The Hindu Business Line : The mobile revolution: Global scale is critical

FROM the 1910s to the mid-1990s, the United States dominated the mobile business. It was the delay in the commercialisation of the cellular technology — from 1947 to 1983 - that opened the window of opportunity to mobile challengers in Europe and Asia.

In the 1990s, Euro-Nordic operators and equipment manufacturers dominated mobile innovation. Since the late 1990s, Japan has excelled in mobile service innovation, and South Korea in broadband innovation. In contemporary mobile competition, it is global scale that matters. Big is beautiful.

Rise and decline of US leadership

Pioneered by Guglielmo Marconi, wireless telegraphy created the first customers and business models in the industry, particularly in the maritime sector.

Over time, it was superseded by AM and FM communication, which provided a substantial military advantage to US defence forces during the Second World War. After the War years, these technologies led to mobile industrial services and the first consumer test markets.

The cellular concept was discovered as early as 1947 at the Bell Labs, in the US, but the commercialisation followed only in the 1980s with analog cellular networks. These services appealed primarily to automobile drivers and corporate markets.

Things changed with the digital transition, which was driven by the European-based standard (GSM) and pioneered by Euro-Nordic operators and vendors, such as Nokia and Ericsson. At the turn of the 21st century, service innovation migrated to Japan, where NTT DoCoMo pioneered user-friendly, high-speed services.

Meanwhile, South Korea engaged in broadband innovation. Amid the boom and bust of the technology sector in 2001-2003, the industry witnessed a dramatic period of innovation and globalisation — particularly via new massive growth markets, first in China and now in India.

Since 2001, worldwide mobile markets have witnessed the first transition to the multimedia cellular, known as UMTS in Europe and 3G in the US.

Even today the US market remains the most lucrative in the world, but China's is the most populous. As mass compensates for per capita over time, the latter will become the wealthiest.

Why America lost leadership

At its peak, the US leadership in the wireless industry covered the entire value system, embodied by America's largest corporation — AT&T. The leadership was eclipsed because of the conflicting objectives of the federal regulators and the Department of Justice's antitrust division.

The regulators promoted equity (which justified the perceived need for natural monopoly), whereas the concern of the DoJ was efficiency (which justified the promotion of competition). As long as regulators reigned over antitrust authorities, the monopoly system remained intact. When the roles were reversed, the monopoly system fell apart. The tensions were defused with consent decrees (1913, 1956), but ultimately they undid the Bell System (1984).

In the post-War era, the advanced Euro nations and Japan not only caught up with America, but also benefited from increasing diffusion of US wireless R&D. Furthermore, US regulatory policies proved misguided.

The idea of inter-country roaming came about naturally in Northern Europe, where Nordic countries, with their similar cultures, promoted open exchange of ideas, products and services.

In the US, broadcasters and defence forces have dominated large chunks of spectrum, which has not been the case in Europe or Japan. Conversely, in Europe and Japan, licensing policies have caused less turmoil.

Finally, in the US, charging policies (MPP, or mobile party pays) slowed down the rise of the mobile business, whereas in Europe and Japan, different policies (CPP, or calling party pays) have ensured faster growth.

America's resurgence

Since the 1990s, digital convergence has provided three powerful boosts to America's mobile leaders.

The first evolved in the early 1990s with the San Diego-based Qualcomm and its CDMA, which is now the core technology for the 3G era.

The second wave followed in the late 1990s, when the US-based IT enablers (Microsoft, Intel, IBM, followed by Apple, RealNetworks and others) entered the business and absorbed mobile capabilities worldwide.

The third, and most recent, wave came in the early 2000s, when US-based content providers (media and entertainment, music and record companies, publishers) established a foothold in mobility. In the past, voice drove mobility. Today, data enables mobile content that makes or breaks new mobile services. US players are now better positioned to capitalise on these trends.

Mobile service innovation

By the end of 2004, there were more than 16 million 3G/UMTS customers subscribing to 60 networks based on WCDMA technology in 25 countries, and many more networks were either in advanced testing or in pre-commercial launch phase.

Due to NTT DoCoMo's early lead, Japan accounted for 53 per cent of the global 3G/UMTS market, while Europe contributed a further 42 per cent to the global WCDMA base.

In service innovation, NTT DoCoMo has shown the way since the launch of its high-speed services (i-mode, 1999; FOMA, 2001). These services have inspired operators worldwide, but such achievements cannot be easily replicated globally.

In Europe, Vodafone, after exploring DoCoMo's success drivers in Japan, pioneered its own service portfolio (Vodafone Live!); in the US, Verizon Wireless followed with its services (Get It, V Cast).

The arrival of dynamic mobile content, particularly mobile phone television, provides new opportunities to US media and entertainment. Yet, these prospects are not as promising as some US players would like to think. Unlike classic Hollywood cinema and popular US television, mobile multimedia can be a very local medium.

