Time and time again, the market keeps on having to correct the mobile operator’s misguided attempts at trying to evolve beyond a utility bit pipe.
In this post, I’m going to explore that issue, culminating in explaining why the idea of a jointly created mobile operating system is absolutely ridiculous (and yes, as I will explain, this is precisely what Vodafone, Orange and a few others are mulling right now). So this is coffee-and-a-biscuit read, I think. I’d very much welcome your opinion at the end.
Are you sitting comfortably? Right, come with me…
There is perhaps one more thing that’s worse than a mobile operator trying to innovate in unfamiliar markets: It’s another utility provider, such as your local electricity provider, trying to sell you entertainment services.
Now, this generally doesn’t happen because electricity providers understand that they know nothing about entertainment. Instead they leave that to companies like Channel4, Endemol, Fox and NBC. Those specialists produce and commission entertainment content that is delivered over a multi-layer infrastructure platform manufactured by an array of hardware specialists such as Samsung and Sony. The end-consumption device is the television. Consumers plug in their televisions (powered by the electricity provider’s output) and enjoy the resulting entertainment.
At no point did the electricity company interfere with the delivery, style, substance, production or hardware beyond specifying that all devices must conform to a 220v range.
And we’re good.
The electricity company knows nothing about entertainment. Or user interfaces for kettles, electric razors, or anything else that runs on their utility. They just sell electricity. They don’t even bother marketing their services. I don’t see advertisements encouraging me to use my television for an extra hour per day. I don’t even think about my electricity consumption beyond a) paying the bill at the end of the quarter and b) trying to be ‘green’ and not leaving lights on unnecessarily.
Interestingly, I will never receive a flyer with my electricity bill asking if I’d like to upgrade my television. The electricity firm doesn’t try and sell me an upgraded interface for my television. They don’t suggest I get HD — that’s left to the content providers and hardware vendors. They don’t try and produce their own version of ‘The Wire’ or ‘Big Brother’. They don’t hire a series of young actors and try and produce television dramas. Nor do they sell me toast to go in my toaster or lightbulbs, electric toothbrushes, toothpaste or doorbell buzzers.
In some circumstances, my electricity company will expand it’s utility presence to offer me gas. Or perhaps water.
But they never try and sell me a kettle ‘to go with my water’, an oven or some cookery books.
They just don’t bother.
They recognise their responsibility, their DNA and their fundamental limitations. Their job is to make sure their production and delivery network stays live on a 99.999% (“five nines”) basis, respond swiftly and effectively to any outages, invest next generation electricity delivery technologies to augment (for example, the effects of weather or disaster) and to take their well earned profits.
I want my utility providers to make a bucketload of money. I don’t want their Board of Directors panicking about trying to counter Sony’s new Playstation or worrying about how to make me buy more sport content on my television. I want the provider to be able to burn £10 notes. Figuratively. I need them to be well fed, well financed and I need their CFO to encourage massive investment into assuring the supply of one of the key utilities I rely on. I want the lights to stay on. I need the cash dispensers to keep on working so I can get money to buy some food in Sainsbury’s to feed my young child. And I want to be able to heat my house precisely as I wish. Further, I want the company to be able to invest sufficiently at scale so that it is able to offer me service at reasonable rates. I want everybody to be able to afford to purchase a basic amount of electricity without it costing the Earth.
And that’s it. That’s what I want from my utility provider.
There’s the odd exception but generally speaking, especially here in the West, the model works really nicely for all utility providers and their customers.
A mobile operator is a utility provider of telecommunications services. Are we agreed? Fundamentally, a mobile operator provides voice calls, messaging services and data connectivity services. Through their utility services, it is also possible for them to function as a transaction engine, initially offering revenue to content providers (premium rate SMS/voice) and more recently, by offering other companies (such as mobile developers) the ability to transact with the provider’s customers.
Now, let’s take a look back at the emergence of the mobile operator.
The Utility Exception: Mobile Operators
In the face of unprecedented demand for mobile services over the past 20 years, our mobile utility providers have grown dramatically. In their formative years, mobile utility providers competed against each other to deliver better and better utility. It was simply amazing to be able to take a taxi from one part of London to another and be able to continue a mobile telephone call.
Later, the utility providers recognised they’d deliver greater utility by enabling interconnectivity, so I could call a friend using a different network.
Everything was working nicely as the utility providers continued to upgrade and strengthen their networks. Data services were launched. Text messaging as a utility service was ‘discovered’ and the medium exploded.
Customers were provided with financing in the form of an annual contract to enable the supply of ever evolving mobile ‘terminals’ or handsets.
Device hardware manufacturers sought to produce better devices. Continued innovation delivered hardware with integrated FM radios, MP3 players and even cameras. Consumers who purchased a device with a camera were delighted to be able to use their GPRS data network to take a photo and then email it to their friends. Granted, the transmission speeds were slow and the method expensive and charged ‘per megabyte’ (or, more accurately, per kilobyte!) by the utility provider. Some kind of charging mechanism had to be introduced and ‘per meg’ was — well, it was at least usage based charging, like the per minute structure.
