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No. 75 - Changeover in the Mobile Ecosystem

DigiWorld Economic Journal - C&S - 30/09/2009 No. 75 - Changeover in the Mobile Ecosystem

3rd quarter 2009

Since 2006, mobile services have accounted for more than half of the total telecom services revenue in the world. Does this mean we have an industry that has reached maturity, and which will remain governed chiefly by regulatory provisions and structural shifts? Or is this a relative maturity, behind which is taking shape a new era of innovation for consumers, but also of uncertainty for industry's main players? What are the common features and the differences between the huge transformation of the wireline telephony market spurred by increasingly ubiquitous broadband and VoIP, and what is starting to take place with high-speed mobile access and the mobile Internet?


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Dossier

Changeover in the mobile ecosystem

Edited by Erik BOHLIN, Pierre CARBONNE, Martin CAVE & GÚrard POGOREL

Introduction

By the Editors

The Platformisation of the European Mobile Industry
Pieter BALLON

Business Innovation Strategies to Reduce the Revenue Gap for Wireless Broadband Services
Jan MARKENDAHL, Bengt G. MÍLLERYD, Ísten M─KITALO & Jan WERDING

The Next Paradigm Shift in the Mobile Ecosystem:
Mobile Social Computing and the Increasing Relevance of Users

Claudio FEIJËO, Corina PASCU, Gianluca MISURACA & Wainer LUSOLI   

The Brand is the Bundle
Strategies for the Mobile Ecosystem

Dave HEATLEY & Bronwyn HOWELL   


Interview with

Philippe LUCAS, Orange, Vice President International Standards and Industry Relationships     103
 
Other
paper

Analysis of Radio Spectrum Market Evolution Possibilities
Thomas CASEY

Features

Technical Innovations

Ľ The Future of Mobile Communications
New Communication Methods to Preserve Revenue Growth
Pierre CARBONNE & Soichi NAKAJIMA   
Ľ M2M
The Machine-to-Machine Markets, 2009-2013
Samuel ROPERT   

Book Review

Ľ Emmanuel CAUVIN, Ils regardent le gouffre (They Look at the Abyss)
By Isabelle POTTIER   
Ľ Eli M. NOAM & Lorenzo Maria PUPILLO (Eds), Peer-to-Peer Video
By Petros KAVASSALIS   
Ľ Subhasis RAY (Ed.), The Broadband Revolution
By Lorenzo PUPILLO   
Ľ John URE (Ed.), Telecommunications Development in Asia
By Etienne TURPIN   



The Platformisation of the European Mobile Industry
Pieter BALLON
Key words: Mobile Platforms, Business Models, Gatekeeping, Platform Typology.

This paper argues that the structure of the mobile communications industry is being decisively affected by 'platformisation', yet in a present context of strong 'platform ambiguity'. It introduces the concept of gatekeeper roles to compare current mobile platform initiatives, and proposes a typology of platforms to characterise the various models encountered.


Business Innovation Strategies to Reduce the Revenue Gap for Wireless Broadband Services
Jan MARKENDAHL, Bengt G. MÍLLERYD, Ísten M─KITALO & Jan WERDING
Key words: Wireless Internet access, data traffic, revenues, network
costs, spectrum, deployment strategies, HSPA, LTE, operator cooperation,
value added services, NFC, B2B2C.


Mobile broadband is increasing rapidly both when it comes to traffic and number of subscriptions. The swift growth of the demand will require substantial capacity expansions. Operators are challenged by the fact that revenues from mobile broadband are limited, just a few per cent of APRU, and thus not compensating for declining voice revenues, creating a so called "revenue gap". Concurrently, mobile broadband dominates the traffic, set to grow strongly. In this paper we analyze the potential of different strategies for operators to reduce or bridge the revenue gap. The main options are to reduce network costs, to increase access prices and to exploit new revenue streams. The focus in the paper is on cost & capacity challenges and solutions in the network domain. Operators can cooperate and share sites and spectrum, which could be combined with off-loading heavy traffic to less costly local networks. In the network analysis we illustrate the cost impacts of different levels of demand, re-use of existing base station sites, sharing of base stations and spectrum and deployment of a denser network. A sensitivity analysis illustrates the impact on total revenues if access prices are increased, whether new types of services generate additional revenues, and if it fills the revenue gap. Our conclusion is that the different technical options to reduce the revenue gap can be linked to business strategies that include cooperation with both other operators as well as with non-telecom actors. Hence, innovations in the business domain enable technical solutions to be better or fully exploited.


