Qualcomm has been struggling to sell BREW handsets outside CDMA markets for some time now. Its first breakthrough came with operator O2’s announcement in November 2005 that it will sell BREW-based handsets within its ‘X’ range of branded handsets. Later it emerged that O2 was buying the uiOne on-device portal and idle-screen customisation client-side application, but not DeliveryOne, Qualcomms’ back-end content and application delivery server-side infrastructure. Today, a year later from the O2 press release, Qualcomm announced that operator Telecom Italia Mobile (TIM) has agreed to launch two BREW handsets, the Onda N5050 which will feature uiOne with downloadable themes, and the Samsung Z630. Both handsets support BREW extensions for 3D games, which in association with Gameloft will allow for downloadable 3D games to TIM subscribers. There was no explicit mention of the DeliveryOne infrastructure within the announcement for the deal, which probably means that TIM wouldn’t shell out the license fees for the server infrastructure when it is only agreed to a single ODM handset. [Update: Qualcomm PR contacted me to say that “TIM’s deployment of BREW services does include DeliveryOne. TIM has taken both the client technology and the server technology. DeliveryOne is used to deliver the uiOne ‘Themes’ and the BREW games”]. Note that Onda is an Italian value-added-distributor who also brands ODM handsets. The TIM announcement brings Qualcomm an inch closer to Europe – although this success pattern seems to be not far off a marked improvement compared to last-year’s announcements, i.e. deals on 1-2 handset models with uiOne, but without with the server-side baggage. It once again confirms the following paradox: uiOne is a brilliant software solution for delivering idle-screen personalisation and customisation (see earlier article on this fascinating topic), while Qualcomm is the product’s biggest advantage (given the cash investment to build uiOne, a.k.a Trigenix-on-steroids), and its biggest drawback, given that operators are wary of being locked-in to the Qualcomm chipset-plus-OS-plus-UI-plus-services vertical stack. [Update: Ok, so TIM has also ‘taken’ both the client technology and the server technology from Qualcomm, licensing and financial terms remaining undisclosed. This does mark a success for Qualcomm in selling the full uiOne solution in Europe, although much has yet to be proven, i.e. whether TIM will actually go beyond dipping its toe in the water, into deploying BREW devices and uiOne across a greater share of its handset portfolio. At the same time it should be noted that Qualcomm possesses a strong card, which is an out-of-the-box software platform (BREW + uiOne) customisable to a good extent by mobile operators, and available on tier-2 or tier-3 ODM feature phones that come at competitive price points. This proposition does present an appealing option to European operators who have either not seen enough return-on-investment from their previous handset customisation efforts (e.g. O2, Vodafone?), or who are wondering how to best embark on portfolio-wide handset customisation strategies (e.g. TIM and T-Mobile)] Andreas

In the last five years, tier-1 mobile network operators (MNOs) have looked for strategic inspiration in many places, albeit with limited success: at the killer app, the killer brand, the killer supermarket, the killer segmentation, the killer branded handset, the killer content and the killer service. All have been results of the operator-is-king mentality, which followed from the astonishing revenue growth reaped by networks in the early years of mobile. All have come far short of expectations. My thesis is that operators should re-evaluate their strategies, not in the context of the one-sided market, but in the context of a two-sided market, where value flows both from the left and right of the chain. In other words, rather than continue the one-firm-provides-all strategy, they should adopt a platform strategy, by linking users with content providers and advertisers. They should take lessons from Google, VISA, Microsoft, Shell, Monster and shopping malls. MNOs should focus on extracting value only where they can add value, i.e. through network, handset and retail enablers. Let me explain, starting with a short history of how operators have tried to run the show so far. The killer app The buzzword of the telecoms-bubble era was the killer app. What was it? Email, chat, TV, IMS, mobile broadband (I still find the term amusing!) ? Nobody knew and nobody ever found out – the killer app turned out to be a bubble in itself. The killer supermarket Operators then tried the ‘killer supermarket’ recipe. The idea was that you could get customers to pay just for walking around the supermarket and browsing the shelves. Oh, and when you wanted to go across the street a guard at the door said: “Sorry, you can walk within our beautiful gardens, but you can’t go out. Don’t you remember ? You agreed to these terms when you walked in”. Within these gardens, operators dreamed that they could open up a bank, utility services and all the shops that the consumer would ever need. Tier-1 MNOs had to stop dreaming when the golden era of GSM growth started to dry and so was funding for blue sky projects. Walled gardens, too had to open after journalists did not spare any flattery with the whole garden business. The killer brand One of the most memorable milestones in mobile operator history was around 2002 when most tier-1 MNOs got jealous of Orange’s success and thought they should have national colours and buy lots of paint buckets to dress up their portals, handsets and everything else. Thus came Vodafone’s Red, O2’s Blue, T-mobile’s Magenta and Sprint’s Yellow. The colours did have a memorable effect on the consumer, but they lacked a memorable deliverable. When the brand deliverables are not clear or relevant to the consumer (what does an MNO brand stand for?), there is little tangible differentiation to the eyes of the consumer, other than price. What does Vodafone Live! mean today to the average consumer ? Sergio Zyman (ex CMO, Coca Cola) wrote an entire book The killer segmentation Since 2004, operators invested in building more and more sophisticated marketing segmentation plans. Most tier-1 MNOs today have about 10 segments (including business users), as shown in the case of T-Mobile below. The killer content It was then that operators realised they needed Disney, MTV and Ferrari to get their users excited. However, content licensing turned out to be expensive (from 20M to license Disney content for a major operator, to nearly $100M to build ESPN Mobile, which as we all know went the way of the dodo). The killer handset What if operators could be making their own handsets ? Surely they would deliver the best handset for their own consumer segments, they thought. Vodafone decided to walk down this path and assembled a fine team to produce the Simply range. Vodafone’s Simply proposition, comprising of handsets, customer service and dedicated calling plan, was designed for a consumer segment the operator calls ‘adult personal users’. However, according to reliable sources, Vodafone country operations are today struggling to sell Simply handsets, because the range is competing unfavourably with other handsets in terms of price. Here’s another lesson: operators don’t know how to sell handset propositions, but manufacturers do. So much for the killer handset notion. The killer service We ‘ve heard it again and again. At 3GSM 04 the killer service was 3G. At 3GSM 05 it was HSDPA. At 3GSM 06 it was Mobile TV. All have come and gone, but still 80-90% of data revenues are driven by SMS in most western markets. In most cases, operators who have licensed DoCoMo’s i-mode solution have been able to convert at best 10% of their subscriber base. A new tariff and marketing plan stands to make much more revenue for the operator than x (insert a large number) billions spent on upgrading the network and handsets for next-generation services. So where to next ? From product to platform strategy I would argue that tier-1 operators need to go back to square one and reconsider their long-term strategies. Starting from first principles, operators should extract value where they can add value. Beyond the voice and data transport network, there are two other things that operators do well: handset customisation and retail shops. However, these should be seen not as products, but as platforms. My thesis is that MNOs should look into the mirror and realise that the market is not one-sided, as in the traditional manufacturing business, where revenue flows from right to left. MNOs should understand that they are part of a two-sided market, where buyers are on both sides of the value-chain equation and value flows from both the left and right. Two-sided markets have been successfully exploited by credit card companies (VISA, who links consumers to merchants), operating systems (Microsoft, who links PC users to application developers), internet search (Google, who links surfers to advertisers), recruitment (Monster, who links job hunters to employers), fuel(Shell, who links gas stations to car owners) and shopping malls (who link shoppers to retailers). Two-sided market concepts and strategies are the subject of the article “Strategies for Two-Sided Markets” by Eisenmann, Parker and Van Alstyne appearing in the October 06 issue of the Harvard Business Review (and well worth a read in my opinion). In this context, operators should realise that they should act as the platform that links consumers with service providers and advertisers. This in essence is a three-sided market, where value flows from, and to, all three sides. Rather than try to be the manufacturing point for all goods, operators should extract value by adopting a platform strategy. I have been thinking about this topic since my early strategy days at Orange. All in all, I believe MNOs should focus their platform strategies three pillars: Pillar 1: Focus on Voice Voice is the quintessential mobile service, revenue and profit-wise. Operators should own and manage voice services, but also provide peripheral data services related to voice. Examples are T-Mobile’s My Faves, Comverse’s visual voicemail, SnapIn’s self-service and SKT’s avatar-based videotelephony service). Pillar 2: Develop Platform, not Product Strategies Operators should realise that consumer service innovation most often comes from 3rd party service developers (and as Bill Joy says, the smartest guys work for someone else). Operators should develop platforms that link service providers with advertisers and consumers (and do it faster than Yahoo, Google and Nokia) – in other words be service pipes, to avoid being bit pipes. MNOs can develop platforms that expose network, device customisation and retail enablers as follows: – Network, location, subscription and device management APIs on the network side – on-device portals and on-device electronic service guides that act as an accessibility/discoverablity portals for 3rd party services across all handsets. – offer service promotion through retail stores – here operators win doubly by reselling services and selling retail space. Operators should offer these platform constituents to all service providers (big and small), all advertisers and all consumers, and let the killer app, brand, supermarket, segmentation, branded handset, content and service be figured out by someone else. Pillar 3: Develop brand deliverables that make sense to the consumer If MNOs want to to be ranked more favourably within the list of handset purchase criteria, they should refocus on developing clear and sustainable brand deliverables that are relevant to the consumer, namely: – offer choice. This can be choice of latest handsets, choice of home-screens or themes, choice of third party brand, service provider, etc – offer peace of mind. Good examples are Orange’s Signature Premium package and Telefonica’s use of FOTA as an assurance of instant handset fix) – offer convenience, i.e. allow users to visually check their balance, or how much a particular service will cost, check their voicemail, request upgrades, manage their subscription,etc. In in all, operators should become platforms or service pipes, before they degrade to being bit pipes. Thoughts and rants are welcome.

