This week's JavaOne show highlighted the increasing involvement of European cellcos in the platform, which they see as a way to strengthen their control on the development of multimedia handsets and deliver consumer applications more rapidly. There are major risks however: the cellcos need to adapt to new business models, managing software projects and investing in R&D; and they need to achieve new levels of co-operation to address standards in key areas like DRM.
The European mobile operators have moved aggressively in recent months to tighten their grip on the evolution of the handset platform and increasingly, they are seeking to turn Java to their cause. The JavaOne annual show this week highlighted their absolute determination to direct the future of the media handset, and to build a strong revenue stream around multimedia, as did several other developments, notably T-Mobile's full-on launch in to music services.
The most significant announcement at JavaOne was a partnership between Sun and Vodafone to define a next generation Java-based platform for the 3G version of Vodafone Live!. The Vodafone VFX platform will be based on the Java Technology for the Wireless Industry (JTWI) technology specification and some third party technologies. The closeness of the relationship with Sun shows how Vodafone increasingly seeks to control the technologies that are fundamental to delivering its multimedia services and its brand - responsibilities that would once have rested with its handset suppliers.
Since Java supports rapid application deployment, content download platforms and multimedia, it is an ideal tool in the cellcos' common strategy - to increase ARPU through multimedia services, and to use these offerings to strengthen their own position in the overall mobile industry. This was highlighted by the fact that T-Mobile and Orange have now joined the Java Verified program, previously dominated by manufacturers. This program is designed to enable Java mobile applications to run on phones from multiple vendors with only one certification required. Sun will manage and operate the scheme, which aims to maximize available software and allow developers and content providers to get their products to market more quickly.
Software partners on the Asian model
Operators will increasingly seek partnerships with software houses that enable them to achieve their aim of customisable handsets that can be easily changed and upgraded to support new features or applications, through rapid development and over the air delivery. One example is French company Open Plug, whose Flexibleware provides a component-based platform for creating embedded software with a Lego-style approach similar in concept to Java, though aimed at lower level applications and functions.
Andreas Malzach, head of sales and marketing, believes Europe has been blind for too long to the developments in Asian handsets and that western operators are just starting to wake up to the advances there and to seek a similar position to their counterparts such as NTT DoCoMo of Japan or SKT of Korea.
These operators largely specify the designs that they commission from the phonemakers and argue that this position has enabled them to remain far closer to consumer needs than cellcos in Europe, and to deliver rapid fire enhancements and multimedia features almost on demand.
Orange and Vodafone are probably the most advanced European players in moving towards the position of SKT or DoCoMo. Open Plug is working with Orange on technology that will enable the 'configurable phone', which can be upgraded over the air to incorporate new applications such as push to talk without forcing the user to swap device. This takes the focus off the hardware and shifts it to applications and ARPU - the area where the operators, rather than the handset makers, make their best margins.
Critical is the ability to deliver more advanced multimedia applications more cheaply and quickly. Malzach, whose company sells mainly in Asia, believes this is the main route for operators to increase their revenues and they need to be able to support multimedia far more effectively. There are many excuses made, with claims that European consumers are less interested in applications such as video than those in Asia.
However, it is far more likely that operators and phonemakers have failed to deliver those applications at affordable price points and with genuine consumer appeal, because cellcos have often been seriously out of touch with their end user market. Now they plan to change all this, which means achieving a handset platform that can deliver such new facilities quickly and attractively; controlling its interface; and working far more closely with the friendlier of the manufacturers.
Operators taking huge risks
All this is involving dramatic changes in habits. Orange, for instance, has invested significantly in R&D and in developer relations programs - both areas that cellcos formerly left mainly to phonemakers. In turn, such requirements change their cost base and business structure, bringing them closer to the development- heavy Asian giants like DoCoMo, but also requiring them to learn some unfamiliar skills very quickly. Managing and end-to-end business from R&D to end user commercialisation is a very different process to what European carriers are used to, and there are sure to be mistakes and even casualties along the way.
Effective software partnerships will be critical to minimise the risks, something that Sun has clearly recognised with its Java programs. While it may seek to replace Nokia as the supplier without which operators cannot provide an attractive service, the handset makers will be performing shifts of their own. Most interesting will be the Koreans, Samsung and LG, which are already gaining ground in Europe and which will see the opportunity to take a key role as the operators shift to a model with which they are entirely familiar at home.
Samsung, whose mission is to overtake Nokia in the number one spot by 2010, is the most advanced of the majors in multimedia innovation, with R&D driven by the stringent requirements of the Asian cellcos and the almost boundless demand of Asian consumers for new media applications.
The starkest illustration of the power of the Asian operators, to which Vodafone and co aspire, is SK Telecom's recent statements that it seeks to buy a handset maker. This could be a bridge too far, even in South Korea. Since the operator could hardly afford to acquire Samsung or LG, it would need to buy up an unbranded manufacturer, and then risk sacrificing a carefully nurtured closed loop relationship with Samsung by setting up in competition with it. In turn, this could reduce the choice of handsets open to SKT to offer its consumers. So perhaps the strategy is unlikely to become reality - even if regulators allowed it - but it does indicate the scale of the cellcos' ambitions, which is sure to influence the approach of European counterparts too.