The First Utility Provider Screw-Up
And then it all went wrong. Mobile utility providers became mobile operators. They decided they knew what their customers wanted. They turned into the electricity company trying to sell us toasters.
Their marketing teams went into overdrive and their technology teams introduced MMS (“Multimedia message service”). The idea? Duplicate the success of text messaging by taking the burgeoning send-photo-by-email facility and screwing it up. Instead of working out a global standard to send photos (and perhaps video later on), the utility teams over complicated it, over priced it and delivered an utterly shit service to their end users. Handset manufacturers struggled to work out the best way of integrating with ‘MMS’ and in the end, had to do their best to make their devices work with it. The result was a complete disaster with consumers being charged for messages that never arrived, or — even worse — did arrive but the size of a postage stamp (because the network ‘optimised’ the photo for the user’s handset). The medium never recovered until Apple arrived with an iPhone UI that made sending photos (and video) easy… By email.
So the same feature that some of us were experimenting with a decade ago is reintroduced by Apple to a hail of amazement. We didn’t reckon on the mobile utility provider’s ability to make an arse of the whole process.
The Second Utility Provider Screw-Up
The mobile utility providers were just getting started though. Can you imagine your electricity provider demanding that you only purchase a Sony television — and ‘locking’ the TV so that it cannot be viewed by your neighbours if they pop in for a coffee? Witness then, the utility provider deciding to buy millions of handsets from Nokia to offer to customers — but insisting that the VOIP facilities in the devices are deactivated (Here’s a link to a 2007 The Register article about this issue). The worry? Utility providers might lose a bit of revenue. Fast forward two years and the same utility providers are screaming for their customers to offload any and all possible data usage to WiFi.
The Third Utility Provider Screw-Up
It wasn’t long before the utility providers decided to launch all sorts of services for their consumers, simultaneously restricting them from using services delivered by competent specialists (e.g. MSN messenger). Witness, for example Orange insisting that all their Windows Mobile devices have Pocket MSN Messenger removed so that users can install Orange’s own sub-standard, useless and rubbish instant messenger service. Obviously no one bothered to use the Orange IM service and — from memory — the service was dumped quickly, in favour of the shiny MSN logo.
Almost every third party service introduced by a mobile utility provider goes nowhere.
It gets worse though.
The Fourth Utility Provider Screw-Up
It gets MUCH worse.
Now and again, ageing executives read inspiring articles in American business magazines and decide that, somehow, even though they’re a utility provider, they should reach beyond that function. They look at other fun companies operating in the technology space and think they can do the same.
Vodafone 360 is perhaps the best example — ever — of what happens when a utility provider thinks it can ‘do-an-Apple’.
In the same way that it’s ludicrous to consider my electricity provider supplying me a toaster along with weekly deliveries of bread to use within the toaster, it’s entirely unnatural for a mobile operator to reach beyond a basic transaction-led service oriented architecture.
In the case of Vodafone 360, the operator controlled every facet of the service, from specifying the Samsung hardware, operating system, handset user interface to the application layer. What happened? They produced a ‘service’ that simply didn’t work to spec. It was utterly shocking to see — a global billion dollar company, humbled and brought to its knees because of a functional inability to deliver beyond the company’s utility mandate. The people paying the price? The small number of customers duped into spunking their money on 18 or 24 months of 360 misery.
Like all utility provider experiments, 360 was hugely expensive, completely misaligned, poorly executed and woefully managed by a totally ineffectual team of senior executives. And, of course, it was quietly sidelined.
Yet another gazillion dollars down the pan funded by profits I willingly paid for their utility service.
The Fifth Utility Provider Screw-Up
Systemic structural change arrived recently to the world’s economy masquerading as ‘the financial crisis’. Not one of the utility providers saw a dramatic decrease in overall revenues. (Oh, revenues went down, but not in the same way they disappeared for, say, estate agents). Most mobile utility providers have actually done very, very well in terms of revenues recently. This, despite trying their best to innovate rubbish, irrelevant and totally misguided products and services in an attempt ‘to stay relevant’ and ‘beat Apple/Google/etc’.
Toward the tail end of 2010, the utility providers are still in rude health in the context of delivering utility.
Meanwhile as utility provider executive teams delight over huge sales of devices such as iPhones, they continue to obsess with what they see as the horrors of becoming ‘a bit pipe’ without seeming to notice that they’ve always been a bit-pipe utility provider that continues to make ridiculous amounts of money.
The fifth screw-up then, was the continual obsession of becoming something they are not and should not be.
The Sixth Utility Provider Screw-Up
It’s just about to happen, if reporting is to be believed — which brings me (finally) to the subject of this missive.
Telecompaper published a little article this week titled, “Orange to discuss joint mobile OS with Vodafone, others”.
Here’s a quick summary. Before you read, prepare yourself for the’ what-the-hell’ battering your neurons are about to receive:
France Telecom-Orange CEO Stephane Richard has invited the heads of Vodafone, Telefonica and Deutsche Telekom (T-Mobile) to Paris on 8 October to discuss the possible development of a common operating system for mobile devices. He told Le Figaro that mobile operating systems were the Trojan horse used by Google and Apple to establish their own relationships with mobile service customers.
