The Ovum View: Mobility - still reasons to be cheerful

Despite being in the doldrums, the mobile industry shouldn't despair. There are still victories to be won, says Ovum research director wireless, Jeremy Green...

It's not been the best of years for the mobile industry. Share prices have slumped throughout the sector and in many of the most developed markets growth in connections has slowed, while ARPU (average revenue per user) continued to decline. Vendors of both network equipment and handsets have seen sales slowing and - for the most part - losses rather than profits. Several commentators took the opportunity to conclude that this is what maturity looks like - the glory days are over and the mobile industry has nothing but middle age to look forward to. And several of the next big things just around the corner have had a distinctly under-whelming impact. It's already commonplace to write off WAP as at best a learning experience. GPRS has had a slower start than planned, with the now-traditional late arrival of handsets, but also a distinct absence of compelling applications - and some implementations that are not up to scratch. Meanwhile, the 'Bluetooth Xmas' that was supposed to happen at the end of 2000 didn't, and despite the release of some products this year shows no real sign of materialising at the end of 2001. Last year's mobile ASPs and would-be independent portals are running for cover as middleware or software system vendors - and finding that space is rapidly becoming as crowded and as uncomfortable as the one they have just left. The biggest thing of all - the transition to 3G - has thus far shown itself to be just the mother of all headaches. There is a growing realisation that the schedules for launch and rollout that appear on regulators' timescales, and in business plans, are to say the least somewhat optimistic. There have been flashes of candour from operators and vendors as to what the capabilities of 3G will be in the early years. And it's beginning to dawn that there aren't yet many really good application ideas - especially for those of us who don't like sport and can't see themselves paying much to get localised weather information. So why, then, is this column called 'reasons to be cheerful'? Because the fundamental value of mobility has not gone away and will continue to be something for which customers of all kinds are prepared to pay a premium. Post-11 September, many things have changed, and a minor one relevant here is that the value of basic connectivity and mobility management has gone up. What's more, many of the downsides of 'wireless-ness' can now be seen in a new perspective. There are fears about the health risks from phones and base stations - but in the context of a world which now seems less safe and secure, those risks must be balanced against the additional safety and security which can be derived from carrying a mobile. There are legitimate concerns about the privacy and security of location data which mobile networks can compile - but equally, the ability of the network to locate users accurately can now seem like a much bigger plus than it used to. Right now the future of tracking and location services based on E911 capability seems brighter than ever before. Nor is that all there is. There are plenty of patches of bright blue sky visible between the clouds, if only one is inclined to look. Value added data services may be getting off to a slower start than was hoped for, but there is plenty of evidence that customers are prepared to pay serious money for the right kinds of data applications. The i-mode experience shows that users are willing to pay for content and applications - if they can be made to work properly and packaged in a way that makes sense and is attractive against the available substitutes. If one is tempted to conclude that the Japanese context is so special that nothing can be generalised from it to other markets, then there is another example much closer to home. SMS now accounts for a considerable chunk of some operators' revenues and of some users' expenditure on mobile communications. And it's clear that users happily accept value-based pricing - they no more expect to pay for SMS on a per-bit basis than they expect to buy perfume by volume or books by weight. Perversely, the same users and commentators who are critical of all the data services rolled out by the industry and cynical about the all the future planned ones give the industry no credit for SMS. It's as if they think they invented it themselves, despite the industry rather than because of it. Moreover, as far as GPRS goes, things can only get better. Corporate users might be rational in their decision to stay away right now, because the quality of implementations does not match the description on the packet. But the industry has a good track record in fine tuning complex systems to optimise performance. Those with long memories might recall the horrid performance offered by the early GSM networks. SMS languished for years as a technical curiosity, buried within the feature set of the phone and the network. GPRS will undoubtedly experience a similar pick-up. There will be more and better phones, more closely tailored to the bearer characteristics and the applications - whatever they turn out to be. The industry may have stuffed up the initial launch somewhat, but they will have plenty of time to get it right. And there are plenty of surfaces that have only just been scratched. As yet the industry has done relatively little to deliver value to industrial users and applications - although Nextel's iDEN service and the GSM Workgroup services deserve an honourable mention here. Machine-to-machine services are very much in their infancy. Even boring old voice telephony is a long way short of achieving its full potential. Increases in the carrying capacity and efficiency of the network make new products and strategies possible even for telephony. And recent experiences with Voice XML, and with voice portals, suggest that the secular decline in voice ARPUs is not necessarily a permanent feature of the landscape. So it's too early for the wireless industry to be getting out the carpet slippers and the cardigan and settling down in front of the fire with a nice book. There are still places to be gone, races to be raced, and lots of reasons to be cheerful. For more information, see http://www.ovum.com