The Next Paradigm Shift in the Mobile Ecosystem:
Mobile Social Computing and the Increasing Relevance of Users

Claudio FEIJËO, Corina PASCU, Gianluca MISURACA, Wainer LUSOLI
Key words: Mobile social computing, user innovation, mobile ecosystem.

Abstract: Social computing has become the paradigm for the increasingly relevant role of users in the Internet world. In this paper, it is argued that mobile social computing will eventually cause an even bigger impact in the mobile ecosystem. We are already at the beginning of the "transference" of a significant part of Internet social computing usage to the mobile domain, where users are no longer passive consumers of content and applications, but co-creators and even innovators of them. However, mobile social computing will go one step further in the contribution to the development of the mobile ecosystem, since it will put the many situations of users' daily activities at the centre stage. To prove this case, this paper gathers available data and evidence on the patterns of mobile social computing usage and discusses user innovation and user empowerment in the framework of the current mobile ecosystem.

The Brand is the Bundle
Strategies for the Mobile Ecosystem
Dave HEATLEY & Bronwyn HOWELL
Key words: Business ecosystem, platform, monopolistic competition,
product bundling, heterogeneous demand, business strategies, mobile
telephony, mobile applications, branding, price discrimination.


The current mobile ecosystem is best understood in terms of a monopolistic competition model, characterised by heterogeneous producers providing a range of differentiated products for consumers with heterogeneous preferences. Product differentiation offers producers some market power, ultimately constrained by imperfect substitutes from rivals and the threat of market entry. To achieve their goals, consumers require a mixture of products from the network, handset and application domains. Reduced search and other transaction costs are a demand-side benefit of product bundling. Producers in this market have high fixed costs and low marginal costs. High fixed costs discourage entry, which increases the market power of producers. Low marginal costs and uncorrelated customer preferences across products for individual consumers encourage producers to expand their sales using supply-side bundling. Thus there are strong supply and demand side benefits from product bundling. We argue that producers will compete in terms of differentiated bundles combining network, handset and application features, with branding as the essential strategy for bundle differentiation. Successful business strategies will require direct access to customers and information about their specific preferences. For illustration, we look at the currently apparent strategies of Google, Apple and Nokia. The mobile ecosystem is complex but not unique. Strong parallels can be drawn between the mobile ecosystem and the television ecosystem. Google appears to be following a "free to air" strategy and Apple a "pay TV" strategy in bundle differentiation. Television manufacturers are largely undifferentiated and have little market power: this may be the fate of handset manufacturers and network operators who are comparatively powerless to withstand the evolutionary development of the mobile ecosystem.

Analysis of Radio Spectrum Market Evolution Possibilities
Thomas CASEY
Key words: Spectrum Markets, Spectrum Policy, Flexible Spectrum Usage,
Cognitive Radio, Value Networks, Scenario Planning, System Dynamics.


A tremendous growth in wireless traffic volumes and a shortage of feasible radio spectrum has led to a situation where the old and rigid spectrum regime is not a viable option for spectrum management and a shift towards a more market driven approach has begun. Great uncertainty still exists over how such a radio spectrum market will come about and what kind of shape it would take. This paper studies some long term macro level evolution possibilities for how this radio spectrum market could emerge and what would be the corresponding value chain configurations. The scenario planning and system dynamics methods are utilized to build four alternative future spectrum market scenarios.




Pieter BALLON leads the Media, Market & Innovation research team of IBBT-SMIT at the Vrije Universiteit Brussel, Belgium. He is also guest professor in media economics at this university, and is general manager of iLab.o, the lab for open innovation in ICT of the Institute for Broadband Technology. He holds an MA in Modern History and a Ph.D. in Communication Science. He specialises in changing business models for mobile & broadband applications and in living lab research. He is the current acting Secretary of the European Network of Living Labs. In 2006-2007, Pieter Ballon coordinated the joint research on business models for future mobile IP-based systems of the Wireless World Initiative (WWI) within the European 6th Framework Programme.


