the iPhone, and actually released it 6 months earlier than Apple did (on the same level of specs) and have had a real hit product to follow the Razr. But no. Too lazy. Not bold enough.

Ericsson was in Sweden right next to Nokia in Finland, with both companies offering both networks and handsets. Nokia moved aggressively to capture the handset space and eventually merged its networks business with that of Siemens. Ericsson was content to let its handsets be a minor part of its telecoms play, and while focusing on networks, Ericsson let its handsets business merge with Sony.

Perhaps the most bewildering play has been Sony. The most portable of consumer electronics, with the invention of the Walkman and its various pocket TVs and transistor radios; and now the iconic Playstation Portable. But even more than portable electronics, Sony is the consumer electronics king, the world heavyweight in this space. They own magnificent consumer brands like the Walkman, the Cybershot and Playstation. Why did it take so long for Sony branded Walkman musicphones and Cybershot cameraphones? And why is there still no PSP-phone? To me it sounds like a natural. Sony (PSP) is to me the most obvious "next iPhone play" of a global brand doing an ultra-cool and ultra-desirable phone. What the Nokia N-Gage hoped to be, if Sony really put its mind to it, they could make the PSP phone the hottest thing. I mean, Sony could make its PSP-phone as big as the iPhone was in 2007. Why not?

The exception is the Koreans. LG and Samsung, with tons of innovation, playing now in the most exciting home market - not the leading country in "mobile telecoms" alone - which is still Japan - but more importantly for the topic of this posting, digital convergence - South Korea is by far the most advanced country in digital convergence as Jim O'Reilly and I chronicle in our book Digital Korea. Samsung and LG get to experiment in that market, with the most advanced, enlightened and demanding customers too. Samsung shot past Motorola and is now pulling far ahead as the second biggest phone maker in the world. LG is neck-and-neck with SonyEricsson, and its my bet to take the number three position from Motorola shortly (but SonyEricsson is likely to do that too). Did you notice both LG and Samsung offer 8 megapixel cameraphones already? They've had them available in their home market for three years.

But yes, the innovation is coming from the smaller, hungrier players, not the incumbents. Nokia was the little kid and became the big boy ten years ago. It is still in its heart and soul, a young, "challenger company", not yet resting on its past successes. Philips, Siemens, Motorola, Sony and Ericsson were all old players in telecoms and too lazy to really pursue the phone opportunity, "seriously".

And we have the real small players, newcomers. RIM with its Blackberry (phone and email convergence); Apple with its iPhone (phone, PC, media player and internet convergence). Google (internet and phone convergence) and others, not forgetting the various Taiwanese and Chinese makers. Here we see innovation, hunger to experiment and discover the new and magnificent.

SO WHY NOKIA?

Now lastly, why Nokia? Why has this bizarre obscure company better known in the 1980s for paper and rubber, than high tech. Why did it take this decade by storm?

Part is Jorma Ollila obviously and his management team. He decided that Nokia would stop being a multi-industry conglomerate, and shred its other businesses and focus on telecoms (and even later to limit that focus to mobile telecoms, with a strong further focus on the GSM-WCDMA technical evolution path). Fifteen years ago, that was a considerable gamble, a "roll of the dice" to go against the flow, where most giant global companies tried to diversify, to pick a laser-like focus onto only one industry. Nokia went the other way, and put all its eggs in one basket, telecoms. And then their pick, it was not obvious that telecoms would be the strongest play. Remember Nokia was already a computer maker at the time, with a popular series of home PCs (the MikroMikko) in Finland and many other computing units from telecoms switching computers to the control units in nuclear reactors. Nokia could have picked the computer path - and many would have said it was the more obvious and rewarding path, at the time in the early 1990s. Nokia was also one of Europe's largest home electronics providers about twenty years ago, so it was a bold move indeed to say goodbye to those, and instead pick telecoms as the growth opportunity.

But of the mobile phone? Why mobile? Here we have a happy instance of timing and coincidence. Finland was the first country where mobile phones expanded beyond the business users, and into the residential home use, and then for teenagers. This had all happened - or clear signs of it - by 1998. It was not happening (yet) at that time in America for example, and I am sure if Nokia had been based in the USA at the time, they would not have made such a bold move into mobile phones at the time. Too risky if the total market - indeed the specified ceiling for users in the early planning of GSM - for mobile phones was 20% of total population. We were not meant to be walking around with these "executive gadgets."

