Healthy Debate with Martin Geddes about the 'Mobile Mogul Millionaire' blog

I hope all the debates about mobile this year can be as smart and considered as Martin Geddes blog is in response to my long Mobile Mogul blog posting from Tuesday.

Martin says he agrees with much but won't agree with all (and thats fair, my blog was intended to be provocative, to inspire thinking and motivate exploration of the mobile opporutnity). He has a very good posting on his Telepocalypse blog. Please go read his full posting first. Its not monsterously long, but he makes really good points in support of, and against my blog. I will be responding here to his main points

Thank you Martin for very kind words in general, and also for the kind mention of the book. Lets go to the points where you express disagreement with me and I'll respond to all of those points here. We do have considerable areas of agreement here too, as you certainly will know, you and I see the world in a very similar way haha..

First Martin doesn't like separating mobile from other telecoms and media. Ok. That is a point of delineation. Of definition. I can completely agree that it is one valid view, to consider all media and telecoms as one giant industry (converging). And yet, I do think that television as a broadcast media, and one that only does media (ie is not a communcation technology) is different from the fixed landline telephone, which is only a communication technology and very few (mostly adult entertainment) services have been able to offer media services on the phone. But its a valid view. I do think its also a very relevant and widely accepted view, that mobile is distinct from fixed telecoms, and both are distinct from media, so with this view, I am not in any way 'radical' - I am conforming with the common industry view, but Martin makes a good point, perhaps its time to think of them all as part of one. Perhaps.

Then Martin disagrees with my view that mobile is the biggest change ever (or biggest since money actually) and brings in trains. Fine, trains is a huge change, helped bring in the industrial age, brought the concept of travel holidays to mass markets, created needs for big hotel industries, helped expand cities to the suburbs etc. Even changed time haha (before trains, all time was 'local time' but the exact time of 12 noon differs by location, and with train travel and the phenomenal speed of Isambard Kingdom Brunel's Great Western train travelling over 50 miles per hour - suddenly local time was not a practical solution when people could move 'faster than time' and Greenwich standard time was introduced..

But trains did not change everything. Certainly electricity reached far more people than trains and changed our world in far more profound ways than trains (not to mention, changing trains too haha). But this is also an interesting point that could warrant a good deal of further debate, over a good whisky at some pub some nice afternoon haha. I am sure our readers don't want a long argument about this point. I'll grant you Martin that trains were a huge change. But not even the biggest change between money and now. Electricity, the printing press, radio, the car, the airplane and the internet I think most would agree, were bigger changes to all of mankind..

But if you meant Martin the railway bubble in the mid 1800s, haha, well, that is NOT what I was suggesting. I am afraid some of our tech obsessions can be bubbles (like iPhone apps haha) and yes, railroad investment speculation created an enormous bubble but I believe mobile telecoms overall is one of the most robust and useful industries, very mature, that it is not in any way in danger of being an investment bubble today. Some concepts in it (Location-based services haha) perhaps, but not mobile itself. Remember the last bubble, dot com, ten years ago - was fuelled by investors who suspended belief in traditional economics and started to believe in 'new economics' where revenues and profits did not matter. In mobile telecoms revenues and profits have been central to the industry from day 1. And in the dire economic times of the past two years, mobile has solidly performed increases in revenues and generated very healthy profits.

Then Martin says "a great deal of the revenue comes from rent-seeking behaviour that other industries would struggle to match." This is fair, we agree. He adds that he doesn't see Carlos Slim as the poster child for value creation. Fine. His companies have nonetheless brought first-time connectivity to countless millions in nations where there was no hope of delivering landlines to far-away villages and locations. I would argue this is significantly more 'value generation' than a new flavor at McDonalds or a new style of T-Shirt at Hennes & Mauritz haha. And as for the big barons of the world, at least he didn't earn his billions the old-fashioned way of swindling his customers out of money in the style of say Madoff or Enron or Worldcom haha.