Erik BOHLIN
is currently Head and Professor in Technology Assessment at the Division of Technology & Society, Department of Technology Management & Economics at Chalmers University of Technology. He has published in a number of areas relating to the information society - policy, strategy, and management. He is Chair of the International Telecommunications Society; Chief Editor of Telecommunications Policy; Member of the Scientific Advisory Boards of COMMUNICATIONS & STRATEGIES, Info, International Journal of Management and Network Economics, and Nordic and Baltic Journal of Information and Communication Technologies. He obtained his graduate degree in Business Administration and Economics at the Stockholm School of Economics (1987) and his Ph.D. at Chalmers University of Technology (1995).
erik.bohlin@chalmers.se


Pierre CARBONNE
is Senior Consultant, Head of Mobile Broadband Practice at IDATE. His assignments include management of large scale projects, markets studies and consultancy missions on broadband network deployments and broadband coverage issues, conducted on behalf of telcos or public authorities. Pierre is also specialized in spectrum allocation processes, spectrum regulation, and wireless broadband access. Before joining IDATE, Pierre worked as an economic consultant for Chambers of Commerce and Industry in Morocco, and for consulting firm ABD, providing assistance to telecom equipment manufacturers. Prior to that, Pierre was employed by LBO investment fund, CLAM Private Equity, and by the financial engineering department of a prominent French bank. He attended the HEC business school, majoring in Corporate Audit and Finance.
p.carbonne@idate.org


Martin CAVE is professor at Warwick Business School in the UK. He is a regulatory economist specialising in the communications sector. He has worked extensively for regulators in Europe and elsewhere.


Thomas CASEY is a researcher and a post-graduate student in the Department of Communications and Networking in Helsinki University of Technology. He has been involved in various wireless communications related R&D activities both in the industry and in the academic world. His current research interests include the dynamics and evolution of mobile access provisioning and the related value networks.


Claudio FEIJËO holds a MSc and Ph.D. in Telecommunication Engineering from Universidad PolitÚcnica de Madrid, Spain. Currently, he is working at the Institute for Prospective Technological Studies of the JRC of the European Commission where he researches on the future socio-economic impact of emerging information society technologies. He is professor (on leave) at the Universidad PolitÚcnica de Madrid, where he directed the Chair in Telecommunications Regulation and Information Society Public Policies. He was also adviser for the Spanish State Secretary on Telecommunications and Information Society, participating in the design of information society development plans and broadband deployment strategies. For three years, he was involved in a university spin-off devoted to the transfer of know-how in technology, media and telecommunications. He has worked in numerous research and development, public and private, projects in Spain, Europe, Latin America and North Africa. He is particularly proud of the project for electronic communication sector development he conducted for the EU in Latvia. He lectures regularly in seminars and postgraduate courses and has authored many publications in journals and conferences.


Dave HEATLEY
is a Research Fellow at the New Zealand Institute for the Study of Competition and Regulation. His research interests include transport and environmental economics, and business strategies in the IT and telecommunications industries. At various times Dave has been a computer programmer, environmental campaigner, software entrepreneur, company director and economist. He is the founder of the company Myriax and an author of the scientific software Echoview and the geospatial software Eonfusion. In his spare time Dave is working on a business startup targeting a niche created by recent evolution of the mobile ecosystem.
dave.heatley@vuw.ac.nz


Bronwyn HOWELL is General Manager of the New Zealand Institute for the Study of Competition and Regulation, and a faculty member of Victoria Management School, Victoria University of Wellington, Wellington New Zealand. She teaches and researches in the areas of institutional economics, the information economy and regulation, with specific interests in the development, implementation and performance of institutions and policies governing the operation of information technology and telecommunications markets.  
bronwyn.howell@vuw.ac.nz


Petros KAVASSALIS is Associate Professor with the University of the Aegean and Senior Researcher at RACTI (Research Academic Computer Technology Istitute), Greece. His main areas of research include: Business Process Management & Document Engineering, Information Management & Simulations of e-Markets and Online Social Networks, Internet Economics and Policy. In the past, he has been working with Ecole Polytechnique (Paris) and MIT.