The end of each quarter is always an exciting period in the mobile business, the average selling price and market shares of the manufacturers are disclosed. The third quarter, 2006, looked like this in terms of market shares:Nokia33.6%Motorola22%Samsung11.1%Sony Ericsson6.7%LG6.3% (Source: http://www.theregister.co.uk/2006/08/28/moto_gains_market_share/) As can be seen, the top five cell phone manufacturers own around 80% of the market, less than 10% correspond to a handful of Japanese OEMs and the remaining 10% of a collection of smaller brands. Result: The world will more and more be ruled by a few handset vendors, instead of many. (In the CDMA-space, Qualcomm has tried to create the opposite situation with 1-3% companies like Pantech-Curitel and the Japanese vendors, but as any monopolized market everyone involved pays a higher price. Due to a lot of reasons; cost being one of them, dependency from one player another, CDMA has not gained market share over time.) Disclosure: Average Selling Price and Market share are connected What then happens is that people look at the report to find statements like ‘Nokia device ASP of EUR 93, down from EUR 102 in Q2 2006‘ or from SEMC ‘Average Selling Price increases sequentially to 147‘. After this statement they usually make two statements: ‘Why are Nokia losing their margins?!’ or ‘Sony Ericsson is one of the few vendors who really know how to make phones!’. It is not that strange that Nokia and Motorola have largest market shares but not the best ASP. The world market looks roughly like this (divided by type of phone):Low end (Voice phones)41%Mid/High-end (Feature phones)42%OpenOS (Smart phones)17% Source: Nomura 2005 (To avoid unnecessary discussion: the OpenOS-figure is rather high, Gartner for example has a guesstimate of around 10 %.) In the stagnant markets (Western Europe, Korea, Japan) the devices that are sold are to a greater extent feature and OpenOS phones, and people switch phones at least once a year. Here it is a margin business; few phones with good margins are sold. In BRICE (Brazil, Russia, India, China, Emerging) mainly voice phones are sold and these countries has a LOT more people. This is a volume market; a lot of terminals, but with bad margins. (In US, and some other parts of the world, the gaps are as usual bigger and there is a large diversity.) So with greater presence in these the volume markets you get better market share, but also lowered average sales price and margins. Bigger players always have the economy of scale to help them, but it is usually easier to increase price than to lower development costs and bill of material. Vertical vs. Horizontal Sony Ericsson focuses on the feature phone market and not voice phones. At the same time, they are doing something even more important to help their ASP: They focus on clear vertical segments. Sony Ericsson has created two recognizable sub-brands that actually help the user select phones: Walkman for music centric devices and Cybershot for the devices sporting a better camera experience. This is good marketing! The best way of making a consumer pay more is to make her understand why she should. Motorola’s four letter abbreviations (RAZR, ROKR, SLVR, etc) or Nokia’s N-series, E-series or four digit versions don’t bring the same clarity. (The 2xxx, 3xxx, 5xxx, etc series might be clear to Nokia’s marketing gurus, but they are certainly not clear to us consumers.) Samsung and LG haven’t even tried, but spend their time creating pushing the envelope of hardware instead. What Sony Ericsson has done is to create a vertical device: A device which is dedicated to a certain usage (or at least better at this). Nokia with its S60 is moving the other direction: towards a horizontal platform. Most other devices are just fuzzy. There is another group of companies who has followed a similar strategy as Sony Ericsson has: ELLE, Bang & Olufsens Serene, Nokia’s Vertu, Goldvish and others with them. The ‘vertical’ is not a dedicated usage, but an attitude, a clear proposition. The great thing of having a horizontal strategy is that you can become the required middle-man. Who would have built applications for anything but Microsoft Windows a couple of years ago? What we don’t know is whether the horizontals become important. Will people buy a handset so that they can download apps? Or will they choose a pre-packaged target group (and maybe add some links, wallpapers and Java-applications and games)? The risk of going for the platform strategy is that if a certain usage or application becomes dominant you risk become a pipe, or plumbing. Who would have thought that Microsoft’s greatest threat would be Google or Adobe? Hampus Jakobsson, TAT

In the mobile industry, we often talk about customisation and personalisation interchangeably to describe how a service or a handset is adapted to the needs of users. I would argue that these two terms refer to very distinct concepts; in fact customisation is the exact opposite of personalisation. Let me explain why. Customisation In general, we can safely define customisation as the act of modifying the mobile handset or service to suit operator goals. Examples are Orange’s home-screen customisation, and Vodafone’s Live customised WAP portal. The defining characteristic of customisation is that the same content, look & feel, settings, etc of the customisation handset or service are the same for all users. Whether you are Mary, John, Samantha or Bill, you ‘re bound to like seeing your handset painted in the same trademark red, orange, blue or magenta that matches the operator contract that you ‘ve chosen. Right. Personalisation Customisation and personalisation are two extremes along the same spectrum of possibilities. Interestingly, there are two more points along that spectrum, which offer a compromise between customisation and personalisation, as shown below. Targeted customisation Operators are making significant efforts to target niche user segments such as the young or the elderly. Targeted customisation is when the operator or service provider modifies the handset or service to suit the (perceived) needs of a specific customer segment. Another example is the Sony Ericsson Robbie Williams special edition W800i walkman phone launched exclusively by T-Mobile in October 2005 to appeal to fans of the pop artist. Targeted personalisation Mobile service providers have explored yet another approach of a mass-market service that can be personalised to individual users and usage patterns. Targeted personalisation is when the service provider is able to profile each user and tailor the service to the individual characteristics of that user. Personalisation, the end-goal of customisation Mobile operator customisation strategies in 2002-3 evolved around branding the handsets and services with the trademark orange, red, blue or magenta colours, assuming that the one-brand-fits-all approach would win customers, increase ARPU and reduce churn. As the operator strategies have been maturing in 2005-6, operators are realising that a low-key brand approach, coupled with strong elements consumer brands (read Google, Yahoo, Robbie Williams and Ferrari) are more successful at attracting consumers. Both Vodafone and Orange claim to focus on user personalisation, while the implementation of their strategies suggests otherwise. The branded hard key on Live! phones takes you to the central operator portal, and the ‘Your Page’ entry on the home-screen of Orange Signature devices is the very last entry of the menu structure. If operators want to maintain a clear, desirable and sustainable advantage over competitors, they need to offer not only brand, but choice at each and every point.