But its more than that. Finland also has been a remarkable test-bed for the industry. Why was that? Why not the Netherlands or Greece or Canada for example? A big key to Finland's mature telecoms market was that it was one of only six countries that had fully liberalized the telecoms market before the EU mandated that to happen to all EU area countries from 1998 (and the rest of the world would follow EU's lead). Finland had a long history of fierce competitiveness in telecoms. That breeds innovation and it helps educate the consumers to demand better. The Finnish domestic market for Nokia has been an incredibly powerful home market as a testbed. So many of Nokia's handset-making rivals ten years ago, like Motorola in America, Siemens in Germany and Alcatel in France - had domestic markets which were years behind Finland in mobile telecoms maturity. The Nokia engineers would be able to witness the changes in their "backyards" ie with the way their family members used mobile phones at home, etc. Even where some concepts seemed "counter-intuitive" like say, SMS text messaging or ringing tones - when the market clearly proved that these were making money, who was Nokia to argue; rather capitalize on that insight !

Finally there is Moore's Law. It is clear, that with Moore's Law, the computing power would increase and the technical performance would increase dramatically over periods such as a decade. It would not matter, whether the microchip was in a car, or in our watch, or in our Playstation or our laptop or our calculator or our phone - the power would grow to be so enormous, that certainly by the end of this decade, Moore's Law would dictate that we will have "supercomputer" power in our pocket. It did not matter to Moore's Law, whether this is a Playstation Portable, or the iPod Touch, or a Nokia N95. The pocketable digital device would become by simply the natural evolution of computing power, capable of multitasking and ever more amazing capabilities.

This was not true in any previous decade, we did not have such incredible miniaturization in our home stereo equipment in the 1960s or our video recorder equipment in the 1970s or our videogaming consoles in the 1980s or our CD players in the 1990s. Yes, all of those did shrink, but very gradually. It was not until the microprocessor and the personal computer, that we got into the digital age. And then the PC started from a very modest capability on a very complex system. That would take twenty years until we had the laptop as a single integrated device which was easy enough to use that everyday normal people would be willing to use them. That was not achieved until about ten years ago.

DIGITAL REVOLUTION

This decade is when the digital revolution really happened. It was only in 2001 that the first cross-over happened from a legacy analogue system to digital, when DVD player sales exceeded VHS videocassette recorder sales globally. The 1990s were not a digital decade. Only in 2003 did more digital camcorders sell than analogue camcorders and in 2004 more digital cameras than film based cameras (excluding disposables). We are only now witnessing the transition of analogue TV to digital TV and worldwide have not reached the half point yet. This Nokia phone success could not have happened in an analogue world, it could only happen in digital. And if it were not the phone, it might have been the PSP or the iPod, that took over all those abilities.

Again, Nokia was in the right place at the right time. Finland was at the forefront of all digitalization from internet hosts and broadband penetration rates to digital TV broadcasts and yes, of course the country where digital mobile telecoms was first launched.

How much of it is "chicken", and how much of it is "egg", one will never really know. But Finland had been very good for Nokia and Nokia had been very good for Finland. The company was built then to capitalize on innovation, preparing for change. Nokia was not satisfied to have become the leader in the handset world of 2G with GSM. They then went full speed ahead into 3G (with the predominant standard, WCDMA also known as UMTS). And even that was not enough for Nokia, they pursued aggressively the services opportunity and the convergence opportunity. They even said, Nokia would become an internet company (which now they say a bit more mildly, that they want to become like an internet company or something like that). Nokia is moving into many new areas from advertising to mapping.

So there you have it. The world's most widely-spread technology brand. If you want to compare it, consider these types of numbers. Logitech, the PC mouse maker, has sold one billion mice. Seagate the hard disk drive maker, has shipped one billion hard drives. Hot Wheels, the toy car maker, has manufactured a billion toy cars. Nokia has shipped more than two billion phones, has an installed base of active users of its phones at over 1.25 billion, and sells a massive 450 million more this year alone. But there are still bigger players in the graphical input industries.. BIC has sold 100 billion pens and its rival, Crayola, has manufactured 100 billion color crayons for kids. So there is still a way for Nokia to grow into the next decade ha-ha.

PS - on a grammatical note. I believe it is acceptable to use the term "decade" for any ten year period, ie starting in January 1999 and ending in January 2009. But I know there are many who think a decade must be one that starts and ends in the zeros, so the 1920s could be a decade from January 1 1920 to December 31 1929, etc. By that definition, the Nokia decade could not have started until January 2000, and it would end in 2010. If you hold that view, then please note, that Nokia's pre-eminence and dominance on all of the industries mentioned, will be far more in 2009 than it was in 1999 - so in that case, if the decade has a year still to go (or even two) then yes, it will be an "even more Nokia decade" with some months still to go. But please lets not argue about the semantics of "what is the definition of a decade". Lets discuss digital convergence and Nokia's astonishing ten years of it.

PS PS - if you are interested in the convergence of advertising and mobile specifically, then you might want to sample my newest book, and my first eBook, which has 50 examples of real mobile advertising and marketing services around the world. I have free sample pages for you to view at this link [Tomi's new book Pearls Vol 1: Mobile Advertising]

PS PS PS - thank you Martin Sauter at Wireless Moves for the correction on Tarrega's name

Comments

[Sujeewad de Silva]

A wonderfully thorough analysis of mobile convergence! Thank you for making the effort to compile it.