Philippe LUCAS
is VP International Standards & Industry Relationships and in charge of managing standardisation activities and international participation of the FT/Orange Group. Philippe entered FT/Orange in 2002 to manage standards for Orange France and gradually has restructured the FT/Orange group participation in international organisations matching marketing, strategy, technical and regulatory interests. He is personally involved in many international organisations as member of the Executive Committee of the GSM Association, member of the ETSI Board and member of the OMA Board. Philippe was previously an independent consultant on mobile strategy for government, operators and manufacturers. Before, Philippe was senior adviser for TIW for the 3G business in Europe to acquire new licences. From 1994 to 1999 Philippe was in SFR in charge of deployment activities for GSM and then in charge of the prospective marketing for wireline/mobile/internet business; as such he participated actively in the definition of the UMTS and in the first commercial launch of mobile multimedia services. Philippe started his carrier from 1990 to 1994 as a telecommunication engineer at Matra Communication in advanced digital processing developments for 2G and 3G mobile networks and military systems. Philippe is graduated from the INPG in 1990 and has a master degree of signal processing. He has been very active in the GSM, UMTS and Mobile Multimedia standardisation activities for the last 15 years.


Wainer LUSOLI
graduated in Political Science from the University of Bologna (BSc, MSc, MA) and has a Ph.D. in Media and Communication from the London School of Economics. Before joining IPTS, he was a Senior Lecturer in Social and Communication Studies at the University of Chester (UK), working on several projects regarding citizen participation, online elections, political representation and new media and the political process. He has published widely on new media and politics and is on the Editiorial Board of several ICT-related journals. At the IPTS, he has been working on European citizens' views on new technologies, in relation to identity, privacy and trust; on the economics of the identity market; and on the legal aspects of personal data protection in the Information Society.
http://www.lusoli.info


Jan MARKENDAHL
, Lic. Eng. in Telcommunications Theory is a senior researcher and lecturer at Royal Institute of Technology in Stockholm (KTH). Jan has been in the telecom, defence systems and consultancy business for 25 years. He joined KTH in 2003 after being research manager at the Nokia Networks R&D site in Stockholm. His research interests are in techno-economics with a focus on wireless networks, infrastructure economics, business modelling and value networks. Jan is currently working towards a Ph.D. degree in Tele-Economics.
jan.markendahl@radio.kth.se


Gianluca MISURACA
holds a Degree in Business Administration, a Specialisation Diploma in EU Economics and Law, an Executive Master in e-Governance and he is now finalizing his Ph.D. in Management of Technology at the Swiss Federal Institute of Technology in Lausanne (EPFL). He has several publications in the area of ICT for Governance and ICT for Development. Gianluca joined IPTS in 2009 and he is working in the area of ICT for Governance, investigating, from a technological and socio/economic point of view, ICT-enabled user-driven innovation in public services and new forms of ICT-enabled governance, in order to support innovation and policy for those public services relevant to the development of the Information Society in Europe. Before joining IPTS, Gianluca was the Managing Director and Scientific Coordinator of the Executive Master in e-Governance, organized by EPFL. Previously, he held several positions as lead consultant and policy advisor for different UN agencies, the World Bank, the European Commission, and bilateral cooperation agencies. In the past he was a consultant at Ernst & Young International in the area of public administration reform and regional development.


Bengt G MÍLLERYD
, Ph.D., has been Senior Analyst at the Swedish Post and Telecom Agency (PTS) in the Competition Department since early 2009, and a researcher at Wireless@KTH, Royal Institute of Technology involved in research revolving around business models and mobile broadband. Prior to PTS he worked as a telecom analyst in investment banking during ten years.
Bengt.molleryd@pts.se


Ísten M─KITALO, Ph.D. h.c, has for many years been employed by Telia. As CTO and Head of research he has actively been involved in the development of many of the international standards now in use in the radio field such as NMT, GSM, UMTS and RDS. He is at present Guest Professor at Royal Institute of Technology with future mobile communication (business and technical aspects) as the research area.
ostenm@kth.se


Soichi NAKAJIMA is a senior consultant at IDATE. His main area of endeavour is the mobile communications market, covering services such as mobile broadband, communication and ubiquitous services, as well as operator strategies such as modelling, pricing and branding. Whilst being responsible in these areas, Soichi also works on telecoms and ICT strategies all across the globe. Before coming to IDATE, Soichi worked for NTT DOCOMO, Japan's largest mobile network operator by subscriber numbers. He played a leading role in the strategic planning of the roll-out of Japan's first 3G M2M data-only tariffs, and prior to this he worked on the analysis and review of potential new multimedia services for the company. Soichi holds a Bachelors degree in mathematics, from the University of Nottingham in the UK.
s.nakajima@idate.org