Martin says that the internet has "had a more profound impact than Tomi allows" and says I should not limit it measuring it by its revenues. This is a very valid point and we agree to a large degree. I totally agree that the internet's influence is far bigger than its monetary value today. Far bigger. Totally agree. But, the total global value of what consumers are willing to pay for a given good or service is one - generally accepted - economic measure of its value. We do this also all the time. TV is bigger than radio, why? Radio reaches more people but TV earns 3 times more money than radio. Print is bigger than cinema. Why. because it earns more. It is one valid way that all industry analysts use, not just Tomi. I think Martin, you are projecting some frustrations you have with the overall (perhaps obsolete) ways to measure the world economy, to my blog. I didn't invent these conventions or methodologies, and far more eminent scholars of industry use these methods all the time haha. I don't mean to be critical of Martin, I mean, that this approach is very widely used and generally accepted as a valid method to compare otherwise often very distinct industries. And its not the only way. Yes, I totally agree, that the internet's influence is enormous beyond its monetary value. Look at elections. Look at protests in countries which do not have democracy, etc. Totally agree.

Yet, I make the point in my blog, that while the internet's impact is great, and many say it changed everything - it didn't - and couldn't change everything. But mobile will have a greater impact because it reaches every industry and activity that the internet reaches today - plus reaches all those instances where the internet is not relevant, like fishing or the lumberjack etc.

Martin points out that there are significant complications to comparing fixed and mobile telecoms. I again agree. But the overall trend is that fixed telecoms lines, fixed telecoms minutes, fixed telecoms paid users are in decline; mobile telecoms lines are bigger and are growing, as are their minutes and revenues. But of multiple SIMs, that is not a valid argument to say its apples and oranges. We have the multiple phone lines situation also with fixed landlines. The same person can easily have more than one landline, with two homes for example or a summer cottage or the phone at the office and the other at home. This is the same phenomenon as the multiple SIM, although with mobile the situation is far more common.

Martin argues that the effect of mobile in emerging economies is equivalent to that of fixed landlines in the Industrialized markets a century earlier. A good point and again we mostly agree. My response is simply, that today the cost of laying fixed landlines (and in low-income countries of stealing the cables for their copper) is not viable. The fixed landline is not a viable technology for the rural areas of the emerging world. Mobile expands that economic opporunity where fixed landline cannot go. Separately, I do think that a first time mobile connection in an African village that today has no electricity or water or any public transport like a bus service - is far more impactful to that community than the introduction of fixed landlines in England in 1890 when the town already had newspapers, electricity, running water, gas lighting, trains and tramways etc. But yes, good point, we do agree the impact is similar although I would argue mobile impacts those villages now more.

Then a philosophical argument about Mobile vs Internet. Martin argues it is a false dichotomy. Most of the 'mobile' services I consume are delivered via... the Internet. Non-IP services will increasingly fall behind the functionality needed. Ok. Non-IP services like what? SMS text messaging? The world's most widely used digital interactive technology with more than twice the users of the total internet (including all who access the web via phone). Here I think today the evidence is to the contrary. There is no SMS on the internet for good reason. Maybe one day the two will merge into a post-SMS era messaging nirvana haha (Twitter?) but not today. Today mobile is clearly very different. SMS alone earns more than all content revenues - and all advertising revenues - paid on the internet.

Martin argues that the Internet is not a medium, it is a meta-medium that allows new media to be created at will. Ok maybe so. This is a definitional issue. If its a 'meta-medium' then when compared to the classic media channels like radio, TV, print - isn't it still a valid 'rival' while perhaps a more potent one. How else to compare it. Yes, an airplane may be an astonishing 'vehicle' as it can fly over oceans, and is clearly different from trains and cars - but its still a valid transport vehicle form isn't it. But a new one, and perhaps more potent. Yes, the internet is a 'meta medium' and can do much more - but so was print 500 years earlier - invented the first new rival to coins in money (paper money) for example. Very powerful (at the time). Nothing new here. Some media are more capable - take radio, which allows us to talk to each other, send telegraphs, listen to broadcasts, measure distance (with radar) etc. More than just a mass media. Cinema on the other hand, started out as a mass medium and still only serves us a mass medium.

This one I liked. Martin pointed out the the phone on at night is nothing new, that we had it on our landline. Haha. True. But the landline system was never adapted to be used as a mass media (or alarm) system which mobile already is. So yes, technically, it could perhaps be modfified so, that every phone would ring, and deliver a recorded message, but as far as I know, no fixed landline system has been used that way nationally, like we do use SMS now in many countries. But good point.

Also this was good, that there is no magic associated with freemium services. The seats in the pub are free, the beer is not. Good point, honestly I had not thought of that before.

