WAC and JIL went up the hill…

By The Informer

Popular nursery rhymes often have quite gruesome origins and typically tell the tale of some unfortunate character or event from history. Not that there’s anything gruesome about the origin of the Wholesale Applications Community, otherwise known as the WAC, of course. But the Informer fears the initiative might come to an unfortunate end after this week’s developments.

Born in February at MWC (perhaps that does count as a gruesome origin then?) the alliance is designed to build an open platform for delivering applications to all mobile phone users and this week announced plans to subsume the Joint Innovation Lab (JIL) – an older but similar initiative.

The leadership will also merge, with Peter Suh, formerly CEO of the JIL, taking up the same position at the WAC, supported by Michel Combes, Vodafone chief executive Europe as chairman, and Jean-Philippe Vanot, deputy CEO of France Telecom as vice chairman. The initial WAC specification and components of its SDK will be available in November and will provide backwards compatibility for devices based upon the current JIL and BONDI specifications. The SDK is set to launch commercially by February 2011, allowing developers to create widgets that will run on a wide range of devices and be sold on the application stores of a wide range of operators.

Initially, the WAC platform will allow operators to distribute applications through their respective application storefronts and charge users through their existing phone bill. Under this model, developers will set the application price and will receive a revenue share for the transaction, defined on an operator-by-operator basis. WAC is a not-for-profit organisation and will receive a small transaction fee for each application to cover its operating costs.

Only in the future will WAC offer business models that enable additional purchases from within an application; leverage network capabilities, such as location, to enhance an application; and facilitate the serving of ads.

It all sounds so impressive. Or it would if this exact ecosystem hadn’t already been created on the Apple, Android and Symbian platforms with varying degrees of success, putting WAC’s efforts months if not years behind the market leaders.

Perhaps the Informer is being too harsh. The genuinely impressive element of this proposal is that it focuses on the lowest common denominator. Because it’s widget-based it’s not targeted at smartphone users, but instead is meant for the mass market. And here’s the problem. JIL was launched more than two years ago and has attracted 9,000 developers with 8,000 widgets published to the platform. No figures are available for downloads of those widgets. But Apple’s App Store on the other hand has attracted 43,000 developers, with 236,000 active applications and more than five billion downloads since its launch in July 2008.

To date, the only avenue available to JIL app developers has been Vodafone’s V360 Shop, which is only available on a limited number of devices through eight of Vodafone’s subsidiaries in Europe. Vodafone 360 has troubles of its own having only attracted 500,000 users and it was also recently revealed that the company has stopped selling the Samsung H1 and M1 devices, which are the only handsets to natively integrate V360. Instead, Vodafone will focus on pushing 360 as a suite of services and applications, which looks like a mammoth task and smacks of the bad old days of operator portals that no doubt leaves a bitter taste in the mouth of many developers.

The other thing, as pointed out by Guillermo Escofet, principal analyst at Informa Telecoms & Media, is that most of the developers in question don’t even have the operators on their radar. They belong to the online and computer worlds in which the likes of Google and Apple are iconic brands for whom they feel inspired to create stuff. Telcos are an alien species as far as they are concerned. And while these guys can do cool stuff with native applications that run on sophisticated smartphones, they may well feel constrained by the limits of the widget environment, which, let’s face it, is little more than a website in a custom browser, and doesn’t give much scope for premium charging.

Still, the app store market opportunity is seriously overhyped, according to Forrester Research, which carried out a survey that revealed that 21 per cent of all European mobile users consider apps to be an important feature when choosing a new mobile handset, yet only 4 per cent of all mobile users and 15 per cent of smartphone users download apps at least once per month.

This limited usage is primarily due to the combination of two factors: identified as the small number of exhaustive offerings available, and the fact that only recently shipped smartphones come with native application stores embedded. The exception to this rule, unsurprisingly, is Apple (yawn), with 64 per cent of European iPhone users downloading apps on a monthly basis. So the Informer doesn’t hold out much hope for the WAC and JIL partnership despite its noble intentions.

There was marriage of a happier kind on the cards for Spanish incumbent Telefónica, which finally charmed the prospective Portuguese in-laws and looks to have won the hand of its Brazilian bride. On Wednesday, Telefónica said that it has finally reached an agreement with Portugal Telecom over the acquisition of Brazilian operator Vivo (by buying up Portugal Telecom’s stake in Brasilcel, which in turn controls Vivo). Official figures haven’t been disclosed but the deal is expected to total around €7.5bn, yet another increase on the original offer of €5.7bn, underscoring the importance of the stake to Telefónica.