Utterly preposterous. We don’t see electricity companies getting really, really REALLY frustrated by BSkyB or DirecTV for establishing a relationship with their customers. For good reason. It’s not their business.
Yet mobile utility providers seem unable to accept that they are .. well, utility providers. Instead of innovating utility to deliver a plethora of ways to enable services for Google, Apple and the rest of the market, they’re obsessing about competing with them.
The Telecompaper post goes on to explain that France Telecom’s CEO, Stephane reckons that since the four operators mentioned have almost a billion customers combined, they have the capacity to influence the industry.
But not in the way they think.
Network As A Service?
Can you imagine the potential of a mobile operator working WITH Google, Yahoo and an array of (reliable, well financed) startups to deliver network-as-a-service facilities such as advanced, ubiquitous location services? Can you imagine being able to track every piece of hardware you own thanks to your mobile utility provider? Can you imagine being able to switch on your car’s heating from your bed in the morning on a cold day, thanks to a combination of services from your mobile utility provider, Apple, Nokia, and goodness knows how many other companies in between? Wouldn’t it be brilliant to simply wave our mobile handset at the taxi and hit ‘confirm’ to pay for the fare? Wouldn’t be even better if Vodafone had deployed LTE Advanced to give us <6ms latency for a network-as-a-service real time taxi service auction the moment I come out of my city meeting?
It’d be great, but…
Unfortunately our utility providers are far too busy obsessing with irrelevant nonsense.
Time for some dodgy-but-workable-fag-packet calculations.
Assume that Vodafone’s 18 million customers each spend on average 25,000 pounds a year on all sorts of things — from meals to shoes to clothes to cinema tickets to food to rent. Work with me on this. 18 million people x £25,000 = £450,000,000,000 (that’s 450 billion). A year. Now assume that Vodafone can get 100% of their customers to spend that money via their Vodafone account with an NFC-enabled handset (work with me, here).
Now assume that Vodafone takes a workable 3.5% of revenue as a service charge. That’s £15.75 billion in revenue. To put this in perspective, that’s 35% of the Vodafone Group’s annual £44.5 billion in worldwide revenue last year. I know these numbers are made-up but they do indicate one possible future revenue growth possibility that involves transaction management (something mobile utility providers already excel at) and doesn’t involve arsing around with non-core things like device operating systems.
They’re off dicking about with operating systems, application stores and developer outreach programmes that reach nobody.
Meanwhile, in every mobile operator, there’s a small collection of forgotten Business-As-Usual departments working away feverishly trying to do their best with diminishing budgets. They’re trying to reduce network failures, sleepy cell towers and data speed delays. They’re trying — with limited senior management attention — to stick to the knitting and evolve their utility service as best they can.
I understand a heck of a lot of work is spent on business as usual activities within a mobile operator. But if only senior management time and the huge ‘innovation’ budgets were better aligned to delivering better utility…
I Dreamed A Dream
I often wonder what it would be like to be a customer of a mobile operator that invested heavily and singularly in providing really, really, REALLY good utility services.
What might that look like?
– They’d have ‘network-as-a-service’ API access to every part of their infrastructure
– Whilst every other provider was stuck on “3G+” speeds, our fictional operator would have already launched super fast Advanced LTE. But they’d have time to make it backward compatible.
– They’d have innovated their billing structures to eliminate customer confusion
– They’d have introduced support for 3 different NFC payment standards, before deciding on a clear-market-winner
– They’d enable me to pay for anything with my NFC-enabled handset so I’d start to pay people via my operator account and adopt the operator as my primary current account
– They’d have broken the silly standard network limitations with mobile numbers and devices, enabling me to have 10+ devices running the same phone number. And when I call out from each device, they’d all use the same phone number.
– They’d let people call my Twitter ID (by resolving that to my chosen device)
– They’d provide Google and Facebook super-API access into their network allowing their users to do amazingly cool things — and control their security absolutely and precisely. This kind of open can-do attitude would prompt most of the operator’s users to purchase multiple devices and additional service plan offerings (Yes, I would like a 10″ Facebook Gallery Frame running on my operator’s data network for an extra £4 per month. In fact, I’ll have three please.)
– They’d let me use my service plan(s) anywhere — absolutely anywhere. I’d pay a simple easy roaming charge integrated into my monthly bill — and I’d pay it monthly whether I went abroad or not. But when I’m abroad, it’s like the Kindle’s data connection: It works anywhere without any stupid bills.
– The operator would quickly become my trusted gateway to the planet, enabling me to easily and clearly manage my privacy settings.
– They’d have fixed or been close to fixing the ‘status’ issue, working closely with handset manufacturers and other third parties to continually innovate an interface and set of standards
Our mobile utility providers are off arsing around trying to do it all themselves. Badly. Again, again and again.
What do you think? Have I missed out some key screw-up stages? What do you think Vodafone or Orange might look like if they’d invested 90% of their expenditure on steady evolution of their utility service, rather than spunking it up the wall on stuff that simply doesn’t work? And what do you think of a 4-way mobile operator defined handset operating system?