It’s about the Service
On occasion I have written about the failure of the wireless Internet to achieve its potential, and the need to develop appropriate open platforms and ecosystems to support an even more profitable wireless industry. Today, Third Screen of CNNMoney wrote on the need for the service providers to focus on simplifying their offer rather than race after the latest feature and further confuse their customers. Simplifying wireless services represents significant low hanging fruit in a provider’s bid to improve the wireless experience and help drive revenue. As Third Screen put it:
“There are so many different features, technologies and phones being pushed to market this year that it’s nearly impossible for the everyday user to choose. So they might not. “
The article pointed to relative newcomer Helio and their service oriented offer that is driving double the ARPU of many of its competitors. The article also raised the crucial point that today mobile stores essentially sell devices to customers, and not the services that drive revenue. Granted, fashion and device ergonomics are important elements of the appeal when hooking customers, but ultimately it is the service proposition that is more important to revenue and long term customer retention. And;
“when it comes to complex technologies, competing standards and operating systems, most consumers would rather be spared.”
Service Providers need to first focus on positioning the Service (package), and ensure that the device and everything else supports that, rather than selling the device, and then worrying about how to market the service.
Nortel’s Vaunted 4G Strategy in Trouble?
In an earlier post I wrote of the decision by Eriksson to drop their investments in WiMax, and the fact that this should be considered carefully by those in the wireless industry. I have also expressed concern over Nortel’s ability to execute successfully on their stated 4G strategy, given their exit from UMTS (for a song) and the likely competitive nature of the WiMax business, as well as their failure to capture part of the all important Sprint deal. Well, it appears that others in the investment community share these concerns, and there is a good summary of these views here.
It will be interesting to see if, and how Nortel reacts to, what will likely be growing pressure for some decisive action.
Eriksson Drops WiMax
Last week prior to the CTIA show, Eriksson - the world’s leading wireless infrastructure vendor - confirmed that it will be closing down its WiMax development efforts, and will instead focus all its energies on UMTS LTE. Given Eriksson’s role in the the wireless industry, as well as all the buzz around WiMax, its decision deserves a little closer scrutiny from all those invested in the wireless business. What does it say about the prospects for WiMax, the future of the Wireless industry, and the position taken by some of the other vendors?
There is definitely a good deal of uncertainty hanging over WiMax and the impact it will have on the industry, and this announcement only contributes to that. WiMax has long been touted as providing a cost effective alternative network architecture. It was originally sponsored by Intel as a technology to open up the wireless access network, simplify network architectures, and commoditize the Core Network. It was planned to be introduced in phases, starting with a fixed wireless (backhaul) facility, and culminating in a fully mobile version that could potentially supplant most elements of existing cellular networks. It is based on OFDM technology which is seen as providing the basis for so-called 4G networks. To date however, there are very few tier 1 networks that have been committed to WiMax, and it’s impact has been limited.
Eriksson has obviously decided that the market is going to be too small and / or competitive to bother with, and have decided to save their ‘powder’ for what they believe will be a higher stakes battle - the fight for LTE market share. This despite the fact that LTE as a technology is still very much ‘on the drawing board’ and at least 2 years behind WiMax in terms of real deployments. Some have argued that this could be a big strategic mistake for Eriksson, claiming that experience in OFDM capabilities from WiMax deployments will be an important asset when fighting the LTE (also an OFDM technology) market share battles in the future. I doubt this very much. These were the same arguments used by Nortel with UMTS. Nortel, was the only competitive UMTS vendor with real CDMA experience (the basis of UMTS as well), and they made a big deal of this. Yet despite this experience, and an early lead in network deployment, their market share position worsened from what they had enjoyed with the previous ‘world’ (European) standard - GSM!
So what impact will a commodity business like WiMax, have on those Telecom vendors that continue to chase this market? Have these companies adapted sufficiently over the past few years to enable them to capitalize on such an opportunity, or will the technology prove to be disruptive? And what will this mean to Nortel in particular. The struggling company recently surrendered their UMTS business and customer base (future customers of LTE) claiming that they wanted to instead focus on the bigger prize of 4G networks - what ever the heck that is. Most consider 4G to be either an evolution of the WiMax or UMTS LTE. If it is WiMax; then is Nortel in a good position to lead in this market, ignoring the fact that they have failed to capture any part of the early Sprint deal? And if it is LTE; how are they going to overcome the incumbency challenges, given they have recently exited the UMTS business?
Eriksson’s previous gamble not to commit to CDMA technology in the 90’s proved to be costly for the company. They are not, however, stupid businessmen and so with that experience in mind, their decision to abandon WiMax is all the more foreboding.
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Welcome to TelecomVistas
This site captures some of my thoughts on the changes happening in Communications Technology and Business today.
While most of the traditional Telecom players find themselves mired in continuing consolidation and restructuring efforts, that has dragged on for too many years, the industry around them is rapidly changing. Increasingly these changes are being driven by companies with a computing industry heritage, and the resulting clash of cultures is yielding some interesting results.
