June has been a very exciting month for us at Chetan Sharma Consulting. We took our Mobile Breakfast Series first outside Seattle to Atlanta and then, last week, outside US to London. Both places, it was very well received and we thank all the partners, speakers, and attendees who helped us out. On Jun 29th, we hosted our first European Mobile Breakfast Series at Wayra, Telefonica in London. My thanks to the Telefonica team for hosting us and making the whole experience worry-free. The topic of the discussion was Operator/OTT – The Way Forward. Regular readers would remember, we did a Seattle Breakfast Event on the same topic earlier in June. Wanted to get the European flavor of the same hot topic.
Operator traditional revenue streams are under threat esp. voice and messaging. Access margins will continue to stay under pressure. OTT players are coming in fast and furious and it is not just the big ones like Google but also players like Whatsapp, Voxer, Viber and others. How do operators play in the new landscape – lessen the decline of their traditional revenues while investing in new areas that improve their overall margins and revenues. Do they play the role of an enabler, a utility player, or become the OTT player themselves? In a software-driven world, how do they stay nimble? On the flip side, what are some things that operators can provide to the OTT players that make them successful, take them to the market quickly and maintain a long-term healthy and mutually-beneficial partnership? Operators still generate 70% of the global mobile industry revenues, so they are an important part of the chain but how do they ensure they have an equally relevant share in the profits. The panel will discuss how operators and OTT players think about the challenges and the opportunities, the competition and the coopetition.
To discuss the topic we had excellent panel with Jamie Finn, Director of Product Design at Telefonica Digital. This is a new unit within Telefonica that is doing some great work (recently released TU Me – a messaging application to compete with other VoIP/IP messaging apps) and Jamie is an integral part of the team.
Jamie was joined by Dominique Rougié, Director, TV Interactive Services & Media, Digital Innovation, Orange Group. Dominique has an interesting perspective since he is responsible for services across the three channels – online, cable, and mobile. From the OTT side, we had Andreas Bernström Chief Executive Officer, Rebtel. Rebtel is the second largest VoIP player after Skype with over $80M in revenue slated for 2012. Finally, we had Frank Meehan who has been doing OTT for a long time first at 3Uk and then at INQMobile. Some of the earliest OTT integrations of Skype, Facebook, and Twitter came from his team.
Some highlights from the discussion -
- There is this myth perpetuating that operators are just going to fall over and die. AT&T has been around for 100 years and it is likely that they will be around for another 100. These companies will obviously morph and find their relevant role in the ecosystem.
- It is likely that the operator business will segment into commodity access business and VAS business that generates more revenue.
- OTT players need operators more than operators need OTT players.
- The biggest challenge for the operators is internal – getting organized, giving the new group autonomy to operate and innovate independent of the parent organization.
- Operators still have a lot of fat. Need to streamline.
- It does require a different mindset from the operators to operate in the OTT world – embrace beta launches.
- There are great opportunities for the operators in billing, payments, and commerce. Right now the process is cumbersome, can be made much simpler. It will help the OTT players as well.
- Right now NFC traction is low, maybe Apple’s inclusion of NFC in the next rev will spur things up?
- Rebtel is exploring transfer of credit and money between accounts as some of the new features for their service.
- It less about technology and more about talent. How do you get the brightest people to work for your organization. 17 year olds can bring in lot of energy and drive to make something big.
- Telefonica Digital launched TU Me – a messaging app in 100 days from concept to app store availability. Lot of learning right away – users cared and demanded a Spanish version which was duly built (The company released some figures yesterday – 250K active users in the first few weeks). The lesson is that you got to launch things quickly and iterate based on feedback.
- Telefonica betting big on open mobile devices, essentially a new HTML5 based OS from Mozilla.
- For Orange, in working with the OTT players – rev share is the primary business model. Additionally, for some companies, they will also take a financial stake. There is lot of value in operator becoming an aggregator of apps and content.
- There are lot of opportunities for operators in identity, security, and privacy.
- The best way to look at multiple opportunities is take portfolio-based approach. Invest in the best ideas and compete to win.
- Mobile advertising is another big opportunity for the operator though they have been a bit behind the curve in leveraging their assets.
- Operators bring the distribution power to the ecosystem. Have the relationship with the customers and for the right startup/app, they can help tremendously.
- It is clear that a more clear regulatory regime is necessary but relying on regulators to fix some of the problems might be foolish as you will have to wait too long. Regulators on their part need to create an equitable playing field.