Then another good argument that probably fits better in the pub than here, but Martin argues that mobile will not have a bigger impact than cars. He offered a thought experiment, to try to imagine living in a world with mobiles and no cars. That is a false comparison. Cars have been around for 100 years and we've built our cities and world to accommodate them. The valid comparison is to look at the roughly same point in time - 30 years from launch of cars - in the 1920s and compare that time to phones today. How much would the world have 'suffered' if cars had been outlawed at that time, when the Ford Model T was the bestselling car, and it did not start with the turn of a key (no battery) and it did not have synchronized gears etc etc. The world would have very comfortably adjusted to a world of horse-drawn carriages and trains and the emerging airplanes, even without cars. Yes, cars are important, and changed the world a lot, but come on. Mobile. Cars changed how we travel. Mobile changed how we communicate. How we consume our news. How we make payments. Cars only changed one major part of human activity and stil today, they have not in any way taken over for all transport - we still use the older trains and bicycles and the newer airplanes to do part of our travel - and interchangeably with cars (and vehicles, busses, trucks) in many cases. And cars couldn't even replace part of travel vehicles that existed before - ships. But airplanes theoretically could replace (most) ships.

Meanwhile in communciations, mobile will kill the fixed landline in the long run and can replace all of it easily today. Mobile phones ten-twenty years from now will have replaced at least 90% of what we now think of as personal computers, maybe all of them. Mobile will kill off cash as a money instrument. Mobile is having a dramatically bigger impact in society already today. And I havent' even touched on the economic argument. Cars are vital to us in the Industrialized World but China grew most of its growth in a time where people travelled by bicycle. It would not put the country back a lot, if cars were banned (they are far more a luxury and status symbol than necessity). And what of Africa, where mobile will touch everybody but cars have relatively modest impact to most Africans, again, bicycles far more important (today).

On LBS (location based services) yes we agree it is not a revenue model. I also agree that context and intention is worth studying. But context is far more than location. I can completely grant the argument and still be right. Context I do believe is going to be big, I still am convinced LBS won't be.

I very much agree with Martin about his point that mobile should be thought of together with other technologies and media. And a very useful 'component'. I did not make that point well enough in my long article although I tried with several exmaples of the convergence like SMS voting with TV for example.

Martin's biggest beef deserves to be quoted verbatim, so we get his point exactly correctly here

My biggest bone with Tomi would be how this plays out in the longer run. That 50 cent virtual ice cube has zero marginal cost of production, and low cost to replicate. That suggests its price will drop to zero, and be part of a multi-sided market platform that monetises free C2C user services with B2C/C2B business processes (ads, CEBP, etc.). Ringtones are in freefall, and the same dynamic applies on each cycle. Consider the Finnair upgrade example he gives. SMS works -- but not well. It's clunky, there is a risk of phishing ("text your PIN to pay! - honest we're your bank"). Payment is not well integrated. Solving these problems - making communications fit for commerce - could either reinforce these services... or destroy them.

Martin again makes excellent points here. And we mostly agree. I agree that the long-term viability of some cool new digital service today (like melting ice cube) is not strong. And economic theory suggests it should soon have its price (and profit opportunity) approach zero. Fine. But the evidence is not showing that. The best example we have is SMS. The cost to produce one SMS text message is far less than one Euro cent. Yet the Industrialized World average price for SMS has held stubbornly close to 10 cents. The global average is very solidly around the 3 cent mark. It is able to sustain phenomenal profit margins - on a 100 Billion dollar sized business with national competition in every market and 600 companies providing the services - so this gives me confidence the life spans in mobile will be astonishingly long. Yet I do agree philosophically that economic theory suggests this will pass and I have no reason to think that not to be true. Only that I am repeatedly surprised at how robustly mobile sustains its ability to charge for these basic services. 

Thank you Martin. Very good blog and comments and I even agree with very much of where you 'disagreed' with me haha. I also appreciate the kind words in the end, when you wrote

"Taking all the above together, I feel Tomi is broadly right in his analysis that "mobile is it", but that has to be seen in the context of the overall "mobile, social, cloud" era that is upon us. I look forward to reading his book."

And he ended with a funny line too, as one more clever argument - "This blog post was delivered to you via Electricity - The Power of the Twentieth Century." Haha very good! Electricity is to my mind the second biggest change to mankind since money and it would be easy to argue its relevance to have been bigger than that of mobile. I am arguing that mobile will change the world now more than electicity has been able to - so we will have to see over the next two decades if that indeed happens. It may be that Martin ends up being right haha. But if we see mobile eliminating cash, and now try to imagine what else it will do, this is a race where mobile may well end up winning. In any case, we both agree that mobile is the hottest opportunity now, so at least roughly as big an opportunity now, as electricity was more than a century ago.

