INTERVIEW: Mark Newman, Chief Research Officer at analyst house Informa, talks about some of the latest trends affecting the mobile voice and data markets.
Speaking in advance of his address to the Insights’09 conference next month in Lisbon, he discusses the impact of the iPhone, the rush to open app stores and carriers’ attitude to mobile VoIP.
There is no doubt the phenomenal success of Apple’s App Store has been the spur for other handset makers and carriers to open similar ventures.
The rush to download software to the iPhone has led to Nokia, Google, Microsoft, Palm and RIM, and operators like Vodafone, announcing their own versions of online mobile application stores.
But while these will give consumers incredible choice Mark Newman, Chief Research Officer at analyst house Informa, said the proliferation of app stores might also lead to confusion.
"It’s going to become a complete nightmare for the consumer," he said. "Already they have to make a decison about which device and which operating system, now they also have to decide which app store.
"It’s unclear today if you buy a high-end Nokia device, with Vodafone as the operator and running the Symbian operating system, which app store you will first get access to."
Newman said he believed there would be "massive fragmentation" since operators supporting hundreds of different handsets were not going to make all applications available on every handset.
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| Mark Newman, Informa |
But he said mobile operators were keen to tap the lucrative app market because they realised that in the long-term new revenue-earning services are needed if they weren’t to become simply "dumb pipes".
"Here we have a brand new market created by Apple. The operators are not going to allow Apple to secure that for themselves," he said.
Newman is speaking at the Insights’09 conference next month in Lisbon, Portugal, an event covering a range of themes related to the global mobile market.
He will be talking about the latest voice and data mobile trends on a global and regional scale.
Mobile Has Become Indispensible
In an interview with smartphone.biz-news, the analyst said there is no doubt that the mobile industry is being affected by the global recession.
But he said that the financial results seen so far from the operators suggest that it is more robust than many other sectors.
"The mobile phone is no longer a discretionary spend," he said. "It’s something we need for our everyday lives.
"There are examples of people economising in their bills – but not as much as thought."
Newman said a glance at any "high street" in any country around the world would reveal the dynamic and fast-changing nature of the mobile phone.
He said this applied as much to the hardware – the handsets – as to the software and mobile applications.
"In any country we will have 3-10 mobile operators, often fighting very aggressively to win market share," he said. "The winner tends to be the consumer."
Newman said there had been two big new trends in mobile industry in the last couple of years.
Mobile Broadband: Success and Challenge
The first was mobile broadband, which allows laptops to be connected through the mobile network.
He said that while the industry had been reasonably optimistic about the success of this service, operators have been surprised at how quickly it has grown.
"Now it is a very big market and in many places is outselling fixed broadband," he said. "This brings new revenues for the operators but it also brings about major challenges for them as well.
"Data services use up a lot more bandwidth than mobile voice services, so the operators are having to invest heavily to ensure support for data requirements."
Newman said the evidence so far was that mobile broadband use was not dissimilar to that for fixed – with a lot of P2P traffic, which sucked up bandwidth.
"What the mobile operators do not like is consumers paying a flat rate for services," he said. "They will think of ways around this."
iPhone Sets the Pace
Newman said the second big change to impact heavily on the mobile industry in the last couple of years has been the iPhone.
He said the Apple handset’s success has had a profound effect – both on mobile operators and handset manufacturers.
"If you look at its recent history – the last six months – it has moved from being an iconic handset in terms of its design, but it is the first example of a handheld device that people can use for basic internet connectivity," he said.
"It is very exciting for a huge number of people and has opened up new services and possibilities."
Newman said making internet connectivity mobile – and not just something you did from home – created the potential for a raft of features, not least the ability to use smartphones’ location capabilities to design new applications.
While the iPhone is oriented towards the top end of the market, Newman said the fact it had been so succesful meant it was now being marketed to the broader consumer market.
"It’s quite likely that Apple will introduce some low-priced offering," he said. "Which will be a threat to the likes of Nokia, Sony Ericsson, Motorola and Samsung."
Posturing For Position
Apple has also shown its ability to generate revenue through its app store and when it came to consumers paying for mobile applications, Newman said this has been well managed through the iTunes Store.
He said having billing capacity was one factor that operators have in their favour, but it was unclear what payment mechanism Nokia, for example, was intending to use.
"Nokia would like people to buy a Nokia device and be billed by Nokia," he said. "But the operators want revenue share from Nokia."
Newman said that as a result, the industry is currently experiencing the early stages of posturing between players to determine how this very lucrative new market is going to be handled and divided up.
He didn’t expect the outcome of this to be known for two to three years.
"It’s not clear who will win," he said. "In the short-term it will be confined to high-end devices.
"But that’s going to start to change as handset makers bring down the price of phones with internet capability."
Newman said the issue was much simpler with Apple, since it had one device and a strong brand in the market.
He said this meant Apple was in the "enviable position" of having the leverage to more easily dictate the terms of deals with operators.
"Apple will keep that advantage," he added.
As for Apple’s competitors, Newman believes Android will be a force to be reckoned with even if the early devices supporting its OS have not been as attractive as hoped.
He said RIM’s Blackberrys and Palm’s soon-to-be launched Pre will both see demand for applications but not on anything like the scale of the iPhone.
Mobile VoIP Not in Carriers’ Interests
One area where Newman doesn’t see operators backing down is on the issue of Voice-over-IP (VoIP).
While carrier 3UK recently launched a SIM card that allows users to make Skype calls for free, it stands out among mobile operators who have largely sought to block VoIP use over their networks.
He describes 3UK’s position as unique and doubts if any other operators will follow its lead.
"3UK is a group that entered the European market quite recently," he said. "They have come into a crowded market as the fourth or fifth operator and have the disadvantage of adding spectrum at high frequencies.
"It’s not desperation – that’s harsh. But 3 has to offer something that’s different. They are using Skype largely as a marketing strategy in order to win customers from their competitors."
Newman said that if any other operator took this approach it would simply be to stand out in a crowded market.
"I can not see why it would be in an operator’s interests to allow VoIP," he said. "Eighty per cent of their revenues are voice, so there is really little or no motivation to allow VoIP."
In the future, however, Newman said the roll out of next-generation LTE and the fact they were going to be All IP Networks meant it would be more difficult for operators to stop subscribers using VoIP.
"Because of that we are seeing a lot of operators investing in technology that allows them to see different types of VoIP applications," he said.
Newman said this raises the possibility of operators charging by VoIP type, with users being able to pay for the "privilege" of using VoIP.
New Entrants
If the dynamic nature of the mobile industry is causing carriers to feel the heat, consider also the situation with handset manufacturers.
Recently, a number of companies whose heritage is in the PC space have either entered, or shown a desire to enter, the smartphone market – most notably Acer, HP and Dell.
Newman said this was significant because of their access to low-cost manufacturing bases in the Asia Pacific region and their ability to share components, such as screens, across devices and industries.
Consequently some of the traditional handset makers will be put under pressure over the next three to five years.
He said this would result in some leading brand names’ market position being seriously transformed in much the same way that Sony Ericsson has moved from a position of great strength to one of weakness.
Mark Newman will be speaking at the Insights’09 conference being held on 8-10 June in Lisbon, Portugal
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