It’s sunny but cold in Barcelona today, as more than 72,000 telecom and technology professionals arrive for the first day of the Mobile World Congress. They come for the spinning, networking, and opportunity seeking—and perhaps for the tapas and Spanish wine. Yet the show is so big and so dispersed that most companies begin trumpeting their messages a week before the conference actually opens.
Innovation continues to drive the mobile telecommunications industry, which is still highly profitable—with typical earnings of 30 percent to 50 percent before interest, taxes, depreciation, and amortization (EBITDA). The technology also is expanding well beyond mobile phones, seeping into everything around us. A car is no longer a car but its value will be soon in the connectivity it carries through machine-to-machine (M2M) communications. A cell phone is also becoming your wallet. And of course, tablets and smartphones can guide you on the streets of every city in the world using GPS and digital maps.
This year we are again bearing witness to the biggest technology fight of the decade, a clash that pits cell phone operators against suppliers of mobile content and applications, epitomized by such stalwarts of Silicon Valley as Apple, Google, and Facebook. The cell phone operators do not want to become the mere pipelines that provide connectivity for the “over the top” providers who use that connectivity to sell content and applications to mobile users.
Yet the operators have been hoisted on their own petard. Their resistance to working with companies funded by venture capitalists has stalled business plans aimed at selling products and services to the operators, or through them. As a result, innovators that could sell their content delivery and applications directly to consumers were the ones that got funded in the last decade or so. So operators unintentionally strengthened the over-the-top players, big and small. Now the operators are facing this reality of their own making, and we all are watching to see what they can possibly do to regain control over their own business.
This situation will become more pronounced with the accelerating transition to fourth generation long-term evolution (4G LTE) technology. Internet Protocol (IP) networks make it more difficult for operators to “own” the monetization of their customers. The unregulated IT players such as Google will have operators coming to play in their IP turf, while operators will continue to bear the increasingly high costs of regulations imposed by governments on an industry that was until very recently a monopoly business.
In Finland, broadband access is now a human right. Across the world, legislation is being introduced to establish net neutrality—which limits the ability of operators to manage and charge according to different types of traffic.
In other words, the worldwide mobile industry is poised for disruption. This is the undercurrent of tension behind the products, solutions, and pitches being made this week in Barcelona, as industry players ask whether a particular technology, product, or service will strengthen the IT/IP ecosystem players at the expense of traditional telecom players. The other question we’re all wondering is whether the traditional telecom players will wake up to the importance of innovation—not only in services, but also in technology.