Digital rights management
One thing all operators agree on is that success in establishing a strong brand in the multimedia markets will be fundamental to furthering their political as well as commercial objectives. This forces them to adapt to yet another unfamiliar business model, that of content aggregator and retailer. It also raises more practical issues and one of the thorniest of these is content protection. Cellcos complain that content providers, such as film studios or record labels, are unwilling to sign up for their programs because of fear of piracy and so are putting huge pressure on handset makers to incorporate deterrents into their designs.
This is clear in a new alliance between Texas Instruments and ARM, under which TI will incorporate its partner's TrustZone hardware security scheme into its chipsets for media handsets. For TI, this boosts its ambition to be the chipmaker of choice for advanced phones, though the move also raises suspicions that operators will seek to use security and digital rights as a new excuse to lock down their handsets and retain control of their 'walled gardens'.
"Operators are crying out for the digital multimedia handset," said Dave Steer, ARM's director of US marketing. "The key is to convince Hollywood that we've got it under control."
TrustZone designates protected areas of memory for passwords and encryption algorithms that are separated from other applications, including the operating system.
T-Mobile's Ear Phones
On the software side, the Open Mobile Alliance's digital rights management system is gaining ground as a standard and the big operators are putting pressure on manufacturers to incorporate it into a wide range of handsets. One of the cellcos supporting the OMA technology is T-Mobile with its new music service, Ear Phones, which offers a Jukebox track download service as well as ringtones and other music-related services. Currently, only OMA-compliant handsets can access Ear Phones, hence the urgency to get more handsets on board. The relevant models available now are the Nokia 7600 and 6230, the Motorola E398 and the Sony Ericsson P900 and K700.
T-Mobile believes Ear Phones has a better chance of attracting the mass market than rival services because it does not require an application on the phone and so can be used on a wide variety of devices, not just certain operating systems (provided the DRM is supported). Nor does it require a dedicated gadget like the MMO2 offering.
By Christmas, it will support download of full tracks at a cost of £1.50 in the UK or €1.50 in Germany, Austria, Czech Republic and the Netherlands, with download times of about one minute per track in 3G or five minutes in GPRS. Content partners include Universal Music and Sony, both of which insist that T-Mobile's openness to their concerns about DRM had attracted them to the service.
In February, MMO2 was the first cellco to offer a music downloading device that did not have phone functionality. It seemed to show MMO2 taking the Nokia line that customers will purchase multiple mobile devices for different functions - the opposite opinion to that of T-Mobile, which wants to make the handset a universal, integrated gadget for a wide range of functions. Because of the DRM problem, MMO2 failed to gain agreement with music publishers to let songs downloaded to its player be played on computers or transferred to MP3 devices, so tracks remained confined to its gadget, and only songs on the O2 site can be downloaded
The threat of IP
Issues like DRM will be addressed over the months, but there is a far broader threat to the operators' multimedia-driven ambitions. This, of course, lies in IP, as does the potential fightback route for Nokia and the other handset giants. Mobile devices that support Wi-Fi and, in future, WiMAX are the antithesis of what cellcos want from their newly acquired power over their handsets.
The initiative is returned decisively to the manufacturer, the phone - like a computer - can support a choice of operating systems and networks and it becomes impossible to confine customers within the walled garden without losing their business once the contract expires. With Windows or Symbian devices, users can bypass the carrier and create or purchase their own content. They might even use IP, instead of the cellular network, for messaging, currently the operators' best source of data revenue, just as they can use generic MP3 players, embedded in phones, to avoid the cellco's own download platform.
The fear factor for carriers was highlighted with a demonstration by Fujitsu and Net-2Com last week of what they claim to be the first fully mobile IP handset that switches seamlessly between wireless Lans and cellular networks without dropping the call. Fujitsu Laboratories said that this product is the first wireless handset with an open architecture, enabling free selection of applications and networks by swapping in CompactFlash cards to support various systems in different parts of the world. This means that users would no longer have to worry about which networks they can roam on to under their operator agreement. The handset also takes an open, PDA-style approach to operating systems, and is capable of running Windows or Linux, making it suitable for business applications.
Operators know that they have to incorporate Wi-Fi and IP into their strategies, both at network and handset level. Their challenge over the coming 12 months is to make sufficient impact with their branding strategies and their multimedia services that they retain customer loyalty even when the walls have crumbled, and so create new revenue streams based on multiple networks rather than losing out. While the tactics for establishing this level of brand power may be heavy handed, the news can only be good for consumers in the medium term, since offering mediocre content services, locked-down devices and relying on cheap voice plans will no longer be an acceptable way for European carriers to compete.
© Copyright 2004 Wireless Watch
Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.