[phil barrett]

Thanks for a great read. If the last 10 years belonged to Nokia, do you think the next 10 may belong to Apple? Industry projections say that Apple will outsell Nokia in the smartphone space within 4 years....

[Tomi T Ahonen]

Hi Sujeewad and phil

Thank you for the kind comments. I'll respond to both invidivually.

Sujeewad. Thank you. Yes, it became a bit of a project of passion, combining my love of statistics, a long passion in history, and of course my close association with the Nokia brand, both as a former employer of mine, and now a regular customer of my consulting.

Was a delight, but as you can imagine, some of those stats took considerable effort, as I usually don't "track" the sales levels of alarm clocks or electronic calculators etc. It was also a lot of fun, and you should see the original draft, it was twice as long with umpteen details that I just had to cut - its not meant to be a book ha-ha, and as a blog, its really too long even as it is. But it was a nice story to research, and I hope it can also serve to provide some impetus for some "real journalists" to research and write that story into a more mainstream media..

phil - thank you very much to you too. Yes, good point, who owns the next 10 years. My gut says a global leader cannot continue to hold such a lead, although IBM did for many decades and GM has done it for even more decades (while both have had their ups and downs in their periods of reign).

If I had to pick a "other than Nokia" guess, my first gut instinct says Google. Deep pockets, hungry and have been focused on mobile far longer than Apple. Also Google is not obsessed with perfection, but rather goes to business in the incremental method, offering a "good enough" product with some unique benefit(s) and then develop it relentlessly. Apple is obsessed with secret development of a superior technology. It can lead to market-failing products like the Newton or market-disappointing products like the Lisa.

Also, I'd say Apple core ethos does not bode well for "world domination" type of scale and speed. They are a typical niche high-quality high-price high-premium brand. If Nokia is Ford, Apple is Porsche. Ford offers a huge range of products, from the very cheap basic transport to luxury sedans, trucks and sports cars. Porsche only offers sports cars (at the very high end of those) and now sporty SUVs. Ford can figth for world domination against a GM or Toyota; but Porsche (alone) cannot. Only if they buy a mass market player like the discussions now with VW, can they hope to be a rival in the big game.

Now, there is nothing wrong with being a high-end niche player, Porsche is the most profitable car maker ha-ha, not Ford. But I don't really see their competence easily translating into a global domination play. They don't have the scale in low-cost production and sourcing, for example, that Nokia has mastered.

So it would need to be a much more tightly-defined contest, like you say, among smartphones. Of those pundits who suggest Apple will outsell Nokia in 4 years, I an promise you, that won't happen. Those "industry projections" come only from "misguided" North American analysts. The North American market is only 8% of the globe.

If you ask European or Asian experts, most will feel very doubtful that Apple could match Nokia in size even in the smartphone space, based on how poorly they are adjusting to the new market they have entered (even the second edition of the iPhone is severely deficient, from the primary buying customer - the mobile operator community - point of view, such as still not supporting MMS, the second biggest messaging platform on the planet behind SMS and ahead of eMail, and a vital leg on the future of mobile operator revenues and profits, etc..)

I don't mean to suggest the iPhone is a bad phone. But, I do suggest, that Apple cannot - it is economically impossible - to get a major market share without strong mobile operator (carrier) support. And Apple has not played that game well (so far). They are behaving very arrogantly, and many operators feel burned by early promises and now Apple developments, from exclusivity to the Apps store.

Now, I've said again and again, that Apple is great at learning, and they will improve and get better at this game. But I also said, that Apple has never in its life, faced the quality of competition as they do now in mobile. In the PC world in the 1970s they faced garage competitors. In the 1980s, IBM did not put its first team on the field, with the PC. With the iPod they never had a challenge from the big portable music player maker, Sony, because Sony mistakenly thought the musicplayer market was saturated and focused on the Playstation and PSP.

Now, Apple faces four very competent and powerful companies (Nokia, Samsung, LG and SonyEricsson - obviously Motorola is not in this class) who know the market inside out, who have far stronger and more broad customer relationships with the 300 relevant mobile operator/carrier companies around the world; and who all have staked their future on specifically mobile phone success.

And this is a fashion oriented industry - something Apple has not yet grasped, but even RIM has already noticed - which means new phones for every season, not once per year.

I honestly don't see Apple capable of succeeding in this battle. Note that when they passed 10 million iPhones sold in 12 months, they have matched the level of Nokia's output in one week. Lets say Apple pursues a relentless and total commitment to capture this space, and plays severe price-cutting/cost-cutting games and grows its sales volume 50% year on year, it would take them 10 years to match Nokia's current sales level (assuming no growth for the industry in the same period..)

