Should operators be involved in the devices business?

31 AUG 2010

Should mobile operators be putting time and resources into the development of devices? Following Vodafone’s recent decision to abandon the development of dedicated phones for its 360 suite of mobile Internet services, surely the answer must be ‘no’. Shall we move on?

Not so fast. Japanese mobile operators NTT Docomo and KDDI’s deep role in the development of handsets has been a key factor in Japan’s global leadership in the adoption of mobile data services and these operators’ ability to generate some of the highest ARPUs in the world. Docomo and KDDI have been able to ensure that the devices and services they sell work really well together, creating a good experience for their customers.

Moreover, the success of both the iPod and the iPhone is partly due to Apple’s success in creating an intuitive and complete package through its control of both the handset and related services via iTunes and the App Store. RIM’s initial success was also due to its tight integration of its devices and push email services.

These were probably the very valid arguments made within Vodafone when it conceived the idea of handsets optimised for its 360 suite, which includes contacts aggregation and back-up services, plus an app store. But Vodafone’s announcement earlier this week, in which it said there will be no further development of bespoke Vodafone 360 handsets, appears to have been driven by a more realistic assessment of mobile operators’ role in the mobile Internet value chain.

“From now on we will be focusing all efforts on expanding the range of handsets and platforms that support Vodafone 360 and in developing and enhancing the suite of Vodafone 360 services,” said Vodafone in a statement Monday.

That is surely the right decision – in the mid-to-high-end of the handset market, in which Vodafone’s initial 360 devices were positioned, there is just too much competition and brands such as Apple, Android, BlackBerry and Nokia carry much more weight than Vodafone and the operating system it favoured, LiMo. Better to focus on making 360 services work well with the various versions of Android and Symbian, than to try and shoehorn another platform into a crowded and competitive market.

Indeed, Vodafone’s decision to stop making bespoke 360 phones is a major blow to LiMo, the Linux-based handset operating system, which was already struggling for traction, while two other mostly-open operating systems – Android and Symbian – have become much, much better established in the marketplace. LiMo’s biggest advantage is the backing of many of the world’s leading mobile operators, but that alone clearly isn’t sufficient to ensure its success.

Where mobile operators can play

Still, mobile operators clearly do need to take an active role in ensuring that devices work well with their networks and their services. Apple and RIM have demonstrated the importance of end-to-end thinking. But there is no need for each and every mobile operator to be dabbling in handset software, so the establishment of the Wholesale Applications Community and its merger with the Vodafone-backed Joint Innovation Lab makes sense.

Seeking to create a one-stop commercial and technical shop for apps developers, WAC could ensure that a wide range of devices take full advantage of mobile operators’ services, billing and network capabilities, creating a better experience for users and a more central role for telecoms companies in the mobile Internet value chain. But WAC needs to be very well-resourced, and move very fast, if it is going to keep pace with the ecosystems working their way round the operators.

There is also a case for mobile operators to get involved at the very low end of the handset market, where competition is less intense and the device brand isn’t as important as the price. Vodafone has a range of entry-level phones which are obviously designed to push down the cost of a basic handset and enable more poor people to use Vodafone’s telephony services. In this market, the Vodafone brand will surely be stronger than that of the Chinese or Taiwanese manufacturer, so it makes sense to slap it on the phone.

In other words, mobile operators do have a role to play in the devices business, but they should pick their battles very carefully.

 

David Pringle

 

This article was first published on the GSMA’s Mobile World Live portal. David moderates discussion forums on the site and is a freelance media and investor relations consultant.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members

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