Mark Newman identifies highlights from the Mobile World Congress.

Mobile broadband and internet were the two dominant themes for mobile operators at the Mobile World Congress in Barcelona this year. Operators were generally upbeat and their confidence that these two new lines of business can more than offset declining voice revenues is borne out in their most recent financial results.

Mobile internet

Mobile internet has now re-emerged as the 'umbrella' term for mobile operators' strategy towards delivering non-voice, non-messaging services to the consumer market. Almost without exception mobile operators are claiming to embrace the open internet but at the same time, they continue to strive to develop their own services in specific market segments.

The preferred model now appears to be a portal that allows customers to click straight into the open internet but one which also contains direct links to operators' own services. TeliaSonera, for example, demonstrated a toolbar on the top of its screen that guided people to its own preferred content (ie that content for which it derives revenues, be they paid-for services or ad-supported content). This approach becomes particularly complex when operators partner with other third party service/content aggregators.

Informa Telecoms & Media spoke to both Vodafone and Orange about their agreements with Nokia's Ovi internet services brand. Vodafone said that it was happy to promote similar types of service (eg music, navigation) from different providers (including Vodafone) and that it would leave the consumer to decide which one to choose. Orange said that a 'win-win' could be achieved with Ovi, even when they were promoting rival services, because under its deal advertising revenues from Ovi services would be shared by the two companies. Furthermore, Ovi operator partners have requested a direct click into their own services from the Ovi portal.

With regards the pricing for mobile internet services, there now appears to be a consensus that flat-rate pricing is the way forward. Many operators believe that this is one of the key factors behind the success of the iPhone measured in terms of data usage.

Mobile broadband

Moving onto mobile broadband, operators continue to report strong mobile broadband growth. Their concern now is upgrading and improving different parts of their network. Whether or not mobile operators will be able to withstand the onslaught from P2P traffic and video is becoming a major concern for them. The need to upgrade backhaul networks has moved from a medium to a short-term priority with several operators now looking to deploy fibre to move traffic in urban hotspots.

Regulation

The overall mood of the mobile operator community was positive in Barcelona. This follows a strong set of financial results for the fourth quarter of 2007 and encouraging growth in mobile broadband and mobile data generally. However, one group of operators that are clearly not so happy about the status quo staged a major press event at the Mobile World Congress to highlight their collective unhappiness with mobile regulation in Europe. The 'Mobile Challenger' group of operators comprises those operators which are not part of one of the major operator groups in Europe. It includes Bouygues Telecom, 3 and E-Plus. They are unhappy with the current state of regulation in areas including number portability and mobile termination where they believe incumbent operators hold an unfair advantage.

Roaming regulation was also a topic of discussion among the mobile operator community. EU commissioner and mobile-operator persona non-grata Viviane Reding held an impromptu press conference at the event and reiterated the Commission's determination for regulatory-led price cuts for SMS roaming at the end of this year if operators fail to act by then. Reding said that she was prepared to dictate the wholesale and retails prices operators charge for data roaming, as she did last year for voice roaming calls.

Operator groups have taken steps to reduce the price of data roaming - new initiatives were unveiled by the Challenger Group and T-Mobile to reduce wholesale and retail prices respectively, but there was no progress on SMS roaming. Clearly SMS roaming is such a lucrative business for mobile operators that it pains any of them to be the first to unilaterally reduce price levels when there is little evidence of price elasticity. Reding said that she will take stock of all data roaming prices July 1, a date she dramatically termed 'the moment of truth' for operators.

Mobile Networks

While much of the talk in the corridors and along the aisles in the exhibition halls was about the perilous state of the mobile network infrastructure sector, the focus of the vendors themselves was HSPA+ and 3G LTE.

Operators are intent on squeezing everything they can from HSPA and Australia's Telstra, a mobile broadband pioneer, said it would open a 21mbps HSPA+ service in the fourth quarter of 2008.

Migration from HSPA+ to LTE was a major issue for operators and infrastructure vendors played down any lingering expectations that LTE could have as big an impact on operator capex as, for example, WCDMA. Migration to LTE will be a slow evolution over the period 2010 to 2015 and beyond. Early pilots of LTE will be towards the end of 2010.

A number of operators lent their support to LTE in Barcelona including Vodafone, China Mobile and AT&T. There was a general feeling that with operators turning up the pressure to deliver LTE in 2010 or 2011, the window of opportunity for mobile WIMAX to steal a time-to-market advantage may be closing. Many CDMA2000 operators are also now turning their attention to LTE because of the demise of UMB as an alternative 3.9G technology. These operators are increasingly driving the timetable for LTE because, unlike WCDMA operators, they do not have an evolution path to HSPA+ which can provide significant enhancements before the new radio network technology is commercially available.