Just as mobile users in Silicon Valley are unlikely to get excited over Chinese SMS campaigns, mobile users in Bangalore or Mumbai may not be particularly intrigued by local news in New York City or Los Angeles.

From mobile devices to multimedia, mobile TV

Among equipment manufacturers, the US-based Motorola has made a great comeback under Ed Zander's leadership. The design of cellphones has undergone a metamorphosis, through the ingenious brand language of moto-morphing. During the past year or two, the ultra-thin Moto Razr V3 has electrified users in lead markets.

After years of R&D investments, Microsoft's mobile devices — from smart phones to game devices such as XBox 360 — are capturing market attention.

As the Internet has diffused worldwide, the US-based IT enablers are also promoting complementary solutions, from Wi-Fi to WiMAX. "The new growth engine is broadband wireless," says Sean Maloney, Intel's Executive Vice-President and chief of the Communications Group.

With increasing consolidation, the leading mobile operators are gradually catching up with developments in the cutting-edge markets of Western Europe and Asia-Pacific. Last January, Verizon's `V Cast' began to offer multiple channels of mobile multimedia, including CNN and MTV, for $15 a month.

In the coming years, true mobile TV will replace on-demand video. "Global multimedia is the next big trend," says Dr. Paul E. Jacobs, Qualcomm's new CEO.

Of the studios, Walt Disney has been proactive in the mobile space, not just in the US but via its Japanese subsidiary. Fox has used SMS for voting in the American Idol programme. ABC has developed texting campaigns to loyalise soap operas fans. Along with MTV, Viacom's Nickelodeon has scanned worldwide trends to generate SMS campaigns for tweens.

Music has been the bellwether industry, due to the young, technology-embracing audiences. With iPod, Apple was the first to capitalise on this business worldwide (Singapore-based Creative Technology Ltd was the first to launch a similar product some two years before).

The great marketing success also shares vulnerabilities that once pushed the Mac into a niche. As mobile vendors prepare for counter-attacks worldwide, pioneer benefits may not be sufficient for sustainable competitive advantage.

Global scale matters

Digital convergence, US innovation, the role of IT-enablers, the entry of Hollywood studios and Madison Avenue, not to speak of Fortune 500, virtually ensures that American momentum is about to play a more powerful role in the mobile business than ever before since the mid-1990s.

American players are not losing; the competition has caught up. However, the US can no longer dominate the mobile business. No single nation can. When markets globalise, the business is no longer a zero-sum game. As the playground grows, there is more space for new players.

Finland has a population of five million. In the past, Chinese mobile operators have created five million new subscribers on a monthly basis. Since global scale is now critical, the greatest opportunities are in the greatest volume and growth markets — that is, China and India.

From paper and pulp to mobiles

ALMOST 140 years old, Nokia, the world's leading mobile equipment manufacturer has endured Russian oppression, a Bolshevik revolution, an independence struggle, a civil war, a worldwide Depression, two World Wars, reparations and reconstruction, cyclical recessions, the collapse of Soviet trade, the premature deaths of several key executives, and the technology stagnation of the early 2000s.

Launched during the early industrialisation of Finland in the mid-1860s, Nokia grew along with the national ambitions of a small country that had been ruled for centuries by neighbouring Sweden and Russia.

Founded by Fredrik Idestam, a young engineer in an era of entrepreneurialism, optimism and new technological opportunities, Nokia from the mid-1860s to the late-1890s operated primarily in the forestry industry. By the late-1960s, Nokia had grown into a diversified conglomerate (forestry, rubber, cable).

Ironically, the war reparations proved very beneficial to Nokia, which played a central role as the cable supplier in the Soviet trade. Nokia's rise as the leader of the cellular industry derives from the consolidation of Finnish electronics in the post-War era, its history in cable and supplier role in the reparations to the Soviet Union. This required a difficult balance between the East and the West.

After the elections of 1987, the small Nordic country got its first non-socialist government since 1966. The European integration finally provided the business environment that Kari H. Kairamo (1932-1988) — the man responsible for making Nokia known for its high-technology and bold efforts at internationalisation — had envisioned as a catalyst for Nokia's expansion.

In 1992, Jorma Ollila, current chief of Nokia, and Olli-Pekka Kallasvuo, its future chief, bet the future of Nokia on wireless.

Led by the Nordic markets, the Europeans opted for GSM, which was pioneered by Nokia and Ericsson.

In 1994, Nokia was the first manufacturer to launch a series of portable handset phones for all major digital standards: the Nokia 2100 family. By August 1997, Nokia supplied GSM systems to 59 operators in 31 countries.

Since 2001, Nokia, along with other equipment manufacturers and mobile operators, has pushed the potential of 3G technology, which makes possible mobile Internet, video, music, games and e-mails through a new generation of "smart" phones and handheld devices.

(The author is the ICT Research Director of the India, China and America Institute, and the Faculty Spokesman of FAME, a mobile initiative by the CMO Council representing some 1,500 leading technology companies. He can be reached at dsmba@hotmail.com)

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