Mr Operator on the Credit Crunch: Opportunity Knocks

This week, Mr Operator surveys the wreckage on the stock market, the dithering Government Ministers and the Daily Mail doom, gloom, horror headlines — and sees only opportunity.

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Hmmmm…..Credit Crunch…best kept fresh in silver foil…

There are no better opportunities to look for silver linings than when you are in the middle of a huge dark cloud. And financially, things are pretty cloudy right now.

For telcos, and in particular mobile telcos, the next 5 years will see a radical re-arrangement of the deckchairs. Partly this will be driven by the usual challenging of traditional business models, as new leaders get the chance to make a difference. As MNO’s evolve and as new platforms allow ever-more innovative tariffs and service offerings, it’s only natural that the fearless will tinker. We may not see another Web’n’Walk or mobile Skype for a while, but nevertheless things will naturally evolve.

But innovation lead by industry is less than half the story. The real sea-change that’s coming is innovation lead by the masses, delivered not by the MNO’s or OEM’s but by 3rd parties. Until now closed platforms, walled gardens and tariffs of mortgage-payment scale (should you foolishly venture into the wild web from your handset), meant the enablers for people to tinker, experiment and learn were only for the true geeks.

Not anymore. This democratization of mobile will be its saviour in hard times – and the MNO’s that play nicest will benefit the most.

About 3 years ago we saw the first relatively mass-market WiFi handsets released. But it took the iPhone to open the public’s eyes to what WiFi can mean on a mobile – in terms of quality of experience and zero cost. Ditto the usability of GPS on mobiles, where the release of the E71 with its ultra-quick GPS fix times has made a long-present feature into something normal people can see themselves using in the back of a taxi in a strange town. Of course both GPS and WiFi are still a way off from mass-market handsets, but the omens are gathering for both technologies to be in all mobile chipsets by default within 2 years (Bluetooth used to be a luxury. Now you basically cannot buy a mobile chipset without it). Once the functionality is in all the silicon, it’s much easier for the Handset vendor / MNO to decide to pay a little extra to enable it by purchasing the WiFi and GPS antennas at time of manufacture. No wonder TI, Qualcomm et al are so keen on the idea. Nothing adds to add-on sales like not wanting to be the ugly sister at the handset ball. And right now 90% of handsets are ugly sisters, but as more and more begin to have baubles like WiFi, GPS, etc by default, the more obvious those that don’t become.

The tangible customer benefits that GPS (for example) could bring – Search for ‘cheap gas’, get “Save 5 cents per gallon at Texaco only 2 miles down the road” – are what’s been missing until now. Users have had to know the benefits of features to drive them to find and use them – they were not self-evident. Thus only geeks knew about in-store comparison shopping using m-sites such as Pricerunner, Kelkoo etc. But to paraphrase a rather obscure Roger Waters song the last year of iPhone jailbreak, then App Store, Android, Linux, and now the G1 – er – App Store, has ‘wrested the technologist’s sword from the hands of the handset OEMs’ and placed it firmly in the entrepreneurial grasp of the customer’s champion – the independent developer.

To wit: put simple, location-sensitive real-time price comparison in the hands of a housewife out for the morning and watch the dollars roll in (I fully expect that within 2 years this will be a widespread reality). The MNO’s and OEM’s, with all their billions in budgets, couldn’t even start the process, let alone get it right. The intelligence needed to be in the cloud, with several partners involved, and for a device + core network business like ours the cloud is a scary place where ownership and value is hard – if not impossible – to pin down. Fear of giving away the crown jewels meant MNO management preferred to sit on its hands. So nothing happened…..until one day they woke up and found themselves selling open, advanced devices on flat-rate plans. And their customers weren’t talking to them anymore, let alone looking to them for innovation. Cue mad scramble to get back in the value chain, but without having to recreate the walled-gardens of the past. Tricky. Watch this space…

So where’s the tie-in with the current financial gumbo? Like alcohol and tobacco, mobile is one of those things that will go last in the household budget cuts. Given telecommunications accounts for less than 5% of developed-world household spending, it’s a small amount that can generate major savings in the other areas such as fuel and food. As travel cost more, it’s more important to maximize its value. For example, mobile can save you money through services helping you to find better deals or leverage socially serendipitous coincidence (“I saw on mobile FaceBook you’re driving home this weekend? Can I bum a ride?” or “Fancy sharing a cab to the concert?”. You are much more likely to frequently check your friends and update your status on a well-executed mobile platform than on a PC. Mobile use fits in with the day’s downtime. PC activity detracts from other work to hand). The environment is there, the public eye is open to mobile innovation, the data plans are as flat as a wet Sunday in Tulsa and the devices are smarter than the Space Shuttle.

That silver lining is there for the industries’ taking.

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You can read more Mr Operator here. If you’d like to put a question to him, send it over and I’ll try and get it in front of him for next week.