Handsets for niche segments are making their presence felt, not only behind the mobile industry scenes, but also in the retail marketplace. Siemens Xelibri was the first bold experiment into handsets designed exclusively for niche segments (back when the German manufacturer had cash to spare). Turns out the experiment was extremely valuable for the industry, but an expensive mistake for Siemens. Xelibri has been followed by tens of handsets every year targeting niche segments: for examples look at Vertu, ESCADA, Firefly, Vodafone Simply, Dmobo’s Disney-themed M900, i-kids, ELLE Glamphone, Bang & Olufsen Serene, Goldvish, Casio G-Zone, Voce, Jitterbug and Nordisk MobilTelefon handsets, which target at a wide range of segments: kids, fashionable females, tweens, teenagers, sports enthusiasts, senior citizens and VIPs. ARCchart’s new report on the ‘The New Age of Handset Customisation: 2006-2011‘ takes a close look at the wonderful and risky crossroads of niche marketing and mobile handsets (I was the lead author of the report). The report documents a wide range of uniquely customised handset to date. The screenshots below tell the complete story (click twice to enlarge): In this context, Xelibri is the earliest and probably the most fascinating case study on handsets for niche segments. And one that has many lessons to teach to the industry. Xelibri: a valuable, but expensive lesson Xelibri is a well-known case of manufacturer device customisation, both for its uniqueness and its ultimate failure to execute. Quoting from the ARCchart report, ‘Siemens gave birth to Xelibri in 2001 with a view to creating a differentiated range of handset models which would support higher handset margins by appealing to consumers’ sense of fashion and style, as opposed to differentiating on technology features. In addition, by releasing two new portfolios a year, in sync with the established fashion seasons, it was intended as a vehicle to shorten the handset replacement cycle. In creating Xelibri, Siemens management opted for developing of a new handset line and an entirely new brand, free of any existing technology associations. Xelibri was announced to the world in February 2003, with a plan to release ‘collections’ of four handsets every six months – a Spring/Summer collection and a Fall/Winter collection. The first Xelibri collection dubbed ‘Space on Earth’ was launched in March 2003 and the handsets were sold in fashion boutiques and through concessions in department stores, positioned alongside the clothes and jewellery and not the electronics. The phones were sold SIM-free, without any operator involvement in the sales process and therefore no subsidy. The first collection did not sell well, and rumours circulated that Siemens had sold less than 100,000 units in total, despite the launch hype and the extensive (albeit not always glowing) press coverage. The second collection launched in October 2003 amid a barrage of publicity and a high profile TV campaign in a number of its key markets. The designs – all produced this time by the design consultancy IDEO – were an improvement on the first range, with each product appealing to a fairly distinct demographic Towards the end of 2003, Siemens management acknowledged that sell-through rate at distribution outlets was very poor – on some occasions as low as 100 handsets for major fashion stores. To shift stock, Xelibri handsets ended up being sold in some incongruous locations, including discount supermarkets and bargain internet sites, at discount rates up to half their original value. Eventually, in May 2004, Xelibri was officially delivered the coup de grace by Siemens. It was the conclusion to a bold experiment, but in the end a reported total of only 720,000 handsets were sold, less than 2% of Siemens’ total handset sales in 2003, according to the Wall Street Journal. Where did Xelibri go wrong? While the conceptualisation and the organisational effort around Xelibri was a valid one, the project failed to execute for a number of reasons. The handsets lacked a recognisable brand. This was intentional, as Siemens wanted to establish a brand entirely separate from its own, which it could buld into an identifiable handset ‘fashion brand’. However, building a brand on this scale requires a budget to match and years of campaigning, something which Siemens was lacking. Furthermore, the Siemens brand was never exposed to the consumer, leaving the handsets with a lack of technology assurance. Typically, a demographic that has disposable income to spend on one or two supplemental handsets as discretionary fashion purchases is going to be a moneyed elite. In general, these consumers are sophisticated and educated men and women who are familiar and comfortable users of technology. However, the Xelibri handsets had appalling feature sets (typically only supporting voice and SMS) in a market where high-quality colour screens and integrated digital cameras were becoming the norm. Xelibri lagged the technology curve and that harmed sales. The handsets looked and felt cheap. While aspects of the fashion market may appear entirely frivolous, great care and pride is taken in the product finish, particularly in the power brand accessories market against which Xelibri was benchmarking itself. Xelibri failed to incorporate this, which corresponded to a low value perception. The distribution channels – fashion boutiques and department stores – did not have enough time to develop: these retailers were not accustomed to selling technology items. At the same time, shelf positioning was not controlled by Siemens, meaning that Xelibri handsets were ‘lost’ amidst unrelated items and imagery, when they should have been framed by promotional material and images. The lack of operator subsidy meant that a Xelibri handset costing around $250 had to compete against a sexy Nokia handset with colour screen and integrated camera sold at low cost under an operator contract. The desirability of the Xelibri range was not high enough to place it in an entirely new product category to that occupied by the standard subsidised handset portfolios. According to a Tier-1 manufacturer who performed a post-mortem on Xelibri, the handsets included a new hardware reference design which was created from scratch for this project. This was an unnecessary risk and a significant surplus to the Xelibri handset BOM. Perhaps Siemens’ most significant failure was that Xelibri simply did not engage with its target market. While most of the marketing around Xelibri positioned the handsets as an accessory for the urban and street demographic, the handsets themselves did not carry design traits, which appealed to this audience. While all of Xelibri’s failures could be corrected by Siemens with hindsight, its inability to garner respect from a fashion conscious consumer base would be difficult to rectify since it goes to the very heart of the company’s nature. Fashion companies such as Chanel, Armani, Quicksilver, Nike and Oakley have spent years and hundreds of millions of dollars understanding and engaging with their target audiences and reinforcing their respective brand values. It is questionable whether a consumer electronics manufacturer will ever be able to engage consumers in a fashion context. This is not a limitation that only BenQ Siemens faces, but indeed is applicable to all Tier-1 OEMs. All in all, Xelibri was a valuable lesson to the handset industry, albeit a very expensive one. Since 2004 a lot has happened. Tens more handsets for niche segments have appeared. Although no one has been as brave in delivering a unique concept as Xelibri to the market, there are plenty of other case studies worth highlighting, two in particular: Bang & Olufsen’s Serene handset and ELLE’s Glamphone. Bang & Olufsen’s Serene: total handset redesign in true B&O style “Bang & Olufsen is a vertically integrated business that sources and manufacturs most products internally, including its DECT handsets, with only a few of its core components, such as its LCD and Plasma screens, supplied by third parties. However, B&O decided not to develop handset technology internally since mobile communications was not a core competence. Instead, B&O decided to partner with Samsung, since the two companies had prior working relationships, but also because B&O felt the Korean manufacturer shared similar processes and a focus on quality. Samsung also had a matching strength of brand and was able to deliver an international footprint. The Serene concept was developed by David Lewis, B&O’s Chief Designer for the past 30 years. B&O retains Lewis on a consultancy basis, as the company recognises that designers have to remain independent and work in different industries to keep track with market trends. Lewis was heavily involved in the entire design process, while the engineering team was a mix of B&O and Samsung staff. Development of the Serene handset took one and a half years from design to completed product. The handset The Serene handset sports typical B&O industrial design and is highly customised. One of its unique features is the motorised hinge – slight pressure on the phone flip activates the motor and the phone automatically opens and closes itself. Beyond voice, the functionality of the handset has been limited to the basics: SMS, phonebook, calendar, VGA camera, calculator, dictaphone, world time, alarm and Bluetooth. B&O justifies the limited functionality and poor camera quality as a result of the decision to optimize the device for voice and emphasise simplicity and ease of use. The wheel-shaped keypad is another distinguishing characteristic, taken from B&O’s range of DECT