There was some uncertainty about the scale of investment and network upgrade that might be needed to upgrade to LTE. It is a completely new radio technology and interface but infrastructure vendors are tending to downplay the extent to which it requires the building of a totally new network. In a briefing with analysts France Telecom said it expected LTE to require little more than 'swapping out cards' from base stations rather than the rolling out of a new network.

Despite the vendor enthusiasm for next generation networks, there is an acceptance that operators will not roll out LTE nationwide. Ericsson, for example, promoted enhanced EDGE which will support speeds of up to 1mbps.

Backhaul and femtocells were the other key network topics in Barcelona. Many operators are already having to invest in backhaul because of the massive surge in traffic levels off the back of mobile broadband connections. Operators are looking for cost-effective backhaul solutions but some of the mobile broadband pioneers - including Singapore's M1 and Telstra - are starting to lay down fibre rather than investing in interim solutions. There is a general trend among operators to replace leased lines with DSL/Ethernet connections for mobile backhaul.

While 2007 was the year that the femtocell concept seeped into the consciousness of the mobile industry, 2008 will see the first operator trials. A number of operators have expressed interest in femtocells including Vodafone and Telefonica/O2 but there remains huge uncertainty about price and performance levels. France Telecom said retail prices would need to be below Euro100 for femtocells to be viable but some operators were being quoted wholesale prices of up to Euro300 in Barcelona. In terms of timing, operators expect that it could take 6-12 months to refine the software in femtocells and to address issues relating to interference.

A number of vendors lent their backing at the MWV to the concept of ubiquitous networks and multi-protocol, multi-band infrastructures. Infrastructure manufacturers including NSN, Huawei and Ericsson all expressed an interest in creating integrated mobile towers that will enable access to different cellular technologies. Chipset manufacturers such as TI, Qualcomm and NXP have also demonstrated multimode and multiprotocol chipsets using software-defined radio (SDR).

The overall health of the mobile infrastructure sector was a big talking point at the Mobile World Congress. Speculation about the potential merger of Motorola's and Nortel's infrastructure businesses coincided with the show while a JV between Alcatel Lucent and NEC in developing LTE solutions was announced in Barcelona.

Mobile Content & Applications

Mobile content generally took a backseat to mobile internet at this year's Mobile World Congress. The term mobile entertainment seems to have fallen out of fashion (even though operators continue to push these services under their mobile internet umbrella) while progress on mobile TV seems to have stalled as a result of uncertainty over technologies and business models.

Over the last 12 months mobile advertising has been touted as a universal panacea for the mobile value-added services sector. However, this was not in evidence in Barcelona and, if anything, the (short term) potential of mobile advertising was downplayed at the event. SMS/messaging-based advertising was identified as a sector with strong potential for mobile advertising but issues relating to the placement of adverts and underlying network infrastructures remain unresolved.

Location and navigation were strong themes again this year. Navigation capabilities were pushed on a number of devices but, in the longer term, greater potential is seen in overlaying subscriber data on top of location information. However, this potential can only be unlocked if operators work together to overcome interoperability issues.

Nokia and Microsoft had, arguably, the biggest presence of any mobile content and applications providers in Barcelona. There were less smaller/niche mobile entertainment providers than in recent years, reinforcing the view that the sector is in the process of becoming dominated by major internet, entertainment and handset brands.

Operators are caught in a quandary currently with no easy answers with regards to what they need to do to give their customers a mobile internet experience. On one hand they realize that the experience that they offer their customers has to be as streamlined and as close to what consumers expect from their online experience. But on the other hand, they realize that it is extremely difficult to monetize such an experience beyond selling basic access. It is likely that exclusive arrangements with "best of breed" sites will become the norm with operators charging (additional) monthly fees to access these services.

In the messaging space, 'sweating the assets' was a mantra for many operators as they seek to make the most of the investments they have already made. This means creative ways to reduce churn or increase traffic/minutes. Voice SMS, voice to text and utilizing MMS as a media channel rather than just plain picture messaging were all important themes in Barcelona. Mobile operators generally are now viewing messaging as a business in its own right, rather than an add on. Many messaging vendors reported that their meetings this year were with 'C' level executives at operators rather than in previous years when they tended to meet with engineers.