It’s doing well though, Telefónica turned in net income of €2.12bn during the second quarter of 2010, up from €1.83bn in 2009, while revenues jumped to €15.12bn compared to €13.8bn last year. The Spanish firm’s acquisition of Vivo will have a significant impact on the Brazilian market, most notably giving the company the platform it needs to launch convergent services. According to Julio Puschel, head of mobile operator strategy at Informa: “I believe that the acquisition will accelerate Telefónica’s strategy to launch fixed services outside Sao Paulo state. As Vivo has national coverage, it makes sense for Telefónica to bring fixed service to these markets as well. WiMAX could be an option to last mile networks in this case and the small and medium business market should be a primary target. It is very likely that competition in regions I and II will increase after the acquisition.”

Sometimes the best way to get over one failed relationship is to dive straight into the next one, and Portugal Telecom is reported to be already moving on, with its eye on a stake in Vivo’s local competitor Telemar PCS, otherwise known as Oi. Oi is the smallest of the leading players, with 42.3 million users at end June, according to Informa’s WCIS. TIM had 43.7 million users while Claro had 46.9 million and Vivo had 55.8 million.

US handset manufacturer Motorola (as it is now known), also benefitted from its relationship with the Android platform, turning in net earnings of $162m for the second quarter of 2010, compared to a profit of $26m in the same period last year. Net sales dipped slightly from $5.49bn in 2Q09 to $5.41bn in 2Q10, but the Droid and Droid X are selling like hot cakes and with Droid 2 coming up, things are looking rosy for Motorola. The one thing that does set alarm bells ringing for the Informer is all this ‘Droid’ branding – it’s all about continual innovation remember, Motorola? The last thing the company needs is for Droid to become the next RAZR.

Speaking of alarm bells, the sirens were going off at Alcatel-Lucent HQ this week, after CEO Ben Verwaayen announced that the firm maintained its losing streak in the second quarter with a loss of €184m, compared to a profit of €14m in the same period last year. Still, the numbers are moving in the right direction when compared to a loss of €515m in the first quarter of 2010. Revenues were down 2.4 per cent year on year to €3.81m.

Slightly different noises were being made by France Telecom, owner of the Orange brand, which reported a slight decrease in EBITDA from €2.96bn in the second quarter of 2009 to €2.73bn in the same period in 2010. Revenues also sank slightly to €11.18bn in 2Q10 from €11.38bn the same period last year.

Over in the UK communications regulator Ofcom has finally been given the go ahead to move forward with the auctioning of 4G spectrum, as well as the refarming of 2G spectrum so it can be used for 3G services. Ongoing delays have put the country behind other parts of Western Europe and operators are unlikely to get their hands on the attractive 2.6GHz band before 2012.

On Wednesday, the UK’s Minister for Communications, Ed Vaizey, tasked Ofcom with a spectrum modernisation programme that will result in the combined auction of the 2.6GHz and digital dividend 800MHz spectrum as well as the liberalisation and refarming of 2G spectrum at 900MHz and 1800MHz to allow operators to use these frequencies for 3G technologies.

However, the auctions will not take place until late 2011 at the earliest, putting the UK behind other European nations such as Denmark, Finland, Germany, Norway, the Netherlands and Sweden, which have already awarded 2.6GHz spectrum and in some cases, seen it in commercial use. Under the initiative, Ofcom will also make 3G licences indefinite to encourage greater investment; make these licenses tradable; but to apply annual licence fees to reflect the market value of these licences. There will also be a “generous compensation package” to support the Programme Making and Special Events users (PMSE) – such as musicians and theatres – that’s you Dolly Parton and Guns n’ Roses – which are being evicted from the 800MHz spectrum they currently use for wireless microphones.

And the Informer’s just seen that Amazon has unveiled a slimmer, new look, Kindle e-reader for the UK market, which looks like a pretty attractive option for whiling away the hours in the back of mum and dad’s Morris Traveller this summer. The device will be priced at £149 and will be available on the Vodafone network. A UK Kindle store will also be launched on August 27 with more than 400,000 books on offer. That should keep the Informer busy on his road trip around Europe. There’s even talk of a family visit to the old Belarusian switching cabinet where the Informer was born, although he imagines those contacts he polished as a child have long since dulled and faded.

Enjoy your summer, see you in September,

The Informer.