handsets. The screen is 2.1” QVGA (320×240 pixels) with 262K colours and the user interface has been totally redesigned, with much of the functionality found in today’s mass market phones omitted. B&O Serene: Market reaction and strategy According to Brian Stilling Laursen, Product Manager for Serene, the feedback B&O has received so far has been positive, with the company being thanked for breaking the boring mobile handset mould. The simplicity of operation and limited functionality has also been another source of positive feedback. With a EUR1000 price tag, B&O’s margins for the Serene are comparable to the margins of its other entertainment products. However, small volumes and fast replacement cycles may challenge B&Os business case for Serene, with the company contemplating in early May whether to proceed with a second version of Serene. According to David Lewis, Bang & Olufsen is quite exceptional, because they require a concept to last for at least 10 years, a requirement that is unlikely to remain true in the case of mobile handsets. In turn, ELLE’s Glamphone project has been surprisingly succesful, given that it has produced a distinguishing design for a niche segment that has sold in 6 figure numbers. The Glamphone: a handset for fashion-consious women “The GlamPhone series has been made possible by the collaboration of three parties: ELLE, Tedemis and TCL Alcatel. ELLE, a leading women’s fashion magazine brand is owned by Lagardere Media, the number one special interest magazine publisher worldwide. ELLE stands for femininity, fashion and French culture. ELLE contracted with Tedemis, a French mobile phone licensing agency, to assist in the identification of a handset partner and manage license contracts between the brand and the manufacturer. Tedemis is essentially the matchmaker that brought together TCL Alcatel and ELLE. The GlamPhone No 1 handset has sold more than 100,000 units in 1Q06, with the sales of GlamPhone range expected to reach 250,000 by 3Q06. These volumes rank the GlamPhone particularly high in the league of uniquely customised handsets. The distribution network includes Europe, Russia and Latin America, while the manufacturer is expanding sales to Asia (including Thailand and Malaysia) and the US, where it will be channelled through a San Diego-based distributor. Expansion in global sales is expected to ramp up volumes on GlamPhone handsets to 500,000 by the end of 2006. Clearly, TCL Alcatel is satisfied with the product revenues and profitability, given that the handsets sell at a premium, compared to handsets of similar function. While GlamPhone sales account for a small fraction of the total handsets which TCL Alcatel ships annually, they account for a disproportionately greater level of its profits, and the company expects this trend to continue and grow as it adds new uniquely customised handsets to it production line. We expect ELLE to be making in the order of $2 million to $3 million annually from the sale of GlamPhone handsets, a particularly attractive figure given that this is mostly profit arising from brand licensing”.

A couple of years ago, many in the mobile industry foresaw that mobile operators would control most of the device specification, including the user experience. The manufacturers would turn into unknown hardware manufacturers, considered happy if their name was printed on the battery. There was plenty of evidence; NTT DoCoMo’s undisputed reign in Japan and Vodafone’s increasing specification work. Today, I say the tables have turned. The manufactures are still the big brands and most of the user experience is still controlled by them. The operators are still waiting for data revenues to rise and their specifications of look-and-feel are shrinking. Someone proved that a Vodafone UI increased the usage of Vodafone services, but not to the extent that it gave any meaningful return of investment. It was too arduous and expensive to fight about the user interface. Most operators (maybe not in the US – yet) have lowered their walled gardens, to increase data revenues from uncontrolled Internet usage. So what is it that hinders consumers from switching between operator or manufacturer brands? Brand, price, and service quality are the three motivations that come to mind for operators. And brand, overall quality, and industrial design for the manufacturers. These motivations are not walled gardens at all, but the primary values of these companies. But there is one more thing: the user interface. Intangible and tangible at the same time, both logical and emotional. Anyone who has tried to switch between different device brands knows that this is not easy. Contacts are deleted, downloaded content is lost, and the camera does not take pictures, just to name a few. Look at the PC industry. A lot of consumers are turning to Apple because of one thing: Brand, coherently manifested in industrial design and user interface. But try to change! You will agree that the Mac is beautiful and that all the nice swooshes in the UI makes you feel as if the machine loves you. But the paradigm is not the one you are used to. And in the beginning that will drive you crazy! Essentially the UI raises the comfort level once you are inside, which is also an exit barrier – a soft walled garden. So I don’t think we will have a homogenization of the user interface into a single mobile paradigm. Manufacturers will probably continue to manifest and develop their own unique UI:s because there is an opportunity to continuously ‘lock in’ the consumer. Because switching would mean learning – and boy, aren’t we consumers lazy! There is a great incentive for the big structured mobile manufacturers (Nokia, Motorola and Sony Ericsson) to keep up their good work. There is also a big incitement for the historically more hardware-focused manufacturers (Samsung and BenQ) to invest more in this field. Strong brands like B&O and Apple will also have to keep this in mind when they are moving into our world. Google, Yahoo!, and other of our newly-found friends will have to consider this. And Microsoft will stick to their desktop paradigm, for better or for worse.

The Customised Design Manufacturer (CDM) is a new business model in the mobile handset industry that fills a very important market gap: producing uniquely customised handsets on-demand for consumer brands and 3rd parties. CDMs are here to capture a portion of the emerging market for uniquely customised handsets (UCHs) i.e. handsets for niche customer segments. Operators (see Vodafone Simply and the upcoming NMT handset), MVNOs (see Helio and Jitterbug), handset manufacturers (see Alcatel’s ELLE phone and EmporiaLife) and consumer brands (see Versace, Dolce & Gabbana and Bang & Olufsen) want to deliver uniquely customised handsets to firstly differentiate and secondly capture the market for trully unique, branded handsets. The Customised Design Manufacturer is a fabless manufacturer who caters for this very need: producing uniquely customised handsets for niche customer segments, taylor-made and styled to consumer brands, MVNOs and manufacturers. A CDM is an integrated business that combines brand licensing with handset industrial design, outsourced manufacturing, quality control, distribution, reverse logistics retailing and can also include an after sale, on-device service proposition as part of the handset. In essence, a CDM is a specialised, yet vertically integrated service house that is able to act as a one-stop shop for brands wishing to enter the mobile phone business or MVNOs, MNOs and manufacturers wishing to outsource development of unique handset designs. I first wrote about Customised Design Manufacturers after an inspirational talk with i-mate at 3GSM 2005. i-mate is the earliest example of a CDM, for prosumer and corporate customers. i-mate has been buying bulk from HTC and reselling customised handsets to several operators and independent retailers, adding in preloaded applications, internationalisation, warranty, support and marketing. Since 3GSM 2006, i-mate is transforming itself into a system integrator for corporate customers offering uniquely customised handsets with a complete enterprise device management solution. Customised Design Manufacturers are Here In the last year, several CDMs have surfaced; Modelabs, Tedemis, TCL Alcatel (an OEM with an in-house CDM business unit), while Emblaze Mobile plans to follow the same path. Modelabs is the leading CDM today, having produced handsets for Airness and Elite Model Look brands and expected to launch MTV and Tag Heuer handsets. Tedemis was the matchmaker that lead TCL Alcatel to produce the Glamphone for the ELLE publisher brand. ARCchart‘s new report titled ‘The New Age of Handset Customisation: 2006-2011‘ (of which I was the lead author), has analysis and case studies of these customised design manufacturers. The report also profiles tens of uniquely customised handsets to date, including Vertu, Xelibri, ESCADA, Firefly, Vodafone Simply, Dmobo’s Disney-themed M900, i-kids, ELLE Glamphone, Bang & Olufsen Serene, Goldvish, Casio G-Zone, Voce, Jitterbug and Nordisk MobilTelefon handsets, which targeted at a wide range of segments, including kids, fashionable females, tweens, teenagers, sports enthusiasts, senior citizens and VIPs. The report examines the Customised Design Manufacturer business model and provides insightful detail: “Each of the three CDMs ARCchart has identified – modelabs, Tedemis and Emblaze Mobile – take a different approach to integrating all handset commercialisation stages under one roof. Modelabs has grown in-house teams for brand licensing, industrial design, supplier