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Mobile Industry Update: Barcelona 2010

A Report on the Mobile World Congress and What to Watch This Year

The world’s largest gathering of the mobile ecosystem convened in Barcelona, Spain last month, attracting 49,000 attendees from carriers, device manufacturers, developers, the media, and interested onlookers. According to GSMA, organizer and host of the four-day Mobile World Congress, attendees hailed from 200 countries and included 2,800 CEOs. 1GSM World, “The Mobile Communications Industry Demonstrates Momentum,” 2/18/10

Such robust attendance is a sign that the mobile industry is ready to shrug off the world’s economic woes, if it hasn’t done so already. It’s also a sign that the myriad mobile players are anxious to find out where the frenetic changes in the industry are taking them, what technologies they should hang their hats on, and how they’re going to make (lots of) money.

The industry appears to be on the cusp of major changes on a variety of fronts, from network technology to applications to how devices are being used. A sea change toward smartphones, and smartphone-like functionality on feature phones, is clearly underway. As keynote speaker Eric Schmidt put it, “it’s now the joint project of all of us to make mobile the answer to pretty much everything.”

For some “old-timers” in attendance, it felt a lot like the 1990s all over again, a miniaturized replay of the scramble brought on by the ascent of the World Wide Web. Browsers were duking it out for the desktop, broadband technology was getting sorted out, dot-coms were attracting cash beyond all reason — and in the midst of it all, enterprises were trying to figure out how to leverage this exciting new channel.

The analogy is apropos, but with significant differences in velocity. The technology is moving at a much more rapid pace; the tech industry is that much more mature today, and simply moves much more quickly. At the same time, carriers with their huge and expensive infrastructures are being deliberate in their progress, making sure their central role is not undermined even as they begin the first phases of huge investments to accommodate exploding data usage.

Steve Jobs Wins Top Award, in Absentia

Apple doesn’t even attend MacWorld, the show that’s just for Apple, and they don’t attend the Mobile World Congress, either. But that didn’t stop the Global Mobile Awards from dubbing Jobs the Mobile Personality of the Year. The moment must have been a bit awkward, with no one from Apple to accept the award, and the most prominent runner-up, Google’s Eric Schmidt, in attendance and delivering the show’s keynote address.

In a way, the scenario was symbolic of the relatively new and increasingly bitter rivalry between Apple and Google, which is being fought almost entirely on the mobile front. For now, Jobs and Apple are still the industry darlings. Indeed, it is not a stretch to trace virtually all of the major trends and technology in mobile operating systems, software, interfaces, and app stores to the iPhone. But Schmidt, Google, and Android are fast at Apple’s heels, and clearly are serious about the fight. With 60,000 Android-driven phones shipping every day, according to Google’s reports — an annual rate of 21.9 million units — they could pass the iPhone installed based before the end of 2010. 2Mashable.com, “60,000 Android Phones Shipped Every Day, Says Google,” by Stan Schroeder, 2/17/10

"Definitely the iPhone is changing the world — it affects every company out there," says Shlomi Gian, Keynote’s director of mobile business development, who was in Barcelona for the congress, "But Android is catching up. Many people believe Android will take the lead not too far from now."

A Balance Shift Toward Mobile?

Is the online access point of choice shifting to mobile? Benchmark has reported previously on the predictions that say it will be so. Most visibly, perhaps, the Morgan Stanley "Mobile Internet Report," authored by Mary Meeker, that predicts that in five years, more people will access the Internet on mobile devices than on desktops. Already, the report says, "the iPhone is growing faster than the Internet did during the 90s." 3“The Mobile Internet Report,” Morgan Stanley, December 15, 2009

A recent report by Gartner concurs that smartphones will be the most common primary Internet access device by 2015. The installed base of smartphones and browser-equipped phones will actually exceed the PC installed base as early as 2012, according to Gartner, but they will not serve as the primary access point until 2015. 4“Gartner Top End User Predictions for 2010: Coping with the New Balance of Power,” summary report, Gartner, Inc., 2010

In his keynote at the Mobile World Congress, Schmidt sounded a theme of “mobile first.” He cited the “three Cs,” three drivers that will push mobile to the foreground not just of daily online access, but of daily computing. First is computing power itself — the tremendously increased processing power of mobile devices. Second, connectivity — the installation of higher-speed, higher-capacity wireless networks. And third, the cloud — the tethering of mobile devices to remote servers not just to store or access data and media, but to tap into tremendous processing power.

According to Schmidt, Google engineers now want to work on mobile first, and then have their products ported back to the desktop. Several Google engineers joined Schmidt onstage to demonstrate a few of the mobile projects they’re working on. An engineer from the translation group demoed both real-time voice translation — he spoke into the phone in one language and Google computers in the cloud instantaneously translated it into another — and also print translation, where he took a photo of a menu with his phone and Google translated it into his native language.