Fun thinking, Martin, I really appreciate it, that you not only read the article, but you really thought about the points and found good reasons to think of other views about those points. Thanks!

Comments

[Sandeep]

there are a few points
1) Mobile 3G data revenues should not be included under mobile section I think, as people use mobile 3G data mainly for internet browsing.
2) Internet is a meta-medium and some of the values of it is pretty incalculable, for eg, what is the value of 'wikipedia' ? it is pretty much invaluable.

[Arthur]

Fascinating arguments on both sides, just a couple of thoughts: Firstly, electricity, via the light bulb, has done more than anything for productivity/industry etc in the modern era. The number of working hours in different areas and circumstances that non flammable, reliable light has created is incalculable! Also, the invention that everyone forgets, glass. Glass created the renaissance and thus all further reform (cf the stagnation of the previous leading eastern science). Maybe not strictly on topic, but thought I'd mention it (I'm sure you appreciate the magic of glass to a working life Tomi!).
Finally, I wondered whether you had any idea why sms is so expensive when it is given away for free in most contracts in the uk (unlimited on a 25 pound one), and zhen technology like bbm does it for free.
Many thanks for all your work,
Arthur

[Jason B]

Seeing as there's no effective competion for SMS, it's price is not subject to market forces. If the EU or FCC forces this private data network to behave like email it will cost nothing. You could also argue that for smartphone customers in a lot of countries it is zero as part of a all you can eat data plan.

[E.Casais]

Interesting debate, but one should exercise caution and skepticism before making very bold, definitive statements. A close look at the history of technology uncovers some surprises.

For instance:

> the fixed landline telephone, which is only a
> communication technology and very few (mostly
> adult entertainment) services have been able
> to offer media services on the phone.

Well no. A number of services are or were delivered over landline phones, except that you have forgotten about them after all those years using a mobile device.
Apart from smut, we have:
a) wake-up services;
b) radio and music (there was a system called "télédiffusion" in Switzerland, where radio programmes were broadcast over the telephone network from 1931 to 1998 -- see www.swisscom.ch/GHQ/content/Innovation/Geschichte/Geschichte.htm?lang=en);
c) information services (time, meteorological information, news, traffic conditions, sports and lottery results, etc);
d) telephone dictation services.

All of which matches capabilities in current mobile phones -- except many decades earlier, with older technology, and in a very different regulatory environment. So in this regard, mobile and fixed are more alike than it seems.

Second example:

> But the landline system was never
> adapted to be used as a mass media (or
> alarm) system which mobile already is.

10 seconds with a search engine returned these links:
www.ses.sa.gov.au/site/community_safety/emergency_alert.jsp
www.emergencyalert.gov.au/component/content/article/2/65-english-language-videos.html

quotes:
"Emergency Alert messages will be sent via telephones based on the physical location of your landline and mobile phones via the registered address.
Landline telephones will receive a voice message while mobile phones will receive a text message.
[...]
When you pick up your landline phone you will hear the Standard Emergency Warning Signal, which sounds like this followed by the words ‘Emergency, Emergency’.
[...]
The system is set up to make three attempts at delivering the message.
The landline will ring for 45 second before it hangs up."

Once again, mobile and fixed are more alike than it seems.

Third example, on the historical perspective:

> Cars changed how we travel. Mobile changed how we communicate.
> How we consume our news. How we make payments. Cars only changed
> one major part of human activity...

No. They also changed the way we live (cities were remodelled to assume the utilization of cars and accommodate their ubiquitous presence), how we buy and consume (malls), how we work (people commuting daily to -- possibly various -- distant places of work was unheard of before cars). And as for mobile phones, we continue using other forms of inter-personal communication as well (landline phones, letters, e mail). So the comparison between cars and phones is more apt than Tomi contends.

A last point on historical perspectives:

> Electricity is to my mind the second biggest change to mankind since money...

Really? How do they compare to stirrups, alphabetical writing, the mouldboard plough, or vaccines?

E.Casais

[Phil W]

@ Baron 65, I think you'll find that poor agricultural villages in Africa or anywhere else actually value mobile phones. What they do is club together and by communal phones which they then share, so the cost of ownership is not so great.