management, marketing, distribution and support. Tedemis grew from a brand manager into a value-adding matchmaker between brands and manufacturers, adding service integration functionality to the handsets. Finally, Emblaze Mobile is moving from a virtual ODM towards a full CDM business model with the acquisition of European Telecom. TCL Alcatel has shown how an OEM can adopt such a business model by forming an in-house CDM business unit. The Chinese-French OEM has created an internal business team under the name ‘Brand Design’, dedicated to designing, manufacturing and marketing branded, customised devices for niche segments. The multi-disciplinary team pulls together functions across the breadth of the handset commercialisation process, including industrial design, engineering and marketing, to form a virtual CDM operation. This structure essentially allows TCL Alcatel to bridge the previously existing communication gaps between handset teams, allowing it to develop uniquely customised handsets, while leveraging the know-how and manufacturing assets of an OEM and reducing time-to-market and cost.” Challenges faced by CDMs However, creating a CDM is not simply a matter of integrating several business units under one roof. The ARCchart report has some interesting analysis on the challenges faced by CDMs today: “Customised design manufacturers have arrived in a challenging market place. As of 2005, about 84% of the global handset market is controlled by the top six OEMs. This leaves limited market share for the remaining hundred or so OEMs, ODMs, ODEs and CDMs. Furthermore, generous operator subsidies have turned mobile phones into consumer electronics items which are perceived as low-value by the consumer. Brands who want to play in the handset space will have to place brand appeal above pricing considerations, in the eyes of the sophisticated consumer. One of the most challenging aspects of a CDM business is merging the distribution and industrial design businesses. These two disciplines, within the traditional context of mobile phones, have different working cultures, processes, business models and margins. Distribution is about a high-volume, low margin business with cold, operational efficiency and large staff count. At the other end, industrial design is about small, closely-knit teams with creativity and flair which develop a few products a year and look to high margins. This challenge is also one that modelabs claims to have overcome, which is one of the reasons for its market lead. Another challenge for customised design manufacturers is linking brand companies to manufacturers. The cultural and communication gap is substantial, but not insurmountable. CDMs therefore have to act as a bridge between brand clients with creative, lifestyle marketing cultures and handset manufacturers who are engineering-led organisations.” Coming into the limelight The report predicts that CDMs such as Modelabs, Tedemis and TCL Alcatel will far outgrow ODMs and ODEs in the production of uniquely customised handsets in 2007. This is due to the appeal of CDMs as a one-stop shop for consumer brands wishing to enter the handset market. The ELLE GlamPhone No 1 handset has sold more than 100,000 units in 1Q06, with the sales of GlamPhone range expected to reach 250,000 by 3Q06, according to the ARCchart report. Modelabs is expected to announce handsets for MTV and Tag Heuer, which will further make an PR impact in the industry and bring CDMs into the limelight. Modelabs’ strong growth in profitability (+59.6% in net income in 1H06) is another validation for the viability and promise of the CDM business model.

ARCchart‘s latest report is titled ‘The New Age of Handset Customisation: 2006-2011‘. The report analyses the new players, business models and market trends that are changing the economics and dynamics of delivering uniquely customised handsets. As the lead author of that report, I will spend some time highlighting key findings of the research in the next few posts. Twelve Stages So much time, money and energy is being devoted across the industry in producing handsets, yet there is scarse analyst coverage and analysis of the handset commercialisation process – understanding this process is key to all vendors wishing to play within the handset customisation business. The ARCchart report spends a chapter analysing this industry process – quite appropriately, the chapter is titled “The Silk Road of Customised Handsets”, and talks about the path of handset commercialisation, from brand licensing and industrial design to distribution and the retail experience” Exactly how complex is the process of designing, producing, marketing and supporting a mobile handset ? The diagram below, taken from the ARCchart report, shows the twelve stages in the process of handset commercialisation: This diagram is particularly interesting, given that it also portrays the stages where the major players in the value chain are active today, and will be active in the future. The report then goes on to analyse each of the twelve stages. Of particular interest is the analysis of ‘brand licensing’ and ‘last mile handset customisation’ stages: Brand licensing “Handset OEMs have also typically been the brand owners. Companies like Nokia, Sony Ericsson and Samsung have both strong manufacturer organisations and healthy brands. However, with the increasing segmentation of OEMs, operator handset customisation and the entry of consumer brands, branded handsets for niche segments are slowly becoming a mainstream activity. Since brand marketing and handset manufacturing are two very different disciplines, a brand licensing agreement or proxy can bridge the gap. Technically speaking, brand licensing involves a brand owner leasing the use of a brand to another company. It represents the exploitation of intellectual property in its purest form. Brand licensing typically involves contractual terms stipulating which products the brand will feature on, co-branding elements, positioning and rendering of the brand logo, product lifetime, distribution, pricing, promotion, retail placement and retail experience of the branded products. The revenue model for brand licensing is a per-device royalty fee, often with a minimum volume commitment. This revenue model presents a low-risk, minimal cost endeavour for the brand owner, albeit at a limited potential for revenue returns. Brand owners may extend this model through strategic revenue share agreements, opting to share both increased potential revenues, with the potential risks. Beyond 1-to-1 brand licensing between owner and licensee, there are a number of proxy companies specialising in multi-brand representation. These players secure long-term licensing deals with brands, which they then represent, sublicensing brands within their portfolio to product manufacturers. An example of a brand license aggregator is Global Wireless Entertainment, Inc. (GWE) which specializes in long-term brand acquisition and representation. GWE’s current brand portfolio includes Pele, Muhammad Ali, Warner Bros., DC Comics, Marvel, Lucas Film, NHL and NBA.” … Last mile Handset Customisation “The final stages of handset customisation aim to furnish the handset with the external branding, applications, settings and increasingly, user interface components, to satisfy the customer’s requirements (typically an operator or OEM). Essentially, this process customises the plastics, settings and software of a basic handset in line with client specifications. Traditionally, client-specific handset customisation includes adding external branding elements to the handset plastics (such as the operator logo), adding local language support in the software and programming network-specific settings onto the handset. In today’s age of operator-led handset customisation, this stage typically involves embedding specific applications to support operator services (e.g. an IM application), or the OEM value portfolio (e.g. a push-to-talk application). It also includes embedding clientspecific software modifications (e.g. for handling special SMS messages, GPRS optimisations, specific codecs and Java APIs). Increasingly, this stage of handset customisation includes modifications to the user interface. The user interface of a handset is essentially made up of the visual elements of the applications that sit on the device, including the homescreen and menu application. Therefore, to customise the handset user interface, the manufacturer needs to adapt these applications one by one for a consistent look & feel. In the last two years, UI customisation frameworks have emerged which enable manufacturers to deliver a completely customised user interface within much shorter development times. UI customisation frameworks and their vendors (e-SIM, Digital Airways, TAT and MSX) are analysed further in Section G.3.” The report also discusses the cost and time-to-market of the typical handset commercialisation process: “The complete handset commercialisation lifecycle typically takes 12-18 months: a considerably long time, given that it is similar to the typical amount of time over which handsets are replaced in saturated mobile markets. The sheer number of stages involved in commercialising a handset also indicates that the total handset development cost is substantially higher than the basic bill of materials (BOM). Over and above the BOM, the total cost includes costs for handset production operations, testing and quality assurance, retail training and customer support training. In total, a low-end handset is likely to cost between $3 – $10 million to develop, while a high-end handset may cost $10 – $50 million.”

