Morgan Stanley Web 2.0 Summit Presentation

After noting good comments on the Web about Morgan Stanley (MS) Internet analyst, Mary Meeker’s Economy & Internet Trends presentation, I had a look at it. It’s worth a flick through. For those not so interested in financial data, can I suggest you start on slide 28. Main points of interest are:

• Mobile Internet usage is and will be bigger than most think (i.e they agree with Cisco’s forecasts).
• Telcos will face serious challenges in managing incremental traffic.
• The mobile applications development ecosystem has disrupted the walled garden carrier portals.
• Improvements in social networking and mobile computing platforms are fundamentally changing the ways people communicate with each other and ways that developers/advertisers/marketers reach consumers.
• Location information changes everything: where we shop, who we talk to, what we read, what we search for, where we go – they all change once we merge location and the Web.

Eric Schonfeld’s posting on TechCrunch is also worth a read. Worth noting in particular is that “She [Meeker] singles out the mobile industry as the one where both the most opportunity will be found and disruptions will occur over the next five years. Moreover, she suggests that the U.S. is poised to lead the transition in mobile to a Web-centric model. (I totally agree). Interestingly, she points to the introduction of the first Android phone by T-Mobile, not the launch of the iPhone, as the key inflection point for the coming era of the mobile web.”

While I agree that the mobile ecosystem in the U.S is moving to a Web-central model, I am not sure that the U.S. can claim leadership in that transition. For example, Japan is about eight years ahead of the rest of the world in mobile commerce (slide 48).  Australia is also a witnessing a similar transition to a mobile Web era, particularly in the way people communicate with each other.

Mobile Internet Type II

Following on from my recent “Mobile Internet’ posting, a message (some would say ’vision’) - that the future is mobile – is one that the wireless industry has been on about for about four or five years now. It’s only recently that there are signs in Australia of the promise coming to fruition. But there are two distinct offerings at play.

3G operators like ‘3′ and Virgin offer mobile broadband dongles (modems) for as little as $20 month for 1GB (upload + download). Just plug the modem into your PC or laptop and away you go – just like fixed network broadband access. There is an article in today’s The Age about the high demand for this form of wireless broadband in preference to fixed-line broadband. What’s more, the networks seem to have plenty of capacity to make these offerings – acting to stimulate demand rather than building more capacity (as the fixed line networks must do) in response to demand.

 

Meanwhile, 3G operators continue to offer mobile phone plans including voice, video/TV and data services…oh, and the mobile Internet.

 

The distinction is that mobile phone plans are run over the GSM cellular ecosystem (i.e. integrating service access, addressing and billing systems). This operating systems enables carriers to charge for every transaction, differentiating based on what the traffic is. It’s that charging capacity that carriers want to take forward to the brave new world of 4G with the IMS (IP Multimedia Subsystem) standard. That appears to be the issue of so much concern to Joi Ito.

 

Virgin’s advertising captures this interplay between the two offerings well in its blurb ”The Internet should be free”. Get their mobile modem for no charge….as long as you purchase the bundling home or mobile phone package.

In summary, there are two ‘mobile Internet’ offerings available – one that may well have content and voice service provision tethered to the network and one that is just another broadband internet access service (but one that is mobile). The broadband internet accesss offer resembles a commoditised utility service. The mobile phone plan offering is consistent  with the more familiar telecommunications offering of any-to-any connectivity for voice, video, messaging and some data.

The Mobile Internet

Here is an interesting posting by Joi Ito. The open, innovative and competitive nature of the internet is compared with the closed ecosystem of the mobile phone industry (an industry that is operated by comparatively few players). Joi essentially questions the ‘fit’ of the internet with the mobile sector.

In a world that has over 3 billion mobile phones as against 1.3 billion internet users, there is no question that the mobile phone and the internet are highly valued respectively. While the open nature of the internet has generated so much growth in the communications and media industry, people love the convenience and usefulness of their mobile phones. It will be very interesting to see how these two stand-out forms of connectivity will evolve over the next few years, and what  will come from the influence of one on the other.

Telecommunications and the mobile internet

Susan Crawford has posted a useful perspective on the ‘open’ conditions placed on C Block spectrum (in reference to the recent FCC auction, USA) and what is possibly a strategy to get around them. Bear in mind that the intent of the open conditions rules is to decouple applications and devices from the underlying network, thereby promoting innovation and choice.

There are fundamental issues at stake here in the migration of voice and multimedia to wireless IP networks. Verizon’s strategy appears to be a reassertion of the telecommunications model of vertically integrated, fully managed and billed services. As Ms Crawford observed, that’s not the internet.

The strategy underpinning Verizon’s business model hinges on the successful deployment of IP Multimedia Subsystems (IMS). Developed by the mobile industry standards group 3GPP, IMS was developed as an evolutionary replacement to GSM (an ecosystem for cellular networks inclusive of billing systems). IMS allows for traffic discrimination, billed according to network operator requirements. As an industry standard – as with GSM – IMS is a standardised set of specifications for devices to connect to broadband wireless networks.

Susan’s posting also provides a view on government’s role in this context:

- In cooperation with industry, develop a standard set of specifications
for all devices to connect to broadband wireless networks
- Ensure the specifications do not unfairly discriminate
- Police the industry to ensure that industry effective comply with the
policy intent of de-coupling networks from applications and devices

Verizon’s mobile sector strategy in the United States is a test between vertically-integrated, fully managed networks vs. the open nature of the internet. What’s more, my understanding is that IMS could be deployed in wired networks as well. Will openness win over closed systems in the long-run?