Corina PASCU has a M. Sc. degree in Electronics and Telecommunications Engineering in 1989 from the Polytechnics University of Bucharest, Faculty of Electronics Engineering and Telecommunications. Corina joined IPTS in 2002, after managing the implementation of the TEMPUS programme in Romania between 1997-2002. She has acted as an expert evaluator/reviewer for a number of programmes for the European Commission since 1996, including Inco-Copernicus, Telematics for Education and Training, and Phare Europa Programmes. She also has spent years in scientific research in ICTs and as associate lecturer in the Polytechnics University of Bucharest. At IPTS, her main research interests and activities concern the social and economic impacts of information society technologies by using prospective methodologies (foresight) and integrating them to develop policy support at European level. She has published widely on the future of ISTs in Europe, socio-economic impacts of web2.0 and she is on the Scientific  Board of Romanian Journal of Social Informatics and been a member of the High-Level Advisory Group of the project "Elaboration of the national RDI strategy in Romania for 2007-2013 using strategic planning instruments".


GÚrard POGOREL, is Professor of Economics and Management, Telecom ParisTech, France. He has published numerous articles, books, and reports on Radio Spectrum Management and Regulation, competitive compliance, digital networks. He has taught professional seminars on radio spectrum to industry and Governments throughout the world. He chairs in several European instances, currently the Evaluation of the European Union ICT Policy Support Programme dealing with the diffusion of IT-based services in public interest activities. He participates in a range of Government-level and regulation Authorities Committees in Europe as well as in countries in Asia, contributing to the determination of the rules governing spectrum licenses and their valuation, interconnections rules and rates, and Next Generation Networks deployment. Professor Pogorel has acted as the expert designated by International Communications Regulators in controversies between telecomČmunication operators on issues of interconnection rules and rates. He is presently  an expert member (designated by the Italian Regulator AGCom) of the Supervisory Board of Open Access Telecom Italia.


Isabelle POTTIER, attorney-at-law and head of the research and publications department of the law firm Alain Bensoussan; she has particular expertise in drafting studies on the assessment and legal protection of new technologies as well as on electronic evidence and archival.


Lorenzo Maria PUPILLO is an Executive Director in the Public Affairs Unit of Telecom Italia and Affiliated Researcher at Columbia Institute for Tele-Information. In Telecom Italia, he is working on Geographic Markets, Functional Separation, Next Generation Networks and ICT Policy. He is an economist by training and has worked in many areas of telecommunications demand and regulatory analysis, publishing papers in applied econometrics and industrial organization. He has also been Advisor to the Global Information and Communication Technologies Department of the World Bank in Washington. Before joining Telecom Italia in 1992, he was member of the technical staff at AT&T Bell Laboratories in Murray Hill, New Jersey. Dr. Pupillo also serves on numerous committees for international organizations and on scientific and advisory boards around the globe.  He earned a Ph.D. and an M.A. from University of Pennsylvania, an MBA from Istituto Adriano Olivetti in Ancona Italy and a MS in Mathematics from University of Rome.


Samuel ROPERT is Consultant at IDATE. Before coming to IDATE, Samuel worked as a junior Consultant for NPA Conseil (a French media consultancy). He focused on the new networks strategies (IPTV, HDTV, VoD and mobile TV) and was in charge of these networks' deployment forecasts. Mr. Ropert is graduated from the Ecole Nationale SupÚrieure des TÚlÚcommunications de Bretagne. He holds a master degree in European policies from IEP Rennes (2006) and also in Physics (2004) from the University of Bretagne-Sud.
s.ropert@idate.org


Etienne TURPIN studied at the French Ecole Polytechnique and School of statistics and economics (ENSAE). He joined the Institute of Statistics and economic Studies where he was in charge firstly of conjuncture surveys and secondly of economic business studies. He joined the CNET (French Telecommunication Research Center) in 1989 where he became head economist. He then moved to the Orange Group Finance Department where he was in charge of Capital Expenditure Control. He left Orange Group in 2006 and he is now a free lance consultant working on telecommunications regulation matters and economic studies.


Jan WERDING is researcher at Wireless@KTH at the Royal Institute of Technology in Stockholm. He holds a Ph.D. in Finance and a Bachelor of Business Administration (Stockholm School of Economics 1971).
werding@kth.se




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