Poor discovery and accessibility are two major obstables hindering the growth of data services. In simple English, the user often does not know that a service exists (it’s poorly communicated) or how to access it (it’s hidden under layers of menus). In the past vendors have suggested software methods for improving discoverability and accessibility: personalised WAP portals (see ChangingWorlds), on-device portals (see SurfKitchen, uiOne), on-SIM portals (see Celltick) and WAP toolbars (see Alatto), with results which are encouraging but not ground breaking. A new paradigm for service discovery An idea struck me while I was recently explaining the world of the mobile industry to a fellow passenger on the plane. Why not exploit the communication power of consumer brands and place them within the retail environment for service promotion ? Here’s the scenario. Imagine walking into a mobile operator retail store in London in 2007. You spend ten minutes choosing your new phone and another five minutes choosing the right tariff. Following that the shop assistant shows you to a set of shelves stacked with branded, colourful boxes that easily fit in the palm of your hand. It looks like a console games shop, only now the shelves are stacked with small shiny boxes, each carrying a high street brand like Disney, Robbie Williams, Nike, Kodak, BBC News, AtoZ, the AA, the Discovery Channel, and SKY Sports. Each box represents an information or entertainment service that you can get on your mobile phone. You ‘re already familiar with the 10s of brands already on the shelves, so you can pretty easily make out the stuff that of most interest. You pick the motorist news alert service from the AA and the London’s map & planner service from AtoZ. You pretty much know that the AA service is probably about traffic information, and you check the small print to find out that the service is about daily traffic alerts. Both services cost 2 pounds a month. You take the two boxes to the shop assistant who scans the barcode on each box. She tells you that you ‘ll be able to access the services by pressing the MyStuff hard key on the phone, and then you ‘ll see the icons of the services on your screen (Technical note: the hard key is a shortcut to the WAP portal and specifically to the user’s own page. For smartphones a more elegant, and visually appealing alternative is to use an on-device portal local software application). Behind the scenes: the point of discovery This scenario presents a new paradigm for service discovery and accessibility. The use of consumer brands as a tangible, visual communication medium for the service proposition exploits the brand recognition that these content providers enjoy. The operator exploits this brand recognition in the retail environment to effectively communicate the value proposition of the service and allow the user to quickly browse and select from 10s of content providers. The branded box contains service details, pricing, as well as terms and conditions. At the same time, the retail POS acts as an advertising medium: the operator can command a commission for the sale of a service and at the same time play the content provider/advertisers against each other for availability and pricing of shelf space. Naturally, independent retailers (see CarPhone Warehouse) can also implement this concept, aided by independent off-portal providers like Bango and RefreshMobile (minus the hard key shortcut). The setup of a point of service discovery is straightforward for today’s mobile operators with 100s of retail points of sale. What an operator needs is a framework agreement with existing content providers, a logistics operation for the promotional boxes, some shelf space, training for the shop assistants, a MyStuff page on the portal and a straightforward mechanism for provisioning the portal that is accessible from the point of sale. An important yet subtle element in this concept is the hard key: I fundamentally believe that operators should send hard key presses not to the portal front page but the user’s own page. Personalisation should take priority over Customisation. Reality check The beauty of this concept is that it’s easy to implement, and it can be easily demonstrated (ok, instinctive proof will have to do for now) to accelerate service adoption and hence data ARPU. The drawbacks of the approach I would consider to be minor: there is a cost to the shelf space occupied by the branded box shelves (and probably reduction of shelf space for selling phones). Then there is the concern of increased ‘product noise’ and ‘brand noise’ in the retail environment which may complicate the sale. Overall though, I do believe it is a promising solution to boost service accessibility and discoverability that with an optimised retail planning can do wonders to the traditional mechanisms of service promotion. Any operator listening ?

We all know that the radio spectrum is the electromagnetic spectrum which mobile operators use to offer wireless services. It’s interesting to look into the lesser-known economics of the radio spectrum, such as auctions, spectrum allocation and regulation. In most cases, governments assign the national radio spectrum licenses with one of the following methods: Beauty Contest: Companies interested in obtaining spectrum licenses submit proposals to regulators outlining what they would do if they got them. The regulators then determine which applicant would make best use of the available radio spectrum. Lottery: self-explanatory. Auction: Available radio spectrum is licensed to the company offering the most money. The philosophy behind the “beauty contest” was to ensure that spectrum would be passed on to the group that would best use it for the public interest. It’s still the system used in a number of countries, including France and Spain. Many governments rely on the “beauty contest” because they want to keep control on the spectrum usage while supporting the investment capabilities of the telecom industry. Lotteries have been abandoned because of large number of bidding companies and many times the wrong kind of winning companies (companies that do not utilise spectrum in the most appropriate way) Auctioning has gained popularity because of fairness, transparency, and high government revenues. Statistics from the ITU-R show that most governments favour the auctioning process when: the density of the country’s population in high enough, the government’s budget deficit is large, the number of licenses is high. Auction basics The auction method in assigning radio spectrum is considered economically efficient because it maximises the social welfare if it allocates items to bidders who value them the most. Types of Auction: Open or oral auctions – These often have several rounds while sealed-bid auctions have only a single round. Dutch or descending auctions are typically fast because the auctioneer alone drives the price down. First-price sealed-bid auction is when the bidders decide off-line their claim without revealing any information and the winner pays the highest bid. Second-price sealed-bid or Vickrey auction is when the bidders tend to bid their true valuations and the winner pays the second highest bid. Sequential is the auction when prices tend to decline in the later auctions due to fewer or poorer bidders (e.g. UMTS). Simultaneous ascending auction is the most common approach for auctioning a set of spectrum licenses (most European UMTS license auctions). Spectrum allocation – demand vs supply ITU-R create global recommendations on spectrum allocations but it is governments taking the decisions. Governments consider radio spectrum as a scarce resource requiring extremely strict regulation. High demand of mobile broadband wireless services together with the development of new wireless technologies like DVB-H, 4G and UWB maintain demand for new spectrum. The impact of new technologies New technologies can utilise the radio spectrum more efficiently. For example, radio spectrum can be shared efficiently using spread spectrum technologies like in WCDMA 3G. Digitalisation i.e. Digital TV (MPEG 2, 4) also saves spectrum. Smart antennas and MIMO techniques further increase the spectral efficiency (bits/second/Hertz) hence reducing the spectrum demand. However, we are in the era where everything tends to be wireless and spectrum availability for deploying new services is very limited. There are many technologies in devices sharing the same spectrum i.e. WiFi and Bluetooth share the 2.4GHz spectrum. Wireless technology coexistence in the same spectrum band will be very common in the future, and it will be interference dictating the performance of these systems. Interference, even though is not an inherent property of spectrum but a property of devices, limits the performance of most current radio systems. In this multi-radio world where a single device might have more than nine different radio technologies, it is heavily mandated to find techniques allocating spectrum in a smarter way. But how is that going to be achieved? The emergence of cognitive radio Future radio systems should be able to sense the radio spectrum and adapt their service to the spectrum which is least utilised. This requires the development of smart radios or radios that are defined by software. Spectrum sensing radios or “cognitive radios” that adapt their transmit/receive parameters and access spectrum dynamically will decrease interference and allow wireless coexistence. A step closer to the development of a commercial cognitive radio is Vanu which is pioneering in the area of software defined radios. Is there an expiry date for radio spectrum regulation? 4G radio systems that might be deployed in the 2015 – 2020 timeframe are probably going to use software cognitive radio technology in order to achieve wireless convergence and coexistence. But, if cognitive radios are going to be used in the future, is there a need for spectrum allocation and auctioning? Is there going to be a “peaceful” coexistence between the radio systems sharing the same spectrum or chaos will emerge in the radio world? Whatever the future holds, ITU should allow the usage of cognitive radios but apply rules on spectrum usage to avoid a chaotic wireless coexistence that might hinder the development and adoption of future ubiquitous wireless broadband services.