[E.Casais]

@Phil W

... which is also what took place in Europe many decades ago, especially in the poorer parts of the continent. Villages had just one landline phone -- found at the local post office (the then communal service). Once again, there are strong historical precedents to what is happening nowadays with mobile.

And by the way: then, as now in Thirld-World countries, going shopping or to school could take hours (on foot); visiting relatives or dealing with administrative matters in another town could require planning in terms of days. Transport was way more crucial than telecommunications...

[Tomi Ahonen]

Hi all. I will respond in groups

Hi Sandeep, Arthur, Jason, E and Baron

Sandeep - What makes you think 3G data revenues are mostly 'internet browsing'? You have not heard about various 3G premium services from videogaming to social networking to music services and video blogging? There is very much more to 3G than just internet browsing. You may be thinking of iPhone users specifically?

About the internet being a 'meta medium' then isn't also print a meta medium? We use print for example to handle most of the value of cash (banknotes and cheques). Just because it has other uses doesn't invalidate it in the comparison of one medium vs others. Everything you can do on the internet can already now be done on mobile - which by your definition makes mobile another meta medium, but mobile can do far more than the internet cannot, like ringing tones, 3D barcodes, augmented reality etc.

Arthur - I agree that the electric light has been very important (and is only one part of the contributions of electricity) but industrialized light was already available in gas powered city lighting and in consumer lamps fuelled by kerosine. Not perhaps as 'convenient' as electric light, but far more commercially practical than candles, and I'd argue, the shift from gas and kerosine powered light to electric light was only an incremental gain, whereas mobile in many cases is a radical change, especially for the 3/4 of the planet who never had any other kind of telephone connection before.

I do like glass and am happy you mentioned it. A magical technology most definitely haha..

Arthur - the SMS pricing is a mystery for me too haha.. There are markets whereit is more 'sensible' but we can do the math for the 25 UK pound price bundle and find that the operators do make a nice profit on typical users on that price plan, so it does make some sense. As to free messaging, they will erode the SMS space but not kill it in a very long while to come for very many reasons.

Jason - the primary competition within SMS is between operators/carriers, not by rival technologies. This is typical of most industries. Airlines will not see competition from passenger ships or long distance trains, they mostly see their competition from other airlines.

E - good arguments and points. I am not a historian nor a sociologist and I am not about to try to argue how electricity compares to stirrups (for those readers who are not very fluent with English, those are where you put your feet when you ride a horse, as part of the saddle arrangement) haha. The clear topic of my blog was about mobile phones, not a historical analysis of different contributors to mankind, but I did argue electricity and money are to my mind the biggest changes since fire, but feel free to disagree.

I can comment on the items you mentioned from the fixed landline environment. I did already state that there were some content services on the fixed landline. All were so tiny as to account for less than 1% of total landline industry revenues, combined, as late as 1998 the last time I studied those numbers. By far the biggest was adult entertainment. We did have the talking clock in Finland too and miscellaneous services on premium calls. If the total industry is under 1%, then its pretty tiny. But yes, I'll grant you, some other services did exist. That is nothing like mobile where a quarter of all revenues are earned in non-voice services, in some countries more than half of all income is non-voice.

About the landline as alarm - I meant it but probably was not clear to say - 'at the time when it was introduced by mobile' The landline has not been - as far as I know - a national alarm system - until first done using mobile and SMS. The Australian example I understand was deployed after the SMS based services. But I may be wrong. Feel free to dig for the facts and tell us haha..

On cars changing one aspect of humanity - you claim cars changed how we live (suburbs) and shop (malls) etc - no, that again was first caused by trains (and trams, the short-haul trains) and later that change was accelerated by cars, not caused by cars. If cars were never invented, we'd still live in suburbian worlds today.

Baron - you clearly have not studied the situation of poor villages in Africa, Sri Lanka, Bangladesh etc poor countries. What you describe seems very sensible but is not true. The utility of a mobile phone is so great, that farmers, fishermen, laborers etc will get phones. Not that they can call their friends - but to help them get jobs, find work, sell their services, sell their produce, their catch, etc. Sorry, the facts are opposite to your assumptions. They cannot afford a new phone, so they buy a used phone. They cannot afford to make calls, so they use free 'call me' types of services, so that the more affluent family member or business partner will call, etc.

Thank you all for the comments, I will be back with more

Tomi Ahonen :-)

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