Totally unreasonable.

But, its not just the phones, obviously. The more it is a different, media-delivery game, then Apple has strengths, such as its iTunes heritage. It also brings considerable baggage and iTunes is not universally loved by the record industry... Yes, they have a chance, but I'd say a very dark horse, and only if the industry shifts very strongly away from the handset side. And Apple would need to shift their resources very deliberately to the phones (and related software and services) side, away from the PCs an iPods..

I don't see them able to pull it off. But Google, that I think is a strong rival from among the non-handset makers, and obviously Samsung is now the strongest (growing) rival to Nokia.

My two cents..

Thank you both for writing.

Tomi Ahonen :-)

[E. Casais]

When analyzing the fate of digital processing products, the evolution of and disruptions in storage technologies are at least as important, and often much more important than the famous Moore's law about raw computing power. This applies to mobile phones as well.

10 years ago, one of the top three features of a mobile phone was the size of the phonebook: how many addresses or phone numbers could it store? Five years
ago the question moved to how much space for Java applications. Today it is more
like: how many movie clips? All of which highlight the crucial significance of
that technology called flash memory.

Without it, no phonebook; one could place a call, but not store numbers (just as in very old phones). No permanent storage of SMS (and hence phones would be reduced to simple pagers, not messaging or e-mailing devices). No downloading of ringing tones or wallpapers (one could hear them or look at them, but they would disappear once the battery dies). No photographs or video capture (except with an attached film or video-cassette recorder, as in older cameras). No music
clips (except with an attached CD-reader, just like a walkman). No games or installable applications (except with a cartridge reader, like older game
stations). No software upgrades (one would need a hard drive to store software, like in computers). No exchange of data (except with an attached diskette drive).

Before flash, code was inalterably in ROM and data in RAM -- which was cleaned
up when the battery died; EPROM required a special setup to be rewritten. All other storage mechanisms -- used in the other data devices throughout history --
were bulky, mechanically fragile or required a considerable (relatively
speaking) source of electricity.

In short, most of the applications you mentioned, and all of the important early ones, would be impossible or excruciatingly tedious. Think about it: the advent of miniaturized electronic, easily rewritable memory storage, independent from a permanent source of current, was perhaps the single technological factor that enabled the ascent of mobile phones to their status of king of multimedia, multichannel communication.

[Fred]

Just a comment about a little mistake :
it is now admitted that Marconi didn't invent radio...

otherwise great article!

[Tomi T Ahonen]

Hi E and Fred

Thank you for the comments.

E - great point, yes storage ability has been one of the most important developments, although probably the battery development is even more critical to enabling the modern phone.

Fred - thanks. yes, good point. Many inventions actually weren't by those we generally believe, such as Alexander Graham Bell who is also strongly believed today to have stolen the patent for the telephones.

Thank you both for writing

Tomi Ahonen :-)

[Ganesh]

An Excellent Article....

just adding my points to it.

Nokia is on its way to replace CDs with their "comes with music service", though it didnt make an huge impact in 2008 but it is expected to do in 2009.

Nokia with its TV-Out enabled phones has the capacity replace even DVD Players. Though it cannot exactly replace one now but with the support of all video file extensions and better video quality it can do it in the future.

Nokia with its own "mail on Ovi" Service, it can compete with Gmail and Yahoomail. It is expected that more people in developing countries like Africa, India and China will experience Internet, first on their mobiles only. So Nokia has a chance of winning even this competetion.

With the N97, Nokia has promised "SoLo", which is Social Networking and blogging on the mobile. we have to watch out for the responses when that product gets released

[Tomi T Ahonen]

Hi Ganesh

Thanks, yeah, looks very promising for more convergence and more cannibalization both by the mobile phone in general, and Nokia in particular.

About the DVD cannibalization, I think we see a tiny step in that direction, in that some movies are now available on the memory module formats for phones (and PSPs). I received the Mission Impossible 3 movie on the memory card that came with the Nokia N93 in 2006 and watched the movie on the phone with no problems. I think its a start..

SoLo on the N97 looks also very promising..

Thanks for commenting

Tomi Ahonen :-)

[senior phone]

It is great how easy and cheap cell phones have become.

[used computers]

In short, most of the applications you mentioned, and all of the important early ones, would be impossible or excruciatingly tedious.

[virtual laser keyboard]

Companies today need to have next-generation technologies, especially those engaged in some kind of engineering who need to maintain constant flow of work and the people.

[refurbished computers]

it cannot exactly replace one now but with the support of all video file extensions and better video quality it can do it in the future.

[Multi-Vision]

I don't know of anyone who hasn't owned a Nokia mobile phone at some time!
However Apple are now set to dominate the next decade with the iphone.
For me as long as it makes a call & texts then it's OK

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