I ‘ve spent most of my time in the last three months researching and authoring a report on the future of handset customisation. I believe that in 2008, hundreds of consumer brands will be commercialising mobile handsets, in a trend started by Bang & Olufsen’s Serene, ELLE’s Glamphone, Elite Model Look’s EML1 and Dmobo’s Disney-themed handset. There are far too many boring grey- and black- coloured handsets out there with the same-old designs and form factors. At the same time, operator and manufacturer brands are too coarse and rarely communicate values which are relevant to the user. There is a clear demand for handsets branded and designed to appeal to different consumer groups, while at the same time manufacturers are desperately trying to produce handsets where the brand value can command a significant delta on the retail price. Overcoming challenges for unique handset designs In order for supply to meet the demand for branded or uniquely customised handsets, there are several economic challenges, most of which are being overcome. The cost and time-to-market of producing made-to-order handsets (with moderate modifications to software and plastics) is very reasonable thanks to customised design manufacturers like Modelabs. Hardware reference designs are shrinking in size (see NewGen’s square phones for example) which frees up the industrial designer’s imagination to go create. There is no shortage of creativity and concepts today from industrial design houses like Idem, Ocean Observations, Frog, Product Visionaires, No Picnic, Alloy and IDEO. Distributors are getting into the handset customisation game (see Dangaard’s business of customising Qtek-brand handsets), and customised design manufacturers are getting into the distribution game (see Modelabs’ and Emblaze Mobile‘s acquisitions of distributor businesses). However, there is still a significant barrier to the proliferation of handsets with unique industrial designs (that appeal to the heart and the wallet of the niche segments to whom they are targeted). The supply chain issue If we are going to see tens or hundreds of consumer brands like Nike, Gucci, MTV and Google release their own handsets to the market, someone will have to stock these handsets and have a brilliantly effective system for managing these stocks. In other words, we need to see the Zara equivalent of the mobile handset customiser and distributor – Zara’s success is in most part owning to their just-in-time clothes customisation business and lean supply chain management. In plain English, this means that the distributor should be able to take the unsold stock of 10,000 Barbie handsets, change the plastics/enclosure to a Gucci handset, repackage the contents and shift the boxes from Malaysia to the UK. Vertu’s circa $50 hardware BOM is a testament to the power of the plastics and enclosure and the commodity of the hardware. To accomplish this just-in-time customisation we need two things: One-size-fits-all hardware reference platforms. With the component size reducing and the form factor volume reducing to 3x3cm PCBs, I don’t see this as being an issue. Add a customisable software stacks from Purple Labs, a la Mobile, or the Digital Airways + SKY MobileMedia + Montavista partnership and you’re there. Add a firmware OTA platform from Red Bend, Innopath or Bitfone (or OMSI‘s firmware over-the-wire platform) and you can customise the software at any stage in the distribution channel. Industrial Design Platforms. This is the three-word answer to the problem of snapping off the Barbie enclosure and snapping on the Gucci enclosure (and it’s not as easy as it sounds). Calling for the Industrial Design Platform To date, ID houses have worked off assumptions of the volume metrics of the hardware reference design of the handsets (and in a several cases, the ID and the hardware reference design have been created through iterative revisions). I believe what we need is a new paradigm of the industrial design platform (IDP), i.e. a physical plastics arrangement that can act as the smallest-volume common denominator for a range of industrial designs, that wraps around given hardware reference platforms. IDPs should be designed for certain classes of form factors (for example a lipstick-type factor, a thin flip phone or a square single-body factor) and allow reliable and safe modding of the entire handset enclosure. On top of the IDP, enclosures can be as sophisticated from Voce’s leather RAZRs to a Replay-jeans-moulded handset (as e.g. made possible by Inclosia technology), to cheap plastic Barbie enclosures. UI Customisation platforms: the perfect partner UI customisation platforms such as TAT, MSX, Digital Airways, e-SIM (and in the future Flash) are the perfect partner for industrial design houses, as well as the IDP model. This is for three reasons: UI customisation platforms make money through handset royalties – the nicer a handset looks the more money they make (and ID houses sure know how to make a handset look nice) ID houses need flexible UIs to work with. Ocean Observations’ Sofia Svantesson calls this an elastic UI. UI customisation platforms can deliver this elasticity to mass-market handsets and across the entire breadth and depth of the user journey, from start-up to shut-down The ID needs to be coordinated with the UI of the handset. Bang & Olufsen’s Serene is the perfect example. An IDP should therefore be matched with a UI customisation platform; you snap on the enclosure, you update the software UI, and voila, you have a totally different handset in your hands. Wildseed’s Smartskin tried to execute this very concept in 2004, but they were too early to market. Lesson for industrial design houses: Invest in building IDPs. This offers a clear differentiation to your competitors, reduces time-to-market and cost for handset variants, and improves your attractiveness as a valued partner for your customers (both tier-1 and tier-2 OEMs, customised handsets manufacturers, and value-added distributors). Go forth and multiply.

I ‘ve written before about on-device portals (ODPs) – it’s essentially device software that delivers offline browsing, storefront and homescreen replacement functionality. Whereas before it was a space to watch, ODP is now an adopted industry term and a vibrant market that’s here to stay. Quick round up of the market The ODP market was first analysed in a January 2006 ARCchart research paper which also coined the term – as the lead author of that report, I have since been watching the space closely. There are now 25 or more vendors of ODP products: Abaxia, Action Engine, Airmedia, Cibenix, Communology, Comverse, Crisp Wireless, Everypoint, Geniem, Macromedia (FlashCast), Handmark (Pocket Express), InFusio (nMap), mPortal, MSX, Nellymoser, Nokia, OnSkreen, Opera Platform & Mini, Picsel, Qualcomm (uiOne), RefreshMobile, Silk, Streamezzo, SurfKitchen, U-Turn and Volantis. The term ODP has now been adopted by Nokia, SurfKitchen and Cibenix. It’s good to see a term that you ‘ve coined become adopted (although it can become abused for self-promotion, too). Nokia, Airmedia, mPortal, Everypoint, Volantis and Picsel are vendors that have popped onto the ODP radar in the recent months. Nokia Content Discoverer In June 2006, Nokia announced the Content Discoverer (NCD) on-device portal solution, as the evolution of, and successor to, Nokia’s Preminet. Content Discoverer is currently embedded in millions of Nokia devices based on S60 and Series 40, including the Nseries multimedia devices, Eseries devices for enterprise users, Nokia 3250 and 6131 devices, and to-be-embedded on six more handsets by end 2006. Nokia dropped the Preminet back-end and instead integrated NCD with several service delivery solution providers, incl. Handango, Jamster, End2End, Plus Four Six and Qpass. Nokia has also established content aggregation agreements with eight local content aggregators. It’s worth noting that NCD features a portal-based view of content catalogues, rather than search-based views, to avoid disintermediation of content retailer portals. Vendor update: Airmedia, mPortal, Everypoint, Volantis, Picsel, InFusio Airmedia channels content to BREW, Java and FlashLite-capable devices using on-device portal products. Troy Evans, Macromedia’s FlashLite guru stopped briefly at Airmedia before going to Nokia as a Sr Manager, Branded Content. mPortal is an MVNO-focused ODP vendor that is targeting the US market and counts Disney and ESPN among its customers – another unique positioning among ODP vendors. Interestingly, according to an investor report, mPortal is looking towards MVNEs, chipset manufacturers, and device manufacturers as potential acquirers. Everypoint is an ODP vendor that specialises in the delivery of real-time sports content onto mobile devices. Everypoint developed Yahoo’s Mobile Matchcast application, an ODP application with sports content for the World Cup in Germany. MatchCast is a MIDP2 application available as a free download in 12 countries and 7 languages. Check out the screenshots here. Everypoint claims several selling points such as a home-grown vector-graphics engine, incremental, fast data updates and rapid application development. The Boston-based company has so far received $14M in VC investment from Venrock Associates, Prism Venture Partners and TD Capital Ventures. Everypoint’s closest competitor is Streamezzo, with the difference being that Everypoint focuses on real-time data delivery, while Streamezzo focuses on real-time video