Mobile banking and payments have been generating considerable interest over the last year or so, partly as a result of the GSM Association's own initiatives in this space. The focus is very much on emerging markets and developed economies with large communities of migrant workers. Vodafone is one operator that is keen to learn from mobile banking deployments in parts of its footprint, such as Kenya and Afghanistan, and apply them group wide. France Telecom is involved in several projects in Africa, in partnership with different banks.

Mobile handsets & devices

Apple may not have had a physical presence at the Mobile World Congress but its influence was everywhere - in the touch screen displays of new mobile devices, in the widget strategies of operators and device manufacturers, the use of accelerometers and in a range of different mobile music offerings.

Sony Ericsson's Xperia X1 was the device of the show and the one which drew heavily from the iPhone for its proprietary touch screen user interface. Its main rival was the Nokia N96 - the successor to the N95 - which does not have a touch screen. LG and Samsung also unveiled new touch screen devices.

Nokia's aggressive push in mobile content services, and self-redefinition as a media/ company, as opposed to plain old handset maker, has not so far sparked similar copycat tactics from rival OEMs. We spoke to the likes of Samsung, Sony Ericsson and Motorola, all of whom were keen to stress their desire to work alongside operators on the mobile content front.

LG did unveil an 'unlimited music' phone in partnership with MusicStation vendor Omnifone but this is being pitched as an operator-friendly service given that music needs to be downloaded over the air. This is in contrast to Nokia's 'Comes with Music' device which also includes a year of music bundled into the price of the devices but which - along with most other devices - allows users to side load content from their PCs.

A number of devices showcased navigation capabilities but one interesting variation on this was the idea of 'geotagging' photos and adding metadata to them.

'Gesture' recognition and accelerometers were another theme in Barcelona, the industry drawing its inspiration from Wii games consoles and from the iPhone. Applications include games - as demonstrated by NTT DoCoMo - that allow the use of the mobile handset like a Wii console; the ability to 'throw' content from a phone to a TV screen (gesture recognition) and the ability to turn off a phone's alarm clock simply by turning it upside down.

Other device trends include: the trend towards multiple input methods - Qwerty keypads, optical mouse and touch screens; better audio quality, as evidenced by a tie-up between Samsung and Bang & Olufsen and Sony Ericsson's decision to embed FM transmitters in its W980 handset; and increased memory storage capability with Nokia's N96 offering 16 megabytes of embedded memory plus 8 megabytes of expandable memory.

Broadband devices

Building on the success of mobile broadband was a major theme at Barcelona this year. While most of this success has been built on the sale of USB modems there is now a strong push towards the embedding of HSPA modems in laptops.

Ericsson said that it expected 50% of all new laptops to have an embedded module by 2011 but that prices needed to fall to $30 to achieve this. There was considerable interest in Qualcomm's Gobi platform as a 'global' module that can work on 3.5G networks worldwide.

As far as form factors are concerned there were some new examples of devices that sit somewhere between a smartphone and a laptop on display in the exhibition.

Mobile handset software

Perhaps one of the least expected tie-ups in the mobile software space was between Sony Ericsson and Microsoft whose operating system will sit on the Xperia X1 smartphone.

There was also considerable interest in the continued emergence of mobile Linux as an operating system. The LiMo foundation announced a number of new members and unveiled 15 commercial handset models while a handful of chip makers demonstrated devices running Google's Linux-based Android platform.

Mobile no-shows

Sometimes you can glean more from the companies and themes that fail to make an appearance at the Mobile World Congress than those that do have a strong presence.

Notable absentees from the event this year were Apple - although this was not particularly surprising given Apple's track record of attendance at trade shows generally. More surprising perhaps was the limited presence from Google particularly given its involvement in Project Android and in the mobile sector generally.

On the vendor side very little mention was made of IMS although 'IP transformation' generally was a theme. UMB was totally absent from the show and the only issue here is whether Qualcomm officially abandons the next generation mobile network initiative or allows it to slowly wither. Mobile TV technologies - and in particular DVB-H - were conspicuous by their absence and the only mobile TV announcement of any note was of a joint MBMS initiative from Orange and T-Mobile.

WiMAX was by no means absent from the show but there was certainly less support from the major infrastructure vendors than in previous years. Most surprising was the absence of mobile WiMAX devices, especially from Motorola which has been such a keen backer. Given the aggressive timetable for LTE, mobile WiMAX really needed to have a greater visible presence at the show in order to demonstrate its time to market advantage.

Mark Newman is chief research officer at telecoms.com's parent, Informa Telecoms & Media

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