- There is lack of consistency in regulations in Europe. For e.g. VoIP regulations vary from UK to France depending on who is launching the service and the competitive dynamics of the market.
- For any new service, you have to first build engagement and get scale, only then can you think about monetization.
I really enjoyed the discussion and audience participation. We now take a break from our Mobile Breakfast Series and focus our attention to our annual mobile executive summit – Mobile Future Forward which is going to be held on Sept 10th in Seattle. We have an extraordinary group of executives who are joining us and I hope you can too.
Until then, have a great summer and see you soon.
MBS London – Frank Meehan Interview June 9, 2012Posted by chetan in : Mobile Breakfast Series, OTT, Wireless Value Chain, Worldwide Wireless Market , 1 comment so far
With MBS Seattle behind us, we are gearing up for Atlanta and London. Our good partner Mobile Groove did a nice interview with one of our speakers and my good friend – Frank Meehan who will be with us in London on the Operators/OTT panel. Frank has done terrific stints at Ericsson, 3 UK, INQMobile and now is with Horizons Venture -
What must mobile operators do?
Yes, OTT players have had a hearty meal at the expense of the mobile operator, but there is still money to be made if mobile operators concentrate on what they do best.
As Frank puts it: “Going out and trying to build a social network is probably not the right thing to do, but there are some great things that operators are doing. I particularly like the way Telefónica Digital has set up really a separate company which is designed to go after digital opportunities. That’s the right way to do it.”
Facing the talent crisis
Operators should stake their turf (connected home, security, the Cloud, etc) and build their business. But, Frank warns, the biggest challenge for operators is talent. “A lot of the young and upcoming talent is going off to work for startups.”
What can operators do to stem the flow of talent to startups (that may one day be their rivals)? A lot! Follow the Telefónica Digital blueprint and give your talent freedom to innovate. “You’ve got to have incentives that compete with startups, or with the Facebooks and Googles otherwise it will become very difficult.”
When it comes to software solutions or the way they are developed, mobile operators should see these are the work of a “separate team outside of the operator standard operations.”
AORTA, Applications, Carnival of Mobilists, Connected Devices, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Ecosystem, Mobile Future Forward, OTT, US Wireless Market, Unified Messaging, VoIP, Worldwide Wireless Market , 4 comments
What awaits operators?
As a VC, Frank is convinced there is money to be made. “Operators are cash rich and it’s still a good business and they will snap up things, so certainly there’s an opportunity for investments to crystallize, particularly from a sale — then operators are very interesting.”
Overall, Frank says 2012 has been a great year from “an investment and a start-up perspective.” In his view, it’s “booming” — in part thanks to the Facebook IPO and the excitement it has generated around other companies that tap into our mobile Zeitgeist and requirement for social, sharing and connectedness. “Facebook is literally now the electricity of the Internet … and it’s a huge shift — you’re seeing the big companies like Spotify and others — and it’s just really dragging a huge start-up industry along with it, and it’s accelerating.”
June is the Mobile Breakfast Series Month with 3 programs planned in 3 cities across 2 continents. We kicked things off with the first one earlier today in Seattle. The topic of discussion was Operators and OTT – The Way Forward.
We also announced our fall program of Mobile Future Forward. More about that later.
There is an old Chinese saying, “When the wind of change blows, some build walls others build windmills” Our industry is going through tremendous change; it won’t be an exaggeration if I say that the tectonic plates are moving, in some places quite violently. The motion is being forced both by the economic conditions but also by the technology and business progress. I have been around the industry long enough but it still amazes me – the stuff that’s in the pipeline and how quickly consumers absorb it.
The topic of our discussion was Operators and OTT or Over the Top. These are services like Skype, Youtube, Amazon video, HBO, etc. things that go over the network. I wanted to broaden the discussion to another acronym – VAS or value added services – both for the consumer segment and the enterprise segment. These will be simple things like address backup or CRM applications to more sophisticated supply chain management, in-store location targeting, advertising etc. To discuss this we have an absolutely brilliant panel representing various parts of the value chain.
RealNetworks has been the Kevin Bacon of startups in Seattle. Thanks to the people Rob Glaser hired, RN has done a better job at spawning up new ideas that your bigger cousins in town. Rob is well known for his pioneering work in giving Internet its voice (in the words of Kara Swisher in the 1998 article for WSJ). But lately, Rob has been busy with Sidecar – a next generation communication app that does more things than messaging and voice. If you haven’t tried, please do so.