A second engineer demoed Google Goggles, an app that lets you search using the phone’s camera. Take a picture of a book or DVD, landmarks, a logo, artwork, business, product, barcode, or text, and Google delivers descriptions and data about the subject. Google Goggles is currently available on phones running Android 1.6 and above.

Another Google engineer showed a game built in Flash running on an Android phone, which highlighted Adobe’s important announcement at the show of Flash 10 and AIR for mobile devices (except for Apple, which rejects Flash).

6,850,000 Apps Every Day?

There was a time when phones were used for talking. But for the first time, in 2009 U.S. data traffic exceeded voice traffic on mobile phones, and that ratio is expected to widen in 2010, according to industry observer Chetan Sharma. 5ChetanSharma.com, “US Wireless Data Market Update — Q4 2009 and 2009,” by Chetan Sharma, 2/2/2010 And one of the biggest drivers of that data, in the U.S. and around the world, is apps.

Apps have been around for mobile phones for quite a few years. But once again, it was the iPhone and the Apple App Store that caused a veritable explosion in mobile phone apps. In 18 months, users downloaded 3 billion applications from the App Store; reports quote Garnter putting Apple’s 2009 share of mobile apps at 99.4 percent. No, that is not a misprint, and yes, that number is nearly impossible to believe; readers sent Ars Technica back to Gartner and to Apple to confirm the number, which they did. 6ArsTechnica.com, “Apple responsible for 99.4% of mobile app sales in 2009 (Updated),” by Chris Foresman, updated 1/18/10

Whatever numbers you go by, the Apple App Store is a multi-billion business (even accounting for the many free apps), and Apple takes a 30% cut of every app sold. Gartner puts 2009 app volume at $4.2 billion, contributing an estimated $1 billion to Apple revenues. 7The New York times, “A Conference Keen on Finding Open Communication,” by Kevin J. O’Brien, 2/17/10

So, let’s do the math: If Apple accounts for 25.1 percent of mobile subscribers as of January 2010, 8comScore Press, “comScore Reports January 2010 U.S. Mobile Subscriber Market Share,” 3/10/2010 and Apple moved about 2.5 billion apps in 2009, 9op cit then that would indicate an unfulfilled potential of 7.5 billion apps to be sold for non-Apple smartphones, roughly speaking. In other words, the biggest piece of the pie is waiting to be served. And using Gartner’s numbers, that unserved pie should be worth about $16.8 billion.

Enter App Planet, the newest addition to the Mobile World Congress, a show-within-the-show in its own exhibit hall that attracted more than 20,000 visitors. App Planet gave developers, manufacturers and carriers the opportunity to check out each other’s wares, and for the big players to hold application developer conferences. The mere existence of the App Planet, as well as the announcement there of the Wholesale Application Community, points out the almost feverish land-grab mentality that has taken hold of the industry around apps.

The Wholesale Application Community was formed by two dozen carriers literally from every corner of the globe, plus Samsung, LG, and Sony Ericsson. Its stated purpose is “to create a ‘wholesale applications community’ that will establish a simple route to market for developers, in turn, providing access to the latest and widest range of innovative applications and services to as many customers as possible worldwide. This alliance will deliver scale unparalleled by any application distribution ecosystem in existence today. 10www.wholesaleappcommunity.com/home

It’s a lofty ambition, and if it can be pulled off, it could theoretically simplify life for developers trying to tackle multiple operating systems. But whether a globally diverse group, primarily made up of carriers with very different markets, different needs and different business objectives, can pull together and play nicely in the same sandbox together remains to be seen.

And in the end, how wise a strategy would it be for carriers that are trying to competitively differentiate themselves? If customers can get the same apps and a decent phone from any of their local carriers, where does that leave the carriers? In the Q&A following the keynote, an audience member questioned whether Google was trying to turn the carriers into “dumb pipes” that are merely the conduits for data, a charge Schmidt emphatically denied. But through WAC, could they be doing just that to themselves, in return for a cut of app sales?

Even network equipment manufacturers are getting into the app act. Alcatel-Lucent announced at MWC a cloud-based “sandbox in the sky” development laboratory to help coordinate and accelerate broad-based app development. The new initiative follows on the heels of their Application Exposure Suite, announced in December 2009. 11Alcatel-Lucent press release, “Alcatel-Lucent opens developer sandbox in the sky,” 2/16/10 With these efforts, Alcatel-Lucent appears to be positioning itself as a broker and go-between among carriers, developers, and content providers, and would take a cut of whatever is created in the process.

But What Operating System?

Despite efforts of various players to come together on apps, the fact remains that the mobile industry is seriously fragmented among operating systems. This is a persistent challenge for developers, and a situation that is not likely to change soon.