delivery. Volantis is a vendor of mobile content delivery platforms that recently launched two ODP products (Content Storefront and Content Player). Picsel is a Glasgow-based company that is planning to spin off its office document viewer into an ODP product for magazine publishers. Essentially, this is another uniquely positioning ODP product, targetting magazine publishers and addressing ease of use for publishers. Picsel claims they ‘ll have the solution live by the end of summer 2006. Finally, InFusio’s nMap is a repackaged Geniem Superstore ODP product which will feature on the ELLE Glamphone uniquely customised handsets in 4Q06. Deals and partnerships Quick update on the deals that I have come across in the last few months in the ODP market: In February Vodafone K.K. announced that its Live! Cast product will launch in Japan (following its launch in Germany last year). The service will be pre-installed on NEC and Toshiba handsets and will feature three content magazines targeted at 25-35 old males. Adobe announced that more than two million mobile phone subscribers have signed up for DoCoMo’s i-channel news and information delivery service since it was launched in Japan last September (i-channel is powered by FlashCast). Refresh Mobile customer base has expanded to ITV, BBC, Conde Nast, Shiny Media, AFP (Mumbai) OnSkreen’s Fusion feature set now mobile search for movie times, stocks and sports scores and the web. UIEvolution developed the application environment and ODP application that powers Mobile ESPN’s MVP and ACE’s handsets Comverse announced that it will resell SurfKitchen products Cibenix announced a combined solution with Sybase mFolio July Systems announced it is partnering with SurfKitchen to extend its content retailing channels with on-device storefronts. Yahoo’s big bet: beyond the browser The market of on-device portals is certain to grow aggressively. This is not only forecasted by ARCchart and indicated by Nokia’s Content Discovery deployment plans, but also hinted by Yahoo at their presentation at their Analyst Day in May. One of Yahoo’s big bets for the next 5 years is titled ‘beyond the browser’ – they see their Yahoo! Go product providing a range of features including integrated mail, integrated contacts, calendar, messenger, photos, search, news and information. This is ODP on steroids. Some Yahoo! facts: Yahoo! has over 50 mobile partnerships worldwide Yahoo! Go Mobile will support over 50% of Java handsets launched in the next 18 months RIM partnership enables Y! distribution across 160 carriers worldwide Partnered with Nokia, the largest handset manufacturer in the world Partnership to bring Y! services to millions of Motorola Linux-based mobile devices Trends in the ODP market So where is the ODP market heading? There are several clear trends. Firstly,ODP products will morph into on-device search portals, as ordinary content portals are disintermediated by search engines. Secondl ODPs will extend into an Electronic Service Guide for all mobile media, incl. TV, irrespective of format. This is where Streamezzo is taking their client and O2 UK certainly seems to agree, based on their presentation at the World Handset Forum in May. I have little doubt that ODPs will be featuring on every high-end handset (and several mid-end handsets) by the end of 2007.

3.5G or HSDPA was developed as an evolution of initial UMTS network to enhance the data throughput and provide a better data usage experience to users. 3GPP is considering another evolution step after HSxPA so-called 3GPP long-term evolution ‘3G LTE’ or as more commonly called 3.9G or ‘Super 3G’. Super 3G is expected to be an evolved radio access technology that can provide equivalent or better service performance compared to current fixed line access technologies, and at much lower cost compared to current radio access technologies (e.g. HSDPA and HSUPA). Deployment timeframe The main focus of this evolution will be on enhancements for packet-based services over an all-IP core network. 3GPP aims to finalise the development of the standard in July 2007, with subsequent initial operator deployments in the 2009 – 2010 timeframe. Super 3G will be based on 3GPP Release 8 and will be built on already existing investment. Super 3G aims The main targets of Super 3G are: Higher data rates than HSxPA: 100 Mbps for downlink, and 50 Mbps for uplink Increased ‘cell edge’ bit rate whilst maintaining same site locations as deployed today Improved spectral efficiency – three times more compared to current systems Reduced network delay – below 10 ms Spectrum flexibility – enabling deployment in different spectrum allocations Reduced CAPEX and OPEX To meet this challenge, a change in 3G radio technology is envisaged that integrates OFDM (Orthogonal Frequency Division Multiplexing) and MIMO (Multiple Input Multiple Output) technology within the current 3G investment. This is called HSOPA or High Speed OFDM Packet Access and was proposed initially by Nortel. HSOPA is considered necessary in order to achieve higher download data rates than 50 Mbps. Impact on existing infrastructure Super 3G will provide a smooth technological upgrade, using the existing WCDMA / HSxPA infrastructure, such that operators will not need to build a new network from scratch. However, how is it going to impact the HSxPA network? Is Super 3G a Mobile WiMAX killer? The only thing that’s certain is that Super 3G will further increase the capacity and hence the throughput of current 3G networks. The transmission network will require serious upgrades to accommodate the increased capacity. Mobile WiMAX and Super 3G Mobile WIMAX (IEEE 802.16e) will compete head to head with Super 3G and the comparison between the two will be more fair since both of them share the same technologies e.g. OFDM, Hybrid ARQ, All-IP Architecture, Adaptive Modulation and coding. The wireless leader will be the one not having necessarily the best radio technology but the best capacity and range of user devices. NTT DoCoMo is so far keeping a distance from Mobile WiMAX. Is that a strategy to protect their FOMA investment? It probably is. DoCoMo is pushing hard Super 3G as the main 3GPP standard for mobile broadband before the advent of 4G systems. On the other hand, Intel is aggressively promoting Mobile WiMAX and is starting integrating their Rosedale 2 chipset in some OEM laptops. Time will show which technology will dominate at the end and how “Super” Super 3G is going to pan out.

Vodafone’s Simply handset range has been a pioneering approach at unique handset customisation from a mobile operator. Not only does Simply effectively target a niche segment which craves easy-to-use handsets, but it does so by redefining the entire user interface and hardware ergonomics. Since May 2005, three Simply handsets have been launched; the Sagem VS1, a silver, stylish handset, the Sagem VS2, a simple black candy bar design and the Sagem VS3, a silver flip-phone design. Here’s some not-so-simple facts about Vodafone Simply that I uncovered recently: 1. Coming soon: the fourth Simply handset For those that were wondering if the line of Simply handsets had been a long-term strategy for Vodafone, the wait is over. The GCF (Global Certification Forum) lists the ‘Vodafone Simply Sagem VS4’ handset as having been certified on 24 May 2006. [updated] According to this post, the VS4 will have a slim form factor. 2. It wasn’t just a Sagem job Some little known facts about Sagem’s Simply handsets: The UI and information architecture were designed by Vodafone’s in-house User Experience team, which collaborated with US-based market research firm UsableProducts for usability design and testing, while the hardware design was by IDEO, the US-based industrial design house also credited with designing Apple’s mouse in 1980. As for the software, it was designed by a Paris-based UI technogy company. 3. Simply is targeted at the 34-54 year-old segment If you were like me, you ‘d have thought that the Simply handsets were targeted at the elderly segment. A Vodafone presentation from June 2005 states otherwise. Apparently, the Vodafone Simply proposition, comprising of handsets, customer service and dedicated calling plan, has been designed for a consumer segment the operator calls ?adult personal users?. This segment is the largest in Vodafone?s market segmentation, made up of 35-54 year olds, married with children, mostly female, with a low comfort or interest in technology. Makes sense. 4. The simple handset paradigm is becoming popular Apart from DoCoMo’s Raku Raku and TuKa’s S phone, there have been attempts at creating simple handsets in US and Japan. US-based Jitterbug for example is planning to launch their Samsung-designed handsets with a three-button interface, while Austrian-based Emporia is soon to launch their EmporiaLife handsets with completely redesigned hardware and software, including a big red emergency button on the back. If handsets weren’t so much about fashion and personality, I bet most people would opt for a simple handset that does voice and text really well and does away with the 80% of the functionality that only 20% (or rather 2%) of people use. One thing is for sure. The market for uniquely customised handsets is rapidly emerging aided by Customised Design Manufacturers such as Modelabs and tier-2 OEMs such as Alcatel, of ELLE GlamPhone fame. The ‘simple’ handsets are but one segment that uniquely customised handsets will cater to. As Apple says, one has to think different! Andreas