Mary Jesse is one of the most distinguished engineers in WA State going back from the McCaw days, VP of Eng at AT&T, CTO of RadioFrame and now CoFounder and CEO of an enterprise communications company called Ivytalk. Again, if you haven’t tried it out, please do so.
Michael Shim was with Yahoo before Groupon and Yahoo was one of the true pioneers in the mobile space and now at Groupon he is seeing the new opportunities on the VAS, payments, and commerce. It will be great to get his view of how Groupon thinks about the space.
Have you tried T-Mobile’s Bobsled? Well, Alex Samano is the man and energy behind this service and T-Mobile is one of the few operators globally who are taking this OTT opportunity head-on. At TMO, he has been involved some really interesting initiatives like @home and wifi calling.
Last but not the least, Abhi Ingle from AT&T who heads up the mobile enterprise business. The industry has been talking about enterprise mobility for ages but his team generates more revenue than majority of the industry players combined. Did you know that AT&T is one of the biggest app developer on the planet? I bet you didn’t know that.
Operator traditional revenue streams are under threat esp. voice and messaging. Access margins will continue to stay under pressure. OTT players are coming in fast and furious and it is not just the big ones like Google but also players like Whatsapp, Voxer, Viber and others. How do operators play in the new landscape – lessen the decline of their traditional revenues while investing in new areas that improve their overall margins and revenues. Do they play the role of an enabler, a utility player, or become the OTT player themselves? In a software-driven world, how do they stay nimble? On the flip side, what are some things that operators can provide to the OTT players that make them successful, take them to the market quickly and maintain a long-term healthy and mutually-beneficial partnership? Operators still generate 70% of the global mobile industry revenues, so they are an important part of the chain but how do they ensure they have an equally relevant share in the profits. The panel discussed how operators and OTT players think about the challenges and the opportunities, the competition and the coopetition.
Some highlights from the discussion:
- You have heard it before, but Apple really changed the game. It allowed for the OTT players to be born and thrive. iPhone drove the networks to adopt faster and better technologies over a span of 4-5 years and the world changed as a result.
- The capabilities that are available in an robust IP environment are leading to tremendous opportunities around the ecosystem.
- Groupon drives 30% of its business from mobile. If the payments/commerce piece was more seamless, this could be much higher.
- Groupon thinks that if the consumer data is productized by the operators, there are some big opportunities that players like Groupon can take advantage of.
- There is significantly more cooperation with the operators in the developing world as the Groupon brand is not well known and the operator channel is great for distribution.
- For AT&T, 65% of the postpaid base is using smartphones, 80% of the new devices sold to this group is now smartphones. Changing the landscape pretty dramatically.
- Web 3.0 is Mobile Internet.
- App providers and Operators have natural tension because they want to compete for the same set of communication features/functionality. However, for some apps like Sidecar cooperation is must because of the QoS issues. While it is hard to do things simultaneously with all the operators, things can be achieved working 1-2 carriers at a time.
- To some extent the story is repeating itself, operators used to be in the hardware business but Apple and Samsung rule segment now. Things always change, who knows what the next cycle will bring.
- We are just at the start of a phenomenal run that will dwarf the achievements of the past. Like I say, more changes in the next 10 years than in the last 100 years.
- Collectively, operators need a better strategy for opening APIs to startups. Currently, they find it tedious and time consuming.
- Bobsled user base is growing fast but the contrast to other OTT players is stark. The scale is different because they are driven by different performance metrics. At the end of the day, Operators have to show revenues while OTT players are going after the audience and then worry about revenues later. It is obvious, many of the communication OTT providers won’t succeed, a few will reach the next level but this forces the marketplace to shrink and more players to go after that pie.
- RCS has been talked about since 2007 but it has taken 5 years for the functionality to come to market from limited number of operators on limited number of handsets. That’s the dilemma for the operators. While interoperability is important and desired, the rate of time-to-market is more important.
- Operators have started to offer cross carrier services for messaging, location APIs and others which will help the ecosystem.
- Operators and OTT players will have to settle into a more collaborative approach to reach new heights of service and application deployment.
- There was an agreement that too much is made out of the Operators vs. OTT trash talk and there are more synergies than there are differences in overall objectives to make the consumer experience better.
Our next breakfast event is in Atlanta on Connected Devices on June 22nd. Then we revisit the Operator/OTT discussion again from the European point of view in London on June 29th. Tell your colleagues and friends about it. They will thank you for that.