MWC Blog: WAC - Owning the content, owning the network

The emergence of the Wholesale Applications Community was perhaps the most significant event of Mobile World Congress 2010. Developing Telecoms' editor-in-chief Alec Barton ponders how this will affect the industry...

One of the most significant announcements made at Mobile World Congress (MWC) in Barcelona this week was the formation of the Wholesale Applications Community (WAC). This is an alliance of twenty-four of the world’s largest telecommunications operators*, including may leading emerging markets players, to build an open platform to deliver applications to all mobile phone users.

WAC is also supported by some of the largest handset vendors such as LG Electronics, Samsung and Sony Ericsson as well as by the GSMA.

More than any other news from MWC, this points to where the wireless industry is going. Applications and content are the driving force. It used to be said there were two parties seated at the communications top table – operators and vendors. If there is one thing MWC 2010 made abundantly clear it is that a third party has now claimed a seat – content providers.

WAC should be seen as nothing less than the operators’ and service providers’ statement of intent that they don’t intend to let content providers such as Google, the BBC and Facebook take control of the network and become dumb pipes. Many commentators and analysts have been quick to point out that statements of intent have a nasty habit of leading to very little, particularly when they are made by a large and potentially unwieldy group of organisations more used to competing against each other.

So when enemies decide to bury the hatchet and cooperate, even to the limited extent implied by WAC, you need to ask why. The answer is provided by some statistics from none other than the ITU, an organisation which seems increasingly marginal to the dynamic and fluid content-driven mobile communications industry, published during MWC.

According to the ITU there were 4.6 billion mobile subscribers end 2009, forecast to reach  5 billion by end 2010, an increase of 8%. Nothing much new there, I hear you say, except of course to remember that all this growth is from emerging markets. The effect will therefore be disproportionately beneficial in these areas.

However, it is the next set of numbers which are impressive. The number of wireless broadband subscriptions globally reached 600 million at the end of 2009 and is forecast grow to 1 billion by end 2010, an increase of 40%. Moreover, within 5 years, according to the ITU, mobile internet subscriptions will exceed fixed internet connections.

The ITU are not alone. One leading vendor, Nokia Siemens Networks, has gone on record to say they expect mobile data from smart devices to have increased 10,000 percent by 2015.

The growth of mobile internet is the key issue which is redefining and reshaping the future of the mobile industry. It creates three clear challenges:

  • Capacity: The vast increase in data use is putting huge pressure on operators to deal with network capacity. 4G networks are not yet ready and existing networks are starting to creak as the capacity crunch bites.
  • Applications and services: How are users going to access to new applications and services, and which will be successful?
  • The role of operators and service providers: Alternative service providers, such as Google, represent a genuine threat to mobile operators who are seeking to retain customer brand recognition and loyalty.

And in case anyone thinks these challenges are limited to developed markets consider this. There are over 400 million mobile subscribers in Africa, compared with approximately 300 million in North America. In Africa, the most popular destinations for mobile internet users in 2009 were (in order):

  • social networks
  • operator portal
  • mobile search
  • instant messaging

This demonstrates clearly that users in emerging markets want the same services their counterparts in developed countries want.  The real challenge in emerging markets is that they also want a whole raft of other wireless internet services in addition, such as mobile banking, which consumers in the developed world are used to getting via their fixed internet.

The service delivery challenges in developed and emerging markets are different. But these relate to the specific properties of mobility, such as intermittent connectivity and shifting location, as well as low population densities, coupled with the increasing range of smart devices. As a result mobile broadband networks will need to be much more intelligent in their handling of traffic growth, particularly in emerging markets.

Operators and service providers currently believe they are in a strong position to take a significant share of this rapidly growing market, and this belief is not without foundation. Many are strong, well established global brands and recent surveys show that customers trust mobile operators to deliver services at levels similar to the trust given to banks.

Moreover, with services such as mobile banking, a major potential growth area in emerging markets where 65% of the c. 3 billion mobile subscribers are unbanked, operators have some unique advantages to leverage through their established billing and payment systems.

But some operators are already showing signs of complacency and are slow to realise that users will not accept everything their service provider offers is automatically the best. Users will increasingly evaluate services offered by operators against those offered from the ‘cloud’ by the likes of Google and Facebook.

Operator portals are without doubt going to have to fight for market share. The fixed internet ecosystem is littered with the remnants of former giants such as Netscape, AOL and Yahoo. Only the best and most innovative network operators and service providers will avoid going the same way.

Past performance indicates that the user’s experience is the deciding factor. And brand identity is a vital component of user’s willingness to stick with a service provider. Mobile operators are already familiar with the concept of churn. The growth of cloud-based services makes the likelihood of churn greater as users are less dependent on their operator for their mobile services.

And it’s no good thinking exclusive agreements with content providers will provide a solution. Apple has  already shown how owning a strong brand and a large block of content enables a company to tear up traditional business models to claim a greater share of the pie. Once a content provider has built up a substantial mobile brand and a user group based around their unique content they are in a position to pitch operators against each other to get the best deal for the traffic they control.

Moreover, the capacity crunch will work in the content providers’ favour. Content providers like Google are not going to stop launching bandwidth hungry apps and content because networks can’t cope – instead, they will take their users to the network operator who is most responsive to their requirements. The pipe will get the blame when things go wrong, not the content provider.

At the end of the day, content is king. In the beginning there was voice. Then there was SMS. In both cases the operator ‘owned’ the service. In mobile internet content is owned by content providers who can compete for users on any operator network.

Wither the operator? The view already is that only the biggest, best resourced and most innovative will succeed. The inevitable consequence of this is that there has to be consolidation. In a future where networks carry 10-100 times today’s volumes this trend will only increase. He who owns the content owns the network.

* The 24 founder members of WAC are: América Móvil, AT&T, Bharti Airtel, China Mobile, China Unicom, Deutsche Telekom, KT, mobilkom austria group, MTN Group, NTT DoCoMo, Orange, Orascom Telecom, Softbank Mobile, Telecom Italia, Telefónica, Telenor Group, TeliaSonera, SingTel, SK Telecom, Sprint, Verizon Wireless, VimpelCom, Vodafone and Wind.

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