The Mobile World Congress saw its share of operating system announcements. The biggest was the introduction of Windows Phone Series 7 (more below). Others included Symbian^3, an open source version of the operating system most closely associated with Nokia. Symbian^3 adds improvements in touchscreen features, memory management, graphics and UI to the widely distributed Symbian OS, which claimed a 46.9 percent share of smart mobile devices shipped worldwide in 2009, making it the most widely used smartphone OS. 12Ubergizmo.com, “Symbian remains top, Android closing in,” 2/23/10

Also announced was MeeGo, a mash-up of Nokia’s Maemo and Intel’s Moblin, both Linux-based operating systems. And Samsung introduced a new operating system, Bada, for its Wave phone, 13PCMag.com, “Mobile Platform Competition Benefits Consumers,” by Michael J. Miller, 2/17/10 which begs the question: if Samsung chooses Microsoft for its search engine, will it be called “Bada-Bing”?

Will 7 Be a Charm For Microsoft?

The biggest OS news at MWC was that Microsoft is restarting its mobile operating system, jettisoning the flawed Windows Mobile platform, and introducing the Windows Phone 7 Series. It will include Microsoft’s Zune music and video software, and be able to run Xbox LIVE games. And naturally, it will include Bing search and map services, reportedly accessible via a dedicated hardware button.

A fresh user interface feature on the Phone 7 Series is the organization of functionality around “hubs” — the music+video hub, the people hub, etc. The people hub reflects the platform’s potentially impressive social media integration, enabling users to pull from and post to a variety of social media communities from one central screen.

At this point, Microsoft Phone 7 is something to watch on the horizon. Its release is slated for “holiday 2010,” which ostensibly means the end of this year. Microsoft will have to overcome the serious stumble it made in the mobile market with Windows Mobile; it has demonstrated its ability to overcome its own missteps in the past. But a year is practically an eternity in today’s mobile market — especially a year in which Google Android is anticipated to gain serious traction.

“Microsoft is making a desperate attempt to get back into the game,” Keynote’s Gian says, “They made a big push. They realized they’re late. So Windows Phone 7 is coming in December. Between now and then, though, all they can do is wave their hands, and that’s what they did. Steve Ballmer was there, and they put up a pretty good demo.”

“I think a lot of folks, myself included, are probably thinking ‘hmm,’” adds Keynote Senior Director of Mobile Technologies Manny Gonzalez. “There’s nothing there that makes you want to run out and get it as soon as it comes out. But they have a track record of coming in and just systematically getting there. Microsoft has shown that they can take their time and still come back.”

The Need For Speed

The undercurrent to all the new product announcements and apps and slick new phones was the question of the networks themselves. How will they accommodate the tremendous new data demands being placed on them by all of the new smart devices? How will they service a world that is increasingly using mobile devices for primary Internet access? How will they deliver the speed that is a requisite for a quality user experience?

The leading topic in the network conversation in Barcelona was LTE, or Long Term Evolution, a next-generation technology that offers theoretically possible peak download speeds of 100 Mbps and beyond. Already deployed in parts of Scandinavia, test results show that LTE is delivering average speeds of around 12 Mbps. Verizon Wireless reports its testing has achieved download peaks of 40–50 Mbps and upload peaks of 20–25 Mbps, but average speeds hover around 5–12 Mbps for upload and 2–5 Mbps for download. 14Rethink Wireless, “TeliaSonera aims to boost LTE performance to 80Mbps,” by Caroline Gabriel, 3/14/10

Nonetheless, 51 of the world’s largest operators have expressed their intention to adopt LTE, with 19 expected to begin this year. Several big players have indicated they may begin introducing LTE service in 2010 or 2011, including AT&T and Verizon Wireless in the U.S., Australia’s Telstra, and Japan’s NTT Docomo. 15The New York Times, “Mobile Data, the Next Generation: High Speeds but at What Cost?” by Kevin J. O’Brien, 2/16/10

The costs to build out an LTE network are monumental, which no doubt accounts for carriers’ measured embrace of the technology. The New York Times quotes a London research firm, Aircom International, as estimating a price tag of $1.8 billion for a U.S. operator and $880 million for a European operator in the first year. 16ibid

Until Next Year

The Mobile World Congress highlighted a number of things to watch in 2010, and a number of questions looking to be answered. Will it be the year Android achieves critical mass and gives the iPhone a run for its money? Most likely. Will the various players, mostly the carriers, collaborate successfully and arrive at some sort of standards or common infrastructure and cooperation for apps? We’ll see. And will Microsoft succeed in getting back into the mobile game with Windows 7 Phone Series? That’s likely a story for 2011 and next year’s MWC.

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