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Internet big boys muscle into mobile

An opportunity for Nokia, perhaps?

Top three mobile application threats

When looking at the rampage of the internet giants into the mobile world, there has been great focus on the threat to the carriers, especially as Google and possibly Microsoft seek to acquire networks and spectrum. More commonly, though, the internet players will partner with the established operators to pursue a common goal of convergence, one that will change the role of the handset and turn it into a communications and media platform with the same range of functionality as a PC.

Carriers will need to negotiate relationships carefully to avoid losing the bulk of the revenue to their new allies, but the real challenge is for the handset manufacturers, in particular Nokia, which have been trying to control the transformation of the handset into PC/set-top/organizer themselves. While the phonemakers can no longer hope, as they once did, to control the mobile internet environment entirely, working closely with the internet specialists will offer a chance to regain a measure of dominance over the cellcos.

Microsoft has not always executed its mobile convergence moves very slickly but it certainly grasped the idea early that users could access services, from phone books to music, seamlessly across various devices in the home and on the road, with common interfaces, passwords and databases, and using a variety of methods from email to instant messaging. Now its challengers, Yahoo and Google, are stepping up their moves in the same direction, all with a view to becoming the default environment in which users access their services, whether wirelessly or on the PC, and so driving advertising and other revenues.

Yahoo is to introduce a handset, in partnership initially with SBC and its mobile arm Cingular, that will link cellphone services such as music, photos and email with existing Yahoo address books and preferences. Like Microsoft MSN, Yahoo is working to integrate various communication methods, such as email and instant messaging, and in future push to talk, across different platforms in a uniform way.

The SBC-Yahoo phone, the latest in a series of collaborations with SBC, will be made by Nokia and cost up to $300. The partnership is part of SBC’s increasingly aggressive strategy for converging wired and wireless networks and offering the same services over both, in bundles that it believes will reduce churn and increase margins. Other internet players are expected to form similar alliance with telcos chasing the convergence dream.

Google-a-go-go

Google is majoring on location based services, also a priority for MSN. Both are collecting massive databases of satellite maps, and Google has just announced mobile access from certain cellphones to its Maps offering. Google Local, the company’s first downloadable cellphone application, will initially be available on about 100 Java enabled handsets – in the US from Sprint Nextel, T-Mobile and Cingular. Allowing people to access information relevant to their location is also a value add that many cellcos are chasing, but for Google it has the additional benefit of enabling locally-based advertising, for instance for restaurants in the user’s vicinity.

Such applications, which are free to download, are a double-edged sword for the cellcos. On the one hand they drive internet traffic and mobile phone usage, which when data is paid for by volume or time, and when the data optimized cellular networks remain underused, is a bonus. But well branded, free options like Google Local will prevent the cellcos themselves from charging fees for their own location based services, which are seen as a key revenue driver for mobile data.

They will have two main defenses. One is to create location based services that are so much easier to use than Google’s that users will pay for them – a realistic option in the short term, since Google Local is widely said to be cumbersome, making the Microsoft error of transferring PC interface norms to a device that usually lacks a keyboard. Cellcos and their partners are undoubtedly better, at this stage, at creating applications that take advantage of the handset’s form factor and interface, but this advantage it likely to be short lived. The other defense is to sign up attractive partnerships with providers of services that can be reached via the basic free location platform, so that usage of apps like Google Local encourages users to move back into the cellco’s semi-walled garden.

The dilemma is even greater for the handset makers, which in the early days of mobile data believed that they would control the market. Since they understood how to make attractive handsets and user interfaces, they argued, they would find the best ways to deliver data services and would sign up the internet partners. The operators hit back by creating their own content platforms, such as Vodafone Live! and by moving towards self-branded phones and interfaces. How the shifting balance of power between cellco and handset maker works out in the coming few years will partly depend on which side makes more creative alliances with internet companies.

Nokia’s Preminet applications platform and its increasing interest in open handset designs with full internet access over IP and Linux, show its determination to regain the momentum as the mobile world moves away from walled gardens and into the PC-style open internet era. The Nokia-Yahoo handset may be specifically for SBC/Cingular, but it will be the first of many collaborations between the Finnish giant and the internet world as the former seeks to push its smartphones into the roles currently occupied by IP-connected PCs.

The Microsoft response

Microsoft followed up its recent announcement of internet-based office software with one of chairman Bill Gates’ sporadic high level emails, which often signal a major strategy shift for the company. The email, accompanied by a memo from Ray Ozzie, the man tipped eventually to take over Gates’ helm as chief software architecture, focused on Microsoft’s response to the challenge from internet companies like Google, and the need to deliver services over multiple platforms seamlessly, including mobile handsets and televisions.

Ozzie called on the operating system and MSN units within Microsoft to join forces to define "next generation internet services platform” for creating new services and products internally and with partners.

Ozzie believes Microsoft’s progress in the internet world has been shackled by tensions between different teams, while "a set of very strong and determined competitors is laser-focused on internet services and service-enabled software”.

He calls for Microsoft to become an innovator not a follower, pointing out that Skype popularized consumer VoIP and BlackBerry mobile email, even though both were well researched at an early stage within Microsoft.

The former Lotus executive did not define specific services and software that Microsoft should create, but stressed they must be seamless and designed for users who move between PCs, cellphones, TVs and game consoles. Such a system would "deploy software automatically and as appropriate to all of your devices”, he wrote.

Copyright © 2005, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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